<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, 2000 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 Identification No.)
of incorporation or organization)
13550 HEMPSTEAD HIGHWAY
HOUSTON, TEXAS
77040
(Address of principal executive offices)
(Zip Code)
(713) 939-7711
(Registrant's telephone number, including area code)
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 11, 2000, the number of shares outstanding of the registrant's
common stock, par value $.01 per share, was 17,282,998.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>
PART I--FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
DRIL-QUIP, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, June 30,
1999 2000
------------ --------
ASSETS
------ (In thousands)
<S> <C> <C>
Current assets:
Cash and cash equivalents............................. $ 10,456 $ 2,632
Trade receivables..................................... 36,832 50,067
Inventories........................................... 53,561 55,731
Deferred taxes........................................ 4,894 5,040
Prepaids and other current assets..................... 960 1,568
-------- --------
Total current assets................................ 106,703 115,038
Property, plant and equipment, net...................... 72,288 77,313
Other assets............................................ 472 636
-------- --------
Total assets........................................ $179,463 $192,987
======== ========
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<S> <C> <C>
Current liabilities:
Accounts payable...................................... $ 12,775 $ 14,231
Current maturities of long-term debt.................. 88 64
Accrued income taxes.................................. 482 690
Customer prepayments.................................. 5,119 1,872
Accrued compensation.................................. 4,439 3,836
Other accrued liabilities............................. 1,888 2,698
-------- --------
Total current liabilities........................... 24,791 23,391
Long-term debt.......................................... 61 11,541
Deferred taxes.......................................... 1,987 1,909
-------- --------
Total liabilities................................... 26,839 36,841
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,
17,278,374 shares issued and outstanding (17,245,000
at December 31, 1999)............................... 172 173
Additional paid-in capital............................ 63,291 64,288
Retained earnings..................................... 91,782 97,014
Foreign currency translation adjustment............... (2,621) (5,329)
-------- --------
Total stockholders' equity.......................... 152,624 156,146
-------- --------
Total liabilities and stockholders' equity.......... $179,463 $192,987
======== ========
</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 June Six months ended June
30, 30,
------------------------ ------------------------
1999 2000 1999 2000
----------- ----------- ----------- -----------
(In thousands except share amounts)
<S> <C> <C> <C> <C>
Revenues..................... $ 39,895 $ 39,345 $ 79,479 $ 74,353
Cost and expenses:
Cost of sales.............. 27,435 26,079 53,968 49,473
Selling, general and
administrative............ 5,262 5,935 10,752 11,124
Engineering and product
development............... 2,844 2,887 5,679 5,690
----------- ----------- ----------- -----------
35,541 34,901 70,399 66,287
----------- ----------- ----------- -----------
Operating income............. 4,354 4,444 9,080 8,066
Interest expense (income).... (78) 83 (181) 28
----------- ----------- ----------- -----------
Income before income taxes... 4,432 4,361 9,261 8,038
Income tax provision......... 1,535 1,519 3,222 2,806
=========== =========== =========== ===========
Net income................... $ 2,897 $ 2,842 $ 6,039 $ 5,232
=========== =========== =========== ===========
Earnings per share:
Basic...................... $ 0.17 $ 0.16 $ 0.35 $ 0.30
=========== =========== =========== ===========
Fully diluted.............. $ 0.17 $ 0.16 $ 0.35 $ 0.30
=========== =========== =========== ===========
Weighted average shares:
Basic...................... 17,245,000 17,278,000 17,245,000 17,278,000
=========== =========== =========== ===========
Fully diluted.............. 17,273,000 17,550,000 17,259,000 17,505,000
=========== =========== =========== ===========
</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,
----------------
1999 2000
------- -------
(In thousands)
<S> <C> <C>
Operating activities
Net income.................................................. $ 6,039 $ 5,232
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization.............................. 3,261 3,509
Gain on sale of equipment.................................. (177) 5
Deferred income taxes...................................... (588) (273)
Changes in operating assets and liabilities:
Trade receivables......................................... 8,123 (13,591)
Inventories............................................... 1,683 (4,208)
Prepaids and other assets................................. 187 (784)
Trade accounts payable and accrued expenses............... (6,786) (1,050)
------- -------
Net cash provided by (used in) operating activities...... 11,742 (11,160)
Investing activities
Purchase of property, plant and equipment................... (11,579) (9,672)
Proceeds from sale of equipment............................. 322 34
------- -------
Net cash used in investing activities.................... (11,257) (9,638)
Financing activities
Proceeds from revolving line of credit and long-term
borrowing.................................................. -- 11,600
Principal payments on long-term debt........................ (79) (42)
Activity under stock option plan............................ -- 997
------- -------
Net cash provided by (used in) financing activities...... (79) 12,555
</TABLE>
<TABLE>
<S> <C> <C>
Effect of exchange rate changes on cash activities.............. 204 419
------- ------
Increase (decrease) in cash..................................... 610 (7,824)
Cash at beginning of period..................................... 11,869 10,456
------- ------
Cash at end of period........................................... $12,479 $2,632
======= ======
</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 condensed consolidated financial statements included herein have been
prepared by Dril-Quip and are unaudited, except for the balance sheet at
December 31, 1999, which has been prepared from the audited financial
statements at that date. In the opinion of management, the unaudited condensed
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, 2000, and the results of operations and
the cash flows for each of the three and six-month periods ended June 30, 2000
and 1999. 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, 2000 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, 1999.
2. INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
(Unaudited)
December 31, June 30,
1999 2000
------------ -----------
(In thousands)
<S> <C> <C>
Raw materials and supplies.......................... $15,012 $12,720
Work in progress.................................... 11,731 19,935
Finished goods and purchased supplies............... 26,818 23,076
------- -------
$53,561 $55,731
======= =======
</TABLE>
3. 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 stockholders' equity.
SFAS No. 130 requires the Company to include unrealized gains or losses on
foreign currency translation adjustments in other comprehensive income, which
prior to adoption were reported separately in stockholders' equity.
During the first six months of 2000 and 1999, total comprehensive income
equaled $2.5 million and $3.9 million, respectively. For the three-month
periods ended June 30, 2000 and 1999, total comprehensive income equaled
$800,000 and $2.3 million, respectively.
5
<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, 1999.
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.
Both the market for offshore drilling and production equipment and services
and the Company's business are substantially dependent on the condition of the
oil and gas industry and, in particular, the willingness of oil and gas
companies to make capital expenditures on exploration, drilling and production
operations offshore. Oil and gas prices and the level of offshore drilling and
production activity have historically been characterized by significant
volatility.
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. For the six months ended June 30,
2000, the Company derived 86.8% of its revenues from the sale of its products
and 13.2% 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 a
completed product. Beginning in 1997, the Company began receiving orders
relating to larger and more complex projects that have longer manufacturing
time frames. The Company accounts for such projects on a percentage of
completion basis. For the first six months of 2000, eight projects
representing approximately 27% of the Company's revenues were accounted for
using percentage of completion accounting. 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.
Foreign sales represent a significant portion of the Company's business. In
the six months ended June 30, 2000, the Company generated approximately 58% 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.
6
<PAGE>
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. 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.
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
30, June 30,
------------- -------------
1999 2000 1999 2000
------ ------ ------ ------
<S> <C> <C> <C> <C>
Revenues:
Product Group................................. 88.9% 86.0% 87.0% 86.8%
Service Group................................. 11.1% 14.0% 13.0% 13.2%
------ ------ ------ ------
Total....................................... 100.0% 100.0% 100.0% 100.0%
Cost of sales................................... 68.8% 66.3% 67.9% 66.5%
Selling, general and administrative expenses.... 13.2% 15.1% 13.5% 15.0%
Engineering and product development expenses.... 7.1% 7.3% 7.2% 7.7%
------ ------ ------ ------
Operating income................................ 10.9% 11.3% 11.4% 10.8%
Interest expense (income)....................... (0.2)% 0.2% (0.2)% 0.0%
------ ------ ------ ------
Income before income taxes...................... 11.1% 11.1% 11.6% 10.8%
Income tax provision............................ 3.8% 3.9% 4.0% 3.8%
------ ------ ------ ------
Net income...................................... 7.3% 7.2% 7.6% 7.0%
====== ====== ====== ======
</TABLE>
Three Months Ended June 30, 2000 Compared to Three Months Ended June 30, 1999.
Revenues. Revenues decreased by $550,000, or 1%, to $39.3 million in the
three months ended June 30, 2000 from $39.9 million in the three months ended
June 30, 1999. The net decrease resulted from decreased domestic sales in the
United States of $3.1 million, offset by increased sales of $900,000 in the
Asia-Pacific area and $1.2 million in the European area, and increased export
sales from the United States of $400,000. The overall decrease in revenues was
primarily attributable to depressed oil prices that began in 1998 and
continued through the first half of 1999, which led to worldwide exploration
and budget cuts by most major oil companies. Although oil prices have returned
to higher levels since mid-1999, exploration and production spending by major
oil companies has not returned to previous levels. These conditions resulted
in pricing pressure and lower demand for Dril-Quip products.
Cost of Sales. Cost of sales decreased $1.4 million, or 5%, to $26.1
million for the three months ended June 30, 2000 from $27.5 million for the
same period in 1999. As a percentage of revenues, cost of sales were 66.3% and
68.8% for the three-month periods ending June 30, 2000 and 1999. This
reduction in cost of sales as a percentage of revenues resulted primarily from
improved margins related to long-term projects.
7
<PAGE>
Selling, General and Administrative Expenses. In the three months ended
June 30, 2000, selling, general and administrative expenses increased by
approximately $700,000, or 13%, to $5.94 million from $5.26 million in the
1999 period. Selling, general and administrative expenses increased as a
percentage of revenues to 15.1% from 13.2%. Approximately $400,000 of this
increase resulted from foreign currency translation losses caused by weakness
in the U.K. Pound Sterling relative to the U.S. Dollar.
Engineering and Product Development Expenses. In the three months ended
June 30, 2000, engineering and product development expenses increased by
approximately 2% to $2.89 million from $2.84 million in the same period in
1999. Engineering and product development expenses increased as a percentage
of revenues to 7.3% from 7.1%.
Interest Income and Expense. Interest expense for the three months ended
June 30, 2000 was $83,000 as compared to interest income of $78,000 for the
three-month period ended June 30, 1999. This change resulted primarily from
borrowings during the period ended June 30, 2000 under the Company's unsecured
revolving line of credit.
Net Income. Net income decreased by $55,000, or approximately 2%, to $2.8
million in the three months ended June 30, 2000 from $2.9 million for the same
period in 1999 for the reasons set forth above.
Six Months Ended June 30, 2000 Compared to Six Months Ended June 30, 1999.
Revenues. Revenues decreased by $5.1 million, or 6%, to $74.4 million in
the six months ended June 30, 2000 from $79.5 million in the six months ended
June 30, 1999. The net decrease was primarily due to decreased domestic sales
in the United States of $7.7 million, decreased sales of $1.5 million in the
European area, offset by increased export sales from the United States of $3.7
million, and increased sales of $400,000 in the Asia-Pacific area. The
decrease in revenues can be attributed to previously depressed oil prices
which led to worldwide exploration and production budget cuts by most major
oil companies. These reductions resulted in pricing pressure and less demand
for Dril-Quip products.
Cost of Sales. Cost of sales decreased $4.5 million, or 8%, to $49.5
million for the six months ended June 30, 2000 from $54.0 million for the same
period in 1999. As a percentage of revenues, cost of sales were 66.5% and
67.9% for the six month periods ending June 30, 2000 and 1999, respectively.
This reduction in cost of sales as a percentage of revenues resulted primarily
from improved margins related to long-term projects.
Selling, General and Administrative Expenses. In the six months ended June
30, 2000, selling, general and administrative expenses increased by
approximately $370,000, or 3%, to $11.12 million from $10.75 million in the
1999 period. The increase was primarily due to foreign currency translation
losses caused by weakness in the U.K. Pound Sterling relative to the U.S.
Dollar. Selling, general and administrative expenses increased as a percentage
of revenues to 15% from 13.5%.
Engineering and Product Development Expenses. Engineering and product
development expenses were $5.7 million for both of the six month periods ended
June 30, 2000 and 1999. Engineering and product development expenses increased
as a percentage of revenues to 7.7% from 7.2%.
Interest Income and Expense. Interest expense for the six months ended June
30, 2000 was approximately $28,000 as compared to interest income of $181,000
for the six month period ended June 30, 1999. This change resulted primarily
from borrowings during the period ended June 30, 2000 under the Company's
unsecured revolving line of credit.
Net Income. Net income decreased by approximately $800,000, or 13%, to $5.2
million in the six months ended June 30, 2000 from $6.0 million for the same
period in 1999 for the reasons set forth above.
8
<PAGE>
Liquidity and Capital Resources
The primary liquidity needs of the Company are (i) to fund capital
expenditures to increase manufacturing capacity, improve and expand facilities
and manufacture additional rental running tools and (ii) to fund working
capital. The Company's principal sources of funds are cash flows from
operations and bank indebtedness.
Net cash used in operating activities was approximately $11.2 million for
the six months ended June 30, 2000 while net cash provided by operating
activities was approximately $11.7 million in the 1999 period. The decrease in
cash flow from operating activities was principally due to increased working
capital requirements attributable to accounts receivable, inventories, trade
accounts payable and accrued expenses.
Capital expenditures by the Company were $9.7 million and $11.6 million for
the six months ended June 30, 2000 and 1999, respectively. Principal payments
on long-term debt were approximately $42,000 and $79,000 for the six months
ended June 30, 2000 and 1999, respectively.
On May 26, 2000, the Company amended its credit agreement with Bank One,
Texas, N.A. dated August 27, 1999 to increase its unsecured revolving line of
credit from $10 million to $30 million. At the option of the Company,
borrowing under this facility bears interest at either a rate equal to LIBOR
(London Interbank Offered Rate) plus 2% or the Bank One base rate. In
addition, the facility calls for quarterly interest payments and terminates on
June 30, 2003. As of June 30, 2000 the Company had drawn down $10.2 million
under this facility as a result of working capital requirements related to
operating activities.
On November 18, 1999, Dril-Quip (Europe) Limited entered into a credit
agreement with the Bank of Scotland which provides for a secured line of
credit of up to U.K. Pounds Sterling 3.0 million (approximately U.S. $4.5
million). Borrowing under this facility bears interest at the Bank of Scotland
base rate, currently 6.0%, plus 1%. As of June 30, 2000 Dril-Quip (Europe)
Limited had drawn down approximately U.S. $1.4 million under this facility.
The Company believes that cash generated from operations plus cash on hand
and its existing lines of credit will be sufficient to fund operations,
working capital needs and anticipated capital expenditure requirements.
However, should market conditions result in unexpected cash requirements, the
Company believes that additional borrowing from commercial lending
institutions would be readily available and more than adequate to meet such
requirements.
Item 3. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK
The Company does not engage in any material hedging transactions, forward
contracts or currency trading which could be subject to market risks inherent
to such transactions.
9
<PAGE>
PART II--OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 2. Changes in Securities and Use of Proceeds.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
Dril-Quip's annual meeting of stockholders was held on May 9, 2000 for the
purpose of electing two directors to serve a three-year term and approving the
appointment of Ernst & Young LLP as independent public accountants of the
Company for 2000.
1. Election of Directors
Stockholders elected Larry E. Reimert and Gary D. Smith, each for a three-
year term expiring at the 2003 annual meeting. The vote tabulation for each
individual director was as follows:
<TABLE>
<CAPTION>
Votes Cast
Votes Cast Against
Director For Or Withheld
-------- ---------- -----------
<S> <C> <C>
Larry E. Reimert...................................... 16,432,139 125,315
Gary D. Smith......................................... 16,432,139 125,315
</TABLE>
Directors continuing in office were J. Mike Walker, Gary W. Loveless, and
James M. Alexander.
2. Proposal approving the appointment of Ernst & Young LLP as independent
public accountants of the Company for 2000.
<TABLE>
<S> <C>
For............................................................... 16,556,317
Against........................................................... 685
Abstain........................................................... 452
</TABLE>
Item 5. Other Information.
Forward Looking Statements.
Statements contained in all parts of this document that are not historical
facts are forward looking statements that involve risks and uncertainties that
are beyond the Company's control. These forward-looking statements include the
following types of information and statements as they relate to the Company:
. scheduled, budgeted and other future capital expenditures;
. working capital requirements;
. the availability of expected sources of liquidity;
10
<PAGE>
. all statements regarding future operations, financial results, business
plans and cash needs; and
. the use of the words "anticipate," "estimate," "expect," "may,"
"project," "believe" and similar expressions intended to identify
uncertainties.
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 initial
public 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.
Item 6. Exhibits and Reports on Form 8-K.
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
*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)).
*4.1 --Certificate of Designations for Series A Junior Participating
Preferred Stock (Incorporated herein by reference to Exhibit 3.4 to
the Company's Registration Statement on Form S-1 (Registration No.
333-33447)).
*4.2 --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)).
*4.3 --Rights Agreement between Dril-Quip, Inc. and Chase Mellon
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)).
*10.1 --Credit Agreement between the Company and Bank One, Texas, N.A. dated
August 27, 1999 (Incorporated herein by reference to Exhibit 10.1 to
the Company's Report on Form 10-Q for the Quarter ended September 30,
1999).
10.2 --First amendment to Credit Agreement between the Company and Bank
One, Texas, N.A. dated May 26, 2000.
*10.3 --Credit Agreement between Dril-Quip (Europe) Limited and Bank of
Scotland dated November 18, 1999 (Incorporated herein by reference to
Exhibit 10.2 to the Company's Report on Form 10-Q for the Quarter
ended March 31, 2000).
27.1 --Financial Data Schedule.
</TABLE>
--------
* Incorporated herein by reference as indicated.
Reports on Form 8-K
None.
11
<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.
/s/ Jerry M. Brooks
-------------------------------------
Principal Financial Officer and
Duly Authorized Signatory
Date: August 11, 2000
12
