What changed in this filing

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Item 1. Financial Statements

2021-04-29 compared with 2020-10-30 · 257 added, 377 removed, 402 unchanged (61% of the section changed)

4 unchanged sentences

(In Thousands, Except Per Share Amounts)

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

Three Months Ended March 31,

Products $ 61,445 $ 102,980

9 unchanged sentences

Impairments of fixed assets 650 5,198

Other operating expense (income), net ( 652 ) 519 ( 679 ) 34

Other operating (income) expense, net ( 354 ) 107

145,351 661,496

16 unchanged sentences

(In Thousands)

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

Three Months Ended March 31,

Net loss $ ( 15,810 ) $ ( 405,041 )

Other comprehensive income (loss):

Other comprehensive loss:

Currency translation adjustments ( 1,529 ) ( 14,791 )

5 unchanged sentences

(In Thousands, Except Share Amounts)

September 30,

2021 December 31, 2020

39 unchanged sentences

(In Thousands)

Three Months Ended September 30, 2020 Common

Stock Additional

Capital Retained

Earnings Accumulated

Comprehensive

Loss Treasury

Stockholders'

Balance, June 30, 2020 $ 733 $ 1,117,771 $ 368,043 $ ( 83,767 ) $ ( 623,911 ) $ 778,869

Net loss — — ( 19,969 ) — — ( 19,969 )

Currency translation adjustments (excluding intercompany advances) — — — 4,624 — 4,624

Currency translation adjustments on intercompany advances — — — ( 1,267 ) — ( 1,267 )

Stock-based compensation expense:

Restricted stock — 2,089 — — — 2,089

Surrender of stock to settle taxes on restricted stock awards — — — — ( 8 ) ( 8 )

Balance, September 30, 2020 $ 733 $ 1,119,860 $ 348,074 $ ( 80,410 ) $ ( 623,919 ) $ 764,338

Nine Months Ended September 30, 2020 Common

Three Months Ended March 31, 2021 Common

Stock Additional

11 unchanged sentences

Surrender of stock to settle taxes on restricted stock awards — — — — ( 1,500 ) ( 1,500 )

Balance, September 30, 2020 $ 733 $ 1,119,860 $ 348,074 $ ( 80,410 ) $ ( 623,919 ) $ 764,338

The accompanying notes are an integral part of these financial statements.

OIL STATES INTERNATIONAL, INC.

AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(In Thousands)

Three Months Ended September 30, 2019 Common Stock Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive Loss Treasury Stock Total Stockholders' Equity

Balance, June 30, 2019 $ 726 $ 1,106,340 $ 1,005,130 $ ( 71,260 ) $ ( 621,208 ) $ 1,419,728

Net loss — — ( 31,868 ) — — ( 31,868 )

Currency translation adjustments (excluding intercompany advances) — — — ( 4,448 ) — ( 4,448 )

Currency translation adjustments on intercompany advances — — — ( 1,224 ) — ( 1,224 )

Stock-based compensation expense:

Restricted stock — 4,232 — — — 4,232

Stock options — — — — — —

Stock repurchases — — — — — —

Surrender of stock to settle taxes on restricted stock awards — — — — ( 76 ) ( 76 )

Balance, September 30, 2019 $ 726 $ 1,110,572 $ 973,262 $ ( 76,932 ) $ ( 621,284 ) $ 1,386,344

Nine Months Ended September 30, 2019 Common Stock Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive Loss Treasury Stock Total Stockholders' Equity

Adoption of ASU 2020-06 — ( 25,683 ) 16,233 — — ( 9,450 )

Balance, March 31, 2021 $ 738 $ 1,100,077 $ 329,750 $ ( 72,914 ) $ ( 625,489 ) $ 732,162

Three Months Ended March 31, 2020 Common Stock Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive Loss Treasury Stock Total Stockholders' Equity

Balance, December 31, 2019 $ 726 $ 1,114,521 $ 797,710 $ ( 67,746 ) $ ( 621,244 ) $ 1,223,967

4 unchanged sentences

Restricted stock 6 1,156 — — — 1,162

Stock options — 53 — — — 53

Stock repurchases — — — — ( 757 ) ( 757 )

Surrender of stock to settle taxes on restricted stock awards — — — — ( 2,665 ) ( 2,665 )

Balance, September 30, 2019 $ 726 $ 1,110,572 $ 973,262 $ ( 76,932 ) $ ( 621,284 ) $ 1,386,344

Balance, March 31, 2020 $ 732 $ 1,115,677 $ 392,669 $ ( 82,537 ) $ ( 623,909 ) $ 802,632

The accompanying notes are an integral part of these financial statements.

3 unchanged sentences

(In Thousands)

Nine Months Ended September 30,

Three Months Ended March 31,

Cash flows from operating activities:

Net loss $ ( 15,810 ) $ ( 405,041 )

Adjustments to reconcile net loss to net cash provided by operating activities:

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

Depreciation and amortization expense 21,520 26,409

15 unchanged sentences

Other operating assets and liabilities, net 1,026 2,650

Net cash flows provided by operating activities 131,142 115,894

Net cash flows provided by (used in) operating activities ( 8,417 ) 5,449

Cash flows from investing activities:

6 unchanged sentences

Revolving credit facility repayments ( 24,220 ) ( 52,404 )

Issuance of 4.75 % convertible senior notes

Purchases of 1.50 % convertible senior notes

( 120,000 ) ( 4,737 )

Other debt and finance lease repayments, net ( 337 ) ( 434 )

Other debt and finance lease activity, net ( 145 ) 35

Payment of financing costs ( 7,961 ) —

1 unchanged sentence

due to vesting of stock awards ( 1,500 ) ( 2,665 )

Purchases of treasury stock — ( 757 )

Net cash flows used in financing activities ( 56,983 ) ( 76,909 )

Net cash flows provided by (used in) financing activities ( 6,606 ) 12,402

Effect of exchange rate changes on cash and cash equivalents ( 111 ) 9

2 unchanged sentences

Cash and cash equivalents, end of period $ 54,513 $ 24,308

Cash paid (received) for:

Cash paid for:

Interest $ 1,842 $ 2,436

14 unchanged sentences

As further discussed in Note 13, "Commitments and Contingencies," the impact of the Coronavirus Disease 2019 ("COVID-19") pandemic and the related economic, business and market disruptions continues to evolve and its future effects remain uncertain.

The actual impact of these developments on the Company will depend on many factors, many of which are beyond management's control and knowledge.

The actual impact of these developments on the Company will depend on numerous factors, many of which are beyond management's control and knowledge.

It is therefore difficult for management to assess or predict with precision the broad future effect of this health crisis on the global economy, the energy industry or the Company.

During the first nine months of 2020, the Company recorded asset impairments, severance and facility closure charges in response to these recent developments, as further discussed in Note 3, "Asset Impairments and Other Charges." As additional information becomes available, events or circumstances change and strategic operational decisions are made by management, further adjustments may be required which could have a material adverse impact on the Company's consolidated financial position, results of operations and cash flows.

During 2020 and the first quarter of 2021, the Company recorded asset impairments, severance and facility closure charges in response to these developments as further discussed in Note 3, "Asset Impairments and Other Restructuring Items." As additional information becomes available, events or circumstances change and strategic operational decisions are made by management, further adjustments may be required which could have a material adverse impact on the Company's consolidated financial position, results of operations and cash flows.

The preparation of condensed consolidated financial statements in conformity with GAAP requires the use of estimates and assumptions by management in determining the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.

Examples of such estimates include, but are not limited to, goodwill and other asset impairments, revenue and income recognized over time, valuation allowances recorded on deferred tax assets, reserves on inventory, allowances for doubtful accounts, and potential future adjustments related to contractual indemnification and other agreements.

Examples of such estimates include, but are not limited to, goodwill and long-lived asset impairments, revenue and income recognized over time, valuation allowances recorded on deferred tax assets, reserves on inventory, allowances for doubtful accounts, settlement of litigation and potential future adjustments related to contractual indemnification and other agreements.

Actual results could materially differ from those estimates.

3 unchanged sentences

Unless otherwise discussed, management believes that the impact of recently issued standards, which are not yet effective, will not have a material impact on the Company's consolidated financial statements upon adoption.

In August 2020, the FASB issued updated guidance to simplify the accounting for convertible instruments and contracts in an entity's own equity.

This new guidance will eliminate the current requirement that the carrying value of convertible debt instruments, including the Company's 1.50 % convertible senior notes due 2023 (the "Notes"), be allocated between the debt and equity components.

As permitted under the standard, the Company plans to adopt the new guidance on January 1, 2021 using the modified retrospective transition method.

Upon initial evaluation, the Company believes the key changes upon adoption will be to increase the carrying value of the debt component of the Notes and reduce the reported level of interest expense recognized over the remaining life of the Notes.

Based on the $ 157.4 million principal amount of the Notes outstanding as of September 30, 2020, the Company estimates that the adoption of the standard on January 1, 2021 will result in a $ 12.2 million increase in the net carrying value of the Notes, a $ 3.7 million decrease in deferred income taxes and an $ 8.5 million net decrease in stockholders' equity.

Beginning on January 1, 2021, the effective interest rate associated with the Notes is expected to decrease from approximately 6 % to approximately 2 %, which compares to the contractual cash interest rate of 1.50 %.

In August 2020, the FASB issued updated guidance to simplify the accounting for convertible instruments and contracts in an entity's own equity (referred to as "ASU 2020-06").

This guidance eliminated the requirement that the carrying value of convertible debt instruments, such as the Company's 1.50 % convertible senior notes due 2023 (the "2023 Notes"), be allocated between debt and equity components.

As permitted under the standard, the Company adopted the guidance on January 1, 2021, using the modified retrospective transition method.

Adoption of the standard resulted in a $ 12.2 million increase in the net carrying value of the 2023 Notes, a $ 2.7 million decrease in deferred income taxes and an $ 9.5 million net decrease in stockholders' equity.

The effective interest rate associated with the 2023 Notes after adoption decreased from approximately 6 % to approximately 2 %, which compares to the contractual interest rate of 1.50 %.

As further discussed in Note 6, "Long-term Debt," the Company issued $ 135 million principal amount of its 4.75 % convertible senior notes due 2026 (the "2026 Notes") on March 19, 2021, which have been accounted for in accordance with the provisions of ASU 2020-06.

OIL STATES INTERNATIONAL, INC.

2 unchanged sentences

FINANCIAL STATEMENTS

In June 2016, the FASB issued guidance on credit impairment for short-term receivables which, as amended, introduces the recognition of management's current estimate of credit losses that are expected to occur over the remaining life of a financial asset.

The Company adopted this guidance on January 1, 2020, using the optional transition method of recognizing any cumulative effect of adopting this guidance as an adjustment to the opening balance of retained earnings.

The cumulative impact of the adoption of the new standard was not material to the Company's consolidated financial statements.

Prior periods were not retrospectively adjusted.

Asset Impairments and Other Charges

In March of 2020, the spot price of West Texas Intermediate ("WTI") crude oil declined over 50 % in response to current and expected material reductions in global demand stemming from the global response to the COVID-19 pandemic, coupled with announcements by Saudi Arabia and Russia of plans to increase crude oil production.

Asset Impairments and Other Restructuring Items

In March of 2020, the spot price of West Texas Intermediate ("WTI") crude oil declined over 50 % in response to actual and forecasted reductions in global demand for crude oil due to the COVID-19 pandemic, coupled with announcements by Saudi Arabia and Russia of plans to increase crude oil production in an effort to protect market share.

Following this unprecedented collapse in crude oil prices, the spot price of Brent and WTI crude oil closed at $ 15 and $ 21 per barrel, respectively, on March 31, 2020.

Crude oil prices further declined in April of 2020 to record low levels, and while the spot price of Brent and WTI crude oil increased to an average of $ 43 and $ 41 per barrel, respectively, in the third quarter of 2020, these average prices continue to be depressed versus historical price levels.

Demand for most of the Company's products and services depends substantially on the level of capital expenditures by the oil and natural gas industry.

The decline in oil prices has, and is expected to continue to, result in further near-term reductions to most of the Company's customers' drilling, completion and production activities and their related spending on products and services, particularly in the U.S.

shale play regions.

These conditions may also result in a material adverse impact on certain customers' liquidity and financial position, leading to further spending reductions, delays in the collection of amounts owed and in certain instances, non-payment of amounts owed.

Consistent with oilfield service industry peers, the Company's stock price declined dramatically during the first quarter of 2020, with its market capitalization falling substantially below the carrying value of stockholders' equity.

Demand for most of the Company's products and services depends substantially on the level of capital expenditures invested in the oil and natural gas industry, which reached 15-year lows in 2020.

The decline in oil prices, coupled with higher crude oil inventory levels in 2020, caused rapid reductions in most of the Company's customers' drilling, completion and production activities and their related spending on products and services, particularly those supporting activities in the U.S.

shale play regions.

While crude oil prices have recovered significantly since reaching record low levels in April 2020, with crude oil inventory levels moderating, there remains some uncertainty around the timing of demand recovery to pre-COVID-19 levels.

These conditions have and may continue to result in adverse impacts on certain customers' liquidity and financial position, leading to further spending reductions, delays in the collection of amounts owed and in certain instances, non-payment of amounts owed.

Following these March 2020 events, the Company immediately implemented significant cost reduction initiatives.

1 unchanged sentence

As a result of these events, actions and assessments, the Company recorded the following charges during the first quarter of 2020 (in thousands):

Completion Services Drilling Services Downhole Technologies Offshore/

Manufactured Products Pre-tax Total Tax After-tax Total

Impairments of goodwill $ 127,054 $ — $ 192,502 $ 86,500 $ 406,056 $ 19,600 $ 386,456

Impairments of fixed assets — 5,198 — — 5,198 1,092 4,106

Impairments of inventories (Note 4)

Manufactured Products Downhole Technologies Well Site Services Corporate Pre-tax Total Tax After-tax Total

Impairments of:

$ 86,500 $ 192,502 $ 127,054 $ — $ 406,056 $ 19,600 $ 386,456

Severance and facility closure costs 331 217 — 112 660 139 521

During the second and third quarters of 2020, the Company further reduced its workforce and closed additional facilities in the United States and continued to assess the carrying value of its assets based on the industry outlook regarding demand for and pricing of its products and services, and recorded the following charges (in thousands):

Completion Services Downhole Technologies Offshore/ Manufactured Products Corporate Pre-tax Total Tax After-tax Total

Second quarter 2020

Fixed assets — — 5,198 — 5,198 1,092 4,106

Inventories (Note 4)

16,249 — 8,981 — 25,230 4,736 20,494

Severance and restructuring charges 112 — 548 — 660 139 521

During the first quarter of 2021, the Company further reduced its workforce, closed additional facilities in the United States and continued to assess the carrying value of its assets based on the industry outlook regarding demand for and pricing of its products and services, and recorded the following charges (in thousands):

Offshore/ Manufactured Products Downhole Technologies Well Site Services Corporate Pre-tax Total Tax After-tax Total

Impairments of fixed assets $ — $ — $ 650 $ — $ 650 $ 137 $ 513

Severance and facility closure costs 3,544 1,315 322 216 5,397 1,133 4,264

Third quarter 2020

Impairments of inventories (Note 4) $ — $ 5,921 $ — $ — $ 5,921 $ 1,243 $ 4,678

Severance and facility closure costs — — 288 — 288 60 228

Severance and restructuring charges 282 275 1,306 1,555 3,418 717 2,701

Additionally, during the first quarter of 2021, the Company recognized an aggregate $ 4.8 million reduction of payroll tax expense (within cost of revenues and selling, general and administrative expense) as part of the Coronavirus Aid, Relief and Economic Security Act (the "CARES Act") employee retention credit program.

The Company continues to evaluate additional benefits potentially available to it under the CARES Act.

OIL STATES INTERNATIONAL, INC.

2 unchanged sentences

FINANCIAL STATEMENTS

The Company has three reporting units – Completion Services, Downhole Technologies and Offshore/Manufactured Products – with goodwill balances totaling $ 482.3 million as of December 31, 2019.

Goodwill is allocated to each reporting unit from acquisitions made by the Company.

In accordance with current accounting guidance, the Company does not amortize goodwill, but rather assesses goodwill for impairment annually and when an event occurs or circumstances change that indicate the carrying amounts may not be recoverable.

Goodwill is allocated to each reporting unit based on acquisitions made by the Company and is assessed for impairment annually and when an event occurs or circumstances change that indicate the carrying amounts may not be recoverable.

If the carrying amount of a reporting unit exceeds its fair value, goodwill is considered impaired and an impairment loss is recorded.

The Company had three reporting units – Offshore/Manufactured Products, Downhole Technologies and Well Site Services – whose goodwill balances totaled $ 482.3 million as of December 31, 2019.

Given the significance of the March 2020 events described above, the Company performed a quantitative assessment of goodwill for impairment as of March 31, 2020.

This interim assessment indicated that the fair value of each of the reporting units was less than their respective carrying amounts.

This interim assessment indicated that the fair value of each of the reporting units was less than their respective carrying amounts due to, among other factors, the significant decline in the Company's stock price (and that of its peers) and reduced growth rate expectations given weak energy market conditions resulting from the demand destruction caused by the global response to the COVID-19 pandemic.

In addition, the estimated returns required by market participants increased materially in the Company's March 31, 2020 assessment from the assessment performed as of December 1, 2019, resulting in higher discount rates used in the discounted cash flow analysis.

Management utilizes, depending on circumstances, a combination of valuation methodologies including a market approach and an income approach, as well as guideline public company comparables.

The valuation techniques used in the March 31, 2020 assessment were consistent with those used during the December 1, 2019 assessment, except for the Completion Services reporting unit where the income approach was used to estimate its fair value – with the market approach used only to validate the results in 2020.

The fair values of each of the Company's reporting units were determined using significant unobservable inputs (Level 3 fair value measurements).

This approach estimates fair value by discounting the Company's forecasts of future cash flows by a discount rate (expected return) that a market participant is expected to require.

Significant assumptions and estimates used in the income approach include, among others, estimated future net annual cash flows and discount rates for each reporting unit, current and anticipated market conditions, estimated growth rates and historical data.

These estimates rely upon significant management judgment, particularly given the continued uncertainties regarding the COVID-19 pandemic and its impact on activity levels and commodity prices as well as future global economic growth.

Based on this quantitative assessment as of March 31, 2020, the Company concluded that goodwill recorded in the Completion Services and Downhole Technologies businesses was fully impaired while goodwill recorded in the Offshore/Manufactured Products business was partially impaired.

The Company therefore recognized non-cash goodwill impairment charges totaling $ 406.1 million in the first quarter of 2020.

These impairment charges did not impact the Company's liquidity position, debt covenants or cash flows.

The discount rates used to value the Company's reporting units as of March 31, 2020 ranged between 16.8 % and 18.5 %.

Holding all other assumptions and inputs used in the discounted cash flow analysis constant, a 50 basis point increase in the discount rate assumption for the Offshore/Manufactured Products reporting unit would have increased the goodwill impairment charge by approximately $ 10 million.

A summary of changes in the carrying values of goodwill by reporting unit in the first nine months of 2020 is presented in Note 4, "Details of Selected Balance Sheet Accounts."

The fair values of the Company's reporting units were determined using significant unobservable inputs (Level 3 fair value measurements).

Based on this quantitative assessment as of March 31, 2020, the Company concluded that goodwill recorded in the Downhole Technologies and Well Site Services segments was fully impaired while goodwill recorded in the Offshore/Manufactured Products segment was partially impaired.

The Company therefore recognized non-cash goodwill impairment charges totaling $ 406.1 million in the first quarter of 2020, as presented in further detail in the table above.

The Company performed its annual quantitative assessment of goodwill as of December 1, 2020, which indicated that the fair value of the Offshore/Manufactured Products segment was greater than its carrying amount and no additional provision for impairment was required.

The Company's remaining goodwill within the segment totaled approximately $ 76.5 million as of March 31, 2021 and December 31, 2020.

Long-lived Assets

The Company also assesses the carrying value of long-lived assets, including property, plant and equipment, operating lease assets and other intangible assets held by each of its four reporting units.

As a result of the March 2020 assessment, the Company concluded that property and equipment held by the Drilling Services reporting unit was further impaired and recognized a non-cash fixed asset impairment charge of $ 5.2 million in the first quarter of 2020.

During the second quarter of 2020, the Company concluded that certain facilities held for sale by the Completion Services reporting unit were impaired and recognized a non-cash fixed asset impairment charge of $ 3.0 million to reduce the carrying value of the facilities to their estimated realizable value based on the current market environment.

The Company performed a qualitative assessment of goodwill and long-lived assets as of September 30, 2020 and concluded that no further impairment evaluation was required.

As a result, no material impairments of goodwill or long-lived assets were recorded in the third quarter of 2020.

Should, among other events and circumstances, global economic and industry conditions further deteriorate, the COVID-19 pandemic business and market disruptions worsen, the outlook for future operating results and cash flow for any of the Company's reporting units decline, income tax rates increase or regulations change, costs of equity or debt capital increase, valuations for comparable public companies or comparable acquisition valuations decrease, or management implement strategic decisions based on industry conditions, the Company may need to recognize additional impairment losses in future periods.

As a result of the March 2020 assessment, the Company concluded that certain drilling-related property and equipment held by the Well Site Services segment was impaired and recognized a non-cash fixed asset impairment charge of $ 5.2 million in the first quarter of 2020.

During the first quarter of 2021, the Well Site Services segment recognized non-cash fixed asset impairment charges of $ 0.7 million associated with the closure of additional facilities and other management actions.

Should, among other events and circumstances, global economic and industry conditions deteriorate, the COVID-19 pandemic business and market disruptions worsen, the outlook for future operating results and cash flow for any of the Company's reporting units decline, income tax rates increase or regulations change, costs of equity or debt capital increase, valuations for comparable public companies or comparable acquisition valuations decrease, or management implement strategic decisions based on industry conditions, the Company may need to recognize additional impairment losses in future periods.

OIL STATES INTERNATIONAL, INC.

3 unchanged sentences

Details of Selected Balance Sheet Accounts

Additional information regarding selected balance sheet accounts as of September 30, 2020 and December 31, 2019 is presented below (in thousands):

September 30,

Additional information regarding selected balance sheet accounts as of March 31, 2021 and December 31, 2020 is presented below (in thousands):

2021 December 31,

8 unchanged sentences

Allowance for doubtful accounts as a percentage of total accounts receivable 5 % 5 %

September 30,

2021 December 31,

Deferred revenue (contract liabilities) $ 43,207 $ 43,384

For the nine months ended September 30, 2020, the $ 0.8 million net decrease in contract assets was primarily attributable to $ 22.8 million transferred to accounts receivable, which was substantially offset by $ 22.0 million in revenue recognized during the period.

Deferred revenue (contract liabilities) increased by $ 31.1 million in 2020, primarily reflecting $ 46.4 million in new customer billings which were not recognized as revenue during the period, partially offset by the recognition of $ 15.2 million of revenue that was deferred at the beginning of the period.

As of September 30, 2020, accounts receivable, net in the United States, the United Kingdom and Singapore represented 62 %, 17 % and 12 %, respectively, of the respective total.

No other country or single customer accounted for more than 10% of the Company's total accounts receivable as of September 30, 2020.

The Company maintains allowances for doubtful accounts for estimated losses resulting from the inability of the Company's customers to make required payments.

Determination of the collectability of amounts due from customers requires us to make judgments regarding future events and trends.

Allowances for doubtful accounts are established through an assessment of the Company's portfolio on an individual customer and consolidated basis taking into account current and expected future market conditions and trends.

This process consists of a thorough review of historical collection experience, current aging status of the customer accounts, and financial condition of the Company's customers as well as political and economic factors in countries of operations and other customer-specific factors.

Based on a review of these factors, the Company establishes or adjusts allowances for trade and unbilled receivables as well as contract assets.

If a customer receivable is deemed to be uncollectible, the receivable is charged-off against allowance for doubtful accounts.

If the financial condition of the Company's customers were to deteriorate, adversely affecting their ability to make payments, additional allowances would be required.

The following provides a summary of activity in the allowance for doubtful accounts for the nine months ended September 30, 2020 and 2019 (in thousands):

For the three months ended March 31, 2021, the $ 5.9 million net decrease in contract assets was primarily attributable to $ 16.8 million transferred to accounts receivable, which was partially offset by $ 10.9 million in revenue recognized during the period.

Deferred revenue (contract liabilities) decreased by $ 0.2 million in the first quarter of 2021, primarily reflecting the recognition of $ 3.0 million of revenue that was deferred at the beginning of the period, substantially offset by $ 2.8 million in new customer billings which were not recognized as revenue during the period.

As of March 31, 2021, accounts receivable, net in the United States and the United Kingdom represented 70 % and 18 %, respectively, of the total.

No other country or single customer accounted for more than 10% of the Company's total accounts receivable as of March 31, 2021.

The following provides a summary of activity in the allowance for doubtful accounts for the three months ended March 31, 2021 and 2020 (in thousands):

Three Months Ended March 31,

Allowance for doubtful accounts – January 1 $ 8,304 $ 8,745

2 unchanged sentences

Other 143 1,137

Allowance for doubtful accounts – September 30 10,200 6,971

OIL STATES INTERNATIONAL, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

September 30,

Allowance for doubtful accounts – March 31 $ 8,545 $ 8,686

2021 December 31,

6 unchanged sentences

$ 174,314 $ 170,376

The Company recorded an impairment charge of $ 5.9 million in the third quarter of 2020 to reduce the carrying value of inventories within the Downhole Technologies segment to their estimated net realizable value based on changes in expectations regarding the near-term utility, customer demand and market pricing of certain goods.

The Company recorded impairment charges totaling $ 25.2 million in the first quarter of 2020 to reduce the carrying value of inventories to their estimated net realizable value following the March 2020 decline in crude oil prices, which reduced the near-term utility of certain goods within the Offshore/Manufactured Products and Completion Services operations.

September 30,

OIL STATES INTERNATIONAL, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

2021 December 31,

3 unchanged sentences

Machinery and equipment 241,734 239,986

Completion Services equipment 507,769 510,737

Completion-related rental equipment 505,521 507,755

Office furniture and equipment 32,260 35,767

4 unchanged sentences

$ 365,605 $ 383,562

For the three months ended September 30, 2020 and 2019, depreciation expense was $ 18.0 million and $ 24.6 million, respectively.

Depreciation expense was $ 56.6 million and $ 74.5 million for the nine months ended September 30, 2020 and 2019, respectively.

During the third quarter of 2019, the Company made the strategic decision to reduce the scope of its Drilling Services reporting unit (adjusting from 34 rigs to 9 rigs) due to the ongoing weakness in customer demand for vertical drilling rigs in the U.S.

land market, particularly the Permian Basin, which resulted in the recognition of a $ 33.7 million non-cash fixed asset impairment charge.

As discussed in Note 3, "Asset Impairments and Other Charges," during the first quarter of 2020 the Drilling Services reporting unit recognized a non-cash impairment charge of $ 5.2 million to further reduce the carrying value of the business's fixed assets to their estimated realizable value.

Additionally, in the second quarter of 2020, the Completion Services reporting unit recognized a non-cash impairment charge of $ 3.0 million to reduce the carrying value of certain facilities to their estimated realizable value.

September 30,

For the three months ended March 31, 2021 and 2020, depreciation expense was $ 16.4 million and $ 20.1 million, respectively.

March 31, 2021 December 31, 2020

Amount Accumulated

Amortization Net Carrying Amount Gross

Amount Accumulated

Amortization Net Carrying Amount

Other intangible assets:

Customer relationships $ 168,290 $ 58,158 $ 110,132 $ 168,288 $ 55,380 $ 112,908

Patents/Technology/Know-how 78,293 28,832 49,461 75,920 26,124 49,796

Noncompete agreements — — — 16,044 14,742 1,302

Tradenames and other 53,708 12,616 41,092 53,708 11,965 41,743

$ 300,291 $ 99,606 $ 200,685 $ 313,960 $ 108,211 $ 205,749

For the three months ended March 31, 2021 and 2020, amortization expense was $ 5.2 million and $ 6.3 million, respectively.

2021 December 31,

1 unchanged sentence

Deferred compensation plan $ 23,053 $ 22,801

Deferred income taxes 1,359 1,280

Other 5,539 5,646

$ 29,951 $ 29,727

OIL STATES INTERNATIONAL, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

September 30,

2021 December 31,

7 unchanged sentences

$ 40,552 $ 44,504

Well Site Services Downhole Technologies Offshore/

Manufactured Products Total

Completion Services Drilling Services Subtotal

Balance as of December 31, 2019

Goodwill $ 221,582 $ 22,767 $ 244,349 $ 357,502 $ 162,750 $ 764,601

Accumulated impairment losses ( 94,528 ) ( 22,767 ) ( 117,295 ) ( 165,000 ) — ( 282,295 )

127,054 — 127,054 192,502 162,750 482,306

Goodwill impairments (1)

( 127,054 ) — ( 127,054 ) ( 192,502 ) ( 86,500 ) ( 406,056 )

Foreign currency translation — — — — ( 199 ) ( 199 )

Balance as of September 30, 2020 $ — $ — $ — $ — $ 76,051 $ 76,051

________________

(1) See Note 3, "Asset Impairments and Other Charges" for discussion of first quarter 2020 goodwill impairments.

Other Intangible Assets:

September 30, 2020 December 31, 2019

Amount Accumulated

Amortization Net Carrying Amount Gross

Amount Accumulated

Amortization Net Carrying Amount

Customer relationships $ 168,271 $ 52,598 $ 115,673 $ 168,278 $ 44,296 $ 123,982

Patents/Technology/Know-how 75,741 24,617 51,124 85,919 30,791 55,128

Noncompete agreements 16,010 13,542 2,468 17,125 11,061 6,064

Tradenames and other 53,708 11,169 42,539 53,708 8,791 44,917

$ 313,730 $ 101,926 $ 211,804 $ 325,030 $ 94,939 $ 230,091

For the three months ended September 30, 2020 and 2019, amortization expense was $ 6.2 million and $ 6.8 million, respectively.

Amortization expense was $ 18.7 million and $ 20.3 million for the nine months ended September 30, 2020 and 2019, respectively.

OIL STATES INTERNATIONAL, INC.

3 unchanged sentences

Net Loss Per Share

The table below provides a reconciliation of the numerators and denominators of basic and diluted net loss per share for the three and nine months ended September 30, 2020 and 2019 (in thousands, except per share amounts):

The table below provides a reconciliation of the numerators and denominators of basic and diluted net loss per share for the three months ended March 31, 2021 and 2020 (in thousands, except per share amounts):

Three Months Ended

September 30, Nine Months Ended

September 30,

2020 2019 2020 2019

Net loss $ ( 15,810 ) $ ( 405,041 )

11 unchanged sentences

Diluted ( 0.26 ) ( 6.79 )

The calculation of diluted net loss per share for the three and nine months ended September 30, 2020 excluded 560 thousand shares and 595 thousand shares, respectively, issuable pursuant to outstanding stock options, due to their antidilutive effect.

The calculation of diluted net loss per share for the three and nine months ended September 30, 2019 excluded 643 thousand shares and 665 thousand shares, respectively, issuable pursuant to outstanding stock options, due to their antidilutive effect.

Additionally, shares issuable upon conversion of the 1.50 % convertible senior notes were excluded for the three and nine month periods ended September 30, 2020 and 2019, due to their antidilutive effect.

The calculation of diluted net loss per share for the three months ended March 31, 2021 and 2020 excluded 500 thousand shares and 629 thousand shares, respectively, issuable pursuant to outstanding stock options, due to their antidilutive effect.

Additionally, shares issuable upon conversion of both the 2023 Notes and the 2026 Notes were excluded due to, among other factors, their antidilutive effect.

Long-term Debt

As of September 30, 2020 and December 31, 2019, long-term debt consisted of the following (in thousands):

September 30,

As of March 31, 2021 and December 31, 2020, long-term debt consisted of the following (in thousands):

2021 December 31,

Revolving credit facility due January 2022 (1)

Revolving credit facilities (1)

$ 3,807 $ 18,408

1.50 % convertible senior notes due February 2023 (2)

2023 Notes (2)

32,022 143,242

2026 Notes (3)

Promissory note 17,095 17,095

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____________________

(1) Presented net of $ 1.3 million and $ 1.4 million of unamortized debt issuance costs as of September 30, 2020 and December 31, 2019, respectively.

(2) The outstanding principal amount of the 1.50 % convertible senior notes was $ 157.4 million and $ 192.3 million as of September 30, 2020 and December 31, 2019, respectively.

(1) Presented net of $ 3.2 million and $ 0.6 million of unamortized debt issuance costs as of March 31, 2021 and December 31, 2020, respectively.

(2) The outstanding principal amount of the 2023 Notes was $ 32.4 million and $ 157.4 million as of March 31, 2021 and December 31, 2020, respectively.

(3) The outstanding principal amount of the 2026 Notes was $ 135.0 million as of March 31, 2021.

OIL STATES INTERNATIONAL, INC.

2 unchanged sentences

FINANCIAL STATEMENTS

Revolving Credit Facility due January 2022

The Company's senior secured revolving credit facility (the "Revolving Credit Facility") is governed by an amended and restated credit agreement with Wells Fargo Bank, N.A., as administrative agent for the lenders party thereto, and the lenders and other financial institutions from time to time party thereto, dated as of January 30, 2018 (the "Credit Agreement"), which matures on January 30, 2022.

Prior to June 17, 2020, the Revolving Credit Facility provided for $ 350.0 million in lender commitments, including $ 50.0 million available for the issuance of letters of credit.

On June 17, 2020, the Company entered into an omnibus amendment to the Credit Agreement (as amended, the "Amended Credit Agreement").

Lender commitments under the Amended Credit Agreement were reduced to $ 200.0 million in exchange for the suspension of the financial covenants described below from July 1, 2020 through March 30, 2021.

During the financial covenant suspension period, borrowing availability under the Revolving Credit Facility (as amended, the "Amended Revolving Credit Facility") is limited to 85 % of the lesser of (i) $ 200.0 million or (ii) a borrowing base, calculated monthly, equal to the sum of 70 % of the consolidated net book value of eligible receivables and 20 % of the consolidated net book value of eligible inventory (the "Borrowing Base").

As of September 30, 2020, the Company had $ 19.0 million of borrowings outstanding under the Amended Revolving Credit Facility and $ 31.2 million of outstanding letters of credit.

The total amount available to be drawn as of October 1, 2020 was $ 83.8 million, calculated based on 85 % of the current Borrowing Base less outstanding borrowings and letters of credit.

Prior to June 17, 2020, amounts outstanding under the Revolving Credit Facility accrued interest at LIBOR plus a margin of 1.75 % to 3.00 %, or at a base rate plus a margin of 0.75 % to 2.00 %, in each case based on a ratio of the Company's total net funded debt to consolidated EBITDA (as defined in the Credit Agreement).

The Company was also required to pay a quarterly commitment fee of 0.25 % to 0.50 %, based on the Company's ratio of total net funded debt to consolidated EBITDA, on the unused commitments under the Credit Agreement.

Effective June 17, 2020, borrowings outstanding under the Amended Revolving Credit Facility bear interest at LIBOR plus a margin of 2.50 % to 3.75 %, or at a base rate plus a margin of 1.50 % to 2.75 %, in each case based on a ratio of the Company's total net funded debt to consolidated EBITDA.

The Company must also pay a quarterly commitment fee of 0.50 %, based on unused commitments under the Amended Credit Agreement.

The Company expensed $ 0.5 million of previously deferred financing costs in the second quarter of 2020, which is included in interest expense, net, as a result of the amendment of the Credit Agreement.

The Amended Credit Agreement contains customary financial covenants and restrictions.

Specifically, except for the period from July 1, 2020 through March 30, 2021, the Company must maintain an interest coverage ratio, defined as the ratio of consolidated EBITDA to consolidated interest expense, of at least 3.0 to 1.0, a maximum senior secured leverage ratio, defined as the ratio of senior secured debt to consolidated EBITDA, of no greater than 2.25 to 1.0 and a total net leverage ratio, defined as the ratio of total net funded debt to consolidated EBITDA, of no greater than 3.75 to 1.0.

The various components used in the calculation of these ratios are defined in the Amended Credit Agreement.

Consolidated EBITDA and consolidated interest expense, as defined, exclude non-cash goodwill, fixed asset and inventory impairment charges, gains or losses on the extinguishment of debt, debt discount amortization, stock-based compensation expense and other non-cash charges.

Borrowings under the Amended Credit Agreement are secured by a pledge of substantially all of the Company's assets and the assets of its domestic subsidiaries.

The Company's obligations under the Amended Credit Agreement are guaranteed by its significant domestic subsidiaries.

The Amended Credit Agreement also contains negative covenants that limit the Company's ability to accumulate cash in excess of $ 45.0 million in the United States, borrow additional funds, encumber assets, pay dividends, sell assets, repurchase shares of common stock and enter into other significant transactions.

Under the Amended Credit Agreement, the occurrence of specified change of control events involving the Company would constitute an event of default that would permit the banks to, among other things, accelerate the maturity of the facility and cause it to become immediately due and payable in full.

Revolving Credit Facilities

On February 10, 2021, the Company entered into a senior secured credit facility with certain lenders, which provides for a $ 125.0 million asset-based revolving credit facility (the "ABL Facility") under which credit availability is subject to a borrowing base calculation.

Concurrent with entering into this facility, the Former Facility (discussed below) was terminated.

On March 16, 2021, the Company entered into an amendment to the ABL Facility that permitted the Company to incur the indebtedness represented by the 2026 Notes.

The ABL Facility is governed by a credit agreement, as amended, with Wells Fargo Bank, National Association, as administrative agent and the lenders and other financial institutions from time to time party thereto (the "ABL Agreement").

The ABL Agreement matures on February 10, 2025 with a springing maturity 91 days prior to the maturity of any outstanding indebtedness with a principal amount in excess of $ 17.5 million (excluding the unsecured promissory note discussed below).

The ABL Agreement provides funding based on a borrowing base calculation that includes eligible U.S.

customer accounts receivable and inventory and provides for a $ 50.0 million sub-limit for the issuance of letters of credit.

Borrowings under the ABL Agreement are secured by a pledge of substantially all of the Company's domestic assets (other than real property) and the stock of certain foreign subsidiaries.

Borrowings under the ABL Agreement bear interest at a rate equal to the London Interbank Offered Rate ("LIBOR") plus a margin of 2.75 % to 3.25 % and subject to a LIBOR floor rate of 0.50 %, or at a base rate plus a margin of 1.75 % to 2.25 %, in each case based on average borrowing availability.

The Company must also pay a quarterly commitment fee of 0.375 % to 0.50 % per annum, based on unused commitments under the ABL Agreement.

The ABL Agreement places restrictions on the Company's ability to incur additional indebtedness, grant liens on assets, pay dividends or make distributions on equity interests, dispose of assets, make investments, repay other indebtedness (including the 2023 Notes and the 2026 Notes), engage in mergers, and other matters, in each case, subject to certain exceptions.

The ABL Agreement contains customary default provisions, which, if triggered, could result in acceleration of all amounts then outstanding.

The ABL Agreement also requires the Company to satisfy and maintain a fixed charge coverage ratio of not less than 1.0 to 1.0 for specified periods of time in the event that availability under the ABL Agreement is less than the greater of 15 % of the borrowing base and $ 14.1 million or if an event of default has occurred and is continuing.

As of March 31, 2021, the Company had $ 7.0 million of borrowings outstanding under the ABL Agreement and $ 19.0 million of outstanding letters of credit.

The total amount available to be drawn as of March 31, 2021 was $ 40.6 million, calculated based on the current borrowing base less outstanding borrowings and letters of credit.

As of March 31, 2021, the Company was in compliance with its debt covenants under the ABL Agreement.

Former Facility

The Company's former senior secured revolving credit facility was governed by a credit agreement which was scheduled to mature on January 30, 2022.

On June 17, 2020, the Company entered into an omnibus amendment to the credit agreement, under which lender commitments were reduced in exchange for the suspension of certain financial covenants through March 30, 2021.

OIL STATES INTERNATIONAL, INC.

2 unchanged sentences

FINANCIAL STATEMENTS

1.50 % Convertible Senior Notes due February 2023

The following provides a summary of the more significant provisions of the Company's former revolving credit facility.

Prior to June 17, 2020 From June 17, 2020 to February 10, 2021

Lender commitments $ 350 million $ 200 million

Interest rate on outstanding borrowings (1) :

LIBOR based borrowings LIBOR plus a margin of 1.75 % to 3.00 %

LIBOR plus a margin of 2.50 % to 3.75 %

Base-rate based borrowings Base rate plus a margin of 0.75 % to 2.00 %

Base rate plus a margin of 1.50 % to 2.75 %

Commitment fees (2)

0.25 % to 0.50 %

0.375 % to 0.50 %

____________________

(1) Based on the ratio of the Company's total net funded debt to consolidated EBITDA.

(2) Based on unused commitments under the credit agreement.

On March 19, 2021, the Company issued $ 135 million aggregate principal amount of the 2026 Notes pursuant to an indenture, dated as of March 19, 2021 (the "2026 Indenture"), between the Company and Wells Fargo Bank, National Association, as trustee.

Net proceeds from the 2026 Notes offering, after deducting issuance costs, totaled $ 130.3 million.

The Company used $ 120.0 million of the cash proceeds to purchase $ 125.0 million principal amount of the outstanding 2023 Notes, with the balance added to cash on-hand.

The 2026 Notes bear interest at a rate of 4.75 % per year until maturity.

Interest is payable semi-annually in arrears on April 1 and October 1 of each year.

In addition, additional interest and special interest may accrue on the 2026 Notes under certain circumstances as described in the 2026 Indenture.

The 2026 Notes will mature on April 1, 2026, unless earlier repurchased, redeemed or converted.

The initial conversion rate is 95.3516 shares of the Company's common stock per $1,000 principal amount of 2026 Notes (equivalent to an initial conversion price of approximately $ 10.49 per share of common stock).

The conversion rate, and thus the conversion price, may be adjusted under certain circumstances as described in the 2026 Indenture.

The Company's intent is to repay the principal amount of the 2026 Notes in cash and settle the conversion feature in shares of the Company's common stock.

Noteholders may convert their 2026 Notes, at their option, only in the following circumstances:

(1) during any calendar quarter commencing after the calendar quarter ending on June 30, 2021, if the last reported sale price per share of the Company's common stock exceeds 130 % of the conversion price for each of at least 20 trading days during the 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter;

(2) during the five consecutive business days immediately after any five consecutive trading day period (such five consecutive trading day period, the "measurement period") in which the trading price per $1,000 principal amount of the 2026 Notes for each trading day of the measurement period was less than 98 % of the product of the last reported sale price per share of the Company's common stock on such trading day and the conversion rate on such trading day;

(3) upon the occurrence of certain corporate events or distributions on the Company's common stock, as described in the 2026 Indenture;

or (4) if the Company calls the 2026 Notes for redemption, or at any time from, and including, January 1, 2026 until the close of business on the second scheduled trading day immediately before the maturity date.

The Company will settle conversions by paying or delivering, as applicable, cash, shares of common stock or a combination of cash and shares of common stock, at the Company's election, based on the applicable conversion rate(s).

If the Company elects to deliver cash or a combination of cash and shares of common stock, then the consideration due upon conversion will be based on a defined observation period.

The 2026 Notes will be redeemable, in whole or in part, at the Company's option on or after April 6, 2024, at a cash redemption price equal to the principal amount of the 2026 Notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date, but only if the last reported sale price per share of common stock exceeds 130 % of the conversion price on each of at least 20 trading days during the 30 consecutive trading days ending on, and including, the trading day immediately before the date the Company sends the related redemption notice.

If specified change in control events involving the Company as defined in the 2026 Indenture occur, then noteholders may require the Company to repurchase their 2026 Notes at a cash repurchase price equal to the principal amount of the 2026 Notes to be repurchased, plus accrued and unpaid interest.

Additionally, the 2026 Indenture contains certain events of default,

OIL STATES INTERNATIONAL, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

including certain defaults by the Company with respect to other indebtedness of at least $ 40.0 million.

As of March 31, 2021, none of the conditions allowing holders of the 2026 Notes to convert, or requiring the Company to repurchase the 2026 Notes, had been met.

On January 30, 2018, the Company issued $ 200 million aggregate principal amount of the 2023 Notes pursuant to an indenture, dated as of January 30, 2018 (the "2023 Indenture"), between the Company and Wells Fargo Bank, National Association, as trustee.

During the three months ended September 30, 2020, the Company purchased $ 17.2 million principal amount of the outstanding Notes for $ 9.5 million in cash.

The net carrying amount of the liability component of these Notes totaled $ 15.4 million.

In connection with extinguishment of these Notes, the Company recognized non-cash gains totaling $ 5.9 million during the third quarter of 2020, which is included within other income, net.

During the nine months ended September 30, 2020, the Company purchased $ 34.9 million principal amount of the outstanding Notes for $ 20.1 million in cash.

The net carrying amount of the liability component of these Notes totaled $ 30.8 million.

In connection with extinguishment of these Notes, the Company recognized non-cash gains totaling $ 10.7 million during the first nine months of 2020, which is included within other income, net.

Since September 2019, the Company has purchased $ 42.6 million principal amount of the outstanding notes for $ 26.8 million in cash.

The initial carrying amount of the Notes recorded in the consolidated balance sheet was less than the $ 200 million principal amount of the Notes, in accordance with the currently applicable accounting principles, reflective of the estimated fair value of a similar debt instrument that does not have a conversion feature.

The Company recorded the value of the conversion feature as a debt discount, which is amortized as interest expense over the term of the Notes, with a similar amount allocated to additional paid-in capital.

As a result of this amortization, interest expense currently recognized on the Notes for accounting purposes, reflecting an effective interest rate of approximately 6 %, is greater than cash interest the Company is obligated to pay.

Reported interest expense associated with the Notes for the three and nine months ended September 30, 2020 was $ 2.3 million and $ 7.2 million, respectively, while the related contractual cash interest expense totaled $ 0.6 million and $ 2.0 million, respectively.

Reported interest expense associated with the Notes for the three and nine months ended September 30, 2019 was $ 2.6 million and $ 7.7 million, respectively, while the related contractual cash interest expense totaled $ 0.8 million and $ 2.3 million, respectively.

The following table presents the carrying amount of the Notes in the consolidated balance sheets as of September 30, 2020 and December 31, 2019 (in thousands):

September 30,

During the three months ended March 31, 2021, the Company purchased $ 125.0 million principal amount ($ 123.6 million net carrying amount) of the outstanding 2023 Notes for $ 120.0 million in cash.

In connection with extinguishment of a portion of the 2023 Notes, the Company recognized non-cash gains totaling $ 3.6 million during the first quarter of 2021, which is included as other income, net.

During the three months ended March 31, 2020, the Company purchased $ 5.7 million principal amount of the outstanding 2023 Notes for $ 4.7 million in cash, which approximated the net carrying amount of the related liability.

Since December 31, 2018, the Company has purchased a cumulative $ 167.6 million principal amount of the outstanding 2023 Notes for $ 146.8 million.

The initial carrying amount of the 2023 Notes recorded in the consolidated balance sheet was less than their $ 200 million principal amount, in accordance with then-applicable accounting principles, reflective of the estimated fair value of a similar debt instrument that did not have a conversion feature.

The Company recorded the value of the conversion feature as a debt discount, which was amortized as interest expense over the term of the 2023 Notes, with a similar amount allocated to additional paid-in capital.

As a result of this amortization, prior to the Company's adoption of ASU 2020-06 effective January 1, 2021, the interest expense recognized on the 2023 Notes for accounting purposes was based on an effective interest rate of approximately 6 %, which was greater than the cash interest the Company is obligated to pay.

The following table presents the carrying amount of the 2023 Notes in the consolidated balance sheets as of March 31, 2021 and December 31, 2020 (in thousands):

2021 December 31,

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Net carrying amount of the liability component $ 32,022 $ 143,242

Net carrying amount of the equity component $ 25,683 $ 25,683

See Note 2, "Recent Accounting Pronouncement," for discussion of the FASB's recent revision to accounting guidance for convertible instruments, which will change the Company's method of accounting for the Notes upon its adoption of the standard effective January 1, 2021.

Net carrying amount of the equity component n.a.

See Note 2, "Recent Accounting Pronouncement," for discussion of the recent revision to accounting guidance for convertible instruments, which changed the Company's method of accounting for the 2023 Notes upon its adoption of the standard effective January 1, 2021.

The 2023 Notes bear interest at a rate of 1.50 % per year until maturity.

6 unchanged sentences

Noteholders may convert their 2023 Notes, at their option, only in the following circumstances:

(1) if the last reported sale price per share of the Company's common stock exceeds 130 % of the conversion price for each of at least 20 trading days during the 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter;

(2) during the five consecutive business days immediately after any five consecutive trading day period (such five consecutive trading day period, the "measurement period") in which the trading price per $1,000 principal amount of the Notes for each trading day of the measurement period was less than 98 % of the product of the last reported sale price per share of the Company's common stock on

(1) if the last reported sale price per share of the Company's common stock exceeds 130 % of the conversion price for each of at least 20 trading days

OIL STATES INTERNATIONAL, INC.

2 unchanged sentences

FINANCIAL STATEMENTS

such trading day and the conversion rate on such trading day;

during the 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter;

(2) during the five consecutive business days immediately after any five consecutive trading day period (such five consecutive trading day period, the "measurement period") in which the trading price per $1,000 principal amount of the 2023 Notes for each trading day of the measurement period was less than 98 % of the product of the last reported sale price per share of the Company's common stock on such trading day and the conversion rate on such trading day;

(3) upon the occurrence of certain corporate events or distributions on the Company's common stock, as described in the 2023 Indenture;

2 unchanged sentences

If the Company elects to deliver cash or a combination of cash and shares of common stock, then the consideration due upon conversion will be based on a defined observation period.

The Notes will be redeemable, in whole or in part, at the Company's option at any time, and from time to time, on or after February 15, 2021, at a cash redemption price equal to the principal amount of the Notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date, but only if the last reported sale price per share of common stock exceeds 130 % of the conversion price on each of at least 20 trading days during the 30 consecutive trading days ending on, and including, the trading day immediately before the date the Company sends the related redemption notice.

The 2023 Notes are redeemable, in whole or in part, at the Company's option at a cash redemption price equal to the principal amount of the 2023 Notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date, but only if the last reported sale price per share of common stock exceeds 130 % of the conversion price on each of at least 20 trading days during the 30 consecutive trading days ending on, and including, the trading day immediately before the date the Company sends the related redemption notice.

If specified change in control events involving the Company as defined in the 2023 Indenture occur, then noteholders may require the Company to repurchase their 2023 Notes at a cash repurchase price equal to the principal amount of the 2023 Notes to be repurchased, plus accrued and unpaid interest.

Additionally, the 2023 Indenture contains certain events of default, including certain defaults by the Company with respect to other indebtedness of at least $ 40.0 million.

As of September 30, 2020, none of the conditions allowing holders of the Notes to convert, or requiring the Company to repurchase the Notes, had been met.

As of March 31, 2021, none of the conditions allowing holders of the 2023 Notes to convert, or requiring the Company to repurchase the 2023 Notes, had been met.

Promissory Note

In connection with the 2018 acquisition of GEODynamics, Inc.

("GEODynamics"), the Company issued a $ 25.0 million promissory note that bears interest at 2.50 % per annum and was scheduled to mature on July 12, 2019.

Payments due under the promissory note are subject to set off, in part or in full, against certain indemnification claims related to matters occurring prior to the Company's acquisition of GEODynamics.

The Company has provided notice to and asserted indemnification claims against the seller of GEODynamics.

As a result, the maturity date of the note is extended until these indemnity claims are resolved.

The Company expects that the amount ultimately paid in respect of such note to be reduced by these indemnification claims.

See Note 13, "Commitments and Contingencies," for additional discussion.

In connection with the 2018 acquisition of GEODynamics (the "GEODynamics Acquisition"), the Company issued a $ 25.0 million promissory note that bears interest at 2.50 % per annum and was scheduled to mature on July 12, 2019.

The Company believes that payments due under the promissory note are subject to set-off, in full or in part, against certain indemnification claims related to matters occurring prior to the GEODynamics Acquisition.

The Company has provided notice to and asserted indemnification claims against the seller of GEODynamics (the "Seller"), and the Seller has filed a breach of contract suit against the Company and one of its wholly-owned subsidiaries alleging that payments due under the promissory note are required to be, but have not been, repaid in accordance with the terms of such note.

The Company has incurred settlement costs and expenses of $ 7.9 million related to such indemnification claims, and believes that the maturity date of such note is extended until the resolution of these claims and expects that the amount ultimately paid in respect of such note will be reduced as a result of the indemnification claims.

Accordingly, the Company has reduced the carrying amount of such note in the consolidated balance sheet to $ 17.1 million as of March 31, 2021 and December 31, 2020, which is its current best estimate of what is owed after set-off for such indemnification matters.

See Note 13, "Commitments and Contingencies."

Fair Value Measurements

The Company's financial instruments consist of cash and cash equivalents, investments, receivables, payables and debt instruments.

The Company believes that the carrying values of these instruments, other than the Notes, on the accompanying consolidated balance sheets approximate their fair values.

The estimated fair value of the Notes as of September 30, 2020 was $ 89.7 million based on quoted market prices (a Level 1 fair value measurement), which compares to the $ 157.4 million principal amount of the Notes.

See Note 2, "Recent Accounting Pronouncements."

Stockholders' Equity

The following table provides details with respect to the changes to the number of shares of common stock, $ 0.01 par value, outstanding during the first nine months of 2020 (in thousands):

Shares of common stock outstanding – December 31, 2019 60,501

Restricted stock awards, net of forfeitures 755

Shares withheld for taxes on vesting of stock awards and transferred to treasury ( 225 )

Shares of common stock outstanding – September 30, 2020 61,031

As of September 30, 2020 and December 31, 2019, the Company had 25,000,000 shares of preferred stock, $ 0.01 par value, authorized, with no shares issued or outstanding.

The Company historically maintained a share repurchase program, which was allowed to expire on July 29, 2020.

The Company believes that the carrying values of these instruments, other than the 2023 Notes and 2026 Notes, on the accompanying consolidated balance sheets approximate their fair values.

The estimated fair value of the 2023 Notes as of March 31, 2021 was $ 27.3 million based on quoted market prices (a Level 2 fair value measurement), which compares to the principal amount of $ 32.4 million.

The estimated fair value of the 2026 Notes as of March 31, 2021 was $ 128.4 million based on quoted market prices (a Level 2 fair value measurement), which compares to the principal amount of $ 135.0 million.

OIL STATES INTERNATIONAL, INC.

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FINANCIAL STATEMENTS

Stockholders' Equity

The following table provides details with respect to the changes to the number of shares of common stock, $ 0.01 par value, outstanding during the first three months of 2021 (in thousands):

Shares of common stock outstanding – December 31, 2020 61,005

Restricted stock awards, net of forfeitures 501

Shares withheld for taxes on vesting of stock awards and transferred to treasury ( 225 )

Shares of common stock outstanding – March 31, 2021 61,281

As of March 31, 2021 and December 31, 2020, the Company had 25,000,000 shares of preferred stock, $ 0.01 par value, authorized, with no shares issued or outstanding.

Accumulated Other Comprehensive Loss

Accumulated other comprehensive loss, reported as a component of stockholders' equity, increased from $ 67.7 million at December 31, 2019 to $ 80.4 million at September 30, 2020, due to changes in currency exchange rates.

Accumulated other comprehensive loss, reported as a component of stockholders' equity, increased from $ 71.4 million at December 31, 2020 to $ 72.9 million at March 31, 2021, due to changes in currency exchange rates.

Accumulated other comprehensive loss is primarily related to fluctuations in the currency exchange rates compared to the U.S.

dollar which are used to translate certain of the international operations of the Company's reportable segments.

For the nine months ended September 30, 2020 and 2019, currency translation adjustments recognized as a component of other comprehensive loss were primarily attributable to the United Kingdom and Brazil.

As of September 30, 2020, the exchange rates for the British pound and the Brazilian real compared to the U.S.

dollar weakened by 2 % and 29 %, respectively, compared to the exchange rates at December 31, 2019, contributing to other comprehensive loss of $ 12.7 million reported for the nine months ended September 30, 2020.

During the first nine months of 2019, the exchange rate for the British pound and the Brazilian real compared to the U.S.

dollar weakened by 4 % and 7 %, respectively, compared to the exchange rate at December 31, 2018, contributing to other comprehensive loss of $ 5.5 million reported for the nine months ended September 30, 2019.

dollar which are used to translate certain of the international operations of the Company's operating segments.

For the three months ended March 31, 2021 and 2020, currency translation adjustments recognized as a component of other comprehensive loss were primarily attributable to the United Kingdom and Brazil.

As of March 31, 2021, the exchange rate for the British pound compared to the U.S.

dollar strengthened by 1 % while the exchange rate for the Brazilian real compared to the U.S.

dollar weakened by 8 % compared to the exchange rates at December 31, 2020, contributing to other comprehensive loss of $ 1.5 million reported for the three months ended March 31, 2021.

Long-Term Incentive Compensation

The following table presents a summary of activity for stock options, service-based restricted stock awards and performance-based stock unit awards for the nine months ended September 30, 2020 (in thousands):

The following table presents a summary of activity for stock options, service-based restricted stock awards and performance-based stock unit awards for the three months ended March 31, 2021 (in thousands):

Stock Options Service-based Restricted Stock Performance-based Stock Units

3 unchanged sentences

Forfeited ( 80 ) ( 15 ) ( 42 )

Outstanding – September 30, 2020 550 1,155 304

Outstanding – March 31, 2021 450 1,012 420

Weighted average grant date fair value (2021 awards) $ — $ 6.87 $ 6.84

5 unchanged sentences

If the actual performance falls below the threshold performance level, no restricted shares will vest.

The performance measure for outstanding awards is the Company's EBITDA growth rate over a three-year period.

During the first quarters of 2020 and 2019, the Company issued conditional long-term cash incentive awards ("Cash Awards") of approximately $ 2.0 million and $ 1.4 million, respectively, with the ultimate dollar amount to be awarded ranging from zero to a maximum of $ 4.0 million for the 2020 Cash Award and from zero to a maximum of $ 2.7 million for the 2019 Cash Award.

The performance measure for outstanding awards granted in 2019 and 2020 is the Company's EBITDA growth rate over a three-year period.

The performance measure for outstanding awards granted in 2021 is the Company's cumulative EBITDA over a three-year period.

During the first quarters of 2021 and 2020, the Company issued conditional long-term cash incentive awards ("Cash Awards") of $ 1.5 million and $ 1.5 million (adjusted for forfeitures), respectively, with the ultimate dollar amount to be awarded ranging from zero to a maximum of $ 3.1 million for the 2021 Cash Award and from zero to a maximum of $ 3.0 million for the 2020 Cash Award.

The performance measure for these Cash Awards is relative total stockholder return compared to a peer group of companies measured over a three-year period.

The ultimate dollar amount to be awarded for the 2020 and 2019 Cash Awards is limited to their targeted award value ($ 2.0 million and $ 1.4 million, respectively) if the Company's total stockholder return is negative over the performance period.

The obligation related to the Cash Awards is classified as a liability and recognized over the vesting period.

Stock-based compensation expense recognized during the three and nine months ended September 30, 2020 totaled $ 2.1 million and $ 5.3 million, respectively.

Stock-based compensation expense recognized during the three and nine months ended September 30, 2019 totaled $ 4.2 million and $ 12.8 million, respectively.

As of September 30, 2020, there was $ 11.3 million of pre-tax compensation costs related to service-based and performance-based stock awards, which will be recognized in future periods as vesting conditions are satisfied.

The ultimate dollar amount to be awarded for the 2021 and 2020 Cash

OIL STATES INTERNATIONAL, INC.

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FINANCIAL STATEMENTS

The income tax benefit for the three and nine month periods ended September 30, 2020 was calculated using a discrete approach.

This methodology was used because changes in the Company's results of operations and non-deductible expenses can materially impact the estimated annual effective tax rate.

For the three months ended September 30, 2020, the Company's income tax benefit was $ 7.7 million on a pre-tax loss of $ 27.6 million, which includes certain non-deductible expenses and discrete tax benefits.

This compares to an income tax benefit of $ 6.2 million on a pre-tax loss of $ 38.1 million, which includes certain non-deductible expenses, for the three months ended September 30, 2019.

For the nine months ended September 30, 2020, the Company's income tax benefit was $ 54.1 million on a pre-tax loss of $ 503.7 million, which included non-cash goodwill charges (approximately $ 313.1 million) and other expenses that are not deductible for income tax purposes.

Awards is limited to their targeted award value ($ 1.5 million) if the Company's total stockholder return is negative over the performance period.

The obligations, if any, related to the Cash Awards are classified as liabilities and recognized over the vesting period.

Stock-based compensation expense recognized during the three months ended March 31, 2021 and 2020 totaled $ 2.8 million and $ 1.2 million, respectively.

As of March 31, 2021, there was $ 10.4 million of pre-tax compensation costs related to service-based and performance-based stock awards, which will be recognized in future periods as vesting conditions are satisfied.

For the three months ended March 31, 2021, the Company's income tax benefit was $ 2.3 million on a pre-tax loss of $ 18.1 million, which included certain non-deductible expenses and discrete tax items.

This compares to an income tax benefit of $ 39.5 million on a pre-tax loss of $ 444.5 million, which included non-cash goodwill charges (approximately $ 313.1 million) and other expenses that are not deductible for income tax purposes, for the three months ended March 31, 2020.

The impact of these non-deductible expenses was partially offset by a $ 14.8 million discrete tax benefit related to the carryback of U.S.

net operating losses under the Coronavirus Aid, Relief, and Economic Security ("CARES") Act.

This compares to an income tax benefit of $ 6.7 million on a pre-tax loss of $ 63.0 million, which includes certain non-deductible expenses, for the nine months ended September 30, 2019.

net operating losses under the CARES Act.

Segments and Related Information

The Company operates through three reportable segments:

Well Site Services, Downhole Technologies and Offshore/Manufactured Products.

The Company's reportable segments represent strategic business units that generally offer different products and services.

They are managed separately because each business often requires different technologies and marketing strategies.

Financial information by business segment for the three and nine months ended September 30, 2020 and 2019 is summarized in the following tables (in thousands).

The Company operates through three operating segments:

Offshore/Manufactured Products, Downhole Technologies and Well Site Services.

Financial information by operating segment for the three months ended March 31, 2021 and 2020 is summarized in the following tables (in thousands).

Revenues Depreciation and amortization Operating income (loss) Capital expenditures Total assets

Three Months Ended September 30, 2020

Well Site Services –

Completion Services $ 34,893 $ 12,914 $ ( 14,330 ) $ 1,579 $ 248,715

Drilling Services 2,479 16 458 — 5,166

Total Well Site Services 37,372 12,930 ( 13,872 ) 1,579 253,881

Three Months Ended March 31, 2021

Offshore/Manufactured Products $ 60,609 $ 5,469 $ 1,071 $ 463 $ 534,819

Downhole Technologies 25,430 4,389 ( 1,615 ) 83 280,320

Well Site Services (1)

39,550 11,468 ( 9,853 ) 3,330 229,968

Offshore/Manufactured Products 78,674 5,401 3,875 686 541,661

Corporate — 194 ( 9,365 ) 244 79,312

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Revenues Depreciation and amortization Operating income (loss) Capital expenditures Total assets

Three Months Ended September 30, 2019

Well Site Services –

Completion Services $ 103,966 $ 17,024 $ 1,719 $ 6,088 $ 496,684

Drilling Services (2)

12,034 3,164 ( 36,495 ) 538 21,464

Total Well Site Services 116,000 20,188 ( 34,776 ) 6,626 518,148

Downhole Technologies 42,882 5,309 659 4,045 700,789

Three Months Ended March 31, 2020

Offshore/Manufactured Products (2)

Corporate — 189 ( 11,932 ) 437 41,080

Total $ 263,697 $ 31,366 $ ( 34,910 ) $ 14,255 $ 1,933,964

OIL STATES INTERNATIONAL, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

Revenues Depreciation and

amortization Operating income (loss) Capital

expenditures Total assets

Nine months ended September 30, 2020

Well Site Services –

Completion Services (3)

$ 91,172 $ 5,628 $ ( 95,496 ) $ 1,065 $ 562,179

Drilling Services (4)

7,179 302 ( 5,338 ) 114 5,166

Total Well Site Services 161,173 41,334 ( 181,746 ) 6,554 253,881

Downhole Technologies (3)

41,065 5,584 ( 192,691 ) 1,649 333,518

Offshore/Manufactured Products (6)

264,782 16,505 ( 82,202 ) 2,208 541,661

Corporate — 563 ( 25,633 ) ( 377 ) 90,476

Total $ 500,698 $ 75,306 $ ( 505,976 ) $ 11,277 $ 1,180,786

Revenues Depreciation and

amortization Operating income (loss) Capital

expenditures Total assets

Nine months ended September 30, 2019

Well Site Services (4)

Completion Services $ 307,928 $ 51,558 $ ( 2,282 ) $ 24,971 $ 496,684

Drilling Services (2)

87,457 15,036 ( 144,954 ) 3,052 320,855

Total Well Site Services 340,358 61,287 ( 45,937 ) 27,423 518,148

Downhole Technologies 143,912 15,631 3,251 11,121 700,789

Offshore/Manufactured Products 294,723 17,240 26,207 6,413 673,947

Corporate — 161 ( 8,661 ) 115 95,458

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________________

(1) Operating loss includes a non-cash inventory impairment charge of $ 5.9 million to reduce the carrying of the Downhole Technologies reporting unit's inventory to its estimated realizable value.

(2) Operating loss includes a non-cash fixed asset impairment charge of $ 33.7 million to reduce the carrying value of the Drilling Services reporting unit's fixed assets to their estimated realizable value.

(3) Operating loss includes a non-cash goodwill impairment charge of $ 127.1 million to reduce the carrying value of the Completion Services reporting unit to its estimated fair value, a non-cash inventory impairment charge of $ 9.0 million to reduce the carrying value of the Completion Services reporting unit's inventory to its estimated realizable value and a non-cash fixed asset impairment charge of $ 3.0 million to reduce the carrying value of certain of the Completion Services reporting unit's facilities to their estimated realizable value.

(4) Operating loss includes a non-cash fixed asset impairment charge of $ 5.2 million to further reduce the carrying value of the Drilling Services reporting unit's fixed assets to their estimated realizable value.

(5) Operating loss includes a non-cash goodwill impairment charge of $ 192.5 million to reduce the carrying value of the Downhole Technologies reporting unit to its estimated fair value and a non-cash inventory impairment charge of $ 5.9 million to reduce the carrying value of the Downhole Technologies reporting unit's inventory to its estimated realizable value.

(6) Operating loss includes a non-cash goodwill impairment charge of $ 86.5 million to reduce the carrying value of the Offshore/Manufactured Products reporting unit to its estimated fair value and a non-cash inventory impairment charge of $ 16.2 million to reduce the carrying value of the Offshore/Manufactured Products reporting unit's inventory to its estimated net realizable value.

See Note 3, "Asset Impairments and Other Charges" and Note 4, "Details of Selected Balance Sheet Accounts," for further discussion of these and other charges recorded during the first nine months of 2020 and 2019.

(1) Operating loss included a non-cash fixed asset impairment charge of $ 0.7 million.

(2) Operating loss included non-cash goodwill and inventory impairment charges of $ 86.5 million and $ 16.2 million, respectively.

(3) Operating loss included a non-cash goodwill impairment charge of $ 192.5 million.

(4) Operating loss included non-cash goodwill, inventory and fixed asset impairment charges of $ 127.1 million, $ 9.0 million and $ 5.2 million, respectively.

See Note 3, "Asset Impairments and Other Restructuring Items," and Note 4, "Details of Selected Balance Sheet Accounts," for further discussion of these and other charges and benefits recognized in first three months of 2021 and 2020.

OIL STATES INTERNATIONAL, INC.

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FINANCIAL STATEMENTS

The following tables provide supplemental disaggregated revenue from contracts with customers by business segment for the three and nine months ended September 30, 2020 and 2019 (in thousands):

Well Site Services Downhole Technologies Offshore/Manufactured Products Total

2020 2019 2020 2019 2020 2019 2020 2019

Three months ended September 30

Major revenue categories -

Project-driven products $ — $ — $ — $ — $ 41,004 $ 39,474 $ 41,004 $ 39,474

Completion products and services 34,893 103,966 18,713 42,882 3,664 26,710 57,270 173,558

Drilling services 2,479 12,034 — — — — 2,479 12,034

Other products — — — — 4,200 7,988 4,200 7,988

Total short-cycle 37,372 116,000 18,713 42,882 7,864 34,698 63,949 193,580

Other products and services — — — — 29,806 30,643 29,806 30,643

$ 37,372 $ 116,000 $ 18,713 $ 42,882 $ 78,674 $ 104,815 $ 134,759 $ 263,697

Well Site Services Downhole Technologies Offshore/Manufactured Products Total

The following tables provide supplemental disaggregated revenue from contracts with customers by operating segment for the three months ended March 31, 2021 and 2020 (in thousands):

Offshore/Manufactured Products Downhole Technologies Well Site Services Total

2021 2020 2021 2020 2021 2020 2021 2020

Nine months ended September 30

Three months ended March 31

Major revenue categories -

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$ 60,609 $ 91,172 $ 25,430 $ 41,065 $ 39,550 $ 87,457 $ 125,589 $ 219,694

No customer individually accounted for 10% of the Company's consolidated revenue for the nine months ended September 30, 2020 and 2019.

Revenues from products and services transferred to customers over time accounted for approximately 62 % and 67 % of consolidated revenues for the nine months ended September 30, 2020 and 2019, respectively.

Revenues from products and services transferred to customers over time accounted for approximately 62 % and 66 % of consolidated revenues for each of the three months ended March 31, 2021 and 2020, respectively.

The balance of revenues for the respective periods relates to products and services transferred to customers at a point in time.

As of September 30, 2020, the Company had $ 157 million of remaining backlog related to contracts with an original expected duration of greater than one year.

Approximately 14 % of this remaining backlog is expected to be recognized as revenue over the remaining three months of 2020, with an additional 38 % in 2021 and the balance thereafter.

As of March 31, 2021, the Company had $ 166 million of remaining backlog related to contracts with an original expected duration of greater than one year .

Approximately 40 % of this remaining backlog is expected to be recognized as revenue over the remaining nine months of 2021, with an additional 31 % in 2022 and the balance thereafter.

Commitments and Contingencies

The impact of the recent COVID-19 pandemic and related economic, business and market disruptions continues to evolve and its future effects remain uncertain.

The impact of the COVID-19 pandemic and related economic, business and market disruptions continue to evolve and their future effects remain uncertain.

The most direct and immediate impact that the Company has experienced and expects to continue to experience from the COVID-19 pandemic is decreased demand for its products and services due to lower activity levels by its customers resulting from the precipitous decline in crude oil prices.

The overall impact of the pandemic and oil price collapse on the Company and its customers will depend on many factors, many of which are beyond management's control and knowledge.

In response to public health concerns related to COVID-19, many federal, state, local and other authorities around the world have imposed mandatory regulations directing individuals to stay at home and have limited their ability to travel domestically or internationally.

In certain cases, when travel is permitted, a multi-week quarantine period is required before an individual can work in the area.

The overall impact of the pandemic and oil price collapse on the Company and its customers will depend on numerous factors, many of which are beyond management's control and knowledge.

In response to public health concerns related to COVID-19, many federal, state, local and other authorities around the world imposed mandatory regulations directing individuals to stay at home and limited their ability to travel domestically or internationally.

In certain cases, when travel was permitted, a multi-week quarantine period was required before an individual could work in the area.

Additionally, rules and regulations regarding employer responsibilities continue to be promulgated.

Facility closures, quarantines, travel restrictions, and possible future workforce shortages may, among numerous other impacts, result in delays by the Company in fulfilling its existing contractual obligations to its customers, which could result in adverse financial consequences.

Additionally, the Company procures a variety of raw materials and component products,

OIL STATES INTERNATIONAL, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

including steel, in the manufacture of its products from companies which may be impacted by similar challenges.

Additionally, the Company procures a variety of raw materials and component products, including steel, in the manufacture of its products from companies which may be impacted by similar challenges.

The Company continues to monitor the effect of COVID-19 on its employees, customers, critical suppliers and other stakeholders.

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and global economy and capital markets remains uncertain.

Following the Company's acquisition of GEODynamics in January 2018, the Company determined that certain steel products historically imported by GEODynamics from China for use in its manufacturing process may potentially be subject to anti-dumping and countervailing duties based on clarifications/decisions rendered by the U.S.

Department of Commerce and the U.S.

Court of International Trade.

Following these findings, the Company commenced an internal review of this matter and ceased further purchases of these potentially affected Chinese products.

As part of the Company's internal review, the Company engaged trade counsel and decided to voluntarily disclose this matter to U.S.

Customs and Border Protection in September 2018.

In connection with the acquisition of GEODynamics, the seller of GEODynamics (the "Seller") agreed to indemnify and hold the Company harmless against certain claims related to matters such as this, and the Company has provided notice to and asserted indemnification claims against the Seller.

Additionally, the Company's agreements with the Seller allow the Company to set off payments due under the $ 25.0 million promissory note (see Note 6, "Long-term Debt") issued to the Seller in respect of indemnification claims.

Such note was scheduled to mature on July 12, 2019, but, because the Company has provided notice to and asserted indemnification claims, the maturity date of the note is extended until the resolution of such claim.

Although, as explained below, the Seller now claims the note has matured, the Company believes its position is correct and expects that the amount ultimately paid in respect of such note will be reduced as a result of any payments made to U.S.

Customs and Border Protection associated with these indemnification claims.

In August 2020, the Seller filed a breach of contract suit against the Company and one of its wholly-owned subsidiaries alleging that payments due under the promissory note discussed above have not been repaid in accordance with the terms of the note.

Additionally, the Seller alleges in this suit that it is entitled to approximately $ 19 million in U.S.

federal income tax carryback claims received by the Company under the provisions of the CARES Act legislation enacted in March 2020.

The Company denies the validity of these breach of contract claims and plans to vigorously defend against this lawsuit.

Additionally, in the ordinary course of conducting its business, the Company becomes involved in litigation and other claims from private party actions, as well as judicial and administrative proceedings involving governmental authorities at the federal, state and local levels.

The Company is a party to various pending or threatened claims, lawsuits and administrative proceedings seeking damages or other remedies concerning its commercial operations, products, employees and other matters, including occasional claims by individuals alleging exposure to hazardous materials as a result of the Company's products or operations.

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Although the Company can give no assurance about the outcome of pending legal and administrative proceedings and the effect such outcomes may have on the Company, management believes that any ultimate liability resulting from the outcome of such proceedings, to the extent not otherwise provided for or covered by indemnity or insurance, will not have a material adverse effect on the Company's consolidated financial position, results of operations or liquidity.

OIL STATES INTERNATIONAL, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

Following the GEODynamics Acquisition in January 2018, the Company determined that certain steel products historically imported by GEODynamics from China for use in its manufacturing process were potentially be subject to anti-dumping and countervailing duties.

Following an internal review, the Company voluntarily disclosed this matter to U.S.

Customs and Border Protection ("CBP") and, in December 2020, reached an agreement with CBP to settle this matter for $ 7.3 million.

The Company believes that the Seller is required to indemnify and hold the Company harmless against the amount of this and other settlements and related costs of $ 7.9 million, and the Company has provided notice to and asserted indemnification claims against the Seller.

Additionally, the Company believes that its agreements with the Seller allow it to set-off such amounts against payments due under the $ 25.0 million promissory note and that, because the Company has asserted indemnification claims, the maturity date of such note is extended until the resolution of such claims.

Accordingly, the Company has reduced the carrying amount of such note in its consolidated balance sheets to $ 17.1 million as of December 31, 2020 and March 31, 2021, which is the Company's current best estimate of what is owed after set-off for indemnification matters.

In August 2020, the Seller filed a breach of contract suit against the Company and one of its wholly-owned subsidiaries in federal court alleging that payments due under the promissory note are required to be, but have not been, repaid in accordance with the terms of the note.

Additionally, the Seller alleged that it was entitled to approximately $ 19 million in U.S.

federal income tax carryback claims received by the Company under the provisions of the CARES Act.

On February 15, 2021, the Seller dismissed the federal lawsuit without prejudice and refiled its lawsuit in state court.

The Company denies the validity of these breach of contract claims and plans to vigorously defend against this lawsuit.

C autionary Statement Regarding Forward-Looking Statements

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The following are important factors that could cause actual results to differ materially from those expressed in any forward-looking statement made by, or on behalf of, our Company:

• public health crises, such as the Coronavirus Disease 2019 ("COVID-19") outbreak at the beginning of 2020, which has negatively impacted the global economy, and correspondingly, the price of crude oil;

• public health crises, such as the Coronavirus Disease 2019 ("COVID-19") pandemic, which has negatively impacted the global economy, and correspondingly, the price of oil;

• the ability and willingness of the Organization of Petroleum Exporting Countries ("OPEC") and other producing nations to set and maintain oil production levels and pricing;

• the level of supply of and demand for oil and natural gas;

• fluctuations in current and future prices of oil and natural gas;

• the cyclical nature of the oil and natural gas industry;

• fluctuations in the current and future prices of oil and natural gas;

• the level of exploration, drilling and completion activity;

• the financial health of our customers;

• political, economic and legal efforts to restrict or eliminate certain oil and natural gas exploration, development and production activities due to concerns over the threat of climate change;

• the availability of and access to attractive oil and natural gas field prospects by our customers, which may be affected by governmental actions or actions of other parties which may restrict drilling and completion activities;

• the cyclical nature of the oil and natural gas industry;

• the level of offshore oil and natural gas developmental activities;

• the financial health of our customers;

• the impact of environmental matters, including executive actions and regulatory or legislative efforts under the Biden Administration to adopt environmental or climate change regulations that may result in increased operating costs or reduced oil and natural gas production or demand globally;

• political, economic and litigation efforts to restrict or eliminate certain oil and natural gas exploration, development and production activities due to concerns over the threat of climate change;

• the availability of and access to attractive oil and natural gas field prospects, which may be affected by governmental actions or actions of other parties which may restrict drilling and completion activities;

• general global economic conditions;

• the ability of the Organization of Petroleum Exporting Countries ("OPEC") to set and maintain production levels and pricing;

• global weather conditions and natural disasters;

• changes in tax laws and regulations;

• the impact of tariffs and duties on imported raw materials and exported finished goods;

• impact of environmental matters, including future regulatory efforts to adopt environmental or climate change regulations that may result in increased operating costs or reduced commodity demand globally;

• our ability to timely obtain critical permits for constructing or operating our facilities and find and retain skilled personnel;

• the impact of tariffs and duties on imported materials and exported finished goods;

• our ability to timely obtain and maintain critical permits for operating facilities;

• our ability to find and retain skilled personnel;

• negative outcome of litigation, threatened litigation or government proceedings;

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• fluctuations in currency exchange rates;

• physical, digital, cyber, internal and external security breaches;

• the availability and cost of capital;

• our ability to protect our intellectual property rights;

• physical, digital, cyber, internal and external security breaches and other incidents affecting information security and data privacy;

• our ability to access and the cost of capital in the bank and capital markets;

• our ability to protect and enforce our intellectual property rights;

• our ability to complete the integration of acquired businesses and achieve the expected accretion in earnings;

• the other factors identified in "Part I, Item 1A.

Risk Factors" in our 2019 Annual Report on Form 10-K and "Part II, Item 1A.

Risk Factors" included in this Quarterly Report on Form 10-Q.

Risk Factors" in our 2020 Annual Report on Form 10-K.

Should one or more of these risks or uncertainties materialize, or should the assumptions on which our forward-looking statements are based prove incorrect or change, actual results may differ materially from those expected, estimated or projected.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements