UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
FORM 10-Q
(Mark One)
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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For the quarterly period ended March 31, 2005 |
OR
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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For the transition period from to |
Commission file number
1-16337
OIL STATES INTERNATIONAL, INC.
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,
Houston, Texas
77002
(Address of principal executive offices)
(Zip Code)
(713) 652-0582
None
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.
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b – 2 of the Exchange Act).
The Registrant had 49,912,986 shares of common stock outstanding as of April 19, 2005.
OIL STATES INTERNATIONAL, INC.
INDEX
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Part I — FINANCIAL INFORMATION
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Item 1. Financial Statements:
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Condensed Consolidated Financial Statements
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| 2001 Equity Participation Plan | ||||||||
| Form of Executive Agreement | ||||||||
| Certification of CEO Pursuant to Rule 13a-14(a) | ||||||||
| Certification of CFO Pursuant to Rule 13a-14(a) | ||||||||
| Certification of CEO Pursuant to Rule 13a-14(b) | ||||||||
| Certification of CFO Pursuant to Rule 13a-14(b) | ||||||||
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OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
The accompanying notes are an integral part of
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OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
The accompanying notes are an integral part of
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OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
The accompanying notes are an integral part of these
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OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
1. ORGANIZATION AND BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements of the Company and its
wholly-owned subsidiaries 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 in financial statements prepared in accordance with U.S.
generally accepted accounting principles 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 presentation 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 year.
Preparation of financial statements in conformity with U.S. generally accepted accounting
principles requires management to make estimates and assumptions that affect the reported amounts
of assets and liabilities, the disclosed amounts of contingent assets and liabilities and the
reported amounts of revenues and expenses. If the underlying estimates and assumptions, upon which
the financial statements are based, change in future periods, actual amounts may differ from those
included in the accompanying unaudited consolidated condensed financial statements.
The Company’s shares outstanding include all shares issuable upon the exercise of exchangeable
shares of one of the Company’s Canadian subsidiaries.
The calculation of diluted earnings per share include the effect of the Company’s outstanding
stock options determined under the treasury stock method.
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 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.
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, 2004.
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2. DETAILS OF SELECTED BALANCE SHEET ACCOUNTS
Additional information regarding selected balance sheet accounts is presented below (in
thousands):
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Changes in the carrying amount of goodwill for the three month period ended March 31, 2005 are
as follows (in thousands):
3. SEGMENT AND RELATED INFORMATION
In accordance with SFAS No. 131, “Disclosures about Segments of an Enterprise and Related
Information,” the Company has identified the following reportable segments: Offshore Products,
Wellsite Services and Tubular Services. The Company’s reportable segments are strategic business
units that offer different products and services. They are managed separately because each business
requires different technology and marketing strategies. Most of the businesses were acquired as a
unit, and the management at the time of the acquisition was retained. Results of our Canadian well
site services business related to the provision of work force accommodations, catering and
logistics services are seasonal with significant activity occurring in the peak winter drilling
season.
Financial information by industry segment for each of the three month periods ended March 31,
2005 and 2004 is summarized in the following table (in thousands):
4. COMPREHENSIVE INCOME AND CHANGES IN COMMON STOCK OUTSTANDING:
Comprehensive income for the three months ended March 31, 2005 and 2004 was as follows (in
thousands):
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5. STOCK-BASED COMPENSATION
In December 2002, the FASB issued SFAS No. 148, “Accounting for Stock Based Compensation —
Transition and Disclosure.” The Company has adopted the disclosure requirements of SFAS No. 148 and
has elected to record employee compensation expense utilizing the intrinsic value method permitted
under Accounting Principles Board (APB) Opinion No. 25, “Accounting for Stock Issued to Employees.”
The Company accounts for its employee stock-based compensation plan under APB Opinion No. 25
and its related interpretations. Accordingly, any deferred compensation expense would be recorded
for stock options based on the excess of the market value of the common stock on the date the
options were granted over the aggregate exercise price of the options. This deferred compensation
would be amortized over the vesting period of each option. The Company is authorized to grant
common stock based awards covering 5,700,000 shares of common stock under the 2001 Equity
Participation Plan, as amended and restated (the “Stock Option Plan”), to employees, consultants
and directors with amounts, exercise prices and vesting schedules determined by the compensation
committee of the Company’s Board of Directors. An amendment to the plan, effective February 16,
2005, increased the number of shares in the plan by 2,000,000. This amendment is subject to
shareholder approval and will be voted upon at the Company’s May 18, 2005 Annual Shareholders
meeting. Since February 2001, all option grants have been priced at the closing price on the day
of grant, except a variable option award granted in 2002 for up to 100,000 shares based on various
performance criteria whose outcome was determined in 2003. This specific award ultimately totaled
67,000 option shares which were priced based on the 2002 award date price. In addition, all
options vest 25% per year and have a life ranging from six to ten years. When the exercise price of
options granted under the Stock Option Plan has been equal to or greater than the market price of
the Company’s shares of common stock on the date of grant, no compensation expense related to this
plan has been recorded. When the exercise price per share of the option award has been lower than
the current market price per share, as was the case in the one instance of the 2002 variable option
award, compensation expense was recognized for the intrinsic value of the award as required by APB
Opinion No. 25.
In February 2005, 32,900 shares of restricted stock were awarded to certain employees. The
fair market value of the awards will be charged to expense over the vesting period of the
restricted stock award. Had compensation expense for the Stock Option Plan been determined
consistent with SFAS No. 123 utilizing the fair value method, the Company’s net income and earnings
per share at March 31, 2005 and 2004, would have been as follows (in thousands, except per share
amounts):
6. INCOME TAXES
Our primary deferred tax asset, which totaled approximately $12.5 million at December 31,
2004, is related to $35.8 million in available federal net operating loss carryforwards, or NOLs,
as of that date. A valuation allowance of approximately $5.1 million was provided against the
deferred tax asset associated with our NOLs at December 31, 2004. The NOLs will expire in varying
amounts during the years 2008 through 2020 if they are not first used to offset taxable income
generated by the Company. The Company’s ability to utilize a significant portion of the NOLs is
currently limited under Section 382 of the Internal Revenue Code (“Code”) due to a change of
control that occurred during 1995. A successive change in control was triggered in 2003 pursuant
to Section 382 of the Code; however it did not significantly change the Company’s NOL utilization
expectations.
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The Company’s income tax provision for the three months ended March 31, 2005 totaled $14.8
million, or 36.9% of pretax income compared to $1.5 million, or 8.6% of pretax income, for the
three months ended March 31, 2004. Our effective tax rate was lower in the first quarter of 2004
as a result of the recognition of a $5.4 million income tax benefit related to the partial reversal
of the valuation allowance applied against NOLs which were recorded as of the prior year end.
Based upon the loss limitation provisions of Section 382 of the Code, we should be able to
utilize approximately $8 million of our NOLs to offset taxable income generated by the Company
during the tax year ended December 31, 2005.
7. COMMITMENTS AND CONTINGENCIES
We are a party to various pending or threatened claims, lawsuits and administrative
proceedings seeking damages or other remedies concerning our commercial operations, products,
employees and other matters, including occasional claims by individuals alleging exposure to
hazardous materials as a result of our products or operations. Some of these claims relate to
matters occurring prior to our acquisition of businesses, and some relate to businesses we have
sold. In certain cases, we are entitled to indemnification from the sellers of businesses and in
other cases, we have indemnified the buyers that purchased businesses from us. Although we can
give no assurance about the outcome of pending legal and administrative proceedings and the effect
such outcomes may have on us, we believe that any ultimate liability resulting from the outcome of
such proceedings, to the extent not otherwise provided for or covered by indemnity or insurance,
will not have a material adverse effect on our consolidated financial position, results of
operations or liquidity.
On February 18, 2005, the Company announced that it had conducted an internal investigation
prompted by the discovery of over billings totaling approximately $400,000 by one of its
subsidiaries (the “Subsidiary”) to a government owned oil company in South America. The over
billings were detected by the Company during routine financial review procedures, and appropriate
financial statement adjustments were included in its previously reported fourth quarter 2004
results. The Company and independent counsel retained by the Company’s audit committee conducted
separate investigations consisting of interviews and an examination of the facts and circumstances
in this matter. The Company has voluntarily reported the results of its investigation to the
Securities and Exchange Commission (the “SEC”) and will fully cooperate with any additional
requests for information received from the SEC.
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This quarterly report on
Form 10-Q
contains forward-looking statements within the meaning of
Section 27A of the Securities Exchange Act of 1933 and Section 21E of the Securities Exchange Act
of 1934. Actual results could differ materially from those projected in the forward-looking
statements as a result of a number of important factors. For a discussion of important factors
that could affect our results, please refer to “Item 1. Business” including the risk factors
discussed therein and the financial statement line item discussions set forth in “Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in
our
Form 10-K
Annual Report for the year ended December 31, 2004 filed with the Securities and
Exchange Commission on March 2, 2005 and Item 2., which follows. Except to the extent required by
law, we undertake no obligation to update publicly any forward-looking statements, even if new
information becomes available or other events occur in the future.
ITEM 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
You should read the following discussion and analysis together with our financial statements
and the notes to those statements included elsewhere in this Quarterly Report on Form 10-Q.
Critical Accounting Policies
In our selection of critical accounting policies, our objective is to properly reflect our
financial position and results of operations in each reporting period in a manner that will be
understood by those who utilize our financial statements. Often we must use our judgment about
uncertainties.
There are several critical accounting policies that we have put into practice that have an
important effect on our reported financial results. There have been no changes in these policies
since the filing of our Annual Report on Form 10-K for the year ended December 31, 2004.
We have contingent liabilities and future claims for which we have made estimates of the
amount of the eventual cost to liquidate these liabilities or claims. These liabilities and claims
sometimes involve threatened or actual litigation where damages have been quantified and we have
made an assessment of our exposure and recorded a provision in our accounts to cover an expected
loss. Other claims or liabilities have been estimated based on our experience in these matters and,
when appropriate, the advice of outside counsel or other outside experts. Upon the ultimate
resolution of these uncertainties, our future reported financial results will be impacted by the
difference between our estimates and the actual amounts paid to settle a liability. Examples of
areas where we have made important estimates of future liabilities include litigation, taxes,
warranty claims, contract claims and discontinued operations.
The determination of impairment on long-lived assets, including goodwill, is conducted when
indicators of impairment are present. If such indicators were present, the determination of the
amount of impairment would be based on our judgments as to the future operating cash flows to be
generated from these assets throughout their estimated useful lives. Our industry is highly
cyclical and our estimates of the period over which future cash flows will be generated, as well as
the predictability of these cash flows, can have a significant impact on the carrying value of
these assets and, in periods of prolonged down cycles, may result in impairment charges.
We recognize revenue and profit as work progresses on long-term, fixed price contracts using
the percentage-of-completion method, which relies on estimates of total expected contract revenue
and costs. We follow this method since reasonably dependable estimates of the revenue and costs
applicable to various stages of a contract can be made. Recognized revenues and profit are subject
to revisions as the contract progresses to completion. Revisions in profit estimates are charged to
income or expense in the period in which the facts and circumstances that give rise to the revision
become known. Provisions for estimated losses on uncompleted contracts are made in the period in
which losses are determined.
Our valuation allowances, especially related to potential bad debts in accounts receivable and
to obsolescence or market value declines of inventory, involve reviews of underlying details of
these assets, known trends in the marketplace and the application of historical factors that
provide us with a basis for recording these allowances. If market conditions are less favorable
than those projected by management, or if our historical experience is materially different from
future experience, additional allowances may be required. We record a valuation allowance
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to reduce our deferred tax assets to the amount that is more likely than not to be realized.
While we have considered future taxable income and ongoing prudent and feasible tax planning
strategies in assessing the need for the valuation allowance, in the event we were to determine
that we would be able to realize our deferred tax assets in the future in excess of our net
recorded amount, an adjustment to the deferred tax asset would increase income in the period such
determination was made. Likewise, should we determine that we would not likely be able to realize
all or part of our net deferred tax asset in the future, an adjustment to the deferred tax asset
would be charged to expense in the period such determination was made. See also “Note 6 – Income
Taxes” and “Tax Matters” herein.
The selection of the useful lives of many of our assets requires the judgments of our
operating personnel as to the length of these useful lives. Should our estimates be too long or
short, we might eventually report a disproportionate number of losses or gains upon disposition or
retirement of our long-lived assets. We believe our estimates of useful lives are appropriate.
Overview
We provide a broad range of products and services to the oil and gas industry through our
offshore products, well site services and tubular services business segments. Demand for our
products and services is cyclical and substantially dependent upon activity levels in the oil and
gas industry, particularly our customers’ willingness to spend capital on the exploration for and
development of oil and gas reserves. Demand for our products and services by our customers is
highly sensitive to current and expected oil and natural gas prices. Generally, our tubular
services and well site services segments respond more rapidly to shorter-term movements in oil and
natural gas prices than our offshore products segment. Our offshore products segment provides
highly engineered and technically designed products for offshore oil and gas development and
production systems and facilities. Sales of our offshore products and services depend upon the
development of offshore production systems, repairs and upgrades of existing drilling rigs and
construction of new drilling rigs. In this segment, we are particularly influenced by deepwater
drilling and production activities, which are driven largely by our customers’ outlook for
longer-term future oil prices. In our well site services business segment, we provide hydraulic
well control services, pressure control equipment and rental tools, drilling rigs and work force
accommodations, catering and logistics services. Demand for our well site services depends upon the
level of worldwide drilling and workover activity. We have also seen increased demand in our work
force accommodation business as a result of oil sands development activities in Northern Alberta,
Canada. Through our tubular services segment, we distribute a broad range of casing and tubing.
Sales of tubular products and services depend upon the overall level of drilling activity, the
types of wells being drilled and the level of oil country tubular goods (“OCTG”) pricing.
Historically, tubular services gross margins expand during periods of rising OCTG prices and
contract during periods of decreasing OCTG prices.
We have a diversified product and service offering which has exposure throughout the oil and
gas cycle. Demand for our tubular services and well site services is highly correlated to changes
in the rig count in the United States. The table below sets forth a summary of North American rig
activity, as measured by Baker Hughes Incorporated, as of and for the periods indicated.
The average North American rig count for the three months ended March 31, 2005 increased 153
rigs, or 9.3%, compared to the three months ended March 31, 2004. This overall increase in
activity, while tempered somewhat by relatively flat activity levels in the U.S. Gulf of Mexico and
Canada, did contribute to increased revenues in our well site services segment. Our well site
services results for the first quarter of 2005 also benefited from well site services segment
capital spending, which has totaled $57.9 million in the twelve months ended March 31, 2005, the
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acquisition of Elenburg Exploration Company on February 1, 2005 for $22 million, acquisitions
made in our rental tool business in the second and third quarters of 2004 and the impact of
activity levels and pricing gains in certain business lines. The Canadian rig count was flat
comparing the first quarter of 2004 and 2005; however, our operations benefited from increased
activity in support of oil sands development in the region. Our offshore products segment
reported a much improved first quarter of 2005 compared to the first quarter of 2004 as a result of
increased activity and greater fixed cost absorption. Our offshore products backlog totaled $99.8
million at March 31, 2005, $97.5 million at December 31, 2004 and $76.9 at March 31, 2004. We
believe that the offshore construction and development business is characterized by lengthy
projects and a long “lead-time” order cycle. While change in backlog levels from one quarter to
the next does not necessarily evidence a long-term trend, we believe activity levels in our
offshore products segment will increase in future quarters, given the growth in our backlog, when
compared to March 31, 2004.
On May 11, 2004, our tubular services segment purchased the OCTG distribution business of
Hunting Energy Services, L.P. (“Hunting”) for $47.2 million, including purchase price adjustments.
Under the terms of the transaction, we purchased Hunting’s U.S. tubular
inventory, assumed certain customer contracts and entered into supply and distribution
relationships with Hunting. Substantially all of the purchase price was assigned to the OCTG
inventory acquired.
Our tubular services segment shipped 82,000 tons of OCTG in the first quarter of 2005 compared
to 67,300 tons in the first quarter of 2004. Our tubular services segment benefited in the past
year from a 15.4% year over year increase in average U.S. land drilling activity, the acquisition
of the Hunting OCTG distribution business and a significant increase in OCTG prices. Tubular
services margins expanded since the first quarter of 2004 and have reached historically high levels
given the significant increase in OCTG prices coupled with strong demand.
During the first quarter of 2005, the results generated by our Canadian workforce
accommodations, catering and logistics operations benefited from strengthening of the Canadian
currency. The Canadian dollar vs. U.S. dollar conversion rate averaged $0.82 in the first quarter
of 2005 compared to $0.76 in the first quarter of 2004.
The Company’s income tax provision for the first quarter of 2005 totaled $14.8 million, or
36.9% of pretax income. Our effective tax rate increased in the first quarter of 2005 compared to
the first quarter of 2004 which reflected an effective tax rate of 8.6%, due to greater NOL
benefits recognized in 2004.
Management believes that fundamental oil and gas supply and demand factors will continue to
support a high level of drilling activity in North America over time which should continue to
positively impact the Company, particularly its well site services and tubular services businesses.
We believe that oil and gas producers have increased their view of longer term oil and gas prices
based on current supply and demand fundamentals, even though they are still at levels below current
prices. As a result, our customers could increase their spending on deepwater offshore exploration
and development which should benefit our offshore products segment. However, there can be no
assurance that these expectations will be realized.
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Results of Operations (in millions, except margin percentages)
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Within our well site services segment, we have four reportable business units as follows:
THREE MONTHS ENDED MARCH 31, 2005 COMPARED TO THREE MONTHS ENDED MARCH 31, 2004
Revenues
. Revenues increased $127.7 million, or 62.5%, to $331.9 million during the current
quarter compared to revenues of $204.2 million during the quarter ended March 31, 2004. Tubular
services revenues and tons shipped increased $71.6 million, or 108.2%, and 14,700 tons, or 21.8%,
respectively, in the three months ended March 31, 2005 compared to the three months ended March 31,
2004 due to the May 2004 Hunting OCTG distribution business acquisition, increased industry demand
and higher OCTG prices. Our average OCTG selling prices increased 71% from the first quarter of
2004 to the first quarter of 2005. Well site services revenues increased $31.5 million, or 32.8%,
and offshore products revenues increased $24.6 million, or 58.7%, during the same period. Well
site services revenues increased compared to the prior year due primarily to increased oil sands
development activity in Canada and drilling activity in the United States, favorable Canadian
dollar exchange rates, the impact of capital expenditures, which totaled $57.9 million for this
segment, made since the first quarter of 2004 and the acquisition of Elenburg Exploration Company
for $22 million, which closed on February 1, 2005. Offshore products revenues increased as a
result of higher activity supporting offshore production facility construction.
Gross Margin
. Our gross margins, which we calculate before a deduction for depreciation
expense, increased $28.4 million, or 66.2%, from $42.9 million in the quarter ended March 31, 2004
to $71.3 million in the quarter ended March 31, 2005. Our overall gross margin as a percent of
revenues increased from 21.0% in the first quarter of 2004 to 21.5% in the current quarter
primarily because of higher offshore products and tubular services gross margins percentages offset
by lower wellsite services gross margin percentages. Gross margin dollar contributions were higher
in every segment of our business in the first quarter of 2005 compared to the first quarter of
2004. Well site services gross margins increased $9.4 million, or 31.5%, to $39.2 million in the
quarter ended March 31, 2005 compared to the quarter ended March 31, 2004. Within our well site
services segment, shallow drilling and
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specialty rental tool businesses’ gross margins increased $2.6 million, or 81.3%, and $1.9
million, or 27.9%, respectively, during the quarter ended March 31, 2005 compared to the quarter
ended March 31, 2004 as a result of the Elenburg Exploration Company acquisition by our shallow
drilling business, new rigs added to the fleet in February and December of 2004 as well as higher
average dayrates received for our drilling rigs and contributions from rental tool acquisitions
completed in the past year. Also in well site services, our work force accommodations, catering
and logistics services and modular building construction services gross margins increased by $4.7
million, or 25.7%, in the three months ended March 31, 2005 compared to the three months ended
March 31, 2004 primarily due to increased oil sands development activity in Canada. Our hydraulic
workover gross margins increased by $0.2 million, or 13.3%, as a result of increased dayrates in
the Middle East. Our well site services gross margin percent decreased to 30.7% in the current
quarter compared to 31.0% in the first quarter of last year as a result of lower gross margins in
our Canadian accommodations, catering and logistics services and modular building construction
services businesses which were impacted by a greater mix of relatively low margin building
construction services compared to the prior year. This decrease was partially offset by a higher
land drilling gross margin percentage.
Offshore products gross margins increased $6.9 million, or 95.8%, from $7.2 million in the
three months ended March 31, 2004 to $14.1 million in the three months ended March 31, 2005 due to
increased activity and increased fixed cost absorption. These same factors were the primary reason
that offshore products gross margin percent increased from 17.2% of revenues in the first quarter
of 2004 to 21.2% in the first quarter of 2005.
Tubular services gross margins increased to $18.0 million, or 13.1% of tubular services
revenues, in the three months ended March 31, 2005 compared to $5.9 million, or 8.9% of tubular
services revenues, in the three months ended March 31, 2004 as a result of increased oil and gas
drilling activity which increased demand for our tubular products and services and an increase in
OCTG prices during the quarter.
Selling, General and Administrative Expenses
. Selling, general and administrative expenses
(SG&A) increased $4.4 million, or 29.8% in the first quarter of 2005 compared to the same period in
2004. During the three months ended March 31, 2005, SG&A totaled $19.1 million, or 5.7% of
revenues, compared to SG&A of $14.7 million, or 7.2% of revenues, for the three months ended March
31, 2004. Increased SG&A expense associated with acquisitions completed since the first quarter of
2004, higher ad valorem taxes for OCTG inventory and higher professional fees associated with
Sarbanes-Oxley compliance were the primary factors causing increased SG&A in 2005 compared to 2004.
Depreciation and Amortization
. Depreciation and amortization expense increased $1.7 million
in the first quarter 2005 compared to the first quarter 2004 due primarily to acquisitions of
businesses and capital expenditures made in the past year.
Operating Income
. Our operating income represents revenues less (i) cost of sales, (ii)
selling, general and administrative expenses, (iii) depreciation and amortization expense, and (iv)
other operating (income) expense. Our operating income increased $23.1 million, or 120.9%, to
$42.2 million for the three months ended March 31, 2005 from $19.1 million for the quarter ended
March 31, 2004. Well site services operating income increased $7.1 million during the period.
Offshore products operating income increased $6.1 million and tubular services operating income
increased $11.3 million. These increases were partially offset by higher corporate costs of $1.4
million.
Interest Expense
. Interest expense increased $0.7 million, or 40.5%, for the quarter ended
March 31, 2005 compared to the quarter ended March 31, 2004. Increased interest expense
attributable to higher debt levels resulting from acquisitions completed since the first quarter of
2004 in addition to capital expenditures combined with higher interest rates resulting in increased
interest expense compared to the prior period.
Income Tax Expense
. Income tax expense totaled $14.8 million, or 36.9% of pretax income,
during the quarter ended March 31, 2005 compared to $1.5 million, or 8.6% of pretax income, during
the quarter ended March 31, 2004. See “Management’s Discussion and Analysis of Financial Condition
and Results of Operations – Tax Matters” discussion following.
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Liquidity and Capital Resources
Our primary liquidity needs are to fund capital expenditures, such as expanding and upgrading
our manufacturing facilities and equipment, increasing and replacing our drilling rig, rental tool
and workover assets, and our accommodation units, funding new product development and funding
general working capital needs. In addition, capital is needed to fund strategic business
acquisitions. Our primary sources of funds have been cash flow from operations and proceeds from
borrowings under our bank facilities.
Cash totaling $6.1 million was used by operations during the three months ended March 31, 2005
compared to cash totaling $5.1 million provided by operations in the three months ended March 31,
2004. During the first quarter of 2005, $45.6 million was used to fund working capital.
Significantly increased receivables in our Canadian operations due to seasonal activity levels and
increased activity in the oil sands region contributed to a net usage of cash for the first quarter
of 2005. In addition, tubular services inventory increased during the quarter primarily due to
increases in the price paid for OCTG. Cash provided by operations in the first quarter of 2004 was
generated by our net income plus depreciation and amortization which was partially offset by higher
working capital invested in our Canadian remote accommodations and catering operations.
Cash was used in investing activities during the three months ended March 31, 2005 and 2004 in
the amount of $39.3 million and $41.6 million, respectively. Capital expenditures totaled $17.1
million and $8.9 million during the three months ended March 31, 2005 and 2004, respectively.
Capital expenditures in both years consisted principally of purchases of assets for our well site
services businesses and for consolidation of our offshore products manufacturing capacity. During
the first quarter of 2005, the Company purchased Elenburg Exploration Company, Inc. (“Elenburg”)
for $22 million, including $21.3 million of cash financed utilizing the existing bank credit
facility. Elenburg provides shallow drilling services in the Rocky Mountain area utilizing its
seven drilling rigs. We currently expect to spend a total of approximately $59.0 million for
capital expenditures during 2005 for maintenance and upgrade of our equipment and facilities and
also to expand our product and service offerings. We expect to fund these capital expenditures with
internally generated funds and proceeds from borrowings under our revolving credit facilities.
Net cash of $47.5 million was provided by financing activities during the three months ended
March 31, 2005, primarily as a result of revolving credit borrowings which were utilized for
capital expenditures, acquisitions and to fund seasonal working capital needs. The Company’s Board
of Directors authorized the repurchase of shares of the Company’s common stock, par value $.01 per
share, during the first quarter of 2005. A total of up to $50 million was authorized to repurchase
shares over a two year period. Through March 31, 2005, there have been no purchases of the
Company’s stock under this program.
Our primary bank credit facility (the “Credit Agreement”) provides for $325 million of
revolving credit. The Credit Agreement, which matures in January 2010, contains customary
financial covenants and restrictions, including restrictions on our ability to declare and pay
dividends. Borrowings under the Credit Agreement are secured by a pledge of substantially all of
our assets and the assets of our subsidiaries, and our obligations under the Credit Agreement are
guaranteed by our significant subsidiaries. Borrowings under the Credit Agreement accrue interest
at a rate equal to either LIBOR or another benchmark interest rate (at our election) plus an
applicable margin based on our leverage ratio (as defined in the Credit Agreement). We must pay a
quarterly commitment fee, based on the Company’s leverage ratio, on the unused commitments under
the Credit Agreement. During the first quarter of 2005, our applicable margin over LIBOR ranged
from 1% to 2% and it was 1% as of March 31, 2005.
As of March 31, 2005, we had $217.8 million outstanding under the Credit Agreement and an
additional $7.8 million of outstanding letters of credit, leaving $99.4 million available to be
drawn under the facility. In addition, we have other floating rate bank credit facilities in the
U.S. and the U.K. that provide for an aggregate borrowing capacity of $8.8 million. We had no
borrowings outstanding under these facilities as of March 31, 2005. Our total debt represented
28.2% of our total capitalization at March 31, 2005.
17
We believe that cash from operations and available borrowings under our credit facilities will
be sufficient to meet our liquidity needs for the foreseeable future. If our plans or assumptions
change or are inaccurate, or we make further acquisitions, we may need to raise additional capital.
However, there is no assurance that we will be able to raise additional funds or be able to raise
such funds on favorable terms.
Tax Matters
Our primary deferred tax asset, which totaled approximately $12.5 million at December 31,
2004, is related to $35.8 million in available federal net operating loss carryforwards, or NOLs,
as of that date. A valuation allowance of approximately $5.1 million was provided against the
deferred tax asset associated with our NOLs at December 31, 2004. The NOLs will expire in varying
amounts during the years 2008 through 2020 if they are not first used to offset taxable income
generated by the Company. The Company’s ability to utilize a significant portion of the NOLs is
currently limited under Section 382 of the Internal Revenue Code due to a change of control that
occurred during 1995. A successive change in control was triggered in 2003 pursuant to Section
382; however it did not significantly change the Company’s NOL utilization expectations.
The Company’s income tax provision for the three months ended March 31, 2005 totaled $14.8
million, or 36.9% of pretax income, compared to $1.5 million, or 8.6% of pretax income, for the
three months ended March 31, 2004. Our effective tax rate was lower in the first quarter of 2004
as a result of the recognition of a $5.4 million income tax benefit related to the partial reversal
of the valuation allowance applied against NOLs which were recorded as of the prior year end.
We currently estimate that our effective tax rate for the full year 2005 will approximate 35%
to 38%. Our actual effective tax rate could differ materially from this estimate, which is subject
to a number of uncertainties, including future taxable income projections, the amount of income
attributable to domestic versus foreign sources, the amount of capital expenditures and any changes
in applicable tax laws and regulations. Based upon the loss limitation provisions of Section 382,
we should be able to utilize approximately $8 million of our NOLs to offset taxable income
generated by the Company during the tax year ended December 31, 2005.
Recent Accounting Pronouncements
In the fourth quarter of 2004, the FASB issued Statement No. 123 (revised 2004), or SFAS No.
123R, “Share-Based Payment,” which replaces Statement No. 123 “Accounting for Stock-Based
Compensation,” and supersedes APB Opinion No. 25, “Accounting for Stock Issued to Employees.” SFAS
No. 123R eliminates the alternative to use APB Opinion 25’s intrinsic value method of accounting
that was provided in Statement No. 123 as originally issued. After a phase-in period for Statement
No. 123R, pro forma disclosure will no longer be allowed. In the first quarter of 2005 the
Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin No. 107 which provided
further clarification on the implementation of SFAS No. 123R.
Alternative phase-in methods are allowed under Statement No. 123R, which was to be effective
as of the beginning of the first interim or annual reporting period that begins after June 15,
2005. The SEC announced in the second quarter of 2005 that it would extend this phase-in period
and, therefore, the Company’s effective date for implementation of SFAS 123R is January 1, 2006.
The Company expects it will use the modified-prospective phase-in method that requires entities to
recognize compensation costs in financial statements issued after the date of adoption for all
share based payments granted, modified or settled after the date of adoption as well as for any
awards that were granted prior to the adoption date for which the required service has not yet been
performed.
ITEM 3.
Quantitative and Qualitative Disclosures about Market Risk
Interest Rate Risk.
We have long-term debt and revolving lines of credit subject to the risk
of loss associated with movements in interest rates. As of March 31, 2005, we had floating rate
obligations totaling approximately $225.6 million for amounts borrowed under our revolving credit
facilities. These floating-rate obligations expose us to the risk of increased interest expense in
the event of increases in short-term interest rates. If the floating interest rate were to increase
by 1% from March 31, 2005 levels, our consolidated interest expense would increase by a total of
approximately $2.3 million annually.
18
Foreign Currency Exchange Rate Risk.
Our operations are conducted in various countries around
the world in a number of different currencies. As such, our earnings are subject to movements in
foreign currency exchange rates when transactions are denominated in currencies other than the U.S.
dollar, which is our functional currency or the functional currency of our subsidiaries, which is
not necessarily the U.S. dollar. In order to mitigate the effects of exchange rate risks, we
generally pay a portion of our expenses in local currencies and a substantial portion of our
contracts provide for collections from customers in U.S. dollars. We have hedged U.S. dollar
balances and cash flows totaling $4.8 million in our U.K. subsidiary in the second through
third
quarters of 2005. Results of operations have not been materially affected by foreign currency
hedging activity.
ITEM 4.
Controls and Procedures
As of the end of the period covered by this Quarterly Report on Form 10-Q, we carried out an
evaluation, under the supervision and with the participation of our management, including our Chief
Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of
our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act
of 1934). Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer
concluded that our disclosure controls and procedures were effective as of March 31, 2005 in
ensuring that material information was accumulated and communicated to management, and made known
to our Chief Executive Officer and Chief Financial Officer, on a timely basis to allow disclosure
as required in this Quarterly Report on Form 10-Q. During the three months ended March 31, 2005,
there were no changes in our internal control over financial reporting (as defined in Rule
13a-15(f) of the Securities Exchange Act of 1934) or in other factors which have materially
affected our internal control over financial reporting, or are reasonably likely to materially
affect our internal control over financial reporting.
19
(In Thousands, Except Per Share Amounts)
THREE MONTHS ENDED MARCH 31,
2005
2004
$
331,946
$
204,190
260,653
161,297
19,065
14,691
10,228
8,572
(214
)
532
289,732
185,092
42,214
19,098
131
81
(2,314
)
(1,647
)
46
145
40,077
17,677
(14,788
)
(1,520
)
$
25,289
$
16,157
$
0.51
$
0.33
$
0.50
$
0.32
49,669
49,129
50,560
49,754
these financial statements.
Table of Contents
(In Thousands)
MARCH 31,
DECEMBER 31,
2005
2004
(UNAUDITED)
$
21,188
$
19,740
214,766
198,297
230,712
209,825
6,019
7,322
472,685
435,184
242,686
227,343
272,014
258,046
13,780
13,039
$
1,001,165
$
933,612
$
143,695
$
159,265
10,226
5,821
576
228
27,798
25,420
438
2,296
182,733
193,030
219,323
173,887
32,299
28,871
7,708
7,800
442,063
403,588
499
496
343,691
338,906
193,469
168,180
21,760
22,759
(317
)
(317
)
559,102
530,024
$
1,001,165
$
933,612
these financial statements.
Table of Contents
(In Thousands)
THREE MONTHS ENDED MARCH 31,
2005
2004
$
25,289
$
16,157
10,228
8,572
1,752
(5,108
)
2,194
534
(45,595
)
(15,016
)
(6,132
)
5,139
(22,606
)
(32,916
)
(17,147
)
(8,896
)
501
218
(80
)
7
(39,332
)
(41,587
)
45,148
38,030
(113
)
(208
)
3,165
471
(707
)
(164
)
47,493
38,129
(439
)
(144
)
1,590
1,537
(142
)
(190
)
19,740
19,318
$
21,188
$
20,665
$
750
$
—
consolidated financial statements.
Table of Contents
FINANCIAL STATEMENTS
Table of Contents
MARCH 31,
DECEMBER 31,
2005
2004
$
185,410
$
177,784
29,982
21,431
1,219
605
(1,845
)
(1,523
)
$
214,766
$
198,297
MARCH 31,
DECEMBER 31,
2005
2004
$
141,989
$
123,555
30,235
29,255
39,328
39,936
24,333
21,978
235,885
214,724
(5,173
)
(4,899
)
$
230,712
$
209,825
ESTIMATED
MARCH 31,
DECEMBER 31,
USEFUL LIFE
2005
2004
$
5,790
$
5,909
5-40 years
44,553
43,482
2-20 years
250,385
236,266
3-15 years
61,455
56,572
1-10 years
15,102
14,238
2-5 years
12,629
11,036
13,295
12,841
403,209
380,344
(160,523
)
(153,001
)
$
242,686
$
227,343
MARCH 31,
DECEMBER 31,
2005
2004
$
107,471
$
124,193
10,723
13,589
4,838
4,261
3,975
3,310
4,059
4,200
12,629
9,712
$
143,695
$
159,265
Table of Contents
OFFSHORE
WELLSITE
TUBULAR
PRODUCTS
SERVICES
SERVICES
TOTAL
$
75,582
$
130,860
$
51,604
$
258,046
—
14,561
—
14,561
(92
)
(114
)
(387
)
(593
)
$
75,490
$
145,307
$
51,217
$
272,014
OFFSHORE
WELL SITE
TUBULAR
CORPORATE AND
PRODUCTS
SERVICES
SERVICES
ELIMINATIONS
TOTAL
$
66,491
$
127,596
$
137,859
$
—
$
331,946
2,433
7,601
172
22
10,228
5,268
24,603
15,145
(2,802
)
42,214
3,240
13,709
72
126
17,147
287,131
471,831
233,803
8,400
1,001,165
$
41,888
$
96,140
$
66,162
$
—
$
204,190
2,248
6,151
157
16
8,572
(798
)
17,520
3,767
(1,391
)
19,098
1,071
7,724
101
—
8,896
256,435
371,888
136,285
11,258
775,866
THREE MONTHS
ENDED MARCH 31,
2005
2004
$
25,289
$
16,157
(1,021
)
276
23
—
$
24,291
$
16,433
49,577,786
334,325
49,912,111
Table of Contents
THREE MONTHS ENDED
MARCH 31,
2005
2004
$
25,289
$
16,157
(600
)
(788
)
$
24,689
$
15,369
$
0.51
$
0.33
0.50
0.32
$
0.50
$
0.31
0.49
0.31
Table of Contents
Table of Contents
Table of Contents
Average Rig Count for
Three Months Ended March 31,
Year Ended December 31,
2005
2004
2004
2003
2002
2001
2000
1,178
1,021
1,093
924
718
1,003
778
101
98
97
108
113
153
140
1,279
1,119
1,190
1,032
831
1,156
918
521
528
369
372
266
341
345
1,800
1,647
1,559
1,404
1,097
1,497
1,263
(1)
Canadian rig counts typically increase during the peak winter drilling season.
Table of Contents
Table of Contents
THREE MONTHS ENDED
MARCH 31,
2005
2004
$
127.6
$
96.1
66.5
41.9
137.8
66.2
$
331.9
$
204.2
$
39.2
$
29.8
14.1
7.2
18.0
5.9
$
71.3
$
42.9
30.7
%
31.0
%
21.2
%
17.2
%
13.1
%
8.9
%
21.5
%
21.0
%
$
24.6
$
17.5
5.3
(0.8
)
15.1
3.8
(2.8
)
(1.4
)
$
42.2
$
19.1
Table of Contents
Three Months Ended March 31,
2005
2004
$
83.2
$
62.5
19.1
15.4
16.8
10.6
8.5
7.6
$
127.6
$
96.1
$
23.0
$
18.3
8.7
6.8
5.8
3.2
1.7
1.5
$
39.2
$
29.8
27.6
%
29.3
%
45.5
%
44.2
%
34.5
%
30.2
%
20.0
%
19.7
%
30.7
%
31.0
%
$
17.1
$
13.2
3.3
2.3
4.2
2.2
0.0
(0.2
)
$
24.6
$
17.5
Table of Contents
Table of Contents
Table of Contents
Table of Contents
Table of Contents
PART II — OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We are a party to various pending or threatened claims, lawsuits and administrative
proceedings seeking damages or other remedies concerning our commercial operations, products,
employees and other matters, including warranty and product liability claims and occasional claims
by individuals alleging exposure to hazardous materials as a result of our products or operations.
Some of these claims relate to matters occurring prior to our acquisition of businesses, and some
relate to businesses we have sold. In certain cases, we are entitled to indemnification from the
sellers of businesses and in other cases, we have indemnified the buyers that purchased businesses
from us. Although we can give no assurance about the outcome of pending legal and administrative
proceedings and the effect such outcomes may have on us, we believe that any ultimate liability
resulting from the outcome of such proceedings, to the extent not otherwise provided for or covered
by indemnity or insurance, will not have a material adverse effect on our consolidated financial
position, results of operations or liquidity.
On February 18, 2005, the Company announced that it had conducted an internal investigation
prompted by the discovery of over billings totaling approximately $400,000 by one of its
subsidiaries (the “Subsidiary”) to a government owned oil company in South America. The over
billings were detected by the Company during routine financial review procedures, and appropriate
financial statement adjustments were included in its previously reported fourth quarter 2004
results. The Company and independent counsel retained by the Company’s audit committee conducted
separate investigations consisting of interviews and an examination of the facts and circumstances
in this matter. The Company has voluntarily reported the results of its investigation to the
Securities and Exchange Commission (the “SEC”) and will fully cooperate with any requests for
additional information received from the SEC.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
20
21
22
Exhibit No.
Description
—
Amended and Restated Certificate of Incorporation
(incorporated by reference to Exhibit 3.1 to the
Company’s Annual Report on Form 10-K for the year
ended December 31, 2000, as filed with the
Commission on March 30, 2001).
—
Amended and Restated Bylaws (incorporated by
reference to Exhibit 3.2 to the Company’s Annual
Report on Form 10-K for the year ended December
31, 2000, as filed with the Commission on March
30, 2001).
—
Certificate of Designations of Special Preferred
Voting Stock of Oil States International, Inc.
(incorporated by reference to Exhibit 3.3 to the
Company’s Annual Report on Form 10-K for the year
ended December 31, 2000, as filed with the
Commission on March 30, 2001).
Table of Contents
Exhibit No.
Description
—
Form of common stock certificate (incorporated by reference to Exhibit 4.1 to the
Company’s Registration Statement on Form S-1 (File No. 333-43400)).
—
Amended and Restated Registration Rights Agreement (incorporated by reference to
Exhibit 4.2 to the Company’s Annual Report on Form 10-K for the year ended December
31, 2000, as filed with the Commission on March 30, 2001).
—
First Amendment to the Amended and Restated Registration Rights Agreement dated May
17, 2002 (incorporated by reference to Exhibit 4.3 to the Company’s Annual Report
on Form 10-K for the year ended December 31, 2002, as filed with the Commission on
March 13, 2003).
—
Combination Agreement dated as of July 31, 2000 by and among Oil States
International, Inc., HWC Energy Services, Inc., Merger Sub-HWC, Inc., Sooner Inc.,
Merger Sub-Sooner, Inc. and PTI Group Inc. (incorporated by reference to Exhibit
10.1 to the Company’s Registration Statement on Form S-1 (File No. 333-43400)).
—
Plan of Arrangement of PTI Group Inc. (incorporated by reference to Exhibit 10.2 to
the Company’s Annual Report on Form 10-K for the year ended December 31, 2000, as
filed with the Commission on March 30, 2001).
—
Support Agreement between Oil States International, Inc. and PTI Holdco
(incorporated by reference to Exhibit 10.3 to the Company’s Annual Report on Form
10-K for the year ended December 31, 2000, as filed with the Commission on March
30, 2001).
—
Voting and Exchange Trust Agreement by and among Oil States International, Inc.,
PTI Holdco and Montreal Trust Company of Canada (incorporated by reference to
Exhibit 10.4 to the Company’s Annual Report on Form 10-K for the year ended
December 31, 2000, as filed with the Commission on March 30, 2001).
—
2001 Equity Participation Plan, as amended and restated effective February 16, 2005.
—
Deferred Compensation Plan effective November 1, 2003. (incorporated by reference
to Exhibit 10.6 to the Company’s Annual Report on Form 10-K for the year ended
December 31, 2003, as filed with the Commission on March 5, 2004).
—
Annual Incentive Compensation Plan (incorporated by reference to Exhibit 10.7 to
the Company’s Annual Report on Form 10-K for the year ended December 31, 2000, as
filed with the Commission on March 30, 2001).
—
Executive Agreement between Oil States International, Inc. and Douglas E. Swanson
(incorporated by reference to Exhibit 10.8 to the Company’s Annual Report on Form
10-K for the year ended December 31, 2000, as filed with the Commission on March
30, 2001).
—
Executive Agreement between Oil States International, Inc. and Cindy B. Taylor
(incorporated by Reference to Exhibit 10.9 to the Company’s Annual Report on Form
10-K for the year ended December 31, 2000, as filed with the Commission on March
30, 2001).
—
Form of Executive Agreement between Oil States International, Inc. and Named
Executive Officer (Mr. Hughes) (incorporated by reference to Exhibit 10.10 of the
Company’s Registration Statement on Form S-1 (File No. 333-43400)).
—
Form of Change of Control Severance Plan for Selected Members of Management
(incorporated by reference to Exhibit 10.11 of the Company’s Registration Statement
on Form S-1 (File No. 333-43400)).
Table of Contents
Exhibit No.
Description
—
Credit Agreement, dated as
of October 30, 2003, among
Oil States International,
Inc., the Lenders named
therein and Wells Fargo
Bank Texas, National
Association, as
Administrative Agent and
U.S. Collateral Agent; and
Bank of Nova Scotia, as
Canadian Administrative
Agent and Canadian
Collateral Agent; Hibernia
National Bank and Royal
Bank of Canada, as
Co-Syndication Agents and
Bank One, NA and Credit
Lyonnais New York Branch,
as Co-Documentation Agents
(incorporated by reference
to Exhibit 10.12 to the
Company’s Quarterly Report
on Form 10Q for the three
months ended September 30,
2003, as filed with the
Commission on November 11,
2003.)
—
Incremental Assumption
Agreement, dated as of May
10, 2004, among Oil States
International, Inc., Wells
Fargo, National Association
and each of the other
lenders listed as an
Increasing Lender
(incorporated by reference
to Exhibit 10.12A to the
Company’s Quarterly Report
on Form 10-Q for the three
months ended June 30, 2004,
as filed with the
Commission on August 4,
2004).
—
Amendment No. 1, dated as
of January 31, 2005, to the
Credit Agreement among Oil
States International, Inc.,
the lenders named therein
and Wells Fargo Bank,
Texas, National
Association, as
Administrative Agent and
U.S. Collateral Agent; and
Bank of Nova Scotia, as
Canadian Administrative
Agent and Canadian
Collateral Agent; Hibernia
National Bank and Royal
Bank of Canada, as
Co-Syndication Agents and
Bank One, NA and Credit
Lyonnais New York Branch,
as Co-Documentation Agents (incorporated by reference to
Exhibit 10.12B to the Company’s Annual Report on Form 10-K for the year ended
December 31, 2004, as filed with the Commission on March 2, 2005).
—
Restricted Stock Agreement,
dated February 8, 2001,
between Oil States
International, Inc. and
Douglas E. Swanson
(incorporated by reference
to Exhibit 10.13A to the
Company’s Quarterly Report
on Form 10-Q for the three
months ended March 31,
2001, as filed with the
Commission on May 15,
2001).
—
Restricted Stock Agreement,
dated February 22, 2001,
between Oil States
International, Inc. and
Douglas E. Swanson
(incorporated by reference
to Exhibit 10.13B to the
Company’s Quarterly Report
on Form 10-Q for the three
months ended March 31,
2002, as filed with the
Commission on May 15,
2002).
—
Form of Indemnification
Agreement (incorporated by
reference to Exhibit 10.14
to the Company’s Quarterly
Report on Form 10-Q for the
quarter ended September 30,
2004, as filed with the
Commission on November 5,
2004).
—
Form of Executive Agreement
between Oil States
International, Inc. and
named Executive Officer
(Mr. Slator) (incorporated
by reference to Exhibit
10.16 to the Company’s
Annual Report on Form 10-K
for the year ended December
31, 2001, as filed with the
Commission on March 1,
2002).
—
Douglas E. Swanson
contingent option award
dated as of February 11,
2002 (incorporated by
reference to Exhibit 10.17
to the Company’s Quarterly
Report on Form 10-Q for the
three months ended
September 30, 2002 as filed
with the Commission on
November 13, 2002).
—
Form of Executive Agreement
between Oil States
International, Inc. and
named executive officer
(Mr. Trahan) (incorporated
by reference to Exhibit
10.16 to the Company’s
Quarterly Report on Form
10-Q for the three months
ended June 30, 2002, as
filed with the Commission
on August 13, 2002).
—
Form of Director Stock
Option Agreement under the
Company’s 2001 Equity
Participation Plan
(incorporated by reference
to Exhibit 10.18 to the
Company’s Annual Report of
Form 10-K for the year
ended December 31, 2004, as
filed with the Commission
on March 2, 2005).
—
Form of Employee Non
Qualified Stock Option
Agreement under the
Company’s 2001 Equity
Participation Plan
(incorporated by reference
to Exhibit 10.19 to the
Company’s Annual Report of
Form 10-K for the year
ended December 31, 2004, as
filed with the Commission
on March 2, 2005).
—
Form of Restricted
Stock Agreement under the
Company’s 2001 Equity
Participation Plan
(incorporated by reference
to Exhibit 10.20 to the
Company’s Annual Report of
Form 10-K for the year
ended December 31, 2004, as
filed with the Commission
on March 2, 2005).
Table of Contents
| Exhibit No. | Description | |||
|
10.21**
|
— | Non-Employee Director Compensation Summary (incorporated by reference to Exhibit 10.21 to the Company’s Annual Report of Form 10-K for the year ended December 31, 2004, as filed with the Commission on March 2, 2005). | ||
|
|
||||
|
10.22**,*
|
— | Form of Executive Agreement between Oil States International, Inc. and named executive officer (Mr. Cragg). | ||
|
|
||||
|
31.1*
|
— | Certification of Chief Executive Officer of Oil States International, Inc. pursuant to Rules 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934. | ||
|
|
||||
|
31.2*
|
— | Certification of Chief Financial Officer of Oil States International, Inc. pursuant to Rules 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934. | ||
|
|
||||
|
32.1***
|
— | Certification of Chief Executive Officer of Oil States International, Inc. pursuant to Rules 13a-14(b) or 15d-14(b) under the Securities Exchange Act of 1934. | ||
|
|
||||
|
32.2***
|
— | Certification of Chief Financial Officer of Oil States International, Inc. pursuant to Rules 13a-14(b) or 15d-14(b) under the Securities Exchange Act of 1934. |
| * | Filed herewith | |
| ** | Management contracts or compensatory plans or arrangements | |
| *** | Furnished herewith. |
(a) REPORTS ON FORM 8-K.
| (1) | Form 8-K filed March 2, 2005 – Item 8. Other Events – Announcement of a stock repurchase program for up to $50 million of the Company’s common stock. | |||
| (2) | Form 8-K filed February 18, 2005 – Item 8. Other Events – Report on results of internal investigation concerning an overbilling of approximately $400,000. | |||
| (3) | Form 8-K filed February 9, 2005 – Item 2. Results of Operations and Financial Condition (Quarter and year ended December 31, 2004 Earnings Press Release) | |||
| (4) | Form 8-K filed February 4, 2005 – Item 8. Other Events – Acquisition of Elenburg Acquisition Company, Inc. for $22 million. | |||
23
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
OIL STATES INTERNATIONAL, INC.
24
Date: April 29, 2005
By
/s/ CINDY B. TAYLOR
Cindy B. Taylor
Senior Vice President, Chief Financial Officer and
Treasurer (Principal Financial Officer)
Date: April 29, 2005
By
/s/ ROBERT W. HAMPTON
Robert W. Hampton
Vice President -- Finance and Accounting and
Secretary (Principal Accounting Officer)
Table of Contents
Exhibit Index
(a) REPORTS ON FORM 8-K.
Exhibit No.
Description
—
Amended and Restated Certificate of Incorporation
(incorporated by reference to Exhibit 3.1 to the
Company’s Annual Report on Form 10-K for the year
ended December 31, 2000, as filed with the
Commission on March 30, 2001).
—
Amended and Restated Bylaws (incorporated by
reference to Exhibit 3.2 to the Company’s Annual
Report on Form 10-K for the year ended December
31, 2000, as filed with the Commission on March
30, 2001).
—
Certificate of Designations of Special Preferred
Voting Stock of Oil States International, Inc.
(incorporated by reference to Exhibit 3.3 to the
Company’s Annual Report on Form 10-K for the year
ended December 31, 2000, as filed with the
Commission on March 30, 2001).
Table of Contents
Exhibit No.
Description
—
Form of common stock certificate (incorporated by reference to Exhibit 4.1 to the
Company’s Registration Statement on Form S-1 (File No. 333-43400)).
—
Amended and Restated Registration Rights Agreement (incorporated by reference to
Exhibit 4.2 to the Company’s Annual Report on Form 10-K for the year ended December
31, 2000, as filed with the Commission on March 30, 2001).
—
First Amendment to the Amended and Restated Registration Rights Agreement dated May
17, 2002 (incorporated by reference to Exhibit 4.3 to the Company’s Annual Report
on Form 10-K for the year ended December 31, 2002, as filed with the Commission on
March 13, 2003).
—
Combination Agreement dated as of July 31, 2000 by and among Oil States
International, Inc., HWC Energy Services, Inc., Merger Sub-HWC, Inc., Sooner Inc.,
Merger Sub-Sooner, Inc. and PTI Group Inc. (incorporated by reference to Exhibit
10.1 to the Company’s Registration Statement on Form S-1 (File No. 333-43400)).
—
Plan of Arrangement of PTI Group Inc. (incorporated by reference to Exhibit 10.2 to
the Company’s Annual Report on Form 10-K for the year ended December 31, 2000, as
filed with the Commission on March 30, 2001).
—
Support Agreement between Oil States International, Inc. and PTI Holdco
(incorporated by reference to Exhibit 10.3 to the Company’s Annual Report on Form
10-K for the year ended December 31, 2000, as filed with the Commission on March
30, 2001).
—
Voting and Exchange Trust Agreement by and among Oil States International, Inc.,
PTI Holdco and Montreal Trust Company of Canada (incorporated by reference to
Exhibit 10.4 to the Company’s Annual Report on Form 10-K for the year ended
December 31, 2000, as filed with the Commission on March 30, 2001).
—
2001 Equity Participation Plan, as amended and restated effective February 16, 2005.
—
Deferred Compensation Plan effective November 1, 2003. (incorporated by reference
to Exhibit 10.6 to the Company’s Annual Report on Form 10-K for the year ended
December 31, 2003, as filed with the Commission on March 5, 2004).
—
Annual Incentive Compensation Plan (incorporated by reference to Exhibit 10.7 to
the Company’s Annual Report on Form 10-K for the year ended December 31, 2000, as
filed with the Commission on March 30, 2001).
—
Executive Agreement between Oil States International, Inc. and Douglas E. Swanson
(incorporated by reference to Exhibit 10.8 to the Company’s Annual Report on Form
10-K for the year ended December 31, 2000, as filed with the Commission on March
30, 2001).
—
Executive Agreement between Oil States International, Inc. and Cindy B. Taylor
(incorporated by Reference to Exhibit 10.9 to the Company’s Annual Report on Form
10-K for the year ended December 31, 2000, as filed with the Commission on March
30, 2001).
—
Form of Executive Agreement between Oil States International, Inc. and Named
Executive Officer (Mr. Hughes) (incorporated by reference to Exhibit 10.10 of the
Company’s Registration Statement on Form S-1 (File No. 333-43400)).
—
Form of Change of Control Severance Plan for Selected Members of Management
(incorporated by reference to Exhibit 10.11 of the Company’s Registration Statement
on Form S-1 (File No. 333-43400)).
Table of Contents
Exhibit No.
Description
—
Credit Agreement, dated as
of October 30, 2003, among
Oil States International,
Inc., the Lenders named
therein and Wells Fargo
Bank Texas, National
Association, as
Administrative Agent and
U.S. Collateral Agent; and
Bank of Nova Scotia, as
Canadian Administrative
Agent and Canadian
Collateral Agent; Hibernia
National Bank and Royal
Bank of Canada, as
Co-Syndication Agents and
Bank One, NA and Credit
Lyonnais New York Branch,
as Co-Documentation Agents
(incorporated by reference
to Exhibit 10.12 to the
Company’s Quarterly Report
on Form 10Q for the three
months ended September 30,
2003, as filed with the
Commission on November 11,
2003.)
—
Incremental Assumption
Agreement, dated as of May
10, 2004, among Oil States
International, Inc., Wells
Fargo, National Association
and each of the other
lenders listed as an
Increasing Lender
(incorporated by reference
to Exhibit 10.12A to the
Company’s Quarterly Report
on Form 10-Q for the three
months ended June 30, 2004,
as filed with the
Commission on August 4,
2004).
—
Amendment No. 1, dated as
of January 31, 2005, to the
Credit Agreement among Oil
States International, Inc.,
the lenders named therein
and Wells Fargo Bank,
Texas, National
Association, as
Administrative Agent and
U.S. Collateral Agent; and
Bank of Nova Scotia, as
Canadian Administrative
Agent and Canadian
Collateral Agent; Hibernia
National Bank and Royal
Bank of Canada, as
Co-Syndication Agents and
Bank One, NA and Credit
Lyonnais New York Branch,
as Co-Documentation Agents
—
Restricted Stock Agreement,
dated February 8, 2001,
between Oil States
International, Inc. and
Douglas E. Swanson
(incorporated by reference
to Exhibit 10.13A to the
Company’s Quarterly Report
on Form 10-Q for the three
months ended March 31,
2001, as filed with the
Commission on May 15,
2001).
—
Restricted Stock Agreement,
dated February 22, 2001,
between Oil States
International, Inc. and
Douglas E. Swanson
(incorporated by reference
to Exhibit 10.13B to the
Company’s Quarterly Report
on Form 10-Q for the three
months ended March 31,
2002, as filed with the
Commission on May 15,
2002).
—
Form of Indemnification
Agreement (incorporated by
reference to Exhibit 10.14
to the Company’s Quarterly
Report on Form 10-Q for the
quarter ended September 30,
2004, as filed with the
Commission on November 5,
2004).
—
Form of Executive Agreement
between Oil States
International, Inc. and
named Executive Officer
(Mr. Slator) (incorporated
by reference to Exhibit
10.16 to the Company’s
Annual Report on Form 10-K
for the year ended December
31, 2001, as filed with the
Commission on March 1,
2002).
—
Douglas E. Swanson
contingent option award
dated as of February 11,
2002 (incorporated by
reference to Exhibit 10.17
to the Company’s Quarterly
Report on Form 10-Q for the
three months ended
September 30, 2002 as filed
with the Commission on
November 13, 2002).
—
Form of Executive Agreement
between Oil States
International, Inc. and
named executive officer
(Mr. Trahan) (incorporated
by reference to Exhibit
10.16 to the Company’s
Quarterly Report on Form
10-Q for the three months
ended June 30, 2002, as
filed with the Commission
on August 13, 2002).
—
Form of Director Stock
Option Agreement under the
Company’s 2001 Equity
Participation Plan
(incorporated by reference
to Exhibit 10.18 to the
Company’s Annual Report of
Form 10-K for the year
ended December 31, 2004, as
filed with the Commission
on March 2, 2005).
—
Form of Employee Non
Qualified Stock Option
Agreement under the
Company’s 2001 Equity
Participation Plan
(incorporated by reference
to Exhibit 10.19 to the
Company’s Annual Report of
Form 10-K for the year
ended December 31, 2004, as
filed with the Commission
on March 2, 2005).
—
Form of Restricted
Stock Agreement under the
Company’s 2001 Equity
Participation Plan
(incorporated by reference
to Exhibit 10.20 to the
Company’s Annual Report of
Form 10-K for the year
ended December 31, 2004, as
filed with the Commission
on March 2, 2005).
Table of Contents
Exhibit No.
Description
—
Non-Employee Director
Compensation Summary
(incorporated by reference
to Exhibit 10.21 to the
Company’s Annual Report of
Form 10-K for the year
ended December 31, 2004, as
filed with the Commission
on March 2, 2005).
—
Form of Executive
Agreement between Oil
States International, Inc.
and named executive officer
(Mr. Cragg).
—
Certification of Chief
Executive Officer of Oil
States International, Inc.
pursuant to Rules 13a-14(a)
or 15d-14(a) under the
Securities Exchange Act of
1934.
—
Certification of Chief
Financial Officer of Oil
States International, Inc.
pursuant to Rules 13a-14(a)
or 15d-14(a) under the
Securities Exchange Act of
1934.
—
Certification of Chief
Executive Officer of Oil
States International, Inc.
pursuant to Rules 13a-14(b)
or 15d-14(b) under the
Securities Exchange Act of
1934.
—
Certification of Chief
Financial Officer of Oil
States International, Inc.
pursuant to Rules 13a-14(b)
or 15d-14(b) under the
Securities Exchange Act of
1934.
*
Filed herewith
**
Management contracts or compensatory plans or arrangements
***
Furnished herewith.
(1)
Form 8-K filed March 2, 2005 — Item 8. Other Events — Announcement of a stock
repurchase program for up to $50 million of the Company’s common stock.
(2)
Form 8-K filed February 18, 2005 — Item 8. Other Events — Report on results of
internal investigation concerning an overbilling of $439,000.
(3)
Form 8-K filed February 9, 2005 — Item 2. Results of Operations and Financial
Condition (Quarter and year ended December 31, 2004 Earnings Press Release)
(4)
Form 8-K filed February 4, 2005 — Item 8. Other Events — Acquisition of Elenburg
Acquisition Company, Inc. for $22 million.
| (1) To provide an additional incentive for Directors, Employees and consultants to further the growth, development and financial success of the Company by personally benefiting through the ownership of Company stock and/or rights which recognize such growth, development and financial success. | |
| (2) To enable the Company to obtain and retain the services of Directors, Employees and consultants considered essential to the long range success of the Company by offering them an opportunity to own stock in the Company and/or rights which will reflect the growth, development and financial success of the Company. |
| (a) any “person” (as such term is used in Section 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), (other than a trustee or other fiduciary holding securities under an employee benefit plan of the Company or any affiliate, SCF III, L.P., SCF IV, L.P., or any affiliate of SCF-III, L.P. or SCF-IV, L.P. or any corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company), acquires “beneficial ownership” (within the meaning of Rule 13d-3 under the Exchange Act) of securities of the Company representing 35% or more of the combined voting power of the Company’s then outstanding securities; provided, however, that if the Company engages in a merger or consolidation in which the Company or surviving entity in such merger or consolidation becomes a subsidiary of another entity, then references to the Company’s then outstanding securities shall be deemed to refer to the outstanding securities of such parent entity; | |
| (b) a change in the composition of the Board, as a result of which fewer than a majority of the directors are Incumbent Directors. “Incumbent Directors” shall mean directors who either (i) are directors of the Company as of the Effective Date, or (ii) are elected, or nominated for election, to the Board with the affirmative votes of at least two-thirds of the Incumbent Directors at the time of such election or nomination, but Incumbent Director shall not include an individual whose election or nomination occurs as a result of either (1) an actual or threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or (2) an actual or threatened solicitation of proxies or consents by or on behalf of a person other than the Board; | |
| (c) the consummation of a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity (or if the surviving entity is or shall become a subsidiary of another entity, then such parent entity)) more than 50% of the combined voting power of the voting securities of the Company (or such surviving entity or parent entity, as the case may be) outstanding immediately after such merger or consolidation; | |
| (d) the stockholders of the Company approve a plan of complete liquidation of the Company; or | |
| (e) the sale or disposition (other than a pledge or similar encumbrance) by the Company of all or substantially all of the assets of the Company other than to a subsidiary or subsidiaries of the Company. |
| (i) Select from among the Employees, Directors or consultants (including Employees, Directors or consultants who have previously received Options or other awards under this Plan) such of them as in its opinion should be granted Options; | |
| (ii) Subject to the Award Limit, determine the number of shares to be subject to such Options granted to the selected Employees, Directors or consultants; | |
| (iii) Determine whether such Options are to be Incentive Stock Options or Non-Qualified Stock Options; and | |
| (iv) Determine the terms and conditions of such Options, consistent with this Plan. |
| (a) A written notice complying with the applicable rules established by the Committee stating that the Option, or a portion thereof, is exercised. The notice shall be signed by the Optionee or other person then entitled to exercise the Option or such portion; | |
| (b) Such representations and documents as the Committee, in its absolute discretion, deems necessary or advisable to effect compliance with all applicable provisions of the Securities Act of 1933, as amended, and any other federal or state securities laws or regulations. The Committee or Board may, in its absolute discretion, also take whatever additional actions it deems appropriate to effect such compliance including, without limitation, placing legends on share certificates and issuing stop-transfer notices to agents and registrars; | |
| (c) In the event that the Option shall be exercised pursuant to Section 10.1 by any person or persons other than the Optionee, appropriate proof of the right of such person or persons to exercise the Option; and | |
| (d) Full cash payment to the Secretary of the Company for the shares with respect to which the Option, or portion thereof, is exercised. However, the Committee may in its discretion or provide in the grant agreement (i) that payment may be made, in whole or in part, through the delivery of shares of Common Stock owned by the Optionee, duly endorsed for transfer to the Company, with a Fair Market Value on the date of delivery not in excess of the aggregate exercise price of the Option or exercised portion thereof and subject to such other limitations as the Committee may impose thereon, (ii) allow payment, in whole or in part, through the surrender of shares of Common Stock then issuable upon exercise of the Option having a Fair Market Value on the date of Option exercise equal to the aggregate exercise price of the Option or exercised portion thereof, (iii) allow payment, in whole or in part, through the delivery of property of any kind which constitutes good and valuable consideration; (iv) allow payment, in whole or in part, through the delivery of a full recourse promissory note bearing interest (at no less than such rate as shall then preclude the imputation of interest under the Code) and payable upon such terms as may be prescribed by the Committee, (v) allow payment through a cashless-broker procedure approved by the Company, or (vi) allow payment through any combination of the consideration provided above. In the case of a promissory note, the Committee may also prescribe the form of such note and the security to be given for such note. The Option may not be exercised, however, by delivery of a promissory note or by a loan from the Company when or where such loan or other extension of credit is prohibited by law. |
| (a) The admission of such shares to listing on all stock exchanges on which such class of stock is then listed; |
| (b) The completion of any registration or other qualification of such shares under any state or federal law, or under the rulings or regulations of the Securities and Exchange Commission or any other governmental regulatory body which the Committee shall, in its absolute discretion, deem necessary or advisable; | |
| (c) The obtaining of any approval or other clearance from any state or federal governmental agency which the Committee shall, in its absolute discretion, determine to be necessary or advisable; | |
| (d) The lapse of such reasonable period of time following the exercise of the Option as the Committee may establish from time to time for reasons of administrative convenience; and | |
| (e) The receipt by the Company of full payment for such shares, including payment of any applicable withholding tax. |
| (i) Select from among the Employees or consultants (including Employees or consultants who have previously received other awards under this Plan) such of them as in its opinion should be awarded Restricted Stock; and | |
| (ii) Determine the terms and conditions applicable to such Restricted Stock, consistent with this Plan, which may include the achievement of Performance Objectives. |
| (a) The expiration of ten years from the date the Plan is adopted by the Board; or | |
| (b) The expiration of ten years from the date the Plan is approved by the Company’s stockholders under Section 10.4. |
| (i) the number and kind of shares of Common Stock (or other securities or property) with respect to which Options, Performance Awards, Dividend Equivalents or Stock Payments may be granted under the Plan, or which may be granted as Restricted Stock or Deferred Stock (including, but not limited to, adjustments of the limitations in Section 2.1 on the maximum number and kind of shares which may be issued and adjustments of the Award Limit), | |
| (ii) the number and kind of shares of Common Stock (or other securities or property) subject to outstanding Options, Performance Awards, Dividend Equivalents, or Stock Payments, and in the number and kind of shares of outstanding Restricted Stock or Deferred Stock, and | |
| (iii) the grant or exercise price with respect to any Option, Performance Award, Dividend Equivalent or Stock Payment. |
| (i) In its discretion, and on such terms and conditions as it deems appropriate, the Committee may provide, either automatically or upon the Optionee’s request, for either the purchase of any such Option, |
| Performance Award, Dividend Equivalent, or Stock Payment, or any Restricted Stock or Deferred Stock for an amount of cash equal to the amount that could have been attained upon the exercise of such option, right or award or realization of the Optionee’s rights had such option, right or award been currently exercisable or payable or the replacement of such option, right or award with other rights or property selected by the Committee in its sole discretion; | |
| (ii) In its sole and absolute discretion, the Committee may provide, either by the terms of such Option, Performance Award, Dividend Equivalent, or Stock Payment, or Restricted Stock or Deferred Stock or by action taken prior to the occurrence of such transaction or event that it cannot be exercised after such event; | |
| (iii) In its sole and absolute discretion, and on such terms and conditions as it deems appropriate, the Committee may provide, either by the terms of such Option, Performance Award, Dividend Equivalent, or Stock Payment, or Restricted Stock or Deferred Stock or by action taken prior to the occurrence of such transaction or event, that, for a specified period of time prior to such transaction or event, such option, right or award shall be exercisable as to all shares covered thereby, notwithstanding anything to the contrary in (1) Section 4.4 or (2) the provisions of such Option, Performance Award, Dividend Equivalent, or Stock Payment, or Restricted Stock or Deferred Stock; | |
| (iv) In its discretion, and on such terms and conditions as it deems appropriate, the Committee may provide, either by the terms of such Option, Performance Award, Dividend Equivalent, or Stock Payment, or Restricted Stock or Deferred Stock or by action taken prior to the occurrence of such transaction or event, that upon such event, such option, right or award be assumed by the successor corporation, or a parent or subsidiary thereof, or shall be substituted for by similar options, rights or awards covering the stock of the successor corporation, or a parent or subsidiary thereof, with appropriate adjustments as to the number and kind of shares and prices; | |
| (v) In its discretion, and on such terms and conditions as it deems appropriate, the Committee may make adjustments in the number and type of shares of Common Stock (or other securities or property) subject to outstanding Options, Performance Awards, Dividend Equivalents, or Stock Payments, and in the number and kind of outstanding Restricted Stock or Deferred Stock and/or in the terms and conditions of (including the grant or exercise price), and the criteria included in, outstanding options, rights and awards and options, rights and awards which may be granted in the future; | |
| (vi) In its discretion, and on such terms and conditions as it deems appropriate, the Committee may provide either by the terms of a Restricted Stock award or Deferred Stock award or by action taken prior to the occurrence of such event that, for a specified period of time prior to such event, the restrictions imposed under a Restricted Stock Agreement or a Deferred Stock Agreement upon some or all shares of Restricted Stock or Deferred Stock may be terminated; and | |
| (vii) In its discretion, and on such terms and conditions as it deems appropriate, the Committee may make adjustments to the Performance Objectives of any outstanding award. |
Exhibit 10.22
EXECUTIVE AGREEMENT
This Executive Agreement (“Agreement”) between Oil States International, Inc., a Delaware corporation (the “Company”), and Christopher E. Cragg (the “Executive”) is made and entered into effective March 1, 2004 (the “Effective Date”).
WHEREAS , Executive is a key executive of the Company or a subsidiary; and
WHEREAS , the Company believes it to be in the best interests of its stockholders to attract, retain and motivate key executives and ensure continuity of management; and
WHEREAS , it is in the best interest of the Company and its stockholders if the key executives can approach material business development decisions objectively and without concern for their personal situation; and
WHEREAS , the Company recognizes that the possibility of a Change of Control (as defined below) of the Company may result in the departure of key executives to the detriment of the Company and its stockholders; and
WHEREAS , the Board of Directors of the Company has authorized this Agreement and certain similar agreements in order to retain and motivate key management and to ensure continuity of key management;
THEREFORE , for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and Executive agree as follows:
| 1. | Term of Agreement |
| A. | This Agreement shall commence on the Effective Date and, subject to the provisions for earlier termination in this Agreement, shall continue in effect through the third anniversary of the Effective Date; provided, however, commencing on the Effective Date and on each day thereafter, the term of this Agreement shall automatically be extended for one additional day unless the Board of Directors of the Company shall give written notice to Executive that the term shall cease to be so extended in which event the Agreement shall terminate on the third anniversary of the date such notice is given. | |||
| B. | Notwithstanding anything in this Agreement to the contrary, this Agreement, if in effect on the date of a Change of Control, shall automatically be extended for the 24-month period following the Change of Control. | |||
| C. | Termination of this Agreement shall not alter or impair any rights of Executive arising hereunder on or before such termination. | |||
| 2. | Certain Definitions |
| A. | “ Cause ” shall mean: |
| (i) | Executive’s conviction of (or plea of nolo contendere to) a felony, dishonesty or a breach of trust as regards the Company or any subsidiary; | |||
| (ii) | Executive’s commission of any act of theft, fraud, embezzlement or misappropriation against the Company or any subsidiary that is materially injurious to the Company or such subsidiary regardless of whether a criminal conviction is obtained; | |||
| (iii) | Executive’s willful and continued failure to devote substantially all of his business time to the Company’s business affairs (excluding failures due to illness, incapacity, vacations, incidental civic activities and incidental personal time) which failure is not remedied within a reasonable time after written demand is delivered by the Company, which demand specifically identifies the manner in which the Company believes that Executive has failed to devote substantially all of his business time to the Company’s business affairs; or | |||
| (iv) | Executive’s unauthorized disclosure of confidential information of the Company that is materially injurious to the Company. | |||
| For purposes of this definition, no act, or failure to act, on Executive’s part shall be deemed “willful” unless done, or omitted to be done, by Executive not in good faith and without reasonable belief that Executive’s action or omission was in the best interest of the Company. | ||||
| B. | “ Change of Control ” shall mean any of the following: | |||
| (i) | any “person” (as such term is used in Section 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) (other than a trustee or other fiduciary holding securities under an employee benefit plan of the Company or any affiliate, other than any corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company or other than SCF III, L.P., SCF IV, L.P., or any affiliate of SCF III, L.P. or SCF IV, L.P.) acquires “beneficial ownership” (within the meaning of Rule 13d-3 under the Exchange Act) of securities of the Company representing 35% or more of the combined voting power of the Company’s then outstanding securities; provided, however, that if the Company engages in a merger or consolidation in which the Company or surviving entity in such merger or consolidation becomes a subsidiary of another entity, then references to the Company’s then outstanding securities shall be deemed to refer to the outstanding securities of such parent entity; | |||
| (ii) | a change in the composition of the Board, as a result of which fewer than a majority of the directors are Incumbent Directors. “Incumbent Directors” shall mean directors who either (i) are directors of the Company as of the | |||
2
| Effective Date, or (ii) are elected, or nominated for election, to the Board with the affirmative votes of at least two-thirds of the Incumbent Directors at the time of such election or nomination, but Incumbent Director shall not include an individual whose election or nomination occurs as a result of either (1) an actual or threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or (2) an actual or threatened solicitation of proxies or consents by or on behalf of a person other than the Board of Directors of the Company; | ||||
| (iii) | the consummation of a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity (or if the surviving entity is or shall become a subsidiary of another entity, then such parent entity)) more than 50% of the combined voting power of the voting securities of the Company (or such surviving entity or parent entity, as the case may be) outstanding immediately after such merger or consolidation; | |||
| (iv) | the stockholders of the Company approve a plan of complete liquidation of the Company; or | |||
| (v) | the sale or disposition (other than a pledge or similar encumbrance) by the Company of all or substantially all of the assets of the Company other than to a subsidiary or subsidiaries of the Company. | |||
| C. | “ Date of Termination ” shall mean the date the Notice of Termination is given unless such termination is by Executive in which event the Date of Termination shall not be less than 30 days following the date the Notice of Termination is given. Further, a Notice of Termination given by Executive due to a Good Reason event that is corrected by the Company before the Date of Termination shall be void. | |||
| D. | “ Good Reason ” shall mean: | |||
| (i) | a material reduction in Executive’s authority, duties or responsibilities from those in effect immediately prior to the Change of Control or the assignment to Executive duties or responsibilities inconsistent in any material respect from those of Executive in effect immediately prior to the Change of Control; | |||
| (ii) | a material reduction of Executive’s compensation and benefits, including, without limitation, annual base salary, annual bonus, and equity incentive opportunities, from those in effect immediately prior to the Change of Control; | |||
3
| (iii) | the Company fails to obtain a written agreement from any successor or assigns of the Company to assume and perform this Agreement as provided in Section 9 hereof; or | |||
| (iv) | the Company requires Executive, without Executive’s consent, to be based at any office located more than 50 miles from the Company’s offices to which Executive was based immediately prior to the Change of Control, except for travel reasonably required in the performance of Executive’s duties. | |||
| Notwithstanding the above however, Good Reason shall not exist with respect to a matter unless Executive gives the Company written notice of such matter within 30 days of the date Executive knows or should reasonably have known of its occurrence. If Executive fails to give such notice timely, Executive shall be deemed to have waived all rights Executive may have under this Agreement with respect to such matter. | ||||
| E. | “ Notice of Termination” shall mean a written notice delivered to the other party indicating the specific termination provision in this Agreement relied upon for termination of Executive’s employment and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executive’s employment under the provision so indicated. | |||
| F. | “ Protected Period ” shall mean the 24-month period beginning on the effective date of a Change of Control. | |||
| G. | “ Target AICP ” shall mean the targeted value of Executive’s annual incentive compensation plan bonus for the year in which the Date of Termination occurs or the fiscal year immediately preceding the Change of Control, whichever is a greater amount. | |||
| H. | “ Termination Base Salary ” shall mean Executive’s base salary at the rate in effect at the time the Notice of Termination is given or, if a greater amount, Executive’s base salary at the rate in effect immediately prior to the Change of Control. | |||
| 3. | No Employment Agreement. | |||
| This Agreement shall be considered solely as a “severance agreement” obligating the Company to pay Executive certain amounts of compensation and to provide certain benefits in the event and only in the event of Executive’s termination of employment for the specified reasons and at the times specified herein. The parties agree that this Agreement shall not be considered an employment agreement and that Executive is an “at will” employee of the Company. | ||||
4
| 4. | Regular Severance Benefits. | |||
| Subject to the conditions precedent set out in Section 13, if the Company terminates Executive’s employment (i) other than for Cause and (ii) not during the Protected Period, Executive shall receive the following compensation and benefits from the Company: | ||||
| A. | Within 15 days of Executive’s satisfaction of the requirements of Section 13, the Company shall pay to Executive in a lump sum, in cash, an amount equal to one times the sum of Executive’s (i) Termination Base Salary and (ii) Target AICP. | |||
| B. | Notwithstanding anything in any Company stock plan or grant agreement to the contrary, all restricted shares and restricted stock units of Executive shall become 100% vested and all restrictions thereon shall lapse as of the Date of Termination and the Company shall promptly deliver such shares to Executive. | |||
| C. | For the 24-month period following the Date of Termination (the “Regular Severance Period”), the Company shall continue to provide Executive and Executive’s eligible family members, based on the cost sharing arrangement between the Company and similarly situated active employees, with medical and dental health benefits and disability coverage and benefits at least equal to those which would have been provided to Executive if Executive’s employment had not been terminated or, if more favorable to Executive, as in effect generally at any time during such period. Notwithstanding the foregoing, if Executive becomes eligible to receive medical, dental and disability benefits under another employer’s plans during this Regular Severance Period, the Company’s obligations under this Section 4C shall be reduced to the extent comparable benefits are actually received by Executive during such period, and any such benefits actually received by Executive shall be promptly reported by Executive to the Company. In the event Executive is ineligible under the terms of the Company’s health and other welfare benefit plans or programs to continue to be so covered, the Company shall provide Executive with substantially equivalent coverage through other sources or will provide Executive with a lump sum payment in such amount that, after all taxes on that amount, shall be equal to the cost to Executive of providing Executive such benefit coverage. The lump sum shall be determined on a present value basis using the interest rate provided in Section 1274(b)(2)(B) of the Internal Revenue Code of 1986, as amended (the “Code”) on the Date of Termination. | |||
Change of Control Severance Benefits
| 5. | Severance Benefits. Subject to the conditions precedent set out in Section 13, if either (a) Executive terminates his employment during the Protected Period for a Good Reason event or (b) the Company terminates Executive’s employment during the Protected Period other than for Cause, Executive shall receive the following compensation and benefits from the Company: |
5
| A. | Within 15 days of Executive’s satisfaction of the requirements of Section 13, the Company shall pay to Executive in a lump sum, in cash, an amount equal to two times the sum of Executive’s (i) Termination Base Salary and (ii) Target AICP. | |||
| B. | Notwithstanding anything in any Company stock plan or grant agreement to the contrary, (i) all restricted shares and restricted stock units of Executive shall become 100% vested and all restrictions thereon shall lapse as of the Date of Termination and the Company shall promptly deliver such shares to Executive and (ii) each then outstanding stock option of Executive shall become 100% exercisable and, excluding any incentive stock option granted prior to the Effective Date, shall remain exercisable for the remainder of such option’s term. | |||
| C. | Executive shall be fully vested in Executive’s accrued benefits under all qualified pension, nonqualified pension, profit sharing, 401(k), deferred compensation and supplemental plans maintained by the Company for Executive’s benefit, except to that the extent the acceleration of vesting of such benefits would violate any applicable law or require the Company to accelerate the vesting of the accrued benefits of all participants in such plan or plans, in which event the Company shall pay Executive a lump sum amount, in cash, within 15 days following the Date of Termination, equal to the present value of such unvested accrued benefits that cannot become vested under the plan for the reasons provided above. | |||
| D. | For the 36-month period following the Date of Termination (the “COC Severance Period”), the Company shall continue to provide Executive and Executive’s eligible family members, based on the cost sharing arrangement between Executive and the Company on the Date of Termination, with medical and dental health benefits and disability coverage and benefits at least equal to those which would have been provided to Executive if Executive’s employment had not been terminated or, if more favorable to Executive, as in effect generally at any time during such period. Notwithstanding the foregoing, if Executive becomes eligible to receive medical, dental and disability benefits under another employer’s plans during this COC Severance Period, the Company’s obligations under this Section 5D shall be reduced to the extent comparable benefits are actually received by Executive during such period, and any such benefits actually received by Executive shall be promptly reported by Executive to the Company. In the event Executive is ineligible under the terms of the Company’s health and other welfare benefit plans or programs to continue to be so covered, the Company shall provide Executive with substantially equivalent coverage through other sources or will provide Executive with a lump sum payment in such amount that, after all taxes on that amount, shall be equal to the cost to Executive of providing Executive such benefit coverage. The lump sum shall be determined on a present value basis using the interest rate provided in Section 1274(b)(2)(B) of the Code on the Date of Termination. | |||
| E. | Throughout the term of the COC Severance Period or until Executive accepts other employment, including as an independent contractor, with a new employer, whichever occurs first, Executive shall be entitled to receive outplacement | |||
6
| services, payable by the Company, with an aggregate cost not to exceed 15% of Executive’s Termination Base Salary, with an executive outplacement service firm reasonably acceptable to the Company and Executive. |
| 6. | Parachute Tax Gross Up. | |||
| If any payment (including without limitation any imputed income) made, or benefit provided, to or on behalf of Executive pursuant to this Agreement, including any accelerated vesting or any deferred compensation or other award, in connection with a “change in control” of the Company (within the meaning of Section 280G of the Code) results in Executive being subject to the excise tax imposed by Section 4999 of the Code (or any successor or similar provision) the Company shall promptly pay Executive an additional amount in cash (the “Additional Amount”) such that the net amount of all such payments and benefits received by Executive after paying all applicable taxes (including penalties and interest) on such payments and benefits, including on such Additional Amount, shall be equal to the net after-tax amount of the payments and benefits (excluding the Additional Amount) that Executive would have received if Section 4999 were not applicable to such payments and benefits. Such determinations shall be made by the Company’s independent certified public accountants. | ||||
| 7. | Accelerated Vesting of Options Upon a Change of Control. | |||
| Notwithstanding any provisions of any Company stock option plan or option agreement to the contrary, upon a Change of Control all outstanding unvested stock options, if any, granted to Executive under any Company stock option plan (or options substituted therefor covering the stock of a successor corporation) shall be fully vested and exercisable as to all shares of stock covered thereby effective as of the date of the Change of Control. | ||||
| 8. | Mitigation. | |||
| Executive shall not be required to mitigate the amount of any payment provided for in this Agreement by seeking other employment or otherwise nor, except as provided in Section 4C and Section 5D, shall the amount of any payment or benefit provided for in this Agreement be reduced by any compensation earned or benefit received by Executive as the result of employment by another employer or self-employment, by retirement benefits, by offset against any amount claimed to be owed by Executive to the Company or otherwise, except that any severance payments or benefits that Executive is entitled to receive pursuant to a Company severance plan or program for employees in general shall reduce the amount of payments and benefits otherwise payable or to be provided under this Agreement. | ||||
| 9. | Successor Agreement. | |||
| The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no succession | ||||
7
| had taken place. Failure of the successor to so assume shall constitute a breach of this Agreement and entitle Executive to the benefits hereunder as if triggered by a termination by the Company other than for Cause. | ||||
| 10. | Indemnity. | |||
| In any situation where under applicable law the Company has the power to indemnify, advance expenses to and defend Executive in respect of any judgments, fines, settlements, loss, cost or expense (including attorneys fees) of any nature related to or arising out of Executive’s activities as an agent, employee, officer or director of the Company or in any other capacity on behalf of or at the request of the Company, then the Company shall promptly on written request, indemnify Executive, advance expenses (including attorney’s fees) to Executive and defend Executive to the fullest extent permitted by applicable law, including but not limited to making such findings and determinations and taking any and all such actions as the Company may, under applicable law, be permitted to have the discretion to take so as to effectuate such indemnification, advancement or defense. Such agreement by the Company shall not be deemed to impair any other obligation of the Company respecting Executive’s indemnification or defense otherwise arising out of this or any other agreement or promise of the Company under any statute. | ||||
| 11. | Notice. | |||
| For the purpose of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and delivered by United States certified or registered mail (return receipt requested, postage prepaid) or by courier guaranteeing overnight delivery or by hand delivery (with signed receipt required), addressed to the respective addresses set forth below, and such notice or communication shall be deemed to have been duly given two days after deposit in the mail, one day after deposit with such overnight carrier or upon delivery with hand delivery. The addresses set forth below may be changed by a writing in accordance herewith. | ||||
| Company: Executive: | ||||
|
Oil States International, Inc.
333 Clay Street, Suite 3460 Houston, Texas 77002 Attn: Chairman of the Board |
||||
| 12. | Arbitration. | |||
| The parties agree to resolve any claim or controversy arising out of or relating to this Agreement, including but not limited to issues relating to Executive’s termination of employment, by binding arbitration under the Federal Arbitration Act before one arbitrator in Houston, Texas, administered by the American Arbitration Association under its Commercial Arbitration Rules, and judgment on the award rendered by the arbitrator may be entered in any court having jurisdiction thereof. The fees and expenses of the arbitrator shall be borne solely by the non-prevailing party or, in the event there is | ||||
8
| no clear prevailing party, as the arbitrator deems appropriate. Except as provided above, each party shall pay its own costs and expenses (including, without limitation, attorneys’ fees) relating to any mediation/arbitration proceeding conducted under this Section 12. | ||||
| 13. | Waiver and Release. | |||
| As a condition to the receipt of any payment or benefit under this Agreement, Executive must first execute and deliver to the Company a binding general release, as prepared by the Company, that releases the Company, its officers, directors, employees, agents, subsidiaries and affiliates from any and all claims and from any and all causes of action of any kind or character that Executive may have arising out of Executive’s employment with the Company or the termination of such employment, but excluding (i) any claims and causes of action that Executive may have arising under or based upon this Agreement, and (ii) any vested rights Executive may have under any employee benefit plan or deferred compensation plan or program of the Company. If Executive is age 40 or above at the time of execution of the general release, pursuant to the terms of the Older Worker Benefits Protection Act, the release does not become a ‘binding general release’ until the 8th day after execution and so long as it is not revoked during the 7-day revocation period following execution. | ||||
| 14. | Employment with Affiliates. | |||
| Employment with the Company for purposes of this Agreement includes employment with any entity in which the Company has a direct or indirect ownership interest of 50% or more of the total combined voting power of all outstanding equity interests, and employment with any entity which has a direct or indirect interest of 50% or more of the total combined voting power of all outstanding equity interests of the Company. For purposes of this Agreement, “Good Reason” shall be construed to refer to Executive’s positions, duties, and responsibilities in the position or positions in which Executive serves immediately before the Change of Control, but shall not include titles or positions with subsidiaries and affiliates of the Company that are held primarily for administrative convenience. | ||||
| 15. | Governing Law. | |||
| (a) | THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES. | |||
| (b) | EACH PARTY HERETO HEREBY IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS IN HARRIS COUNTY, TEXAS, FOR THE PURPOSES OF ANY PROCEEDING ARISING OUT OF THIS AGREEMENT. | |||
| 16. | Entire Agreement. | |||
| This Agreement is an integration of the parties’ agreement and no agreement or representatives, oral or otherwise, express or implied, with respect to the subject matter | ||||
9
| hereof have been made by either party which are not set forth expressly in this Agreement. This Agreement hereby expressly terminates, rescinds and replaces in full any prior agreement (written or oral) between the parties relating to the subject matter hereof, including, without limitation, the previously executed by you on but does not in any manner affect any confidentiality or non-disclosure agreements with the Company Executive may have entered into.. | ||||
| 17. | Withholding of Taxes. | |||
| The Company shall withhold from all payments and benefits provided under this Agreement all taxes required to be withheld by applicable law. | ||||
| 18. | Beneficiary. | |||
| In the event Executive dies before receiving the lump sum severance payment to which Executive was entitled hereunder, Executive’s spouse or, if there is no spouse, the beneficiary designated by Executive under the Company-sponsored group term life insurance plan, shall receive such payment. | ||||
IN WITNESS WHEREOF
, the Company and Executive have executed this Agreement
effective for all purposes as of
the Effective Date.
OIL STATES INTERNATIONAL, INC.
By:
Name:
Cindy Taylor
Title:
Senior VP, Chief Financial Officer and Treasurer
|
EXECUTIVE
|
||||
10
EXHIBIT 31.1
CERTIFICATION OF
I, Douglas E. Swanson, certify that:
Date: April 29, 2005
25
CHIEF EXECUTIVE OFFICER
OF OIL STATES INTERNATIONAL, INC.
PURSUANT TO RULE 13a – 14(a) UNDER THE
SECURITIES EXCHANGE ACT OF 1934
1.
I have reviewed this Quarterly Report on Form 10-Q of Oil States International,
Inc. (“Registrant”);
2.
Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements made,
in light of the circumstances under which such statements were made, not misleading
with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the Registrant as of, and
for, the periods presented in this report;
4.
The Registrant’s other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in Exchange
Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a – 15(f) and 15d – 15(f)) for the Registrant and we
have:
a.
designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to ensure
that material information relating to the Registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this report is being prepared;
b.
designed such internal control over financial reporting, or caused such
internal control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles;
c.
evaluated the effectiveness of the Registrant’s disclosure controls and
procedures and presented in this report our conclusions about the effectiveness of
the disclosure controls and procedures, as of the end of the period covered by this
report based on such evaluation; and
d.
disclosed in this report any change in the Registrant’s internal
control over financial reporting that occurred during the Registrant’s most recent
fiscal quarter that has materially affected, or is reasonably likely to materially
affect, the Registrant’s internal control over financial reporting; and
5.
The Registrant’s other certifying officer and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to the
Registrant’s auditors and the audit committee of the Registrant’s Board of Directors
(or persons performing the equivalent functions):
a.
all significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably likely
to adversely affect the Registrant’s ability to record, process, summarize and
report financial information; and
b.
any fraud, whether or not material, that involves management or other
employees who have a significant role in the Registrant’s internal control over
financial reporting.
/s/ Douglas E. Swanson
Douglas E. Swanson
President and Chief Executive Officer
EXHIBIT 31.2
CERTIFICATION OF
I, Cindy B. Taylor, certify that:
Date: April 29, 2005
26
CHIEF FINANCIAL OFFICER
OF OIL STATES INTERNATIONAL, INC.
PURSUANT TO RULE 13a – 14(a) UNDER THE
SECURITIES EXCHANGE ACT OF 1934
1.
I have reviewed this Quarterly Report on Form 10-Q of Oil States International,
Inc. (“Registrant”);
2.
Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements made,
in light of the circumstances under which such statements were made, not misleading
with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the Registrant as of, and
for, the periods presented in this report;
4.
The Registrant’s other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in Exchange
Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a – 15(f) and 15d – 15(f)) for the Registrant and we
have:
a.
designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to ensure
that material information relating to the Registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this report is being prepared;
b.
designed such internal control over financial reporting, or caused such
internal control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles;
c.
evaluated the effectiveness of the Registrant’s disclosure controls and
procedures and presented in this report our conclusions about the effectiveness of
the disclosure controls and procedures, as of the end of the period covered by this
report based on such evaluation; and
d.
disclosed in this report any change in the Registrant’s internal
control over financial reporting that occurred during the Registrant’s most recent
fiscal quarter that has materially affected, or is reasonably likely to materially
affect, the Registrant’s internal control over financial reporting; and
5.
The Registrant’s other certifying officer and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to the
Registrant’s auditors and the audit committee of the Registrant’s Board of Directors
(or persons performing the equivalent functions):
a.
all significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably likely
to adversely affect the Registrant’s ability to record, process, summarize and
report financial information; and
b.
any fraud, whether or not material, that involves management or other
employees who have a significant role in the Registrant’s internal control over
financial reporting.
/s/ Cindy B. Taylor
Cindy B. Taylor
Senior Vice President and Chief Financial Officer
EXHIBIT 32.1
CERTIFICATION OF
In connection with the Quarterly Report on Form 10-Q for the quarterly period ended March 31,
2005 filed with the Securities and Exchange Commission (the “Report”), I, Douglas E. Swanson,
President and Chief Executive Officer of Oil States International, Inc. (the “Company”), hereby
certify, to my knowledge, that:
27
CHIEF EXECUTIVE OFFICER
OF OIL STATES INTERNATIONAL, INC.
PURSUANT TO 18 U.S.C. § 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 AND RULE 13a – 14(b) UNDER THE
SECURITIES EXCHANGE ACT OF 1934
1.
The Report fully complies with the requirements of Section 13(a) or 15(d) of
the Securities Exchange Act of 1934; and
2.
The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.
/s/ Douglas E. Swanson
Name:
Douglas E. Swanson
Date:
April 29, 2005
EXHIBIT 32.2
CERTIFICATION OF
In connection with the Quarterly Report on Form 10-Q for the quarterly period ended March 31,
2005 filed with the Securities and Exchange Commission (the “Report”), I, Cindy B. Taylor, Senior
Vice President and Chief Financial Officer of Oil States International, Inc. (the “Company”),
hereby certify, to my knowledge, that:
28
CHIEF FINANCIAL OFFICER
OF OIL STATES INTERNATIONAL, INC.
PURSUANT TO 18 U.S.C. § 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 AND RULE 13a – 14(b) UNDER THE
SECURITIES EXCHANGE ACT OF 1934
1.
The Report fully complies with the requirements of Section 13(a) or 15(d) of
the Securities Exchange Act of 1934; and
2.
The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.
/s/ Cindy B. Taylor
Name:
Cindy B. Taylor
Date:
April 29, 2005