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2021-03-31

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(MARK ONE)

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

 

 

For the Quarterly Period Ended June 30, 2021

or

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

 

 

Commission file number 001-13439

 

DRIL-QUIP, INC.

(Exact name of registrant as specified in its charter)

 

 

delaware

 

74-2162088

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

6401 N. ELDRIDGE PARKWAY

HOUSTON, texas

77041

(Address of principal executive offices) (Zip Code)

(713) 939-7711

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading symbol(s)

Name of each exchange on which registered

Common Stock, $0.01 par value per share

DRQ

New York Stock Exchange

 

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.    Yes       No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of regulations S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes       No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

 

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2).    Yes       No  

As of July 26, 2021, the number of shares outstanding of the registrant’s common stock, par value $0.01 per share, was 35,431,110.

 

 


 

TABLE OF CONTENTS

 

 

 

 


Table of Contents

 

 

PART I—FINANCIAL INFORMATION

Item 1.        Financial Statements

DRIL-QUIP, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

 

 

 

June 30,

2021

 

 

December 31,

2020

 

 

 

(In thousands, except per share data)

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

370,481

 

 

$

345,955

 

Trade receivables, net

 

 

90,417

 

 

 

116,202

 

Unbilled receivables

 

 

145,400

 

 

 

140,318

 

Inventories, net

 

 

202,382

 

 

 

212,536

 

Prepaids and other current assets

 

 

40,606

 

 

 

48,182

 

Total current assets

 

 

849,286

 

 

 

863,193

 

Operating lease right of use assets

 

 

5,542

 

 

 

6,962

 

Property, plant and equipment, net

 

 

229,247

 

 

 

234,823

 

Deferred income taxes

 

 

6,403

 

 

 

5,768

 

Intangible assets

 

 

27,979

 

 

 

29,434

 

Other assets

 

 

6,252

 

 

 

10,992

 

Total assets

 

$

1,124,709

 

 

$

1,151,172

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

47,610

 

 

$

37,424

 

Accrued income taxes

 

 

1,960

 

 

 

4,343

 

Contract liabilities

 

 

13,448

 

 

 

11,339

 

Accrued compensation

 

 

8,549

 

 

 

5,015

 

Operating lease liabilities

 

 

928

 

 

 

1,110

 

Other accrued liabilities

 

 

34,040

 

 

 

26,281

 

Total current liabilities

 

 

106,535

 

 

 

85,512

 

Deferred income taxes

 

 

6,694

 

 

 

6,779

 

Income tax payable

 

 

9,524

 

 

 

9,383

 

Operating lease liabilities, long-term

 

 

4,636

 

 

 

5,845

 

Other long-term liabilities

 

 

1,996

 

 

 

2,125

 

Total liabilities

 

 

129,385

 

 

 

109,644

 

Contingencies (Note 12)

 

 

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

 

 

Preferred stock: 10,000,000 shares authorized at $0.01 par value (none issued)

 

 

-

 

 

 

-

 

Common stock:

 

 

 

 

 

 

 

 

100,000,000 shares authorized at $0.01 par value, 35,431,110 and 35,417,712

shares issued and outstanding at June 30, 2021 and December 31, 2020

 

 

363

 

 

 

363

 

Additional paid-in capital

 

 

71,878

 

 

 

65,613

 

Retained earnings

 

 

1,071,838

 

 

 

1,125,263

 

Accumulated other comprehensive losses

 

 

(148,755

)

 

 

(149,711

)

Total stockholders' equity

 

 

995,324

 

 

 

1,041,528

 

Total liabilities and stockholders' equity

 

$

1,124,709

 

 

$

1,151,172

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

3


Table of Contents

 

DRIL-QUIP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)

(UNAUDITED)

 

 

 

Three months ended

 

 

Six months ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

 

 

(In thousands, except per share data)

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Products

 

$

55,860

 

 

$

63,133

 

 

$

111,443

 

 

$

130,691

 

Services

 

 

17,536

 

 

 

20,750

 

 

 

35,203

 

 

 

39,564

 

Leasing

 

 

7,401

 

 

 

6,563

 

 

 

15,390

 

 

 

16,189

 

Total revenues

 

 

80,797

 

 

 

90,446

 

 

 

162,036

 

 

 

186,444

 

Cost and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of sales:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Products

 

 

43,920

 

 

 

49,741

 

 

 

85,124

 

 

 

103,386

 

Services

 

 

8,317

 

 

 

9,222

 

 

 

17,667

 

 

 

18,910

 

Leasing

 

 

9,302

 

 

 

7,974

 

 

 

15,535

 

 

 

16,055

 

Total cost of sales

 

 

61,539

 

 

 

66,937

 

 

 

118,326

 

 

 

138,351

 

Selling, general and administrative

 

 

29,593

 

 

 

23,331

 

 

 

59,151

 

 

 

47,989

 

Engineering and product development

 

 

3,722

 

 

 

5,364

 

 

 

7,759

 

 

 

10,889

 

Impairments

 

 

-

 

 

 

-

 

 

 

-

 

 

 

7,719

 

Restructuring and other charges

 

 

1,000

 

 

 

1,587

 

 

 

26,020

 

 

 

34,300

 

(Gain) loss on sale of assets

 

 

82

 

 

 

(85

)

 

 

(3,873

)

 

 

(552

)

Foreign currency transaction (gains) and losses

 

 

(475

)

 

 

817

 

 

 

899

 

 

 

(2,425

)

Total costs and expenses

 

 

95,461

 

 

 

97,951

 

 

 

208,282

 

 

 

236,271

 

Operating loss

 

 

(14,664

)

 

 

(7,505

)

 

 

(46,246

)

 

 

(49,827

)

Interest income

 

 

63

 

 

 

653

 

 

 

112

 

 

 

1,859

 

Interest expense

 

 

(59

)

 

 

(209

)

 

 

(498

)

 

 

(400

)

Loss before income taxes

 

 

(14,660

)

 

 

(7,061

)

 

 

(46,632

)

 

 

(48,368

)

Income tax provision (benefit)

 

 

4,407

 

 

 

7,081

 

 

 

6,793

 

 

 

(14,528

)

Net loss

 

$

(19,067

)

 

$

(14,142

)

 

$

(53,425

)

 

$

(33,840

)

Loss per common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

(0.54

)

 

$

(0.40

)

 

$

(1.51

)

 

$

(0.96

)

Diluted

 

$

(0.54

)

 

$

(0.40

)

 

$

(1.51

)

 

$

(0.96

)

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

35,387

 

 

 

35,023

 

 

 

35,386

 

 

 

35,359

 

Diluted

 

 

35,387

 

 

 

35,023

 

 

 

35,386

 

 

 

35,359

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

4


Table of Contents

 

DRIL-QUIP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(UNAUDITED)

 

 

 

Three months ended

 

 

Six months ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

 

 

(In thousands)

 

Net loss

 

$

(19,067

)

 

$

(14,142

)

 

$

(53,425

)

 

$

(33,840

)

Other comprehensive income (loss), net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

3,046

 

 

 

2,048

 

 

 

956

 

 

 

(22,931

)

Total comprehensive loss

 

$

(16,021

)

 

$

(12,094

)

 

$

(52,469

)

 

$

(56,771

)

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

5


Table of Contents

 

DRIL-QUIP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

 

 

 

Six months ended

 

 

 

June 30,

 

 

 

2021

 

 

2020

 

 

 

(In thousands)

 

Operating activities

 

 

 

 

 

 

 

 

Net loss

 

$

(53,425

)

 

$

(33,840

)

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

14,759

 

 

 

16,813

 

Stock-based compensation expense

 

 

6,265

 

 

 

6,458

 

Impairments

 

 

-

 

 

 

7,719

 

Restructuring and other charges

 

 

23,218

 

 

 

34,300

 

Gain on sale of assets

 

 

(3,873

)

 

 

(552

)

Deferred income taxes

 

 

(695

)

 

 

(2,421

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Trade receivables, net

 

 

26,450

 

 

 

(104

)

Unbilled receivables

 

 

(5,082

)

 

 

(467

)

Inventories, net

 

 

(12,700

)

 

 

(33,869

)

Prepaids and other assets

 

 

14,375

 

 

 

(23,452

)

Accounts payable and accrued expenses

 

 

15,123

 

 

 

11,224

 

Net cash provided by (used in) operating activities

 

 

24,415

 

 

 

(18,191

)

Investing activities

 

 

 

 

 

 

 

 

Purchase of property, plant and equipment

 

 

(5,625

)

 

 

(8,318

)

Proceeds from sale of equipment

 

 

5,950

 

 

 

3,138

 

Net cash provided by (used in) investing activities

 

 

325

 

 

 

(5,180

)

Financing activities

 

 

 

 

 

 

 

 

Repurchase of common shares

 

 

-

 

 

 

(25,000

)

Other

 

 

(77

)

 

 

(129

)

Net cash used in financing activities

 

 

(77

)

 

 

(25,129

)

Effect of exchange rate changes on cash activities

 

 

(137

)

 

 

(4,638

)

Increase (decrease) in cash and cash equivalents

 

 

24,526

 

 

 

(53,138

)

Cash and cash equivalents at beginning of period

 

 

345,955

 

 

 

398,946

 

Cash and cash equivalents at end of period

 

$

370,481

 

 

$

345,808

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

6


Table of Contents

 

 

DRIL-QUIP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(UNAUDITED)

 

 

 

Common Stock

 

 

Additional Paid-In Capital

 

 

Retained Earnings

 

 

Accumulated Other Comprehensive Losses

 

 

Total

 

 

 

 

 

 

 

(In thousands, except shares)

 

 

 

 

 

Balance at April 1, 2021

 

$

363

 

 

$

68,799

 

 

$

1,090,905

 

 

$

(151,801

)

 

$

1,008,266

 

Foreign currency translation adjustment

 

 

-

 

 

 

-

 

 

 

-

 

 

 

3,046

 

 

 

3,046

 

Net loss

 

 

-

 

 

 

-

 

 

 

(19,067

)

 

 

-

 

 

 

(19,067

)

Comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(16,021

)

Stock option expense

 

 

-

 

 

 

3,079

 

 

 

-

 

 

 

-

 

 

 

3,079

 

Balance at June 30, 2021

 

$

363

 

 

$

71,878

 

 

$

1,071,838

 

 

$

(148,755

)

 

$

995,324

 

 

 

Balance at January 1, 2021

 

$

363

 

 

$

65,613

 

 

$

1,125,263

 

 

$

(149,711

)

 

$

1,041,528

 

Foreign currency translation adjustment

 

 

-

 

 

 

-

 

 

 

-

 

 

 

956

 

 

 

956

 

Net loss

 

 

-

 

 

 

-

 

 

 

(53,425

)

 

 

-

 

 

 

(53,425

)

Comprehensive loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(52,469

)

Stock option expense

 

 

-

 

 

 

6,265

 

 

 

-

 

 

 

-

 

 

 

6,265

 

Balance at June 30, 2021

 

$

363

 

 

$

71,878

 

 

$

1,071,838

 

 

$

(148,755

)

 

$

995,324

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Stock

 

 

Additional Paid-In Capital

 

 

Retained Earnings

 

 

Accumulated Other Comprehensive Losses

 

 

Total

 

 

 

 

 

 

 

(In thousands, except shares)

 

 

 

 

 

Balance at April 1, 2020

 

$

363

 

 

$

56,045

 

 

$

1,136,335

 

 

$

(168,542

)

 

$

1,024,201

 

Foreign currency translation adjustment

 

 

-

 

 

 

-

 

 

 

-

 

 

 

2,048

 

 

 

2,048

 

Net loss

 

 

-

 

 

 

-

 

 

 

(14,142

)

 

 

-

 

 

 

(14,142

)

Comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(12,094

)