What changed in this filing

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Item 9A. Controls and Procedures

2023-02-17 compared with 2022-02-22 · 203 added, 294 removed, 965 unchanged (34% of the section changed)

48 unchanged sentences

(b) Index of Exhibits

— Stock Purchase Agreement, dated as of December 12, 2017, by and among GEODynamics B.V., GEODynamics, Inc., the Seller Shareholders, GD Development Corporation and Oil States International, Inc.

(incorporated by reference to Exhibit 2.1 to the Company's Current Report on Form 8-K, as filed with the SEC on December 13, 2017 (File No.

— Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the Company's Annual Report on Form 10‑K for the year ended December 31, 2000, as filed with the SEC on March 30, 2001 (File No.

— Fourth Amended and Restated Bylaws (incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8‑K, as filed with the SEC on May 8, 2019 (File No.

— Certificate of Designations of Special Preferred Voting Stock of Oil States International, Inc.

(incorporated by reference to Exhibit 3.3 to the Company's Annual Report on Form 10‑K for the year ended December 31, 2000, as filed with the SEC on March 30, 2001 (File No.

— Fifth Amended and Restated Bylaws of Oil States International, Inc., dated as of February 16, 2023.

— Form of common stock certificate (incorporated by reference to Exhibit 4.1 to the Company's Registration Statement on Form S‑1, as filed with the SEC on November 7, 2000 (File No.

— Indenture, dated January 30, 2018, between Oil States International, Inc., and Wells Fargo Bank, National Association, as trustee, relating to the Company's 1.50% Convertible Senior Notes Due 2023 (incorporated by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K, as filed with the SEC on February 2, 2018 (File No.

— Indenture, dated March 19, 2021, by and among Oil States International, Inc.

2 unchanged sentences

— Amended and Restated Equity Participation Plan of Oil States International, Inc.

(incorporated by reference to Exhibit 4.

4 to the Company's Registration Statement on Form S-8, as filed with the SEC on May 28 , 2021 (File No.

(incorporated by reference to Exhibit 4.4 to the Company's Registration Statement on Form S-8, as filed with the SEC on May 28, 2021 (File No.

333‑2565777)).

— Form of Deferred Stock Award Election under the Company's Amended and Restated Equity Participation Plan.

(incorporated by Reference to Exhibit 10.2 to the Company's Annual Report on Form 10‑K for the year ended December 31, 2021, as filed with the SEC on February 22, 2022 (File No.

— Form of Deferred Stock Grant Notice and Agreement under the Company's Amended and Restated Equity Participation Plan.

(incorporated by Reference to Exhibit 10.3 to the Company's Annual Report on Form 10‑K for the year ended December 31, 2021, as filed with the SEC on February 22, 2022 (File No.

— Deferred Compensation Plan effective January 1, 2012 (incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10‑Q for the quarter ended March 31, 2013, as filed with the SEC on April 25, 2013 (File No.

4 unchanged sentences

— Asset-based Credit Agreement, dated as of February 10, 2021, among Oil States International, Inc., as Borrower, the Lenders from time to time party thereto, and Wells Fargo Bank, National Association as Agent (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K, as filed with the SEC on February 12, 2021 (File No.

— First Amendment to Credit Agreement , dated March 16, 2021, among Oil States International, Inc.

, as Borrower, the Lenders from time to t ime hereto, and Wells Fargo Bank, National Asso ciation as Agent (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K, as filed with the SEC on March 22, 2021 (File No.

— Second Amendment to Credit Agreement, dated December 13, 2022, among Oil States International, Inc., as Borrower, the Lenders from time to time hereto, and Wells Fargo Bank, National Association as Agent.

— Form of Indemnification Agreement (incorporated by reference to Exhibit 10.14 to the Company's Quarterly Report on Form 10‑Q for the quarter ended September 30, 2004, as filed with the SEC on November 5, 2004 (File No.

2 unchanged sentences

333‑2565777)).

— Form of Restricted Stock Agreement under the Company's Amended and Restated Equity Participation Plan (incorporated by reference to Exhibit 4.

5 to the Company's Registration Statement on Form S-8, as filed with the SEC on May 28, 2021 (File No.

— Form of Restricted Stock Agreement under the Company's Amended and Restated Equity Participation Plan (incorporated by reference to Exhibit 4.5 to the Company's Registration Statement on Form S-8, as filed with the SEC on May 28, 2021 (File No.

333‑2565777)).

— Form of Performance Award Agreement under the Company's Amended and Restated Equity Participation Plan (incorporated by reference to Exhibit 4.

8 to the Company's Registration Statement on Form S-8, as filed with the SEC on May 28, 2021 (File No.

— Form of Performance Award Agreement under the Company's Amended and Restated Equity Participation Plan (incorporated by reference to Exhibit 4.8 to the Company's Registration Statement on Form S-8, as filed with the SEC on May 28, 2021 (File No.

333‑2565777)).

1 unchanged sentence

— Non-Employee Director Compensation Summary (incorporated by reference to Exhibit 10.21 to the Company's Report on Form 8‑K as filed with the SEC on November 15, 2006 (File No.

— Form of Non-Employee Director Restricted Stock Agreement under the Company's Amended and Restated Equity Participation Plan (incorporated by reference to Exhibit 4.

6 to the Company's Registration Statement on Form S-8, as filed with the SEC on May 28, 2021 (File No.

— Form of Non-Employee Director Restricted Stock Agreement under the Company's Amended and Restated Equity Participation Plan (incorporated by reference to Exhibit 4.6 to the Company's Registration Statement on Form S-8, as filed with the SEC on May 28, 2021 (File No.

333‑2565777)).

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At December 31, 2022, the Company's goodwill in the Offshore/Manufactured Products reporting unit was $79.3 million.

As described in Note 2 to the consolidated financial statements, goodwill is assessed for impairment annually (as of December 1) and when an event occurs or circumstances change to suggest that the carrying amount may not be recoverable.

The Company performed its annual quantitative assessment of goodwill for impairment, which indicated that the fair value of the Offshore/Manufactured Products reporting unit was greater than its carrying amount and no impairment was required for the year ended December 31, 2021.

As discussed in Note 2 to the consolidated financial statements, goodwill is assessed for impairment annually (as of December 1) and when an event occurs or circumstances change to suggest that the carrying amount may not be recoverable.

Auditing management's annual goodwill impairment assessment for the Company's Offshore/Manufactured Products reporting unit was subjective and required the involvement of specialists due to the significant measurement uncertainty in determining the fair value of the reporting unit.

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To test the estimated fair value of the reporting unit, our audit procedures included, among others, assessing the valuation methodology and testing the significant assumptions discussed herein.

For example, we compared the revenue growth rate in the prospective financial data used by management to external forecasted spending trends in industry, analysts' forecasted commodity prices and historical performance.

For example, we compared the revenue growth rate in the prospective financial data used by management to external forecasted spending trends in the industry, analysts' forecasted commodity prices and historical performance.

We performed sensitivity analyses of certain significant assumptions to evaluate the change in the fair value resulting from changes in the significant assumptions.

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734,801 637,953 1,172,415

Operating loss ( 64,792 ) ( 534,340 ) ( 228,180 )

Operating income (loss) 2,905 ( 64,792 ) ( 534,340 )

Interest expense ( 10,571 ) ( 10,328 ) ( 14,259 )

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Loss before income taxes ( 4,060 ) ( 73,334 ) ( 534,329 )

Income tax benefit 9,341 65,946 8,919

Income tax (provision) benefit ( 5,480 ) 9,341 65,946

Net loss $ ( 9,540 ) $ ( 63,993 ) $ ( 468,383 )

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Other comprehensive income (loss):

Currency translation adjustments ( 12,977 ) ( 4,044 ) ( 3,750 )

Release of currency translation adjustments on liquidation of an international operation — 9,320 —

Other currency translation adjustments ( 4,044 ) ( 3,750 ) 3,462

Other 67 78 111

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Stock-based compensation expense 7 8,424 — — — 8,431

Restricted stock 8 16,707 — — — 16,715

Stock options — 53 — — — 53

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

Surrender of stock to settle taxes on restricted stock awards — — — — ( 2,745 ) ( 2,745 )

Common stock withdrawn from deferred compensation plan — 3 — — 40 43

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

2 unchanged sentences

Currency translation adjustment on intercompany advances — — — ( 2,948 ) — ( 2,948 )

Release of currency translation adjustments on liquidation of an international operation — — — 9,320 — 9,320

Other comprehensive income — — — 78 — 78

Stock-based compensation expense 6 7,873 — — — 7,879

Restricted stock 7 8,424 — — — 8,431

Surrender of stock to settle taxes on restricted stock awards — — — — ( 1,595 ) ( 1,595 )

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

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

2 unchanged sentences

Currency translation adjustments on intercompany advances — — — 2,281 — 2,281

Release of currency translation adjustments on liquidation of an international operation — — — 9,320 — 9,320

Other comprehensive income — — — 67 — 67

Issuance of common stock in connection with settlement of disputes with seller of GEODynamics, Inc.

19 10,313 — — — 10,332

Stock-based compensation expense 8 6,844 — — — 6,852

Restricted stock 6 7,873 — — — 7,879

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

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

Balance, December 31, 2022 $ 766 $ 1,122,292 $ 272,027 $ ( 78,941 ) $ ( 626,586 ) $ 689,558

15 unchanged sentences

Amortization of debt discount and deferred financing costs 1,886 2,314 7,736

Deferred income tax benefit ( 8,639 ) ( 24,404 ) ( 15,469 )

Deferred income tax provision (benefit) 2,020 ( 8,639 ) ( 24,404 )

Release of foreign currency translation adjustments on liquidation of an international operation — 9,320 —

3 unchanged sentences

Other, net 2,066 ( 511 ) 4,668

Changes in operating assets and liabilities:

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

Accounts receivable ( 35,443 ) ( 24,407 ) 63,876

7 unchanged sentences

Proceeds from disposition of property and equipment 5,877 11,527 9,601

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

Other, net ( 211 ) ( 636 ) ( 581 )

3 unchanged sentences

Revolving credit facility repayments ( 10,090 ) ( 31,873 ) ( 105,104 )

Payment of promissory note to seller of GEODynamics, Inc.

( 10,000 ) — —

Issuance of 4.75 % convertible senior notes

3 unchanged sentences

Payment of financing costs ( 105 ) ( 7,791 ) ( 1,041 )

Purchases of treasury stock — — ( 757 )

Shares added to treasury stock as a result of net share settlements

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All significant intercompany accounts and transactions between the Company and its consolidated subsidiaries have been eliminated in the accompanying Consolidated Financial Statements.

The Company operates through three business segments – Offshore/Manufactured Products, Downhole Technologies and Well Site Services – and, through its subsidiaries, is a leading provider of specialty products and services to oil and gas and industrial companies around the world.

The Company operates through three business segments – Offshore/Manufactured Products, Well Site Services and Downhole Technologies – and, through its subsidiaries, is a leading provider of specialty products and services to oil and gas and industrial companies around the world.

The Company operates in a substantial number of the world's active resource intensive regions, including:

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Use of Estimates

As further discussed in Note 14, "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 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 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 2020 and 2021, the Company recorded asset impairments, severance and restructuring 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 consolidated financial statements in conformity with generally accepted accounting principles 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 Consolidated Financial Statements and the reported amounts of revenues and expenses during the reporting period.

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Inventories also include raw materials, labor, subcontractor charges, manufacturing overhead and supplies and are carried at the lower of cost or net realizable value.

The cost of inventories is determined on an average cost or specific-

OIL STATES INTERNATIONAL, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

identification method.

The cost of inventories is determined on an average cost or specific-identification method.

A reserve for excess and/or obsolete inventory is maintained based on the age, turnover, condition, expected near-term utility and market pricing of the goods.

2 unchanged sentences

Leasehold improvements are capitalized and amortized over the lesser of the life of the lease or the estimated useful life of the asset.

OIL STATES INTERNATIONAL, INC.

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Expenditures for repairs and maintenance are charged to expense when incurred.

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If the carrying amount of a reporting unit exceeds its fair value, goodwill is considered impaired and an impairment loss is recorded based on the excess of the carrying amount over the reporting unit's fair value.

As further discussed in Note 5, "Goodwill and Other Intangible Assets," the Company recognized non-cash goodwill impairment charges of $ 406.1 million in the first quarter of 2020 and $ 165.0 million in the fourth quarter of 2019.

As further discussed in Note 6, "Goodwill and Other Intangible Assets," the Company recognized non-cash goodwill impairment charges of $ 406.1 million in the first quarter of 2020.

Long-Lived Assets

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The fair value of the asset group is based on appraised values, prices of similar assets (if available), or discounted cash flows.

As further discussed in Note 4, "Details of Selected Balance Sheet Accounts," and Note 7, "Operating Leases," the Company recognized non-cash asset impairment charges totaling $ 4.2 million, $ 12.4 million and $ 33.7 million in 2021, 2020 and 2019, respectively, to reduce the carrying value of certain equipment and facilities (owned and leased) to their estimated realizable value.

Based on the Company's review, the carrying values of its other long-lived assets are recoverable, and no additional impairment losses were recorded during the periods presented.

As further discussed in Note 5, "Details of Selected Balance Sheet Accounts," and Note 8, "Operating Leases," the Company recognized non-cash asset impairment charges totaling $ 4.2 million and $ 12.4 million in 2021 and 2020, respectively, to reduce the carrying value of certain equipment and facilities (owned and leased) to their estimated realizable value.

No additional impairment losses were recorded during the periods presented.

The Company leases a portion of its facilities, office space, equipment and vehicles under contracts which provide it with the right to control identified assets.

The Company recognizes the right to use identified assets under operating leases (with an initial term of greater than 12 months) as operating lease assets and the related obligations to make payments under the lease arrangements as operating lease liabilities.

Finance lease obligations, which are not material, are classified within long-term

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debt while related assets are included within property, plant and equipment.

Finance lease obligations, which are not material, are classified within long-term debt while related assets are included within property, plant and equipment.

Lease assets and liabilities are recorded at the commencement date based on the present value of lease payments over the lease term.

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Cash outflows related to operating leases are presented within cash flows from operations.

OIL STATES INTERNATIONAL, INC.

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Research and Development Costs

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right to payment for the product, transfer of legal title to the customer, transfer of physical possession of the product, transfer of risk and customer acceptance of the product.

OIL STATES INTERNATIONAL, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Revenues from products and services transferred to customers over time accounted for approximately 65 %, 65 % and 62 % of consolidated revenues for the years ended December 31, 2022, 2021 and 2020, respectively.

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Management believes this method is the most appropriate measure of progress on large contracts.

Billings on such contracts in excess of costs incurred and estimated profits are classified as a contract liability (deferred revenue).

Billings on such contracts in excess of costs incurred and estimated profits are classified

OIL STATES INTERNATIONAL, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

as a contract liability (deferred revenue).

Costs incurred and estimated profits in excess of billings on these contracts are recognized as a contract asset (a component of accounts receivable).

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Under this method, deferred income taxes are recorded based upon the differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws in effect at the time the underlying assets or liabilities are recovered or settled.

As of December 31, 2021, the Company's total investment in foreign subsidiaries is considered to be permanently reinvested outside of the United States.

As of December 31, 2022, the Company's total investment in foreign subsidiaries (except for its Canadian operations) is considered to be permanently reinvested outside of the United States.

The Company accounts for the U.S.

1 unchanged sentence

The Company records a valuation allowance in the reporting period when management believes that it is more likely than not that any deferred tax asset will not be realized.

This assessment requires analysis of changes in tax laws as well as available positive and negative evidence, including consideration of losses in recent years, reversals of temporary differences, forecasts of

OIL STATES INTERNATIONAL, INC.

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future income and assessment of future business and tax planning strategies.

During 2022, 2021 and 2020, the Company recorded valuation allowances primarily with respect to foreign and U.S.

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An additional charge is recorded as a provision for taxes in the period in which management determines that the recorded tax liability is less than the expected ultimate assessment.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Receivables and Concentration of Credit Risk

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Because both the liquidation and dividend rights are identical, undistributed earnings are allocated on a proportionate basis.

OIL STATES INTERNATIONAL, INC.

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Stock-Based Compensation

The fair value of share-based payments is estimated using the quoted market price of the Company's common stock and pricing models as of the date of grant as further discussed in Note 11, "Long-Term Incentive and Deferred Compensation Plans." The resulting cost, net of estimated forfeitures, is recognized over the period during which an employee is required to provide service in exchange for the awards, usually the vesting period.

The fair value of share-based payments is estimated using the quoted market price of the Company's common stock and pricing models as of the date of grant as further discussed in Note 12, "Long-Term Incentive Compensation." The resulting cost, net of estimated forfeitures, is recognized over the period during which an employee is required to provide service in exchange for the awards, usually the vesting period.

In addition to service-based awards, the Company issues performance-based awards, which are conditional based upon Company performance.

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During the ordinary course of business, the Company also provides standby letters of credit or other guarantee instruments to certain parties as required for certain transactions initiated by either the Company or its subsidiaries.

As of December 31, 2021, the maximum potential amount of future payments that the Company could be required to make under these guarantee agreements (letters of credit) was $ 16.1 million.

As of December 31, 2022, the maximum potential amount of future payments that the Company could be required to make under these guarantee

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agreements (letters of credit) was $ 15.4 million.

The Company has not recorded any liability in connection with these guarantee arrangements.

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From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (the "FASB"), which are adopted by the Company as of the specified effective date.

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.

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 (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.

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, 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.

1 unchanged sentence

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 $ 135.0 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.

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Asset Impairments and Other Restructuring Items

During 2019, the Company recorded the following charges (in thousands):

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

Impairments of:

Goodwill (Note 5)

$ — $ 165,000 $ — $ — $ 165,000 $ — $ 165,000

Fixed assets (Note 4)

— — 33,697 — 33,697 7,076 26,621

Severance and restructuring costs 1,655 — 1,847 — 3,502 735 2,767

As further discussed in Note 7, "Long-term Debt," the Company issued $ 135.0 million principal amount of its 4.75 % convertible senior notes due 2026 on March 19, 2021, which have been accounted for in accordance with the provisions of ASU 2020-06.

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.

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 transaction was accounted for using the acquisition method of accounting, based on the Company's 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.

Asset Impairments and Other Charges and Benefits

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.

1 unchanged sentence

shale play regions, until the supply/demand imbalances eased.

While the prices of and demand for crude oil have increased significantly since reaching record low levels in April 2020, uncertainty remains regarding the timing of demand recovery to pre-COVID-19 levels and the willingness of operators to invest in U.S.

land-based drilling, completion and production activities given regulatory pressures around environmental, social and governance considerations.

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

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Severance and restructuring costs 1,355 2,018 4,311 1,385 9,069 1,904 7,165

During 2021, the Company continued its restructuring efforts, closed additional facilities in the United States, liquidated an international operation 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 Downhole Technologies Well Site Services Corporate Pre-tax Total Tax After-tax Total

During 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

Impairments of:

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(1) Includes recognition of $ 1.9 million in additional lease-related liabilities associated with the exit of a long-term lease supporting the Well Site Services segment.

Additionally, during 2021, the Company recognized $ 8.8 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.

In August 2022, the Offshore/Manufactured Products segment settled outstanding litigation against certain service providers in exchange for cash totaling $ 6.9 million.

In connection with this settlement, the Company recognized a gain of $ 6.1 million (net of legal and other related costs) in 2022, which is included in other operating income, net.

OIL STATES INTERNATIONAL, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Should, among other events and circumstances, global economic and industry conditions deteriorate, the COVID-19 pandemic business and market disruptions continue, 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 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.

Details of Selected Balance Sheet Accounts

Additional information regarding selected balance sheet accounts as of December 31, 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 %

2022 December 31,

Deferred revenue (contract liabilities) $ 44,790 $ 43,236

As of December 31, 2021, accounts receivable, net in the United States and the United Kingdom represented 73 % and 14 %, respectively, of the total.

As of December 31, 2022, accounts receivable, net in the United States represented 77 %, of the total.

No other country or single customer accounted for more than 10% of the Company's total accounts receivable as of December 31, 2022.

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In the normal course of business, the Company also receives advance consideration from customers on many other short-term, smaller product and service contracts which is deferred and recognized as revenue once the related performance obligation is satisfied.

For the year ended December 31, 2021, the $ 3.9 million net increase in contract assets was primarily attributable to $ 38.9 million in revenue recognized during the period, which was partially offset by $ 35.0 million transferred to accounts receivable.

Deferred revenue (contract liabilities) decreased by $ 0.1 million in 2021, reflecting the recognition of $ 10.5 million of revenue that was deferred at the beginning of the period, offset by $ 10.4 million in new customer billings which were not recognized as revenue during the period.

For the year ended December 31, 2022, the $ 2.8 million net increase in contract assets was attributable to $ 34.8 million in revenue recognized during the period, which was partially offset by $ 31.7 million transferred to accounts receivable.

Deferred revenue (contract liabilities) increased by $ 1.6 million in 2022, reflecting $ 19.0 million in new customer billings which were not recognized as revenue during the period, partially offset by the recognition of $ 17.2 million of revenue that was deferred at the beginning of the period.

For the year ended December 31, 2021, the $ 3.9 million net increase in contract assets was primarily attributable to $ 38.9 million in revenue recognized during the year, which was partially offset by $ 35.0 million transferred to accounts receivable.

OIL STATES INTERNATIONAL, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the year ended December 31, 2020, the $ 9.8 million net increase in contract assets was primarily attributable to $ 32.4 million in revenue recognized during the year, which was partially offset by $ 22.8 million transferred to accounts receivable.

Deferred revenue (contract liabilities) increased by $ 25.6 million in 2020, reflecting $ 41.6 million in new customer billings which were not recognized as revenue during the year, partially offset by the recognition of $ 16.0 million of revenue that was deferred at the beginning of the period.

2022 December 31,

Inventories, net:

5 unchanged sentences

$ 182,658 $ 168,573

During 2021, the Company recorded impairment charges totaling $ 3.6 million to reduce the carrying value of inventories to their estimated net realizable value based primarily on management's decisions to exit certain product and service offerings.

The Company recorded impairment charges totaling $ 3.6 million in 2021 to reduce the carrying value of inventories to their estimated net realizable value based primarily on management's decision to exit certain product and service offerings.

During 2020, the Company recorded impairment charges totaling $ 31.2 million to reduce the carrying value of inventories to their estimated net realizable value based on changes in expectations regarding the near-term utility, customer demand and market pricing of certain goods.

Useful Life (years) 2021 2020

Useful Life (years) December 31,

2022 December 31,

Property, plant and equipment, net:

2 unchanged sentences

Machinery and equipment 2 – 28 241,257 247,285

Completion-related rental equipment 1 – 10 510,816 507,755

Completion-related equipment 3 – 10 504,770 510,816

Office furniture and equipment 1 – 10 33,529 33,155

5 unchanged sentences

For the years ended December 31, 2022, 2021 and 2020, depreciation expense was $ 47.0 million, $ 60.1 million and $ 73.6 million, respectively.

During 2019, the Company made the strategic decision to reduce the scope of its drilling operations (adjusting from 34 rigs to 9 rigs) within the Well Sites Services segment due to the ongoing weakness in customer demand for vertical drilling rigs in the U.S.

land market, particularly the Permian Basin.

As a result of this decision, the carrying value of 25 rigs, which were decommissioned or sold, was reduced to their estimated realizable value, resulting in the recognition of a $ 25.5 million non-cash impairment charge.

The Company also performed a fair value assessment on the remaining drilling rigs and recognized an additional non-cash impairment charge of $ 8.2 million (a Level 3 fair value measurement).

During 2020, the Well Site Services segment recognized a non-cash impairment charge of $ 5.2 million to further reduce the carrying value of the segment's remaining drilling rigs to their estimated realizable value and $ 3.6 million to reduce the carrying value of certain other facilities to their estimated realizable value.

During 2020, the Well Site Services segment recognized a non-cash impairment charge of $ 5.2 million to reduce the carrying value of the segment's drilling rigs to their estimated realizable value and $ 3.6 million to reduce the carrying value of certain other facilities to their estimated realizable value.

Also during 2020, the Downhole Technologies segment recognized a non-cash impairment charge of $ 1.6 million to reduce the carrying value of certain of the segment's fixed assets to their estimated realizable value.

During 2021, the Well Site Services segment recognized non-cash impairment charges of $ 1.4 million to reduce the carrying value of certain of the segment's fixed assets to their estimated realizable value.

OIL STATES INTERNATIONAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2022 December 31,

Other noncurrent assets:

4 unchanged sentences

$ 25,687 $ 32,889

OIL STATES INTERNATIONAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2022 December 31,

Accrued liabilities:

7 unchanged sentences

Goodwill and Other Intangible Assets

Changes in the carrying amount of goodwill for the years ended December 31, 2021 and 2020 were as follows (in thousands):

Changes in the carrying amount of goodwill recorded within the Offshore/Manufactured Products segment for the years ended December 31, 2022 and 2021 were as follows (in thousands):

Offshore / Manufactured

Products Downhole Technologies Well Site Services Total

Products Well Site Services Downhole Technologies Total

Balance as of December 31, 2020

2 unchanged sentences

76,489 — — 76,489

Goodwill impairment (March 2020) ( 86,500 ) ( 192,502 ) ( 127,054 ) ( 406,056 )

Foreign currency translation ( 77 ) — — ( 77 )

4 unchanged sentences

76,412 — — 76,412

Goodwill acquired 4,146 — — 4,146

Foreign currency translation ( 1,276 ) — — ( 1,276 )

4 unchanged sentences

$ 79,282 $ — $ — $ 79,282

As further discussed in Note 2, "Summary of Significant Accounting Policies," 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.

OIL STATES INTERNATIONAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 2019 Impairment

The Company had three reporting units – Offshore/Manufactured Products, Downhole Technologies and Well Site Services – whose goodwill balances totaled approximately $ 647 million as of September 30, 2019.

During the fourth quarter of 2019, U.S.

land-based completion activity declined significantly from levels experienced over the previous three quarters.

Additionally, a number of other market indicators declined to levels not experienced in recent years.

Consistent with most other oilfield service industry peers, the Company's stock price declined and its market capitalization was below the carrying value of stockholders' equity.

Given these market conditions, the Company reduced its near-term demand outlook for its short-cycle products and services in the U.S.

shale play regions.

This refined outlook was incorporated in the December 1, 2019 annual impairment assessment.

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 December 1, 2019 assessment were consistent with those used during previous testing, except for the Downhole Technologies reporting unit where the income approach was used to estimate its fair value – with the market approach used only to validate the results in 2019.

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

The income approach estimates the fair value of each reporting unit by discounting the Company's current forecast of future cash flows by its estimate of the discount rate (or expected return) that a market participant would require.

The market approach includes the use of comparative multiples to corroborate the discounted cash flow results.

The market approach involves judgment in the selection of the appropriate peer group companies and valuation multiples.

Significant assumptions used in the income approach include, among others, the estimated future net annual cash flows and discount rates for each reporting unit.

Management selected estimates used in the discounted cash flow projections using historical data as well as then-current and anticipated market conditions and estimated growth rates.

These estimates were based upon assumptions that considered published industry trends and market forecasts of commodity prices, rig count, well count and offshore/onshore drilling and completion spending, and were believed to be reasonable at the time.

The discount rates used to value the Company's reporting units as of December 1, 2019 ranged between 12.5 % and 13.0 %.

Based on this quantitative assessment, the Company concluded that the goodwill amount recorded in its Downhole Technologies reporting unit was partially impaired and recognized a non-cash goodwill impairment charge of $ 165.0 million in the fourth quarter of 2019.

As further discussed in Note 2, "Summary of Significant Accounting Policies," goodwill is assessed for impairment annually and when an event occurs or circumstances change that indicate the carrying amounts may not be recoverable.

March 2020 Impairments

Given the significance of the March 2020 events described in Note 3, "Asset Impairments and Other Charges," the Company performed a quantitative assessment of goodwill for further impairment as of March 31, 2020.

Given the significance of the March 2020 events described in Note 4, "Asset Impairments and Other Charges and Benefits," 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 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.

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 the March 2020 assessment.

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

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

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

OIL STATES INTERNATIONAL, INC.

2 unchanged sentences

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, as presented in further detail in the table above.

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

December 2020, 2021 and 2022 Assessments

As of December 1, 2020 and 2021, the Company had only one reporting unit – Offshore/Manufactured Products – with a goodwill balance of $ 76 million.

The Company performed its annual quantitative assessments of goodwill for impairment, which indicated that the fair value of the Offshore/Manufactured Products reporting unit was greater than its carrying amount and no additional impairment was required in either period.

As of December 1, 2020, 2021 and 2022, the Company had only one reporting unit – Offshore/Manufactured Products – with goodwill balances.

The Company performed its annual quantitative assessments of goodwill for impairment, which indicated that the fair value of the Offshore/Manufactured Products reporting unit was greater than its carrying amount at each date and no additional impairments were required in any period.

The fair value of the Offshore/Manufactured Products reporting unit was determined using significant unobservable inputs (a Level 3 fair value measurement).

1 unchanged sentence

The discount rate used to value the Offshore/Manufactured Products reporting unit as of December 1, 2020, 2021 and 2022 was 15.3 %, 14.5 % and 15.0 %, respectively.

The estimated returns required by market participants decreased in the Company's 2020 and 2021 annual assessments from the assessment as of March 31, 2020 given improvements in the global economy and financial markets.

Other Intangible Assets

7 unchanged sentences

Patents/Technology/Know-how 69,830 29,214 40,616 78,821 33,151 45,670

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

Tradenames and other 52,488 16,856 35,632 53,708 15,179 38,529

2 unchanged sentences

The weighted average remaining amortization period for all intangible assets, other than goodwill, was 10.6 years as of December 31, 2022 and 11.3 years as of December 31, 2021.

Amortization expense is expected to total approximately $ 20 million in 2022 and $ 17 million in 2023 through 2026.

Amortization expense is expected to total approximately $ 17 million in 2023 through 2026 and $ 16 million in 2027.

As of December 31, 2022 and 2021, no impairment of other intangible assets was required.

3 unchanged sentences

Long-term Debt

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

Revolving credit facilities (1)

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

2022 December 31,

Revolving credit facility (1)

2026 Notes (2)

132,164 131,291

2023 Notes (3)

6 unchanged sentences

____________________

(1) Presented net of $ 0.6 million of unamortized deferred financing costs as of December 31, 2020.

Unamortized deferred financing costs of $ 2.7 million as of December 31, 2021 are presented in Other noncurrent assets.

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

(1) Unamortized deferred financing costs of $ 1.9 million and $ 2.7 million as of December 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 December 31, 2022 and December 31, 2021.

(3) The outstanding principal amount of the 2023 Notes was $ 17.3 million and $ 26.0 million as of December 31, 2022 and December 31, 2021, respectively.

The 2023 Notes matured and were repaid in full on February 15, 2023.

Scheduled maturities of total debt as of December 31, 2022, are as follows (in thousands):

Thereafter 831

Revolving Credit Facilities

Revolving Credit Facility

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 Company's former senior secured revolving credit 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.

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.

On December 13, 2022, the Company entered into an additional technical amendment to the ABL Facility to replace the reference benchmark rate of the London Interbank Offered Rate ("LIBOR") with the Secured Overnight Financing Rate ("SOFR").

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 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.

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

1 unchanged sentence

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.

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

OIL STATES INTERNATIONAL, INC.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

Prior to December 13, 2022, borrowings under the ABL Agreement bore interest at a rate equal to the LIBOR rate (subject to a floor rate of 0.50 %) plus a margin of 2.75 % to 3.25 %, or at a base rate plus a margin of 1.75 % to 2.25 %, in each case based on average borrowing availability.

Effective December 13, 2022, borrowings under the ABL Agreement bear interest at a rate equal to the SOFR rate (subject to a floor rate of 0 %) plus a margin of 2.75 % to 3.25 %, or at a base rate plus a margin of 1.75 % to 2.25 %, in each case based on average borrowing availability.

Quarterly, the Company must also pay a 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 discussed below), 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 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.

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 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 December 31, 2022, the Company had $ 15.4 million of outstanding letters of credit, but no borrowings outstanding under the ABL Agreement.

1 unchanged sentence

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

Former Revolving Credit Facility

Until its termination on February 10, 2021, 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.

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 $ 135.0 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.

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 Computershare Trust Company, National Association, as successor trustee.

Net proceeds from the 2026 Notes offering, after deducting issuance costs, totaled $ 130.6 million.

3 unchanged sentences

Additional interest and special interest may accrue on the 2026 Notes under certain circumstances as described in the 2026 Indenture.

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) 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

OIL STATES INTERNATIONAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

As of December 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 $ 200.0 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.

The 2023 Notes bear interest at a rate of 1.50 % per year and will mature on February 15, 2023, unless earlier repurchased, redeemed or converted.

The initial conversion rate is 22.2748 shares of the Company's common stock per $1,000 principal amount of 2023 Notes (equivalent to an initial conversion price of approximately $ 44.89 per share of common stock).

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

The initial carrying amount of the 2023 Notes recorded in the consolidated balance sheet was less than their 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.

See Note 2, "Summary of Significant Accounting Policies," for discussion of ASU 2020-06, which changed the Company's method of accounting for the 2023 Notes upon adoption.

The following table provides details with respect to the carrying amount of the 2023 Notes in the consolidated balance sheets as of December 31, 2021 and 2020 (in thousands):

Principal amount of the liability component $ 25,969 $ 157,369

Unamortized discount — 12,308

Unamortized issuance costs 167 1,819

Net carrying amount of the liability component $ 25,802 $ 143,242

Net carrying amount of the equity component n.a.

OIL STATES INTERNATIONAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of December 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.

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 Computershare Trust Company, National Association, as successor trustee.

As of December 31, 2022, $ 17.3 million principal amount of the 2023 Notes remained outstanding.

The 2023 Notes bore interest at a rate of 1.50 % per year, and matured and were repaid in full on February 15, 2023.

The following table provides a summary of the Company's purchases of outstanding 2023 Notes during the years ended December 31, 2022, 2021 and 2020, with non-cash gains reported within other income, net (in thousands):

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

Year Ended December 31,

2022 $ 8,654 $ 8,626 $ 8,450 $ 176

1 unchanged sentence

2020 34,881 30,799 20,078 10,721

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 December 31, 2021, which is its current best estimate of what is owed after set-off for such indemnification matters.

See Note 14, "Commitments and Contingencies."

In connection with the 2018 acquisition of GEODynamics, Inc.

("GEODynamics" and 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 seller of GEODynamics (the "GEO Seller"), and the GEO Seller filed a breach of contract suit against the Company 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.

As further discussed in Note 15, "Commitments and Contingencies," on June 28, 2022, the Company settled its disputes with the GEO Seller, which included the full and final settlement of all amounts due under the GEO Note.

Pursuant to the settlement agreement, on July 1, 2022, the Company paid the GEO Seller $ 10.0 million in cash, issued approximately 1.9 million shares of its common stock (having a market value of $ 10.3 million) and extinguished the $ 17.5 million carrying value of the GEO Note along with accrued interest of $ 2.2 million.

Operating Leases

3 unchanged sentences

Operating lease asset additions are offset by a corresponding increase to operating lease liabilities and do not impact the consolidated statement of cash flows at commencement.

The non-cash effect of operating lease additions in 2020 and 2019 totaled $ 1.9 million and $ 53.7 million (inclusive of $ 47.7 million recognized in 2019 upon adoption of the revised lease accounting guidance), respectively.

The non-cash effect of operating lease additions in 2022, 2021 and 2020 totaled $ 0.4 million, $ 0.1 million and $ 1.9 million, respectively.

The following table provides details regarding the components of operating lease expense based on the initial term of underlying agreements for the years ended December 31, 2022, 2021 and 2020 (in thousands):

4 unchanged sentences

Total operating lease expense $ 13,043 $ 13,644 $ 16,588

During 2020, the Downhole Technologies segment closed certain lease facilities in connection with restructuring activities and recognized a non-cash impairment charge of $ 2.0 million to reduce the carrying value of the related operating lease assets to their estimated realizable value.

During 2020, the Downhole Technologies segment closed certain leased facilities in connection with restructuring activities and recognized a non-cash impairment charge of $ 2.0 million to reduce the carrying value of the related operating lease assets to their estimated realizable value.

During 2021, the Well Site Services segment recognized non-cash operating lease asset impairment charges of $ 2.8 million associated with the closure of certain leased facilities.

21 unchanged sentences

Shares of common stock outstanding – December 31, 2021 73,900 12,522 61,378

Issuance of common stock to seller of GEODynamics, Inc.

1,910 — 1,910

Restricted stock awards, net of forfeitures 778 — 778

2 unchanged sentences

As of December 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.

On February 16, 2023, the Company's Board of Directors authorized $ 25.0 million for the repurchases of the Company's common stock, par value $ 0.01 per share, through February 2025.

Subject to applicable securities laws, such purchases will be at such times and in such amounts as the Company deems appropriate.

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 $ 71.4 million at December 31, 2020 to $ 66.0 million at December 31, 2021, with the reclassification of $ 9.3 million in historical currency translation adjustments to net loss upon the liquidation of an international operation partially offset by the impact of changes in currency exchange rates during 2021.

For 2021 and 2020, 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 2021, the exchange rate for the British pound and the Brazilian real compared to the U.S.

dollar weakened by 1 % and 7 %, respectively, contributing to other comprehensive loss of $ 4.0 million.

During 2020, the exchange rate for the British pound strengthened by 3 % compared to the U.S.

dollar while the Brazilian real weakened by 23 % compared to the U.S.

dollar, contributing to other comprehensive loss of $ 3.6 million.

Accumulated other comprehensive loss increased from $ 66.0 million at December 31, 2021 to $ 78.9 million at December 31, 2022.

During 2021, in addition to the impact of changes in currency exchange rates, $ 9.3 million in historical currency translation adjustments were reclassified to net loss upon the liquidation of an international operation.

For the years ended December 31, 2022 and 2021, currency translation adjustments recognized as a component of other comprehensive loss were primarily attributable to the United Kingdom and Brazil.

OIL STATES INTERNATIONAL, INC.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

During the year ended December 31, 2022, the exchange rate for the British pound weakened by 11 % compared to the U.S.

dollar while the Brazilian real strengthened by 6 % compared to the U.S.

dollar, contributing to other comprehensive loss of $ 12.9 million.

During the year ended December 31, 2021, the exchange rate for the British pound and the Brazilian real weakened by 1 % and 7 %, respectively, compared to the U.S.

dollar, contributing to other comprehensive loss of $ 4.0 million.

Consolidated loss before income taxes for the years ended December 31, 2022, 2021 and 2020 consisted of the following (in thousands):

4 unchanged sentences

The 2021 foreign losses before income taxes included the reclassification of $ 9.3 million in historical currency translation adjustments upon the liquidation of an international operation, which were not deductible for income tax purposes.

Additionally, the 2020 and 2019 U.S.

losses before income taxes included non-cash goodwill impairment charges of $ 406.1 million and $ 165.0 million, respectively.

Approximately $ 313.1 million and $ 165.0 million of the goodwill impairment charges were not deductible for income tax purposes in 2020 and 2019, respectively.

Components of income tax benefit for the years ended December 31, 2021, 2020 and 2019 consisted of the following (in thousands):

Additionally, the 2020 U.S.

losses before income taxes included non-cash goodwill impairment charges of $ 406.1 million.

Approximately $ 313.1 million of the goodwill impairment charges were not deductible for income tax purposes in 2020.

Components of income tax provision (benefit) for the years ended December 31, 2022, 2021 and 2020 consisted of the following (in thousands):

2022 2021 2020

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2,020 ( 8,639 ) ( 24,404 )

Total income tax benefit $ ( 9,341 ) $ ( 65,946 ) $ ( 8,919 )

Total income tax provision (benefit) $ 5,480 $ ( 9,341 ) $ ( 65,946 )

A reconciliation of the U.S.

statutory tax benefit rate to the effective tax benefit rate for the years ended December 31, 2021, 2020 and 2019 is as follows:

statutory income tax benefit to the total income tax provision (benefit) for the years ended December 31, 2022, 2021 and 2020 is as follows:

2022 2021 2020

statutory tax benefit rate ( 21.0 ) % ( 21.0 ) % ( 21.0 ) %

Release of foreign currency translation adjustments on liquidation of an international operation 2.7 — —

Impairments of goodwill — 12.3 14.4

Effect of CARES Act — ( 3.1 ) —

State income taxes, net of federal benefits ( 1.6 ) ( 1.1 ) ( 0.4 )

statutory income tax benefit $ ( 853 ) $ ( 15,400 ) $ ( 112,209 )

Effect of foreign income taxed at different rates 1,895 ( 483 ) 755

Foreign income subject to U.S.

taxes 1,876 182 —

State income taxes, net of federal benefits 89 ( 1,157 ) ( 5,833 )

Valuation allowances against tax assets 19 2,410 1,381

1 unchanged sentence

Other non-deductible expenses, net 1,827 2,336 98

Effective tax benefit rate ( 12.7 ) % ( 12.3 ) % ( 3.7 ) %

Release of foreign currency translation adjustments on liquidation of an international operation — 1,957 —

Impairments of goodwill — — 65,740

Effect of CARES Act — — ( 16,362 )

Total income tax provision (benefit) $ 5,480 $ ( 9,341 ) $ ( 65,946 )

OIL STATES INTERNATIONAL, INC.

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Net operating loss carryforwards 44,955 46,304

Employee benefits 5,456 7,353

Inventories 9,969 10,192

Operating lease liabilities 4,822 5,355

Employee benefits 4,327 5,456

Other 3,357 6,899

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Intangible assets ( 29,232 ) ( 29,671 )

Convertible senior notes discount — ( 2,790 )

Operating lease assets ( 4,013 ) ( 4,355 )

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On March 27, 2020, the CARES Act was signed into law.

In accordance with the rules and provisions under the CARES Act, the Company has filed carryback claims regarding U.S.

In accordance with the rules and provisions under the CARES Act, the Company filed carryback claims regarding U.S.

net operating losses generated in 2018 and 2019.

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The calculation of diluted net loss per share for the years ended December 31, 2022, 2021 and 2020 excluded 277 thousand shares, 430 thousand shares and 582 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.

Additionally, shares issuable upon conversion of both the 2023 Notes and the 2026 Notes were excluded from the calculation of diluted net loss per share for the years ended December 31, 2022, 2021 and 2020 due to, among other factors, the Company's share price.

Long-Term Incentive Compensation

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The number of performance-based restricted shares ultimately issued under the program is dependent upon achievement of predefined specific performance objectives generally measured over a three-year period.

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

The performance objectives for performance-based stock units granted during 2020 and 2019 are based on the Company's EBITDA growth rate over a three-year period.

In the event the predefined targets are exceeded for any performance-based award, additional shares up to a maximum of 200 % of the target award may be granted.

Conversely, if actual performance falls below the predefined target, the number of

The performance objectives for performance-based restricted stock units granted in 2022 and 2021 are based on the Company's cumulative EBITDA over a three-year period.

The performance objective for performance-based stock units granted in 2020 is based on the Company's EBITDA growth rate over a three-year period.

OIL STATES INTERNATIONAL, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

shares vested is reduced.

In the event the predefined targets are exceeded for any performance-based award, additional shares up to a maximum of 200 % of the target award may be granted.

Conversely, if actual performance falls below the predefined target, the number of shares vested is reduced.

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

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The following table presents changes in restricted stock awards and related information for the year ended December 31, 2022 (shares in thousands):

Service-based Restricted Stock Performance-based Restricted Stock

Number of Shares Weighted Average Grant Date Fair Value Number of Shares Weighted Average Grant Date Fair Value Total Number of Restricted Shares

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

Number of Shares Weighted Average Grant Date Fair Value Number of Units Weighted Average Grant Date Fair Value Total Number of Restricted Shares and Units

Unvested, December 31, 2021 993 $ 9.29 358 $ 8.49 1,350

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As of December 31, 2022, there was $ 6.8 million of total compensation costs related to unvested restricted stock awards not yet recognized, which is expected to be recognized over a weighted average vesting period of 1.5 years.

On May 11, 2021, the Company’s stockholders approved the Amended and Restated Equity Participation Plan of Oil States International, Inc.

(the "Plan"), which provided for a 4.5 million increase in the number of shares authorized for issuance under the plan.

As of December 31, 2021, approximately 5.0 million shares were available for future grant under the Plan.

As of December 31, 2022, approximately 4.2 million shares were available for future grant under the Company's Amended and Restated Equity Participation Plan.

Stock Options

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Long-Term Cash Incentive Awards

During 2021 and 2020, the Company issued conditional long-term cash incentive awards ("Cash Awards") of $ 1.5 million and $ 2.0 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 $ 4.0 million for the 2020 Cash Award.

The Company issued conditional long-term cash incentive awards ("Cash Awards") totaling $ 1.5 million in both 2022 and 2021.

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 2021 and 2020 Cash Awards is limited to their targeted award value ($ 1.5 million and $ 2.0 million, respectively) 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.

The ultimate dollar amount to be awarded for each annual grant ranges from zero to a maximum of $ 3.1 million, but is limited to the targeted award value if the Company's total stockholder return is negative over the respective performance period.

Obligations related to these Cash Awards are classified as liabilities and recognized over the vesting period.

Retirement Plans

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Participation in these plans is available to substantially all employees.

The Company recognized expenses of $ 0.8 million, $ 3.4 million and $ 9.5 million primarily related to matching contributions under its various defined contribution plans during the years ended December 31, 2021, 2020 and 2019, respectively.

Effective January 1, 2022, the Company resumed matching contributions to the Company's 401(k) Plan and Deferred Compensation Plan (defined below) – which were suspended in 2020 in response to the significant decline in industry activity levels due to the COVID-19 pandemic.

Deferred Compensation Plan

The Company also maintains a nonqualified deferred compensation plan (the "Deferred Compensation Plan") that permits eligible directors and employees to elect to defer the receipt of all or a portion of their directors' fees or salary and annual

The Company recognized expenses of $ 3.4 million, $ 0.8 million and $ 3.4 million primarily related to matching contributions under its various defined contribution plans during the years ended December 31, 2022, 2021 and 2020, respectively.

OIL STATES INTERNATIONAL, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Deferred Compensation Plan

The Deferred Compensation Plan permits the Company to make discretionary contributions to an employee's account.

Since inception of the plan, this discretionary contribution provision has been limited to a matching of the employee's contributions on a basis equivalent to matching permitted under the Company's 401(k) Plan but are not subject to the IRS limitations on match-eligible compensation.

Since inception of the plan, this discretionary contribution provision has been limited to a matching of the employee's contributions on a basis equivalent to matching permitted under the Company's 401(k) Plan, but not subject to the IRS limitations on match-eligible compensation.

The vesting of Company contributions to participant accounts is equivalent to the vesting requirements of the Company's 401(k) Plan.

The assets of the Deferred Compensation Plan are held in a Rabbi Trust (the "Trust") and, therefore, are available to satisfy the claims of the Company's creditors in the event of bankruptcy or insolvency of the Company.

Participants have the ability to direct the plan administrator to invest the assets in their individual accounts, including any discretionary contributions by the Company, in a selection of funds consistent with those in the Company's 401(k) Plan.

Distributions from the plan are generally made in cash upon the participants' termination as a director or employee of the Company.

Participants have the ability to direct the plan administrator to invest the assets in their individual accounts, including any discretionary contributions made by the Company, in a selection of funds consistent with those in the Company's 401(k) Plan.

Distributions from the Deferred Compensation Plan are generally made in cash upon the participants' termination as a director or employee of the Company.

As of December 31, 2022, Trust assets and amounts payable to plan participants totaled $ 17.6 million, which are classified as "Other noncurrent assets" and "Other noncurrent liabilities" in the Company's consolidated balance sheet.

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The segment also offers a broad line of complementary, value-added services including specialty welding, fabrication, cladding and machining services, offshore installation services, and inspection and repair services.

The Downhole Technologies segment, comprised of the GEODynamics business acquired in 2018, provides oil and gas perforation systems and downhole tools in support of completion, intervention, wireline and well abandonment operations.

This segment designs, manufactures and markets its consumable engineered products to oilfield service as well as exploration and production companies, which are completing complex wells with longer lateral lengths, increased frac stages and more perforation clusters to increase unconventional well productivity.

The Well Site Services segment provides a broad range of equipment and services that are used to drill for, establish and maintain the flow of oil and natural gas from a well throughout its life cycle.

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The segment provides solutions to its customers using its completion tools, drilling rigs and highly-trained personnel throughout its service offerings which include wireline support, frac stacks, isolation tools, downhole and extended reach activity, well testing and flowback operations, sand control and land drilling.

Corporate information includes corporate expenses, such as those related to corporate governance, stock-based compensation and other infrastructure support, as well as impacts from corporate-wide decisions for which individual operating units are not evaluated.

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Offshore/Manufactured Products (1)

Downhole Technologies (1)

$ 381,723 $ 20,451 $ 45,268 $ 5,857 $ 556,769

Well Site Services 231,189 28,564 4,865 12,963 206,632

170,940 40,152 ( 34,511 ) 10,977 200,874

Downhole Technologies 124,794 17,628 ( 6,669 ) 1,271 255,550

Corporate — 691 ( 40,559 ) 175 45,441

1 unchanged sentence

Offshore/Manufactured Products $ 298,729 $ 22,190 $ 15,447 $ 4,628 $ 541,346

Well Site Services (2)

170,940 40,152 ( 34,511 ) 10,977 200,874

1 unchanged sentence

103,492 17,591 ( 13,470 ) 901 267,468

Well Site Services (5)

199,839 53,240 ( 193,388 ) 6,937 244,932

Corporate — 808 ( 32,258 ) 1,011 76,060

1 unchanged sentence

Offshore/Manufactured Products (4)

Downhole Technologies (6)

$ 340,300 $ 21,881 $ ( 80,794 ) $ 2,913 $ 547,962

1 unchanged sentence

199,839 53,240 ( 193,388 ) 6,937 244,932

Downhole Technologies (6)

97,936 22,649 ( 224,414 ) 3,230 280,096

Corporate — 773 ( 35,744 ) ( 331 ) 79,270

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________________

(1) Operating loss included a non-cash inventory impairment charge of $ 2.1 million.

(1) Operating income included a $ 6.1 million gain on settlement of outstanding litigation.

(2) Operating loss included non-cash inventory and fixed and operating lease asset impairment charges of $ 1.5 million and $ 4.2 million, respectively.

(3) Operating loss included a non-cash inventory impairment charge of $ 2.1 million.

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

(4) Operating loss included non-cash goodwill, inventory and fixed and operating lease impairment charges of $ 192.5 million, $ 5.9 million and $ 3.6 million, respectively.

(5) Operating loss included non-cash goodwill, inventory and fixed asset impairment charges of $ 127.1 million, $ 9.0 million and $ 8.8 million, respectively.

(6) Operating loss included a non-cash goodwill impairment charge of $ 165.0 million.

(7) Operating loss included a non-cash fixed asset impairment charge of $ 33.7 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.

(6) Operating loss included non-cash goodwill, inventory and fixed and operating lease impairment charges of $ 192.5 million, $ 5.9 million and $ 3.6 million, respectively.

See Note 4, "Asset Impairments and Other Charges and Benefits," and Note 5, "Details of Selected Balance Sheet Accounts," for further discussion of these and other charges and benefits.

No customer individually accounted for greater than 10% of the Company's 2022, 2021 or 2020 consolidated revenues or individually accounted for greater than 10% of the Company's consolidated accounts receivable at December 31, 2022.

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The following tables provide supplemental disaggregated revenue from contracts with customers by operating segment for the years ended December 31, 2022, 2021 and 2020 (in thousands):

Offshore/Manufactured Products Downhole Technologies Well Site Services

Offshore/Manufactured Products Well Site Services Downhole Technologies

2022 2021 2020 2022 2021 2020 2022 2021 2020

17 unchanged sentences

Long-lived assets 554,926 78,622 16,509 48,883 698,940

OIL STATES INTERNATIONAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Commitments and Contingencies

During 2021, 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.

The most direct impacts that the Company continues to experience are decreased pricing for its products and services due to the timing and rate of activity increases, the demand for crude oil, market pressures driving increased capital discipline by its customers and, to a lesser extent, supply chain disruptions.

While the prices of and demand for crude oil have recovered from the lows seen in the initial stages of the pandemic, further outbreaks or the emergence of new strains of the COVID-19 virus, such as the Omicron variant, could result in the reimposition of domestic and international regulations directing individuals to stay at home, limiting travel, requiring facility closures and imposing quarantines.

Widespread implementation of these or similar restrictions could result in commodity price volatility, reduced demand for the Company's products and services, as well as delays in or inability of the Company to fulfill its contractual obligations to customers, logistic constraints, increases in the Company's costs and workforce and raw material shortages.

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

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.

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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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 December 31, 2021, 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.

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.

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.

OIL STATES INTERNATIONAL, INC.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In August 2020, the GEO Seller filed a breach of contract suit against the Company 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 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"), which included the full and final settlement of all amounts due pursuant to the GEO Note ($ 17.5 million in principal amount and accrued interest of $ 2.2 million outstanding as of June 28, 2022).

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 and (ii) the issuance by the Company of 1,909,722 shares of its common stock (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.

In August 2022, the Offshore/Manufactured Products segment settled outstanding litigation against certain service providers in exchange for cash totaling $ 6.9 million.

In connection with this settlement, the Company recognized a gain of $ 6.1 million (net of legal and other related costs) in the third quarter of 2022, which is included in other operating income, net.

Valuation Allowances

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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-K

Item 9A. Controls and Procedures