NATIONAL RETAIL PROPERTIES, INC. and SUBSIDIARIES Year Ended December 31, 2013 2012 2011 Cash flows from operating activities: Earnings including noncontrolling interests $ 160,085 $ 141,937 $ 92,416 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 99,617 75,334 58,817 Impairment losses and other charges 4,106 10,114 2,115 Impairment – commercial mortgage residual interests valuation 1,185 2,812 1,024 Amortization of notes payable discount 3,188 4,976 6,191 Amortization of debt costs 3,118 2,584 — Amortization of mortgages payable premium (57) (29) — Amortization of deferred interest rate hedges 438 231 9 Interest rate hedge payment (3,141) — (5,218) Equity in earnings of unconsolidated affiliate — (4,074) (474) Distributions received from unconsolidated affiliate — 7,019 593 Gain on disposition of real estate (6,445) (10,956) (721) Deferred income taxes 800 637 796 Income tax valuation allowance — (7,671) — Performance incentive plan expense 8,518 10,136 8,283 Performance incentive plan payment (2,138) — — Change in operating assets and liabilities, net of assets acquired and liabilities assumed in business combinations: Additions to held for sale real estate (1,029) (6,616) (1,025) Proceeds from disposition of held for sale real estate — — 1,993 Decrease in real estate leased to others using the direct financing method 1,573 1,624 1,595 Decrease (increase) in mortgages, notes and accrued interest receivable 641 (187) (96) Decrease (increase) in receivables 62 (264) 1,108 Decrease (increase) in accrued rental income 368 (456) 253 Decrease in other assets 400 1,657 746 Increase (decrease) in accrued interest payable (385) 2,419 7,766 Increase (decrease) in other liabilities 3,841 (2,002) 2,682 Other (324) (1,095) (1,125) Net cash provided by operating activities 274,421 228,130 177,728 Cash flows from investing activities: Proceeds from the disposition of real estate 60,626 81,402 10,696 Additions to real estate: Accounted for using the operating method (637,417) (684,925) (756,633) Accounted for using the direct financing method — — (1,747) Increase in mortgages and notes receivable (3,857) (8,768) (9,838) Principal payments on mortgages and notes receivable 14,617 12,804 6,837 Cash received from commercial mortgage residual interests — — — Payment of lease costs (1,186) (2,594) (1,589) Return of investment from unconsolidated affiliate — 1,220 — Other (823) (898) 206 Net cash used in investing activities (568,040) (601,759) (752,068) See accompanying notes to consolidated financial statements.  48 CONSOLIDATED STATEMENTS OF CASH FLOWS (dollars in thousands)