<PAGE>
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
----------------
FORM 10-Q
----------------
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY
PERIOD ENDED JUNE 30, 1998 OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 001-13439
----------------
DRIL-QUIP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
----------------
DELAWARE 74-2162088
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
13550 HEMPSTEAD HIGHWAY
HOUSTON, TEXAS 77040
(713) 939-7711
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
----------------
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 X NO
As of August 10, 1998, the number of shares outstanding of the registrant's
common stock,
par value $.01 per share, was 17,245,000.
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<PAGE>
PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
DRIL-QUIP, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
ASSETS 1997 1998
------ ------------ --------
(IN THOUSANDS)
<S> <C> <C>
Current assets:
Cash and cash equivalents............................. $ 32,612 $ 29,045
Trade receivables..................................... 27,336 33,926
Inventories........................................... 52,436 52,148
Deferred taxes........................................ 3,694 4,249
Prepaids and other current assets..................... 657 1,163
-------- --------
Total current assets................................ 116,735 120,531
Property, plant and equipment, net...................... 35,814 48,156
Other assets............................................ 372 274
-------- --------
Total assets........................................ $152,921 $168,961
======== ========
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<S> <C> <C>
Current liabilities:
Accounts payable...................................... $ 15,354 $ 16,949
Current maturities of long-term debt.................. 210 169
Accrued income taxes.................................. 1,176 2,254
Customer prepayments.................................. 4,324 9,223
Accrued compensation.................................. 3,098 3,335
Other accrued liabilities............................. 3,200 2,555
-------- --------
Total current liabilities........................... 27,362 34,485
Long-term debt.......................................... 308 244
Deferred taxes.......................................... 1,090 1,090
-------- --------
Total liabilities................................... 28,760 35,819
Stockholders' equity:
Preferred stock, 10,000,000 shares authorized at $0.01
par value (none issued).............................. -- --
Common stock:
50,000,000 shares authorized at $0.01 par value,
17,245,000 shares issued and outstanding........... 172 172
Additional paid-in capital............................ 63,291 63,291
Retained earnings..................................... 62,590 71,194
Foreign currency translation adjustment............... (1,892) (1,515)
-------- --------
Total stockholders' equity.......................... 124,161 133,142
-------- --------
Total liabilities and stockholders' equity.......... $152,921 $168,961
======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
2
<PAGE>
DRIL-QUIP, INC.
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
--------------------- ---------------------
1997 1998 1997 1998
---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Revenues......................... $ 34,454 $ 44,888 $ 68,669 $ 85,704
Cost and expenses:
Cost of sales.................. 23,090 30,274 47,725 57,557
Selling, general and
administrative................ 4,138 5,223 7,839 10,159
Engineering and product
development................... 2,219 2,883 4,109 5,554
---------- ---------- ---------- ----------
29,447 38,380 59,673 73,270
---------- ---------- ---------- ----------
Operating income................. 5,007 6,508 8,996 12,434
Interest expense (income)........ 732 (322) 1,400 (700)
---------- ---------- ---------- ----------
Income before income taxes....... 4,275 6,830 7,596 13,134
Income tax provision............. 1,418 2,356 2,483 4,531
---------- ---------- ---------- ----------
Net income....................... $ 2,857 $ 4,474 $ 5,113 $ 8,603
========== ========== ========== ==========
Earnings per share:
Basic.......................... $ 0.20 $ 0.26 $ 0.36 $ 0.50
========== ========== ========== ==========
Fully diluted.................. $ 0.20 $ 0.26 $ 0.36 $ 0.50
========== ========== ========== ==========
Weighted average shares:
Basic.......................... 14,370,000 17,245,000 14,370,000 17,245,000
========== ========== ========== ==========
Fully diluted.................. 14,370,000 17,311,000 14,370,000 17,305,000
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these statements
3
<PAGE>
DRIL-QUIP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30,
----------------
1997 1998
------- -------
(IN THOUSANDS)
<S> <C> <C>
OPERATING ACTIVITIES
Net income.................................................. $ 5,113 $ 8,603
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization............................. 2,608 2,550
Gain on sale of equipment................................. (126) (8)
Deferred income taxes..................................... (336) (552)
Changes in operating assets and liabilities:
Trade receivables........................................ 502 (6,492)
Inventories.............................................. (1,146) 620
Prepaids and other assets................................ (18) (401)
Trade accounts payable and accrued expense............... (4,160) 7,068
------- -------
Net cash provided by operating activities.................... 2,437 11,388
INVESTING ACTIVITIES
Purchase of property, plant, and equipment.................. (3,603) (14,924)
Proceeds from sale of equipment............................. 224 192
------- -------
Net cash used in investing activities....................... (3,379) (14,732)
FINANCING ACTIVITIES
Proceeds from revolving line of credit and long-term
borrowings................................................. 1,773 0
Principal payments on long-term debt........................ (1,769) (105)
------- -------
Net cash provided by (used in) financing activities......... 4 ( 105)
Effect of exchange rate changes on cash activities.......... 343 (118)
------- -------
Increase (decrease) in cash................................. ( 595) (3,567)
Cash at beginning of period................................. 1,361 32,612
------- -------
Cash at end of period....................................... $ 766 $29,045
======= =======
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE>
DRIL-QUIP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. ORGANIZATION AND PRINCIPLES OF CONSOLIDATION
Dril-Quip, Inc., a Delaware corporation (the "Company" or "Dril-Quip"),
manufactures highly engineered offshore drilling and production equipment
which 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, mudline hanger
systems, specialty connectors and associated pipe, drilling and production
riser systems, wellhead connectors and diverters for use by major integrated,
large independent and foreign national oil and gas companies in offshore areas
throughout the world. Dril-Quip also provides installation and reconditioning
services and rents running tools for use in connection with the installation
and retrieval of its products. The Company has three subsidiaries that
manufacture and market the Company's products abroad. Dril-Quip (Europe)
Limited is located in Aberdeen, Scotland, with branches in Norway, Holland,
and Denmark. Dril-Quip Asia Pacific PTE Ltd. is located in Singapore. DQ
Holdings PTY Ltd. is located in Perth, Australia.
The consolidated financial statements included herein have been prepared by
Dril-Quip and are unaudited, except for the balance sheet at December 31,
1997, which has been prepared from the audited financial statements at that
date. In the opinion of management, the unaudited consolidated interim
financial statements include all adjustments, consisting solely of normal
recurring adjustments, necessary for a fair presentation of the financial
position as of June 30, 1998, the results of operations for each of the three
and six-month periods ended June 30, 1998 and 1997 and the cash flows for each
of the six-month periods ended June 30, 1998 and 1997. Although management
believes the unaudited interim related disclosures in these financial
statements are adequate to make the information presented not misleading,
certain information and footnote disclosures normally included in annual
audited financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to the rules and
regulations of the Securities and Exchange Commission. The results of
operations and the cash flows for the six-month period ended June 30, 1998 are
not necessarily indicative of the results to be expected for the full year.
The consolidated financial statements included herein should be read in
conjunction with the audited financial statements and notes thereto included
in the Company's Annual Report on Form 10-K for the year ended December 31,
1997.
2. INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
(UNAUDITED)
DECEMBER 31, JUNE 30,
1997 1998
------------ -----------
(IN THOUSANDS)
<S> <C> <C>
Raw materials and supplies............................. $13,178 $13,812
Work in progress....................................... 14,766 17,408
Finished goods and purchased supplies.................. 24,492 20,928
------- -------
$52,436 $52,148
======= =======
</TABLE>
5
<PAGE>
DRIL-QUIP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) --(CONTINUED)
3. USE OF PROCEEDS
On October 28, 1997, the Company sold 2,875,000 shares of common stock in an
initial public offering (the "Offering"). The net proceeds to the Company from
the Offering were approximately $63 million. The Company is using these
proceeds for a three-year capital expansion program to increase manufacturing
capacity, improve and expand facilities and manufacture additional running
tools for rental. The Company plans to expand its manufacturing capacity by
approximately 90% during the three-year period 1997 through 1999,
approximately two-thirds of which is expected to be completed by the end of
1998. Pending application of the proceeds for these purposes, the Company used
approximately $30 million to repay its bank indebtedness in full during late
October and November 1997. The balance of the proceeds will be used for
working capital and excess cash is being invested in short-term investment
grade securities.
4. COMPREHENSIVE INCOME
As of January 1, 1998, the Company adopted Statement of Financial Accounting
Standards No. 130 ("SFAS No. 130"), Reporting Comprehensive Income. SFAS No.
130 establishes new rules for the reporting and display of comprehensive
income and its components; however, the adoption of this Statement had no
impact on the Company's net income or shareholders' equity. SFAS No. 130
requires unrealized gains or losses on the Company's foreign currency
translation adjustments, which prior to adoption were reported separately in
shareholders' equity, to be included in other comprehensive income.
During the first six months of 1998 and 1997, total comprehensive income
amounted to $9.0 million and $4.0 million, respectively. For the three-month
periods ended June 30, 1998 and 1997, total comprehensive income equaled $3.9
million and $2.9 million, respectively.
6
<PAGE>
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following is management's discussion and analysis of certain significant
factors that have affected certain aspects of the Company's financial position
and results of operations during the periods included in the accompanying
unaudited consolidated financial statements. This discussion should be read in
conjunction with the unaudited consolidated financial statements included
elsewhere herein, and with the discussion under "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the annual
consolidated financial statements included in the Company's Annual Report on
Form 10-K for the year ended December 31, 1997.
OVERVIEW
Dril-Quip manufactures highly engineered offshore drilling and production
equipment which is well suited for use in deepwater, harsh environment and
severe service applications. The Company designs and manufactures subsea
equipment, surface equipment and offshore rig equipment for use by major
integrated, large independent and foreign national oil and gas companies in
offshore areas throughout the world. The Company's principal products consist
of subsea and surface wellheads, subsea and surface production trees, mudline
hanger systems, specialty connectors and associated pipe, drilling and
production riser systems, wellhead connectors and diverters. Dril-Quip also
provides installation and reconditioning services and rents running tools for
use in connection with the installation and retrieval of its products.
The market for offshore drilling and production equipment and services is
fundamentally driven by the exploration, development and production spending
of oil and gas companies, particularly with respect to offshore activities
worldwide.
Revenues. Dril-Quip's revenues are generated by its two operating groups:
the Product Group and the Service Group. The Product Group manufactures
offshore drilling and production equipment, and the Service Group provides
installation and reconditioning services as well as rental running tools for
installation and retrieval of its products. In 1997, the Company derived 86%
of its revenues from the sale of its products and 14% of its revenues from
services. Revenues from the Service Group generally correlate to revenues from
product sales, because increased product sales generate increased revenues
from installation services and rental running tools. Substantially all of
Dril-Quip's sales are made on a purchase order basis. Purchase orders are
subject to change and/or termination at the option of the customer. In case of
a change or termination, the customer is required to pay the Company for work
performed and other costs necessarily incurred as a result of the change or
termination.
Historically, Dril-Quip recognized revenues upon the delivery of completed
product. Beginning in 1997, the Company has been involved with larger and more
complex projects that have longer manufacturing times. The Company accounted
for such projects on a percentage of completion basis. For the first six
months of 1998, two projects representing approximately 13% of the Company's
revenues were accounted for using percentage of completion accounting. The
Company expects that this percentage may increase in the future. Revenues
accounted for in this manner are generally recognized on the ratio of costs
incurred to the total estimated costs. Accordingly, price and cost estimates
are reviewed periodically as the work progresses, and adjustments
proportionate to the percentage of completion are reflected in the period when
such estimates are revised. Amounts received from customers in excess of
revenues recognized are classified as a current liability. The Company
historically has experienced some seasonality, with revenues and operating
income slightly lower during the first and third quarters compared to the
second and fourth quarters. The Company's revenues are affected by its
customers' capital expenditure budgeting process, which generally results in
lower revenues in the first quarter and higher revenues in the fourth quarter.
The increase in revenues recognized using percentage of completion accounting
may result in less fluctuation in revenues recognized from quarter to quarter.
7
<PAGE>
Foreign sales represent a significant portion of the Company's business. In
the six months ended June 30, 1998, the Company generated approximately 65% of
its revenues from foreign sales. In this period, approximately 70% (on the
basis of revenues generated) of all products sold were manufactured in the
United States.
Cost of Sales. The principal elements of cost of sales are labor, raw
materials and manufacturing overhead. Variable costs, such as labor, raw
materials, supplies and energy, generally account for approximately two-thirds
of the Company's cost of sales. The Company has experienced increased labor
costs over the past few years due to the limited supply of skilled workers.
Fixed costs, such as the fixed portion of manufacturing overhead, constitute
the remainder of the Company's cost of sales. Cost of sales as a percentage of
revenues is also influenced by the product mix sold in any particular quarter
and market conditions. The Company's costs related to its foreign operations
do not significantly differ from its domestic costs.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses include the costs associated with sales and marketing,
general corporate overhead, compensation expense, legal expenses and other
related administrative functions.
Engineering and Product Development Expenses. Engineering and product
development expenses consist of new product development and testing, as well
as application engineering related to customized products.
Income Tax Provision. Dril-Quip's effective tax rate has historically been
lower than the statutory rate due to benefits from its foreign sales
corporation.
8
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, certain statement
of operations data expressed as a percentage of revenues:
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED JUNE ENDED JUNE
30, 30,
------------- -------------
1997 1998 1997 1998
------ ------ ------ ------
<S> <C> <C> <C> <C>
Revenues:
Product Group..................................... 84.7% 87.3% 85.6% 87.6%
Service Group..................................... 15.3% 12.7% 14.4% 12.4%
------ ------ ------ ------
Total........................................... 100.0% 100.0% 100.0% 100.0%
Cost of sales....................................... 67.0% 67.5% 69.5% 67.2%
Selling, general and administrative expenses........ 12.0% 11.6% 11.4% 11.8%
Engineering and product development expenses........ 6.5% 6.4% 6.0% 6.5%
------ ------ ------ ------
Operating income.................................... 14.5% 14.5% 13.1% 14.5%
Interest expense.................................... 2.1% (0.7)% 2.0% (0.8)%
------ ------ ------ ------
Income before income taxes.......................... 12.4% 15.2% 11.1% 15.3%
Income tax provision................................ 4.1% 5.2% 3.6% 5.3%
------ ------ ------ ------
Net income.......................................... 8.3% 10.0% 7.5% 10.0%
====== ====== ====== ======
</TABLE>
THREE MONTHS ENDED JUNE 30, 1998 COMPARED TO THREE MONTHS ENDED JUNE 30, 1997.
Revenues. Revenues increased by $10.4 million, or 30%, to $44.9 million in
the three months ended June 30, 1998 from $34.5 million in the three months
ended June 30, 1997. This increase was primarily due to increased domestic
sales in the United States of $2.7 million, increased export sales from the
United States to South America of $2.8 million, increased European sales of
$2.1 million and increased sales of $2.4 million in the Asia-Pacific area. In
general, these revenue increases were the result of increased manufacturing
capacity and an increase in sales of new products related to larger and longer
term projects.
Cost of Sales. Cost of sales increased $7.2 million, or 31%, to $30.3
million for the three months ended June 30, 1998 from $23.1 million for the
same period in 1997. As a percentage of revenues, cost of sales was 67.0% and
67.5% for the three month periods ending June 30, 1997 and 1998.
Selling, General and Administrative Expenses. In the three months ended June
30, 1998, selling, general and administrative expenses increased by $1.1
million, or 26%, to $5.2 million from $4.1 million in the 1997 period. The
increase was due to an increased number of personnel to support higher sales
volumes and increased labor costs. Selling, general and administrative
expenses decreased as a percentage of revenues from 12.0% to 11.6%.
Engineering and Product Development Expenses. In the three months ended June
30, 1998, engineering and product development expenses increased by $664,000,
or 30%, to $2.9 million from $2.2 million in the same period in 1997. The
increase reflects an increased number of personnel and increased development
testing related to new products.
Interest Expense. Interest expense for the three months ended June 30, 1997
was approximately $732,000 as compared to interest income of $332,000 for the
three month period ended June 30, 1998. This fluctuation of approximately $1.1
million resulted from the repayment of substantially all of the Company's bank
debt during the fourth quarter of 1997.
Net Income. Net income increased by approximately $1.61 million, or 56%,
from $2.86 million in the three months ended June 30, 1997 to $4.47 million
for the same period in 1998 for the reasons set forth above.
9
<PAGE>
SIX MONTHS ENDED JUNE 30, 1998 COMPARED TO SIX MONTHS ENDED JUNE 30, 1997.
Revenues. Revenues increased by $17.0 million, or 25%, to $85.7 million in
the six months ended June 30, 1998 from $68.7 million in the six months ended
June 30, 1997. This increase was primarily due to increased domestic sales in
the United States of $6.9 million, increased export sales from the United
States to South America of $6.0 million, increased European sales of $1.2
million and increased sales of $2.7 million in the Asia-Pacific area. In
general, these revenue increases were the result of increased manufacturing
capacity and an increase in sales of new products related to larger and longer
term projects.
Cost of Sales. Cost of sales increased $9.8 million, or 21%, to $57.5
million for the six months ended June 30, 1998 from $47.7 million for the same
period in 1997. As a percentage of revenues, cost of sales was 69.5% and 67.2%
for the six month periods ending June 30, 1997 and 1998, respectively. This
improvement in cost of sales was mainly due to changes in the product mix and
improving margins on project-related sales.
Selling, General and Administrative Expenses. In the six months ended June
30, 1998, selling, general and administrative expenses increased by $2.3
million, or 30%, to $10.1 million from $7.8 million in the 1997 period. The
increase was due to an increased number of personnel to support higher sales
volumes and increased labor costs. Selling, general and administrative
expenses increased as a percent of revenues from 11.4% to 11.8%.
Engineering and Product Development Expenses. In the six months ended June
30, 1998, engineering and product development expenses increased by $1.4
million, or 35%, to $5.5 million from $4.1 million in the same period in 1997.
The increase reflects an increased number of personnel and increased
development testing related to new products.
Interest Expense. Interest expense for the six months ended June 30, 1997
was approximately $1.4 million as compared to interest income of $700,000 for
the six month period ended June 30, 1998. This fluctuation of approximately
$2.1 million resulted from the repayment of substantially all of the Company's
bank debt during the fourth quarter of 1997.
Net Income. Net income increased by approximately $3.5 million, or 68%, from
$5.1 million in the six months ended June 30, 1997 to $8.6 million for the
same period in 1998 for the reasons set forth above.
LIQUIDITY AND CAPITAL RESOURCES
The primary liquidity needs of the Company are to fund capital expenditures
and to fund working capital. Historically, the Company's principal sources of
funds have been cash flow from operations and bank indebtedness. However, in
October of 1997, the Company sold 2,875,000 shares of common stock in an
initial public offering (the "Offering") which resulted in net proceeds to the
Company of approximately $63 million. The Company is using the proceeds from
the Offering for a three-year capital expansion program to increase
manufacturing capacity, improve and expand facilities and manufacture
additional running tools for rental. The Company plans to expand its
manufacturing capacity by approximately 90% during the three-year period 1997
through 1999, approximately two-thirds of which is expected to be completed by
the end of 1998. Pending application of the proceeds for these purposes, the
Company used approximately $30 million to repay its bank indebtedness in full
during late October and November 1997. The balance of the proceeds will be
used for working capital and excess cash is being invested in short-term
investment grade securities.
Net cash provided by operating activities was approximately $2.4 million and
$11.4 million for the six months ended June 30, 1997 and 1998, respectively.
Improvements in cash flow from operating activities are principally due to
improved operating results, offset by increased working capital requirements
attributable to increases in accounts receivable due to increased sales.
Capital expenditures by the Company were $3.6 million and $14.9 million for
the six months ended June 30, 1997 and 1998, respectively. Principal payments
on long-term debt were approximately $1.8 million and $105,000 for the six
months ended June 30, 1997 and 1998, respectively.
The Company believes that the remaining proceeds from the Offering and cash
generated from operations will be sufficient to fund operations, working
capital needs and anticipated capital expenditure requirements.
10
<PAGE>
PART II--OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
None.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
Use of Proceeds.
In October 1997 the Company sold 2,875,000 shares of Common Stock in the
Offering. The net proceeds to the Company from the Offering were $63.3
million. As of June 30, 1998, the Company had used such net proceeds as
follows: (i) to repay $30 million of indebtedness outstanding under the
Company's credit facilities and term loans, which constitutes repayment of
such facilities in full, (ii) $10.2 million for the purchase of buildings,
machinery and equipment and (iii) $23.1 million in temporary investments. None
of such payments was a direct or indirect payment to directors or officers of
the Company or their associates, to persons owning 10% or more of any class of
equity securities of the Company or to affiliates of the Company.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 5. OTHER INFORMATION.
Forward Looking Statements.
The statements contained in all parts of this document, including, but not
limited to, those relating to the Company's scheduled, budgeted and other
future capital expenditures, use of Offering proceeds, working capital
requirements, the availability of expected sources of liquidity to implement
its business strategy, and any other statements regarding future operations,
financial results, business plans and cash needs and other statements that are
not historical facts are forward looking statements. When used in this
document, the words "anticipate," "estimate," "expect," "may," "project,"
"believe" and similar expressions are intended to be among the statements that
identify forward looking statements. These statements are based upon certain
assumptions and analyses made by management of the Company in light of its
experience and its perception of historical trends, current conditions,
expected future developments and other factors it believes are appropriate in
the circumstances. Such statements are subject to a number of assumptions,
risks and uncertainties, including but not limited to, those relating to the
volatility of oil and natural gas prices and cyclicality of the oil and gas
industry, the Company's international operations, operating risks, the
Company's dependence on key employees, the Company's dependence on skilled
machinists and technical personnel, the Company's reliance on product
development and possible technological obsolescence, control by certain
stockholders, the potential impact of governmental regulation and
environmental matters, competition, reliance on significant customers and
other factors detailed in the Registration Statement on Form S-1 (Registration
No. 333-33447) filed in connection with the Offering and the Company's other
filings with the Securities and Exchange Commission. Prospective investors are
cautioned that any such statements are not guarantees of future performance,
and that, should one or more of these risks or uncertainties materialize, or
should underlying assumptions prove incorrect, actual outcomes may vary
materially from those indicated.
11
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
*2.1 --Agreement and Plan of Merger by and Between Dril-Quip, Inc., a Texas
corporation, and Dril-Quip, Inc., a Delaware corporation
(Incorporated herein by reference to Exhibit 2.1 to the Company's
Registration Statement on Form S-1 (Registration No. 333-33447)).
*3.1 --Restated Certificate of Incorporation of the Company (Incorporated
herein by reference to Exhibit 3.2 to the Company's Registration
Statement on Form S-1 (Registration No. 333-33447)).
*3.2 --Bylaws of the Company (Incorporated herein by reference to Exhibit
3.3 to the Company's Registration Statement on Form S-1 (Registration
No. 333-33447)).
*3.3 --Certificate of Designations for Series A Junior Participating
Preferred Stock.
*4.1 --Form of certificate representing Common Stock (Incorporated herein
by reference to Exhibit 4.1 to the Company's Registration Statement
on Form S-1 (Registration No. 333-33447)).
*4.2 --Registration Rights Agreement among Dril-Quip, Inc. and certain
stockholders (Incorporated herein by reference to Exhibit 4.2 to the
Company's Registration Statement on Form S-1 (Registration No. 333-
33447)).
*4.3 --Rights Agreement between Dril-Quip, Inc. and ChaseMellon Shareholder
Services, L.L.C., as rights agent (Incorporated herein by reference
to Exhibit 4.3 to the Company's Registration Statement on Form S-1
(Registration No. 333-33447)).
27.1 --Financial Data Schedule.
</TABLE>
- --------
* Incorporated herein by reference as indicated.
REPORTS ON FORM 8-K
None.
12
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DRIL-QUIP, INC.
Date: August 10, 1998
/s/ Larry E. Reimert
-------------------------
Principal Financial Officer
and Duly Authorized Signatory
13
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