10-Q

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, 2014

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 of incorporation or organization)	(I.R.S. Employer Identification No.)

6401 N. ELDRIDGE PARKWAY

HOUSTON, TEXAS

77041

(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  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of regulations S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	x	Accelerated filer	¨
Non-accelerated filer	¨  (Do not check if a smaller reporting company)	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2).    Yes  ¨    No  x

As of July 23, 2014, the number of shares outstanding of the registrant’s common stock, par value $.01 per share, was 39,977,175.

PART I—FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

DRIL-QUIP, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

	June 30, 2014			December 31, 2013
	(In thousands)
ASSETS
Current assets:
Cash and cash equivalents	$	342,621		$	384,356
Trade receivables, net		316,921			279,253
Inventories, net		408,066			368,354
Deferred income taxes		27,299			24,951
Prepaids and other current assets		26,613			21,899
Total current assets		1,121,520			1,078,813
Property, plant and equipment, net		316,288			304,806
Other assets		10,752			10,993
Total assets	$	1,448,560		$	1,394,612
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	55,010		$	38,801
Accrued income taxes		8,136			13,628
Customer prepayments		69,712			45,025
Accrued compensation		18,977			21,556
Other accrued liabilities		17,570			23,780
Total current liabilities		169,405			142,790
Deferred income taxes		9,571			9,804
Total liabilities		178,976			152,594
Commitments and contingencies (Note 7)
Stockholders’ equity:
Preferred stock, 10,000,000 shares authorized at $0.01 par value (none issued)		—			—
Common stock:
100,000,000 shares authorized at $0.01 par value, 39,977,175 and 40,822,627 shares issued and outstanding at June 30, 2014 and December 31, 2013		398			407
Additional paid-in capital		109,170			191,965
Retained earnings		1,163,758			1,069,816
Accumulated other comprehensive losses		(3,742	)		(20,170	)
Total stockholders’ equity		1,269,584			1,242,018
Total liabilities and stockholders’ equity	$	1,448,560		$	1,394,612

The accompanying notes are an integral part of these condensed consolidated financial statements.

2

DRIL-QUIP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

	Three months ended June 30,						Six months ended June 30,
	2014			2013			2014			2013
	(In thousands, except per share data)
Revenues:
Products	$	189,914		$	188,859		$	361,915		$	349,344
Services		40,401			33,172			72,473			65,842
Total revenues		230,315			222,031			434,388			415,186
Cost and expenses:
Cost of sales:
Products		104,208			113,312			195,539			209,985
Services		20,785			19,891			40,241			39,546
Total cost of sales		124,993			133,203			235,780			249,531
Selling, general and administrative		25,520			23,273			49,455			38,902
Engineering and product development		10,848			9,340			21,632			18,361
Total costs and expenses		161,361			165,816			306,867			306,794
Operating income		68,954			56,215			127,521			108,392
Interest income		266			167			349			283
Interest expense		(5	)		(6	)		(12	)		(20	)
Income before income taxes		69,215			56,376			127,858			108,655
Income tax provision		17,891			13,449			33,916			25,886
Net income	$	51,324		$	42,927		$	93,942		$	82,769
Earnings per common share:
Basic	$	1.27		$	1.06		$	2.32		$	2.04
Diluted	$	1.27		$	1.05		$	2.31		$	2.03
Weighted average common shares outstanding:
Basic		40,327			40,636			40,501			40,583
Diluted		40,562			40,821			40,723			40,767

The accompanying notes are an integral part of these condensed consolidated financial statements.

3

DRIL-QUIP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)

	Three months ended June 30,					Six months ended June 30,
	2014		2013			2014		2013
	(In thousands)
Net income	$	51,324	$	42,927		$	93,942	$	82,769
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments		10,699		(9,511	)		16,428		(24,134	)
Total comprehensive income	$	62,023	$	33,416		$	110,370	$	58,635

The accompanying notes are an integral part of these condensed consolidated financial statements.

4

DRIL-QUIP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	Six months ended June 30,
	2014			2013
	(In thousands)
Operating activities
Net income	$	93,942		$	82,769
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization		15,126			14,353
Stock-based compensation expense		5,660			4,136
Gain on sale of equipment		(149	)		(22	)
Deferred income taxes		(2,507	)		(1,751	)
Changes in operating assets and liabilities:
Trade receivables, net		(33,272	)		15,203
Inventories, net		(32,708	)		(24,658	)
Prepaids and other assets		(3,460	)		(921	)
Excess tax benefits of stock option and awards		(251	)		(1,682	)
Accounts payable and accrued expenses		24,291			(1,326	)
Net cash provided by operating activities		66,672			86,101
Investing activities
Purchase of property, plant and equipment		(23,218	)		(23,101	)
Proceeds from sale of equipment		470			299
Net cash used in investing activities		(22,748	)		(22,802	)
Financing activities
Repurchase of common stock		(90,022	)		—
Proceeds from exercise of stock options		1,386			7,749
Excess tax benefits of stock options and awards		251			1,682
Net cash provided by (used in) financing activities		(88,385	)		9,431
Effect of exchange rate changes on cash activities		2,726			(4,380	)
Increase (decrease) in cash and cash equivalents		(41,735	)		68,350
Cash and cash equivalents at beginning of period		384,356			257,191
Cash and cash equivalents at end of period	$	342,621		$	325,541

The accompanying notes are an integral part of these condensed consolidated financial statements.

5

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”), designs, manufactures, sells and services highly engineered offshore drilling and production equipment that is well suited for use in deepwater, harsh environments and severe service applications. The Company’s principal products consist of subsea and surface wellheads, subsea and surface production trees, subsea control systems and manifolds, mudline hanger systems, specialty connectors and associated pipe, drilling and production riser systems, liner hangers, wellhead connectors and diverters. Dril-Quip’s products are used by major integrated, large independent and foreign national oil and gas companies in offshore areas throughout the world. Dril-Quip also provides technical advisory assistance on an as-requested basis during installation of its products, as well as rework and reconditioning services for customer-owned Dril-Quip products. In addition, Dril-Quip’s customers may rent or purchase running tools from the Company for use in the installation and retrieval of the Company’s products.

The Company’s operations are organized into three geographic segments—Western Hemisphere (including North and South America; headquartered in Houston, Texas), Eastern Hemisphere (including Europe and Africa; headquartered in Aberdeen, Scotland) and Asia-Pacific (including the Pacific Rim, Southeast Asia, Australia, India and the Middle East; headquartered in Singapore). Each of these segments sells similar products and services and the Company has major manufacturing facilities in all three of its headquarter locations as well as in Macae, Brazil.

The condensed consolidated financial statements included herein are unaudited. The balance sheet at December 31, 2013, has been derived from the audited consolidated financial statements at that date. In the opinion of management, the unaudited condensed consolidated interim financial statements include all normal recurring adjustments necessary for a fair presentation of the financial position as of June 30, 2014 and the results of operations and comprehensive income for the three- and six-month periods ended June 30, 2014 and 2013 and the cash flows for the six-month periods ended June 30, 2014 and 2013. Certain information and footnote disclosures normally included in the 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 the cash flows for the six-month period ended June 30, 2014 are not necessarily indicative of the results to be expected for the full year. The condensed consolidated financial statements included herein should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013.

2. Significant Accounting Policies

Principles of Consolidation

The condensed consolidated financial statements include the accounts of the Company and its subsidiaries. All material intercompany accounts and transactions have been eliminated.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Some of the Company’s more significant estimates are those affected by critical accounting policies for revenue recognition, inventories and contingent liabilities as discussed more fully in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013.

Revenue Recognition

Product Revenue

The Company earns product revenues from two methods:

• product revenues recognized under the percentage-of-completion method; and

• product revenues from the sale of products that do not qualify for the percentage-of-completion method.

6

Revenues recognized under the percentage-of-completion method

The Company uses the percentage-of-completion method on long-term project contracts that have the following characteristics:

• The contracts call for products which are designed to customer specifications;

• The structural designs are unique and require significant engineering and manufacturing efforts generally requiring more than one year in duration;

• The contracts contain specific terms as to milestones, progress billings and delivery dates; and

• Product requirements cannot be filled directly from the Company’s standard inventory.

For each project, the Company prepares a detailed analysis of estimated costs, profit margin, completion date and risk factors which include availability of material, production efficiencies and other factors that may impact the project. On a quarterly basis, management reviews the progress of each project, which may result in revisions of previous estimates, including revenue recognition. The Company calculates the percent complete and applies the percentage to determine the revenues earned and the appropriate portion of total estimated costs. Losses, if any, are recorded in full in the period they become known. Historically, the Company’s estimates of total costs and costs to complete have approximated actual costs incurred to complete the project.

Under the percentage-of-completion method, billings may not correlate directly to the revenue recognized. Based upon the terms of the specific contract, billings may be in excess of the revenue recognized, in which case the amounts are included in customer prepayments as a liability on the Condensed Consolidated Balance Sheets. Likewise, revenue recognized may exceed customer billings in which case the amounts are reported in trade receivables. Unbilled revenues are expected to be billed and collected within one year. As of June 30, 2014 and December 31, 2013, receivables included $43.9 million and $52.9 million of unbilled receivables, respectively. For the quarter ended June 30, 2014, there were 12 projects representing approximately 5% of the Company’s total revenue and approximately 6% of its product revenues that were accounted for using percentage-of-completion accounting, compared to 11 projects during the second quarter of 2013, which represented approximately 6% of the Company’s total revenues and approximately 7% of its product revenues. For the six months ended June 30, 2014, there were 16 projects representing approximately 8% of the Company’s total revenues and 10% of its product revenues, compared to 15 projects that represented approximately 12% of the Company’s total revenues and 14% of its product revenues for the six months ended June 30, 2013, all of which were accounted for using percentage-of-completion accounting.

Revenues not recognized under the percentage-of-completion method

Revenues from the sale of inventory products, not accounted for under the percentage-of-completion method, are recorded at the time the manufacturing processes are complete and ownership is transferred to the customer.

Service revenue

The Company earns service revenues from three sources:

• technical advisory assistance;

• rental of running tools; and

• rework and reconditioning of customer-owned Dril-Quip products.

The Company does not install products for its customers, but it does provide technical advisory assistance. At the time of delivery of the product, the customer is not obligated to buy or rent the Company’s running tools and the Company is not obligated to perform any subsequent services relating to installation. Technical advisory assistance service revenue is recorded at the time the service is rendered. Service revenues associated with the rental of running and installation tools are recorded as earned. Rework and reconditioning service revenues are recorded when the refurbishment process is complete.

The Company normally negotiates contracts for products, including those accounted for under the percentage-of-completion method, and services separately. For all product sales, it is the customer’s decision as to the timing of the product installation as well as whether Dril-Quip running tools will be purchased or rented. Furthermore, the customer is under no obligation to utilize the Company’s technical advisory 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.

7

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 number of common shares outstanding at June 30 of each year to the weighted average 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 June 30,				Six months ended June 30,
	2014		2013		2014		2013
	(In thousands)
Weighted average basic common shares outstanding—basic		40,327		40,636		40,501		40,583
Dilutive effect of common stock options and awards		235		185		222		184
Weighted average diluted common shares outstanding—diluted		40,562		40,821		40,723		40,767

3. New Accounting Standards

In May 2014, the FASB issued ASU 2014-09 “Revenue from Contracts with Customer (Topic 606).” The amendment applies a new five-step revenue recognition model to be used in recognizing revenues associated with customer contracts. The amendment requires disclosure sufficient to enable readers of financial statements to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers, including qualitative and quantitative disclosures, significant judgments and changes in judgments, and assets recognized from the costs to obtain or fulfill the contract. The standard is effective for fiscal years beginning after December 15, 2016, including interim periods within that reporting period. The Company is currently evaluating the new guidance to determine the impact on its consolidated financial statements.

4. Stock-Based Compensation and Stock Awards

During the three months ended June 30, 2014 and 2013, the Company recognized approximately $2.8 million and $2.0 million, respectively, of stock-based compensation expense, which is included in the selling, general and administrative expense line on the Condensed Statement of Income. For the six months ended June 30, 2014 and 2013, stock-based compensation expense totaled $5.7 million and $4.1 million, respectively. No stock-based compensation expense was capitalized during the three or six months ended June 30, 2014 or 2013. There were no stock options or awards granted in the second quarter of 2014 or 2013. In May 2014, 1,602 shares of restricted stock awards vested from a May 2012 grant to the directors.

5. Inventories

Inventories consist of the following:

	June 30, 2014			December 31, 2013
	(In thousands)
Raw materials	$	95,441		$	85,670
Work in progress		134,042			119,929
Finished goods		214,138			195,971
		443,621			401,570
Less: allowance for obsolete and excess inventory		(35,555	)		(33,216	)
Total inventory	$	408,066		$	368,354

8

6. Geographic Areas

	Three months ended June 30,						Six months ended June 30,
	2014			2013			2014			2013
	(In thousands)
Revenues:
Western Hemisphere
Products	$	115,953		$	95,871		$	210,342		$	195,600
Services		18,381			18,567			35,281			34,196
Intercompany		9,063			10,891			19,355			23,278
Total	$	143,397		$	125,329		$	264,978		$	253,074
Eastern Hemisphere
Products	$	43,814		$	60,647		$	97,737		$	98,480
Services		16,514			10,400			27,991			22,567
Intercompany		3,325			596			3,499			751
Total	$	63,653		$	71,643		$	129,227		$	121,798
Asia-Pacific
Products	$	30,147		$	32,341		$	53,836		$	55,264
Services		5,506			4,205			9,201			9,079
Intercompany		962			4,146			2,330			4,277
Total	$	36,615		$	40,692		$	65,367		$	68,620
Summary
Products	$	189,914		$	188,859		$	361,915		$	349,344
Services		40,401			33,172			72,473			65,842
Intercompany		13,350			15,633			25,184			28,306
Eliminations		(13,350	)		(15,633	)		(25,184	)		(28,306	)
Total	$	230,315		$	222,031		$	434,388		$	415,186
Income before income taxes:
Western Hemisphere	$	36,010		$	19,199		$	72,170		$	44,145
Eastern Hemisphere		15,827			21,116			31,174			38,124
Asia-Pacific		15,853			13,133			21,308			22,824
Eliminations		1,525			2,928			3,206			3,562
Total	$	69,215		$	56,376		$	127,858		$	108,655

	June 30, 2014			December 31, 2013
	(In thousands)
Total Long-Lived Assets:
Western Hemisphere	$	224,188		$	216,104
Eastern Hemisphere		48,185			43,430
Asia-Pacific		57,593			59,192
Eliminations		(2,926	)		(2,927	)
Total	$	327,040		$	315,799
Total Assets:
Western Hemisphere	$	785,759		$	803,069
Eastern Hemisphere		364,355			316,473
Asia-Pacific		332,102			292,600
Eliminations		(33,656	)		(17,530	)
Total	$	1,448,560		$	1,394,612

9

7. Commitments and Contingencies

Deepwater Horizon Incident

On April 22, 2010, a deepwater U.S. Gulf of Mexico drilling rig known as the Deepwater Horizon, that was operated by BP Exploration & Production, Inc. (“BP”) sank after an explosion and fire that began on April 20, 2010. Pursuant to a contract that the Company entered into with an affiliate of BP, it supplied to BP a wellhead and certain other equipment that were in use on the Deepwater Horizon at the time of the incident. The Company was named, along with other unaffiliated defendants, in both class action and other lawsuits arising from the Deepwater Horizon incident. These lawsuits were consolidated in the multi-district proceeding In Re: Oil Spill by the Oil Rig “Deepwater Horizon” in the Gulf of Mexico, on April 20, 2010 (“MDL Proceeding”). In 2012, the judge presiding over various lawsuits and proceedings dismissed all claims asserted against the Company in those proceedings with prejudice. On April 9, 2012, the judge issued an order granting a final judgment in favor of the Company with respect to the court’s prior order that granted the Company’s Motion for Summary Judgment.

One of the lawsuits against the Company consolidated in the MDL Proceeding was a personal injury lawsuit initially filed in a Texas state court. The plaintiff has filed a motion to remand the lawsuit back to the Texas state court. If that lawsuit is remanded to the Texas state court, the Company intends to vigorously defend that lawsuit and does not believe it will have a material adverse impact on its results of operations. Accordingly, no liability has been accrued in conjunction with this matter.

Brazilian Tax Issue

From 2002 to 2007, the Company’s Brazilian subsidiary imported goods through the State of Espirito Santo in Brazil and subsequently transferred them to its facility in the State of Rio de Janeiro. During that period, the Company’s Brazilian subsidiary paid taxes to the State of Espirito Santo on its imports. Upon the final sale of these goods, the Company’s Brazilian subsidiary collected taxes from customers and remitted them to the State of Rio de Janeiro net of the taxes paid on importation of those goods to the State of Espirito Santo in accordance with the Company’s understanding of Brazilian tax laws.

In August 2007, the State of Rio de Janeiro served the Company’s Brazilian subsidiary with assessments to collect a state tax on the importation of goods through the State of Espirito Santo from 2002 to 2007 claiming that these taxes were due and payable to it under applicable law. The Company settled these assessments with payments to the State of Rio de Janeiro of $12.2 million in March 2010 and $3.9 million in December 2010. Approximately $7.8 million of these settlement payments were attributable to penalties, interest and amounts that had expired under the statute of limitations so that amount was recorded as an expense. The remainder of the settlement payments generated credits (recorded as a prepaid tax) that can be used to offset future state taxes on sales to customers in the State of Rio de Janeiro once certified by the tax authorities under a process that is currently ongoing. When the credits are certified, the Company will have a five-year period in which to utilize them. In December 2010 and January 2011, the Company’s Brazilian subsidiary was served with additional assessments totaling approximately $13.0 million from the State of Rio de Janeiro to cancel the credits associated with the tax payments to the State of Espirito Santo (“Santo Credits”) on the importation of goods from July 2005 to October 2007. The Santo Credits are not related to the credits described above. The Company has objected to this assessment on the grounds that it would represent double taxation on the importation of the same goods and that the Company is entitled to the credits under applicable Brazilian law. The Company believes that these credits are valid and success in the matter is probable. Based upon this analysis, the Company has not accrued any liability in conjunction with this matter.

Since 2007, the Company’s Brazilian subsidiary has paid taxes on the importation of goods directly to the State of Rio de Janeiro and the Company does not expect any similar issues to exist for periods subsequent to 2007.

General

The Company operates its business and markets its products and services in most of the significant oil and gas producing areas in the world and is, therefore, subject to the risks customarily attendant to international operations and dependency on the condition of the oil and gas industry. Additionally, products of the Company are used in potentially hazardous drilling, completion, and production applications that can cause personal injury, product liability, and environmental claims. Although exposure to such risk has not resulted in any significant problems in the past, there can be no assurance that ongoing and future developments will not adversely impact the Company.

The Company is also involved in a number of legal actions arising in the ordinary course of business. Although no assurance can be given with respect to the ultimate outcome of such legal action, in the opinion of management, the ultimate liability with respect thereto will not have a material adverse effect on the Company’s operations, financial position or cash flows.

10

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 aspects of the Company’s financial position, results of operations, comprehensive income and cash flows during the periods included in the accompanying unaudited condensed consolidated financial statements. This discussion should be read in conjunction with the unaudited condensed consolidated financial statements presented elsewhere herein as well as the discussion under “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013.

Overview

Dril-Quip designs, manufactures, sells and services highly engineered offshore drilling and production equipment that is well suited for use in deepwater, harsh environments and severe service applications. The Company 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, subsea control systems and manifolds, mudline hanger systems, specialty connectors and associated pipe, drilling and production riser systems, liner hangers, wellhead connectors and diverters. Dril-Quip 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 customers may rent or purchase running tools from the Company for use in the installation and retrieval of the Company’s products.

Oil and Gas Prices

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 have historically been characterized by significant volatility.

According to the Energy Information Administration (“EIA”) of the U.S. Department of Energy, average Brent Crude oil and natural gas (Henry Hub) closing prices are listed below for the periods covered by this report:

	Three months ended June 30,				Six months ended June 30,
	2014		2013		2014		2013
Crude oil ($/Bbl)	$	109.69	$	102.56	$	108.93	$	107.34
Natural gas ($/Mcf)		4.75		4.14		5.04		3.88

During the second quarter of 2014, Brent Crude oil closing prices ranged between $103.37 per barrel and $115.19 per barrel with an average quarterly price of $109.69 per barrel, as compared to a range of $96.84 and $109.66 per barrel with the average quarterly price of $102.56 per barrel for the same period in 2013. For the six months ended June 30, 2014 and 2013, Brent Crude oil closing prices averaged $108.93 per barrel and $107.34 per barrel, respectively, and ranged between $103.37 per barrel and $115.19 per barrel for the 2014 period, as compared to a range of $96.84 per barrel to $118.90 per barrel for the same period in 2013. Brent Crude oil prices ended the second quarter of 2014 at $111.03 per barrel and closed at $104.73 per barrel on July 14, 2014. The Henry Hub natural gas price at June 30, 2014 was $4.53 per Mcf and on July 14, 2014, the closing price was $4.26 per Mcf.

According to the July 2014 release of the Short-Term Energy Outlook published by the EIA, Brent Crude oil prices are projected to average approximately $109.55 per barrel in 2014 and $104.92 per barrel in 2015. In its July 2014 Oil Market Report, the International Energy Agency projected that world demand growth for oil will be approximately 1.2 million barrels per day in 2014, increasing to 1.4 million barrels per day in 2015. In July 2014, the EIA projected that Henry Hub natural gas prices will average $4.91 per Mcf in 2014 and $4.64 per Mcf in 2015.

11

Rig Count

Detailed below is the average contracted rig count for the Company’s geographic regions for the six months ended June 30, 2014 and 2013. The rig count data includes floating rigs (semi-submersibles and drillships) and jack-up rigs. The Company has included only these types of rigs as they are the primary end users of the Company’s products.

	Six months ended June 30,
	2014				2013
	Floating Rigs		Jack-up Rigs		Floating Rigs		Jack-up Rigs
Western Hemisphere		126		98		131		87
Eastern Hemisphere		99		96		92		89
Asia—Pacific		54		260		48		239
TOTAL		279		454		271		415

Source: ODS—Petrodata RigBase – June 30, 2014 and 2013

The table represents rigs under contract and includes rigs currently drilling as well as rigs committed, but not yet drilling. According to ODS-Petrodata RigBase, as of June 30, 2014, there were 71 rigs under contract in the U.S. Gulf of Mexico (43 floating rigs and 28 jack-up rigs), 63 of which were actively drilling (35 floating rigs and 28 jack-up rigs). As of June 30, 2013, there were also 71 rigs under contract in the U.S. Gulf of Mexico, (37 floating rigs and 34 jack-up rigs), all of which were actively drilling.

The Company believes that the number of rigs (semi-submersibles, drillships and jack-up rigs) under construction impacts its revenues because in certain cases, its customers order some of the Company’s products during the construction of such rigs. As a result, an increase in rig construction activity tends to favorably impact the Company’s backlog while a decrease in rig construction activity tends to negatively impact the Company’s backlog. According to ODS-Petrodata, at the end of June 2014 and 2013, there were 244 and 213 rigs, respectively, under construction. The expected delivery dates for the rigs under construction on June 30, 2014 are as follows:

	Floating Rigs		Jack-Up Rigs		Total
2014		19		24		43
2015		28		64		92
2016		21		48		69
2017		15		11		26
After 2017 or unspecified delivery date		14		—		14
		97		147		244

Regulation

The demand for the Company’s products and services is also affected by laws and regulations relating to the oil and gas industry in general, including those specifically directed to offshore operations. The adoption of new laws and regulations, or changes to existing laws or regulations that curtail exploration and development drilling for oil and gas for economic or other policy reasons could adversely affect the Company’s operations by limiting demand for its products.

Business Environment

Oil and gas prices and the level of offshore drilling and production activity have been characterized by significant volatility in recent years. Worldwide military, political, economic and other events have contributed to oil and natural gas price volatility and are likely to continue to do so in the future. For the first six months of 2013, Brent Crude oil prices ranged between $96.84 per barrel and $118.90 per barrel with an average price of $107.34 per barrel and ended the year at $109.95 per barrel. For the first six months of 2014 the price of Brent Crude oil ranged between $103.37 per barrel and $115.19 per barrel with an average price of $108.93 per barrel and ended the quarter at $111.03 per barrel. The Company expects continued volatility in both crude oil and natural gas prices, as well as in the level of drilling and production related activities. Even during periods of high prices for oil and natural gas, companies exploring for oil and gas may cancel or curtail programs, or reduce their levels of capital expenditures for exploration and production for a variety of reasons. In addition, a significant and prolonged decline in hydrocarbon prices would likely have a material adverse effect on the Company’s results of operations.

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The Company believes that its backlog should help mitigate the impact of negative market conditions; however, a prolonged decline in commodity prices, an extended continuation of the downturn in the global economy or future restrictions or declines in offshore oil and gas exploration and production could have a negative impact on the Company and/or its backlog. The Company’s backlog at June 30, 2014 was approximately $1.32 billion compared to approximately $1.14 billion at June 30, 2013 and $1.18 billion at December 31, 2013. In August 2012, the Company’s Brazilian subsidiary, Dril-Quip do Brasil LTDA, was awarded a four-year contract by Petroleo Brasileiro S.A. (“Petrobras”), Brazil’s national oil company. At exchange rates in effect at the signing date (2.04 Brazilian real to 1.00 U.S. dollar), the contract is valued at $650 million, net of Brazilian taxes, if all the equipment under the contract is ordered. Amounts will be included in the Company’s backlog as purchase orders under this contract are received. As of June 30, 2014, the Company’s backlog included approximately $131 million of purchase orders under the new Petrobras contract. Revenues of approximately $30 million have been recognized on this contract through June 30, 2014. The Company has not recognized revenue of approximately $12.4 million during the six months ended June 30, 2014 for certain items of equipment that were completed but not accepted for delivery by Petrobras. Petrobras has asserted that such equipment does not satisfy certain contractual requirements. If the Company is unable to timely resolve these objections, or if Petrobras refuses to accept similar items of completed equipment in the future, the Company’s results of operations may be adversely affected.

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 investments in foreign countries. These risks include nationalization, expropriation, war, acts of terrorism and civil disturbance, restrictive action by local governments, limitation on repatriation of earnings, change in foreign tax laws and change in currency exchange rates, any of which could have an adverse effect on either the Company’s ability to manufacture its products in its facilities abroad or the demand in certain regions for the Company’s products or both. To date, the Company has not experienced any significant problems in foreign countries arising from local government actions or political instability, but there is no assurance that such problems will not arise in the future. Interruption of the Company’s international operations could have a material adverse effect on its results of operations.

Revenues. Dril-Quip’s revenues are generated from two sources: products and services. Product revenues are derived from the sale of offshore drilling and production equipment. Service revenues are earned when the Company provides technical advisory assistance for installation of the Company’s products, reconditioning services and rental of running tools for installation and retrieval of the Company’s products. For the six months ended June 30, 2014 and 2013, the Company derived 83% and 84%, respectively, of its revenues from the sale of its products and 17% and 16% of its revenues from services, respectively. Service revenues generally correlate to revenues from product sales because increased product sales typically generate increased demand for technical advisory services during installation and rental of running tools. The Company has substantial international operations, with approximately 57% and 67% of its revenues derived from foreign sales for the three months ended June 30, 2014 and 2013, respectively, and 60% and 70% for the six months ended June 30, 2014 and 2013, respectively. Substantially all of the Company’s domestic revenue relates to operations in the U. S. Gulf of Mexico. Domestic revenue approximated 43% and 33%, respectively, of the Company’s total revenues for the three months ended June 30, 2014 and 2013 and 40% and 30%, respectively, for the six months ended June 30, 2014 and 2013.

Product contracts are negotiated and sold separately from service contracts. In addition, service contracts are not typically included in the product contracts or related sales orders and are not offered to the customer as a condition of the sale of the Company’s products. The demand for products and services is generally based on world-wide economic conditions in the offshore oil and gas industry, and is not based on a specific relationship between the two types of contracts. Substantially all of the Company’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.

Generally, the Company attempts to raise its prices as its costs increase. However, the actual pricing of the Company’s products and services is impacted by a number of factors, including competitive pricing pressure, the level of utilized capacity in the oil service sector, maintenance of market share, the introduction of new products and general market conditions.

The Company accounts for larger and more complex projects that have relatively longer manufacturing time frames on a percentage-of-completion basis. For the six months ended June 30, 2014, 16 projects representing approximately 8% of the Company’s total revenue and approximately 10% of its product revenue were accounted for using percentage-of-completion accounting, compared to 15 projects representing approximately 12% of the Company’s total revenue and approximately 14% of its product revenue for the first six months of 2013. This percentage may fluctuate in the future. Revenues accounted for in this manner are generally recognized based upon a calculation of the percentage complete, which is used to determine the revenue earned and the appropriate portion of total estimated cost of sales. Accordingly, price and cost estimates are reviewed periodically as the work progresses, and adjustments proportionate to the percent complete are reflected in the period when such estimates are revised. Losses, if any, are recorded in full in the period they become known. Amounts received from customers in excess of revenues recognized are classified as a current liability.

13

The following table sets forth, for the periods indicated, a breakdown of the Company’s U.S. Gulf of Mexico products and services revenues:

	Three months ended June 30,				Six months ended June 30,
	2014		2013		2014		2013
	(In millions)
Revenues:
Products
Subsea equipment	$	74.3	$	58.9	$	126.7	$	97.3
Surface equipment		1.4		0.1		3.7		0.1
Offshore rig equipment		9.1		0.4		18.8		0.9
Total products		84.8		59.4		149.2		98.3
Services		14.3		13.9		26.0		25.0
Total U.S. Gulf of Mexico revenues	$	99.1	$	73.3	$	175.2	$	123.3

Subsea equipment revenues rose $15.4 million to $74.3 million from $58.9 million and offshore rig equipment revenues increased $8.7 million to $9.1 million from $0.4 million for the three months ended June 30, 2014 and 2013, respectively. These increases are largely due to the increases in demand, evidenced by the increase in backlog, and the increase in the number of rigs under construction as of June 30, 2014 compared to June 30, 2013. For the three months ended June 30, 2014 and 2013, the Company’s U.S. Gulf of Mexico service revenues as a percentage of worldwide revenues was 6% for both periods.

Cost of Sales. The principal elements of cost of sales are labor, raw materials and manufacturing overhead. Cost of sales as a percentage of revenues is influenced by the product mix sold in any particular period, costs from projects accounted for under the percentage-of-completion method 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, stock-based compensation expense, legal expenses, foreign currency transaction gains and losses 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. The Company’s effective income tax rate has historically been lower than the statutory rate primarily due to foreign income tax rate differentials, research and development credits and deductions related to domestic manufacturing activities.

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Results of Operations

The following table sets forth, for the periods indicated, certain condensed statements of income data expressed as a percentage of revenues:

	Three months ended June 30,						Six months ended June 30,
	2014			2013			2014			2013
Revenues:
Products		82.5	%		85.1	%		83.3	%		84.1	%
Services		17.5			14.9			16.7			15.9
Total revenues		100.0			100.0			100.0			100.0
Cost of sales:
Products		45.2			51.0			45.0			50.6
Services		9.1			9.0			9.3			9.5
Total cost of sales		54.3			60.0			54.3			60.1
Selling, general and administrative expenses		11.0			10.5			11.4			9.4
Engineering and product development expenses		4.7			4.2			5.0			4.4
Operating income		30.0			25.3			29.3			26.1
Interest income		0.1			0.1			0.1			0.1
Interest expense		—			—			—			—
Income before income taxes		30.1			25.4			29.4			26.2
Income tax provision		7.8			6.1			7.8			6.2
Net income		22.3	%		19.3	%		21.6	%		20.0	%

The following table sets forth, for the periods indicated, a breakdown of our products and service revenues:

	Three months ended June 30,				Six months ended June 30,
	2014		2013		2014		2013
	(In millions)
Revenues:
Products
Subsea equipment	$	175.6	$	174.2	$	328.1	$	313.3
Surface equipment		4.9		8.5		12.7		15.1
Offshore rig equipment		9.4		6.1		21.1		20.9
Total products		189.9		188.8		361.9		349.3
Services		40.4		33.2		72.5		65.9
Total revenues	$	230.3	$	222.0	$	434.4	$	415.2

Three Months Ended June 30, 2014 Compared to Three Months Ended June 30, 2013.

Revenues. Revenues increased by $8.3 million, or approximately 3.7%, to $230.3 million in the three months ended June 30, 2014 from $222.0 million in the three months ended June 30, 2013. Product revenues increased by approximately $1.1 million for the three months ended June 30, 2014 compared to the same period in 2013 as a result of increased revenues of $1.4 million in subsea equipment and $3.3 million in offshore rig equipment, slightly offset by a decrease of $3.6 million in surface equipment. The increase in subsea equipment and offshore rig equipment is primarily due to increased activity in the Gulf of Mexico. In any given time period, the revenues recognized between the various product lines and geographic areas will vary depending upon the timing of shipments to customers, completion status of the projects accounted for under the percentage-of-completion accounting method, market conditions and customer demand at that time. Product revenues increased in the Western Hemisphere by approximately $20.1 million, partially offset by a decrease in the Eastern Hemisphere of approximately $16.8 million and in Asia-Pacific by $2.2 million. Service revenues increased by approximately $7.2 million as a result of increases of $6.1 million in the Eastern Hemisphere and $1.3 million in Asia-Pacific, slightly offset by a decrease of $200,000 in the Western Hemisphere. The majority of the increases in service revenues related to an increase in technical advisory assistance revenues and rental of running tools.

Cost of Sales. Cost of sales decreased by $8.2 million, or approximately 6.2%, to $125.0 million for the three months ended June 30, 2014 from $133.2 million for the same period in 2013. As a percentage of revenues, cost of sales were approximately 54.3% and 60.0% for the three-month period ended June 30, 2014 and 2013, respectively. The decrease in cost of sales as a percentage of revenues resulted primarily from changes in product mix and a decrease in unabsorbed manufacturing overhead.

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Selling, General and Administrative Expenses. Selling, general and administrative expenses increased by $2.2 million, or approximately 9.4%, to $25.5 million for the three months ended June 30, 2014 from $23.3 million for the same period in 2013. The increase is partially attributable to $2.0 million in foreign currency transaction losses for the three months ended June 30, 2014 compared to a $900,000 loss for the three months ended June 30, 2013. Stock-based compensation expense for the second quarter of 2014 was $2.8 million compared to $2.0 million for the quarter ended June 30, 2013. Selling, general and administrative expenses as a percentage of revenues increased to 11.0% in 2014 from 10.5% in 2013.

Engineering and Product Development Expenses. For the three months ended June 30, 2014, engineering and product development expenses increased by $1.5 million in the second quarter of 2014 compared to the same period in 2013 due to increases in personnel and related costs. Engineering and product development expenses as a percentage of revenues increased to 4.7% in 2014 from 4.2% in 2013.

Income tax provision. Income tax expense for the three months ended June 30, 2014 was $17.9 million on income before taxes of $69.2 million, resulting in an effective tax rate of approximately 26%. Income tax expense for the three months ended June 30, 2013 was $13.4 million on income before taxes of $56.4 million, resulting in an effective tax rate of approximately 24%. The increase in the effective income tax rate reflects the difference in income before income taxes among the Company’s three geographic areas, which have different income tax rates.

Net Income. Net income was approximately $51.3 million for the three months ended June 30, 2014 and $42.9 million for the same period in 2013 for the reasons set forth above.

Six Months Ended June 30, 2014 Compared to Six Months Ended June 30, 2013.

Revenues. Revenues increased by $19.2 million, or approximately 4.6%, to $434.4 million in the six months ended June 30, 2014 from $415.2 million in the six months ended June 30, 2013. Product revenues increased by approximately $12.6 million for the six months ended June 30, 2014 compared to the same period in 2013 as a result of increased revenues of $14.8 million in subsea equipment and $200,000 in offshore rig equipment, partially offset by a $2.4 million decrease in surface equipment. The majority of the subsea equipment increases occurred in the Western Hemisphere as activity increased in the U.S. Gulf of Mexico. Product revenues increased in the Western Hemisphere by $14.7 million, partially offset by decreases in the Eastern Hemisphere of $700,000 and Asia-Pacific of $1.4 million. In any given time period, the revenues recognized between the various product lines and geographic areas will vary depending upon the timing of shipments to customers, completion status of the projects accounted for under the percentage-of-completion accounting method, market conditions and customer demand at that time. Service revenues increased by approximately $6.6 million due to increased service revenues in the Western Hemisphere of $1.1 million, $5.4 million in the Eastern Hemisphere and $100,000 in Asia-Pacific. The majority of the increase in service revenues related to an increase in technical advisory assistance revenues and rental of running tools.

Cost of Sales. Cost of sales decreased by $13.7 million, or approximately 5.5%, to $235.8 million for the six months ended June 30, 2014 from $249.5 million for the same period in 2013. The decrease was primarily due to changes in product mix and a decrease in unabsorbed manufacturing overhead. As a percentage of revenues, cost of sales were approximately 54.3% and 60.1% for the six months ended June 30, 2014 and 2013, respectively.

Selling, General and Administrative Expenses. For the six months ended June 30, 2014, selling, general and administrative expenses increased by approximately $10.6 million, or 27.2%, to $49.5 million from $38.9 million for the same period in 2013. The Company experienced approximately $3.0 million in foreign currency transaction losses in the first six months of 2014 compared to approximately $4.7 million in foreign currency transaction gains for the same period in 2013. Stock-based compensation expense for the first six months of 2014 was $5.7 million compared to $4.1 million for the same period in 2013. Approximately $800,000 was primarily related to increases in personnel and related expenses. Selling, general and administrative expenses as a percentage of revenues increased to 11.4% in 2014 from 9.4% in 2013.

Engineering and Product Development Expenses. For the six months ended June 30, 2014 engineering and product development expenses increased by $3.2 million, or approximately 17.4%, to $21.6 million from $18.4 million for the same period in 2013. Engineering and product development expenses as a percentage of revenues was 5.0% in 2014 and 4.4% in 2013 due to increases in personnel and related costs.

Income tax provision. Income tax expense for the six months ended June 30, 2014 was $33.9 million on income before taxes of $127.9 million, resulting in an effective tax rate of approximately 27%. Income tax expense for the six months ended June 30, 2013 was $25.9 million on income before taxes of $108.7 million, resulting in an effective tax rate of approximately 24%. The increase in the effective income tax rate reflects the $1.2 million Research and Development tax credit from the “American Taxpayer Relief Act of 2012” recognized on the 2012 U.S. income tax return, but not recognized until the first quarter of 2013 in accordance with GAAP, and the changes in the taxable income among the Company’s three geographic areas, which have different income tax rates.

16

Net Income. Net income was approximately $93.9 million for the six months ended June 30, 2014 and $82.8 million for the same period in 2013 for the reasons set forth above.

Liquidity and Capital Resources

Cash flows provided by (used in) type of activity were as follows:

	Six months ended June 30,
	2014			2013
	(In thousands)
Operating activities	$	66,672		$	86,101
Investing activities		(22,748	)		(22,802	)
Financing activities		(88,385	)		9,431
		(44,461	)		72,730
Effect of exchange rate changes on cash activities		2,726			(4,380	)
Increase (decrease) in cash and cash equivalents	$	(41,735	)	$	68,350

Statements of cash flows for entities with international operations that are local currency functional exclude the effects of the changes in foreign currency exchange rates that occur during any given period, as these are non-cash changes. As a result, changes reflected in certain accounts on the Condensed Consolidated Statements of Cash Flows may not reflect the changes in corresponding accounts on the Condensed Consolidated Balance Sheets.

The primary liquidity needs of the Company are (i) to fund capital expenditures to improve and expand facilities and manufacture additional running tools and (ii) to fund working capital. The Company’s principal sources of funds have been cash flows from operations.

Net cash provided from operating activities decreased by $19.4 million for the first six months of 2014 compared to the same period in 2013, primarily due to a decrease in cash from operating assets and liabilities of $32.0 million slightly offset by an increase of $11.1 million in net income.

The decrease in cash from operating assets and liabilities for the first six months of 2014 of $45.4 million primarily reflected an increase in trade receivables of $33.3 million and an increase in inventory of $32.7 million, partially offset by a $24.3 million increase in accounts payable and accrued expenses. Trade receivables increased in 2014 largely due to increased billings directly attributable to significant milestone billings on our percentage-of-completion projects and an increase in revenues in the second quarter of 2014. Inventory increased due to higher balances in raw materials, work in progress and finished goods to accommodate the higher backlog requirements related to long-term projects. Accounts payable and accrued expenses increased due to purchases of raw materials and an increase in customer prepayments from billings in excess of revenues.

The decrease in cash from operating assets and liabilities for the first six months of 2013 of $13.4 million primarily reflected a decrease in trade receivables of $15.2 million and an increase in inventory of $24.7 million. Trade receivables decreased to $24.3 million due to a decrease in unbilled receivables on long-term projects and a net increase of $9.1 million in trade receivables attributable to revenue growth in 2013. Inventory increased due to higher balances in work in progress to accommodate the increased backlog.

Capital expenditures by the Company were $23.2 million and $23.1 million in the first six months of 2014 and 2013, respectively. Capital expenditures in 2014 and 2013 included expanding manufacturing facilities in the Asia-Pacific, Eastern and Western Hemispheres and increased expenditures on machinery and equipment and running tools. The capital expenditures for the first six months of 2014 were primarily $1.9 million for facilities, $16.5 million for machinery and equipment, $2.6 million for running tools and other expenditures of $2.2 million. Capital expenditures for the first six months of 2013 were $4.7 million for facilities, $11.2 million for machinery and equipment, $4.6 million for running tools and other expenditures of $2.6 million.

The exercise of stock options generated cash to the Company of $1.4 million in the first six months of 2014 as compared to $7.7 million in the same period of 2013.

17

On June 19, 2012, the Company announced that its Board of Directors authorized a stock repurchase plan under which the Company was authorized to repurchase up to $100 million of its common stock. Under the plan, the Company repurchased and cancelled (i) 85,840 shares at a total cost of $10.0 million in the fourth quarter of 2013, and (ii) 869,699 shares at a total cost of $90.0 million during the second quarter of 2014. As a result, a total of 955,539 shares for a total cost of $100.0 million had been repurchased and cancelled thereby completing this stock repurchase program.

On June 12, 2014 the Company announced the Board of Directors authorized another stock repurchase program under which the Company is authorized to repurchase up to $100 million of its common stock. The program has no expiration date and any repurchased shares are expected to be cancelled. There were no shares purchased under this program in the second quarter of 2014.

On June 16, 2014 the Board of Directors adopted the Dril-Quip, Inc. Stock Compensation Plan for Directors, which allows directors to receive all or a portion of their fees in the form of restricted stock in an amount equal to 125% of such fees in lieu of cash.

At the Company’s annual meeting in May 2014, the shareholders approved an amendment to the Company’s Restated Certificate of Incorporation to increase the number of authorized shares of capital stock from 60 million to 110 million. As a result, the number of authorized shares of common stock increased from 50 million to 100 million shares, and the preferred stock remained at 10 million shares.

Off-Balance Sheet Arrangements

The Company has no derivative instruments and no off-balance sheet hedging or financing arrangements, contracts or operations.

Critical Accounting Policies

Refer to our Annual Report on Form 10-K for the year ended December 31, 2013 for a discussion of our critical accounting policies. During the six months ended June 30, 2014, there were no material changes in our judgments and assumptions associated with the development of our critical accounting policies.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The Company is currently exposed to certain market risks related to interest rate changes on its short-term investments and fluctuations in foreign exchange rates. The Company does not engage in any material hedging transactions, forward contracts or currency trading which could mitigate the market risks inherent in such transactions. There have been no material changes in market risks for the Company from December 31, 2013.

Foreign Exchange Rate Risk

Through its subsidiaries, the Company conducts a portion of its business in currencies other than the United States dollar, principally the British pound sterling and the Brazilian real. The Company experienced a foreign currency pre-tax loss of approximately $2.0 million during the three months ended June 30, 2014 and a $3.0 million pre-tax loss during the six months ended June 30, 2014, compared to approximately $900,000 in pre-tax losses and a $4.7 million pre-tax gain during the three and six months ended June 30, 2013, respectively. Historically, the Company’s foreign currency gains and losses have not been significant. However, when significant disparities between the British pound sterling and the U.S. dollar or the Brazilian real and the U.S. dollar occur, there can be no assurance that currency fluctuations will not have a significant impact on the Company in the future.

Item 4. Controls and Procedures

In accordance with Exchange Act Rules 13a-15 and 15d-15, the Company carried out an evaluation, under the supervision and with the participation of management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Company’s disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of June 30, 2014 to provide reasonable assurance that information required to be disclosed in the Company’s reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and such information is accumulated and communicated to management, including the Company’s Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding disclosure.

There has been no change in the Company’s internal controls over financial reporting that occurred during the quarter ended June 30, 2014 that has materially affected, or is reasonably likely to materially affect, the Company’s internal controls over financial reporting.

18

PART II—OTHER INFORMATION

Item 1. Legal Proceedings.

For a description of the Company’s legal proceedings, see “Commitments and Contingencies,” Note 7 to the Notes to Condensed Consolidated Financial Statements.

Item 1A. Risk Factors.

There have been no material changes from the risk factors disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

In June 2012, the Company announced that its Board of Directors authorized a stock repurchase program under which the Company was authorized to repurchase up to $100 million of its common stock. In the fourth quarter of 2013, the Company repurchased and cancelled 85,840 shares at a total cost of $10.0 million. The following table summarizes the repurchase and cancellation of common stock during the three months ended June 30, 2014. As of June 30, 2014, the Company had completed this stock repurchase program.

Issuer Purchase of Equity Securities

	Total Number of Shares Purchased		Average Price paid Per Share		Total Number of Shares Purchased as Part of a Publicly Announced Plan or Program		Maximum Dollar Value (in millions) of Shares that May Yet Be Purchased Under the Program
April 1 – 30, 2014		—		—		—	$	90.0
May 1 – 31, 2014		869,699		103.51		869,699		—
June 1 – 30, 2014		—		—		—		—
Total		869,699		103.51		869,699		—

FORWARD LOOKING STATEMENTS

This Quarterly Report on Form 10-Q includes certain statements that may be deemed to be “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). 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 control of Dril-Quip, Inc. (the “Company” or “Dril-Quip”). You can identify the Company’s forward-looking statements by the words “anticipate,” “estimate,” “expect,” “may,” “project,” “believe” and similar expressions, or by the Company’s discussion of strategies or trends. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, no assurance can be given that these expectations will prove to be correct. These forward-looking statements include the following types of information and statements as they relate to the Company:

• future operating results and cash flow;

• scheduled, budgeted and other future capital expenditures;

• working capital requirements;

• the availability of expected sources of liquidity;

• the introduction into the market of the Company’s future products;

• the market for the Company’s existing and future products;

• the Company’s ability to develop new applications for its technologies;

• the exploration, development and production activities of the Company’s customers;

• compliance with present and future environmental regulations and costs associated with environmentally related penalties, capital expenditures, remedial actions and proceedings;

• effects of pending legal proceedings;

• changes in customers’ future product and service requirements that may not be cost effective or within the Company’s capabilities; and

• future operations, financial results, business plans and cash needs.

19

These statements are based on assumptions and analyses in light of the Company’s experience and perception of historical trends, current conditions, expected future developments and other factors the Company believes were appropriate in the circumstances when the statements were made. Forward-looking statements by their nature involve substantial risks and uncertainties that could significantly impact expected results, and actual future results could differ materially from those described in such statements. While it is not possible to identify all factors, the Company continues to face many risks and uncertainties. Among the factors that could cause actual future results to differ materially are the risks and uncertainties discussed under “Item 1A. Risk Factors” in Part I of the Company’s Annual Report on Form 10-K for the year ended December 31, 2013 and the following:

• the volatility of oil and natural gas prices;

• the cyclical nature of the oil and gas industry;

• uncertainties associated with the United States and worldwide economies;

• uncertainties regarding political tensions in the Middle East, Africa and elsewhere;

• current and potential governmental regulatory actions in the United States and regulatory actions and political unrest in other countries;

• uncertainties regarding future oil and gas exploration and production activities in the U.S. Gulf of Mexico and elsewhere, including new regulations, customs requirements and product testing requirements;

• operating interruptions (including explosions, fires, weather-related incidents, mechanical failure, unscheduled downtime, labor difficulties, transportation interruptions, spills and releases and other environmental risks);

• project terminations, suspensions or scope adjustments to contracts reflected in the Company’s backlog;

• the Company’s reliance on product development;

• technological developments;

• the Company’s reliance on third-party technologies;

• the Company’s dependence on key employees and skilled machinists, fabricators and technical personnel;

• the Company’s reliance on sources of raw materials;

• impact of environmental matters, including future environmental regulations;

• competitive products and pricing pressures;

• fluctuations in foreign currency;

• the Company’s reliance on significant customers;

• creditworthiness of the Company’s customers;

• fixed-price contracts;

• changes in general economic, market or business conditions;

• access to capital markets;

• negative outcome of litigation, threatened litigation or government proceedings;

• terrorist threats or acts, war and civil disturbances; and

• the interpretation of foreign tax law with respect to our foreign subsidiaries.

Many of such factors are beyond the Company’s ability to control or predict. Any of the factors, or a combination of these factors, could materially affect the Company’s future results of operations and the ultimate accuracy of the forward-looking statements. Management cautions against putting undue reliance on forward-looking statements or projecting any future results based on such statements or present or prior earnings levels. Every forward-looking statement speaks only as of the date of the particular statement, and the Company undertakes no obligation to publicly update or revise any forward-looking statement.

20

Item 6.

(a) Exhibits

The following exhibits are filed herewith:

Exhibit No.	Description
*3.1	Restated Certificate of Incorporation of the Company (incorporated herein by reference to Exhibit 3.1 to the Company’s report on Form 8-K filed on May 20, 2014)).
*3.2	Certificate of Designations of Series A Junior Participating Preferred Stock of the Company (incorporated herein by reference to Exhibit 3.1 to the Company’s report on Form 8-K dated November 25, 2008).
*3.3	Amended and Restated Bylaws of the Company (incorporated herein by reference to Exhibit 3.2 to the Company’s report on Form 8-K filed on May 20, 2014).
*4.1	Form of certificate representing Common Stock (incorporated herein by reference to Exhibit 4.2 to the Company’s Registration Statement on Form S-1 (Registration No. 333-33447)).
*4.2	Rights Agreement dated as of November 24, 2008 between Dril-Quip, Inc. and Mellon Investor Services LLC, as Rights Agent (incorporated herein by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on November 25, 2008).
+10.1	Dril-Quip, Inc. Stock Compensation Program for Directors
31.1	Rule 13a-14(a)/15d-14(a) Certification of Blake T. DeBerry.
31.2	Rule 13a-14(a)/15d-14(a) Certification of Jerry M. Brooks.
32.1	Section 1350 Certification of Blake T. DeBerry.
32.2	Section 1350 Certification of Jerry M. Brooks.
101.INS	XBRL Instance Document
101.SCH	XBRL Schema Document
101.CAL	XBRL Calculation Document
101.DEF	XBRL Definition Linkbase Document.
101.LAB	XBRL Label Linkbase Document
101.PRE	XBRL Presentation Linkbase Document

* Incorporated herein by reference as indicated.

+ Management contract or compensatory plan or arrangement required to be filed as an exhibit to this Form 10-Q.

21

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.
By:	/s/ JERRY M. BROOKS
	Jerry M. Brooks,
	Vice-President—Finance and Chief Financial Officer (Principal Accounting Officer and Duly Authorized Signatory)

Date: July 29, 2014

22

EX-10.1

Exhibit 10.1

DRIL-QUIP, INC.

STOCK COMPENSATION PROGRAM FOR DIRECTORS

This Dril-Quip, Inc. Stock Compensation Program for Directors (this “Program”) under the 2004 Incentive Plan of Dril-Quip, Inc., as amended and restated effective as of May 10, 2012 (the “Plan”), was adopted by the Board of Directors of Dril-Quip, Inc. (the “Company”), effective as of June 16, 2014 (“Effective Date”).

ARTICLE 1

PURPOSE

The purpose of this Program is to provide a means for the non-employee members (“Directors”) of the Company’s Board of Directors (the “Board”) to elect to receive all or a portion of their fees in the form of Restricted Stock under the Plan (or any successor plan which permits such awards) in an amount equal to 125% of such fees in lieu of cash. The Plan provides authority for the Board to grant Awards (other than Incentive Options) to each Director. The Plan and this Program are intended to encourage Directors to acquire and hold Common Stock to strengthen the mutuality of interests between the Directors and the Company’s other stockholders.

ARTICLE 2

DEFINITIONS

Capitalized terms herein have the meaning specified in the Plan. In addition, the following are defined terms wherever they appear in this Program:

2.1 “Change in Control” shall mean (i) there shall have occurred an event required to be reported with respect to the Company in response to Item 6(e) of Schedule 14A of Regulation 14A (or in response to any similar item or any similar schedule or form) promulgated under the Exchange Act, whether or not the Company is then subject to such reporting requirement; (ii) any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) shall have become the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 30% or more of the combined voting power of the Company’s then outstanding voting securities; (iii) the Company is a party to a merger, consolidation, sale of assets or other reorganization, or a proxy contest, as a consequence of which members of the Board in office immediately prior to such transaction or event constitute less than a majority of the Board thereafter; or (iv) during any period of two consecutive years, individuals who at the beginning of such period constituted the Board (including, for this purpose, any new director whose election or nomination for election by the Company’s stockholders was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of such period) cease for any reason to constitute at least a majority of the Board.

2.2 “Conversion Amount” shall mean an amount equal to 125% of the Director Fees earned for a calendar quarter.

2.3 “Conversion Price” shall mean the Fair Market Value of a share of Common Stock as of the last day of the calendar quarter for which the Director Fees are attributable.

2.4 “Director Fees” shall mean the compensation to which a Director is entitled as a retainer for his or her services as a member of the Board during the calendar year, including fees paid for attending Board meetings or for serving on or attending meetings of Board committees. Director Fees shall not include (i) reimbursements of expenses or (ii) any other amounts paid to a Director by the Company or a Subsidiary for services rendered to the Company or the Subsidiary in a capacity other than as a Director.

2.5 “Restricted Stock Election” shall mean an irrevocable election pursuant to Article 5 to waive all or a specified percentage of each installment of Director Fees for any calendar year and receive shares of Restricted Stock under the Plan.

2.6 “Restricted Stock Election Percentage” shall mean twenty-five percent (25%), fifty percent (50%), seventy-five percent (75%), or one hundred percent (100%), as elected by a Director on a Restricted Stock Election.

ARTICLE 3

SOURCE OF SHARES

Shares of Common Stock granted or issued under this Program are issued under the Plan and shall be subject to, and count against, the limits on the number of such shares available under the Plan.

ARTICLE 4

ADMINISTRATION

The Board shall administer this Program; provided, however, that ministerial actions such as processing Restricted Stock Elections shall be carried out by the Committee or its delegate. Restricted Stock granted pursuant to this Program shall be administered as provided in the Plan.

2

ARTICLE 5

PARTICIPATION; ELECTIONS

5.1 Participation. Each Director shall be eligible to participate in this Program. A Director shall become a Participant for purposes of this Program upon his or her timely submission of an executed Restricted Stock Election with respect to an upcoming calendar year (or, in the circumstances set forth in Section 5.3 below, the balance of the calendar year).

5.2 Restricted Stock Election. A Restricted Stock Election shall be made on a written or electronic form approved by the Committee and delivered to the Company. The Director’s election to receive Restricted Stock in lieu of cash shall specify the Restricted Stock Election Percentage of each installment of his or her Director Fees paid in respect of service provided in the upcoming calendar year (or, in circumstances set forth in Section 5.3 below, for the balance of the calendar year). The Restricted Stock Election shall be executed prior to the commencement of the calendar year to which it applies, and may be amended or revoked prior to the commencement of such calendar year (that is, no later than December 31st of such preceding calendar year or such earlier date as established by the Committee), but shall be irrevocable and may not be revoked or amended thereafter.

5.3 2014 Calendar Year and New Directors. The foregoing notwithstanding, for the 2014 calendar year (in which this Program was adopted by the Board), a Director may make a Restricted Stock Election prior to the commencement of the third calendar quarter of 2014 (that is, prior to July 1, 2014) and such election shall be effective for Director Fees earned for the third calendar quarter and the fourth calendar quarter of 2014. Such election shall be irrevocable as of June 30, 2014 (or such earlier date established by the Committee). Any individual who initially becomes a Director after the Effective Date may execute a Restricted Stock Election during the first thirty (30) days following the date he or she was elected a Director with respect to such election year. The Restricted Stock Election shall apply with respect to Director Fees earned during the calendar quarters commencing after making such election for the calendar year during which he or she was elected to the Board. Thereafter, the participation and election provisions in Sections 5.1 and 5.2 shall apply.

ARTICLE 6

RESTRICTED STOCK AWARDS

6.1 Shares of Restricted Stock. A Director who timely makes a Restricted Stock Election for a calendar year (or partial calendar year), as provided in Article 5 above, shall receive for each calendar quarter during such calendar year (or partial calendar year) as of the first business day following the end of the calendar quarter (the “Award Date”), the number of shares of Restricted Stock equal to the result of (i) the Conversion Amount for such calendar quarter, divided by (ii) the Conversion Price for such calendar quarter (with the result rounded down to the next whole share). The shares of Restricted Stock shall be subject to the vesting requirements of this Section 6.1 and other terms of this Program, the Plan and the Restricted Stock Election.

3

The shares of Restricted Stock granted as described above shall be delivered to the Director’s account at the Company’s stock plan administrator (currently Solium Capital LLC) as of, or not later than the third business day following, the Award Date. The cash amount of Director Fees otherwise payable for a calendar quarter shall be reduced by the Restricted Stock Election Percentage in effect for such calendar year (or partial year).

Except as provided below, a Director’s Restricted Stock shall vest, and all restrictions on the shares shall lapse, as of January 1st of the second calendar year following the calendar year to which the Director’s Restricted Stock Election applies (the “Vesting Date”); provided, however, that the Director has continuously served as a member of the Board from the Award Date through the Vesting Date. If the Director does not continuously serve as a member of the Board until the Vesting Date, then, except as provided below, all shares of Restricted Stock shall be forfeited immediately after the Director ceases to be a member of the Board. The foregoing notwithstanding, a Director’s shares of Restricted Stock shall vest, and all restrictions on the shares shall lapse, as of the date (x) of (i) the Director’s death, (ii) the shareholder meeting where the Director was nominated to continue to serve as a member of the Board but failed to be reelected or (iii) a Change in Control; provided, however, that the Director has continuously served as a member of the Board from the Award Date through such date or (y) that the Director ceases to be a member of the Board, but only if such vesting is approved by the Committee.

As soon as administratively feasible following the Vesting Date, the Company will cause to be removed from the Director’s account that holds the Restricted Stock the restrictions or, if requested in writing to the Committee, cause to be issued and delivered to the Director (in certificate or electronic form) shares of Common Stock equal to the number of shares of Restricted Stock that have vested (and provided that the Restricted Stock has not been forfeited prior to the date such restrictions lapsed).

For example, if a Director elected to have all of his or her Director Fees for 2015 paid in shares of Restricted Stock and such Director Fees are $21,500 per calendar quarter, then as of April 1, 2015 (the Award Date), for the first quarter of 2015, assuming the Conversion Price is $110 per share, the Director shall be granted 244 shares of Restricted Stock (($21,500 x 1.25)/$110, rounded down) with a Vesting Date as of January 1, 2017.

6.2 Terms and Conditions of Awards. Each Restricted Stock Award shall be subject to the terms, conditions, and limitations of this Program, any other terms, conditions or limitations as shall have been approved by the Board, and the terms and conditions of the Plan. In the event that any provision of this Program conflicts with the Plan, the provisions of the Plan shall control. The Director acknowledges receipt of a copy of the Plan and agrees that all decisions under and interpretations of the Plan by the Committee shall be final, binding and conclusive upon the Director.

6.3 Voting and Dividend Rights. During the period in which the restrictions provided herein are applicable to the Restricted Stock, the Director shall have the right to vote the shares of Restricted Stock and to receive any cash dividends paid with respect thereto unless and until forfeiture thereof. Any dividend or distribution payable with respect to shares of Restricted Stock that shall be paid or distributed in shares of Common Stock shall be subject to the same restrictions provided for herein, and the shares so paid or distributed shall be deemed Restricted Stock subject to all terms and conditions herein. Any

4

dividend or distribution (other than cash or Common Stock) payable or distributable on shares of Restricted Stock, unless otherwise determined by the Committee, shall be subject to the terms and conditions of this Program to the same extent and in the same manner as the Restricted Stock is subject; provided that the Committee may make such modifications and additions to the terms and conditions (including restrictions on transfer and the conditions to the timing and degree of lapse of such restrictions) that shall become applicable to such dividend or distribution as the Committee may provide in its absolute discretion.

6.4 Adjustments. As provided in Section 16 of the Plan, certain adjustments may be made to the Restricted Stock upon the occurrence of events or circumstances described in Section 16 of the Plan. Without limiting the generality of the foregoing, and except as otherwise provided in the Plan, in the event of any merger, consolidation, reorganization, recapitalization, reclassification or other capital or corporate structure change of the Company, the securities or other consideration receivable for or in conversion of or exchange for shares of Restricted Stock shall be subject to the terms and conditions of this Program to the same extent and in the same manner as the Restricted Stock is subject; provided that the Committee may make such modifications and additions to the terms and conditions (including restrictions on transfer and the conditions to the timing and degree of lapse of such restrictions) that shall become applicable to the securities or other consideration so receivable as the Committee may provide in its absolute discretion.

ARTICLE 7

GENERAL PROVISIONS AND TERMS

7.1 Nontransferability. Except as expressly provided in the Plan, shares of Restricted Stock granted under this Program pursuant to any election are non-transferable and may not otherwise be assigned, pledged, hypothecated or otherwise disposed of and shall not be subject to execution, attachment or similar process. Upon any attempt to effect any such disposition, or upon the levy of any such process, shares of Restricted Stock provided under this Program shall immediately become null and void, and the shares of Restricted Stock shall be immediately forfeited to the Company.

7.2 Compliance with Legal and Trading Requirements. The Plan and this Program shall be subject to all applicable laws, rules and regulations, including but not limited to, federal and state laws, rules and regulations, and to such approvals by any regulatory or governmental agency as may be required. The transfer by a Director of Common Stock distributed pursuant to this Program will be subject to such restrictions as the Committee deems necessary or desirable in connection with federal or state securities laws, and Common Stock certificates may bear a legend setting forth any such restriction.

7.3 Amendment or Termination. The Board may amend, alter, suspend, discontinue, or terminate this Program at any time without the consent of stockholders of the Company or individual Directors; provided, however, that any amendment of outstanding Restricted Stock Awards under this Program shall be governed by the Plan.

7.4 No Right to Remain on the Board. Neither the terms of Plan nor this Program shall be deemed to give any individual a right to remain a Director of the Company or create any obligation on the part of the Board to nominate any Director for reelection by the stockholders of the Company.

5

7.5 Construction; Governing Law. This Program and actions taken pursuant to this Program shall be subject to all terms of the Plan that are not specifically inconsistent with the provisions of this Program, including rules of construction and governing law.

IN WITNESS WHEREOF, the Company has caused this instrument to be executed as of June 16, 2014, by its duly authorized officer pursuant to prior action taken by the Board.

DRIL-QUIP, INC.
By:	/s/ James C. Webster
Name:	James C. Webster
Title:	Vice President, General Counsel & Sec.

6

EX-31.1

Exhibit 31.1

RULE 13a-14(a)/15d-14(a) CERTIFICATION

I, Blake T. DeBerry, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Dril-Quip, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, comprehensive income and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: July 29, 2014

/s/ Blake T. DeBerry

Blake T. DeBerry

President and Chief Executive Officer

EX-31.2

Exhibit 31.2

RULE 13a-14(a)/15d-14(a) CERTIFICATION

I, Jerry M. Brooks, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Dril-Quip, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, comprehensive income and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: July 29, 2014

/s/ Jerry M. Brooks

Jerry M. Brooks

Vice-President—Finance and

Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Dril-Quip, Inc. (the “Company”) on Form 10-Q for the period ended June 30, 2014 (the “Report”), as filed with the Securities and Exchange Commission on the date hereof, I, Blake T. DeBerry, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge, that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Blake T. DeBerry

Blake T. DeBerry

President and Chief Executive Officer

Date: July 29, 2014

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Dril-Quip, Inc. (the “Company”) on Form 10-Q for the period ended June 30, 2014 (the “Report”), as filed with the Securities and Exchange Commission on the date hereof, I, Jerry M. Brooks, Vice President-Finance and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge, that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Jerry M. Brooks

Jerry M. Brooks

Vice-President—Finance and Chief Financial Officer

Date: July 29, 2014

XML

New Accounting Standards

6 Months Ended

Jun. 30, 2014

Accounting Changes And Error Corrections [Abstract]

New Accounting Standards

3. New Accounting Standards

In May 2014, the FASB issued ASU 2014-09 “Revenue from Contracts with Customer (Topic 606).” The amendment applies a new five-step revenue recognition model to be used in recognizing revenues associated with customer contracts. The amendment requires disclosure sufficient to enable readers of financial statements to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers, including qualitative and quantitative disclosures, significant judgments and changes in judgments, and assets recognized from the costs to obtain or fulfill the contract. The standard is effective for fiscal years beginning after December 15, 2016, including interim periods within that reporting period. The Company is currently evaluating the new guidance to determine the impact on its consolidated financial statements.

XML

Significant Accounting Policies

6 Months Ended

Jun. 30, 2014

Accounting Policies [Abstract]

Significant Accounting Policies

2. Significant Accounting Policies

Principles of Consolidation

The condensed consolidated financial statements include the accounts of the Company and its subsidiaries. All material intercompany accounts and transactions have been eliminated.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Some of the Company’s more significant estimates are those affected by critical accounting policies for revenue recognition, inventories and contingent liabilities as discussed more fully in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013.

Revenue Recognition

Product Revenue

The Company earns product revenues from two methods:

• product revenues recognized under the percentage-of-completion method; and

• product revenues from the sale of products that do not qualify for the percentage-of-completion method.

Revenues recognized under the percentage-of-completion method

The Company uses the percentage-of-completion method on long-term project contracts that have the following characteristics:

• The contracts call for products which are designed to customer specifications;

• The structural designs are unique and require significant engineering and manufacturing efforts generally requiring more than one year in duration;

• The contracts contain specific terms as to milestones, progress billings and delivery dates; and

• Product requirements cannot be filled directly from the Company’s standard inventory.

For each project, the Company prepares a detailed analysis of estimated costs, profit margin, completion date and risk factors which include availability of material, production efficiencies and other factors that may impact the project. On a quarterly basis, management reviews the progress of each project, which may result in revisions of previous estimates, including revenue recognition. The Company calculates the percent complete and applies the percentage to determine the revenues earned and the appropriate portion of total estimated costs. Losses, if any, are recorded in full in the period they become known. Historically, the Company’s estimates of total costs and costs to complete have approximated actual costs incurred to complete the project.

Under the percentage-of-completion method, billings may not correlate directly to the revenue recognized. Based upon the terms of the specific contract, billings may be in excess of the revenue recognized, in which case the amounts are included in customer prepayments as a liability on the Condensed Consolidated Balance Sheets. Likewise, revenue recognized may exceed customer billings in which case the amounts are reported in trade receivables. Unbilled revenues are expected to be billed and collected within one year. As of June 30, 2014 and December 31, 2013, receivables included $43.9 million and $52.9 million of unbilled receivables, respectively. For the quarter ended June 30, 2014, there were 12 projects representing approximately 5% of the Company’s total revenue and approximately 6% of its product revenues that were accounted for using percentage-of-completion accounting, compared to 11 projects during the second quarter of 2013, which represented approximately 6% of the Company’s total revenues and approximately 7% of its product revenues. For the six months ended June 30, 2014, there were 16 projects representing approximately 8% of the Company’s total revenues and 10% of its product revenues, compared to 15 projects that represented approximately 12% of the Company’s total revenues and 14% of its product revenues for the six months ended June 30, 2013, all of which were accounted for using percentage-of-completion accounting.

Revenues not recognized under the percentage-of-completion method

Revenues from the sale of inventory products, not accounted for under the percentage-of-completion method, are recorded at the time the manufacturing processes are complete and ownership is transferred to the customer.

Service revenue

The Company earns service revenues from three sources:

• technical advisory assistance;

• rental of running tools; and

• rework and reconditioning of customer-owned Dril-Quip products.

The Company does not install products for its customers, but it does provide technical advisory assistance. At the time of delivery of the product, the customer is not obligated to buy or rent the Company’s running tools and the Company is not obligated to perform any subsequent services relating to installation. Technical advisory assistance service revenue is recorded at the time the service is rendered. Service revenues associated with the rental of running and installation tools are recorded as earned. Rework and reconditioning service revenues are recorded when the refurbishment process is complete.

The Company normally negotiates contracts for products, including those accounted for under the percentage-of-completion method, and services separately. For all product sales, it is the customer’s decision as to the timing of the product installation as well as whether Dril-Quip running tools will be purchased or rented. Furthermore, the customer is under no obligation to utilize the Company’s technical advisory 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 number of common shares outstanding at June 30 of each year to the weighted average 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 June 30,				Six months ended June 30,
	2014		2013		2014		2013
	(In thousands)
Weighted average basic common shares outstanding—basic		40,327		40,636		40,501		40,583
Dilutive effect of common stock options and awards		235		185		222		184
Weighted average diluted common shares outstanding—diluted		40,562		40,821		40,723		40,767

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CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Current assets:
Cash and cash equivalents	$ 342,621	$ 384,356
Trade receivables, net	316,921	279,253
Inventories, net	408,066	368,354
Deferred income taxes	27,299	24,951
Prepaids and other current assets	26,613	21,899
Total current assets	1,121,520	1,078,813
Property, plant and equipment, net	316,288	304,806
Other assets	10,752	10,993
Total assets	1,448,560	1,394,612
Current liabilities:
Accounts payable	55,010	38,801
Accrued income taxes	8,136	13,628
Customer prepayments	69,712	45,025
Accrued compensation	18,977	21,556
Other accrued liabilities	17,570	23,780
Total current liabilities	169,405	142,790
Deferred income taxes	9,571	9,804
Total liabilities	178,976	152,594
Commitments and contingencies (Note 7)
Stockholders' equity:
Preferred stock, 10,000,000 shares authorized at $0.01 par value (none issued)	0	0
Common stock: 100,000,000 shares authorized at $0.01 par value, 39,977,175 and 40,822,627 shares issued and outstanding at June 30, 2014 and December 31, 2013	398	407
Additional paid-in capital	109,170	191,965
Retained earnings	1,163,758	1,069,816
Accumulated other comprehensive losses	(3,742)	(20,170)
Total stockholders' equity	1,269,584	1,242,018
Total liabilities and stockholders' equity	$ 1,448,560	$ 1,394,612

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013
Operating activities
Net income	$ 93,942	$ 82,769
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization	15,126	14,353
Stock-based compensation expense	5,660	4,136
Gain on sale of equipment	(149)	(22)
Deferred income taxes	(2,507)	(1,751)
Changes in operating assets and liabilities:
Trade receivables, net	(33,272)	15,203
Inventories, net	(32,708)	(24,658)
Prepaids and other assets	(3,460)	(921)
Excess tax benefits of stock option and awards	(251)	(1,682)
Accounts payable and accrued expenses	24,291	(1,326)
Net cash provided by operating activities	66,672	86,101
Investing activities
Purchase of property, plant and equipment	(23,218)	(23,101)
Proceeds from sale of equipment	470	299
Net cash used in investing activities	(22,748)	(22,802)
Financing activities
Repurchase of common stock	(90,022)
Proceeds from exercise of stock options	1,386	7,749
Excess tax benefits of stock options and awards	251	1,682
Net cash provided by (used in) financing activities	(88,385)	9,431
Effect of exchange rate changes on cash activities	2,726	(4,380)
Increase (decrease) in cash and cash equivalents	(41,735)	68,350
Cash and cash equivalents at beginning of period	384,356	257,191
Cash and cash equivalents at end of period	$ 342,621	$ 325,541

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Inventories - Schedule of Inventories (Detail) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Inventory Disclosure [Abstract]
Raw materials	$ 95,441	$ 85,670
Work in progress	134,042	119,929
Finished goods	214,138	195,971
Inventory, gross, Total	443,621	401,570
Less: allowance for obsolete and excess inventory	(35,555)	(33,216)
Total inventory	$ 408,066	$ 368,354

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Commitments and Contingencies - Additional Information (Detail) (Brazil [Member], USD $) In Millions, unless otherwise specified	1 Months Ended		6 Months Ended
	Dec. 31, 2010	Mar. 31, 2010	Jun. 30, 2014
Brazil [Member]
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 once certified, period to use credits			5 years
Value of assessments served on Brazilian subsidiary	$ 13.0

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Organization and Principles of Consolidation

6 Months Ended

Jun. 30, 2014

Accounting Policies [Abstract]

Organization and Principles of Consolidation

1. Organization and Principles of Consolidation

Dril-Quip, Inc., a Delaware corporation (the “Company” or “Dril-Quip”), designs, manufactures, sells and services highly engineered offshore drilling and production equipment that is well suited for use in deepwater, harsh environments and severe service applications. The Company’s principal products consist of subsea and surface wellheads, subsea and surface production trees, subsea control systems and manifolds, mudline hanger systems, specialty connectors and associated pipe, drilling and production riser systems, liner hangers, wellhead connectors and diverters. Dril-Quip’s products are used by major integrated, large independent and foreign national oil and gas companies in offshore areas throughout the world. Dril-Quip also provides technical advisory assistance on an as-requested basis during installation of its products, as well as rework and reconditioning services for customer-owned Dril-Quip products. In addition, Dril-Quip’s customers may rent or purchase running tools from the Company for use in the installation and retrieval of the Company’s products.

The Company’s operations are organized into three geographic segments—Western Hemisphere (including North and South America; headquartered in Houston, Texas), Eastern Hemisphere (including Europe and Africa; headquartered in Aberdeen, Scotland) and Asia-Pacific (including the Pacific Rim, Southeast Asia, Australia, India and the Middle East; headquartered in Singapore). Each of these segments sells similar products and services and the Company has major manufacturing facilities in all three of its headquarter locations as well as in Macae, Brazil.

The condensed consolidated financial statements included herein are unaudited. The balance sheet at December 31, 2013, has been derived from the audited consolidated financial statements at that date. In the opinion of management, the unaudited condensed consolidated interim financial statements include all normal recurring adjustments necessary for a fair presentation of the financial position as of June 30, 2014 and the results of operations and comprehensive income for the three- and six-month periods ended June 30, 2014 and 2013 and the cash flows for the six-month periods ended June 30, 2014 and 2013. Certain information and footnote disclosures normally included in the 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 the cash flows for the six-month period ended June 30, 2014 are not necessarily indicative of the results to be expected for the full year. The condensed consolidated financial statements included herein should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013.

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CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (Parenthetical) (USD $)	Jun. 30, 2014	Dec. 31, 2013
Statement Of Financial Position [Abstract]
Preferred stock, shares authorized	10,000,000	10,000,000
Preferred stock, par value	$ 0.01	$ 0.01
Preferred stock, shares issued	0	0
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares authorized	100,000,000	100,000,000
Common stock, shares issued	39,977,175	40,822,627
Common stock, shares outstanding	39,977,175	40,822,627

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Geographic Areas (Tables)

6 Months Ended

Jun. 30, 2014

Segment Reporting [Abstract]

Schedule of Segment Reporting

	Three months ended June 30,						Six months ended June 30,
	2014			2013			2014			2013
	(In thousands)
Revenues:
Western Hemisphere
Products	$	115,953		$	95,871		$	210,342		$	195,600
Services		18,381			18,567			35,281			34,196
Intercompany		9,063			10,891			19,355			23,278
Total	$	143,397		$	125,329		$	264,978		$	253,074
Eastern Hemisphere
Products	$	43,814		$	60,647		$	97,737		$	98,480
Services		16,514			10,400			27,991			22,567
Intercompany		3,325			596			3,499			751
Total	$	63,653		$	71,643		$	129,227		$	121,798
Asia-Pacific
Products	$	30,147		$	32,341		$	53,836		$	55,264
Services		5,506			4,205			9,201			9,079
Intercompany		962			4,146			2,330			4,277
Total	$	36,615		$	40,692		$	65,367		$	68,620
Summary
Products	$	189,914		$	188,859		$	361,915		$	349,344
Services		40,401			33,172			72,473			65,842
Intercompany		13,350			15,633			25,184			28,306
Eliminations		(13,350	)		(15,633	)		(25,184	)		(28,306	)
Total	$	230,315		$	222,031		$	434,388		$	415,186
Income before income taxes:
Western Hemisphere	$	36,010		$	19,199		$	72,170		$	44,145
Eastern Hemisphere		15,827			21,116			31,174			38,124
Asia-Pacific		15,853			13,133			21,308			22,824
Eliminations		1,525			2,928			3,206			3,562
Total	$	69,215		$	56,376		$	127,858		$	108,655

	June 30, 2014			December 31, 2013
	(In thousands)
Total Long-Lived Assets:
Western Hemisphere	$	224,188		$	216,104
Eastern Hemisphere		48,185			43,430
Asia-Pacific		57,593			59,192
Eliminations		(2,926	)		(2,927	)
Total	$	327,040		$	315,799
Total Assets:
Western Hemisphere	$	785,759		$	803,069
Eastern Hemisphere		364,355			316,473
Asia-Pacific		332,102			292,600
Eliminations		(33,656	)		(17,530	)
Total	$	1,448,560		$	1,394,612

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Document and Entity Information	6 Months Ended
	Jun. 30, 2014	Jul. 23, 2014
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2014
Document Fiscal Year Focus	2014
Document Fiscal Period Focus	Q2
Trading Symbol	DRQ
Entity Registrant Name	DRIL-QUIP INC
Entity Central Index Key	0001042893
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		39,977,175

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Organization and Principles of Consolidation - Additional Information (Detail)	6 Months Ended
	Jun. 30, 2014 Segment
Organization Consolidation And Presentation Of Financial Statements [Abstract]
Number of geographic segments	3

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CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Revenues:
Products	$ 189,914	$ 188,859	$ 361,915	$ 349,344
Services	40,401	33,172	72,473	65,842
Total revenues	230,315	222,031	434,388	415,186
Cost and expenses:
Products	104,208	113,312	195,539	209,985
Services	20,785	19,891	40,241	39,546
Total cost of sales	124,993	133,203	235,780	249,531
Selling, general and administrative	25,520	23,273	49,455	38,902
Engineering and product development	10,848	9,340	21,632	18,361
Total costs and expenses	161,361	165,816	306,867	306,794
Operating income	68,954	56,215	127,521	108,392
Interest income	266	167	349	283
Interest expense	(5)	(6)	(12)	(20)
Income before income taxes	69,215	56,376	127,858	108,655
Income tax provision	17,891	13,449	33,916	25,886
Net income	$ 51,324	$ 42,927	$ 93,942	$ 82,769
Earnings per common share:
Basic	$ 1.27	$ 1.06	$ 2.32	$ 2.04
Diluted	$ 1.27	$ 1.05	$ 2.31	$ 2.03
Weighted average common shares outstanding:
Basic	40,327	40,636	40,501	40,583
Diluted	40,562	40,821	40,723	40,767

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Geographic Areas

6 Months Ended

Jun. 30, 2014

Segment Reporting [Abstract]

Geographic Areas

6. Geographic Areas

	Three months ended June 30,						Six months ended June 30,
	2014			2013			2014			2013
	(In thousands)
Revenues:
Western Hemisphere
Products	$	115,953		$	95,871		$	210,342		$	195,600
Services		18,381			18,567			35,281			34,196
Intercompany		9,063			10,891			19,355			23,278
Total	$	143,397		$	125,329		$	264,978		$	253,074
Eastern Hemisphere
Products	$	43,814		$	60,647		$	97,737		$	98,480
Services		16,514			10,400			27,991			22,567
Intercompany		3,325			596			3,499			751
Total	$	63,653		$	71,643		$	129,227		$	121,798
Asia-Pacific
Products	$	30,147		$	32,341		$	53,836		$	55,264
Services		5,506			4,205			9,201			9,079
Intercompany		962			4,146			2,330			4,277
Total	$	36,615		$	40,692		$	65,367		$	68,620
Summary
Products	$	189,914		$	188,859		$	361,915		$	349,344
Services		40,401			33,172			72,473			65,842
Intercompany		13,350			15,633			25,184			28,306
Eliminations		(13,350	)		(15,633	)		(25,184	)		(28,306	)
Total	$	230,315		$	222,031		$	434,388		$	415,186
Income before income taxes:
Western Hemisphere	$	36,010		$	19,199		$	72,170		$	44,145
Eastern Hemisphere		15,827			21,116			31,174			38,124
Asia-Pacific		15,853			13,133			21,308			22,824
Eliminations		1,525			2,928			3,206			3,562
Total	$	69,215		$	56,376		$	127,858		$	108,655

	June 30, 2014			December 31, 2013
	(In thousands)
Total Long-Lived Assets:
Western Hemisphere	$	224,188		$	216,104
Eastern Hemisphere		48,185			43,430
Asia-Pacific		57,593			59,192
Eliminations		(2,926	)		(2,927	)
Total	$	327,040		$	315,799
Total Assets:
Western Hemisphere	$	785,759		$	803,069
Eastern Hemisphere		364,355			316,473
Asia-Pacific		332,102			292,600
Eliminations		(33,656	)		(17,530	)
Total	$	1,448,560		$	1,394,612

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Inventories

6 Months Ended

Jun. 30, 2014

Inventory Disclosure [Abstract]

Inventories

5. Inventories

Inventories consist of the following:

	June 30, 2014			December 31, 2013
	(In thousands)
Raw materials	$	95,441		$	85,670
Work in progress		134,042			119,929
Finished goods		214,138			195,971
		443,621			401,570
Less: allowance for obsolete and excess inventory		(35,555	)		(33,216	)
Total inventory	$	408,066		$	368,354

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Geographic Areas - Schedule of Segment Reporting (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013	Dec. 31, 2013
Segment Reporting Information [Line Items]
Products	$ 189,914	$ 188,859	$ 361,915	$ 349,344
Services	40,401	33,172	72,473	65,842
Intercompany	13,350	15,633	25,184	28,306
Eliminations	(13,350)	(15,633)	(25,184)	(28,306)
Total Revenues	230,315	222,031	434,388	415,186
Total Long-Lived Assets	327,040		327,040		315,799
Income before income taxes	69,215	56,376	127,858	108,655
Total Assets	1,448,560		1,448,560		1,394,612
Eliminations [Member]
Segment Reporting Information [Line Items]
Income before income taxes	1,525	2,928	3,206	3,562
Total Long-Lived Assets Eliminations	(2,926)		(2,926)		(2,927)
Total Assets Eliminations	(33,656)		(33,656)		(17,530)
Western Hemisphere [Member] | Operating Segments [Member]
Segment Reporting Information [Line Items]
Products	115,953	95,871	210,342	195,600
Services	18,381	18,567	35,281	34,196
Intercompany	9,063	10,891	19,355	23,278
Total Revenues	143,397	125,329	264,978	253,074
Total Long-Lived Assets	224,188		224,188		216,104
Income before income taxes	36,010	19,199	72,170	44,145
Total Assets	785,759		785,759		803,069
Eastern Hemisphere [Member] | Operating Segments [Member]
Segment Reporting Information [Line Items]
Products	43,814	60,647	97,737	98,480
Services	16,514	10,400	27,991	22,567
Intercompany	3,325	596	3,499	751
Total Revenues	63,653	71,643	129,227	121,798
Total Long-Lived Assets	48,185		48,185		43,430
Income before income taxes	15,827	21,116	31,174	38,124
Total Assets	364,355		364,355		316,473
Asia-Pacific [Member] | Operating Segments [Member]
Segment Reporting Information [Line Items]
Products	30,147	32,341	53,836	55,264
Services	5,506	4,205	9,201	9,079
Intercompany	962	4,146	2,330	4,277
Total Revenues	36,615	40,692	65,367	68,620
Total Long-Lived Assets	57,593		57,593		59,192
Income before income taxes	15,853	13,133	21,308	22,824
Total Assets	$ 332,102		$ 332,102		$ 292,600

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Significant Accounting Policies - Additional Information (Detail) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014 Project	Jun. 30, 2013 Project	Jun. 30, 2014 Source Method Project	Jun. 30, 2013 Project	Dec. 31, 2013
Accounting Policies [Abstract]
Number of product revenue sources			2
Unbilled receivables	$ 43.9		$ 43.9		$ 52.9
Number of projects	12	11	16	15
Percentage of total revenues	5.00%	6.00%	8.00%	12.00%
Percentage of product revenues	6.00%	7.00%	10.00%	14.00%
Number of service revenue sources			3

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Significant Accounting Policies (Tables)

6 Months Ended

Jun. 30, 2014

Accounting Policies [Abstract]

Schedule of Earnings Per Share

The following table reconciles the number of common shares outstanding at June 30 of each year to the weighted average 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 June 30,				Six months ended June 30,
	2014		2013		2014		2013
	(In thousands)
Weighted average basic common shares outstanding—basic		40,327		40,636		40,501		40,583
Dilutive effect of common stock options and awards		235		185		222		184
Weighted average diluted common shares outstanding—diluted		40,562		40,821		40,723		40,767

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Commitments and Contingencies

6 Months Ended

Jun. 30, 2014

Commitments And Contingencies Disclosure [Abstract]

Commitments and Contingencies

7. Commitments and Contingencies

Deepwater Horizon Incident

On April 22, 2010, a deepwater U.S. Gulf of Mexico drilling rig known as the Deepwater Horizon, that was operated by BP Exploration & Production, Inc. (“BP”) sank after an explosion and fire that began on April 20, 2010. Pursuant to a contract that the Company entered into with an affiliate of BP, it supplied to BP a wellhead and certain other equipment that were in use on the Deepwater Horizon at the time of the incident. The Company was named, along with other unaffiliated defendants, in both class action and other lawsuits arising from the Deepwater Horizon incident. These lawsuits were consolidated in the multi-district proceeding In Re: Oil Spill by the Oil Rig “Deepwater Horizon” in the Gulf of Mexico, on April 20, 2010 (“MDL Proceeding”). In 2012, the judge presiding over various lawsuits and proceedings dismissed all claims asserted against the Company in those proceedings with prejudice. On April 9, 2012, the judge issued an order granting a final judgment in favor of the Company with respect to the court’s prior order that granted the Company’s Motion for Summary Judgment.

One of the lawsuits against the Company consolidated in the MDL Proceeding was a personal injury lawsuit initially filed in a Texas state court. The plaintiff has filed a motion to remand the lawsuit back to the Texas state court. If that lawsuit is remanded to the Texas state court, the Company intends to vigorously defend that lawsuit and does not believe it will have a material adverse impact on its results of operations. Accordingly, no liability has been accrued in conjunction with this matter.

Brazilian Tax Issue

From 2002 to 2007, the Company’s Brazilian subsidiary imported goods through the State of Espirito Santo in Brazil and subsequently transferred them to its facility in the State of Rio de Janeiro. During that period, the Company’s Brazilian subsidiary paid taxes to the State of Espirito Santo on its imports. Upon the final sale of these goods, the Company’s Brazilian subsidiary collected taxes from customers and remitted them to the State of Rio de Janeiro net of the taxes paid on importation of those goods to the State of Espirito Santo in accordance with the Company’s understanding of Brazilian tax laws.

In August 2007, the State of Rio de Janeiro served the Company’s Brazilian subsidiary with assessments to collect a state tax on the importation of goods through the State of Espirito Santo from 2002 to 2007 claiming that these taxes were due and payable to it under applicable law. The Company settled these assessments with payments to the State of Rio de Janeiro of $12.2 million in March 2010 and $3.9 million in December 2010. Approximately $7.8 million of these settlement payments were attributable to penalties, interest and amounts that had expired under the statute of limitations so that amount was recorded as an expense. The remainder of the settlement payments generated credits (recorded as a prepaid tax) that can be used to offset future state taxes on sales to customers in the State of Rio de Janeiro once certified by the tax authorities under a process that is currently ongoing. When the credits are certified, the Company will have a five-year period in which to utilize them. In December 2010 and January 2011, the Company’s Brazilian subsidiary was served with additional assessments totaling approximately $13.0 million from the State of Rio de Janeiro to cancel the credits associated with the tax payments to the State of Espirito Santo (“Santo Credits”) on the importation of goods from July 2005 to October 2007. The Santo Credits are not related to the credits described above. The Company has objected to this assessment on the grounds that it would represent double taxation on the importation of the same goods and that the Company is entitled to the credits under applicable Brazilian law. The Company believes that these credits are valid and success in the matter is probable. Based upon this analysis, the Company has not accrued any liability in conjunction with this matter.

Since 2007, the Company’s Brazilian subsidiary has paid taxes on the importation of goods directly to the State of Rio de Janeiro and the Company does not expect any similar issues to exist for periods subsequent to 2007.

General

The Company operates its business and markets its products and services in most of the significant oil and gas producing areas in the world and is, therefore, subject to the risks customarily attendant to international operations and dependency on the condition of the oil and gas industry. Additionally, products of the Company are used in potentially hazardous drilling, completion, and production applications that can cause personal injury, product liability, and environmental claims. Although exposure to such risk has not resulted in any significant problems in the past, there can be no assurance that ongoing and future developments will not adversely impact the Company.

The Company is also involved in a number of legal actions arising in the ordinary course of business. Although no assurance can be given with respect to the ultimate outcome of such legal action, in the opinion of management, the ultimate liability with respect thereto will not have a material adverse effect on the Company’s operations, financial position or cash flows.

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Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2014

Accounting Policies [Abstract]

Principles of Consolidation

Principles of Consolidation

The condensed consolidated financial statements include the accounts of the Company and its subsidiaries. All material intercompany accounts and transactions have been eliminated.

Use of Estimates

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Some of the Company’s more significant estimates are those affected by critical accounting policies for revenue recognition, inventories and contingent liabilities as discussed more fully in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013.

Revenue Recognition

Revenue Recognition

Product Revenue

The Company earns product revenues from two methods:

• product revenues recognized under the percentage-of-completion method; and

• product revenues from the sale of products that do not qualify for the percentage-of-completion method.

Revenues Recognized Under Percentage-of-Completion Method

Revenues recognized under the percentage-of-completion method

The Company uses the percentage-of-completion method on long-term project contracts that have the following characteristics:

• The contracts call for products which are designed to customer specifications;

• The structural designs are unique and require significant engineering and manufacturing efforts generally requiring more than one year in duration;

• The contracts contain specific terms as to milestones, progress billings and delivery dates; and

• Product requirements cannot be filled directly from the Company’s standard inventory.

For each project, the Company prepares a detailed analysis of estimated costs, profit margin, completion date and risk factors which include availability of material, production efficiencies and other factors that may impact the project. On a quarterly basis, management reviews the progress of each project, which may result in revisions of previous estimates, including revenue recognition. The Company calculates the percent complete and applies the percentage to determine the revenues earned and the appropriate portion of total estimated costs. Losses, if any, are recorded in full in the period they become known. Historically, the Company’s estimates of total costs and costs to complete have approximated actual costs incurred to complete the project.

Under the percentage-of-completion method, billings may not correlate directly to the revenue recognized. Based upon the terms of the specific contract, billings may be in excess of the revenue recognized, in which case the amounts are included in customer prepayments as a liability on the Condensed Consolidated Balance Sheets. Likewise, revenue recognized may exceed customer billings in which case the amounts are reported in trade receivables. Unbilled revenues are expected to be billed and collected within one year. As of June 30, 2014 and December 31, 2013, receivables included $43.9 million and $52.9 million of unbilled receivables, respectively. For the quarter ended June 30, 2014, there were 12 projects representing approximately 5% of the Company’s total revenue and approximately 6% of its product revenues that were accounted for using percentage-of-completion accounting, compared to 11 projects during the second quarter of 2013, which represented approximately 6% of the Company’s total revenues and approximately 7% of its product revenues. For the six months ended June 30, 2014, there were 16 projects representing approximately 8% of the Company’s total revenues and 10% of its product revenues, compared to 15 projects that represented approximately 12% of the Company’s total revenues and 14% of its product revenues for the six months ended June 30, 2013, all of which were accounted for using percentage-of-completion accounting.

Revenues Not Recognized Under Percentage-of-Completion Method

Revenues not recognized under the percentage-of-completion method

Revenues from the sale of inventory products, not accounted for under the percentage-of-completion method, are recorded at the time the manufacturing processes are complete and ownership is transferred to the customer.

Service Revenue

Service revenue

The Company earns service revenues from three sources:

• technical advisory assistance;

• rental of running tools; and

• rework and reconditioning of customer-owned Dril-Quip products.

The Company does not install products for its customers, but it does provide technical advisory assistance. At the time of delivery of the product, the customer is not obligated to buy or rent the Company’s running tools and the Company is not obligated to perform any subsequent services relating to installation. Technical advisory assistance service revenue is recorded at the time the service is rendered. Service revenues associated with the rental of running and installation tools are recorded as earned. Rework and reconditioning service revenues are recorded when the refurbishment process is complete.

The Company normally negotiates contracts for products, including those accounted for under the percentage-of-completion method, and services separately. For all product sales, it is the customer’s decision as to the timing of the product installation as well as whether Dril-Quip running tools will be purchased or rented. Furthermore, the customer is under no obligation to utilize the Company’s technical advisory services. The customer may use a third party or their own personnel.

Fair Value of Financial Instruments

Fair Value of Financial Instruments

The Company’s financial instruments consist primarily of cash and cash equivalents, receivables and payables. The carrying values of these financial instruments approximate their respective fair values as they are short-term in nature.

Earnings Per Share

Earnings Per Share

Basic earnings per common share is computed by dividing net income by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per common share is computed considering the dilutive effect of stock options and awards using the treasury stock method.

In each relevant period, the net income used in the basic and dilutive earnings per share calculations is the same. The following table reconciles the number of common shares outstanding at June 30 of each year to the weighted average 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 June 30,				Six months ended June 30,
	2014		2013		2014		2013
	(In thousands)
Weighted average basic common shares outstanding—basic		40,327		40,636		40,501		40,583
Dilutive effect of common stock options and awards		235		185		222		184
Weighted average diluted common shares outstanding—diluted		40,562		40,821		40,723		40,767

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Inventories (Tables)

6 Months Ended

Jun. 30, 2014

Inventory Disclosure [Abstract]

Schedule of Inventories

Inventories consist of the following:

	June 30, 2014			December 31, 2013
	(In thousands)
Raw materials	$	95,441		$	85,670
Work in progress		134,042			119,929
Finished goods		214,138			195,971
		443,621			401,570
Less: allowance for obsolete and excess inventory		(35,555	)		(33,216	)
Total inventory	$	408,066		$	368,354

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Stock-Based Compensation and Stock Awards - Additional Information (Detail) (USD $)	0 Months Ended	3 Months Ended		6 Months Ended
	May 10, 2014	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]
Stock-based compensation expense		$ 2,800,000	$ 2,000,000	$ 5,660,000	$ 4,136,000
Capitalized expense		$ 0	$ 0	$ 0	$ 0
Stock options or stock awards granted		0	0
Restricted stock vested	1,602

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CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Statement Of Income And Comprehensive Income [Abstract]
Net income	$ 51,324	$ 42,927	$ 93,942	$ 82,769
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments	10,699	(9,511)	16,428	(24,134)
Total comprehensive income	$ 62,023	$ 33,416	$ 110,370	$ 58,635

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Stock-Based Compensation and Stock Awards

6 Months Ended

Jun. 30, 2014

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Stock-Based Compensation and Stock Awards

4. Stock-Based Compensation and Stock Awards

During the three months ended June 30, 2014 and 2013, the Company recognized approximately $2.8 million and $2.0 million, respectively, of stock-based compensation expense, which is included in the selling, general and administrative expense line on the Condensed Statement of Income. For the six months ended June 30, 2014 and 2013, stock-based compensation expense totaled $5.7 million and $4.1 million, respectively. No stock-based compensation expense was capitalized during the three or six months ended June 30, 2014 or 2013. There were no stock options or awards granted in the second quarter of 2014 or 2013. In May 2014, 1,602 shares of restricted stock awards vested from a May 2012 grant to the directors.

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Significant Accounting Policies - Schedule of Earnings Per Share (Detail) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Earnings Per Share [Abstract]
Weighted average basic common shares outstanding-basic	40,327	40,636	40,501	40,583
Dilutive effect of common stock options and awards	235	185	222	184
Weighted average diluted common shares outstanding-diluted	40,562	40,821	40,723	40,767