completed and shipped. Product revenues increased in the Western Hemisphere by $121.6 million and in Asia- Pacific by $10.1 million, partially offset by a decrease of $10.3 million in the Eastern Hemisphere. Service revenues increased by approximately $18.0 million resulting from increased service revenues in the Western Hemisphere of $3.4 million, $9.4 million in the Eastern Hemisphere and $5.2 million in Asia-Pacific. The majority of the increases in service revenues related to increased technical advisory assistance services and reconditioning of the Company’s running and installation tools. Cost of Sales. Cost of sales increased by $62.2 million, or approximately 13.8%, to $513.9 million for 2013 from $451.7 million for the same period in 2012. As a percentage of revenues, cost of sales were approximately 58.9% in 2013 and 61.6% in 2012. Cost of sales as a percentage of revenue decreased in 2013 primarily due to changes in the product mix and decreases in unabsorbed manufacturing overhead expenses. Selling, General and Administrative Expenses. For 2013, selling, general and administrative expenses increased by approximately $12.6 million, or 15.3%, to $94.8 million from $82.2 million in 2012. The increase in selling, general and administrative expenses was primarily due to increased personnel and related expenses, foreign currency transaction losses and an increase in stock-based compensation. Personnel and related expenses were higher by $6.1 million in 2013 as compared to 2012. The Company recognized approximately $6.0 million in foreign currency transaction losses during 2013 compared to approximately $5.2 million of losses during 2012. Stock-based compensation expense for 2013 totaled $8.9 million compared to $5.7 million in 2012. Selling, general and administrative expenses as a percentage of revenues were 10.9% in 2013 and 11.2% in 2012. Engineering and Product Development Expenses. For 2013, engineering and product development expenses increased by approximately $2.6 million, or 6.9%, to $40.1 million from $37.5 million in 2012. The increase was primarily due to additional personnel required to meet the demands of the backlog related to long-term projects. Engineering and product development expenses as a percentage of revenues decreased to 4.6% in 2013 from 5.1% in 2012. Income tax provision . Income tax expense for 2013 was $54.3 million on income before taxes of $224.1 million, resulting in an effective income tax rate of approximately 24.2%. Income tax expense in 2012 was $42.9 million on income before taxes of $162.1 million, resulting in an effective tax rate of approximately 26.4%. The decrease in the effective income tax rate reflects the $1.2 million Research and Development tax credit from the “American Taxpayer Relief Act of 2012” recognized on the 2012 U.S. income tax return, but not recorded until 2013 for financial statement purposes in accordance with GAAP. Also contributing to the decreased tax rate is the difference in income tax rates between the Company’s three geographic areas. Net Income. Net income was approximately $169.8 million in 2013 and $119.2 million in 2012 for the reasons set forth above. Cash flows provided by (used in) operations by type of activity were as follows: Operating activities ........................... Investing activities ............................ Financing activities ........................... Effect of exchange rate changes on cash activities . . . Increase (decrease) in cash and cash equivalents .... 35 Year ended December 31, 2014 2013 2012 (In thousands) $149,313 $162,229 $ (8,159) (41,571) (41,873) (48,999) (186,827) 3,367 12,257 (79,085) 123,723 (44,901) (6,566) 3,442 3,516 $ (85,651) $127,165 $(41,385) Liquidity and Capital Resources