DOCUMENT AND ENTITY INFORMATION
DOCUMENT AND ENTITY INFORMATION - shares | 9 Months Ended | |
Sep. 30, 2017 | Oct. 25, 2017 | |
Document And Entity Information [Abstract] | ||
Entity Registrant Name | DRIL-QUIP INC | |
Entity Central Index Key | 1,042,893 | |
Trading Symbol | DRQ | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Large Accelerated Filer | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2017 | |
Document Fiscal Year Focus | 2,017 | |
Document Fiscal Period Focus | Q3 | |
Amendment Flag | false | |
Entity Common Stock, Shares Outstanding (in shares) | 37,860,549 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) - USD ($) $ in Thousands | Sep. 30, 2017 | Dec. 31, 2016 |
Current assets: | ||
Cash and cash equivalents | $ 473,045 | $ 423,497 |
Trade receivables, net | 197,139 | 213,513 |
Inventories, net | 297,217 | 355,413 |
Deferred income taxes | 0 | 24,497 |
Prepaids and other current assets | 25,088 | 39,791 |
Total current assets | 992,489 | 1,056,711 |
Property, plant and equipment, net | 286,560 | 323,149 |
Deferred income taxes | 53,713 | 1,699 |
Goodwill | 48,514 | 34,371 |
Intangible assets | 39,019 | 29,594 |
Other assets | 17,169 | 15,880 |
Total assets | 1,437,464 | 1,461,404 |
Current liabilities: | ||
Accounts payable | 23,860 | 36,108 |
Accrued income taxes | 5,448 | 24,543 |
Customer prepayments | 5,203 | 11,884 |
Accrued compensation | 16,070 | 10,829 |
Other accrued liabilities | 18,702 | 18,116 |
Total current liabilities | 69,283 | 101,480 |
Deferred income taxes | 2,188 | 3,500 |
Total liabilities | 71,471 | 104,980 |
Commitments and contingencies (Note 11) | ||
Stockholders’ equity: | ||
Preferred stock, 10,000,000 shares authorized at $0.01 par value (none issued) | 0 | 0 |
Common stock: | ||
100,000,000 shares authorized at $0.01 par value, 37,857,549 and 37,797,317 shares issued and outstanding at September 30, 2017 and December 31, 2016 | 375 | 375 |
Additional paid-in capital | 16,401 | 5,468 |
Retained earnings | 1,471,838 | 1,500,988 |
Accumulated other comprehensive losses | (122,621) | (150,407) |
Total stockholders’ equity | 1,365,993 | 1,356,424 |
Total liabilities and stockholders’ equity | $ 1,437,464 | $ 1,461,404 |
CONDENSED CONSOLIDATED BALANCE3
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (Parenthetical) - $ / shares | Sep. 30, 2017 | Dec. 31, 2016 |
Statement of Financial Position [Abstract] | ||
Preferred stock, shares authorized (in shares) | 10,000,000 | 10,000,000 |
Preferred stock, shares issued (in shares) | 0 | 0 |
Preferred stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized (in shares) | 100,000,000 | 100,000,000 |
Common stock, shares issued (in shares) | 37,857,549 | 37,797,317 |
Common stock, shares outstanding (in shares) | 37,857,549 | 37,797,317 |
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Revenues: | ||||
Products | $ 75,885 | $ 101,277 | $ 269,570 | $ 352,519 |
Services | 24,461 | 22,363 | 77,928 | 80,121 |
Total revenues | 100,346 | 123,640 | 347,498 | 432,640 |
Cost of sales: | ||||
Products | 48,761 | 63,879 | 190,214 | 206,208 |
Services | 14,289 | 13,754 | 42,825 | 44,402 |
Total cost of sales | 63,050 | 77,633 | 233,039 | 250,610 |
Selling, general and administrative | 27,994 | 12,504 | 84,981 | 31,487 |
Engineering and product development | 10,379 | 10,570 | 32,537 | 33,050 |
Impairment and other charges | 60,968 | 0 | 60,968 | 0 |
Total costs and expenses | 162,391 | 100,707 | 411,525 | 315,147 |
Total costs and expenses | (62,045) | 22,933 | (64,027) | 117,493 |
Interest income | 957 | 945 | 2,963 | 1,968 |
Interest expense | (12) | (1) | (44) | (15) |
Income (loss) before income taxes | (61,100) | 23,877 | (61,108) | 119,446 |
Income tax provision (benefit) | (31,840) | 4,864 | (31,959) | 27,527 |
Net income (loss) | $ (29,260) | $ 19,013 | $ (29,149) | $ 91,919 |
Earnings (loss) per common share: | ||||
Basic (in dollars per share) | $ (0.78) | $ 0.51 | $ (0.78) | $ 2.45 |
Diluted (in dollars per share) | $ (0.78) | $ 0.51 | $ (0.78) | $ 2.44 |
Weighted average common shares outstanding: | ||||
Basic (in shares) | 37,528 | 37,371 | 37,527 | 37,562 |
Diluted (in shares) | 37,528 | 37,554 | 37,527 | 37,699 |
CONDENSED CONSOLIDATED STATEME5
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Statement of Comprehensive Income [Abstract] | ||||
Net income (loss) | $ (29,260) | $ 19,013 | $ (29,149) | $ 91,919 |
Other comprehensive loss, net of tax: | ||||
Foreign currency translation adjustments | 13,187 | (8,852) | 27,786 | (30,204) |
Total comprehensive income | $ (16,073) | $ 10,161 | $ (1,363) | $ 61,715 |
CONDENSED CONSOLIDATED STATEME6
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2017 | Sep. 30, 2016 | |
Operating activities | ||
Net income (loss) | $ (29,149) | $ 91,919 |
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | ||
Depreciation and amortization | 32,231 | 23,092 |
Stock-based compensation expense | 10,477 | 9,442 |
Impairment and other charges | 60,968 | 0 |
Gain on sale of equipment | (79) | (93) |
Deferred income taxes | (31,529) | (3,435) |
Changes in operating assets and liabilities: | ||
Trade receivables, net | 21,271 | 92,075 |
Inventories | 32,596 | (12,515) |
Prepaids and other assets | 17,308 | 34,350 |
Excess tax benefits of stock options and awards | 0 | (58) |
Accounts payable and accrued expenses | (39,359) | (13,283) |
Net cash provided by operating activities | 74,735 | 221,494 |
Investing activities | ||
Purchase of property, plant and equipment | (19,563) | (20,289) |
Proceeds from sale of equipment | 1,160 | 281 |
Acquisition of business, net of cash acquired | (21,289) | 0 |
Net cash used in investing activities | (39,692) | (20,008) |
Financing activities | ||
Repurchase of common stock | 0 | (24,238) |
Proceeds from exercise of stock options | 455 | 940 |
Excess tax benefits of stock options and awards | 0 | 58 |
Net cash provided by (used in) financing activities | 455 | (23,240) |
Effect of exchange rate changes on cash activities | 14,050 | (16,952) |
Increase (decrease) in cash and cash equivalents | 49,548 | 161,294 |
Cash and cash equivalents at beginning of period | 423,497 | 381,336 |
Cash and cash equivalents at end of period | $ 473,045 | $ 542,630 |
Organization and Principles of
Organization and Principles of Consolidation | 9 Months Ended |
Sep. 30, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Organization and Principles of Consolidation | Organization and Principles of Consolidation Dril-Quip, Inc., a Delaware corporation (the “Company” or “Dril-Quip”), designs, manufactures, sells and services highly engineered drilling and production equipment that is well suited primarily for use in deepwater, harsh environment and severe service applications. The Company’s principal products consist of subsea and surface wellheads, subsea and surface production trees, subsea control systems and manifolds, mudline hanger systems, specialty connectors and associated pipe, drilling and production riser systems, liner hangers, wellhead connectors, diverters and safety valves. Dril-Quip’s products are used by major integrated, large independent and foreign national oil and gas companies and drilling contractors 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 in Macae, Brazil and at TIW Corporation (TIW) in Houston, Texas. The Company maintains additional facilities for fabrication and/or reconditioning and rework in Australia, China, Denmark, Ecuador, Egypt, Ghana, Hungary, Indonesia, Mexico, Nigeria, Norway, Qatar and Venezuela. The Company’s manufacturing operations are vertically integrated, allowing it to perform substantially all of its forging, heat treating, machining, fabrication, inspection, assembly and testing at its own facilities. The Company’s major subsidiaries are Dril-Quip (Europe) Limited, located in Aberdeen with branches in Denmark, Norway and Holland; Dril-Quip Asia Pacific PTE Ltd., located in Singapore; TIW, located in Houston, Texas; Dril-Quip do Brasil LTDA, located in Macae, Brazil; and DQ Holdings Pty. Ltd., located in Perth, Australia. Other subsidiaries include Dril-Quip Oilfield Services (Tianjin) Co. Ltd., located in Tianjin, China with branches in Shenzhen and Beijing, China; Dril-Quip Egypt for Petroleum Services S.A.E., located in Alexandria, Egypt; Dril-Quip (Ghana) Ltd., located in Takoradi, Ghana; TIW Hungary LLC, located in Szolnok, Hungary; PT DQ Oilfield Services Indonesia, located in Jakarta, Indonesia; TIW de Mexico S.A. de C.V., located in Villahermosa, Mexico; Dril-Quip (Nigeria) Ltd., located in Port Harcourt, Nigeria; Dril-Quip Qatar LLC, located in Doha, Qatar; TIW (UK) Limited, located in Aberdeen, Scotland; TIW de Venezuela S.A., located in Anaco, Venezuela and with a registered branch located in Shushufindi, Ecuador; and TIW International, Inc., with a registered branch located in Singapore. The condensed consolidated financial statements included herein are unaudited. The balance sheet at December 31, 2016 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 statement of the financial position as of September 30, 2017 and the results of operations and comprehensive income for the three and nine months ended September 30, 2017 and 2016 and cash flows for the nine -month periods ended September 30, 2017 and 2016 . Certain information and footnote disclosures normally included in annual audited consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission. Management believes the unaudited interim related disclosures in these condensed consolidated financial statements are adequate. The results of operations, comprehensive income and cash flows for the nine -month period ended September 30, 2017 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, 2016 . |
Significant Accounting Policies
Significant Accounting Policies | 9 Months Ended |
Sep. 30, 2017 | |
Accounting Policies [Abstract] | |
Significant Accounting Policies | Significant Accounting Policies Principles of Consolidation The condensed consolidated financial statements include the accounts of the Company and its subsidiaries. All material intercompany accounts and transactions have been eliminated. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Some of the Company’s more significant estimates are those affected by critical accounting policies for revenue recognition and valuation of inventories, contingent liabilities and fixed assets. Revenue Recognition Product revenues The Company recognizes product revenues from two methods: • product revenues recognized under the percentage-of-completion method; and • product revenues from the sale of products that do not qualify for the percentage-of-completion method. Revenues recognized under the percentage-of-completion method The Company uses the percentage-of-completion method on long-term project contracts that have the following characteristics: • the contracts call for products which are designed to customer specifications; • the structural designs are unique and require significant engineering and manufacturing efforts generally requiring more than one year in duration; • the contracts contain specific terms as to milestones, progress billings and delivery dates; and • product requirements cannot be filled directly from the Company’s standard inventory. For each project, the Company prepares a detailed analysis of estimated costs, profit margin, completion date and risk factors which include availability of material, production efficiencies and other factors that may impact the project. On a quarterly basis, management reviews the progress of each project, which may result in revisions of previous estimates, including revenue recognition. The Company, using the efforts-expended method, calculates the percentage complete and applies the percentage to determine the revenues earned and the appropriate portion of total estimated costs to be recognized. Losses, if any, are recorded in full in the period they become known. Historically, the Company’s estimates of total costs and costs to complete have approximated actual costs incurred to complete the project. Under the percentage-of-completion method, billings may not correlate directly to the revenue recognized. Based upon the terms of the specific contract, billings may be in excess of the revenue recognized, in which case the amounts are included in customer prepayments as a liability on the Condensed Consolidated Balance Sheets. Likewise, revenue recognized may exceed customer billings in which case the amounts are reported in trade receivables. Unbilled revenues are expected to be billed and collected within one year. At September 30, 2017 and December 31, 2016 , receivables included $ 44.1 million and $ 56.8 million of unbilled receivables, respectively. For the three months ended September 30, 2017 , there were seven projects representing approximately 20% of the Company's total revenues and approximately 15% of the Company's product revenues that were accounted for using percentage-of-completion accounting, compared to four projects for the three months ended September 30, 2016 , which represented approximately 12% of the Company's total revenues and approximately 14% of its product revenues. For the nine months ended September 30, 2017 , there were eight projects representing approximately 15% of the Company’s total revenues and approximately 19% of its product revenues that were accounted for using percentage-of-completion accounting, compared to 10 projects for the nine months ended September 30, 2016 , which represented approximately 14% of the Company’s total revenues and approximately 17% of its product revenues. Revenues not recognized under the percentage-of-completion method Revenues from the sale of inventory products, not accounted for under the percentage-of-completion method, are recorded at the time the manufacturing processes are complete and ownership is transferred to the customer. Service revenues The Company recognizes service revenues from three sources: • technical advisory assistance; • rental of running tools; and • rework and reconditioning of customer-owned Dril-Quip products. The Company does not install products for its customers, but it does provide technical advisory assistance. At the time of delivery of the product, the customer is not obligated to buy or rent the Company’s running tools and the Company is not obligated to perform any subsequent services relating to installation. Technical advisory assistance service revenue is recorded at the time the service is rendered. Service revenues associated with the rental of running and installation tools are recorded as earned. Rework and reconditioning service revenues are recorded when the refurbishment process is complete. The Company normally negotiates contracts for products, including those accounted for under the percentage-of-completion method, and services separately. For all product sales, it is the customer’s decision as to the timing of the product installation as well as whether Dril-Quip running tools will be purchased or rented. Furthermore, the customer is under no obligation to utilize the Company’s technical advisory assistance services. The customer may use a third party or their own personnel. Fair Value of Financial Instruments The Company’s financial instruments consist primarily of cash and cash equivalents, receivables and payables. The carrying values of these financial instruments approximate their respective fair values as they are short-term in nature. Earnings Per Share Basic earnings per common share is computed by dividing net income by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per common share is computed considering the dilutive effect of stock options and awards using the treasury stock method. In each relevant period, the net income used in the basic and dilutive earnings per share calculations is the same. The following table reconciles the weighted average basic number of common shares outstanding and the weighted average diluted number of common shares outstanding for the purpose of calculating basic and diluted earnings per share: Three months ended Nine months ended 2017 2016 2017 2016 (In thousands) Weighted average common shares outstanding—basic 37,528 37,371 37,527 37,562 Dilutive effect of common stock options and awards — 183 — 137 Weighted average common shares outstanding—diluted 37,528 37,554 37,527 37,699 For the three and nine month period ended September 30, 2017, the Company has excluded the following common stock options and awards because their impact on the loss per share is anti-dilutive (in thousands on a weighted average basis): Three Months Ended September 30, Nine months ended September 30, 2017 2016 2017 2016 (In thousands) Director stock awards 15 — 13 — Stock options 328 — 333 — Performance share units 212 — 207 — Restricted stock awards 315 — 293 — |
New Accounting Standards
New Accounting Standards | 9 Months Ended |
Sep. 30, 2017 | |
Accounting Changes and Error Corrections [Abstract] | |
New Accounting Standards | New Accounting Standards In September 2017, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2017-13, "Revenue Recognition (Topic 605), Revenue from Contracts with Customers (Topic 606), Leases (Topic 840), and Leases (Topic 842)". This update clarifies the definition of a public business entity for the application of the new revenue recognition and leasing standards. This update did not have an impact on our assessment of these standards, discussed below in connection with ASU 2014-09, and will not impact our implementation strategies. The revenue standard is effective for annual periods beginning after December 15, 2017, including interim periods within those fiscal years, and the leasing standard is effective for annual periods beginning after December 15, 2018, including interim periods within those fiscal years. In May 2017, the FASB issued Accounting Standards Update (ASU) 2017-09, "Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting." This update clarifies which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. For public business entities, the amendments in this update are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company does not anticipate any modifications to its existing awards and therefore has concluded that there is no impact to its consolidated financial statements. In January 2017, the FASB issued ASU 2017-04, “Intangibles - Goodwill and Other (Topic 350).” The standard simplifies the subsequent measurement of goodwill by removing the second step of the two-step impairment test. The amendment requires an entity to perform its annual or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit's fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. The amendment should be applied on a prospective basis. The standard is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company is evaluating the impact of the new standard on its consolidated financial statements. In January 2017, the FASB issued ASU 2017-01, “Business Combinations: Clarifying the Definition of a Business (Topic 805).” This update clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. For public business entities, the amendments in this update are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company is evaluating the impact of the new standard on its consolidated financial statements. In March 2016, the FASB issued ASU 2016-09 “Improvements to Employee Share-Based Payment Accounting (Topic 718).” The standard simplifies several aspects of accounting for share-based payment transactions, including the accounting for income taxes, forfeitures and statutory withholding requirements, as well as classification in the statement of cash flows. The standard is effective for annual periods beginning after December 15, 2016, including interim periods within those fiscal years. The Company adopted this standard as of January 1, 2017. The primary impact of this standard is the income tax effects of awards recognized when the awards are vested or settled is now reflected in the statement of cash flows as part of net income from operating activities. In February 2016, the FASB issued ASU 2016-02 “Leases (Topic 842).” The new standard requires lessees to recognize lease assets (right of use) and lease obligations (lease liability) for leases previously classified as operating leases under generally accepted accounting principles on the balance sheet for leases with terms in excess of 12 months. The standard is effective for annual periods beginning after December 15, 2018, including interim periods within those fiscal years. The Company is in the process of assessing its contractual commitments and arrangements with respect to the required presentation and disclosure under the new lease standard and its impact. Remaining implementation matters include completing the gap analysis between current requirements and the new leasing standard, establishing new policies, procedures and controls and quantifying any adjustments upon adoption. In November 2015, the FASB issued ASU 2015-17 “Income Taxes (Topic 740)." The new standard requires that deferred tax assets and liabilities be classified as noncurrent on a classified balance sheet. The Company adopted this standard in the first quarter of 2017 on a prospective basis. In May 2014, the FASB issued ASU 2014-09 “Revenue from Contracts with Customers (Topic 606).” The amendment applies a new five-step revenue recognition model to be used in recognizing revenues associated with customer contracts. The amendment requires disclosure sufficient to enable readers of financial statements to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers, including qualitative and quantitative disclosures, significant judgments and changes in judgments and assets recognized from the costs to obtain or fulfill the contract. The standard’s effective date was originally for fiscal years beginning after December 15, 2016, including interim periods within that reporting period. On April 1, 2015, the FASB voted to defer the effective date by one year to December 15, 2017 and interim periods within annual reporting periods beginning after December 15, 2017. The new revenue standard permits companies to either apply the requirements retrospectively to all prior periods presented or apply the requirements in the year of adoption through a cumulative adjustment. The Company has engaged a third party expert to assist in the analysis of contracts and to perform testing of the contracts to ensure the appropriate steps are taken in its assessment of the standard. The Company has completed the scoping process and has begun selection of contracts for testing, which is expected to be completed in the fourth quarter of 2017. Remaining implementation matters include completing the gap analysis between current requirements and the new revenue standard, establishing new policies, procedures and controls, and quantifying any adjustments upon adoption. The Company has not yet determined if it will apply the full retrospective or the modified retrospective method. |
Business Acquisitions
Business Acquisitions | 9 Months Ended |
Sep. 30, 2017 | |
Business Combinations [Abstract] | |
Business Acquisitions | Business Acquisitions On October 14, 2016, the Company entered into an agreement with Pearce Industries, Inc. to acquire all the outstanding common stock, par value $100.00 per share, of TIW for a cash purchase price of $142.7 million , which is subject to customary adjustments for cash and working capital. The acquisition closed on November 10, 2016 and is expected to strengthen the Company's liner hanger sales and increase market share. Additionally, the acquisition of TIW gives Dril-Quip a presence in the onshore oil and gas market. Total acquisition costs since inception through September 30, 2017 in connection with the purchase of TIW were $2.5 million . These costs were expensed in general and administrative costs as of December 31, 2016 . Purchase Price Allocation Acquired assets and liabilities were recorded at estimated fair value as of the acquisition date. The excess of the purchase price over the estimated fair value of tangible and intangible identifiable net assets resulted in the recognition of goodwill of $34.4 million , the majority of which is included in long-lived assets in the Western Hemisphere and is attributable to expected synergies from combining operations as well as intangible assets which do not qualify for separate recognition. The amount of goodwill that is deductible for income tax purposes is not significant. The goodwill was determined on the basis of the fair values of the tangible and intangible assets and liabilities as of the acquisition date. It may be adjusted if the provisional fair values change as a result of circumstances existing at the acquisition date. Such fair value adjustments may arise in respect to intangible assets, inventories and property, plant and equipment, upon completion of the necessary valuations and physical verifications of such assets. The amount of deferred taxes may also be adjusted during the measurement period. For further information regarding goodwill, see Note 8 . The following table sets forth the preliminary purchase price allocation, which was based on fair value of assets acquired and liabilities assumed at the acquisition date, November 10, 2016: Valuation at November 10, 2016 (In thousands) Cash $ 1,829 Trade receivables 9,794 Inventories 29,896 Prepaid and other current assets 3,572 Deferred income taxes 205 Property, plant and equipment 38,058 Intangible assets (1) 29,808 Total assets acquired $ 113,162 Accounts payable 5,599 Customer prepayments 2,757 Other accrued liabilities 2,644 Deferred tax liabilities, non-current 2,261 Total liabilities assumed $ 13,261 Net identifiable assets acquired $ 99,901 Goodwill 34,371 Net assets acquired $ 134,272 (1) Includes $3.3 million of patents with a weighted average useful life of 10 years , $8.4 million of tradenames with an indefinite life and $18.1 million of customer relationships with a weighted average useful life of 15 years . See Note 9 for further information regarding intangible assets. Summary of Unaudited Pro Forma Information TIW's results of operations have been included in Dril-Quip's financial statements for the period subsequent to the closing of the acquisition on November 10, 2016. Business acquired from TIW contributed revenues of $36.3 million , a pre-tax operating loss of $13.9 million and a net loss of $8.7 million for the nine months ended September 30, 2017 . The following table reflects the unaudited pro forma consolidated results of operations for the three and nine months ended September 30, 2016 , as though the acquisition of TIW had occurred on January 1, 2016: Three months ended September 30, 2016 Nine months ended September 30, 2016 (In thousands, except per share data) (unaudited) Revenues $ 133,526 $ 485,505 Net income $ 14,637 $ 89,290 Basic earnings per share $ 0.39 $ 2.38 Diluted earnings per share $ 0.39 $ 2.37 The unaudited pro forma financial information is presented for illustrative purposes only and is not indicative of the results of operations that would have been realized if the acquisition had been completed on the date indicated, nor is it indicative of future operating results. The pro forma results do not include, for example, the effects of anticipated synergies from the acquisition. On January 6, 2017 , the Company acquired The Technologies Alliance Inc. d/b/a OilPatch Technologies (OPT) for approximately $20.0 million , which was subject to customary adjustments for cash and working capital. The acquisition was accounted for as a business combination in accordance with ASC 805. The purchase price was subject to closing adjustments and was funded with cash on hand. The acquisition and purchase price allocation do not meet the significant subsidiary test outlined in Regulation S-X Rule 1-02. The acquisition does not have a material impact on the Company's Consolidated Balance Sheets. OPT's results of operations for the periods prior to this acquisition were not material to the Company's Consolidated Statements of Operations. |
Stock-Based Compensation and St
Stock-Based Compensation and Stock Awards | 9 Months Ended |
Sep. 30, 2017 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Stock-Based Compensation and Stock Awards | Stock-Based Compensation and Stock Awards During the three and nine months ended September 30, 2017 , the Company recognized approximately $3.7 million and $ 10.5 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, compared to $3.2 million and $ 9.4 million recorded for the three and nine months ended September 30, 2016 , respectively. No stock-based compensation expense was capitalized during the three and nine months ended September 30, 2017 or 2016 . |
Inventories, net
Inventories, net | 9 Months Ended |
Sep. 30, 2017 | |
Inventory Disclosure [Abstract] | |
Inventories, net | Inventories, net Inventories consist of the following: September 30, December 31, (In thousands) Raw materials $ 78,934 $ 85,684 Work in progress 71,614 81,645 Finished goods 230,497 233,732 381,045 401,061 Less: allowance for obsolete and excess inventory (see Note 7) (83,828 ) (45,648 ) Net inventory $ 297,217 $ 355,413 |
Goodwill
Goodwill | 9 Months Ended |
Sep. 30, 2017 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Goodwill | Goodwill The changes in the carrying amount of goodwill by reporting unit during the nine months ended September 30, 2017 were as follows: Carrying Value Carrying Value December 31, 2016 Acquisitions (1) Foreign Currency Translation Adjustment September 30, 2017 (In thousands) Western Hemisphere $ 26,632 $ 12,788 $ 696 $ 40,116 Eastern Hemisphere 7,739 — 659 8,398 Asia-Pacific — — — — Total $ 34,371 $ 12,788 $ 1,355 $ 48,514 (1) Primarily relates to goodwill additions as a result of the OPT acquisition. The Company performs its annual impairment tests of goodwill as of October 1 or when there is an indication an impairment may have occurred. In connection with our preparation and review of financial statements for the quarter ended September 30, 2017 , as a result of charges related to inventory and fixed assets and our updated business outlook, the Company performed a goodwill impairment test for the Western Hemisphere reporting unit as of September 30, 2017 . Based on the results of this assessment, we concluded that no goodwill impairment was required. The fair values used in the goodwill impairment assessment were determined using the net present value of the expected future cash flows for the reporting unit. During the Company’s goodwill impairment analysis, the Company determines the fair value of the reporting unit, as a whole, using a discounted cash flow analysis, which requires significant assumptions and estimates about future operations. The assumptions about future cash flows and growth rates are based on our current budget for the remainder of the current year, 2018 and for future periods, as well as our strategic plans and management’s beliefs about future exploration and development in the industry. Changes in management's forecast commodity price assumptions may cause us to reassess our goodwill for impairment, and could result in non-cash impairment charges in the future. |
Impairments and Other Charges
Impairments and Other Charges | 9 Months Ended |
Sep. 30, 2017 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Impairments and Other Charges | Impairments and Other Charges We carry a variety of long-lived assets on our balance sheet, including property, plant and equipment, goodwill and other intangibles. We conduct impairment tests on long-lived assets if events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. We review the recoverability of the carrying value of our assets based upon estimated future cash flows while taking into consideration assumptions and estimates including the future use of the asset, remaining useful life of the asset and service potential of the asset. Additionally, inventories are valued at the lower of cost or market. In connection with our preparation and review of financial statements for the quarter ended September 30, 2017, after considering current Brent Crude (Brent) consensus forecasts and expected rig counts for the foreseeable future, we determined the carrying amount of certain of our long-lived assets in the Western Hemisphere exceeded their respective fair values due to projected declines in asset utilization, and that the cost of some of our worldwide inventory exceeded its market value. As a result, we recorded corresponding impairments and other charges. Primarily as a result of the factors described above, we recorded charges of approximately $33.6 million related to inventory and $ 27.4 million related to fixed assets. |
Intangible Assets
Intangible Assets | 9 Months Ended |
Sep. 30, 2017 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Intangible Assets | Intangible Assets Intangible assets, substantially all of which were acquired in the acquisition of TIW and OPT, consist of the following: Estimated September 30, 2017 December 31, 2016 Gross Book Value Accumulated Amortization Net Book Value Gross Book Value Accumulated Amortization Net Book Value (In thousands) Trademarks indefinite $ 8,474 $ — $ 8,474 $ 8,416 $ — $ 8,416 Patents 15 - 30 years 5,955 (745 ) 5,210 3,583 (294 ) 3,289 Customer relationships 5 - 15 years 26,737 (1,531 ) 25,206 18,057 (168 ) 17,889 Noncompete Agreements 3 years 171 (42 ) 129 — — — $ 41,337 $ (2,318 ) $ 39,019 $ 30,056 $ (462 ) $ 29,594 Amortization expense for the three and nine months ended September 30, 2017 , was $0.6 million and $1.8 million , respectively. |
Geographic Areas
Geographic Areas | 9 Months Ended |
Sep. 30, 2017 | |
Segment Reporting [Abstract] | |
Geographic Areas | Geographic Areas Three months ended Nine months ended 2017 2016 2017 2016 (In thousands) Revenues: Western Hemisphere Products $ 43,344 $ 61,071 $ 162,931 $ 202,457 Services 14,406 13,395 49,298 47,171 Intercompany 12,569 6,444 22,700 27,660 Total $ 70,319 $ 80,910 $ 234,929 $ 277,288 Eastern Hemisphere Products $ 17,200 $ 26,133 $ 53,567 $ 89,207 Services 7,557 7,264 20,685 28,275 Intercompany 267 109 554 316 Total $ 25,024 $ 33,506 $ 74,806 $ 117,798 Asia-Pacific Products $ 15,341 $ 14,073 $ 53,072 $ 60,855 Services 2,498 1,704 7,945 4,675 Intercompany 416 1,335 533 1,851 Total $ 18,255 $ 17,112 $ 61,550 $ 67,381 Summary Products $ 75,885 $ 101,277 $ 269,570 $ 352,519 Services 24,461 22,363 $ 77,928 $ 80,121 Intercompany 13,252 7,888 $ 23,787 $ 29,827 Eliminations (13,252 ) (7,888 ) (23,787 ) (29,827 ) Total $ 100,346 $ 123,640 $ 347,498 $ 432,640 Impairment and Other Charges: Western Hemisphere $ 45,439 $ — $ 45,439 $ — Eastern Hemisphere 8,532 — 8,532 — Asia-Pacific 6,997 — 6,997 — Total $ 60,968 $ — $ 60,968 $ — Depreciation and amortization: Western Hemisphere $ 6,827 $ 5,052 $ 24,153 15,157 Eastern Hemisphere 1,073 1,171 $ 3,228 3,856 Asia-Pacific 1,015 1,070 $ 3,046 3,319 Corporate 603 299 1,804 760 Total $ 9,518 $ 7,592 $ 32,231 $ 23,092 Income before income taxes: Western Hemisphere $ (40,472 ) $ 22,009 $ (28,558 ) $ 85,921 Eastern Hemisphere (2,882 ) 15,618 3,401 57,352 Asia-Pacific (4,525 ) 73 3,115 11,296 Corporate (13,283 ) (12,603 ) (37,878 ) (37,524 ) Eliminations 62 (1,220 ) (1,188 ) 2,401 Total $ (61,100 ) $ 23,877 $ (61,108 ) $ 119,446 September 30, December 31, (In thousands) Total Long-Lived Assets: Western Hemisphere $ 373,394 $ 317,875 Eastern Hemisphere 34,248 33,338 Asia-Pacific 58,203 53,960 Eliminations (20,870 ) (480 ) Total $ 444,975 $ 404,693 Total Assets: Western Hemisphere $ 771,401 $ 775,358 Eastern Hemisphere 325,476 318,529 Asia-Pacific 365,976 370,043 Eliminations (25,389 ) (2,526 ) Total $ 1,437,464 $ 1,461,404 |
Income Taxes
Income Taxes | 9 Months Ended |
Sep. 30, 2017 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes Valuation Allowances As of September 30, 2017, the Company recorded a full valuation allowance in Asia Pacific of $1.6 million related to beginning of the year deferred tax assets in the region due to the projected cumulative loss position in the most recent forecast. The Company has evaluated the need for a valuation allowance in the remaining jurisdictions based on the most recent forecast, cumulative loss position, reversing taxable temporary differences and allowable carrybacks and determined that no additional valuation allowances are required. The Company will continue to monitor the need for a further valuation adjustment as the year progresses. Uncertain Tax Positions (UTPs) As of September 30, 2017, the Company has accrued liabilities for tax exposures of $2.2 million related to tax on service revenue in Saudi Arabia, an increase of $168,000 from year end recorded as a discrete period tax in the quarter ended September 30, 2017. The Company recognized deductions related to the UK patent box. This resulted in the Company recording a discrete tax benefit in the amount of $8.2 million . The Company has reviewed its various tax positions around the world including the impact of any tax authority audits or inquiry and determined that no additional UTPs were required. |
Commitments and Contingencies
Commitments and Contingencies | 9 Months Ended |
Sep. 30, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies Brazilian Tax Issue From 2002 to 2007, the Company’s Brazilian subsidiary imported goods through the State of Espirito Santo in Brazil and subsequently transferred them to its facility in the State of Rio de Janeiro. During that period, the Company’s Brazilian subsidiary paid taxes to the State of Espirito Santo on its imports. Upon the final sale of these goods, the Company’s Brazilian subsidiary collected taxes from customers and remitted them to the State of Rio de Janeiro net of the taxes paid on importation of those goods to the State of Espirito Santo in accordance with the Company’s understanding of Brazilian tax laws. In August 2007, the State of Rio de Janeiro served the Company’s Brazilian subsidiary with assessments to collect a state tax on the importation of goods through the State of Espirito Santo from 2002 to 2007 claiming that these taxes were due and payable to it under applicable law. The Company settled these assessments with payments to the State of Rio de Janeiro of $ 12.2 million in March 2010 and $ 3.9 million in December 2010. Approximately $ 7.8 million of these settlement payments were attributable to penalties, interest and amounts that had expired under the statute of limitations so that amount was recorded as an expense. The remainder of the settlement payments generated credits (recorded as a long-term prepaid tax) to be used to offset future state taxes on sales to customers in the State of Rio de Janeiro, which were subject to certification by the tax authorities. During the second quarter of 2015, the tax authorities certified approximately $ 8.3 million of those credits paid in 2010 and granted an additional $ 2.3 million in inflation-related credits. The additional amount of credits granted by the tax authorities increased long-term prepaid taxes and decreased selling, general and administrative expenses by $ 2.3 million . In December 2010 and January 2011, the Company’s Brazilian subsidiary was served with two additional assessments totaling approximately $ 13.0 million from the State of Rio de Janeiro to cancel the credits associated with the tax payments to the State of Espirito Santo (“Santo Credits”) on the importation of goods from July 2005 to October 2007. The Santo Credits are not related to the credits described above. The Company has objected to these assessments on the grounds that they would represent double taxation on the importation of the same goods and that the Company is entitled to the credits under applicable Brazilian law. With regard to the December 2010 assessment, the Company’s Brazilian subsidiary filed an appeal with a State of Rio de Janeiro judicial court to annul the tax assessment following a ruling against the Company by the tax administration’s highest council. In connection with that appeal, the Company was required to deposit with the court approximately $ 3.1 million in December 2014 as the full amount of the assessment with penalties and interest. The Company filed a similar appeal in the judicial system with regard to the January 2011 assessment and was required to deposit with the court approximately $5.7 million in December 2016. The Company believes that these credits are valid and that success in the judicial court process is probable. Based upon this analysis, the Company has not accrued any liability in conjunction with this matter. Since 2007, the Company’s Brazilian subsidiary has paid taxes on the importation of goods directly to the State of Rio de Janeiro and the Company does not expect any similar issues to exist for periods subsequent to 2007. General The Company operates its business and markets its products and services in most of the significant oil and gas producing areas in the world and is, therefore, subject to the risks customarily attendant to international operations and 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, property damage 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 Polici19
Significant Accounting Policies (Policies) | 9 Months Ended |
Sep. 30, 2017 | |
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 and valuation of inventories, contingent liabilities and fixed assets. |
Revenue Recognition | Revenue Recognition Product revenues The Company recognizes product revenues from two methods: • product revenues recognized under the percentage-of-completion method; and • product revenues from the sale of products that do not qualify for the percentage-of-completion method. |
Revenues recognized under the percentage-of-completion method | Revenues recognized under the percentage-of-completion method The Company uses the percentage-of-completion method on long-term project contracts that have the following characteristics: • the contracts call for products which are designed to customer specifications; • the structural designs are unique and require significant engineering and manufacturing efforts generally requiring more than one year in duration; • the contracts contain specific terms as to milestones, progress billings and delivery dates; and • product requirements cannot be filled directly from the Company’s standard inventory. For each project, the Company prepares a detailed analysis of estimated costs, profit margin, completion date and risk factors which include availability of material, production efficiencies and other factors that may impact the project. On a quarterly basis, management reviews the progress of each project, which may result in revisions of previous estimates, including revenue recognition. The Company, using the efforts-expended method, calculates the percentage complete and applies the percentage to determine the revenues earned and the appropriate portion of total estimated costs to be recognized. Losses, if any, are recorded in full in the period they become known. Historically, the Company’s estimates of total costs and costs to complete have approximated actual costs incurred to complete the project. Under the percentage-of-completion method, billings may not correlate directly to the revenue recognized. Based upon the terms of the specific contract, billings may be in excess of the revenue recognized, in which case the amounts are included in customer prepayments as a liability on the Condensed Consolidated Balance Sheets. Likewise, revenue recognized may exceed customer billings in which case the amounts are reported in trade receivables. Unbilled revenues are expected to be billed and collected within one year. |
Revenues not recognized under the percentage-of-completion method | Revenues not recognized under the percentage-of-completion method Revenues from the sale of inventory products, not accounted for under the percentage-of-completion method, are recorded at the time the manufacturing processes are complete and ownership is transferred to the customer. |
Service revenues | Service revenues The Company recognizes service revenues from three sources: • technical advisory assistance; • rental of running tools; and • rework and reconditioning of customer-owned Dril-Quip products. The Company does not install products for its customers, but it does provide technical advisory assistance. At the time of delivery of the product, the customer is not obligated to buy or rent the Company’s running tools and the Company is not obligated to perform any subsequent services relating to installation. Technical advisory assistance service revenue is recorded at the time the service is rendered. Service revenues associated with the rental of running and installation tools are recorded as earned. Rework and reconditioning service revenues are recorded when the refurbishment process is complete. The Company normally negotiates contracts for products, including those accounted for under the percentage-of-completion method, and services separately. For all product sales, it is the customer’s decision as to the timing of the product installation as well as whether Dril-Quip running tools will be purchased or rented. Furthermore, the customer is under no obligation to utilize the Company’s technical advisory assistance services. The customer may use a third party or their own personnel. |
Fair Value of Financial Instruments | Fair Value of Financial Instruments The Company’s financial instruments consist primarily of cash and cash equivalents, receivables and payables. The carrying values of these financial instruments approximate their respective fair values as they are short-term in nature. |
Earnings Per Share | Earnings Per Share Basic earnings per common share is computed by dividing net income by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per common share is computed considering the dilutive effect of stock options and awards using the treasury stock method. |
Significant Accounting Polici20
Significant Accounting Policies (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
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 2017 2016 2017 2016 (In thousands) Weighted average common shares outstanding—basic 37,528 37,371 37,527 37,562 Dilutive effect of common stock options and awards — 183 — 137 Weighted average common shares outstanding—diluted 37,528 37,554 37,527 37,699 |
Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share | For the three and nine month period ended September 30, 2017, the Company has excluded the following common stock options and awards because their impact on the loss per share is anti-dilutive (in thousands on a weighted average basis): Three Months Ended September 30, Nine months ended September 30, 2017 2016 2017 2016 (In thousands) Director stock awards 15 — 13 — Stock options 328 — 333 — Performance share units 212 — 207 — Restricted stock awards 315 — 293 — |
Business Acquisitions (Tables)
Business Acquisitions (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Business Combinations [Abstract] | |
Schedule of Recognized Identified Assets Acquired and Liabilities Assumed | The following table sets forth the preliminary purchase price allocation, which was based on fair value of assets acquired and liabilities assumed at the acquisition date, November 10, 2016: Valuation at November 10, 2016 (In thousands) Cash $ 1,829 Trade receivables 9,794 Inventories 29,896 Prepaid and other current assets 3,572 Deferred income taxes 205 Property, plant and equipment 38,058 Intangible assets (1) 29,808 Total assets acquired $ 113,162 Accounts payable 5,599 Customer prepayments 2,757 Other accrued liabilities 2,644 Deferred tax liabilities, non-current 2,261 Total liabilities assumed $ 13,261 Net identifiable assets acquired $ 99,901 Goodwill 34,371 Net assets acquired $ 134,272 (1) Includes $3.3 million of patents with a weighted average useful life of 10 years , $8.4 million of tradenames with an indefinite life and $18.1 million of customer relationships with a weighted average useful life of 15 years . See Note 9 for further information regarding intangible assets. |
Business Acquisition, Pro Forma Information | The following table reflects the unaudited pro forma consolidated results of operations for the three and nine months ended September 30, 2016 , as though the acquisition of TIW had occurred on January 1, 2016: Three months ended September 30, 2016 Nine months ended September 30, 2016 (In thousands, except per share data) (unaudited) Revenues $ 133,526 $ 485,505 Net income $ 14,637 $ 89,290 Basic earnings per share $ 0.39 $ 2.38 Diluted earnings per share $ 0.39 $ 2.37 |
Inventories, net (Tables)
Inventories, net (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Inventory Disclosure [Abstract] | |
Schedule of Inventories | Inventories consist of the following: September 30, December 31, (In thousands) Raw materials $ 78,934 $ 85,684 Work in progress 71,614 81,645 Finished goods 230,497 233,732 381,045 401,061 Less: allowance for obsolete and excess inventory (see Note 7) (83,828 ) (45,648 ) Net inventory $ 297,217 $ 355,413 |
Goodwill (Tables)
Goodwill (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of Goodwill | The changes in the carrying amount of goodwill by reporting unit during the nine months ended September 30, 2017 were as follows: Carrying Value Carrying Value December 31, 2016 Acquisitions (1) Foreign Currency Translation Adjustment September 30, 2017 (In thousands) Western Hemisphere $ 26,632 $ 12,788 $ 696 $ 40,116 Eastern Hemisphere 7,739 — 659 8,398 Asia-Pacific — — — — Total $ 34,371 $ 12,788 $ 1,355 $ 48,514 (1) Primarily relates to goodwill additions as a result of the OPT acquisition. The Company performs its annual impairment tests of goodwill as of October 1 or when there is an indication an impairment may have occurred. In connection with our preparation and review of financial statements for the quarter ended September 30, 2017 , as a result of charges related to inventory and fixed assets and our updated business outlook, the Company performed a goodwill impairment test for the Western Hemisphere reporting unit as of September 30, 2017 . Based on the results of this assessment, we concluded that no goodwill impairment was required. The fair values used in the goodwill impairment assessment were determined using the net present value of the expected future cash flows for the reporting unit. During the Company’s goodwill impairment analysis, the Company determines the fair value of the reporting unit, as a whole, using a discounted cash flow analysis, which requires significant assumptions and estimates about future operations. The assumptions about future cash flows and growth rates are based on our current budget for the remainder of the current year, 2018 and for future periods, as well as our strategic plans and management’s beliefs about future exploration and development in the industry. Changes in management's forecast commodity price assumptions may cause us to reassess our goodwill for impairment, and could result in non-cash impairment charges in the future. |
Intangible Assets (Tables)
Intangible Assets (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of Finite-Lived and Indefinite-Lived Intangible Assets | Intangible assets, substantially all of which were acquired in the acquisition of TIW and OPT, consist of the following: Estimated September 30, 2017 December 31, 2016 Gross Book Value Accumulated Amortization Net Book Value Gross Book Value Accumulated Amortization Net Book Value (In thousands) Trademarks indefinite $ 8,474 $ — $ 8,474 $ 8,416 $ — $ 8,416 Patents 15 - 30 years 5,955 (745 ) 5,210 3,583 (294 ) 3,289 Customer relationships 5 - 15 years 26,737 (1,531 ) 25,206 18,057 (168 ) 17,889 Noncompete Agreements 3 years 171 (42 ) 129 — — — $ 41,337 $ (2,318 ) $ 39,019 $ 30,056 $ (462 ) $ 29,594 |
Geographic Areas (Tables)
Geographic Areas (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Segment Reporting [Abstract] | |
Schedule of Segment Reporting | Three months ended Nine months ended 2017 2016 2017 2016 (In thousands) Revenues: Western Hemisphere Products $ 43,344 $ 61,071 $ 162,931 $ 202,457 Services 14,406 13,395 49,298 47,171 Intercompany 12,569 6,444 22,700 27,660 Total $ 70,319 $ 80,910 $ 234,929 $ 277,288 Eastern Hemisphere Products $ 17,200 $ 26,133 $ 53,567 $ 89,207 Services 7,557 7,264 20,685 28,275 Intercompany 267 109 554 316 Total $ 25,024 $ 33,506 $ 74,806 $ 117,798 Asia-Pacific Products $ 15,341 $ 14,073 $ 53,072 $ 60,855 Services 2,498 1,704 7,945 4,675 Intercompany 416 1,335 533 1,851 Total $ 18,255 $ 17,112 $ 61,550 $ 67,381 Summary Products $ 75,885 $ 101,277 $ 269,570 $ 352,519 Services 24,461 22,363 $ 77,928 $ 80,121 Intercompany 13,252 7,888 $ 23,787 $ 29,827 Eliminations (13,252 ) (7,888 ) (23,787 ) (29,827 ) Total $ 100,346 $ 123,640 $ 347,498 $ 432,640 Impairment and Other Charges: Western Hemisphere $ 45,439 $ — $ 45,439 $ — Eastern Hemisphere 8,532 — 8,532 — Asia-Pacific 6,997 — 6,997 — Total $ 60,968 $ — $ 60,968 $ — Depreciation and amortization: Western Hemisphere $ 6,827 $ 5,052 $ 24,153 15,157 Eastern Hemisphere 1,073 1,171 $ 3,228 3,856 Asia-Pacific 1,015 1,070 $ 3,046 3,319 Corporate 603 299 1,804 760 Total $ 9,518 $ 7,592 $ 32,231 $ 23,092 Income before income taxes: Western Hemisphere $ (40,472 ) $ 22,009 $ (28,558 ) $ 85,921 Eastern Hemisphere (2,882 ) 15,618 3,401 57,352 Asia-Pacific (4,525 ) 73 3,115 11,296 Corporate (13,283 ) (12,603 ) (37,878 ) (37,524 ) Eliminations 62 (1,220 ) (1,188 ) 2,401 Total $ (61,100 ) $ 23,877 $ (61,108 ) $ 119,446 September 30, December 31, (In thousands) Total Long-Lived Assets: Western Hemisphere $ 373,394 $ 317,875 Eastern Hemisphere 34,248 33,338 Asia-Pacific 58,203 53,960 Eliminations (20,870 ) (480 ) Total $ 444,975 $ 404,693 Total Assets: Western Hemisphere $ 771,401 $ 775,358 Eastern Hemisphere 325,476 318,529 Asia-Pacific 365,976 370,043 Eliminations (25,389 ) (2,526 ) Total $ 1,437,464 $ 1,461,404 |
Organization and Principles o26
Organization and Principles of Consolidation - Additional Information (Detail) | 9 Months Ended |
Sep. 30, 2017SegmentLocation | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Number of geographic segments | Segment | 3 |
Number of headquarter locations | Location | 3 |
Significant Accounting Polici27
Significant Accounting Policies - Additional Information (Detail) $ in Millions | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2017USD ($)Project | Sep. 30, 2016Project | Sep. 30, 2017USD ($)ProjectSourceMethod | Sep. 30, 2016Project | Dec. 31, 2016USD ($) | |
Accounting Policies [Abstract] | |||||
Number of product revenue sources | Method | 2 | ||||
Unbilled receivables | $ | $ 44.1 | $ 44.1 | $ 56.8 | ||
Number of projects | Project | 7 | 4 | 8 | 10 | |
Percentage of total revenues | 20.00% | 12.00% | 15.00% | 14.00% | |
Percentage of product revenues | 15.00% | 14.00% | 19.00% | 17.00% | |
Number of service revenue sources | Source | 3 |
Significant Accounting Polici28
Significant Accounting Policies - Schedule of Earnings Per Share (Detail) - shares shares in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Accounting Policies [Abstract] | ||||
Weighted average common shares outstanding—basic (in shares) | 37,528 | 37,371 | 37,527 | 37,562 |
Dilutive effect of common stock options and awards (in shares) | 0 | 183 | 0 | 137 |
Weighted average common shares outstanding—diluted (in shares) | 37,528 | 37,554 | 37,527 | 37,699 |
Significant Accounting Polici29
Significant Accounting Policies - Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share (Details) - shares shares in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Director stock awards | ||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Antidilutive securities (in shares) | 15 | 0 | 13 | 0 |
Stock options | ||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Antidilutive securities (in shares) | 328 | 0 | 333 | 0 |
Performance share units | ||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Antidilutive securities (in shares) | 212 | 0 | 207 | 0 |
Restricted stock awards | ||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Antidilutive securities (in shares) | 315 | 0 | 293 | 0 |
Business Acquisitions - Narrati
Business Acquisitions - Narrative (Details) - USD ($) $ / shares in Units, $ in Thousands | Jan. 06, 2017 | Oct. 14, 2016 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Dec. 31, 2016 | Nov. 10, 2016 |
Business Acquisition [Line Items] | ||||||||
Goodwill | $ 48,514 | $ 48,514 | $ 34,371 | |||||
TIW Corporation | ||||||||
Business Acquisition [Line Items] | ||||||||
Stock purchase agreement, par value of common stock (in dollars per share) | $ 100 | |||||||
Cash purchase price as a result of business acquisition | $ 142,700 | |||||||
Acquisition costs | $ 2,500 | |||||||
Goodwill | $ 34,400 | $ 34,371 | ||||||
Revenues | $ 133,526 | 36,300 | $ 485,505 | |||||
Pre-tax operating loss | $ 14,637 | (13,900) | $ 89,290 | |||||
Net income (loss) from business acquisition | $ (8,700) | |||||||
Technology Alliance Inc. | ||||||||
Business Acquisition [Line Items] | ||||||||
Cash purchase price as a result of business acquisition | $ 20,000 |
Business Acquisitions - Schedul
Business Acquisitions - Schedule of Assets Acquired and Liabilities Assumed (Details) - USD ($) $ in Thousands | Nov. 10, 2016 | Sep. 30, 2017 | Dec. 31, 2016 | Oct. 14, 2016 |
Business Acquisition [Line Items] | ||||
Goodwill | $ 48,514 | $ 34,371 | ||
TIW Corporation | ||||
Business Acquisition [Line Items] | ||||
Cash | $ 1,829 | |||
Trade receivables | 9,794 | |||
Inventories | 29,896 | |||
Prepaid and other current assets | 3,572 | |||
Deferred income taxes | 205 | |||
Property, plant and equipment | 38,058 | |||
Intangible assets | 29,808 | |||
Total assets acquired | 113,162 | |||
Accounts payable | 5,599 | |||
Customer prepayments | 2,757 | |||
Other accrued liabilities | 2,644 | |||
Deferred tax liabilities, non-current | 2,261 | |||
Total liabilities assumed | 13,261 | |||
Net identifiable assets acquired | 99,901 | |||
Goodwill | 34,371 | $ 34,400 | ||
Net assets acquired | 134,272 | |||
Patents | TIW Corporation | ||||
Business Acquisition [Line Items] | ||||
Intangible assets | $ 3,300 | |||
Weighted average useful life (in years) | 10 years | |||
Customer Relationships | TIW Corporation | ||||
Business Acquisition [Line Items] | ||||
Intangible assets | $ 18,100 | |||
Weighted average useful life (in years) | 15 years | |||
Trade Names | TIW Corporation | ||||
Business Acquisition [Line Items] | ||||
Intangible assets | $ 8,400 |
Business Acquisitions - Sched32
Business Acquisitions - Schedule of Pro Forma Information (Details) - TIW Corporation - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 9 Months Ended | |
Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Business Acquisition [Line Items] | |||
Revenues | $ 133,526 | $ 36,300 | $ 485,505 |
Net income | $ 14,637 | $ (13,900) | $ 89,290 |
Basic earnings per share (in dollars per share) | $ 0.39 | $ 2.38 | |
Diluted earnings per share (in dollars per share) | $ 0.39 | $ 2.37 |
Stock-Based Compensation and 33
Stock-Based Compensation and Stock Awards - Additional Information (Detail) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Stock-based compensation expense | $ 10,477,000 | $ 9,442,000 | ||
Capitalized expense | $ 0 | $ 0 | 0 | 0 |
Selling, General and Administrative Expenses | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Stock-based compensation expense | $ 3,700,000 | $ 3,200,000 | $ 10,500,000 | $ 9,400,000 |
Inventories, net - Schedule of
Inventories, net - Schedule of Inventories (Detail) - USD ($) $ in Thousands | Sep. 30, 2017 | Dec. 31, 2016 |
Inventory Disclosure [Abstract] | ||
Raw materials | $ 78,934 | $ 85,684 |
Work in progress | 71,614 | 81,645 |
Finished goods | 230,497 | 233,732 |
Inventory, gross, total | 381,045 | 401,061 |
Less: allowance for obsolete and excess inventory | (83,828) | (45,648) |
Net inventory | $ 297,217 | $ 355,413 |
Impairments and Other Charges -
Impairments and Other Charges - Narrative (Details) $ in Millions | Sep. 30, 2017USD ($) |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Impairments and other charges related to inventory | $ 33.6 |
Impairments and other charges related to fixed assets | $ 27.4 |
Goodwill - Schedule of Changes
Goodwill - Schedule of Changes in Carrying Amount of Goodwill (Details) $ in Thousands | 9 Months Ended |
Sep. 30, 2017USD ($) | |
Goodwill [Roll Forward] | |
Goodwill, Beginning balance | $ 34,371 |
Foreign Currency Translation Adjustment | 1,355 |
Goodwill, Ending balance | 48,514 |
Western Hemisphere | |
Goodwill [Roll Forward] | |
Goodwill, Beginning balance | 26,632 |
Foreign Currency Translation Adjustment | 696 |
Goodwill, Ending balance | 40,116 |
Eastern Hemisphere | |
Goodwill [Roll Forward] | |
Goodwill, Beginning balance | 7,739 |
Foreign Currency Translation Adjustment | 659 |
Goodwill, Ending balance | 8,398 |
Asia Pacific | |
Goodwill [Roll Forward] | |
Goodwill, Beginning balance | 0 |
Foreign Currency Translation Adjustment | 0 |
Goodwill, Ending balance | 0 |
Technology Alliance Inc. | |
Goodwill [Roll Forward] | |
Acquisition | 12,788 |
Technology Alliance Inc. | Western Hemisphere | |
Goodwill [Roll Forward] | |
Acquisition | 12,788 |
Technology Alliance Inc. | Eastern Hemisphere | |
Goodwill [Roll Forward] | |
Acquisition | 0 |
Technology Alliance Inc. | Asia Pacific | |
Goodwill [Roll Forward] | |
Acquisition | $ 0 |
Intangible Assets - Schedule of
Intangible Assets - Schedule of Intangible Assets (Details) - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2017 | Dec. 31, 2016 | |
Finite-Lived Intangible Assets [Line Items] | ||
Gross Book Value, Trademarks | $ 8,474 | $ 8,416 |
Gross Book Value, Other Intangibles | 41,337 | 30,056 |
Accumulated Amortization | (2,318) | (462) |
Net Book Value | 39,019 | 29,594 |
Patents | ||
Finite-Lived Intangible Assets [Line Items] | ||
Gross Book Value, Other Intangibles | 5,955 | 3,583 |
Accumulated Amortization | (745) | (294) |
Net Book Value | 5,210 | 3,289 |
Customer Relationships | ||
Finite-Lived Intangible Assets [Line Items] | ||
Gross Book Value, Other Intangibles | 26,737 | 18,057 |
Accumulated Amortization | (1,531) | (168) |
Net Book Value | 25,206 | 17,889 |
Noncompete Agreements | ||
Finite-Lived Intangible Assets [Line Items] | ||
Gross Book Value, Other Intangibles | 171 | 0 |
Accumulated Amortization | (42) | 0 |
Net Book Value | $ 129 | $ 0 |
Minimum | Patents | ||
Finite-Lived Intangible Assets [Line Items] | ||
Estimated Useful Lives | 15 years | |
Minimum | Customer Relationships | ||
Finite-Lived Intangible Assets [Line Items] | ||
Estimated Useful Lives | 5 years | |
Minimum | Noncompete Agreements | ||
Finite-Lived Intangible Assets [Line Items] | ||
Estimated Useful Lives | 3 years | |
Maximum | Patents | ||
Finite-Lived Intangible Assets [Line Items] | ||
Estimated Useful Lives | 30 years | |
Maximum | Customer Relationships | ||
Finite-Lived Intangible Assets [Line Items] | ||
Estimated Useful Lives | 15 years | |
Maximum | Noncompete Agreements | ||
Finite-Lived Intangible Assets [Line Items] | ||
Estimated Useful Lives | 3 years |
Intangible Assets - Narrative (
Intangible Assets - Narrative (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended |
Sep. 30, 2017 | Sep. 30, 2017 | |
Goodwill and Intangible Assets Disclosure [Abstract] | ||
Amortization of intangible assets | $ 0.6 | $ 1.8 |
Geographic Areas - Schedule of
Geographic Areas - Schedule of Segment Reporting (Detail) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | Dec. 31, 2016 | |
Segment Reporting Information [Line Items] | |||||
Products | $ 75,885 | $ 101,277 | $ 269,570 | $ 352,519 | |
Services | 24,461 | 22,363 | 77,928 | 80,121 | |
Revenues | 100,346 | 123,640 | 347,498 | 432,640 | |
Impairment and other charges | 60,968 | 0 | 60,968 | 0 | |
Depreciation and amortization | 9,518 | 7,592 | 32,231 | 23,092 | |
Income before income taxes | (61,100) | 23,877 | (61,108) | 119,446 | |
Total Long-Lived Assets | 444,975 | 444,975 | $ 404,693 | ||
Total Assets | 1,437,464 | 1,437,464 | 1,461,404 | ||
Intercompany | |||||
Segment Reporting Information [Line Items] | |||||
Revenues | 13,252 | 7,888 | 23,787 | 29,827 | |
Eliminations | |||||
Segment Reporting Information [Line Items] | |||||
Revenues | (13,252) | (7,888) | (23,787) | (29,827) | |
Income before income taxes | 62 | (1,220) | (1,188) | 2,401 | |
Total Long-Lived Assets | (20,870) | (20,870) | (480) | ||
Total Assets | (25,389) | (25,389) | (2,526) | ||
Western Hemisphere | |||||
Segment Reporting Information [Line Items] | |||||
Products | 43,344 | 61,071 | 162,931 | 202,457 | |
Services | 14,406 | 13,395 | 49,298 | 47,171 | |
Western Hemisphere | Intercompany | |||||
Segment Reporting Information [Line Items] | |||||
Revenues | 12,569 | 6,444 | 22,700 | 27,660 | |
Western Hemisphere | Operating Segments | |||||
Segment Reporting Information [Line Items] | |||||
Revenues | 70,319 | 80,910 | 234,929 | 277,288 | |
Impairment and other charges | 45,439 | 0 | 45,439 | 0 | |
Depreciation and amortization | 6,827 | 5,052 | 24,153 | 15,157 | |
Income before income taxes | (40,472) | 22,009 | (28,558) | 85,921 | |
Total Long-Lived Assets | 373,394 | 373,394 | 317,875 | ||
Total Assets | 771,401 | 771,401 | 775,358 | ||
Eastern Hemisphere | |||||
Segment Reporting Information [Line Items] | |||||
Products | 17,200 | 26,133 | 53,567 | 89,207 | |
Services | 7,557 | 7,264 | 20,685 | 28,275 | |
Eastern Hemisphere | Intercompany | |||||
Segment Reporting Information [Line Items] | |||||
Revenues | 267 | 109 | 554 | 316 | |
Eastern Hemisphere | Operating Segments | |||||
Segment Reporting Information [Line Items] | |||||
Revenues | 25,024 | 33,506 | 74,806 | 117,798 | |
Impairment and other charges | 8,532 | 0 | 8,532 | 0 | |
Depreciation and amortization | 1,073 | 1,171 | 3,228 | 3,856 | |
Income before income taxes | (2,882) | 15,618 | 3,401 | 57,352 | |
Total Long-Lived Assets | 34,248 | 34,248 | 33,338 | ||
Total Assets | 325,476 | 325,476 | 318,529 | ||
Asia Pacific | |||||
Segment Reporting Information [Line Items] | |||||
Products | 15,341 | 14,073 | 53,072 | 60,855 | |
Services | 2,498 | 1,704 | 7,945 | 4,675 | |
Asia Pacific | Intercompany | |||||
Segment Reporting Information [Line Items] | |||||
Revenues | 416 | 1,335 | 533 | 1,851 | |
Asia Pacific | Operating Segments | |||||
Segment Reporting Information [Line Items] | |||||
Revenues | 18,255 | 17,112 | 61,550 | 67,381 | |
Impairment and other charges | 6,997 | 0 | 6,997 | 0 | |
Depreciation and amortization | 1,015 | 1,070 | 3,046 | 3,319 | |
Income before income taxes | (4,525) | 73 | 3,115 | 11,296 | |
Total Long-Lived Assets | 58,203 | 58,203 | 53,960 | ||
Total Assets | 365,976 | 365,976 | $ 370,043 | ||
Corporate Segment | Operating Segments | |||||
Segment Reporting Information [Line Items] | |||||
Depreciation and amortization | 603 | 299 | 1,804 | 760 | |
Income before income taxes | $ (13,283) | $ (12,603) | $ (37,878) | $ (37,524) |
Income Taxes - Narrative (Detai
Income Taxes - Narrative (Details) - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2017 | Sep. 30, 2016 | |
Income Tax Contingency [Line Items] | ||
Discrete tax benefit | $ 31,529 | $ 3,435 |
Foreign Tax Authority | ||
Income Tax Contingency [Line Items] | ||
Accrued liabilities related to tax service on revenue | 2,200 | |
Reserve | 168 | |
Discrete tax benefit | 8,200 | |
Foreign Tax Authority | Asia Pacific | ||
Income Tax Contingency [Line Items] | ||
Discrete period tax related to beginning of year | $ 1,600 |
Commitments and Contingencies -
Commitments and Contingencies - Additional Information (Detail) $ in Millions | 1 Months Ended | 2 Months Ended | 3 Months Ended | 10 Months Ended | |||
Dec. 31, 2010USD ($) | Mar. 31, 2010USD ($) | Jan. 31, 2011USD ($)Assessment | Jun. 30, 2015USD ($) | Dec. 31, 2010USD ($) | Dec. 31, 2016USD ($) | Dec. 31, 2014USD ($) | |
Commitments And Contingencies [Line Items] | |||||||
Court deposit | $ 3.1 | ||||||
Brazil | |||||||
Commitments And Contingencies [Line Items] | |||||||
Tax assessment settled with payments | $ 3.9 | $ 12.2 | |||||
Amount of interest, penalties and monetary restatement fees on tax assessments | $ 7.8 | ||||||
Tax credits certified | $ 8.3 | ||||||
Number of additional assessments | Assessment | 2 | ||||||
Value of assessments served on Brazilian subsidiary | $ 13 | ||||||
Court deposit | $ 5.7 | ||||||
Brazil | Inflation Related Credits | |||||||
Commitments And Contingencies [Line Items] | |||||||
Tax credits certified | $ 2.3 |