Reconciliation of Non-GAAP Items - Oil States International, Inc.

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Reconciliation of Non-GAAP Items

Reconciliation of Non-GAAP Financial Measures

In the company's investor presentations and other public documents, Oil States may include certain financial measures (EBITDA, EBITDA Margin) which are not calculated in accordance with generally accepted accounting principles (GAAP). You should not consider these measures in isolation from or as a substitute for measures prepared in accordance with GAAP. Additionally, these financial measures may not be comparable to other similarly titled measures of other companies. Descriptions of these non-GAAP financial measures and management’s reasons for employing them are provided below.

EBITDA and EBITDA Margin
EBITDA is not a measure of financial performance calculated in accordance with GAAP. The GAAP financial measure that is most directly comparable to EBITDA is operating income. EBITDA represents net income plus taxes, interest, depreciation and amortization expenses. Oil States has included EBITDA as a supplemental disclosure because management believes that it provides (i) useful information regarding its ability to service debt and to fund capital expenditures, (ii) investors a helpful measure for comparing its operating performance with the performance of other companies with different capital structures or tax rates, (iii) a basis for comparing the performance of OIS’ business segments to other comparable public companies and (iv) a benchmark for the award of incentive compensation under OIS’ annual incentive compensation plan.

EBITDA Margin is not a measure of financial performance calculated in accordance with GAAP. The GAAP financial measure that is most directly comparable to EBITDA Margin is operating margin, which represents operating income divided by revenues. EBITDA Margin represents EBITDA divided by revenues. Oil States has included EBITDA Margin as a supplemental disclosure because management believes that it provides a basis for comparing profit producing efficiency at any level of a business organization.

Please refer to the table below that reconciles EBITDA to Net Income (U.S. dollars in thousands):

	Fiscal Years Ended December 31,
	2002	2003	2004	2005	2006	2007	2008	2009
Net Income	$39,676	$44,432	$59,362	$120,153	$194,310	$199,792	$218,853	$59,114
Income Tax Expense	11,357	14,222	29,406	59,748	102,119	94,945	154,151	46,097
Depreciation & Amortization	23,312	27,905	35,988	46,704	54,340	70,703	102,604	118,108
Interest Income	(469)	(389)	(363)	(475)	(2,506)	(3,508)	(3,561)	(380)
Interest Expense	4,863	7,930	7,667	16,508	24,608	23,610	23,585	15,266
EBITDA	$78,739	$94,100	$132,060	$242,638	$372,871	$385,542	$495,632	$238,205
Goodwill Impairment	0	0	0	0	0	0	85,630	94,528
Adjusted EBITDA	$78,739	$94,100	$132,060	$242,638	$372,871	$385,542	$581,262	$332,733