8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (date of earliest event reported): October 27, 2017

DRIL-QUIP, INC.

(Exact name of registrant as specified in its charter)

Delaware	001-13439	74-2162088
(State or other jurisdiction of incorporation)	(Commission File Number)	(I.R.S. Employer Identification No.)

6401 N. Eldridge Parkway Houston, Texas	77041
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (713) 939-7711

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2):

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company  ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Item 2.02 Results of Operations and Financial Condition.

On October 27, 2017, Dril-Quip, Inc. (“Dril-Quip”) reported third quarter 2017 earnings. For additional information regarding Dril-Quip’s third quarter 2017 earnings, please refer to Dril-Quip’s press release attached to this report as Exhibit 99.1 (the “Press Release”), which Press Release is incorporated by reference herein.

Item 7.01 Regulation FD Disclosure.

On October 27, 2017, Dril-Quip posted the Q3 2017 Supplemental Earnings Information presentation (the “Presentation”) to its website at www.dril-quip.com. The Presentation is attached hereto as Exhibit 99.2.

The information in the Press Release and the Presentation are being furnished, not filed, pursuant to Items 2.02 and 7.01. Accordingly, the information in the Press Release and the Presentation will not be incorporated by reference into any registration statement filed by Dril-Quip under the Securities Act of 1933, as amended, unless specifically identified therein as being incorporated therein by reference.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits.

The exhibits listed below are being furnished pursuant to Items 2.02 and 7.01 of this Form 8-K:

Exhibit No.	Description
99.1	Press Release issued October 27, 2017.
99.2	Q3 2017 Supplemental Earnings Information Presentation.

2

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 hereunto duly authorized.

DRIL-QUIP, INC.
By:	/s/ Jeffrey J. Bird
	Jeffrey J. Bird
	Vice President and Chief Financial Officer

Date: October 27, 2017

3

EX-99.1

Exhibit 99.1

Dril-Quip, Inc. Announces Results for Third Quarter 2017

• Generated $100 million of revenue, consistent with general guidance

• Increased gross margin percentage to 37.1%, up 550 bps sequentially, partially driven by the ongoing cost savings initiatives

• Reported a Net Loss of $29.3 million, or $0.78 loss per diluted share, including an after tax $31 million impact from one-time charges, foreign currency and tax benefits

• Adjusted diluted earnings per share, excluding after tax one-time charges, foreign currency and tax benefits, was $0.05 per share

• Generated $36.0 million of Net Cash Provided by Operating Activities

• Grew cash on hand to $473 million at September 30, 2017

• Maintained strong balance sheet with no debt at September 30, 2017

HOUSTON – October 27, 2017 / PR Newswire - Dril-Quip, Inc. (NYSE: DRQ) today reported operational and financial results for the third quarter of 2017.

Blake DeBerry, Dril-Quip’s President and Chief Executive Officer, commented, “Despite the fact our markets remained challenging, in the third quarter we generated Adjusted EBITDA of $13.7 million and Free Cash Flow of $29.4 million. This increased our already significant cash position to $473 million at September 30, 2017. This cash balance, coupled with our debt-free balance sheet, positions us to continue to execute our long-term, forward focused strategy. Looking ahead, we believe oil prices and the offshore rig environment will remain uncertain into 2018. However, we are seeing early signs of increased activity in our markets and as the industry rebounds, we expect the new products we are launching will meaningfully increase our total available market and contribute substantially to Dril-Quip’s revenue in the future.”

	Three months ended									Change
	30-Sep-17			30-June-17			30-Sep-16			3Q17-2Q17			3Q17-3Q16
	(in millions, except per share data)
Revenues	$	100.3		$	127.9		$	123.6			-22	%		-19	%
Cost of sales		63.1			87.5			77.6			-28	%		-19	%
Gross Margin	$	37.2			40.4		$	46.0			-8	%		-19	%
Gross Margin %		37.1	%		31.6	%		37.2	%		550 bps			-13 bps
Net Income (Loss)	$	(29.3	)		—		$	19.0			N/M	1		N/M	1
Adjusted EBITDA	$	13.7			19.3		$	28.2			-29	%		-52	%
Diluted EPS	$	(0.78	)		—		$	0.51			N/M	1		N/M	1
Diluted EPS, excluding charges and forex	$	0.05			0.09		$	0.63			N/M	1		N/M	1

1 N/M for the purposes of this presentation is defined as “not meaningful”.

In conjunction with today’s release, the Company posted a new investor presentation entitled “Q3 2017 Supplemental Earnings Information” to its website, www.dril-quip.com, in the Presentations section under the Investors tab.

Third Quarter Segment Review and Financial Discussion

Consolidated revenues in the quarter were down $27.5 million, or 22%, largely in line with Company guidance. Also consistent with that prior guidance, Dril-Quip does not expect fourth quarter 2017 revenues to materially change from the third quarter. Bookings remained muted as they have been throughout 2017.

Western Hemisphere revenue declined sequentially $13 million, or 18%. This decline was driven by lower subsea wellhead and fabricated joint revenues in the United States and slower than expected customer approvals in Brazil. Additionally, the disruption caused by Hurricane Harvey accounted for approximately $2.5 million in delayed revenues.

Eastern Hemisphere revenue declined sequentially by $4.5 million, or 15%, as a number of customer delivery dates peaked in the second quarter of 2017.

Asia-Pacific revenue declined sequentially by $10 million, or 36%, as work on the Kangean project in Indonesia slowed as it nears completion. Additionally, the region did not benefit from the call-out work it experienced in the second quarter of 2017.

Dril-Quip’s largest markets remain offshore, harsh, deepwater environments and the Company believes it is at or near the trough today in terms of the activity in those markets. However, recent industry consensus forecasts a longer and shallower recovery for oil prices and Dril-Quip’s primary end markets. This outlook necessitated a review of the usefulness of the Company’s fixed assets and inventory which resulted in a pre-tax $61 million non-cash impairment charge in the third quarter of 2017.

Consolidated Adjusted EBITDA fell 29% sequentially in the third quarter of 2017 on lower revenues offset in part by continuing savings from the Company’s cost reduction initiatives. These improvements include TIW, where the Company is in the early stages of both cross-selling efforts and cost synergies. TIW revenues increased 4% sequentially and the Adjusted EBITDA loss narrowed to $1 million. Dril-Quip expects to see continued sequential improvement in TIW results in the coming quarters with meaningful improvement expected by mid-2018. The Company believes cost synergies, once fully executed, should yield approximately $8 million to $10 million annualized.

Balance Sheet

Dril-Quip’s cash on hand grew to $473 million resulting from $29.4 million of Free Cash Flow in the quarter. This increase, combined with the Company’s debt-free balance sheet, provides both financial and operational flexibility through the current downturn and will allow the Company to quickly capitalize on opportunities when the market rebounds.

New Products

The Company is encouraged by the early acceptance of new products introduced in 2017. Dril-Quip licensed the new boltless DXe Wellhead Connector and expects further gains in market share in the coming months. Additionally, the Company recently received technical acceptance from a large customer of the new HPHT BigBore IIe Wellhead System. Dril-Quip expects a meaningful contribution from the new products being launched, including increases to addressable market, market share and future revenues.

The Company’s investments in research and development remain strong and are made possible because of a strong, debt-free balance sheet. This robust cash position will allow management and the Board to continue to execute on Dril-Quip’s long-term, forward-focused strategy of pursuing acquisitions, investing in research and development and opportunistically repurchasing shares

Dril-Quip is a leading manufacturer of highly engineered drilling and production equipment for use onshore and offshore, but which is particularly well suited for use in deep-water, harsh environment and severe service applications.

Forward-Looking Statements

Statements contained herein relating to future operations and financial results that are forward-looking statements, including those related to market conditions, anticipated revenues, cost synergies, possible acquisitions, share repurchases and expectations regarding operating results, are based upon certain assumptions and analyses made by the management of the Company in light of its experience and perception of historical trends, current conditions, expected future developments and other factors. These statements are subject to risks beyond the Company’s control, including, but not limited to, the volatility of oil and natural gas prices and cyclicality of the oil and gas industry, project terminations, suspensions or scope adjustments to contracts, uncertainties regarding the effects of new governmental regulations, the Company’s international operations, operating risks, and other factors detailed in the Company’s public filings with the Securities and Exchange Commission. Investors are cautioned that any such statements are not guarantees of future performance and actual outcomes may vary materially from those indicated.

Non-GAAP Financial Information

Adjusted net income, Adjusted diluted EPS, Free Cash Flow, and Adjusted EBITDA are non-GAAP measures.

Adjusted net income and diluted adjusted net income per common share are defined as net income (loss) and earnings per share, respectively, excluding the impact of foreign currency gains or losses as well as other significant non-cash items and certain charges and credits.

Free Cash Flow is defined as net cash provided by operating activities less net cash used in the purchase of property, plant, and equipment.

Adjusted EBITDA is defined as net income excluding income taxes, interest income and expense, depreciation and amortization expense, non-cash gains or losses from foreign currency exchange rate changes as well as other significant non-cash items and items that can be considered non-recurring.

The Company believes that these non-GAAP measures enable it to evaluate more effectively the operations period over period and identify operating trends by removing the effect of its capital structure from its operating structure. In addition, the Company believes that these measures are a supplemental measurement tool used by analysts and investors to help evaluate overall operating performance, ability to pursue and service possible debt opportunities and make future capital expenditures. Adjusted Net Income, Adjusted EBITDA, and Free Cash Flow do not represent funds available for our discretionary use and are not intended to represent or to be used as a substitute for net income and net cash provided by operating activities, as measured under U.S. generally accepted accounting principles.

See tables below for additional information concerning non-GAAP financial information, including a reconciliation of the non-GAAP financial information presented in this press release to the most directly comparable financial information presented in accordance with GAAP. Non-GAAP financial information supplements should be read together with, and are not an alternative or substitute for, the Company’s financial results reported in accordance with GAAP. Because non-GAAP financial information is not standardized, it may not be possible to compare these financial measures with other companies’ non-GAAP financial measures.

SOURCE: Dril-Quip, Inc.

Jerry Brooks, Vice President - Investor Relations, (713) 939-7711

Dril-Quip, Inc.

Comparative Consensed Consolidated Income Statement

(Unaudited)

	Three months ended
	September 30, 2017			June 30, 2017			September 30, 2016
	(in thousands, except per share data)
Revenues:
Products	$	75,885		$	102,092		$	101,277
Services		24,461			25,830			22,363
Total revenues		100,346			127,922			123,640
Costs and expenses
Cost of sales		63,050			87,549			77,633
Selling, general and administrative		27,994			31,179			12,504
Engineering and product develoipment		10,379			10,308			10,570
Impairment and other chanrges		60,968			—			—
Total Costs		162,391			129,036			100,707
Operating income (loss)		(62,045	)		(1,114	)		22,933
Interest income		957			1,070			945
Interest expense		(12	)		(18	)		(1	)
Income tax provision (benefit)		(31,840	)		(77	)		4,864
Net income (loss)	$	(29,260	)	$	15		$	19,013
Earnings (loss) per share, diluted	$	(0.78	)	$	—		$	0.51
Depreciation and amortization	$	9,518		$	12,881		$	7,592
Capital expenditures	$	6,627		$	8,089		$	5,013

Dril-Quip, Inc.

Unaudited Non-GAAP Financial Measures

(In thousands, except per share amounts)

Adjusted Net Income and EPS:

	Three months ended
	30-Sep-17						30-Jun-17				30-Sep-16
	Effect on net income (after-tax)			Impact on diluted earnings per share			Effect on net income (after-tax)		Impact on diluted earnings per share		Effect on net income (after-tax)		Impact on diluted earnings per share
Net Income (Loss)	$	(29,260	)	$	(0.78	)	$	15	$	0.00	$	19,013	$	0.51
Adjustments (after tax)
Reverse the effect of foreign currency		308			0.01			2,988		0		4,361		0.12
Add back impairment and other charges		35,876			0.96			—		—		—
Less one-time tax adjustments		(6,075	)		(0.16	)		—		—		—
Add back severance payments		942			0.03			247		0		—		—
Adjusted net income	$	1,791		$	0.05		$	3,250	$	0.09	$	23,374	$	0.63

Adjusted EBITDA

	Three months ended
	September 30, 2017			June 30, 2017			September 30, 2016
	(in thousands)
Net Income (Loss)	$	(29,260	)	$	15		$	19,013
Add:
Interest (income) expenses		(945	)		(1,052	)		(944	)
Income tax expense (benefit)		(31,840	)		(77	)		4,864
Depreciation and amortization expense		9,518			12,881			7,592
Impairment and other charges		60,968			—			—
Foreign currency loss (gain)		380			3,689			(5,478	)
Severance costs		1,163			305			—
Stock compensation expense		3,694			3,567			3,188
Adjusted EBITDA1	$	13,678		$	19,328		$	28,235

1 Adjusted EBITDA for the three months ended September 30, 2017 and June 30, 2017 include net losses related to TIW Adjusted EBITDA of approximately $1.0 million and $1.5 million respectively.

Free Cash Flow

	Three months ended
	September 30, 2017			June 30, 2017			September 30, 2016
	(in thousands)
Net cash provided by operating activities	$	36,035		$	27,224		$	58,633
Less:
Purchase of property, plant and equipment		(6,627	)		(8,089	)		(5,013	)
Free Cash Flow	$	29,408		$	19,135		$	53,620

EX-99.2

Dril-Quip, Inc. Q3 2017 Supplemental Earnings Information Exhibit 99.2

1 Forward-Looking Statements The information furnished in this presentation contains “forward-looking statements” within the meaning of the Federal Securities laws. Forward-looking statements include goals, projections, estimates, expectations, forecasts, plans and objectives, including revenue and other projections, acquisition opporutnities, and share repurchases and are based on assumptions, estimates and risk analysis made by management of Dril-Quip in light of its experience and perception of historical trends, current conditions, expected future developments and other factors. No assurance can be given that actual future results will not differ materially from those contained in the forward-looking statements in this presentation. Although Dril-Quip believes that all such statements contained in this presentation are based on reasonable assumptions, there are numerous variables of an unpredictable nature or outside of Dril-Quip’s control that could affect Dril-Quip’s future results and the value of its shares. Each investor must assess and bear the risk of uncertainty inherent in the forward-looking statements contained in this presentation. Please refer to Dril-Quip’s filings with the SEC for additional discussion of risks and uncertainties that may affect Dril-Quip’s actual future results. Dril-Quip undertakes no obligation to update the forward-looking statements contained herein. Use of Non-GAAP Financial Measure We calculate Adjusted EBITDA to evaluate and compare the results of our operations from period to period by removing the effect of our capital structure from our operating structure.  We calculate Free Cash Flow as net cash provided by operating activities less net cash used in the purchase of property, plant, and equipment. These measurements are used in concert with net income and cash flows from operations, which measures actual cash generated in the period.  In addition, we believe that Adjusted  EBITDA and Free Cash Flow are supplemental measurement tools used by analysts and investors to help evaluate overall operating performance, ability to pursue and service possible debt opportunities and make future capital expenditures.  These metrics do not represent funds available for our discretionary use and is not intended to represent or to be used as a substitute for net income, as measured under U.S. generally accepted accounting principles.  The items excluded from Adjusted EBITDA, but included in the calculation of reported net income and net cash provided by operating activities, are significant components of the consolidated statements of income and must be considered in performing a comprehensive assessment of overall financial performance.  Our calculation of Adjusted EBITDA and Free Cash Flow may not be consistent with calculations used by other companies. Cautionary Statement

Leading manufacturer of highly engineered drilling and production equipment Onshore and offshore uses Particularly well suited for use in deepwater and harsh environments Strong financial position Strong balance sheet with no debt $473 million cash on hand as of 9/30/2017 Historically superior margins to peers Technically differentiated products & 1st class service Experienced management team DRQ Overview

Subsea equipment Downhole tools & liner hangers Surface equipment Rig equipment Services – technical advisory, rental tools and reconditioning Products & Services

Generated $100 million of revenue, consistent with general guidance Increased gross margin percentage to 37.1%, up 550 bps sequentially, partially driven by the ongoing cost savings initiatives Reported a Net Loss of $29.3 million, or $0.78 loss per diluted share, including an after tax $31 million impact from one-time charges, foreign currency and tax benefits Adjusted diluted earnings per share, excluding after tax one-time charges, foreign currency and tax benefits, was $0.05 per share Generated $36.0 million of Net Cash Provided by Operating Activities Grew cash on hand to $473 million at September 30, 2017 Maintained strong balance sheet with no debt at September 30, 2017 Revenue in Q4 expected to be in line with Q3 revenue Early indications of potential new projects for 2018 and beyond Q3 2017 Highlights and Recent Key Items Executing Our Forward Focused Strategy While Maintaining Strong Balance Sheet With No Debt *Refer to slide 10 for a reconciliation of GAAP Net Income to non-GAAP Adjusted EBITDA and slide 1 for information on non-GAAP financial measures

Oil price and offshore rig environments remain uncertain into 2018, however Dril-Quip is seeing early signs of increased activity in some markets Offshore spending will remain suppressed as operators delay FIDs in favor of reduced spending and shorter cycle investment options Operators willing to progress projects may face financing challenges Competitive pressure on offshore projects that do progress is expected Market Outlook Well Positioned with Strong, Debt-Free Balance Sheet and Robust Cash to Endure Lower for Longer Environment

Evaluate and adjust cost base to fit current market conditions Continue to generate free cash flow Target positive EPS, excluding charges, fx Execute forward focused strategy Operating Plan in Current Environment Uncertainty of Oil Prices Negatively Impacting Recent Results

Deepwater Outlook Value in Deepwater Essential to meet growing long-term worldwide demand Source of significant production and reserve replacement Investment Returning to Deepwater

Increasing Offshore Efficiencies Significant drilling improvements leading to: More wells being drilled per rig year Fewer rigs needed to drill same inventory Drilling cost reductions improves economics Source: Rystad Energy and Chevron, GALP, Petrobras, DNB Well count a proxy for Dril-Quip demand

Looking Past the Trough Outlook for Subsea Improving After Three Years of Decline Source: Rystad Energy DCube Purchases of oilfield services Annual change

Focused on Introducing Award Winning Technology Worldwide to Grow Market Share Preliminary Indications of Interest Provide Encouragement US and Mexico GOM drilling successes leading to new development projects Evaluating opportunities in Brazil as market stabilizes Activity increasing in 2018 in China, Australia, Vietnam and Indonesia Renewed interest in North Sea, Caspian and West Africa

Forward Focused Strategy Ensure financial stability and flexibility Enhance product, service and R&D capabilities to grow market share Return cash to shareholders Pursue growth opportunities through strategic M&A Strong Balance Sheet Internal Initiatives External Initiatives Zero Debt Share Repurchase

Acquisition Focus Closed two acquisitions in last 12 months (TIW & OPT) Brand recognition and patented technologies for global markets Expanded customer offerings and strengthened liner hanger sales Added presence in U.S. and international onshore market Provider of offshore riser systems and components with focus on products for Floating Production Platforms (TLPs & SPARs) Recently commenced significant footprint rationalization that is expected to save $8-10 million annualized Continuing to focus on inorganic expansion Technically differentiated Increasing share of rig “wallet” Leveraging current employees to reduce rig headcount for customers Targeting $125 million in “Acquisition” Revenue by 2021

Structurally reduce customer costs while expanding product and service offerings to generate higher revenues per well Developing technologically advanced products increases market share 2017: Introducing four significant new products “BigBore-IIe” Wellhead System (won 2017 OTC Spotlight award) “DXe” Wellhead Connector (won 2017 OTC Spotlight award) “HorizontalBore” subsea tree “Badger” high performance specialty casing connector Established new High Pressure, High Temperature (HPHT) center in Singapore Executing Our R&D Strategy Targeting $100 million in New Product Revenue by 2021

Product Optimization & Integration Product Description 2.0 MM lockdown per casing string Casing weights up to 2.5 MM lbf Qualified dynamic metal to metal sealing Qualified up to 20 ksi @ 35°-350° Qualified to 17D 2nd Edition Simpler and easier to install, saves 5 trips in hole Market Opportunity Substantial well cost savings for operator Ability to convert existing customer inventory Differentiating Technology BB-IIe Wellhead System Product Description 5-1/8” x 2-1/16” 10,000 psi Horizontal Subsea Tree Temperature Rating : 0-300°F 10,000 ft. Maximum Water Depth 11 Downhole Functions (9 hyd. + 2 elec.) Size = 5m x 5m, Approx. Weight = 45 Tonnes Market Opportunity Double addressable tree market Standardized tooling for all Trees HorizontalBore Subsea Tree New Products Designed to Increase Markets and Market Share

Forward Focused Strategy Targeting $225MM Revenue in 2021 From Acquisitions and R&D Supported by Strong Balance Sheet with More Opportunities Expected

DRQ - Investment Highlights Well-Positioned to Navigate the Industry Downturn Leading manufacturer of highly engineered drilling and production equipment Technically differentiated products – R&D momentum Strong balance sheet Historically superior margins to peer group Experienced management team

DRIL-QUIP, Inc. 6401 N. Eldridge Pkwy. Houston, TX 77041 USA +1 713 939 7711 DRIL-QUIP (Europe), Ltd. Stoneywood Park Dyce, Aberdeen, AB21 7DZ, Scotland +44 (0) 1224 727000 DRIL-QUIP Asia Pacific Pte., Ltd 80 Tuas West Drive Singapore, 638417 +65 68610600 DRIL-QUIP do Brasil, Ltda. Estrada de Imboassica, 853 CEP 27920-340 Macaé +55 22 27918950 www.dril-quip.com

Income Statement

Balance Sheet Working Capital Initiatives Should Yield Results in 4Q 2017

Non-GAAP Financial Measures Non-GAAP Financial Measure We calculate Adjusted EBITDA to evaluate and compare the results of our operations from period to period by removing the effect of our capital structure from our operating structure.  We calculate Free Cash Flow as net cash provided by operating activities less net cash used in the purchase of property, plant, and equipment. These measurements are used in concert with net income and cash flows from operations, which measure actual cash generated in the period.  In addition, we believe that Adjusted  EBITDA and Free Cash Flow are supplemental measurement tools used by analysts and investors to help evaluate overall operating performance, ability to pursue and service possible debt opportunities and make future capital expenditures.  These metrics do not represent funds available for our discretionary use and is not intended to represent or to be used as a substitute for net income, as measured under U.S. generally accepted accounting principles.  The items excluded from Adjusted EBITDA, but included in the calculation of reported net income and net cash provided by operating activities, are significant components of the consolidated statements of income and must be considered in performing a comprehensive assessment of overall financial performance.  Our calculation of Adjusted EBITDA and Free Cash Flow may not be consistent with calculations used by other companies.

Non-GAAP Financial Measures Non-GAAP Financial Measure We calculate Adjusted EBITDA to evaluate and compare the results of our operations from period to period by removing the effect of our capital structure from our operating structure.  We calculate Free Cash Flow as net cash provided by operating activities less net cash used in the purchase of property, plant, and equipment. These measurements are used in concert with net income and cash flows from operations, which measure actual cash generated in the period.  In addition, we believe that Adjusted  EBITDA and Free Cash Flow are supplemental measurement tools used by analysts and investors to help evaluate overall operating performance, ability to pursue and service possible debt opportunities and make future capital expenditures.  These metrics do not represent funds available for our discretionary use and is not intended to represent or to be used as a substitute for net income, as measured under U.S. generally accepted accounting principles.  The items excluded from Adjusted EBITDA, but included in the calculation of reported net income and net cash provided by operating activities, are significant components of the consolidated statements of income and must be considered in performing a comprehensive assessment of overall financial performance.  Our calculation of Adjusted EBITDA and Free Cash Flow may not be consistent with calculations used by other companies.

Capital Expenditures Annual Maintenance Capex ~$15 - $20 Million

70-80% of backlog expected to convert to revenue in 12 months or less Bookings require shorter lead times due to available capacity and inventory on hand Weakening of oil prices is placing downward pressure on bookings Backlog Bookings include cancellations of $36.8 mm for Q4 2016, $3.5 mm for Q1 2017, $2.8 mm for Q2 2017 and $0.1 million for Q3 2017.