SEC Filing | Oil States International, Inc.

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ois-20210930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

____________________

FORM 10-Q

____________________


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2021


☐			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)


Delaware		76-0476605
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

Three Allen Center, 333 Clay Street
Suite 4620		77002
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 class

Trading Symbol(s)

Name of each exchange on which registered

Common stock, par value $0.01 per share

OIS

New 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.


Yes			☒			No			☐

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).


Yes			☒			No			☐

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 22, 2021, the number of shares of common stock outstanding was 61,375,811.

OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES

TABLE OF CONTENTS


	Page
Part I – FINANCIAL INFORMATION

Item 1. Financial Statements:

Condensed Consolidated Financial Statements
Unaudited Consolidated Statements of Operations			3
Unaudited Consolidated Statements of Comprehensive Loss			4
Consolidated Balance Sheets			5
Unaudited Consolidated Statements of Stockholders' Equity			6
Unaudited Consolidated Statements of Cash Flows			8
Notes to Unaudited Condensed Consolidated Financial Statements	9	–	23

Cautionary Statement Regarding Forward-Looking Statements	24	–	25

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	25	–	40

Item 3. Quantitative and Qualitative Disclosures About Market Risk			40

Item 4. Controls and Procedures			41

Part II – OTHER INFORMATION

Item 1. Legal Proceedings			42

Item 1A. Risk Factors			42

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			42

Item 3. Defaults Upon Senior Securities			42

Item 4. Mine Safety Disclosures			42

Item 5. Other Information			42

Item 6. Exhibits			43

Signature Page			44

OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES

PART I – FINANCIAL INFORMATION

ITEM 1. Financial Statements

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

(In Thousands, Except Per Share Amounts)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Revenues:
Products	$	70,409	$	72,598	$	209,892	$	258,221
Services	70,119		62,161		201,949		242,477
	140,528		134,759		411,841		500,698

Costs and expenses:
Product costs	60,310		66,789		173,699		224,623
Service costs	56,897		53,822		163,450		221,673
Cost of revenues (exclusive of depreciation and amortization expense presented below)	117,207		120,611		337,149		446,296
Selling, general and administrative expense	20,078		21,389		63,395		71,505
Depreciation and amortization expense	19,657		24,251		62,086		75,306
Impairments of goodwill	—		—		—		406,056
Impairments of fixed and lease assets	—		—		3,444		8,190
Other operating income, net	(275)		(652)		(714)		(679)
	156,667		165,599		465,360		1,006,674
Operating loss	(16,139)		(30,840)		(53,519)		(505,976)

Interest expense, net	(2,569)		(3,549)		(7,593)		(11,232)
Other income, net	2,137		6,744		7,917		13,512
Loss before income taxes	(16,571)		(27,645)		(53,195)		(503,696)
Income tax benefit	3,529		7,676		9,072		54,060
Net loss	$	(13,042)	$	(19,969)	$	(44,123)	$	(449,636)

Net loss per share:
Basic	$	(0.22)	$	(0.33)	$	(0.73)	$	(7.52)
Diluted	(0.22)		(0.33)		(0.73)		(7.52)

Weighted average number of common shares outstanding:
Basic	60,377		59,871		60,264		59,788
Diluted	60,377		59,871		60,264		59,788

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

OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(In Thousands)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Net loss	$	(13,042)	$	(19,969)	$	(44,123)	$	(449,636)

Other comprehensive income (loss):
Currency translation adjustments	(5,838)		3,357		(4,207)		(12,664)
Comprehensive loss	$	(18,880)	$	(16,612)	$	(48,330)	$	(462,300)

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

OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In Thousands, Except Share Amounts)


	September 30, 2021		December 31, 2020
	(Unaudited)
ASSETS

Current assets:
Cash and cash equivalents	$	67,561	$	72,011
Accounts receivable, net	161,440		163,135
Inventories, net	178,078		170,376
Prepaid expenses and other current assets	15,919		18,071
Total current assets	422,998		423,593

Property, plant, and equipment, net	340,384		383,562
Operating lease assets, net	27,435		33,140
Goodwill, net	76,372		76,489
Other intangible assets, net	190,845		205,749
Other noncurrent assets	33,865		29,727
Total assets	$	1,091,899	$	1,152,260

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
Current portion of long-term debt	$	18,234	$	17,778
Accounts payable	49,128		46,433
Accrued liabilities	53,431		44,504
Current operating lease liabilities	7,004		7,620
Income taxes payable	1,945		2,413
Deferred revenue	42,512		43,384
Total current liabilities	172,254		162,132

Long-term debt	160,434		165,759
Long-term operating lease liabilities	26,598		29,166
Deferred income taxes	1,553		14,263
Other noncurrent liabilities	26,553		23,309
Total liabilities	387,392		394,629

Stockholders' equity:
Common stock, $.01 par value, 200,000,000 shares authorized, 73,897,645 shares and 73,288,976 shares issued, respectively	739		733
Additional paid-in capital	1,103,507		1,122,945
Retained earnings	301,437		329,327
Accumulated other comprehensive loss	(75,592)		(71,385)
Treasury stock, at cost, 12,521,834 and 12,283,817 shares, respectively	(625,584)		(623,989)
Total stockholders' equity	704,507		757,631
Total liabilities and stockholders' equity	$	1,091,899	$	1,152,260

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

OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(In Thousands)


Three Months Ended September 30, 2021	Common Stock		Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Treasury Stock		Total Stockholders' Equity
Balance, June 30, 2021	$	739	$	1,101,959	$	314,479	$	(69,754)	$	(625,489)	$	721,934
Net loss	—		—		(13,042)		—		—		(13,042)
Currency translation adjustments (excluding intercompany advances)	—		—		—		(3,273)		—		(3,273)
Currency translation adjustments on intercompany advances	—		—		—		(2,565)		—		(2,565)
Stock-based compensation expense:
Restricted stock	—		1,548		—		—		—		1,548
Surrender of stock to settle taxes on restricted stock awards	—		—		—		—		(95)		(95)
Adoption of ASU 2020-06	—		—		—		—		—		—
Balance, September 30, 2021	$	739	$	1,103,507	$	301,437	$	(75,592)	$	(625,584)	$	704,507


Nine Months Ended September 30, 2021	Common Stock		Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Treasury Stock		Total Stockholders' Equity
Balance, December 31, 2020	$	733	$	1,122,945	$	329,327	$	(71,385)	$	(623,989)	$	757,631
Net loss	—		—		(44,123)		—		—		(44,123)
Currency translation adjustments (excluding intercompany advances)	—		—		—		(1,649)		—		(1,649)
Currency translation adjustments on intercompany advances	—		—		—		(2,558)		—		(2,558)
Stock-based compensation expense:
Restricted stock	6		6,245		—		—		—		6,251
Surrender of stock to settle taxes on restricted stock awards	—		—		—		—		(1,595)		(1,595)
Adoption of ASU 2020-06	—		(25,683)		16,233		—		—		(9,450)
Balance, September 30, 2021	$	739	$	1,103,507	$	301,437	$	(75,592)	$	(625,584)	$	704,507

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

OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(In Thousands)


Three Months Ended September 30, 2020	Common 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, 2020	Common Stock		Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Treasury Stock		Total Stockholders' Equity
Balance, December 31, 2019	$	726	$	1,114,521	$	797,710	$	(67,746)	$	(621,244)	$	1,223,967
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 stock	7		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.

OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands)


	Nine Months Ended September 30,
	2021		2020
Cash flows from operating activities:
Net loss	$	(44,123)	$	(449,636)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization expense	62,086		75,306
Impairments of goodwill	—		406,056
Impairments of inventories	2,113		31,151
Impairments of fixed and lease assets	3,444		8,190
Stock-based compensation expense	6,251		5,346
Amortization of debt discount and deferred financing costs	1,839		5,937
Deferred income tax benefit	(10,340)		(16,915)
Gains on extinguishment of 1.50% convertible senior notes	(4,022)		(10,721)
Gains on disposals of assets	(3,558)		(2,088)
Other, net	325		3,732
Changes in operating assets and liabilities:
Accounts receivable	1,112		67,371
Inventories	(10,767)		9,174
Accounts payable and accrued liabilities	13,708		(39,594)

Deferred revenue	(872)		31,114
Other operating assets and liabilities, net	3,376		6,719
Net cash flows provided by operating activities	20,572		131,142

Cash flows from investing activities:
Capital expenditures	(10,977)		(11,277)
Proceeds from disposition of property and equipment	6,160		8,984
Other, net	(511)		(444)
Net cash flows used in investing activities	(5,328)		(2,737)

Cash flows from financing activities:
Revolving credit facility borrowings	12,782		72,173
Revolving credit facility repayments	(31,782)		(105,104)
Issuance of 4.75% convertible senior notes	135,000		—
Purchases of 1.50% convertible senior notes	(125,952)		(20,078)
Other debt and finance lease repayments, net	(55)		(337)
Payment of financing costs	(7,785)		(962)
Shares added to treasury stock as a result of net share settlements due to vesting of stock awards	(1,595)		(2,675)
Net cash flows used in financing activities	(19,387)		(56,983)

Effect of exchange rate changes on cash and cash equivalents	(307)		(214)
Net change in cash and cash equivalents	(4,450)		71,208
Cash and cash equivalents, beginning of period	72,011		8,493
Cash and cash equivalents, end of period	$	67,561	$	79,701

Cash paid (received) for:
Interest	$	2,785	$	5,716
Income taxes, net	1,272		(37,393)

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

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 (the "Company") have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission pertaining to interim financial information. Certain information in footnote disclosures normally included with financial statements prepared in accordance with 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 numerous factors, many of which are beyond management's control and knowledge. It is therefore difficult for management to assess or predict with precision the broad future effect of this health crisis on the global economy, the energy industry or the Company. During 2020 and the first nine months of 2021, the Company recorded asset impairments, severance and restructuring charges in response to these developments as further discussed in Note 3, "Asset Impairments and Other Restructuring Items." As additional information becomes available, events or circumstances change and strategic operational decisions are made by management, further adjustments may be required which could have a material adverse impact on the Company's consolidated financial position, results of operations and cash flows.

The preparation of 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 long-lived asset impairments, revenue and income recognized over time, valuation allowances recorded on deferred tax assets, reserves on inventory, allowances for doubtful accounts, settlement of litigation and potential future adjustments related to contractual indemnification and other agreements. Actual results could materially differ from those estimates.

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, 2020.

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 (referred to as "ASU 2020-06"). This guidance eliminated the requirement that the carrying value of convertible debt instruments, such as the Company's 1.50% convertible senior notes due 2023 (the "2023 Notes"), be allocated between debt and equity components. As permitted under the standard, the Company adopted the guidance on January 1, 2021, using the modified retrospective transition method. Adoption of the standard resulted in a $12.2 million increase in the net carrying value of the 2023 Notes, a $2.7 million decrease in deferred income taxes and a $9.5 million net decrease in stockholders' equity. The effective interest rate associated with the 2023 Notes after adoption decreased from approximately 6% to approximately 2%, which compares to the contractual interest rate of 1.50%. As further discussed in Note 5, "Long-term Debt," the Company issued $135.0 million principal amount of its 4.75% convertible senior notes due 2026 (the "2026 Notes") on March 19, 2021, which have been accounted for in accordance with the provisions of ASU 2020-06.

OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(Continued)

3. Asset Impairments and Other Restructuring Items

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

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, and these conditions caused rapid reductions to most of the Company's customers' drilling, completion and production activities and their related spending on products and services, particularly those supporting activities in the U.S. shale play regions. While the prices of and demand for crude oil have increased significantly since reaching record low levels in April 2020, uncertainty remains regarding the timing of demand recovery to pre-COVID-19 levels and operators' willingness to invest in U.S. land-based drilling, completion and production activities given regulatory pressures around environmental, social and governance considerations.

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):


	Offshore/ Manufactured Products		Downhole Technologies		Well Site Services		Corporate		Pre-tax Total		Tax		After-tax Total
First quarter 2020
Impairments of:
Goodwill	$	86,500	$	192,502	$	127,054	$	—	$	406,056	$	19,600	$	386,456
Fixed assets	—		—		5,198		—		5,198		1,092		4,106
Inventories (Note 4)	16,249		—		8,981		—		25,230		4,736		20,494
Severance and restructuring costs	112		—		548		—		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):


	Offshore/ Manufactured Products		Downhole Technologies		Well Site Services		Corporate		Pre-tax Total		Tax		After-tax Total
Second quarter 2020
Impairments of fixed assets	$	—	$	—	$	2,992	$	—	$	2,992	$	628	$	2,364
Severance and restructuring costs	322		1,315		3,544		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 restructuring costs	288		—		—		—		288		60		228

OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(Continued)

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


	Offshore/ Manufactured Products		Downhole Technologies		Well Site Services		Corporate		Pre-tax Total		Tax		After-tax Total
First quarter 2021
Impairments of fixed assets	$	—	$	—	$	650	$	—	$	650	$	137	$	513
Severance and restructuring costs	282		275		1,306		1,555		3,418		717		2,701

Second quarter 2021
Impairments of operating lease assets	$	—	$	—	$	2,794	$	—	$	2,794	$	587	$	2,207
Severance and restructuring costs(1)	—		203		2,351		—		2,554		536		2,018

Third quarter 2021
Impairment of inventories (Note 4)	$	—	$	2,113	$	—	$	—	$	2,113	$	444	$	1,669
Severance and restructuring costs	256		129		352		—		737		154		583

____________________

(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 the three and nine months ended September 30, 2021, the Company recognized $1.2 million and $8.8 million, respectively, in aggregate reductions to payroll tax expense (within cost of revenues and selling, general and administrative expense) as part of the Coronavirus Aid, Relief and Economic Security Act (the "CARES Act") employee retention credit program. The Company continues to evaluate any and all benefits potentially available to it under the CARES Act.

Goodwill

Goodwill is allocated to each reporting unit based on acquisitions made by the Company and is assessed for impairment annually and when an event occurs or circumstances change that indicate the carrying amounts may not be recoverable. If the carrying amount of a reporting unit exceeds its fair value, goodwill is considered impaired and an impairment loss is recorded. The Company had three reporting units – Offshore/Manufactured Products, Downhole Technologies and Well Site Services – whose goodwill balances totaled $482.3 million as of December 31, 2019. Given the significance of the March 2020 events described above, the Company performed a quantitative assessment of goodwill for impairment as of March 31, 2020. This interim assessment indicated that the fair value of each of the reporting units was less than their respective carrying amounts due to, among other factors, the significant decline in the Company's stock price (and that of its peers) and reduced growth rate expectations given weak energy market conditions resulting from the demand destruction caused by the global response to the COVID-19 pandemic. In addition, the estimated returns required by market participants increased materially in the Company's March 31, 2020 assessment from the assessment performed as of December 1, 2019, resulting in higher discount rates used in the discounted cash flow analysis.

Management utilizes, depending on circumstances, a combination of valuation methodologies including a market approach and an income approach, as well as guideline public company comparables. The fair values of the Company's reporting units were determined using significant unobservable inputs (Level 3 fair value measurements).

Based on this quantitative assessment as of March 31, 2020, the Company concluded that goodwill recorded in the Downhole Technologies and Well Site Services segments was fully impaired while goodwill recorded in the Offshore/Manufactured Products segment was partially impaired. The Company therefore recognized non-cash goodwill impairment charges totaling $406.1 million in the first quarter of 2020, as presented in further detail in the table above.

OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(Continued)

The Company performed its annual quantitative assessment of goodwill as of December 1, 2020, which indicated that the fair value of the Offshore/Manufactured Products segment was greater than its carrying amount and no additional provision for impairment was required. The Company's remaining goodwill within the segment totaled approximately $76.5 million as of September 30, 2021 and December 31, 2020.

Long-lived Assets

The Company also assesses the carrying value of long-lived assets, including property, plant and equipment, operating lease assets and other intangible assets held by each of its segments (reporting units). As a result of the March 2020 assessment, the Company concluded that certain drilling-related property and equipment held by the Well Site Services segment was impaired and recognized a non-cash fixed asset impairment charge of $5.2 million in the first quarter of 2020.

During the nine months ended September 30, 2021, the Well Site Services segment recognized non-cash fixed and operating lease asset impairment charges of $3.4 million associated with the closure of additional facilities coupled with other management actions. During the nine months ended September 30, 2021, the segment also recorded an additional $1.9 million charge associated with the exit of a leased facility.

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

4. Details of Selected Balance Sheet Accounts

Additional information regarding selected balance sheet accounts as of September 30, 2021 and December 31, 2020 is presented below (in thousands):


	September 30, 2021			December 31, 2020
Accounts receivable, net:
Trade	$	112,077		$	109,294
Unbilled revenue	21,523			23,173
Contract assets	22,428			35,870
Other	11,672			3,102
Total accounts receivable	167,700			171,439
Allowance for doubtful accounts	(6,260)			(8,304)
	$	161,440		$	163,135

Allowance for doubtful accounts as a percentage of total accounts receivable	4		%	5		%


	September 30, 2021		December 31, 2020
Deferred revenue (contract liabilities)	$	42,512	$	43,384

As of September 30, 2021, accounts receivable, net in the United States and the United Kingdom represented 77% and 12%, respectively, of the total. No other country or single customer accounted for more than 10% of the Company's total accounts receivable as of September 30, 2021.

For the nine months ended September 30, 2021, the $13.4 million net decrease in contract assets was primarily attributable to $34.6 million transferred to accounts receivable, which was partially offset by $21.1 million in revenue recognized during the period. Deferred revenue (contract liabilities) decreased by $0.9 million in the first nine months of 2021, primarily reflecting the recognition of $6.1 million of revenue that was deferred at the beginning of the period, partially offset by $5.3 million in new customer billings which were not recognized as revenue during the period.

OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(Continued)

The following provides a summary of activity in the allowance for doubtful accounts for the nine months ended September 30, 2021 and 2020 (in thousands):


	Nine Months Ended September 30,
	2021		2020
Allowance for doubtful accounts – January 1	$	8,304	$	8,745
Provisions	20		2,787
Write-offs	(2,200)		(2,490)
Other	136		1,158
Allowance for doubtful accounts – September 30	$	6,260	$	10,200


	September 30, 2021		December 31, 2020
Inventories, net:
Finished goods and purchased products	$	90,558	$	88,634
Work in process	33,852		27,063
Raw materials	93,779		95,410
Total inventories	218,189		211,107
Allowance for excess or obsolete inventory	(40,111)		(40,731)
	$	178,078	$	170,376

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 Well Site Services segments.

During the third quarter of 2020, the Company recorded an impairment charge of $5.9 million 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 an impairment charge of $2.1 million in the third quarter of 2021 to reduce the carrying value of inventories within the Downhole Technologies segment to their estimated net realizable value based primarily on management's decision to exit a product offering.


			September 30, 2021			December 31, 2020
Property, plant and equipment, net:
Land	$	33,622		$	34,968
Buildings and leasehold improvements							260,772		267,072
Machinery and equipment							240,302		239,986
Completion-related rental equipment							504,890		507,755
Office furniture and equipment							32,936		35,767
Vehicles							75,119		81,607
Construction in progress	8,059			7,207
Total property, plant and equipment	1,155,700			1,174,362
Accumulated depreciation	(815,316)			(790,800)
							$	340,384	$	383,562

For the three months ended September 30, 2021 and 2020, depreciation expense was $14.7 million and $18.0 million, respectively. Depreciation expense was $46.7 million and $56.6 million for the nine months ended September 30, 2021 and 2020, respectively.

OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(Continued)


	September 30, 2021						December 31, 2020
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Other intangible assets:
Customer relationships	$	168,283	$	63,956	$	104,327	$	168,288	$	55,380	$	112,908
Patents/Technology/Know-how	78,692		31,497		47,195		75,920		26,124		49,796
Noncompete agreements	—		—		—		16,044		14,742		1,302
Tradenames and other	53,708		14,385		39,323		53,708		11,965		41,743
	$	300,683	$	109,838	$	190,845	$	313,960	$	108,211	$	205,749

For the three months ended September 30, 2021 and 2020, amortization expense was $4.9 million and $6.2 million, respectively. Amortization expense was $15.4 million and $18.7 million for the nine months ended September 30, 2021 and 2020, respectively.


	September 30, 2021		December 31, 2020
Other noncurrent assets:
Deferred compensation plan	$	24,609	$	22,801
Deferred financing costs	2,886		—
Deferred income taxes	1,281		1,280
Other	5,089		5,646
	$	33,865	$	29,727


	September 30, 2021		December 31, 2020
Accrued liabilities:
Accrued compensation	$	22,072	$	18,463
Accrued taxes, other than income taxes	12,558		7,307
Insurance liabilities	6,684		7,694
Accrued interest	5,185		2,202
Accrued commissions	1,664		1,416
Other	5,268		7,422
	$	53,431	$	44,504

OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(Continued)

5. Long-term Debt

As of September 30, 2021 and December 31, 2020, long-term debt consisted of the following (in thousands):