What changed in this filing

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Item 1. Financial Statements

2022-07-28 compared with 2022-04-29 · 232 added, 136 removed, 399 unchanged (48% of the section changed)

2 unchanged sentences

(In Thousands, Except Per Share Amounts)

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2022 2021 2022 2021

Products $ 99,033 $ 78,038 $ 184,794 $ 139,483

7 unchanged sentences

Depreciation and amortization expense 17,239 20,909 35,056 42,429

Impairments of fixed assets — 650

Other operating (income) expense, net 126 ( 354 )

Impairments of fixed and lease assets — 2,794 — 3,444

Other operating income, net ( 228 ) ( 85 ) ( 102 ) ( 439 )

182,924 163,342 351,304 308,693

16 unchanged sentences

(In Thousands)

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2022 2021 2022 2021

Net loss $ ( 5,144 ) $ ( 15,271 ) $ ( 14,568 ) $ ( 31,081 )

48 unchanged sentences

(In Thousands)

Three Months Ended March 31, 2022 Common

Three Months Ended June 30, 2022 Common

Stock Additional

4 unchanged sentences

Stockholders'

Balance, March 31, 2022 $ 746 $ 1,106,963 $ 272,143 $ ( 65,170 ) $ ( 626,574 ) $ 688,108

Net loss — — ( 5,144 ) — — ( 5,144 )

Currency translation adjustments (excluding intercompany advances) — — — ( 9,628 ) — ( 9,628 )

Currency translation adjustments on intercompany advances — — — ( 3,052 ) — ( 3,052 )

Stock-based compensation expense 1 1,668 — — — 1,669

Surrender of stock to settle taxes on stock awards — — — — ( 12 ) ( 12 )

Balance, June 30, 2022 $ 747 $ 1,108,631 $ 266,999 $ ( 77,850 ) $ ( 626,586 ) $ 671,941

Six Months Ended June 30, 2022 Common

Stock Additional

Capital Retained

Earnings Accumulated

Comprehensive

Loss Treasury

Stockholders'

Balance, December 31, 2021 $ 739 $ 1,105,135 $ 281,567 $ ( 66,031 ) $ ( 625,584 ) $ 695,826

3 unchanged sentences

Stock-based compensation expense 8 3,496 — — — 3,504

Restricted stock 7 1,828 — — — 1,835

Surrender of stock to settle taxes on restricted stock awards — — — — ( 990 ) ( 990 )

Surrender of stock to settle taxes on stock awards — — — — ( 1,002 ) ( 1,002 )

Balance, June 30, 2022 $ 747 $ 1,108,631 $ 266,999 $ ( 77,850 ) $ ( 626,586 ) $ 671,941

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 June 30, 2021 Common Stock Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive Loss Treasury Stock Total Stockholders' Equity

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

Three Months Ended March 31, 2021 Common Stock Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive Loss Treasury Stock Total Stockholders' Equity

Net loss — — ( 15,271 ) — — ( 15,271 )

Currency translation adjustments (excluding intercompany advances) — — — 556 — 556

Currency translation adjustments on intercompany advances — — — 2,604 — 2,604

Stock-based compensation expense 1 1,882 — — — 1,883

Surrender of stock to settle taxes on stock awards — — — — — —

Adoption of ASU 2020-06 — — — — — —

Balance, June 30, 2021 $ 739 $ 1,101,959 $ 314,479 $ ( 69,754 ) $ ( 625,489 ) $ 721,934

Six Months Ended June 30, 2021 Common Stock Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive Loss Treasury Stock Total Stockholders' Equity

Balance, December 31, 2020 $ 733 $ 1,122,945 $ 329,327 $ ( 71,385 ) $ ( 623,989 ) $ 757,631

3 unchanged sentences

Stock-based compensation expense 6 4,697 — — — 4,703

Restricted stock 5 2,815 — — — 2,820

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

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

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

Balance, June 30, 2021 $ 739 $ 1,101,959 $ 314,479 $ ( 69,754 ) $ ( 625,489 ) $ 721,934

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

3 unchanged sentences

(In Thousands)

Three Months Ended March 31,

Six Months Ended June 30,

Cash flows from operating activities:

Net loss $ ( 14,568 ) $ ( 31,081 )

Adjustments to reconcile net loss to net cash used in operating activities:

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

Depreciation and amortization expense 35,056 42,429

Impairments of fixed assets — 650

Settlement of disputes with seller of GEODynamics, Inc.

Impairments of fixed and lease assets — 3,444

Stock-based compensation expense 3,504 4,703

Amortization of debt discount and deferred financing costs 944 1,366

Deferred income tax benefit ( 174 ) ( 2,710 )

Deferred income tax provision (benefit) 2,584 ( 6,834 )

Gains on extinguishment of 1.50 % convertible senior notes

( 157 ) ( 4,022 )

Gains on disposals of assets ( 1,185 ) ( 1,632 )

Other, net 517 375

Changes in operating assets and liabilities:

Changes in operating assets and liabilities, net of effect from acquired business:

Accounts receivable ( 20,469 ) ( 6,962 )

3 unchanged sentences

Other operating assets and liabilities, net ( 870 ) 2,929

Net cash flows used in operating activities ( 10,735 ) ( 8,417 )

Net cash flows provided by (used in) operating activities ( 10,035 ) 13,933

Cash flows from investing activities:

1 unchanged sentence

Proceeds from disposition of property and equipment 1,652 3,422

Acquisition of business, net of cash acquired ( 8,125 ) —

Other, net ( 85 ) ( 326 )

6 unchanged sentences

( 6,272 ) ( 125,952 )

Other debt and finance lease repayments, net ( 165 ) ( 145 )

Other debt and finance lease activity, net ( 359 ) 119

Payment of financing costs ( 74 ) ( 7,779 )

29 unchanged sentences

The financial statements included in this report should be read in conjunction with the Company's audited financial statements and accompanying notes included in its Annual Report on Form 10-K for the year ended December 31, 2021.

On April 14, 2022, the Company acquired E-Flow Control Holdings Limited ("E-Flow"), a U.K.-based global provider of fully integrated handling, control, monitoring and instrumentation solutions.

The purchase price of $ 8.1 million (net of cash acquired) was funded with cash-on-hand and is subject to customary post-closing adjustments.

Under the terms of the purchase agreement, the Company may be entitled to indemnification for certain matters occurring prior to the acquisition.

The E-Flow acquisition was accounted for using the acquisition method of accounting, based on the Company's preliminary estimates of the fair value of assets acquired (primarily long-lived intangible assets and goodwill) and liabilities assumed in the acquisition.

E-Flow's results of operations have been included in the Company's consolidated financial statements and have been reported within the Offshore/Manufactured Products segment subsequent to the closing of the acquisition.

OIL STATES INTERNATIONAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Asset Impairments and Other Restructuring Items

3 unchanged sentences

Following these March 2020 events, the Company immediately implemented significant cost reduction initiatives, which continued into 2021.

OIL STATES INTERNATIONAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In this regard, during the first quarter of 2021, the Company continued its restructuring efforts, closed additional facilities in the United States and continued to assess the carrying value of its assets based on management actions and the industry outlook regarding demand for and pricing of its products and services, and recorded the following charges (in thousands):

In this regard, during the first six months of 2021, the Company continued its restructuring efforts, closed additional facilities in the United States and continued to assess the carrying value of its assets based on management actions and the industry outlook regarding demand for and pricing of its products and services, and recorded the following charges (in thousands):

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

First quarter 2021

Impairments of fixed assets (Note 4)

1 unchanged sentence

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

Additionally, during the first quarter of 2021, the Company recognized $ 4.8 million in aggregate reductions to 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.

Second quarter 2021

Impairments of operating lease assets (Note 4)

$ — $ 2,794 $ — $ — $ 2,794 $ 587 $ 2,207

Severance and restructuring costs — 2,351 203 — 2,554 536 2,018

Additionally, during the three and six months ended June 30, 2021, the Company recognized $ 2.8 million and $ 7.6 million, respectively, in aggregate reductions to 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.

As further discussed in Note 12, "Commitment and Contingencies," on June 28, 2022, the Company settled its disputes with the seller (the "GEO Seller") of GEODynamics, Inc.

("GEODynamics"), which was acquired in 2018, including the full and final settlement of all amounts due pursuant to the GEO Note (as defined below).

As consideration for such settlement, on July 1, 2022, the Company issued the GEO Seller approximately 1.9 million shares of its common stock (having a market value of $ 10.3 million on the date of issuance) and paid the GEO Seller $ 10.0 million in cash.

In connection with this settlement, the $ 17.5 million carrying value of the GEO Note and accrued interest of $ 2.2 million was extinguished on July 1, 2022.

Should, among other events and circumstances, the ongoing war between Russia and Ukraine escalate or spread, global economic and industry conditions deteriorate, the COVID-19 pandemic business, supply chain and market disruptions worsen, the outlook for future operating results and cash flow for any of the Company's segments decline, income tax rates increase or regulations change, climate and environmental regulations or rules change, costs of equity or debt capital increase, valuation for comparable public companies or comparable acquisition valuations decrease, or management implements strategic decisions based on industry conditions, the Company may need to recognize additional impairment losses and/or other costs in future periods.

OIL STATES INTERNATIONAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Details of Selected Balance Sheet Accounts

Additional information regarding selected balance sheet accounts as of March 31, 2022 and December 31, 2021 is presented below (in thousands):

March 31, 2022 December 31, 2021

Additional information regarding selected balance sheet accounts as of June 30, 2022 and December 31, 2021 is presented below (in thousands):

2022 December 31,

Accounts receivable, net:

7 unchanged sentences

Allowance for doubtful accounts as a percentage of total accounts receivable 2 % 2 %

March 31, 2022 December 31, 2021

2022 December 31,

Deferred revenue (contract liabilities) $ 47,883 $ 43,236

As of March 31, 2022, accounts receivable, net in the United States and the United Kingdom represented 78 % and 12 %, 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, 2022.

For the three months ended March 31, 2022, the $ 0.2 million net increase in contract assets was attributable to $ 15.3 million in revenue recognized during the period, which was substantially offset by $ 15.1 million transferred to accounts receivable.

Deferred revenue (contract liabilities) increased by $ 4.3 million in the first three months of 2022, reflecting $ 10.9 million in new customer billings which were not recognized as revenue during the period, offset by the recognition of $ 6.6 million of revenue that was deferred at the beginning of the period.

OIL STATES INTERNATIONAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following provides a summary of activity in the allowance for doubtful accounts for the three months ended March 31, 2022 and 2021 (in thousands):

Three Months Ended March 31,

As of June 30, 2022, accounts receivable, net in the United States and the United Kingdom represented 74 % and 14 %, respectively, of the total.

No other country or single customer accounted for more than 10% of the Company's total accounts receivable as of June 30, 2022.

For the six months ended June 30, 2022, the $ 3.1 million net increase in contract assets was attributable to $ 30.1 million in revenue recognized during the period, which was partially offset by $ 26.7 million transferred to accounts receivable.

Deferred revenue (contract liabilities) increased by $ 4.6 million in the first six months of 2022, reflecting $ 16.2 million in new customer billings which were not recognized as revenue during the period, partially offset by the recognition of $ 11.2 million of revenue that was deferred at the beginning of the period.

The following provides a summary of activity in the allowance for doubtful accounts for the six months ended June 30, 2022 and 2021 (in thousands):

Six Months Ended June 30,

Allowance for doubtful accounts – January 1 $ 4,471 $ 8,304

1 unchanged sentence

Write-offs ( 629 ) ( 815 )

Allowance for doubtful accounts – March 31 $ 4,779 $ 8,545

Other 280 148

Allowance for doubtful accounts – June 30 $ 5,166 $ 7,698

2022 December 31,

6 unchanged sentences

$ 179,819 $ 168,573

OIL STATES INTERNATIONAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2022 December 31,

3 unchanged sentences

$ 314,898 $ 338,583

For the three months ended March 31, 2022 and 2021, depreciation expense was $ 12.7 million and $ 16.4 million, respectively.

During the first quarter of 2021, the Well Site Services segment recognized non-cash impairment charges of $ 0.7 million to reduce the carrying value of certain of the segment's fixed assets to their estimated realizable value.

March 31, 2022 December 31, 2021

For the three months ended June 30, 2022 and 2021, depreciation expense was $ 12.0 million and $ 15.6 million, respectively.

Depreciation expense was $ 24.6 million and $ 32.0 million, respectively, for the six months ended June 30, 2022 and 2021.

During the first and second quarters of 2021, the Well Site Services segment recognized non-cash fixed and operating lease asset impairment charges of $ 0.7 million and $ 2.8 million, respectively, associated with the closure of additional facilities coupled with other management actions.

During the second quarter of 2021, the segment also recorded an additional $ 1.9 million charge associated with the exit of a leased facility.

June 30, 2022 December 31, 2021

Amount Accumulated

7 unchanged sentences

$ 304,963 $ 125,372 $ 179,591 $ 300,813 $ 115,064 $ 185,749

For the three months ended March 31, 2022 and 2021, amortization expense was $ 5.2 million and $ 5.2 million, respectively.

OIL STATES INTERNATIONAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the three months ended June 30, 2022 and 2021, amortization expense was $ 5.3 million and $ 5.3 million, respectively.

Amortization expense was $ 10.4 million and $ 10.5 million for the six months ended June 30, 2022 and 2021, respectively.

2022 December 31,

14 unchanged sentences

$ 46,344 $ 43,401

OIL STATES INTERNATIONAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Long-term Debt

As of March 31, 2022 and December 31, 2021, long-term debt consisted of the following (in thousands):

As of June 30, 2022 and December 31, 2021, long-term debt consisted of the following (in thousands):

2022 December 31,

5 unchanged sentences

Promissory note (4)

17,534 17,534

Other debt and finance lease obligations 3,763 4,123

3 unchanged sentences

____________________

(1) Unamortized deferred financing costs of $ 2.5 million and $ 2.7 million as of March 31, 2022 and December 31, 2021, respectively, are presented in other noncurrent assets.

(2) The outstanding principal amount of the 2026 Notes was $ 135.0 million as of March 31, 2022 and December 31, 2021.

(3) The outstanding principal amount of the 2023 Notes was $ 26.0 million as of March 31, 2022 and December 31, 2021.

(1) Unamortized deferred financing costs of $ 2.3 million and $ 2.7 million as of June 30, 2022 and December 31, 2021, respectively, are presented in other noncurrent assets.

(2) The outstanding principal amount of the 2026 Notes was $ 135.0 million as of June 30, 2022 and December 31, 2021.

(3) The outstanding principal amount of the 2023 Notes was $ 19.5 million and $ 26.0 million as of June 30, 2022 and December 31, 2021, respectively.

(4) The promissory note was settled on July 1, 2022.

See Note 12, "Commitments and Contingencies" for additional discussion.

Revolving Credit Facilities

2 unchanged sentences

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 discussed below.

OIL STATES INTERNATIONAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

5 unchanged sentences

The ABL Agreement contains customary default provisions, which, if triggered, could result in acceleration of repayment 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;

to complete certain specified transactions;

or if an event of default has occurred and is continuing.

As of March 31, 2022, the Company had $ 19.6 million of outstanding letters of credit, but no borrowings outstanding under the ABL Agreement.

The total amount available to be drawn as of March 31, 2022 was $ 51.0 million, calculated based on the current borrowing base less outstanding borrowings, if any, and letters of credit.

As of March 31, 2022, the Company was in compliance with its debt covenants under the ABL Agreement.

On March 19, 2021, the Company issued $ 135.0 million aggregate principal amount of its 4.75 % senior convertible notes (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.

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 (i) in the event that availability under the ABL Agreement is less than the

OIL STATES INTERNATIONAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

greater of (a) 15 % of the borrowing base and (b) $ 14.1 million;

(ii) to complete certain specified transactions;

or (iii) if an event of default has occurred and is continuing.

As of June 30, 2022, the Company had $ 18.6 million of outstanding letters of credit, but no borrowings outstanding under the ABL Agreement.

The total amount available to be drawn as of June 30, 2022 was $ 61.8 million, calculated based on the current borrowing base less outstanding borrowings, if any, and letters of credit.

As of June 30, 2022, the Company was in compliance with its debt covenants under the ABL Agreement.

On March 19, 2021, the Company issued $ 135.0 million aggregate principal amount of its 4.75 % convertible senior notes due 2026 (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.

Computershare Trust Company, National Association, assumed the role of trustee as of March 1, 2022.

7 unchanged sentences

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.

As of March 31, 2022, none of the conditions allowing holders of the 2026 Notes to convert, or requiring us to repurchase the 2026 Notes, had been met.

OIL STATES INTERNATIONAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

On January 30, 2018, the Company issued $ 200.0 million aggregate principal amount of its 1.50 % senior convertible notes (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.

As of June 30, 2022, none of the conditions allowing holders of the 2026 Notes to convert, or requiring us to repurchase the 2026 Notes, had been met.

On January 30, 2018, the Company issued $ 200.0 million aggregate principal amount of its 1.50 % convertible senior notes due 2023 (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.

Computershare Trust Company, National Association, assumed the role of trustee as of March 1, 2022.

2 unchanged sentences

The conversion rate, and thus the conversion price, may be adjusted under certain circumstances as described in the 2023 Indenture.

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

As of March 31, 2022, $ 26.0 million principal amount of the 2023 Notes remained outstanding.

The following table provides a summary of the Company's purchases of outstanding 2023 Notes during the three months ended March 31, 2021, with non-cash gains reported within other income, net (in thousands):

The Company's intent is to repay the principal amount of the 2023 Notes in cash.

As of June 30, 2022, $ 19.5 million principal amount of the 2023 Notes remained outstanding.

The following table provides a summary of the Company's purchases of outstanding 2023 Notes during the three and six months ended June 30, 2022 and 2021, with non-cash gains reported within other income, net (in thousands):

Principal Amount Carrying Value of Liability Cash Paid Non-cash Gains Recognized

Three Months Ended March 31,

Three Months Ended June 30,

2022 $ 6,454 $ 6,429 $ 6,272 $ 157

2021 6,400 6,337 5,952 385

Six Months Ended June 30,

2022 $ 6,454 $ 6,429 $ 6,272 $ 157

2021 131,400 129,974 125,952 4,022

OIL STATES INTERNATIONAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Promissory Note

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

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 $ 7.5 million related to such indemnification claims, and believes that the maturity date of such note is extended until the resolution of such indemnity claims and that it is permitted to set-off the principal amount owed by the amount of such costs and expenses.

Accordingly, the Company has reduced the carrying amount of such note in the consolidated balance sheet to $ 17.5 million as of March 31, 2022, which is its current best estimate of what is owed after set-off for such indemnification matters.

See Note 11, "Commitments and Contingencies."

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

Payments due under the GEO Note were subject to set-off, in full or in part, against certain indemnification claims related to matters occurring prior to the GEODynamics Acquisition.

The Company asserted indemnification claims against the GEO Seller, and the GEO Seller filed a breach of contract suit against the Company and one of its wholly-owned subsidiaries alleging that payments due under the GEO Note were required to be repaid in accordance with the terms of such note.

The Company incurred settlement costs and expenses of $ 7.5 million related to such indemnification claims, and as of June 28, 2022 had reduced the carrying amount of such note in the consolidated balance sheet to $ 17.5 million, which was its then-current best estimate of what was owed after set-off for such indemnification matters.

On June 28, 2022, the Company agreed to a settlement of all disputes that arose with the GEO Seller, including the full and final settlement of all amounts due pursuant to the GEO Note.

See Note 12, "Commitments and Contingencies" f or additional discussion.

Fair Value Measurements

1 unchanged sentence

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, 2022 was $ 24.9 million based on quoted market prices (a Level 2 fair value measurement), which compares to the principal amount of $ 26.0 million.

The estimated fair value of the 2026 Notes as of March 31, 2022 was $ 146.7 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.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The estimated fair value of the 2023 Notes as of June 30, 2022 was $ 19.0 million based on quoted market prices (a Level 2 fair value measurement), which compares to the principal amount of $ 19.5 million.

The estimated fair value of the 2026 Notes as of June 30, 2022 was $ 123.8 million based on quoted market prices (a Level 2 fair value measurement), which compares to the principal amount of $ 135.0 million.

Stockholders' Equity

Common and Preferred Stock

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 2022 (in thousands):

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 six months of 2022 (in thousands):

Shares of common stock outstanding – December 31, 2021 61,378

1 unchanged sentence

Shares withheld for taxes on vesting of stock awards ( 162 )

Shares of common stock outstanding – March 31, 2022 61,891

As of March 31, 2022 and December 31, 2021, the Company had 25,000,000 shares of preferred stock, $ 0.01 par value, authorized, with no shares issued or outstanding.

Shares of common stock outstanding – June 30, 2022 61,989

As of June 30, 2022 and December 31, 2021, 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

1 unchanged sentence

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

Accumulated other comprehensive loss decreased from $ 66.0 million at December 31, 2021 to $ 65.2 million at March 31, 2022.

For the three months ended March 31, 2022 and 2021, currency translation adjustments recognized as a component of other comprehensive loss due to exchange rate movements were primarily attributable to the United Kingdom and Brazil.

During the three months ended March 31, 2022, the exchange rate for the British pound weakened by 3 % compared to the U.S.

dollar and the Brazilian real strengthened by 17 % compared to the U.S.

dollar, contributing to other comprehensive income of $ 0.9 million.

During the three months ended March 31, 2021, the exchange rate for the British pound strengthened by 1 % compared to the U.S.

dollar while the Brazilian real weakened by 8 % compared to the U.S.

Accumulated other comprehensive loss increased from $ 66.0 million at December 31, 2021 to $ 77.9 million at June 30, 2022.

For the six months ended June 30, 2022 and 2021, currency translation adjustments recognized as a component of other comprehensive income (loss) were primarily attributable to the United Kingdom and Brazil.

During the six months ended June 30, 2022, the exchange rate for the British pound weakened by 10 % compared to the U.S.

dollar while the Brazilian real strengthened by 7 % compared to the U.S.

dollar, contributing to other comprehensive loss of $ 11.8 million.

For the three months ended March 31, 2022, the Company's income tax expense was $ 3.4 million on a pre-tax loss of $ 6.0 million.

Income tax expense in the first quarter of 2022 included the impact of valuation allowances recorded against U.S.

tax assets as well as certain non-deductible expenses and discrete tax items.

This compares to an income tax benefit of $ 2.3 million on a pre-tax loss of $ 18.1 million, which included certain non-deductible expenses and discrete tax items, for the three months ended March 31, 2021.

During the six months ended June 30, 2021, the exchange rate for the British pound and the Brazilian real strengthened by 1 % and 4 %, respectively, compared to the U.S.

dollar, contributing to other comprehensive income of $ 1.6 million.

OIL STATES INTERNATIONAL, INC.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the three months ended June 30, 2022, the Company's income tax expense was $ 1.8 million on a pre-tax loss of $ 3.4 million.

Income tax expense in the second quarter of 2022 was negatively impacted by valuation allowances recorded against U.S.

tax assets as well as certain non-deductible expenses.

This compares to an income tax benefit of $ 3.2 million on a pre-tax loss of $ 18.5 million, which included certain non-deductible expenses, for the three months ended June 30, 2021.

For the six months ended June 30, 2022, the Company's income tax expense was $ 5.2 million on a pre-tax loss of $ 9.3 million.

Income tax expense in the first six months of 2022 was negatively impacted by valuation allowances recorded against U.S.

tax assets as well as certain non-deductible expenses and discrete tax items.

This compares to an income tax benefit of $ 5.5 million on a pre-tax loss of $ 36.6 million, which included certain non-deductible expenses and discrete tax items, for the six months ended June 30, 2021.

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 months ended March 31, 2022 and 2021 (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 and six months ended June 30, 2022 and 2021 (in thousands, except per share amounts):

Three Months Ended

June 30, Six Months Ended

2022 2021 2022 2021

Net loss $ ( 5,144 ) $ ( 15,271 ) $ ( 14,568 ) $ ( 31,081 )

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Diluted ( 0.08 ) ( 0.25 ) ( 0.24 ) ( 0.52 )

The calculation of diluted net loss per share for the three months ended March 31, 2022 and 2021 excluded 298 thousand shares and 500 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 six months ended June 30, 2022 excluded 264 thousand shares and 306 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 six months ended June 30, 2021 excluded 437 thousand shares and 468 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.

OIL STATES INTERNATIONAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 three months ended March 31, 2022 (in thousands):

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

The following table presents a summary of activity for stock options, service-based restricted stock and stock unit awards and performance-based stock unit awards for the six months ended June 30, 2022 (in thousands):

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

Outstanding – December 31, 2021 388 993 358

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Forfeited ( 141 ) ( 12 ) —

Outstanding – March 31, 2022 266 1,264 591

Outstanding – June 30, 2022 247 1,222 630

Weighted average grant date fair value (2022 awards) $ 6.51 $ 6.51

The restricted stock program consists of a combination of service-based restricted stock and performance-based stock units.

The restricted stock program consists of a combination of service-based restricted stock and stock units, as well as performance-based stock units.

Service-based restricted stock awards generally vest on a straight-line basis over a term of three years .

Performance-based stock awards generally vest at the end of a three-year period, with the number of shares ultimately issued under the program dependent upon achievement of predefined specific performance objectives.

Service-based stock unit awards generally vest at the end of a one-year period.

Performance-based stock unit awards generally vest at the end of a three-year period, with the number of shares ultimately issued under the program dependent upon achievement of predefined specific performance objectives.

The performance objective for performance-based awards granted in 2022 and 2021 is the Company's cumulative EBITDA over a three-year period.

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

OIL STATES INTERNATIONAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

During the first quarters of 2022 and 2021, the Company issued conditional long-term cash incentive awards ("Cash Awards") of $ 1.5 million and $ 1.5 million, respectively, with the ultimate dollar amount to be awarded ranging from zero to a maximum of $ 3.1 million for both the 2022 and 2021 Cash Awards.

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 2022 and 2021 Cash 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 ultimate dollar amount to be awarded for the 2022 and 2021 Cash Awards is limited to their targeted award value ($ 1.5 million) if the Company's total stockholder return were to be 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, 2022 and 2021 totaled $ 1.8 million and $ 2.8 million, respectively.

As of March 31, 2022, there was $ 11.0 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.

Stock-based compensation expense recognized during the three and six months ended June 30, 2022 totaled $ 1.7 million and $ 3.5 million, respectively.

Stock-based compensation expense recognized during the three and six months ended June 30, 2021 totaled $ 1.9 million and $ 4.7 million, respectively.

As of June 30, 2022, there was $ 10.2 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.

OIL STATES INTERNATIONAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Segments and Related Information

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

Financial information by operating segment for the three months ended March 31, 2022 and 2021 is summarized in the following tables (in thousands).

Financial information by operating segment for the three and six months ended June 30, 2022 and 2021 is summarized in the following tables (in thousands).

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

Three Months Ended March 31, 2022

Three Months Ended June 30, 2022

Offshore/Manufactured Products $ 96,467 $ 5,249 $ 9,441 $ 571 $ 552,091

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

Three Months Ended March 31, 2021

Three Months Ended June 30, 2021

Offshore/Manufactured Products $ 76,908 $ 5,557 $ 4,810 $ 792 $ 526,842

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________________

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

See Note 2, "Asset Impairments and Other Restructuring Items," and Note 3, "Details of Selected Balance Sheet Accounts," for further discussion of these and other charges and benefits recognized in first three months of 2021.

(1) Operating loss included non-cash operating lease impairment charges of $ 2.8 million.

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

Six Months Ended June 30, 2022

Offshore/Manufactured Products $ 180,579 $ 10,579 $ 19,637 $ 1,473 $ 552,091

Well Site Services 102,991 15,327 ( 2,794 ) 4,466 195,444

Downhole Technologies 62,308 8,807 ( 2,990 ) 384 257,174

Corporate — 343 ( 19,279 ) 130 47,594

Total $ 345,878 $ 35,056 $ ( 5,426 ) $ 6,453 $ 1,052,303

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

Six Months Ended June 30, 2021

Offshore/Manufactured Products $ 137,517 $ 11,026 $ 5,881 $ 1,255 $ 526,842

Well Site Services (1)

81,606 22,110 ( 21,443 ) 5,207 216,498

Downhole Technologies 52,190 8,910 ( 3,910 ) 280 279,324

Corporate — 383 ( 17,908 ) 569 93,060

Total $ 271,313 $ 42,429 $ ( 37,380 ) $ 7,311 $ 1,115,724

________________

(1) Operating loss included non-cash fixed and lease asset impairment charges of $ 3.4 million.

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 six months of 2021.

OIL STATES INTERNATIONAL, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following tables provide supplemental disaggregated revenue from contracts with customers by operating segment for the three months ended March 31, 2022 and 2021 (in thousands):

The following tables provide supplemental disaggregated revenue from contracts with customers by operating segment for the three and six months ended June 30, 2022 and 2021 (in thousands):

Offshore/Manufactured Products Well Site Services Downhole Technologies Total

2022 2021 2022 2021 2022 2021 2022 2021

Three Months Ended March 31

Three Months Ended June 30

Major revenue categories -

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$ 96,467 $ 76,908 $ 54,819 $ 42,056 $ 30,548 $ 26,760 $ 181,834 $ 145,724

Revenues from products and services transferred to customers over time accounted for approximately 62 % and 62 % of consolidated revenues for the three months ended March 31, 2022 and 2021, respectively.

Offshore/Manufactured Products Well Site Services Downhole Technologies Total

2022 2021 2022 2021 2022 2021 2022 2021

Six Months Ended June 30

Major revenue categories -

Project-driven products $ 74,942 $ 53,200 $ — $ — $ — $ — $ 74,942 $ 53,200

Completion products and services 28,857 18,561 95,917 77,882 62,308 52,190 187,082 148,633

Drilling services — — 7,074 3,724 — — 7,074 3,724

Other products 15,378 9,719 — — — — 15,378 9,719

Total short-cycle 44,235 28,280 102,991 81,606 62,308 52,190 209,534 162,076

Other products and services 61,402 56,037 — — — — 61,402 56,037

$ 180,579 $ 137,517 $ 102,991 $ 81,606 $ 62,308 $ 52,190 $ 345,878 $ 271,313

Revenues from products and services transferred to customers over time accounted for approximately 64 % and 61 % of consolidated revenues for the six months ended June 30, 2022 and 2021, respectively.

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

As of March 31, 2022, the Company had $ 152.0 million of remaining backlog related to contracts with an original expected duration of greater than one year .

Approximately 35 % of this remaining backlog is expected to be recognized as revenue over the remaining nine months of 2022, with an additional 35 % recognized in 2023 and the balance thereafter.

As of June 30, 2022, the Company had $ 141.6 million of remaining backlog related to contracts with an original expected duration of greater than one year .

Approximately 26 % of this remaining backlog is expected to be recognized as revenue over the remaining six months of 2022, with an additional 41 % recognized in 2023 and the balance thereafter.

Commitments and Contingencies

During 2021 and the first quarter of 2022, the distribution of COVID-19 vaccines progressed and many government-imposed restrictions were relaxed or rescinded.

During 2021 and the first six months of 2022, the distribution of COVID-19 vaccines progressed and many government-imposed restrictions were relaxed or rescinded.

However, the effects of the COVID-19 pandemic and related economic, business and market disruptions continue and the macro outlook remains uncertain.

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The ultimate duration of the COVID-19 pandemic, along with resulting governmental restrictions and related impacts on the prices of and demand for crude oil, the global economy and capital markets remains uncertain.

OIL STATES INTERNATIONAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 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 subject to anti-dumping and countervailing duties.

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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 $ 7.5 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 reduced the carrying amount of such note in its consolidated balance sheet to $ 17.5 million as of March 31, 2022, which is the Company's current best estimate of what is owed after set-off for such indemnification matters, but without considering the outcome of the counterclaim described below.

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 $ 19.0 million in U.S.

The Company asserted indemnification claims for such settlement amount and related costs of $ 7.5 million against the GEO Seller and pursed its right to set-off such amounts against payments due under the GEO Note.

As of June 28, 2022, the Company had reduced the carrying amount of such note in its consolidated balance sheet to $ 17.5 million, which was the Company's then-current best estimate of what was owed after set-off for such indemnification matters prior to the settlement of the counterclaim described below.

In August 2020, the GEO 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 GEO Note were not repaid in accordance with the terms of such note.

Additionally, the GEO Seller alleged that it was entitled to approximately $ 19.0 million in U.S.

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

On February 15, 2021, following the federal magistrate's report and recommendation that the federal district court dismiss the Seller's lawsuit for lack of federal jurisdiction, the Seller dismissed the federal lawsuit without prejudice and refiled its lawsuit in state court.

On September 20, 2021, the state court denied the Seller's motion for partial summary judgement.

In December 2021, the Company filed a counterclaim against the Seller alleging material misrepresentations and breaches of warranties by the Seller with respect to GEODynamics' liability for anti-dumping and countervailing duties.

The Company denies the validity of the breach of contract claims asserted by the Seller and is vigorously defending against this lawsuit.

Subsequent Events

On April 14, 2022, the Offshore/Manufactured Products segment acquired E-Flow Control Holdings Limited ("E-Flow"), a global provider of fully integrated handling, control, monitoring and instrumentation solutions.

E-Flow, founded in 1988, provides a broad range of engineering, design, manufacturing, installation and commissioning services to its customers in the energy industry.

The purchase price of $ 8.6 million, which is subject to customary post-closing adjustments, was funded with cash on-hand.

On February 15, 2021, following the federal magistrate's report and recommendation that the federal district court dismiss the GEO Seller's lawsuit for lack of federal jurisdiction, the GEO Seller dismissed the federal lawsuit without prejudice and refiled its lawsuit in state court.

On September 20, 2021, the state court denied the GEO Seller's motion for partial summary judgement.

In December 2021, the Company filed a counterclaim against the GEO Seller alleging material misrepresentations and breaches of warranties by the GEO Seller with respect to GEODynamics' liability for anti-dumping and countervailing duties.

On June 28, 2022, the Company entered into a settlement agreement (the "Settlement Agreement") with the GEO Seller, related to the matters discussed above (the "Settlement"), including the full and final settlement of all amounts due pursuant to the GEO Note ($ 17.5 million in principal amount outstanding as of June 28, 2022) and related accrued interest.

Pursuant to the Settlement Agreement, the Company and the GEO Seller agreed to the resolution of such disputes through, among other matters, (i) the payment by the Company of $ 10.0 million in cash to the GEO Seller and (ii) the issuance by the Company of 1,909,722 shares of its common stock to the GEO Seller (having a market value of $ 10.3 million on the date of issuance).

The payment and issuance of common stock were made on July 1, 2022.

In connection with the execution of the Settlement Agreement, the Company recognized a non-cash settlement charge of $ 0.6 million in the second quarter of 2022.

The final settlement will be reflected in the third quarter of 2022.

C autionary Statement Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q and other statements we make contain certain "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 (the "Securities Act") and Section 21E of the Securities Exchange Act of 1934 (the "Exchange Act").

This Quarterly Report on Form 10-Q and other statements we make contain certain "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 (the "Exchange Act").

Actual results could differ materially from those projected in the forward-looking statements as a result of a number of important factors, including incorrect or changed assumptions.

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Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Part II, Item 7A.

Quantitative and Qualitative Disclosures about Market Risk" included in our 2021 Annual Report on Form 10-K filed with the Securities and Exchange Commission (the "SEC") on February 22, 2022.

Quantitative and Qualitative Disclosures about Market Risk" included in our 2021 Annual Report on Form 10-K filed with the Securities and Exchange Commission (the "SEC") on February 22, 2022, as well as to "Part II, Item 1A.

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

You can typically identify "forward-looking statements" by the use of forward-looking words such as "may," "will," "could," "project," "believe," "anticipate," "expect," "estimate," "potential," "plan," "forecast," "proposed," "should," "seek," and other similar words.

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• the ongoing impact of the Coronavirus Disease 2019 ("COVID-19") pandemic;

• the impact of the ongoing military action between Russia and Ukraine, that began in February 2022, including, but not limited to, supply chain disruptions and increased costs, government sanctions, and delays or potential cancellation of planned customer projects;

• 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, which has been impacted by the ongoing war between Russia and Ukraine that began in February 2022;

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

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

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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