10-Q/A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q/A

(MARK ONE)


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

For the quarterly period ended March 31, 2024


☐	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.)

2050 West Sam Houston Parkway S., Suite 1100

Houston, texas

77042

(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 Regulation 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 Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

As of April 29, 2024, the number of shares outstanding of the registrant’s common stock, par value $0.01 per share, was 34,420,419.

EXPLANATORY NOTE

Dril-Quip, Inc. (the “Company” or “Dril-Quip”) is filing this Amendment No. 1 on Form 10-Q/A (this “Amendment” or “Form 10-Q/A”) to amend and restate certain items in its Quarterly Report on Form 10-Q for the quarter ended March 31, 2024, originally filed with the Securities and Exchange Commission (the “SEC”) on May 2, 2024 (the “Original Form 10-Q”).

In filing this Amendment, we are restating our previously issued Part I, Item 4. Controls and Procedures for the quarter ended March 31, 2024 to update that our disclosure controls and procedures were not effective due to the material weakness described below. In addition, we have filed an amended Annual Report on Form 10-K/A for the fiscal year ended December 31, 2023 with the SEC on July 8, 2024 (such report, the “Amended 2023 Form 10-K/A” and, together with this Amendment, the “Amended Reports”). The Amended 2023 Form 10-K/A was filed to correct for a misclassification of inventory write-downs as “Restructuring and other charges" rather than being recorded as “Cost of sales" in the Consolidated Statement of Income (Loss) for the fiscal year ended December 31, 2021 (the “Affected Period”) and other immaterial disclosure errors. All material restatement information will be included in the Amended Reports, and we do not intend to separately amend other filings that we have previously filed with the SEC.

Accordingly, investors and other readers should rely only on the financial information and other disclosures regarding the periods described above in this Amendment and in any other future filings with the SEC (as applicable) and should not rely on any previously issued or filed reports, press releases, corporate presentations or similar communications relating to the periods described above.

Background of the Restatement

As described in our Current Report on Form 8-K filed with the SEC on July 8, 2024, the Company received comment letters from the Division of Corporation Finance of the Securities and Exchange Commission ("SEC") on June 3, 2024 related to their review of both the Company’s Registration Statement on Form S-4 filed with the SEC on May 1, 2024 and the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023 (the “2023 Form 10-K”), and we became aware of an error in the classification of certain inventory write-downs. We misclassified inventory write-downs from 2021 totaling approximately $67 million, including $19.3 million related to the 2018 global strategic plan and approximately $47.7 million due to the discontinuation of certain product categories under the 2021 global strategic plan. The Company classified these charges as "Restructuring and other charges"; however, these charges should have been classified in "Cost of sales" in the Consolidated Statement of Income (Loss) for the fiscal year ended December 31, 2021, in accordance with ASC 420-10-S99-3. We have also updated other immaterial disclosure errors in this Amendment. See Note 1, Organization and Principals of Consolidation, in the Consolidated Financial Statements for additional information related to the specific items updated in this Amended Report, including descriptions of the adjustments.

Internal Control Considerations

In connection with the restatement of the audited Consolidated Financial Statements for the Affected Period, management re-evaluated the effectiveness of our internal control over financial reporting and identified a material weakness in our internal control over financial reporting as of December 31, 2023, described in Part II, Item 9A of the Amended 2023 Form 10-K/A. The material weakness remained in place as of March 31, 2024. As further described in Part I, Item 4 of this Amendment, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of March 31, 2024 due to such material weakness.

Items Amended in this Filing

For the convenience of the reader, this Amended Report presents the Original Report in its entirety, subject to the changes described below. The Company is filing this Amended Report in order to amend the following items (the “Amended Items”) of the Original Report:

•Part I, Item 1. Notes to Financial Statements

•Part I, Item 2. Management's Discussion and Analysis

•Part I, Item 4. Controls and Procedures

This Amended Report also includes revisions and updates to certain other information including, but not limited to, cross-references, an updated signature page and other conforming changes. Pursuant to the rules of the SEC, the exhibit list included in Part II, Item 6. Exhibits, Financial Statement Schedules of the Original Report has been amended and restated to include updates to applicable exhibits, consisting of currently-dated certifications.

In accordance with Rule 12b-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), this Amendment includes new certifications specified in Rule 13a-14 under the Exchange Act, from the Company’s Chief Executive Officer and Chief Financial Officer dated as of the date of this Amendment. This Amendment continues to describe the conditions as of the date of the Original Form 10-Q and, except as set forth herein, we have not updated or modified the disclosures contained in the Original Form 10-Q to reflect any events that have occurred after the Original Form 10-Q. Accordingly, forward-looking statements included in this Amendment may represent management’s views as of the Original Form 10-Q and should not be assumed to be accurate as of any date thereafter.

TABLE OF CONTENTS




		Page
PART I
Item 1.	Condensed Consolidated Financial Statements	4
	Balance Sheets	4
	Statements of Income (Loss)	5
	Statements of Comprehensive Income (Loss)	6
	Statements of Cash Flows	7
	Statements of Stockholders’ Equity	8
	Notes to Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	29
Item 4.	Controls and Procedures	29
PART II
Item 1.	Legal Proceedings	31
Item 1A.	Risk Factors	31
Item 5.	Other Information	35
Item 6.	Index to Exhibits	36
	Signatures	37

Table of Contents

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

DRIL-QUIP, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)


	March 31, 2024		December 31, 2023
	(In thousands, except per share data)
ASSETS
Current assets:
Cash and cash equivalents	$	198,197	$	187,323
Restricted cash		4,103		4,077
Short-term investments		4,016		25,908
Trade receivables, net		137,135		135,569
Unbilled receivables		139,610		148,429
Inventories		209,160		194,593
Prepaid expenses		13,126		14,119
Other current assets		8,285		9,699
Assets held for sale		1,513		-
Total current assets		715,145		719,717
Operating lease right of use assets		16,356		16,343
Property, plant and equipment, net		215,264		217,631
Deferred income taxes		9,663		8,989
Goodwill		16,288		16,654
Intangible assets		40,247		41,941
Other assets		8,064		6,906
Total assets	$	1,021,027	$	1,028,181
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	62,907	$	60,160
Accrued income taxes		7,064		5,942
Contract liabilities		6,839		7,583
Accrued compensation		14,026		14,035
Operating lease liabilities		2,300		2,118
Other accrued liabilities		40,420		27,865
Total current liabilities		133,556		117,703
Deferred income taxes		10,330		10,564
Income tax payable		385		346
Operating lease liabilities, long-term		14,541		14,554
Other long-term liabilities		4,852		3,754
Total liabilities		163,664		146,921
Contingencies (Note 14)
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,

Amendment: SEC Form 10-Q/A filed by Dril-Quip Inc.