UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED ~~SEPTEMBER~~JUNE 30, ~~2020~~2021

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM to .

Commission File No. 1-13179

FLOWSERVE CORPORATION

(Exact name of registrant as specified in its charter)

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,~~700,

Irving,

Texas

75039

(Address of principal executive offices)

(Zip Code)

( 972 ) 443-6500

(Registrant’s telephone number, including area code)

Former name, former address and former fiscal year, if changed since last report: N/A

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol

Name of Each Exchange on Which Registered

Common Stock, $1.25 Par Value

FLS

New York Stock Exchange

~~1.25% Senior Notes due 2022~~

~~FLS22A~~

~~New York Stock Exchange~~

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 the 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

☐

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 ~~November 6, 2020~~July 30, 2021 there were ~~130,263,432~~130,262,789 ~~sha~~shares ~~res~~ of the issuer’s common stock outstanding.

FLOWSERVE CORPORATION

FORM 10-Q

TABLE OF CONTENTS


			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~~June 30, ~~2020~~2021 and ~~2019~~2020 (unaudited)			1
Condensed Consolidated Statements of Income and Condensed Consolidated Statements of Comprehensive Income (Loss) – ~~Nine~~Six Months Ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~2020 (unaudited)			2
Condensed Consolidated Balance Sheets – ~~September~~Condensed Consolidated Balance Sheets – June 30, ~~2020~~2021 and December 31, ~~2019~~2020 (unaudited)			3
Condensed Consolidated Statements of ~~Stockholders'~~Shareholders' Equity – Three Months Ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~2020 (unaudited)			4
Condensed Consolidated Statements of Stockholders' Equity – ~~Nine~~Six Months Ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~2020 (unaudited)			5
Condensed Consolidated Statements of Cash Flows – ~~Nine~~Six Months Ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~2020 (unaudited)			6
Notes to Condensed Consolidated Financial Statements (unaudited)			7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			3435
Item 3. Quantitative and Qualitative Disclosures About Market Risk			5349
Item 4. Controls and Procedures			5349

PART II – OTHER INFORMATION
Item 1. Legal Proceedings			5550
Item 1A. Risk Factors			5550
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			5550
Item 3. Defaults Upon Senior Securities			5852
Item 4. Mine Safety Disclosures			5852
Item 5. Other Information			5852
Item 6. Exhibits			5852
SIGNATURES			5953

Table of Co ~~ntents~~Contents

PART I — FINANCIAL INFORMATION

Item 1.Financial Statements.

FLOWSERVE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

(Amounts in thousands, except per share data) Three Months Ended September 30,
2020 2019
Sales $ 924,301 $ 995,709
Cost of sales (639,092) (662,856)
Gross profit 285,209 332,853
Selling, general and administrative expense (200,729) (230,362)
Net earnings from affiliates 2,842 2,087
Operating income 87,322 104,578
Interest expense (14,710) (13,981)
Interest income 673 2,253
Other income (expense), net (963) (8,477)
Earnings before income taxes 72,322 84,373
Provision for income taxes (18,672) (22,410)
Net earnings, including noncontrolling interests 53,650 61,963
Less: Net earnings attributable to noncontrolling interests (2,647) (2,121)
Net earnings attributable to Flowserve Corporation $ 51,003 $ 59,842
Net earnings per share attributable to Flowserve Corporation common shareholders:
Basic $ 0.39 $ 0.46
Diluted 0.39 0.45


(Amounts in thousands, except per share data)	Three Months Ended June 30,
	2021		2020
Sales	$	898,178	$	925,012
Cost of sales	(619,940)		(655,305)
Gross profit	278,238		269,707
Selling, general and administrative expense	(210,789)		(229,343)
Gain on sale of business	1,806		0
Net earnings from affiliates	2,907		3,088
Operating income	72,162		43,452
Interest expense	(14,322)		(12,935)

Interest income	465		1,149
Other income (expense), net	(7,850)		(18,907)
Earnings before income taxes	50,455		12,759
Provision for income taxes	(2,711)		(4,485)
Net earnings, including noncontrolling interests	47,744		8,274
Less: Net earnings attributable to noncontrolling interests	(2,390)		(2,142)
Net earnings attributable to Flowserve Corporation	$	45,354	$	6,132
Net earnings per share attributable to Flowserve Corporation common shareholders:
Basic	$	0.35	$	0.05
Diluted	0.35		0.05

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

(Amounts in thousands) Three Months Ended September 30,
2020 2019
Net earnings, including noncontrolling interests $ 53,650 $ 61,963
Other comprehensive income (loss):
Foreign currency translation adjustments, net of taxes of $140 and $852, respectively 25,204 (30,600)
Pension and other postretirement effects, net of taxes of $(421) and $(231), respectively (976) 3,648
Cash flow hedging activity 41 44
Other comprehensive income (loss) 24,269 (26,908)
Comprehensive income (loss), including noncontrolling interests 77,919 35,055
Comprehensive (income) loss attributable to noncontrolling interests (2,643) (2,055)
Comprehensive income (loss) attributable to Flowserve Corporation $ 75,276 $ 33,000


(Amounts in thousands)	Three Months Ended June 30,
	2021		2020
Net earnings, including noncontrolling interests	$	47,744	$	8,274
Other comprehensive income (loss):
Foreign currency translation adjustments, net of taxes of $(6,401) and $(1,188), respectively	13,998		19,048
Pension and other postretirement effects, net of taxes of $(472) and $(444), respectively	2,059		1,758
Cash flow hedging activity	15		44
Other comprehensive income (loss)	16,072		20,850
Comprehensive income (loss), including noncontrolling interests	63,816		29,124
Comprehensive (income) loss attributable to noncontrolling interests	(2,403)		(2,079)
Comprehensive income (loss) attributable to Flowserve Corporation	$	61,413	$	27,045

See accompanying notes to condensed consolidated financial statements.

Table of Co ~~ntents~~Contents

FLOWSERVE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

(Amounts in thousands, except per share data) Nine Months Ended September 30,
2020 2019
Sales $ 2,742,826 $ 2,871,517
Cost of sales (1,921,451) (1,931,756)
Gross profit 821,375 939,761
Selling, general and administrative expense (675,523) (665,625)
Net earnings from affiliates 9,125 8,057
Operating income 154,977 282,193
Interest expense (40,608) (42,025)
Interest income 3,571 6,494
Other income (expense), net 7,558 (15,153)
Earnings before income taxes 125,498 231,509
Provision for income taxes (59,175) (58,607)
Net earnings, including noncontrolling interests 66,323 172,902
Less: Net earnings attributable to noncontrolling interests (6,890) (6,659)
Net earnings attributable to Flowserve Corporation $ 59,433 $ 166,243
Net earnings per share attributable to Flowserve Corporation common shareholders:
Basic $ 0.46 $ 1.27
Diluted 0.45 1.26



(Amounts in thousands, except per share data)	Six Months Ended June 30,
	2021		2020
Sales	$	1,755,486	$	1,818,526
Cost of sales	(1,226,348)		(1,282,360)
Gross profit	529,138		536,166
Selling, general and administrative expense	(409,104)		(474,794)
Gain on sale of business	1,806		0
Net earnings from affiliates	6,425		6,283
Operating income	128,265		67,655
Interest expense	(31,101)		(25,898)
Loss on extinguishment of debt	(7,610)		0
Interest income	1,067		2,898
Other income (expense), net	(19,213)		19,295
Earnings before income taxes	71,408		63,950
Provision for income taxes	(6,503)		(41,453)
Net earnings, including noncontrolling interests	64,905		22,497
Less: Net earnings attributable to noncontrolling interests	(5,471)		(4,243)
Net earnings attributable to Flowserve Corporation	$	59,434	$	18,254
Net earnings per share attributable to Flowserve Corporation common shareholders:
Basic	$	0.46	$	0.14
Diluted	0.45		0.14

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(Amounts in thousands) Nine Months Ended September 30,
2020 2019
Net earnings, including noncontrolling interests $ 66,323 $ 172,902
Other comprehensive income (loss):
Foreign currency translation adjustments, net of taxes of $6,114 and $2,043, respectively (41,022) (26,503)
Pension and other postretirement effects, net of taxes of $(1,263) and $(660), respectively
7,091 7,051
Cash flow hedging activity 139 149
Other comprehensive income (loss) (33,792) (19,303)
Comprehensive income (loss), including noncontrolling interests 32,531 153,599
Comprehensive (income) loss attributable to noncontrolling interests (7,662) (7,258)
Comprehensive income (loss) attributable to Flowserve Corporation $ 24,869 $ 146,341



(Amounts in thousands)	Six Months Ended June 30,
	2021		2020
Net earnings, including noncontrolling interests	$	64,905	$	22,497
Other comprehensive income (loss):
Foreign currency translation adjustments, net of taxes of $(5,747) and $5,974, respectively	3,109		(77,013)
Pension and other postretirement effects, net of taxes of $(942) and $(842), respectively	6,318		8,067
Cash flow hedging activity	217		98
Other comprehensive income (loss)	9,644		(68,848)
Comprehensive income (loss), including noncontrolling interests	74,549		(46,351)
Comprehensive (income) loss attributable to noncontrolling interests	(5,633)		(5,018)
Comprehensive income (loss) attributable to Flowserve Corporation	$	68,916	$	(51,369)

See accompanying notes to condensed consolidated financial statements.

Table of Co ~~ntents~~Contents

FLOWSERVE CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(Amounts in thousands, except par value) September 30, December 31,
2020 2019
ASSETS
Current assets:
Cash and cash equivalents $ 921,178 $ 670,980
Accounts receivable, net of allowance for expected credit losses of $76,061 and $53,412, respectively 750,897 795,538
Contract assets, net of allowance for expected credit losses of $3,043 at September 30, 2020 310,130 272,914
Inventories, net 714,489 660,837
Prepaid expenses and other 109,451 106,478
Total current assets 2,806,145 2,506,747
Property, plant and equipment, net of accumulated depreciation of $1,068,613 and $1,013,207, respectively 551,011 563,564
Operating lease right-of-use assets, net 166,850 186,218
Goodwill 1,204,609 1,193,010
Deferred taxes 32,206 54,879
Other intangible assets, net 171,246 180,805
Other assets, net of allowance for expected credit losses of $97,897 and $101,439, respectively 241,509 253,054
Total assets $ 5,173,576 $ 4,938,277
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable $ 428,870 $ 447,582
Accrued liabilities 423,117 401,385
Contract liabilities 198,380 221,095
Debt due within one year 8,581 11,272
Operating lease liabilities 34,634 36,108
Total current liabilities 1,093,582 1,117,442
Long-term debt due after one year 1,701,082 1,365,977
Operating lease liabilities 133,348 151,523
Retirement obligations and other liabilities 541,721 530,994
Shareholders’ equity:
Commitments and contingencies (See Note 11)
Common shares, $1.25 par value 220,991 220,991
Shares authorized – 305,000
Shares issued – 176,793
Capital in excess of par value 499,561 501,045
Retained earnings 3,625,291 3,652,244
Treasury shares, at cost – 46,775 and 46,262 shares, respectively (2,059,666) (2,051,583)
Deferred compensation obligation 6,100 8,334
Accumulated other comprehensive loss (618,856) (584,292)
Total Flowserve Corporation shareholders’ equity 1,673,421 1,746,739
Noncontrolling interests 30,422 25,602
Total equity 1,703,843 1,772,341
Total liabilities and equity $ 5,173,576 $ 4,938,277


(Amounts in thousands, except par value)	June 30,		December 31,
	2021		2020
ASSETS
Current assets:
Cash and cash equivalents	$	630,397	$	1,095,274
Accounts receivable, net of allowance for expected credit losses of $74,782 and $75,176, respectively	729,551		753,462
Contract assets, net of allowance for expected credit losses of $3,038 and $3,205, respectively	262,231		277,734
Inventories, net	690,145		667,228

Prepaid expenses and other	128,364		110,635
Total current assets	2,440,688		2,904,333
Property, plant and equipment, net of accumulated depreciation of $1,107,765 and $1,093,348, respectively	526,101		556,873
Operating lease right-of-use assets, net	204,075		208,125
Goodwill	1,213,103		1,224,886
Deferred taxes	46,904		30,538
Other intangible assets, net	160,653		168,496
Other assets, net of allowance for expected credit losses of $67,770 and $67,842, respectively	227,145		221,426
Total assets	$	4,818,669	$	5,314,677

LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	393,608	$	440,199
Accrued liabilities	422,161		463,222
Contract liabilities	209,092		194,227
Debt due within one year	9,599		8,995

Operating lease liabilities	35,256		34,990
Total current liabilities	1,069,716		1,141,633
Long-term debt due after one year	1,307,149		1,717,911
Operating lease liabilities	173,388		176,246
Retirement obligations and other liabilities	497,724		517,566
Commitments and contingencies (See Note 11)	0		0
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	494,221		502,227
Retained earnings	3,677,117		3,670,543
Treasury shares, at cost – 46,806 and 46,768 shares, respectively	(2,058,279)		(2,059,309)
Deferred compensation obligation	7,077		6,164
Accumulated other comprehensive loss	(600,143)		(609,625)
Total Flowserve Corporation shareholders’ equity	1,740,984		1,730,991
Noncontrolling interests	29,708		30,330
Total equity	1,770,692		1,761,321
Total liabilities and equity	$	4,818,669	$	5,314,677

See accompanying notes to condensed consolidated financial statements.

Table of Co ~~ntents~~Contents

FLOWSERVE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF ~~STOCKHOLDERS’~~SHAREHOLDERS’ 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 — July 1, 2020 176,793 $ 220,991 $ 499,152 $ 3,600,645 (46,873) $ (2,064,302) $ 6,036 $ (643,129) $ 27,779 $ 1,647,172
Stock activity under stock plans — — (5,220) — 98 4,636 64 — — (520)
Stock-based compensation — — 5,629 — — — — — — 5,629
Net earnings — — — 51,003 — — — — 2,647 53,650
Cash dividends declared — — — (26,357) — — — — — (26,357)
Other comprehensive income (loss), net of tax — — — — — — — 24,273 (4) 24,269
Other, net — — — — — — 0 — 0 0
Balance — September 30, 2020 176,793 $ 220,991 $ 499,561 $ 3,625,291 (46,775) $ (2,059,666) $ 6,100 $ (618,856) $ 30,422 $ 1,703,843
Balance — July 1, 2019 $ 176,793 $ 220,991 $ 493,037 $ 3,570,119 (45,943) $ (2,036,857) $ 8,219 $ (567,007) $ 23,477 $ 1,711,979
Stock activity under stock plans — — (260) — 4 149 58 — — (53)
Stock-based compensation — — 7,153 — — — — — — 7,153
Net earnings — — — 59,842 — — — — 2,121 61,963
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 — — — — — — 0 — (63) (63)
Balance — September 30, 2019 176,793 $ 220,991 $ 499,930 $ 3,604,716 (46,053) $ (2,042,140) $ 8,277 $ (593,849) $ 25,469 $ 1,723,394
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 — April 1, 2021	176,793	$	220,991	$	488,906	$	3,658,158	(46,496)	$	(2,045,937)	$	6,114	$	(616,200)	$	29,754	$	1,741,786

Stock activity under stock plans	—	—		(1,397)		—		1	107		963		—		—		(327)
Stock-based compensation	—	—		6,712		—		—	—		—		—		—		6,712

Net earnings	—	—		—		45,354		—	—		—		—		2,390		47,744
Cash dividends declared	—	—		—		(26,395)		—	—		—		—		—		(26,395)
Repurchases of common shares	—	—		—		—		(311)	(12,449)		—		—		—		(12,449)
Other comprehensive income (loss), net of tax	—	—		—		—		—	—		—		16,058		14		16,072

Other, net	—	—		—		—		—	—		—		(1)		(2,450)		(2,451)
Balance — June 30, 2021	176,793	$	220,991	$	494,221	$	3,677,117	(46,806)	$	(2,058,279)	$	7,077	$	(600,143)	$	29,708	$	1,770,692

Balance — April 1, 2020	176,793	$	220,991	$	497,721	$	3,630,694	(47,002)	$	(2,069,063)	$	8,324	$	(674,829)	$	25,995	$	1,639,833

Stock activity under stock plans	—	—		(2,733)		—		129	4,761		(2,288)		—		—		(260)
Stock-based compensation	—	—		4,164		—		—	—		—		—		—		4,164

Net earnings	—	—		—		6,132		—	—		—		—		2,142		8,274
Cash dividends declared	—	—		—		(26,356)		—	—		—		—		—		(26,356)

Other comprehensive income (loss), net of tax	—	—		—		—		—	—		—		20,913		(63)		20,850

Other, net	—	—		—		—		—	—		—		—		(295)		(295)
Balance — June 30, 2020	176,793	$	220,991	$	499,152	$	3,610,470	(46,873)	$	(2,064,302)	$	6,036	$	(653,916)	$	27,779	$	1,646,210
See accompanying notes to condensed consolidated financial statements.

Table of Co ~~ntents~~Contents

FLOWSERVE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF ~~STOCKHOLDERS’~~SHAREHOLDERS’ 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 $ 3,652,244 (46,262) $ (2,051,583) $ 8,334 $ (584,292) $ 25,602 $ 1,772,341
ASU No. 2016-13 - Measurement of Credit Losses on Financial Instruments (Topic 326)
— — — (7,291) — — — — — (7,291)
Stock activity under stock plans — — (25,588) — 544 24,029 (2,234) — — (3,793)
Stock-based compensation — — 24,104 — — — — — — 24,104
Net earnings — — — 59,433 — — — — 6,890 66,323
Cash dividends declared — — — (79,095) — — — — — (79,095)
Repurchases of common shares — — — — (1,057) (32,112) — — — (32,112)
Other comprehensive income (loss), net of tax — — — — — — — (34,564) 772 (33,792)
Other, net — — — — — — — — (2,842) (2,842)
Balance — September 30, 2020 176,793 $ 220,991 $ 499,561 $ 3,625,291 (46,775) $ (2,059,666) $ 6,100 $ (618,856) $ 30,422 $ 1,703,843
Balance — January 1, 2019 176,793 $ 220,991 $ 494,551 $ 3,514,229 (46,237) $ (2,049,404) $ 7,117 $ (573,947) $ 18,465 $ 1,632,002
Stock activity under stock plans — — (17,129) — 298 12,696 1,160 — — (3,273)
Stock-based compensation — — 22,508 — — — — — — 22,508
Net earnings — — — 166,243 — — — — 6,659 172,902
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 — — — — — — 0 — (254) (254)
Balance — September 30, 2019 176,793 $ 220,991 $ 499,930 $ 3,604,716 (46,053) $ (2,042,140) $ 8,277 $ (593,849) $ 25,469 $ 1,723,394
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 — January 1, 2021	176,793	$	220,991	$	502,227	$	3,670,543	(46,768)	$	(2,059,309)	$	6,164��	$	(609,625)	$	30,330	$	1,761,321

Stock activity under stock plans	—	—		(24,478)		—		402	18,561		913		—		—		(5,004)
Stock-based compensation	—	—		16,472		—		—	—		—		—		—		16,472

Net earnings	—	—		—		59,434		—	—		—		—		5,471		64,905
Cash dividends declared	—	—		—		(52,860)		—	—		—		—		—		(52,860)
Repurchases of common shares	—	—		—		—		(440)	(17,531)		—		—		—		(17,531)
Other comprehensive income (loss), net of tax	—	—		—		—		—	—		—		9,482		162		9,644

Other, net	—	—		—		—		—	—		—		—		(6,255)		(6,255)
Balance — June 30, 2021	176,793	$	220,991	$	494,221	$	3,677,117	(46,806)	$	(2,058,279)	$	7,077	$	(600,143)	$	29,708	$	1,770,692

Balance — January 1, 2020	176,793	$	220,991	$	501,045	$	3,652,244	(46,262)	$	(2,051,583)	$	8,334	$	(584,292)	$	25,602	$	1,772,341
ASU No. 2016-13 - Measurement of Credit Losses on Financial Instruments (Topic 326)	—	—		—		(7,291)		—	—		—		—		—		(7,291)
Stock activity under stock plans	—	—		(20,368)		—		446	19,393		(2,298)		—		—		(3,273)
Stock-based compensation	—	—		18,475		—		—	—		—		—		—		18,475

Net earnings	—	—		—		18,254		—	—		—		—		4,243		22,497
Cash dividends declared	—	—		—		(52,737)		—	—		—		—		—		(52,737)
Repurchases of common shares	—	—		—		—		(1,057)	(32,112)		—		—		—		(32,112)
Other comprehensive income (loss), net of tax	—	—		—		—		—	—		—		(69,624)		776		(68,848)

Other, net	—	—		—		—		—	—		—		—		(2,842)		(2,842)
Balance — June 30, 2020	176,793	$	220,991	$	499,152	$	3,610,470	(46,873)	$	(2,064,302)	$	6,036	$	(653,916)	$	27,779	$	1,646,210
See accompanying notes to condensed consolidated financial statements.

Table of Co ~~ntents~~Contents

FLOWSERVE CORPORATION

(Exact name of registrant as specified in its charter)

New York

31-0267900

(State or other jurisdiction of incorporation or organization)

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

5215 N. O’Connor Blvd., Suite 700,

Irving,

Texas

75039

(Address of principal executive offices)

(Zip Code)

( 972 ) 443-6500

(Registrant’s telephone number, including area code)

Former name, former address and former fiscal year, if changed since last report: N/A

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol

Name of Each Exchange on Which Registered

Common Stock, $1.25 Par Value

FLS

New York Stock Exchange

Large accelerated filer

☑

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

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 July 30, 2021 there were 130,262,789shares of the issuer’s common stock outstanding.

FLOWSERVE CORPORATION

FORM 10-Q

TABLE OF CONTENTS


			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 June 30, 2021 and 2020 (unaudited)			1
Condensed Consolidated Statements of Income and Condensed Consolidated Statements of Comprehensive Income (Loss) – Six Months Ended June 30, 2021 and 2020 (unaudited)			2
Condensed Consolidated Balance Sheets – Condensed Consolidated Balance Sheets – June 30, 2021 and December 31, 2020 (unaudited)			3
Condensed Consolidated Statements of Shareholders' Equity – Three Months Ended June 30, 2021 and 2020 (unaudited)			4
Condensed Consolidated Statements of Stockholders' Equity – Six Months Ended June 30, 2021 and 2020 (unaudited)			5
Condensed Consolidated Statements of Cash Flows – Six Months Ended June 30, 2021 and 2020 (unaudited)			6
Notes to Condensed Consolidated Financial Statements (unaudited)			7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			35
Item 3. Quantitative and Qualitative Disclosures About Market Risk			49
Item 4. Controls and Procedures			49

PART II – OTHER INFORMATION
Item 1. Legal Proceedings			50
Item 1A. Risk Factors			50
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			50
Item 3. Defaults Upon Senior Securities			52
Item 4. Mine Safety Disclosures			52
Item 5. Other Information			52
Item 6. Exhibits			52
SIGNATURES			53

Table of Contents

PART I — FINANCIAL INFORMATION

Item 1.Financial Statements.

FLOWSERVE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF ~~CASH FLOWS~~INCOME

(Unaudited)


(Amounts in thousands, except per share data)	Three Months Ended June 30,
	2021		2020
Sales	$	898,178	$	925,012
Cost of sales	(619,940)		(655,305)
Gross profit	278,238		269,707
Selling, general and administrative expense	(210,789)		(229,343)
Gain on sale of business	1,806		0
Net earnings from affiliates	2,907		3,088
Operating income	72,162		43,452
Interest expense	(14,322)		(12,935)

Interest income	465		1,149
Other income (expense), net	(7,850)		(18,907)
Earnings before income taxes	50,455		12,759
Provision for income taxes	(2,711)		(4,485)
Net earnings, including noncontrolling interests	47,744		8,274
Less: Net earnings attributable to noncontrolling interests	(2,390)		(2,142)
Net earnings attributable to Flowserve Corporation	$	45,354	$	6,132
Net earnings per share attributable to Flowserve Corporation common shareholders:
Basic	$	0.35	$	0.05
Diluted	0.35		0.05

(Amounts in thousands) Nine Months Ended September 30,
2020 2019
Cash flows – Operating activities:
Net earnings, including noncontrolling interests $ 66,323 $ 172,902
Adjustments to reconcile net earnings to net cash provided (used) by operating activities:
Depreciation 63,887 69,320
Amortization of intangible and other assets 8,788 10,134
Stock-based compensation 24,104 22,507
Foreign currency, asset write downs and other non-cash adjustments 19,519 (8,284)
Change in assets and liabilities:
Accounts receivable, net 24,324 (11,994)
Inventories, net (51,974) (64,280)
Contract assets, net (37,328) (35,607)
Prepaid expenses and other assets, net 6,051 (26,194)
Accounts payable (21,756) (11,994)
Contract liabilities (22,468) 26,641
Accrued liabilities and income taxes payable 24,257 (8,459)
Retirement obligations and other 22,729 9,257
Net deferred taxes (10,827) (726)
Net cash flows provided (used) by operating activities 115,629 143,223
Cash flows – Investing activities:
Capital expenditures (47,919) (45,276)
Proceeds from disposal of assets and other 13,759 40,773
Net cash flows provided (used) by investing activities (34,160) (4,503)
Cash flows – Financing activities:
Payments on long-term debt (191,258) (105,000)
Proceeds from short-term financing 0 75,000
Payments on short-term financing 0 (75,000)
Proceeds from issuance of senior notes 498,280 0
Payments of deferred loan cost (4,572) 0
Proceeds under other financing arrangements 154 2,572
Payments under other financing arrangements (5,773) (8,903)
Repurchases of common shares (32,112) (5,432)
Payments related to tax withholding for stock-based compensation (4,521) (3,835)
Payments of dividends (78,106) (74,695)
Other (3,120) (252)
Net cash flows provided (used) by financing activities 178,972 (195,545)
Effect of exchange rate changes on cash (10,243) (17,009)
Net change in cash and cash equivalents 250,198 (73,834)
Cash and cash equivalents at beginning of period 670,980 619,683
Cash and cash equivalents at end of period $ 921,178 $ 545,849

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)


(Amounts in thousands)	Three Months Ended June 30,
	2021		2020
Net earnings, including noncontrolling interests	$	47,744	$	8,274
Other comprehensive income (loss):
Foreign currency translation adjustments, net of taxes of $(6,401) and $(1,188), respectively	13,998		19,048
Pension and other postretirement effects, net of taxes of $(472) and $(444), respectively	2,059		1,758
Cash flow hedging activity	15		44
Other comprehensive income (loss)	16,072		20,850
Comprehensive income (loss), including noncontrolling interests	63,816		29,124
Comprehensive (income) loss attributable to noncontrolling interests	(2,403)		(2,079)
Comprehensive income (loss) attributable to Flowserve Corporation	$	61,413	$	27,045

See accompanying notes to condensed consolidated financial statements.

Table of Co ~~ntents~~Contents

FLOWSERVE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)



(Amounts in thousands, except per share data)	Six Months Ended June 30,
	2021		2020
Sales	$	1,755,486	$	1,818,526
Cost of sales	(1,226,348)		(1,282,360)
Gross profit	529,138		536,166
Selling, general and administrative expense	(409,104)		(474,794)
Gain on sale of business	1,806		0
Net earnings from affiliates	6,425		6,283
Operating income	128,265		67,655
Interest expense	(31,101)		(25,898)
Loss on extinguishment of debt	(7,610)		0
Interest income	1,067		2,898
Other income (expense), net	(19,213)		19,295
Earnings before income taxes	71,408		63,950
Provision for income taxes	(6,503)		(41,453)
Net earnings, including noncontrolling interests	64,905		22,497
Less: Net earnings attributable to noncontrolling interests	(5,471)		(4,243)
Net earnings attributable to Flowserve Corporation	$	59,434	$	18,254
Net earnings per share attributable to Flowserve Corporation common shareholders:
Basic	$	0.46	$	0.14
Diluted	0.45		0.14

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)



(Amounts in thousands)	Six Months Ended June 30,
	2021		2020
Net earnings, including noncontrolling interests	$	64,905	$	22,497
Other comprehensive income (loss):
Foreign currency translation adjustments, net of taxes of $(5,747) and $5,974, respectively	3,109		(77,013)
Pension and other postretirement effects, net of taxes of $(942) and $(842), respectively	6,318		8,067
Cash flow hedging activity	217		98
Other comprehensive income (loss)	9,644		(68,848)
Comprehensive income (loss), including noncontrolling interests	74,549		(46,351)
Comprehensive (income) loss attributable to noncontrolling interests	(5,633)		(5,018)
Comprehensive income (loss) attributable to Flowserve Corporation	$	68,916	$	(51,369)

See accompanying notes to condensed consolidated financial statements.

Table of Contents

FLOWSERVE CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)


(Amounts in thousands, except par value)	June 30,		December 31,
	2021		2020
ASSETS
Current assets:
Cash and cash equivalents	$	630,397	$	1,095,274
Accounts receivable, net of allowance for expected credit losses of $74,782 and $75,176, respectively	729,551		753,462
Contract assets, net of allowance for expected credit losses of $3,038 and $3,205, respectively	262,231		277,734
Inventories, net	690,145		667,228

Prepaid expenses and other	128,364		110,635
Total current assets	2,440,688		2,904,333
Property, plant and equipment, net of accumulated depreciation of $1,107,765 and $1,093,348, respectively	526,101		556,873
Operating lease right-of-use assets, net	204,075		208,125
Goodwill	1,213,103		1,224,886
Deferred taxes	46,904		30,538
Other intangible assets, net	160,653		168,496
Other assets, net of allowance for expected credit losses of $67,770 and $67,842, respectively	227,145		221,426
Total assets	$	4,818,669	$	5,314,677

LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	393,608	$	440,199
Accrued liabilities	422,161		463,222
Contract liabilities	209,092		194,227
Debt due within one year	9,599		8,995

Operating lease liabilities	35,256		34,990
Total current liabilities	1,069,716		1,141,633
Long-term debt due after one year	1,307,149		1,717,911
Operating lease liabilities	173,388		176,246
Retirement obligations and other liabilities	497,724		517,566
Commitments and contingencies (See Note 11)	0		0
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	494,221		502,227
Retained earnings	3,677,117		3,670,543
Treasury shares, at cost – 46,806 and 46,768 shares, respectively	(2,058,279)		(2,059,309)
Deferred compensation obligation	7,077		6,164
Accumulated other comprehensive loss	(600,143)		(609,625)
Total Flowserve Corporation shareholders’ equity	1,740,984		1,730,991
Noncontrolling interests	29,708		30,330
Total equity	1,770,692		1,761,321
Total liabilities and equity	$	4,818,669	$	5,314,677

See accompanying notes to condensed consolidated financial statements.

Table of Contents

FLOWSERVE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ 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 — April 1, 2021	176,793	$	220,991	$	488,906	$	3,658,158	(46,496)	$	(2,045,937)	$	6,114	$	(616,200)	$	29,754	$	1,741,786

Stock activity under stock plans	—	—		(1,397)		—		1	107		963		—		—		(327)
Stock-based compensation	—	—		6,712		—		—	—		—		—		—		6,712

Net earnings	—	—		—		45,354		—	—		—		—		2,390		47,744
Cash dividends declared	—	—		—		(26,395)		—	—		—		—		—		(26,395)
Repurchases of common shares	—	—		—		—		(311)	(12,449)		—		—		—		(12,449)
Other comprehensive income (loss), net of tax	—	—		—		—		—	—		—		16,058		14		16,072

Other, net	—	—		—		—		—	—		—		(1)		(2,450)		(2,451)
Balance — June 30, 2021	176,793	$	220,991	$	494,221	$	3,677,117	(46,806)	$	(2,058,279)	$	7,077	$	(600,143)	$	29,708	$	1,770,692

Balance — April 1, 2020	176,793	$	220,991	$	497,721	$	3,630,694	(47,002)	$	(2,069,063)	$	8,324	$	(674,829)	$	25,995	$	1,639,833

Stock activity under stock plans	—	—		(2,733)		—		129	4,761		(2,288)		—		—		(260)
Stock-based compensation	—	—		4,164		—		—	—		—		—		—		4,164

Net earnings	—	—		—		6,132		—	—		—		—		2,142		8,274
Cash dividends declared	—	—		—		(26,356)		—	—		—		—		—		(26,356)

Other comprehensive income (loss), net of tax	—	—		—		—		—	—		—		20,913		(63)		20,850

Other, net	—	—		—		—		—	—		—		—		(295)		(295)
Balance — June 30, 2020	176,793	$	220,991	$	499,152	$	3,610,470	(46,873)	$	(2,064,302)	$	6,036	$	(653,916)	$	27,779	$	1,646,210
See accompanying notes to condensed consolidated financial statements.

Table of Contents

FLOWSERVE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ 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, 2021	176,793	$	220,991	$	502,227	$	3,670,543	(46,768)	$	(2,059,309)	$	6,164��	$	(609,625)	$	30,330	$	1,761,321

Stock activity under stock plans	—	—		(24,478)		—		402	18,561		913		—		—		(5,004)
Stock-based compensation	—	—		16,472		—		—	—		—		—		—		16,472

Net earnings	—	—		—		59,434		—	—		—		—		5,471		64,905
Cash dividends declared	—	—		—		(52,860)		—	—		—		—		—		(52,860)
Repurchases of common shares	—	—		—		—		(440)	(17,531)		—		—		—		(17,531)
Other comprehensive income (loss), net of tax	—	—		—		—		—	—		—		9,482		162		9,644

Other, net	—	—		—		—		—	—		—		—		(6,255)		(6,255)
Balance — June 30, 2021	176,793	$	220,991	$	494,221	$	3,677,117	(46,806)	$	(2,058,279)	$	7,077	$	(600,143)	$	29,708	$	1,770,692

Balance — January 1, 2020	176,793	$	220,991	$	501,045	$	3,652,244	(46,262)	$	(2,051,583)	$	8,334	$	(584,292)	$	25,602	$	1,772,341
ASU No. 2016-13 - Measurement of Credit Losses on Financial Instruments (Topic 326)	—	—		—		(7,291)		—	—		—		—		—		(7,291)
Stock activity under stock plans	—	—		(20,368)		—		446	19,393		(2,298)		—		—		(3,273)
Stock-based compensation	—	—		18,475		—		—	—		—		—		—		18,475

Net earnings	—	—		—		18,254		—	—		—		—		4,243		22,497
Cash dividends declared	—	—		—		(52,737)		—	—		—		—		—		(52,737)
Repurchases of common shares	—	—		—		—		(1,057)	(32,112)		—		—		—		(32,112)
Other comprehensive income (loss), net of tax	—	—		—		—		—	—		—		(69,624)		776		(68,848)

Other, net	—	—		—		—		—	—		—		—		(2,842)		(2,842)
Balance — June 30, 2020	176,793	$	220,991	$	499,152	$	3,610,470	(46,873)	$	(2,064,302)	$	6,036	$	(653,916)	$	27,779	$	1,646,210
See accompanying notes to condensed consolidated financial statements.

Table of Contents

FLOWSERVE CORPORATION

(Exact name of registrant as specified in its charter)

New York

31-0267900

(State or other jurisdiction of incorporation or organization)

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

5215 N. O’Connor Blvd., Suite 700,

Irving,

Texas

75039

(Address of principal executive offices)

(Zip Code)

( 972 ) 443-6500

(Registrant’s telephone number, including area code)

Former name, former address and former fiscal year, if changed since last report: N/A

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol

Name of Each Exchange on Which Registered

Common Stock, $1.25 Par Value

FLS

New York Stock Exchange

Large accelerated filer

☑

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

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 July 30, 2021 there were 130,262,789shares of the issuer’s common stock outstanding.

FLOWSERVE CORPORATION

FORM 10-Q

TABLE OF CONTENTS


			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 June 30, 2021 and 2020 (unaudited)			1
Condensed Consolidated Statements of Income and Condensed Consolidated Statements of Comprehensive Income (Loss) – Six Months Ended June 30, 2021 and 2020 (unaudited)			2
Condensed Consolidated Balance Sheets – Condensed Consolidated Balance Sheets – June 30, 2021 and December 31, 2020 (unaudited)			3
Condensed Consolidated Statements of Shareholders' Equity – Three Months Ended June 30, 2021 and 2020 (unaudited)			4
Condensed Consolidated Statements of Stockholders' Equity – Six Months Ended June 30, 2021 and 2020 (unaudited)			5
Condensed Consolidated Statements of Cash Flows – Six Months Ended June 30, 2021 and 2020 (unaudited)			6
Notes to Condensed Consolidated Financial Statements (unaudited)			7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			35
Item 3. Quantitative and Qualitative Disclosures About Market Risk			49
Item 4. Controls and Procedures			49

PART II – OTHER INFORMATION
Item 1. Legal Proceedings			50
Item 1A. Risk Factors			50
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			50
Item 3. Defaults Upon Senior Securities			52
Item 4. Mine Safety Disclosures			52
Item 5. Other Information			52
Item 6. Exhibits			52
SIGNATURES			53

Table of Contents

PART I — FINANCIAL INFORMATION

Item 1.Financial Statements.

FLOWSERVE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)


(Amounts in thousands, except per share data)	Three Months Ended June 30,
	2021		2020
Sales	$	898,178	$	925,012
Cost of sales	(619,940)		(655,305)
Gross profit	278,238		269,707
Selling, general and administrative expense	(210,789)		(229,343)
Gain on sale of business	1,806		0
Net earnings from affiliates	2,907		3,088
Operating income	72,162		43,452
Interest expense	(14,322)		(12,935)

Interest income	465		1,149
Other income (expense), net	(7,850)		(18,907)
Earnings before income taxes	50,455		12,759
Provision for income taxes	(2,711)		(4,485)
Net earnings, including noncontrolling interests	47,744		8,274
Less: Net earnings attributable to noncontrolling interests	(2,390)		(2,142)
Net earnings attributable to Flowserve Corporation	$	45,354	$	6,132
Net earnings per share attributable to Flowserve Corporation common shareholders:
Basic	$	0.35	$	0.05
Diluted	0.35		0.05

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)


(Amounts in thousands)	Three Months Ended June 30,
	2021		2020
Net earnings, including noncontrolling interests	$	47,744	$	8,274
Other comprehensive income (loss):
Foreign currency translation adjustments, net of taxes of $(6,401) and $(1,188), respectively	13,998		19,048
Pension and other postretirement effects, net of taxes of $(472) and $(444), respectively	2,059		1,758
Cash flow hedging activity	15		44
Other comprehensive income (loss)	16,072		20,850
Comprehensive income (loss), including noncontrolling interests	63,816		29,124
Comprehensive (income) loss attributable to noncontrolling interests	(2,403)		(2,079)
Comprehensive income (loss) attributable to Flowserve Corporation	$	61,413	$	27,045

See accompanying notes to condensed consolidated financial statements.

Table of Contents

FLOWSERVE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)



(Amounts in thousands, except per share data)	Six Months Ended June 30,
	2021		2020
Sales	$	1,755,486	$	1,818,526
Cost of sales	(1,226,348)		(1,282,360)
Gross profit	529,138		536,166
Selling, general and administrative expense	(409,104)		(474,794)
Gain on sale of business	1,806		0
Net earnings from affiliates	6,425		6,283
Operating income	128,265		67,655
Interest expense	(31,101)		(25,898)
Loss on extinguishment of debt	(7,610)		0
Interest income	1,067		2,898
Other income (expense), net	(19,213)		19,295
Earnings before income taxes	71,408		63,950
Provision for income taxes	(6,503)		(41,453)
Net earnings, including noncontrolling interests	64,905		22,497
Less: Net earnings attributable to noncontrolling interests	(5,471)		(4,243)
Net earnings attributable to Flowserve Corporation	$	59,434	$	18,254
Net earnings per share attributable to Flowserve Corporation common shareholders:
Basic	$	0.46	$	0.14
Diluted	0.45		0.14

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)



(Amounts in thousands)	Six Months Ended June 30,
	2021		2020
Net earnings, including noncontrolling interests	$	64,905	$	22,497
Other comprehensive income (loss):
Foreign currency translation adjustments, net of taxes of $(5,747) and $5,974, respectively	3,109		(77,013)
Pension and other postretirement effects, net of taxes of $(942) and $(842), respectively	6,318		8,067
Cash flow hedging activity	217		98
Other comprehensive income (loss)	9,644		(68,848)
Comprehensive income (loss), including noncontrolling interests	74,549		(46,351)
Comprehensive (income) loss attributable to noncontrolling interests	(5,633)		(5,018)
Comprehensive income (loss) attributable to Flowserve Corporation	$	68,916	$	(51,369)

See accompanying notes to condensed consolidated financial statements.

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FLOWSERVE CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)


(Amounts in thousands, except par value)	June 30,		December 31,
	2021		2020
ASSETS
Current assets:
Cash and cash equivalents	$	630,397	$	1,095,274
Accounts receivable, net of allowance for expected credit losses of $74,782 and $75,176, respectively	729,551		753,462
Contract assets, net of allowance for expected credit losses of $3,038 and $3,205, respectively	262,231		277,734
Inventories, net	690,145		667,228

Prepaid expenses and other	128,364		110,635
Total current assets	2,440,688		2,904,333
Property, plant and equipment, net of accumulated depreciation of $1,107,765 and $1,093,348, respectively	526,101		556,873
Operating lease right-of-use assets, net	204,075		208,125
Goodwill	1,213,103		1,224,886
Deferred taxes	46,904		30,538
Other intangible assets, net	160,653		168,496
Other assets, net of allowance for expected credit losses of $67,770 and $67,842, respectively	227,145		221,426
Total assets	$	4,818,669	$	5,314,677

LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	393,608	$	440,199
Accrued liabilities	422,161		463,222
Contract liabilities	209,092		194,227
Debt due within one year	9,599		8,995

Operating lease liabilities	35,256		34,990
Total current liabilities	1,069,716		1,141,633
Long-term debt due after one year	1,307,149		1,717,911
Operating lease liabilities	173,388		176,246
Retirement obligations and other liabilities	497,724		517,566
Commitments and contingencies (See Note 11)	0		0
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	494,221		502,227
Retained earnings	3,677,117		3,670,543
Treasury shares, at cost – 46,806 and 46,768 shares, respectively	(2,058,279)		(2,059,309)
Deferred compensation obligation	7,077		6,164
Accumulated other comprehensive loss	(600,143)		(609,625)
Total Flowserve Corporation shareholders’ equity	1,740,984		1,730,991
Noncontrolling interests	29,708		30,330
Total equity	1,770,692		1,761,321
Total liabilities and equity	$	4,818,669	$	5,314,677

See accompanying notes to condensed consolidated financial statements.

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FLOWSERVE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ 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 — April 1, 2021	176,793	$	220,991	$	488,906	$	3,658,158	(46,496)	$	(2,045,937)	$	6,114	$	(616,200)	$	29,754	$	1,741,786

Stock activity under stock plans	—	—		(1,397)		—		1	107		963		—		—		(327)
Stock-based compensation	—	—		6,712		—		—	—		—		—		—		6,712

Net earnings	—	—		—		45,354		—	—		—		—		2,390		47,744
Cash dividends declared	—	—		—		(26,395)		—	—		—		—		—		(26,395)
Repurchases of common shares	—	—		—		—		(311)	(12,449)		—		—		—		(12,449)
Other comprehensive income (loss), net of tax	—	—		—		—		—	—		—		16,058		14		16,072

Other, net	—	—		—		—		—	—		—		(1)		(2,450)		(2,451)
Balance — June 30, 2021	176,793	$	220,991	$	494,221	$	3,677,117	(46,806)	$	(2,058,279)	$	7,077	$	(600,143)	$	29,708	$	1,770,692

Balance — April 1, 2020	176,793	$	220,991	$	497,721	$	3,630,694	(47,002)	$	(2,069,063)	$	8,324	$	(674,829)	$	25,995	$	1,639,833

Stock activity under stock plans	—	—		(2,733)		—		129	4,761		(2,288)		—		—		(260)
Stock-based compensation	—	—		4,164		—		—	—		—		—		—		4,164

Net earnings	—	—		—		6,132		—	—		—		—		2,142		8,274
Cash dividends declared	—	—		—		(26,356)		—	—		—		—		—		(26,356)

Other comprehensive income (loss), net of tax	—	—		—		—		—	—		—		20,913		(63)		20,850

Other, net	—	—		—		—		—	—		—		—		(295)		(295)
Balance — June 30, 2020	176,793	$	220,991	$	499,152	$	3,610,470	(46,873)	$	(2,064,302)	$	6,036	$	(653,916)	$	27,779	$	1,646,210
See accompanying notes to condensed consolidated financial statements.

Table of Contents

FLOWSERVE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ 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, 2021	176,793	$	220,991	$	502,227	$	3,670,543	(46,768)	$	(2,059,309)	$	6,164��	$	(609,625)	$	30,330	$	1,761,321

Stock activity under stock plans	—	—		(24,478)		—		402	18,561		913		—		—		(5,004)
Stock-based compensation	—	—		16,472		—		—	—		—		—		—		16,472

Net earnings	—	—		—		59,434		—	—		—		—		5,471		64,905
Cash dividends declared	—	—		—		(52,860)		—	—		—		—		—		(52,860)
Repurchases of common shares	—	—		—		—		(440)	(17,531)		—		—		—		(17,531)
Other comprehensive income (loss), net of tax	—	—		—		—		—	—		—		9,482		162		9,644

Other, net	—	—		—		—		—	—		—		—		(6,255)		(6,255)
Balance — June 30, 2021	176,793	$	220,991	$	494,221	$	3,677,117	(46,806)	$	(2,058,279)	$	7,077	$	(600,143)	$	29,708	$	1,770,692

Balance — January 1, 2020	176,793	$	220,991	$	501,045	$	3,652,244	(46,262)	$	(2,051,583)	$	8,334	$	(584,292)	$	25,602	$	1,772,341
ASU No. 2016-13 - Measurement of Credit Losses on Financial Instruments (Topic 326)	—	—		—		(7,291)		—	—		—		—		—		(7,291)
Stock activity under stock plans	—	—		(20,368)		—		446	19,393		(2,298)		—		—		(3,273)
Stock-based compensation	—	—		18,475		—		—	—		—		—		—		18,475

Net earnings	—	—		—		18,254		—	—		—		—		4,243		22,497
Cash dividends declared	—	—		—		(52,737)		—	—		—		—		—		(52,737)
Repurchases of common shares	—	—		—		—		(1,057)	(32,112)		—		—		—		(32,112)
Other comprehensive income (loss), net of tax	—	—		—		—		—	—		—		(69,624)		776		(68,848)

Other, net	—	—		—		—		—	—		—		—		(2,842)		(2,842)
Balance — June 30, 2020	176,793	$	220,991	$	499,152	$	3,610,470	(46,873)	$	(2,064,302)	$	6,036	$	(653,916)	$	27,779	$	1,646,210
See accompanying notes to condensed consolidated financial statements.

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FLOWSERVE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


(Amounts in thousands)	Six Months Ended June 30,
	2021		2020
Cash flows – Operating activities:
Net earnings, including noncontrolling interests	$	64,905	$	22,497
Adjustments to reconcile net earnings to net cash provided (used) by operating activities:
Depreciation	44,491		41,711
Amortization of intangible and other assets	7,433		6,136
Loss on extinguishment of debt	7,610		0





Stock-based compensation	16,472		18,475

Foreign currency, asset write downs and other non-cash adjustments	12,460		10,970
Change in assets and liabilities:
Accounts receivable, net	14,285		858
Inventories, net	(30,784)		(36,575)
Contract assets, net	12,232		(44,276)
Prepaid expenses and other assets, net	(16,187)		(3,956)
Accounts payable	(41,146)		(9,201)
Contract liabilities	17,026		4,412
Accrued liabilities and income taxes payable	(37,123)		(1,140)
Retirement obligations and other	(2,761)		15,717

Net deferred taxes	(7,607)		(5,445)
Net cash flows provided (used) by operating activities	61,306		20,183
Cash flows – Investing activities:
Capital expenditures	(22,541)		(29,072)

Proceeds from disposal of assets	2,085		10,810
Net affiliate investment activity	(3,384)		0


Net cash flows provided (used) by investing activities	(23,840)		(18,262)
Cash flows – Financing activities:

Payments on long-term debt	(407,473)		0




Proceeds under other financing arrangements	1,386		1,990
Payments under other financing arrangements	(3,256)		(4,862)
Repurchases of common shares	(17,531)		(32,112)
Payments related to tax withholding for stock-based compensation	(5,777)		(3,850)
Payments of dividends	(52,168)		(52,054)
Other	(6,275)		(2,844)
Net cash flows provided (used) by financing activities	(491,094)		(93,732)
Effect of exchange rate changes on cash	(11,249)		(17,464)
Net change in cash and cash equivalents	(464,877)		(109,275)
Cash and cash equivalents at beginning of period	1,095,274		670,980
Cash and cash equivalents at end of period	$	630,397	$	561,705

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

Basis of Presentation

The accompanying condensed consolidated balance sheet as of ~~September~~June 30, ~~2020,~~2021, the related condensed consolidated statements of income and comprehensive income (loss) for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, the condensed consolidated statements of ~~stockholders'~~shareholders' equity for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~2020 and the condensed consolidated statements of cash flows for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~2020 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~~June 30, ~~2020~~2021 ("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, ~~2019~~2020 ("~~2019~~2020 Annual Report").

Revision to Previously Reported Financial Information - During the first quarter of 2021, as previously disclosed, we identified an accounting error involving foreign currency transactions beginning with the first quarter of 2020 through the year ended December 31, 2020. These adjustments increased retirement obligations and other liabilities by $1.5 million, retained earnings by $14.0 million and accumulated other comprehensive loss by $15.5 million as of December 31, 2020.

In ~~conjunction with our close process for~~addition, as previously disclosed, during the third quarter of 2020, we identified accounting errors related to the recognition of a liability for unasserted asbestos claims. The adjustments primarily related to an incurred but not reported ("IBNR") liability associated with unasserted asbestos claims, but also included adjustments related to the associated receivables for expected insurance proceeds for asbestos settlement and defense costs from insurance coverage and the recognition as an expense the related legal fees that were previously estimated to be recoverable from insurance carriers for which coverage is not currently sufficient following the recognition of the IBNR for periods beginning with the year ended December 31, 2014 through the second quarter of 2020 and to correct certain other previously identified immaterial errors.

We have assessed ~~these~~the above described errors, individually and in the aggregate, and concluded ~~that~~ they were not material to the period ended June 30, 2020 or any ~~prior annual or interim~~previous period. ~~However,~~The June 30, 2020, balances, as presented herein, have been revised. Additionally, the ~~aggregate amount~~remaining periods in 2020 will be revised the next time such financial statements are filed as applicable. Refer to Note 2 for a detailed discussion related to the impact of the ~~prior period errors would have been material to our current interim condensed consolidated statements~~revision as of ~~income~~ and ~~to our anticipated full year results and therefore, we have revised our previously issued unaudited condensed consolidated financial information~~ for the three and ~~nine~~six months ended ~~September~~June 30, ~~2019. Prior~~2020 and the impact to future periods ~~not presented herein~~in 2020 which will be revised ~~as applicable,~~ in future filings. ~~See Note 2 for more information.~~

Coronavirus Pandemic ("COVID-19") and Oil and Gas Market - During the first ~~nine~~six months of ~~2020,~~2021, we ~~have been~~continue to be challenged by macroeconomics and global economic impacts based on the disruption and uncertainties caused by ~~COVID-19 and the emanating impacts~~COVID-19. As a result of the ~~pandemic~~COVID-19 pandemic’s effect on ~~pricing and dampened demand for~~ oil further resulting in instability and volatility in oil commodity prices. To date, the COVID-19 pandemic has had widespread implications worldwide and has caused substantial economic uncertainty and challenging operational conditions. For example, in the first nine months of 2020, these conditions drove the announcement of significant and broad-based decreases in customer planned capital spending. As a result,prices, many of our large customers ~~have announced double-digit~~reduced capital ~~expenditure budget decreases for the remainder of the year, resulting~~expenditures and budgets in ~~lower bookings in the first nine months of 2020 as compared~~2020. To date, customer spending has yet to ~~the prior year.~~return to pre-pandemic levels.

The preparation of our 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 directly or indirectly impacts 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 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 the near to mid-term as new information becomes available. Actual results may differ from these estimates.

Table of Co ~~ntents~~Contents

Accounting Developments

Pronouncements Implemented

In ~~June 2016,~~January 2020, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. ~~2016-13, "Financial Instruments-Credit Losses~~2020-01, "Investments—Equity Securities (Topic ~~326)~~321), Measurement of Credit Losses on Financial Instruments" ("CECL"). The ASU requires, among other things, the use of a new current expected credit loss model in order to determine an allowance for expected credit losses with respect to financial assetsInvestments—Equity Method and instruments held. The CECL model requires that 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 the requirements of ~~Topic 326~~Joint Ventures (Topic 323), and ~~we modified our accounting policy~~Derivatives and ~~processes to facilitate this approach. As a result of~~Hedging (Topic 815): Clarifying 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 shee~~t.

~~Our primary exposure to financial assets that are within the scope of CECL are trade receivables~~Interactions between Topics 321, 323 and contract assets. For these financial assets, we record an allowance for expected credit losses that, when deducted from the gross asset balance, presents the net amount expected to be collected. We estimate the allowance based on an aging schedule and according to historical losses as determined from our billings and collections history. Additionally, we adjust the allowance for factors that 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.

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 September 30, 2020, wa~~s $76.1 million, compared to $53.4 million as of December 31, 2019. The nine months of activity included $6.9 million for the adoption of the CECL model at January 1, 2020 and $15.8 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 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 September 30, 2020, we had $108.2 million of long-term receivables, compared to $118.5 million as of December 31, 2019. Our allowance for expected credit losses for long-term receivables as of September 30, 2020 was $97.9 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 we believe the risk of loss is immaterial to our financial statements as of September 30, 2020.

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. Our adoption 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.~~815." The amendments of the ASU ~~modify~~addresses accounting for the ~~disclosure requirements for fair value measurements by removing, modifying, or adding~~transition into and out of the equity method and measurement of certain ~~disclosure requirements for assets~~purchased options and ~~liabilities measured at fair value in the statement of financial position or disclosed in the notes~~forward contracts to ~~the financial statements.~~acquire investments. The ASU is effective for ~~fiscal years, and interim~~annual 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 were adopted on a retrospective basis and the new disclosures were adopted on a prospective basis. Our adoption of ASU No. 2018-13 effective January 1, 2020 did not have an impact on our 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

~~Table of~~ Co ~~ntents~~

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 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. The amendments in this ASU can be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. Our adoption of ASU No. 2018-15 effective January 1, 2020 on a prospective basis 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 U.S. Generally Accepted Accounting Principles ("GAAP"). The amendments of this ASU are effective for fiscal years beginning after December 15, 2019. 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 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 ASU No. 2014-09. The ASU also provides more comparability in the presentation of revenue for certain transactions between collaborative arrangement participants. Parts of 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. Our adoption 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. 2018-14 and we anticipate that our~~The adoption of this ASU ~~will~~did not have an impact on our ~~disclosures.~~consolidated financial condition, results of operations or net cash flows.

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 may be applied to contract modifications and hedging relationships from the beginning of an interim period that includes or is subsequent to March 12, 2020. At this time, we do not have hedging relationships that reference LIBOR or another reference rate expected to be discontinued and therefore, have not applied the practical expedients and exceptions as required by the ASU. As referenced in Note 7 of this Quarterly Report, the Company’s Senior Credit Facility agreement includes a transition clause in the event LIBOR is discontinued, as such, we do not expect the transition of LIBOR to have a material impact on our consolidated financial statements. We do not expect the application of these expedients and exceptions to have an impact on our consolidated financial condition and results of operations.

In October 2020, the FASB issued ASU No. 2020-10, "Codification Improvements: Amendments to the FASB Accounting Standards Codification." The amendments in this ASU do not change GAAP and, therefore, are not expected to result in a significant change in practice. Rather, the amendments are intended to improve codification guidance and disclosure requirements in Company's financial statements and notes to the financial statements. The amendments are effective for annual periods beginning after December 15, 2020 and the amendments should be applied ~~prospectively~~retrospectively to all periods presented. ~~We have evaluated the impact of ASU No. 2020-04 and we anticipate that our~~The adoption of this ASU ~~will~~did not have an impact on our ~~condensed~~ consolidated financial condition, ~~and~~ results of ~~operations.~~operations or net cash flows.

2.Revision to Previously Reported Financial Information

~~In conjunction~~During the first quarter of 2021, we identified an accounting error involving foreign currency transactions beginning with ~~our close process for~~the first quarter of 2020 though the year ended December 31, 2020. These adjustments increased retirement obligations and other liabilities by $1.5 million, retained earnings by $14.0 million and accumulated other comprehensive loss by $15.5 million as of December 31, 2020.

In the third quarter of 2020, we identified accounting errors related to the recognition of a liability for unasserted asbestos claims. The adjustments primarily relate to an IBNR associated with unasserted asbestos claims, but also include adjustments related to the associated receivables for expected insurance proceeds for asbestos settlement and defense costs from insurance coverage and the recognition as an expense the related legal fees that

~~Table of~~ Co ~~ntents~~

were previously estimated to be recoverable from insurance carriers for which coverage is not currently sufficient following the recognition of the IBNR and to correct certain other previously identified immaterial misstatements. ~~Prior periods not presented herein will be revised, as applicable, in future filings.~~

Table of Contents

The following ~~table presents~~tables present the impact ~~of correcting the errors previously discussed on~~to the affected line items ofon our condensed consolidated ~~balance sheet as~~financial statements for the periods indicated for the correction of ~~December 31, 2019:~~

December 31, 2019
(Amounts in thousands, except par value) As Reported Adjustments As Revised
Prepaid expenses and other $ 105,101 $ 1,377 $ 106,478
Total current assets 2,505,370 1,377 2,506,747
Property, plant and equipment, net of accumulated depreciation (1) 572,175 (8,611) 563,564
Other assets, net of allowance for expected credit losses (2) 227,185 25,869 253,054
Total assets 4,919,642 18,635 4,938,277
Contract liabilities (3) 216,541 4,554 221,095
Total current liabilities 1,112,888 4,554 1,117,442
Retirement obligations and other liabilities (4) 473,295 57,699 530,994
Retained earnings (5) 3,695,862 (43,618) 3,652,244
Total Flowserve Corporation shareholders’ equity 1,790,357 (43,618) 1,746,739
Total equity 1,815,959 (43,618) 1,772,341
Total liabilities and equity $ 4,919,642 $ 18,635 $ 4,938,277

~~(1)~~ ~~Adjustment~~the accounting error involving foreign currency transactions identified in the first quarter of 2021, the accounting errors related to the ~~misclassification~~recognition of ~~Software as~~ a ~~Service arrangements as property, plant~~liability for unasserted asbestos claims identified in the third quarter of 2020, and ~~equipment rather than~~ other ~~assets, net, as prescribed by ASU 2018-15.~~immaterial misstatements previously identified:


	June 30, 2020
(Amounts in thousands)	As Reported		Adjustments		As Revised




Contract assets, net of allowance for expected credit losses	$	309,149	$	47	$	309,196



Total current assets	2,430,555		47		2,430,602
Property, plant and equipment, net of accumulated depreciation(1)	541,768		5,703		547,471




Other assets, net of allowance for expected credit losses(2)	218,604		16,926		235,530
Total assets	4,755,702		22,676		4,778,378



Accrued liabilities(3)	401,041		(4,029)		397,012
Contract liabilities(4)	214,135		5,498		219,633
Debt due within one year	9,058		156		9,214


Total current liabilities	1,088,738		1,625		1,090,363
Long-term debt due after one year(1)	1,367,478		5,646		1,373,124

Retirement obligations and other liabilities(5)	$	470,400	$	59,546	$	529,946






Retained earnings(6)	3,643,868		(33,398)		3,610,470


Accumulated other comprehensive loss	(643,173)		(10,743)		(653,916)
Total Flowserve Corporation shareholders’ equity	1,662,572		(44,141)		1,618,431

Total equity	1,690,351		(44,141)		1,646,210
Total liabilities and equity	$	4,755,702	$	22,676	$	4,778,378

______________________________________

(1) Adjustment relates to right-of-use (“ROU”) asset and lease liability for an operating lease.

(2) Adjustment ~~related~~relates to the associated receivables for expected insurance proceeds for asbestos settlements and defense costs.

~~(3)~~(3) Adjustment primarily relates to non-restructuring realignment charges associated with workforce reductions in our Realignment Programs ("2020 Realignment Program"). Refer to Note 17 for further discussion of this program.

(4) Adjustment ~~related~~relates to one of our sites for correction in contract position caused by errors in estimated costs under the over time revenue recognition model.

~~(4)~~ (5) Adjustment primarily relates to IBNR reserves associated with unasserted asbestos claims.

~~(5)~~(6) The adjustments to retained earnings ~~represents~~are the cumulative effect of the immaterial errors that were corrected in ~~periods~~ prior ~~to and through December 31, 2019.~~periods.

~~The following table presents the impact~~

Table of ~~correcting the errors previously discussed on the affected line items of our condensed consolidated statement of income for the three months ended September 30, 2019:~~Contents


									Three Months Ended June 30, 2020
(Amounts in thousands, except per share data)	(Amounts in thousands, except per share data)	Three Months Ended September 30, 2019						(Amounts in thousands, except per share data)	As Reported		Adjustments		As Revised
		As Reported		Adjustments		As Revised
Sales	Sales	$	996,544	$	(835)	$	995,709	Sales	$	924,965	$	47	$	925,012

Cost of sales(1)								Cost of sales(1)	(657,805)		2,500		(655,305)
Gross profit	Gross profit	333,688		(835)		332,853		Gross profit	267,160		2,547		269,707
Selling, general and administrative expense ~~(1)~~(2)	Selling, general and administrative expense ~~(1)~~(2)	(226,216)		(4,146)		(230,362)		Selling, general and administrative expense ~~(1)~~(2)	(227,358)		(1,985)		(229,343)

Operating income	Operating income	109,559		(4,981)		104,578		Operating income	42,888		564		43,452

Other income (expense), net ~~(2)~~(3)	Other income (expense), net ~~(2)~~(3)	(1,622)		(6,855)		(8,477)		Other income (expense), net ~~(2)~~(3)	(14,941)		(3,966)		(18,907)
Earnings before income taxes	Earnings before income taxes	96,209		(11,836)		84,373		Earnings before income taxes	16,196		(3,437)		12,759
Provision for income taxes ~~(3)~~	Provision for income taxes ~~(3)~~	(25,646)		3,236		(22,410)		Provision for income taxes ~~(3)~~	(5,409)		924		(4,485)
Net earnings, including noncontrolling interests	Net earnings, including noncontrolling interests	70,563		(8,600)		61,963		Net earnings, including noncontrolling interests	10,787		(2,513)		8,274

Net earnings attributable to Flowserve Corporation		$	68,442	(8,600)		$	59,842
Net earnings per share attributable to Flowserve Corporation common shareholders:
Net earnings (loss) attributable to Flowserve Corporation								Net earnings (loss) attributable to Flowserve Corporation	$	8,645	$	(2,513)	$	6,132
Net earnings (loss) per share attributable to Flowserve Corporation common shareholders:								Net earnings (loss) per share attributable to Flowserve Corporation common shareholders:
Basic	Basic	$	0.52	$	(0.06)	$	0.46	Basic	$	0.07	$	(0.02)	$	0.05
Diluted	Diluted	0.52		(0.07)		0.45		Diluted	0.07		(0.02)		0.05

(1) Adjustment primarily ~~relate~~relates to non-restructuring realignment charges associated with workforce reductions in our 2020 Realignment Program.

(2) Adjustment primarily relates to asbestos settlement and defense costs for related legal fees.

(3) Adjustment relates to the accounting error involving foreign currency transactions.


	Three Months Ended June 30, 2020
(Amounts in thousands)	As Reported		Adjustments		As Revised
Net earnings, including noncontrolling interests(1)	$	10,787	$	(2,513)	$	8,274
Other comprehensive income (loss):
Foreign currency translation adjustments, net of taxes(2)	15,084		3,964		19,048


Other comprehensive income (loss)	16,886		3,964		20,850
Comprehensive income (loss), including noncontrolling interests	27,673		1,451		29,124

Comprehensive income (loss) attributable to Flowserve Corporation	$	25,594	$	1,451	$	27,045

(1) Adjustment relates to cumulative effect of the accounting errors that were corrected in the periods, as outlined above.

(2) Adjustment relates to the accounting error involving foreign currency transactions.

Table of Co ~~ntents~~Contents


	Six Months Ended June 30, 2020
(Amounts in thousands, except per share data)	As Reported		Adjustments		As Revised
Sales	$	1,819,422	$	(896)	$	1,818,526
Cost of sales(1)	(1,286,285)		3,925		(1,282,360)
Gross profit	533,137		3,029		536,166
Selling, general and administrative expense(2)	(470,980)		(3,814)		(474,794)


Operating income	68,440		(785)		67,655
Interest expense	(25,863)		(35)		(25,898)


Other income (expense), net(3)	8,521		10,774		19,295
Earnings before income taxes	53,996		9,954		63,950
Provision for income taxes	(41,719)		266		(41,453)
Net earnings, including noncontrolling interests	12,277		10,220		22,497

Net earnings (loss) attributable to Flowserve Corporation	$	8,035	$	10,219	$	18,254
Net earnings (loss) per share attributable to Flowserve Corporation common shareholders:
Basic	$	0.06	$	0.08	$	0.14
Diluted	0.06		0.08		0.14

(1) Adjustment primarily relates to non-restructuring realignment charges associated with workforce reductions in our 2020 Realignment Program.

(2) Adjustment primarily relates to asbestos settlement and defense costs for related ~~to our Argentinian subsidiary's use of an incorrect exchange rate in connection with a change to using the U.S. dollar as the functional currency.~~legal fees.

(3) Adjustment ~~related~~relates to ~~tax impacts~~the accounting error involving foreign currency transactions.


	Six Months Ended June 30, 2020
(Amounts in thousands)	As Reported		Adjustments		As Revised
Net earnings, including noncontrolling interests(1)	$	12,277	$	10,220	$	22,497
Other comprehensive income (loss):
Foreign currency translation adjustments, net of taxes(2)	(66,269)		(10,744)		(77,013)


Other comprehensive income (loss)	(58,104)		(10,744)		(68,848)
Comprehensive income (loss), including noncontrolling interests	(45,827)		(524)		(46,351)

Comprehensive income (loss) attributable to Flowserve Corporation	$	(50,845)	$	(524)	$	(51,369)

(1) Adjustment relates to cumulative effect of the ~~matters described~~accounting errors that were corrected in ~~notes (1) and~~ the periods, as outlined above.

(2)~~, above.~~ Adjustment relates to the accounting error involving foreign currency transactions.

The following ~~table presents~~tables present the impact ~~of correcting the errors previously discussed on the~~to affected line items ofon our condensed consolidated ~~statement of income~~financial statements for the ~~nine months ended September 30, 2019:~~periods indicated for the correction of the accounting error involving foreign currency transactions identified in the first quarter of 2021:


	September 30, 2020
(Amounts in thousands)	As Reported		Adjustments(1)		As Revised



























Retirement obligations and other liabilities	$	541,721	$	1,500	$	543,221






Retained earnings	3,625,291		14,936		3,640,227


Accumulated other comprehensive loss	(618,856)		(16,436)		(635,292)
Total Flowserve Corporation shareholders’ equity	1,673,421		(1,500)		1,671,921

Total equity	1,703,843		(1,500)		1,702,343

(1) Adjustments relate to the accounting error involving foreign currency transactions.

(Amounts in thousands, except per share data) Nine Months Ended September 30, 2019
As Reported Adjustments As Revised
Sales (1) $ 2,876,679 (5,162) $ 2,871,517
Cost of sales (1,930,881) (875) (1,931,756)
Gross profit 945,798 (6,037) 939,761
Selling, general and administrative expense (2) (655,046) (10,579) (665,625)
Operating income 298,809 (16,616) 282,193
Other income (expense), net (3) (8,098) (7,055) (15,153)
Earnings before income taxes 255,180 (23,671) 231,509
Provision for income taxes (4) (64,646) 6,039 (58,607)
Net earnings, including noncontrolling interests 190,534 (17,632) 172,902
Net earnings attributable to Flowserve Corporation $ 183,875 (17,632) $ 166,243
Net earnings per share attributable to Flowserve Corporation common shareholders:
Basic $ 1.40 $ (0.13) $ 1.27
Diluted 1.40 (0.14) 1.26

~~(1) Adjustment related to one of our sites related to errors in estimated costs under the over time revenue recognition model.~~

~~(2) Adjustment primarily relate to~~ ~~asbestos settlement and defense costs from insurance coverage and expense for related legal fees and broad-based annual incentive compensation.~~

~~(3) Adjustment related to our Argentinian subsidiary's use of an incorrect exchange rate in connection with a change to using the U.S. dollar as the functional currency.~~

~~(4) Adjustment related to tax impacts of the matters described in notes (1), (2) and (3), above.~~

The condensed consolidated statements of stockholders' equity for the period from January 1, 2019 to September 30, 2019 and the period from July 1, 2019 to September 30, 2019 and the condensed consolidated statements of comprehensive income for the three months and nine months ended September 30, 2019 have also been revised to reflect the impacts to net earnings. The impact of errors arising in periods commencing prior to January 1, 2019 and July 1, 2019 have been reflected as a reduction to opening retained earnings in the amount of $28.8 million and $37.8 million, respectively, in the condensed consolidated statement of stockholders' equity.

Except for as described below in (1), the effect of the adjustments to the condensed consolidated statements of cash flows for the nine months ended September 30, 2019 primarily related to net earnings, including noncontrolling interests, for the change in net earnings in the table above and were offset primarily by impacts to changes in operating assets and liabilities. The following table presents the impact of correcting the errors previously discussed on the affected line items of our condensed consolidated statement of cash flows for the nine months ended September 30, 2019:

Nine Months Ended September 30, 2019
(Amounts in thousands) As Reported Adjustments As Revised
Net cash flows provided (used) by operating activities (1) $ 143,991 $ (768) $ 143,223
Net cash flows provided (used) by investing activities (1) (3,851) (652) (4,503)
Cash and cash equivalents at end of period (1) 547,270 (1,421) 545,849

Table of Co ~~ntents~~Contents


	Three Months Ended September 30, 2020
(Amounts in thousands, except per share data)	As Reported		Adjustments(1)		As Revised









Other income (expense), net	$	(963)	$	5,636	$	4,673
Earnings before income taxes	72,322		5,636		77,958
Provision for income taxes	(18,672)		(524)		(19,196)
Net earnings, including noncontrolling interests	53,650		5,112		58,762

Net earnings attributable to Flowserve Corporation	$	51,003	$	5,112	$	56,115
Net earnings per share attributable to Flowserve Corporation common shareholders:
Basic	$	0.39	$	0.04	$	0.43
Diluted	0.39		0.04		0.43

(1) Adjustments relate to the accounting error involving foreign currency transactions.


	Three Months Ended September 30, 2020
(Amounts in thousands)	As Reported		Adjustments(1)		As Revised
Net earnings, including noncontrolling interests	$	53,650	$	5,112	$	58,762
Other comprehensive income (loss):
Foreign currency translation adjustments, net of taxes	25,204		(5,649)		19,555


Other comprehensive income (loss)	24,269		(5,649)		18,620
Comprehensive income (loss), including noncontrolling interests	77,919		(537)		77,382

Comprehensive income (loss) attributable to Flowserve Corporation	$	75,276	$	(537)	$	74,739

(1) Adjustments relate to the accounting error involving foreign currency transactions.


(Amounts in thousands, except per share data)	Nine Months Ended September 30, 2020
	As Reported		Adjustments(1)		As Revised










Other income (expense), net	$	7,558	$	16,411	$	23,969
Earnings before income taxes	125,498		16,411		141,909
Provision for income taxes	(59,175)		(1,475)		(60,650)
Net earnings, including noncontrolling interests	66,323		14,936		81,259

Net earnings attributable to Flowserve Corporation	$	59,433	$	14,936	$	74,369
Net earnings per share attributable to Flowserve Corporation common shareholders:
Basic	$	0.46	$	0.11	$	0.57
Diluted	0.45		0.12		0.57

(1) Adjustments relate to the accounting error involving foreign currency transactions.

Table of Contents


	Nine Months Ended September 30, 2020
(Amounts in thousands)	As Reported		Adjustments(1)		As Revised
Net earnings, including noncontrolling interests	$	66,323	$	14,936	$	81,259
Other comprehensive income (loss):
Foreign currency translation adjustments, net of taxes	(41,022)		(16,434)		(57,456)


Other comprehensive income (loss)	(33,792)		(16,434)		(50,226)
Comprehensive income (loss), including noncontrolling interests	32,531		(1,498)		31,033

Comprehensive income (loss) attributable to Flowserve Corporation	$	24,869	$	(1,498)	$	23,371

(1) Adjustments relate to the accounting error involving foreign currency transactions.


	December 31, 2020
(Amounts in thousands)	As Reported		Adjustments(1)		As Revised



























Retirement obligations and other liabilities	$	516,087	$	1,479	$	517,566






Retained earnings	3,656,449		14,094		3,670,543


Accumulated other comprehensive loss	(594,052)		(15,573)		(609,625)
Total Flowserve Corporation shareholders’ equity	1,732,470		(1,479)		1,730,991

Total equity	1,762,800		(1,479)		1,761,321

(1) Adjustments relate to the accounting error involving foreign currency transactions.


(Amounts in thousands, except per share data)	Three Months Ended December 31, 2020
	As Reported		Adjustments(1)		As Revised









Other income (expense), net	$	(17,811)	$	(931)	$	(18,742)
Earnings before income taxes	61,314		(931)		60,383
Provision for income taxes	(856)		89		(767)
Net earnings, including noncontrolling interests	60,458		(842)		59,616

Net earnings attributable to Flowserve Corporation	$	56,893	$	(842)	$	56,051
Net earnings per share attributable to Flowserve Corporation common shareholders:
Basic	$	0.44	$	(0.01)	$	0.43
Diluted	0.43		0		0.43

(1) Adjustments relate to the accounting error involving foreign currency transactions.


	Three Months Ended December 31, 2020
(Amounts in thousands)	As Reported		Adjustments(1)		As Revised
Net earnings, including noncontrolling interests	$	60,458	$	(842)	$	59,616
Other comprehensive income (loss):
Foreign currency translation adjustments, net of taxes	41,411		862		42,273


Other comprehensive income (loss)	24,803		862		25,665
Comprehensive income (loss), including noncontrolling interests	85,261		20		85,281

Comprehensive income (loss) attributable to Flowserve Corporation	$	81,698	$	20	$	81,718

(1) Adjustments relate to the accounting error involving foreign currency transactions.

Table of Contents


(Amounts in thousands, except per share data)	Year Ended December 31, 2020
	As Reported		Adjustments(1)		As Revised








Other income (expense), net	$	(10,254)	$	15,480	$	5,226
Earnings before income taxes	186,812		15,480		202,292
Provision for income taxes	(60,031)		(1,386)		(61,417)
Net earnings, including noncontrolling interests	126,781		14,094		140,875

Net earnings attributable to Flowserve Corporation	$	116,326	$	14,094	$	130,420
Net earnings per share attributable to Flowserve Corporation common shareholders:
Basic	$	0.89	$	0.11	$	1.00
Diluted	0.89		0.11		1.00

(1) Adjustments relate to the accounting error involving foreign currency transactions.


	Year Ended December 31, 2020
(Amounts in thousands)	As Reported		Adjustments(1)		As Revised
Net earnings, including noncontrolling interests	$	126,781	$	14,094	$	140,875
Other comprehensive income (loss):
Foreign currency translation adjustments, net of taxes	388		(15,571)		(15,183)


Other comprehensive income (loss)	(8,991)		(15,571)		(24,562)
Comprehensive income (loss), including noncontrolling interests	117,790		(1,477)		116,313

Comprehensive income (loss) attributable to Flowserve Corporation	$	106,565	$	(1,477)	$	105,088

(1) Adjustments relate to the accounting error involving foreign currency transactions.

The condensed consolidated statements of shareholders' equity for the three and six months ended June 30, 2020 have been revised to reflect the impacts of the above described errors. Additionally, the condensed consolidated statements of shareholders' equity for the periods from July 1, 2020 to September 30, 2020, January 1, 2020 to September 30, 2020 and for the year ended December 31, 2020, which will be revised the next time such financial statements are filed, have been corrected to reflect the impact of the errors described above and there are no other adjustments impacting those statements.

The following tables present the impact to affected sub-totals for the correction of the errors on our condensed consolidated statement of cash flows for the six month and nine month periods ended June 30, 2020 and September 30, 2020, respectively. There was no impact on the condensed consolidated statement of cash flows for the year ended December 31, 2020.


	Six Months Ended June 30, 2020
(Amounts in thousands)	As Reported		Adjustments		As Revised
Net cash flows provided (used) by operating activities (1)	$	21,231	$	(1,048)	$	20,183
Net cash flows provided (used) by investing activities (2)	(21,161)		2,899		(18,262)
Net cash flows provided (used) by financing activities(3)	(91,881)		(1,851)		(93,732)
Cash and cash equivalents at end of period	561,705		0		561,705

______________________________________

(1) Adjustment relates to cumulative effect of the accounting errors that were corrected in the periods, as outlined above.

(2) Primarily related to adjustments resulting from the misclassification of Software as a ~~Service~~service arrangements as property, plant and equipment rather than other assets, net, as prescribed by ASU ~~2018-15,~~2018-15.

(3) Primarily resulting from the misclassification of non-cash items under proceeds and apayments under other financing arrangements in financing activities, rather than other assets, net, in operating activities.

~~djustments~~Table of Contents


	Nine Months Ended September 30, 2020
(Amounts in thousands)	As Reported		Adjustments		As Revised
Net cash flows provided (used) by operating activities (1)	$	115,629	$	(1,380)	$	114,249
Net cash flows provided (used) by investing activities (1)	(34,160)		1,495		(32,665)
Net cash flows provided (used) by financing activities	178,972		(115)		178,857
Cash and cash equivalents at end of period	921,178		0		921,178

(1) Primarily related to ~~our international operations’ exposure to fluctuations in foreign currency exchange rates,~~adjustments resulting from ~~our Argentinian subsidiary's change in using~~ the ~~U.S. dollar~~misclassification of Software as ~~our functional currency in Argentina~~.a service arrangements as property, plant and equipment rather than other assets, net, as prescribed by ASU 2018-15.

The impacts of the revisions have been reflected throughout the financial statements, including the applicable footnotes, as appropriate.

3.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 ~~23%~~15% and ~~21%~~22% of total revenue for the three month ~~periods~~period ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, respectively, and ~~22%~~16% and ~~19%~~22% for the ~~nine~~six month period ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, respectively. 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 ~~77%~~85% and ~~79%~~78% of total revenue for the three month period ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, respectively, and ~~78%~~84% and ~~81%~~78% for the ~~nine~~six month period ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, respectively. Refer to Note 23 to our consolidated financial statements included in~~cluded in~~ our ~~2019~~2020 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:

•Flowserve Pump Division ("FPD") ~~for~~designs and manufactures 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~~designs, manufactures and ~~industrial~~distributes a broad portfolio of engineered-to-order and configured-to-order isolation valves, control valves, ~~actuators and controls~~valve automation products and related ~~services.~~equipment.

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.

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

1215

Table of Co ~~ntents~~Contents

Three Months Ended September 30, 2020
(Amounts in thousands) FPD FCD Total
Original Equipment $ 280,951 $ 198,472 $ 479,423
Aftermarket 388,584 56,294 444,878
$ 669,535 $ 254,766 $ 924,301
Three Months Ended September 30, 2019
FPD FCD Total
Original Equipment $ 256,664 $ 251,447 $ 508,111
Aftermarket 426,134 61,464 487,598
$ 682,798 $ 312,911 $ 995,709
The following tables present our customer revenues disaggregated by revenue source:


	Three Months Ended June 30, 2021
(Amounts in thousands)	FPD		FCD		Total
Original Equipment	$	220,387	$	214,097	$	434,484
Aftermarket	397,047		66,647		463,694
	$	617,434	$	280,744	$	898,178

	Three Months Ended June 30, 2020
	FPD		FCD		Total
Original Equipment	$	271,465	$	191,358	$	462,823
Aftermarket	402,089		60,100		462,189
	$	673,554	$	251,458	$	925,012



	Six Months Ended June 30, 2021
(Amounts in thousands)	FPD		FCD		Total
Original Equipment	$	434,541	$	406,817	$	841,358
Aftermarket	785,059		129,069		914,128
	$	1,219,600	$	535,886	$	1,755,486

	Six Months Ended June 30, 2020
	FPD		FCD		Total
Original Equipment	$	524,198	$	389,977	$	914,175
Aftermarket	784,482		119,869		904,351
	$	1,308,680	$	509,846	$	1,818,526

Nine Months Ended September 30, 2020
(Amounts in thousands) FPD FCD Total
Original Equipment $ 805,150 $ 588,448 $ 1,393,598
Aftermarket 1,173,065 176,163 1,349,228
$ 1,978,215 $ 764,611 $ 2,742,826
Nine Months Ended September 30, 2019
FPD FCD Total
Original Equipment $ 706,092 $ 710,144 $ 1,416,236
Aftermarket 1,259,431 195,850 1,455,281
$ 1,965,523 $ 905,994 $ 2,871,517

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


		Three Months Ended September 30, 2020							Three Months Ended June 30, 2021
(Amounts in thousands)	(Amounts in thousands)	FPD		FCD		Total		(Amounts in thousands)	FPD		FCD		Total
North America(1)	North America(1)	$	245,282	$	96,435	$	341,717	North America(1)	$	243,611	$	98,118	$	341,729
Latin America(1)		47,346		6,065		53,411
Latin America(2)								Latin America(2)	52,219		8,879		61,098
Middle East and Africa	Middle East and Africa	83,330		29,045		112,375		Middle East and Africa	69,662		26,530		96,192
Asia Pacific	Asia Pacific	151,227		66,836		218,063		Asia Pacific	119,375		88,944		208,319
Europe	Europe	142,350		56,385		198,735		Europe	132,567		58,273		190,840
		$	669,535	$	254,766	$	924,301		$	617,434	$	280,744	$	898,178

		Three Months Ended September 30, 2019							Three Months Ended June 30, 2020
		FPD		FCD		Total			FPD		FCD		Total
North America(1)	North America(1)	$	279,583	$	133,881	$	413,464	North America(1)	$	269,610	$	106,737	$	376,347
Latin America(1)		51,338		7,682		59,020
Latin America(2)								Latin America(2)	46,909		6,905		53,814
Middle East and Africa	Middle East and Africa	87,982		23,721		111,703		Middle East and Africa	96,740		21,687		118,427
Asia Pacific	Asia Pacific	129,047		85,952		214,999		Asia Pacific	128,102		64,546		192,648
Europe	Europe	134,848		61,675		196,523		Europe	132,193		51,583		183,776
		$	682,798	$	312,911	$	995,709		$	673,554	$	251,458	$	925,012

~~Table of~~ Co ~~ntents~~


		Nine Months Ended September 30, 2020							Six Months Ended June 30, 2021
(Amounts in thousands)	(Amounts in thousands)	FPD		FCD		Total		(Amounts in thousands)	FPD		FCD		Total
North America (1)		$	782,403	$	326,271	$	1,108,674
Latin America(1)		136,443		18,480		154,923
North America(1)								North America(1)	$	467,582	$	188,368	$	655,950
Latin America(2)								Latin America(2)	94,256		15,694		109,950
Middle East and Africa	Middle East and Africa	277,231		77,404		354,635		Middle East and Africa	152,207		54,226		206,433
Asia Pacific	Asia Pacific	391,796		185,946		577,742		Asia Pacific	244,027		167,600		411,627
Europe	Europe	390,342		156,510		546,852		Europe	261,528		109,998		371,526
		$	1,978,215	$	764,611	$	2,742,826		$	1,219,600	$	535,886	$	1,755,486

		Nine Months Ended September 30, 2019							Six Months Ended June 30, 2020
		FPD		FCD		Total			FPD		FCD		Total
North America (1)		$	797,092	$	401,921	$	1,199,013
Latin America(1)		134,716		23,574		158,290
North America(1)								North America(1)	$	537,135	$	229,862	$	766,997
Latin America(2)								Latin America(2)	89,096		12,415		101,511
Middle East and Africa	Middle East and Africa	249,694		69,484		319,178		Middle East and Africa	193,908		48,352		242,260
Asia Pacific	Asia Pacific	367,204		223,864		591,068		Asia Pacific	240,557		119,103		359,660
Europe	Europe	416,817		187,151		603,968		Europe	247,984		100,114		348,098
		$	1,965,523	$	905,994	$	2,871,517		$	1,308,680	$	509,846	$	1,818,526

(1) North America represents the United States and ~~Canada;~~Canada.

(2) Latin America includes Mexico.

On ~~September~~June 30, ~~2020~~2021, the aggregate transaction price allocated to unsatisfied (or partially unsatisfied) performance obligations was approximately ~~$435~~$470 million. We estimate recognition of approximately ~~$130~~$294 million of this amount as revenue in the remainder of ~~2020~~2021 and an additional ~~$305~~$176 million in ~~2021~~2022 and thereafter.

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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 tables present beginning and ending balances of contract assets and contract liabilities, current and long-term, for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 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 $ 221,095 $ 1,652
Revenue recognized that was included in contract liabilities at the beginning of the period 0 0 (159,376) (1,198)
Revenue recognized in the period in excess of billings 654,967 0 0 0
Billings arising during the period in excess of revenue recognized 0 0 137,986 309
Amounts transferred from contract assets to receivables (606,564) 191 0 0
Currency effects and other, net (11,187) (6,585) (1,325) 15
Ending balance, September 30, 2020 $ 310,130 $ 2,886 $ 198,380 $ 778

142020:

~~Table of~~ Co ~~ntents~~


(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, 2021	$	277,734	$	1,139	$	194,227	$	822
Revenue recognized that was included in contract liabilities at the beginning of the period	0		0		(112,835)		0
Revenue recognized in the period in excess of billings	321,040		54		0		0
Billings arising during the period in excess of revenue recognized	0		0		126,591		0
Amounts transferred from contract assets to receivables	(326,634)		(28)		0		0

Currency effects and other, net	(9,909)		(86)		1,109		(19)
Ending balance, June 30, 2021	$	262,231	$	1,079	$	209,092	$	803


(Amounts in thousands)	(Amounts in thousands)	Contract Assets, net (Current)		Long-term Contract Assets, net(1)		Contract Liabilities (Current)		Long-term Contract Liabilities(2)		(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		$	229,297	$	10,967	$	201,702	$	1,370
Beginning balance, January 1, 2020										Beginning balance, January 1, 2020	$	272,914	$	9,280	$	221,095	$	1,652
Revenue recognized that was included in contract liabilities at the beginning of the period	Revenue recognized that was included in contract liabilities at the beginning of the period	0		0		(129,265)		0		Revenue recognized that was included in contract liabilities at the beginning of the period	0		0		(138,994)		(646)
Revenue recognized in the period in excess of billings	Revenue recognized in the period in excess of billings	584,784		0		0		0		Revenue recognized in the period in excess of billings	386,250		511		0		0
Billings arising during the period in excess of revenue recognized	Billings arising during the period in excess of revenue recognized	0		0		148,552		0		Billings arising during the period in excess of revenue recognized	0		0		141,156		0
Amounts transferred from contract assets to receivables	Amounts transferred from contract assets to receivables	(544,533)		(3,414)		0		0		Amounts transferred from contract assets to receivables	(335,505)		(93)		0		0

Currency effects and other, net	Currency effects and other, net	(11,249)		539		3,254		248		Currency effects and other, net	(14,463)		(6,689)		(3,624)		(31)
Ending balance, September 30, 2019		$	258,299��	$	8,092	$	224,243	$	1,618
Ending balance, June 30, 2020										Ending balance, June 30, 2020	$	309,196	$	3,009	$	219,633	$	975

(1) Included in other assets, net.

(2) Included in retirement obligations and other liabilities.

4.~~Leases~~Allowance for Expected Credit Losses

The allowance for credit losses is an estimate of the credit losses expected over the life of our financial assets and instruments. We ~~have operating~~assess and ~~finance leases for certain manufacturing facilities, offices, service~~measure expected credit losses on a collective basis when similar risk characteristics exist, including market, geography, credit risk and ~~quick response centers, machinery, equipment~~remaining duration. Financial assets and ~~automobiles.~~instruments that do not share risk characteristics are evaluated on an individual basis. Our ~~leases have remaining lease~~estimate of the allowance balance is assessed and quantified using internal and external valuation information relating to past events, current conditions and reasonable and supportable forecasts over the contractual terms of upan asset.

Our primary exposure to ~~33 years. The terms~~expected credit losses is through our trade receivables and ~~conditions of our leases may include options to extend or terminate the lease which are considered and included in the lease term when~~contract assets. For 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~~financial assets, we ~~have elected~~record an allowance for expected credit losses that, when deducted from the ~~practical expedient to account for any non-lease components in~~gross asset balance, presents 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.

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 ROU 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.

~~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~~collected. Primarily, our experience of historical credit losses provides the basis for ~~residual value guarantees~~our estimation of the allowance. We estimate the allowance based on an aging schedule and according to historical losses as determined from our history of billings and collections. Additionally, we adjust the allowance for factors that are ~~included in operating lease liabilities and ROU assets, net.~~

~~We had $33.4 million and $34.7 million of legally binding minimum lease payments for operating leases signed but not yet commenced as of September 30, 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.~~

specific to our customers’ credit

1518

Table of Co ~~ntents~~Contents

~~Other information related~~risk such as financial difficulties, liquidity issues, insolvency, and country and geopolitical risks. We also consider both the current and forecasted macroeconomic conditions as of the reporting date. As identified and needed, 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 previously written off amounts are reflected as a reduction to credit impairment losses in the condensed consolidated statements of income.

Contract assets represent a conditional right to consideration for satisfied performance obligations that become a receivable when the conditions are satisfied. Generally, contract assets are recorded when contractual billing schedules differ from revenue recognition based on timing and are managed through the revenue recognition process. Based on our ~~leases~~historical credit loss experience, the current expected credit loss for contract assets is ~~as follows:~~estimated to be approximately 1% of the asset balance.

September 30, December 31,
(Amounts in thousands) 2020 2019
Operating Leases:
ROU assets recorded under operating leases $ 227,437 $ 220,865
Accumulated amortization associated with operating leases (60,587) (34,647)
Total operating leases ROU assets, net $ 166,850 $ 186,218
Liabilities recorded under operating leases (current) $ 34,634 $ 36,108
Liabilities recorded under operating leases (non-current) 133,348 151,523
Total operating leases liabilities $ 167,982 $ 187,631
Finance Leases:
ROU assets recorded under finance leases $ 26,942 $ 19,606
Accumulated depreciation associated with finance leases (8,443) (7,551)
Total finance leases ROU assets, net(1) $ 18,499 $ 12,055
Total finance leases liabilities(2) $ 18,540 $ 11,788
The costs components of operating and finance leases are as follows:
Three Months Ended September 30, Nine Months Ended September 30,
(Amounts in thousands) 2020 2019 2020 2019
Operating Lease Costs:
Fixed lease expense(3) $ 14,114 $ 13,858 $ 42,655 $ 43,864
Variable lease expense(3) 1,569 1,119 5,260 3,999
Total operating lease expense $ 15,683 $ 14,977 $ 47,915 $ 47,863
Finance Lease Costs:
Depreciation of finance lease ROU assets(3) $ 1,448 $ 993 $ 4,051 $ 3,280
Interest on lease liabilities(4) 181 102 472 253
Total finance lease expense $ 1,629 $ 1,095 $ 4,523 $ 3,533
The following table presents the changes in the allowance for expected credit losses for our trade receivables and contract assets for the six months ended June 30, 2021 and 2020:

~~_____________________~~

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

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

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

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


(Amounts in thousands)	Trade receivables		Contract assets
Beginning balance, January 1, 2021	$	75,176	$	3,205
Charges to cost and expenses, net of recoveries	865		0
Write-offs	(2,015)		0
Currency effects and other, net	756		(167)
Ending balance, June 30, 2021	$	74,782	$	3,038

Beginning balance, January 1, 2020	$	53,412	$	206
Adoption of ASU 2016-13	6,970		2,779
Charges to cost and expenses, net of recoveries	11,800		0

Currency effects and other, net	(98)		25
Ending balance, June 30, 2020	$	72,084	$	3,010

Our allowance on long-term receivables, included in other assets, net, represent receivables with collection periods longer than 12 months and the balance primarily consists of reserved receivables associated with the national oil company in Venezuela. The following table presents the changes in the allowance for long-term receivables for the six months ended June 30, 2021 and 2020:


(Amounts in thousands)	2021		2020
Balance at January 1	$	67,842	$	68,555
Adoption of ASU 2016-13	0		(679)


Currency effects and other, net	(72)		(617)
Balance at June 30	$	67,770	$	67,259

~~Table~~We also have exposure to credit losses from off-balance sheet exposures, such as financial guarantees and standby letters of Co ~~ntents~~

~~Supplemental cash flows information~~credit, where we believe the risk of loss is immaterial to our financial statements as of ~~and for the nine months ended~~:

September 30,
(Amounts in thousands, except lease term and discount rate) 2020 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases(1) $ 51,918 $ 39,642
Financing cash flows from finance leases(2) 3,408 4,177
ROU assets obtained in exchange for lease obligations:
Operating leases $ 16,327 15,739
Finance leases 12,278 10,184
Weighted average remaining lease term (in years)
Operating leases 8 years 9 years
Finance leases 7 years 4 years
Weighted average discount rate (percent)
Operating leases 4.4 % 4.6 %
Finance leases 3.5 % 3.7 %

~~_____________________~~

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

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

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

Year ending December 31, Operating
Leases Finance Leases
2020 (excluding the nine months ended September 30, 2020) $ 10,527 $ 1,437
2021 37,135 5,281
2022 30,869 4,267
2023 24,494 2,775
2024 18,889 1,353
Thereafter 79,176 6,064
Total future minimum lease payments $ 201,090 $ 21,177
Less: Imputed interest (33,108) (2,637)
Total $ 167,982 $ 18,540
Other current liabilities $ 34,634 $ —
Operating lease liabilities 133,348 —
Debt due within one year — 5,626
Long-term debt due after one year — 12,914
Total $ 167,982 $ 18,540
2021.

5.Stock-Based Compensation Plans

~~Effective January 1, 2020, our shareholders approved~~We maintain the Flowserve Corporation 2020 Long-Term Incentive Plan (“2020 Plan”). The 2020 Plan replaces and supersedes the Flowserve Corporation Equity and Incentive Compensation Plan ("2010 Plan") 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, which is a shareholder approved plan authorizing the issuance of 12,500,000 shares of our common stock in the form of

~~Table of~~ Co ~~ntents~~

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, in addition to any shares available for issuance or subject to forfeiture under the 2010 Plan as of its expiration on December 31, 2019.~~stock. Of the shares of common stock authorized under the 2020 Plan, ~~and remaining shares under the 2010 Plan, 13,527,202~~11,273,436 were available for issuance as of ~~September~~June 30, ~~2020.~~2021. 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 continue to vest over the original vesting period ("55/10 Provision"). As of ~~September~~June 30, ~~2020,~~2021, 114,943 stock options were outstanding, with a grant date fair value of $2.0 million recognized over three years. As of September 30, 2020, compensation associated with these stock options was fully earned. The total fair value of stock options vested during both the three and nine months ended September 30, 2020 was $2.0 million, compared to 0 stock options vested during both the three and nine months ended September 30, 2019. The fair value of each option award was estimated on the date of grant using the Black-Scholes option pricing model. outstanding. NaN stock options were granted or vested during the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019.~~2020.

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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 $38.1 million ~~$25.7 million~~ and ~~$23.4~~$18.7 million at ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, 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~~June 30, 2021 and 2020 ~~and 2019~~ was ~~$4.9~~$0.9 million and ~~$0.3~~$2.9 million, respectively. The total fair value of Restricted Shares vested during the ~~nine~~six months ended ~~September~~June 30, 2021 and 2020 was $24.4 million and ~~2019 was $25.9 million an~~d ~~$16.5~~$21.0 million, respectively.

We recorded stock-based compensation expense of ~~$4.3~~ $5.1 million ($~~5.6~~6.7 million pre-tax) and ~~$5.5~~$3.3 million ($~~7.2~~4.2 million pre-tax) for the three months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, respectively. We recorded stock-based compensation expense of ~~$18.7~~$12.7 million ($~~24.1~~16.5 million pre-tax) andand $~~17.4~~14.4 million ~~($22.5~~ ($18.5 million pre-tax) for the ~~nine~~six months ended ~~September~~June 30, 2021 and 2020, ~~and 2019,~~ respectively.Performance-based shares granted in 2016 did not vest due to 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 months ended September 30, 2019.

The following table summarizes information regarding Restricted Shares:

Nine Months Ended September 30, 2020
Shares Weighted Average
Grant-Date Fair
Value
Number of unvested shares:
Outstanding - January 1, 2020 1,690,600 $ 46.71
Granted 706,340 46.92
Vested (576,441) 44.99
Forfeited (355,922) 49.32
Outstanding as of September 30, 2020 1,464,577 $ 46.86


	Six Months Ended June 30, 2021
	Shares	Weighted Average Grant-Date Fair Value
Number of unvested shares:
Outstanding - January 1, 2021	1,373,657	$	46.76
Granted	995,204	39.59
Vested	(550,370)	44.27
Forfeited	(117,090)	48.01
Outstanding as of June 30, 2021	1,701,401	$	43.29

Unvested Restricted Shares outstanding as of ~~September~~June 30, ~~2020~~2021 included approximately ~~551,000~~509,000 units with performance-based vesting ~~provisions. Performance-based units are~~provisions issuable in common stock and vest upon the achievement of pre-defined performance ~~targets. Performance-based units have~~metrics. Targets for outstanding performance ~~targets~~awards are based on our average return on invested capital, ~~and our~~ total shareholder return ("TSR") or free cash flow as a percent of net income over a three-year period. ~~Most unvested~~Performance units ~~were granted~~issued in 2021 include a secondary measure, relative total shareholder return, which can increase or decrease the number of vesting units by~~three~~ 15% ~~annual grants since January 1, 2018~~depending on the Company's performance versus peers. Performance units issued in 2019 and 2020 have a vesting percentage between 0% and 200% ~~depending on~~, while the ~~achievement of the specific~~2021 performance ~~targets. Except for shares granted under the 55/10 Provision, compensation~~units have a vesting percentage up to 230%. 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 ~~1,103,000~~1,063,000 shares based on performance targets. As of ~~September~~June 30, ~~2020,~~2021, we estimate vesting of approximately ~~608,000~~480,000 shares based on expected achievement of performance targets.

~~Table of~~ Co ~~ntents~~

6.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 89 to our consolidated financial statements included in our ~~2019~~2020 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 ~~$399.6~~$385.7 million and ~~$398.5~~$388.1 million at ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively. At ~~September~~June 30, ~~2020,~~2021, the length of foreign exchange contracts currently in place ranged from 926 days to 2327 months.

We are exposed to risk from ~~credit-related~~credit-related losses resulting from ~~nonperformance~~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.

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The fair values of foreign exchange contracts are summarized below:


		September 30,		December 31,			June 30,		December 31,
(Amounts in thousands)	(Amounts in thousands)	2020		2019		(Amounts in thousands)	2021		2020
Current derivative assets	Current derivative assets	$	1,082	$	892	Current derivative assets	$	1,389	$	2,857
Noncurrent derivative assets	Noncurrent derivative assets	65		15		Noncurrent derivative assets	20		249
Current derivative liabilities	Current derivative liabilities	682		3,418		Current derivative liabilities	914		682
Noncurrent derivative liabilities	Noncurrent derivative liabilities	4		8		Noncurrent derivative liabilities	62		0

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) 2020 2019 2020 2019
Losses recognized in income $ (2,293) $ (1,817) $ (2,354) $ (4,511)


	Three Months Ended June 30,				Six Months Ended June 30,
(Amounts in thousands)	2021		2020		2021		2020
(Losses) gains recognized in income	$	(4,312)	$	(3,520)	$	1,793	$	(61)

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

~~On September 22, 2020, as~~As a means of managing the volatility of foreign currency exposure with the Euro/U.S. dollar exchange rate, we ~~entered~~enter into cross-currency swaps agreements ("Swaps") as a ~~cross-currency swap ("Swap") associated with~~hedge of our Euro investment in certain of our international ~~subsidiaries~~subsidiaries. Accordingly, on April 14, 2021 and ~~was~~March 9, 2021, we entered into cross currency swap agreements, with termination dates of October 1, 2030 and an early termination date of March 11, 2025, respectively. Also, during the third quarter of 2020 we entered into a cross currency swap agreement with an early termination date of September 22, 2025. The swap agreements are designated as a net investment ~~hedge.~~ hedges and as of June 30, 2021 the combined notional value of these swaps was €423.2 million. The swaps are included in retirement obligations and other liabilities in our condensed consolidated balance sheet as of June 30, 2021, with a fair value of $5.3 million, compared to $18.1 million as of December 31, 2020. The swaps are classified as Level II under the fair value hierarchy.

We exclude the interest accruals on the ~~swap~~swaps from the assessment of hedge effectiveness and recognize the interest accruals in earnings within interest expense. For each reporting period, the change in the fair value of the ~~swap~~swaps attributable to changes in the spot rate and differences between the change in the fair value of the excluded components and the amounts recognized in earnings under the swap accrual process are reported in accumulated other comprehensive loss on our consolidated balance sheet. AsFor the three and six months ending June 30, 2021, an interest accrual of ~~September 30, 2020,~~$(2.1) million and $(2.7) million, respectively, was recognized in other income (expense), net, in our condensed consolidated statements of income.

The cumulative net investment hedge loss, net of deferred taxes, under cross-currency swaps recorded in accumulated other comprehensive loss ("AOCL") on our condensed consolidated balance sheet are summarized below:


	Three Months Ended June 30,				Six Months Ended June 30,
(Amounts in thousands)	2021		2020		2021		2020
Loss (gain)-included component (1)	$	1,798	$	0	$	185	$	0
(Gain) loss-excluded component (2)	(11,749)		0		3,890		0
(Gain) loss recognized in AOCL	$	(9,951)	$	0	$	4,075	$	0

(1) Change in the ~~notional~~fair value of the ~~Swap wa~~s ~~€163.2 million and~~ ~~has an early termination date~~swaps attributable to changes in spot rates.

(2) Change in the fair value of ~~September 2025~~.the swaps due to changes other than those attributable to spot rates.

In March 2015, we designated €255.7 million of our 1.25% EUR 2022 Senior Notes ("2022 Euro Senior Notes") discussed in Note 67 as a net investment hedge of our Euro investment in certain of our international subsidiaries. On September 22, 2020, we increased the designated hedged value on the 2022 Euro Senior Notes to €336.3 ~~million.~~ million, which reflected the remaining balance of the 2022 Euro Senior Notes.For each reporting period, the change in the carrying value due to the remeasurement of the effective portion is reported in ~~accumulated other comprehensive loss~~AOCL on our condensed consolidated balance sheet and the remaining change in the

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carrying value of the ineffective portion, if any, is recognized in other income (expense), net in our condensed consolidated ~~statement~~statements of income. As a result of the redemption of our 2022 Euro Senior Notes discussed in Note 7, in February and March of 2021 we dedesignated the hedged value of our net investment hedge.

Prior to the dedesignation, the cumulative impact recorded in AOCL on our condensed consolidated balance sheet from the change in carrying value due to the remeasurement of the effective portion of the net investment hedge are summarized below:


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
	(Amounts in thousands)
Loss recognized in AOCL	$	0	$	3,990	$	29,554	$	12,510

~~We use~~Prior to the dedesignation of the net investment hedge, we used the spot method to measure the effectiveness of both ~~of the~~ net investment hedges and evaluate the effectiveness on a prospective basis at the beginning of each quarter. We did not record any ineffectiveness during the ~~nine~~three and six months ended ~~September~~June 30, 2021 and 2020, ~~and 2019.~~respectively.

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7.Debt

Debt, including finance lease obligations, net of discounts and debt issuance costs, consisted of:

September 30,
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 $1,239 and $2,653 393,403 $ 557,847
3.50% USD Senior Notes due September 15, 2022, net of unamortized discount and debt issuance costs of $1,410 and $1,924 498,590 498,076
4.00% USD Senior Notes due November 15, 2023, net of unamortized discount and debt issuance costs of $1,455 and $1,777 298,545 298,223
3.50% USD Senior Notes due October 1, 2030, net of unamortized discount and debt issuance costs of $6,277 as of September 30, 2020 493,723 0
Finance lease obligations and other borrowings 25,402 23,103
Debt and finance lease obligations 1,709,663 1,377,249
Less amounts due within one year 8,581 11,272
Total debt due after one year $ 1,701,082 $ 1,365,977


	June 30,		December 31,
(Amounts in thousands, except percentages)	2021		2020
1.25% EUR Senior Notes due March 17, 2022, net of unamortized discount and debt issuance costs of $1,070 as of December 31, 2020	$	0	$	410,243
3.50% USD Senior Notes due September 15, 2022, net of unamortized discount and debt issuance costs of $882 and $1,235	499,118		498,765
4.00% USD Senior Notes due November 15, 2023, net of unamortized discount and debt issuance costs of $1,122 and $1,345	298,878		298,655
3.50% USD Senior Notes due October 1, 2030, net of unamortized discount and debt issuance costs of $5,881 and $6,147	494,119		493,853

Finance lease obligations and other borrowings	24,633		25,390
Debt and finance lease obligations	1,316,748		1,726,906
Less amounts due within one year	9,599		8,995

Total debt due after one year	$	1,307,149	$	1,717,911

Senior Notes

On ~~September 14, 2020,~~March 19, 2021, we ~~completed a public offering of $500.0 million in aggregate principal amount of senior notes due October 1, 2030 ("2030 Senior Notes"). The 2030 Senior Notes bear an interest rate~~redeemed the remaining ~~of 3.50% per year, payable on April 1 and October 1 of each year, commencing on April 1, 2021. The 2030 Senior Notes were priced at~~ ~~99.656%~~ ~~of par value, reflecting a discount to the aggregate principal amount. We used a portion of the net proceeds of the 2030 Senior Notes offering to fund a partial tender offer of our~~ ~~2022 Euro Senior Notes. As of~~ ~~September 30, 2020 we had tendered $191.4~~$400.9 million of our 2022 Euro Senior Notes and have recorded ~~in interest expense an~~a loss on early extinguishment of $7.6 million, which included the impact of a $6.6 million make-whole premium. During the third quarter of 2020 we tendered $191.4 million of our 2022 Euro Senior Notes and recorded a loss on early extinguishment of $1.2 million~~. We intend to use the remaining net proceeds from the 2030 Senior Notes for future debt reduction.~~ in interest expense.

Senior Credit Facility

On September 4, 2020, we amended our credit agreement with Bank of America, N.A., as administrative agent, and the other lenders party thereto ("Amended Credit Agreement") to provide greater flexibility in maintaining adequate liquidity in the event we have the need to access available borrowings under our Senior Credit Facility ("Credit Facility"). The Amended Credit Agreement provides for an $800.0 million unsecured senior credit facility with a maturity date of July 16, 2024. The 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 Credit Facility by an aggregate amount not to exceed $400.0 million, subject to certain conditions, including each Lender's approval providing any increase.

The Amended Credit Agreement, among other things, (i) replaces the existing leverage ratio financial covenant (the “Existing Leverage Covenant”) with a leverage ratio financial covenant that requires the Company’s ratio of consolidated funded indebtedness, minus the amount of all cash and cash equivalents on our balance sheet in excess of $250.0 million, to the Company’s Consolidated EBITDA, not to exceed 4.00 to 1.00 as of the last day of any quarter through and including December

31, 2021 (the “Covenant Relief Period”), (ii) amends the Existing Leverage Covenant to provide that it will not be tested until the quarter ending March 31, 2022, (iii) provides that the Existing Leverage Covenant, beginning March 31, 2022, cannot exceed 4.00 to 1.00 (or as increased to 4.50 to 1.00 in connection with certain acquisitions) and (iv) limits the Company’s ability to pay dividends and repurchase its shares of common stock, par value $1.25, during the Covenant Relief Period, to an amount not to exceed 115% of the total amount of dividends and share repurchases we made during the period commencing January 1, 2019 through and including June 30, 2020.

The interest rates per annum applicable to the Senior Credit Facility, other than with respect to swing line 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 Credit Agreement) plus between 0.000% to 0.750% depending on our debt rating by either Moody’s Investors Service, Inc. or S&P Ratings. At ~~September~~June 30, ~~2020,~~2021, the interest rate on the 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 Credit Facility. The commitment fee will be between 0.090% and 0.300% of unused amounts under the Credit

Facility depending on our debt rating by either Moody’s Investors Service, Inc. or S&P’s Ratings. The commitment fee was 0.20% (per annum) during the ~~period~~three and six months ended ~~September~~June 30, ~~2020.~~2021.

AsAs of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, we had 0 revolving loans outstanding. We had outstanding letters of credit of ~~$54.1~~$61.1 million and ~~$88.5~~$58.1 million at ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively. As of ~~September~~June 30, ~~2020,~~2021, the amount available for borrowings u~~nder~~under our Senior Credit Facility was ~~$745.9~~ $738.9 million, compared to $~~711.5~~741.9 million at December 31, ~~2019.~~2020.

Our compliance with applicable financial covenants under the Senior Notes and Credit Facility are tested quarterly. We were in compliance with all applicable covenants as of ~~September~~June 30, ~~2020.~~2021.

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 judgment associated 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.

~~Our~~The carrying value of our financial instruments ~~are presented at fair value~~as reflected in our condensed consolidated balance sheets approximates fair value, with the exception of our long-term debt. The estimated fair value of our long-term debt, excluding the Senior Notes, ~~approximates~~approximates the carrying value and is classified as Level II under the fair value h~~ierarchy.~~hierarchy. The carrying value of our debt is included in Note 7. The estimated fair value of our Senior Notes at ~~September~~June 30, ~~2020~~2021 was ~~$1,711.9~~$1,356.4 million compared to the carrying value of ~~$1,684.3~~$1,292.1 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~~approximated fair value due to their short-term nature at ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019.~~2020.

9.~~Inventories~~

~~Inventories, net consisted of the following:~~

September 30, December 31,
(Amounts in thousands) 2020 2019
Raw materials $ 345,419 $ 328,080
Work in process 246,902 192,993
Finished goods 207,239 218,408
Less: Excess and obsolete reserve (85,071) (78,644)
Inventories, net $ 714,489 $ 660,837

2022

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9.Inventories

Inventories, net consisted of the following:


	June 30,		December 31,
(Amounts in thousands)	2021		2020
Raw materials	$	327,799	$	321,600
Work in process	253,097		210,174
Finished goods	201,802		221,532

Less: Excess and obsolete reserve	(92,553)		(86,078)
Inventories, net	$	690,145	$	667,228

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 September 30,					Three Months Ended June 30,
(Amounts in thousands, except per share data)	(Amounts in thousands, except per share data)	2020		2019		(Amounts in thousands, except per share data)	2021		2020
Net earnings of Flowserve Corporation	Net earnings of Flowserve Corporation	$	51,003	$	59,842	Net earnings of Flowserve Corporation	$	45,354	$	6,132
Dividends on restricted shares not expected to vest	Dividends on restricted shares not expected to vest	0		0		Dividends on restricted shares not expected to vest	0		0
Earnings attributable to common and participating shareholders	Earnings attributable to common and participating shareholders	$	51,003	$	59,842	Earnings attributable to common and participating shareholders	$	45,354	$	6,132
Weighted average shares:	Weighted average shares:					Weighted average shares:
Common stock	Common stock	130,292		131,122		Common stock	130,279		130,148
Participating securities	Participating securities	21		23		Participating securities	26		22
Denominator for basic earnings per common share	Denominator for basic earnings per common share	130,313		131,145		Denominator for basic earnings per common share	130,305		130,170
Effect of potentially dilutive securities	Effect of potentially dilutive securities	587		701		Effect of potentially dilutive securities	499		560
Denominator for diluted earnings per common share	Denominator for diluted earnings per common share	130,900		131,846		Denominator for diluted earnings per common share	130,804		130,730
Earnings per common share:	Earnings per common share:					Earnings per common share:
Basic	Basic	$	0.39	$	0.46	Basic	$	0.35	$	0.05
Diluted	Diluted	0.39		0.45		Diluted	0.35		0.05


	Six Months Ended June 30,
(Amounts in thousands, except per share data)	2021		2020
Net earnings of Flowserve Corporation	$	59,434	$	18,254
Dividends on restricted shares not expected to vest	0		0
Earnings attributable to common and participating shareholders	$	59,434	$	18,254
Weighted average shares:
Common stock	130,342		130,439
Participating securities	24		24
Denominator for basic earnings per common share	130,366		130,463
Effect of potentially dilutive securities	539		689
Denominator for diluted earnings per common share	130,905		131,152
Earnings per common share:
Basic	$	0.46	$	0.14
Diluted	0.45		0.14

Nine Months Ended September 30,
(Amounts in thousands, except per share data) 2020 2019
Net earnings of Flowserve Corporation $ 59,433 $ 166,243
Dividends on restricted shares not expected to vest 0 0
Earnings attributable to common and participating shareholders $ 59,433 $ 166,243
Weighted average shares:
Common stock 130,390 131,070
Participating securities 23 22
Denominator for basic earnings per common share 130,413 131,092
Effect of potentially dilutive securities 655 605
Denominator for diluted earnings per common share 131,068 131,697
Earnings per common share:
Basic $ 0.46 $ 1.27
Diluted 0.45 1.26

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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.

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11.Legal Matters and Contingencies

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. Typically, these lawsuits have been brought against multiple defendants in state and federal courts. While the overall number of asbestos-related claims in which we or our predecessors have been named has generally declined in recent years, there can be no assurance that this trend will continue, or that the average cost per claim to us 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, other than legal fees. Activity related to asbestos claims during the periods indicated was as follows:


		Three Months Ended		Nine Months		Year Ended		Three Months Ended		Six Months		Year Ended
		September 30,		September 30,		December 31,		June 30,		June 30,		December 31,
		2020	2019	2020	2019	2019		2021	2020	2021	2020	2020
Beginning claims(1)	Beginning claims(1)	8,100	8,315	8,345	8,619	8,619	Beginning claims(1)	8,445	8,282	8,366	8,345	8,345
New claims	New claims	635	656	1,672	1,671	2,314	New claims	603	456	1,232	1,037	2,140
Resolved claims	Resolved claims	(398)	(699)	(1,706)	(2,027)	(2,601)	Resolved claims	(479)	(667)	(1,023)	(1,308)	(2,203)
Other(2)	Other(2)	9	5	35	14	13	Other(2)	(10)	29	(16)	26	84
Ending claims(1)	Ending claims(1)	8,346	8,277	8,346	8,277	8,345	Ending claims(1)	8,559	8,100	8,559	8,100	8,366

____________________

(1) ~~All~~Beginning and ending claims data in each period excludes inactive claims, as the Company considers it unlikely that inactive cases will be pursued further by the respective plaintiffs.A claim is classified as inactive either due to inactivity over a period of time or if designated as inactive by the applicable court.

(2) Represents the net change in claims as a result of the reclassification of active cases as inactive and inactive cases as active during the period indicated. Cases moved from active to inactive status are removed from the claims count without being accounted for as a "Resolved claim", and cases moved from inactive status to active status are added back to the claims count without being accounted for as a “New claim”.

During the ~~nine~~three months ended ~~September~~June 30, ~~2020~~,2021 the Company ~~paid~~incurred expenses (net of ~~insurance and/or indemnity)~~insurance) of approximately ~~$12.1~~$1.8 million, compared to $5.9 million for the same period in 2020 to defend, resolve or otherwise dispose of outstanding claims, including legal and other related expenses. During the six months ended June 30, 2021 the Company incurred expenses (net of insurance) of approximately $4.5 million, compared to $10.2 million for the same period in 2020 to defend, resolve or otherwise dispose of outstanding claims, including legal and other related expenses. These expenses are included within SG&A in our condensed consolidated statements of income.

The Company had cash inflows/(outflows) (net of insurance and/or indemnity) to defend, resolve or otherwise dispose of outstanding claims, including legal and other related expenses of approximately $(3.3) million and $(6.7) million during the six months ended June 30, 2021 and 2020, respectively.

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.

We believe that our reserve for asbestos claims and the receivable for recoveries from insurance carriers that we have recorded for these claims reflects reasonable and probable estimates of these amounts.Our estimate of our ultimate exposure for asbestos claims, however, is subject to significant uncertainties, including the timing and number and types of new claims, unfavorable court rulings, judgments or settlement terms and ultimate costs to settle.Additionally, ~~including~~ the continued viability of carriers may also impact the amount of probable insurance recoveries.We believe that these uncertainties could have a

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material adverse impact on our business, financial condition, results of operations and cash flows, though we currently believe the likelihood is remote.

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.

Other 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

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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.

12.Retirement and Postretirement Benefits

Components of the net periodic cost for retirement and postretirement benefits for the three months ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~2020 were as follows:


		U.S. Defined Benefit Plans				Non-U.S. Defined Benefit Plans				Postretirement Medical Benefits					U.S. Defined Benefit Plans				Non-U.S. Defined Benefit Plans				Postretirement Medical Benefits
(Amounts in millions)	(Amounts in millions)	2020		2019		2020		2019		2020		2019		(Amounts in millions)	2021		2020		2021		2020		2021		2020
Service cost	Service cost	$	6.4	$	5.9	$	2.0	$	1.3	$	0	$	0	Service cost	$	5.8	$	6.6	$	1.9	$	1.7	$	0	$	0
Interest cost	Interest cost	3.8		4.5		1.8		2.0		0.1		0.2		Interest cost	2.9		3.7		1.4		1.6		0.1		0.2
Expected return on plan assets	Expected return on plan assets	(6.4)		(6.4)		(1.4)		(1.7)		0		0		Expected return on plan assets	(6.2)		(6.1)		(1.7)		(1.2)		0		0
Amortization of prior service cost	Amortization of prior service cost	0		0		0.1		0.1		0		0		Amortization of prior service cost	0.1		0.1		0.1		0		0.1		0
Amortization of unrecognized net loss (gain)	Amortization of unrecognized net loss (gain)	1.7		1.0		1.2		0.6		0		0		Amortization of unrecognized net loss (gain)	2.0		1.8		1.2		1.1		0		0
Net periodic cost recognized	Net periodic cost recognized	$	5.5	$	5.0	$	3.7	$	2.3	$	0.1	$	0.2	Net periodic cost recognized	$	4.6	$	6.1	$	2.9	$	3.2	$	0.2	$	0.2

Components of the net periodic cost for retirement and postretirement benefits for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~2020 were as follows:

U.S.
Defined Benefit Plans Non-U.S.
Defined Benefit Plans Postretirement
Medical Benefits
(Amounts in millions) 2020 2019 2020 2019 2020 2019
Service cost $ 19.4 $ 17.4 $ 5.4 $ 4.2 $ 0 $ 0
Interest cost 11.3 13.2 5.0 6.5 0.4 0.5
Expected return on plan assets (19.3) (19.2) (3.8) (5.5) 0 0
Amortization of prior service cost 0.1 0.1 0.2 0.2 0.1 0.1
Amortization of unrecognized net loss (gain) 5.2 2.8 3.3 2.1 (0.1) (0.1)
Net periodic cost recognized $ 16.7 $ 14.3 $ 10.1 $ 7.5 $ 0.4 $ 0.5


	U.S. Defined Benefit Plans				Non-U.S. Defined Benefit Plans				Postretirement Medical Benefits
(Amounts in millions)	2021		2020		2021		2020		2021		2020
Service cost	$	12.6	$	12.9	$	3.7	$	3.4	$	0	$	0
Interest cost	6.0		7.5		2.8		3.2		0.2		0.3
Expected return on plan assets	(12.7)		(12.8)		(3.2)		(2.4)		0		0
Amortization of prior service cost	0.1		0.1		0.2		0.1		0.1		0.1
Amortization of unrecognized net loss (gain)	3.9		3.5		2.3		2.1		0		(0.1)
Net periodic cost recognized	$	9.9	$	11.2	$	5.8	$	6.4	$	0.3	$	0.3

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

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13.Shareholders’ Equity

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.

Dividends declared per share were as follows:

Three Months Ended September 30, Nine Months Ended September 30,
2020 2019 2020 2019
Dividends declared per share $ 0.20 $ 0.19 $ 0.60 $ 0.57


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Dividends declared per share	$	0.20	$	0.20	$	0.40	$	0.40

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 ~~had 0 repurchases of~~repurchased 311,000 shares of our outstanding common stock for $12.5 million during the three months ended ~~September~~June 30, ~~2020,~~2021, compared to ~~113,656 shares~~no repurchases ~~for $5.4 million~~ for the same period in ~~2019.~~2020. We repurchased ~~1,057,115~~440,000 shares of our outstanding common stock for ~~$32.1 million, and 113,656 shares for $5.4~~$17.5 million during the ~~nine~~six months ended ~~September~~June 30, ~~2020 and 2019, respectively.~~2021, compared to 1,057,115 shares repurchases for $32.1 million for the same period in 2020. As of ~~September~~June 30, ~~2020,~~2021, we had ~~$113.6~~$101.2 million of remaining capacity under our current share repurchase program.

14.Income Taxes

For the three months ended ~~September~~June 30, ~~2020,~~2021, we earned ~~$72.3~~$50.5 million before taxes and provided for income taxes of ~~$18.7~~$2.7 million resulting in an effective tax rate of ~~25.8%~~5.4%. For the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, we earned ~~$125.5~~$71.4 million before taxes and provided for income taxes of ~~$59.2~~$6.5 million resulting in an effective tax rate of ~~47.2%~~9.1%. The effective tax rate varied from the U.S. federal statutory rate for the three months ended ~~September~~June 30, 2021 primarily due to the net impact of foreign operations and favorable resolution of audits in foreign jurisdictions. The effective tax rate varied from the U.S. federal statutory rate for the six months ended June 30, 2021 primarily due to the net impact of foreign operations, the reversal of certain deferred tax liabilities as a result of restructuring specific aspects of our global financing arrangements, higher withholding taxes related to transactions with and amongst various foreign subsidiaries and favorable resolution of audits in foreign jurisdictions.

For the three months ended June 30, 2020, we earned $12.8 million before taxes and provided for income taxes of $4.5 million resulting in an effective tax rate of 35.2%. For the six months ended June 30, 2020, we earned $64.0 million before taxes and provided for income taxes of $41.5 million resulting in an effective tax rate of 64.8%. The effective tax rate varied from the U.S. federal statutory rate for the three months ended June 30, 2020 primarily due to the net impact of foreign operations. The effective tax rate varied from the U.S. federal statutory rate for the ~~nine~~six months ended ~~September~~June 30, 2020 primarily due to the establishment of a valuation allowance against certain deferred tax assets given the current and anticipated impact to the Company's operations resulting from the COVID-19 pandemic and the distressed oil prices, and the net impact of foreign operations.

For the three months ended September 30, 2019, we earned $84.4 million before taxes and provided for income taxes of $22.4 million resulting in an effective tax rate of 26.6%. For the nine months ended September 30, 2019, we earned $231.5 million before taxes and provided for income taxes of $58.6 million resulting in an effective tax rate of 25.3%. The effective tax rate varied from the U.S. federal statutory rate for the three months ended September 30, 2019 primarily due to the BEAT provision in the Tax Reform Act and state tax. 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.

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 temporary changes to income and non-income-based tax laws. For the three and ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, there ~~were~~were no material tax 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~~June 30, ~~2020,~~2021, the amount of unrecognized tax benefits ~~increased~~decreased by ~~$6.0~~$3.6 million from December 31, ~~2019.~~2020. With limited exception, we are no longer subject to U.S. federal income tax audits for years through 2017, state and local income tax audits for years through ~~2013~~2014 or non-U.S. income tax audits for years through ~~2012.~~2013. We are currently under examination for various years in Canada, Germany, India, Indonesia, Italy, Malaysia, Mexico, the ~~Netherlands,~~ Philippines, Saudi Arabia, the U.S. and 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 $7$13 million within the next 12 months.

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15.Segment Information

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, 2020
Three Months Ended June 30, 2021												Three Months Ended June 30, 2021
(Amounts in thousands)	(Amounts in thousands)	FPD		FCD		Subtotal–Reportable Segments		Eliminations and All Other		Consolidated Total		(Amounts in thousands)	FPD		FCD		Subtotal–Reportable Segments		Eliminations and All Other		Consolidated Total
Sales to external customers	Sales to external customers	$	669,535	$	254,766	$	924,301	$	—	$	924,301	Sales to external customers	$	617,434	$	280,744	$	898,178	$	—	$	898,178
Intersegment sales	Intersegment sales	673		455		1,128		(1,128)		—		Intersegment sales	257		416		673		(673)		—
Segment operating income	Segment operating income	86,660		30,752		117,412		(30,090)		87,322		Segment operating income	67,845		37,229		105,074		(32,912)		72,162

Three Months Ended September 30, 2019
Three Months Ended June 30, 2020												Three Months Ended June 30, 2020
		FPD		FCD		Subtotal–Reportable Segments		Eliminations and All Other		Consolidated Total			FPD		FCD		Subtotal–Reportable Segments		Eliminations and All Other		Consolidated Total
Sales to external customers	Sales to external customers	$	682,798	$	312,911	$	995,709	$	—	$	995,709	Sales to external customers	$	673,554	$	251,458	$	925,012	$	—	$	925,012
Intersegment sales	Intersegment sales	(52)		1,066		1,014		(1,014)		—		Intersegment sales	510		828		1,338		(1,338)		—
Segment operating income	Segment operating income	85,461		49,243		134,704		(30,126)		104,578		Segment operating income	60,355		26,227		86,582		(43,130)		43,452


Nine Months Ended September 30, 2020
Six Months Ended June 30, 2021												Six Months Ended June 30, 2021
(Amounts in thousands)	(Amounts in thousands)	FPD		FCD		Subtotal–Reportable Segments		Eliminations and All Other		Consolidated Total		(Amounts in thousands)	FPD		FCD		Subtotal–Reportable Segments		Eliminations and All Other		Consolidated Total
Sales to external customers	Sales to external customers	$	1,978,215	$	764,611	$	2,742,826	$	—	$	2,742,826	Sales to external customers	$	1,219,600	$	535,886	$	1,755,486	$	—	$	1,755,486
Intersegment sales	Intersegment sales	1,710		2,280		3,990		(3,990)		—		Intersegment sales	733		1,096		1,829		(1,829)		—
Segment operating income	Segment operating income	186,740		74,160		260,900		(105,923)		154,977		Segment operating income	121,627		61,942		183,569		(55,304)		128,265

Nine Months Ended September 30, 2019
Six Months Ended June 30, 2020												Six Months Ended June 30, 2020
		FPD		FCD		Subtotal–Reportable Segments		Eliminations and All Other		Consolidated Total			FPD		FCD		Subtotal–Reportable Segments		Eliminations and All Other		Consolidated Total
Sales to external customers	Sales to external customers	$	1,965,523	$	905,994	$	2,871,517	$	—	$	2,871,517	Sales to external customers	$	1,308,680	$	509,846	$	1,818,526	$	—	$	1,818,526
Intersegment sales	Intersegment sales	1,249		2,716		3,965		(3,965)		—		Intersegment sales	1,037		1,825		2,862		(2,862)		—
Segment operating income	Segment operating income	242,085		134,689		376,774		(94,581)		282,193		Segment operating income	100,080		43,408		143,488		(75,833)		67,655

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16.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~~June 30, ~~2020~~2021 and ~~2019:~~2020:

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 - July 1 $ (507,633) $ (129,094) $ (573) $ (637,300) $ (443,828) $ (117,244) $ (753) $ (561,825)
Other comprehensive income (loss) before reclassifications 25,204 (3,647) 41 21,598 (30,600) 2,184 44 (28,372)
Amounts reclassified from AOCL 0 2,671 0 2,671 0 1,464 0 1,464
Net current-period other comprehensive income (loss) 25,204 (976) 41 24,269 (30,600) 3,648 44 (26,908)
Balance - September 30 $ (482,429) $ (130,070) $ (532) $ (613,031) $ (474,428) $ (113,596) $ (709) $ (588,733)


	2021								2020
(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 - April 1	$	(467,326)	$	(142,464)	$	(286)	$	(610,076)	$	(537,425)	$	(130,852)	$	(617)	$	(668,894)
Other comprehensive income (loss) before reclassifications	13,998		(713)		15		13,300		19,048		(793)		44		18,299
Amounts reclassified from AOCL	0		2,772		0		2,772		0		2,551		0		2,551
Net current-period other comprehensive income (loss)	13,998		2,059		15		16,072		19,048		1,758		44		20,850
Balance - June 30	$	(453,328)	$	(140,405)	$	(271)	$	(594,004)	$	(518,377)	$	(129,094)	$	(573)	$	(648,044)

(1) Includes foreign currency translation adjustments attributable to noncontrolling interests of $6.1 million and $5.9 million at April 1, 2021 and ~~$5.2 million at July 1,~~ 2020, ~~and 2019,~~ respectively, and ~~$5.8~~$6.1 million and ~~$5.1~~$5.9 million at ~~September~~June 30, 2021 and 2020, ~~and 2019,~~ respectively. ~~Includes net investment hedge losses of $12.1 million and gains of $9.3 million, net of deferred taxes, at September 30, 2020 and 2019, 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 2020(1) 2019(1)
Pension and other postretirement effects
Amortization of actuarial losses(2) Other income (expense), net $ (2,942) $ (1,564)
Prior service costs(2) Other income (expense), net (150) (131)
Tax benefit 421 231
Net of tax $ (2,671) $ (1,464)

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

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

~~Table of~~ AOCL.Co ~~ntents~~

~~The following table presents the changes in AOCL, net of tax for the~~ ~~nine~~ ~~months ended September 30, 2020 and 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 $ (441,407) $ (137,161) $ (671) $ (579,239) $ (447,925) $ (120,647) $ (858) $ (569,430)
Other comprehensive (loss) income before reclassifications (41,022) (531) 139 (41,414) (26,503) 2,576 149 (23,778)
Amounts reclassified from AOCL 0 7,622 0 7,622 0 4,475 0 4,475
Net current-period other comprehensive (loss) income (41,022) 7,091 139 (33,792) (26,503) 7,051 149 (19,303)
Balance - September 30 $ (482,429) $ (130,070) $ (532) $ (613,031) $ (474,428) $ (113,596) $ (709) $ (588,733)

~~(1) Includes foreign currency translation adjustments attributable to noncontrolling interests of $5.1 million and $4.5 million at January 1, 2020 and 2019, respectively, and $5.8 million and $5.1 million at September 30, 2020 and 2019, respectively. Includes net investment hedge losses of $24.6 million a~~nd ~~$5.9 million, net of deferred taxes, for the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2020 and 2019,~~ ~~respectively. Amounts in parentheses indicate debits.~~

The following table presents the reclassifications out of AOCL:


			Nine Months Ended September 30,						Three Months Ended June 30,
(Amounts in thousands)	(Amounts in thousands)	Affected line item in the statement of income	2020(1)		2019(1)		(Amounts in thousands)	Affected line item in the statement of income	2021(1)		2020(1)

Pension and other postretirement effects	Pension and other postretirement effects						Pension and other postretirement effects
Amortization of actuarial losses(2)	Amortization of actuarial losses(2)	Other income (expense), net	$	(8,456)	$	(4,727)	Amortization of actuarial losses(2)	Other income (expense), net	$	(3,089)	$	(2,857)
Prior service costs(2)	Prior service costs(2)	Other income (expense), net	(429)		(408)		Prior service costs(2)	Other income (expense), net	(155)		(138)
		Tax benefit	1,263		660			Tax benefit	472		444
		Net of tax	$	(7,622)	$	(4,475)		Net of tax	$	(2,772)	$	(2,551)

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

(2) These AOCL components are included in the computation of net periodic pension cost. See Note 12 for additional details.

Table of Contents

The following table presents the changes in AOCL, net of tax for the six months ended June 30, 2021 and 2020:


	2021								2020
(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	$	(456,437)	$	(146,723)	$	(488)	$	(603,648)	$	(441,364)	$	(137,161)	$	(671)	$	(579,196)
Other comprehensive (loss) income before reclassifications	3,109		804		217		4,130		(77,013)		3,116		98		(73,799)
Amounts reclassified from AOCL	0		5,514		0		5,514		0		4,951		0		4,951
Net current-period other comprehensive (loss) income	3,109		6,318		217		9,644		(77,013)		8,067		98		(68,848)
Balance - June 30	$	(453,328)	$	(140,405)	$	(271)	$	(594,004)	$	(518,377)	$	(129,094)	$	(573)	$	(648,044)

(1) Includes foreign currency translation adjustments attributable to noncontrolling interests of $5.9 million and $5.1 million at January 1, 2021 and 2020, respectively, and $6.1 million and $5.9 million at June 30, 2021 and 2020, respectively. Amounts in parentheses indicate an increase to AOCL.

The following table presents the reclassifications out of AOCL:


		Six Months Ended June 30,
(Amounts in thousands)	Affected line item in the statement of income	2021(1)		2020(1)
















Pension and other postretirement effects
Amortization of actuarial losses(2)	Other income (expense), net	$	(6,148)	$	(5,514)
Prior service costs(2)	Other income (expense), net	(308)		(279)
	Tax benefit	942		842
	Net of tax	$	(5,514)	$	(4,951)

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

(2) These AOCL components are included in the computation of net periodic pension cost. See Note 12 for additional details.

Table of Contents

17.Realignment and Transformation Programs

In the second quarter of 2020, we identified and initiated certain realignment activities resulting from our Flowserve 2.0 Transformation Program (defined below) to right-size our organizational operations based on the current business environment, with the overall objective to reduce our workforce costs, including manufacturing optimization through the consolidation of certain facilities ("2020 Realignment Program"). The realignment activities consist of restructuring and non-restructuring charges. Restructuring charges represent costs associated with the relocation of certain business activities and facility closures and include related severance costs. Non-restructuring charges are primarily employee severance associated with the workforce reductions. Expenses are primarily reported in cost of sales ("COS") or selling, general and administrative ("SG&A"), as applicable, in our condensed consolidated statements of income. We anticipate a total investment in these activities of approximately ~~$75~~$95 million and ~~that~~ the majority of the charges ~~will~~were incurred in 2020 with the remainder to be incurred inthrough 2021. ~~2020.~~ There are certain other realignment activities that are currently being evaluated, but have not yet been finalized. ~~The realignment programs initiated in 2015 ("2015~~

~~Table of~~ Co ~~ntents~~

Realignment Programs"), which consisted of both restructuring and non-restructuring charges, were substantially complete as of March 31, 2020, resulting in $362.4 million of total charges incurred through the completion of the 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. The Flowserve 2.0 Transformation expenses incurred primarily ~~consist~~consisted of professional services, project management and related travel costs recorded in SG&A expenses. As of December 31, 2020, the Flowserve 2.0 Transformation efforts were substantially completed. For the six months ended June 30, 2021, there were no Flowserve 2.0 Transformation charges.

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 our realignment activities and Flowserve 2.0 Transformation charges. Realignment charges~~ incurred in ~~2020~~2021 related to our 2020 Realignment Program and ~~realignment~~the total charges incurred in ~~2019~~2020 are related to our ~~2015~~2020 Realignment ~~Programs:~~Program and Flowserve 2.0 Transformation:

Three Months Ended September 30, 2020
(Amounts in thousands) FPD FCD Subtotal–Reportable Segments All Other Consolidated Total
Realignment Charges
Restructuring Charges
     COS $ 5,469 $ 590 $ 6,059 $ 0 $ 6,059
     SG&A (10) (2) (12) 0 (12)
$ 5,459 $ 588 $ 6,047 $ 0 $ 6,047
Non-Restructuring Charges
     COS $ 1,210 $ (1,366) $ (156) $ (245) $ (401)
     SG&A 1,097 75 1,172 613 1,785
$ 2,307 $ (1,291) $ 1,016 $ 368 $ 1,384
Total Realignment Charges
     COS $ 6,679 $ (776) $ 5,903 $ (245) $ 5,658
     SG&A 1,087 73 1,160 613 $ 1,773
Total $ 7,766 $ (703) $ 7,063 $ 368 $ 7,431
Transformation Charges
     SG&A $ — $ — $ — $ 4,746 $ 4,746
$ — $ — $ — $ 4,746 $ 4,746
Total Realignment and Transformation Charges
     COS $ 6,679 $ (776) $ 5,903 $ (245) $ 5,658
     SG&A 1,087 73 1,160 5,359 6,519
Total $ 7,766 $ (703) $ 7,063 $ 5,114 $ 12,177

~~Table of~~ Co ~~ntents~~

Three Months Ended September 30, 2019
(Amounts in thousands) FPD FCD Subtotal–Reportable Segments All Other Consolidated Total
Realignment Charges
Restructuring Charges
     COS $ 197 $ 811 $ 1,008 $ 0 $ 1,008
     SG&A 37 0 37 0 37
$ 234 $ 811 $ 1,045 $ 0 $ 1,045
Non-Restructuring Charges
     COS $ 2,409 $ 3 $ 2,412 $ 0 $ 2,412
     SG&A 343 0 343 994 1,337
$ 2,752 $ 3 $ 2,755 $ 994 $ 3,749
Total Realignment Charges
     COS $ 2,606 $ 814 $ 3,420 $ 0 $ 3,420
     SG&A 380 0 380 994 $ 1,374
Total $ 2,986 $ 814 $ 3,800 $ 994 $ 4,794
Transformation Charges
     SG&A $ — $ — $ — $ 5,058 $ 5,058
$ — $ — $ — $ 5,058 $ 5,058
Total Realignment and Transformation Charges
     COS $ 2,606 $ 814 $ 3,420 $ 0 $ 3,420
     SG&A 380 $ 0 380 6,052 6,432
Total $ 2,986 $ 814 $ 3,800 $ 6,052 $ 9,852

~~Table of~~ Co ~~ntents~~

Nine Months Ended September 30, 2020
(Amounts in thousands) FPD FCD Subtotal–Reportable Segments All Other Consolidated Total
Realignment Charges
Restructuring Charges
COS $ 18,800 $ 318 $ 19,118 $ 0 $ 19,118
SG&A 221 (5) 216 0 216
$ 19,021 $ 313 $ 19,334 $ 0 $ 19,334
Non-Restructuring Charges
COS $ 13,339 $ 7,876 $ 21,215 $ 303 $ 21,518
SG&A 10,899 4,459 15,358 16,107 31,465
$ 24,238 $ 12,335 $ 36,573 $ 16,410 $ 52,983
Total Realignment Charges
COS $ 32,139 $ 8,194 $ 40,333 $ 303 $ 40,636
SG&A 11,120 4,454 15,574 16,107 31,681
Total $ 43,259 $ 12,648 $ 55,907 $ 16,410 $ 72,317
Transformation Charges
SG&A — — — 16,007 16,007
$ — $ — $ — $ 16,007 $ 16,007
Total Realignment and Transformation Charges
COS $ 32,139 $ 8,194 $ 40,333 $ 303 $ 40,636
SG&A 11,120 4,454 15,574 32,114 47,688
Total $ 43,259 $ 12,648 $ 55,907 $ 32,417 $ 88,324

~~Table of~~ Co ~~ntents~~

Nine Months Ended September 30, 2019
(Amounts in thousands) FPD FCD Subtotal–Reportable Segments All Other Consolidated Total
Restructuring Charges
     COS $ 1,892 $ 1,291 $ 3,183 $ 0 $ 3,183
     SG&A(1) (17,072) 413 (16,659) 0 (16,659)
$ (15,180) $ 1,704 $ (13,476) $ 0 $ (13,476)
Non-Restructuring Charges
     COS $ 9,531 $ 72 $ 9,603 $ 0 $ 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 $ 0 $ 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 $ 0 $ 12,786
     SG&A (16,302) 447 (15,855) 23,281 7,426
Total $ (4,879) $ 1,810 $ (3,069) $ 23,281 $ 20,212

~~(1) Primarily consists of gains from the sales of non-strategic manufacturing facilities that were included in our 2015 Realignment Programs.~~


	Three Months Ended June 30, 2021
(Amounts in thousands)	FPD		FCD		Subtotal–Reportable Segments		All Other		Consolidated Total
Realignment Charges
Restructuring Charges
COS	$	2,016	$	171	$	2,187	$	0	$	2,187
SG&A	667		0		667		0		667

	$	2,683	$	171	$	2,854	$	0	$	2,854
Non-Restructuring Charges
COS	$	1,558	$	80	$	1,638	$	0	$	1,638
SG&A	338		(129)		209		915		1,124
	$	1,896	$	(49)	$	1,847	$	915	$	2,762












Total Realignment Charges
COS	$	3,574	$	251	$	3,825	$	0	$	3,825
SG&A	1,005		(129)		876		915		1,791

Total	$	4,579	$	122	$	4,701	$	915	$	5,616

Table of Co ~~ntents~~Contents


	Three Months Ended June 30, 2020
(Amounts in thousands)	FPD		FCD		Subtotal–Reportable Segments		All Other		Consolidated Total
Realignment Charges
Restructuring Charges
COS	$	11,650	$	(167)	$	11,483	$	0	$	11,483
SG&A	126		3		129		0		129

	$	11,776	$	(164)	$	11,612	$	0	$	11,612
Non-Restructuring Charges
COS	$	12,003	$	2,917	$	14,920	$	548	$	15,468
SG&A	9,316		4,333		13,649		14,852		28,501
	$	21,319	$	7,250	$	28,569	$	15,400	$	43,969
Total Realignment Charges
COS	$	23,653	$	2,750	$	26,403	$	548	$	26,951
SG&A	9,442		4,336		13,778		14,852		$	28,630

Total	$	33,095	$	7,086	$	40,181	$	15,400	$	55,581

Transformation Charges

SG&A	$	0	$	0	$	0	$	5,618	$	5,618

	$	0	$	0	$	0	$	5,618	$	5,618

Total Realignment and Transformation Charges
COS	$	23,653	$	2,750	$	26,403	$	548	$	26,951
SG&A	9,442		$	4,336	13,778		20,470		34,248

Total	$	33,095	$	7,086	$	40,181	$	21,018	$	61,199


	Six Months Ended June 30, 2021
(Amounts in thousands)	FPD		FCD		Subtotal–Reportable Segments		All Other		Consolidated Total
Realignment Charges
Restructuring Charges
COS	$	6,043	$	470	$	6,513	$	0	$	6,513
SG&A	667		(9)		658		0		658

	$	6,710	$	461	$	7,171	$	0	$	7,171

Non-Restructuring Charges
COS	$	5,449	$	678	$	6,127	$	590	$	6,717
SG&A	495		739		1,234		4,195		5,429
	$	5,944	$	1,417	$	7,361	$	4,785	$	12,146












Total Realignment Charges
COS	$	11,492	$	1,148	$	12,640	$	590	$	13,230
SG&A	1,162		730		1,892		4,195		6,087

Total	$	12,654	$	1,878	$	14,532	$	4,785	$	19,317

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	Six Months Ended June 30, 2020
(Amounts in thousands)	FPD		FCD		Subtotal–Reportable Segments		All Other		Consolidated Total
Restructuring Charges
COS	$	13,331	$	(272)	$	13,059	$	0	$	13,059
SG&A(1)	230		(3)		227		0		227

	$	13,561	$	(275)	$	13,286	$	0	$	13,286
Non-Restructuring Charges
COS	$	12,128	$	9,242	$	21,370	$	548	$	21,918
SG&A	9,801		4,384		14,185		15,497		29,682
	$	21,929	$	13,626	$	35,555	$	16,045	$	51,600
Total Realignment Charges
COS	$	25,459	$	8,970	$	34,429	$	548	$	34,977
SG&A	10,031		4,381		14,412		15,497		29,909

Total	$	35,490	$	13,351	$	48,841	$	16,045	$	64,886

Transformation Charges

SG&A	$	0	$	0	$	0	$	11,261	$	11,261

	$	0	$	0	$	0	$	11,261	$	11,261

Total Realignment Charges
COS	$	25,459	$	8,970	$	34,429	$	548	$	34,977
SG&A	10,031		4,381		14,412		26,758		41,170

Total	$	35,490	$	13,351	$	48,841	$	27,306	$	76,147

The following is a summary of total inception to date charges, net of adjustments, related to the 2020 Realignment ~~Program initiated in 2020:~~Program:


		Inception to Date											Inception to Date
(Amounts in thousands)	(Amounts in thousands)	FPD		FCD		Subtotal–Reportable Segments		All Other		Consolidated Total		(Amounts in thousands)	FPD		FCD		Subtotal–Reportable Segments		All Other		Consolidated Total
Realignment Charges	Realignment Charges											Realignment Charges
Restructuring Charges	Restructuring Charges											Restructuring Charges
COS	COS	$	17,119	$	423	$	17,542	$	0	$	17,542	COS	$	23,872	$	1,697	$	25,569	$	0	$	25,569
SG&A	SG&A	116		22		138		0		138		SG&A	718		316		1,034		0		1,034

		$	17,235	$	445	$	17,680	$	0	$	17,680		$	24,590	$	2,013	$	26,603	$	0	$	26,603
Non-Restructuring Charges	Non-Restructuring Charges											Non-Restructuring Charges
COS	COS	$	13,213	$	1,551	$	14,764	$	303	$	15,067	COS	$	24,653	$	205	$	24,858	$	642	$	25,500
SG&A	SG&A	10,413		4,387		14,800		15,465		30,265		SG&A	11,176		5,293		16,469		22,077		38,546
		$	23,626	$	5,938	$	29,564	$	15,768	$	45,332		$	35,829	$	5,498	$	41,327	$	22,719	$	64,046
Total Realignment Charges	Total Realignment Charges											Total Realignment Charges
COS	COS	$	30,332	$	1,974	$	32,306	$	303	$	32,609	COS	$	48,525	$	1,902	$	50,427	$	642	$	51,069
SG&A	SG&A	10,529		4,409		14,938		15,465		30,403		SG&A	11,894		5,609		17,503		22,077		39,580

Total	Total	$	40,861	$	6,383	$	47,244	$	15,768	$	63,012	Total	$	60,419	$	7,511	$	67,930	$	22,719	$	90,649

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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 our restructuring ~~activities. Restructuring charges incurred in 2020~~activities related to our 2020 Realignment ~~Program and restructuring charges incurred in 2019 related to our 2015 Realignment Programs:~~Program:


	Three Months Ended June 30, 2021
(Amounts in thousands)	Severance		Contract Termination		Asset Write-Downs		Other		Total

COS	$	(154)	$	0	$	(849)	$	3,190	$	2,187
SG&A	168		0		0		499		667

Total	$	14	$	0	$	(849)	$	3,689	$	2,854


	Three Months Ended June 30, 2020
(Amounts in thousands)	Severance		Contract Termination		Asset Write-Downs		Other		Total
COS	$	10,572	$	0	$	994	$	(83)	$	11,483
SG&A	126		0		3		0		129

Total	$	10,698	$	0	$	997	$	(83)	$	11,612


		Three Months Ended September 30, 2020											Six Months Ended June 30, 2021
(Amounts in thousands)	(Amounts in thousands)	Severance		Contract Termination		Asset Write-Downs		Other		Total		(Amounts in thousands)	Severance		Contract Termination		Asset Write-Downs		Other		Total

COS	COS	$	4,704	$	0	$	331	$	1,024	$	6,059	COS	$	1,219	$	0	$	1,341	$	3,953	$	6,513
SG&A	SG&A	(16)		0		3		1		(12)		SG&A	168		0		0		490		658

Total	Total	$	4,688	$	0	$	334	$	1,025	$	6,047	Total	$	1,387	$	0	$	1,341	$	4,443	$	7,171

Three Months Ended September 30, 2019
(Amounts in thousands) Severance Contract Termination Asset Write-Downs Other Total
COS $ (729) $ 3 $ 19 $ 1,715 $ 1,008
SG&A (9) 0 5 41 37
Total $ (738) $ 3 $ 24 $ 1,756 $ 1,045


	Six Months Ended June 30, 2020
(Amounts in thousands)	Severance		Contract Termination		Asset Write-Downs		Other		Total
COS	$	12,255	$	0	$	991	$	(187)	$	13,059
SG&A	265		0		0		(38)		227

Total	$	12,520	$	0	$	991	$	(225)	$	13,286

3133

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Nine Months Ended September 30, 2020
(Amounts in thousands) Severance Contract Termination Asset Write-Downs Other Total
COS $ 16,959 $ 0 $ 1,322 $ 837 $ 19,118
SG&A 228 25 (37) 216
Total $ 17,187 $ 0 $ 1,347 $ 800 $ 19,334

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 0 (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 were included in our 2015 Realignment Programs.~~

The following is a summary of total inception to date restructuring charges, net of adjustments, related to our 2020 Realignment ~~Program initiated in 2020:~~Program:

Inception to Date
(Amounts in thousands) Severance Contract Termination Asset Write-Downs Other Total
COS $ 15,276 $ 0 $ 1,325 $ 941 $ 17,542
SG&A 110 0 27 1 138
Total $ 15,386 $ 0 $ 1,352 $ 942 $ 17,680


	Inception to Date
(Amounts in thousands)	Severance		Contract Termination		Asset Write-Downs		Other		Total
COS	$	16,463	$	52	$	2,753	$	6,301	$	25,569
SG&A	252		0		14		768		1,034

Total	$	16,715	$	52	$	2,767	$	7,069	$	26,603

The following represents the activity, primarily severance charges from reductions in force, related to the restructuring reserves for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019:~~2020:


(Amounts in thousands)	(Amounts in thousands)	2020		2019		(Amounts in thousands)	2021		2020
Balance at January 1	Balance at January 1	$	6,703	$	11,927	Balance at January 1	$	18,255	$	6,703
Charges, net of adjustments	Charges, net of adjustments	17,986		5,817		Charges, net of adjustments	5,830		12,270
Cash expenditures	Cash expenditures	(4,772)		(8,196)		Cash expenditures	(14,388)		(2,713)
Other non-cash adjustments, including currency	Other non-cash adjustments, including currency	425		(461)		Other non-cash adjustments, including currency	(461)		(118)
Balance at September 30		$	20,342	$	9,087
Balance at June 30						Balance at June 30	$	9,236	$	16,142

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 ~~2019~~2020 Annual Report.

~~Table of~~ Co ~~ntents~~

EXECUTIVE OVERVIEW

Our Company

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 ~~16,000~~15,000 employees in more than 50 countries.

Our business model is significantly influenced by the capital and operating 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. 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 of ~~165~~162 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.

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

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.

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, 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~~maintaining the local capability to sell, install and service our equipment in remote regions, it is equally imperative to continuously improve our global operations. Despite ~~recent~~ headwinds caused by the COVID-19 pandemic, we continue to enhance our global supply chain ~~capability~~capabilities to continue to increase our ability to meet global customer demands and improve the quality and timely delivery of our products over the long-term. Additionally, we continue to devote resources to ~~improving~~improve the supply chain processes across our business segments toand find areas of synergy and cost reduction, ~~and to improve~~all along improving our supply chain management capability to 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 goal of the CIP initiative, which includes lean manufacturing, six sigma business management strategy and value engineering, is to maximize service fulfillment to customers through on-time delivery, reduced cycle time and quality at the highest internal productivity.

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COVID-19 Update

The COVID-19 pandemic continues to have an impact on human health, the global economy and society at large. The pandemic is expected to continue to adversely impact, for its duration, our operations and financial performance.~~In response, we continue to actively monitor the impacts of the COVID-19 pandemic on all aspects of our business and geographies.~~ Our cross-functional crisis management team established during the first quarter of 2020 has continued monitoring and making recommendations to management to help us continue operating as an essential business, while also protecting the health and safety of our associates. We expect that widespread implications of the pandemic worldwide will continue to cause substantial economic uncertainty and challenging operational conditions throughout 2021.

~~Despite our evolving response,~~We continue to actively monitor the impacts of the COVID-19 pandemic ~~has had an adverse effect~~ on all aspects of our ~~performance during the nine months of 2020, which we expect will continue through at least the remainder of 2020.~~business and geographies.

While 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, we nonetheless 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.

Health and Safety of Our Associates

The health and safety of our associates, suppliers and customers around the world continues to be ~~our first~~a priority as we ~~continue to~~ navigate the COVID-19 pandemic, including recent spikes in cases of the virus and its variants in various geographies in which we operate. We are incredibly proud of the great teamwork exhibited by our global workforce who have demonstrated strong resilience in adapting to continually evolving health and safety guidelines while addressing these challenging times and providing products and services to our customers.

~~We have~~At the beginning of the pandemic we implemented policies and practices to help protect our workforce so they can safely and effectively carry out their vital work, and we have continued to revise those policies and practices in light of guidance received from local and regional health authorities where appropriate. We instituted global restrictions on non-essential travel in March 2020 and the work-from-home policy for all non-essential employees who are able to do so has continued in effect in locations where health officials have advised such policies, including for our global headquarters in Irving, Texas, which will maintain its work-from-home policy at least through the end of 2020. In those locations where employees are going to work in our facilities, including our global headquarters in Irving, Texas, which began a phased reopening during the second quarter of 2021, we ~~have continued~~continue taking steps, consistent with guidelines from local and global health experts to protect our employees so that we can continue tooperations and manufacture critical technologies and equipment, including providing face coverings and other personal protective equipment, enhanced cleaning of sites and implemented 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

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our facilities have experienced periods of temporary closures ~~during the first six months of 2020~~ in accordance with decrees, orders and laws in their respective countries and geographies, many of which occurred at the onset of the pandemic, as of ~~November 13, 2020,~~August 5, 2021, all of our facilities are open and operational, and are running close to pre-COVID-19 levels as we continue to make essential products and provide services for our customers. ~~However,~~While 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 having an adverse impact on our financial performance throughout the remainder of the ~~pandemic.~~pandemic, we have seen these adverse impacts begin to decline as the roll out of vaccines has improved around the world, and we expect a further decline of these adverse impacts and as we navigate further through the pandemic in 2021.

Customer Demand

During the first ~~nine~~six months of ~~2020,~~2021, the ongoing effects of 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 in the first half of 2020, led to extreme volatilitypandemic in global markets ~~and in oil prices. These conditions have~~has continued to adversely ~~impacted~~impact our customers, particularly in the oil and gas markets. ~~For example, in~~As a result of the ~~first half of~~pandemic’s effect (among certain other effects) on oil prices during 2020, ~~these conditions drove a significant and broad-based decrease in customer planned capital spending, leading~~ many of our large customers reduced capital expenditures and budgets last year. To date, while we have seen some modest improvement, customer spending has yet to ~~announce double-digit capital expenditure budget decreases for the remainder of 2020.~~return to pre-pandemic levels. As a result, while bookings in the first six months of 2021 continued to be lower than pre-pandemic levels, we saw an overall increase in bookings ~~decline by~~ ~~21.2%~~of 6.3% in the ~~third quarter~~first six months of ~~2020~~2021 as compared to the same period in ~~2019, resulting in a lower sequential backlog, though we have not seen a significant increase in the levels of customer cancellations in our existing backlog.~~2020.

Additionally, the rapidly evolving impacts of the COVID-19 pandemic have caused reduced activity levels in our aftermarket business in the first nine months of 2020 due to deferred spending of our customers' repair and maintenance budgets, including the impact of restricted access to our customers' facilities. While we expect that ~~these~~many of the repair and maintenance projects that were paused by our customers last year as a result of the pandemic will ultimately need to be completed, the timing will largely depend on the duration of the COVID-19 pandemic and how the virus continues to spread in our ~~customer’s~~customers’ various geographies.

~~These trends are likely to continue~~ While we have seen some recovery in capital expenditure budgets and, therefore, our bookings, during the ~~duration~~first half of ~~the COVID-19 pandemic as various actions implemented~~2021, we do not expect planned capital spending to combat the pandemic will continue to reduce demand for oil and gas. As a result, we have experienced decreased bookings, sales and financial performance and anticipate this continuing throughout the remainder of the pandemic. Additionally, we

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~~expect the headwinds~~approach pre-pandemic levels in the oil and gas markets that have resulted in, and are likely to continue to result in, reduced capital expenditures and bookings for oil and gas customers to continue at least until oil demand and prices stabilize, which may not occur until after the pandemic subsides.2021.

Supply Chain Impact

Since the onset of the pandemic, many of our suppliers have also experienced varying lengths of production and shipping ~~conditions~~delays related to the COVID-19 pandemic, some of which continue to exist in highly affected countries. 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 of our manufacturing sites. Though some of these issues have abated as the ~~year~~pandemic has progressed, certain disruptions in our supply chain and their effects have continued ~~through the third and fourth quarter of 2020~~ and we expect they will continue as the COVID-19 pandemic continues.

Operational Impacts

We ~~have also engaged~~continue to engage 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 certain realignment activities (further described below under “—RESULTS OF OPERATIONS – Three and ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019”~~2020”), ~~a freeze on all non-essential open employment requisitions, cancellation of merit-based payroll increases for 2020, reduction of~~reductions in capital expenditures ~~to approximately $60 million~~ and continued cuts in other discretionary ~~spending. Together, we are planning approximately $100 million of cost reductions, excluding realignment charges, in 2020 as compared to 2019,~~spending due ~~in large part~~ to our response to the effects of COVID-19, which partially offsets the ~~increased~~continued costs and operational impacts of the safety protocols and procedures that we have implemented and sustained as described above under the heading ~~"-Health~~"Health and Safety of Our Associates." We continue to evaluate additional cost savings measures ~~and will continue to implement such measures in the near term~~ in order to reduce the impact of the COVID-19 pandemic on our financial results.

We continually monitor and assess the spread of COVID-19 and known variants, including in areas that have seen recent increases in cases, and we will continue to adapt our operations to respond the changing conditions as needed. 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.

~~2020~~2021 Outlook

As ~~the headwinds experienced during the first~~ ~~nine~~ ~~months~~ of ~~2020 continue to impact our business, we expect to see an approximately 20% decline in bookings in the fourth quarter of 2020 as compared to the same period in 2019, with slightly less of an impact on revenue, which we expect will decline approximately 10% as c~~ompared to the same period in 2019. Despite these effects, however, we expect to be able to maintain adequate liquidity over the next 12 months as we manage through the current market environment. As of SeptemberJune 30, ~~2020,~~2021, we had ~~approximately $1.7~~approximately $1.4 billion of liquidity, consisting of cash and cash equivalents of ~~$921.2~~$630.4 million and ~~$745.9~~$738.9 million of borrowings available under our Senior Credit Facility. We will continue to actively monitor the potential impacts of COVID-19 and related events onon the credit markets in order to maintain sufficient liquidity and access to capital throughout 2021. As the ~~remainder of~~world continues to make progress against COVID-19 largely through increased vaccinations, we have begun to see an inflection in our served end-markets as commodity prices and mobility levels increase. As such, we expect full-year bookings in 2021 to increase over 10% compared to 2020 ~~and 2021.~~levels.

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RESULTS OF OPERATIONS — Three months ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~2020

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.

~~Table~~During the first quarter of Co ~~ntents~~

2021, as previously disclosed, we identified an accounting error involving foreign currency transactions beginning with the first quarter of 2020 through the year ended December 31, 2020. These adjustments increased retirement obligations and other liabilities by $1.5 million, retained earnings by $14.0 million and accumulated other comprehensive loss by $15.5 million as of December 31, 2020.

We have assessed the above described errors, individually and in the aggregate, ~~are~~and concluded they were not material to the period ended June 30, 2020 or any ~~prior annual or interim~~previous period. ~~However,~~The June 30, 2020, balances, as presented herein, have been revised. Additionally, the ~~aggregate amount~~remaining periods in 2020 will be revised the next time such financial statements are filed as applicable. Refer to Note 2 for a detailed discussion related to the impact of the ~~prior period errors would have been material to our current interim condensed consolidated statements~~revision as of ~~income~~ and ~~to our anticipated full year results and therefore, we have revised our previously issued financial information~~ for the three and ~~nine~~six months ended ~~September~~June 30, ~~2019, as discussed~~2020 and the impact to future periods in ~~Note 2 to our condensed consolidated financial statements included~~2020 which will be revised in ~~this Quarterly Report.~~future filings.

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. ~~We anticipate that the Flowserve 2.0 Transformation will result in further restructuring charges, non-restructuring charges and other related transformation expenses.~~ The Flowserve 2.0 Transformation expenses incurred primarily consist of professional services, project management and related travel costs recorded in SG&A expenses. As of December 31, 2020, the Flowserve 2.0 Transformation efforts were substantially complete.

In the second quarter of 2020, we identified and initiated certain realignment activities resulting from our Flowserve 2.0 Transformation Program to right-size our organizational operations based on the current business environment, with the overall objective to reduce our workforce costs. We anticipate a total investment in 2020 Realignment Program activities of approximately ~~$75~~$95 million and ~~that~~ the majority of the ~~remaining~~ charges ~~will~~were incurred in 2020 with the remainder to be incurred through the ~~remain~~remainder of 2021~~der of 2020. Based~~. Based on the actions initiated inwith the ~~second quarter of~~ 2020 Realignment Program, we estimate that we have achieved cost savings of approximately ~~$14~~$49 million ~~as of September~~for the six months ended June 30, ~~2020,~~2021, with approximately $5$25 million of those savings in COS and approximately $9$24 million in SG&A. Upon completion of the 2020 Realignment Program activities, we expect full year run-rate cost savings of approximately ~~$100 million~~.$125 million. Actual savings could vary from expected savings, which represent management’s best estimate to date. There are certain other realignment activities that are currently being evaluated, but have not yet been finalized. The realignment programs initiated in 2015 ("2015 Realignment Programs"), which consisted of both restructuring and non-restructuring charges, were substantially complete as of March 31, 2020, resulting in $362.4 million of total charges incurred through the completion of the programs.

Realignment Activity

The following tables present out realignment activity by segment related to our 2020 Realignment Program. For the three and six months ended June 30, 2021, the total charges incurred ~~in 2020~~are related to our 2020 Realignment Program ~~activities~~and there were no Flowserve 2.0 Transformation charges. For the three and six months ended June 30, 2020, the total charges incurred are related to our 2020 Realignment Program and Flowserve 2.0 ~~Transformation by segment and the charges incurred in 2019 related to our 2015 Realignment Programs and Flowserve 2.0 Transformation by segment are presented in the following tables:~~

Three Months Ended September 30, 2020
(Amounts in thousands) FPD FCD Subtotal–Reportable Segments Eliminations and All Other Consolidated Total
Total Realignment and Transformation Charges
COS $ 6,679 $ (776) $ 5,903 $ (245) $ 5,658
SG&A 1,087 73 1,160 5,359 6,519
Total $ 7,766 $ (703) $ 7,063 $ 5,114 $ 12,177
Transformation:

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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

Nine Months Ended September 30, 2020
(Amounts in thousands) FPD FCD Subtotal–Reportable Segments Eliminations and All Other Consolidated Total
Total Realignment and Transformation Charges
     COS $ 32,139 $ 8,194 $ 40,333 $ 303 $ 40,636
     SG&A 11,120 $ 4,454 15,574 32,114 47,688
Total $ 43,259 $ 12,648 $ 55,907 $ 32,417 $ 88,324
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

~~(1) Primarily consists of gains from the sales of non-strategic manufacturing facilities that were included in our 2015 Realignment Programs.~~

~~Consolidated Results~~

~~Bookings, Sales and Backlog~~

Three Months Ended September 30,
(Amounts in millions) 2020 2019
Bookings $ 806.1 $ 1,023.4
Sales 924.3 995.7

Nine Months Ended September 30,
(Amounts in millions) 2020 2019
Bookings $ 2,587.3 $ 3,188.4
Sales 2,742.8 2,871.5


	Three Months Ended June 30, 2021

(Amounts in thousands)	FPD		FCD		Subtotal–Reportable Segments		Eliminations and All Other		Consolidated Total
Total Realignment Charges
COS	$	3,574	$	251	$	3,825	$	—	$	3,825
SG&A	1,005		(129)		876		915		1,791

Total	$	4,579	$	122	$	4,701	$	915	$	5,616

Table of Co ~~ntents~~Contents











	Three Months Ended June 30, 2020

(Amounts in thousands)	FPD		FCD		Subtotal–Reportable Segments		Eliminations and All Other		Consolidated Total
Total Realignment and Transformation Charges
COS	$	23,653	$	2,750	$	26,403	$	548	$	26,951
SG&A	9,442		$	4,336	13,778		20,470		34,248

Total	$	33,095	$	7,086	$	40,181	$	21,018	$	61,199


	Six Months Ended June 30, 2021

(Amounts in thousands)	FPD		FCD		Subtotal–Reportable Segments		Eliminations and All Other		Consolidated Total
Total Realignment and Transformation Charges
COS	$	11,492	$	1,148	$	12,640	$	590	$	13,230
SG&A	1,162		$	730	1,892		4,195		6,087

Total	$	12,654	$	1,878	$	14,532	$	4,785	$	19,317

	Six Months Ended June 30, 2020

(Amounts in thousands)	FPD		FCD		Subtotal–Reportable Segments		Eliminations and All Other		Consolidated Total
Total Realignment and Transformation Charges
COS	$	25,459	$	8,970	$	34,429	$	548	$	34,977
SG&A	10,031		4,381		14,412		26,758		41,170

Total	$	35,490	$	13,351	$	48,841	$	27,306	$	76,147

Consolidated Results

Bookings, Sales and Backlog


	Three Months Ended June 30,
(Amounts in millions)	2021		2020
Bookings	$	952.8	$	808.3
Sales	898.2		925.0


	Six Months Ended June 30,
(Amounts in millions)	2021		2020
Bookings	$	1,896.8	$	1,783.6
Sales	1,755.5		1,818.5

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~~June 30, ~~2020 decreased~~2021 increased by ~~$217.3~~$144.5 million, or ~~21.2%~~17.9%, as compared with the same period in ~~2019.~~2020. The ~~decrease~~increase included currency benefits of approximately $4$39 million. The ~~decrease~~increase was primarily driven by ~~lower~~increased customer bookings in the oil and gas, chemical, water and power generation ~~and water management industries, partially offset~~industries. The increase in customer bookings was driven by ~~increased bookings in the general industries. Customer bookings were down in~~ both ~~aftermarket and~~ original equipment ~~which have decreased in light~~and aftermarket bookings.

Table of ~~the impacts of COVID-19 on customer spending and distressed oil prices on these industries.~~Contents

Bookings for the ~~nine~~six months ended June 30, 2021 ~~September 30, 2020~~increase ~~decreased~~d by ~~$601.1~~$113.2 million, or ~~18.9%~~6.3%, as compared with the same period in ~~2019.~~2020. The ~~decrease~~increase included ~~negative~~ currency ~~effects~~benefits of approximately ~~$36~~$65 million. The ~~decrease~~increase was driven by ~~lower~~increased customer bookings in the chemical, water, general and oil and gas ~~chemical, power generation~~industries and ~~water management industries,~~were partially offset by ~~increased~~decreased bookings in the ~~general industries. Customer~~power generation industry. The increase in customer bookings ~~were down in both aftermarket and~~was primarily driven by original equipment ~~which have decreased in light of the impacts of COVID-19 on customer spending~~ and ~~distressed oil prices on these industries.~~to a lesser extent aftermarket bookings.

Sales for the three months ended ~~September~~June 30, ~~2020~~2021 decreased by ~~$71.4~~$26.8 million, or ~~7.2%~~2.9%, as compared with the same period in ~~2019.~~2020. The decrease included currency benefits of approximately $5$39 million. The decreased sales were driven by ~~both~~ original equipment, ~~and aftermarket sales,~~ with decreased sales into North America, ~~Latin America~~the Middle East and ~~Asia Pacific,~~Africa, partially offset by increased sales into ~~the Middle East~~Asia Pacific, Europe and ~~Europe~~.Latin America. Net sales to international customers, including export sales from the U.S., were approximately ~~68%~~66% and ~~63%~~64% of total sales for the three months ended ~~September~~June 30, 2021 and 2020, ~~and 2019,~~ respectively.

Sales for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 decreased by ~~$128.7~~$63.0 million, or ~~4.5%~~3.5%, as compared with the same period in ~~2019.~~2020. The decrease included ~~negative~~ currency ~~effects~~benefits of approximately ~~$34~~$66 million. The decreased sales were ~~primarily~~ driven by ~~aftermarket sales,~~original equipment, with decreased sales into North America, ~~Europe, Asia Pacific,~~the Middle East and Africa, ~~and Latin America,~~ partially offset by increased sales into ~~the Middle East.~~Asia Pacific, Europe and Latin America. Net sales to international customers, including export sales from the U.S., were approximately ~~65%~~67% and 63% of total sales for the ~~nine~~three months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, respectively.

Backlog represents the aggregate value of booked but uncompleted customer orders and is influenced primarily by bookings, sales, cancellations and currency effects. Backlog of ~~$1,980.1~~$1,949.5 million at ~~September~~June 30, ~~2020 decreased~~2021 increased by ~~$176.9~~$94.6 million, or ~~8.2%~~5.1%, as compared with December 31, ~~2019.~~2020. Currency effects provided ~~an increase~~a decrease of approximately $1$29 million. Approximately ~~36%~~37% and 33% of the backlog at ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively, 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 ~~$435~~$470 million, as discussed in Note 3 to our condensed consolidated financial statements included in this Quarterly Report.

Gross Profit and Gross Profit Margin


		Three Months Ended September 30,							Three Months Ended June 30,
(Amounts in millions, except percentages)	(Amounts in millions, except percentages)	2020			2019			(Amounts in millions, except percentages)	2021			2020
Gross profit	Gross profit	$	285.2		$	332.9		Gross profit	$	278.2		$	269.7
Gross profit margin	Gross profit margin	30.9		%	33.4		%	Gross profit margin	31.0		%	29.2		%

Nine Months Ended September 30,
(Amounts in millions, except percentages) 2020 2019
Gross profit $ 821.4 $ 939.8
Gross profit margin 29.9 % 32.7 %


	Six Months Ended June 30,
(Amounts in millions, except percentages)	2021			2020
Gross profit	$	529.1		$	536.2
Gross profit margin	30.1		%	29.5		%

Gross profit for the three months ended ~~September~~June 30, ~~2020 decreased~~2021 increased by ~~$47.7~~$8.5 million, or ~~14.3%~~3.2%, as compared with the same period in ~~2019.~~2020. Gross profit margin for the three months ended ~~September~~June 30, ~~2020~~2021 of ~~30.9% decreased~~31.0% increased from ~~33.4%~~29.2% for the same period in ~~2019.~~2020. The ~~decrease~~increase in gross profit margin was primarily due to ~~sales~~a $6.6 million charge of underutilized capacity manufacturing costs expensed related to the COVID-19 pandemic that did not recur, a mix shift to ~~lower~~higher margin ~~original equipment~~aftermarket sales and decreased realignment charges and increased savings associated with our realignment actions as compared to the same period in 2020, partially offset by revenue recognized on lower margin original equipment ~~orders as compared to the same period in 2019, partially offset by increased savings related to our 2020 Realignment Program as compared to the same period in 2019.~~orders. Aftermarket sales represented approximately ~~48%~~52% of total sales, as compared with approximately ~~49%~~50% of total sales for the same period in ~~2019~~2020.

Gross profit for the six months ended June 30, 2021 decreased by $7.1 million, or 1.3%, as compared with the same period in 2020. Gross profit margin for the six months ended June 30, 2021 of 30.1% increased from 29.5% for the same period in 2020. The increase in gross profit margin was primarily due to a $15.0 million charge of underutilized capacity manufacturing costs expensed related to the COVID-19 pandemic in 2020 that did not recur, a mix shift to higher margin aftermarket sales and decreased charges and increased savings related to our realignment actions as compared to the same period in 2020, partially offset by revenue recognized on lower margin original equipment orders. Aftermarket sales represented approximately 52% of total sales, as compared with approximately 50% of total sales for the same period in 2020.

Table of Co ~~ntents~~Contents

~~Gross profit for the nine months ended September 30, 2020 decreased by~~ ~~$118.4 million~~, or 12.6%, as compared with the same period in 2019. Gross profit margin for the nine months ended September 30, 2020 of 29.9% decreased from 32.7% for the same period in 2019. The decrease in gross profit margin was primarily due to ~~a sales mix shift to lower margin original equipment sales, revenue recognized on lower margin original equipment~~ ~~orders~~ ~~as compared to the same period in 2019,~~ ~~increased realignment charges associated with our~~ ~~2020 Realignment Program~~ ~~and the unfavorable impact of underutilized capacity from the COVID-19 pandemic resulting in $15.0 million of manufacturing costs being expensed and other related costs.~~ ~~Aftermarket sales represented approximately~~ ~~49% of total sales, as compared with approximately 51% of total sales for the same period in 2019.~~

Selling, General and Administrative Expense


		Three Months Ended September 30,							Three Months Ended June 30,
(Amounts in millions, except percentages)	(Amounts in millions, except percentages)	2020			2019			(Amounts in millions, except percentages)	2021			2020
SG&A	SG&A	$	200.7		$	230.4		SG&A	$	210.8		$	229.3
SG&A as a percentage of sales	SG&A as a percentage of sales	21.7		%	23.1		%	SG&A as a percentage of sales	23.5		%	24.8		%


		Nine Months Ended September 30,							Six Months Ended June 30,
(Amounts in millions, except percentages)	(Amounts in millions, except percentages)	2020			2019			(Amounts in millions, except percentages)	2021			2020
SG&A	SG&A	$	675.5		$	665.6		SG&A	$	409.1		$	474.8
SG&A as a percentage of sales	SG&A as a percentage of sales	24.6		%	23.2		%	SG&A as a percentage of sales	23.3		%	26.1		%

SG&A for the three months ended ~~September~~June 30, ~~2020~~2021 decreased by ~~$29.7~~$18.5 million, or ~~12.9%~~8.1%, as compared with the same period in ~~2019.~~2020. Currency effects yielded an increase of approximately $26 million. SG&A as a percentage of sales for the three months ended ~~September~~June 30, ~~2020~~2021 decreased ~~140~~130 basis points asprimarily due to decreased charges and increased savings related to our realignment actions, partially offset by increased broad-based annual incentive compensation compared with the same period in ~~2019 primarily due to a~~ decrease in travel and selling-related expenses from our cost-saving initiatives in response to COVID-19 and increased savings related to our 2020 Realignment Program as compared to the same period in 2019, partially offset by the reversal of a loss contingency related to a legal matter in the same period in 2019 that did not recur.2020.

SG&A for the ~~nine~~six months ended ~~September~~June 30, ~~2020 increased~~2021 decreased by ~~$9.9~~$65.7 million, or ~~1.5%~~13.8%, as compared with the same period in ~~2019.~~2020. Currency effects yielded ~~a decrease~~an increase of approximately $4$11 million. SGSG&A as a percentage of sales for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 decreased 280 basis points primarily due to decreased charges and increased ~~140 basis points~~savings related to our realignment actions, decreased travel-related expenses and lower bad debt expense, partially offset by increased broad-based annual incentive compensation as compared with the same period in ~~2019~~ ~~primarily due to~~ ~~increased charges related to our~~ ~~2020 Realignment Program,~~ ~~an $8.5 million~~ ~~write-down of accounts receivables and contract assets related to a contract with an oil and gas customer in Latin America,~~ ~~and the favorable impacts resulting from gains from the sales of non-strategic manufacturing facilities in the first quarter of 2019 that did not recur. This increase was~~ ~~partially offset by a~~ decrease in travel and selling-related expenses from our cost-saving initiatives in response to COVID-19 and increased savings related to our 2020 Realignment Program as compared to the same period in 2019.2020.

Net Earnings from Affiliates


	Three Months Ended June 30,
(Amounts in millions)	2021		2020
Net earnings from affiliates	$	2.9	$	3.1


		Three Months Ended September 30,					Six Months Ended June 30,
(Amounts in millions)	(Amounts in millions)	2020		2019		(Amounts in millions)	2021		2020
Net earnings from affiliates	Net earnings from affiliates	$	2.8	$	2.1	Net earnings from affiliates	$	6.4	$	6.3

Nine Months Ended September 30,
(Amounts in millions) 2020 2019
Net earnings from affiliates $ 9.1 $ 8.1

Net earnings from affiliates for the three months ended ~~September~~June 30, ~~2020 increased $0.7~~2021 decreased $0.2 million, or ~~33.3%~~6.5%, as compared with the same period in ~~2019.~~2020.

Net earnings from affiliates for the six months ended June 30, 2021 increased $0.1 million, or 1.6%, as compared with the same period in 2020. ~~The increase was primarily a result of increased earnings of our FPD joint venture in South Korea.~~

Operating Income and Operating Margin


	Three Months Ended June 30,
(Amounts in millions, except percentages)	2021			2020
Operating income	$	72.2		$	43.5
Operating income as a percentage of sales	8.0		%	4.7		%


	Six Months Ended June 30,
(Amounts in millions, except percentages)	2021			2020
Operating income	$	128.3		$	67.7
Operating income as a percentage of sales	7.3		%	3.7		%

3940

Table of Co ~~ntents~~Contents

Net earnings from affiliates for the nine months ended September 30, 2020 increase $1 million or 12.3% compared with the same period in 2019. The increase was primarily a result of increased earnings of our FPD joint venture in South Korea.

~~Operating Income and Operating Margin~~

Three Months Ended September 30,
(Amounts in millions, except percentages) 2020 2019
Operating income $ 87.3 $ 104.6
Operating income as a percentage of sales 9.4 % 10.5 %

Nine Months Ended September 30,
(Amounts in millions, except percentages) 2020 2019
Operating income $ 155.0 $ 282.2
Operating income as a percentage of sales 5.7 % 9.8 %

Operating income for the three months ended ~~September~~June 30, ~~2020 decreased~~2021 increased by ~~$17.3~~$28.7 million, or ~~16.5%~~66.0%, as compared with the same period in ~~2019.~~2020. The ~~decrease~~increase included ~~negative~~ currency ~~effects~~benefits of approximately $3$6 million. The ~~decrease~~increase was primarily a result of the ~~$47.7~~$18.5 million decrease in SG&A and by the $8.5 million increase in gross ~~profit and the $29.7 million decrease in SG&A.~~profit.

Operating income for the ~~nine~~six months ended ~~September~~June 30, ~~2020 decreased~~2021 increased by ~~$127.2~~$60.6 million, or ~~45.1%~~89.5%, as compared with the same period in ~~2019.~~2020. The ~~decrease~~increase included ~~negative~~ currency ~~effects~~benefits of approximately $8 $7 million. ~~The decrease~~The increase was primarily a result of the ~~$9.9~~$65.7 million ~~increase~~decrease in SG&A, ~~and~~partially offset by the $~~118.4~~7 million decrease in gross profit.

Interest Expense and Interest Income

Three Months Ended September 30,
(Amounts in millions) 2020 2019
Interest expense $ (14.7) $ (14.0)
Interest income 0.7 2.3


	Three Months Ended June 30,
(Amounts in millions)	2021		2020
Interest expense	$	(14.3)	$	(12.9)
Interest income	0.5		1.1


	Six Months Ended June 30,
(Amounts in millions)	2021		2020
Interest expense	$	(31.1)	$	(25.9)
Interest income	1.1		2.9

Nine Months Ended September 30,
(Amounts in millions) 2020 2019
Interest expense $ (40.6) $ (42.0)
Interest income 3.6 6.5

Interest expense for the three months ended ~~September~~June 30, ~~2020~~2021 increased ~~$0.7~~$1.4 million, as compared with the same period in ~~2019.~~2020. Interest income for the three months ended ~~September~~June 30, ~~2020~~2021 decreased $~~1.6~~0.7 million, as compared with the same period in ~~2019.~~2020. The increase in interest expense was primarily attributable to interest expense associated with the ~~early extinguishment loss~~senior notes issued in the third quarter of ~~$1.2 million resulting from our partial tender of our 2022 Euro Senior Notes~~.2020. The decrease in interest income was partially due to lower interest rates on our average cash balances compared with same period in ~~2019.~~2020.

Interest expense for the ~~nine~~six months ended ~~September~~June 30, ~~2020 decreased~~ ~~$1.4~~2021 increased $5.2 million, as compared with the same period in ~~2019.~~ 2020. Interest income for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 decreased ~~$2.9~~$1.8 million,, as compared with the same period in ~~2019.~~2020. The ~~decrease~~increase in interest expense was primarily attributable to ~~lower borrowings compared~~interest expense associated with ~~same period in 2019, partially offset by t~~he ~~early extinguishment loss of~~ ~~$1.2 million resulting from our partial tender of our 2022 Euro Senior Notes~~the senior notes issued in the third quarter of ~~2020~~.2020. The decrease in interest income was partially due to lower interest rates on our average cash balances compared with same period in ~~2019.~~2020.

Loss on Extinguishment of Debt


	Six Months Ended June 30,
(Amounts in millions)	2021		2020
Loss on extinguishment of debt	$	(7.6)	$	—

Loss on extinguishment of debt for the six months ended June 30, 2021 of $7.6 million, resulted from the redemption of our 2022 Euro Senior Notes. For a further discussion on the redemption of our 2022 Euro Senior Notes refer to Note 7 to our condensed consolidated financial statements included in this Quarterly Report.

Other Income (Expense), Net


	Three Months Ended June 30,
(Amounts in millions)	2021		2020
Other income (expense), net	$	(7.9)	$	(18.9)


	Six Months Ended June 30,
(Amounts in millions)	2021		2020
Other income (expense), net	$	(19.2)	$	19.3

Table of Co ~~ntents~~Contents

~~Other Income (Expense), Net~~

Three Months Ended September 30,
(Amounts in millions) 2020 2019
Other income (expense), net $ (1.0) $ (8.5)

Nine Months Ended September 30,
(Amounts in millions) 2020 2019
Other income (expense), net $ 7.6 $ (15.2)

Other income (expense), net for the three months ended ~~September~~June 30, ~~2020~~2021 decreased ~~$7.5~~$11.0 million as compared with the same period in ~~2019,~~2020, due primarily to an ~~$6.0~~$14.6 million ~~increase~~decreases in ~~gains~~losses from transactions in currencies other than our sites' functional currencies, partially offset by a ~~$0.5~~$0.8 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 ~~Euro, Argentinian peso,~~ Mexican peso, ~~and~~ Brazilian real, Canadian dollar and Singapore dollar in relation to the U.S. dollar during the three months ended ~~September~~June 30, ~~2020,~~2021, as compared with the same period in ~~2019.~~2020.

Other income (expense), net for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 decreased ~~$22.8 million from an expense of $15.2~~$38.5 million as compared with the same period in ~~2019,~~2020, due primarily to ~~a $20.9~~an $37.9 million increase in ~~gains~~losses from transactions in currencies other than our sites' functional currencies, ~~and~~partially offset by a ~~$2.2~~$1.9 million increase inin gains arising from transactions on foreign exchange contracts. The net change was primarily due to the foreign currency exchange rate movements in th~~e Euro,~~the Canadian dollar, Mexican peso, ~~Argentinian peso~~Euro and ~~Canadian dollar~~Brazilian real in relation to the U.S. dollar during the ~~three~~six months ended ~~September~~June 30, ~~2020,~~ 2021, as compar~~as compared~~ed with the same period in ~~2019.~~2020.

Tax Expense and Tax Rate

Three Months Ended September 30,
(Amounts in millions, except percentages) 2020 2019
Provision for income taxes $ 18.7 $ 22.4
Effective tax rate 25.8 % 26.6 %


		Nine Months Ended September 30,							Three Months Ended June 30,
(Amounts in millions, except percentages)	(Amounts in millions, except percentages)	2020			2019			(Amounts in millions, except percentages)	2021			2020
Provision for income taxes	Provision for income taxes	$	59.2		$	58.6		Provision for income taxes	$	2.7		$	4.5
Effective tax rate	Effective tax rate	47.2		%	25.3		%	Effective tax rate	5.4		%	35.2		%


	Six Months Ended June 30,
(Amounts in millions, except percentages)	2021			2020
Provision for income taxes	$	6.5		$	41.5
Effective tax rate	9.1		%	64.8		%

The effective tax rate of ~~25.8%~~5.4% for the three months ended ~~September~~June 30, ~~2020~~2021 decreased from ~~26.6%~~35.2% for the same period in ~~2019.~~2020. The effective tax rate varied from the U.S. federal statutory rate for the three months ended ~~September~~June 30, ~~2020~~2021 primarily due to the net impact of foreign ~~operations.~~operations and favorable resolution of audits in foreign jurisdictions. Refer to Note 14 to our condensed consolidated financial statements included in this Quarterly Report for further discussion.

The effective tax rate of ~~47.2%~~9.1% for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~ ~~increased~~2021 decreased from ~~25.3%~~64.8% for the same period in ~~2019.~~2020. The effective tax rate varied from the U.S. federal statutory rate for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 primarily due to the establishment of a valuation allowance against certain deferred tax assets given the current and anticipated impact to the Company's operations resulting from the COVID-19 pandemic and the distressed oil prices, ~~and~~ the net impact of foreign ~~operations.~~operations, favorable resolution of audits in foreign jurisdictions, the reversal of certain deferred tax liabilities as a result of restructuring specific aspects of our global financing arrangements, higher withholding taxes related to transactions with and amongst various foreign subsidiaries and favorable resolution of audits in foreign jurisdictions.Refer to Note 14 to our condensed consolidated financial statements included in this Quarterly Report for further discussion.

~~Table of~~ Co ~~ntents~~

Other Comprehensive Income (Loss)


		Three Months Ended September 30,					Three Months Ended June 30,
(Amounts in millions)	(Amounts in millions)	2020		2019		(Amounts in millions)	2021		2020
Other comprehensive income (loss)	Other comprehensive income (loss)	$	24.3	$	(26.9)	Other comprehensive income (loss)	$	16.1	$	20.9

Nine Months Ended September 30,
(Amounts in millions) 2020 2019
Other comprehensive income (loss) $ (33.8) $ (19.3)


	Six Months Ended June 30,
(Amounts in millions)	2021		2020
Other comprehensive income (loss)	$	9.6	$	(68.8)

Other comprehensive income ~~(loss)~~ for the three months ended ~~September~~June 30, ~~2020~~2021 decreased $4.8 million from income of $20.9 million in 2020. The decreased income was primarily due to foreign currency translation adjustments resulting primarily from exchange rate movements of the Euro, Colombian peso, Indian rupee and British pound versus the U.S. dollar during the three months ended June 30, 2021, as compared with the same period in 2020.

Other comprehensive income for the six months ended June 30, 2021 increased ~~$51.2~~$78.4 million from a loss of ~~$26.9~~$68.8 million in ~~2019.~~2020. The ~~increased~~increased income was primarily due to foreign currency translation adjustments resulting primarily from

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exchange rate movements of the Euro, ~~British pound, Chinese yuan~~Brazilian real, Mexican peso and Indian rupee versus the U.S. dollar during the three months ended ~~September~~June 30, ~~2020,~~2021, as compared with the same period in ~~2019.~~

~~Other comprehensive income (loss) for the nine months ended~~ ~~September 30, 2020~~ ~~increased $14.5 million as compared to the same period in 2019.~~ ~~The increased loss was primarily due to foreign currency translation adjustments resulting primarily from exchange rate movements of the Euro, Mexican peso, Indian rupee and the British pound versus the U.S. dollar during the nine months ended September 30, 2020, as~~ ~~compared with the same period in 2019.~~2020.

Business Segments

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, and auxiliary systems (collectively referred to as ~~"original~~"original equipment") and related services. FPD primarily operates in the oil and gas, power generation, chemical and general industries. FPD operates in 48 countries with 39 manufacturing facilities worldwide, 13 of which are located in Europe, 12 in North America, eight in Asia and six in Latin America, and it operates ~~139~~136 QRCs, including those co-located in manufacturing facilities and/or shared with FCD.


		Three Months Ended September 30,							Three Months Ended June 30,
(Amounts in millions, except percentages)	(Amounts in millions, except percentages)	2020			2019			(Amounts in millions, except percentages)	2021			2020
Bookings	Bookings	$	574.1		$	742.1		Bookings	$	668.8		$	536.5
Sales	Sales	670.2			$	682.7		Sales	617.5			674.1
Gross profit	Gross profit	210.0			$	230.4		Gross profit	196.4			197.9
Gross profit margin	Gross profit margin	31.3		%	33.7		%	Gross profit margin	31.8		%	29.4		%
SG&A	SG&A	126.2			147.1			SG&A	133.6			140.6

Gain on sale of business								Gain on sale of business	1.8			—
Segment operating income	Segment operating income	86.7			85.5			Segment operating income	67.8			60.4
Segment operating income as a percentage of sales	Segment operating income as a percentage of sales	12.9		%	12.5		%	Segment operating income as a percentage of sales	11.0		%	9.0		%

~~Table of~~ Co ~~ntents~~


		Nine Months Ended September 30,							Six Months Ended June 30,
(Amounts in millions, except percentages)	(Amounts in millions, except percentages)	2020			2019			(Amounts in millions, except percentages)	2021			2020
Bookings	Bookings	$	1,792.3		$	2,253.5		Bookings	$	1,322.2		$	1,220.1
Sales	Sales	1,979.9			1,966.8			Sales	1,220.1			1,309.7
Gross profit	Gross profit	603.7			653.8			Gross profit	379.2			393.7
Gross profit margin	Gross profit margin	30.5		%	33.2		%	Gross profit margin	31.1		%	30.1		%
SG&A	SG&A	426.1			419.7			SG&A	266.2			299.9

Gain on sale of business								Gain on sale of business	1.8			—
Segment operating income	Segment operating income	186.7			242.1			Segment operating income	121.6			100.1
Segment operating income as a percentage of sales	Segment operating income as a percentage of sales	9.4		%	12.3		%	Segment operating income as a percentage of sales	10.0		%	7.6		%

Bookings for the three months ended ~~September~~June 30, ~~2020 decreased~~2021 increased by ~~$168.0~~$132.3 million, or ~~22.6%~~24.7%, as compared with the same period in ~~2019.~~2020. The ~~decrease~~increase included currency benefits of approximately $1$29 million. The ~~decrease~~increase in customer bookings was driven by ~~decrease~~increased orders in the oil and gas, chemical, and ~~power generation~~water industries and were partially offset by ~~increased~~decreased bookings in the general ~~industries.~~industry. Customer bookings ~~decreased $61.3~~increased $46.6 million into North America, ~~$59.3~~$39.3 million into the Middle East, ~~$32.2 million into Asia Pacific, $11.6~~$22.3 million into Europe, ~~$10.8~~$16.8 million into Latin America and $13.9 million into Africa and ~~$4.4~~were partially offset by decreased bookings of $3.6 million into ~~Latin America.~~ Asia Pacific. The increase was more heavily weighted toward~~Customer bookings were down in both~~s aftermarket and original equipment, which have decreased in light of the impacts of COVID-19 on customer spending and distressed oil prices on these industries. Interdivision bookings (which are eliminated and are not included in consolidated bookings as disclosed above) increased by bookings.~~$4.1 million.~~

Bookings for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 increased by $102.1 million, or 8.4%, as compared with the same period in 2020. The increase included currency benefits of approximately $46 million. The increase in customer bookings was driven by increased orders in the chemical, oil and gas and water industries and were partially offset by decreased bookings in the power generation industry. Customer bookings increased $42.6 million into North America, $30.1 million into Latin America, $29.3 million into the Middle East and $22.3 million into Europe and were partially offset by decreased bookings of $51.1 million into Asia Pacific. The increase was more heavily weighted towards aftermarket bookings.

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Sales for the three months ended June 30, 2021 decreased by ~~$461.2~~$56.6 million, or ~~20.5%,~~8.4% as compared with the same period in ~~2019. The decrease~~2020 and included ~~negative~~ currency ~~effects~~benefits of approximately ~~$28~~$27 million. The decrease ~~in customer bookings~~ was driven by ~~decreased orders in~~customer original equipment sales. Decreased customer sales of $26.1 million into North America, $17.2 million into the ~~oil~~Middle East, $10.0 million into Africa and ~~gas, chemical and power generation industries,~~$9.0 million into Asia Pacific were partially offset by increased ~~bookings in the general industries. Customer bookings decreased $228.5~~sales of $5.3 million~~into North America,~~ ~~$121.8 million~~ ~~into the Middle East,~~ ~~$45.9 million~~ ~~into Asia Pacific,~~ ~~$24.9 million~~ ~~into Africa,~~ ~~$23.3 million~~ ~~into Europe and~~ ~~$10.5 million~~ into Latin America.~~The decrease in~~ ~~customer bookings was primarily~~ driven by customer original equipment bookings which have decreased in light of the impacts of COVID-19 on customer spending and distressed oil prices on these industries. Interdivision bookings (which are eliminated and are not included in consolidated bookings as disclosed above) increased $5.7 million.

Sales for the ~~three~~six months ended ~~September~~June 30, ~~2020~~2021 decreased by ~~$12.5~~$89.6 million, or ~~1.8%~~6.8% as compared with the same period in ~~2019~~2020 and included currency benefits of approximately $2$45 million. The decrease was driven byby customer ~~aftermarket~~original equipment sales. Decreased customer sales of ~~$33.8~~$69.8 million into North America, ~~$3.9 million into Latin America, $2.5 million into Africa and $2.0~~$34.3 million into the Middle East and $7.5 million into Africa were partially offset by increased sales of ~~$22.6~~$13.6 million into ~~Asia Pacific and $7.9 million into Europe.~~

~~Sales for the nine months ended September 30, 2020 increased $13.1 million, or 0.7%, as compared with the same period in 2019. The increase in sales included negative currency effects~~ ~~of approximately~~ ~~$30 million. The increase in sales was driven by original equipment sales.~~ ~~Customer sales increased $39.2 million into the Middle East, $25.8 million into Asia Pacific and $2.1~~Europe, $5.2 million into Latin America ~~partially offset by decreased~~ ~~sales of $25.4~~and $3.3 million into ~~Europe, $10.8 million into Africa and $12.4 million into North America.~~Asia Pacific.

Gross profit for the three months ended ~~September~~June 30, ~~2020~~2021 decreased by ~~$20.4~~$1.5 million, or ~~8.9%~~0.8%, as compared with the same period in ~~2019.~~2020. Gross profit margin for the three months ended ~~September~~June 30, ~~2020~~2021 of ~~31.3% decreased~~31.8% increased from ~~33.7%~~29.4% for the same period in ~~2019.~~2020. The ~~decrease~~increase in gross profit margin was primarily ~~due~~attributable to ~~a sales mix shift to lower margin original equipment sales~~ decreased charges and increased savings under our realignment actions as compared to the same period in ~~2019 and the increased~~2020, ~~charges~~a $3.3 million charge of underutilized capacity manufacturing costs expensed related to ~~our~~the COVID-19 pandemic in 2020 that did not recur and ~~2020 Realignment Program, partially offset by increased savings related~~a mix shift to ~~our 2020 Realignment Program as compared to the same period in 2019.~~higher margin aftermarket sales.

Gross profit for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 decreased by ~~$50.1~~$14.5 million, or ~~7.7%~~3.7%, as compared with the same period in ~~2019.~~2020. Gross profit margin for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 of ~~30.5% decreased~~31.1% increased from ~~33.2%~~30.1% for the same period in ~~2019.~~2020. The ~~decrease~~increase in gross profit margin was primarily ~~due~~attributable to ~~a sales mix shift to lower margin original equipment sales~~decreased charges and increased savings under our realignment actions as compared to the same period in ~~2019, the increased charges related to our~~ 2020, ~~Realignment Program and~~ ~~the unfavorable impact~~a $9.2 million charge of underutilized capacity ~~from~~manufacturing costs expensed related to the COVID-19 pandemic ~~resulting~~ in ~~$9.2 million of~~ ~~manufacturing costs being expensed~~2020 that did not recur and ~~other related costs.~~a mix shift to higher margin aftermarket sales.

SG&A for the three months ended ~~September~~June 30, ~~2020~~2021 decreased by ~~$20.9~~$7.0 million, or ~~14.2%~~5.0%, as compared with the same period in ~~2019.~~2020. Currency effects provided an increase of approximately $2$5 million. The decrease in SG&A was primarily due to decreased charges and increased savings under our realignment actions as compared to the same period in 2020.

SG&A for the six months ended June 30, 2021 decreased by $33.7 million, or 11.2%, as compared with the same period in 2020. Currency effects provided an increase of approximately $8 million. The decrease in SG&A was primarily due to a decrease in travel, administrative and selling-related expenses, lower bad debt expense and decreased charges and increased savings ~~related to~~under our ~~2020 Realignment Program~~realignment actions as compared to the same period in ~~2019.~~

~~Table of~~ 2020Co ~~ntents~~

~~SG&A for the nine months ended September 30, 2020~~ ~~increased by $6.4 million, or 1.5%, as compared with the same period in 2019. Currency effects provided a decrease of approximately $4 million. The~~ ~~increase~~ ~~in SG&A was primarily due to an $8.5 million~~ ~~write-down of accounts receivables and contract assets related to a contract with an oil and gas customer in Latin America,~~ ~~the favorable impacts resulting from gains from the sales of non-strategic manufacturing facilities in the first quarter of 2019 that did not recur and increased charges related to our 2020 Realignment Program, partially offset by a~~ ~~decrease in travel and selling-related expenses compared to the same period in 2019.~~.

Operating income for the three months ended ~~September~~June 30, ~~2020~~2021 increased by ~~$1.2~~$7.4 million, or ~~1.4%~~12.3%, as compared with the same period in ~~2019.~~2020. The increase included ~~negative~~ currency ~~effects~~benefits of approximately $3$5 million. The increase was primarily due to the $~~20.9~~7.0 million decrease in SG&A ~~and~~partially offset by the ~~$20.4~~$1.5 million decrease in gross profit.

Operating income for the ~~nine~~six months ended ~~September~~June 30, ~~2020 decreased~~2021 increased by ~~$55.4~~$21.5 million, or ~~22.9%~~21.5%, as compared with the same period in ~~2019.~~2020. The ~~decrease~~increase included ~~negative~~ currency ~~effects~~benefits of approximately $8$6 million. The ~~decrease~~increase was primarily due to the ~~$50.1~~$33.7 million decrease in SG&A partially offset by the$14.5 milliondecrease in gross ~~profit and the $6.4 million increase in SG&A.~~profit.

Backlog of ~~$1,338.9~~$1,294.1 million at ~~September~~June 30, ~~2020 decrease~~2021 increased by ~~$222.0~~$57.2 million, or ~~14.2%~~4.6%, as compared with December 31, ~~2019.~~2020. Currency effects provided a decrease of approximately $7$22 million.

Flow Control Division Segment Results

FCD designs, manufactures and distributes a broad portfolio of engineered-to-order and configured-to-order isolation valves, control valves, valve automation products ~~boiler controls~~ and related ~~services.~~equipment. FCD leverages its experience and application know-how by offering a complete menu of engineered services to complement its expansive product portfolio. FCD has a total of 4846 manufacturing facilities and QRCs in 22 countries around the world, with five of its 2119 manufacturing operations located in the U.S., 10eight located in Europe, five located in Asia Pacific and one located in Latin America. Based on independent industry sources, we believe that FCD is the second largest industrial valve supplier on a global basis.

Three Months Ended September 30,
(Amounts in millions, except percentages) 2020 2019
Bookings $ 237.6 $ 282.7
Sales 255.2 314.0
Gross profit 78.1 101.8
Gross profit margin 30.6 % 32.4 %
SG&A 47.3 52.5
Segment operating income 30.8 49.2
Segment operating income as a percentage of sales 12.1 % 15.7 %

Nine Months Ended September 30,
(Amounts in millions, except percentages) 2020 2019
Bookings $ 807.8 $ 942.8
Sales 766.9 908.7
Gross profit 229.1 293.7
Gross profit margin 29.9 % 32.3 %
SG&A 154.9 159.1
Segment operating income 74.2 134.7
Segment operating income as a percentage of sales 9.7 % 14.8 %

~~Bookings for the three months ended September 30, 2020 decreased by $45.1 million, or 16.0%, as compared with the same period in 2019. Bookings included currency benefits of approximately $2 million. The~~ ~~decrease in~~ ~~customer bookings was primarily driven by decreased orders in the oil and gas, power generation and general industries. Decrease customers bookings of~~ $29.4 million into North America, $8.8 million into Europe, $8.1 million into Asia Pacific, $3.3 million into the Middle East and $2.4 million into Africa were partially offset by increased bookings of $2.7 million into Latin America. ~~The~~ ~~decreasewas~~ ~~more heavily weighted towards customer original equipment bookings.~~

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	Three Months Ended June 30,
(Amounts in millions, except percentages)	2021			2020
Bookings	$	289.1		$	274.6
Sales	281.2			252.3
Gross profit	84.8			76.2
Gross profit margin	30.2		%	30.2		%
SG&A	48.0			50.0

Segment operating income	37.2			26.2
Segment operating income as a percentage of sales	13.2		%	10.4		%


	Six Months Ended June 30,
(Amounts in millions, except percentages)	2021			2020
Bookings	$	582.6		$	570.8
Sales	537.0			511.7
Gross profit	159.4			151.0
Gross profit margin	29.7		%	29.5		%
SG&A	97.8			107.6

Segment operating income	61.9			43.4
Segment operating income as a percentage of sales	11.5		%	8.5		%

Bookings for the ~~nine~~three months ended ~~September~~June 30, ~~2020 decreased~~2021 increased by ~~$135.0~~$14.5 million, or ~~14.3%~~5.3%, as compared with the same period in ~~2019.~~2020. Bookings included ~~negative~~ currency ~~effects~~benefits of ~~approximately $8 million. Decreased~~ approximately $10 million. The increase in customer bookings was primarily driven by increased orders in the general, power generation and chemical industries, partially offset by decreased bookings in the oil and gas ~~chemical~~industry. Increase customers bookings of $36.2 million into North America and ~~general industries~~$12.3 million into Europe were partially offset by ~~increased bookings in the power generation industry. Decreased customer~~decreased bookings of ~~$102.1~~$26.8 million into ~~North America, $30.6 million into Europe, $6.9 million into Africa, $4.4~~Asia Pacific, $5.2 million into the Middle East, $2.4 million into Latin America and ~~$2.7~~$1.4 million into Africa. The increasewas primarily driven by both customer original equipment and aftermarket bookings.

Bookings for the six months ended June 30, 2021 increased by $11.8 million, or 2.1%, as compared with the same period in 2020. Bookings included currency benefits of approximately $19 million. The increase in customer bookings was primarily driven by increased orders in the chemical, power generation and general industries, partially offset by decreased orders in the the oil and gas industry. Increase customers bookings of $26.2 million into North America and $1.9 million into Asia Pacific were partially offset by ~~increased~~decreased bookings of ~~$5.8~~$12.9 million into the Middle East and $3.2 million into Latin America. The ~~decrease~~ increasewas ~~primarily~~ driven by ~~lower~~ customer original equipment bookings.

Sales for the three months ended ~~September~~June 30, ~~2020 decreased $58.8~~2021 increased $28.9 million, or ~~18.7%~~11.5%, as compared with the same period in ~~2019.~~2020. The ~~decrease~~increase included currency benefits of approximately $3$12 million. ~~Decreased~~Increased sales were ~~primarily~~ driven by both original equipment and aftermarket sales. The ~~decrease~~increase was primarily driven by ~~decreased~~increased customer sales of ~~$36.9 million into North America, $20.1~~$24.5 million into Asia Pacific, ~~$5.4~~$6.7 million into Europe, ~~and $1.6 million into Latin America,~~ ~~partially offset by~~ ~~increased sales of~~ ~~$3.0~~$3.9 million into the Middle East and ~~$2.3~~$2.0 million into ~~Africa.~~Latin America, partially offset by decreased sales of $8.6 million into North America.

Sales for the ~~nine~~six months ended ~~September~~June 30, ~~2020 decreased $141.8~~2021 increased $25.3 million, or ~~15.6%~~4.9%, as compared with the same period in ~~2019.~~2020. The ~~decrease~~increase included ~~negative~~ currency ~~effects~~benefits of ~~approximately $5~~approximately $21 million. ~~Decreased~~ Increased sales were ~~primarily~~ driven by both original equipment and aftermarket sales. The ~~decrease~~increase was primarily driven by ~~decreased~~increased customer sales of ~~$76.3 million~~ ~~into North America, $30.9 million into Europe, $38.3~~$48.0 million into Asia Pacific, ~~and $5.1~~$10.1 million into ~~Latin America, partially offset by~~Europe, $6.4 million ~~increased sales of $4.2 million~~ into the Middle East and $~~3.6~~3.3 million into Latin America, partially offset by decreased sales of $41.1 million into ~~Africa.~~North America.

Gross profit for the three months ended ~~September~~June 30, ~~2020 decreased~~2021 increased by ~~$23.7~~$8.6 million, or ~~23.3%~~11.3%, as compared with the same period in ~~2019.~~2020. Gross profit margin for the three months ended ~~September~~June 30, ~~2020~~2021 of ~~30.6% decreased from 32.4%~~30.2% remained consistent with the 30.2% for the same period in ~~2019.~~2020. The ~~decrease in~~ ~~gross profit margin was primarily due to lower sales volume and revenue recognized on lower margin original equipment orders~~ ~~as compared to the same period in 2019, partially~~ ~~offset by increased savings related to our 2020 Realignment Program as compared to the same period in 2019.~~

~~Gross profit margin for the nine months ended September 30, 2020~~ ~~decreased~~ of ~~$64.6 million, or 22.0%, as compared with the same period in 2019. Gross profit margin for the~~ ~~nine~~ ~~months ended September 30, 2020 of~~ ~~29.9% decreased from 32.3% for the same period in 2019. The~~ ~~decrease~~increase in gross profit margin was primarily ~~due~~attributable to ~~increased charges~~a $3.4 million charge of underutilized capacity manufacturing costs expensed related to the COVID-19 pandemic that did not recur and decreased charges and increased savings under our ~~2020 Realignment Program,~~ ~~lower sales volume and~~realignment actions, completely offset by revenue recognized on lower margin original equipment orders as compared to the same period in ~~2019 and~~2020.

Gross profit for the ~~unfavorable impact~~six months ended June 30, 2021 increased by $8.4 million, or 5.6%, as compared with the same period in 2020. Gross profit margin for the six months ended June 30, 2021 of 29.7% increased from 29.5% for the same period in 2020. The increase in gross profit margin was primarily attributable to a $5.8 million charge of underutilized capacity ~~from~~

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manufacturing costs expensed related to the COVID-19 pandemic ~~resulting~~that did not recur and decreased charges and increased savings under our realignment actions, substantially offset by revenue recognized on lower margin original equipment orders as compared to the same period in ~~$5.8 million of~~ ~~manufacturing costs being expensed and other related costs.~~2020.

SG&A for the three months ended ~~September~~June 30, ~~2020~~2021 decreased by ~~$5.2~~$2.0 million, or ~~10.0%~~4.0%, as compared with the same period in ~~2019.~~2020. Currency effects provided an increase of approximately $12 million. The decrease in SG&A was primarily due to ~~a decrease in travel and selling-related expenses from our cost saving initiatives in response to COVID-19~~decreased charges and increased savings related to our ~~2020 Realignment Program~~realignment actions, partially offset by increased selling-related expenses as compared to the same period in ~~2019.~~2020.

SG&A for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~ 2021 decreased~~decrease~~ by ~~d by $4.2~~$10 million, or ~~2.6%~~9.1%, as ~~compared~~compared with the same period in ~~2019.~~2020. Currency effects provided ~~a decrease~~an increase of ~~approximately $1~~approximately $3 million. The decrease in SG&A was primarily due to ~~a decrease in travel from our cost saving initiatives in response to COVID-19, partially offset~~ bydecreased charges and increased ~~charges related~~ savings related to our ~~2020 Realignment Program~~realignment actions, partially offset by increased selling-related expenses as compared to the same period in ~~2019.~~2020.

Operating income for the three months ended ~~September~~June 30, ~~2020 decreased~~2021 increased by ~~$18.4~~$11.0 million, or ~~37.5%~~42.0%, as compared with the same period in ~~2019.~~2020. The ~~decrease~~increase included currency benefits of ~~less than~~approximately $1 million. The ~~decrease~~increase was primarily due to the ~~$23.7~~$8.6 million ~~decrease~~increase in gross profit ~~partially offset by~~and the ~~$5.2~~$2.0 million decrease in SG&A.

Operating income for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~ ~~decrease~~d2021 increased by $~~60.5~~19 million, or ~~44.9%~~42.6%, as compared with the same period in ~~2019.~~2020. The ~~decrease~~increase included ~~negative~~ currency ~~effects~~ benefits of ~~less than $1~~approximately $2 million. The ~~decrease~~increase was primarily due to the ~~$64.6~~$8.4 million ~~decrease~~increase in gross profit and the $9.8 million ~~partially offset by the $4.2 million~~ decrease in SG&A.&A.

Backlog of ~~$647.9~~$660.4 million at ~~September~~June 30, ~~2020~~2021 increased by ~~$47.8~~$37.3 million, or ~~8.0%~~6.0%, as compared with December 31, ~~2019.~~2020. Currency effects provided ~~an increase~~a decrease of approximately $8$6 million.

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LIQUIDITY AND CAPITAL RESOURCES

Cash Flow and Liquidity Analysis


		Nine Months Ended September 30,					Six Months Ended June 30,
(Amounts in millions)	(Amounts in millions)	2020		2019		(Amounts in millions)	2021		2020
Net cash flows provided (used) by operating activities	Net cash flows provided (used) by operating activities	$	115.6	$	143.2	Net cash flows provided (used) by operating activities	$	61.3	$	20.2
Net cash flows provided (used) by investing activities	Net cash flows provided (used) by investing activities	(34.2)		(4.5)		Net cash flows provided (used) by investing activities	(23.8)		(18.3)
Net cash flows provided (used) by financing activities	Net cash flows provided (used) by financing activities	179.0		(195.5)		Net cash flows provided (used) by financing activities	(491.1)		(93.7)

Existing cash, cash generated by operations and borrowings available under our Senior Credit Facility are our primary sources of short-term liquidity. We monitor the depository institutions that hold our cash and cash equivalents on a regular basis, and we believe that we have placed our deposits with creditworthy financial institutions. Our sources of operating cash generally include the sale of our products and services and the conversion of our working capital, particularly accounts receivable and inventories. Our cash balance at ~~September~~June 30, ~~2020~~2021 was ~~$921.2~~ $630.4 million, as compared with ~~$671.0~~$1,095.3 million at December 31, ~~2019.~~2020.

Our cash balance ~~increased~~decreased by ~~$250.2~~$464.9 million to ~~$921.2~~$630.4 million at ~~September~~June 30, ~~2020,~~2021, as compared with December 31, ~~2019.~~2020. The cash activity during the first ~~nine~~six months of ~~2020~~2021 included the $~~498.3~~407.5 million redemption in proceeds from the issuance of our 2030 Senior Notes and $10.8 million of proceeds from the sale of non-strategic manufacturing facilities in 2019 that were included in our 2015 Realignment Programs, partially ~~offset by a $191.3 million partial tender offer~~ of our 2022 Euro Senior Notes, ~~$78.1~~$52.2 million in dividend payments, ~~$47.9~~$22.5 million in capital expenditures and ~~$32.1~~$17.5 million of share ~~repurchases.~~ repurchases, partially offset by cash provided by operating activities.

For the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, our cash provided by operating activities was ~~$115.6~~$61.3 million, as compared to $~~143.2~~20.2 million for the same period in ~~2019.~~2020. Cash flow ~~used~~provided from working capital increased for the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, due primarily to decreased cash flows used or increased cash ~~flow used related to accounts payable~~flows provided by contract assets, contract liabilities and ~~contract liabilities,~~inventories, partially offset by increased cash flows ~~from~~used or decreased cash flows provided by accounts ~~receivable~~payable and ~~inventory as~~accounts receivable compared to the same period in ~~2019.~~2020.

Decreases in accounts receivable provided ~~$24.3~~$14.3 million of cash flow for the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, as compared to ~~a cash flow use of $12.0~~$0.9 million for the same period in ~~2019.~~2020. As of ~~September~~June 30, ~~2020,~~2021, our days’ sales outstanding ("DSO") was 73 days as compared with 7174 days as of ~~September~~June 30, ~~2019.~~2020.

~~Increases~~Decreases in contract assets ~~used $37.3~~provided $12.2 million of cash flow for the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, as compared with ~~$35.6~~cash flows used of $44.3 million for the same period in ~~2019.~~2020.

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Increases in inventory used $~~52.0~~30.8 million and ~~$64.3~~$36.6 million of cash flow for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~September~~June 30, ~~2019,~~2020, respectively. Inventory turns were 3.6 times at ~~September~~June 30, ~~2020,~~2021, as compared to ~~3.9~~3.8 as of ~~September~~June 30, ~~2019.~~2020.

Decreases in accounts payable used ~~$21.8~~$41.1 million of cash flow for the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, as compared with ~~$12.0~~$9.2 million for the same period in ~~2019.~~ 2020. Decreases~~Increases~~ in accrued liabilities and income taxes payable ~~provided $24.3~~used $37.1 million of cash flow for the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, as compared with ~~cash flows used of $8.5~~$1.1 million for the same period in ~~2019.~~2020.

~~Decreases~~Increases in contract liabilities ~~used~~provided $~~22.5~~17.0 million of cash flow for the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, as compared ~~with cash flows provided $26.6~~to $4.4 million for the same period in ~~2019.~~2020.

Cash flows used by investing activities during the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 were $~~34.2~~23.8 million, as compared to ~~$4.5~~$18.3 million for the same period in ~~2019.~~2020. Capital expenditures during the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 were $~~47.9~~22.5 million, ~~an increase~~a decrease of ~~$2.6~~$6.5 million as compared with the same period in ~~2019.~~2020. Our capital expenditures are generally focused on strategic initiatives to pursue information technology infrastructure, ongoing scheduled replacements and upgrades and cost reduction opportunities. In ~~2020, total~~2021, we currently estimate capital expenditures ~~are expected~~ to be ~~approximately~~between $70 million and $80 million, ~~$60 million.~~before consideration of any acquisition activity. In addition, proceeds received during the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 from disposal of assets provided ~~$13.8~~$2.1 million, primarily from the ~~2019~~2020 sale of non-strategic manufacturing facilities that were included in our Realignment Programs. Proceeds received during the first ~~nine~~six months of ~~2019~~2020 included $~~40.8~~10.8 million ~~of proceeds~~ from the disposal of assets, primarily due to the 2019 sale of non-strategic manufacturing facilities that were included in ~~our 2015~~ Realignment Programs.

Cash flows ~~provided~~used by financing activities during the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 were $~~179.0~~491.1 million, as compared ~~with cash flows used of $195.5~~to $93.7 million for the same period in ~~2019.~~2020. Cash ~~inflows~~outflows during the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 resulted primarily from ~~$498.3 million in net proceeds from the issuance of the 2030 Senior Notes, partially offset by~~ a ~~$191.3~~$407.5 million payment on long-term debt resulting from ~~our partial tender offer~~the redemption of our 2022 Euro Senior

~~Table of~~ Co ~~ntents~~

Notes, ~~$78.1~~$52.2 million of dividend payments and the repurchase of ~~$32.1~~$17.5 million of common shares.~~We intend to use the remaining net proceeds from the public offering of the 2030 Senior Notes for future debt reduction~~.

As of ~~September~~June 30, ~~2020,~~2021, we had an available capacity of ~~$745.9~~$738.9 million on our Senior Credit Facility, which provides for a $800.0 million unsecured revolving credit facility with a maturity date of July 16, 2024. Our borrowing capacity is subject to financial covenant limitations based on the terms of our Senior Credit Facility and is also reduced by outstanding letters of credit. Our Senior Credit Facility is committed and held by a diversified group of financial institutions. Refer to Note 7 to our condensed consolidated financial statements included in this Quarterly Report for additional information concerning our Senior Credit Facility.

During the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 we made no cash contributions to our U.S. pension plan. At December 31, ~~2019,~~2020 our U.S. pension plan was fully funded as defined by applicable law. After consideration of our funded status, we ~~elected~~currently anticipate making $20 million in contributions to ~~make no contributions attributable to the~~our U.S. pension plan in ~~2020.~~2021, excluding direct benefits paid. We continue to maintain an asset allocation consistent with our strategy to maximize total return, while reducing portfolio risks through asset class diversification.

Considering our current debt structure and cash needs, we currently believe cash flows generated from operating activities combined with availability under our Senior Credit Facility and our existing cash balance will be sufficient to meet our cash needs for the next 12 months. Cash flows from operations could be adversely affected by economic, political and other risks associated with sales of our products, operational factors, competition, fluctuations in foreign exchange rates and fluctuations in interest rates, among other factors. See "COVID-19 Liquidity Update" and "Cautionary Note Regarding Forward-Looking Statements" below.

As of ~~September~~June 30, ~~2020,~~2021, we have ~~$113.6~~$101.2 million of remaining capacity for Board of Directors approved share repurchases. While we currently intend to continue to return cash through dividends and/or share repurchases for the foreseeable future, any future returns of cash through dividends and/or share repurchases will be reviewed individually, declared by our Board of Directors at its discretion and implemented by management.

Financing

Credit Facilities

See ~~Note 12 to our consolidated financial statements included in our 2019 Annual Report and~~ Note 7 to our condensed consolidated financial statements included in this Quarterly Report for a discussion of our Senior Credit Facility and related covenants. We were in compliance with all applicable covenants under our Senior Credit Facility as of ~~September~~June 30, ~~2020.~~2021.

COVID-19 Liquidity Update

~~Given our current financial condition, we expect to be able to maintain adequate liquidity over the next 12 months as we manage through the current market environment.~~

Table of Contents

As of ~~September~~June 30, ~~2020,~~2021, we had approximately ~~$1.7~~$1.4 billion of liquidity, consisting of cash and cash equivalents of ~~$921.2~~$630.4 million and ~~$745.9~~$738.9 million of borrowings available under our Senior Credit Facility. In light of the liquidity currently available to us, and the costs savings measures planned and already in place, we expect to be able to maintain adequate liquidity over the next 12 months as we manage through the current market environment. We ~~will~~will continue to actively monitor the potential impacts of COVID-19 and related events on the credit markets in order to maintain sufficient liquidity and access to capital throughout ~~2020.~~2021.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Management’s discussion and analysis of financial condition and results of operations are based on our condensed consolidated financial statements and related footnotes contained within this Quarterly Report. Our critical accounting policies used in the preparation of our condensed consolidated financial statements were discussed in "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" of our ~~2019~~2020 Annual Report.

During the three months ended September 30, 2020, our critical accounting policies and methodology used in determining reserves for contingent losses associated with unasserted asbestos claims changed. As described below, we identified accounting errors related to the recognition of a liability for unasserted asbestos claims. The adjustments primarily related to an incurred but not reported (“IBNR”) liability associated with unasserted asbestos claims, but also included adjustments related to the associated receivables for expected insurance proceeds for asbestos settlement and defense costs from insurance coverage and related legal fees. For further discussion related to this matter refer to Notes 1 and 2 to our condensed consolidated financial statements included in this Quarterly Report.

~~Table of~~ Co ~~ntents~~

The Company is a defendant in a number of lawsuits that seek to recover damages for personal injury allegedly resulting from exposure to asbestos-containing products formerly manufactured and/or distributed by heritage companies of the Company. Historically, the Company estimated the liability for unsettled asbestos-related claims based on known claims and on experience during the preceding two years for claims filed, settled and dismissed, with adjustments for events deemed unusual or unlikely to recur. In October 2020, the Company entered into a settlement agreement with two insurance companies providing coverage for one of its heritage companies. Given the size of the settlement, and as part of the third quarter close process, the Company re-evaluated its accounting for asbestos-related matters and evaluated the amount of receivables that were currently recorded. Additionally the Company considered the amount of historical data available, related to historic asbestos claims and settlements, which led the Company to conclude that a liability for an IBNR was probable and reasonably estimable.

The Company initiated an actuarial study to determine the amount of the IBNR, excluding legal fees, and evaluated all insurance programs for all product lines for insurance recoveries. With the assistance of third party consultants, the Company estimates the liability for pending and future claims not yet asserted, and which are probable and estimable, through 2049, which represents the expected end of our asbestos liability exposure with no further ongoing claims expected beyond that date. This estimate is based on the Company's historical claim experience and estimates of the number and resolution cost of potential future claims that may be filed based on anticipated levels of unique plaintiff asbestos-related claims in the U.S. tort system against all defendants, the diminished volatility and consistency of observable claims data, the period of time that has elapsed since we stopped manufacturing products that contained encapsulated asbestos and an expected downward trend in claims due to the average age of our claimants. This estimate is not discounted to present value. In light of the uncertainties and variables inherent in the long-term projection of the Company’s total asbestos liability, as part of our ongoing review of asbestos claims, each year we will reassess the projected liability of unasserted asbestos claims to be filed through 2049, and we will continually reassess the time horizon over which a reasonable estimate of unasserted claims can be projected.

The Company assesses the sufficiency of its estimated liability for pending and future claims on an ongoing basis by evaluating actual experience regarding claims filed, settled and dismissed, and amounts paid in settlements. In addition to claims and settlement experience, the Company considers additional quantitative and qualitative factors such as changes in legislation, the legal environment and the Company's defense strategy. In connection with the Company’s ongoing review of its asbestos-related claims, the Company also reviewed the amount of its potential insurance coverage for such claims, taking into account the remaining limits of such coverage, the number and amount of claims on our insurance from co-insured parties, ongoing litigation against the Company’s insurers, potential remaining recoveries from insolvent insurers, the impact of previous insurance settlements and coverage available from solvent insurers not party to the coverage litigation. The Company continues to have ongoing insurance coverage available for a significant amount of the potential future asbestos-related claims and may have additional insurance coverage, in the future.

~~The study from the Company’s actuary, based on data as of September 30, 2020, provided for a range of possible future liability from approximately $80.1 million to $131.7 million.~~ The Company does not believe any amount within the range of potential outcomes represents a better estimate than another given the many factors and assumptions inherent in the projections and therefore the Company has recorded the liability at the actuarial central estimate of approximately $101.1 million. ~~The Company has recorded estimated insurance receivables of approximately $87.5 million.~~ The amounts recorded for the asbestos-related liability and the related insurance receivables are based on facts known at the time and a number of assumptions. However, projecting future events, such as the number of new claims to be filed each year, the length of time it takes to defend, resolve, or otherwise dispose of such claims, coverage issues among insurers and the continuing solvency of various insurance companies, as well as the numerous uncertainties surrounding asbestos litigation in the United States, could cause the actual liability and insurance recoveries for us to be higher or lower than those projected or recorded. Changes recorded in the estimated liability and estimated insurance recovery based on projections of asbestos litigation and corresponding insurance coverage, result in the recognition of additional expense or income.

Liabilities are recorded for various non-asbestos contingencies arising in the normal course of business when it is both probable that a loss has been incurred and such loss is reasonably estimable. Assessments of reserves are based on information obtained from our independent and in-house experts, including recent legal decisions and loss experience in similar situations. The recorded legal reserves are susceptible to changes due to new developments regarding the facts and circumstances of each matter, changes in political environments, legal venue and other factors. Recorded environmental reserves could change based on further analysis of our properties, technological innovation and regulatory environment changes.

~~Other~~ critical policies, for which no significant changes have occurred in the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, include:

•Revenue Recognition;

~~Table of~~ Co ~~ntents~~

•Deferred Taxes, Tax Valuation Allowances and Tax Reserves;

•Reserves for Contingent Loss;

•Retirement and Postretirement Benefits; and

•Valuation of Goodwill, Indefinite-Lived Intangible Assets and Other Long-Lived Assets.

The process of preparing condensed consolidated financial statements in conformity with U.S. GAAP requires the use of estimates and assumptions to determine certain of the assets, liabilities, revenues and expenses. These estimates and assumptions are based upon what we believe is the best information available at the time of the estimates or assumptions. The estimates and assumptions could change materially as conditions within and beyond our control change. Accordingly, actual results could differ materially from those estimates. The significant estimates are reviewed quarterly with the Audit Committee of our Board of Directors.

Based on an assessment of our accounting policies and the underlying judgments and uncertainties affecting the application of those policies, we believe that our condensed consolidated financial statements provide a meaningful and fair perspective of our consolidated financial condition and results of operations. This is not to suggest that other general risk factors, such as changes in worldwide demand, changes in material costs, performance of acquired businesses and others, could not adversely impact our consolidated financial condition, results of operations and cash flows in future periods. See "Cautionary Note Regarding Forward-Looking Statements" below.

ACCOUNTING DEVELOPMENTS

We have presented the information about pronouncements not yet implemented in Note 1 to our condensed consolidated financial statements included in this Quarterly Report.

Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, as amended. Words or phrases such as, "may," "should," "expects," "could," "intends," "plans," "anticipates," "estimates," "believes," "predicts" or other similar expressions are intended to identify forward-looking statements, which include, without limitation, statements concerning our future financial performance, future debt and financing levels, investment objectives, implications of litigation and regulatory investigations and other management plans for future operations and performance.

The forward-looking statements included in this Quarterly Report are based on our current expectations, projections, estimates and assumptions. These statements are only predictions, not guarantees. Such forward-looking statements are subject to numerous risks and uncertainties that are difficult to predict. These risks and uncertainties may cause actual results to differ

materially from what is forecast in such forward-looking statements and are currently, or in the future could be, amplified by the COVID-19 pandemic. Specific factors that might cause such a difference include, without limitation, the following:

•uncertainties related to the impact of the COVID-19 pandemic on our business and operations, financial results and financial position, our customers and suppliers, and on the global economy, including its impact on our sales;

•a portion of our bookings may not lead to completed sales, and our ability to convert bookings into revenues at acceptable profit margins;

•changes in the global financial markets and the availability of capital and the potential for unexpected cancellations or delays of customer orders in our reported backlog;

•our dependence on our customers' ability to make required capital investment and maintenance expenditures. The liquidity and financial position of our customers could impact capital investment decisions and their ability to pay in full and/or on a timely basis;

•if we are not able to successfully execute and realize the expected financial benefits from our strategic transformation, realignment and other cost-saving initiatives, our business could be adversely affected;

•risks associated with cost overruns on fixed fee projects and in accepting customer orders for large complex custom engineered products;

•the substantial dependence of our sales on the success of the oil and gas, chemical, power generation and water management industries;

•the adverse impact of volatile raw materials prices on our products and operating margins;

•economic, political and other risks associated with our international operations, including military actions, trade embargoes or changes to tariffs or trade agreements that could affect customer markets, particularly North African, Russian and Middle Eastern markets and global oil and gas producers, and non-compliance with U.S. export/reexport control, foreign corrupt practice laws, economic sanctions and import laws and regulations;

•increased aging and slower collection of receivables, particularly in Latin America and other emerging markets;

•our exposure to fluctuations in foreign currency exchange rates, particularly the Euro and British pound and in hyperinflationary countries such as Venezuela and Argentina;

•our furnishing of products and services to nuclear power plant facilities and other critical applications;

•potential adverse consequences resulting from litigation to which we are a party, such as litigation involving asbestos-containing material claims;

•expectations regarding acquisitions and the integration of acquired businesses;

•our relative geographical profitability and its impact on our utilization of deferred tax assets, including foreign tax credits;

•the potential adverse impact of an impairment in the carrying value of goodwill or other intangible assets;

•our dependence upon third-party suppliers whose failure to perform timely could adversely affect our business operations;

•the highly competitive nature of the markets in which we operate;

•environmental compliance costs and liabilities;

•potential work stoppages and other labor matters;

•access to public and private sources of debt financing;

•our inability to protect our intellectual property in the U.S., as well as in foreign countries;

•obligations under our defined benefit pension plans;

•our internal control over financial reporting may not prevent or detect misstatements because of its inherent limitations, including the possibility of human error, the circumvention or overriding of controls, or fraud;

•the recording of increased deferred tax asset valuation allowances in the future or the impact of tax law changes on such deferred tax assets could affect our operating results;

•risks and potential liabilities associated with cyber security threats; and

•ineffective internal controls could impact the accuracy and timely reporting of our business and financial results.

These and other risks and uncertainties are more fully discussed in the risk factors identified in "Item 1A. Risk Factors" in Part I of our ~~2019~~2020 Annual Report ~~Part II of the Quarterly Report for the period ended March 31, 2020,~~ and Part II of this Quarterly Report, and may be identified in our Quarterly Reports on Form 10-Q and our other filings with the SEC and/or press releases from time to time. All forward-looking statements included in this document are based on information available to us on the date hereof, and we assume no obligation to update any forward-looking statement.

Item 3.Quantitative and Qualitative Disclosures About Market Risk.

We have market risk exposure arising from changes in foreign currency exchange rate movements in foreign exchange contracts. We are exposed to credit-related losses in the event of non-performance by counterparties to financial instruments, but we currently expect our counterparties will continue to meet their obligations given their current creditworthiness.

LIBOR

On March 5, 2021, the UK Financial Conduct Authority (“FCA”), which regulates the London Interbank Offered Rate (“LIBOR”) issued an announcement on the future cessation or loss of representativeness of LIBOR benchmark settings currently published by ICE Benchmark Administration. That announcement confirmed that LIBOR will either cease to be provided by any administrator or will no longer be representative after December 31, 2021 for all non-USD LIBOR reference rates, and for 1-Week and 2-Month USD LIBOR and after June 30, 2023 for other USD LIBOR reference rates. The U.S. Federal Reserve, in conjunction with the Alternative Reference Rate Committee, has proposed the replacement of U.S. dollar LIBOR rates with a new index calculated by short-term repurchase agreements backed by U.S. Treasury securities called the Secured Overnight Financing Rate (“SOFR”). Whether or not SOFR is generally accepted as the LIBOR replacement remains in question and the future of LIBOR at this time is uncertain. The Company’s current Senior Credit Facility agreement includes a provision for the determination of a successor LIBOR rate when appropriate by reference to the then-prevailing market convention for determining an interest rate for syndicated loans in the United States, subject to a right of the lenders thereunder to reject the application of the determined rate by written notice. While we will work with our administrative agent to incorporate a successor reference rate, there can be no assurances as to what alternative reference rates may be and whether such rates will be more or less favorable than LIBOR and any other unforeseen impacts of the potential discontinuation of LIBOR.

Foreign Currency Exchange Rate Risk

A substantial portion of our operations are conducted by our subsidiaries outside of the U.S. in currencies other than the U.S. dollar. Almost all of our non-U.S. subsidiaries conduct their business primarily in their local currencies, which are also their functional currencies. Foreign currency exposures arise from translation of foreign-denominated assets and liabilities into

U.S. dollars and from transactions, including firm commitments and anticipated transactions, denominated in a currency other than our or a non-U.S. subsidiary’s functional currency. ~~We have designated €336.3 million~~ ~~of our 1.25% Euro 2022 Senior Notes~~ ~~as a net investment hedge of our investments in certain of our international subsidiaries that use the Euro as their functional currency.~~ ~~On September 22, 2020, as~~As a means of managing the volatility of foreign currency exposure with the Euro/U.S. dollar exchange rate, we entered into athree swap agreements associated with our Euro investment in certain of our international ~~subsidiaries and was~~subsidiaries. The swap agreements are designated as a net investment ~~hedge. As~~hedges and as of ~~September~~June 30, ~~2020,~~2021, the notional value of the ~~swap~~swaps agreements was ~~€163.2~~€423.20 million. Routinely, wewe review our investments in foreign subsidiaries from a long-term perspective and use capital structuring techniques to manage our investment in foreign subsidiaries as deemed necessary. For further discussion related to these swap agreements refer to Note 6 to our condensed consolidated financial statements included in this Quarterly Report. We ~~realized~~recognized net gains (losses) associated with foreign currency translation of ~~$25.2~~$14.0 million and ~~$(30.6)~~$19.0 million for the three months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, respectively, and ~~$(41.0)~~$3.1 million and ~~$(26.5)~~$(77.0) million for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, respectively, which are included in other comprehensive income (loss).

We employ a foreign currency risk management strategy to minimize potential changes in cash flows from unfavorable foreign currency exchange rate movements. Where available, the use of foreign exchange contracts allows us to mitigate transactional exposure to exchange rate fluctuations as the gains or losses incurred on the foreign exchange contracts will offset, in whole or in part, losses or gains on the underlying foreign currency exposure. As of ~~September~~June 30, ~~2020,~~2021, we had a U.S. dollar equivalent of ~~$399.6~~$385.7 million in a~~ggregate~~aggregate notional amount outstanding in foreign exchange contracts with third parties, as compared with ~~$398.5~~$388.1 million at December 31, ~~2019.~~2020. Transactional currency gains and losses arising from transactions outside of our sites’ functional currencies and changes in fair value of ~~non-designated~~non-designated foreign exchange contracts are included in our consolidated results of operations. We recognized foreign currency net (losses) gains of ~~$(2.3)~~$(4.2) million and ~~$(7.8)~~$(18.0) million for the three months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, respectively, and ~~$9.3~~$(13.7) million and ~~$(13.8)~~$22.4 million for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, respectively, which are included in other income (expense), net in the accompanying condensed consolidated statements of income.

Based on a sensitivity analysis at ~~September~~June 30, ~~2020,~~2021, a 10% change in the ~~foreign~~foreign currency exchange rates for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 would have impacted our net earnings by ~~approximatel~~approximately $11 million. T~~y $16 million.~~ ~~This~~his calculation assumes that all currencies change in the same direction and proportion relative to the U.S. dollar and that there are no indirect effects, such as changes in non-U.S. dollar sales volumes or prices. This calculation does not take into account the impact of the foreign currency exchange contracts discussed above.

Item 4.Controls and Procedures.

Disclosure Controls and Procedures

Disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) are controls and other procedures that are designed to ensure that the information that we are required to disclose in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Principal Executive Officer and Principal Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

~~Table of~~ Co ~~ntents~~

In connection with the preparation of this Quarterly Report, our management, under the supervision and with the participation of our Principal Executive Officer and Principal Financial Officer, carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of ~~September~~June 30, ~~2020.~~2021. Based on this evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective as of ~~September~~June 30, ~~2020.~~2021.

Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) of the Exchange Act) during the quarter ended ~~September~~June 30, ~~2020~~2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II — OTHER INFORMATION

Item 1.Legal Proceedings.

We are party to the legal proceedings that are described in Note 11 to our condensed consolidated financial statements included in "Item 1. Financial Statements" of this Quarterly Report, and such disclosure is incorporated by reference into this "Item 1. Legal Proceedings." In addition to the foregoing, we and our subsidiaries are named defendants in certain other ordinary routine lawsuits incidental to our business and are involved from time to time as parties to governmental proceedings, all arising in the ordinary course of business. Although the outcome of lawsuits or other proceedings involving us and our subsidiaries cannot be predicted with certainty, and the amount of any liability that could arise with respect to such lawsuits or other proceedings cannot be predicted accurately, management does not currently expect the amount of any liability that could arise with respect to these matters, either individually or in the aggregate, to have a material adverse effect on our financial position, results of operations or cash flows.

Item 1A.Risk Factors.

There are numerous factors that affect our business, financial condition, results of operations, cash flows, reputation and/or prospects, many of which are beyond our control. In addition to other information set forth in this Quarterly Report, careful consideration should be given to "Item 1A. Risk Factors" in Part I and "Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations" in Part II of our ~~2019~~2020 Annual Report, which contain descriptions of significant factors that might cause the actual results of operations in future periods to differ materially from those currently projected in the forward-looking statements contained therein.

There have been no material changes in risk factors discussed in our ~~2019~~2020 Annual Report and subsequent SEC filings. The risks described in this Quarterly Report ~~the Quarterly Report~~ filed for the period ended ~~March 31,~~June 30, 2021, our 2020 ~~our 2019~~ Annual Report and in our other SEC filings or press releases from time to time are not the only risks we face. Additional risks and uncertainties are currently deemed immaterial based on management's assessment of currently available information, which remains subject to change; however, new risks that are currently unknown to us may surface in the future that materially adversely affect our business, financial condition, results of operations or cash flows.

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

Note 13 to our condensed consolidated financial statements included in this Quarterly Report includes a discussion of our share repurchase program and payment of quarterly dividends on our common stock.

During the quarter ended ~~September~~June 30, ~~2020,~~2021, we ~~had no repurchases~~repurchased 311,000 for $12.5 million (representing an average cost of ~~our common stock shares.~~$40.03 per share). As of ~~September~~June 30, ~~2020,~~2021, we have ~~$113.6~~$101.2 million of rerema~~maining~~ining capacity under our current share repurchase program. The following table sets forth the activity for each of the three months during the quarter ended ~~September~~June 30, ~~2020:~~2021:

Total Number of Shares Purchased Average Price Paid per Share Total Number of
Shares Purchased as
Part of Publicly Announced Program (1) Maximum Number of
Shares (or
Approximate Dollar
Value) of Shares That May Yet
Be Purchased Under
the Program (in millions)
Period
July 1 - 31 22,600 (2) $ 30.31 — $ 113.6
August 1 - 31 2,242 (3) 30.80 — 113.6
September 1 - 30 595 (2) 28.16 — 113.6
Total 25,437 $ 30.30 —


	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Program (1)	Maximum Number of Shares (or Approximate Dollar Value) of Shares That May Yet Be Purchased Under the Program (in millions)
Period
April 1 - 30	244,530	(2)	$	39.78	244,000	$	103.9
May 1 -31	71,835	(3)	41.05		67,000	101.2
June 1 - 30	1,353	(4)	42.66		—	101.2
Total	317,718		$	40.08	311,000

(1)On November 13, 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.

(2)~~Represents shares that were tendered by employees to satisfy minimum tax withholding amounts for Restricted Shares~~.

~~(3)Includes 163~~Includes 530 shares that were tendered by employees to satisfy minimum tax withholding amounts for Restricted Shares at an average price per share of ~~$31.98~~$40.02.

(3)Includes 3,290 shares that were tendered by employees to satisfy minimum tax withholding amounts for Restricted Shares at an average price per share of $42.93 and ~~2,079~~1,545 shares purchased at a price of ~~$30.71~~$41.32 per share by a rabbi trust that we established in connection with our director deferral plans, pursuant to which non-employee directors may elect to defer directors’ quarterly cash compensation to be paid at a later date in the form of common stock.

(4)Represents shares that were tendered by employees to satisfy minimum tax withholding amounts for Restricted Shares.

Table of Co ~~ntents~~Contents

Item 3.Defaults Upon Senior Securities.

None

Item 4.Mine Safety Disclosures.

Not applicable.

Item 5.Other Information.

None

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Item 6.Exhibits


Exhibit No.						Description




3.1						Restated Certificate of Incorporation of Flowserve Corporation, as amended and restated effective May ~~26, 2020~~20, 2021 (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K ~~dated~~filed on May ~~26, 2020).~~25, 2021.

3.2						Flowserve Corporation By-Laws, as amended and restated effective ~~August 12, 2020~~May 20, 2021 (incorporated by reference to Exhibit ~~3.1~~3.2 to the Registrant’s Current Report on Form 8-K ~~dated August 14, 2020).~~

~~4.1~~						Fourth Supplemental Indenture, dated September 21, 2020, between Flowserve Corporation and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 4.2 to the Registrant's Current Reportfiled on ~~Form 8-K dated September 22, 2020)~~May 25, 2021).



~~10.1~~						First Amendment to Credit Agreement, dated September 4, 2020, among Flowserve Corporation, Bank of America, N.A., as 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 September 8, 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.

4.1						Senior Indenture, dated September 11, 2012, by and between Flowserve Corporation and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 4.1 to the Registrant's Current Report on Form 8-K (File No. 001-13179) dated September 11, 2012).

4.2						First Supplemental Indenture, dated September 11, 2012, by and among Flowserve Corporation, certain of its subsidiaries and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 4.2 to the Registrant's Current Report on Form 8-K (File No. 001-13179) dated September 11, 2012).

4.3						Second Supplemental Indenture, dated November 1, 2013, by and among Flowserve Corporation, certain of its subsidiaries and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 4.2 to the Registrant's Current Report on Form 8-K (File No. 001-13179) dated November 1, 2013).

4.4						Third Supplemental Indenture, dated March 17, 2015, by and among Flowserve Corporation, certain of its subsidiaries and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 4.2 to the Registrant's Current Report on Form 8-K (File No. 001-13179) dated March 17, 2015).

4.5						Fourth Supplemental Indenture, dated September 21, 2020, between Flowserve Corporation and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 4.2 to the Registrant's Current Report on Form 8-K dated September 22, 2020).

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 ~~September~~June 30, ~~2020,~~2021, formatted in Inline XBRL (included as Exhibit 101)

_______________________

* Management contracts and compensatory plans and arrangements required to be filed as exhibits to this Quarterly + Report on Form 10-Q.

+ Filed herewith.

++ Furnished herewith.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


						FLOWSERVE CORPORATION


Date:	~~November 13, 2020~~August 5, 2021	/s/ Amy B. Schwetz
		Amy B. Schwetz
		Senior Vice President and Chief Financial Officer (Principal Financial Officer)




Date:	~~November 13, 2020~~August 5, 2021	/s/ Scott K. Vopni
		Scott K. Vopni
		Vice President and Chief Accounting Officer (Principal Accounting Officer)

5452


	December 31, 2019
(Amounts in thousands, except par value)	As Reported		Adjustments		As Revised







Prepaid expenses and other	$	105,101	$	1,377	$	106,478
Total current assets	2,505,370		1,377		2,506,747
Property, plant and equipment, net of accumulated depreciation (1)	572,175		(8,611)		563,564




Other assets, net of allowance for expected credit losses (2)	227,185		25,869		253,054
Total assets	4,919,642		18,635		4,938,277




Contract liabilities (3)	216,541		4,554		221,095



Total current liabilities	1,112,888		4,554		1,117,442


Retirement obligations and other liabilities (4)	473,295		57,699		530,994






Retained earnings (5)	3,695,862		(43,618)		3,652,244



Total Flowserve Corporation shareholders’ equity	1,790,357		(43,618)		1,746,739

Total equity	1,815,959		(43,618)		1,772,341
Total liabilities and equity	$	4,919,642	$	18,635	$	4,938,277


	September 30,
(Amounts in thousands, except lease term and discount rate)	2020			2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases(1)	$	51,918		$	39,642

Financing cash flows from finance leases(2)	3,408			4,177
ROU assets obtained in exchange for lease obligations:
Operating leases	$	16,327		15,739
Finance leases	12,278			10,184
Weighted average remaining lease term (in years)
Operating leases	8 years			9 years
Finance leases	7 years			4 years
Weighted average discount rate (percent)
Operating leases	4.4		%	4.6		%
Finance leases	3.5		%	3.7		%


Year ending December 31,	Operating Leases		Finance Leases
2020 (excluding the nine months ended September 30, 2020)	$	10,527	$	1,437
2021	37,135		5,281
2022	30,869		4,267
2023	24,494		2,775
2024	18,889		1,353
Thereafter	79,176		6,064
Total future minimum lease payments	$	201,090	$	21,177
Less: Imputed interest	(33,108)		(2,637)
Total	$	167,982	$	18,540

Other current liabilities	$	34,634	$	—
Operating lease liabilities	133,348		—
Debt due within one year	—		5,626
Long-term debt due after one year	—		12,914
Total	$	167,982	$	18,540