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Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2020

OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to _____

Commission file number: 001-16337

OIL STATES INTERNATIONAL, INC.
______________
(Exact name of registrant as specified in its charter)
Delaware76-0476605
(State or other jurisdiction of(I.R.S. Employer
incorporation or organization)Identification No.)
Three Allen Center, 333 Clay Street
Suite 462077002
Houston, Texas(Zip Code)
(Address of principal executive offices)
(713) 652-0582
(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common stock, par value $0.01 per shareOISNew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
YesNo
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
YesNo
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer Accelerated filer
Non-accelerated filer Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes No
As of October 23, 2020, the number of shares of common stock outstanding was 61,031,053.



OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES
INDEX
 Page No.
Part I – FINANCIAL INFORMATION 
  
Item 1. Financial Statements: 
  
Condensed Consolidated Financial Statements 
Unaudited Consolidated Statements of Operations
Unaudited Consolidated Statements of Comprehensive Loss
Consolidated Balance Sheets
Unaudited Consolidated Statements of Stockholders' Equity
Unaudited Consolidated Statements of Cash Flows
Notes to Unaudited Condensed Consolidated Financial Statements23
  
Cautionary Statement Regarding Forward-Looking Statements
  
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
  
Item 3. Quantitative and Qualitative Disclosures About Market Risk
  
Item 4. Controls and Procedures
  
Part II – OTHER INFORMATION 
  
Item 1. Legal Proceedings
  
Item 1A. Risk Factors
  
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  
Item 3. Defaults Upon Senior Securities
  
Item 4. Mine Safety Disclosures
  
Item 5. Other Information
  
Item 6. Exhibits
  
Signature Page
2


PART I – FINANCIAL INFORMATION
ITEM 1. Financial Statements
OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Per Share Amounts)
Three Months Ended September 30,Nine Months Ended September 30,
2020201920202019
Revenues:
Products$72,598 $122,067 $258,221 $363,360 
Services62,161 141,630 242,477 415,633 
134,759 263,697 500,698 778,993 
Costs and expenses:
Product costs66,789 90,796 224,623 275,353 
Service costs53,822 110,294 221,673 333,727 
Cost of revenues (exclusive of depreciation and amortization expense presented below)120,611 201,090 446,296 609,080 
Selling, general and administrative expense21,389 31,935 71,505 93,527 
Depreciation and amortization expense24,251 31,366 75,306 94,800 
Impairments of goodwill  406,056  
Impairments of fixed assets 33,697 8,190 33,697 
Other operating expense (income), net(652)519 (679)34 
165,599 298,607 1,006,674 831,138 
Operating loss(30,840)(34,910)(505,976)(52,145)
Interest expense, net(3,549)(4,352)(11,232)(13,721)
Other income, net6,744 1,190 13,512 2,866 
Loss before income taxes(27,645)(38,072)(503,696)(63,000)
Income tax benefit7,676 6,204 54,060 6,744 
Net loss$(19,969)$(31,868)$(449,636)$(56,256)
Net loss per share:
Basic$(0.33)$(0.54)$(7.52)$(0.95)
Diluted(0.33)(0.54)(7.52)(0.95)
Weighted average number of common shares outstanding:
Basic59,871 59,423 59,788 59,362 
Diluted59,871 59,423 59,788 59,362 
The accompanying notes are an integral part of these financial statements.
3


OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(In Thousands)
Three Months Ended September 30,Nine Months Ended September 30,
2020201920202019
Net loss$(19,969)$(31,868)$(449,636)$(56,256)
Other comprehensive income (loss):
Currency translation adjustments3,357 (5,672)(12,664)(5,535)
Comprehensive loss$(16,612)$(37,540)$(462,300)$(61,791)
The accompanying notes are an integral part of these financial statements.
4


OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share Amounts)
September 30,
2020
December 31, 2019
(Unaudited) 
ASSETS
Current assets:
Cash and cash equivalents$79,701 $8,493 
Accounts receivable, net158,184 233,487 
Inventories, net180,497 221,342 
Prepaid expenses and other current assets14,921 20,107 
Total current assets433,303 483,429 
Property, plant, and equipment, net390,962 459,724 
Operating lease assets, net36,902 43,616 
Goodwill, net76,051 482,306 
Other intangible assets, net211,804 230,091 
Other noncurrent assets31,764 28,701 
Total assets$1,180,786 $1,727,867 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt$25,620 $25,617 
Accounts payable36,666 78,368 
Accrued liabilities49,755 48,840 
Current operating lease liabilities7,942 8,311 
Income taxes payable3,501 4,174 
Deferred revenue48,851 17,761 
Total current liabilities172,335 183,071 
Long-term debt163,526 222,552 
Long-term operating lease liabilities30,459 35,777 
Deferred income taxes26,643 38,079 
Other noncurrent liabilities23,485 24,421 
Total liabilities416,448 503,900 
Stockholders' equity:
Common stock, $.01 par value, 200,000,000 shares authorized, 73,301,564 shares and 72,546,321 shares issued, respectively
733 726 
Additional paid-in capital1,119,860 1,114,521 
Retained earnings348,074 797,710 
Accumulated other comprehensive loss(80,410)(67,746)
Treasury stock, at cost, 12,270,511 and 12,045,065 shares, respectively
(623,919)(621,244)
Total stockholders' equity764,338 1,223,967 
Total liabilities and stockholders' equity$1,180,786 $1,727,867 
The accompanying notes are an integral part of these financial statements.
5


OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In Thousands)
Three Months Ended September 30, 2020Common
Stock
Additional
Paid-In
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Loss
Treasury
Stock
Total
Stockholders'
Equity
Balance, June 30, 2020$733 $1,117,771 $368,043 $(83,767)$(623,911)$778,869 
Net loss— — (19,969)— — (19,969)
Currency translation adjustments (excluding intercompany advances)— — — 4,624 — 4,624 
Currency translation adjustments on intercompany advances— — — (1,267)— (1,267)
Stock-based compensation expense:
Restricted stock 2,089 — — — 2,089 
Surrender of stock to settle taxes on restricted stock awards— — — — (8)(8)
Balance, September 30, 2020$733 $1,119,860 $348,074 $(80,410)$(623,919)$764,338 

Nine Months Ended September 30, 2020Common
Stock
Additional
Paid-In
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Loss
Treasury
Stock
Total
Stockholders'
Equity
Balance, December 31, 2019$726 $1,114,521 $797,710 $(67,746)$(621,244)$1,223,967 
Net loss— — (449,636)— — (449,636)
Currency translation adjustments (excluding intercompany advances)— — — (4,524)— (4,524)
Currency translation adjustments on intercompany advances— — — (8,140)— (8,140)
Stock-based compensation expense:
Restricted stock7 5,339 — — — 5,346 
Surrender of stock to settle taxes on restricted stock awards— — — — (2,675)(2,675)
Balance, September 30, 2020$733 $1,119,860 $348,074 $(80,410)$(623,919)$764,338 
The accompanying notes are an integral part of these financial statements.
6


OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In Thousands)
Three Months Ended September 30, 2019Common StockAdditional Paid-In CapitalRetained EarningsAccumulated Other Comprehensive LossTreasury StockTotal Stockholders' Equity
Balance, June 30, 2019$726 $1,106,340 $1,005,130 $(71,260)$(621,208)$1,419,728 
Net loss— — (31,868)— — (31,868)
Currency translation adjustments (excluding intercompany advances)— — — (4,448)— (4,448)
Currency translation adjustments on intercompany advances— — — (1,224)— (1,224)
Stock-based compensation expense:
Restricted stock 4,232 — — — 4,232 
Stock options— — — — —  
Stock repurchases— — — — —  
Surrender of stock to settle taxes on restricted stock awards— — — — (76)(76)
Balance, September 30, 2019$726 $1,110,572 $973,262 $(76,932)$(621,284)$1,386,344 

Nine Months Ended September 30, 2019Common StockAdditional Paid-In CapitalRetained EarningsAccumulated Other Comprehensive LossTreasury StockTotal Stockholders' Equity
Balance, December 31, 2018$718 $1,097,758 $1,029,518 $(71,397)$(616,829)$1,439,768 
Net loss— — (56,256)— — (56,256)
Currency translation adjustments (excluding intercompany advances)— — — (4,841)— (4,841)
Currency translation adjustments on intercompany advances— — — (694)— (694)
Stock-based compensation expense:
Restricted stock8 12,761 — — — 12,769 
Stock options— 53 — — — 53 
Stock repurchases— — — — (757)(757)
Surrender of stock to settle taxes on restricted stock awards— — — — (3,698)(3,698)
Balance, September 30, 2019$726 $1,110,572 $973,262 $(76,932)$(621,284)$1,386,344 
The accompanying notes are an integral part of these financial statements.
7


OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
Nine Months Ended September 30,
20202019
Cash flows from operating activities:
Net loss$(449,636)$(56,256)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization expense75,306 94,800 
Impairments of goodwill406,056  
Impairments of inventories31,151  
Impairments of fixed assets8,190 33,697 
Stock-based compensation expense5,346 12,822 
Amortization of debt discount and deferred financing costs5,937 5,903 
Deferred income tax benefit(16,915)(11,935)
Gains on extinguishment of 1.50% convertible senior notes
(10,721) 
Gains on disposals of assets(2,088)(2,310)
Other, net3,732 1,216 
Changes in operating assets and liabilities:
Accounts receivable67,371 24,993 
Inventories9,174 (6,867)
Accounts payable and accrued liabilities(39,594)3,143 
Income taxes payable248 1,948 
Deferred revenue31,114 11,793 
Other operating assets and liabilities, net6,471 2,947 
Net cash flows provided by operating activities131,142 115,894 
Cash flows from investing activities:
Capital expenditures(11,277)(45,832)
Proceeds from disposition of property, plant and equipment8,984 3,619 
Other, net(444)(1,534)
Net cash flows used in investing activities(2,737)(43,747)
Cash flows from financing activities:
Revolving credit facility borrowings72,173 175,306 
Revolving credit facility repayments(105,104)(246,450)
Purchases of 1.50% convertible senior notes
(20,078)(858)
Other debt and finance lease repayments, net(337)(434)
Payment of financing costs(962)(18)
Shares added to treasury stock as a result of net share settlements
due to vesting of stock awards
(2,675)(3,698)
Purchases of treasury stock (757)
Net cash flows used in financing activities(56,983)(76,909)
Effect of exchange rate changes on cash and cash equivalents(214)101 
Net change in cash and cash equivalents71,208 (4,661)
Cash and cash equivalents, beginning of period8,493 19,316 
Cash and cash equivalents, end of period$79,701 $14,655 
Cash paid (received) for:
Interest$5,716 $8,378 
Income taxes, net (37,393)(2,522)
The accompanying notes are an integral part of these financial statements.
8

 
OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES
 
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS

1.    Organization and Basis of Presentation
The accompanying unaudited condensed consolidated financial statements of Oil States International, Inc. and its subsidiaries (referred to in this report as "we" or the "Company") have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the "Commission") pertaining to interim financial information. Certain information in footnote disclosures normally included with financial statements prepared in accordance with U.S. generally accepted accounting principles ("GAAP") have been condensed or omitted pursuant to these rules and regulations. The unaudited financial statements included in this report reflect all the adjustments, consisting of normal recurring adjustments, which the Company considers necessary for a fair statement of the results of operations for the interim periods covered and for the financial condition of the Company at the date of the interim balance sheet. Results for the interim periods are not necessarily indicative of results for the full year. Certain prior-year amounts in the Company's unaudited condensed consolidated financial statements have been reclassified to conform to the current year presentation.
As further discussed in Note 13, "Commitments and Contingencies," the impact of the Coronavirus Disease 2019 ("COVID-19") pandemic and the related economic, business and market disruptions continues to evolve and its future effects remain uncertain. The actual impact of these developments on the Company will depend on many factors, many of which are beyond management's control and knowledge. It is therefore difficult for management to assess or predict with precision the broad future effect of this health crisis on the global economy, the energy industry or the Company. During the first nine months of 2020, the Company recorded asset impairments, severance and facility closure charges in response to these recent developments, as further discussed in Note 3, "Asset Impairments and Other Charges." As additional information becomes available, events or circumstances change and strategic operational decisions are made by management, further adjustments may be required which could have a material adverse impact on the Company's consolidated financial position, results of operations and cash flows.
The preparation of condensed consolidated financial statements in conformity with GAAP requires the use of estimates and assumptions by management in determining the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Examples of such estimates include, but are not limited to, goodwill and other asset impairments, revenue and income recognized over time, valuation allowances recorded on deferred tax assets, reserves on inventory, allowances for doubtful accounts, and potential future adjustments related to contractual indemnification and other agreements. Actual results could materially differ from those estimates.
The financial statements included in this report should be read in conjunction with the Company's audited financial statements and accompanying notes included in its Annual Report on Form 10-K for the year ended December 31, 2019.
2.    Recent Accounting Pronouncements
From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (the "FASB"), which are adopted by the Company as of the specified effective date. Unless otherwise discussed, management believes that the impact of recently issued standards, which are not yet effective, will not have a material impact on the Company's consolidated financial statements upon adoption.
In August 2020, the FASB issued updated guidance to simplify the accounting for convertible instruments and contracts in an entity's own equity. This new guidance will eliminate the current requirement that the carrying value of convertible debt instruments, including the Company's 1.50% convertible senior notes due 2023 (the "Notes"), be allocated between the debt and equity components. As permitted under the standard, the Company plans to adopt the new guidance on January 1, 2021 using the modified retrospective transition method. Upon initial evaluation, the Company believes the key changes upon adoption will be to increase the carrying value of the debt component of the Notes and reduce the reported level of interest expense recognized over the remaining life of the Notes. Based on the $157.4 million principal amount of the Notes outstanding as of September 30, 2020, the Company estimates that the adoption of the standard on January 1, 2021 will result in a $12.2 million increase in the net carrying value of the Notes, a $3.7 million decrease in deferred income taxes and an $8.5 million net decrease in stockholders' equity. Beginning on January 1, 2021, the effective interest rate associated with the Notes is expected to decrease from approximately 6% to approximately 2%, which compares to the contractual cash interest rate of 1.50%.
9

 
OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES
 
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(Continued)
In June 2016, the FASB issued guidance on credit impairment for short-term receivables which, as amended, introduces the recognition of management's current estimate of credit losses that are expected to occur over the remaining life of a financial asset. The Company adopted this guidance on January 1, 2020, using the optional transition method of recognizing any cumulative effect of adopting this guidance as an adjustment to the opening balance of retained earnings. The cumulative impact of the adoption of the new standard was not material to the Company's consolidated financial statements. Prior periods were not retrospectively adjusted.
3.    Asset Impairments and Other Charges
In March of 2020, the spot price of West Texas Intermediate ("WTI") crude oil declined over 50% in response to current and expected material reductions in global demand stemming from the global response to the COVID-19 pandemic, coupled with announcements by Saudi Arabia and Russia of plans to increase crude oil production. Following this unprecedented collapse in crude oil prices, the spot price of Brent and WTI crude oil closed at $15 and $21 per barrel, respectively, on March 31, 2020. Crude oil prices further declined in April of 2020 to record low levels, and while the spot price of Brent and WTI crude oil increased to an average of $43 and $41 per barrel, respectively, in the third quarter of 2020, these average prices continue to be depressed versus historical price levels.
Demand for most of the Company's products and services depends substantially on the level of capital expenditures by the oil and natural gas industry. The decline in oil prices has, and is expected to continue to, result in further near-term reductions to most of the Company's customers' drilling, completion and production activities and their related spending on products and services, particularly in the U.S. shale play regions. These conditions may also result in a material adverse impact on certain customers' liquidity and financial position, leading to further spending reductions, delays in the collection of amounts owed and in certain instances, non-payment of amounts owed.
Consistent with oilfield service industry peers, the Company's stock price declined dramatically during the first quarter of 2020, with its market capitalization falling substantially below the carrying value of stockholders' equity.
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 the first quarter of 2020 (in thousands):
Completion ServicesDrilling ServicesDownhole TechnologiesOffshore/
Manufactured Products
Pre-tax TotalTaxAfter-tax Total
Impairments of goodwill$127,054 $ $192,502 $86,500 $406,056 $19,600 $386,456 
Impairments of fixed assets 5,198   5,198 1,092 4,106 
Impairments of inventories (Note 4)
8,981   16,249 25,230 4,736 20,494 
Severance and facility closure costs331 217  112 660 139 521 
During the second and third quarters of 2020, the Company further reduced its workforce and closed additional facilities in the United States and continued to assess the carrying value of its assets based on the industry outlook regarding demand for and pricing of its products and services, and recorded the following charges (in thousands):
Completion ServicesDownhole TechnologiesOffshore/ Manufactured ProductsCorporatePre-tax TotalTaxAfter-tax Total
Second quarter 2020
Impairments of fixed assets$2,992 $ $ $ $2,992 $628 $2,364 
Severance and facility closure costs3,544 1,315 322 216 5,397 1,133 4,264 
Third quarter 2020
Impairments of inventories (Note 4)$ $5,921 $ $ $5,921 $1,243 $4,678 
Severance and facility closure costs  288  288 60 228 
10

 
OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES
 
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(Continued)
Goodwill
The Company has three reporting units – Completion Services, Downhole Technologies and Offshore/Manufactured Products – with goodwill balances totaling $482.3 million as of December 31, 2019. Goodwill is allocated to each reporting unit from acquisitions made by the Company. In accordance with current accounting guidance, the Company does not amortize goodwill, but rather assesses goodwill for impairment annually and when an event occurs or circumstances change that indicate the carrying amounts may not be recoverable. If the carrying amount of a reporting unit exceeds its fair value, goodwill is considered impaired and an impairment loss is recorded. Given the significance of the March 2020 events described above, the Company performed a quantitative assessment of goodwill for impairment as of March 31, 2020. This interim assessment indicated that the fair value of each of the reporting units was less than their respective carrying amounts.
Management utilizes, depending on circumstances, a combination of valuation methodologies including a market approach and an income approach, as well as guideline public company comparables. The valuation techniques used in the March 31, 2020 assessment were consistent with those used during the December 1, 2019 assessment, except for the Completion Services reporting unit where the income approach was used to estimate its fair value – with the market approach used only to validate the results in 2020. The fair values of each of the Company's reporting units were determined using significant unobservable inputs (Level 3 fair value measurements). This approach estimates fair value by discounting the Company's forecasts of future cash flows by a discount rate (expected return) that a market participant is expected to require.
Significant assumptions and estimates used in the income approach include, among others, estimated future net annual cash flows and discount rates for each reporting unit, current and anticipated market conditions, estimated growth rates and historical data. These estimates rely upon significant management judgment, particularly given the continued uncertainties regarding the COVID-19 pandemic and its impact on activity levels and commodity prices as well as future global economic growth.
Based on this quantitative assessment as of March 31, 2020, the Company concluded that goodwill recorded in the Completion Services and Downhole Technologies businesses was fully impaired while goodwill recorded in the Offshore/Manufactured Products business was partially impaired. The Company therefore recognized non-cash goodwill impairment charges totaling $406.1 million in the first quarter of 2020. These impairment charges did not impact the Company's liquidity position, debt covenants or cash flows.
The discount rates used to value the Company's reporting units as of March 31, 2020 ranged between 16.8% and 18.5%. Holding all other assumptions and inputs used in the discounted cash flow analysis constant, a 50 basis point increase in the discount rate assumption for the Offshore/Manufactured Products reporting unit would have increased the goodwill impairment charge by approximately $10 million.
A summary of changes in the carrying values of goodwill by reporting unit in the first nine months of 2020 is presented in Note 4, "Details of Selected Balance Sheet Accounts."
Long-lived Assets
The Company also assesses the carrying value of long-lived assets, including property, plant and equipment, operating lease assets and other intangible assets held by each of its four reporting units. As a result of the March 2020 assessment, the Company concluded that property and equipment held by the Drilling Services reporting unit was further impaired and recognized a non-cash fixed asset impairment charge of $5.2 million in the first quarter of 2020. During the second quarter of 2020, the Company concluded that certain facilities held for sale by the Completion Services reporting unit were impaired and recognized a non-cash fixed asset impairment charge of $3.0 million to reduce the carrying value of the facilities to their estimated realizable value based on the current market environment.
The Company performed a qualitative assessment of goodwill and long-lived assets as of September 30, 2020 and concluded that no further impairment evaluation was required. As a result, no material impairments of goodwill or long-lived assets were recorded in the third quarter of 2020.
Should, among other events and circumstances, global economic and industry conditions further deteriorate, the COVID-19 pandemic business and market disruptions worsen, the outlook for future operating results and cash flow for any of the Company's reporting units decline, income tax rates increase or regulations change, costs of equity or debt capital increase, valuations for comparable public companies or comparable acquisition valuations decrease, or management implement strategic decisions based on industry conditions, the Company may need to recognize additional impairment losses in future periods.
11

 
OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES
 
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(Continued)
4.    Details of Selected Balance Sheet Accounts
Additional information regarding selected balance sheet accounts as of September 30, 2020 and December 31, 2019 is presented below (in thousands):
September 30,
2020
December 31,
2019
Accounts receivable, net:
Trade$114,204 $178,813 
Unbilled revenue25,461 28,341 
Contract assets25,276 26,034 
Other3,443 9,044 
Total accounts receivable168,384 242,232 
Allowance for doubtful accounts(10,200)(8,745)
$158,184 $233,487 
Allowance for doubtful accounts as a percentage of total accounts receivable6 %4 %
September 30,
2020
December 31,
2019
Deferred revenue (contract liabilities)$48,851 $17,761 
For the nine months ended September 30, 2020, the $0.8 million net decrease in contract assets was primarily attributable to $22.8 million transferred to accounts receivable, which was substantially offset by $22.0 million in revenue recognized during the period. Deferred revenue (contract liabilities) increased by $31.1 million in 2020, primarily reflecting $46.4 million in new customer billings which were not recognized as revenue during the period, partially offset by the recognition of $15.2 million of revenue that was deferred at the beginning of the period.
As of September 30, 2020, accounts receivable, net in the United States, the United Kingdom and Singapore represented 62%, 17% and 12%, respectively, of the respective total. No other country or single customer accounted for more than 10% of the Company's total accounts receivable as of September 30, 2020.
The Company maintains allowances for doubtful accounts for estimated losses resulting from the inability of the Company's customers to make required payments. Determination of the collectability of amounts due from customers requires us to make judgments regarding future events and trends. Allowances for doubtful accounts are established through an assessment of the Company's portfolio on an individual customer and consolidated basis taking into account current and expected future market conditions and trends. This process consists of a thorough review of historical collection experience, current aging status of the customer accounts, and financial condition of the Company's customers as well as political and economic factors in countries of operations and other customer-specific factors. Based on a review of these factors, the Company establishes or adjusts allowances for trade and unbilled receivables as well as contract assets. If a customer receivable is deemed to be uncollectible, the receivable is charged-off against allowance for doubtful accounts. If the financial condition of the Company's customers were to deteriorate, adversely affecting their ability to make payments, additional allowances would be required. The following provides a summary of activity in the allowance for doubtful accounts for the nine months ended September 30, 2020 and 2019 (in thousands):
20202019
Allowance for doubtful accounts – January 1$8,745 $6,701 
Provisions2,787 1,222 
Write-offs(2,490)(894)
Other1,158 (58)
Allowance for doubtful accounts – September 3010,200 6,971 
12

 
OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES
 
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(Continued)
September 30,
2020
December 31,
2019
Inventories, net:
Finished goods and purchased products$96,753 $107,691 
Work in process23,390 21,963 
Raw materials102,621 110,719 
Total inventories222,764 240,373 
Allowance for excess or obsolete inventory(42,267)(19,031)
$180,497 $221,342 
The Company recorded an impairment charge of $5.9 million in the third quarter of 2020 to reduce the carrying value of inventories within the Downhole Technologies segment to their estimated net realizable value based on changes in expectations regarding the near-term utility, customer demand and market pricing of certain goods.
The Company recorded impairment charges totaling $25.2 million in the first quarter of 2020 to reduce the carrying value of inventories to their estimated net realizable value following the March 2020 decline in crude oil prices, which reduced the near-term utility of certain goods within the Offshore/Manufactured Products and Completion Services operations.
September 30,
2020
December 31,
2019
Property, plant and equipment, net:
Land$34,046 $37,507 
Buildings and leasehold improvements264,434 273,384 
Machinery and equipment238,579 246,826 
Completion Services equipment507,769 510,737 
Office furniture and equipment35,419 45,309 
Vehicles82,161 97,264 
Construction in progress7,777 13,281 
Total property, plant and equipment1,170,185 1,224,308 
Accumulated depreciation(779,223)(764,584)
$390,962 $459,724 
For the three months ended September 30, 2020 and 2019, depreciation expense was $18.0 million and $24.6 million, respectively. Depreciation expense was $56.6 million and $74.5 million for the nine months ended September 30, 2020 and 2019, respectively.
During the third quarter of 2019, the Company made the strategic decision to reduce the scope of its Drilling Services reporting unit (adjusting from 34 rigs to 9 rigs) due to the ongoing weakness in customer demand for vertical drilling rigs in the U.S. land market, particularly the Permian Basin, which resulted in the recognition of a $33.7 million non-cash fixed asset impairment charge.
As discussed in Note 3, "Asset Impairments and Other Charges," during the first quarter of 2020 the Drilling Services reporting unit recognized a non-cash impairment charge of $5.2 million to further reduce the carrying value of the business's fixed assets to their estimated realizable value. Additionally, in the second quarter of 2020, the Completion Services reporting unit recognized a non-cash impairment charge of $3.0 million to reduce the carrying value of certain facilities to their estimated realizable value.
September 30,
2020
December 31,
2019
Other noncurrent assets:
Deferred compensation plan$22,767 $22,268 
Other8,997 6,433 
$31,764 $28,701 
13

 
OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES
 
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(Continued)
September 30,
2020
December 31,
2019
Accrued liabilities:
Accrued compensation$20,146 $27,428 
Insurance liabilities8,079 9,108 
Accrued taxes, other than income taxes12,427 3,424 
Accrued interest2,052 2,387 
Accrued commissions1,934 1,481 
Other5,117 5,012 
$49,755 $48,840 
Goodwill:Well Site ServicesDownhole TechnologiesOffshore/
Manufactured Products
Total
Completion ServicesDrilling ServicesSubtotal
Balance as of December 31, 2019
Goodwill$221,582 $22,767 $244,349 $357,502 $162,750 $764,601 
Accumulated impairment losses(94,528)(22,767)(117,295)(165,000) (282,295)
127,054  127,054 192,502 162,750 482,306 
Goodwill impairments(1)
(127,054) (127,054)(192,502)(86,500)(406,056)
Foreign currency translation    (199)(199)
Balance as of September 30, 2020$ $ $ $ $76,051 $76,051 
________________
(1)See Note 3, "Asset Impairments and Other Charges" for discussion of first quarter 2020 goodwill impairments.
Other Intangible Assets:September 30, 2020December 31, 2019
Gross
Carrying
Amount
Accumulated
Amortization
Net Carrying AmountGross
Carrying
Amount
Accumulated
Amortization
Net Carrying Amount
Customer relationships$168,271 $52,598 $115,673 $168,278 $44,296 $123,982 
Patents/Technology/Know-how75,741 24,617 51,124 85,919 30,791 55,128 
Noncompete agreements16,010 13,542 2,468 17,125 11,061 6,064 
Tradenames and other53,708 11,169 42,539 53,708 8,791 44,917 
$313,730 $101,926 $211,804 $325,030 $94,939 $230,091 
For the three months ended September 30, 2020 and 2019, amortization expense was $6.2 million and $6.8 million, respectively. Amortization expense was $18.7 million and $20.3 million for the nine months ended September 30, 2020 and 2019, respectively.
14

 
OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES
 
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(Continued)