Dril-Quip Axes Jobs as Profits Dip

Dril-Quip has generated net income of $1.3 million, or $0.03 per diluted share, for the three months ended December 31, 2016, versus net income of $48.4 million, or $1.28 per diluted share, for the fourth quarter of 2015.

Total revenues were $106.1 million during the quarter ended December 31, 2016 compared to $201.6 million for the same period in 2015. Total revenues for the year ended December 31, 2016 were $538.7 million, compared to $844.3 million for the same period in 2015.

For the year ended December 31, 2016, net income was $93.2 million, or $2.47 per diluted share, compared with net income of $192.0 million, or $4.98 per diluted share, for 2015.

The full year 2016 results were negatively impacted by the following after-tax amounts: inventory valuation adjustments of $4.8 million ($0.13 per diluted share), acquisition costs and fees of $3.5 million ($0.09 per diluted share) and net loss from operations of TIW Corporation of $3.1 million ($0.08 per diluted share).

In addition, the company announced that its backlog at December 31, 2016 was $318 million, compared to $685 million at December 31, 2015.

Blake DeBerry, Dril-Quip’s president and CEO, said: “Our disappointing fourth quarter results were primarily driven by revenue shortfalls in each of our major operating regions as operators continued to defer spending in the face of difficult market conditions. In addition, our fourth quarter results were negatively impacted by a number of non-recurring items, including costs associated with the TIW acquisition and one-time inventory adjustments.

“2017 will be a very challenging year for us and for the entire offshore sector. Accordingly, our diminished backlog will limit our manufacturing flexibility and will require an even higher level of execution in order for us to meet our revenue targets. Regarding costs, we continue to minimize expenditures while maintaining our ability to capitalize on the eventual market rebound. Following a series of reductions dating back to 2015, we further reduced our employee headcount in the first quarter of 2017. In addition, reductions in pay have been instituted globally.

“Due to our reduced backlog level and the uncertainty of book-and-ship order volumes, we do not believe that it would be prudent to provide 2017 earnings-per-share guidance at this time. The first quarter of 2017 is expected to be our most challenging quarter of the year with the impact of severance costs and only benefiting from a partial quarter of pay reductions. However, we do expect to be net income and free cash flow positive during 2017, allowing us to continue to execute our long-term strategies.

“Looking forward, we believe that our existing operating cost structure, combined with a debt-free balance sheet and a significant cash position, leaves us well-positioned for an anticipated market upturn.”