DRIL-QUIP, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS Year Ended December 31, 2014 2013 2012 (In thousands) Operating activities Net income .................................................... $208,712 $169,827 $119,209 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization ............................. 31,155 29,340 26,224 Stock-based compensation expense ......................... 11,856 8,900 5,748 Loss (gain) on sale of equipment ........................... (146) 124 239 Deferred income taxes ................................... (3,145) (1,235) 338 Changes in operating assets and liabilities: Trade receivables, net ................................ (102,696) (17,250) (81,566) Inventories, net ..................................... (36,814) (10,562) (81,884) Prepaids and other assets ............................. (13,239) 6,161 (8,510) Excess tax benefits of stock options and awards ........... (558) (2,863) (1,487) Accounts payable and accrued expenses ................. 54,188 (20,213) 13,530 Net cash provided by (used in) operating activities ............. 149,313 162,229 (8,159) Investing activities Purchase of property, plant and equipment ....................... (42,549) (42,633) (50,773) Proceeds from sale of equipment ............................... 978 760 1,774 Net cash used in investing activities ......................... (41,571) (41,873) (48,999) Financing activities Repurchase of common stock .................................. (190,234) (10,002) — Principal payments on debt .................................... — — (39) Proceeds from exercise of stock options .......................... 2,849 10,506 10,809 Excess tax benefits of stock options and awards ................... 558 2,863 1,487 Net cash provided by (used in) financing activities ............. (186,827) 3,367 12,257 Effect of exchange rate changes on cash activities ...................... (6,566) 3,442 3,516 Increase (decrease) in cash and cash equivalents ....................... (85,651) 127,165 (41,385) Cash and cash equivalents at beginning of year ........................ 384,356 257,191 298,576 Cash and cash equivalents at end of year ............................. $298,705 $384,356 $257,191 The accompanying notes are an integral part of these consolidated financial statements. 49