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On July 8, 2024, Dril-Quip disclosed in a filing with the U.S. Securities and Exchange Commission that it had identified “an error in the classification of certain inventory write-downs from 2021.” Specifically, the Company had “misclassified inventory write-downs from 2021 totaling approximately $67 million, including $19.3 million related to the 2018 global strategic plan and approximately $47.7 million due to the discontinuation of certain product categories under the 2021 global strategic plan. 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’).” Accordingly, Dril-Quip stated that its prior statements regarding the Affected Period “should no longer be relied upon” and will be restated. Dril-Quip further stated that “the Company’s disclosure controls and procedures as of December 31, 2023 were not effective.”
On this news, Dril-Quip’s stock price fell $1.76 per share, or 9.9%, to close at $16.01 per share on July 9, 2024.