Business Acquisitions (Tables)

9 Months Ended

Sep. 30, 2023

Business Combinations [Abstract]

Schedule of Pro forma Consolidated Results of Operations

The following unaudited pro forma summary presents consolidated information of Dril-Quip as if the business combination had occurred on January 1, 2022.

	Pro forma three months ended September 30,					Pro forma nine months ended September 30,
	2023			2022		2023		2022
	(In thousands)
	(unaudited)
Revenues	$	125,367		$	112,471	$	352,343	$	329,692
Net income	$	(1,611	)	$	15,810	$	10,387	$	(1,450	)

Summary of Consideration Transferred to Acquire Great North

The following table summarizes the consideration transferred to acquire Great North:

Fair value of consideration transferred:	(In thousands)
Cash	$	84,097
Contingent consideration		3,571
Total	$	87,668

The acquisition of Great North includes a contingent consideration arrangement that requires additional consideration to be paid by Dril-Quip to the sellers of Great North based on the future revenues of Great North for FY 2024 and 2025. The range of the undiscounted amounts Dril-Quip could pay under the contingent consideration agreement is between zero and $30 million CAD, approximately $22.8 million. The fair value of the contingent consideration recognized on the acquisition date was $3.6 million. The current and noncurrent portion of contingent consideration is included in other accrued liabilities and other long-term liabilities, respectively. The fair value of the contingent consideration recognized on the acquisition date of $3.6 million was estimated by applying a Monte-Carlo valuation model based on Level 3 inputs. The Company will be required to remeasure this liability to fair value quarterly with any changes in the fair value recorded in income until the final payment is made.

Allocation of Purchase Price to Fair Value of Assets Acquired and Liabilities Assumed

The following table sets forth the preliminary purchase price allocation, which was based on fair value of assets acquired and liabilities assumed at the acquisition date, July 31, 2023:

Preliminary amounts of identified assets acquired and liabilities assumed:

	(In thousands)
Cash	$	1,810
Accounts receivable		16,499
Prepaid expenses and other current assets		609
Inventory		16,068
Property, plant and equipment		29,338
Right of use assets		11,115
Intangible assets (1)		22,263
Total assets acquired	$	97,702
Accounts payable		7,034
Accrued expenses		3,522
Deferred revenue		47
Lease liability, long-term		11,115
Deferred taxes		5,075
Total liabilities assumed	$	26,793
Net identifiable assets acquired	$	70,909
Goodwill		16,759
Net assets acquired	$	87,668

(1) Includes $4.0 million of trademarks with a weighted average useful life of 10 years, $3.6 million of patents with a weighted average useful life of 15 years, and $14.7 million of customer relationships with a weighted average useful life of 10 years. See “Goodwill and Intangible Assets,” Note 11 of Notes to the Condensed Consolidated Financial Statements for further information regarding intangible assets.