What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2024-02-21 compared with 2023-02-17 · 226 added, 290 removed, 878 unchanged (37% of the section changed)

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Other Information

There was no information required to be disclosed in a report on Form 8‑K during the fourth quarter of 2022 that was not reported on a Form 8‑K during such time.

During the three months ended December 31, 2023, no director or executive officer adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement” (as each is defined in Item 408 of Regulation S-K) related to securities of our company.

Directors, Executive Officers and Corporate Governance

(1) Information concerning directors, including our audit committee financial experts, appears in our Definitive Proxy Statement for the 2023 Annual Meeting of Stockholders, under "Election of Directors." This portion of the Definitive Proxy Statement is incorporated herein by reference.

(2) Information with respect to executive officers appears in our Definitive Proxy Statement for the 2023 Annual Meeting of Stockholders, under "Executive Officers of the Registrant." This portion of the Definitive Proxy Statement is incorporated herein by reference.

(3) Information concerning Section 16(a) beneficial ownership reporting compliance appears in our Definitive Proxy Statement for the 2023 Annual Meeting of Stockholders, under "Section 16(a) Beneficial Ownership Reporting Compliance." This portion of the Definitive Proxy Statement is incorporated herein by reference.

(4) Information concerning corporate governance and our code of ethics appears in our Definitive Proxy Statement for the 2023 Annual Meeting of Stockholders, under "Financial Code of Ethics for Senior Officers." This portion of the Definitive Proxy Statement is incorporated herein by reference.

(1) Information concerning directors, including our audit committee financial experts, is incorporated by reference to our Definitive Proxy Statement for the 2024 Annual Meeting of Stockholders, under “Election of Directors.”

(2) Information with respect to executive officers is incorporated by reference to our Definitive Proxy Statement for the 2024 Annual Meeting of Stockholders, under “Executive Officers.”

(3) Information concerning Section 16(a) beneficial ownership reporting compliance is incorporated by reference to our Definitive Proxy Statement for the 2024 Annual Meeting of Stockholders, under “Section 16(a) Beneficial Ownership Reporting Compliance,” to the extent such disclosure is required.

(4) Information concerning corporate governance and our code of ethics is incorporated by reference to our Definitive Proxy Statement for the 2024 Annual Meeting of Stockholders, under “Corporate Governance.”

Executive Compensation

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Principal Accounting Fees and Services

Information concerning principal accounting fees and services and the audit committee's preapproval policies and procedures appear in our Definitive Proxy Statement for the 2023 Annual Meeting of Stockholders under the heading "Fees Paid to Ernst & Young LLP" and is incorporated herein by reference.

Information concerning principal accounting fees and services and the audit committee’s preapproval policies and procedures is incorporated by reference to our Definitive Proxy Statement for the 2024 Annual Meeting of Stockholders, under “Audit Fee Disclosure.”

Exhibits, Financial Statement Schedules

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(b) Index of Exhibits

— 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.

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

— Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the Company's Quarterly Report on Form 10‑Q for the quarter ended June 30, 2023, as filed with the SEC on July 27, 2023 (File No.

— Fifth Amended and Restated Bylaws of Oil States International, Inc.

(incorporated by reference to Exhibit 3.2 to the Company’s Annual Report on Form 10‑K for the year ended December 31, 2022, as filed with the SEC on February 17, 2023 (File No.

— 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.

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and Wells Fargo Bank, National Association, as trustee, relating to the 4.75% Convertible Senior Notes due 2026 (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K, as filed with the Commission on March 22, 2021 (File No.

— Description of Common Stock (incorporated by reference to Exhibit 4.4 to the Company's Annual Report on Form 10-K for the year ended December 31, 2019, as filed with the SEC on February 21, 2020).

— Description of Common Stock (incorporated by reference to Exhibit 4.4 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, as filed with the SEC on February 21, 2020 (File No.

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

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— 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.

— 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 (incorporated by reference to Exhibit 10.9 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, as filed with the SEC on February 17, 2023 (File No.

— Third Amendment to Credit Agreement, dated February 16, 2024, 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.

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Moses) effective July 1, 2015 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8‑K, as filed with the SEC on July 8, 2015 (File No.

— Executive Agreement between Oil States International, Inc.

and named executive officer (Brian E.

Taylor) effective May 10, 2022 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8‑K, as filed with the SEC on May 13, 2022 (File No.

— Annual Incentive Compensation Plan, dated January 1, 2020 (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, as filed with the SEC on May 1, 2020 (File No.

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pursuant to Rules 13a‑14(b) or 15d‑14(b) under the Securities Exchange Act of 1934.

— In centive-Based Compensation Recoupment Policy

101.INS* — XBRL Instance Document

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Denise Castillo-Rhodes

Christopher T.

Joseph Wright

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Consolidated Statements of Operations 56

Consolidated Statements of Comprehensive Loss 57

Consolidated Statements of Comprehensive Income (Loss)

Consolidated Balance Sheets 58

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We have audited the accompanying consolidated balance sheets of Oil States International, Inc.

and subsidiaries (the Company) as of December 31, 2022 and 2021, the related consolidated statements of operations, comprehensive loss, stockholders' equity and cash flows for each of the three years in the period ended December 31, 2022, and the related notes (collectively referred to as the "consolidated financial statements").

and subsidiaries (the Company) as of December 31, 2023 and 2022, the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2023, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with U.S.

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The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Goodwill Impairment Assessment – Offshore/Manufactured Products

Product revenues recognized over-time on project-driven contracts

Description of the Matter

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

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.

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.

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.

In particular, the fair value estimate attributable to the income approach was sensitive to changes in significant assumptions, such as the discount rate and the revenue growth rate, both of which are affected by market forecasts of commodity prices and the level of capital expenditures in the oil and gas industry.

As discussed in Note 2 to the consolidated financial statements, the Company recognizes product revenue over time for certain project-driven contracts using an input method such as the percentage of costs incurred to date relative to total estimated costs at completion for each contract (cost-to-cost method).

Auditing management’s calculation of product revenues recognized under the cost-to-cost method was complex and subjective due to the significant estimation required in determining the estimated costs remaining on the project.

In particular, the estimates of remaining costs associated with materials and labor are sensitive and may be impacted by factors outside of the Company’s control.

How We Addressed the Matter in Our Audit

We obtained an understanding, evaluated the design, and tested the operating effectiveness of controls over the Company's annual goodwill impairment assessment process.

For example, we tested controls over the Company's forecasting process as well as controls over management's review of the significant assumptions in estimating the fair value of the reporting unit and the related evaluation of management's specialist.

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 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.

We also involved our valuation specialists to assist in the evaluation of the fair value methodology and the discount rate assumption in the fair value estimate.

We further tested the completeness and accuracy of the underlying data used in the fair value estimate.

We obtained an understanding, evaluated the design, and tested the operating effectiveness of controls over the Company’s process for recognizing product revenues over-time on project-driven contracts, including management’s review of the estimated costs to complete and associated revenues.

To test the Company’s estimate of the progress towards completion of its projects, we performed audit procedures that included, among others, testing the significant assumptions discussed above to develop the estimated cost to complete and testing the completeness and accuracy of the underlying data.

To assess management’s estimated costs, we performed audit procedures that included, among others, agreeing the estimates to supporting documentation;

conducting interviews with project personnel;

observing selected project review meetings;

performing observations of select projects to observe progress;

and performing lookback analyses to historical actual costs to assess management’s ability to estimate.

/s/ Ernst & Young LLP

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and subsidiaries (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2022 and 2021, the related consolidated statements of operations, comprehensive loss, stockholders' equity and cash flows for each of the three years in the period ended December 31, 2022 and the related notes, and our report dated February 17, 2023 expressed an unqualified opinion thereon.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2023 and 2022, the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2023 and the related notes, and our report dated February 21, 2024 expressed an unqualified opinion thereon.

Basis for Opinion

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Depreciation and amortization expense 60,778 67,334 80,741

Impairments of goodwill — — 406,056

Impairments of fixed and lease assets — — 4,166

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Other income, net 849 3,315 1,628

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

Income (loss) before income taxes 15,824 ( 4,060 ) ( 73,334 )

Income tax (provision) benefit ( 2,933 ) ( 5,480 ) 9,341

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

Net loss per share:

Net income (loss) $ 12,891 $ ( 9,540 ) $ ( 63,993 )

Net income (loss) per share:

Basic $ 0.20 $ ( 0.15 ) $ ( 1.06 )

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AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In Thousands)

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2023 2022 2021

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

Net income (loss) $ 12,891 $ ( 9,540 ) $ ( 63,993 )

Other comprehensive income (loss):

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Total other comprehensive income (loss) 8,957 ( 12,910 ) 5,354

Comprehensive loss $ ( 22,450 ) $ ( 58,639 ) $ ( 472,022 )

Comprehensive income (loss) $ 21,848 $ ( 22,450 ) $ ( 58,639 )

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

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Total stockholders’ equity

709,545 689,558

Total liabilities and stockholders’ equity

$ 1,046,486 $ 1,064,392

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

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

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

Net loss — — ( 63,993 ) — — ( 63,993 )

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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

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Currency translation adjustment 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

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

Net loss — — ( 9,540 ) — — ( 9,540 )

— — 12,891 — — 12,891

Currency translation adjustments (excluding intercompany advances) — — — 6,822 — 6,822

Currency translation adjustments on intercompany advances — — — 2,135 — 2,135

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 6 6,948 — — — 6,954

Surrender of stock to settle taxes on restricted stock awards — — — — ( 1,948 ) ( 1,948 )

Stock repurchases — — — — ( 6,867 ) ( 6,867 )

Balance, December 31, 2023 $ 772 $ 1,129,240 $ 284,918 $ ( 69,984 ) $ ( 635,401 ) $ 709,545

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Cash flows from operating activities:

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

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

Net income (loss) $ 12,891 $ ( 9,540 ) $ ( 63,993 )

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

Depreciation and amortization expense 60,778 67,334 80,741

Impairments of goodwill — — 406,056

Impairments of inventories — — 3,581

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Stock-based compensation expense 6,954 6,852 7,879

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

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 —

Amortization of deferred financing costs 1,798 1,886 2,314

Deferred income tax provision 226 2,020 ( 8,639 )

Gains on disposals of assets ( 4,075 ) ( 2,856 ) ( 6,472 )

Gains on extinguishment of 1.50 % convertible senior notes

— ( 176 ) ( 4,022 )

Gains on disposals of assets ( 2,856 ) ( 6,472 ) ( 2,444 )

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

Other, net ( 1,001 ) 2,066 ( 511 )

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Revolving credit facility repayments ( 35,816 ) ( 10,090 ) ( 31,873 )

Payment of promissory note to seller of GEODynamics, Inc.

Repayment of 1.50 % convertible senior notes

( 17,315 ) ( 8,450 ) ( 125,952 )

Issuance of 4.75 % convertible senior notes

Purchases of 1.50 % convertible senior notes

Payment of promissory note to seller of GEODynamics, Inc.

— ( 10,000 ) —

Other debt and finance lease repayments, net ( 732 ) ( 230 ) ( 8,222 )

Other debt and finance lease repayments ( 457 ) ( 732 ) ( 230 )

Payment of financing costs ( 128 ) ( 105 ) ( 7,791 )

Purchases of treasury stock ( 6,867 ) — —

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

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Cash and cash equivalents, end of period $ 47,111 $ 42,018 $ 52,852

Cash paid (received) for:

Cash paid for:

Interest $ 7,867 $ 8,339 $ 6,532

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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 presentation of certain prior-year amounts in the Notes to the Company’s Consolidated Financial Statements have been conformed to the current-year presentation.

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.

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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.

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

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

Actual results could materially differ from those estimates.

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

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

The estimated fair value of the 2023 Notes as of December 31, 2022 was $ 17.4 million based on quoted market prices (a Level 2 fair value measurement), which compares to the principal amount of $ 17.3 million.

The Company believes that the carrying values of these instruments, other than the 2026 Notes (as defined below), on the accompanying consolidated balance sheets approximate their fair values.

The estimated fair value of the 2026 Notes as of December 31, 2023 was $ 136.3 million based on quoted market prices (a Level 2 fair value measurement), which compares to the principal amount of $ 135.0 million.

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Upon retirement or disposition of property and equipment, the cost and related accumulated depreciation are removed from the accounts and any resulting gain or loss is recognized in the statements of operations.

Goodwill represents the excess after impairments, if applicable, of the purchase price for acquired businesses over the allocated fair value of related net assets.

Goodwill represents the excess of the purchase price for acquired businesses over the allocated fair value of related net assets, reduced by historical impairments.

In accordance with current accounting guidance, the Company does not amortize goodwill, but rather assesses goodwill for impairment annually (as of December 1) and when an event occurs or circumstances change that indicate the carrying amounts may not be recoverable.

In the evaluation of goodwill, each reporting unit with goodwill on its balance sheet is assessed separately using relevant events and circumstances.

Following the goodwill impairments recognized by the Company in 2020, only the Offshore/Manufactured Products segment has remaining goodwill.

The Company’s December 1, 2023 qualitative assessment identified no events or changes in circumstances which indicated that, more likely than not, the $ 79.9 million carrying value of goodwill on the balance sheet of the Offshore/Manufactured Products segment was recoverable.

The Company’s December 1, 2022 and 2021 quantitative assessments of goodwill for impairment indicated that the fair value of the Offshore/Manufactured Products reporting unit was greater than its carrying amount at each date and no impairments were required in either period.

When a quantitative assessment of goodwill is necessary, each reporting unit with goodwill on its balance sheet is assessed separately using relevant events and circumstances.

Management estimates the fair value of each reporting unit and compares that fair value to its recorded carrying value.

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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 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 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.

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 in 2021 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.

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Therefore, the Company’s incremental borrowing rate, based on available information at the lease commencement date, is used to determine the present value of lease payments.

OIL STATES INTERNATIONAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Most of the Company’s operating leases include one or more options to renew, with renewal terms that can extend the lease term from one to 20 years.

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

OIL STATES INTERNATIONAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Research and Development Costs

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The majority of the Company’s revenue recognized over time is for services provided under short-term contracts, with revenue recognized as the customer receives and consumes the services.

In addition, the Company manufactures certain products to individual customer specifications under short-term contracts for which control passes to the customer as the performance obligations are fulfilled and for which revenue is recognized over time.

For significant project-related contracts involving custom engineered products within the Offshore/Manufactured Products segment (also referred to as "project-driven products"), revenues are typically recognized over time using an input measure such as the percentage of costs incurred to date relative to total estimated costs at completion for each contract (cost-to-cost method).

Contract costs include labor, material and overhead.

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

In addition, the Company manufactures certain products to individual customer

OIL STATES INTERNATIONAL, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

as a contract liability (deferred revenue).

specifications under short-term contracts for which control passes to the customer as the performance obligations are fulfilled and for which revenue is recognized over time.

For significant project-related contracts involving custom engineered products within the Offshore/Manufactured Products segment (also referred to as “project-driven products”), revenues are typically recognized over time using an input measure such as the percentage of costs incurred to date relative to total estimated costs at completion for each contract (cost-to-cost method).

Contract costs include labor, material and overhead.

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).

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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Shipping and handling costs associated with outbound freight after control over a product has transferred to a customer are accounted for as a fulfillment cost and are included in cost of products.

Proceeds from customers for the cost of oilfield rental equipment that is damaged or lost downhole are reflected as gains or losses on the disposition of assets after considering the write-off of the remaining net book value of the equipment.

As of December 31, 2023, the Company had $ 216.8 million of remaining backlog related to contracts with an original expected duration of greater than one year .

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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, 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.

As of December 31, 2023, the Company’s total investment in foreign subsidiaries (except for its Canadian and Cyprus operations) is considered to be permanently reinvested outside of the United States.

The Company accounts for the U.S.

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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 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.

state net operating loss ("NOL") carryforwards.

During 2023, 2022 and 2021, the Company recorded adjustments to valuation allowances primarily with respect to foreign and U.S.

state net operating loss (“NOL”) carryforwards as well as U.S.

foreign tax credit carryforwards.

The calculation of tax liabilities involves assessing uncertainties regarding the application of complex tax regulations.

Uncertain tax positions are accounted for using a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return.

For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities.

If management ultimately determines that payment of these amounts is unnecessary, the liability is reversed and a tax benefit is recognized during the period in which management determines that the liability is no longer necessary.

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.

For those benefits to be recognized,

OIL STATES INTERNATIONAL, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities.

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.

Receivables and Concentration of Credit Risk

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Performance-based award expense, and ultimate vesting, is recognized in an amount that depends on the Company’s probable achievement of specified performance objectives.

OIL STATES INTERNATIONAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Some product sales in the Offshore/Manufactured Products segment are sold with an assurance warranty, generally ranging from 12 to 18 months.

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

OIL STATES INTERNATIONAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

agreements (letters of credit) was $ 15.4 million.

As of December 31, 2023, the maximum potential amount of future payments that the Company could be required to make under these guarantee agreements (letters of credit) was $ 15.2 million.

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

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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, 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 (the “2023 Notes”), be allocated between debt and equity components.

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

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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 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.

As further discussed in Note 7, “Long-term Debt,” the 2023 Notes matured and were repaid in full on February 15, 2023.

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.

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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.

As demand for most of the Company's products and services depends substantially on the level of capital expenditures by the oil and natural gas industry, these conditions caused rapid reductions to most of the Company's customers' drilling, completion and production activities and their related spending on the Company's products and services, particularly those supporting activities in the U.S.

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

OIL STATES INTERNATIONAL, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

The Company also assessed the carrying value of goodwill, long-lived and other assets based on the industry outlook regarding overall demand for and pricing of its products and services, other market considerations and the financial condition of the Company's customers.

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

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

Impairments of:

Goodwill (Note 6)

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

Fixed assets (Note 5)

— 1,623 8,845 — 10,468 2,198 8,270

Operating lease assets (Note 8)

— 1,979 — — 1,979 416 1,563

Inventories (Note 5)

16,249 5,921 8,981 — 31,151 5,979 25,172

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 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):

Asset Impairments and Other Charges and Benefits

During 2023, the Offshore/Manufactured Products segment recognized facility consolidation charges totaling $ 2.5 million in connection with the ongoing consolidation and relocation of certain manufacturing and service facilities and the relocation of related equipment, which is included in “Other operating income, net.” Additionally, during 2023, the Well Site Services segment recognized $ 0.6 million in costs associated with the defense of certain patents, which are included in “Selling, general and administrative expense.”

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.”

During 2021, the Company continued its restructuring efforts which began in 2020 due to the COVID-19 pandemic, closing facilities in the United States and assessing 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

8 unchanged sentences

868 4,266 809 1,555 7,498 1,573 5,925

Release of foreign currency translation adjustments on liquidation of an international operation (Note 9)

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

— — — 9,320 9,320 — 9,320

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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.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Details of Selected Balance Sheet Accounts

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

OIL STATES INTERNATIONAL, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2023 December 31,

Deferred revenue (contract liabilities) $ 36,757 $ 44,790

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

As of December 31, 2023, accounts receivable, net in the United States, the United Kingdom and Singapore represented 66 %, 12 % and 11 %, respectively, 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, 2023.

A summary of activity in the allowance for doubtful accounts for the years ended December 31, 2022, 2021 and 2020 is provided in Note 16, "Valuation Allowances."

A summary of activity in allowance for doubtful accounts for the years ended December 31, 2023, 2022 and 2021 is provided in Note 16, “Valuation Allowances.”

For the majority of contracts with customers, the Company receives payments based upon established contractual terms as products are delivered and services are performed.

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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, 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, 2023, the $ 4.1 million net increase in contract assets was primarily attributable to $ 44.3 million in revenue recognized during the period, which was partially offset by $ 40.2 million transferred to accounts receivable.

Deferred revenue (contract liabilities) decreased by $ 8.0 million in 2023, primarily reflecting the recognition of $ 17.6 million of revenue that was deferred at the beginning of the period, partially offset by $ 9.3 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 primarily attributable to $ 34.8 million in revenue recognized during the year, which was partially offset by $ 31.7 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 year.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

2023 December 31,

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$ 202,027 $ 182,658

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.

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 decision to exit certain product and service offerings.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Useful Life (years) December 31,

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Construction in progress 7,829 10,053

Total property, plant and equipment $ 1,128,834 $ 1,151,533

Property, plant and equipment $ 754,143 $ 1,128,834

Accumulated depreciation ( 473,754 ) ( 824,999 )

$ 280,389 $ 303,835

During 2023, certain facilities in the Offshore/Manufactured Products segment were reclassified as held for sale assets, and transferred from property, plant and equipment to prepaid and other current assets.

The carrying value of these facilities totaled $ 17.2 million as of December 31, 2023.

Additionally, the Company sold certain idle facilities and equipment and retired other fully-depreciated completion-related equipment during 2023.

For the years ended December 31, 2023, 2022 and 2021, depreciation expense was $ 43.6 million, $ 47.0 million and $ 60.1 million, respectively.

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.

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$ 23,253 $ 25,687

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2023 December 31,

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$ 44,227 $ 49,057

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Goodwill and Other Intangible Assets

Changes in the carrying amount of goodwill recorded within the Offshore/Manufactured Products segment for the years ended December 31, 2023 and 2022 were as follows (in thousands):

Offshore / Manufactured

Products Well Site Services Downhole Technologies Total

Balance as of December 31, 2021 (1)

Goodwill $ 162,989 $ 244,349 $ 357,502 $ 764,840

Accumulated impairment losses ( 86,500 ) ( 244,349 ) ( 357,502 ) ( 688,351 )

76,489 — — 76,489

Foreign currency translation ( 77 ) — — ( 77 )

Balance as of December 31, 2021 $ 76,412 $ — $ — $ 76,412

Balance as of December 31, 2021

Goodwill $ 162,912 $ 244,349 $ 357,502 $ 764,763

Accumulated impairment losses ( 86,500 ) ( 244,349 ) ( 357,502 ) ( 688,351 )

76,412 — — 76,412

Goodwill acquired 4,146

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Balance as of December 31, 2022 (1)

Foreign currency translation 585

Balance as of December 31, 2023 (1)

Goodwill $ 165,782 $ 244,349 $ 357,502 $ 767,633

Accumulated impairment losses ( 86,500 ) ( 244,349 ) ( 357,502 ) ( 688,351 )

____________________

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 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.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

December 2020, 2021 and 2022 Assessments

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).

The valuation techniques used in these annual assessments were consistent with those used during the March 31, 2020 assessment.

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.

(1) Net of accumulated impairment losses of $ 86.5 million.

Other Intangible Assets

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The weighted average remaining amortization period for all intangible assets, other than goodwill, was 10.0 years as of December 31, 2023 and 10.6 years as of December 31, 2022.

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

Amortization expense is expected to total approximately $ 17 million in 2024 through 2026, $ 16 million in 2027 and $ 15 million in 2028.

As of December 31, 2023 and 2022, no impairment of other intangible assets was required.

OIL STATES INTERNATIONAL, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Long-term Debt

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2023 Notes (3)

17,303 25,802

Promissory note — 17,534

Other debt and finance lease obligations 3,092 3,430

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(2) The outstanding principal amount of the 2026 Notes was $ 135.0 million as of December 31, 2023 and December 31, 2022.

(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.

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Scheduled maturities of total debt as of December 31, 2023, are as follows (in thousands):

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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.

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.

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

On February 16, 2024, the Company amended the ABL Facility to extend the maturity date to February 16, 2028 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.

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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.

OIL STATES INTERNATIONAL, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

Since December 13, 2022, borrowings under the ABL Agreement bear interest at a rate equal to the Secured Overnight Financing 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 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 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.

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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.

As of December 31, 2023, the Company had no borrowings outstanding under the ABL Facility and $ 15.2 million of outstanding letters of credit.

The total amount available to be drawn as of December 31, 2023 was $ 76.1 million, calculated based on the current borrowing base less outstanding borrowings, if any, and letters of credit.

As of December 31, 2023, the Company was in compliance with its debt covenants under the ABL Agreement.

On March 19, 2021, the Company issued $ 135.0 million aggregate principal amount of its 4.75 % convertible senior notes due 2026 (the "2026 Notes") pursuant to an indenture, dated as of March 19, 2021 (the "2026 Indenture"), between the Company and Computershare Trust Company, National Association, as successor trustee.

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

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

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.

The 2026 Notes bear interest at a rate of 4.75 % per year and will mature on April 1, 2026, unless earlier repurchased, redeemed or converted.

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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 the 2026 Notes (equivalent to an initial conversion price of $ 10.49 per share of common stock).

OIL STATES INTERNATIONAL, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 Company’s intent is to repay the principal amount of the 2026 Notes in cash and settle the conversion feature (if any) in shares of the Company’s common stock.

As of December 31, 2023, 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.

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Promissory Note

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.

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

Prior to settlement on July 1, 2022, the carrying amount of the GEO Note was $ 17.5 million, which was the Company’s then-current best estimate of what was owed after set-off for certain indemnification matters.

On July 1, 2022, the Company paid $ 10.0 million in cash and issued approximately 1.9 million shares of its common stock (having a market value of $ 10.3 million) to extinguish the GEO Note along with accrued interest of $ 2.2 million.

Operating Leases

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Total operating lease expense $ 13,333 $ 13,043 $ 13,644

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.

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

OIL STATES INTERNATIONAL, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

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

Operating Lease Liabilities

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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

1 unchanged sentence

Shares of common stock outstanding – December 31, 2022 76,588 12,684 63,904

Issuance of common stock to seller of GEODynamics, Inc.

1,910 — 1,910

Restricted stock awards, net of forfeitures 631 — 631

Shares withheld for taxes on vesting of stock awards — 206 ( 206 )

Purchases of treasury stock — 1,002 ( 1,002 )

Shares of common stock outstanding – December 31, 2023 77,219 13,892 63,327

As of December 31, 2023 and December 31, 2022, 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.

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

Over the balance of 2023, the Company repurchased 1,001,753 shares of common stock under the program at a total cost of $ 6.9 million.

The amount remaining under the Company’s share repurchase authorization as of December 31, 2023 was $ 18.1 million.

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

Accumulated other comprehensive loss, reported as a component of stockholders' equity, primarily relates to fluctuations in currency exchange rates against the U.S.

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

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.

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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.

Accumulated Other Comprehensive Loss

Accumulated other comprehensive loss, reported as a component of stockholders’ equity, primarily relates to fluctuations in currency exchange rates against the U.S.

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

Accumulated other comprehensive loss decreased from $ 78.9 million at December 31, 2022 to $ 70.0 million at December 31, 2023.

For the years ended December 31, 2023 and 2022, currency translation adjustments recognized as a component of other comprehensive income (loss) were primarily attributable to the United Kingdom and Brazil.

During 2023, the exchange rates for the British pound and the Brazilian real strengthened by 6 % and 8 %, respectively, compared to the U.S.

dollar, contributing to other comprehensive income of $ 9.0 million.

During 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):

Consolidated income (loss) before income taxes for the years ended December 31, 2023, 2022 and 2021 consisted of the following (in thousands):

2023 2022 2021

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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 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, 2023, 2022 and 2021 consisted of the following (in thousands):

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Total income tax provision (benefit) $ 2,933 $ 5,480 $ ( 9,341 )

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

A reconciliation of the U.S.

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2023 2022 2021

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

statutory income tax provision (benefit) $ 3,323 $ ( 853 ) $ ( 15,400 )

Effect of foreign income taxed at different rates ( 425 ) 1,895 ( 483 )

1 unchanged sentence

taxes 931 1,876 182

Utilization of U.S.

foreign tax credits

( 1,460 ) ( 291 ) —

State income taxes, net of federal benefits 962 89 ( 1,157 )

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

Changes in valuation allowances against tax assets (see Note 16)

( 2,010 ) 19 2,410

Non-deductible compensation 1,390 627 814

Other non-deductible expenses, net

222 2,118 2,336

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) $ 2,933 $ 5,480 $ ( 9,341 )

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The significant items giving rise to the deferred tax assets and liabilities as of December 31, 2023 and 2022 are as follows (in thousands):

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Employee benefits 4,442 4,327

Deferred revenue

Other 5,770 3,357

Gross deferred tax asset 69,080 86,667

Valuation allowance ( 36,749 ) ( 37,643 )

Valuation allowance (see Note 16)

( 29,638 ) ( 36,749 )

Net deferred tax asset 39,442 49,918

10 unchanged sentences

Net deferred tax liability $ ( 5,506 ) $ ( 5,135 )

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

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.

Prior to the enactment of the CARES Act, such tax losses could only be carried forward.

The Company recognized a discrete tax benefit of $ 16.4 million and received cash of $ 41.3 million related to these CARES Act carryback claims in 2020.

The Company had $ 10.7 million of U.S.

federal NOL carryforwards as of December 31, 2023, which can be carried forward indefinitely.

Approximately $ 37.6 million of the U.S.

federal NOL carryforwards are attributable to the acquired GEODynamics operations and are subject to certain limitation provisions.

The Company’s U.S.

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state NOL carryforwards.

OIL STATES INTERNATIONAL, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2023 and 2022, the Company’s foreign tax credit carryforwards totaled $ 12.6 million and $ 19.2 million, respectively.

These foreign tax credits will expire in varying amounts from 2023 to 2029.

During 2023, $ 5.0 million of the Company’s foreign tax credits expired, and the offsetting valuation allowances were reduced.

The remaining foreign tax credits will expire in varying amounts from 2024 to 2029.

As of December 31, 2023 and 2022, the Company had recorded valuation allowances of $ 11.9 million and $ 16.7 million, respectively, with respect to foreign tax credit carryforwards.

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The Company believes that it has recorded sufficient tax liabilities and does not expect that the resolution of any examination or audit of its tax returns will have a material adverse effect on its consolidated operating results, financial condition or liquidity.

Tax years subsequent to 2013 remain open to U.S.

Tax years subsequent to 2013 (except for 2016) remain open to U.S.

federal tax audit.

Foreign subsidiary federal tax returns subsequent to 2012 are subject to audit by various foreign tax authorities.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The total amount of unrecognized tax benefits as of December 31, 2023 and 2022 was nil .

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As of December 31, 2023 and 2022, the Company had no accrued interest expense or penalties.

Net Loss Per Share

The table below provides a reconciliation of the numerators and denominators of basic and diluted net loss per share for the years ended December 31, 2022, 2021 and 2020 (in thousands, except per share amounts):

Net Income (Loss) Per Share

The table below provides a reconciliation of the numerators and denominators of basic and diluted net income (loss) per share for the years ended December 31, 2023 and 2022 (in thousands, except per share amounts):

2023 2022 2021

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

Net income (loss) $ 12,891 $ ( 9,540 ) $ ( 63,993 )

Income attributable to unvested restricted stock awards ( 251 ) — —

Numerator for basic net loss per share ( 9,540 ) ( 63,993 ) ( 468,383 )

Numerator for basic net income (loss) per share 12,640 ( 9,540 ) ( 63,993 )

Effect of dilutive securities:

Unvested restricted stock awards 2 — —

Numerator for diluted net loss per share $ ( 9,540 ) $ ( 63,993 ) $ ( 468,383 )

Numerator for diluted net income (loss) per share $ 12,642 $ ( 9,540 ) $ ( 63,993 )

Denominators:

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Weighted average number of unvested restricted stock awards outstanding ( 1,244 ) ( 1,204 ) ( 1,021 )

Denominator for basic and diluted net loss per share 61,638 60,293 59,812

Net loss per share:

Denominator for basic net income (loss) per share 62,690 61,638 60,293

Effect of dilutive securities:

Performance share units 462 — —

Denominator for diluted net income (loss) per share 63,152 61,638 60,293

Net income (loss) per share:

Basic $ 0.20 $ ( 0.15 ) $ ( 1.06 )

Diluted 0.20 ( 0.15 ) ( 1.06 )

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 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.

The calculation of diluted net income (loss) per share for the years ended December 31, 2023, 2022 and 2021 excluded 172 thousand shares, 277 thousand shares and 430 thousand shares, respectively, issuable pursuant to outstanding stock options, due to their antidilutive effect.

Additionally, shares issuable upon conversion of the 2026 Notes were excluded due to, among other factors, the Company’s share price.

Long-Term Incentive Compensation

The Company measures the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award.

The fair value of service-based restricted stock awards is determined by the quoted market price of the Company's common stock on the date of grant.

The fair value of service-based restricted stock awards is determined by the quoted

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AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

market price of the Company’s common stock on the date of grant.

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.

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

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 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.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The number of performance-based restricted shares ultimately issued under the program is dependent upon achievement of predefined specific performance objectives based on the Company’s cumulative EBITDA 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.

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Granted 647 8.80 211 8.66 858

Performance adjustment (1)

— — 222 6.87 222

Vested ( 620 ) 7.62 — — ( 620 )

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Unvested, December 31, 2023 1,233 $ 7.74 927 $ 7.17 2,160

____________________

(1) Reflects an adjustment to the number of shares issued in 2024 upon vesting of the 2021 performance-based stock awards.

The total fair value of restricted stock awards that vested in 2023, 2022 and 2021 was $ 4.7 million, $ 5.5 million and $ 9.3 million, respectively.

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No options were awarded or exercised in 2023, 2022 or 2021.

As of December 31, 2022, the Company had 245 thousand stock options outstanding and exercisable, with exercise prices ranging from $ 42.29 to $ 58.54 and a weighted-average contractual life of 1.1 years.

As of December 31, 2023, the Company had 158 thousand stock options outstanding and exercisable, with exercise prices ranging from $ 42.29 to $ 58.54 and a weighted-average contractual life of 7 months.

Long-Term Cash Incentive Awards

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

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Retirement Plans

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The Company recognized expenses of $ 7.0 million, $ 3.4 million and $ 0.8 million primarily related to matching contributions under its various defined contribution plans during the years ended December 31, 2023, 2022 and 2021, respectively.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Deferred Compensation Plan

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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.

Distributions from the Deferred Compensation Plan are made in cash based upon the participants’ specific deferral payment elections.

As of December 31, 2023, Trust assets and amounts payable to plan participants totaled $ 17.3 million, which are classified as “other noncurrent assets” and “other noncurrent liabilities” in the Company’s consolidated balance sheet.

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

Recent acquisitions, except for the GEODynamics Acquisition, have been direct extensions to existing business segments.

Recent acquisitions, except for the acquisition of GEODynamics, have been direct extensions to existing business segments.

Accounting policies of the segments are the same as those described in the summary of significant accounting policies.

The Offshore/Manufactured Products segment designs, manufactures and markets capital equipment utilized on floating production systems, subsea pipeline infrastructure, and offshore drilling rigs and vessels, along with short-cycle and other products.

Driven principally by longer-term customer investments for offshore oil and natural gas projects, project-driven product revenues include flexible bearings, advanced connector systems, high-pressure riser systems, deepwater mooring systems, cranes, subsea pipeline products and blow-out preventer stack integration.

Driven principally by longer-term customer investments for offshore oil and natural gas projects, project-driven product revenues include flexible bearings, advanced connector systems, high-pressure riser systems, managed pressure drilling systems, deepwater mooring systems, cranes, subsea pipeline products and blow-out preventer stack integration.

Short-cycle products manufactured by the segment include valves, elastomers and other specialty products generally used in the land-based drilling and completion markets.

Other products manufactured and offered by the segment include a variety of products for use in industrial, military and other applications outside the oil and gas industry.

Other products manufactured and offered by the segment include a variety of products for use in industrial, military, alternative energy and other applications outside the oil and gas industry.

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.

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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.

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.

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.

The Downhole Technologies segment 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

OIL STATES INTERNATIONAL, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

complex wells with longer lateral lengths, increased frac stages and more perforation clusters to increase unconventional well productivity.

Financial information by business segment for each of the three years ended December 31, 2023, 2022 and 2021, is summarized in the following table (in thousands):

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Well Site Services (2)

242,633 25,318 13,881 19,125 191,630

Downhole Technologies (3)

98,387 16,314 ( 14,884 ) 1,399 238,901

Corporate — 636 ( 41,132 ) 468 54,782

1 unchanged sentence

Offshore/Manufactured Products (4)

Well Site Services (2)

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

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

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

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

Corporate — 691 ( 40,559 ) 175 45,441

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

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

Well Site Services (5)

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________________

(1) Operating income included $ 2.5 million of facility consolidation charges.

(2) Operating income included $ 0.6 million in costs associated with the defense of certain patents.

(3) Operating loss included $ 3.2 million in provisions for excess and obsolete inventories.

(4) 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.

(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 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.

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

(6) Operating loss included an inventory impairment charge of $ 2.1 million.

See Note 4, “Asset Impairments and Other Charges and Benefits,” Note 5, “Details of Selected Balance Sheet Accounts,” and Note 8, “Operating Leases” for further discussion of these and other charges and benefits.

No customer individually accounted for greater than 10% of the Company’s 2023, 2022 or 2021 consolidated revenues or individually accounted for greater than 10% of the Company’s consolidated accounts receivable at December 31, 2023.

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2023 2022 2021 2023 2022 2021 2023 2022 2021

Major revenue categories -

Project-driven products $ 158,040 $ 122,097 $ 165,497 $ — $ — $ — $ — $ — $ —

Completion products and services 60,350 41,640 26,148 210,584 160,881 191,529 124,794 103,492 97,936

Drilling services — — — 20,605 10,059 8,310 — — —

Other products 31,802 23,534 21,994 — — — — — —

Project-driven:

Products $ 189,739 $ 158,040 $ 122,097 $ — $ — $ — $ — $ — $ —

Services 112,742 98,968 87,344 — — — — — —

Total project-driven 302,481 257,008 209,441 — — — — — —

Military and other products 32,596 32,563 24,114 — — — — — —

Products 106,186 92,152 65,174 — — — 90,029 102,808 87,908

Services — — — 242,633 231,189 170,940 8,358 21,986 15,584

Total short-cycle 106,186 92,152 65,174 242,633 231,189 170,940 98,387 124,794 103,492

Other products and services 131,531 111,458 126,661 — — — — — —

$ 441,263 $ 381,723 $ 298,729 $ 242,633 $ 231,189 $ 170,940 $ 98,387 $ 124,794 $ 103,492

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Commitments and Contingencies

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.

Some of these claims relate to matters occurring prior to the acquisition of businesses, and some relate to businesses the Company has sold.

In certain cases, the Company is entitled to indemnification from the sellers of businesses and, in other cases, the Company has indemnified the buyers of businesses.

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

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

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

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

The Company 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.

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

OIL STATES INTERNATIONAL, INC.

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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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Valuation allowance on deferred tax assets (1)

36,749 ( 2,010 ) ( 5,020 ) ( 81 ) 29,638

Year Ended December 31, 2022:

6 unchanged sentences

Valuation allowance on deferred tax assets 35,497 2,410 — ( 264 ) 37,643

________________

(1) As further discussed in Note 10, “Income Taxes,” the $ 5.0 million reduction in the valuation allowance on deferred tax assets is attributable to the expiration of foreign tax credit carryforwards in 2023.

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