Letter To Our Stockholders Highlights Earnings Brief In 2002 the Company experienced record sales, despite depressed drilling activity and sluggish economies throughout the world. While we are proud of this achievement, profits were adversely affected by continued pricing pres- sures, process inefficiencies resulting from the relocation and rapid growth of our manufactur- ing facilities and ongoing costs associated with new product development. As a result, we have implemented cost con- tainment measures, including an upgrade to our manufacturing scheduling system which we believe will result in improvements to our overall performance. These efforts should result in improvement of on time deliveries, improved efficiencies in manufacturing and increased customer satisfaction. In addition, we believe the continuing development of new products will ultimately increase both rev- enues and earnings as these products achieve market recognition. many of our customers to provide both opera- tional and technical benefits for offshore development projects. We were also success- ful in installing ten dual bore subsea trees in over 3000 feet of water offshore Brazil as part of an overall subsea development project. These trees were successfully installed in record time and are scheduled to begin pro- duction during 2003. Revenues for the 12 months ending December 31, 2002 were $215.8 million, as compared with $202.9 million for the same period in 2001. Net income for 2002 was $8.7 million versus $12.2 million for the prior year; and earnings per share were $0.50 for 2002 com- pared with $0.70 for 2001. Our 2002 results include the $900,000 after-tax effect of estab- lishing a $1.35 million reserve for warranty claims related to our drilling riser product. Excluding the effects of the after-tax charge, net income for 2002 was $9.6 million and earnings per share were $0.55.  An increased number of DRIL-QUIP subsea trees were installed during the year. The Company’s proprietary SingleBore TM subsea tree was a significant part of this increase. The SingleBore subsea tree has been used by In 2002 we continued the development of two new D RIL-QUIP products, the LS-15 TM liner hanger system and the Subsea Production Control System. These new products provide solutions for a variety of problems commonly experienced by operators. The LS-15 liner hanger system has been designed to meet the challenges of demanding offshore environ- ments, while delivering the performance operators require for successful liner hanger installations. We believe these same features will also be recognized as beneficial for on- shore liner hanger installations and provide the Our deepwater subsea wellhead systems were used in water depths exceeding 9,000 feet during 2002. These subsea wellhead systems were designed to incorporate an increased number of casing strings, allowing the opera- tors to drill not only in deeper water but also to drill deeper wells. These systems continue to gain market strength for deepwater applica- tions and are recognized as systems of choice for ultra deep water drilling with extended reach casing programs. 2 DRIL-QUIP 2002 Annual Report