Company Quick10K Filing
Oil States International
Price12.76 EPS-1
Shares61 P/E-14
MCap772 P/FCF7
Net Debt251 EBIT-55
TEV1,023 TEV/EBIT-18
TTM 2019-09-30, in MM, except price, ratios
10-Q 2020-03-31 Filed 2020-05-01
10-K 2019-12-31 Filed 2020-02-21
10-Q 2019-09-30 Filed 2019-10-28
10-Q 2019-06-30 Filed 2019-07-29
10-Q 2019-03-31 Filed 2019-04-25
10-K 2018-12-31 Filed 2019-02-19
10-Q 2018-09-30 Filed 2018-10-31
10-Q 2018-06-30 Filed 2018-07-31
10-Q 2018-03-31 Filed 2018-04-27
10-K 2017-12-31 Filed 2018-02-20
10-Q 2017-09-30 Filed 2017-10-27
10-Q 2017-06-30 Filed 2017-07-31
10-Q 2017-03-31 Filed 2017-04-27
10-K 2016-12-31 Filed 2017-02-17
10-Q 2016-09-30 Filed 2016-10-28
10-Q 2016-06-30 Filed 2016-07-28
10-Q 2016-03-31 Filed 2016-04-28
10-K 2015-12-31 Filed 2016-02-22
10-Q 2015-09-30 Filed 2015-10-30
10-Q 2015-06-30 Filed 2015-07-30
10-K 2014-12-31 Filed 2015-02-23
10-Q 2014-12-31 Filed 2015-04-30
10-Q 2014-09-30 Filed 2014-10-31
10-Q 2014-06-30 Filed 2014-08-01
10-Q 2014-03-31 Filed 2014-05-02
10-K 2013-12-31 Filed 2014-02-25
10-Q 2013-09-30 Filed 2013-11-01
10-Q 2013-06-30 Filed 2013-07-31
10-Q 2013-03-31 Filed 2013-04-25
10-K 2012-12-31 Filed 2013-02-20
10-Q 2012-09-30 Filed 2012-11-02
10-Q 2012-06-30 Filed 2012-08-03
10-Q 2012-03-31 Filed 2012-04-30
10-K 2011-12-31 Filed 2012-02-17
10-Q 2011-09-30 Filed 2011-11-04
10-Q 2011-06-30 Filed 2011-08-02
10-Q 2011-03-31 Filed 2011-04-28
10-K 2010-12-31 Filed 2011-02-22
10-Q 2010-09-30 Filed 2010-11-05
10-Q 2010-06-30 Filed 2010-08-05
10-Q 2010-03-31 Filed 2010-04-30
10-K 2009-12-31 Filed 2010-02-22
8-K 2020-06-17
8-K 2020-05-12
8-K 2020-04-29
8-K 2020-04-21
8-K 2020-02-19
8-K 2020-01-23
8-K 2019-10-24
8-K 2019-07-29
8-K 2019-07-16
8-K 2019-05-07
8-K 2019-04-24
8-K 2019-02-13
8-K 2018-10-29
8-K 2018-10-17
8-K 2018-08-07
8-K 2018-07-30
8-K 2018-06-11
8-K 2018-06-04
8-K 2018-05-08
8-K 2018-04-25
8-K 2018-02-28
8-K 2018-02-22
8-K 2018-02-22
8-K 2018-02-21
8-K 2018-02-14
8-K 2018-02-06
8-K 2018-01-30
8-K 2018-01-25
8-K 2018-01-24
8-K 2018-01-12

OIS 10Q Quarterly Report

Part I - Financial Information
Item 1. Financial 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
EX-10.1 ois20200331ex101.htm
EX-31.1 ois20200331ex311.htm
EX-31.2 ois20200331ex312.htm
EX-32.1 ois20200331ex321.htm
EX-32.2 ois20200331ex322.htm

Oil States International Earnings 2020-03-31

Balance SheetIncome StatementCash Flow
4.53.62.71.80.90.02012201420172020
Assets, Equity
1.20.90.70.40.2-0.12012201420172020
Rev, G Profit, Net Income
0.70.40.1-0.2-0.5-0.82012201420172020
Ops, Inv, Fin

Document
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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 March 31, 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)
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 April 24, 2020, the number of shares of common stock outstanding was 60,941,131.



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 Statements
 
 
 
 
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 March 31,
 
2020
 
2019
Revenues:
 
 
 
Products
$
102,980

 
$
116,328

Services
116,714

 
134,283

 
219,694

 
250,611

 
 
 
 
Costs and expenses:
 
 
 
Product costs
89,746

 
89,268

Service costs
107,856

 
110,610

Cost of revenues (exclusive of depreciation and amortization expense presented below)
197,602

 
199,878

Selling, general and administrative expense
26,124

 
30,108

Depreciation and amortization expense
26,409

 
31,551

Impairments of goodwill
406,056

 

Impairment of fixed assets
5,198

 

Other operating expense (income), net
107

 
(86
)
 
661,496

 
261,451

Operating loss
(441,802
)
 
(10,840
)
 
 
 
 
Interest expense, net
(3,504
)
 
(4,752
)
Other income, net
774

 
667

Loss before income taxes
(444,532
)
 
(14,925
)
Income tax benefit
39,491

 
277

Net loss
$
(405,041
)
 
$
(14,648
)
 
 
 
 
Net loss per share:
 
 
 
Basic
$
(6.79
)
 
$
(0.25
)
Diluted
(6.79
)
 
(0.25
)
 
 
 
 
Weighted average number of common shares outstanding:
 
 
 
Basic
59,654

 
59,258

Diluted
59,654

 
59,258


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 March 31,
 
2020
 
2019
Net loss
$
(405,041
)
 
$
(14,648
)
 
 
 
 
Other comprehensive income (loss):
 
 
 
Currency translation adjustments
(14,791
)
 
2,466

Comprehensive loss
$
(419,832
)
 
$
(12,182
)

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)
 
March 31,
2020
 
December 31, 2019
 
(Unaudited)
 
 
ASSETS
 
 
 
 
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
24,308

 
$
8,493

Accounts receivable, net
222,472

 
233,487

Inventories, net
209,180

 
221,342

Income taxes receivable
43,950

 
2,568

Prepaid expenses and other current assets
14,638

 
17,539

Total current assets
514,548

 
483,429

 
 
 
 
Property, plant, and equipment, net
429,002

 
459,724

Operating lease assets, net
40,902

 
43,616

Goodwill, net
75,757

 
482,306

Other intangible assets, net
223,958

 
230,091

Other noncurrent assets
27,843

 
28,701

Total assets
$
1,312,010

 
$
1,727,867

 
 
 
 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
 
 
 
 
 
 
Current liabilities:
 
 
 
Current portion of long-term debt
$
25,643

 
$
25,617

Accounts payable
75,392

 
78,368

Accrued liabilities
43,227

 
48,840

Current operating lease liabilities
8,361

 
8,311

Income taxes payable
2,845

 
4,174

Deferred revenue
20,721

 
17,761

Total current liabilities
176,189

 
183,071

 
 
 
 
Long-term debt
239,229

 
222,552

Long-term operating lease liabilities
33,323

 
35,777

Deferred income taxes
38,506

 
38,079

Other noncurrent liabilities
22,131

 
24,421

Total liabilities
509,378

 
503,900

 
 
 
 
Stockholders' equity:
 
 
 
Common stock, $.01 par value, 200,000,000 shares authorized, 73,212,778 shares and 72,546,321 shares issued, respectively
732

 
726

Additional paid-in capital
1,115,677

 
1,114,521

Retained earnings
392,669

 
797,710

Accumulated other comprehensive loss
(82,537
)
 
(67,746
)
Treasury stock, at cost, 12,268,293 and 12,045,065 shares, respectively
(623,909
)
 
(621,244
)
Total stockholders' equity
802,632

 
1,223,967

Total liabilities and stockholders' equity
$
1,312,010

 
$
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 March 31, 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

 

 
(405,041
)
 

 

 
(405,041
)
Currency translation adjustments (excluding intercompany advances)

 

 

 
(6,085
)
 

 
(6,085
)
Currency translation adjustments on intercompany advances

 

 

 
(8,706
)
 

 
(8,706
)
Stock-based compensation expense:
 
 
 
 
 
 
 
 
 
 
 
Restricted stock
6

 
1,156

 

 

 

 
1,162

Surrender of stock to settle taxes on restricted stock awards

 

 

 

 
(2,665
)
 
(2,665
)
Balance, March 31, 2020
$
732

 
$
1,115,677

 
$
392,669

 
$
(82,537
)
 
$
(623,909
)
 
$
802,632


Three Months Ended March 31, 2019
Common Stock
 
Additional Paid-In Capital
 
Retained Earnings
 
Accumulated Other Comprehensive Loss
 
Treasury Stock
 
Total Stockholders' Equity
Balance, December 31, 2018
$
718

 
$
1,097,758

 
$
1,029,518

 
$
(71,397
)
 
$
(616,829
)
 
$
1,439,768

Net loss

 

 
(14,648
)
 

 

 
(14,648
)
Currency translation adjustments (excluding intercompany advances)

 

 

 
2,553

 

 
2,553

Currency translation adjustments on intercompany advances

 

 

 
(87
)
 

 
(87
)
Stock-based compensation expense:
 
 
 
 
 
 
 
 
 
 
 
Restricted stock
7

 
4,365

 

 

 

 
4,372

Stock options

 
53

 

 

 

 
53

Stock repurchases

 

 

 

 
(757
)
 
(757
)
Surrender of stock to settle taxes on restricted stock awards

 

 

 

 
(3,610
)
 
(3,610
)
Balance, March 31, 2019
$
725

 
$
1,102,176

 
$
1,014,870

 
$
(68,931
)
 
$
(621,196
)
 
$
1,427,644


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

6


OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
 
Three Months Ended March 31,
 
2020
 
2019
Cash flows from operating activities:
 
 
 
Net loss
$
(405,041
)
 
$
(14,648
)
Adjustments to reconcile net loss to net cash provided by operating activities:
 
 
 
Depreciation and amortization expense
26,409

 
31,551

Impairments of goodwill
406,056

 

Impairments of inventories
25,230

 

Impairment of fixed assets
5,198

 

Stock-based compensation expense
1,162

 
4,425

Amortization of debt discount and deferred financing costs
1,681

 
1,937

Deferred income tax benefit
(40,832
)
 
(1,513
)
Gain on disposals of assets
(513
)
 
(418
)
Other, net
771

 
(340
)
Changes in operating assets and liabilities:
 
 
 
Accounts receivable
4,617

 
21,893

Inventories
(15,332
)
 
2,735

Accounts payable and accrued liabilities
(8,625
)
 
(9,576
)
Income taxes payable
(1,100
)
 
1,878

Other operating assets and liabilities, net
5,768

 
(3,632
)
Net cash flows provided by operating activities
5,449

 
34,292

 
 
 
 
Cash flows from investing activities:
 
 
 
Capital expenditures
(5,881
)
 
(17,922
)
Proceeds from disposition of property, plant and equipment
4,092

 
368

Other, net
(256
)
 
(304
)
Net cash flows used in investing activities
(2,045
)
 
(17,858
)
 
 
 
 
Cash flows from financing activities:
 
 
 
Revolving credit facility borrowings
72,173

 
57,874

Revolving credit facility repayments
(52,404
)
 
(73,774
)
Purchase of 1.50% convertible senior notes
(4,737
)
 

Other debt and finance lease activity, net
35

 
(142
)
Shares added to treasury stock as a result of net share settlements
due to vesting of restricted stock
(2,665
)
 
(3,610
)
Purchase of treasury stock

 
(757
)
Net cash flows provided by (used in) financing activities
12,402

 
(20,409
)
 
 
 
 
Effect of exchange rate changes on cash and cash equivalents
9

 
(32
)
Net change in cash and cash equivalents
15,815

 
(4,007
)
Cash and cash equivalents, beginning of period
8,493

 
19,316

Cash and cash equivalents, end of period
$
24,308

 
$
15,309

 
 
 
 
Cash paid for:
 
 
 
Interest
$
2,436

 
$
3,460

Income taxes, net of refunds
2,499

 
(487
)

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

7

 
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 related economic, business and market disruptions is evolving rapidly and its future effects are uncertain. The actual impact of these recent 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 quarter of 2020, the Company recorded asset impairments and recorded 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 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.

8

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

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 reductions in global demand due to the COVID-19 pandemic and 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.
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. This decline in oil prices is expected 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 expanded its cost reduction initiatives. The Company also assessed the carrying value of goodwill, long-lived assets and other assets based on the current 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 Services
 
Drilling Services
 
Downhole Technologies
 
Offshore/
Manufactured Products
 
Pre-tax Total
 
Tax
 
After-tax Total
Impairment of goodwill
$
127,054

 
$

 
$
192,502

 
$
86,500

 
$
406,056

 
$
19,600

 
$
386,456

Impairment of fixed assets

 
5,198

 

 

 
5,198

 
1,092

 
4,106

Impairment of inventories (Note 4)
8,981

 

 

 
16,249

 
25,230

 
4,736

 
20,494

Severance and facility closure costs
331

 
217

 

 
112

 
660

 
139

 
521


In addition, the Company further reduced its workforce in the United States in April of 2020, which will result in additional severance costs in the second quarter of 2020.
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.

9

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

Based on this quantitative assessment, 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 do not impact the Company's liquidity position, debt covenants or cash flows. Following impairment, the Offshore/Manufactured Products reporting unit did not have a fair value substantially in excess of its carrying amount.
The discount rates used to value the Company's reporting units 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 quarter of 2020 is presented in Note 4, "Details of Selected Balance Sheet Accounts."
Long-lived Assets
The Company also assessed 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 this 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.
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.
4.
Details of Selected Balance Sheet Accounts
Additional information regarding selected balance sheet accounts at March 31, 2020 and December 31, 2019 is presented below (in thousands):
 
March 31,
2020
 
December 31,
2019
Accounts receivable, net:
 
 
 
Trade
$
174,041

 
$
178,813

Unbilled revenue
29,086

 
28,341

Contract assets
23,148

 
26,034

Other
4,883

 
9,044

Total accounts receivable
231,158

 
242,232

Allowance for doubtful accounts
(8,686
)
 
(8,745
)
 
$
222,472

 
$
233,487

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

 
March 31,
2020
 
December 31,
2019
Deferred revenue (contract liabilities)
$
20,721

 
$
17,761


For the three months ended March 31, 2020, the $2.9 million net decrease in contract assets was primarily attributable to $18.7 million transferred to accounts receivable, which was partially offset by $16.1 million in revenue recognized during the period. Deferred revenue (contract liabilities) increased by $3.0 million in 2020, primarily reflecting $10.5 million in new customer billings which were not recognized as revenue during the period, partially offset by the recognition of $7.4 million of revenue that was deferred at the beginning of the period.
As of March 31, 2020 and December 31, 2019, 74% and 73%, respectively, of total accounts receivables related to revenues generated in the United States. As of March 31, 2020 and December 31, 2019, 10% of total accounts receivables related to revenues generated in the United Kingdom. No other country or single customer accounted for more than 10% of the Company's total accounts receivables at these dates.

10

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

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 three months ended March 31, 2020 (in thousands):
 
2020
 
2019
Allowance for doubtful accounts – December 31
$
8,745

 
$
6,701

Provision
589

 
(134
)
Write-offs
(1,785
)
 

Other
1,137

 
157

Allowance for doubtful accounts – March 31
8,686

 
6,724


 
March 31,
2020
 
December 31,
2019
Inventories, net:
 
 
 
Finished goods and purchased products
$
106,833

 
$
107,691

Work in process
30,175

 
21,963

Raw materials
114,818

 
110,719

Total inventories
251,826

 
240,373

Allowance for excess or obsolete inventory
(42,646
)
 
(19,031
)
 
$
209,180

 
$
221,342


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 is expected to reduce the near-term utility of certain goods within the Offshore/Manufactured Products and Completion Services operations.
 
March 31,
2020
 
December 31,
2019
Property, plant and equipment, net:
 
 
 
Land
$
34,917

 
$
37,507

Buildings and leasehold improvements
265,924

 
273,384

Machinery and equipment
238,599

 
246,826

Completion Services equipment
513,101

 
510,737

Office furniture and equipment
37,554

 
45,309

Vehicles
93,301

 
97,264

Construction in progress
11,358

 
13,281

Total property, plant and equipment
1,194,754

 
1,224,308

Accumulated depreciation
(765,752
)
 
(764,584
)
 
$
429,002

 
$
459,724


For the three months ended March 31, 2020 and 2019, depreciation expense was $20.1 million and $24.8 million, respectively.
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 reduce the carrying value of the business's fixed assets to their estimated realizable value.

11

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

 
March 31,
2020
 
December 31,
2019
Other noncurrent assets:
 
 
 
Deferred compensation plan
$
21,327

 
$
22,268

Other
6,516

 
6,433

 
$
27,843

 
$
28,701


 
March 31,
2020
 
December 31,
2019
Accrued liabilities:
 
 
 
Accrued compensation
$
16,340

 
$
24,930

Insurance liabilities
8,563

 
9,108

Accrued taxes, other than income taxes
4,335

 
3,424

Accrued commissions
2,089

 
1,481

Other
11,900

 
9,897

 
$
43,227

 
$
48,840


Goodwill:
Well Site Services
 
Downhole Technologies
 
Offshore/
Manufactured Products
 
Total
 
Completion Services
 
Drilling Services
 
Subtotal
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

 

 

 

 
(493
)
 
(493
)
Balance as of March 31, 2020
$

 
$

 
$

 
$

 
$
75,757

 
$
75,757

________________
(1)
See Note 3, "Asset Impairments and Other Charges" for discussion of first quarter 2020 goodwill impairments.
Other Intangible Assets:
March 31, 2020
 
December 31, 2019
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Net Carrying Amount
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Net Carrying Amount
Customer relationships
$
168,260

 
$
47,056

 
$
121,204

 
$
168,278

 
$
44,296

 
$
123,982

Patents/Technology/Know-how
86,123

 
32,291

 
53,832

 
85,919

 
30,791

 
55,128

Noncompete agreements
17,087

 
12,291

 
4,796

 
17,125

 
11,061

 
6,064

Tradenames and other
53,708

 
9,582

 
44,126

 
53,708

 
8,791

 
44,917

 
$
325,178

 
$
101,220

 
$
223,958

 
$
325,030

 
$
94,939

 
$
230,091


For the three months ended March 31, 2020 and 2019, amortization expense was $6.3 million and $6.7 million, respectively.

12

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

5.
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 months ended March 31, 2020 and 2019 (in thousands, except per share amounts):
 
Three Months Ended
March 31,
 
2020
 
2019
Numerators:
 
 
 
Net loss
$
(405,041
)
 
$
(14,648
)
Less: Income attributable to unvested restricted stock awards

 

Numerator for basic net loss per share
(405,041
)
 
(14,648
)
Effect of dilutive securities:
 
 
 
Unvested restricted stock awards

 

Numerator for diluted net loss per share
$
(405,041
)
 
$
(14,648
)
 
 
 
 
Denominators:
 
 
 
Weighted average number of common shares outstanding
60,770

 
60,249

Less: Weighted average number of unvested restricted stock awards outstanding
(1,116
)
 
(991
)
Denominator for basic and diluted net loss per share
59,654

 
59,258

 
 
 
 
Net loss per share:
 
 
 
Basic
$
(6.79
)
 
$
(0.25
)
Diluted
(6.79
)
 
(0.25
)

The calculation of diluted net loss per share for the three months ended March 31, 2020 and 2019 excluded 629 thousand shares and 687 thousand shares, respectively, issuable pursuant to outstanding stock options, due to their antidilutive effect. Additionally, shares issuable upon conversion of the 1.50% convertible senior notes were not convertible and therefore excluded for the three months ended March 31, 2020 and 2019, due to their antidilutive effect.
6.
Long-term Debt
As of March 31, 2020 and December 31, 2019, long-term debt consisted of the following (in thousands):
 
March 31,
2020
 
December 31,
2019
Revolving credit facility(1)
$
70,471

 
$
50,534

1.50% convertible senior notes(2)
164,370

 
167,594

Promissory note
25,000

 
25,000

Other debt and finance lease obligations
5,031

 
5,041

Total debt
264,872

 
248,169

Less: Current portion
(25,643
)
 
(25,617
)
Total long-term debt
$
239,229

 
$
222,552

____________________
(1)
Presented net of $1.2 million and $1.4 million of unamortized debt issuance costs as of March 31, 2020 and December 31, 2019, respectively.
(2)
The outstanding principal amount of the 1.50% convertible senior notes was $186.6 million and $192.3 million as of March 31, 2020 and December 31, 2019, respectively.

13

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

Revolving Credit Facility
The Company's senior secured revolving credit facility, as amended (the "Revolving Credit Facility") is governed by a credit agreement with Wells Fargo Bank, N.A., as administrative agent for the lenders party thereto and collateral agent for the secured parties thereunder, and the lenders and other financial institutions from time to time party thereto, dated as of January 30, 2018, as amended and restated (the "Credit Agreement"), and matures on January 30, 2022. The Revolving Credit Facility provides for $350.0 million in lender commitments. Under the Revolving Credit Facility, $50.0 million is available for the issuance of letters of credit.
As of March 31, 2020, the Company had $71.7 million of borrowings and $19.1 million of outstanding letters of credit under the Revolving Credit Facility, leaving $107.6 million available to be drawn. The total amount available to be drawn under the Revolving Credit Facility was less than the total lender commitments due to limits imposed by maintenance covenants in the Credit Agreement. As of March 31, 2020, the Company was in compliance with its debt covenants under the Credit Agreement.
Amounts outstanding under the Revolving Credit Facility bear interest at LIBOR plus a margin of 1.75% to 3.00%, or at a base rate plus a margin of 0.75% to 2.00%, in each case based on a ratio of the Company's total net funded debt to consolidated EBITDA (as defined in the Credit Agreement). The Company must also pay a quarterly commitment fee of 0.25% to 0.50%, based on the Company's ratio of total net funded debt to consolidated EBITDA, on the unused commitments under the Credit Agreement.
The Credit Agreement contains customary financial covenants and restrictions. Specifically, the Company must maintain an interest coverage ratio, defined as the ratio of consolidated EBITDA to consolidated interest expense, of at least 3.0 to 1.0, a maximum senior secured leverage ratio, defined as the ratio of senior secured debt to consolidated EBITDA, of no greater than 2.25 to 1.0 and a total net leverage ratio, defined as the ratio of total net funded debt to consolidated EBITDA, of no greater than 3.75 to 1.0. The financial covenants give pro forma effect to acquired businesses and the annualization of EBITDA for acquired businesses.
The various components used in the calculation of these ratios are defined in the Credit Agreement. Consolidated EBITDA and consolidated interest expense, as defined, exclude non-cash goodwill and fixed asset impairment charges, losses on extinguishment of debt, debt discount amortization, stock-based compensation expense and other non-cash charges.
Borrowings under the Credit Agreement are secured by a pledge of substantially all of the Company's assets and the assets of its domestic subsidiaries. The Company's obligations under the Credit Agreement are guaranteed by its significant domestic subsidiaries. The Credit Agreement also contains negative covenants that limit the Company's ability to borrow additional funds, encumber assets, pay dividends, sell assets and enter into other significant transactions.
Under the Credit Agreement, the occurrence of specified change of control events involving the Company would constitute an event of default that would permit the banks to, among other things, accelerate the maturity of the facility and cause it to become immediately due and payable in full.
The Company is working with its bank group regarding an amendment to the Revolving Credit Facility. The amendment entails converting the Company's existing cash flow-based revolving credit facility into an asset-based revolving credit facility (the "Amended Facility"). The Company currently expects to complete the amendment process in the second quarter of 2020. The amendment process remains subject to completion of final documentation and credit approval by the bank group and, accordingly, the Company cannot be certain that it will be able to complete the amendment process.
If the Company is not successful in amending the Revolving Credit Facility, its borrowings would be governed by the existing Credit Agreement, which contains financial covenants and restrictions as further described above. Based on Company forecasts, the Company anticipates that it could be out of compliance with the total net leverage ratio covenant in the third quarter of 2020 as a result of projected declines in consolidated EBITDA resulting from current industry conditions caused by the global response to the COVID-19 pandemic and the resulting collapse in crude oil prices. However, the Company believes that it will have sufficient liquidity over the next twelve months to fund its liabilities as they become due.
If the Company does not complete the amendment process and subsequently is not in compliance with the total net leverage ratio under its Revolving Credit Facility, the Company believes that it will have sufficient cash on hand, together with cash flow from operations (after investments in capital expenditures), to repay the borrowings outstanding under the Revolving Credit Facility or that it could seek to obtain an amendment or waiver from its lenders in order to avoid a default.

14

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

1.50% Convertible Senior Notes
On January 30, 2018, the Company issued $200 million aggregate principal amount of its 1.50% convertible senior notes due 2023 (the "Notes") pursuant to an indenture, dated as of January 30, 2018 (the "Indenture"), between the Company and Wells Fargo Bank, National Association, as trustee.
During the first quarter of 2020, the Company repurchased $5.7 million in principal amount of the outstanding Notes for $4.7 million, which approximated the net carrying amount of the related liability. Since December 31, 2018, the Company has repurchased $13.5 million in principal amount of the outstanding notes for $11.5 million.
The initial carrying amount of the Notes recorded in the consolidated balance sheet was less than the $200 million in principal amount of the Notes, in accordance with applicable accounting principles, reflective of the estimated fair value of a similar debt instrument that does not have a conversion feature. The Company recorded the value of the conversion feature as a debt discount, which is amortized as interest expense over the term of the Notes, with a similar amount allocated to additional paid-in capital. As a result of this amortization, the interest expense the Company recognizes related to the Notes for accounting purposes is based on an effective interest rate of approximately 6%, which is greater than the cash interest payments the Company is obligated to pay on the Notes. Reported interest expense associated with the Notes for both the three months ended March 31, 2020 and 2019 was $2.5 million, while the related contractual cash interest expense totaled $0.7 million and $0.8 million, respectively.
The following table presents the carrying amount of the Notes in the consolidated balance sheets as of March 31, 2020 and December 31, 2019 (in thousands):
 
March 31,
2020
 
December 31,
2019
Principal amount of the liability component
$
186,550

 
$
192,250

Less: Unamortized discount
19,366

 
21,544

Less: Unamortized issuance costs
2,814

 
3,112

Net carrying amount of the liability component
$
164,370

 
$
167,594

 
 
 
 
Net carrying amount of the equity component
$
25,683

 
$
25,683


The Notes bear interest at a rate of 1.50% per year until maturity. Interest is payable semi-annually in arrears on February 15 and August 15 of each year. In addition, additional interest and special interest may accrue on the Notes under certain circumstances as described in the Indenture. The Notes 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 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 Indenture. The Company's intent is to repay the principal amount of the Notes in cash and the conversion feature in shares of the Company's common stock.
Noteholders may convert their Notes, at their option, only in the following circumstances: (1) if the last reported sale price per share of the Company's common stock exceeds 130% of the conversion price for each of at least 20 trading days during the 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter; (2) during the five consecutive business days immediately after any five consecutive trading day period (such five consecutive trading day period, the "measurement period") in which the trading price per $1,000 principal amount of the Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price per share of the Company's common stock on such trading day and the conversion rate on such trading day; (3) upon the occurrence of certain corporate events or distributions on the Company's common stock, as described in the Indenture; or (4) if the Company calls the Notes for redemption, or at any time from, and including, November 15, 2022 until the close of business on the second scheduled trading day immediately before the maturity date. The Company will settle conversions by paying or delivering, as applicable, cash, shares of common stock or a combination of cash and shares of common stock, at the Company's election, based on the applicable conversion rate(s). If the Company elects to deliver cash or a combination of cash and shares of common stock, then the consideration due upon conversion will be based on a defined observation period.
The Notes will be redeemable, in whole or in part, at the Company's option at any time, and from time to time, on or after February 15, 2021, at a cash redemption price equal to the principal amount of the Notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date, but only if the last reported sale price per share of common stock exceeds

15

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

130% of the conversion price on each of at least 20 trading days during the 30 consecutive trading days ending on, and including, the trading day immediately before the date the Company sends the related redemption notice.
If specified change in control events involving the Company as defined in the Indenture occur, then noteholders may require the Company to repurchase their Notes at a cash repurchase price equal to the principal amount of the Notes to be repurchased, plus accrued and unpaid interest. Additionally, the Indenture contains certain events of default, including certain defaults by the Company with respect to other indebtedness of at least $40.0 million. As of March 31, 2020, none of the conditions allowing holders of the Notes to convert, or requiring the Company to repurchase the Notes, had been met.
Promissory Note
In connection with the 2018 acquisition of GEODynamics, Inc. ("GEODynamics"), the Company issued a $25.0 million promissory note that bears interest at 2.50% per annum and was scheduled to mature on July 12, 2019. Payments due under the promissory note are subject to set off, in part or in full, against certain indemnification claims related to matters occurring prior to the Company's acquisition of GEODynamics. As more fully described in Note 13, "Commitments and Contingencies," the Company has provided notice to and asserted indemnification claims against the seller of GEODynamics. As a result, the maturity date of the note is extended until the resolution of these indemnity claims. The Company expects that the amount ultimately paid in respect of such note will be reduced as a result of these indemnification claims.
7.
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 Notes, on the accompanying consolidated balance sheets approximate their fair values. The estimated fair value of the Notes as of March 31, 2020 was $78.5 million based on quoted market prices (a Level 1 fair value measurement), which compares to the $186.6 million in principal amount of the Notes.
8.
Stockholders' Equity
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 quarter of 2020 (in thousands):