Business Wire | Oct 27, 2021 04:05PM EDT

Flowserve Corporation Reports Third Quarter 2021 Results

Oct. 27, 2021

DALLAS--(BUSINESS WIRE)--Oct. 27, 2021--Flowserve Corporation (NYSE: FLS), a leading provider of flow control products and services for the global infrastructure markets, today announced its financial results for the third quarter ended September 30, 2021.

Third Quarter 2021 Highlights (all comparisons to the 2020 third quarter, unless otherwise noted)1

* Reported Earnings Per Share (EPS) of $0.38 and Adjusted EPS2 of $0.29 Reported EPS includes a net after-tax adjusted gain of $12.1 million, comprised of certain discrete tax items partially offset by realignment and financing costs and below-the-line foreign exchange impacts * Total bookings were $911.6 million, up 13.1%, or 11.8% on a constant currency basis Original equipment bookings were $417.0 million, or 46% of total bookings, up 9.4%, or 7.9% on a constant currency basis Aftermarket bookings were $494.6 million, or 54% of total bookings, up 16.3%, or 15.3% on a constant currency basis * Sales were $866.1 million, down 6.3%, or 7.3% on a constant currency basis Original equipment sales were $425.2 million, down 11.3%, or 12.5% on a constant currency basis Aftermarket sales were $440.9 million, down 0.9%, or 1.8% on a constant currency basis * Reported gross and operating margins were 29.3% and 6.6%, respectively Adjusted gross and operating margins3 were 29.6% and 7.0%, respectively

* Backlog at September 30, 2021 was $1.97 billion, up 6.2% versus December 31, 2020

"We are encouraged that the visibility into our project funnel continues to improve, including numerous energy transition related opportunities. In the third quarter, we captured a number of energy transition awards, including bio-diesel, solar power and desalination projects," said Scott Rowe, Flowserve's president and chief executive officer. "Additionally, our aftermarket and MRO activity are expected to remain at or near pre-pandemic levels, while our capabilities to support our customers' decarbonization and other energy transition initiatives will further support the increased project activity we see ahead. We are confident in our near-term outlook for year-over-year bookings growth which should position Flowserve well to deliver revenue and earnings growth in 2022."

Rowe concluded, "Flowserve's third quarter results reflected substantial global supply chain, logistics, and labor availability issues which deferred approximately $60 million of revenue and $20 million of gross profit out of the quarter. The global nature of our business and our operations network amplified the impact of these disruptions. We strongly believe in our ability to work through these challenges to restore a more normal backlog conversion rate in the coming quarters."

Updated 2021 Guidance4

Flowserve today revised certain of the full-year metrics of our 2021 target range.

Revised Target Range Prior Target Range

Revenues Down 3.5% to 4.5% Down 2.0% to 4.0%

Reported Earnings Per Share $1.05 - $1.10 $1.15 - $1.40

Adjusted Earnings Per Share $1.40 - $1.45 $1.45 - $1.65

Net Interest Expense $55 - $60 million $55 - $60 million

Adjusted Tax Rate ~20% 21%-23%

Capital Expenditures ~$65 million $70 - $80 million

Consistent with the prior range, Flowserve's 2021 Adjusted EPS target range excludes expected net after tax adjusted items of approximately $45 million, including realignment charges, the potential impact of below-the-line foreign currency effects and certain other discrete items. In a change to the approach for 2021, Flowserve 2.0 transformation-related expenses of approximately 5 cents per share will now be included in both the Company's reported and adjusted EPS.

Third Quarter 2021 Results Conference Call

Flowserve will host its conference call with the financial community on Thursday, October 28th at 11:00 AM Eastern. Scott Rowe, president and chief executive officer, as well as other members of the management team will be presenting. The call can be accessed by shareholders and other interested parties at www.flowserve.com under the "Investor Relations" section.

1 Prior period comparisons are impacted by certain accounting revisions. Reference Flowserve's Form 8-K filed on November 5, 2020 and Form 10-Q for the period ending September 30, 2021 for additional details.

2 See Reconciliation of Non-GAAP Measures table for detailed reconciliation of reported results to adjusted measures.

3 Adjusted gross and operating margins are calculated by dividing adjusted gross profit and adjusted operating income, respectively, by revenues. Adjusted gross profit and adjusted operating income are derived by excluding the adjusted items. See reconciliation of Non-GAAP Measures table for detailed reconciliation.

4 Adjusted 2021 EPS excludes realignment expenses, the impact from other specific discrete items and below-the-line foreign currency effects and utilizes year-end 2020 FX rates and approximately 131 million fully diluted shares.

_ FX impact is calculated by comparing the difference between the actual average FX rates of 2020 and the year-end 2020 spot rates both as applied to our 2021 expectations, divided by the number of shares expected for 2021.

About Flowserve

Flowserve Corp. is one of the world's leading providers of fluid motion and control products and services. Operating in more than 50 countries, the company produces engineered and industrial pumps, seals and valves as well as a range of related flow management services. More information about Flowserve can be obtained by visiting the company's Web site at www.flowserve.com.

Safe Harbor Statement This news release 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," "forecasts," "predicts" or other similar expressions are intended to identify forward-looking statements, which include, without limitation, earnings forecasts, statements relating to our business strategy and statements of expectations, beliefs, future plans and strategies and anticipated developments concerning our industry, business, operations and financial performance and condition.

The forward-looking statements included in this news release 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 include, without limitation, the following: the impact of the global outbreak of COVID-19 on our business and operations; 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 global economic conditions 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; if we are not able to successfully execute and realize the expected financial benefits from our strategic transformation and realignment initiatives, our business could be adversely affected; risks associated with cost overruns on fixed-fee projects and in taking 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, epidemics or pandemics 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/re-export 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, including in hyperinflationary countries such as Venezuela and Argentina; our furnishing of products and services to nuclear power plant facilities and other critical processes; 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; our information technology infrastructure could be subject to service interruptions, data corruption, cyber-based attacks or network security breaches, which could disrupt our business operations and result in the loss of critical and confidential information; ineffective internal controls could impact the accuracy and timely reporting of our business and financial results; and other factors described from time to time in our filings with the Securities and Exchange Commission.

All forward-looking statements included in this news release are based on information available to us on the date hereof, and we assume no obligation to update any forward-looking statement.

The Company reports its financial results in accordance with U.S. generally accepted accounting principles (GAAP). However, management believes that non-GAAP financial measures which exclude certain non-recurring items present additional useful comparisons between current results and results in prior operating periods, providing investors with a clearer view of the underlying trends of the business. Management also uses these non-GAAP financial measures in making financial, operating, planning and compensation decisions and in evaluating the Company's performance. Throughout our materials we refer to non-GAAP measures as "Adjusted." Non-GAAP financial measures, which may be inconsistent with similarly captioned measures presented by other companies, should be viewed in addition to, and not as a substitute for, the Company's reported results prepared in accordance with GAAP.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME(Unaudited) Three Months Ended September 30,

(Amounts in thousands, except per share data) 2021 2020

Sales $ 866,118 $ 924,301

Cost of sales (612,626 ) (639,092 )

Gross profit 253,492 285,209

Selling, general and administrative expense (200,862 ) (200,729 )

Net earnings from affiliates 4,732 2,842

Operating income 57,362 87,322

Interest expense (14,746 ) (13,509 )

Loss on extinguishment of debt (563 ) (1,201 )

Interest income 827 673

Other income (expense), net (1,504 ) 4,673

Earnings before income taxes 41,376 77,958

(Provision for) benefit from income taxes 10,433 (19,196 )

Net earnings, including noncontrolling interests 51,809 58,762

Less: Net earnings attributable to noncontrolling (2,024 ) (2,647 )interestsNet earnings attributable to Flowserve Corporation $ 49,785 $ 56,115

Net earnings per share attributable to FlowserveCorporation common shareholders:Basic $ 0.38 $ 0.43

Diluted 0.38 0.43

RECONCILIATION OFNON-GAAP MEASURES(Unaudited) Three Months Ended September 30, 2021(Amounts in As Reported Realignmentthousands, except (a) (1) Other Items As Adjustedper share data) Sales $ 866,118 $ - $ - $ 866,118

Gross profit 253,492 (2,582 ) - 256,074

Gross margin 29.3 % - - 29.6 %

Selling, general and (200,862 ) (368 ) - (200,494 )administrativeexpenseGain on sale of - - - - businessNet earnings from 4,732 - - 4,732 affiliates Operating income 57,362 (2,950 ) - 60,312

Operating income as 6.6 % - - 7.0 %a percentage ofsales Interest and other (15,986 ) - (2,520 ) (3) (13,466 )expense, net Earnings before 41,376 (2,950 ) (2,520 ) 46,846 income taxes(Provision for) 10,433 624 (2) 16,935 (4) (7,126 )benefit from incometaxesTax Rate -25.2 % 21.2 % 672.0 % 15.2 %

Net earningsattributable to $ 49,785 $ (2,326 ) $ 14,415 $ 37,696 FlowserveCorporation Net earnings pershare attributableto FlowserveCorporation commonshareholders:Basic $ 0.38 $ (0.02 ) $ 0.11 $ 0.29

Diluted 0.38 (0.02 ) 0.11 0.29

Basic number of 130,242 130,242 130,242 130,242 shares used forcalculationDiluted number of 130,789 130,789 130,789 130,789 shares used forcalculation (a) Reported inconformity with U.S.GAAPNotes:(1) Represents realignment expense incurred as a result of realignment programs.(2) Includes tax impact of items above.(3) Represents below-the-line foreign exchange impacts and $1.5 million of expense as a result of early extinguishment of debt and duplicate interest expense.(4) Includes tax impact of items above and $16.6 million benefit related to legal entity restructuring of foreign holding companies.Notes:(1) Represents realignment expense incurred as a result of realignmentprograms.(2) Includes tax impact of items above.(3) Represents below-the-line foreign exchange impacts and $1.5 million ofexpense as a result of early extinguishment of debt and duplicate interestexpense.(4) Includes tax impact of items above and $16.6 million benefit related tolegal entity restructuring of foreign holding companies.RECONCILIATION OFNON-GAAP MEASURES(Unaudited) Three Months Ended September 30, 2020(Amounts in As Reported Realignmentthousands, except (a) (1) Other Items As Adjustedper share data) Sales $ 924,301 $ - $ - $ 924,301

Gross profit 285,209 (5,659 ) - 290,868

Gross margin 30.9 % - - 31.5 %

Selling, general and (200,729 ) (1,773 ) (5,856 ) (3) (193,100 )administrativeexpense Operating income 87,322 (7,432 ) (5,856 ) 100,610

Operating income as 9.4 % - - 10.9 %a percentage ofsales Interest and other (9,364 ) - 3,307 (4) (12,671 )expense, net Earnings before 77,958 (7,432 ) (2,549 ) 87,939 income taxesProvision for income (19,196 ) (1,552 ) (2) 2,343 (5) (19,987 )taxesTax Rate 24.6 % -20.9 % 91.9 % 22.7 %

Net earningsattributable to $ 56,115 $ (8,984 ) $ (206 ) $ 65,305 FlowserveCorporation Net earnings pershare attributableto FlowserveCorporation commonshareholders:Basic $ 0.43 $ (0.07 ) $ - $ 0.50

Diluted 0.43 (0.07 ) - 0.50

Basic number of 130,313 130,313 130,313 130,313 shares used forcalculationDiluted number of 130,900 130,900 130,900 130,900 shares used forcalculation (a) Reported inconformity with U.S.GAAPNotes:(1) Represents realignment expense incurred as a result of realignment programs.(2) Includes tax impact of items above.(3) Represents Flowserve 2.0 transformation efforts and $1.1 million related to discrete asset write-downs.(4) Represents below-the-line foreign exchange impacts.(5) Includes tax impact of items above and $0.4 million benefit related to tax reform.Notes:(1) Represents realignment expense incurred as a result of realignmentprograms.(2) Includes tax impact of items above.(3) Represents Flowserve 2.0 transformation efforts and $1.1 million related todiscrete asset write-downs.(4) Represents below-the-line foreign exchange impacts.(5) Includes tax impact of items above and $0.4 million benefit related to taxreform.SEGMENT INFORMATION(Unaudited) Three Months Ended SeptemberFLOWSERVE PUMP DIVISION 30,

(Amounts in millions, except percentages) 2021 2020

Bookings $ 660.9 $ 574.1

Sales 601.8 670.2

Gross profit 182.9 210.0

Gross profit margin 30.4 % 31.3 %

SG&A 128.5 126.2

Segment operating income 59.1 86.7

Segment operating income as a percentage of 9.8 % 12.9 %sales Three Months Ended SeptemberFLOW CONTROL DIVISION 30,

(Amounts in millions, except percentages) 2021 2020

Bookings $ 253.6 $ 237.6

Sales 266.1 255.2

Gross profit 77.0 78.1

Gross profit margin 28.9 % 30.6 %

SG&A 49.3 47.3

Segment operating income 27.7 30.8

Segment operating income as a percentage of 10.4 % 12.1 %salesCONDENSED CONSOLIDATED STATEMENTS OF INCOME(Unaudited) Nine Months Ended September 30,

(Amounts in thousands, except per share data) 2021 2020

Sales $ 2,621,604 $ 2,742,826

Cost of sales (1,838,974 ) (1,921,451 )

Gross profit 782,630 821,375

Selling, general and administrative expense (609,965 ) (675,523 )

Gain on sale of business 1,806 -

Net earnings from affiliates 11,157 9,125

Operating income 185,628 154,977

Interest expense (45,847 ) (39,407 )

Loss on extinguishment of debt (8,173 ) (1,201 )

Interest income 1,893 3,571

Other income (expense), net (20,717 ) 23,969

Earnings before income taxes 112,784 141,909

(Provision for) benefit from income taxes 3,929 (60,650 )

Net earnings, including noncontrolling 116,713 81,259 interestsLess: Net earnings attributable to (7,495 ) (6,890 )noncontrolling interestsNet earnings attributable to Flowserve $ 109,218 $ 74,369 Corporation Net earnings per share attributable toFlowserve Corporation common shareholders:Basic $ 0.84 $ 0.57

Diluted 0.83 0.57

RECONCILIATION OFNON-GAAP MEASURES(Unaudited) Nine Months Ended September 30, 2021(Amounts in As Reported Realignmentthousands, except (a) (1) Other Items As Adjustedper share data) Sales $ 2,621,604 $ - $ - $ 2,621,604

Gross profit 782,630 (15,813 ) - 798,443

Gross margin 29.9 % - - 30.5 %

Selling, general (609,965 ) (6,454 ) - (603,511 )and administrativeexpenseGain on sale of 1,806 - 1,806 (3) - businessNet earnings from 11,157 - - 11,157 affiliates Operating income 185,628 (22,267 ) 1,806 206,089

Operating income 7.1 % - - 7.9 %as a percentage ofsales Interest and other (72,844 ) - (23,833 ) (4) (49,011 )expense, net Earnings before 112,784 (22,267 ) (22,027 ) 157,078 income taxes(Provision for) 3,929 8,466 (2) 22,734 (5) (27,271 )benefit fromincome taxesTax Rate -3.5 % 38.0 % 103.2 % 17.4 %

Net earningsattributable to $ 109,218 $ (13,801 ) $ 707 $ 122,312 FlowserveCorporation Net earnings pershare attributableto FlowserveCorporation commonshareholders:Basic $ 0.84 $ (0.11 ) $ 0.01 $ 0.94

Diluted 0.83 (0.11 ) 0.01 0.93

Basic number of 130,325 130,325 130,325 130,325 shares used forcalculationDiluted number of 130,867 130,867 130,867 130,867 shares used forcalculation (a) Reported inconformity withU.S. GAAPNotes:(1) Represents realignment expense incurred as a result of realignment programs.(2) Includes tax impact of items above and realignment related tax release.(3) Represents final settlement gain on sale of business in 2018.(4) Represents below-the-line foreign exchange impacts and $9.1 million of expense as a result of early extinguishment of debt and duplicate interest expense.(5) Includes tax impact of items above and $17.9 million benefit related to legal entity restructuring of foreign holding companies.Notes:(1) Represents realignment expense incurred as a result of realignmentprograms.(2) Includes tax impact of items above and realignment related tax release.(3) Represents final settlement gain on sale of business in 2018.(4) Represents below-the-line foreign exchange impacts and $9.1 million ofexpense as a result of early extinguishment of debt and duplicate interestexpense.(5) Includes tax impact of items above and $17.9 million benefit related tolegal entity restructuring of foreign holding companies.RECONCILIATION OFNON-GAAP MEASURES(Unaudited) Nine Months Ended September 30, 2020(Amounts in As Reported Realignmentthousands, except (a) (1) Other Items As Adjustedper share data) Sales $ 2,742,826 $ - $ - $ 2,742,826

Gross profit 821,375 (40,636 ) - 862,011

Gross margin 29.9 % - - 31.4 %

Selling, general (675,523 ) (31,681 ) (27,557 ) (3) (616,285 )and administrativeexpense Operating income 154,977 (72,317 ) (27,557 ) 254,851

Operating income 5.7 % - - 9.3 %as a percentage ofsales Interest and other (13,068 ) - 25,663 (4) (38,731 )expense, net Earnings before 141,909 (72,317 ) (1,894 ) 216,120 income taxesProvision for (60,650 ) 10,146 (2) (19,138 ) (5) (51,658 )income taxesTax Rate 42.7 % 14.0 % -1010.5 % 23.9 %

Net earningsattributable to $ 74,369 $ (62,171 ) $ (21,032 ) $ 157,572 FlowserveCorporation Net earnings pershare attributableto FlowserveCorporation commonshareholders:Basic $ 0.57 $ (0.48 ) $ (0.16 ) $ 1.21

Diluted 0.57 (0.47 ) (0.16 ) 1.20

Basic number of 130,413 130,413 130,413 130,413 shares used forcalculationDiluted number of 131,068 131,068 131,068 131,068 shares used forcalculation (a) Reported inconformity withU.S. GAAPNotes:(1) Represents realignment expense incurred as a result of realignment programs.(2) Includes tax impact of items above.(3) Includes $16.0 million related to Flowserve 2.0 transformation efforts and $11.6 million related to discrete asset write-downs.(4) Represents below-the-line foreign exchange impacts.(5) Includes tax impact of items above, $25.7 million related to Italian tax valuation allowance and $2.4 million benefit related to tax reform.Notes:(1) Represents realignment expense incurred as a result of realignmentprograms.(2) Includes tax impact of items above.(3) Includes $16.0 million related to Flowserve 2.0 transformation efforts and$11.6 million related to discrete asset write-downs.(4) Represents below-the-line foreign exchange impacts.(5) Includes tax impact of items above, $25.7 million related to Italian taxvaluation allowance and $2.4 million benefit related to tax reform.SEGMENT INFORMATION(Unaudited) Nine Months Ended SeptemberFLOWSERVE PUMP DIVISION 30,

(Amounts in millions, except percentages) 2021 2020

Bookings $ 1,982.5 $ 1,792.3

Sales 1,821.9 1,979.9

Gross profit 562.1 603.7

Gross profit margin 30.9 % 30.5 %

SG&A 394.7 426.1

Gain on sale of business 1.8 -

Segment operating income 180.7 186.7

Segment operating income as a percentage of 9.9 % 9.4 %sales Nine Months Ended SeptemberFLOW CONTROL DIVISION 30,

(Amounts in millions, except percentages) 2021 2020

Bookings $ 834.0 $ 807.8

Sales 803.1 766.9

Gross profit 236.4 229.1

Gross profit margin 29.4 % 29.9 %

SG&A 147.1 154.9

Segment operating income 89.7 74.2

Segment operating income as a percentage of 11.2 % 9.7 %sales Third Quarter and Year-to-Date 2021 - Segment Results(dollars in millions, comparison vs. 2020 third quarter and year-to-date,unaudited) FPD FCDBookings $ 660.9 $ 1,982.5 $ 253.6 $ 834.0

- vs. prior year 15.1 % 10.6 % 6.7 % 3.2 %

- on constant currency 13.9 % 7.6 % 5.4 % 0.5 %

Sales $ 601.8 $ 1,821.9 $ 266.1 $ 803.1

- vs. prior year -10.2 % -8.0 % 4.3 % 4.7 %

- on constant currency -11.2 % -10.6 % 3.2 % 1.7 %

Gross Profit $ 182.9 $ 562.1 $ 77.0 $ 236.4

- vs. prior year -12.9 % -6.9 % -1.4 % 3.2 %

Gross Margin (% of sales) 30.4 % 30.9 % 28.9 % 29.4 %

- vs. prior year (in basis points) (90) bps 40 bps (170) bps (50) bps Operating Income $ 59.1 $ 180.7 $ 27.7 $ 89.7

- vs. prior year -31.8 % -3.2 % -10.1 % 20.9 %

- on constant currency -33.5 % -7.2 % -11.6 % 17.4 %

Operating Margin (% of sales) 9.8 % 9.9 % 10.4 % 11.2 %

- vs. prior year (in basis points) (310) bps 50 bps (170) bps 150 bps Adjusted Operating Income * $ 61.1 $ 193.6 $ 28.0 $ 91.9

- vs. prior year -35.3 % -18.8 % -10.3 % 2.2 %

- on constant currency -36.9 % -21.9 % -12.1 % -0.7 %

Adj. Oper. Margin (% of sales)* 10.2 % 10.6 % 10.5 % 11.4 %

- vs. prior year (in basis points) (390) bps (140) bps (170) bps (30) bps Backlog $ 1,339.2 $ 636.9

* Adjusted Operating Income and Adjusted Operating Margin exclude realignmentcharges and other specific discrete itemsCONDENSED CONSOLIDATED BALANCE SHEETS(Unaudited) September 30, December 31, (Amounts in thousands, except par value) 2021 2020

ASSETSCurrent assets:Cash and cash equivalents $ 1,457,269 $ 1,095,274

Accounts receivable, net of allowance for 710,782 753,462 expected credit losses of $75,966 and$75,176, respectivelyContract assets, net of allowance for expected 235,917 277,734 credit losses of $2,778 and $3,205,respectivelyInventories, net 698,046 667,228

Prepaid expenses and other 121,209 110,635

Total current assets 3,223,223 2,904,333

Property, plant and equipment, net of 513,168 556,873 accumulated depreciation of $1,117,487 and$1,093,348, respectivelyOperating lease right-of-use assets, net 194,306 208,125

Goodwill 1,202,598 1,224,886

Deferred taxes 57,849 30,538

Other intangible assets, net 155,994 168,496

Other assets, net of allowance for expected 248,778 221,426 credit losses of $67,697 and $67,842,respectivelyTotal assets $ 5,595,916 $ 5,314,677

LIABILITIES AND EQUITYCurrent liabilities:Accounts payable $ 370,977 $ 440,199

Accrued liabilities 468,153 463,222

Contract liabilities 199,103 194,227

Debt due within one year 836,618 8,995

Operating lease liabilities 34,034 34,990

Total current liabilities 1,908,885 1,141,633

Long-term debt due after one year 1,272,246 1,717,911

Operating lease liabilities 165,588 176,246

Retirement obligations and other liabilities 457,964 517,566

Shareholders' equity:Common shares, $1.25 par value 220,991 220,991

Shares authorized - 305,000Shares issued - 176,793Capital in excess of par value 501,122 502,227

Retained earnings 3,700,507 3,670,543

Treasury shares, at cost - 46,804 and 46,768 (2,058,168 ) (2,059,309 )shares, respectivelyDeferred compensation obligation 7,145 6,164

Accumulated other comprehensive loss (612,093 ) (609,625 )

Total Flowserve Corporation shareholders' 1,759,504 1,730,991 equityNoncontrolling interests 31,729 30,330

Total equity 1,791,233 1,761,321

Total liabilities and equity $ 5,595,916 $ 5,314,677

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(Unaudited) Nine Months Ended September 30,

(Amounts in thousands) 2021 2020

Cash flows - Operating activities:Net earnings, including noncontrolling interests $ 116,713 $ 81,259

Adjustments to reconcile net earnings to net cashprovided by operating activities:Depreciation 66,316 63,887

Amortization of intangible and other assets 10,643 8,788

Loss on extinguishment of debt 8,173 1,201

Stock-based compensation 23,610 24,104

Foreign currency, asset write downs and other 9,897 1,880 non-cash adjustmentsChange in assets and liabilities:Accounts receivable, net 24,361 24,324

Inventories, net (47,533 ) (51,974 )

Contract assets, net 35,358 (37,328 )

Prepaid expenses and other assets, net 2,429 6,168

Accounts payable (58,600 ) (21,756 )

Contract liabilities 9,379 (22,468 )

Accrued liabilities and income taxes payable 9,136 22,762

Retirement obligations and other (23,842 ) 22,729

Net deferred taxes (34,933 ) (9,325 )

Net cash flows provided (used) by operating 151,107 114,251 activitiesCash flows - Investing activities:Capital expenditures (34,034 ) (46,424 )

Proceeds from disposal of assets and other 2,525 13,759

Net affiliate investment activity (7,204 ) -

Net cash flows provided (used) by investing (38,713 ) (32,665 )activitiesCash flows - Financing activities:Payments on senior notes (407,473 ) (191,258 )

Proceeds from issuance of senior notes 498,280 498,280

Proceeds from long-term debt 300,000 -

Payments of deferred loan cost (5,399 ) (4,572 )

Proceeds under other financing arrangements 1,408 603

Payments under other financing arrangements (6,215 ) (7,145 )

Repurchases of common shares (17,531 ) (32,112 )

Payments related to tax withholding for (5,899 ) (4,521 )stock-based compensationPayments of dividends (78,551 ) (78,106 )

Other (6,276 ) (2,314 )

Net cash flows provided (used) by financing 272,344 178,855 activitiesEffect of exchange rate changes on cash (22,743 ) (10,243 )

Net change in cash and cash equivalents 361,995 250,198

Cash and cash equivalents at beginning of period 1,095,274 670,980

Cash and cash equivalents at end of period $ 1,457,269 $ 921,178

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CONTACT: Investor Contacts: Jay Roueche, Vice President, Investor Relations & Treasurer, (972) 443-6560 Mike Mullin, Director, Investor Relations, (972) 443-6636

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