On July 8, 2024, after the market closed, Dril-Quip filed a current report on Form 8-K with the SEC. In this current report, Dril-Quip disclosed it had “became aware of an error in the classification of certain inventory write-downs from 2021. … The Company classified these charges as “Restructuring and other charges”; however, these charges should have been classified in “Cost of sales” in the Consolidated Statement of Income (Loss) for the fiscal year ended December 31, 2021, in accordance with ASC 420-10-S99-3. As a result, “Cost of sales” was understated and “Restructuring and other charges” was overstated by $67 million for the fiscal year ended December 31, 2021 (the “Affected Period”).”
Further, Dril-Quip disclosed “after considering the recommendations of management and discussion with the Company’s independent registered public accounting firm[,] the Audit Committee of our board of directors (‘Audit Committee’) concluded that the consolidated financial statements for the Affected Period should no longer be relied upon due to the error described above. Any previously issued or filed reports, press releases, earnings releases and investor presentations or other communications describing the Company’s consolidated financial statements and other related financial information covering the Affected Period also should no longer be relied upon.”
Finally, Dril-Quip disclosed the “Management has also concluded that, in light of the findings described above, the Company’s disclosure controls and procedures as of December 31, 2023 were not effective”, and that it intended “to complete and file restated consolidated financial statements for the Affected Period[.]”
On this news, the price of Dril-Quip stock fell by 9.90% on July 9, 2024.
