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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, DC 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period endedMarch 31, 2007
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission file number 000-31579
 HYDRIL COMPANY
  DELAWARE
    
    95-2777268(State or other jurisdiction of 
incorporation or organization)
    
    (IRS Employer
Identification No.)3300 North Sam Houston Parkway East Houston, Texas
    
    77032-3411(Address of principal executive offices)
    
    (Zip Code)
 (281) 449-2000
 þ o
  þ o o
 o þ
  :   ,




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##### 



HYDRIL COMPANY
 INDEX
 PagePART IFINANCIAL INFORMATIONItem 1. Financial StatementsConsolidated Balance SheetsMarch 31, 2007 (unaudited) and
December 31, 2006
    
    
    5Unaudited Consolidated Statements of OperationsFor the Three
Months Ended March 31, 2007 and 2006
    
    
    7Unaudited Consolidated Statements of Changes in Stockholders
Equity and Comprehensive IncomeFor the Three
Months Ended March 31, 2007
    
    
    8Unaudited Consolidated Statements of Cash FlowsFor the Three
Months Ended March 31, 2007 and 2006
    
    
    9Notes to Unaudited Consolidated Financial Statements
    
    
    10Item 2. Managements Discussion and Analysis of Financial Condition
and Results of Operations
    
    
    20Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    28Item 4. Controls and Procedures
    
    
    28PART IIOTHER INFORMATIONItem 1A. Risk Factors
    
    
    29Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    43Item 6. Exhibits
    
    
    43Amendment to Restoration PlanCertification of CEO Pursuant to Rule 13a-14(a)Certification of CFO Pursuant to Rule 13a-14(a)Certification of CEO Pursuant to Section 906Certification of CFO Pursuant to Section 906




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3




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4




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HYDRIL COMPANY
 
 Part I, Item 1: Consolidated Balance Sheets
  March 31,
    
    
    December 31,2007
    
    
    2006(unaudited)CURRENT ASSETS:Cash and cash equivalents
    
    $
    121,063
    
    
    $
    105,473Investments and marketable securities
    
    
    4,674
    
    
    
    8,209Receivables:Trade, less allowance for doubtful
accounts: 2007, $1,228; 2006, $1,210
    
    
    78,378
    
    
    
    98,734Contract costs and estimated earnings in excess of billings
    
    
    30,232
    
    
    
    25,520Other
    
    
    1,934
    
    
    
    4,041Total receivables
    
    
    110,544
    
    
    
    128,295Inventories:Finished goods
    
    
    75,410
    
    
    
    56,958Work-in-process
    
    
    30,022
    
    
    
    21,815Raw materials
    
    
    19,325
    
    
    
    18,013Total inventories
    
    
    124,757
    
    
    
    96,786Deferred tax asset
    
    
    9,833
    
    
    
    9,715Other current assets
    
    
    5,964
    
    
    
    22,559Total current assets
    
    
    376,835
    
    
    
    371,037PROPERTY:Land and improvements
    
    
    28,572
    
    
    
    24,986Buildings and improvements
    
    
    58,209
    
    
    
    57,719Machinery and equipment
    
    
    180,387
    
    
    
    178,430Construction-in-progress
    
    
    6,217
    
    
    
    11,308Total
    
    
    273,385
    
    
    
    272,443Less accumulated depreciation and amortization
    
    
    (148,545
    )
    
    
    (149,208
    )Property, net
    
    
    124,840
    
    
    
    123,235OTHER LONG-TERM ASSETS:Deferred tax asset
    
    
    456
    
    
    
    256Other assets
    
    
    17,940
    
    
    
    15,503TOTAL
    
    $
    520,071
    
    
    $
    510,031
  5




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HYDRIL COMPANY
Part I, Item 1: Consolidated Balance Sheets
 March 31,
    
    
    December 31,2007
    
    
    2006(unaudited)CURRENT LIABILITIES:Accounts payable
    
    $
    55,488
    
    
    $
    40,695Billings in excess of contract costs and estimated earnings
    
    
    107,452
    
    
    
    102,260Accrued liabilities
    
    
    32,903
    
    
    
    29,913Income taxes payable
    
    
    14,003
    
    
    
    14,687Total current liabilities
    
    
    209,846
    
    
    
    187,555LONG-TERM LIABILITIES:Deferred tax liability
    
    
    14,087
    
    
    
    13,233Other
    
    
    20,040
    
    
    
    18,635Total long-term liabilities
    
    
    34,127
    
    
    
    31,868COMMITTEMENTS AND CONTINGENCIES (Note 6)STOCKHOLDERS EQUITY:Capital stock:Preferred stock  authorized, 10,000,000 shares of $1 par
value; none issued or outstanding
    
    
    
    
    
    
    Common stock  authorized 75,000,000 shares of $.50 par
value; 21,009,549 and 20,922,239 shares issued at March 31,
2007 and December 31, 2006, respectively
    
    
    10,505
    
    
    
    10,461Class B common stock  authorized, 32,000,000 shares of
$.50 par value; 2,928,332 and 2,980,305 shares issued and
outstanding at March 31, 2007 and December 31, 2006,
respectively
    
    
    1,464
    
    
    
    1,490Additional paid in capital
    
    
    87,599
    
    
    
    84,775Retained earnings
    
    
    394,384
    
    
    
    371,069Accumulated other comprehensive loss
    
    
    (2,853
    )
    
    
    (3,773
    )Less treasury stock, at cost; 3,059,835 and 2,547,631 shares
at March 31, 2007 and December 31, 2006, respectively
    
    
    (215,001
    )
    
    
    (173,414
    )Total stockholders equity
    
    
    276,098
    
    
    
    290,608TOTAL
    
    $
    520,071
    
    
    $
    510,031
  6




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HYDRIL COMPANY
 
 Part I, Item 1: Unaudited Consolidated Statements of Operations
  Three Months Ended March 31,2007
    
    
    2006REVENUE
    
    $
    135,017
    
    
    $
    114,060COST OF SALES
    
    
    76,313
    
    
    
    64,181GROSS PROFIT
    
    
    58,704
    
    
    
    49,879SELLING, GENERAL &
ADMINISTRATION EXPENSES:Engineering
    
    
    4,389
    
    
    
    3,435Sales and marketing
    
    
    6,657
    
    
    
    5,593General and administration
    
    
    12,412
    
    
    
    8,000Total
    
    
    23,458
    
    
    
    17,028OPERATING INCOME
    
    
    35,246
    
    
    
    32,851LOSS FROM UNCONSOLIDATED ENTITIES
    
    
    (39
    )
    
    
    (45
    )INTEREST INCOME
    
    
    1,290
    
    
    
    1,470OTHER INCOME (EXPENSE), NET
    
    
    213
    
    
    
    (99
    )INCOME BEFORE INCOME TAXES
    
    
    36,710
    
    
    
    34,177PROVISION FOR INCOME TAXES
    
    
    13,395
    
    
    
    11,508NET INCOME
    
    $
    23,315
    
    
    $
    22,669EARNINGS PER SHARE:BASIC
    
    $
    1.11
    
    
    $
    0.96DILUTED
    
    $
    1.09
    
    
    $
    0.94WEIGHTED AVERAGE SHARES
OUTSTANDING:BASIC
    
    
    21,069,327
    
    
    
    23,697,639DILUTED
    
    
    21,426,129
    
    
    
    24,120,861
  7




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HYDRIL COMPANY
 
 Part I, Item 1: Unaudited Consolidated Statements of Changes in Stockholders Equity
 And Comprehensive Income
  AccumulatedAdditional
    
    
    
    
    
    
    OtherCommon Stock
    
    
    Class B Common Stock
    
    
    Paid-In
    
    
    Retained
    
    
    Comprehensive
    
    
    TreasuryShares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Capital
    
    
    Earnings
    
    
    Loss
    
    
    Stock
    
    
    TotalBalance, December 31, 2006
    
    
    20,922,239
    
    
    $
    10,461
    
    
    
    2,980,305
    
    
    $
    1,490
    
    
    $
    84,775
    
    
    $
    371,069
    
    
    $
    (3,773
    )
    
    $
    (173,414
    )
    
    $
    290,608Net Income
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    $
    
    
    
    $
    23,315
    
    
    $
    
    
    
    $
    
    
    
    $
    23,315Other comprehensive income, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Minimum pension liability adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    920
    
    
    
    
    
    
    
    920Total Comprehensive Income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    23,315
    
    
    
    920
    
    
    
    
    
    
    
    24,235Issuance of Common stock-exercise of
stock options
    
    
    35,337
    
    
    
    18
    
    
    
    
    
    
    
    
    
    
    
    854
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    872Tax benefit on option exercises
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    844
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    844Treasury shares purchased at cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (41,587
    )
    
    
    (41,587
    )Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,147
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,147Conversion of Class B Common stock to
Common stock
    
    
    51,973
    
    
    
    26
    
    
    
    (51,973
    )
    
    
    (26
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Forfeitures of Restricted units
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (21
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (21
    )Balance, March 31, 2007
    
    
    21,009,549
    
    
    $
    10,505
    
    
    
    2,928,332
    
    
    $
    1,464
    
    
    $
    87,599
    
    
    $
    394,384
    
    
    $
    (2,853
    )
    
    $
    (215,001
    )
    
    $
    276,098
  8




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HYDRIL COMPANY
 
 Part I, Item 1: Unaudited Consolidated Statements of Cash Flows
  Three Months EndedMarch 31,2007
    
    
    2006CASH FLOWS FROM OPERATING ACTIVITIES:Net income
    
    $
    23,315
    
    
    $
    22,669Adjustments to reconcile net income to net
cash provided by operating activities:Stock-based compensation
    
    
    1,126
    
    
    
    961Depreciation and amortization
    
    
    3,879
    
    
    
    3,573Deferred income taxes
    
    
    727
    
    
    
    1,088Provision for doubtful accounts
    
    
    70
    
    
    
    236Equity loss in unconsolidated affiliates
    
    
    39
    
    
    
    45Change in operating assets and liabilities:Receivables
    
    
    22,393
    
    
    
    (13,220
    )Contract costs and estimated earnings in excess of billings
    
    
    (4,712
    )
    
    
    (2,303
    )Inventories
    
    
    (27,971
    )
    
    
    (4,645
    )Other current and noncurrent assets
    
    
    (1,332
    )
    
    
    (202
    )Accounts payable
    
    
    14,793
    
    
    
    7,069Billings in excess of contract costs and estimated earnings
    
    
    5,192
    
    
    
    10,670Accrued liabilities
    
    
    3,910
    
    
    
    (1,311
    )Income taxes payable
    
    
    (684
    )
    
    
    1,654Other long-term liabilities
    
    
    1,403
    
    
    
    705Net cash provided by operating activities
    
    
    42,148
    
    
    
    26,989NET CASH FROM INVESTING ACTIVITIES:Proceeds from held-to-maturity investments
    
    
    3,535
    
    
    
    2,576Purchase of available for sale investments
    
    
    
    
    
    
    (49,771
    )Proceeds from available for sale investments
    
    
    
    
    
    
    21,750Capital expenditures
    
    
    (5,255
    )
    
    
    (5,005
    )Other, net
    
    
    (1,382
    )
    
    
    (174
    )Net cash used in investing activities
    
    
    (3,102
    )
    
    
    (30,624
    )NET CASH FROM FINANCING ACTIVITIES:Net proceeds from issuance of common stock
    
    
    
    
    
    
    152Proceeds from exercise of stock options
    
    
    872
    
    
    
    1,397Purchase of treasury stock
    
    
    (41,587
    )
    
    
    Application of advance payments on purchases of treasury stock
    
    
    16,587
    
    
    
    Excess tax benefits from stock-based compensation
    
    
    672
    
    
    
    880Net cash provided by (used in) financing activities
    
    
    (23,456
    )
    
    
    2,429NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
    
    
    15,590
    
    
    
    (1,206
    )CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
    
    
    105,473
    
    
    
    65,145CASH AND CASH EQUIVALENTS AT END OF PERIOD
    
    $
    121,063
    
    
    $
    63,939SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:Income taxes paid:Domestic
    
    $
    8,000
    
    
    $
    3,050Foreign
    
    
    4,133
    
    
    
    4,681
  9




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Hydril Company
 
 Part I, Item 1: Notes to Unaudited Consolidated Financial Statements
 Note 1  BASIS OF PRESENTATION
 Principles of Consolidation
 Use of Estimates
 Interim Presentation
 Cash and Cash Equivalents
 Investments
  10




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Note 2  PENDING MERGER
   Amendment to Rights Agreement
  Note 3  STOCK-BASED COMPENSATION
  11




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Stock Options
   Weighted -Weighted-
    
    
    Average
    
    
    AggregateAverage
    
    
    Remaining
    
    
    IntrinsicExercise
    
    
    Contractual
    
    
    ValueOptions
    
    Shares
    
    
    Price
    
    
    Term
    
    
    (in thousands)Outstanding at December 31, 2006
    
    
    447,159
    
    
    $
    25.53Granted
    
    
    
    
    
    
    Exercised
    
    
    (40,529
    )
    
    
    21.57Cancelled
    
    
    (2,140
    )
    
    
    27.59Outstanding at March 31, 2007
    
    
    404,490
    
    
    $
    25.92
    
    
    
    6.0
    
    
    $
    28,435Exercisable at March 31, 2007
    
    
    189,862
    
    
    $
    23.40
    
    
    
    5.4
    
    
    $
    13,825
 12




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Weighted-AverageNonvested Shares
    
    Shares
    
    
    Grant-Date Fair ValueNonvested at December 31, 2006
    
    
    218,368
    
    
    $
    10.81Granted
    
    
    
    
    
    
    Vested
    
    
    (1,600
    )
    
    
    12.26Forfeited
    
    
    (2,140
    )
    
    
    11.05Nonvested at March 31, 2007
    
    
    214,628
    
    
    $
    10.79
  Restricted Stock and Restricted Stock Units
   13




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Weighted-AverageNonvested Shares
    
    Shares
    
    
    Grant-Date Fair ValueNonvested at December 31, 2006
    
    
    293,262
    
    
    $
    50.69Granted
    
    
    6,100
    
    
    
    69.61Vested
    
    
    
    
    
    
    Forfeited
    
    
    (2,504
    )
    
    
    55.43Nonvested at March 31, 2007
    
    
    296,858
    
    
    $
    51.04
 Note 4  TREASURY STOCK
     14




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Note 5  LONG-TERM CONTRACTS
  March 31,
    
    
    December 31,(in thousands)
    
    2007
    
    
    2006Costs and estimated earnings on uncompleted contracts
    
    $
    83,206
    
    
    $
    76,383Less: billings to date
    
    
    (160,426
    )
    
    
    (153,123
    )Excess of billings over costs and estimated earnings
    
    $
    (77,220
    )
    
    $
    (76,740
    )Included in the accompanying balance sheets under the
Following captions:Contract costs and estimated earnings in excess of billings
    
    $
    30,232
    
    
    $
    25,520Billings in excess of contract costs and estimated earnings
    
    
    (107,452
    )
    
    
    (102,260
    )Total
    
    $
    (77,220
    )
    
    $
    (76,740
    )
 Note 6  COMMITMENTS AND CONTINGENCIES
 Pending Merger
  15




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Litigation
  Other
  Note 7 LETTERS OF CREDIT
  Note 8  EARNINGS PER SHARE
  16




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WeightedNet
    
    
    Average
    
    
    Earnings(in thousands except per share data)
    
    Income
    
    
    Shares
    
    
    Per ShareThree months ended March 31, 2007Basic net income
    
    $
    23,315
    
    
    
    21,069
    
    
    $
    1.11Effect of dilutive stock options
    
    
    
    
    
    
    357
    
    
    
    Diluted net income
    
    $
    23,315
    
    
    
    21,426
    
    
    $
    1.09Three months ended March 31, 2006Basic net income
    
    $
    22,669
    
    
    
    23,698
    
    
    $
    0.96Effect of dilutive stock options
    
    
    
    
    
    
    423
    
    
    
    Diluted net income
    
    $
    22,669
    
    
    
    24,121
    
    
    $
    0.94
 Note 9  INCOME TAXES
      17




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Note 10  EMPLOYEE BENEFITS
   Post-RetirementHealth andDefined Benefit Plan
    
    
    Life BenefitsThree Months
    
    
    Three MonthsEnded March 31,
    
    
    Ended March 31,(in thousands)
    
    2007
    
    
    2006
    
    
    2007
    
    
    2006Components of net periodic benefit cost:Service cost
    
    $
    
    
    
    $
    12
    
    
    $
    19
    
    
    $
    18Interest cost
    
    
    502
    
    
    
    581
    
    
    
    85
    
    
    
    87Expected return on plan assets
    
    
    (430
    )
    
    
    (554
    )
    
    
    
    
    
    
    Amortization of prior service cost (benefit)
    
    
    4
    
    
    
    4
    
    
    
    (122
    )
    
    
    (122
    )Amortization of net loss
    
    
    22
    
    
    
    39
    
    
    
    
    
    
    
    Net periodic benefit cost
    
    $
    98
    
    
    $
    82
    
    
    $
    (18
    )
    
    $
    (17
    )
 Note 11  SEGMENT AND RELATED INFORMATION
    18




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Three Months Ended March 31,(in thousands)
    
    2007
    
    
    2006RevenuePremium Connection
    
    $
    69,688
    
    
    $
    73,549Pressure Control
    
    
    65,329
    
    
    
    40,511Total
    
    $
    135,017
    
    
    $
    114,060Operating income (loss)Premium Connection
    
    $
    25,897
    
    
    $
    27,526Pressure Control
    
    
    17,240
    
    
    
    10,373Corporate Administration
    
    
    (7,891
    )
    
    
    (5,048
    )Total
    
    $
    35,246
    
    
    $
    32,851Depreciation and amortizationPremium Connection
    
    $
    2,498
    
    
    $
    2,257Pressure Control
    
    
    978
    
    
    
    810Corporate Administration
    
    
    403
    
    
    
    506Total
    
    $
    3,879
    
    
    $
    3,573Capital expendituresPremium Connection
    
    $
    1,845
    
    
    $
    1,744Pressure Control
    
    
    3,000
    
    
    
    2,570Corporate Administration
    
    
    410
    
    
    
    691Total
    
    $
    5,255
    
    
    $
    5,005
 19




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Note 12  RECENT ACCOUNTING PROUNOUNCEMENTS
   
 Part I, Item 2: Managements Discussion and Analysis of Financial Condition and Results of
Operations
   20




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OVERVIEW
   Premium Connections
   21




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##### Table of Contents



"
  Average GulfAverage United
    
    
    Of Mexico
    
    
    AverageStates Rig Count
    
    
    Rigs Under
    
    
    InternationalOver 15,000 ft(1)
    
    
    Contract (2)
    
    
    Rig Count (3)Quarter Ended
    
    Number of Rigs
    
    
    Number of Rigs
    
    
    Number of Rigs03/31/2006
    
    
    204
    
    
    
    130
    
    
    
    89606/30/2006
    
    
    208
    
    
    
    132
    
    
    
    91309/30/2006
    
    
    210
    
    
    
    124
    
    
    
    94112/31/2006
    
    
    225
    
    
    
    116
    
    
    
    95203/31/2007
    
    
    231
    
    
    
    113
    
    
    
    982
 
 (1)
    
    Average rig count calculated by Hydril using weekly data published by Smith
International.(2)
    
    Average rigs under contract calculated by Hydril using weekly data published by
ODS-Petrodata Group.(3)
    
    Average international rig count calculated by Hydril using monthly data
published by Baker Hughes Incorporated. The international rig count includes data for
Europe, the Middle East, Africa, Latin America and Asia Pacific, and excludes data for
China, Canada, the former Soviet Union and the United States, as well as Sudan and Iran
as of January 1, 2006. Pressure Control
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AverageWorldwideOffshore Rigs
    
    
    Average UnitedUnder Contract
    
    
    States Land Rig(1)
    
    
    Count (2)Quarter Ended
    
    Number of Rigs
    
    
    Number of Rigs03/31/2006
    
    
    581
    
    
    
    1,43806/30/2006
    
    
    596
    
    
    
    1,53609/30/2006
    
    
    597
    
    
    
    1,62412/31/2006
    
    
    598
    
    
    
    1,63203/31/2007
    
    
    598
    
    
    
    1,650
 
 (1)
    
    Average worldwide offshore rigs under contract calculated by Hydril using
weekly data published by ODS-Petrodata Group.(2)
    
    Average United States land rig count calculated by Hydril using weekly data
published by Baker Hughes Incorporated. RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED
 MARCH 31, 2007 AND 2006
 Revenue
  Gross Profit
  23




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Selling, General and Administrative Expenses
  Operating Income
  Other Income and Expense
  Provision for Income Taxes
  LIQUIDITY AND CAPITAL RESOURCES
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Operating Activities
  Investing Activities
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Financing Activities
   Letters of Credit
  26




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Backlog
  .
 CRITICAL ACCOUNTING ESTIMATES
  RECENT ACCOUNTING PRONOUNCEMENTS
  27




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Part I, Item 3: Quantitative and Qualitative Disclosures About Market Risk
  
 Part I, Item 4: Controls and Procedures
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Part
II,
 
 Item 1A: Risk Factors
  Risks Associated with Pending Merger Transaction with Tenaris
 Failure to complete the merger could negatively impact the market price of Hydril common
stock.
  .
    
    the market price of Hydrils common stock may decline to the extent that the current
market price of its shares reflects a market assumption that the merger will be completed;.
    
    unless the failure to complete the merger is a result of a breach by Tenaris or Merger
Sub, costs relating to the merger, such as legal, accounting and financial advisory fees,
and, in specified circumstances, a termination fee of $77 million and reimbursement of
expenses of up to $5 million, must be paid by Hydril even if the merger is not completed;
and.
    
    the diversion of managements attention from the day-to-day business of Hydril and the
potential disruption to its employees and its relationships with customers, suppliers,
distributors and business partners during the period before the completion of the merger
may make it difficult for Hydril to regain its financial and market positions if the
merger does not occur.
  Until the merger is completed or the merger agreement is terminated, under certain
circumstances, Hydril may not be able to enter into a merger or business combination with another
party at a favorable price because of restrictions in the merger agreement.
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Uncertainties associated with the merger may cause Hydril to lose employees and key personnel
and customers and business partners.
   Risks Associated With Our Business
 A material or extended decline in expenditures by the oil and gas industry, due to a decline
in oil and gas prices or other economic factors, would reduce our revenue.
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.
    
    the level of worldwide oil and gas exploration and production activity;.
    
    worldwide demand for energy, which is affected by worldwide economic conditions;.
    
    the policies of the Organization of Petroleum Exporting Countries, or OPEC;.
    
    significant decreases or increases in the production of oil or gas from countries due to
war or civil unrest, such as in Iraq, Nigeria or Venezuela;.
    
    the cost of producing oil and gas;.
    
    interest rates and the cost of capital;.
    
    technological advances affecting hydrocarbon consumption, particularly oil and gas;.
    
    environmental regulation;.
    
    level of oil and gas inventories in storage;.
    
    tax policies, including windfall profit taxes on oil and gas companies, which have
recently been proposed in the United States Congress;.
    
    extended disruptions of oil and gas drilling and production, refining or pipeline
operations as a result of weather-related factors, such as hurricanes or tropical storms in
the Gulf of Mexico or other natural disasters;.
    
    policies of national governments; and.
    
    war, civil disturbances and political instability.
  We may lose money on fixed-price contracts, which currently constitute a significant part of
our business, and such contracts could cause our quarterly revenue and earnings to fluctuate
significantly.
  .
    
    changes in cost, estimates or expected production time;.
    
    schedule delays caused by third party suppliers and subcontractors;
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.
    
    unanticipated cost escalations from the time the order is received to the time of
delivery, which can be up to three years later;.
    
    engineering design changes; and.
    
    unexpected changes in the availability and cost of labor and raw materials and purchased
components.
  We may lose premium connection business to international and domestic competitors who produce
their own pipe, as well as other new entrants or lose business due to limitations on the
availability of pipe for threading.
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Consolidation or loss of end-users of our products could adversely affect demand for our
products and services and reduce our revenue.
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If we are unable to attract and retain skilled labor, the results of our manufacturing and
services activities will be adversely affected.
  Our quarterly sales and earnings may vary significantly, which could cause our stock price to
fluctuate.
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The level and pricing of tubular goods imported into the United States and Canada could
adversely affect demand for our products and our results of operations.
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We rely on a few distributors for sales of our premium connections in the United States and
Canada; a loss of one or more of our distributors or a change in the method of distribution could
adversely affect our ability to sell our products.
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Intense competition in our industry could result in reduced profitability and loss of market
share for us.
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Our international operations may experience severe interruptions due to political, economic
and other risks.
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The occurrence or threat of terrorist attacks could have an adverse affect on our results and
growth prospects, as well as on our ability to access capital and obtain adequate insurance.
  High fixed costs in the pressure control industry could exacerbate the level of price
competition for our products, adversely affecting our business and revenue.
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If we do not develop new technologies and products that are commercially successful, our
revenue may decline or we may be required to write-off any capitalized investment.
       Limitations on our ability to protect our intellectual property rights could cause a loss in
revenue and any competitive advantage we hold.
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The loss of any member of our senior management and other key employees may adversely affect
our results of operations.
 .
 We could be subject to substantial liability claims, which would adversely affect our results
and financial condition.
   Changes in regulation or environmental compliance costs and liabilities could have a material
adverse effect on our results and financial condition.
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We could become subject to claims related to the release of hazardous substances which could
adversely affect our results and financial condition.
  Liability to customers under warranties may materially and adversely affect our earnings.
  42




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Excess cash is invested in marketable securities which may subject us to potential losses.
  
 Part II, Item 2: Unregistered Sales of Equity Securities and Use of Proceeds
 Repurchases of Common Stock
  Total Number of
    
    Maximum ApproximateShares Purchased as
    
    Dollar Value of SharesTotal Number
    
    Average
    
    Part of Publicly
    
    that May Yet beof Shares
    
    Price Per
    
    Announced Plans or
    
    Purchased Under thePeriod
    
    Purchased
    
    Share
    
    Programs
    
    Plans or ProgramsJanuary 1 - 31, 2007
    
    
    237,475
    (1)
    
    $
    77.22
    
    
    
    237,475
    
    
    $59 million(2)February 1 - 28, 2007
    
    
    172,925
    (1)
    
    $
    84.46
    
    
    
    172,925
    
    
    $44 million(2)March 1 - 31, 2007
    
    
    101,804
    (1)
    
    $
    84.91
    
    
    
    101,804
    
    
    $35 million(2)Total
    
    
    512,204
    (1)
    
    $
    81.19
    
    
    
    512,204
 
 (1)
    
    During the quarter ended March 2007, the Company repurchased a total of 512,204 shares at
an average price, including commission, of $81.19 per share, pursuant to the repurchase
authorization of the Board of Directors discussed below in footnote (2). This included
217,763 shares delivered to Hydril in the first quarter of 2007 under a prepaid share
repurchase contract with a third party institution. Under this agreement, entered into in
November 2006, Hydril advanced $30 million in cash to the institution in exchange for the
delivery by the institution of a variable number of shares on a monthly basis from November
2006 through February 2007. The number of shares ultimately repurchased under the agreement
was based upon the volume weighted average price of Hydrils shares during the term of the
agreement less a discount. A total of 294,441 shares were delivered to Hydril under this
agreement. In addition, in January 2007, the Company entered into a similar agreement with
the same institution under which the Company advanced $25 million in exchange for delivery by
the financial institution of a variable number of shares on a monthly basis through the end of
the first quarter 2007.(2)
    
    On November 9, 2006, the Board of Directors authorized the repurchase of up to $150 million
of the Companys common stock. At March 31, 2007, the Company had repurchased the full amount authorized. 
 Part II, Item 6: Exhibits
  2.1*
    
    Agreement and Plan of Merger among Hydril Company, Tenaris S.A. and Hokkaido Acquisition,
Inc. dated as of February 11, 2007 (incorporated by reference to Exhibit 2.1 of the Companys
Form 8-K filed with the Commission on February 12, 2007).
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10.1*
    
    Description of Non-employee Director Compensation (incorporated by reference to Exhibit
10.15 of the Companys Annual Report on Form 10-K for the year ended December 31, 2006).10.2*
    
    Executive Officer 2006 Bonus Criteria under the 2006 Management Incentive Plan (incorporated
by reference to the Companys Form 8-K filed with the Commission on March 10, 2006).10.3*
    
    2006 Management Incentive Plan (incorporated by reference to Exhibit 10.1 of the Companys
Form 8-K filed with the Commission on March 10, 2006).10.4*
    
    Executive Officer Salaries (incorporated by reference to the Companys Form 8-K filed with
the Commission on March 10,2006).10.5*
    
    Form of Change in Control Renewal Agreement for Executive Officers (through December 31,
2006) (incorporated by reference to Exhibit 10.1 of the Companys Form 8-K filed with the
Commission on March 10, 2006).10.6
    
    Amendment to Hydril Company Restoration Plan.31.1
    
    Certification by Christopher T. Seaver, Chief Executive Officer, pursuant to Rule 13a-14(a)
of the Securities Exchange Act of 1934.31.2
    
    Certification by Chris D. North, Chief Financial Officer, pursuant to Rule 13a-14(a) of the
Securities Exchange Act of 1934.32.1
    
    Certification by Christopher T. Seaver, Chief Executive Officer, pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002 (Subsection (a) and (b) of Section 1350, Chapter 63 of Title
18, United States Code).32.2
    
    Certification by Chris D. North, Chief Financial Officer, pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 (Subsection (a) and (b) of Section 1350, Chapter 63 of Title 18,
United States Code).
 
 *
    
    Incorporated by reference as indicated. 44




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HYDRIL COMPANYDate:  May 4, 2007
    By:
    /s/ Chris D. NorthChris D. NorthChief Financial Officer

(Authorized officer and principal accounting and financial officer) 45




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Exhibit Index
 10.6
    
    Amendment to Hydril Company Restoration Plan.31.1
    
    Certification by Christopher T. Seaver, Chief Executive Officer, pursuant to Rule 13a-14(a)
of the Securities Exchange Act of 1934.31.2
    
    Certification by Chris D. North, Chief Financial Officer, pursuant to Rule 13a-14(a) of the
Securities Exchange Act of 1934.32.1
    
    Certification by Christopher T. Seaver, Chief Executive Officer, pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002 (Subsection (a) and (b) of Section 1350, Chapter 63 of Title
18, United States Code).32.2
    
    Certification by Chris D. North, Chief Financial Officer, pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 (Subsection (a) and (b) of Section 1350, Chapter 63 of Title 18,
United States Code).
 
 *
    
    Incorporated by reference as indicated. 46