OIL STATES INTERNATIONAL, INC [OIS] Filings

10-Q 1 ois-20240630.htm 10-Q ois-20240630

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, 2024


☐			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 19, 2024, the number of shares of common stock outstanding was 63,787,977.

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 Income (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

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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,
	2024		2023		2024		2023
Revenues:
Products	$	108,579	$	92,630	$	202,908	$	192,470
Services	77,804		90,899		150,737		187,258
	186,383		183,529		353,645		379,728

Costs and expenses:
Product costs	82,503		72,659		157,640		151,336
Service costs	59,530		69,371		116,344		141,429
Cost of revenues (exclusive of depreciation and amortization expense presented below)	142,033		142,030		273,984		292,765
Selling, general and administrative expense	26,373		23,528		48,869		47,544
Depreciation and amortization expense	14,698		15,537		28,893		30,793
Impairment of goodwill	—		—		10,000		—
Other operating (income) expense, net	1,234		(835)		1,031		(518)
	184,338		180,260		362,777		370,584
Operating income (loss)	2,045		3,269		(9,132)		9,144



Interest expense, net	(2,061)		(2,059)		(4,162)		(4,450)
Other income, net	652		210		580		486
Income (loss) before income taxes	636		1,420		(12,714)		5,180
Income tax benefit (provision)	665		(862)		641		(2,464)
Net income (loss)	$	1,301	$	558	$	(12,073)	$	2,716

Net income (loss) per share:
Basic	$	0.02	$	0.01	$	(0.19)	$	0.04
Diluted	0.02		0.01		(0.19)		0.04

Weighted average number of common shares outstanding:
Basic	62,483		62,803		62,493		62,814
Diluted	62,704		63,174		62,493		63,161

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

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OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In Thousands)


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Net income (loss)	$	1,301	$	558	$	(12,073)	$	2,716

Other comprehensive income (loss):
Currency translation adjustments	(3,151)		3,270		(6,178)		7,419


Comprehensive income (loss)	$	(1,850)	$	3,828	$	(18,251)	$	10,135

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

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OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In Thousands, Except Share Amounts)


	June 30, 2024		December 31, 2023
	(Unaudited)
ASSETS

Current assets:
Cash and cash equivalents	$	25,188	$	47,111
Accounts receivable, net	203,694		203,211
Inventories, net	217,347		202,027
Prepaid expenses and other current assets	22,587		35,648
Total current assets	468,816		487,997

Property, plant, and equipment, net	270,878		280,389
Operating lease assets, net	22,825		21,970
Goodwill, net	69,789		79,867
Other intangible assets, net	144,505		153,010
Other noncurrent assets	24,365		23,253
Total assets	$	1,001,178	$	1,046,486

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:
Current portion of long-term debt	$	616	$	627
Accounts payable	62,322		67,546
Accrued liabilities	38,493		44,227
Current operating lease liabilities	6,711		6,880
Income taxes payable	1,184		1,233
Deferred revenue	34,404		36,757
Total current liabilities	143,730		157,270

Long-term debt	124,339		135,502
Long-term operating lease liabilities	18,864		18,346
Deferred income taxes	5,657		7,717
Other noncurrent liabilities	18,199		18,106
Total liabilities	310,789		336,941

Stockholders’ equity:
Common stock, $.01 par value, 200,000,000 shares authorized, 78,633,247 shares and 77,218,765 shares issued, respectively	786		772
Additional paid-in capital	1,133,282		1,129,240
Retained earnings	272,845		284,918
Accumulated other comprehensive loss	(76,162)		(69,984)
Treasury stock, at cost, 14,844,049 and 13,892,049 shares, respectively	(640,362)		(635,401)
Total stockholders’ equity	690,389		709,545
Total liabilities and stockholders’ equity	$	1,001,178	$	1,046,486

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

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OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In Thousands)


Three Months Ended June 30, 2024	Common Stock		Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Treasury Stock		Total Stockholders’ Equity
Balance, March 31, 2024	$	785	$	1,130,979	$	271,544	$	(73,011)	$	(637,979)	$	692,318
Net income	—		—		1,301		—		—		1,301
Currency translation adjustments (excluding intercompany advances)	—		—		—		(79)		—		(79)
Currency translation adjustments on intercompany advances	—		—		—		(3,072)		—		(3,072)
Stock-based compensation expense	1		2,303		—		—		—		2,304
Surrender of stock to settle taxes on stock awards	—		—		—		—		(9)		(9)
Stock repurchases	—		—		—		—		(2,374)		(2,374)
Balance, June 30, 2024	$	786	$	1,133,282	$	272,845	$	(76,162)	$	(640,362)	$	690,389


Six Months Ended June 30, 2024	Common Stock		Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Treasury Stock		Total Stockholders' Equity
Balance, December 31, 2023	$	772	$	1,129,240	$	284,918	$	(69,984)	$	(635,401)	$	709,545
Net loss	—		—		(12,073)		—		—		(12,073)
Currency translation adjustments (excluding intercompany advances)	—		—		—		(974)		—		(974)
Currency translation adjustments on intercompany advances	—		—		—		(5,204)		—		(5,204)
Stock-based compensation expense	14		4,042		—		—		—		4,056
Surrender of stock to settle taxes on stock awards	—		—		—		—		(2,587)		(2,587)
Stock repurchases	—		—		—		—		(2,374)		(2,374)
Balance, June 30, 2024	$	786	$	1,133,282	$	272,845	$	(76,162)	$	(640,362)	$	690,389

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

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OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In Thousands)


Three Months Ended June 30, 2023	Common Stock		Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Treasury Stock		Total Stockholders’ Equity
Balance, March 31, 2023	$	771	$	1,123,876	$	274,185	$	(74,792)	$	(628,522)	$	695,518
Net income	—		—		558		—		—		558
Currency translation adjustments (excluding intercompany advances)	—		—		—		2,709		—		2,709
Currency translation adjustments on intercompany advances	—		—		—		561		—		561
Stock-based compensation expense	1		1,771		—		—		—		1,772
Surrender of stock to settle taxes on stock awards	—		—		—		—		(12)		(12)
Stock repurchases	—		—		—		—		(3,001)		(3,001)
Balance, June 30, 2023	$	772	$	1,125,647	$	274,743	$	(71,522)	$	(631,535)	$	698,105


Six Months Ended June 30, 2023	Common Stock		Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Treasury Stock		Total Stockholders’ Equity
Balance, December 31, 2022	$	766	$	1,122,292	$	272,027	$	(78,941)	$	(626,586)	$	689,558
Net income	—		—		2,716		—		—		2,716
Currency translation adjustments (excluding intercompany advances)	—		—		—		6,203		—		6,203
Currency translation adjustments on intercompany advances	—		—		—		1,216		—		1,216
Stock-based compensation expense	6		3,355		—		—		—		3,361
Surrender of stock to settle taxes on stock awards	—		—		—		—		(1,948)		(1,948)
Stock repurchases	—		—		—		—		(3,001)		(3,001)
Balance, June 30, 2023	$	772	$	1,125,647	$	274,743	$	(71,522)	$	(631,535)	$	698,105

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

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OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands)


	Six Months Ended June 30,
	2024		2023
Cash flows from operating activities:
Net income (loss)	$	(12,073)	$	2,716
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization expense	28,893		30,793
Impairment of goodwill	10,000		—
Stock-based compensation expense	4,056		3,361
Amortization of deferred financing costs	841		892
Deferred income tax provision (benefit)	(2,299)		997
Gains on disposals of assets	(1,355)		(561)
Gains on extinguishment of 4.75% convertible senior notes	(515)		—
Other, net	(379)		(267)
Changes in operating assets and liabilities:
Accounts receivable	(2,335)		39,042
Inventories	(16,436)		(21,197)
Accounts payable and accrued liabilities	(9,504)		(25,924)
Deferred revenue	(2,353)		8,237
Other operating assets and liabilities, net	2,341		653
Net cash flows provided by (used in) operating activities	(1,118)		38,742

Cash flows from investing activities:
Capital expenditures	(15,881)		(17,338)
Proceeds from disposition of property and equipment	12,751		690
Other, net	(68)		(66)
Net cash flows used in investing activities	(3,198)		(16,714)

Cash flows from financing activities:
Revolving credit facility borrowings	22,619		35,592
Revolving credit facility repayments	(22,619)		(35,592)
Purchases of 4.75% convertible senior notes	(10,846)		—
Repayment of 1.50% convertible senior notes	—		(17,315)
Other debt and finance lease repayments	(318)		(226)
Payment of financing costs	(1,111)		(95)
Purchases of treasury stock	(2,374)		(3,001)
Shares added to treasury stock as a result of net share settlements due to vesting of stock awards	(2,587)		(1,948)
Net cash flows used in financing activities	(17,236)		(22,585)

Effect of exchange rate changes on cash and cash equivalents	(371)		959
Net change in cash and cash equivalents	(21,923)		402
Cash and cash equivalents, beginning of period	47,111		42,018
Cash and cash equivalents, end of period	$	25,188	$	42,420

Cash paid (received) for:
Interest	$	3,899	$	4,060
Income taxes, net	1,346		(1,475)

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

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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.

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.

In the first quarter of 2024, certain short-cycle, consumable product operations historically reported within the Offshore Manufactured Products segment (legacy frac plug and elastomer products) were integrated into the Downhole Technologies segment to better align with the underlying activity demand drivers and current segment management structure, as well as provide for additional operational synergies. Historical segment financial data and disaggregated revenue information as of and for the three and six months ended June 30, 2023, as presented in Note 10, “Segments and Related Information,” were conformed with the 2024 segment presentation.

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, 2023.

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OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

2. Goodwill Impairment and Other Charges and Credits

In 2023, the Company implemented initiatives to reduce future costs, which are continuing into 2024. These management actions included the consolidation, relocation and exit of certain manufacturing and service locations as well as the realignment of operations within two of the Company’s reportable segments. The Company has also incurred legal and other related costs to enforce certain patents related to its proprietary technologies. As a result of these actions, the Company recorded the following charges during the first quarter of 2024 (in thousands):


	Offshore Manufactured Products		Well Site Services		Downhole Technologies		Corporate		Pre-tax Total		Tax		After-tax Total
Impairment of goodwill	$	—	$	—	$	10,000	$	—	$	10,000	$	481	$	9,519
Facility consolidation and other charges	1,463		685		—		—		2,148		451		1,697
Patent defense costs	—		361		—		—		361		76		285

During the second quarter of 2024, the Company consolidated and exited additional locations, reduced its workforce in the United States and incurred additional costs to enforce certain patents. As a result of these events, actions and assessments, the Company recorded the following charges during the second quarter of 2024 (in thousands):


	Offshore Manufactured Products		Well Site Services		Downhole Technologies		Corporate		Pre-tax Total		Tax		After-tax Total
Facility consolidation and other charges	$	1,547	$	1,916	$	—	$	—	$	3,463	$	727	$	2,736
Patent defense costs	—		963		—		—		963		202		761
Gains on extinguishment of debt (see Note 4)	—		—		—		(515)		(515)		(108)		(407)

Goodwill

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.

Changes in the carrying amount of goodwill, by operating segment, for the six months ended June 30, 2024 were as follows (in thousands):


	Offshore Manufactured Products		Downhole Technologies		Total
Balance as of December 31, 2023	$	79,867	$	—	$	79,867
Goodwill associated with transferred operations	(10,000)		10,000		—
Impairment of goodwill	—		(10,000)		(10,000)
Foreign currency translation	(78)		—		(78)
Balance as of June 30, 2024	$	69,789	$	—	$	69,789

In connection with the first quarter 2024 realignment of the composition of two of its reportable segments discussed in Note 1, “Organization and Basis of Presentation,” goodwill of $10.0 million was reassigned from the Offshore Manufactured Products segment to the Downhole Technologies segment based on estimated relative fair values. The Company performed an interim quantitative assessment of goodwill recorded within the Offshore Manufactured Products segment as of February 29, 2024 (prior to realignment) which indicated that the fair value of the reporting unit exceeded its carrying value.

The Company also performed an interim quantitative assessment of goodwill transferred to the Downhole Technologies segment (subsequent to the realignment). This interim assessment indicated that the fair value of the reporting unit was less than its carrying amount and the Company concluded that goodwill reassigned to the Downhole Technologies business was fully

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OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

impaired. The Company therefore recognized a non-cash goodwill impairment charge totaling $10.0 million in the first quarter of 2024. This impairment charge did not impact the Company’s liquidity position, debt covenants or cash flows.

Management used a combination of valuation methodologies including the income approach and guideline public company comparables. The fair values of each of the Company’s reporting units were determined using significant unobservable inputs (Level 3 fair value measurements). The income 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 on its investment.

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.

3. Details of Selected Balance Sheet Accounts

Additional information regarding selected balance sheet accounts as of June 30, 2024 and December 31, 2023 is presented below (in thousands):


	June 30, 2024			December 31, 2023
Accounts receivable, net:
Trade	$	131,745		$	128,405
Unbilled revenue	26,462			27,756
Contract assets	43,671			46,746
Other	5,784			4,801
Total accounts receivable	207,662			207,708
Allowance for doubtful accounts	(3,968)			(4,497)
	$	203,694		$	203,211

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


	June 30, 2024		December 31, 2023
Deferred revenue (contract liabilities)	$	34,404	$	36,757

As of June 30, 2024, accounts receivable, net in the United States and the United Kingdom represented 68% and 13%, 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, 2024.

For the six months ended June 30, 2024, the $3.1 million net decrease in contract assets was primarily attributable to $34.9 million transferred to accounts receivable, which was partially offset by $31.8 million in revenue recognized during the period. Deferred revenue (contract liabilities) decreased by $2.4 million in the first six months of 2024, primarily reflecting the recognition of $11.1 million of revenue that was deferred at the beginning of the period, partially offset by $8.8 million in new customer billings which were not recognized as revenue during the period.

The following provides a summary of activity in the allowance for doubtful accounts for the six months ended June 30, 2024 and 2023 (in thousands):


	Six Months Ended June 30,
	2024		2023
Allowance for doubtful accounts – January 1	$	4,497	$	5,226
Provisions	135		14
Write-offs	(655)		(204)
Other	(9)		37
Allowance for doubtful accounts – June 30	$	3,968	$	5,073

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OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Continued)


	June 30, 2024		December 31, 2023
Inventories, net:
Finished goods and purchased products	$	106,253	$	103,599
Work in process	33,706		30,546
Raw materials	118,175		109,627
Total inventories	258,134		243,772
Allowance for excess or obsolete inventory	(40,787)		(41,745)
	$	217,347	$	202,027


			June 30, 2024			December 31, 2023
Property, plant and equipment, net:







Property, plant and equipment	$	755,207		$	754,143
Accumulated depreciation	(484,329)			(473,754)
							$	270,878	$	280,389

For the three months ended June 30, 2024 and 2023, depreciation expense was $10.4 million and $11.2 million, respectively. Depreciation expense was $20.3 million and $22.2 million, respectively, for the six months ended June 30, 2024 and 2023.


	June 30, 2024						December 31, 2023
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Other intangible assets:
Customer relationships	$	141,321	$	60,921	$	80,400	$	141,342	$	56,499	$	84,843
Patents/technology/know-how	70,168		37,130		33,038		70,113		34,541		35,572
Tradenames and other	52,503		21,436		31,067		52,505		19,910		32,595
	$	263,992	$	119,487	$	144,505	$	263,960	$	110,950	$	153,010

For the three months ended June 30, 2024 and 2023, amortization expense was $4.3 million and $4.3 million, respectively. Amortization expense was $8.5 million and $8.6 million for the six months ended June 30, 2024 and 2023, respectively.


	June 30, 2024		December 31, 2023
Other noncurrent assets:
Deferred compensation plan	$	17,499	$	17,255
Deferred financing costs	1,805		1,109
Deferred income taxes	2,439		2,211
Other	2,622		2,678
	$	24,365	$	23,253

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OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Continued)


	June 30, 2024		December 31, 2023
Accrued liabilities:
Accrued compensation	$	18,510	$	27,131
Accrued taxes, other than income taxes	3,518		2,076
Insurance liabilities	4,257		3,839
Accrued interest	1,559		1,690
Accrued commissions	3,390		3,060
Other	7,259		6,431
	$	38,493	$	44,227

4. Long-term Debt

As of June 30, 2024 and December 31, 2023, long-term debt consisted of the following (in thousands):


	June 30, 2024		December 31, 2023
Revolving credit facility(1)	$	—	$	—
2026 Notes(2)	122,102		133,037
Other debt and finance lease obligations	2,853		3,092
Total debt	124,955		136,129
Less: Current portion	(616)		(627)
Total long-term debt	$	124,339	$	135,502

____________________

(1)Unamortized deferred financing costs of $1.8 million and $1.1 million as of June 30, 2024 and December 31, 2023, respectively, are presented in other noncurrent assets.

(2)The outstanding principal amount of the 2026 Notes was $123.5 million and $135.0 million as of June 30, 2024 and December 31, 2023, respectively.

Revolving Credit Facility

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

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 (as amended, the “ABL Agreement”). In February 2024, the Company amended the ABL Facility to extend the maturity date to February 16, 2028, with a springing maturity 91 days prior to the maturity of any outstanding indebtedness with a principal amount in excess of $17.5 million.

The ABL Agreement provides funding based on a borrowing base calculation that includes eligible U.S. 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 Secured Overnight Financing Rate (subject to a floor rate of 0%) plus a margin of 2.75% to 3.25%, or at a base rate plus a margin of 1.75% to 2.25%, in each case based on average borrowing availability. Quarterly, the Company must also pay a commitment fee of 0.375% to 0.50% per annum, based on unused commitments under the ABL Agreement.

The ABL Agreement places restrictions on the Company’s ability to incur additional indebtedness, grant liens on assets, pay dividends or make distributions on equity interests, dispose of assets, make investments, repay other indebtedness (including the 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

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ratio of not less than 1.0 to 1.0 (i) in the event that availability under the ABL Agreement is less than the 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, 2024, the Company had no borrowings outstanding under the ABL Facility and $14.4 million of outstanding letters of credit. The total amount available to be drawn as of June 30, 2024 was $82.5 million, calculated based on the current borrowing base less outstanding borrowings, if any, and letters of credit. As of June 30, 2024, the Company was in compliance with its debt covenants under the ABL Agreement.

2026 Notes

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

The following table provides a summary of the Company's purchases of outstanding 2026 Notes during the three and six months ended June 30, 2024, with non-cash gains reported within other income, net (in thousands):


	Principal Amount		Carrying Value of Liability		Cash Paid		Non-cash Pre-Tax Gains Recognized
Three and Six Months Ended June 30, 2024	$	11,500	$	11,361	$	10,846	$	515

The outstanding 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 $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 (if any) in shares of the Company’s common stock. As of June 30, 2024, 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 Notes bore interest at a rate of 1.50% per year, and the outstanding principal amount of $17.3 million matured and was repaid in full on February 15, 2023.

5. 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 2026 Notes, on the accompanying consolidated balance sheets approximate their fair values. The estimated fair value of the 2026 Notes as of June 30, 2024 was $118.7 million based on quoted market prices (a Level 2 fair value measurement), which compares to the principal amount of $123.5 million.

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6. 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 2024 (in thousands):


															Outstanding




Shares of common stock outstanding – December 31, 2023															63,327
Restricted stock awards, net of forfeitures															1,414
Shares withheld for taxes on vesting of stock awards															(409)
Purchases of treasury stock															(543)
Shares of common stock outstanding – June 30, 2024															63,789

As of June 30, 2024 and December 31, 2023, the Company had 25,000,000 shares of preferred stock, $0.01 par value, authorized, with no shares issued or outstanding.

On February 16, 2023, the Company’s Board of Directors authorized $25.0 million for the repurchase of the Company’s common stock, par value $0.01 per share, through February 2025. Subject to applicable securities laws, such purchases will be at such times and in such amounts as the Company deems appropriate. During the three and six months ended June 30, 2024, the Company purchased 543 thousand shares of common stock under the program at a total cost of $2.4 million. The amount remaining under the Company’s share repurchase authorization as of June 30, 2024 was $15.8 million.

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 $70.0 million at December 31, 2023 to $76.2 million at June 30, 2024. For the three and six months ended June 30, 2024 and 2023, 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, 2024, the exchange rates for the British pound and the Brazilian real weakened by 1% and 12%, respectively, compared to the U.S. dollar, contributing to other comprehensive loss of $6.2 million. During the six months ended June 30, 2023, the exchange rates for the British pound and the Brazilian real strengthened by 5% and 8%, respectively, compared to the U.S. dollar, contributing to other comprehensive income of $7.4 million.

7. Income Taxes

Income tax benefit (provision) for the three and six months ended June 30, 2024 and 2023 was calculated using a discrete approach. This methodology was used because changes in the Company’s results of operations and non-deductible expenses can materially impact the estimated annual effective tax rate.

For the three months ended June 30, 2024, the Company’s income tax benefit was $0.7 million on pre-tax income of $0.6 million, which included favorable changes in valuation allowances recorded against deferred tax assets and certain non-deductible expenses. This compares to an income tax expense of $0.9 million on pre-tax income of $1.4 million, which included certain non-deductible expenses, discrete tax items and a favorable change in valuation allowances recorded against deferred tax assets, for the three months ended June 30, 2023.

For the six months ended June 30, 2024, the Company’s income tax benefit was $0.6 million on a pre-tax loss of $12.7 million, which included a $10.0 million goodwill impairment charge (approximately $7.7 million of which was non-deductible), other non-deductible expenses and favorable changes in valuation allowances recorded against deferred tax assets. This compares to an income tax expense of $2.5 million on pre-tax income of $5.2 million, which included certain non-deductible expenses, discrete tax items and a favorable change in valuation allowances recorded against deferred tax assets for the six months ended June 30, 2023.

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8. Net Income (Loss) Per Share

The table below provides a reconciliation of the numerators and denominators of basic and diluted net income (loss) per share for the three and six months ended June 30, 2024 and 2023 (in thousands, except per share amounts):


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Numerators:
Net income (loss)	$	1,301	$	558	$	(12,073)	$	2,716
Less: Income attributable to unvested restricted stock awards	(31)		(11)		—		(53)
Numerator for basic net income (loss) per share	1,270		547		(12,073)		2,663
Effect of dilutive securities:
Unvested restricted stock awards	—		—		—		—
Numerator for diluted net income (loss) per share	$	1,270	$	547	$	(12,073)	$	2,663

Denominators:
Weighted average number of common shares outstanding	64,025		64,061		63,954		64,064
Less: Weighted average number of unvested restricted stock awards outstanding	(1,542)		(1,258)		(1,461)		(1,250)
Denominator for basic net income (loss) per share	62,483		62,803		62,493		62,814
Effect of dilutive securities:
Performance share units	221		371		—		347
Denominator for diluted net income (loss) per share	62,704		63,174		62,493		63,161

Net income (loss) per share:
Basic	$	0.02	$	0.01	$	(0.19)	$	0.04
Diluted	0.02		0.01		(0.19)		0.04

The calculation of diluted earnings per share for the three and six months ended June 30, 2024 excluded 77 thousand shares and 99 thousand shares, respectively, issuable pursuant to outstanding stock options, due to their antidilutive effect. The calculation of diluted earnings per share for the three and six months ended June 30, 2023 excluded 163 thousand shares and 186 thousand shares, respectively, issuable pursuant to outstanding stock options, due to their antidilutive effect. Additionally, shares issuable upon conversion of the 2026 Notes were excluded due to, among other factors, the Company’s share price.

9. Long-Term Incentive Compensation

The following table presents a summary of activity for stock options, service-based restricted stock and stock unit awards, and performance-based stock unit awards for the six months ended June 30, 2024 (in thousands):


	Stock Options	Service-based Restricted Stock		Performance- and Service-based Stock Units
Outstanding – December 31, 2023	158	1,233		927
Granted	—	987		317
Vested and distributed	—	(650)		(444)
Forfeited	(81)	(17)		—
Outstanding – June 30, 2024	77	1,553		800
Weighted average grant date fair value (2024 awards)		$	5.88	$	5.77

The restricted stock program consists of a combination of service-based restricted stock and stock units, as well as performance-based stock units. Service-based restricted stock awards vest on a straight-line basis over a term of three years. Service-based stock unit awards (149 thousand outstanding as of June 30, 2024) vest over one year, with the underlying shares issued at a specified future date. Performance-based stock unit awards vest at the end of a three-year period, with the number of

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shares ultimately issued under the program dependent upon achievement of predefined specific performance objectives based on the Company’s cumulative EBITDA over a three-year period.

In the event the predefined targets are exceeded for any performance-based award, additional shares up to a maximum of 200% of the target award may be granted. Conversely, if actual performance falls below the predefined target, the number of shares vested is reduced. If the actual performance falls below the threshold performance level, no shares will vest.

The Company issued conditional long-term cash incentive awards (“Cash Awards”) of $1.5 million in the first quarters of 2024 and 2023. The performance measure for each of these Cash Awards is relative total stockholder return compared to a peer group of companies over a three-year period. The ultimate dollar amount to be awarded for each annual grant may range from zero to a maximum of $3.1 million, limited to their targeted award value ($1.5 million) if the Company’s total stockholder return were to be negative over the performance period. Obligations related to the Cash Awards are classified as liabilities and recognized over their respective vesting periods.

Stock-based compensation expense recognized during the three and six months ended June 30, 2024 totaled $2.3 million and $4.1 million, respectively. Stock-based compensation expense recognized during the three and six months ended June 30, 2023 totaled $1.8 million and $3.4 million, respectively. As of June 30, 2024, there was $11.2 million of pre-tax compensation costs related to service-based and performance-based stock awards, which will be recognized in future periods as vesting conditions are satisfied.

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10. Segments and Related Information

The Company operates through three operating segments: Offshore Manufactured Products, Well Site Services and Downhole Technologies. Financial information by operating segment as of and for the three and six months ended June 30, 2024 and 2023 is summarized in the following tables (in thousands).


	Revenues		Depreciation and amortization		Operating income (loss)		Capital expenditures		Total assets
Three Months Ended June 30, 2024
Offshore Manufactured Products(1)	$	101,556	$	4,247	$	14,357	$	1,552	$	502,582
Well Site Services(2)	46,421		6,047		(535)		3,918		177,098
Downhole Technologies	38,406		4,255		(1,141)		310		279,947
Corporate	—		149		(10,636)		9		41,551
Total	$	186,383	$	14,698	$	2,045	$	5,789	$	1,001,178

____________________

(1)Operating income included $1.5 million of facility consolidation charges.

(2)Operating income included $2.9 million in facility consolidation and other charges.


	Revenues		Depreciation and amortization		Operating income (loss)		Capital expenditures		Total assets
Three Months Ended June 30, 2023
Offshore Manufactured Products	$	78,647	$	4,075	$	8,838	$	4,587	$	495,983
Well Site Services	64,536		6,564		4,732		5,672		204,437
Downhole Technologies	40,346		4,747		(121)		246		292,047
Corporate	—		151		(10,180)		265		52,553
Total	$	183,529	$	15,537	$	3,269	$	10,770	$	1,045,020


	Revenues		Depreciation and amortization		Operating income (loss)		Capital expenditures		Total assets
Six Months Ended June 30, 2024
Offshore Manufactured Products(3)	$	188,413	$	7,940	$	24,960	$	8,773	$	502,582
Well Site Services(4)	93,713		12,126		(954)		6,332		177,098
Downhole Technologies(5)	71,519		8,525		(13,220)		756		279,947
Corporate	—		302		(19,918)		20		41,551
Total	$	353,645	$	28,893	$	(9,132)	$	15,881	$	1,001,178

____________________

(3)Operating income included $3.0 million of facility consolidation charges.

(4)Operating income included $3.9 million in facility consolidation and other charges.

(5)Operating loss included a $10.0 million non-cash goodwill impairment charge.


	Revenues		Depreciation and amortization		Operating income (loss)		Capital expenditures		Total assets
Six Months Ended June 30, 2023
Offshore Manufactured Products	$	159,152	$	8,150	$	16,536	$	4,946	$	495,983
Well Site Services	131,594		12,710		11,698		11,444		204,437
Downhole Technologies	88,982		9,615		1,752		671		292,047
Corporate	—		318		(20,842)		277		52,553
Total	$	379,728	$	30,793	$	9,144	$	17,338	$	1,045,020

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The following tables provide supplemental disaggregated revenue from contracts with customers by operating segment for the three and six months ended June 30, 2024 and 2023 (in thousands):


	Offshore Manufactured Products				Well Site Services				Downhole Technologies				Total
	2024		2023		2024		2023		2024		2023		2024		2023
Three Months Ended June 30
Project-driven:
Products	$	59,752	$	45,455	$	—	$	—	$	—	$	—	$	59,752	$	45,455
Services	31,024		24,846		—		—		—		—		31,024		24,846
Total project-driven	90,776		70,301		—		—		—		—		90,776		70,301
Military and other products	10,780		8,346		—		—		—		—		10,780		8,346
Short-cycle:
Products	—		—		—		—		38,047		38,829		38,047		38,829
Services	—		—		46,421		64,536		359		1,517		46,780		66,053
Total short-cycle	—		—		46,421		64,536		38,406		40,346		84,827		104,882
	$	101,556	$	78,647	$	46,421	$	64,536	$	38,406	$	40,346	$	186,383	$	183,529


	Offshore Manufactured Products				Well Site Services				Downhole Technologies				Total
	2024		2023		2024		2023		2024		2023		2024		2023
Six Months Ended June 30
Project-driven:
Products	$	112,889	$	94,072	$	—	$	—	$	—	$	—	$	112,889	$	94,072
Services	56,257		49,476		—		—		—		—		56,257		49,476
Total project-driven	169,146		143,548		—		—		—		—		169,146		143,548
Military and other products	19,267		15,604		—		—		—		—		19,267		15,604
Short-cycle:
Products	—		—		—		—		70,752		82,794		70,752		82,794
Services	—		—		93,713		131,594		767		6,188		94,480		137,782
Total short-cycle	—		—		93,713		131,594		71,519		88,982		165,232		220,576
	$	188,413	$	159,152	$	93,713	$	131,594