Innovex International (INVX) 10-Q 27 Oct 16 2016 Q3 Quarterly report Financial data

DOCUMENT AND ENTITY INFORMATION

DOCUMENT AND ENTITY INFORMATION - shares	9 Months Ended
	Sep. 30, 2016	Oct. 26, 2016
Document And Entity Information [Abstract]
Entity Registrant Name	DRIL-QUIP INC
Entity Central Index Key	1,042,893
Trading Symbol	DRQ
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Document Type	10-Q
Document Period End Date	Sep. 30, 2016
Document Fiscal Year Focus	2,016
Document Fiscal Period Focus	Q3
Amendment Flag	false
Entity Common Stock, Shares Outstanding (shares)		37,581,391

CONDENSED CONSOLIDATED BALANCE

CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Sep. 30, 2016	Dec. 31, 2015
Current assets:
Cash and cash equivalents	$ 542,630	$ 381,336
Trade receivables, net	221,601	319,780
Inventories, net	351,133	344,458
Deferred income taxes	25,701	24,613
Prepaids and other current assets	16,987	54,111
Total current assets	1,158,052	1,124,298
Property, plant and equipment, net	290,139	294,251
Deferred income taxes	2,158	0
Other assets	11,711	9,701
Total assets	1,462,060	1,428,250
Current liabilities:
Accounts payable	23,669	30,934
Accrued income taxes	24,334	14,052
Customer prepayments	7,842	18,388
Accrued compensation	12,799	17,957
Other accrued liabilities	18,140	19,484
Total current liabilities	86,784	100,815
Deferred income taxes	2,881	2,977
Total liabilities	89,665	103,792
Commitments and contingencies (Note 7)
Stockholders’ equity:
Preferred stock, 10,000,000 shares authorized at $0.01 par value (none issued)	0	0
Common stock:
100,000,000 shares authorized at $0.01 par value, 37,576,727 and 37,951,223 shares issued and outstanding at September 30, 2016 and December 31, 2015	374	378
Additional paid-in capital	3,556	0
Retained earnings	1,499,934	1,425,344
Accumulated other comprehensive losses	(131,469)	(101,264)
Total stockholders’ equity	1,372,395	1,324,458
Total liabilities and stockholders’ equity	$ 1,462,060	$ 1,428,250

CONDENSED CONSOLIDATED BALANCE3

CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares	Sep. 30, 2016	Dec. 31, 2015
Statement of Financial Position [Abstract]
Preferred stock, shares authorized (in shares)	10,000,000	10,000,000
Preferred stock, shares issued (in shares)	0	0
Preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized (in shares)	100,000,000	100,000,000
Common stock, shares issued (in shares)	37,576,727	37,951,223
Common stock, shares outstanding (in shares)	37,576,727	37,951,223
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01

CONDENSED CONSOLIDATED STATEMEN

CONDENSED CONSOLIDATED STATEMENTS OF INCOME - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Revenues:
Products	$ 101,277	$ 157,790	$ 352,519	$ 521,413
Services	22,363	43,612	80,121	121,267
Total revenues	123,640	201,402	432,640	642,680
Cost of sales:
Products	63,879	88,923	206,208	293,279
Services	13,754	19,209	44,402	57,655
Total cost of sales	77,633	108,132	250,610	350,934
Selling, general and administrative	12,504	17,280	31,487	67,871
Engineering and product development	10,570	11,735	33,050	35,348
Total costs and expenses	100,707	137,147	315,147	454,153
Operating income	22,933	64,255	117,493	188,527
Interest income	945	345	1,968	559
Interest expense	(1)	(4)	(15)	(10)
Income before income taxes	23,877	64,596	119,446	189,076
Income tax provision	4,864	13,819	27,527	45,422
Net income	$ 19,013	$ 50,777	$ 91,919	$ 143,654
Earnings per common share:
Basic (in dollars per share)	$ 0.51	$ 1.32	$ 2.45	$ 3.72
Diluted (in dollars per share)	$ 0.51	$ 1.32	$ 2.44	$ 3.70
Weighted average common shares outstanding:
Basic (in shares)	37,371	38,347	37,562	38,601
Diluted (in shares)	37,554	38,548	37,699	38,789

CONDENSED CONSOLIDATED STATEME5

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Statement of Comprehensive Income [Abstract]
Net income	$ 19,013	$ 50,777	$ 91,919	$ 143,654
Other comprehensive loss, net of tax:
Foreign currency translation adjustments	(8,852)	(33,099)	(30,204)	(43,792)
Total comprehensive income	$ 10,161	$ 17,678	$ 61,715	$ 99,862

CONDENSED CONSOLIDATED STATEME6

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015
Operating activities
Net income	$ 91,919	$ 143,654
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization	23,092	22,777
Stock-based compensation expense	9,442	9,794
(Gain) loss on sale of equipment	(93)	73
Deferred income taxes	(3,435)	(7,420)
Changes in operating assets and liabilities:
Trade receivables, net	92,075	60,329
Inventories, net	(12,515)	8,993
Prepaids and other assets	34,350	(8,747)
Excess tax benefits of stock options and awards	(58)	(57)
Accounts payable and accrued expenses	(13,283)	(70,658)
Net cash provided by operating activities	221,494	158,738
Investing activities
Purchase of property, plant and equipment	(20,289)	(16,746)
Proceeds from sale of equipment	281	183
Net cash used in investing activities	(20,008)	(16,563)
Financing activities
Repurchase of common stock	(24,238)	(40,911)
Proceeds from exercise of stock options	940	1,952
Excess tax benefits of stock options and awards	58	57
Net cash used in financing activities	(23,240)	(38,902)
Effect of exchange rate changes on cash activities	(16,952)	(5,009)
Increase in cash and cash equivalents	161,294	98,264
Cash and cash equivalents at beginning of period	381,336	298,705
Cash and cash equivalents at end of period	$ 542,630	$ 396,969

Organization and Principles of

Organization and Principles of Consolidation	9 Months Ended
	Sep. 30, 2016
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Organization and Principles of Consolidation	Organization and Principles of Consolidation Dril-Quip, Inc., a Delaware corporation (the “Company” or “Dril-Quip”), designs, manufactures, sells and services highly engineered offshore drilling and production equipment that is well suited for use in deepwater, harsh environment and severe service applications. The Company’s principal products consist of subsea and surface wellheads, subsea and surface production trees, subsea control systems and manifolds, mudline hanger systems, specialty connectors and associated pipe, drilling and production riser systems, liner hangers, wellhead connectors and diverters. Dril-Quip’s products are used by major integrated, large independent and foreign national oil and gas companies in offshore areas throughout the world. Dril-Quip also provides technical advisory assistance on an as-requested basis during installation of its products, as well as rework and reconditioning services for customer-owned Dril-Quip products. In addition, Dril-Quip’s customers may rent or purchase running tools from the Company for use in the installation and retrieval of the Company’s products. The Company’s operations are organized into three geographic segments—Western Hemisphere (including North and South America; headquartered in Houston, Texas), Eastern Hemisphere (including Europe and Africa; headquartered in Aberdeen, Scotland) and Asia-Pacific (including the Pacific Rim, Southeast Asia, Australia, India and the Middle East; headquartered in Singapore). Each of these segments sells similar products and services and the Company has major manufacturing facilities in all three of its headquarter locations as well as Macae, Brazil. The condensed consolidated financial statements included herein are unaudited. The balance sheet at December 31, 2015 has been derived from the audited consolidated financial statements at that date. In the opinion of management, the unaudited condensed consolidated interim financial statements include all normal recurring adjustments necessary for a fair presentation of the financial position as of September 30, 2016 and the results of operations and comprehensive income for the three and nine months ended September 30, 2016 and 2015 and the cash flows for the nine months ended September 30, 2016 and 2015 . Certain information and footnote disclosures normally included in annual audited consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission. Management believes the unaudited interim related disclosures in these condensed consolidated financial statements are adequate. The results of operations, comprehensive income and cash flows for the nine months ended September 30, 2016 are not necessarily indicative of the results to be expected for the full year. The condensed consolidated financial statements included herein should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015 .

Significant Accounting Policies

Significant Accounting Policies	9 Months Ended
	Sep. 30, 2016
Accounting Policies [Abstract]
Significant Accounting Policies	Significant Accounting Policies Principles of Consolidation The condensed consolidated financial statements include the accounts of the Company and its subsidiaries. All material intercompany accounts and transactions have been eliminated. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Some of the Company’s more significant estimates are those affected by critical accounting policies for revenue recognition, inventories and contingent liabilities. Revenue Recognition Product revenues The Company recognizes product revenues from two methods: • product revenues recognized under the percentage-of-completion method; and • product revenues from the sale of products that do not qualify for the percentage-of-completion method. Revenues recognized under the percentage-of-completion method The Company uses the percentage-of-completion method on long-term project contracts that have the following characteristics: • the contracts call for products which are designed to customer specifications; • the structural designs are unique and require significant engineering and manufacturing efforts generally requiring more than one year in duration; • the contracts contain specific terms as to milestones, progress billings and delivery dates; and • product requirements cannot be filled directly from the Company’s standard inventory. For each project, the Company prepares a detailed analysis of estimated costs, profit margin, completion date and risk factors which include availability of material, production efficiencies and other factors that may impact the project. On a quarterly basis, management reviews the progress of each project, which may result in revisions of previous estimates, including revenue recognition. The Company calculates the percentage complete and applies the percentage to determine the revenues earned and the appropriate portion of total estimated costs. Losses, if any, are recorded in full in the period they become known. Historically, the Company’s estimates of total costs and costs to complete have approximated actual costs incurred to complete the project. Under the percentage-of-completion method, billings may not correlate directly to the revenue recognized. Based upon the terms of the specific contract, billings may be in excess of the revenue recognized, in which case the amounts are included in customer prepayments as a liability on the Condensed Consolidated Balance Sheets. Likewise, revenue recognized may exceed customer billings in which case the amounts are reported in trade receivables. Unbilled revenues are expected to be billed and collected within one year. At September 30, 2016 and December 31, 2015 , receivables included $ 66.2 million and $ 70.8 million of unbilled receivables, respectively. For the quarter ended September 30, 2016 , there were 4 projects representing approximately 12% of the Company’s total revenues and approximately 14% of its product revenues that were accounted for using percentage-of-completion accounting, compared to 9 projects during the third quarter of 2015 , which represented approximately 17% of the Company’s total revenues and approximately 22% of its product revenues. For the nine months ended September 30, 2016 , there were 10 projects representing approximately 14% of the Company's total revenues and approximately 17% of its product revenues, compared to 14 projects that represented approximately 16% of the Company's total revenues and approximately 20% of its product revenues for the nine months ended September 30, 2015 , all of which were accounted for using percentage-of-completion accounting. Revenues not recognized under the percentage-of-completion method Revenues from the sale of inventory products, not accounted for under the percentage-of-completion method, are recorded at the time the manufacturing processes are complete and ownership is transferred to the customer. Service revenues The Company recognizes service revenues from three sources: • technical advisory assistance; • rental of running tools; and • rework and reconditioning of customer-owned Dril-Quip products. The Company does not install products for its customers, but it does provide technical advisory assistance. At the time of delivery of the product, the customer is not obligated to buy or rent the Company’s running tools and the Company is not obligated to perform any subsequent services relating to installation. Technical advisory assistance service revenue is recorded at the time the service is rendered. Service revenues associated with the rental of running and installation tools are recorded as earned. Rework and reconditioning service revenues are recorded when the refurbishment process is complete. The Company normally negotiates contracts for products, including those accounted for under the percentage-of-completion method, and services separately. For all product sales, it is the customer’s decision as to the timing of the product installation as well as whether Dril-Quip running tools will be purchased or rented. Furthermore, the customer is under no obligation to utilize the Company’s technical advisory assistance services. The customer may use a third party or their own personnel. Fair Value of Financial Instruments The Company’s financial instruments consist primarily of cash and cash equivalents, receivables and payables. The carrying values of these financial instruments approximate their respective fair values as they are short-term in nature. Earnings Per Share Basic earnings per common share is computed by dividing net income by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per common share is computed considering the dilutive effect of stock options and awards using the treasury stock method. In each relevant period, the net income used in the basic and dilutive earnings per share calculations is the same. The following table reconciles the weighted average basic number of common shares outstanding and the weighted average diluted number of common shares outstanding for the purpose of calculating basic and diluted earnings per share: Three months ended Nine months ended 2016 2015 2016 2015 (In thousands) Weighted average common shares outstanding—basic 37,371 38,347 37,562 38,601 Dilutive effect of common stock options and awards 183 201 137 188 Weighted average common shares outstanding—diluted 37,554 38,548 37,699 38,789

New Accounting Standards

New Accounting Standards	9 Months Ended
	Sep. 30, 2016
New Accounting Pronouncements and Changes in Accounting Principles [Abstract]
New Accounting Standards	New Accounting Standards In March 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-09 “Improvements to Employee Share-Based Payment Accounting (Topic 718).” The standard simplifies several aspects of accounting for share-based payment transactions, including the accounting for income taxes, forfeitures and statutory withholding requirements, as well as classification in the statement of cash flows. The standard is effective for annual periods beginning after December 15, 2016, including interim periods within those fiscal years. The Company is evaluating the impact of the new standard on its consolidated financial statements. In February 2016, the FASB issued ASU 2016-02 “Leases (Topic 842).” The new standard requires lessees to recognize lease assets (right of use) and lease obligations (lease liability) for leases previously classified as operating leases under generally accepted accounting principles on the balance sheet for leases with terms in excess of 12 months. The standard is effective for annual periods beginning after December 15, 2018, including interim periods within those fiscal years. The Company is evaluating the impact of the new standard on its consolidated financial statements. In November 2015, the FASB issued ASU 2015-17 “Income Taxes (Topic 740).” In an effort to reduce complexity, the requirement to separate deferred income tax liabilities and assets into current and noncurrent amounts will no longer be necessary. In the future, all deferred income taxes will be considered noncurrent and will continue to be offset into a single amount within each country. The standard is effective for fiscal years beginning after December 15, 2016 and interim periods within those fiscal years. The Company’s financial statements will be revised to reflect this amendment beginning in the first quarter of 2017. In July 2015, the FASB issued ASU 2015-11 “Simplifying the Measurement of Inventory (Topic 330).” This standard states that inventory within the scope of this update should be measured at the lower of cost and net realizable value. Net realizable value is defined as the estimated selling price in the normal course of business, less reasonably predictable costs of completion, disposal, and transportation. The standard is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. The Company is evaluating the impact of the new standard on its consolidated financial statements. In May 2014, the FASB issued ASU 2014-09 “Revenue from Contracts with Customers (Topic 606).” The amendment applies a new five-step revenue recognition model to be used in recognizing revenues associated with customer contracts. The amendment requires disclosure sufficient to enable readers of financial statements to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers, including qualitative and quantitative disclosures, significant judgments and changes in judgments and assets recognized from the costs to obtain or fulfill the contract. The standard’s effective date was originally for fiscal years beginning after December 15, 2016, including interim periods within that reporting period. On April 1, 2015, the FASB voted to defer the effective date by one year to December 15, 2017 and interim periods within annual reporting periods beginning after December 15, 2017. The Company is evaluating the impact of the new standard on its consolidated financial statements.

Stock-Based Compensation and St

Stock-Based Compensation and Stock Awards	9 Months Ended
	Sep. 30, 2016
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Stock-Based Compensation and Stock Awards	Stock-Based Compensation and Stock Awards The Company recognized approximately $3.2 million and $3.3 million , respectively, of stock-based compensation expense during the three months ended September 30, 2016 and 2015 , which is included in the selling, general and administrative expense line on the Condensed Consolidated Statements of Income. For the nine months ended September 30, 2016 and 2015 , stock-based compensation expense totaled $9.4 million and $9.8 million , respectively. No stock-based compensation expense was capitalized during the three or nine months ended September 30, 2016 or 2015 .

Inventories, net

Inventories, net	9 Months Ended
	Sep. 30, 2016
Inventory Disclosure [Abstract]
Inventories, net	Inventories, net Inventories consist of the following: September 30, December 31, (In thousands) Raw materials $ 86,314 $ 101,311 Work in progress 87,015 104,102 Finished goods 221,570 178,292 394,899 383,705 Less: allowance for obsolete and excess inventory (43,766 ) (39,247 ) Net inventory $ 351,133 $ 344,458

Geographic Areas

Geographic Areas	9 Months Ended
	Sep. 30, 2016
Segment Reporting [Abstract]
Geographic Areas	Geographic Areas Three months ended Nine months ended 2016 2015 2016 2015 (In thousands) Revenues: Western Hemisphere Products $ 61,071 $ 75,681 $ 202,457 $ 250,056 Services 13,395 23,285 47,171 67,092 Intercompany 6,444 17,002 27,660 41,757 Total $ 80,910 $ 115,968 $ 277,288 $ 358,905 Eastern Hemisphere Products $ 26,133 $ 44,955 $ 89,207 $ 185,194 Services 7,264 15,128 28,275 40,387 Intercompany 109 549 316 5,372 Total $ 33,506 $ 60,632 $ 117,798 $ 230,953 Asia-Pacific Products $ 14,073 $ 37,154 $ 60,855 $ 86,163 Services 1,704 5,199 4,675 13,788 Intercompany 1,335 2,492 1,851 4,881 Total $ 17,112 $ 44,845 $ 67,381 $ 104,832 Summary Products $ 101,277 $ 157,790 $ 352,519 $ 521,413 Services 22,363 43,612 80,121 121,267 Intercompany 7,888 20,043 29,827 52,010 Eliminations (7,888 ) (20,043 ) (29,827 ) (52,010 ) Total $ 123,640 $ 201,402 $ 432,640 $ 642,680 Income before income taxes: Western Hemisphere $ 9,406 $ 23,536 $ 48,397 $ 83,500 Eastern Hemisphere 15,618 24,386 57,352 69,969 Asia-Pacific 73 16,471 11,296 28,960 Eliminations (1,220 ) 203 2,401 6,647 Total $ 23,877 $ 64,596 $ 119,446 $ 189,076 September 30, December 31, (In thousands) Total Long-Lived Assets: Western Hemisphere $ 213,603 $ 208,408 Eastern Hemisphere 36,137 43,449 Asia-Pacific 54,746 55,021 Eliminations (478 ) (2,926 ) Total $ 304,008 $ 303,952 Total Assets: Western Hemisphere $ 716,829 $ 677,460 Eastern Hemisphere 391,815 391,672 Asia-Pacific 369,102 372,823 Eliminations (15,686 ) (13,705 ) Total $ 1,462,060 $ 1,428,250

Commitments and Contingencies

Commitments and Contingencies	9 Months Ended
	Sep. 30, 2016
Commitments and Contingencies Disclosure [Abstract]
Commitments and Contingencies	Commitments and Contingencies Brazilian Tax Issue From 2002 to 2007, the Company’s Brazilian subsidiary imported goods through the State of Espirito Santo in Brazil and subsequently transferred them to its facility in the State of Rio de Janeiro. During that period, the Company’s Brazilian subsidiary paid taxes to the State of Espirito Santo on its imports. Upon the final sale of these goods, the Company’s Brazilian subsidiary collected taxes from customers and remitted them to the State of Rio de Janeiro net of the taxes paid on importation of those goods to the State of Espirito Santo in accordance with the Company’s understanding of Brazilian tax laws. In August 2007, the State of Rio de Janeiro served the Company’s Brazilian subsidiary with assessments to collect a state tax on the importation of goods through the State of Espirito Santo from 2002 to 2007 claiming that these taxes were due and payable to it under applicable law. The Company settled these assessments with payments to the State of Rio de Janeiro of $ 12.2 million in March 2010 and $ 3.9 million in December 2010. Approximately $ 7.8 million of these settlement payments were attributable to penalties, interest and amounts that had expired under the statute of limitations so that amount was recorded as an expense. The remainder of the settlement payments generated credits (recorded as a long-term prepaid tax) to be used to offset future state taxes on sales to customers in the State of Rio de Janeiro, which were subject to certification by the tax authorities. During the second quarter of 2015, the tax authorities certified approximately $ 8.3 million of those credits paid in 2010 and granted an additional $ 2.3 million in inflation-related credits. The additional amount of credits granted by the tax authorities increased long-term prepaid taxes and decreased selling, general and administrative expenses by $ 2.3 million . In December 2010 and January 2011, the Company’s Brazilian subsidiary was served with two additional assessments totaling approximately $ 13.0 million from the State of Rio de Janeiro to cancel the credits associated with the tax payments to the State of Espirito Santo (Santo Credits) on the importation of goods from July 2005 to October 2007. The Santo Credits are not related to the credits described above. The Company has objected to these assessments on the grounds that they would represent double taxation on the importation of the same goods and that the Company is entitled to the credits under applicable Brazilian law. With regard to the December 2010 assessment, the Company’s Brazilian subsidiary has filed an appeal with the relevant State of Rio de Janeiro judicial court to annul the tax assessment following a ruling against the Company by the tax administration’s highest council. In connection with the appeal of the December 2010 assessment, the Company was required to deposit with the court approximately $ 3.1 million in December 2014 as the full amount of the assessment with penalties and interest. The Company intends to file a similar appeal in the judicial system with regard to the January 2011 assessment as a result of a ruling against the Company by the tax administration's highest council. The Company believes that these credits are valid and that success in the judicial court process is probable. Based upon this analysis, the Company has not accrued any liability in conjunction with this matter. Since 2007, the Company’s Brazilian subsidiary has paid taxes on the importation of goods directly to the State of Rio de Janeiro and the Company does not expect any similar issues to exist for periods subsequent to 2007. General The Company operates its business and markets its products and services in most of the significant oil and gas producing areas in the world and is, therefore, subject to the risks customarily attendant to international operations and dependent on the condition of the oil and gas industry. Additionally, products of the Company are used in potentially hazardous drilling, completion, and production applications that can cause personal injury, product liability and environmental claims. Although exposure to such risk has not resulted in any significant problems in the past, there can be no assurance that ongoing and future developments will not adversely impact the Company. The Company is also involved in a number of legal actions arising in the ordinary course of business. Although no assurance can be given with respect to the ultimate outcome of such legal action, in the opinion of management, the ultimate liability with respect thereto will not have a material adverse effect on the Company’s results of operations, financial position or cash flows.

Subsequent Event

Subsequent Event	9 Months Ended
	Sep. 30, 2016
Subsequent Events [Abstract]
Subsequent Event	Subsequent Event On October 14, 2016, the Company entered into a definitive agreement (Stock Purchase Agreement), dated as of October 14, 2016, with Pearce Industries, Inc. Pursuant to the Stock Purchase Agreement, the Company will acquire all the outstanding common stock, par value $100.00 per share, of TIW Corporation, a Texas Corporation, for a cash purchase price of $142.7 million . The purchase price is subject to adjustment for cash and working capital at the closing of the transaction and the payment by the Company of certain post-closing bonuses. Closing of the transaction is currently expected to occur in the fourth quarter of 2016.

Significant Accounting Polici15

Significant Accounting Policies (Policies)	9 Months Ended
	Sep. 30, 2016
Accounting Policies [Abstract]
Principles of Consolidation	Principles of Consolidation The condensed consolidated financial statements include the accounts of the Company and its subsidiaries. All material intercompany accounts and transactions have been eliminated.
Use of Estimates	Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Some of the Company’s more significant estimates are those affected by critical accounting policies for revenue recognition, inventories and contingent liabilities.
Revenue Recognition	Revenue Recognition Product revenues The Company recognizes product revenues from two methods: • product revenues recognized under the percentage-of-completion method; and • product revenues from the sale of products that do not qualify for the percentage-of-completion method.
Revenues recognized under the percentage-of-completion method	Revenues recognized under the percentage-of-completion method The Company uses the percentage-of-completion method on long-term project contracts that have the following characteristics: • the contracts call for products which are designed to customer specifications; • the structural designs are unique and require significant engineering and manufacturing efforts generally requiring more than one year in duration; • the contracts contain specific terms as to milestones, progress billings and delivery dates; and • product requirements cannot be filled directly from the Company’s standard inventory. For each project, the Company prepares a detailed analysis of estimated costs, profit margin, completion date and risk factors which include availability of material, production efficiencies and other factors that may impact the project. On a quarterly basis, management reviews the progress of each project, which may result in revisions of previous estimates, including revenue recognition. The Company calculates the percentage complete and applies the percentage to determine the revenues earned and the appropriate portion of total estimated costs. Losses, if any, are recorded in full in the period they become known. Historically, the Company’s estimates of total costs and costs to complete have approximated actual costs incurred to complete the project. Under the percentage-of-completion method, billings may not correlate directly to the revenue recognized. Based upon the terms of the specific contract, billings may be in excess of the revenue recognized, in which case the amounts are included in customer prepayments as a liability on the Condensed Consolidated Balance Sheets. Likewise, revenue recognized may exceed customer billings in which case the amounts are reported in trade receivables. Unbilled revenues are expected to be billed and collected within one year.
Revenues not recognized under the percentage-of-completion method	Revenues not recognized under the percentage-of-completion method Revenues from the sale of inventory products, not accounted for under the percentage-of-completion method, are recorded at the time the manufacturing processes are complete and ownership is transferred to the customer.
Service revenues	Service revenues The Company recognizes service revenues from three sources: • technical advisory assistance; • rental of running tools; and • rework and reconditioning of customer-owned Dril-Quip products. The Company does not install products for its customers, but it does provide technical advisory assistance. At the time of delivery of the product, the customer is not obligated to buy or rent the Company’s running tools and the Company is not obligated to perform any subsequent services relating to installation. Technical advisory assistance service revenue is recorded at the time the service is rendered. Service revenues associated with the rental of running and installation tools are recorded as earned. Rework and reconditioning service revenues are recorded when the refurbishment process is complete. The Company normally negotiates contracts for products, including those accounted for under the percentage-of-completion method, and services separately. For all product sales, it is the customer’s decision as to the timing of the product installation as well as whether Dril-Quip running tools will be purchased or rented. Furthermore, the customer is under no obligation to utilize the Company’s technical advisory assistance services. The customer may use a third party or their own personnel.
Fair Value of Financial Instruments	Fair Value of Financial Instruments The Company’s financial instruments consist primarily of cash and cash equivalents, receivables and payables. The carrying values of these financial instruments approximate their respective fair values as they are short-term in nature.
Earnings Per Share	Earnings Per Share Basic earnings per common share is computed by dividing net income by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per common share is computed considering the dilutive effect of stock options and awards using the treasury stock method.

Significant Accounting Polici16

Significant Accounting Policies (Tables)	9 Months Ended
	Sep. 30, 2016
Accounting Policies [Abstract]
Schedule of Earnings Per Share	The following table reconciles the weighted average basic number of common shares outstanding and the weighted average diluted number of common shares outstanding for the purpose of calculating basic and diluted earnings per share: Three months ended Nine months ended 2016 2015 2016 2015 (In thousands) Weighted average common shares outstanding—basic 37,371 38,347 37,562 38,601 Dilutive effect of common stock options and awards 183 201 137 188 Weighted average common shares outstanding—diluted 37,554 38,548 37,699 38,789

Inventories, net (Tables)

Inventories, net (Tables)	9 Months Ended
	Sep. 30, 2016
Inventory Disclosure [Abstract]
Schedule of Inventories	Inventories consist of the following: September 30, December 31, (In thousands) Raw materials $ 86,314 $ 101,311 Work in progress 87,015 104,102 Finished goods 221,570 178,292 394,899 383,705 Less: allowance for obsolete and excess inventory (43,766 ) (39,247 ) Net inventory $ 351,133 $ 344,458

Geographic Areas (Tables)

Geographic Areas (Tables)	9 Months Ended
	Sep. 30, 2016
Segment Reporting [Abstract]
Schedule of Segment Reporting	Three months ended Nine months ended 2016 2015 2016 2015 (In thousands) Revenues: Western Hemisphere Products $ 61,071 $ 75,681 $ 202,457 $ 250,056 Services 13,395 23,285 47,171 67,092 Intercompany 6,444 17,002 27,660 41,757 Total $ 80,910 $ 115,968 $ 277,288 $ 358,905 Eastern Hemisphere Products $ 26,133 $ 44,955 $ 89,207 $ 185,194 Services 7,264 15,128 28,275 40,387 Intercompany 109 549 316 5,372 Total $ 33,506 $ 60,632 $ 117,798 $ 230,953 Asia-Pacific Products $ 14,073 $ 37,154 $ 60,855 $ 86,163 Services 1,704 5,199 4,675 13,788 Intercompany 1,335 2,492 1,851 4,881 Total $ 17,112 $ 44,845 $ 67,381 $ 104,832 Summary Products $ 101,277 $ 157,790 $ 352,519 $ 521,413 Services 22,363 43,612 80,121 121,267 Intercompany 7,888 20,043 29,827 52,010 Eliminations (7,888 ) (20,043 ) (29,827 ) (52,010 ) Total $ 123,640 $ 201,402 $ 432,640 $ 642,680 Income before income taxes: Western Hemisphere $ 9,406 $ 23,536 $ 48,397 $ 83,500 Eastern Hemisphere 15,618 24,386 57,352 69,969 Asia-Pacific 73 16,471 11,296 28,960 Eliminations (1,220 ) 203 2,401 6,647 Total $ 23,877 $ 64,596 $ 119,446 $ 189,076 September 30, December 31, (In thousands) Total Long-Lived Assets: Western Hemisphere $ 213,603 $ 208,408 Eastern Hemisphere 36,137 43,449 Asia-Pacific 54,746 55,021 Eliminations (478 ) (2,926 ) Total $ 304,008 $ 303,952 Total Assets: Western Hemisphere $ 716,829 $ 677,460 Eastern Hemisphere 391,815 391,672 Asia-Pacific 369,102 372,823 Eliminations (15,686 ) (13,705 ) Total $ 1,462,060 $ 1,428,250

Organization and Principles o19

Organization and Principles of Consolidation - Additional Information (Detail)	9 Months Ended
	Sep. 30, 2016SegmentLocation
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Number of geographic segments | Segment	3
Number of headquarter locations | Location	3

Significant Accounting Polici20

Significant Accounting Policies - Additional Information (Detail) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2016USD ($)Project	Sep. 30, 2015Project	Sep. 30, 2016USD ($)ProjectSourceMethod	Sep. 30, 2015Project	Dec. 31, 2015USD ($)
Accounting Policies [Abstract]
Number of product revenue sources | Method			2
Unbilled receivables | $	$ 66.2		$ 66.2		$ 70.8
Number of projects | Project	4	9	10	14
Percentage of total revenues	12.00%	17.00%	14.00%	16.00%
Percentage of product revenues	14.00%	22.00%	17.00%	20.00%
Number of service revenue sources | Source			3

Significant Accounting Polici21

Significant Accounting Policies - Schedule of Earnings Per Share (Detail) - shares shares in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Accounting Policies [Abstract]
Weighted average common shares outstanding—basic (in shares)	37,371	38,347	37,562	38,601
Dilutive effect of common stock options and awards (in shares)	183	201	137	188
Weighted average common shares outstanding—diluted (in shares)	37,554	38,548	37,699	38,789

Stock-Based Compensation and 22

Stock-Based Compensation and Stock Awards - Additional Information (Detail) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Stock-based compensation expense	$ 3,200,000	$ 3,300,000	$ 9,442,000	$ 9,794,000
Capitalized expense	$ 0	$ 0	$ 0	$ 0

Inventories, net - Schedule of

Inventories, net - Schedule of Inventories (Detail) - USD ($) $ in Thousands	Sep. 30, 2016	Dec. 31, 2015
Inventory Disclosure [Abstract]
Raw materials	$ 86,314	$ 101,311
Work in progress	87,015	104,102
Finished goods	221,570	178,292
Inventory, gross, Total	394,899	383,705
Less: allowance for obsolete and excess inventory	(43,766)	(39,247)
Net inventory	$ 351,133	$ 344,458

Geographic Areas - Schedule of

Geographic Areas - Schedule of Segment Reporting (Detail) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015	Dec. 31, 2015
Segment Reporting Information [Line Items]
Products	$ 101,277	$ 157,790	$ 352,519	$ 521,413
Services	22,363	43,612	80,121	121,267
Revenues	123,640	201,402	432,640	642,680
Income before income taxes	23,877	64,596	119,446	189,076
Total Long-Lived Assets	304,008		304,008		$ 303,952
Total Assets	1,462,060		1,462,060		1,428,250
Eliminations [Member]
Segment Reporting Information [Line Items]
Revenues	7,888	20,043	29,827	52,010
Consolidation, Eliminations [Member]
Segment Reporting Information [Line Items]
Revenues	(7,888)	(20,043)	(29,827)	(52,010)
Income before income taxes	(1,220)	203	2,401	6,647
Total Long-Lived Assets	(478)		(478)		(2,926)
Total Assets	(15,686)		(15,686)		(13,705)
Western Hemisphere [Member]
Segment Reporting Information [Line Items]
Products	61,071	75,681	202,457	250,056
Services	13,395	23,285	47,171	67,092
Western Hemisphere [Member] | Operating Segments [Member]
Segment Reporting Information [Line Items]
Revenues	80,910	115,968	277,288	358,905
Income before income taxes	9,406	23,536	48,397	83,500
Total Long-Lived Assets	213,603		213,603		208,408
Total Assets	716,829		716,829		677,460
Western Hemisphere [Member] | Eliminations [Member]
Segment Reporting Information [Line Items]
Revenues	6,444	17,002	27,660	41,757
Eastern Hemisphere [Member]
Segment Reporting Information [Line Items]
Products	26,133	44,955	89,207	185,194
Services	7,264	15,128	28,275	40,387
Eastern Hemisphere [Member] | Operating Segments [Member]
Segment Reporting Information [Line Items]
Revenues	33,506	60,632	117,798	230,953
Income before income taxes	15,618	24,386	57,352	69,969
Total Long-Lived Assets	36,137		36,137		43,449
Total Assets	391,815		391,815		391,672
Eastern Hemisphere [Member] | Eliminations [Member]
Segment Reporting Information [Line Items]
Revenues	109	549	316	5,372
Asia-Pacific [Member]
Segment Reporting Information [Line Items]
Products	14,073	37,154	60,855	86,163
Services	1,704	5,199	4,675	13,788
Asia-Pacific [Member] | Operating Segments [Member]
Segment Reporting Information [Line Items]
Revenues	17,112	44,845	67,381	104,832
Income before income taxes	73	16,471	11,296	28,960
Total Long-Lived Assets	54,746		54,746		55,021
Total Assets	369,102		369,102		$ 372,823
Asia-Pacific [Member] | Eliminations [Member]
Segment Reporting Information [Line Items]
Revenues	$ 1,335	$ 2,492	$ 1,851	$ 4,881

Commitments and Contingencies -

Commitments and Contingencies - Additional Information (Detail) $ in Millions	1 Months Ended		2 Months Ended	3 Months Ended	10 Months Ended
	Dec. 31, 2010USD ($)	Mar. 31, 2010USD ($)	Jan. 31, 2011USD ($)Assessment	Jun. 30, 2015USD ($)	Dec. 31, 2010USD ($)	Dec. 31, 2014USD ($)
Commitments And Contingencies [Line Items]
Court deposit						$ 3.1
Brazil [Member]
Commitments And Contingencies [Line Items]
Tax assessment settled with payments	$ 3.9	$ 12.2
Amount of interest, penalties and monetary restatement fees on tax assessments					$ 7.8
Tax credits certified				$ 8.3
Number of additional assessments | Assessment			2
Value of assessments served on Brazilian subsidiary			$ 13
Brazil [Member] | Inflation Related Credits [Member]
Commitments And Contingencies [Line Items]
Tax credits certified				$ 2.3

Subsequent Event - Narrative (D

Subsequent Event - Narrative (Details) - Subsequent Event [Member] - TIW Corporation [Member] $ / shares in Units, $ in Millions	Oct. 14, 2016USD ($)$ / shares
Business Acquisition [Line Items]
Common stock, par value (in dollars per share) | $ / shares	$ 100
Purchase price for shares of TIW Corporation | $	$ 142.7