Document_and_Entity_Informatio
Document and Entity Information | 9 Months Ended | |
Sep. 30, 2014 | Oct. 24, 2014 | |
Document And Entity Information [Abstract] | ' | ' |
Document Type | '10-Q | ' |
Amendment Flag | 'false | ' |
Document Period End Date | 30-Sep-14 | ' |
Document Fiscal Year Focus | '2014 | ' |
Document Fiscal Period Focus | 'Q3 | ' |
Trading Symbol | 'DRQ | ' |
Entity Registrant Name | 'DRIL-QUIP INC | ' |
Entity Central Index Key | '0001042893 | ' |
Current Fiscal Year End Date | '--12-31 | ' |
Entity Filer Category | 'Large Accelerated Filer | ' |
Entity Common Stock, Shares Outstanding | ' | 39,473,139 |
Condensed_Consolidated_Balance
Condensed Consolidated Balance Sheets (Unaudited) (USD $) | Sep. 30, 2014 | Dec. 31, 2013 |
In Thousands, unless otherwise specified | ||
Current assets: | ' | ' |
Cash and cash equivalents | $314,964 | $384,356 |
Trade receivables, net | 331,572 | 279,253 |
Inventories, net | 407,916 | 368,354 |
Deferred income taxes | 22,580 | 24,951 |
Prepaids and other current assets | 26,937 | 21,899 |
Total current assets | 1,103,969 | 1,078,813 |
Property, plant and equipment, net | 310,300 | 304,806 |
Other assets | 14,761 | 10,993 |
Total assets | 1,429,030 | 1,394,612 |
Current liabilities: | ' | ' |
Accounts payable | 48,134 | 38,801 |
Accrued income taxes | 10,853 | 13,628 |
Customer prepayments | 57,810 | 45,025 |
Accrued compensation | 20,956 | 21,556 |
Other accrued liabilities | 31,672 | 23,780 |
Total current liabilities | 169,425 | 142,790 |
Deferred income taxes | 9,496 | 9,804 |
Total liabilities | 178,921 | 152,594 |
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, 39,473,809 and 40,822,627 shares issued and outstanding at September 30, 2014 and December 31, 2013 | 393 | 407 |
Additional paid-in capital | 62,450 | 191,965 |
Retained earnings | 1,219,440 | 1,069,816 |
Accumulated other comprehensive losses | -32,174 | -20,170 |
Total stockholders' equity | 1,250,109 | 1,242,018 |
Total liabilities and stockholders' equity | $1,429,030 | $1,394,612 |
Condensed_Consolidated_Balance1
Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) (USD $) | Sep. 30, 2014 | Dec. 31, 2013 |
Statement of Financial Position [Abstract] | ' | ' |
Preferred stock, shares authorized | 10,000,000 | 10,000,000 |
Preferred stock, par value | $0.01 | $0.01 |
Preferred stock, shares issued | 0 | 0 |
Common stock, par value | $0.01 | $0.01 |
Common stock, shares authorized | 100,000,000 | 100,000,000 |
Common stock, shares issued | 39,473,809 | 40,822,627 |
Common stock, shares outstanding | 39,473,809 | 40,822,627 |
Condensed_Consolidated_Stateme
Condensed Consolidated Statements of Income (Unaudited) (USD $) | 3 Months Ended | 9 Months Ended | ||
In Thousands, except Per Share data, unless otherwise specified | Sep. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 |
Revenues: | ' | ' | ' | ' |
Products | $198,827 | $187,437 | $560,742 | $536,781 |
Services | 42,923 | 37,287 | 115,396 | 103,129 |
Total revenues | 241,750 | 224,724 | 676,138 | 639,910 |
Cost and expenses: | ' | ' | ' | ' |
Products | 113,642 | 113,184 | 309,181 | 323,169 |
Services | 21,608 | 18,947 | 61,849 | 58,493 |
Total cost of sales | 135,250 | 132,131 | 371,030 | 381,662 |
Selling, general and administrative | 20,845 | 29,830 | 70,300 | 68,732 |
Engineering and product development | 12,663 | 10,778 | 34,295 | 29,139 |
Total costs and expenses | 168,758 | 172,739 | 475,625 | 479,533 |
Operating income | 72,992 | 51,985 | 200,513 | 160,377 |
Interest income | 206 | 203 | 555 | 486 |
Interest expense | -3 | -4 | -15 | -24 |
Income before income taxes | 73,195 | 52,184 | 201,053 | 160,839 |
Income tax provision | 17,512 | 12,189 | 51,428 | 38,075 |
Net income | $55,683 | $39,995 | $149,625 | $122,764 |
Earnings per common share: | ' | ' | ' | ' |
Basic | $1.41 | $0.98 | $3.72 | $3.02 |
Diluted | $1.40 | $0.98 | $3.70 | $3.01 |
Weighted average common shares outstanding: | ' | ' | ' | ' |
Basic | 39,630 | 40,683 | 40,208 | 40,617 |
Diluted | 39,880 | 40,911 | 40,444 | 40,821 |
Condensed_Consolidated_Stateme1
Condensed Consolidated Statements of Comprehensive Income (Unaudited) (USD $) | 3 Months Ended | 9 Months Ended | ||
In Thousands, unless otherwise specified | Sep. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 |
Statement of Comprehensive Income [Abstract] | ' | ' | ' | ' |
Net income | $55,683 | $39,995 | $149,625 | $122,764 |
Other comprehensive income (loss), net of tax: | ' | ' | ' | ' |
Foreign currency translation adjustments | -28,432 | 16,194 | -12,004 | -7,940 |
Total comprehensive income | $27,251 | $56,189 | $137,621 | $114,824 |
Condensed_Consolidated_Stateme2
Condensed Consolidated Statements of Cash Flows (Unaudited) (USD $) | 9 Months Ended | |
In Thousands, unless otherwise specified | Sep. 30, 2014 | Sep. 30, 2013 |
Operating activities | ' | ' |
Net income | $149,625 | $122,764 |
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | ' | ' |
Depreciation and amortization | 22,774 | 21,717 |
Stock-based compensation expense | 8,640 | 6,257 |
(Gain) loss on sale of equipment | -199 | 122 |
Deferred income taxes | 1,879 | -3,443 |
Changes in operating assets and liabilities: | ' | ' |
Trade receivables, net | -55,169 | 17,730 |
Inventories, net | -44,047 | -12,075 |
Prepaids and other assets | -9,375 | 2,586 |
Excess tax benefits of stock options and awards | -309 | -1,893 |
Accounts payable and accrued expenses | 28,765 | -12,911 |
Net cash provided by operating activities | 102,584 | 140,854 |
Investing activities | ' | ' |
Purchase of property, plant and equipment | -31,164 | -30,037 |
Proceeds from sale of equipment | 543 | 228 |
Net cash used in investing activities | -30,621 | -29,809 |
Financing activities | ' | ' |
Repurchase of common stock | -140,261 | 0 |
Proceeds from exercise of stock options | 1,864 | 9,362 |
Excess tax benefits of stock options and awards | 309 | 1,893 |
Net cash provided by (used in) financing activities | -138,088 | 11,255 |
Effect of exchange rate changes on cash activities | -3,267 | 1,451 |
Increase (decrease) in cash and cash equivalents | -69,392 | 123,751 |
Cash and cash equivalents at beginning of period | 384,356 | 257,191 |
Cash and cash equivalents at end of period | $314,964 | $380,942 |
Organization_and_Principles_of
Organization and Principles of Consolidation | 9 Months Ended |
Sep. 30, 2014 | |
Accounting Policies [Abstract] | ' |
Organization and Principles of Consolidation | ' |
1. 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 environments 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, 2013, 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, 2014 and the results of operations and comprehensive income for the three- and nine-month periods ended September 30, 2014 and 2013 and the cash flows for the nine-month periods ended September 30, 2014 and 2013. 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 the condensed consolidated financial statements are adequate. The results of operations, comprehensive income and cash flows for the nine-month period ended September 30, 2014 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, 2013. |
Significant_Accounting_Policie
Significant Accounting Policies | 9 Months Ended | ||||||||||||||||
Sep. 30, 2014 | |||||||||||||||||
Accounting Policies [Abstract] | ' | ||||||||||||||||
Significant Accounting Policies | ' | ||||||||||||||||
2. 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 as discussed more fully in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013. | |||||||||||||||||
Revenue Recognition | |||||||||||||||||
Product Revenue | |||||||||||||||||
The Company earns 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 percent 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. As of September 30, 2014 and December 31, 2013, receivables included $62.8 million and $52.9 million of unbilled receivables, respectively. For the quarter ended September 30, 2014, there were 14 projects representing approximately 15% of the Company’s total revenue and approximately 18% of its product revenues that were accounted for using percentage-of-completion accounting, compared to 12 projects during the third quarter of 2013, which also represented approximately 15% of the Company’s total revenues and approximately 18% of its product revenues. For the nine months ended September 30, 2014, there were 17 projects representing approximately 10% of the Company’s total revenues and approximately 13% of its product revenues, compared to 16 projects representing approximately 13% of the Company’s total revenues and approximately 15% of its product revenues for the nine months ended September 30, 2013, 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 revenue | |||||||||||||||||
The Company earns 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 | ||||||||||||||||
September 30, | September 30, | ||||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||||
(In thousands) | |||||||||||||||||
Weighted average common shares outstanding—basic | 39,630 | 40,683 | 40,208 | 40,617 | |||||||||||||
Dilutive effect of common stock options and awards | 250 | 228 | 236 | 204 | |||||||||||||
Weighted average common shares outstanding—diluted | 39,880 | 40,911 | 40,444 | 40,821 | |||||||||||||
New_Accounting_Standards
New Accounting Standards | 9 Months Ended |
Sep. 30, 2014 | |
Accounting Changes and Error Corrections [Abstract] | ' |
New Accounting Standards | ' |
3. New Accounting Standards | |
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 is effective for fiscal years beginning after December 15, 2016, including interim periods within that reporting period. The Company is currently evaluating the new guidance to determine the impact on its consolidated financial statements. |
StockBased_Compensation_and_St
Stock-Based Compensation and Stock Awards | 9 Months Ended |
Sep. 30, 2014 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ' |
Stock-Based Compensation and Stock Awards | ' |
4. Stock-Based Compensation and Stock Awards | |
During the three months ended September 30, 2014 and 2013, the Company recognized approximately $3.0 million and $2.1 million, respectively, of stock-based compensation expense, 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, 2014 and 2013, stock-based compensation expense totaled $8.6 million and $6.3 million, respectively. No stock-based compensation expense was capitalized during the three and nine months ended September 30, 2014 or 2013. There were no stock options or awards granted in the third quarter of 2014 or 2013. |
Inventories
Inventories | 9 Months Ended | ||||||||
Sep. 30, 2014 | |||||||||
Inventory Disclosure [Abstract] | ' | ||||||||
Inventories | ' | ||||||||
5. Inventories | |||||||||
Inventories consist of the following: | |||||||||
September 30, | December 31, | ||||||||
2014 | 2013 | ||||||||
(In thousands) | |||||||||
Raw materials | $ | 97,502 | $ | 85,670 | |||||
Work in progress | 124,176 | 119,929 | |||||||
Finished goods | 220,575 | 195,971 | |||||||
442,253 | 401,570 | ||||||||
Less: allowance for obsolete and excess inventory | (34,337 | ) | (33,216 | ) | |||||
Total inventory | $ | 407,916 | $ | 368,354 | |||||
Geographic_Areas
Geographic Areas | 9 Months Ended | ||||||||||||||||
Sep. 30, 2014 | |||||||||||||||||
Segment Reporting [Abstract] | ' | ||||||||||||||||
Geographic Areas | ' | ||||||||||||||||
6. Geographic Areas | |||||||||||||||||
Three months ended | Nine months ended | ||||||||||||||||
September 30, | September 30, | ||||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||||
(In thousands) | |||||||||||||||||
Revenues: | |||||||||||||||||
Western Hemisphere | |||||||||||||||||
Products | $ | 101,833 | $ | 105,836 | $ | 312,175 | $ | 301,436 | |||||||||
Services | 20,397 | 19,012 | 55,678 | 53,208 | |||||||||||||
Intercompany | 19,501 | 8,424 | 38,856 | 31,702 | |||||||||||||
Total | $ | 141,731 | $ | 133,272 | $ | 406,709 | $ | 386,346 | |||||||||
Eastern Hemisphere | |||||||||||||||||
Products | $ | 53,894 | $ | 48,235 | $ | 151,631 | $ | 146,715 | |||||||||
Services | 17,587 | 11,614 | 45,578 | 34,181 | |||||||||||||
Intercompany | 7,018 | 243 | 10,517 | 994 | |||||||||||||
Total | $ | 78,499 | $ | 60,092 | $ | 207,726 | $ | 181,890 | |||||||||
Asia-Pacific | |||||||||||||||||
Products | $ | 43,100 | $ | 33,366 | $ | 96,936 | $ | 88,630 | |||||||||
Services | 4,939 | 6,661 | 14,140 | 15,740 | |||||||||||||
Intercompany | 394 | 1,628 | 2,724 | 5,905 | |||||||||||||
Total | $ | 48,433 | $ | 41,655 | $ | 113,800 | $ | 110,275 | |||||||||
Summary | |||||||||||||||||
Products | $ | 198,827 | $ | 187,437 | $ | 560,742 | $ | 536,781 | |||||||||
Services | 42,923 | 37,287 | 115,396 | 103,129 | |||||||||||||
Intercompany | 26,913 | 10,295 | 52,097 | 38,601 | |||||||||||||
Eliminations | (26,913 | ) | (10,295 | ) | (52,097 | ) | (38,601 | ) | |||||||||
Total | $ | 241,750 | $ | 224,724 | $ | 676,138 | $ | 639,910 | |||||||||
Income before income taxes: | |||||||||||||||||
Western Hemisphere | $ | 34,496 | $ | 27,086 | $ | 106,666 | $ | 71,231 | |||||||||
Eastern Hemisphere | 25,620 | 5,597 | 56,794 | 43,721 | |||||||||||||
Asia-Pacific | 13,646 | 16,571 | 34,954 | 39,395 | |||||||||||||
Eliminations | (567 | ) | 2,930 | 2,639 | 6,492 | ||||||||||||
Total | $ | 73,195 | $ | 52,184 | $ | 201,053 | $ | 160,839 | |||||||||
September 30, | December 31, | ||||||||||||||||
2014 | 2013 | ||||||||||||||||
(In thousands) | |||||||||||||||||
Total Long-Lived Assets: | |||||||||||||||||
Western Hemisphere | $ | 224,653 | $ | 216,104 | |||||||||||||
Eastern Hemisphere | 45,519 | 43,430 | |||||||||||||||
Asia-Pacific | 57,815 | 59,192 | |||||||||||||||
Eliminations | (2,926 | ) | (2,927 | ) | |||||||||||||
Total | $ | 325,061 | $ | 315,799 | |||||||||||||
Total Assets: | |||||||||||||||||
Western Hemisphere | $ | 747,194 | $ | 803,069 | |||||||||||||
Eastern Hemisphere | 370,270 | 316,473 | |||||||||||||||
Asia-Pacific | 339,089 | 292,600 | |||||||||||||||
Eliminations | (27,523 | ) | (17,530 | ) | |||||||||||||
Total | $ | 1,429,030 | $ | 1,394,612 | |||||||||||||
Commitments_and_Contingencies
Commitments and Contingencies | 9 Months Ended |
Sep. 30, 2014 | |
Commitments and Contingencies Disclosure [Abstract] | ' |
Commitments and Contingencies | ' |
7. Commitments and Contingencies | |
Deepwater Horizon Incident | |
On April 22, 2010, a deepwater U.S. Gulf of Mexico drilling rig known as the Deepwater Horizon, that was operated by BP Exploration & Production, Inc. (“BP”) sank after an explosion and fire that began on April 20, 2010. Pursuant to a contract that the Company entered into with an affiliate of BP, it supplied to BP a wellhead and certain other equipment that were in use on the Deepwater Horizon at the time of the incident. The Company was named, along with other unaffiliated defendants, in both class action and other lawsuits arising from the Deepwater Horizon incident. These lawsuits were consolidated in the multi-district proceeding In Re: Oil Spill by the Oil Rig “Deepwater Horizon” in the Gulf of Mexico, on April 20, 2010 (“MDL Proceeding”). In 2012, the judge presiding over various lawsuits and proceedings dismissed all claims asserted against the Company in those proceedings with prejudice. On April 9, 2012, the judge issued an order granting a final judgment in favor of the Company with respect to the court’s prior order that granted the Company’s Motion for Summary Judgment. | |
One of the lawsuits against the Company consolidated in the MDL Proceeding was a personal injury lawsuit initially filed in a Texas state court. The plaintiff filed a motion to remand the lawsuit back to the Texas state court. In August 2014, the Company was informed that this lawsuit was settled and all claims against the Company were released. | |
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 prepaid tax) that can be used to offset future state taxes on sales to customers in the State of Rio de Janeiro once certified by the tax authorities under a process that is currently ongoing. When the credits are certified, the Company will have a five-year period in which to utilize them. In December 2010 and January 2011, the Company’s Brazilian subsidiary was served with 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 this assessment on the grounds that it would represent double taxation on the importation of the same goods and that the Company is entitled to the credits under applicable Brazilian law. The Company believes that these credits are valid and that success in the matter 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 dependency 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. |
Significant_Accounting_Policie1
Significant Accounting Policies (Policies) | 9 Months Ended | ||||||||||||||||
Sep. 30, 2014 | |||||||||||||||||
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 as discussed more fully in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013. | |||||||||||||||||
Revenue Recognition | ' | ||||||||||||||||
Revenue Recognition | |||||||||||||||||
Product Revenue | |||||||||||||||||
The Company earns 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 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 percent 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. As of September 30, 2014 and December 31, 2013, receivables included $62.8 million and $52.9 million of unbilled receivables, respectively. For the quarter ended September 30, 2014, there were 14 projects representing approximately 15% of the Company’s total revenue and approximately 18% of its product revenues that were accounted for using percentage-of-completion accounting, compared to 12 projects during the third quarter of 2013, which also represented approximately 15% of the Company’s total revenues and approximately 18% of its product revenues. For the nine months ended September 30, 2014, there were 17 projects representing approximately 10% of the Company’s total revenues and approximately 13% of its product revenues, compared to 16 projects representing approximately 13% of the Company’s total revenues and approximately 15% of its product revenues for the nine months ended September 30, 2013, all of which were accounted for using percentage-of-completion accounting. | |||||||||||||||||
Revenues Not Recognized Under 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 Revenue | ' | ||||||||||||||||
Service revenue | |||||||||||||||||
The Company earns 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. | |||||||||||||||||
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 | ||||||||||||||||
September 30, | September 30, | ||||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||||
(In thousands) | |||||||||||||||||
Weighted average common shares outstanding—basic | 39,630 | 40,683 | 40,208 | 40,617 | |||||||||||||
Dilutive effect of common stock options and awards | 250 | 228 | 236 | 204 | |||||||||||||
Weighted average common shares outstanding—diluted | 39,880 | 40,911 | 40,444 | 40,821 | |||||||||||||
Significant_Accounting_Policie2
Significant Accounting Policies (Tables) | 9 Months Ended | ||||||||||||||||
Sep. 30, 2014 | |||||||||||||||||
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 | ||||||||||||||||
September 30, | September 30, | ||||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||||
(In thousands) | |||||||||||||||||
Weighted average common shares outstanding—basic | 39,630 | 40,683 | 40,208 | 40,617 | |||||||||||||
Dilutive effect of common stock options and awards | 250 | 228 | 236 | 204 | |||||||||||||
Weighted average common shares outstanding—diluted | 39,880 | 40,911 | 40,444 | 40,821 | |||||||||||||
Inventories_Tables
Inventories (Tables) | 9 Months Ended | ||||||||
Sep. 30, 2014 | |||||||||
Inventory Disclosure [Abstract] | ' | ||||||||
Schedule of Inventories | ' | ||||||||
Inventories consist of the following: | |||||||||
September 30, | December 31, | ||||||||
2014 | 2013 | ||||||||
(In thousands) | |||||||||
Raw materials | $ | 97,502 | $ | 85,670 | |||||
Work in progress | 124,176 | 119,929 | |||||||
Finished goods | 220,575 | 195,971 | |||||||
442,253 | 401,570 | ||||||||
Less: allowance for obsolete and excess inventory | (34,337 | ) | (33,216 | ) | |||||
Total inventory | $ | 407,916 | $ | 368,354 | |||||
Geographic_Areas_Tables
Geographic Areas (Tables) | 9 Months Ended | ||||||||||||||||
Sep. 30, 2014 | |||||||||||||||||
Segment Reporting [Abstract] | ' | ||||||||||||||||
Schedule of Segment Reporting | ' | ||||||||||||||||
Three months ended | Nine months ended | ||||||||||||||||
September 30, | September 30, | ||||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||||
(In thousands) | |||||||||||||||||
Revenues: | |||||||||||||||||
Western Hemisphere | |||||||||||||||||
Products | $ | 101,833 | $ | 105,836 | $ | 312,175 | $ | 301,436 | |||||||||
Services | 20,397 | 19,012 | 55,678 | 53,208 | |||||||||||||
Intercompany | 19,501 | 8,424 | 38,856 | 31,702 | |||||||||||||
Total | $ | 141,731 | $ | 133,272 | $ | 406,709 | $ | 386,346 | |||||||||
Eastern Hemisphere | |||||||||||||||||
Products | $ | 53,894 | $ | 48,235 | $ | 151,631 | $ | 146,715 | |||||||||
Services | 17,587 | 11,614 | 45,578 | 34,181 | |||||||||||||
Intercompany | 7,018 | 243 | 10,517 | 994 | |||||||||||||
Total | $ | 78,499 | $ | 60,092 | $ | 207,726 | $ | 181,890 | |||||||||
Asia-Pacific | |||||||||||||||||
Products | $ | 43,100 | $ | 33,366 | $ | 96,936 | $ | 88,630 | |||||||||
Services | 4,939 | 6,661 | 14,140 | 15,740 | |||||||||||||
Intercompany | 394 | 1,628 | 2,724 | 5,905 | |||||||||||||
Total | $ | 48,433 | $ | 41,655 | $ | 113,800 | $ | 110,275 | |||||||||
Summary | |||||||||||||||||
Products | $ | 198,827 | $ | 187,437 | $ | 560,742 | $ | 536,781 | |||||||||
Services | 42,923 | 37,287 | 115,396 | 103,129 | |||||||||||||
Intercompany | 26,913 | 10,295 | 52,097 | 38,601 | |||||||||||||
Eliminations | (26,913 | ) | (10,295 | ) | (52,097 | ) | (38,601 | ) | |||||||||
Total | $ | 241,750 | $ | 224,724 | $ | 676,138 | $ | 639,910 | |||||||||
Income before income taxes: | |||||||||||||||||
Western Hemisphere | $ | 34,496 | $ | 27,086 | $ | 106,666 | $ | 71,231 | |||||||||
Eastern Hemisphere | 25,620 | 5,597 | 56,794 | 43,721 | |||||||||||||
Asia-Pacific | 13,646 | 16,571 | 34,954 | 39,395 | |||||||||||||
Eliminations | (567 | ) | 2,930 | 2,639 | 6,492 | ||||||||||||
Total | $ | 73,195 | $ | 52,184 | $ | 201,053 | $ | 160,839 | |||||||||
September 30, | December 31, | ||||||||||||||||
2014 | 2013 | ||||||||||||||||
(In thousands) | |||||||||||||||||
Total Long-Lived Assets: | |||||||||||||||||
Western Hemisphere | $ | 224,653 | $ | 216,104 | |||||||||||||
Eastern Hemisphere | 45,519 | 43,430 | |||||||||||||||
Asia-Pacific | 57,815 | 59,192 | |||||||||||||||
Eliminations | (2,926 | ) | (2,927 | ) | |||||||||||||
Total | $ | 325,061 | $ | 315,799 | |||||||||||||
Total Assets: | |||||||||||||||||
Western Hemisphere | $ | 747,194 | $ | 803,069 | |||||||||||||
Eastern Hemisphere | 370,270 | 316,473 | |||||||||||||||
Asia-Pacific | 339,089 | 292,600 | |||||||||||||||
Eliminations | (27,523 | ) | (17,530 | ) | |||||||||||||
Total | $ | 1,429,030 | $ | 1,394,612 | |||||||||||||
Organization_and_Principles_of1
Organization and Principles of Consolidation - Additional Information (Detail) | 9 Months Ended |
Sep. 30, 2014 | |
Location | |
Segment | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ' |
Number of geographic segments | 3 |
Number of headquarter locations | 3 |
Significant_Accounting_Policie3
Significant Accounting Policies - Additional Information (Detail) (USD $) | 3 Months Ended | 9 Months Ended | |||
In Millions, unless otherwise specified | Sep. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 | Dec. 31, 2013 |
Project | Project | Source | Project | ||
Method | |||||
Project | |||||
Accounting Policies [Abstract] | ' | ' | ' | ' | ' |
Number of product revenue sources | ' | ' | 2 | ' | ' |
Unbilled receivables | $62.80 | ' | $62.80 | ' | $52.90 |
Number of projects | 14 | 12 | 17 | 16 | ' |
Percentage of total revenues | 15.00% | 15.00% | 10.00% | 13.00% | ' |
Percentage of product revenues | 18.00% | 18.00% | 13.00% | 15.00% | ' |
Number of service revenue sources | ' | ' | 3 | ' | ' |
Significant_Accounting_Policie4
Significant Accounting Policies - Schedule of Earnings Per Share (Detail) | 3 Months Ended | 9 Months Ended | ||
In Thousands, unless otherwise specified | Sep. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 |
Earnings Per Share [Abstract] | ' | ' | ' | ' |
Weighted average common shares outstanding-basic | 39,630 | 40,683 | 40,208 | 40,617 |
Dilutive effect of common stock options and awards | 250 | 228 | 236 | 204 |
Weighted average common shares outstanding-diluted | 39,880 | 40,911 | 40,444 | 40,821 |
StockBased_Compensation_and_St1
Stock-Based Compensation and Stock Awards - Additional Information (Detail) (USD $) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ' | ' | ' | ' |
Stock-based compensation expense | $3,000,000 | $2,100,000 | $8,640,000 | $6,257,000 |
Capitalized expense | $0 | $0 | $0 | $0 |
Stock options or stock awards granted | 0 | 0 | ' | ' |
Inventories_Schedule_of_Invent
Inventories - Schedule of Inventories (Detail) (USD $) | Sep. 30, 2014 | Dec. 31, 2013 |
In Thousands, unless otherwise specified | ||
Inventory Disclosure [Abstract] | ' | ' |
Raw materials | $97,502 | $85,670 |
Work in progress | 124,176 | 119,929 |
Finished goods | 220,575 | 195,971 |
Inventory, gross, Total | 442,253 | 401,570 |
Less: allowance for obsolete and excess inventory | -34,337 | -33,216 |
Total inventory | $407,916 | $368,354 |
Geographic_Areas_Schedule_of_S
Geographic Areas - Schedule of Segment Reporting (Detail) (USD $) | 3 Months Ended | 9 Months Ended | |||
In Thousands, unless otherwise specified | Sep. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 | Dec. 31, 2013 |
Segment Reporting Information [Line Items] | ' | ' | ' | ' | ' |
Products | $198,827 | $187,437 | $560,742 | $536,781 | ' |
Services | 42,923 | 37,287 | 115,396 | 103,129 | ' |
Intercompany | 26,913 | 10,295 | 52,097 | 38,601 | ' |
Eliminations | -26,913 | -10,295 | -52,097 | -38,601 | ' |
Total revenues | 241,750 | 224,724 | 676,138 | 639,910 | ' |
Total Long-Lived Assets | 325,061 | ' | 325,061 | ' | 315,799 |
Income before income taxes | 73,195 | 52,184 | 201,053 | 160,839 | ' |
Total Assets | 1,429,030 | ' | 1,429,030 | ' | 1,394,612 |
Eliminations [Member] | ' | ' | ' | ' | ' |
Segment Reporting Information [Line Items] | ' | ' | ' | ' | ' |
Income before income taxes | -567 | 2,930 | 2,639 | 6,492 | ' |
Total Long-Lived Assets Eliminations | -2,926 | ' | -2,926 | ' | -2,927 |
Total Assets Eliminations | -27,523 | ' | -27,523 | ' | -17,530 |
Western Hemisphere [Member] | Operating Segments [Member] | ' | ' | ' | ' | ' |
Segment Reporting Information [Line Items] | ' | ' | ' | ' | ' |
Products | 101,833 | 105,836 | 312,175 | 301,436 | ' |
Services | 20,397 | 19,012 | 55,678 | 53,208 | ' |
Intercompany | 19,501 | 8,424 | 38,856 | 31,702 | ' |
Total revenues | 141,731 | 133,272 | 406,709 | 386,346 | ' |
Total Long-Lived Assets | 224,653 | ' | 224,653 | ' | 216,104 |
Income before income taxes | 34,496 | 27,086 | 106,666 | 71,231 | ' |
Total Assets | 747,194 | ' | 747,194 | ' | 803,069 |
Eastern Hemisphere [Member] | Operating Segments [Member] | ' | ' | ' | ' | ' |
Segment Reporting Information [Line Items] | ' | ' | ' | ' | ' |
Products | 53,894 | 48,235 | 151,631 | 146,715 | ' |
Services | 17,587 | 11,614 | 45,578 | 34,181 | ' |
Intercompany | 7,018 | 243 | 10,517 | 994 | ' |
Total revenues | 78,499 | 60,092 | 207,726 | 181,890 | ' |
Total Long-Lived Assets | 45,519 | ' | 45,519 | ' | 43,430 |
Income before income taxes | 25,620 | 5,597 | 56,794 | 43,721 | ' |
Total Assets | 370,270 | ' | 370,270 | ' | 316,473 |
Asia-Pacific [Member] | Operating Segments [Member] | ' | ' | ' | ' | ' |
Segment Reporting Information [Line Items] | ' | ' | ' | ' | ' |
Products | 43,100 | 33,366 | 96,936 | 88,630 | ' |
Services | 4,939 | 6,661 | 14,140 | 15,740 | ' |
Intercompany | 394 | 1,628 | 2,724 | 5,905 | ' |
Total revenues | 48,433 | 41,655 | 113,800 | 110,275 | ' |
Total Long-Lived Assets | 57,815 | ' | 57,815 | ' | 59,192 |
Income before income taxes | 13,646 | 16,571 | 34,954 | 39,395 | ' |
Total Assets | $339,089 | ' | $339,089 | ' | $292,600 |
Commitments_and_Contingencies_
Commitments and Contingencies - Additional Information (Detail) (Brazil [Member], USD $) | 1 Months Ended | 9 Months Ended | |
In Millions, unless otherwise specified | Dec. 31, 2010 | Mar. 31, 2010 | Sep. 30, 2014 |
Brazil [Member] | ' | ' | ' |
Commitments And Contingencies [Line Items] | ' | ' | ' |
Tax assessment settled with payments | $3.90 | $12.20 | ' |
Amount of interest, penalties and monetary restatement fees on tax assessments | 7.8 | ' | ' |
Tax credits once certified, period to use credits | ' | ' | '5 years |
Value of assessments served on Brazilian subsidiary | $13 | ' | ' |