New York

31-0267900

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

5215 N. O’Connor Blvd., Suite 2300,

Irving,

Texas

75039

(Address of principal executive offices)

(Zip Code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☑Yes ¨ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☑ Yes ¨ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☑

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

~~Large accelerated filer~~

☑

~~Accelerated filer~~

☐

~~Non-accelerated filer~~

☐

~~Smaller reporting company~~

☐

~~Emerging growth company~~

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

As of ~~October 25, 2019~~May 2, 2020 there were ~~130,860,148~~ 130,125,926 shares of the issuer’s common stock outstanding.

FLOWSERVE CORPORATION

PART I — FINANCIAL INFORMATION

Item 1.Financial Statements.

FLOWSERVE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Amounts in thousands, except per share data) Three Months Ended September 30,
2019 2018
Sales $ 996,544
$ 952,716
Cost of sales (662,855 ) (644,215 )
Gross profit 333,689
308,501
Selling, general and administrative expense (226,216 ) (241,878 )
Loss on sale of businesses —
(7,727 )
Net earnings from affiliates 2,087
3,295
Operating income 109,560
62,191
Interest expense (13,981 ) (13,826 )
Interest income 2,253
1,269
Other income (expense), net (1,622 ) (5,283 )
Earnings before income taxes 96,210
44,351
Provision for income taxes (25,647 ) (14,912 )
Net earnings, including noncontrolling interests 70,563
29,439
Less: Net earnings attributable to noncontrolling interests (2,120 ) (1,234 )
Net earnings attributable to Flowserve Corporation $ 68,443
$ 28,205
Net earnings per share attributable to Flowserve Corporation common shareholders:
Basic $ 0.52
$ 0.22
Diluted 0.52
0.21

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

Pension and other postretirement effects, net of taxes of $(398) and $(207), respectively

(Amounts in thousands) Three Months Ended September 30,
2019 2018
Net earnings, including noncontrolling interests $ 70,563
$ 29,439
Other comprehensive income (loss):
Foreign currency translation adjustments, net of taxes of $852 and $3,246, respectively (30,600 ) (19,669 )
Pension and other postretirement effects, net of taxes of $(231) and $(311), respectively 3,648
2,599
Cash flow hedging activity 44
52
Other comprehensive income (loss) (26,908 ) (17,018 )
Comprehensive income, including noncontrolling interests 43,655
12,421
Comprehensive income attributable to noncontrolling interests (2,055 ) (1,578 )
Comprehensive income attributable to Flowserve Corporation $ 41,600
$ 10,843

Table of Contents

FLOWSERVE CORPORATION

CONDENSED CONSOLIDATED ~~STATEMENTS OF INCOME~~BALANCE SHEETS

(Unaudited)


(Amounts in thousands, except par value)	March 31,		December 31,
	2020		2019
ASSETS
Current assets:
Cash and cash equivalents	$	622,299	$	670,980
Accounts receivable, net of allowance for expected credit losses of $66,252 and $53,412, respectively	732,879		795,538
Contract assets, net of allowance for expected credit losses of $2,681 at March 31, 2020	275,927		272,914
Inventories, net	684,113		660,837

Prepaid expenses and other	110,296		105,101
Total current assets	2,425,514		2,505,370
Property, plant and equipment, net of accumulated depreciation of $1,007,261 and $1,013,207, respectively	550,853		572,175
Operating lease right-of-use assets, net	182,464		186,218
Goodwill	1,180,264		1,193,010
Deferred taxes	31,517		54,879
Other intangible assets, net	174,538		180,805
Other assets, net of allowance for expected credit losses of $100,887 and $101,439, respectively	216,924		227,185
Total assets	$	4,762,074	$	4,919,642

LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	425,795	$	447,582
Accrued liabilities	410,783		401,385
Contract liabilities	223,632		216,541
Debt due within one year	8,980		11,272

Operating lease liabilities	36,841		36,108
Total current liabilities	1,106,031		1,112,888
Long-term debt due after one year	1,357,108		1,365,977
Operating lease liabilities	147,031		151,523
Retirement obligations and other liabilities	466,479		473,295
Shareholders’ equity:
Common shares, $1.25 par value	220,991		220,991
Shares authorized – 305,000
Shares issued – 176,793
Capital in excess of par value	497,721		501,045
Retained earnings	3,661,579		3,695,862
Treasury shares, at cost – 47,002 and 46,262 shares, respectively	(2,069,063)		(2,051,583)
Deferred compensation obligation	8,324		8,334
Accumulated other comprehensive loss	(660,122)		(584,292)
Total Flowserve Corporation shareholders’ equity	1,659,430		1,790,357
Noncontrolling interests	25,995		25,602
Total equity	1,685,425		1,815,959
Total liabilities and equity	$	4,762,074	$	4,919,642

(Amounts in thousands, except per share data) Nine Months Ended September 30,
2019 2018
Sales $ 2,876,679
$ 2,845,798
Cost of sales (1,930,881 ) (1,979,807 )
Gross profit 945,798
865,991
Selling, general and administrative expense (655,046 ) (711,845 )
Loss on sale of businesses —
(7,727 )
Net earnings from affiliates 8,057
7,908
Operating income 298,809
154,327
Interest expense (42,025 ) (43,645 )
Interest income 6,494
4,237
Other income (expense), net (8,098 ) (17,206 )
Earnings before income taxes 255,180
97,713
Provision for income taxes (64,646 ) (37,028 )
Net earnings, including noncontrolling interests 190,534
60,685
Less: Net earnings attributable to noncontrolling interests (6,659 ) (4,117 )
Net earnings attributable to Flowserve Corporation $ 183,875
$ 56,568
Net earnings per share attributable to Flowserve Corporation common shareholders:
Basic $ 1.40
$ 0.43
Diluted 1.40
0.43

~~CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME~~

~~(Unaudited)~~

(Amounts in thousands) Nine Months Ended September 30,
2019 2018
Net earnings, including noncontrolling interests $ 190,534
$ 60,685
Other comprehensive income (loss):
Foreign currency translation adjustments, net of taxes of $2,043 and $8,034, respectively (26,503 ) (61,217 )
Pension and other postretirement effects, net of taxes of $(660) and $(898), respectively 7,051
8,106
Cash flow hedging activity 149
177
Other comprehensive income (loss) (19,303 ) (52,934 )
Comprehensive income, including noncontrolling interests 171,231
7,751
Comprehensive income attributable to noncontrolling interests (7,258 ) (5,270 )
Comprehensive income attributable to Flowserve Corporation $ 163,973
$ 2,481

See accompanying notes to condensed consolidated financial statements.

Table of Contents

~~FLOWSERVE CORPORATION~~

~~CONDENSED CONSOLIDATED BALANCE SHEETS~~

~~(Unaudited)~~

(Amounts in thousands, except par value) September 30, December 31,
2019 2018
ASSETS
Current assets:
Cash and cash equivalents $ 547,270
$ 619,683
Accounts receivable, net of allowance for doubtful accounts of $52,013 and $51,501, respectively 789,448
792,434
Contract assets, net 258,299
228,579
Inventories, net 687,239
633,871
Prepaid expenses and other 113,404
108,578
Total current assets 2,395,660
2,383,145
Property, plant and equipment, net of accumulated depreciation of $989,117 and $956,634, respectively 575,845
610,096
Operating lease right-of-use assets, net 182,273
—
Goodwill 1,178,248
1,197,640
Deferred taxes 44,113
44,682
Other intangible assets, net 182,162
190,550
Other assets, net 206,191
190,164
Total assets $ 4,764,492
$ 4,616,277

LIABILITIES AND EQUITY
Current liabilities:
Accounts payable $ 398,215
$ 418,893
Accrued liabilities 385,520
391,406
Contract liabilities 219,680
202,458
Debt due within one year 9,739
68,218
Operating lease liabilities 35,042
—
Total current liabilities 1,048,196
1,080,975
Long-term debt due after one year 1,350,265
1,414,829
Operating lease liabilities 146,839
—
Retirement obligations and other liabilities 449,388
459,693
Shareholders’ equity:
Common shares, $1.25 par value 220,991
220,991
Shares authorized – 305,000
Shares issued – 176,793
Capital in excess of par value 499,930
494,551
Retained earnings 3,651,126
3,543,007
Treasury shares, at cost – 46,053 and 46,237 shares, respectively (2,042,140 ) (2,049,404 )
Deferred compensation obligation 8,277
7,117
Accumulated other comprehensive loss (593,849 ) (573,947 )
Total Flowserve Corporation shareholders’ equity 1,744,335
1,642,315
Noncontrolling interests 25,469
18,465
Total equity 1,769,804
1,660,780
Total liabilities and equity $ 4,764,492
$ 4,616,277

~~See accompanying notes to condensed consolidated financial statements.~~

~~Table of Contents~~

FLOWSERVE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)


	Total Flowserve Corporation Shareholders’ Equity
					Capital in Excess of Par Value		Retained Earnings					Deferred Compensation Obligation			Accumulated Other Comprehensive Income (Loss)								Total Equity
	Common Stock													Treasury Stock													Non- controlling Interests
	Shares		Amount							Shares				Amount
	(Amounts in thousands)
Balance — January 1, 2020	176,793		$	220,991	$	501,045	$	3,695,862	(46,262)	$	(2,051,583)	$	8,334				$	(584,292)			$	25,602			$	1,815,959
ASU No. 2016-13 - Measurement of Credit Losses on Financial Instruments (Topic 326)	—		—		—		(7,291)		—	—		—			—				—				(7,291)
Stock activity under stock plans	—		—		(17,635)		—		317	14,632		—			—				—				(3,003)
Stock-based compensation	—		—		14,311		—		—	—		—			—				—				14,311

Net earnings	—		—		—		(610)		—	—		—			—				2,100				1,490
Cash dividends declared	—		—		—		(26,382)		—	—		—			—				—				(26,382)
Repurchases of common shares	—		—		—		—		(1,057)	(32,112)		—			—				—				(32,112)
Other comprehensive income (loss), net of tax	—		—		—		—		—	—		—			(75,830)				840				(74,990)

Other, net	—		—		—		—		—	—		(10)			—				(2,547)				(2,557)
Balance — March 31, 2020	176,793		$	220,991	$	497,721	$	3,661,579	(47,002)	$	(2,069,063)	$	8,324		$	(660,122)			$	25,995			$	1,685,425

Balance — January 1, 2019	$	176,793	$	220,991	$	494,551	$	3,543,007	(46,237)	$	(2,049,404)	$	7,117		$	(573,947)			$	18,465			$	1,660,780

Stock activity under stock plans	—		—		(14,488)		—		268	11,818		—			—				—				(2,670)
Stock-based compensation	—		—		7,610		—		—	—		—			—				—				7,610

Net earnings	—		—		—		57,261		—	—		—			—				2,235				59,496
Cash dividends declared	—		—		—		(25,254)		—	—		—			—				—				(25,254)

Other comprehensive income (loss), net of tax	—		—		—		—		—	—		—			7,547				677				8,224

Other, net	—		—		—		—		—	—		(10)			—				(190)				(200)
Balance — March 31, 2019	176,793		$	220,991	$	487,673	$	3,575,014	(45,969)	$	(2,037,586)	$	7,107		$	(566,400)			$	21,187			$	1,707,986
See accompanying notes to condensed consolidated financial statements.

Total Flowserve Corporation Shareholders’ Equity
Capital
in Excess of Par Value Retained Earnings Deferred Compensation Obligation Accumulated
Other Comprehensive Income (Loss) Total Equity
Common Stock Treasury Stock
Non-
controlling Interests

Shares Amount Shares Amount
(Amounts in thousands)
Balance — June 30, 2019 176,793
$ 220,991
$ 493,037
$ 3,607,928
(45,943 ) $ (2,036,857 ) $ 8,219
$ (567,007 ) $ 23,477
$ 1,749,788
Stock activity under stock plans —
—
(260 ) —
4
149
58
—
—
(53 )
Stock-based compensation —
—
7,153
—
—
—
—
—
—
7,153
Net earnings —
—
—
68,443
—
—
—
—
2,120
70,563
Cash dividends declared —
—
—
(25,245 ) —
—
—
—
—
(25,245 )
Repurchases of common shares —
—
—
—
(114 ) (5,432 ) —
—
—
(5,432 )
Other comprehensive income (loss), net of tax —
—
—
—
—
—
—
(26,842 ) (66 ) (26,908 )
Other, net —
—
—
—
—
—
—
—
(62 ) (62 )
Balance — September 30, 2019 176,793
$ 220,991
$ 499,930
$ 3,651,126
(46,053 ) $ (2,042,140 ) $ 8,277
$ (593,849 ) $ 25,469
$ 1,769,804

Balance — June 30, 2018 176,793
$ 220,991
$ 483,477
$ 3,502,006
(46,241 ) $ (2,049,549 ) $ 6,933
$ (542,198 ) $ 19,891
$ 1,641,551
Stock activity under stock plans —
—
(146 ) —
1
14
—
—
—
(132 )
Stock-based compensation —
—
5,735
—
—
—
—
—
—
5,735
Net earnings —
—
—
28,205
—
—
—
—
1,234
29,439
Cash dividends declared —
—
—
(25,160 ) —
—
—
—
—
(25,160 )
Other comprehensive income (loss), net of tax —
—
—
—
—
—
—
(17,361 ) 343
(17,018 )
Other, net —
—
—
—
—
—
92
—
(3,780 ) (3,688 )
Balance — September 30, 2018 176,793
$ 220,991
$ 489,066
$ 3,505,051
(46,240 ) $ (2,049,535 ) $ 7,025
$ (559,559 ) $ 17,688
$ 1,630,727
See accompanying notes to condensed consolidated financial statements.

Table of Contents

~~FLOWSERVE CORPORATION~~

~~CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY~~

~~(Unaudited)~~

Total Flowserve Corporation Shareholders’ Equity
Capital
in Excess of Par Value Retained Earnings Deferred Compensation Obligation Accumulated
Other Comprehensive Income (Loss) Total Equity
Common Stock Treasury Stock
Non-
controlling Interests

Shares Amount Shares Amount
(Amounts in thousands)
Balance — January 1, 2019 176,793
$ 220,991
$ 494,551
$ 3,543,007
(46,237 ) $ (2,049,404 ) $ 7,117
$ (573,947 ) $ 18,465
$ 1,660,780
Stock activity under stock plans —
—
(17,129 ) —
298
12,696
1,160
—
—
(3,273 )
Stock-based compensation —
—
22,508
—
—
—
—
—
—
22,508
Net earnings —
—
—
183,875
—
—
—
—
6,659
190,534
Cash dividends declared —
—
—
(75,756 ) —
—
—
—
—
(75,756 )
Repurchases of common shares —
—
—
—
(114 ) (5,432 ) —
—
—
(5,432 )
Other comprehensive income (loss), net of tax —
—
—
—
—
—
—
(19,902 ) 599
(19,303 )
Other, net —
—
—
—
—
—
—
—
(254 ) (254 )
Balance — September 30, 2019 176,793
$ 220,991
$ 499,930
$ 3,651,126
(46,053 ) $ (2,042,140 ) $ 8,277
$ (593,849 ) $ 25,469
$ 1,769,804

Balance — January 1, 2018 176,793
$ 220,991
$ 488,326
$ 3,503,947
(46,471 ) $ (2,059,558 ) $ 6,354
$ (505,473 ) $ 16,367
$ 1,670,954
ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) —
—
—
19,642
—
—
—
—
—
19,642
Stock activity under stock plans —
—
(13,391 ) —
231
10,023
—
—
—
(3,368 )
Stock-based compensation —
—
14,131
—
—
—
—
—
—
14,131
Net earnings —
—
—
56,568
—
—
—
—
4,117
60,685
Cash dividends declared —
—
—
(75,106 ) —
—
—
—
—
(75,106 )
Other comprehensive income (loss), net of tax —
—
—
—
—
—
—
(54,086 ) 1,152
(52,934 )
Other, net —
—
—
—
—
—
671
—
(3,948 ) (3,277 )
Balance — September 30, 2018 176,793
$ 220,991
$ 489,066
$ 3,505,051
(46,240 ) $ (2,049,535 ) $ 7,025
$ (559,559 ) $ 17,688
$ 1,630,727
See accompanying notes to condensed consolidated financial statements.

~~Table of Contents~~

FLOWSERVE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


(Amounts in thousands)	Three Months Ended March 31,
	2020		2019
Cash flows – Operating activities:
Net earnings, including noncontrolling interests	1,490		59,496
Adjustments to reconcile net earnings to net cash provided (used) by operating activities:
Depreciation	22,166		23,361
Amortization of intangible and other assets	3,121		4,105






Stock-based compensation	14,311		7,609

Foreign currency, asset write downs and other non-cash adjustments	23,065		(15,454)
Change in assets and liabilities:
Accounts receivable, net	19,137		8,174
Inventories, net	(43,226)		(49,478)
Contract assets, net	(14,462)		1,631
Prepaid expenses and other assets, net	(2,493)		(5,128)
Accounts payable	(7,873)		(15,399)
Contract liabilities	15,705		5,567
Accrued liabilities and income taxes payable	12,204		11,462
Retirement obligations and other	9,738		(652)

Net deferred taxes	(5,581)		3,225
Net cash flows provided (used) by operating activities	47,302		38,519
Cash flows – Investing activities:
Capital expenditures	(17,310)		(10,638)

Proceeds from disposal of assets and other	10,737		39,211



Net cash flows provided (used) by investing activities	(6,573)		28,573
Cash flows – Financing activities:

Payments on long-term debt	—		(15,000)



Proceeds under other financing arrangements	3,250		1,660
Payments under other financing arrangements	(3,356)		(2,484)
Repurchases of common shares	(32,112)		—
Payments related to tax withholding for stock-based compensation	(3,137)		(2,861)
Payments of dividends	(26,023)		(24,909)
Other	(2,547)		(192)
Net cash flows provided (used) by financing activities	(63,925)		(43,786)
Effect of exchange rate changes on cash	(25,485)		(5,279)
Net change in cash and cash equivalents	(48,681)		18,027
Cash and cash equivalents at beginning of period	670,980		619,683
Cash and cash equivalents at end of period	$	622,299	$	637,710

(Amounts in thousands) Nine Months Ended September 30,
2019 2018
Cash flows – Operating activities:
Net earnings, including noncontrolling interests $ 190,534
$ 60,685
Adjustments to reconcile net earnings to net cash provided (used) by operating activities:
Depreciation 69,007
72,668
Amortization of intangible and other assets 10,134
12,548
Loss on disposition of businesses —
7,727
Stock-based compensation 22,507
14,130
Foreign currency, asset impairments and other non-cash adjustments (8,284 ) 31,678
Change in assets and liabilities:
Accounts receivable, net (13,351 ) (9,481 )
Inventories, net (68,695 ) (46,699 )
Contract assets, net (36,325 ) (54,822 )
Prepaid expenses and other assets, net 3,786
(16,340 )
Accounts payable (17,889 ) (29,963 )
Contract liabilities 21,323
3,410
Accrued liabilities and income taxes payable (6,407 ) (13,690 )
Retirement obligations and other (27,660 ) (1,480 )
Net deferred taxes 5,311
(4,033 )
Net cash flows provided (used) by operating activities 143,991
26,338
Cash flows – Investing activities:
Capital expenditures (44,624 ) (49,976 )
Proceeds from disposal of assets and other 40,773
4,062
(Payments) proceeds from disposition of businesses —
(3,663 )
Net cash flows provided (used) by investing activities (3,851 ) (49,577 )
Cash flows – Financing activities:
Payments on long-term debt (105,000 ) (45,000 )
Proceeds from short-term financing 75,000
—
Payments on short-term financing (75,000 ) —
Proceeds under other financing arrangements 2,572
2,720
Payments under other financing arrangements (8,903 ) (9,093 )
Repurchases of common shares (5,432 ) —
Payments related to tax withholding for stock-based compensation (3,835 ) (2,972 )
Payments of dividends (74,695 ) (74,548 )
Other (251 ) (4,333 )
Net cash flows provided (used) by financing activities (195,544 ) (133,226 )
Effect of exchange rate changes on cash (17,009 ) (17,038 )
Net change in cash and cash equivalents (72,413 ) (173,503 )
Cash and cash equivalents at beginning of period 619,683
703,445
Cash and cash equivalents at end of period $ 547,270
$ 529,942

See accompanying notes to condensed consolidated financial statements.

Table of Contents

FLOWSERVE CORPORATION

(Unaudited)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


1.	~~Basis of Presentation and Accounting Policies~~

1.Basis of Presentation and Accounting Policies

Basis of Presentation

The accompanying condensed consolidated balance sheet as of ~~September 30, 2019~~,March 31, 2020, the related condensed consolidated statements of income and comprehensive income for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2020 and 2019, ~~and~~ ~~2018~~, the condensed consolidated statements of stockholders' equity for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~ and the condensed consolidated statements of cash flows for the ~~nine~~three months ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~ of Flowserve Corporation are unaudited. In management’s opinion, all adjustments comprising normal recurring adjustments necessary for fair statement of such condensed consolidated financial statements have been made. Where applicable, prior period information has been updated to conform to current year presentation.

The accompanying condensed consolidated financial statements and notes in this Quarterly Report on Form 10-Q for the quarterly period ended ~~September 30, 2019~~March 31, 2020 ("Quarterly Report") are presented as permitted by Regulation S-X and do not contain certain information included in our annual financial statements and notes thereto. Accordingly, the accompanying condensed consolidated financial information should be read in conjunction with the audited consolidated financial statements presented in our Annual Report on Form 10-K for the year ended December 31, ~~2018~~2019 ("~~2018~~2019 Annual Report").

~~Resegmentation~~ ~~- We have determined that there are meaningful operational synergies and benefits to combining our previously reported Engineered Product Division~~Coronavirus Pandemic ("~~EPD"~~COVID-19") and ~~Industrial Product Division ("IPD") segments into one reportable segment, Flowserve Pump Division ("FPD").~~ Oil and Gas Market - During the ~~first quarter~~last several months, we were challenged by macroeconomics and global economic impacts based on the disruption and uncertainties caused by COVID-19 and the emanating impacts of ~~2019, we implemented~~the pandemic on oil pricing and demand, accelerating a ~~reorganization~~deterioration of oil commodity prices. The pandemic outbreak had widespread implications worldwide and has caused substantial economic uncertainty and challenging operational conditions.

The preparation of our ~~operating segments~~condensed consolidated financial statements requires us to make estimates, judgments and assumptions that may affect the reported amounts of assets, liabilities, equity, revenues and expenses and related disclosure of contingent assets and liabilities. We evaluate our estimates, judgments and methodologies on an ongoing basis. We base our estimates on historical experience and on various other assumptions that we believe are reasonable, the results of which form the basis for making judgments about the carrying values of assets, liabilities and equity and the amount of revenues and expenses. The full extent to which the COVID-19 pandemic will directly or indirectly impact our business, results of operations and financial condition, including sales, expenses, our allowance for expected credit losses, stock based compensation, the carrying value of our goodwill and other long-lived assets, financial assets, and valuation allowances for tax assets, will depend on future developments that are highly uncertain, including as a result ~~we report~~of new information that may emerge concerning COVID-19 and the actions taken to contain it or treat it, as well as the economic impact on local, regional, national and international customers, suppliers and markets. We have made estimates of the impact of COVID-19 within our financial statements and there may be changes to those estimates in future periods as new information reflecting two operating segments, FPD and Flow Control Division ("FCD"). The reorganization of the segments reflects how our chief operating decision maker (Chief Executive Officer) regularly reviews financial information to allocate resources and assess performance.

becomes available. Actual results may differ from these estimates.

Accounting Developments

Pronouncements Implemented

In ~~February~~June 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No.2016-02, Leases (Topic 842) ("New Lease Standard"). The New Lease Standard increases transparency and comparability by requiring lessees to recognize right-of-use (“ROU”) assets and lease liabilities for operating leases on their consolidated balance sheets. Additionally, expanded disclosures are required to enable users of financial statements to understand the amount, timing and uncertainty of cash flows arising from leases.

We adopted the New Lease Standard effective January 1, 2019, utilizing the modified retrospective approach and elected an initial application date of January 1, 2019. The adoption resulted in an increase to total assets and liabilities due to the recording of lease ROU assets and lease liabilities of approximately $210 million as of January 1, 2019. The adoption did not materially impact our condensed consolidated results of operations or cash flows. Refer to Note 4 for further discussion of our adoption of the New Lease Standard.

On July 13, 2017, the FASB issued ASU No. 2017-11, “Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815): (Part I) Accounting for Certain Financial Instruments with Down Round Features, (Part II) Replacement of the Indefinite Deferral for Mandatory Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatory Redeemable Noncontrolling Interests with a Scope Exception.” The ASU amends guidance in FASB Accounting Standards Codification ("ASC") 260, Earnings Per Share, FASB ASC 480, Distinguishing Liabilities from Equity, and FASB ASC 815, Derivatives and Hedging. The amendments in Part I of this ASU change the classification analysis of certain equity-linked financial instruments (or embedded features) with down round features. The amendments in this ASU must be applied to annual reporting periods beginning after December 15, 2018. Our adoption of ASU No. 2017-11 effective January 1, 2019 did not have an impact on our condensed consolidated financial condition and results of operations.

On August 28, 2017, the FASB issued ASU No. 2017-12, "Derivatives and Hedging (Topic 815): Targeted improvements of Accounting for Hedging Activities." The purpose of this ASU is to better align a company’s risk management activities and financial reporting for hedging relationships. Additionally, the ASU simplifies the hedge accounting requirements and improve the disclosures of hedging arrangements. The amendments in this ASU must be applied to annual reporting periods beginning after December 15, 2019. Early adoption is permitted. Our adoption of ASU No. 2017-12 effective January 1, 2019 did not have an impact on our condensed consolidated financial condition and results of operations.

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In February 2018, the FASB issued ASU No. 2018-02, "Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Comprehensive Income (“AOCI”)." The ASU and its amendments were issued as a result of the enactment of the U.S. Tax Cuts and Jobs Act of 2017. The amendments of this ASU address the available options to reclassify stranded tax effects within AOCI to retained earnings in each period in which the effect of the change (or portion thereof) is recorded. Additionally, the ASU outlines the disclosure requirements for releasing income tax effects from AOCI. The ASU is effective for fiscal years beginning after December 15, 2018. The ASU should be applied either in the period of adoption or retrospectively to each period (or periods) in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act is recognized. We elected not to reclassify the income tax effects of the Tax Cuts and Jobs Act from accumulated comprehensive income to retained earnings.

In July 2018, the FASB issued ASU No. 2018-07, "Compensation - Stock Compensation (Topic 718) - Improvements to Non-employee Share-based Payment Accounting." The amendments of this ASU apply to all share-based payment transactions to non-employees, in which a grantor acquires goods or services to be used or consumed in a grantor’s own operations, accounted under ASC 505-50, Equity-Based Payments to Non-Employees. Under the amendments of ASU 2018-07, most of the guidance on compensation to non-employees would be aligned with the requirements for shared based payments granted to employees, Topic 718. The ASU is effective for fiscal years beginning after December 15, 2018. Our adoption of ASU No. 2018-07-12 effective January 1, 2019 did not have an impact on our condensed consolidated financial condition and results of operations.

~~Pronouncements Not Yet Implemented~~

~~In June 2016, the FASB issued ASU~~ No. 2016-13, "Financial Instruments-Credit Losses (Topic 326), Measurement of Credit Losses on Financial ~~Instruments."~~Instruments" ("CECL"). The ASU requires, among other things, the use of a new current expected credit loss ~~("CECL")~~ model in order to determine ~~allowances~~an allowance for ~~doubtful accounts~~credit losses with respect to ~~accounts receivable~~financial assets and ~~contract assets.~~instruments held. The CECL model requires that ~~companies~~we estimate the lifetime of an expected credit loss for financial assets held at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts. On January 1, 2020 we adopted the ASU on a prospective basis to determine our allowance for credit losses in accordance with ~~respect~~the requirements of Topic 326, and we modified our accounting policy and processes to facilitate this approach. As a result of the adoption of the ASU we recorded a noncash cumulative effect after-tax adjustment to retained earnings of $7.3 million on our opening condensed consolidated balance sheet.

Our primary exposure to financial assets that are within the scope of CECL are trade receivables and contract assets. For these financial assets, ~~and~~we record ~~allowances~~an allowance for credit losses that, when deducted from the gross asset balance, ~~of the receivables, represent~~presents the net ~~amounts~~amount expected to be collected. ~~Companies will also be required~~We estimate the allowance based on an aging schedule and according to ~~disclose information about how~~historical losses as determined from our billings and collections history. Additionally, we adjust the ~~allowances were developed, including changes in the~~allowance for factors that ~~influenced~~are specific to our customers’ credit risk such as financial difficulties, liquidity issues, insolvency, and country and political risk. We also consider both the current and forecasted direction of macroeconomic conditions at the reporting date. The CECL model requires consideration of reasonable and supportable forecasts of future economic conditions in the estimate of expected credit losses.

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We adjust the allowance and recognize adjustments in the income statement each period. Trade receivables are written off against the allowance in the period when the receivable is deemed to be uncollectible. Subsequent recoveries of amounts previously written off are reflected as a reduction to credit impairment losses in the income statement.

Our allowance for expected credit losses for short-term receivables as of March 31, 2020, was $66.3 million, compared to $53.4 million as of December 31, 2019. The three months activity included $6.9 million for the adoption of the CECL model at January 1, 2020 and $6.0 million for current period adjustments.

Our long-term receivables, included in other assets, net, represent receivables with collection periods longer than 12 months and the ~~reasons~~balance primarily consists of amounts to be collected from insurance companies and fully-reserved receivables associated with the national oil company in Venezuela. As of March 31, 2020, we had $114.0 million of long-term receivables, compared to $118.5 million as of December 31, 2019. Our allowance for ~~those changes. The amendments~~expected credit losses for long-term receivables as of March 31, 2020 was $100.9 million, compared to $101.4 million as of December 31, 2019.

We have exposure to credit losses from off-balance sheet exposures, such as financial guarantees and standby letters of credit, where the ~~ASU are effective for fiscal years beginning after December 15, 2019. We are currently evaluating the impact~~risk of ~~ASU No. 2016-13 and other related ASUs on~~loss is immaterial to our ~~consolidated~~ financial ~~condition and results of operations.~~statements.

In January 2017, the FASB issued ASU No. 2017-04, "Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment." The amendments in this ASU allow companies to apply a one-step quantitative test and record the amount of goodwill impairment as the excess of a reporting unit’s carrying amount over its fair value, not to exceed the total amount of goodwill allocated to the reporting unit. The amendments of the ASU are effective for annual or interim goodwill impairment tests in fiscal years beginning after December 15, 2019. ~~Early~~Our adoption ~~is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. We are currently evaluating the impact~~ of ASU No. 2017-04 effective January 1, 2020 did not have an impact on our condensed consolidated financial condition and results of operations.

In August 2018, the FASB issued ASU No. 2018-13, "Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement." The amendments of the ASU modify the disclosure requirements for fair value measurements by removing, modifying, or adding certain disclosure ~~information~~ requirements for assets and liabilities measured at fair value in the statement of financial position or disclosed in the notes to the financial statements. The ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019, with early adoption permitted for the removed disclosures and delayed adoption until fiscal year 2020 permitted for the new disclosures. The removed and modified disclosures ~~will be~~were adopted on a retrospective basis and the new disclosures ~~will be~~were adopted on a prospective basis. ~~We are currently evaluating the impact~~Our adoption of ASU No. 2018-13 effective January 1, 2020 did not have an impact on our ~~consolidated financial condition and results of operations.~~

In August 2018, the FASB issued ASU No. 2018-14, "Compensation-Retirement Benefits-Defined Benefit Plans-General (Subtopic 715-20): Disclosure Framework-Changes to the Disclosure Requirements for Defined Benefit Plans." The ASU amends the disclosure requirements by adding, clarifying, or removing certain disclosures for sponsor defined benefit pension or other postretirement plans. The amendments are effective for fiscal years ending after December 15, 2020 and the amendments should be applied retrospectively to all periods presented. We are currently evaluating the impact of ASU No. 2018-14 on our consolidated financial condition and results of operations.disclosures.

In August 2018, the FASB issued ASU No. 2018-15, "Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract." The ASU addresses how entities should account for costs associated with implementing a cloud computing arrangement that is considered a service contract. Per the amendments of the ASU, implementation costs incurred in a cloud computing arrangement that is a service contract should be accounted for in the same manner as implementation costs incurred to develop or obtain software for internal use as prescribed by guidance in ASC 350-40. The ASU requires that implementation costs incurred in a cloud computing arrangement be capitalized rather than expensed. Further, the ASU specifies the method for the amortization of costs incurred during implementation, and the manner in which the unamortized portion of these capitalized implementation costs should

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be evaluated for impairment. The ASU also provides guidance on how to present such implementation costs in the financial statements and also creates additional disclosure requirements. The amendments are effective for fiscal years beginning after December 15, 2019. ~~Early adoption of the ASU requirements is permitted, including adoption in any interim period.~~ The amendments in this ASU ~~should~~can be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. ~~We are currently evaluating the impact~~Our adoption of ASU No. 2018-15 effective January 1, 2020 did not have a material impact on our condensed consolidated financial condition and results of operations.

In October 2018, the FASB issued ASU No. 2018-17, "Consolidation (Topic 810): Targeted Improvements to Related Party Guidance for Variable Interest Entities ("VIEs")." The standard reduces the cost and complexity of financial reporting associated with VIEs. The new standard amends the guidance for determining whether a decision-making fee is a VIE. The amendments require organizations to consider indirect interests held through related parties under common control on a proportional basis rather than as the equivalent of a direct interest in its entirety as currently required in ~~GAAP.~~U.S. Generally Accepted Accounting Principles ("GAAP"). The amendments of this ASU are effective for fiscal years beginning after December 15, 2019. ~~We are currently evaluating the impact~~Our adoption of ASU No. 2018-17 effective January 1, 2020 did not have an impact on our condensed consolidated financial condition and results of operations.

In November 2018, the FASB issued ASU No. 2018-18, "Collaborative Arrangements (Topic 808): Clarifying the Interaction Between Topic 808 and Topic 606." The ASU clarifies the interaction between the guidance for certain collaborative arrangements and ~~the New Revenue Standard.~~ASU No. 2014-09, "Revenue from Contracts with Customers (Topic 606)," which we adopted January 1, 2018. The amendments of the ASU provide guidance on how to assess whether certain transactions between collaborative arrangement participants should be accounted for within ~~the New Revenue Standard.~~ASU No. 2014-09. The ASU also provides more comparability in the presentation of revenue for certain transactions between collaborative arrangement participants. Parts of

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the collaborative arrangement that are not in the purview of the revenue recognition standard should be presented separately. The amendments are effective for fiscal years beginning after December 15, 2019. ~~Early~~Our adoption ~~is permitted.~~of ASU No. 2018-18 effective January 1, 2020 did not have an impact on our condensed consolidated financial condition and results of operations.

In December 2019, the FASB issued ASU No. 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes.” The ASU intends to simplify various aspects related to accounting for income taxes and removes certain exceptions to the general principles in the standard. Additionally, the ASU clarifies and amends existing guidance to improve consistent application of its requirements. We early adopted ASU No. 2019-12 effective January 1, 2020 on a prospective basis and the adoption did not have an impact on our condensed consolidated financial condition and results of operations.

Pronouncements Not Yet Implemented

In August 2018, the FASB issued ASU No. 2018-14, "Compensation-Retirement Benefits-Defined Benefit Plans-General (Subtopic 715-20): Disclosure Framework-Changes to the Disclosure Requirements for Defined Benefit Plans." The ASU amends the disclosure requirements by adding, clarifying, or removing certain disclosures for sponsor defined benefit pension or other postretirement plans. The amendments are effective for fiscal years ending after December 15, 2020 and the amendments should be applied retrospectively to all periods presented. We are currently evaluating the impact of ASU No. ~~2018-18~~2018-14 and we anticipate that our adoption of this ASU will not have an impact on our disclosures.

In March of 2020, the FASB issued ASU No. 2020-04, "Reference Rate Reform (Topic 848): Facilitation of The Effects of Reference Rate Reform on Financial Reporting." The ASU provides guidance designed to enable the process for migrating away from reference rates such as the London Interbank Offered Rate ("LIBOR") and others to new reference rates. Further, the amendments of the ASU provides optional expedients and exceptions for applying U.S. GAAP to contract modifications and hedging relationships, subject to meeting certain criteria, that reference LIBOR or another reference rate expected to be discontinued. The amendments are effective as of March 12, 2020 through December 31, 2022 and should be applied prospectively to all periods presented. We are currently evaluating the impact of ASU No. 2020-04 and we anticipate that our adoption of this ASU will not have an impact on our condensed consolidated financial condition and results of operations.

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2.	~~Revenue Recognition~~

2.Revenue Recognition

The majority of our revenues relate to customer orders that typically contain a single commitment of goods or services which have lead times under a year. Longer lead time, more complex contracts with our customers typically have multiple commitments of goods and services, including any combination of designing, developing, manufacturing, modifying, installing and commissioning of flow management equipment and providing services and parts related to the performance of such products. Control transfers over time when the customer is able to direct the use of and obtain substantially all of the benefits of our work as we perform.

Our primary method for recognizing revenue over time is the percentage of completion ("POC") method. Revenue from products and services transferred to customers over time accounted for approximately ~~21%~~23% of total revenue for ~~both~~the three month ~~periods~~period ended ~~September 30, 2019 and 2018, and 18% and 22%~~March 31, 2020, as compared to 17% for the ~~nine month periods ended September 30, 2019 and 2018, respectively.~~same period in 2019. If control does not transfer over time, then control transfers at a point in time. We recognize revenue at a point in time at the level of each performance obligation based on the evaluation of certain indicators of control transfer, such as title transfer, risk of loss transfer, customer acceptance and physical possession. Revenue from products and services transferred to customers at a point in time accounted for approximately ~~79%~~77% of total revenue for ~~both~~the three month ~~periods~~period ended ~~September 30, 2019 and 2018, and 82% and 78%~~March 31, 2020, as compared to 83% for the ~~nine month periods ended September 30,~~same period in 2019 ~~and 2018, respectively.~~. Refer to Note 2 to our consolidated financial statements included in our ~~2018~~2019 Annual Report for a more comprehensive discussion of our policies and accounting practices of revenue recognition.

Disaggregated Revenue

We conduct our operations through 2 business segments based on the type of product and how we manage the business:


•	~~FPD for custom, highly-engineered pumps, pre-configured industrial pumps, pump systems, mechanical seals, auxiliary systems and replacement parts and related services; and~~

~~FCD~~•Flowserve Pump Division ("FPD") for custom, highly-engineered pumps, pre-configured industrial pumps, pump systems, mechanical seals, auxiliary systems and replacement parts and related services; and

•Flow Control Division ("FCD") for engineered and industrial valves, control valves, actuators and controls and related services.

Our revenue sources are derived from our original equipment manufacturing and our aftermarket sales and services. Our original equipment revenues are generally related to originally designed, manufactured, distributed and installed equipment that can range from pre-configured, short-cycle products to more customized, highly-engineered equipment ("Original Equipment"). Our aftermarket sales and services are derived from sales of replacement equipment, as well as maintenance, advanced diagnostic, repair and retrofitting services ("Aftermarket"). Each of our 2 business segments generate Original Equipment and Aftermarket revenues.

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The following table presents our customer revenues disaggregated by revenue source:

Three Months Ended September 30, 2019
(Amounts in thousands) FPD FCD Total
Original Equipment $ 256,664
$ 252,282
$ 508,946
Aftermarket 426,134
61,464
487,598
$ 682,798
$ 313,746
$ 996,544

Three Months Ended September 30, 2018
FPD FCD Total
Original Equipment $ 255,869
$ 239,864
$ 495,733
Aftermarket 391,429
65,554
456,983
$ 647,298
$ 305,418
$ 952,716


	Three Months Ended March 31, 2020
(Amounts in thousands)	FPD		FCD		Total
Original Equipment	$	252,732	$	199,563	$	452,295
Aftermarket	382,394		59,768		442,162
	$	635,126	$	259,331	$	894,457

	Three Months Ended March 31, 2019
	FPD		FCD		Total
Original Equipment	$	205,803	$	214,047	$	419,850
Aftermarket	402,956		67,245		470,201
	$	608,759	$	281,292	$	890,051

Nine Months Ended September 30, 2019
(Amounts in thousands) FPD FCD Total
Original Equipment $ 706,092
$ 715,306
$ 1,421,398
Aftermarket 1,259,431
195,850
1,455,281
$ 1,965,523
$ 911,156
$ 2,876,679

Nine Months Ended September 30, 2018
FPD FCD Total
Original Equipment $ 756,296
$ 689,331
$ 1,445,627
Aftermarket 1,202,510
197,661
1,400,171
$ 1,958,806
$ 886,992
$ 2,845,798

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Our customer sales are diversified geographically. The following table presents our revenues disaggregated by geography, based on the shipping addresses of our customers:


	Three Months Ended September 30, 2019							Three Months Ended March 31, 2020
(Amounts in thousands)	FPD		FCD		Total		(Amounts in thousands)	FPD		FCD		Total
North America(1)	$	279,583	$	133,881	$	413,464	North America(1)	$	267,524	$	123,118	$	390,642
Latin America(1)	51,338		7,682		59,020		Latin America(1)	42,187		5,511		47,698
Middle East and Africa	87,982		23,721		111,703		Middle East and Africa	97,168		26,663		123,831
Asia Pacific	129,047		86,787		215,834		Asia Pacific	112,455		55,507		167,962
Europe	134,848		61,675		196,523		Europe	115,792		48,532		164,324
	$	682,798	$	313,746	$	996,544		$	635,126	$	259,331	$	894,457

	Three Months Ended September 30, 2018							Three Months Ended March 31, 2019
	FPD		FCD		Total			FPD		FCD		Total
North America(1)	$	251,503	$	140,898	$	392,401	North America(1)	$	247,769	$	135,177	$	382,946
Latin America(1)	76,167		4,461		80,628		Latin America(1)	37,601		5,796		43,397
Middle East and Africa	70,666		33,908		104,574		Middle East and Africa	74,366		22,891		97,257
Asia Pacific	119,258		65,858		185,116		Asia Pacific	113,948		57,192		171,140
Europe	129,704		60,293		189,997		Europe	135,075		60,236		195,311
	$	647,298	$	305,418	$	952,716		$	608,759	$	281,292	$	890,051

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Nine Months Ended September 30, 2019
(Amounts in thousands) FPD FCD Total
North America (1) $ 797,092
$ 403,747
$ 1,200,839
Latin America(1) 134,716
23,574
158,290
Middle East and Africa 249,694
69,484
319,178
Asia Pacific 367,204
227,200
594,404
Europe 416,817
187,151
603,968
$ 1,965,523
$ 911,156
$ 2,876,679

Nine Months Ended September 30, 2018
FPD FCD Total
North America (1) $ 774,602
$ 398,872
$ 1,173,474
Latin America(1) 161,344
15,454
176,798
Middle East and Africa 240,497
99,954
340,451
Asia Pacific 385,955
198,437
584,392
Europe 396,408
174,275
570,683
$ 1,958,806
$ 886,992
$ 2,845,798

~~_____________________________________~~

(1) North America represents United States and Canada; Latin America includes Mexico.

On ~~September 30, 2019,~~March 31, 2020, the aggregate transaction price allocated to unsatisfied (or partially unsatisfied) performance obligations was approximately ~~$579~~$660 million. We estimate recognition of approximately ~~$152~~$412 million of this amount as revenue in the remainder of ~~2019~~2020 and an additional ~~$427~~$248 million in ~~2020~~2021 and thereafter.

~~Revenue recognized for performance obligations satisfied (or partially satisfied) in prior periods for the nine months ended September 30, 2019 and 2018 was not material.~~

Contract Balances

We receive payment from customers based on a contractual billing schedule and specific performance requirements as established in our contracts. We record billings as accounts receivable when an unconditional right to consideration exists. A contract asset represents revenue recognized in advance of our right to receive payment under the terms of a contract. A contract liability represents our right to receive payment in advance of revenue recognized for a contract.

The following ~~table presents~~tables present beginning and ending balances of contract assets and contract liabilities, current and long-term, for the ~~nine~~three months ended ~~September 30,~~March 31, 2020 and 2019:


(Amounts in thousands)	Contract Assets, net (Current)		Long-term Contract Assets, net(1)		Contract Liabilities (Current)		Long-term Contract Liabilities(2)
Beginning balance, January 1, 2020	$	272,914	9,280		$	216,541	$	1,652
Revenue recognized that was included in contract liabilities at the beginning of the period	—		—		(85,636)		(634)
Revenue recognized in the period in excess of billings	203,856		504		—		—
Billings arising during the period in excess of revenue recognized	—		—		100,121		—
Amounts transferred from contract assets to receivables	(185,456)		(93)		—		—

Currency effects and other, net	(15,387)		(7,229)		(7,394)		(53)
Ending balance, March 31, 2020	$	275,927	$	2,462	$	223,632	$	965

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(Amounts in thousands) Contract Assets, net (Current) Long-term Contract Assets, net(1) Contract Liabilities (Current) Long-term Contract Liabilities(2)
Beginning balance, January 1, 2019 $ 228,579
10,967
$ 202,458
$ 1,370
Revenue recognized that was included in contract liabilities at the beginning of the period —
—
(129,621 ) —
Revenue recognized in the period in excess of billings 584,784
—
—
—
Billings arising during the period in excess of revenue recognized —
—
148,552
—
Amounts transferred from contract assets to receivables (544,533 ) (3,414 ) —
—
Currency effects and other, net (10,531 ) 539
(1,709 ) 248
Ending balance, September 30, 2019 $ 258,299
$ 8,092
$ 219,680
$ 1,618


(Amounts in thousands)	Contract Assets, net (Current)		Long-term Contract Assets, net(1)		Contract Liabilities (Current)		Long-term Contract Liabilities(2)
Beginning balance, January 1, 2019	$	228,579	$	10,967	$	202,458	$	1,370
Revenue recognized that was included in contract liabilities at the beginning of the period	—		—		(73,417)		—
Revenue recognized in the period in excess of billings	155,444		—		—		—
Billings arising during the period in excess of revenue recognized	—		—		78,078		—
Amounts transferred from contract assets to receivables	(154,817)		(2,202)		—		—

Currency effects and other, net	(4,356)		(19)		623		(12)
Ending balance, March 31, 2019	$	224,850	$	8,746	$	207,742	$	1,358

(1) Included in other assets, net.

(2) Included in retirement obligations and other liabilities.

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3.	~~Dispositions~~

~~FPD Business Divestiture~~

~~On June 29, 2018, pursuant to a plan of sale app~~roved by management, we executed an agreement to divest 2 FPD locations and associated product lines, including the related assets and liabilities. This transaction did not meet the criteria for classification of assets held for sale as of June 30, 2018 due to a contingency that could have potentially impacted the final terms and/or timing of the divestiture. The sale transaction was completed on August 9, 2018. During the twelve months ended December 31, 2018, we recorded a pre-tax charge of $25.1 million, including a pre-tax charge of $17.4 million in the second quarter of 2018 and a loss on sale of the business of $7.7 million in the third quarter of 2018. The second quarter of 2018 pre-tax charge related to write-downs of inventory and long-lived assets to their estimated fair value, of which $7.7 million was recorded in cost of sales ("COS") and $9.7 million was recorded in selling, general and administrative ("SG&A"). The third quarter of 2018 pre-tax charge primarily related to working capital changes since the second quarter of 2018 and net cash transferred at the closing date of $3.7 million. The sale included a manufacturing facility in Germany and a related assembly facility in France. In 2017, net sales related to the business totaled approximately $42 million, although the business produced an operating loss in each of the previous two fiscal years.


4.	~~Leases~~

We adopted the New Lease Standard effective January 1, 2019 utilizing the modified retrospective approach and have elected an initial application date of January 1, 2019. Adoption of the New Lease Standard resulted in an increase to total assets and liabilities due to the recording of lease ROU assets and lease liabilities of approximately $210 million as of January 1, 2019. Our adoption of the New Lease Standard included modification of certain accounting policies and practices, business processes, systems and controls in order to support compliance with the requirements.

We elected the package of three practical expedients for transition, which include the carry forward of our leases without reassessing whether any contracts are leases or contain leases, lease classification and initial direct costs. We elected the transition practical expedient to apply hindsight when determining the lease term and when assessing impairment of ROU assets at the adoption date, which allows us to update our assessments according to new information and changes in facts and circumstances that have occurred since lease inception. We have certain land easements that have historically been accounted for as finite-lived intangible assets. We elected the practical expedient related to land easements, allowing us to carry forward our accounting treatment for land easements on existing agreements as intangible assets. Any new or modified land easements will be accounted for as leases under the New Lease Standard.

~~Presentation of~~ Leases

We have operating and finance leases for certain manufacturing facilities, offices, service and quick response centers, machinery, equipment and automobiles. Our leases have remaining lease terms of up to 3433 years. The terms and conditions of our leases may include options to extend or terminate the lease which are considered and included in the lease term when these options are reasonably certain of exercise.

We determine if a contract is (or contains) a lease at inception by evaluating whether the contract conveys the right to control the use of an identified asset. For all classes of leased assets, we have elected the practical expedient to account for any non-lease components in the contract together with the related lease component in the same unit of account. For lease contracts containing more than one lease component, we allocate the contract consideration to each of the lease components on the basis of relative standalone prices in order to identify the lease payments for each lease component.

~~ROU~~Right-of-use ("ROU") assets and lease liabilities are recognized in our condensed consolidated balance sheets at the commencement date based on the present value of remaining lease payments over the lease term. Additionally, ROU assets include any lease payments made at or before the commencement date, as well as any initial direct costs incurred, and are reduced by any lease incentives received. As most of our operating leases do not provide an implicit rate, we apply our incremental borrowing rate to determine the present value of remaining lease payments. Our incremental borrowing rate is determined based on information available at the commencement date of the lease.

Operating leases are included in operating lease right-of-use assets, net and operating lease liabilities in our condensed consolidated balance sheets. Finance leases are included in property plant and equipment, debt due within one year and long-term debt due after one year in our condensed consolidated balance sheets.

For all classes of leased assets, we have applied an accounting policy election to exclude short-term leases from recognition in our condensed consolidated balance sheets. A short-term lease has a lease term of 12 months or less at the commencement date and does not include a purchase option that is reasonably certain of exercise. We recognize short-term lease expense in our condensed consolidated income statements on a straight-line basis over the lease term. Our short-term lease expense and short-term lease commitments as of September 30, 2019 are immaterial.

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We have certain lease contracts with terms and conditions that provide for variability in the payment amount based on changes in facts or circumstances occurring after the commencement date. These variable lease payments are recognized in our condensed consolidated income statements as the obligation is incurred.

We have certain lease contracts where we provide a guarantee to the lessor that the value of an underlying asset will be at least a specified amount at the end of the lease. Estimated amounts expected to be paid for residual value guarantees are included in operating lease liabilities and ROU ~~assets.~~assets, net.

~~As of September 30, 2019, we~~We had ~~$41.9~~$42.3 million and $34.7 million of legally binding minimum lease payments for operating leases signed but not yet ~~commenced.~~commenced as of March 31, 2020 and December 31, 2019, respectively. We did not have material subleases, leases that imposed significant restrictions or covenants, material related party leases or sale-leaseback arrangements.

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Other information related to our leases is as follows:


			September 30,				March 31,		December 31,
(Amounts in thousands)			2019			(Amounts in thousands)	2020		2019
Operating Leases:						Operating Leases:
ROU assets recorded under operating leases			$	208,943		ROU assets recorded under operating leases	$	224,627	$	220,865
Accumulated amortization associated with operating leases			(26,670		)	Accumulated amortization associated with operating leases	(42,163)		(34,647)
Total operating leases ROU assets, net			$	182,273		Total operating leases ROU assets, net	$	182,464	$	186,218

Liabilities recorded under operating leases (current)			$	35,042		Liabilities recorded under operating leases (current)	$	36,841	$	36,108
Liabilities recorded under operating leases (non-current)			146,839			Liabilities recorded under operating leases (non-current)	147,031		151,523
Total operating leases liabilities			$	181,881		Total operating leases liabilities	$	183,872	$	187,631

Finance Leases:						Finance Leases:
ROU assets recorded under finance leases			$	16,230		ROU assets recorded under finance leases	$	19,761	$	19,606
Accumulated depreciation associated with finance leases			(5,015		)	Accumulated depreciation associated with finance leases	(7,952)		(7,551)
Total finance leases ROU assets, net(1)			$	11,215		Total finance leases ROU assets, net(1)	$	11,809	$	12,055


Total finance leases liabilities(2)			$	11,246		Total finance leases liabilities(2)	$	11,700	$	11,788

The costs components of operating and finance leases are as follows:	The costs components of operating and finance leases are as follows:					The costs components of operating and finance leases are as follows:
							March 31,
(Amounts in thousands)	Three Months Ended September 30, 2019		Nine Months Ended September 30, 2019			(Amounts in thousands)	2020		2019
Operating Lease Costs:						Operating Lease Costs:
Fixed lease expense(3)	$	13,858	$	43,864		Fixed lease expense(3)	$	14,470	$	15,209

Variable lease expense(3)	1,119		3,999			Variable lease expense(3)	2,172		1,575
Total operating lease expense	$	14,977	$	47,863		Total operating lease expense	$	16,642	$	16,784

Finance Lease Costs:						Finance Lease Costs:
Depreciation of finance lease ROU assets(3)	$	993	$	3,280		Depreciation of finance lease ROU assets(3)	$	1,305	$	1,157
Interest on lease liabilities(4)	102		253			Interest on lease liabilities(4)	233		78
Total finance lease expense	$	1,095	$	3,533		Total finance lease expense	$	1,538	$	1,235

_____________________

(1) Included in property plant and equipment, ~~net~~net.

(2) Included in debt due within one year and long-term debt due after one year, ~~accordingly~~accordingly.

(3) Included in cost of sales and selling, general and administrative expense, ~~accordingly~~accordingly.

(4) Included in interest ~~expense~~expense.

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Supplemental cash flows information as of and for the ~~nine~~three months ended ~~September 30, 2019~~:


					March 31,
(Amounts in thousands, except lease term and discount rate)				(Amounts in thousands, except lease term and discount rate)	2020			2019
Cash paid for amounts included in the measurement of lease liabilities:				Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases(1)	$	39,642		Operating cash flows from operating leases(1)	$	17,493		$	16,736

Financing cash flows from finance leases(2)	4,177			Financing cash flows from finance leases(2)	724			1,124
ROU assets obtained in exchange for lease obligations:				ROU assets obtained in exchange for lease obligations:
Operating leases	$	15,739		Operating leases	$	802		$	2,922
Finance leases	10,184			Finance leases	1,411			3,580
Weighted average remaining lease term (in years)				Weighted average remaining lease term (in years)
Operating leases	9 years			Operating leases	9 years			9 years
Finance leases	4 years			Finance leases	3 years			3 years
Weighted average discount rate (percent)				Weighted average discount rate (percent)
Operating leases	4.6		%	Operating leases	4.5		%	4.5		%
Finance leases	3.7		%	Finance leases	3.5		%	3.6		%

_____________________

(1) Included in our condensed consolidated statement of cash flows, operating activities, prepaid expenses and other assets, net and retirement obligations and ~~other~~other.

(2) Included in our condensed consolidated statement of cash flows, financing activities, payments under other financing ~~arrangements~~arrangements.

Future undiscounted lease payments under operating and finance leases as of ~~September 30, 2019~~March 31, 2020 were as follows (amounts in thousands):


Year ending December 31,	Operating Leases		Finance Leases
2020 (excluding the three months ended March 31, 2020)	$	31,199	$	3,899
2021	34,324		4,056
2022	28,631		2,741
2023	23,441		1,384
2024	18,316		335
Thereafter	85,691		55
Total future minimum lease payments	$	221,602	$	12,470
Less: Imputed interest	(37,730)		(770)
Total	$	183,872	$	11,700

Other current liabilities	$	36,841	$	—
Operating lease liabilities	147,031		—
Debt due within one year	—		4,653
Long-term debt due after one year	—		7,047
Total	$	183,872	$	11,700

Year ending December 31,
Operating
Leases
Finance Leases
2019 (excluding the nine months ended September 30, 2019) $ 10,769
$ 1,321
2020 39,425
4,353
2021 30,498
2,854
2022 25,032
1,623
2023 21,235
850
Thereafter 95,094
945
Total future minimum lease payments $ 222,053
$ 11,946
Less: Imputed interest (40,172 ) (700 )
Total $ 181,881
$ 11,246

Other current liabilities $ 35,042
$ —
Operating lease liabilities 146,839
—
Debt due within one year —
4,342
Long-term debt due after one year —
6,904
Total $ 181,881
$ 11,246

The future minimum lease payments as of December 31, 2018 were as follows (amounts in thousands):
Year ending December 31,
2019 $ 68,443
2020 49,874
2021 38,446
2022 28,496
2023 21,473
Thereafter 66,518
Total future minimum lease payments $ 273,250

4. Stock-Based Compensation Plans

Effective January 1, 2020, our shareholders approved the Flowserve Corporation 2020 Long-Term Incentive Plan (“2020 Plan”). The 2020 Plan replaces and supersedes the Flowserve Corporation Equity and Incentive Compensation Plan ~~(the "2010~~("2010 Plan")~~, which is a shareholder-approved plan authorizing~~ in its entirety. See Note 7 to our consolidated financial statements included in our 2019 Annual Report for additional information on the 2010 Plan. The 2020 Plan authorizes the issuance ~~of up to 8,700,000~~12,500,000 shares of our common stock in the form of restricted shares, restricted share units and performance-based units (collectively referred to as "Restricted Shares"), incentive stock options, non-statutory stock options, stock appreciation rights and bonus ~~stock.~~stock, in addition to any shares available for issuance or subject to forfeiture under the 2010 Plan as of its expiration on December 31, 2019. Of the ~~8,700,000~~12,500,000 shares of common stock authorized under the ~~2010~~2020 Plan, ~~1,526,608~~ 12,948,153 were available for issuance as of ~~September 30, 2019.~~March 31, 2020. Restricted Shares primarily vest over a three year period. Restricted Shares granted to employees who retire and have achieved at least 55 years of age and 10 years of service to continue to vest over the original vesting period ("55/10 Provision"). As of ~~September 30, 2019,~~March 31, 2020, 114,943 stock options were outstanding, with a grant date fair value of $2.0 million recognized over three ~~years,~~years. As of March 31, 2020, compensation associated with ~~remaining unearned compensation of $0.3 million.~~ these stock options was fully earned. NaN stock options were granted or vested during the ~~nine~~three months ended ~~September 30, 2019~~March 31, 2020 and ~~2018.~~2019.

Restricted Shares – Awards of Restricted Shares are valued at the closing market price of our common stock on the date of grant. The unearned compensation is amortized to compensation expense over the vesting period of the restricted shares, except for awards related to the 55/10 Provision which are expensed in the period granted. We had unearned compensation of ~~$31.5~~$43.0 million and ~~$24.3~~$23.4 million at ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, respectively, which is expected to be recognized over a remaining weighted-average period of approximately ~~one year.~~two years. These amounts will be recognized into net earnings in prospective periods as the awards vest. The total fair value of Restricted Shares vested during the three months ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~ was ~~$0.3~~$18.1 million and ~~$0.2~~$13.8 million,~~respectively. The total fair value of Restricted Shares vested during the nine months ended September 30, 2019 and 2018 was $16.5 million and $14.0 million~~_,respectively.

We recorded stock-based compensation expense of ~~$5.5~~$11.1 million ($~~7.2~~14.3 million pre-tax) and ~~$4.4~~$6.0 million ($~~5.7~~7.6 million pre-tax) for the three months ended ~~September 30,~~March 31, 2020 and 2019, ~~and 2018,~~ respectively. ~~We recorded stock-based compensation expense of $17.4 million ($22.5 million pre-tax) and $10.9 million ($14.1 million pre-tax) for the nine months ended September 30, 2019 and 2018, respectively.~~ Performance-based shares granted in 2016 did not ~~fully~~ vest due to ~~the unachievement of certain~~ performance targets not being achieved, resulting in 115,302 forfeited shares and a $4.5 million reduction of stock-based compensation expense for the ~~nine~~three months ended ~~September 30,~~March 31, 2019. Performance-based shares granted in 2015 did not vest due to performance targets not being achieved, resulting in 100,033 forfeited shares and a $5.4 million reduction of stock-based compensation expense for the nine months ended September 30, 2018.

The following table summarizes information regarding Restricted Shares:

Nine Months Ended September 30, 2019
Shares
Weighted Average
Grant-Date Fair
Value
Number of unvested shares:
Outstanding - January 1, 2019 1,530,214
$ 45.06
Granted 807,439
46.91
Vested (386,306 ) 42.78
Forfeited (197,004 ) 42.32
Outstanding as of September 30, 2019 1,754,343
$ 46.72

Unvested Restricted Shares outstanding as of ~~September 30, 2019~~March 31, 2020 included approximately ~~687,000~~605,000 units with performance-based vesting provisions. Performance-based units are issuable in common stock and vest upon the achievement of pre-defined performance targets. Performance-based units have performance targets based on our average return on invested capital and our total shareholder return ("TSR") over a three-year period. Most unvested units were granted in three annual grants since January 1,

~~2017~~ 2018 and have a vesting percentage between 0% and 200% depending on the achievement of the specific performance targets. Except for shares granted under the 55/10 Provision, compensation expense is recognized ratably over a cliff-vesting period of 36 months, based on the fair value of our common stock on the date of grant, as adjusted for actual forfeitures. During the performance period, earned and unearned compensation expense is adjusted based on changes in the expected achievement of the performance targets for all performance-based units granted except for the TSR-based units. Vesting provisions range from 0 to approximately ~~1,374,000~~1,209,000 shares based on performance targets. As of ~~September 30, 2019,~~March 31, 2020, we estimate vesting of approximately ~~689,000~~663,000 shares based on expected achievement of performance targets.

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6.	~~Derivative Instruments and Hedges~~

5. Derivative Instruments and Hedges

Our risk management and foreign currency derivatives and hedging policy specifies the conditions under which we may enter into derivative contracts. See Notes 1 and 78 to our consolidated financial statements included in our ~~2018~~2019 Annual Report and Note 8 of this Quarterly Report for additional information on our derivatives. We enter into foreign exchange forward contracts to hedge our cash flow risks associated with transactions denominated in currencies other than the local currency of the operation engaging in the transaction.

Foreign exchange contracts with third parties had a notional value of ~~$377.6~~$375.1 million and ~~$280.9~~$398.5 million at ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, respectively. At ~~September 30, 2019,~~March 31, 2020, the length of foreign exchange contracts currently in place ranged from 1014 days to 3529 months.

We are exposed to risk from credit-related losses resulting from nonperformance by counterparties to our financial instruments. We perform credit evaluations of our counterparties under foreign exchange contracts agreements and expect all counterparties to meet their obligations. We have not experienced credit losses from our counterparties.

The fair values of foreign exchange contracts are summarized below:

September 30, December 31,
(Amounts in thousands) 2019 2018
Current derivative assets $ 1,787
$ 535
Noncurrent derivative assets —
5
Current derivative liabilities 4,841
3,285
Noncurrent derivative liabilities 388
2

Current and noncurrent derivative assets are reported in our condensed consolidated balance sheets in prepaid expenses and other and other assets, net, respectively. Current and noncurrent derivative liabilities are reported in our condensed consolidated balance sheets in accrued liabilities and retirement obligations and other liabilities, respectively.

The impact of net changes in the fair values of foreign exchange contracts are summarized below:

Three Months Ended September 30, Nine Months Ended September 30,
(Amounts in thousands) 2019 2018 2019 2018
Losses recognized in income $ (1,817 ) $ (1,157 ) $ (4,511 ) $ (2,384 )

Gains and losses recognized in our condensed consolidated statements of income for foreign exchange contracts are classified as ~~Other~~other income (expense), net.

We previously designated €255.7 million of our €500.0 million Euro senior notes discussed in Note 76 as a net investment hedge of our investments in certain of our international subsidiaries that use the Euro as their functional currency. We use the spot method to measure the effectiveness of our net investment hedge. Under this method, for each reporting period, the change in the carrying value of the Euro senior notes due to remeasurement of the effective portion is reported in accumulated other comprehensive loss on our condensed consolidated balance sheet and the remaining change in the carrying value of the ineffective portion, if any, is recognized in ~~Other~~other income (expense), net in our condensed consolidated statement of income. We evaluate the effectiveness of our net investment hedge on a prospective basis at the beginning of each quarter. We did not record any ineffectiveness for the ~~nine~~three months ended ~~September 30, 2019~~March 31, 2020 and ~~2018.~~2019.

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6. Debt


7.	~~Debt~~

Debt, including finance lease obligations, consisted of:


	March 31,		December 31,
(Amounts in thousands, except percentages)	2020		2019
1.25% EUR Senior Notes due March 17, 2022, net of unamortized discount and debt issuance costs of $2,319 and $2,653	$	549,131	$	557,847
3.50% USD Senior Notes due September 15, 2022, net of unamortized discount and debt issuance costs of $1,754 and $1,924	498,246		498,076
4.00% USD Senior Notes due November 15, 2023, net of unamortized discount and debt issuance costs of $1,671 and $1,777	298,329		298,223

Finance lease obligations and other borrowings	20,382		23,103
Debt and finance lease obligations	1,366,088		1,377,249
Less amounts due within one year	8,980		11,272

Total debt due after one year	$	1,357,108	$	1,365,977

September 30,
December 31,
(Amounts in thousands, except percentages) 2019 2018
1.25% EUR Senior Notes due March 17, 2022, net of unamortized discount and debt issuance costs of $2,867 and $3,914 $ 542,033
$ 569,536
3.50% USD Senior Notes due September 15, 2022, net of unamortized discount and debt issuance costs of $2,092 and $2,589 497,908
497,411
4.00% USD Senior Notes due November 15, 2023, net of unamortized discount and debt issuance costs of $1,882 and $2,192 298,118
297,808
Term Loan Facility, interest rate of 4.30% at December 31, 2018, net of debt issuance costs of $249 —
104,751
Finance lease obligations and other borrowings 21,945
13,541
Debt and finance lease obligations 1,360,004
1,483,047
Less amounts due within one year 9,739
68,218
Total debt due after one year $ 1,350,265
$ 1,414,829

Senior Credit Facility

On July 16, 2019, we entered into a ~~new~~ credit agreement (“~~New~~ Credit Agreement”) with Bank of America, N.A., as administrative agent, and the other lenders party thereto. The ~~New~~ Credit Agreement provides for aan $800.0 million unsecured ~~revolving~~senior credit facility with a maturity date of July 16, 2024 (“~~New~~ Senior Credit Facility”). The ~~New~~ Senior Credit Facility includes a $750.0 million sublimit for the issuance of letters of credit and a $30.0 million sublimit for swing line loans. We have the right to increase the amount of the ~~New~~ Senior Credit Facility by an aggregate amount not to exceed $400.0 million, subject to certain conditions, including each Lender's approval providing any increase. On July 16, 2019, approximately $75.0 million was borrowed under the New Senior Credit Facility to repay all outstanding indebtedness under the then existing Senior Credit Facility. In connection with this repayment, our outstanding letters of credit under the Senior Credit Facility were transferred to the New Senior Credit Facility, and we terminated the then existing Senior Credit Facility. Subsequently, on September 16, 2019, the $75.0 million borrowed under the New Senior Credit Facility was paid in full.

TheThe interest rates per annum applicable to the ~~New~~ Senior Credit Facility, ~~(other~~other than with respect to swing line ~~loans)~~loans, are LIBOR plus between 1.000% to 1.750%, depending on our debt rating by either Moody’s Investors Service, Inc. or Standard & Poor’s Financial Services LLC ("S&P") Ratings, or, at our option, the Base Rate (as defined in the ~~New Senior~~ Credit Agreement) plus between 0.000% to 0.750% depending on our debt rating by either Moody’s Investors Service, Inc. or S&P ~~Global~~ Ratings. ~~The initial~~At March 31, 2020, the interest rate on the ~~New~~ Senior Credit Facility was LIBOR plus 1.375% in the case of LIBOR loans and the Base Rate plus 0.375% in the case of Base Rate loans. In addition, a commitment fee is payable quarterly in arrears on the daily unused portions of the ~~New~~ Senior Credit Facility. The commitment fee will be between 0.090% and 0.300% of unused amounts under the ~~New~~ Senior Credit Facility depending on our debt rating by either Moody’s Investors Service, Inc. or S&P’s Ratings. The commitment ~~fee~~fee was 0.20% (per annum) during the period ended ~~September 30, 2019.~~March 31, 2020.

As of ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, we had 0 revolving loans outstanding. We had outstanding letters of credit of ~~$79.5~~$79.0 million and ~~$92.9~~$88.5 million at ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, respectively. The amount available for borrowings under our ~~New~~ Senior Credit Facility was ~~$720.5~~$721.0 million at ~~September 30, 2019. As~~March 31, 2020 and as of December 31, ~~2018, due to a financial covenant in the Senior Credit Facility,~~2019, the amount available for borrowings ~~under that facility~~ was ~~effectively limited to $513.7~~$711.5 million.

Our compliance with applicable financial covenants under the ~~New~~Senior Notes and Senior Credit Facility isare tested ~~quarterly, and we complied~~quarterly. We were in compliance with all applicable covenants as of ~~September 30, 2019.~~ March 31, 2020.

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7. Fair Value


8.	~~Fair Value~~

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Where available, fair value is based on observable market prices or parameters or derived from such prices or parameters. Where observable prices or inputs are not available, valuation models may be applied. Assets and liabilities recorded at fair value in our condensed consolidated balance sheets are categorized by hierarchical levels based upon the level of judgmentassociated with the inputs used to measure their fair values. Recurring fair value measurements are limited to investments in derivative instruments. The fair value measurements of our derivative instruments are determined using models that maximize the use of the observable market inputs including interest rate curves and both forward and spot prices for currencies, and are classified as Level II under the fair value hierarchy. The fair values of our derivatives are included in Note 6.5.

Our financial instruments are presented at fair value in our condensed consolidated balance sheets, with the exception of our long-term debt. The estimated fair value of our long-term debt, excluding the Senior Notes, approximates the carrying value and is classified as Level II under the fair value hierarchy. The carrying value of our debt is included in Note 7.6. The estimated fair value of our Senior Notes at ~~September 30, 2019~~March 31, 2020 was ~~$1,366.9~~$1,342.7 million compared to the carrying value of ~~$1,338.1~~$1,345.7 million. The estimated fair value of the Senior Notes is based on Level I quoted market rates. The carrying amounts of our other ~~financial~~financial instruments (e.g., cash and cash equivalents, accounts receivable, net, accounts payable and short-term debt) approximated fair value due to their short-term nature at ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018.~~2019.

9.8. Inventories

Inventories, net consisted of the following:


	March 31,		December 31,
(Amounts in thousands)	2020		2019
Raw materials	$	336,874	$	328,080
Work in process	225,542		192,993
Finished goods	199,922		218,408

Less: Excess and obsolete reserve	(78,225)		(78,644)
Inventories, net	$	684,113	$	660,837

September 30,
December 31,
(Amounts in thousands) 2019 2018
Raw materials $ 328,902
$ 310,204
Work in process 239,339
191,660
Finished goods 195,259
205,814
Less: Excess and obsolete reserve (76,261 ) (73,807 )
Inventories, net $ 687,239
$ 633,871

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9. Earnings Per Share


~~10.~~	~~Earnings Per Share~~

The following is a reconciliation of net earnings of Flowserve Corporation and weighted average shares for calculating net earnings per common share. Earnings per weighted average common share outstanding was calculated as follows:


	Three Months Ended March 31,
(Amounts in thousands, except per share data)	2020		2019
Net earnings (loss) of Flowserve Corporation	$	(610)	$	57,261
Dividends on restricted shares not expected to vest	—		—
Earnings (loss) attributable to common and participating shareholders	$	(610)	$	57,261
Weighted average shares:
Common stock	130,731		130,962
Participating securities	—		20
Denominator for basic earnings per common share	130,731		130,982
Effect of potentially dilutive securities	—		550
Denominator for diluted earnings per common share	130,731		131,532
Earnings (loss) per common share:
Basic	$	—	$	0.44
Diluted	—		0.44

Three Months Ended September 30,
(Amounts in thousands, except per share data) 2019 2018
Net earnings of Flowserve Corporation $ 68,443
$ 28,205
Dividends on restricted shares not expected to vest —
—
Earnings attributable to common and participating shareholders $ 68,443
$ 28,205
Weighted average shares:
Common stock 131,122
130,823
Participating securities 23
20
Denominator for basic earnings per common share 131,145
130,843
Effect of potentially dilutive securities 701
507
Denominator for diluted earnings per common share 131,846
131,350
Earnings per common share:
Basic $ 0.52
$ 0.22
Diluted 0.52
0.21

Nine Months Ended September 30,
(Amounts in thousands, except per share data) 2019 2018
Net earnings of Flowserve Corporation $ 183,875
$ 56,568
Dividends on restricted shares not expected to vest —
—
Earnings attributable to common and participating shareholders $ 183,875
$ 56,568
Weighted average shares:
Common stock 131,070
130,784
Participating securities 22
32
Denominator for basic earnings per common share 131,092
130,816
Effect of potentially dilutive securities 605
408
Denominator for diluted earnings per common share 131,697
131,224
Earnings per common share:
Basic $ 1.40
$ 0.43
Diluted 1.40
0.43

Diluted earnings per share above is based upon the weighted average number of shares as determined for basic earnings per share plus shares potentially issuable in conjunction with stock options and Restricted Shares. As a result of the net loss for the three months ended March 31, 2020, we excluded 842,506 of unvested Restricted Shares from the calculation of diluted EPS due to their anti-dilutive effect.

Asbestos-Related Claims

We are a defendant in a substantial number of lawsuits that seek to recover damages for personal injury allegedly caused by exposure to asbestos-containing products manufactured and/or distributed by our heritage companies in the past. While the overall number of asbestos-related claims has generally declined in recent years, there can be no assurance that this trend will continue, or that the average cost per claim will not further increase. Asbestos-containing materials incorporated into any such products were encapsulated and used as internal components of process equipment, and we do not believe that any significant emission of asbestos fibers occurred during the use of this equipment.

Our practice is to vigorously contest and resolve these claims, and we have been successful in resolving a majority of claims with little or no payment. Historically, a high percentage of resolved claims have been covered by applicable insurance or indemnities from other companies, and we believe that a substantial majority of existing claims should continue to be covered by insurance or indemnities, in whole or in part. Accordingly, we have recorded a liability for our estimate of the most likely settlement

Additionally, we have claims pending against certain insurers that, if resolved more favorably than reflected in the recorded receivables, would result in discrete gains in the applicable quarter. We are currently unable to estimate the impact, if any, of unasserted asbestos-related claims, although we expect that future claims would also be subject to then existing indemnities and insurance coverage.

We are currently involved as a potentially responsible party at 5 former public waste disposal sites in various stages of evaluation or remediation. The projected cost of remediation at these sites, as well as our alleged "fair share" allocation, will remain uncertain until all studies have been completed and the parties have either negotiated an amicable resolution or the matter has been judicially resolved. At each site, there are many other parties who have similarly been identified. Many of the other parties identified are financially strong and solvent companies that appear able to pay their share of the remediation costs. Based on our information about the waste disposal practices at these sites and the environmental regulatory process in general, we believe that it is likely that ultimate remediation liability costs for each site will be apportioned among all liable parties, including site owners and waste transporters, according to the volumes and/or toxicity of the wastes shown to have been disposed of at the sites. We believe that our financial exposure for existing disposal sites will not be materially in excess of accrued reserves.

As previously disclosed in our 2018 Annual Report, in 2016 we terminated an employee of an overseas subsidiary after uncovering actions that violated our Code of Business Conduct and may have violated the Foreign Corrupt Practices Act. We completed our internal investigation into the matter and self-reported the potential violation to the United States Department of Justice (the “DOJ”) and the SEC. We previously received a subpoena from the SEC requesting additional information and documentation related to the matter and have completed our response to the subpoena. Since that time there has not been any legal action in respect of this matter. We currently believe that this matter will not have a material adverse financial impact on the Company. Claims

We are also a defendant in a number of other lawsuits, including product liability claims, that are insured, subject to the applicable deductibles, arising in the ordinary course of business, and we are also involved in other uninsured routine litigation incidental to our business. We currently believe none of such litigation, either individually or in the aggregate, is material to our business, operations or overall financial condition. However, litigation is inherently unpredictable, and resolutions or

dispositions of claims or lawsuits by settlement or otherwise could have an adverse impact on our financial position, results of operations or cash flows for the reporting period in which any such resolution or disposition occurs.

Although none of the aforementioned potential liabilities can be quantified with absolute certainty except as otherwise indicated above, we have established or adjusted reserves covering exposures relating to contingencies, to the extent believed to be reasonably estimable and probable based on past experience and available facts. While additional exposures beyond these reserves could exist, they currently cannot be estimated. We will continue to evaluate and update the reserves as necessary and appropriate.

Components of the net periodic cost for retirement and postretirement benefits for the three months ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018 were as follows:~~

U.S.
Defined Benefit Plans

Non-U.S.
Defined Benefit Plans

Postretirement
Medical Benefits
(Amounts in millions) 2019 2018 2019 2018 2019 2018
Service cost $ 5.9
$ 5.5
$ 1.3
$ 1.7
$ —
$ —
Interest cost 4.5
3.9
2.0
2.2
0.2
0.2
Expected return on plan assets (6.4 ) (6.4 ) (1.7 ) (2.1 ) —
—
Amortization of prior service cost —
—
0.1
—
—
—
Amortization of unrecognized net loss (gain) 1.0
1.3
0.6
0.9
—
(0.2 )
Net periodic cost recognized $ 5.0
$ 4.3
$ 2.3
$ 2.7
$ 0.2
$ —

~~Components of the net periodic cost for retirement and postretirement benefits for the nine months ended September 30, 2019 and 2018~~ were as follows:

U.S.
Defined Benefit Plans

Non-U.S.
Defined Benefit Plans

Postretirement
Medical Benefits
(Amounts in millions) 2019 2018 2019 2018 2019 2018
Service cost $ 17.4
$ 16.6
$ 4.2
$ 5.3
$ —
$ —
Interest cost 13.2
11.8
6.5
6.6
0.5
0.6
Expected return on plan assets (19.2 ) (19.3 ) (5.5 ) (6.4 ) —
—
Amortization of prior service cost 0.1
0.1
0.2
—
0.1
0.1
Amortization of unrecognized net loss (gain) 2.8
4.1
2.1
2.7
(0.1 ) (0.6 )
Net periodic cost recognized $ 14.3
$ 13.3
$ 7.5
$ 8.2
$ 0.5
$ 0.1

The components of net periodic cost for retirement and postretirement benefits other than service costs are included in ~~Other~~other income (expense), net in our condensed consolidated statement of income.

Dividends – Generally, our dividend date-of-record is in the last month of the quarter, and the dividend is paid the following month. Any subsequent dividends will be reviewed by our Board of Directors and declared in its ~~discretion dependent on its assessment of our financial situation and business outlook at the applicable time.~~discretion.

Dividends declared per share were as follows:


	Three Months Ended March 31,
	2020		2019
Dividends declared per share	$	0.20	$	0.19

Three Months Ended September 30, Nine Months Ended September 30,
2019 2018 2019 2018
Dividends declared per share $ 0.19
$ 0.19
$ 0.57
$ 0.57

Share Repurchase Program – In 2014, our Board of Directors approved a $500.0 million share repurchase authorization. Our share repurchase program does not have an expiration date and we reserve the right to limit or terminate the repurchase program at any time without notice.

We ~~repurchased 113,656~~repurchased 1,057,115 shares of our outstanding common stock for ~~$5.4~~$32.1 million ~~during~~during the three months ended ~~September 30, 2019,~~March 31, 2020, compared to 0 repurchases of shares for the same period in 2018. During the nine months ended September 30, 2019 ,we repurchased 113,656 shares of our outstanding common stock for $5.4 million, compared to 0 repurchases of shares during the same period in 2018. The primary purpose for the repurchased shares in 2019 was to offset the dilution of outstanding common stock as a result of the vesting of Restricted Shares during the year related to stock-based compensation.2019. As of ~~September 30, 2019,~~March 31, 2020, we had ~~$155.3~~$113.6 million of remaining capacity under our current share repurchase program.

On December 22, 2017, the U.S. enacted the Tax Cuts and Jobs Act of 2017 (the “Tax Reform Act”), which significantly changed U.S. tax law. The Tax Reform Act, among other things, lowered the Company’s U.S. statutory federal income tax rate from 35% to 21% effective January 1, 2018, while implementing a modified territorial tax system. The Tax Reform Act also provides for two new anti-base erosion provisions, the global intangible low-taxed income (“GILTI”) provision and the base-erosion and anti-abuse tax (“BEAT”) provision which effectively creates a new minimum tax on certain future foreign earnings.

For the three months ended ~~September 30, 2019,~~March 31, 2020, we earned ~~$96.2~~$37.8 million before taxes and provided for income taxes of ~~$25.6~~$36.3 million resulting in an effective tax rate of ~~26.7%. For the nine months ended September 30, 2019, we earned $255.2 million before taxes and provided for income taxes of $64.6 million resulting in an effective tax rate of 25.3%~~96.1%. The effective tax rate varied from the U.S. federal statutory rate for the three months ended ~~September 30, 2019~~March 31, 2020 primarily due to the ~~BEAT provision in~~establishment of a valuation allowance against certain deferred tax assets given the ~~Tax Reform Act~~current and ~~state tax. The effective tax rate varied~~anticipated impact to the Company's operations resulting from the ~~U.S. federal statutory rate for~~COVID-19 pandemic and the ~~nine months ended September 30, 2019 primarily due to the BEAT provision in the Tax Reform Act~~distressed oil prices, and ~~state tax, partially offset by~~ the net impact of foreign operations.

For the three months ended ~~September 30, 2018,~~March 31, 2019, we earned ~~$44.4~~$76.1 million before taxes and provided for income taxes of ~~$14.9~~$16.6 million resulting in an effective tax rate of ~~33.6%. For the nine months ended September 30, 2018, we earned $97.7 million before taxes and provided for income taxes of $37.0 million resulting in an effective tax rate of 37.9%.~~21.8% The effective tax rate varied from the U.S. federal statutory rate for the three ~~and nine~~ months ended ~~September 30, 2018~~March 31, 2019 primarily due to the base-erosion and anti-abuse tax (“BEAT”) provision and state tax, partially offset by the net impact of foreign ~~operations,~~operations.

In response to the COVID-19 pandemic, many governments have enacted or are contemplating measures to provide aid and economic stimulus. These measures may include deferring the due dates of tax payments or other changes to their income and non-income-based tax laws. The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), which was enacted on March 27, 2020 in the U.S., includes measures to assist companies, including ~~losses in certain foreign jurisdictions for which~~temporary changes to income and non-income-based tax laws. For the three months ended March 31, 2020, there were no material tax ~~benefit was provided.~~impacts to our condensed consolidated financial statements as they relate to the CARES Act or any other global COVID-19 measures. We continue to monitor additional guidance issued by the U.S. Treasury Department, the Internal Revenue Service and others.

As of ~~September 30, 2019,~~March 31, 2020, the amount of unrecognized tax benefits decreased by ~~$1.8~~$0.9 million from December 31, ~~2018.~~2019. With limited exception, we are no longer subject to U.S. federal income tax audits for years through 2016, state and local income tax audits for years through ~~2012~~2013 or non-U.S. income tax audits for years through ~~2011.~~ 2012.We are currently under examination for various years in ~~Austria,~~ Canada, China, France, Germany, India, Indonesia, Italy, Mexico, the Netherlands, Philippines, Saudi Arabia, ~~Singapore,~~ the U.S.~~, Venezuela,~~ and ~~Vietnam.~~Venezuela.

It is reasonably possible that within the next 12 months the effective tax rate will be impacted by the resolution of some or all of the matters audited by various taxing authorities. It is also reasonably possible that we will have the statute of limitations close in various taxing jurisdictions within the next 12 months. As such, we estimate we could record a reduction in our tax expense of approximately $6 million within the next 12 months.

The following is a summary of the financial information of the reportable segments reconciled to the amounts reported in the condensed consolidated financial statements:

Three Months Ended September 30, 2019
(Amounts in thousands) FPD FCD Subtotal–Reportable Segments Eliminations and All Other Consolidated Total
Sales to external customers $ 682,798
$ 313,746
$ 996,544
$ —
$ 996,544
Intersegment sales (52 ) 1,066
1,014
(1,014 ) —
Segment operating income 85,461
50,046
135,507
(25,947 ) 109,560

Three Months Ended September 30, 2018
FPD FCD Subtotal–Reportable Segments Eliminations and All Other Consolidated Total
Sales to external customers $ 647,298
$ 305,418
$ 952,716
$ —
$ 952,716
Intersegment sales 667
761
1,428
(1,428 ) —
Segment operating income 56,480
56,430
112,910
(50,719 ) 62,191


Three Months Ended March 31, 2020
(Amounts in thousands)	FPD		FCD		Subtotal–Reportable Segments		Eliminations and All Other		Consolidated Total
Sales to external customers	$	635,126	$	259,331	$	894,457	$	—	$	894,457
Intersegment sales	528		997		1,525		(1,525)		—
Segment operating income	39,725		16,699		56,424		(30,872)		25,552

Three Months Ended March 31, 2019
	FPD		FCD		Subtotal–Reportable Segments		Eliminations and All Other		Consolidated Total
Sales to external customers	$	608,759	$	281,292	$	890,051	$	—	$	890,051
Intersegment sales	650		828		1,478		(1,478)		—
Segment operating income	80,463		44,421		124,884		(33,653)		91,231

Nine Months Ended September 30, 2019
(Amounts in thousands) FPD FCD Subtotal–Reportable Segments Eliminations and All Other Consolidated Total
Sales to external customers $ 1,965,523
$ 911,156
$ 2,876,679
$ —
$ 2,876,679
Intersegment sales 1,249
2,716
3,965
(3,965 ) —
Segment operating income 242,085
140,628
382,713
(83,904 ) 298,809

Nine Months Ended September 30, 2018
FPD FCD Subtotal–Reportable Segments Eliminations and All Other Consolidated Total
Sales to external customers $ 1,958,806
$ 886,992
$ 2,845,798
$ —
$ 2,845,798
Intersegment sales 2,038
2,890
4,928
(4,928 ) —
Segment operating income 122,760
136,741
259,501
(105,174 ) 154,327

15.Accumulated Other Comprehensive Income (Loss)

The following table presents the changes in accumulated other comprehensive loss ("AOCL"), net of tax for the three months ended ~~September 30, 2019~~March 31, 2020 and ~~2018:~~

2019 2018
(Amounts in thousands) Foreign currency translation items(1) Pension and other post-retirement effects Cash flow hedging activity Total(1) Foreign currency translation items(1) Pension and other post-retirement effects Cash flow hedging activity Total(1)
Balance - July 1 $ (443,828 ) $ (117,244 ) $ (753 ) $ (561,825 ) $ (426,327 ) $ (110,248 ) $ (965 ) $ (537,540 )
Other comprehensive income (loss) before reclassifications (30,600 ) 2,184
44
(28,372 ) (19,669 ) 771
52
(18,846 )
Amounts reclassified from AOCL —
1,464
—
1,464
—
1,828
—
1,828
Net current-period other comprehensive income (loss) (30,600 ) 3,648
44
(26,908 ) (19,669 ) 2,599
52
(17,018 )
Balance - September 30 $ (474,428 ) $ (113,596 ) $ (709 ) $ (588,733 ) $ (445,996 ) $ (107,649 ) $ (913 ) $ (554,558 )

2019:



	2020														2019
(Amounts in thousands)	Foreign currency translation items(1)		Pension and other post-retirement effects		Cash flow hedging activity		Total(1)		Foreign currency translation items(1)		Pension and other post-retirement effects		Cash flow hedging activity		Total(1)
Balance - January 1	$	(441,364)	$	(137,161)	$	(671)	$	(579,196)	$	(447,925)	$	(120,647)	$	(858)	$	(569,430)
Other comprehensive income (loss) before reclassifications	(81,353)		3,909		54		(77,390)		6,945		(269)		62		6,738
Amounts reclassified from AOCL	—		2,400		—		2,400		—		1,486		—		1,486
Net current-period other comprehensive income (loss)	(81,353)		6,309		54		(74,990)		6,945		1,217		62		8,224
Balance - March 31	$	(522,717)	$	(130,852)	$	(617)	$	(654,186)	$	(440,980)	$	(119,430)	$	(796)	$	(561,206)

(1) Includes foreign currency translation adjustments attributable to noncontrolling interests of ~~$5.2 million and $4.7 million at July 1, 2019 and 2018, respectively, and~~ $5.1 million and ~~$5.0~~$4.5 million at ~~September 30,~~January 1, 2020 and 2019, respectively, and $5.9 millionand ~~2018,~~$5.2 million at March 31, 2020 and 2019, respectively. Includes net investment hedge ~~gains~~losses of ~~$9.3~~ $8.5 million and ~~$1.5~~$12.2 million, net of deferred taxes, at ~~September 30,~~March 31, 2020 and 2019, ~~and 2018,~~ respectively. Amounts in parentheses indicate debits.

The following table presents the reclassifications out of AOCL:

Three Months Ended September 30,
(Amounts in thousands) Affected line item in the statement of income 2019(1) 2018(1)
Pension and other postretirement effects
Amortization of actuarial losses(2) Other income (expense), net $ (1,564 ) $ (2,061 )
Prior service costs(2) Other income (expense), net (131 ) (78 )

Tax benefit 231
311

Net of tax $ (1,464 ) $ (1,828 )


		Three Months Ended March 31,
(Amounts in thousands)	Affected line item in the statement of income	2020(1)		2019(1)












Pension and other postretirement effects
Amortization of actuarial losses(2)	Other income (expense), net	$	(2,657)	$	(1,555)
Prior service costs(2)	Other income (expense), net	(141)		(138)
	Tax benefit	398		207
	Net of tax	$	(2,400)	$	(1,486)

(1) Amounts in parentheses indicate decreases to income. None of the reclass amounts have a noncontrolling interest component.

(2) These accumulated other comprehensive loss components are included in the computation of net periodic pension cost. See Note 1211 for additional details.

~~The following table presents the changes in AOCL, net of tax for the nine months ended September 30, 2019 and 2018:~~

2019 2018
(Amounts in thousands) Foreign currency translation items(1) Pension and other post-retirement effects Cash flow hedging activity Total(1) Foreign currency translation items(1) Pension and other post-retirement effects Cash flow hedging activity Total(1)
Balance - January 1 $ (447,925 ) $ (120,647 ) $ (858 ) $ (569,430 ) $ (384,779 ) $ (115,755 ) $ (1,090 ) $ (501,624 )
Other comprehensive (loss) income before reclassifications (26,503 ) 2,576
149
(23,778 ) (61,217 ) 2,536
177
(58,504 )
Amounts reclassified from AOCL —
4,475
—
4,475
—
5,570
—
5,570
Net current-period other comprehensive (loss) income (26,503 ) 7,051
149
(19,303 ) (61,217 ) 8,106
177
(52,934 )
Balance - September 30 $ (474,428 ) $ (113,596 ) $ (709 ) $ (588,733 ) $ (445,996 ) $ (107,649 ) $ (913 ) $ (554,558 )

(1) Includes foreign currency translation adjustments attributable to noncontrolling interests of $4.5 million and $3.8 million at January 1, 2019 and 2018, respectively, and $5.1 million and $5.0 million at September 30, 2019 and 2018, respectively. Includes net investment hedge losses of $5.9 million and $19.8 million, net of deferred taxes, for the three months ended September 30, 2019 and 2018, respectively. Amounts in parentheses indicate debits.

~~The following table presents the reclassifications out of AOCL:~~

Nine Months Ended September 30,
(Amounts in thousands) Affected line item in the statement of income 2019(1) 2018(1)
Pension and other postretirement effects
Amortization of actuarial losses(2) Other income (expense), net $ (4,727 ) $ (6,231 )
Prior service costs(2) Other income (expense), net (408 ) (237 )
Tax benefit 660
898
Net of tax $ (4,475 ) $ (5,570 )

~~(1) Amounts in parentheses indicate decreases to income. None of the reclass amounts have a noncontrolling interest component.~~

~~(2) These accumulated other comprehensive loss components are included in the computation of net periodic pension cost. See Note 12 for additional details.~~

16.Realignment and Transformation Programs

In the second quarter of 2018, we launched and committed resources to our Flowserve 2.0 Transformation ("Flowserve 2.0 Transformation"), a program designed to transform our business model to drive operational excellence, reduce complexity, accelerate growth, improve organizational health and better leverage our existing global platform. We anticipate that the Flowserve 2.0 Transformation will result in restructuring charges, non-restructuring charges and other related transformation expenses (primarily professional services, project management and related travel expenses). For the three months ended ~~September 30,~~March 31, 2020 and 2019, ~~and 2018,~~ we incurred Flowserve 2.0 Transformation related expenses of ~~$5.1~~$5.6 million and ~~$24.0 million, respectively. For the nine months ended September 30, 2019 and 2018 we incurred Flowserve 2.0 Transformation related expenses of $21.0 million and $27.4~~$8.4 million, respectively. The Flowserve 2.0 Transformation expenses incurred primarily consist of professional services, project management and related travel costs recorded in selling, general and administrative ("SG~~&A.~~ &A") expenses.

In 2015, we initiated realignment programs to better align costs and improve long-term efficiency, including manufacturing optimization through the consolidation of facilities, reduction in our workforce and divestiture of certain non-strategic assets ~~(the “Realignment~~(“Realignment Programs”). The Realignment Programs consist of both restructuring and non-restructuring charges. Restructuring charges represent costs associated with the relocation or reorganization of certain business activities and facility closures and include related severance costs. Non-restructuring charges are primarily employee severance associated with workforce reductions to reduce redundancies. Expenses are primarily reported in ~~COS~~cost of sales ("COS") or SG&A, as applicable, in our condensed consolidated statements of income. These Realignment Programs have been substantially completed as of ~~December~~March 31, ~~2018. We estimate that the total investment in these programs will be approximately $350 million. As of September 30, 2019,~~2020 and we have incurred charges of ~~$346.9~~$362.4 million ~~since the inception of the programs.~~

Generally, the aforementioned charges will be paid in cash, except for asset write-downs, which are non-cash charges. The following is a summary of total charges, net of adjustments, related to the Realignment and Flowserve 2.0 Transformation program charges:



	Three Months Ended March 31, 2020
(Amounts in thousands)	FPD		FCD		Subtotal–Reportable Segments		Eliminations and All Other		Consolidated Total
Realignment Charges
Restructuring Charges
COS	$	1,680	$	(105)	$	1,575	$	—	$	1,575
SG&A	104		10		114		(16)		98

	$	1,784	$	(95)	$	1,689	$	(16)	$	1,673
Non-Restructuring Charges
COS	$	126	$	7,759	$	7,885	$	—	$	7,885
SG&A	485		50		535		645		1,180
	$	611	$	7,809	$	8,420	$	645	$	9,065
Total Realignment Charges
COS	$	1,806	$	7,654	$	9,460	$	—	$	9,460
SG&A	589		60		649		629		$	1,278

Total	$	2,395	$	7,714	$	10,109	$	629	$	10,738

Transformation Charges

SG&A	$	—	$	—	$	—	$	5,643	$	5,643

	$	—	$	—	$	—	$	5,643	$	5,643

Total Realignment and Transformation Charges
COS	$	1,806	$	7,654	$	9,460	$	—	$	9,460
SG&A	589		60		649		6,272		6,921

Total	$	2,395	$	7,714	$	10,109	$	6,272	$	16,381

Three Months Ended September 30, 2018
(Amounts in thousands) FPD FCD Subtotal–Reportable Segments Eliminations and All Other Consolidated Total
Realignment Charges
Restructuring Charges
     COS $ 3,487
$ 918
$ 4,405
$ —
$ 4,405
     SG&A (205 ) 1
(204 ) 9
(195 )
$ 3,282
$ 919
$ 4,201
$ 9
$ 4,210
Non-Restructuring Charges

     COS $ 4,433
$ (630 ) $ 3,803
$ —
$ 3,803
     SG&A (818 ) 225
(593 ) 3,707
3,114
$ 3,615
$ (405 ) $ 3,210
$ 3,707
$ 6,917
Total Realignment Charges
     COS $ 7,920
$ 288
$ 8,208
$ —
$ 8,208
     SG&A (1,023 ) 226
(797 ) 3,716
$ 2,919
Total $ 6,897
$ 514
$ 7,411
$ 3,716
$ 11,127

Transformation Charges
     SG&A $ —
$ ��
$ —
$ 23,986
$ 23,986
$ —
$ —
$ —
$ 23,986
$ 23,986

Total Realignment and Transformation Charges
     COS $ 7,920
$ 288
$ 8,208
$ —
$ 8,208
     SG&A (1,023 ) $ 226
$ (797 ) $ 27,702
$ 26,905
Total $ 6,897
$ 514
$ 7,411
$ 27,702
$ 35,113

Nine Months Ended September 30, 2019
(Amounts in thousands) FPD FCD Subtotal–Reportable Segments Eliminations and All Other Consolidated Total
Realignment Charges
Restructuring Charges
     COS $ 1,892
$ 1,291
$ 3,183
$ —
$ 3,183
     SG&A(1) (17,072 ) 413
(16,659 ) —
(16,659 )
$ (15,180 ) $ 1,704
$ (13,476 ) $ —
$ (13,476 )
Non-Restructuring Charges

     COS $ 9,531
$ 72
$ 9,603
$ —
$ 9,603
     SG&A 770
34
804
2,237
3,041
$ 10,301
$ 106
$ 10,407
$ 2,237
$ 12,644
Total Realignment Charges
     COS $ 11,423
$ 1,363
$ 12,786
$ —
$ 12,786
     SG&A (16,302 ) 447
(15,855 ) 2,237
(13,618 )
Total $ (4,879 ) $ 1,810
$ (3,069 ) $ 2,237
$ (832 )

Transformation Charges
     SG&A —
—
—
21,044
21,044
$ —
$ —
$ —
$ 21,044
$ 21,044

Total Realignment and Transformation Charges
     COS $ 11,423
$ 1,363
$ 12,786
$ —
$ 12,786
     SG&A (16,302 ) 447
(15,855 ) 23,281
7,426
Total $ (4,879 ) $ 1,810
$ (3,069 ) $ 23,281
$ 20,212



	Three Months Ended March 31, 2019
(Amounts in thousands)	FPD		FCD		Subtotal–Reportable Segments		Eliminations and All Other		Consolidated Total
Realignment Charges
Restructuring Charges
COS	$	2,622	$	456	$	3,078	$	—	$	3,078
SG&A(1)	(18,471)		338		(18,133)		—		(18,133)

	$	(15,849)	$	794	$	(15,055)	$	—	$	(15,055)
Non-Restructuring Charges
COS	$	2,396	$	26	$	2,422	$	—	$	2,422
SG&A	174		—		174		529		703
	$	2,570	$	26	$	2,596	$	529	$	3,125
Total Realignment Charges
COS	$	5,018	$	482	$	5,500	$	—	$	5,500
SG&A	(18,297)		338		(17,959)		529		$	(17,430)

Total	$	(13,279)	$	820	$	(12,459)	$	529	$	(11,930)

Transformation Charges

SG&A	$	—	$	—	$	—	$	8,413	$	8,413

	$	—	$	—	$	—	$	8,413	$	8,413

Total Realignment and Transformation Charges
COS	$	5,018	$	482	$	5,500	$	—	$	5,500
SG&A	(18,297)		$	338	(17,959)		8,942		(9,017)

Total	$	(13,279)	$	820	$	(12,459)	$	8,942	$	(3,517)

Nine Months Ended September 30, 2018
(Amounts in thousands) FPD FCD Subtotal–Reportable Segments Eliminations and All Other Consolidated Total
Restructuring Charges
     COS $ 10,532
$ 3,370
$ 13,902
$ —
$ 13,902
     SG&A 917
345
1,262
37
1,299
$ 11,449
$ 3,715
$ 15,164
$ 37
$ 15,201
Non-Restructuring Charges

     COS $ 17,738
$ (47 ) $ 17,691
$ —
$ 17,691
     SG&A 3,778
947
4,725
5,723
10,448
$ 21,516
$ 900
$ 22,416
$ 5,723
$ 28,139
Total Realignment Charges
     COS $ 28,270
$ 3,323
$ 31,593
$ —
$ 31,593
     SG&A 4,695
1,292
5,987
5,760
11,747
Total $ 32,965
$ 4,615
$ 37,580
$ 5,760
$ 43,340

Transformation Charges
     SG&A —
—
—
27,352
27,352
$ —
$ —
$ —
$ 27,352
$ 27,352

Total Realignment and Transformation Charges
     COS $ 28,270
$ 3,323
$ 31,593
$ —
$ 31,593
     SG&A 4,695
1,292
5,987
33,112
39,099
Total $ 32,965
$ 4,615
$ 37,580
$ 33,112
$ 70,692

Inception to Date
(Amounts in thousands) FPD FCD Subtotal–Reportable Segments Eliminations and All Other Consolidated Total
Realignment Charges
Restructuring Charges
     COS $ 110,934
$ 28,316
$ 139,250
$ —
$ 139,250
     SG&A 19,838
9,868
29,706
317
30,023
     Income tax expense(1) 18,700
1,800
20,500
—
20,500
$ 149,472
$ 39,984
$ 189,456
$ 317
$ 189,773
Non-Restructuring Charges

     COS $ 78,015
$ 13,790
$ 91,805
$ 8
$ 91,813
     SG&A 40,074
7,546
47,620
17,739
65,359
$ 118,089
$ 21,336
$ 139,425
$ 17,747
$ 157,172
Total Realignment Charges
     COS $ 188,949
$ 42,106
$ 231,055
$ 8
$ 231,063
     SG&A 59,912
17,414
77,326
18,056
95,382
     Income tax expense(1) 18,700
1,800
20,500
—
20,500
Total $ 267,561
$ 61,320
$ 328,881
$ 18,064
$ 346,945


	Inception to Date
(Amounts in thousands)	FPD		FCD		Subtotal–Reportable Segments		Eliminations and All Other		Consolidated Total
Realignment Charges
Restructuring Charges
COS	$	111,871	$	29,573	$	141,444	$	—	$	141,444
SG&A	20,404		10,021		30,425		301		30,726
Income tax expense(1)	14,700		1,800		16,500		—		16,500
	$	146,975	$	41,394	$	188,369	$	301	$	188,670
Non-Restructuring Charges
COS	$	80,048	$	23,219	$	103,267	$	263	$	103,530
SG&A(2)	41,893		7,780		49,673		20,575		70,248
	$	121,941	$	30,999	$	152,940	$	20,838	$	173,778
Total Realignment Charges
COS	$	191,919	$	52,792	$	244,711	$	263	$	244,974
SG&A(2)	62,297		17,801		80,098		20,876		100,974
Income tax expense(1)	14,700		1,800		16,500		—		16,500
Total	$	268,916	$	72,393	$	341,309	$	21,139	$	362,448

____________________________

Restructuring charges represent costs associated with the relocation or reorganization of certain business activities and facility closures and include costs related to employee severance at closed facilities, contract termination costs, asset write-downs and other costs. Severance costs primarily include costs associated with involuntary termination benefits. Contract termination costs include costs related to the termination of operating leases or other contract termination costs. Asset write-downs include accelerated depreciation of fixed assets, accelerated amortization of intangible assets, divestiture of certain non-strategic assets and inventory write-downs. Other costs generally include costs related to employee relocation, asset relocation, vacant facility costs (i.e., taxes and insurance) and other charges.

The following is a summary of restructuring charges, net of adjustments, for the Realignment Programs:



	Three Months Ended March 31, 2020
(Amounts in thousands)	Severance		Contract Termination		Asset Write-Downs/ (Gains)		Other		Total

COS	$	1,683	$	—	$	(3)	$	(105)	$	1,575
SG&A	139		—		(3)		(38)		98

Total	$	1,822	$	—	$	(6)	$	(143)	$	1,673

Three Months Ended September 30, 2019
(Amounts in thousands) Severance Contract Termination Asset Write-Downs/ (Gains) Other Total
COS $ (729 ) $ 3
$ 19
$ 1,715
$ 1,008
SG&A (9 ) —
5
41
37
Total $ (738 ) $ 3
$ 24
$ 1,756
$ 1,045

Three Months Ended September 30, 2018
(Amounts in thousands) Severance Contract Termination Asset Write-Downs Other Total
COS $ (590 ) $ 3
$ 449
$ 4,543
$ 4,405
SG&A (46 ) —
10
(159 ) (195 )
Total $ (636 ) $ 3
$ 459
$ 4,384
$ 4,210



	Three Months Ended March 31, 2019
(Amounts in thousands)	Severance		Contract Termination		Asset Write-Downs		Other		Total

COS	$	1,679	$	39	$	233	$	1,127	$	3,078
SG&A(1)	316		—		(18,502)		53		(18,133)

Total	$	1,995	$	39	$	(18,269)	$	1,180	$	(15,055)

_______________________

Nine Months Ended September 30, 2019
(Amounts in thousands) Severance Contract Termination Asset Write-Downs/ (Gains) Other Total
COS $ 1,099
$ 51
$ (799 ) $ 2,832
$ 3,183
SG&A(1) 1,609
—
(18,496 ) 228
(16,659 )
Total $ 2,708
$ 51
$ (19,295 ) $ 3,060
$ (13,476 )

(1) Primarily consists of gains from the sales of non-strategic manufacturing facilities that are included in our Realignment Programs.

Nine Months Ended September 30, 2018
(Amounts in thousands) Severance Contract Termination Asset Write-Downs Other Total
COS $ 2,764
$ 3
$ 3,898
$ 7,237
$ 13,902
SG&A 1,246
—
10
43
1,299
Total $ 4,010
$ 3
$ 3,908
$ 7,280
$ 15,201

The following is a summary of total inception to date restructuring charges, net of adjustments, related to the Realignment Programs:

Inception to Date
(Amounts in thousands) Severance Contract Termination Asset Write-Downs Other Total
     COS $ 86,259
$ 958
$ 23,536
$ 28,497
$ 139,250
     SG&A 33,354
43
(16,807 ) 13,433
30,023
     Income tax expense(1) —
—
—
20,500
20,500
Total $ 119,613
$ 1,001
$ 6,729
$ 62,430
$ 189,773


	Inception to Date
(Amounts in thousands)	Severance		Contract Termination		Asset Write-Downs		Other		Total
COS	$	89,026	$	965	$	22,550	$	28,903	$	141,444
SG&A	34,095		43		(16,743)		13,331		30,726
Income tax expense(1)	—		—		—		16,500		16,500
Total	$	123,121	$	1,008	$	5,807	$	58,734	$	188,670

(1) Income tax expense includes exit taxes as well as non-deductible costs.

The following represents the activity, primarily severance, related to the restructuring reserve for the Realignment Programs for the ~~nine~~three months ended ~~September 30, 2019~~March 31, 2020 and ~~2018:~~2019:




(Amounts in thousands)	2020		2019
Balance at January 1	$	6,703	$	11,927
Charges, net of adjustments	1,658		3,213
Cash expenditures	(1,827)		(3,221)
Other non-cash adjustments, including currency	(216)		(314)
Balance at March 31	$	6,318	$	11,605

(Amounts in thousands) 2019 2018
Balance at December 31 $ 11,927
$ 39,230
Charges, net of adjustments 5,817
11,314
Cash expenditures (8,196 ) (15,935 )
Other non-cash adjustments, including currency (461 ) (15,196 )
Balance at September 30 $ 9,087
$ 19,413

Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and notes thereto, and the other financial data included elsewhere in this Quarterly Report. The following discussion should also be read in conjunction with our audited consolidated financial statements, and notes thereto, and "Management’s Discussion and Analysis of Financial Condition and Results of Operations" ("MD&A") included in our ~~2018~~2019 Annual Report.

We are a world-leading manufacturer and aftermarket service provider of comprehensive flow control systems. We develop and manufacture precision-engineered flow control equipment integral to the movement, control and protection of the flow of materials in our customers’ critical processes. Our product portfolio of pumps, valves, seals, automation and aftermarket services supports global infrastructure industries, including oil and gas, chemical, power generation and water management, as well as general industrial markets where our products and services add value. Through our manufacturing platform and global network of Quick Response Centers ("QRCs"), we offer a broad array of aftermarket equipment services, such as installation, advanced diagnostics, repair and retrofitting. We currently employ ~~approximately~~approximately 17,000 ~~employees~~employees in more than 50 ~~countries.~~countries.

Our business model is significantly influenced by the capital spending of global infrastructure industries for the placement of new products into service and aftermarket services for existing operations. The worldwide installed base of our products is an important source of aftermarket revenue, where products are expected to ensure the maximum operating time of many key industrial processes. Over the past several years, we have significantly invested in our aftermarket strategy to provide local support to drive customer investments in our offerings and use of our services to replace or repair installed products. The aftermarket portion of our business also helps provide business stability during various economic periods. The aftermarket service and solutions business, which is primarily served by our ~~network~~network of ~~173~~ 169 QRCs located around the globe, provides a variety of service offerings for our customers including spare parts, service solutions, product life cycle solutions and other value-added services. It is generally a higher margin business compared to our original equipment business and a key component of our business strategy.

Our operations are conducted through two business segments that are referenced throughout this MD&A:

~~FPD~~•Flowserve Pump Division ("FPD") for custom, highly-engineered pumps, pre-configured industrial pumps, pump systems, mechanical seals, auxiliary systems and replacement parts and related services; and

~~FCD~~•Flow Control Division ("FCD") for engineered and industrial valves, control valves, actuators and controls and related services.

In the second quarter of 2018, we launched and committed resources to our Flowserve 2.0 Transformation, a program designed to transform our business model to drive operational excellence, reduce complexity, accelerate growth, improve organizational health and better leverage our existing global platform, which is further discussed in Note 17 to our condensed consolidated financial statements included in this Quarterly Report.

In connection with the Flowserve 2.0 Transformation, we have determined that there are meaningful operational synergies and benefits to combine our previously reported EPD and IPD segments into one reportable segment, FPD. The reorganization of the segments reflects how our chief operating decision maker (Chief Executive Officer) regularly reviews financial information to allocate resources and assess performance. The reorganization of the segments was implemented during the first quarter of 2019 and prior periods presentations were retrospectively adjusted to conform to the new reportable segment composition. This change had no impact on our historical consolidated financial position or results of operations. Please refer to Note 15 to our condensed consolidated financial statements included in this Quarterly Report for further discussion regarding the segment combination.

Our business segments share a focus on industrial flow control technology and have a number of common customers. These segments also have complementary product offerings and technologies that are often combined in applications that provide us a net competitive advantage. Our segments also benefit from our global footprint and our economies of scale in reducing administrative and overhead costs to serve customers more cost effectively. For example, our segments share leadership for operational support functions, such as sales, research and development, marketing and supply chain.

In the second quarter of 2018, we launched and committed resources to our Flowserve 2.0 Transformation, a program designed to transform our business model to drive operational excellence, reduce complexity, accelerate growth, improve organizational health and better leverage our existing global platform, which is further discussed in Note 16 to our condensed consolidated financial statements included in this Quarterly Report.

The reputation of our product portfolio is built on more than 50 well-respected brand names such as Worthington, IDP, Valtek, Limitorque, Durco, Argus, Edward, ~~Anchor/Darling, SIHI, Halberg~~Valbart and Durametallic, which we believe to be one of the most comprehensive in the industry. Our products and services are sold either directly or through designated channels to more than 10,000 companies, including some of the world’s leading engineering, procurement and construction ("EPC") firms, original equipment manufacturers, distributors and end users.

We continue to leverage our QRC network to be positioned as near to customers as possible for service and support in order to capture valuable aftermarket business. Along with ensuring that we have the local capability to sell, install and service our equipment in remote regions, it is equally imperative to continuously improve our global operations. We continue to ~~expand~~enhance our global supply chain capability to meet global customer demands and ~~ensure~~improve the quality and timely delivery of our products. Additionally, we continue to devote resources to improving the supply chain processes across our business segments to find areas of synergy and cost reduction and to improve our supply chain management capability to ~~ensure it can~~ meet global customer demands. We also remain focused on improving on-time delivery and quality, while managing warranty costs as a percentage of sales across our global operations, through the assistance of a focused Continuous Improvement Process ("CIP") initiative. ~~The~~

Over the past ~~year,~~several months, we have seen the profound impact that the COVID-19 pandemic is having on human health, the global economy and society at large. The pandemic has also adversely impacted, continues to adversely impact, and is expected to continue to adversely impact for its duration, our operations and financial performance.In response, we have been monitoring and continue to actively monitor the impacts of the COVID-19 pandemic on all aspects of our business and geographies, including through a cross-functional crisis management team established to respond to the changing conditions.

We remain committed to providing the critical support, products and services that our customers rely on, and currently believe that we will emerge from these events well positioned for long-term growth, but we cannot reasonably estimate with certainty the duration and severity of the COVID-19 pandemic or its ultimate impact on the global economy, our business or our financial condition and results.

Health and Safety of Our Associates

Our first priority has been and continues to be to protect the health and safety of our associates, suppliers and customers around the world. We are incredibly proud of the great teamwork exhibited by our employees around the world who are doing their best to address these challenging times and provide products and services to our customers.

We have implemented recommended policies and practices to protect our workforce so they can safely and effectively carry out their vital work. We have instituted global restrictions on non-essential travel and implemented a work-from-home policy for all non-essential employees who are able to do so. We are also following guidelines from global health experts and have taken stringent steps to protect our employees going to work in all of our facilities so that we can continue to manufacture critical technologies and equipment, including providing face coverings and other personal protective equipment, enhanced cleaning of sites and the implementation of social distancing protocols.

Our employees and facilities have a key role in keeping essential infrastructure and industries operating, including oil and gas, water, chemical, power generation and other essential industries, such as food and beverage and healthcare. While some of our facilities have experienced periods of temporary closures in accordance with decrees, orders and laws in their respective countries and geographies, as of May 6, 2020, approximately 95% of our facilities were operational and continue to make essential products and provide services for our customers. However, the measures described above, combined with continued employee costs and under-absorption of manufacturing costs as a result of temporary closures and work-from-home policies, have had and are expected to continue to have an adverse impact on our financial performance throughout the remainder of the pandemic.

During the first three months of 2020, the COVID-19 pandemic’s reduction in global demand for oil and gas, coupled with excessive supply due to disagreements between the Organization of Petroleum Exporting Countries (“OPEC”) and other oil producing nations, led to extreme volatility in global markets and in oil prices. These conditions have adversely impacted our customers, particularly in the oil and gas markets. For example, these conditions drove a significant and broad-based decrease in customer planned capital spending and, as a result, many of our large customers have announced double-digit capital expenditure budget decreases for the remainder of 2020.

Additionally, the rapidly evolving impacts of the COVID-19 pandemic have caused reduced activity levels in our aftermarket business due to deferred spending of our customers' repair and maintenance budgets, including the impact of restricted access to our customers' facilities.

These trends are likely to continue during the duration of the COVID-19 pandemic as various actions implemented to combat the pandemic will continue to reduce demand for oil and gas. As a result, we have experienced ~~a stabilization in business conditions~~decreased bookings, sales and ~~gained both traction~~financial performance and ~~momentum in certain~~anticipate this continuing throughout the remainder of ~~our key markets. With continued stability in oil prices, at improved levels beginning~~the pandemic.Additionally, we expect the headwinds in the ~~second half of 2017, our large-project business is showing signs of recovery, while we expect increased geopolitical uncertainty~~oil and gas markets that have resulted in, and are likely to continue to ~~challenge~~result in, reduced capital expenditures and bookings for oil and gas customers ~~maintenance~~to continue at least until oil demand and ~~short cycle investment~~prices stabilize, which may not occur until after the pandemic subsides.

Many of our suppliers have also experienced varying lengths of production and shipping conditions related to the COVID-19 pandemic, particularly in highly affected countries such as China, India and Italy. These conditions have had an adverse effect on the speed at which we can manufacture and ship our products to customers, and have also led to an increase in logistics, transportation and freight costs, requiring that we diversify our supply chain and, in some instances, source materials

from new suppliers. Additionally, these conditions have in some cases impacted our ability to deliver products to customers on time, which has in turn led to an increase in backlog at some our manufacturing sites. These disruptions in our supply chain have continued throughout the of month of April and we expect they will continue as the COVID-19 pandemic continues.

We have also engaged in a number of cost savings measures in order to help mitigate certain of the adverse effects of the COVID-19 pandemic on our financial results, including a freeze on all non-essential open employment requisitions, cancellation of merit-based payroll increases for 2020, reduction of capital expenditures to below $60 million and cuts in other discretionary spending. Together, we are planning approximately $100 million of cost reductions in 2020 as compared to 2019, due in large part to the effects of COVID-19. We continue to evaluate additional cost savings measures and will continue to implement such measures in the near ~~term.~~term in order to reduce the impact of the COVID-19 pandemic on our financial results.

As we continue to manage our business through this unprecedented time of uncertainty and market volatility, we will remain focused on the health and safety of our associates, suppliers, customers, and will continue to provide essential products and services to our customers.

RESULTS OF OPERATIONS — Three ~~and nine~~ months ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~

Throughout this discussion of our results of operations, we discuss the impact of fluctuations in foreign currency exchange rates. We have calculated currency effects on operations by translating current year results on a monthly basis at prior year exchange rates for the same periods.

We anticipate that the Flowserve 2.0 Transformation will result in restructuring charges, non-restructuring charges and other related transformation expenses. For the three months ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~ we incurred Flowserve 2.0 Transformation related expenses of ~~$5.1~~$5.6 million and ~~$24.0 million, respectively. For the nine months ended September 30, 2019 and 2018 we incurred Flowserve 2.0 Transformation related expenses of $21.0 million and $27.4~~$8.4 million, respectively. The Flowserve 2.0 Transformation expenses incurred primarily consist of professional services, project management and related travel costs recorded in SG~~&A.~~ &A expenses.

The Realignment Programs, initiated in 2015, as discussed Note 1716 to our condensed consolidated financial statements included in this Quarterly Report, were substantially complete as of ~~December~~March 31, ~~2018, with an estimated total investment in these programs~~2020. As of ~~approximately $350 million.~~March 31, 2020, we have incurred charges of $362.4 million since the inception of the programs.

The total charges for Realignment Programs and Flowserve 2.0 Transformation by segment are detailed below for the three ~~and nine~~ months ended ~~September 30, 2019~~March 31, 2020 and ~~2018:~~2019:


	Three Months Ended March 31, 2020

(Amounts in thousands)	FPD		FCD		Subtotal–Reportable Segments		Eliminations and All Other		Consolidated Total
Total Realignment and Transformation Charges
COS	$	1,806	$	7,654	$	9,460	$	—	$	9,460
SG&A	589		60		649		6,272		6,921

Total	$	2,395	$	7,714	$	10,109	$	6,272	$	16,381


	Three Months Ended March 31, 2019

(Amounts in thousands)	FPD		FCD		Subtotal–Reportable Segments		Eliminations and All Other		Consolidated Total
Total Realignment and Transformation Charges
COS	$	5,018	$	482	$	5,500	$	—	$	5,500
SG&A(1)	(18,297)		338		(17,959)		8,942		(9,017)

Total	$	(13,279)	$	820	$	(12,459)	$	8,942	$	(3,517)

Three Months Ended September 30, 2019
(Amounts in thousands) FPD FCD Subtotal–Reportable Segments Eliminations and All Other Consolidated Total
Total Realignment and Transformation Charges
COS $ 2,606
$ 814
$ 3,420
$ —
$ 3,420
SG&A 380
—
380
6,052
6,432
Total $ 2,986
$ 814
$ 3,800
$ 6,052
$ 9,852

Three Months Ended September 30, 2018
(Amounts in thousands) FPD FCD Subtotal–Reportable Segments Eliminations and All Other Consolidated Total
Total Realignment and Transformation Charges
COS $ 7,920
$ 288
$ 8,208
$ —
$ 8,208
SG&A (1,023 ) 226
(797 ) 27,702
26,905
Total $ 6,897
$ 514
$ 7,411
$ 27,702
$ 35,113

Table of Contents

Nine Months Ended September 30, 2019

(Amounts in thousands)
FPD FCD Subtotal–Reportable Segments Eliminations and All Other Consolidated Total
Total Realignment and Transformation Charges
COS $ 11,423
$ 1,363
$ 12,786
$ —
$ 12,786
SG&A(1) (16,302 ) 447
(15,855 ) 23,281
7,426
Total $ (4,879 ) $ 1,810
$ (3,069 ) $ 23,281
$ 20,212

Nine Months Ended September 30, 2018
(Amounts in thousands) FPD FCD Subtotal–Reportable Segments Eliminations and All Other Consolidated Total
Total Realignment and Transformation Charges
COS $ 28,270
$ 3,323
$ 31,593
$ —
$ 31,593
SG&A 4,695
1,292
5,987
33,112
39,099
Total $ 32,965
$ 4,615
$ 37,580
$ 33,112
$ 70,692

(1) ~~Includes~~Primarily consists of gains from the sales of non-strategic manufacturing facilities that are included in our Realignment Programs.

Consolidated Results

Bookings, Sales and Backlog


	Three Months Ended March 31,
(Amounts in millions)	2020		2019
Bookings	$	976.9	$	1,066.8
Sales	894.5		890.1

Three Months Ended September 30,
(Amounts in millions) 2019 2018
Bookings $ 1,023.4
$ 1,010.4
Sales 996.5
952.7

Nine Months Ended September 30,
(Amounts in millions) 2019 2018
Bookings $ 3,188.4
$ 2,974.5
Sales 2,876.7
2,845.8

We define a booking as the receipt of a customer order that contractually engages us to perform activities on behalf of our customer with regard to manufacturing, service or support. Bookings recorded and subsequently canceled within the year-to-date period are excluded from year-to-date bookings. Bookings for the three months ended ~~September 30, 2019 increased~~March 31, 2020 decreased by ~~$13.0~~$89.9 million, or ~~1.3%~~8.4%, as compared with the same period in ~~2018.~~2019. The ~~increase~~decrease included negative currency effects of approximately ~~$22~~$20 million. The ~~increase~~decrease was driven by ~~higher bookings in the power generation, chemical and water management industries, partially offset by decreased~~lower bookings in the oil and gas, and ~~general industries. The increase was driven by customer original equipment bookings. The three months ended September 30, 2018 included bookings of approximately $7 million related~~ to ~~the two FPD locations and associated product lines that were divested in the third quarter of 2018.~~

Bookings for the nine months ended September 30, 2019 increased by $213.9 million, or 7.2%, as compared with the same period in 2018. The increase included negative currency effects of approximately $97 million. The increase was primarily driven by customer original equipment bookings. The increase was driven by higher bookings in the oil and gas,a lesser extent, chemical, power generation and water management industries, partially offset by ~~decreased~~increased bookings in ~~the~~ general industries. The ~~nine months ended September 30, 2018 included bookings of approximately $31 million related to the two FPD locations and associated product lines that were divested in the third quarter of 2018.~~decrease was primarily driven by customer original equipment bookings.

Sales for the three months ended ~~September 30, 2019~~March 31, 2020 increased by ~~$43.8~~$4.4 million, or ~~4.6%~~0.5%, as compared with the same period in ~~2018.~~2019. The increase included negative currency effects of approximately ~~$22~~$15 million. ~~The~~The increased sales were ~~more heavily weighted towards aftermarket~~driven by original equipment sales, with increased sales into ~~North America, Asia Pacific,~~ the Middle East, North America and ~~Europe, partially~~

~~Table of Contents~~

Latin America, substantially offset by decreased sales into ~~Latin America~~Europe, Africa and Africa. The three months ended September 30, 2018 included sales of approximately $5 million related to the two FPD locations and associated product lines that were divested in the third quarter of 2018.Asia Pacific. Net sales to international customers, including export sales ~~from~~from the U.S., were approximately 62% and 63% of total sales for the three months ended ~~September 30,~~March 31, 2020 and 2019, ~~and 2018.~~respectively.

Sales for the nine months ended September 30, 2019 increased by $30.9 million, or 1.1%, as compared with the same period in 2018. The increase included negative currency effects of approximately $83 million. The increase was driven by aftermarket sales, with increased sales into Europe, North America and Asia Pacific, partially offset by decreased sales into the Middle East and Latin America. The nine months ended September 30, 2018 included sales of approximately $44 million related to the two FPD locations and associated product lines that were divested in the third quarter of 2018. Net sales to international customers, including export sales from the U.S., were approximately 63% of total sales for the nine months ended September 30, 2019 and 2018.

Backlog represents the aggregate value of booked but uncompleted customer orders and is influenced primarily by bookings, sales, cancellations and currency effects. Backlog of ~~$2,137.5~~$2,182.3 million at ~~September 30, 2019~~March 31, 2020 increased by ~~$245.9~~$25.3 million, or ~~13.0%~~1.2%, as compared with December 31, ~~2018.~~2019. Currency effects provided a decrease of approximately ~~$47~~$57 million. Approximately 33% of the backlog at ~~September 30,~~March 31, 2020 and December 31, 2019 was related to aftermarket orders. Backlog includes our unsatisfied (or partially unsatisfied) performance obligations related to contracts having an original expected duration in excess of one year of approximately ~~$579~~$660 million, as discussed in Note 2 to our condensed consolidated financial statements included in this Quarterly Report.

Gross Profit and Gross Profit Margin


	Three Months Ended March 31,
(Amounts in millions, except percentages)	2020			2019
Gross profit	$	266.0		$	294.1
Gross profit margin	29.7		%	33.0		%

Three Months Ended September 30,
(Amounts in millions, except percentages) 2019 2018
Gross profit $ 333.7
$ 308.5
Gross profit margin 33.5 % 32.4 %

Nine Months Ended September 30,
(Amounts in millions, except percentages) 2019 2018
Gross profit $ 945.8
$ 866.0
Gross profit margin 32.9 % 30.4 %

Gross profit for the three months ended ~~September 30, 2019 increased~~March 31, 2020 decreased by ~~$25.2~~$28.1 million, or ~~8.2%~~9.6%, as compared with the same period in ~~2018.~~2019. Gross profit margin for the three months ended ~~September 30, 2019~~March 31, 2020 of ~~33.5% increased~~29.7% decreased from ~~32.4%~~33.0% for the same period in ~~2018.~~2019. The ~~increase~~decrease in gross profit margin was primarily ~~attributed~~due to the ~~favorable~~unfavorable impact of ~~revenue recognized on higher margin projects, lower~~underutilized capacity from the COVID-19 pandemic resulting in $8.4 million of manufacturing costs being expensed and other related costs, increased realignment charges associated with our Realignment Programs and ~~improvements in operational efficiency.~~a sales mix shift to lower margin original equipment sales. Aftermarket sales represented approximately 49% of ~~total~~total sales, as compared with approximately ~~48%~~53% of total sales for the same period in ~~2018.~~2019.

~~Gross profit~~

Table of Contents

Selling, General and Administrative Expense


	Three Months Ended March 31,
(Amounts in millions, except percentages)	2020			2019
SG&A	$	243.6		$	205.2
SG&A as a percentage of sales	27.2		%	23.1		%

SG&A for the ~~nine~~three months ended ~~September 30, 2019~~March 31, 2020 increased by ~~$79.8~~$38.4 million, or ~~9.2%~~18.7%, as compared with the same period in 2018. Gross profit margin for the nine months ended September 30, 2019 of 32.9% increased from 30.4% for the same period in 2018. The increase in gross profit margin was primarily attributed to the favorable impact of revenue recognized on higher margin projects, sales mix shift to higher margin aftermarket sales, lower realignment charges associated with our Realignment Programs, improvements in operational efficiency and a $7.7 million charge related to the write-down of inventory in the second quarter of 2018 that did not recur. Aftermarket sales represented approximately 51% of total sales, as compared with approximately 49% of total sales for the same period in 2018.

~~Table of Contents~~

~~Selling, General and Administrative Expense~~

Three Months Ended September 30,
(Amounts in millions, except percentages) 2019 2018
SG&A $ 226.2
$ 241.9
SG&A as a percentage of sales 22.7 % 25.4 %

Nine Months Ended September 30,
(Amounts in millions, except percentages) 2019 2018
SG&A $ 655.0
$ 711.8
SG&A as a percentage of sales 22.8 % 25.0 %

~~SG&A for the three months ended September 30, 2019 decreased by $15.7 million, or 6.5%, as compared with the same period in 2018.~~2019. Currency effects yielded a decrease of approximately ~~$4 million.~~$3 million. SG&A as a percentage of sales for the three months ended ~~September 30, 2019 decreased 270~~March 31, 2020 increased 410 basis points as compared with the same period in ~~2018~~2019 primarily due to ~~lower charges related to our Flowserve 2.0 Transformation program, decreased broad-based annual incentive compensation expense and~~ the ~~reversal of a loss contingency related to a legal matter.~~

SG&A for the nine months ended September 30, 2019 decreased by $56.8 million, or 8.0%, as compared with the same period in 2018. Currency effects yielded a decrease of approximately $16 million. SG&A as a percentage of sales for the nine months ended September 30, 2019 decreased 220 basis points as compared with the same period in 2018 primarily due to lower charges related to our Flowserve 2.0 Transformation program, decreased broad-based annual incentive compensation expense,favorable impacts resulting from gains from the sales of non-strategic manufacturing facilities in the first quarter of 2019 ~~favorable impacts resulting from the 2018 divestiture of two FPD locations and a $9.7 million impairment charge related to long-lived assets in the second quarter of 2018~~ that did not ~~recur.~~recur and a $8.5 million write-down of accounts receivables and contract assets related to a contract with an oil and gas customer in Latin America, partially offset by decreased broad-based annual incentive compensation expense.

~~Loss on Sale of Businesses~~

Three Months Ended September 30,
(Amounts in millions) 2019 2018
Loss on sale of businesses $ —
$ (7.7 )

Nine Months Ended September 30,
(Amounts in millions) 2019 2018
Loss on sale of businesses $ —
$ (7.7 )

The loss on sale of businesses for the three and nine months ended September 30, 2018 is due to the loss of $7.7 million from the divestiture of two FPD locations and related product lines in the third quarter of 2018. See Note 3 to our condensed consolidated financial statements included in this Quarterly Report for additional information on these transactions.

Net Earnings from Affiliates


	Three Months Ended September 30,					Three Months Ended March 31,
(Amounts in millions)	2019		2018		(Amounts in millions)	2020		2019
Net earnings from affiliates	$	2.1	$	3.3	Net earnings from affiliates	$	3.2	$	2.3

Nine Months Ended September 30,
(Amounts in millions) 2019 2018
Net earnings from affiliates $ 8.1
$ 7.9

Net earnings from affiliates for the three months ended ~~September 30, 2019 decreased $1.2~~March 31, 2020 increased $0.9 million, or ~~36.4%~~39.1%, as compared with the same period in ~~2018.~~2019. The ~~decrease~~increase was primarily a result of ~~decreased~~increased earnings of our FPD joint venture in ~~India.~~South Korea.

~~Net earnings from affiliates for the nine months ended September 30, 2019 were relatively flat when compared with prior year.~~

Operating Income and Operating Margin


	Three Months Ended March 31,
(Amounts in millions, except percentages)	2020			2019
Operating income	$	25.6		$	91.2
Operating income as a percentage of sales	2.9		%	10.2		%

Three Months Ended September 30,
(Amounts in millions, except percentages) 2019 2018
Operating income $ 109.6
$ 62.2
Operating income as a percentage of sales 11.0 % 6.5 %

Nine Months Ended September 30,
(Amounts in millions, except percentages) 2019 2018
Operating income $ 298.8
$ 154.3
Operating income as a percentage of sales 10.4 % 5.4 %

Operating income for the three months ended ~~September 30, 2019 increased~~March 31, 2020 decreased by ~~$47.4~~$65.6 million, or ~~76.2%~~71.9%, as compared with the same period in ~~2018.~~2019. The ~~increase~~decrease included negative currency effects of approximately $2 $1 million. The ~~increase~~decrease was primarily a result of the ~~$25.2~~$28.1 million decrease in gross profit and the $38.4 million increase in ~~gross profit, the $15.7 million decrease in~~ SG~~&A and the loss of $7.7 million from the divestiture of two FPD locations and related product lines in the third quarter of 2018 that did not recur.~~&A.

Operating income for the nine months ended September 30, 2019 increased by $144.5 million, or 93.6%, as compared with the same period in 2018. The increase included negative currency effects of approximately $11 million. The increase was primarily a result of the $79.8 million increase in gross profit, the $56.8 million decrease in SG&A and the loss of $7.7 million from the divestiture of two FPD locations and related product lines in the third quarter of 2018 that did not recur.

Interest Expense and Interest Income


	Three Months Ended March 31,
(Amounts in millions)	2020		2019
Interest expense	$	(13.0)	$	(14.0)
Interest income	1.7		2.0

Three Months Ended September 30,
(Amounts in millions) 2019 2018
Interest expense $ (14.0 ) $ (13.8 )
Interest income 2.3
1.3

Nine Months Ended September 30,
(Amounts in millions) 2019 2018
Interest expense $ (42.0 ) $ (43.6 )
Interest income 6.5
4.2

Interest expense for the three months ended September 30, 2019 remained relatively constant as compared with the same period in 2018. Interest income for the three months ended September 30, 2019 increased $1.0 million as compared with the same period in 2018. The increase in interest income was primarily attributable to higher average cash balances compared with same period in 2018.

Interest expense and interest income for the ~~nine~~three months ended ~~September 30, 2019~~March 31, 2020 decreased ~~$1.6~~$1.0 million and ~~increased $2.3~~$0.3 million, respectively, as compared with the same period in ~~2018.~~2019. The decrease in interest expense was primarily attributable to lower borrowings ~~in 2019 and currency impacts on interest expense associated~~compared with ~~our outstanding Euro-denominated senior notes, as compared to the~~ same period in ~~2018.~~2019. The ~~increase~~decrease in interest income was ~~primarily attributable~~partially due to ~~higher~~lower interest rates on our average cash balances compared with same period in ~~2018.~~

Other Income (Expense), Net


	Three Months Ended March 31,
(Amounts in millions)	2020		2019
Other income (expense), net	$	23.5	$	(3.1)

Three Months Ended September 30,
(Amounts in millions) 2019 2018
Other income (expense), net $ (1.6 ) $ (5.3 )

Nine Months Ended September 30,
(Amounts in millions) 2019 2018
Other income (expense), net $ (8.1 ) $ (17.2 )

Other income, ~~(expense),~~ net for the three months ended ~~September 30,~~March 31, 2020 increased $26.6 million from an expense of $3.1 million in 2019, ~~decreased $3.7 million, as compared with the same period in 2018, due~~due primarily to a ~~$4.0~~$23.6 million ~~decrease~~increase in ~~losses~~gains from transactions in currencies other than our sites' functional currencies ~~partially offset by~~and a ~~$0.7~~$4.7 million increase ~~in losses~~in gains arising from transactions on foreign exchange contracts. The net change was primarily due to the foreign currency exchange rate movements in ~~the~~the Mexican peso, Euro, Singapore dollar and Brazilian real ~~and Indian rupee~~ in relation to the U.S. dollar during the three months ended ~~September 30, 2019,~~March 31, 2020, as compared with the same period in ~~2018.~~2019.

Other income (expense), net for the nine months ended September 30, 2019 decreased $9.1 million, as compared with the same period in 2018, due primarily to a $11.7 million decrease in losses from transactions in currencies other than our sites' functional currencies, partially offset by a $2.1 million increase in losses arising from transactions on foreign exchange contracts. The net change was primarily due to the foreign currency exchange rate movements in the Indian rupee, Euro, Mexican peso and Brazilian real in relation to the U.S. dollar during the nine months ended September 30, 2019, as compared with the same period in 2018.

Three Months Ended September 30,
(Amounts in millions, except percentages) 2019 2018
Provision for income taxes $ 25.6
$ 14.9
Effective tax rate 26.7 % 33.6 %


	Three Months Ended March 31,
(Amounts in millions, except percentages)	2020			2019
Provision for income taxes	$	36.3		$	16.6
Effective tax rate	96.1		%	21.8		%

Nine Months Ended September 30,
(Amounts in millions, except percentages) 2019 2018
Provision for income taxes $ 64.6
$ 37.0
Effective tax rate 25.3 % 37.9 %

The effective tax rate of ~~26.7%~~96.1% for the three months ended ~~September 30, 2019 decreased~~March 31, 2020 increased from ~~33.6%~~21.8% for the same period in ~~2018.~~2019. The effective tax rate varied from the U.S. federal statutory rate for the three months ended ~~September 30, 2019~~March 31, 2020 primarily due to the ~~BEAT provision in~~establishment of a valuation allowance against certain deferred tax assets given the ~~Tax Reform Act~~current and ~~state tax. The effective tax rate varied~~anticipated impact to the Company's operations resulting from the ~~U.S. federal statutory rate for~~COVID-19 pandemic and the ~~three months ended September 30, 2018 primarily due to~~distressed oil prices, and the net impact of ~~taxes on~~ foreign ~~operations, including losses in certain foreign jurisdictions for which no tax benefit was provided.~~ operations.Refer to Note 1413 to our condensed consolidated financial statements included in this Quarterly Report for further discussion.

The effective tax rate of 25.3% for the nine months ended September 30, 2019 decreased from 37.9% for the same period in 2018. The effective tax rate varied from the U.S. federal statutory rate for the nine months ended September 30, 2019 primarily due to the BEAT provision in the Tax Reform Act and state tax, partially offset by the net impact of foreign operations. The effective tax rate varied from the U.S. federal statutory rate for the nine months ended September 30, 2018 primarily due to the net impact of taxes on foreign operations, including losses in certain foreign jurisdictions for which no tax benefit was provided. Refer to Note 14 to our condensed consolidated financial statements included in this Quarterly Report for further discussion.

Other Comprehensive Income (Loss)


	Three Months Ended March 31,
(Amounts in millions)	2020		2019
Other comprehensive income (loss)	$	(75.0)	$	8.2

Three Months Ended September 30,
(Amounts in millions) 2019 2018
Other comprehensive income (loss) $ (26.9 ) $ (17.0 )

Nine Months Ended September 30,
(Amounts in millions) 2019 2018
Other comprehensive income (loss) $ (19.3 ) $ (52.9 )

Other comprehensive loss for the three months ended ~~September 30, 2019~~March 31, 2020 increased ~~$9.9~~$83.2 million from ~~a loss~~an income of ~~$17.0~~$8.2 million in ~~the same period in 2018.~~2019. The increased loss was primarily due to foreign currency translation adjustments resulting primarily from exchange rate movements of the Mexican peso, Euro, British pound ~~Chinese yuan~~ and ~~Mexican peso~~Indian rupee versus the U.S. dollar during the three months ended ~~September 30, 2019,~~March 31, 2020, as compared with the same period in ~~2018.~~2019.

Other comprehensive loss for the nine months ended September 30, 2019 decreased $33.6 million from a loss of $52.9 million in the same period in 2018. The decreased loss was primarily due to foreign currency translation adjustments resulting primarily from exchange rate movements of the Euro, British pound and Mexican peso versus the U.S. dollar during the nine months ended September 30, 2019, as compared with the same period in 2018.

We conduct our operations through two business segments based on the type of product and how we manage the business. We evaluate segment performance and allocate resources based on each segment’s operating income. The key operating results for our two business segments, FPD and FCD, are discussed below.

Flowserve Pump Division Segment Results

Our largest business segment is FPD, through which we design, manufacture, distribute and service highly custom engineered pumps, pre-configured industrial pumps, pump systems, mechanical seals, auxiliary systems and replacement parts (collectively referred to as "original equipment") and related services. FPD primarily operates in the oil and gas, power generation, chemical and general industries. FPD operates in 50 countries with 4139 manufacturing facilities worldwide, 1413 of which are located in Europe, 1312 in North America, eight in Asia and six in Latin America, and it operates ~~145~~142 QRCs, including those co-located in manufacturing facilities and/or shared with FCD.



			Page
			No.
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements.
Condensed Consolidated Statements of Income and Condensed Consolidated Statements of Comprehensive Income (Loss) – Three Months Ended ~~September 30, 2019~~March 31 , 20 20 and ~~2018~~20 19 (unaudited)			1
~~Condensed Consolidated Statements of Income and Condensed Consolidated Statements of Comprehensive Income – Nine Months Ended September 30, 2019 and 2018 (unaudited)~~			2
Condensed Consolidated Balance Sheets – ~~September 30, 2019~~March 31, 20 20 and December 31, ~~2018~~20 19 (unaudited)			32
Condensed Consolidated Statements of Stockholders' Equity – Three Months Ended ~~September 30, 2019~~March 31, 20 20 and ~~2018~~20 19 (unaudited)			43
~~Condensed Consolidated Statements of Stockholders' Equity – Nine Months Ended September 30, 2019 and 2018 (unaudited)~~			5
Condensed Consolidated Statements of Cash Flows – ~~Nine~~Three Months Ended ~~September 30, 2019~~ March 31, 20 20 and ~~2018~~20 19 (unaudited)			64
Notes to Condensed Consolidated Financial Statements (unaudited)			75
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			3126
Item 3. Quantitative and Qualitative Disclosures About Market Risk			4537
Item 4. Controls and Procedures			4538

PART II – OTHER INFORMATION
Item 1. Legal Proceedings			4639
Item 1A. Risk Factors			4639
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			4640
Item 3. Defaults Upon Senior Securities			4742
Item 4. Mine Safety Disclosures			4742
Item 5. Other ~~information~~I nformation			4742
Item 6. Exhibits			4742
SIGNATURES			4843


	Three Months Ended March 31, 2020
	Shares	Weighted Average Grant-Date Fair Value
Number of unvested shares:
Outstanding - January 1, 2020	1,690,600	$	46.71
Granted	657,765	48.21
Vested	(398,102)	45.41
Forfeited	(159,134)	53.86
Outstanding as of March 31, 2020	1,791,129	$	46.92




(Amounts in thousands, except per share data)	Nine Months Ended September 30,
	2019			2018
Sales	$	2,876,679		$	2,845,798
Cost of sales	(1,930,881		)	(1,979,807		)
Gross profit	945,798			865,991
Selling, general and administrative expense	(655,046		)	(711,845		)
Loss on sale of businesses	—			(7,727		)
Net earnings from affiliates	8,057			7,908
Operating income	298,809			154,327
Interest expense	(42,025		)	(43,645		)
Interest income	6,494			4,237
Other income (expense), net	(8,098		)	(17,206		)
Earnings before income taxes	255,180			97,713
Provision for income taxes	(64,646		)	(37,028		)
Net earnings, including noncontrolling interests	190,534			60,685
Less: Net earnings attributable to noncontrolling interests	(6,659		)	(4,117		)
Net earnings attributable to Flowserve Corporation	$	183,875		$	56,568
Net earnings per share attributable to Flowserve Corporation common shareholders:
Basic	$	1.40		$	0.43
Diluted	1.40			0.43



	U.S. Defined Benefit Plans						Non-U.S. Defined Benefit Plans						Postretirement Medical Benefits
(Amounts in millions)	2019			2018			2019			2018			2019		2018
Service cost	$	5.9		$	5.5		$	1.3		$	1.7		$	—	$	—
Interest cost	4.5			3.9			2.0			2.2			0.2		0.2
Expected return on plan assets	(6.4		)	(6.4		)	(1.7		)	(2.1		)	—		—
Amortization of prior service cost	—			—			0.1			—			—		—
Amortization of unrecognized net loss (gain)	1.0			1.3			0.6			0.9			—		(0.2		)
Net periodic cost recognized	$	5.0		$	4.3		$	2.3		$	2.7		$	0.2	$	—



	Nine Months Ended September 30, 2018
(Amounts in thousands)	FPD		FCD			Subtotal–Reportable Segments		Eliminations and All Other		Consolidated Total
Restructuring Charges
COS	$	10,532	$	3,370		$	13,902	$	—	$	13,902
SG&A	917		345			1,262		37		1,299
	$	11,449	$	3,715		$	15,164	$	37	$	15,201
Non-Restructuring Charges
COS	$	17,738	$	(47	)	$	17,691	$	—	$	17,691
SG&A	3,778		947			4,725		5,723		10,448
	$	21,516	$	900		$	22,416	$	5,723	$	28,139
Total Realignment Charges
COS	$	28,270	$	3,323		$	31,593	$	—	$	31,593
SG&A	4,695		1,292			5,987		5,760		11,747
Total	$	32,965	$	4,615		$	37,580	$	5,760	$	43,340

Transformation Charges
SG&A	—		—			—		27,352		27,352
	$	—	$	—		$	—	$	27,352	$	27,352

Total Realignment and Transformation Charges
COS	$	28,270	$	3,323		$	31,593	$	—	$	31,593
SG&A	4,695		1,292			5,987		33,112		39,099
Total	$	32,965	$	4,615		$	37,580	$	33,112	$	70,692


~~Item 2.~~	~~Management’s Discussion and Analysis of Financial Condition and Results of Operations.~~


~~Item 3.~~	~~Quantitative and Qualitative Disclosures about Market Risk.~~


~~Item 2.~~	~~Unregistered Sales of Equity Securities and Use of Proceeds.~~



	Total Number of Shares Tendered		Average Price per Share		Total Number of Shares Purchased as Part of Publicly Announced Program	Maximum Number of Shares (or Approximate Dollar Value) That May Yet Be Purchased Under the Program (in millions)
Period	Total Number of Shares Tendered		Average Price per Share
July 1 - 31	—		$	—	—	$	160.7
August 1 - 31	822	(1)	43.07		—	160.7
September 1 - 30	115,461	(2)	47.75		113,656	155.3
Total	116,283		$	47.72	113,656


	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Program	Maximum Number of Shares (or Approximate Dollar Value) of Shares That May Yet Be Purchased Under the Program (in millions)
Period
January 1 - 31	322	(1)	$	50.43	—	$	145.7
February 1 - 29	270,021	(2)	40.86		200,000	137.6
March 1 - 31	883,298	(3)	28.00		857,115	113.6
Total	1,153,641		$	31.02	1,057,115


~~(1)~~	~~Represents shares that were tendered by employees to satisfy minimum tax withholding amounts for Restricted Shares at an average price per share of $43.07.~~



~~Exhibit No.~~						~~Description~~

3.1						Restated Certificate of Incorporation of Flowserve Corporation (incorporated by reference to Exhibit 3.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2013).

3.2						Flowserve Corporation By-Laws, as amended and restated effective ~~May 23,~~December 12, 2019 (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K dated ~~May 24,~~December 12, 2019).





10.1 +						~~Credit Agreement, dated July 16, 2019, among~~Amendment to the Flowserve Corporation ~~Bank~~Annual Incentive Plan, effective as of America, N.A., as swing line lender, letter of credit issuer and administrative agent, and the other lenders referred to therein (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K dated July 19, 2019).January 1, 2020.*



31.1+						Certification of Principal Executive Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2+						Certification of Principal Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1++						Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2++						Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS						XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH						XBRL Taxonomy Extension Schema Document

101.CAL						XBRL Taxonomy Extension Calculation Linkbase Document

101.LAB						XBRL Taxonomy Extension Label Linkbase Document

101.PRE						XBRL Taxonomy Extension Presentation Linkbase Document

101.DEF						XBRL Taxonomy Extension Definition Linkbase Document

104						The cover page from the Company’s Quarterly Report on Form 10-Q for the period ended March 31, 2020, formatted in Inline XBRL (included as Exhibit 101)


~~Item 1.~~	~~Financial Statements.~~


				FLOWSERVE CORPORATION

Date:			May 7, 2020	~~FLOWSERVE CORPORATION~~

~~Date:~~	~~October 30, 2019~~	/s/ R. Scott Rowe
				R. Scott Rowe
				President and Chief Executive Officer (Principal Executive Officer)



Date:	~~October 30, 2019~~May 7, 2020	/s/ ~~Lee S. Eckert~~Amy B. Schwetz
		~~Lee S. Eckert~~Amy B. Schwetz
		Senior Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)