SEC Filing | Oil States International, Inc.

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ois-20220630

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 June 30, 2022


☐			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 July 22, 2022, the number of shares of common stock outstanding was 61,989,208.

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	–	20

Cautionary Statement Regarding Forward-Looking Statements	21	–	22

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	22	–	36

Item 3. Quantitative and Qualitative Disclosures About Market Risk			36

Item 4. Controls and Procedures			37

Part II – OTHER INFORMATION

Item 1. Legal Proceedings			38

Item 1A. Risk Factors			38

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			38

Item 3. Defaults Upon Senior Securities			38

Item 4. Mine Safety Disclosures			38

Item 5. Other Information			38

Item 6. Exhibits			39

Signature Page			40

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 June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Revenues:
Products	$	99,033	$	78,038	$	184,794	$	139,483
Services	82,801		67,686		161,084		131,830
	181,834		145,724		345,878		271,313

Costs and expenses:
Product costs	79,388		63,926		144,189		113,389
Service costs	62,768		53,706		124,571		106,553
Cost of revenues (exclusive of depreciation and amortization expense presented below)	142,156		117,632		268,760		219,942
Selling, general and administrative expense	23,757		22,092		47,590		43,317
Depreciation and amortization expense	17,239		20,909		35,056		42,429

Impairments of fixed and lease assets	—		2,794		—		3,444
Other operating income, net	(228)		(85)		(102)		(439)
	182,924		163,342		351,304		308,693
Operating loss	(1,090)		(17,618)		(5,426)		(37,380)



Interest expense, net	(2,638)		(2,699)		(5,310)		(5,024)
Other income, net	376		1,820		1,401		5,780
Loss before income taxes	(3,352)		(18,497)		(9,335)		(36,624)
Income tax (provision) benefit	(1,792)		3,226		(5,233)		5,543
Net loss	$	(5,144)	$	(15,271)	$	(14,568)	$	(31,081)

Net loss per share:
Basic	$	(0.08)	$	(0.25)	$	(0.24)	$	(0.52)
Diluted	(0.08)		(0.25)		(0.24)		(0.52)

Weighted average number of common shares outstanding:
Basic	60,704		60,317		60,601		60,207
Diluted	60,704		60,317		60,601		60,207

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 June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Net loss	$	(5,144)	$	(15,271)	$	(14,568)	$	(31,081)

Other comprehensive income (loss):

Currency translation adjustments	(12,680)		3,160		(11,819)		1,631


Comprehensive loss	$	(17,824)	$	(12,111)	$	(26,387)	$	(29,450)

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)


	June 30, 2022		December 31, 2021
	(Unaudited)
ASSETS

Current assets:
Cash and cash equivalents	$	22,246	$	52,852
Accounts receivable, net	204,387		186,080
Inventories, net	179,819		168,573
Prepaid expenses and other current assets	19,682		19,222
Total current assets	426,134		426,727

Property, plant, and equipment, net	314,898		338,583
Operating lease assets, net	24,843		25,388
Goodwill, net	79,485		76,412
Other intangible assets, net	179,591		185,749
Other noncurrent assets	27,352		32,889
Total assets	$	1,052,303	$	1,085,748

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
Current portion of long-term debt	$	37,595	$	18,262
Accounts payable	54,738		63,343
Accrued liabilities	46,344		43,401
Current operating lease liabilities	6,046		6,481
Income taxes payable	3,163		2,564
Deferred revenue	47,883		43,236
Total current liabilities	195,769		177,287

Long-term debt	134,871		160,488
Long-term operating lease liabilities	22,703		23,452
Deferred income taxes	6,510		3,637
Other noncurrent liabilities	20,509		25,058
Total liabilities	380,362		389,922

Stockholders' equity:
Common stock, $.01 par value, 200,000,000 shares authorized, 74,673,309 shares and 73,900,160 shares issued, respectively	747		739
Additional paid-in capital	1,108,631		1,105,135
Retained earnings	266,999		281,567
Accumulated other comprehensive loss	(77,850)		(66,031)
Treasury stock, at cost, 12,684,101 and 12,521,834 shares, respectively	(626,586)		(625,584)
Total stockholders' equity	671,941		695,826
Total liabilities and stockholders' equity	$	1,052,303	$	1,085,748

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

OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(In Thousands)


Three Months Ended June 30, 2022	Common Stock		Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Treasury Stock		Total Stockholders' Equity
Balance, March 31, 2022	$	746	$	1,106,963	$	272,143	$	(65,170)	$	(626,574)	$	688,108
Net loss	—		—		(5,144)		—		—		(5,144)
Currency translation adjustments (excluding intercompany advances)	—		—		—		(9,628)		—		(9,628)
Currency translation adjustments on intercompany advances	—		—		—		(3,052)		—		(3,052)

Stock-based compensation expense	1		1,668		—		—		—		1,669
Surrender of stock to settle taxes on stock awards	—		—		—		—		(12)		(12)
Balance, June 30, 2022	$	747	$	1,108,631	$	266,999	$	(77,850)	$	(626,586)	$	671,941


Six Months Ended June 30, 2022	Common Stock		Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Treasury Stock		Total Stockholders' Equity
Balance, December 31, 2021	$	739	$	1,105,135	$	281,567	$	(66,031)	$	(625,584)	$	695,826
Net loss	—		—		(14,568)		—		—		(14,568)
Currency translation adjustments (excluding intercompany advances)	—		—		—		(13,208)		—		(13,208)
Currency translation adjustments on intercompany advances	—		—		—		1,389		—		1,389

Stock-based compensation expense	8		3,496		—		—		—		3,504
Surrender of stock to settle taxes on stock awards	—		—		—		—		(1,002)		(1,002)
Balance, June 30, 2022	$	747	$	1,108,631	$	266,999	$	(77,850)	$	(626,586)	$	671,941

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

OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(In Thousands)


Three Months Ended June 30, 2021	Common Stock		Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Treasury Stock		Total Stockholders' Equity
Balance, March 31, 2021	$	738	$	1,100,077	$	329,750	$	(72,914)	$	(625,489)	$	732,162
Net loss	—		—		(15,271)		—		—		(15,271)
Currency translation adjustments (excluding intercompany advances)	—		—		—		556		—		556
Currency translation adjustments on intercompany advances	—		—		—		2,604		—		2,604
Stock-based compensation expense	1		1,882		—		—		—		1,883
Surrender of stock to settle taxes on stock awards	—		—		—		—		—		—
Adoption of ASU 2020-06	—		—		—		—		—		—
Balance, June 30, 2021	$	739	$	1,101,959	$	314,479	$	(69,754)	$	(625,489)	$	721,934


Six Months Ended June 30, 2021	Common Stock		Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Treasury Stock		Total Stockholders' Equity
Balance, December 31, 2020	$	733	$	1,122,945	$	329,327	$	(71,385)	$	(623,989)	$	757,631
Net loss	—		—		(31,081)		—		—		(31,081)
Currency translation adjustments (excluding intercompany advances)	—		—		—		1,624		—		1,624
Currency translation adjustments on intercompany advances	—		—		—		7		—		7
Stock-based compensation expense	6		4,697		—		—		—		4,703
Surrender of stock to settle taxes on stock awards	—		—		—		—		(1,500)		(1,500)
Adoption of ASU 2020-06	—		(25,683)		16,233		—		—		(9,450)
Balance, June 30, 2021	$	739	$	1,101,959	$	314,479	$	(69,754)	$	(625,489)	$	721,934

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

OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands)


	Six Months Ended June 30,
	2022		2021
Cash flows from operating activities:
Net loss	$	(14,568)	$	(31,081)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization expense	35,056		42,429
Settlement of disputes with seller of GEODynamics, Inc.	620		—


Impairments of fixed and lease assets	—		3,444
Stock-based compensation expense	3,504		4,703
Amortization of debt discount and deferred financing costs	944		1,366
Deferred income tax provision (benefit)	2,584		(6,834)

Gains on extinguishment of 1.50% convertible senior notes	(157)		(4,022)
Gains on disposals of assets	(1,185)		(1,632)
Other, net	517		375
Changes in operating assets and liabilities, net of effect from acquired business:
Accounts receivable	(20,469)		(6,962)
Inventories	(14,664)		(4,458)
Accounts payable and accrued liabilities	(5,994)		11,896

Deferred revenue	4,647		1,780
Other operating assets and liabilities, net	(870)		2,929
Net cash flows provided by (used in) operating activities	(10,035)		13,933

Cash flows from investing activities:
Capital expenditures	(6,453)		(7,311)
Proceeds from disposition of property and equipment	1,652		3,422
Acquisition of business, net of cash acquired	(8,125)		—
Other, net	(85)		(326)
Net cash flows used in investing activities	(13,011)		(4,215)

Cash flows from financing activities:
Revolving credit facility borrowings	9,725		12,571
Revolving credit facility repayments	(9,725)		(31,571)

Issuance of 4.75% convertible senior notes	—		135,000
Purchases of 1.50% convertible senior notes	(6,272)		(125,952)
Other debt and finance lease activity, net	(359)		119
Payment of financing costs	(74)		(7,779)
Shares added to treasury stock as a result of net share settlements due to vesting of stock awards	(1,002)		(1,500)
Net cash flows used in financing activities	(7,707)		(19,112)

Effect of exchange rate changes on cash and cash equivalents	147		33
Net change in cash and cash equivalents	(30,606)		(9,361)
Cash and cash equivalents, beginning of period	52,852		72,011
Cash and cash equivalents, end of period	$	22,246	$	62,650

Cash paid for:
Interest	$	4,105	$	2,256
Income taxes, net	291		920

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

OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO 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.

As further discussed in Note 12, "Commitments and Contingencies," the impact of the Coronavirus Disease 2019 ("COVID-19") pandemic and the related economic, business and market disruptions continue to evolve and their 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 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.

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board, which are adopted by the Company as of the specified effective date. Management believes that recently issued standards, which are not yet effective, will not have a material impact on the Company's consolidated financial statements upon adoption.

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

2. Acquisition

On April 14, 2022, the Company acquired E-Flow Control Holdings Limited ("E-Flow"), a U.K.-based global provider of fully integrated handling, control, monitoring and instrumentation solutions. The purchase price of $8.1 million (net of cash acquired) was funded with cash-on-hand and is subject to customary post-closing adjustments. Under the terms of the purchase agreement, the Company may be entitled to indemnification for certain matters occurring prior to the acquisition.

The E-Flow acquisition was accounted for using the acquisition method of accounting, based on the Company's preliminary estimates of the fair value of assets acquired (primarily long-lived intangible assets and goodwill) and liabilities assumed in the acquisition. E-Flow's results of operations have been included in the Company's consolidated financial statements and have been reported within the Offshore/Manufactured Products segment subsequent to the closing of the acquisition.

OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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


	Offshore/ Manufactured Products		Well Site Services		Downhole Technologies		Corporate		Pre-tax Total		Tax		After-tax Total
First quarter 2021
Impairments of fixed assets (Note 4)	$	—	$	650	$	—	$	—	$	650	$	137	$	513
Severance and restructuring costs	282		1,306		275		1,555		3,418		717		2,701

Second quarter 2021
Impairments of operating lease assets (Note 4)	$	—	$	2,794	$	—	$	—	$	2,794	$	587	$	2,207
Severance and restructuring costs	—		2,351		203		—		2,554		536		2,018

Additionally, during the three and six months ended June 30, 2021, the Company recognized $2.8 million and $7.6 million, respectively, in aggregate reductions to payroll tax expense (within cost of revenues and selling, general and administrative expense) as part of the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act") employee retention credit program.

As further discussed in Note 12, "Commitment and Contingencies," on June 28, 2022, the Company settled its disputes with the seller (the "GEO Seller") of GEODynamics, Inc. ("GEODynamics"), which was acquired in 2018, including the full and final settlement of all amounts due pursuant to the GEO Note (as defined below). As consideration for such settlement, on July 1, 2022, the Company issued the GEO Seller approximately 1.9 million shares of its common stock (having a market value of $10.3 million on the date of issuance) and paid the GEO Seller $10.0 million in cash. In connection with this settlement, the $17.5 million carrying value of the GEO Note and accrued interest of $2.2 million was extinguished on July 1, 2022.

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

OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

4. Details of Selected Balance Sheet Accounts

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


	June 30, 2022			December 31, 2021
Accounts receivable, net:
Trade	$	135,121		$	116,434
Unbilled revenue	21,640			24,389
Contract assets	42,876			39,755
Other	9,916			9,973
Total accounts receivable	209,553			190,551
Allowance for doubtful accounts	(5,166)			(4,471)
	$	204,387		$	186,080

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


	June 30, 2022		December 31, 2021
Deferred revenue (contract liabilities)	$	47,883	$43,236

As of June 30, 2022, accounts receivable, net in the United States and the United Kingdom represented 74% and 14%, respectively, of the total. No other country or single customer accounted for more than 10% of the Company's total accounts receivable as of June 30, 2022.

For the six months ended June 30, 2022, the $3.1 million net increase in contract assets was attributable to $30.1 million in revenue recognized during the period, which was partially offset by $26.7 million transferred to accounts receivable. Deferred revenue (contract liabilities) increased by $4.6 million in the first six months of 2022, reflecting $16.2 million in new customer billings which were not recognized as revenue during the period, partially offset by the recognition of $11.2 million of revenue that was deferred at the beginning of the period.

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


	Six Months Ended June 30,
	2022		2021
Allowance for doubtful accounts – January 1	$	4,471	$	8,304
Provisions	1,044		61
Write-offs	(629)		(815)
Other	280		148
Allowance for doubtful accounts – June 30	$	5,166	$	7,698


	June 30, 2022		December 31, 2021
Inventories, net:
Finished goods and purchased products	$	90,948	$	87,934
Work in process	31,464		24,722
Raw materials	94,558		96,357
Total inventories	216,970		209,013
Allowance for excess or obsolete inventory	(37,151)		(40,440)
	$	179,819	$	168,573

OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)


			June 30, 2022			December 31, 2021
Property, plant and equipment, net:







Property, plant and equipment	$	1,126,777		$	1,151,533
Accumulated depreciation	(811,879)			(812,950)
							$	314,898	$	338,583

For the three months ended June 30, 2022 and 2021, depreciation expense was $12.0 million and $15.6 million, respectively. Depreciation expense was $24.6 million and $32.0 million, respectively, for the six months ended June 30, 2022 and 2021.

During the first and second quarters of 2021, the Well Site Services segment recognized non-cash fixed and operating lease asset impairment charges of $0.7 million and $2.8 million, respectively, associated with the closure of additional facilities coupled with other management actions. During the second quarter of 2021, the segment also recorded an additional $1.9 million charge associated with the exit of a leased facility.


	June 30, 2022						December 31, 2021
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Other intangible assets:
Customer relationships	$	170,933	$	72,305	$	98,628	$	168,284	$	66,734	$	101,550
Patents/Technology/Know-how	79,872		36,234		43,638		78,821		33,151		45,670
Tradenames and other	54,158		16,833		37,325		53,708		15,179		38,529
	$	304,963	$	125,372	$	179,591	$	300,813	$	115,064	$	185,749

For the three months ended June 30, 2022 and 2021, amortization expense was $5.3 million and $5.3 million, respectively. Amortization expense was $10.4 million and $10.5 million for the six months ended June 30, 2022 and 2021, respectively.


	June 30, 2022		December 31, 2021
Other noncurrent assets:
Deferred compensation plan	$	19,015	$	23,348
Deferred financing costs	2,308		2,674
Deferred income taxes	1,269		1,878
Other	4,760		4,989
	$	27,352	$	32,889


	June 30, 2022		December 31, 2021
Accrued liabilities:
Accrued compensation	$	20,924	$	20,904
Accrued taxes, other than income taxes	7,579		5,130
Insurance liabilities	5,073		6,361
Accrued interest	3,982		3,629
Accrued commissions	2,380		2,194
Other	6,406		5,183
	$	46,344	$	43,401

OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

5. Long-term Debt

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


	June 30, 2022		December 31, 2021
Revolving credit facilities(1)	$	—	$	—
2026 Notes(2)	131,724		131,291
2023 Notes(3)	19,445		25,802
Promissory note(4)	17,534		17,534
Other debt and finance lease obligations	3,763		4,123
Total debt	172,466		178,750
Less: Current portion	(37,595)		(18,262)
Total long-term debt	$	134,871	$	160,488

____________________

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

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

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

(4)The promissory note was settled on July 1, 2022. See Note 12, "Commitments and Contingencies" for additional discussion.

Revolving Credit Facilities

ABL Facility

On February 10, 2021, the Company entered into a senior secured credit facility with certain lenders, which provides for a $125.0 million asset-based revolving credit facility (the "ABL Facility") under which credit availability is subject to a borrowing base calculation. Concurrent with entering into this facility, the Company's former senior secured revolving credit facility was terminated. On March 16, 2021, the Company entered into an amendment to the ABL Facility that permitted the Company to incur the indebtedness represented by the 2026 Notes discussed below.

The ABL Facility is governed by a credit agreement, as amended, with Wells Fargo Bank, National Association, as administrative agent and the lenders and other financial institutions from time to time party thereto (the "ABL Agreement"). The ABL Agreement matures on February 10, 2025 with a springing maturity 91 days prior to the maturity of any outstanding indebtedness with a principal amount in excess of $17.5 million (excluding the GEO Note discussed below).

The ABL Agreement provides funding based on a borrowing base calculation that includes eligible U.S. customer accounts receivable and inventory and provides for a $50.0 million sub-limit for the issuance of letters of credit. Borrowings under the ABL Agreement are secured by a pledge of substantially all of the Company's domestic assets (other than real property) and the stock of certain foreign subsidiaries.

Borrowings under the ABL Agreement bear interest at a rate equal to the London Interbank Offered Rate ("LIBOR") plus a margin of 2.75% to 3.25% and subject to a LIBOR floor rate of 0.50%, or at a base rate plus a margin of 1.75% to 2.25%, in each case based on average borrowing availability. Quarterly, the Company must also pay a commitment fee of 0.375% to 0.50% per annum, based on unused commitments under the ABL Agreement.

The ABL Agreement places restrictions on the Company's ability to incur additional indebtedness, grant liens on assets, pay dividends or make distributions on equity interests, dispose of assets, make investments, repay other indebtedness (including the 2023 Notes and the 2026 Notes discussed below), engage in mergers, and other matters, in each case, subject to certain exceptions. The ABL Agreement contains customary default provisions, which, if triggered, could result in acceleration of repayment of all amounts then outstanding. The ABL Agreement also requires the Company to satisfy and maintain a fixed charge coverage ratio of not less than 1.0 to 1.0 (i) in the event that availability under the ABL Agreement is less than the

OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

greater of (a) 15% of the borrowing base and (b) $14.1 million; (ii) to complete certain specified transactions; or (iii) if an event of default has occurred and is continuing.

As of June 30, 2022, the Company had $18.6 million of outstanding letters of credit, but no borrowings outstanding under the ABL Agreement. The total amount available to be drawn as of June 30, 2022 was $61.8 million, calculated based on the current borrowing base less outstanding borrowings, if any, and letters of credit. As of June 30, 2022, the Company was in compliance with its debt covenants under the ABL Agreement.

2026 Notes

On March 19, 2021, the Company issued $135.0 million aggregate principal amount of its 4.75% convertible senior notes due 2026 (the "2026 Notes") pursuant to an indenture, dated as of March 19, 2021 (the "2026 Indenture"), between the Company and Wells Fargo Bank, National Association, as trustee. Computershare Trust Company, National Association, assumed the role of trustee as of March 1, 2022. 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 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. Interest is payable semi-annually in arrears on April 1 and October 1 of each year. 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 approximately $10.49 per share of common stock). The conversion rate, and thus the conversion price, may be adjusted under certain circumstances as described in the 2026 Indenture. The Company's intent is to repay the principal amount of the 2026 Notes in cash and settle the conversion feature in shares of the Company's common stock. As of June 30, 2022, none of the conditions allowing holders of the 2026 Notes to convert, or requiring us to repurchase the 2026 Notes, had been met.

2023 Notes

On January 30, 2018, the Company issued $200.0 million aggregate principal amount of its 1.50% convertible senior notes due 2023 (the "2023 Notes") pursuant to an indenture, dated as of January 30, 2018 (the "2023 Indenture"), between the Company and Wells Fargo Bank, National Association, as trustee. Computershare Trust Company, National Association, assumed the role of trustee as of March 1, 2022. The 2023 Notes bear interest at a rate of 1.50% per year and will mature on February 15, 2023, unless earlier repurchased, redeemed or converted. The initial conversion rate is 22.2748 shares of the Company's common stock per $1,000 principal amount of the 2023 Notes (equivalent to an initial conversion price of approximately $44.89 per share of common stock). The conversion rate, and thus the conversion price, may be adjusted under certain circumstances as described in the 2023 Indenture. The Company's intent is to repay the principal amount of the 2023 Notes in cash. As of June 30, 2022, $19.5 million principal amount of the 2023 Notes remained outstanding.

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


	Principal Amount		Carrying Value of Liability		Cash Paid		Non-cash Gains Recognized
Three Months Ended June 30,
2022	$	6,454	$	6,429	$	6,272	$	157
2021	6,400		6,337		5,952		385
Six Months Ended June 30,
2022	$	6,454	$	6,429	$	6,272	$	157
2021	131,400		129,974		125,952		4,022

OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

Promissory Note

In connection with the 2018 acquisition of GEODynamics (the "GEODynamics Acquisition"), the Company issued a $25.0 million promissory note (the "GEO Note") that bore interest at 2.50% per annum (subject to adjustment) and was scheduled to mature on July 12, 2019. Payments due under the GEO Note were subject to set-off, in full or in part, against certain indemnification claims related to matters occurring prior to the GEODynamics Acquisition. The Company asserted indemnification claims against the GEO Seller, and the GEO Seller filed a breach of contract suit against the Company and one of its wholly-owned subsidiaries alleging that payments due under the GEO Note were required to be repaid in accordance with the terms of such note. The Company incurred settlement costs and expenses of $7.5 million related to such indemnification claims, and as of June 28, 2022 had reduced the carrying amount of such note in the consolidated balance sheet to $17.5 million, which was its then-current best estimate of what was owed after set-off for such indemnification matters. On June 28, 2022, the Company agreed to a settlement of all disputes that arose with the GEO Seller, including the full and final settlement of all amounts due pursuant to the GEO Note. See Note 12, "Commitments and Contingencies" for additional discussion.

6. Fair Value Measurements

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 and 2026 Notes, on the accompanying consolidated balance sheets approximate their fair values. The estimated fair value of the 2023 Notes as of June 30, 2022 was $19.0 million based on quoted market prices (a Level 2 fair value measurement), which compares to the principal amount of $19.5 million. The estimated fair value of the 2026 Notes as of June 30, 2022 was $123.8 million based on quoted market prices (a Level 2 fair value measurement), which compares to the principal amount of $135.0 million.

7. Stockholders' Equity

Common and Preferred Stock

The following table provides details with respect to the changes to the number of shares of common stock, $0.01 par value, outstanding during the first six months of 2022 (in thousands):






Shares of common stock outstanding – December 31, 2021															61,378
Restricted stock awards, net of forfeitures															773
Shares withheld for taxes on vesting of stock awards															(162)
Shares of common stock outstanding – June 30, 2022															61,989

As of June 30, 2022 and December 31, 2021, the Company had 25,000,000 shares of preferred stock, $0.01 par value, authorized, with no shares issued or outstanding.

Accumulated Other Comprehensive Loss

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 $77.9 million at June 30, 2022. For the six months ended June 30, 2022 and 2021, currency translation adjustments recognized as a component of other comprehensive income (loss) were primarily attributable to the United Kingdom and Brazil.

During the six months ended June 30, 2022, the exchange rate for the British pound weakened by 10% compared to the U.S. dollar while the Brazilian real strengthened by 7% compared to the U.S. dollar, contributing to other comprehensive loss of $11.8 million. During the six months ended June 30, 2021, the exchange rate for the British pound and the Brazilian real strengthened by 1% and 4%, respectively, compared to the U.S. dollar, contributing to other comprehensive income of $1.6 million.

OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

8. Income Taxes

For the three months ended June 30, 2022, the Company's income tax expense was $1.8 million on a pre-tax loss of $3.4 million. Income tax expense in the second quarter of 2022 was negatively impacted by valuation allowances recorded against U.S. tax assets as well as certain non-deductible expenses. This compares to an income tax benefit of $3.2 million on a pre-tax loss of $18.5 million, which included certain non-deductible expenses, for the three months ended June 30, 2021.

For the six months ended June 30, 2022, the Company's income tax expense was $5.2 million on a pre-tax loss of $9.3 million. Income tax expense in the first six months of 2022 was negatively impacted by valuation allowances recorded against U.S. tax assets as well as certain non-deductible expenses and discrete tax items. This compares to an income tax benefit of $5.5 million on a pre-tax loss of $36.6 million, which included certain non-deductible expenses and discrete tax items, for the six months ended June 30, 2021.

9. Net Loss Per Share

The table below provides a reconciliation of the numerators and denominators of basic and diluted net loss per share for the three and six months ended June 30, 2022 and 2021 (in thousands, except per share amounts):


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Numerators:
Net loss	$	(5,144)	$	(15,271)	$	(14,568)	$	(31,081)
Less: Income attributable to unvested restricted stock awards	—		—