UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
 For the quarterly period ended September 30, 2008
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
 For the transition period from to
 Commission file number: 1-16337
 OIL STATES INTERNATIONAL, INC.
  Delaware
    
    76-0476605(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)Three Allen Center, 333 Clay Street, Suite 4620,Houston, Texas
    
    77002(Address of principal executive offices)
    
    (Zip Code)
  
   
    þ o
  Large accelerated filer
þ
    
    Accelerated filer
o
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
  o þ




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##### 



Page No.Part I  FINANCIAL INFORMATIONItem 1. Financial Statements:Condensed Consolidated Financial StatementsUnaudited Condensed Consolidated Statements of Income for the Three and Nine Month Periods Ended
September 30, 
2008 and 2007
    
    
    3Consolidated Balance Sheets  September 30, 2008 (unaudited) and December 31, 2007
    
    
    4Unaudited Condensed Consolidated Statements of Cash Flows for the Nine Months Ended
September 30, 
2008 and 2007
    
    
    5Notes to Unaudited Condensed Consolidated Financial Statements
    
    
    6  13Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    14  24Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    24Item 4. Controls and Procedures
    
    
    24Part II  OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    25Item 1A. Risk Factors
    
    
    25Item 2. Unregistered Sales of Equity Securities and Use of Proceeds and Issuer Purchases of Equity Securities
    
    
    25-26Item 3. Defaults Upon Senior Securities
    
    
    26Item 4. Submission of Matters to a Vote of Security Holders
    
    
    26Item 5. Other Information
    
    
    26Item 6. Exhibits
    
    
    26(a) Index of Exhibits
    
    
    26-27Signature Page
    
    
    28
  2




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##### 



THREE MONTHS ENDED
    
    
    NINE MONTHS ENDEDSEPTEMBER 30,
    
    
    SEPTEMBER 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Revenues
    
    $
    814,790
    
    
    $
    527,440
    
    
    $
    2,047,401
    
    
    $
    1,507,264Costs and expenses:Cost of sales
    
    
    609,354
    
    
    
    403,369
    
    
    
    1,532,874
    
    
    
    1,145,882Selling, general and administrative expenses
    
    
    37,494
    
    
    
    30,884
    
    
    
    105,577
    
    
    
    86,433Depreciation and amortization expense
    
    
    27,325
    
    
    
    18,788
    
    
    
    75,741
    
    
    
    49,320Other operating income
    
    
    (893
    )
    
    
    (374
    )
    
    
    (659
    )
    
    
    (516
    )673,280
    
    
    
    452,667
    
    
    
    1,713,533
    
    
    
    1,281,119Operating income
    
    
    141,510
    
    
    
    74,773
    
    
    
    333,868
    
    
    
    226,145Interest expense
    
    
    (4,129
    )
    
    
    (4,217
    )
    
    
    (13,917
    )
    
    
    (12,798
    )Interest income
    
    
    940
    
    
    
    890
    
    
    
    2,756
    
    
    
    2,599Equity in earnings of unconsolidated affiliates
    
    
    431
    
    
    
    753
    
    
    
    3,167
    
    
    
    2,043Gain on sale of investment
    
    
    3,452
    
    
    
    
    
    
    
    6,160
    
    
    
    12,774Other income/(expense)
    
    
    (555
    )
    
    
    243
    
    
    
    (591
    )
    
    
    595Income before income taxes
    
    
    141,649
    
    
    
    72,442
    
    
    
    331,443
    
    
    
    231,358Income tax expense
    
    
    (52,594
    )
    
    
    (21,964
    )
    
    
    (115,758
    )
    
    
    (76,186
    )Net income
    
    $
    89,055
    
    
    $
    50,478
    
    
    $
    215,685
    
    
    $
    155,172Net income per share:Basic
    
    $
    1.79
    
    
    $
    1.02
    
    
    $
    4.35
    
    
    $
    3.14Diluted
    
    $
    1.70
    
    
    $
    0.97
    
    
    $
    4.15
    
    
    $
    3.05Weighted average number of common shares outstanding:Basic
    
    
    49,811
    
    
    
    49,661
    
    
    
    49,622
    
    
    
    49,423Diluted
    
    
    52,322
    
    
    
    51,822
    
    
    
    51,949
    
    
    
    50,883
 
 3




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##### 



SEPTEMBER 30,
    
    
    DECEMBER 31,2008
    
    
    2007(UNAUDITED)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    55,621
    
    
    $
    30,592Accounts receivable, net
    
    
    502,807
    
    
    
    450,153Inventories, net
    
    
    463,086
    
    
    
    349,347Prepaid expenses and other current assets
    
    
    13,475
    
    
    
    35,575Total current assets
    
    
    1,034,989
    
    
    
    865,667Property, plant, and equipment, net
    
    
    723,626
    
    
    
    586,910Goodwill, net
    
    
    399,151
    
    
    
    391,644Investments in unconsolidated affiliates
    
    
    6,255
    
    
    
    24,778Other non-current assets
    
    
    56,940
    
    
    
    60,627Total assets
    
    $
    2,220,961
    
    
    $
    1,929,626LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Current portion of long-term debt
    
    $
    179,941
    
    
    $
    4,718Accounts payable and accrued liabilities
    
    
    347,450
    
    
    
    239,119Income taxes
    
    
    24,392
    
    
    
    43Deferred revenue
    
    
    83,585
    
    
    
    60,910Other current liabilities
    
    
    1,220
    
    
    
    121Total current liabilities
    
    
    636,588
    
    
    
    304,911Long-term debt
    
    
    236,574
    
    
    
    487,102Deferred income taxes
    
    
    52,966
    
    
    
    40,550Other liabilities
    
    
    14,293
    
    
    
    12,236Total liabilities
    
    
    940,421
    
    
    
    844,799Stockholders equity:Common stock
    
    
    526
    
    
    
    522Additional paid-in capital
    
    
    422,044
    
    
    
    402,091Retained earnings
    
    
    906,398
    
    
    
    690,713Accumulated other comprehensive income
    
    
    37,854
    
    
    
    73,036Treasury stock
    
    
    (86,282
    )
    
    
    (81,535
    )Total stockholders equity
    
    
    1,280,540
    
    
    
    1,084,827Total liabilities and stockholders equity
    
    $
    2,220,961
    
    
    $
    1,929,626
 
 4




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##### 



NINE MONTHSENDED SEPTEMBER 30,2008
    
    
    2007Cash flows from operating activities:Net income
    
    $
    215,685
    
    
    $
    155,172Adjustments to reconcile net income to net cash provided by
operating activities:Depreciation and amortization
    
    
    75,741
    
    
    
    49,320Deferred income tax provision
    
    
    12,543
    
    
    
    5,053Excess tax benefits from share-based payment arrangements
    
    
    (3,367
    )
    
    
    (8,116
    )Equity in earnings of unconsolidated subsidiaries, net of dividends
    
    
    (2,914
    )
    
    
    (2,043
    )Non-cash compensation charge
    
    
    7,968
    
    
    
    5,872Gain on sale of investment
    
    
    (6,160
    )
    
    
    (12,774
    )Gain on disposal of assets
    
    
    (442
    )
    
    
    (1,454
    )Other, net
    
    
    2,229
    
    
    
    214Changes in working capital
    
    
    4,476
    
    
    
    25,095Net cash flows provided by operating activities
    
    
    305,759
    
    
    
    216,339Cash flows from investing activities:Acquisitions of businesses, net of cash acquired
    
    
    (29,835
    )
    
    
    (102,159
    )Capital expenditures
    
    
    (206,731
    )
    
    
    (172,068
    )Proceeds from sale of investment
    
    
    27,381
    
    
    
    29,354Other, net
    
    
    3,103
    
    
    
    2,004Net cash flows used in investing activities
    
    
    (206,082
    )
    
    
    (242,869
    )Cash flows from financing activities:Revolving credit borrowings (repayments)
    
    
    (73,188
    )
    
    
    24,219Debt repayments
    
    
    (4,816
    )
    
    
    (6,918
    )Issuance of common stock
    
    
    8,628
    
    
    
    10,601Purchase of treasury stock
    
    
    (4,026
    )
    
    
    (12,211
    )Excess tax benefits from share-based payment arrangements
    
    
    3,367
    
    
    
    8,116Other, net
    
    
    (905
    )
    
    
    (431
    )Net cash flows provided by (used in) financing activities
    
    
    (70,940
    )
    
    
    23,376Effect of exchange rate changes on cash
    
    
    (3,664
    )
    
    
    4,450Net increase in cash and cash equivalents from continuing operations
    
    
    25,073
    
    
    
    1,296Net cash used in discontinued operations  operating activities
    
    
    (44
    )
    
    
    (491
    )Cash and cash equivalents, beginning of period
    
    
    30,592
    
    
    
    28,396Cash and cash equivalents, end of period
    
    $
    55,621
    
    
    $
    29,201Non-cash investing and financing activities:Building capital lease
    
    $
    8,304
    
    
    
    Non-cash financing activities:Reclassification of 2 3/8% contingent convertible senior notes to current liabilities
    
    
    175,000
    
    
    $
    175,000Borrowings and assumption of liabilities for business and asset acquisitions and related
intangibles
    
    
    
    
    
    
    9,000
 
 5




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##### 



OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES
 
 NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
 1. ORGANIZATION AND BASIS OF PRESENTATION
     2. RECENT ACCOUNTING PRONOUNCEMENTS
   6




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##### 



3. DETAILS OF SELECTED BALANCE SHEET ACCOUNTS
  SEPTEMBER 30,
    
    
    DECEMBER 31,2008
    
    
    2007Accounts receivable, net:Trade
    
    $
    396,770
    
    
    $
    353,716Unbilled revenue
    
    
    106,427
    
    
    
    97,579Other
    
    
    2,366
    
    
    
    2,487Allowance for doubtful accounts
    
    
    (2,756
    )
    
    
    (3,629
    )$
    502,807
    
    
    $
    450,153
 7




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##### 



SEPTEMBER 30,
    
    
    DECEMBER 31,2008
    
    
    2007Inventories, net:Tubular goods
    
    $
    276,927
    
    
    $
    191,374Other finished goods and purchased products
    
    
    69,182
    
    
    
    61,306Work in process
    
    
    55,647
    
    
    
    56,479Raw materials
    
    
    68,982
    
    
    
    47,737Total inventories
    
    
    470,738
    
    
    
    356,896Inventory reserves
    
    
    (7,652
    )
    
    
    (7,549
    )$
    463,086
    
    
    $
    349,347
 ESTIMATED
    
    
    SEPTEMBER 30,
    
    
    DECEMBER 31,USEFUL LIFE
    
    
    2008
    
    
    2007Property, plant and equipment, net:Land
    
    
    
    
    
    $
    20,352
    
    
    $
    12,665Buildings and leasehold improvements
    
    2-50 years
    
    
    
    136,643
    
    
    
    107,954Machinery and equipment
    
    2-29 years
    
    
    
    255,685
    
    
    
    220,049Accommodations assets
    
    10-15 years
    
    
    
    323,659
    
    
    
    276,182Rental tools
    
    4-10 years
    
    
    
    133,501
    
    
    
    108,968Office furniture and equipment
    
    1-10 years
    
    
    
    26,222
    
    
    
    23,659Vehicles
    
    2-10 years
    
    
    
    67,461
    
    
    
    52,508Construction in progress
    
    
    
    
    
    
    70,954
    
    
    
    43,046Total property, plant and equipment
    
    
    
    
    
    
    1,034,477
    
    
    
    845,031Less: Accumulated depreciation
    
    
    
    
    
    
    (310,851
    )
    
    
    (258,121
    )$
    723,626
    
    
    $
    586,910
 SEPTEMBER 30,
    
    
    DECEMBER 31,2008
    
    
    2007Accounts payable and accrued liabilities:Trade accounts payable
    
    $
    282,426
    
    
    $
    186,357Accrued compensation
    
    
    31,520
    
    
    
    27,156Accrued insurance
    
    
    6,866
    
    
    
    7,386Accrued taxes, other than income taxes
    
    
    10,533
    
    
    
    3,733Reserves related to discontinued operations
    
    
    2,795
    
    
    
    2,839Other
    
    
    13,310
    
    
    
    11,648$
    347,450
    
    
    $
    239,119
 4. EARNINGS PER SHARE
  THREE MONTHS ENDED
    
    NINE MONTHS ENDEDSEPTEMBER 30,
    
    SEPTEMBER 30,2008
    
    2007
    
    2008
    
    2007Basic earnings per share:Net income
    
    $
    89,055
    
    
    $
    50,478
    
    
    $
    215,685
    
    
    $
    155,172Weighted average number of shares outstanding
    
    
    49,811
    
    
    
    49,661
    
    
    
    49,622
    
    
    
    49,423Basic earnings per share
    
    $
    1.79
    
    
    $
    1.02
    
    
    $
    4.35
    
    
    $
    3.14Diluted earnings per share:Net income
    
    $
    89,055
    
    
    $
    50,478
    
    
    $
    215,685
    
    
    $
    155,172Weighted average number of shares outstanding
    
    
    49,811
    
    
    
    49,661
    
    
    
    49,622
    
    
    
    49,423Effect of dilutive securities:Options on common stock
    
    
    490
    
    
    
    649
    
    
    
    509
    
    
    
    6592 3/8% Convertible Senior Subordinated Notes
    
    
    1,900
    
    
    
    1,421
    
    
    
    1,694
    
    
    
    721Restricted stock awards and other
    
    
    121
    
    
    
    91
    
    
    
    124
    
    
    
    80Total shares and dilutive securities
    
    
    52,322
    
    
    
    51,822
    
    
    
    51,949
    
    
    
    50,883Diluted earnings per share
    
    $
    1.70
    
    
    $
    0.97
    
    
    $
    4.15
    
    
    $
    3.05
 8




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##### 



5. BUSINESS ACQUISITIONS AND GOODWILL
         Balance as of
    
    
    Acquisitions
    
    
    Foreign currency
    
    
    Balance as ofJanuary 1,
    
    
    and
    
    
    translation and
    
    
    September 30,2008
    
    
    adjustments
    
    
    other changes
    
    
    2008Offshore Products
    
    $
    75,813
    
    
    $
    11,027
    
    
    $
    (700
    )
    
    $
    86,140Tubular Services
    
    
    62,863
    
    
    
    
    
    
    
    
    
    
    
    62,863Well Site Services
    
    
    252,968
    
    
    
    1,232
    
    
    
    (4,052
    )
    
    
    250,148Total
    
    $
    391,644
    
    
    $
    12,259
    
    
    $
    (4,752
    )
    
    $
    399,151
 9




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##### 



6. DEBT
  September 30,
    
    
    December 31,2008
    
    
    2007(Unaudited)U.S. revolving credit facility which matures on December 5, 2011, with
available commitments up to 
$325 million and with an average interest rate
of 3.9% for the nine month period ended September 30, 2008
    
    $
    142,300
    
    
    $
    214,800Canadian revolving credit facility which matures on December 5, 2011, with
available commitments up to 
$175 million and with an average interest rate
of 4.5% for the nine month period ended September 30, 2008
    
    
    83,970
    
    
    
    89,06023/8% contingent convertible senior subordinated notes due 2025
    
    
    175,000
    
    
    
    175,000Subordinated unsecured notes payable to sellers of businesses, interest of
6%, maturing in 2008 and 2009
    
    
    4,500
    
    
    
    9,000Capital lease obligations and other debt
    
    
    10,745
    
    
    
    3,960Total debt
    
    
    416,515
    
    
    
    491,820Less: current maturities
    
    
    (179,941
    )
    
    
    (4,718
    )Total long-term debt
    
    $
    236,574
    
    
    $
    487,102
    10




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##### 



7. COMPREHENSIVE INCOME AND CHANGES IN COMMON STOCK OUTSTANDING:
  THREE MONTHS
    
    
    NINE MONTHSENDED SEPTEMBER 30,
    
    
    ENDED SEPTEMBER 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Comprehensive income:Net income
    
    $
    89,055
    
    
    $
    50,478
    
    
    $
    215,685
    
    
    $
    155,172Other comprehensive income:Cumulative translation adjustment
    
    
    (26,722
    )
    
    
    18,538
    
    
    
    (35,182
    )
    
    
    42,182Unrealized gain on marketable
securities, net of tax (see Note
11)
    
    
    365
    
    
    
    
    
    
    
    2,170
    
    
    
    Reclassification adjustment, net
of tax (see Note 11)
    
    
    (2,170
    )
    
    
    
    
    
    
    (2,170
    )
    
    
    Total comprehensive income
    
    $
    60,528
    
    
    $
    69,016
    
    
    $
    180,503
    
    
    $
    197,354Shares of common stock outstanding 
January 1, 2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    49,392,106Shares issued upon exercise
of stock options and vesting of
stock awards
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    496,382Repurchase of shares-
transferred to treasury
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (100,000
    )Shares withheld for taxes
on vesting of restricted stock awards
and transferred to treasury
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (17,338
    )Shares of common stock outstanding
 September 30, 2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    49,771,150
 8. STOCK BASED COMPENSATION
   9. INCOME TAXES
  10. SEGMENT AND RELATED INFORMATION
  11




---



##### 



Revenues from
    
    
    Depreciationunaffiliated
    
    
    and
    
    
    Operating
    
    
    Capitalcustomers
    
    
    amortization
    
    
    income (loss)
    
    
    expenditures
    
    
    Total assetsThree months ended
September 30, 2008Well Site Services -Accommodations
    
    $
    105,380
    
    
    $
    9,686
    
    
    $
    23,695
    
    
    $
    29,233
    
    
    $
    525,780Rental tools
    
    
    91,699
    
    
    
    8,921
    
    
    
    21,003
    
    
    
    22,931
    
    
    
    467,983Drilling and other (1)
    
    
    52,086
    
    
    
    5,272
    
    
    
    14,833
    
    
    
    14,005
    
    
    
    200,161Total Well Site Services
    
    
    249,165
    
    
    
    23,879
    
    
    
    59,531
    
    
    
    66,169
    
    
    
    1,193,924Offshore Products
    
    
    120,008
    
    
    
    3,033
    
    
    
    20,273
    
    
    
    2,749
    
    
    
    499,239Tubular Services
    
    
    445,617
    
    
    
    340
    
    
    
    68,261
    
    
    
    1,022
    
    
    
    513,520Corporate and Eliminations
    
    
    
    
    
    
    73
    
    
    
    (6,555
    )
    
    
    1,085
    
    
    
    14,278Total
    
    $
    814,790
    
    
    $
    27,325
    
    
    $
    141,510
    
    
    $
    71,025
    
    
    $
    2,220,961
 Revenues from
    
    
    Depreciationunaffiliated
    
    
    and
    
    
    Operating
    
    
    Capitalcustomers
    
    
    amortization
    
    
    income (loss)
    
    
    expenditures
    
    
    Total assetsThree months ended
September 30, 2007Well Site Services -Accommodations
    
    $
    65,894
    
    
    $
    5,972
    
    
    $
    16,147
    
    
    $
    43,444
    
    
    $
    421,698Rental tools
    
    
    73,602
    
    
    
    6,580
    
    
    
    19,825
    
    
    
    11,594
    
    
    
    412,073Drilling and other (1)
    
    
    40,216
    
    
    
    3,215
    
    
    
    12,908
    
    
    
    10,808
    
    
    
    172,993Total Well Site Services
    
    
    179,712
    
    
    
    15,767
    
    
    
    48,880
    
    
    
    65,846
    
    
    
    1,006,764Offshore Products
    
    
    132,124
    
    
    
    2,612
    
    
    
    22,074
    
    
    
    4,156
    
    
    
    441,767Tubular Services
    
    
    215,604
    
    
    
    351
    
    
    
    9,529
    
    
    
    1,455
    
    
    
    379,462Corporate and Eliminations
    
    
    
    
    
    
    58
    
    
    
    (5,710
    )
    
    
    56
    
    
    
    33,798Total
    
    $
    527,440
    
    
    $
    18,788
    
    
    $
    74,773
    
    
    $
    71,513
    
    
    $
    1,861,791
 Revenues from
    
    
    Depreciation
    
    
    Operatingunaffiliated
    
    
    and
    
    
    income
    
    
    Capitalcustomers
    
    
    amortization
    
    
    (loss)
    
    
    expenditures
    
    
    Total assetsNine months ended
September 30, 2008Well Site Services -Accommodations
    
    $
    332,518
    
    
    $
    26,075
    
    
    $
    93,761
    
    
    $
    98,602
    
    
    $
    525,780Rental tools
    
    
    258,767
    
    
    
    25,793
    
    
    
    54,926
    
    
    
    57,882
    
    
    
    467,983Drilling and other (1)
    
    
    133,316
    
    
    
    14,119
    
    
    
    31,679
    
    
    
    34,429
    
    
    
    200,161Total Well Site Services
    
    
    724,601
    
    
    
    65,987
    
    
    
    180,366
    
    
    
    190,913
    
    
    
    1,193,924Offshore Products
    
    
    386,780
    
    
    
    8,545
    
    
    
    66,656
    
    
    
    12,629
    
    
    
    499,239Tubular Services
    
    
    936,020
    
    
    
    1,004
    
    
    
    106,533
    
    
    
    1,941
    
    
    
    513,520Corporate and Eliminations
    
    
    
    
    
    
    205
    
    
    
    (19,687
    )
    
    
    1,248
    
    
    
    14,278Total
    
    $
    2,047,401
    
    
    $
    75,741
    
    
    $
    333,868
    
    
    $
    206,731
    
    
    $
    2,220,961
 Revenues from
    
    
    Depreciation
    
    
    Operatingunaffiliated
    
    
    and
    
    
    income
    
    
    Capitalcustomers
    
    
    amortization
    
    
    (loss)
    
    
    expenditures
    
    
    Total assetsNine months ended
September 30, 2007Well Site Services -Accommodations
    
    $
    221,311
    
    
    $
    14,722
    
    
    $
    64,291
    
    
    $
    99,337
    
    
    $
    421,698Rental tools
    
    
    178,082
    
    
    
    16,443
    
    
    
    51,437
    
    
    
    29,449
    
    
    
    412,073Drilling and other (1)
    
    
    107,886
    
    
    
    8,758
    
    
    
    34,719
    
    
    
    30,082
    
    
    
    172,993Total Well Site Services
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Offshore Products
    
    
    507,279
    
    
    
    39,923
    
    
    
    150,447
    
    
    
    158,868
    
    
    
    1,006,764Tubular Services
    
    
    386,601
    
    
    
    8,237
    
    
    
    63,889
    
    
    
    10,565
    
    
    
    441,767Corporate and Eliminations
    
    
    613,384
    
    
    
    1,005
    
    
    
    27,973
    
    
    
    2,349
    
    
    
    379,462Total
    
    
    
    
    
    
    155
    
    
    
    (16,164
    )
    
    
    286
    
    
    
    33,798$
    1,507,264
    
    
    $
    49,320
    
    
    $
    226,145
    
    
    $
    172,068
    
    
    $
    1,861,791
 12




---



##### 



(1)
    
    We have classified our equity interest in Boots & Coots and the notes receivable
acquired in the transaction in which we sold our workover services business to Boots &
Coots as Drilling and other. 11. INVESTMENT IN BOOTS & COOTS
   12. COMMITMENTS AND CONTINGENCIES
  13




---



##### 



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 Part I, Item 1.A. Risk Factors 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, 2007 filed with the Securities and Exchange Commission on February
22, 2008. Should one or more of these risks or uncertainties materialize, or should the
assumptions prove incorrect, actual results may differ materially from those expected, estimated or
projected. Our management believes these forward-looking statements are reasonable. However, you
should not place undue reliance on these forward-looking statements, which are based only on our
current expectations. Forward-looking statements speak only as of the date they are made, and we
undertake no obligation to publicly update or revise any of them in light of new information,
future events or otherwise.
 
 ITEM 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
  Overview
   14




---



##### 



Average Drilling Rig Count forThree Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,
    
    September 30,
    
    September 30,2008
    
    2007
    
    2008
    
    2007U.S. Land
    
    
    1,909
    
    
    
    1,716
    
    
    
    1,806
    
    
    
    1,682U.S. Offshore
    
    
    69
    
    
    
    72
    
    
    
    65
    
    
    
    77Total U.S
    
    
    1,978
    
    
    
    1,788
    
    
    
    1,871
    
    
    
    1,759Canada (1)
    
    
    432
    
    
    
    348
    
    
    
    369
    
    
    
    340Total North America
    
    
    2,410
    
    
    
    2,136
    
    
    
    2,240
    
    
    
    2,099
 
 (1)
    
    Canadian rig count typically increases during the peak winter drilling season (December through March).      15




---



##### 



Consolidated Results of Operations (in millions)
 THREE MONTHS ENDED
    
    
    NINE MONTHS ENDEDSeptember 30,
    
    
    September 30,Variance
    
    
    
    
    
    
    
    
    
    
    Variance2008 vs. 2007
    
    
    
    
    
    
    
    
    
    
    2008 vs. 20072008
    
    
    2007
    
    
    $
    
    
    %
    
    
    2008
    
    
    2007
    
    
    $
    
    
    %RevenuesWell Site Services -Accommodations
    
    $
    105.4
    
    
    $
    65.9
    
    
    $
    39.5
    
    
    
    60
    %
    
    $
    332.5
    
    
    $
    221.3
    
    
    $
    111.2
    
    
    
    50
    %Rental Tools
    
    
    91.7
    
    
    
    73.6
    
    
    
    18.1
    
    
    
    25
    %
    
    
    258.8
    
    
    
    178.1
    
    
    
    80.7
    
    
    
    45
    %Drilling and Other
    
    
    52.1
    
    
    
    40.2
    
    
    
    11.9
    
    
    
    30
    %
    
    
    133.3
    
    
    
    107.9
    
    
    
    25.4
    
    
    
    24
    %Total Well Site Services
    
    
    249.2
    
    
    
    179.7
    
    
    
    69.5
    
    
    
    39
    %
    
    
    724.6
    
    
    
    507.3
    
    
    
    217.3
    
    
    
    43
    %Offshore Products
    
    
    120.0
    
    
    
    132.1
    
    
    
    (12.1
    )
    
    
    (9
    %)
    
    
    386.8
    
    
    
    386.6
    
    
    
    0.2
    
    
    
    0
    %Tubular Services
    
    
    445.6
    
    
    
    215.6
    
    
    
    230.0
    
    
    
    107
    %
    
    
    936.0
    
    
    
    613.4
    
    
    
    322.6
    
    
    
    53
    %Total
    
    $
    814.8
    
    
    $
    527.4
    
    
    $
    287.4
    
    
    
    54
    %
    
    $
    2,047.4
    
    
    $
    1,507.3
    
    
    $
    540.1
    
    
    
    36
    %Cost of salesWell Site Services -Accommodations
    
    $
    65.3
    
    
    $
    37.2
    
    
    $
    28.1
    
    
    
    76
    %
    
    $
    193.4
    
    
    $
    125.5
    
    
    $
    67.9
    
    
    
    54
    %Rental Tools
    
    
    52.8
    
    
    
    39.0
    
    
    
    13.8
    
    
    
    35
    %
    
    
    151.2
    
    
    
    90.5
    
    
    
    60.7
    
    
    
    67
    %Drilling and Other
    
    
    31.2
    
    
    
    23.9
    
    
    
    7.3
    
    
    
    31
    %
    
    
    85.2
    
    
    
    62.8
    
    
    
    22.4
    
    
    
    36
    %Total Well Site Services
    
    
    149.3
    
    
    
    100.1
    
    
    
    49.2
    
    
    
    49
    %
    
    
    429.8
    
    
    
    278.8
    
    
    
    151.0
    
    
    
    54
    %Offshore Products
    
    
    88.5
    
    
    
    100.6
    
    
    
    (12.1
    )
    
    
    (12
    %)
    
    
    286.6
    
    
    
    291.5
    
    
    
    (4.9
    )
    
    
    (2
    %)Tubular Services
    
    
    371.6
    
    
    
    202.7
    
    
    
    168.9
    
    
    
    83
    %
    
    
    816.5
    
    
    
    575.6
    
    
    
    240.9
    
    
    
    42
    %Total
    
    $
    609.4
    
    
    $
    403.4
    
    
    $
    206.0
    
    
    
    51
    %
    
    $
    1,532.9
    
    
    $
    1,145.9
    
    
    $
    387.0
    
    
    
    34
    %Gross marginWell Site Services -Accommodations
    
    $
    40.1
    
    
    $
    28.7
    
    
    $
    11.4
    
    
    
    40
    %
    
    $
    139.1
    
    
    $
    95.8
    
    
    $
    43.3
    
    
    
    45
    %Rental Tools
    
    
    38.9
    
    
    
    34.6
    
    
    
    4.3
    
    
    
    12
    %
    
    
    107.6
    
    
    
    87.6
    
    
    
    20.0
    
    
    
    23
    %Drilling and Other
    
    
    20.9
    
    
    
    16.3
    
    
    
    4.6
    
    
    
    28
    %
    
    
    48.1
    
    
    
    45.1
    
    
    
    3.0
    
    
    
    7
    %Total Well Site Services
    
    
    99.9
    
    
    
    79.6
    
    
    
    20.3
    
    
    
    26
    %
    
    
    294.8
    
    
    
    228.5
    
    
    
    66.3
    
    
    
    29
    %Offshore Products
    
    
    31.5
    
    
    
    31.5
    
    
    
    0.0
    
    
    
    0
    %
    
    
    100.2
    
    
    
    95.1
    
    
    
    5.1
    
    
    
    5
    %Tubular Services
    
    
    74.0
    
    
    
    12.9
    
    
    
    61.1
    
    
    
    474
    %
    
    
    119.5
    
    
    
    37.8
    
    
    
    81.7
    
    
    
    216
    %Total
    
    $
    205.4
    
    
    $
    124.0
    
    
    $
    81.4
    
    
    
    66
    %
    
    $
    514.5
    
    
    $
    361.4
    
    
    $
    153.1
    
    
    
    42
    %Gross margin as a
percent of revenuesWell Site Services -Accommodations
    
    
    38
    %
    
    
    44
    %
    
    
    
    
    
    
    
    
    
    
    42
    %
    
    
    43
    %Rental Tools
    
    
    42
    %
    
    
    47
    %
    
    
    
    
    
    
    
    
    
    
    42
    %
    
    
    49
    %Drilling and Other
    
    
    40
    %
    
    
    41
    %
    
    
    
    
    
    
    
    
    
    
    36
    %
    
    
    42
    %Total Well Site Services
    
    
    40
    %
    
    
    44
    %
    
    
    
    
    
    
    
    
    
    
    41
    %
    
    
    45
    %Offshore Products
    
    
    26
    %
    
    
    24
    %
    
    
    
    
    
    
    
    
    
    
    26
    %
    
    
    25
    %Tubular Services
    
    
    17
    %
    
    
    6
    %
    
    
    
    
    
    
    
    
    
    
    13
    %
    
    
    6
    %Total
    
    
    25
    %
    
    
    24
    %
    
    
    
    
    
    
    
    
    
    
    25
    %
    
    
    24
    %
 16




---



##### 



THREE MONTHS ENDED SEPTEMBER 30, 2008 COMPARED TO THREE MONTHS ENDED SEPTEMBER 30, 2007
   Revenues.
    Cost of Sales.
  17




---



##### 



Selling, General and Administrative Expenses.
 Depreciation and Amortization.
 Operating Income.
 Gain on Sale of Investment.
 Interest Expense and Interest Income.
 Equity in Earnings of Unconsolidated Affiliates.
 Income Tax Expense.
 18




---



##### 



NINE MONTHS ENDED SEPTEMBER 30, 2008 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30, 2007
  Revenues.
    Cost of Sales.
    19




---



##### 



Selling, General and Administrative Expenses.
 Depreciation and Amortization.
 Operating Income.
 Gain on Sale of Investment.
 Interest Expense and Interest Income.
 Equity in Earnings of Unconsolidated Affiliates.
 Income Tax Expense.
 Liquidity and Capital Resources
   20




---



##### 



21




---



##### 



22




---



##### 



Critical Accounting Policies
         23




---



##### 



ITEM 3. Quantitative and Qualitative Disclosures about Market Risk
 Interest Rate Risk.
 Foreign Currency Exchange Rate Risk.
 
 ITEM 4. Controls and Procedures
 Evaluation of Disclosure Controls and Procedures.
 Changes in Internal Control over Financial Reporting.
 24




---



##### 



PART II  OTHER INFORMATION
 
 ITEM 1. Legal Proceedings
  
 ITEM 1A. Risk Factors
  Our Business is Subject to a Number of Economic Risks
  
 ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds and Issuer Purchases of Equity
Securities
 Unregistered Sales of Equity Securities and Use of Proceeds
  25




---



##### 



Purchases of Equity Securities by the Issuer and Affiliated Purchases
 Total Number of
    
    ApproximateShares Purchased
    
    Dollar Value of Sharesas Part of the Share
    
    Remaining to be PurchasedTotal Number of
    
    Average Price
    
    Repurchase
    
    Under the Share RepurchasePeriod
    
    Shares Purchased
    
    Paid per Share
    
    Program
    
    ProgramJuly 1, 2008 
July 31, 2008
    
    
    
    
    
    
    
    
    
    
    2,769,932
    
    
    $
    69,357,141August 1, 2008 
August 31, 2008
    
    
    
    
    
    
    
    
    
    
    2,769,932
    
    
    $
    69,357,141September 1, 2008 -
September 30, 2008
    
    
    100,000
    
    
    
    38.97
    
    
    
    2,869,932
    
    
    $
    65,459,901
    (1)Total
    
    
    100,000
    
    
    
    38.97
    
    
    
    2,869,932
    
    
    $
    65,459,901
 
 (1)
    
    On March 2, 2005, we announced a share repurchase program of up to $50,000,000 over
a two year period. On August 25, 2006, we announced the authorization of an additional $50,000,000
and the extension of the program to August 31, 2008. On January 11, 2008, an additional $50
million was approved for the repurchase program and the duration of the program was extended to
December 31, 2009. 
 ITEM 3. Defaults Upon Senior Securities
  
 ITEM 4. Submission of Matters to a Vote of Security Holders
  
 ITEM 5. Other Information
  
 ITEM 6. Exhibits
 
  Exhibit No.
    
    
    
    Description3.1
    
    
    
    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).3.2
    
    
    
    Second Amended and Restated Bylaws
(incorporated by reference to Exhibit 3.1
to the Companys Current Report on Form
8-K, as filed with the Commission on May
21, 2008).3.3
    
    
    
    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).4.1
    
    
    
    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)).4.2
    
    
    
    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).
 26




---



##### 



Exhibit No.
    
    
    
    Description4.3
    
    
    
    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).4.4
    
    
    
    Registration Rights Agreement dated as of
June 21, 2005 by and between Oil States
International, Inc. and RBC Capital
Markets Corporation (incorporated by
reference to Oil States Current Report on
Form 8-K filed with the Commission on June
23, 2005).4.5
    
    
    
    Indenture dated as of June 21, 2005 by and
between Oil States International, Inc. and
Wells Fargo Bank, National Association, as
trustee (incorporated by reference to Oil
States Current Report on Form 8-K filed
with the Commission on June 23, 2005).4.6
    
    
    
    Global Notes representing $175,000,000
aggregate principal amount of 2 3/8%
Contingent Convertible Senior Notes due
2025 (incorporated by reference to Section
2.2 of Exhibit 4.5 hereof) (incorporated
by reference to Oil States Current
Reports on Form 8-K filed with the
Commission on June 23, 2005 and July 13,
2005).10.11D
    
    
    
    Incremental Assumption Agreement, dated as
of December 13, 2007, 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
10.12D to the Companys Current Report on
Form 8-K filed with the Securities and
Exchange Commission on December 18, 2007).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. 27




---



##### 



SIGNATURES
   Date: October 31, 2008
    
    By
    
    /s/ BRADLEY J. DODSON

Bradley J. DodsonVice President, Chief Financial Officer andTreasurer (Duly Authorized Officer and PrincipalFinancial Officer)Date: October 31, 2008
    
    By
    
    /s/ ROBERT W. HAMPTON

Robert W. HamptonSenior Vice President  Accounting andSecretary (Duly Authorized Officer andChief Accounting Officer)
 28




---



##### 



Exhibit
Index
 Exhibit No.
    
    
    
    Description3.1
    
    
    
    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).3.2
    
    
    
    Second Amended and Restated Bylaws
(incorporated by reference to Exhibit 3.1
to the Companys Current Report on Form
8-K, as filed with the Commission on May
21, 2008).3.3
    
    
    
    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).4.1
    
    
    
    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)).4.2
    
    
    
    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).4.3
    
    
    
    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).4.4
    
    
    
    Registration Rights Agreement dated as of
June 21, 2005 by and between Oil States
International, Inc. and RBC Capital
Markets Corporation (incorporated by
reference to Oil States Current Report on
Form 8-K filed with the Commission on June
23, 2005).4.5
    
    
    
    Indenture dated as of June 21, 2005 by and
between Oil States International, Inc. and
Wells Fargo Bank, National Association, as
trustee (incorporated by reference to Oil
States Current Report on Form 8-K filed
with the Commission on June 23, 2005).4.6
    
    
    
    Global Notes representing $175,000,000
aggregate principal amount of 2 3/8%
Contingent Convertible Senior Notes due
2025 (incorporated by reference to Section
2.2 of Exhibit 4.5 hereof) (incorporated
by reference to Oil States Current
Reports on Form 8-K filed with the
Commission on June 23, 2005 and July 13,
2005).10.11D
    
    
    
    Incremental Assumption Agreement, dated as
of December 13, 2007, 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
10.12D to the Companys Current Report on
Form 8-K filed with the Securities and
Exchange Commission on December 18, 2007).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.