• operating interruptions (including explosions, fires, weather-related incidents, mechanical failure, unscheduled downtime, labor difficulties, transportation interruptions, spills and releases and other environmental risks); • project terminations, suspensions or scope adjustments to contracts reflected in the Company’s backlog; • the Company’s reliance on product development; • technological developments; • the Company’s reliance on third-party technologies; • the Company’s dependence on key employees and skilled machinists, fabricators and technical personnel; • the Company’s reliance on sources of raw materials; • impact of environmental matters, including future environmental regulations; • competitive products and pricing pressures; • fluctuations in foreign currency; • the ability of the Organization of Petroleum Exporting Countries (“OPEC”) to set and maintain production levels and pricing; • the Company’s reliance on significant customers; • creditworthiness of the Company’s customers; • fixed-price contracts; • changes in general economic, market or business conditions; • access to capital markets; • negative outcome of litigation, threatened litigation or government proceedings; • terrorist threats or acts, war and civil disturbances; and • the interpretation of foreign tax laws with respect to our foreign subsidiaries. Many of such factors are beyond the Company’s ability to control or predict. Any of the factors, or a combination of these factors, could materially affect the Company’s future results of operations and the ultimate accuracy of the forward-looking statements. Management cautions against putting undue reliance on forward- looking statements or projecting any future results based on such statements or present or prior earnings levels. Every forward-looking statement speaks only as of the date of the particular statement, and the Company undertakes no obligation to publicly update or revise any forward-looking statement. Dril-Quip, Inc., a Delaware corporation (the “Company” or “Dril-Quip”), designs, manufactures, sells and services highly engineered offshore drilling and production equipment that is well suited for use in deepwater, harsh environments and severe service applications. The Company’s principal products consist of subsea and surface wellheads, subsea and surface production trees, subsea control systems and manifolds, mudline hanger systems, specialty connectors and associated pipe, drilling and production riser systems, liner hangers, wellhead connectors and diverters. Dril-Quip’s products are used by major integrated, large independent and foreign PART I Item 1. Business General 4