OIL STATES INTERNATIONAL, INC - Quarter Report: 2016 June (Form 10-Q)

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		THREE MONTHS ENDED								SIX MONTHS ENDED
		JUNE 30,								JUNE 30,
		2016				2015				2016				2015
Revenues		$	175,849			$	269,258			$	345,504			$	606,617
Costs and expenses:
Cost of sales and services			136,400				194,664				265,215				432,386
Selling, general and administrative expenses			30,486				32,002				60,466				67,607
Depreciation and amortization expense			29,415				32,432				59,817				65,011
Other operating (income) expense			(3,291	)			1,436				(2,728	)			(871	)
			193,010				260,534				382,770				564,133
Operating (loss) income			(17,161	)			8,724				(37,266	)			42,484
Interest expense			(1,315	)			(1,627	)			(2,760	)			(3,335	)
Interest income			110				138				202				275
Other income			224				355				430				821
(Loss) income from continuing operations before income taxes			(18,142	)			7,590				(39,394	)			40,245
Income tax benefit (expense)			6,437				(1,442	)			14,453				(14,694	)
Net (loss) income from continuing operations			(11,705	)			6,148				(24,941	)			25,551
Net (loss) income from discontinued operations, net of tax			(1	)			35				(4	)			201
Net (loss) income attributable to Oil States International, Inc.		$	(11,706	)		$	6,183			$	(24,945	)		$	25,752
Net (loss) income attributable to Oil States International, Inc.:
Continuing operations		$	(11,705	)		$	6,148			$	(24,941	)		$	25,551
Discontinued operations			(1	)			35				(4	)			201
Net (loss) income attributable to Oil States International, Inc.		$	(11,706	)		$	6,183			$	(24,945	)		$	25,752
Basic net (loss) income per share attributable to Oil States International, Inc. common stockholders from:
Continuing operations		$	(0.23	)		$	0.12			$	(0.50	)		$	0.50
Discontinued operations			--				--				--				--
Net (loss) income		$	(0.23	)		$	0.12			$	(0.50	)		$	0.50
Diluted net (loss) income per share attributable to Oil States International, Inc. common stockholders from:
Continuing operations		$	(0.23	)		$	0.12			$	(0.50	)		$	0.50
Discontinued operations			--				--				--				--
Net (loss) income		$	(0.23	)		$	0.12			$	(0.50	)		$	0.50
Weighted average number of common shares outstanding:
Basic			50,210				50,427				50,126				50,627
Diluted			50,210				50,515				50,126				50,725

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		THREE MONTHS ENDED								SIX MONTHS ENDED
		JUNE 30,								JUNE 30,
		2016				2015				2016				2015
Net (loss) income		$	(11,706	)		$	6,183			$	(24,945	)		$	25,752
Other comprehensive (loss) income:
Foreign currency translation adjustment			(8,870	)			9,773				(7,317	)			(4,718	)
Unrealized gain on forward contracts, net of tax			--				124				--				72
Total other comprehensive (loss) income			(8,870	)			9,897				(7,317	)			(4,646	)
Comprehensive (loss) income attributable to Oil States International, Inc.		$	(20,576	)		$	16,080			$	(32,262	)		$	21,106

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		JUNE 30,				DECEMBER 31,
		2016				2015
		(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents		$	51,957			$	35,973
Accounts receivable, net			264,101				333,494
Inventories, net			202,269				212,882
Prepaid expenses and other current assets			18,785				29,124
Total current assets			537,112				611,473
Property, plant, and equipment, net			601,228				638,725
Goodwill, net			264,050				263,787
Other intangible assets, net			56,889				59,385
Other noncurrent assets			23,557				23,101
Total assets		$	1,482,836			$	1,596,471
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable		$	48,392			$	59,116
Accrued liabilities			42,805				49,300
Income taxes			5,948				8,303
Current portion of long-term debt and capitalized leases			520				533
Deferred revenue			29,427				36,655
Other current liabilities			291				293
Total current liabilities			127,383				154,200
Long-term debt and capitalized leases			83,604				125,887
Deferred income taxes			22,983				40,497
Other noncurrent liabilities			21,273				20,215
Total liabilities			255,243				340,799
Stockholders’ equity:
Oil States International, Inc. stockholders’ equity:
Common stock, $.01 par value, 200,000,000 shares authorized, 62,279,956 shares and 61,712,805 shares issued, respectively, and 51,360,090 shares and 50,953,149 shares outstanding, respectively			623				617
Additional paid-in capital			721,082				712,980
Retained earnings			1,154,918				1,179,863
Accumulated other comprehensive loss			(58,015	)			(50,698	)
Common stock held in treasury at cost, 10,919,866 and 10,759,656 shares, respectively			(591,015	)			(587,090	)
Total stockholders’ equity			1,227,593				1,255,672
Total liabilities and stockholders’ equity		$	1,482,836			$	1,596,471

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		SIX MONTHS ENDED JUNE 30,
		2016				2015
Cash flows from operating activities:
Net (loss) income		$	(24,945	)		$	25,752
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Loss (income) from discontinued operations			4				(201	)
Depreciation and amortization			59,817				65,011
Deferred income tax (benefit) expense			(20,206	)			(2,331	)
Tax impact of share-based payment arrangements			--				(215	)
Provision for bad debt			784				(1,134	)
Gain on disposals of assets			(372	)			(628	)
Non-cash compensation charge			10,569				10,697
Amortization of deferred financing costs			390				390
Other, net			665				(136	)
Changes in operating assets and liabilities, net of effect from acquired businesses:
Accounts receivable			62,321				206,706
Inventories			7,677				(6,939	)
Accounts payable and accrued liabilities			(14,798	)			(70,666	)
Taxes payable			5,908				5,005
Other operating assets and liabilities, net			(5,688	)			(9,816	)
Net cash flows provided by continuing operating activities			82,126				221,495
Net cash flows (used in) provided by discontinued operating activities			(6	)			314
Net cash flows provided by operating activities			82,120				221,809
Cash flows from investing activities:
Capital expenditures			(18,398	)			(68,740	)
Acquisitions of businesses, net of cash acquired			--				(33,427	)
Proceeds from disposition of property, plant and equipment			546				1,061
Other, net			(1,551	)			(392	)
Net cash flows used in continuing investing activities			(19,403	)			(101,498	)
Cash flows from financing activities:
Revolving credit (repayments) borrowings, net			(42,422	)			10,224
Debt and capital lease repayments			(263	)			(273	)
Issuance of common stock from share-based payment arrangements			367				2,209
Purchase of treasury stock			--				(90,659	)
Tax impact of share-based payment arrangements			--				215
Shares added to treasury stock as a result of net share settlements due to vesting of restricted stock			(3,924	)			(6,750	)
Other, net			(1	)			--
Net cash flows used in continuing financing activities			(46,243	)			(85,034	)
Effect of exchange rate changes on cash			(490	)			892
Net change in cash and cash equivalents			15,984				36,169
Cash and cash equivalents, beginning of period			35,973				53,263
Cash and cash equivalents, end of period		$	51,957			$	89,432

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		Common Stock				Additional Paid-In Capital				Retained Earnings				Accumulated Other Comprehensive (Loss) Income				Treasury Stock				Total Stockholders' Equity
Balance, December 31, 2015		$	617			$	712,980			$	1,179,863			$	(50,698	)		$	(587,090	)		$	1,255,672
Net loss											(24,945	)											(24,945	)
Currency translation adjustment (excluding intercompany notes)															(10,890	)							(10,890	)
Currency translation adjustment on intercompany notes															3,573								3,573
Exercise of stock options, including tax impact							(2,395	)															(2,395	)
Amortization of restricted stock compensation							9,148																9,148
Stock option expense							1,355																1,355
Restricted stock awards granted			6				(6	)															--
Surrender of stock to pay taxes on restricted stock awards																			(3,924	)			(3,924	)
Other																			(1	)			(1	)
Balance, June 30, 2016		$	623			$	721,082			$	1,154,918			$	(58,015	)		$	(591,015	)		$	1,227,593

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1.	ORGANIZATION AND BASIS OF PRESENTATION

 

The accompanying unaudited condensed consolidated financial statements of Oil States International, Inc. and its wholly-owned subsidiaries (referred to in this report as we or the Company) have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the Commission) pertaining to interim financial information. Certain information in footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (GAAP) have been condensed or omitted pursuant to these rules and regulations. The unaudited financial statements included in this report reflect all the adjustments, consisting of normal recurring adjustments, which the Company considers necessary for a fair 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 full year.

 

The preparation of condensed consolidated financial statements in conformity with GAAP requires the use of estimates and assumptions by management in determining the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. 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 condensed consolidated financial statements. Our industry is cyclical and this cyclicality impacts our estimates of the period over which future cash flows will be generated, as well as the predictability of these cash flows including our determination of whether a decline in value of our long-lived assets and related fair values of our reporting units have occurred. A longer term continuation of the current down cycle will likely result in changes in our estimates of forward cash flow timing and amounts and may result in impairment losses.

 

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, 2015 (the 2015 Form 10-K).

 

2.	RECENT ACCOUNTING PRONOUNCEMENTS

 

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (the FASB), which are adopted by the Company as of the specified effective date. Unless otherwise discussed, management believes that the impact of recently issued standards, which are not yet effective, will not have a material impact on the Company’s consolidated financial statements upon adoption.

 

In March 2016, the FASB issued guidance on employee share-based payment accounting which makes several modifications to the current guidance related to the accounting for forfeitures, employer tax withholding on stock-based compensation and the financial statement presentation of excess tax benefits or deficiencies. This guidance also clarifies the statement of cash flows presentation for certain components of share-based awards. The standard is effective for interim and annual reporting periods beginning after December 15, 2016, although early adoption is permitted. We are evaluating the impact of the future adoption of this standard on our consolidated financial position, results of operations and related disclosures.

 

In February 2016, the FASB issued guidance on leases which introduces the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases under previous guidance. The guidance will be effective for annual reporting periods beginning after December 15, 2018 and interim periods within those fiscal years with early adoption permitted. We are evaluating the impact of the future adoption of this standard on our consolidated financial position, results of operations, cash flows and related disclosures.

 

In April 2015, the FASB issued guidance on the presentation of debt issuance costs which requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. In August 2015, the FASB issued additional guidance on this topic which adds comments from the Commission addressing the guidance issued in April 2015 and debt issuance costs related to line-of-credit arrangements. The Commission commented it would not object to an entity deferring and presenting debt issuance costs as an asset and subsequently amortizing the deferred debt issuance costs ratably over the term of the line-of-credit arrangement, regardless of whether there are any outstanding borrowings on the line-of-credit arrangement. The recognition and measurement guidance for debt issuance costs are not affected by this guidance. This new guidance requires retrospective application and represents a change in accounting principle. For public business entities, this guidance is effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. The Company adopted this new guidance during the first quarter of 2016. The adoption of this new guidance did not affect the Company’s results of operations or cash flows, but it resulted in the Company reclassifying its deferred financing costs associated with its revolving credit agreement from other noncurrent assets to long-term debt on a retrospective basis. The Company's consolidated balance sheets included deferred financing costs of $2.7 million as of December 31, 2015 that were reclassed from other noncurrent assets to long-term debt. See Note 7, “Debt.”   

 

In May 2014, the FASB issued guidance on revenue from contracts with customers that will supersede most current revenue recognition guidance, including industry-specific guidance. The underlying principle is that an entity will recognize revenue to depict the transfer of goods or services to customers at an amount that the entity expects to be entitled to in exchange for those goods or services. The guidance provides a five-step analysis of transactions to determine when and how revenue is recognized. Other major provisions include capitalization of certain contract costs, consideration of time value of money in the transaction price, and allowing estimates of variable consideration to be recognized before contingencies are resolved in certain circumstances. The guidance also requires enhanced disclosures regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity’s contracts with customers. In August 2015, the FASB issued guidance deferring the effective date by one year to December 15, 2017 for fiscal years, and interim periods within those years, beginning after that date and permitted early adoption of the standard, but not before the original effective date of December 15, 2016. The guidance permits the use of either a retrospective or cumulative effect transition method. We have not yet selected a transition method and continue to evaluate the impact of the amended guidance on our consolidated financial position, results of operations and related disclosures.

 

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3.	DETAILS OF SELECTED BALANCE SHEET ACCOUNTS

 

Additional information regarding selected balance sheet accounts at June 30, 2016 and December 31, 2015 is presented below (in thousands):

 

 

 

 

 

 

OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES

 

NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(Continued)

 

 

 

4.	ACCUMULATED OTHER COMPREHENSIVE LOSS

 

Our accumulated other comprehensive loss, reported as a component of stockholders’ equity, increased from $50.7 million at December 31, 2015 to $58.0 million at June 30, 2016, primarily as a result of foreign currency exchange rate differences. Our accumulated other comprehensive loss is primarily related to fluctuations in the foreign currency exchange rates compared to the U.S. dollar which are used to translate the foreign operations of our reportable segments (primarily in the United Kingdom, Canada, Brazil, and Argentina). The exchange rates of the Canadian dollar and the Brazilian real compared to the U.S. dollar strengthened by 7% and 19%, respectively, in the first half of 2016 compared to the exchange rates at December 31, 2015, while the exchange rates of the British pound and the Argentine peso compared to the U.S. dollar weakened by 10% and 13%, respectively, during the same period.

 

5.	EARNINGS PER SHARE

 

The numerator (loss/income) and denominator (shares) used for the computation of basic and diluted (loss) earnings per share were as follows (in thousands):

 

 

 

OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES

 

NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(Continued)

 

 

 

Our calculation of diluted loss per share for the three and six months ended June 30, 2016 excluded 756,653 shares and 759,206 shares, respectively, issuable pursuant to outstanding stock options and restricted stock awards, due to their antidilutive effect. Our calculation of diluted earnings per share for the three and six months ended June 30, 2015 excluded 766,203 shares and 739,695 shares, respectively, issuable pursuant to outstanding stock options and restricted stock awards, due to their antidilutive effect.

 

6.	BUSINESS ACQUISITIONS AND GOODWILL

 

On January 2, 2015, we acquired all of the equity of Montgomery Machine Company, Inc. (MMC). Headquartered in Houston, Texas, MMC combines machining and proprietary cladding technology and services to manufacture high-specification components for the offshore capital equipment industry. We believe that the acquisition of MMC strengthens our position in our offshore products segment as a supplier of subsea components with enhanced capabilities, proprietary technology and logistical advantages. Total transaction consideration was $33.4 million, net of cash acquired. The operations of MMC have been included in our offshore products segment since the acquisition date.

 

 

OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES

 

NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(Continued)

 

Changes in the carrying amount of goodwill for the six month period ended June 30, 2016 were as follows (in thousands): 

 

 

7.

DEBT

 

As of June 30, 2016 and December 31, 2015, long-term debt consisted of the following (in thousands):

 

 

(1)

Amounts presented are net of $2.3 million and $2.7 million, respectively, of unamortized debt issuance costs in accordance with FASB guidance issued in April 2015 regarding the presentation of debt issuance costs.

 

Credit Facility

 

The Company currently has a $600 million senior secured revolving credit facility (the revolving credit facility) with an option to increase the maximum borrowings under its revolving credit facility to $750 million subject to additional lender commitments prior to its maturity on May 28, 2019. The revolving credit facility is governed by a Credit Agreement dated as of May 28, 2014 (the Credit Agreement) by and among the Company, the Lenders party thereto, Wells Fargo Bank, N.A., as administrative agent, the Swing Line Lender and an Issuing Bank, and Royal Bank of Canada, as Syndication agent, and Compass Bank, as Documentation agent. Amounts outstanding under the revolving credit facility bear interest at LIBOR plus a margin of 1.50% to 2.50%, or at a base rate plus a margin of 0.50% to 1.50%, in each case based on a ratio of the Company’s total leverage to EBITDA (as defined in the Credit Agreement). During the first half of 2016, our applicable margin over LIBOR was 1.50%. We must also pay a quarterly commitment fee, based on our leverage ratio, on the unused commitments under the Credit Agreement. The unused commitment fee was 0.375% for the first half of 2016. The Credit Agreement contains customary financial covenants and restrictions. Specifically, we must maintain an interest coverage ratio, defined as the ratio of consolidated EBITDA to consolidated interest expense, of at least 3.0 to 1.0 and our maximum leverage ratio, defined as the ratio of total debt to consolidated EBITDA, of no greater than 3.25 to 1.0. Each of the factors considered in the calculations of these ratios are defined in the Credit Agreement. EBITDA and consolidated interest, as defined, exclude goodwill impairments, losses on extinguishment of debt, debt discount amortization, and other non-cash charges. As of June 30, 2016, we were in compliance with our debt covenants.

 

Borrowings under the Credit Agreement are secured by a pledge of substantially all of our assets and the assets of our domestic subsidiaries.  Our obligations under the Credit Agreement are guaranteed by our significant domestic subsidiaries. The revolving credit facility also contains negative covenants that limit the Company's ability to borrow additional funds, encumber assets, pay dividends, sell assets and enter into other significant transactions.

 

 

OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES

 

NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(Continued)

 

 

Under the Company's Credit Agreement, the occurrence of specified change of control events involving our Company would constitute an event of default that would permit the banks to, among other things, accelerate the maturity of the facility and cause it to become immediately due and payable in full.

 

As of June 30, 2016, we had $80.4 million outstanding under the Credit Agreement and an additional $32.5 million of outstanding letters of credit, leaving $283.2 million available to be drawn under the revolving credit facility. The total amount available to be drawn under our revolving credit facility was less than the lender commitments as of June 30, 2016, due to the maximum leverage ratio covenant in our revolving credit facility which serves to limit borrowings, and such availability is expected to be further reduced as our trailing twelve months EBITDA moves lower in 2016.

 

8.	FAIR VALUE MEASUREMENTS

 

The Company’s financial instruments consist of cash and cash equivalents, investments, receivables, payables, bank debt and foreign currency forward contracts. The Company believes that the carrying values of these instruments on the accompanying consolidated balance sheets approximate their fair values.

 

9.	CHANGES IN COMMON STOCK OUTSTANDING

 

 

On September 6, 2013, the Company announced an increase in its Board-authorized Company share repurchase program from $200 million to $500 million providing for the repurchase of the Company’s common stock, par value $.01 per share. On July 29, 2015, the Company’s Board of Directors approved the termination of our then existing share repurchase program and authorized a new program providing for the repurchase of up to $150 million of the Company’s common stock, par value $.01 per share. The new program was originally set to expire on July 29, 2016, however on July 27, 2016, our Board of Directors extended our share repurchase program for one year to July 29, 2017. During the first half of 2016, there were no repurchases of our common stock made under our current program. The amount remaining under our current share repurchase authorization as of June 30, 2016 was $136.8 million. Subject to applicable securities laws, such purchases will be at such times and in such amounts as the Company deems appropriate.

 

10.	STOCK-BASED COMPENSATION

 

The following table presents a summary of stock option award and restricted stock award activity for the six months ended June 30, 2016.

 

 

Stock-based compensation pre-tax expense recognized in the three month periods ended June 30, 2016 and 2015 totaled $5.5 million and $5.0 million, respectively. Stock-based compensation pre-tax expense recognized in the six month periods ended June 30, 2016 and 2015 totaled $10.6 million and $10.7 million, respectively.

 

 

OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES

 

NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(Continued)

 

 

In February 2016, the Company granted performance-based stock awards totaling 86,462 shares valued at a total of approximately $3.3 million using a Monte Carlo simulation model. These performance-based awards may vest in an amount that will depend on the Company’s achievement of specified performance objectives. These performance-based awards have a performance criteria that will be measured based upon the Company’s achievement of specified levels of relative total shareholder return compared to our peer group of companies for the three year period commencing January 1, 2016 and ending December 31, 2018.       

 

At June 30, 2016, $39.3 million of compensation costs related to unvested stock options and restricted stock awards attributable to vesting conditions had not yet been recognized.

 

11.	INCOME TAXES

 

Income tax expense for interim periods is based on estimates of the effective tax rate for the entire fiscal year. The Company’s income tax provision for the three and six months ended June 30, 2016 was an income tax benefit of $6.4 million, or 35.5% of pretax losses, and $14.5 million, or 36.7% of pretax losses, respectively, compared to income tax expense of $1.4 million, or 19.0% of pretax income, and $14.7 million, or 36.5% of pretax income, respectively, for the three and six months ended June 30, 2015. The effective tax rate for the six months ended June 30, 2015 included a $2.3 million deferred tax adjustment in the first quarter of 2015 for certain prior period non-deductible items, partially offset by reduced domestic income in 2015 due to the impact of the industry downturn in activity. 

 

12.	SEGMENT AND RELATED INFORMATION

 

In accordance with current accounting standards regarding disclosures about segments of an enterprise and related information, the Company has identified the following reportable segments: well site services and offshore products. The Company’s reportable segments represent strategic business units that offer different products and services. They are managed separately because each business requires different technologies and marketing strategies. Most of the businesses were initially acquired as a unit, and the management at the time of the acquisition was retained. Subsequent acquisitions have been direct extensions to our business segments. Separate business lines within the well site services segment have been disclosed to provide additional information for that segment.

  

 

OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES

 

NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(Continued)

 

 

Financial information by business segment for each of the three and six months ended June 30, 2016 and 2015 is summarized in the following table (in thousands).

 

 

 

 

 

 

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13.	COMMITMENTS AND CONTINGENCIES

 

In the ordinary course of conducting our business, we become involved in litigation and other claims from private party actions, as well as judicial and administrative proceedings involving governmental authorities at the federal, state and local levels. During 2014 and 2015, a number of lawsuits were filed in Federal Court, against the Company and or one of its subsidiaries, by current and former employees alleging violations of the Fair Labor Standards Act (FLSA). The plaintiffs seek damages and penalties for the Company’s alleged failure to: properly classify its field service employees as “non-exempt” under the FLSA; and pay them on an hourly basis (including overtime). The plaintiffs are seeking recovery on their own behalf as well as on behalf of a class of similarly situated employees. Settlement of the class action against the Company was approved and a judgment was entered November 19, 2015. The Company has settled the vast majority of these claims and is evaluating potential settlements for the remaining individual plaintiffs’ claims which are not expected to be significant.

 

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 of 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.

 

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