Dril-quip Inc has a market cap of $3.06 billion; its shares were traded at around $76.26 with a P/E ratio of 32.59 and P/S ratio of 5.4. Dril-quip Inc had an annual average earning growth of 32.7% over the past 10 years. GuruFocus rated Dril-quip Inc the business predictability rank of 5-star.
Highlight of Business Operations:Revenues. Dril-Quips 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 Companys products, reconditioning services and rental of running tools for installation and retrieval of the Companys products. In 2011, the Company derived 85% of its revenues from the sale of its products and 15% of its revenues from services compared to 86% and 14% in 2010 and 84% and 16% in 2009, 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 69%, 61% and 66% of its revenues derived from foreign sales in 2011, 2010 and 2009, respectively. Substantially all of the Companys domestic revenue relates to operations in the U. S. Gulf of Mexico. Domestic revenue approximated 31%, 39% and 34%, respectively, of the Companys total revenues for 2011, 2010 and 2009.
Revenues. Revenues increased by $35.0 million, or approximately 6.2%, to $601.3 million in 2011 from $566.3 million in 2010. Product revenues increased by approximately $25.5 million for the year ended December 31, 2011 compared to the same period in 2010 as a result of increased revenues of $53.1 million in subsea equipment and $0.5 million in surface equipment, partially offset by a $28.1 million decrease in offshore rig equipment.The decrease in offshore rig equipment revenue was primarily due to the reduction in the number of long-term projects with offshore rig equipment components. Product revenues increased in the Eastern Hemisphere by $33.3 million and $0.9 million in Asia-Pacific, partially offset by a decrease in the Western Hemisphere of $8.7 million. Service revenues increased by approximately $9.5 million resulting from increased service revenues in the Eastern Hemisphere of $2.9 million, $5.6 million in Asia-Pacific and $1.0 million in the Western Hemisphere. The majority of the increases in service revenues related to increased technical advisory services and the rental of running and installation tools, slightly offset by decreases in reconditioning services.
Selling, General and Administrative Expenses. For 2011, selling, general and administrative expenses increased by approximately $9.4 million, or 15.4%, to $70.5 million from $61.1 million in 2010. The increase in selling, general and administrative expenses was primarily due to the effect of foreign currency transactions, increased personnel and related expenses, slightly offset by a decrease in stock options expense. The Company experienced approximately $3.5 million in pre-tax foreign currency transaction losses during 2011 compared to approximately $1.4 million in pre-tax foreign currency transaction gains during 2010. Stock option expense for 2011 totaled $4.5 million compared to $5.0 million in 2010. The stock option expense in 2011 excludes $1.4 million of non-cash expense due to the vesting of Mr. Walkers stock options as a result of his retirement as CEO of the Company. The stock option expense in 2010 excludes of $2.0 million of non-cash expense due to the vesting of Mr. Reimerts stock options as a result of his termination with the Company. These expenses are included in Special Items below. Selling, general and administrative expenses as a percentage of revenues were 11.7% in 2011 and 10.7% in 2010.
Selling, General and Administrative Expenses. For 2010, selling, general and administrative expenses increased by approximately $5.6 million, or 10.1%, to $61.1 million from $55.5 million in 2009. The increase in selling, general and administrative expenses was primarily due to the effect of a reduction in foreign currency transaction gains and increased stock option expenses. The Company experienced approximately $1.4 million in pre-tax foreign currency transaction gains during 2010 compared to approximately $4.6 million in pre-tax foreign currency transaction gains during 2009. The gain in 2010 was basically due to the weakening U.S. dollar compared to the Brazilian real, slightly offset by the strengthening of the U.S. dollar compared to the British pound sterling. The gain in 2009 was primarily due to the weakening of the U.S. dollar compared to the British pound sterling and the Brazilian real. Stock option expense for 2010 totaled $5.0 million compared to $4.0 million in 2009. The stock option expense in 2010 excludes the vesting acceleration of $2.0 million due to the termination of Mr. Reimerts employment with the Company and $1.3 million in 2009 due to the death of Mr. Smith, both of whom were Co-CEOs of the Company. These expenses are included in Special Items below. Selling, general and administrative expenses as a percentage of revenues were 10.7% in 2010 and 10.3% in 2009.
Backlog consists of firm customer orders for which a purchase order or signed contract has been received, satisfactory credit or financing arrangements exist and delivery is scheduled. The Companys revenues for a specific period have not been directly related to its backlog as stated at a particular point in time. The Companys backlog was approximately $716 million, $627 million and $563 million at December 31, 2011, 2010 and 2009, respectively. This represents an increase of approximately $89 million, or 14%, from 2010 to 2011 and an increase of approximately $153 million, or 27%, from 2009 to 2011. The Company expects to fill approximately 68% of the December 31, 2011 backlog by December 31, 2012. The remaining backlog at December 31, 2011 consists of longer-term projects which are being designed and manufactured to customer specifications requiring longer lead times. The backlog amount at December 31, 2009 excludes $27 million related to the MPF contract which was resolved in 2010 as described in Note 10 of Notes to Consolidated Financial Statements.
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