FLOWSERVE CORP

Previous wording

Our business model is significantly influenced by the operating and capital spending of global infrastructure industries for the placement of new products into service and maintenance spending for aftermarket services for existing operations. The worldwide installed base of our products is an important source of aftermarket revenue, where products are relied upon to maximize operating time of many key industrial processes. We continue to invest 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 business, which is primarily served by our network of 155 QRCs (some of which are shared by our two business segments) 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 profitable growth strategy.

Current wording

Our business model is significantly influenced by the operating and capital spending of global infrastructure industries for the placement of new products into service and maintenance spending for aftermarket services for existing operations. The worldwide installed base of our products is an important source of aftermarket revenue, where products are relied upon to maximize operating time of many key industrial processes. We continue to invest 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 business, which is primarily served by our network of 157 QRCs (some of which are shared by our two business segments) 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 profitable growth strategy.

Previous wording

We have seen growth from the end-markets we serve and continue to advance our strategy by driving operational excellence and efficiency throughout the organization supported by the Flowserve Business System. The current macroeconomic environment is dynamic and uncertainty exists given the current armed conflict with Iran, ongoing geopolitical instability, and continued trade policy actions, including higher import tariffs in a number of countries in which we operate, the potential implementation of modified or new tariffs and related retaliatory actions. We plan to leverage our global footprint, expansive manufacturing network, flexible supply chain and ability to incorporate tariff impacts into pricing decisions to minimize the economic impact of this uncertainty to our business. While we will continue to monitor and manage macroeconomic trends and uncertainties, including inflationary and recessionary pressures resulting from the ongoing tariffs and geopolitical climate, our existing backlog, improved execution and announced acquisitions activity, provide a solid revenue base for 2026.

Current wording

We have seen growth from the end-markets we serve and continue to advance our strategy by driving operational excellence and efficiency throughout the organization supported by the Flowserve Business System. The current macroeconomic environment is dynamic and uncertainty exists given the current armed conflict with Iran, ongoing geopolitical instability, and continued trade policy actions, including higher import tariffs in a number of countries in which we operate, the potential implementation of modified or new tariffs and related retaliatory actions. We plan to leverage our global footprint, expansive manufacturing network, flexible supply chain and ability to incorporate tariff impacts into pricing decisions to minimize the economic impact of this uncertainty to our business. While we will continue to monitor and manage macroeconomic trends and uncertainties, including inflationary and recessionary pressures resulting from the ongoing tariffs and geopolitical climate, our existing backlog, improved execution and acquisitions activity, provide a solid revenue base for 2026.

Previous wording

As of June 30, 2026, we have cash and cash equivalents of $731.0 million and $763.3 million of borrowings available under our Third Amended and Restated Credit Agreement. On April 15, 2026, we entered into the Third Amended and Restated Credit Agreement, which includes a $1,000 million Revolving Credit Facility and$450.0 million Term Loan. We do not currently anticipate, nor are we aware of, any significant market conditions or commitments that would change any of our conclusions of the liquidity currently available to us. We will continue to actively monitor the credit markets in order to maintain sufficient liquidity and access to capital throughout 2026.

Current wording

As of September 30, 2026, we have cash and cash equivalents of $742.1 million and $827.0 million of borrowings available under our Third Amended and Restated Credit Agreement. On April 15, 2026, we entered into the Third Amended and Restated Credit Agreement, which includes a $1,000 million Revolving Credit Facility and$450.0 million Term Loan. We do not currently anticipate, nor are we aware of, any significant market conditions or commitments that would change any of our conclusions of the liquidity currently available to us. We will continue to actively monitor the credit markets in order to maintain sufficient liquidity and access to capital throughout 2026.

Previous wording

OUR RESULTS OF OPERATIONS — Three and Six months ended June 30, 2026 and 2025

Current wording

OUR RESULTS OF OPERATIONS — Three and Nine months ended September 30, 2026 and 2025

Previous wording

As discussed in Note 1, "Basis of Presentation and Accounting Policies," to our condensed consolidated financial statements included in this Quarterly Report, on February 20, 2026, the U.S. Supreme Court held in Learning Resources, Inc. v. Trump that the International Emergency Economic Powers Act (“IEEPA”) does not authorize a U.S. President to impose tariffs during peacetime national emergencies and that the challenge to the legality of the tariffs imposed under IEEPA was within the exclusive jurisdiction of the U.S. Court of International Trade (“CIT”), thus affirming the prior decision of the CIT in V.O.S. Selections, Inc. v. United States that the tariffs imposed under IEEPA were invalid. As a result of this ruling, the CIT issued an order directing the U.S. Customs and Border Protection (“CBP”) agency to begin formalizing a process for refunds. On April 20, 2026, the CBP launched an online portal to process tariff refund requests and the Company was able to submit its tariff refund requests through this portal. We have paid IEEPA tariffs to the U.S. government since the enactment on February 1, 2025, and accordingly we submitted our request covering our Phase 1 entries for refund of $35.4 million related to IEEPA tariffs paid during the period from February 1, 2025 to February 20, 2026. The timing for submitting claims related to our Phase 3 entries has not yet been established. We did not have any entries eligible for refunds under CBP’s Phase 2. The timing and amount of any recoveries remain uncertain and subject to execution by the CBP.

Current wording

As discussed in Note 1, "Basis of Presentation and Accounting Policies," to our condensed consolidated financial statements included in this Quarterly Report, on February 20, 2026, the U.S. Supreme Court held in Learning Resources, Inc. v. Trump that the International Emergency Economic Powers Act (“IEEPA”) does not authorize a U.S. President to impose tariffs during peacetime national emergencies and that the challenge to the legality of the tariffs imposed under IEEPA was within the exclusive jurisdiction of the U.S. Court of International Trade (“CIT”), thus affirming the prior decision of the CIT in V.O.S. Selections, Inc. v. United States that the tariffs imposed under IEEPA were invalid. As a result of this ruling, the CIT issued an order directing the U.S. Customs and Border Protection (“CBP”) agency to begin formalizing a process for refunds. On April 20, 2026, the CBP launched an online portal to process tariff refund requests and the Company was able to submit its tariff refund requests through this portal. We have paid IEEPA tariffs to the U.S. government since the enactment on February 1, 2025, and accordingly we submitted our request covering our Phase 1 entries for refund of $35.4 million related to IEEPA tariffs paid during the period from February 1, 2025 to February 20, 2026. We did not have any entries eligible for refunds under CBP's Phase 2. On October 6, 2026, we submitted our request covering our Phase 3 entries for a refund of $1.7 million related to IEEPA tariffs paid during the period from February 1, 2025 to February 20, 2026. The timing and amount of any recoveries under Phase 3 remain uncertain and subject to execution by the CBP.

Previous wording

Beginning on May 6, 2026 and through June 30, 2026, we received cash of $20.9 million for a portion of our refund claims, with applicable interest. Accordingly, we reclassified the remaining receivable from other assets to accounts receivable, net, a current asset, within our condensed consolidated balance sheet as of June 30, 2026. Through July 29, 2026, we have received substantially all cash refunds that were previously submitted and recognized in the consolidated financial statements. We continue to monitor developments, including those that impact our Phase 3 entries, and assess the potential impact on the consolidated financial statements and results of operations.

Current wording

Beginning on May 6, 2026 and through September 30, 2026, we received cash of $34.3 million for our Phase 1 refund claims, with applicable interest. The remaining Phase 1 receivable is included in accounts receivable, net, a current asset, within our condensed consolidated balance sheet as of September 30, 2026. Through October 28, 2026, we have received substantially all Phase 1 cash refunds that were previously submitted and recognized in the consolidated financial statements. We continue to monitor developments, including those that impact our Phase 3 entries, and assess the potential impact on the consolidated financial statements and results of operations.

Previous wording

MOGAS Real Estate LLC and MOGAS Systems & Consulting LLC (such entities collectively, "MOGAS"). We incurred $5.2 million in acquisition and integration related costs for the six-month period ended June 30, 2025 associated with the acquisition which are included within selling, general and administrative expense ("SG&A") in our condensed consolidated statement of income. The impact of the acquisition of MOGAS was not material for the six-months ended June 30, 2025.

Current wording

As discussed in Note 2, "Acquisitions and Divestitures," to our condensed consolidated financial statements included in this Quarterly Report, effective October 15, 2024, we acquired for inclusion in FCD, all of the equity interests of MOGAS Industries, Inc., MOGAS Real Estate LLC and MOGAS Systems & Consulting LLC (such entities collectively, "MOGAS"). We incurred $9.5 million in acquisition and integration related costs for the nine-month period ended September 30, 2025 associated with the acquisition which are included within selling, general and administrative expense ("SG&A") in our condensed consolidated statement of income. The impact of the acquisition of MOGAS was not material for the nine months ended September 30, 2025.

Previous wording

As discussed in Note 2, "Acquisitions," to our condensed consolidated financial statements included in this Quarterly Report, effective December 16, 2025, Flowserve acquired for inclusion in FPD, United Kingdom-based Greenray Turbine Solutions, Ltd. ("Greenray"), a comprehensive provider of aftermarket products and services for industrial gas turbines. We incurred $0.6 million in acquisition and integration-related costs for the six-month period ended June 30, 2026, associated with the acquisition which is included within SG&A in our condensed consolidated statements of income. The impact of the acquisition of Greenray is not material for the three and six-month periods ended June 30, 2026.

Current wording

As discussed in Note 2, "Acquisitions and Divestitures," to our condensed consolidated financial statements included in this Quarterly Report, effective December 16, 2025, Flowserve acquired for inclusion in FPD, United Kingdom-based Greenray Turbine Solutions, Ltd. ("Greenray"), a comprehensive provider of aftermarket products and services for industrial gas turbines. We incurred $1.1 million in acquisition and integration-related costs for the nine-month period ended September 30, 2026, associated with the acquisition, which are included within SG&A in our condensed consolidated statements of income. The impact of the acquisition of Greenray is not material for the three and nine months ended September 30, 2026.

Previous wording

As discussed in Note 2, "Acquisitions," to our condensed consolidated financial statements included in this Quarterly Report, effective May 11, 2026, Flowserve acquired for inclusion in FPD, the remaining 51% equity interest in Flowserve Al Mansoori Services Company ("FAMCO") a joint venture company between Flowserve Corporation and Abu Dhabi based Al Mansoori Specialized Engineering, for the service and repair of all Flowserve pumps, mechanical seals and systems in the region. We incurred an immaterial amount in acquisition and integration-related costs for the three and six-month periods ended June 30, 2026. The impact of the acquisition of FAMCO is not material for the three and six-month periods ended June 30, 2026.

Current wording

As discussed in Note 2, "Acquisitions and Divestitures," to our condensed consolidated financial statements included in this Quarterly Report, effective May 11, 2026, Flowserve acquired for inclusion in FPD, the remaining 51% equity interest in Flowserve Al Mansoori Services Company ("FAMCO") a joint venture company between Flowserve Corporation and Abu Dhabi based Al Mansoori Specialized Engineering, for the service and repair of all Flowserve pumps, mechanical seals and systems in the region. We incurred an immaterial amount in acquisition and integration-related costs for the three and nine months ended September 30, 2026. The impact of the acquisition of FAMCO is not material for the three and nine months ended September 30, 2026.

Previous wording

As discussed in Note 2, "Acquisitions," to our condensed consolidated financial statements included in this Quarterly Report, effective June 30, 2026, we acquired for inclusion in FCD and FPD, all of the equity interests of Trillium Flow Technologies’ Valves Division ("TVD"). TVD is a market leading provider of highly engineered mission-critical valves used in nuclear and traditional power generation, industrial, and critical infrastructure applications. We incurred $8.4 million and $15.1 million in acquisition and integration-related costs for the three and six-month periods ended June 30, 2026, respectively, associated with the acquisition which are included within SG&A in our condensed consolidated statements of income. The impact of the acquisition of TVD is not material for the three and six-month periods ended June 30, 2026.

Current wording

As discussed in Note 2, "Acquisitions and Divestitures," to our condensed consolidated financial statements included in this Quarterly Report, effective June 30, 2026, we acquired for inclusion in FCD and FPD, all of the equity interests of Trillium Flow Technologies’ Valves Division ("TVD"). TVD is a market leading provider of highly engineered mission-critical valves used in nuclear and traditional power generation, industrial, and critical infrastructure applications. We incurred $4.7 million and $19.8 million in acquisition and integration-related costs for the three and nine-month periods ended September 30, 2026, respectively, associated with the acquisition which are included within SG&A in our condensed consolidated statements of income. The impact of the acquisition of TVD is not material for the three and nine months ended September 30, 2026.

Previous wording

Our realignment activities are implemented in phases. We currently anticipate a total investment in the 2025 Realignment Programs, which have been evaluated and initiated, of approximately $170 million of which $23 million is estimated to be non-cash. Upon completion of the 2025 Realignment Programs that have been identified and initiated to date, we expect to achieve annualized cost savings of $140.0 million. Actual savings could vary from expected savings. There are certain remaining realignment activities that are currently being evaluated, but have not yet been approved and therefore are not included in the above anticipated total investment or estimated savings.

Current wording

Our realignment activities are implemented in phases. We currently anticipate a total investment in the 2025 Realignment Programs, which have been evaluated and initiated, of approximately $202 million of which $23 million is estimated to be non-cash. Upon completion of the 2025 Realignment Programs that have been identified and initiated to date, we expect to achieve annualized cost savings of $167.5 million. Actual savings could vary from expected savings. There are certain remaining realignment activities that are currently being evaluated, but have not yet been approved and therefore are not included in the above anticipated total investment or estimated savings.

Previous wording

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 June 30, 2026 increased by $274.2 million, or 25.5%, as compared with the same period in 2025. The increase included currency benefits of approximately $14.4 million. The increased bookings were driven by increased customer orders of $169.6 million in the energy industry, $50.5 million in the power generation industry, $37.8 million in general industries and $16.2 million in the chemical industry. The increase in customer bookings was driven by original equipment and aftermarket bookings.

Current wording

We define a booking as the receipt of a customer order that contractually engages us to perform activities on behalf of our customer with regard to manufacturing, service or support. Bookings recorded and subsequently canceled within the year-to-date period are excluded from year-to-date bookings. Bookings for the three months ended September 30, 2026 increased by $170.5 million, or 14.1%, as compared with the same period in 2025. The increase included negative currency effects of approximately $2.5 million. The increased bookings were driven by increased customer orders of $148.6 million in the energy industry and $42.3 million in the power generation industry, partially offset by decreased orders of $33.5 million in general industries and $0.1 million in the chemical industry. The increase in customer bookings was driven by original equipment and aftermarket bookings.

Previous wording

Sales for the six months ended June 30, 2026 decreased by $95.2 million, or 4.1%, as compared to the same period in 2025. The decrease included currency benefits of approximately $50 million. The decreased sales were driven by original equipment customer sales, with decreased customer sales of $67.4 million into Asia Pacific, $55.4 million into the Middle East and $17.8 million into Europe, partially offset by increased customer sales of $16.0 million into North America, $14.7 million into Latin America and $4.1 million into Africa. Net sales to international customers, including export sales from the United States, were approximately 61% and 62% of total sales for the six months ended June 30, 2026 and 2025, respectively. Aftermarket sales represented approximately 58% of total sales, as compared with approximately 52% of total sales for the same period in 2025.

Current wording

Sales for the three months ended September 30, 2026 increased by $63.4 million, or 5.4%, as compared to the same period in 2025. The increase included negative currency effects of approximately $1.4 million. The increased sales were driven by aftermarket sales. Customer sales increased by $45.2 million into North America, $17.9 million into Asia Pacific, $15.6 million into Latin America and $10.5 million into Europe, partially offset by decreased customer sales of $21.5 million into the Middle East and $6.8 million into Africa. Net sales to international customers, including export sales from the United States, were approximately 61% and 63% of total sales for the three-months ended September 30, 2026 and 2025, respectively. Aftermarket sales represented approximately 56% of total sales, as compared with approximately 53% of total sales for the same period in 2025.

Previous wording

Sales for the three months ended June 30, 2026 decreased by $18.9 million, or 1.6%, as compared to the same period in 2025. The decrease included currency benefits of approximately $9.5 million. The decreased sales were driven by original equipment sales, with decreased customer sales of $16.4 million into Europe, $14.2 million into the Middle East, $12.0 million into Asia Pacific, $3.0 million into Africa and $1.0 million into North America, partially offset by increased customer sales of $21.2 million into Latin America. Net sales to international customers, including export sales from the United States, were approximately 61% and 62% of total sales for the three-months ended June 30, 2026 and 2025, respectively. Aftermarket sales represented approximately 58% of total sales, as compared with approximately 53% of total sales for the same period in 2025.

Current wording

Sales for the nine months ended September 30, 2026 decreased by $31.9 million, or 0.9%, as compared to the same period in 2025. The decrease included currency benefits of approximately $49.0 million. The decreased sales were driven by original equipment customer sales. Customer sales decreased by $76.9 million into the Middle East, $49.6 million into Asia Pacific, $7.3 million into Europe and $2.7 million into Africa, partially offset by increased customer sales of $61.2 million into North America and $30.3 million into Latin America. Net sales to international customers, including export sales from the United States, were approximately 61% and 63% of total sales for the nine-months ended September 30, 2026 and 2025, respectively. Aftermarket sales represented approximately 56% of total sales, as compared with approximately 53% of total sales for the same period in 2025.

Previous wording

Backlog represents the aggregate value of booked but uncompleted customer orders and is influenced primarily by bookings, sales, cancellations and currency effects. Backlog of $3.3 billion at June 30, 2026 increased by $468.2 million, or 16.3%, as compared to December 31, 2025. Currency effects provided an increase of approximately $25.7 million (currency effects on backlog are calculated using the change in period end exchange rates). Approximately 41.1% of the backlog at June 30, 2026 and 42.0% of the backlog at December 31, 2025 was related to aftermarket orders. Backlog includes our unsatisfied (or partially unsatisfied) performance obligations of approximately $1.1 billion related to contracts having an original expected duration of over one year as discussed in Note 3, "Revenue Recognition," to our condensed consolidated financial statements included in this Quarterly Report.

Current wording

Backlog represents the aggregate value of booked but uncompleted customer orders and is influenced primarily by bookings, sales, cancellations and currency effects. Backlog of $3.5 billion at September 30, 2026 increased by $604.0 million, or 21%, as compared to December 31, 2025. Currency effects provided an increase of approximately $19.6 million (currency effects on backlog are calculated using the change in period end exchange rates). Approximately 40.2% of the backlog at September 30, 2026 and 42.0% of the backlog at December 31, 2025 was related to aftermarket orders. Backlog includes our unsatisfied (or partially unsatisfied) performance obligations of approximately $1.2 billion related to contracts having an original expected duration of over one year as discussed in Note 3, "Revenue Recognition," to our condensed consolidated financial statements included in this Quarterly Report.

Previous wording

Gross profit for the six months ended June 30, 2026 decreased by $11.3 million, or 1.5%, as compared with the same period in 2025. Gross profit margin for the six months ended June 30, 2026 of 34.2% increased from 33.3% for the same period in 2025. The increase in gross profit margin was primarily due to continued execution of the Flowserve Business System and our Operational Excellence and Portfolio Excellence programs, with a focus on complexity reduction and product rationalization, lower broad-based annual incentive compensation, decreased amortization expense on intangible assets, including acquisition related intangible assets, of $3.6 million and lower sales volume, partially offset by a $7.9 million charge incurred during the first quarter of 2026 related to a taxing authority matter in Latin America, increased charges of $34.4 million related to our realignment activities and disruptions in the Middle East. The increase in gross profit margin also includes the impact of $30.4 million in IEEPA tariff refunds recorded during the first quarter of 2026.

Current wording

Gross profit for the nine months ended September 30, 2026 increased by $22.7 million, or 2.0%, as compared with the same period in 2025. Gross profit margin for the nine-months ended September 30, 2026 of 33.9% increased from 33.0% for the same period in 2025. The increase in gross profit margin was primarily due to continued execution of the Flowserve Business System and our Operational Excellence and Portfolio Excellence programs, with a focus on complexity reduction and product rationalization and lower broad-based annual incentive compensation, partially offset by increased charges of $34.9 million related to our realignment activities, a $7.9 million charge incurred during the first quarter of 2026 related to a taxing authority matter in Latin America, increased amortization expense on intangible assets, including acquisition related intangible assets, of $7.7 million and disruptions in the Middle East. The increase in gross profit margin also includes the impact of $30.4 million in IEEPA tariff refunds recorded during the first quarter of 2026.

Previous wording

SG&A for the three months ended June 30, 2026 increased by $0.4 million, or 0.2%, as compared with the same period in 2025. Currency effects yielded an increase of approximately $3.1 million. SG&A increased due to increased charges of $9.5 million related to our realignment activities, increased charges of $6.1 million for acquisition and integration related costs associated with the TVD and FAMCO acquisitions and transaction costs associated with the PMV Divestiture incurred in the second quarter of 2026 compared to MOGAS acquisition and integration related charges incurred in the comparative period, higher broad-based annual incentive compensation, increased amortization expense on intangible assets, including acquisition related intangible assets of $1.8 million and an increase in bad debt expense of $1.1 million, partially offset by $15.5 million in transaction costs incurred during the comparative period associated with the terminated Chart Merger that did not recur and decreased research and development costs of $2.3 million, as compared to the same period in 2025. SG&A as a percentage of sales for the three months ended June 30, 2026 increased 40 basis points driven by cost increases and lower sales volume.

Current wording

SG&A for the three months ended September 30, 2026 decreased by $23.3 million, or 7.6%, as compared with the same period in 2025. Currency effects yielded an increase of approximately $0.6 million. SG&A decreased due to decreased asbestos-related charges of $30.1 million driven by Incurred But Not Reported ("IBNR") asbestos claims for which cost was incurred in the comparative period that did not recur, $25.7 million in transaction costs incurred during the comparative period associated with the terminated Chart Merger that did not recur and the impact of targeted cost reduction actions, partially offset by increased research and development costs of $8.0 million driven by the strategic acquisition of intellectual property within FPD, an increase in bad debt expense of $6.7 million, increased amortization expense on intangible assets, including acquisition related intangible assets, of $5.5 million, higher broad-based annual incentive compensation, increased charges of $1.4 million related to our realignment activities and increased acquisition and integration costs of $1.0 million related to strategic acquisition and divestiture activities as compared to the same period in 2025. SG&A as a percentage of sales for the three months ended September 30, 2026 decreased 320 basis points driven by cost decreases and higher sales volume.

Previous wording

SG&A for the six months ended June 30, 2026 increased by $20.6 million, or 4.0%, as compared with the same period in 2025. Currency effects yielded an increase of approximately $12.2 million. SG&A increased due to increased charges of $23.3 million related to our realignment activities, increased charges of $13.4 million for acquisition and integration related costs associated with the Greenray, TVD and FAMCO acquisitions and transaction costs associated with the PMV Divestiture incurred in 2026 compared to MOGAS acquisition and integration related charges incurred in the comparative period, increased amortization expense on intangible assets, including acquisition related intangible assets, of $2.7 million and a $1.4 million charge incurred during the first quarter of 2026 related to a taxing authority matter in Latin America, partially offset by $15.5 million in transaction costs incurred during the comparative period associated with the terminated Chart Merger that did not recur, lower broad-based annual incentive compensation, a decrease in research and development costs of $2.1 million, and a decrease in bad debt expense of $1.1 million. SG&A as a percentage of sales for the six months ended June 30, 2026 increased 190 basis points driven by cost increases.

Current wording

SG&A for the nine months ended September 30, 2026 decreased by $2.5 million, or 0.3%, as compared with the same period in 2025. Currency effects yielded an increase of approximately $12.9 million. SG&A decreased due to decreased charges of $41.2 million in transaction costs incurred during the comparative period associated with the terminated Chart Merger that did not recur, $30.1 million in asbestos-related charges driven by IBNR asbestos claims for which cost was incurred in the comparative period that did not recur, lower broad-based annual incentive compensation and the impact of targeted cost reduction actions, partially offset by increased charges of $24.8 million related to our realignment activities, increased acquisition and integration costs of $14.5 million related to strategic acquisition and divestiture activities, increased amortization expense on intangible assets, including acquisition related intangible assets of $8.2 million, an increase in research and development costs of $5.9 million driven by the strategic acquisition of intellectual property within FPD during the third quarter of 2026, an increase in bad debt expense of $5.6 million and a $1.4 million charge incurred during the first quarter of

Previous wording

Net earnings from affiliates for the three months ended June 30, 2026 increased by $27.1 million, or 459.3%, as compared with the same period in 2025. The increased net earnings from affiliates was primarily a result of a $27.7 million gain recognized on the remeasurement of our previously held equity interest in FAMCO.

Current wording

Net earnings from affiliates for the three months ended September 30, 2026 increased by $1.9 million, or 46.3%, as compared with the same period in 2025. The increased net earnings from affiliates was primarily a result of increased earnings from our FPD joint venture in South Korea.

Previous wording

Net earnings from affiliates for the six months ended June 30, 2026 increased by $24.4 million, or 210.3%, as compared with the same period in 2025. The increased net earnings from affiliates was primarily a result of a $27.7 million gain recognized on the remeasurement of our previously held equity interest in FAMCO, partially offset by decreased earnings of our FPD joint venture in South Korea.

Current wording

Net earnings from affiliates for the nine months ended September 30, 2026 increased by $26.2 million, or 165.8%, as compared with the same period in 2025. The increase in net earnings from affiliates was primarily a result of a $27.7 million gain recognized on the remeasurement of our previously held equity interest in FAMCO, partially offset by decreased earnings from our FPD joint venture in India.

Previous wording

Interest expense for the six months ended June 30, 2026 increased by $6.7 million, as compared with the same period in 2025, primarily due to higher outstanding debt during the period. Interest income for the six months ended June 30, 2026 increased by $2.2 million primarily due to interest income earned on IEEPA tariff refunds and a higher average balance as compared to the same period in 2025.

Current wording

Interest expense for the three months ended September 30, 2026 increased by $7.9 million, as compared with the same period in 2025, primarily due to higher outstanding debt during the period. Interest income for the three months ended September 30, 2026 increased by $1.6 million primarily due to interest income earned on a higher average balance as compared to the same period in 2025.

Previous wording

Interest expense for the three months ended June 30, 2026 increased by $5.4 million, as compared with the same period in 2025, primarily due to higher outstanding debt during the period. Interest income for the three months ended June 30, 2026 increased by $2.5 million primarily due to interest income earned on IEEPA tariff refunds and a higher average balance as compared to the same period in 2025.

Current wording

Interest expense for the nine months ended September 30, 2026 increased by $14.6 million, as compared with the same period in 2025, primarily due to higher outstanding debt during the period. Interest income for the nine-months ended September 30, 2026 increased by $3.8 million primarily due to interest income earned on IEEPA tariff refunds and a higher average balance as compared to the same period in 2025.

Previous wording

Other expense, net for the six months ended June 30, 2026 decreased $37.2 million as compared to the same period in 2025 primarily due to a $28.9 million decrease in losses from transactions in currencies other than our sites' functional currencies and a $5.2 million decrease in losses arising from transactions on foreign exchange forward contracts. The net currency change was primarily due to the foreign currency exchange rate movements in the Euro, Singaporean dollar, and Swedish krona during the six months ended June 30, 2026, as compared to the same period in 2025. The six months ended June 30, 2026 also includes a pension settlement loss of $4.6 million incurred in conjunction with pension plans in the United States and Canada.

Current wording

Other (expense) income, net for the three months ended September 30, 2026 decreased $264.4 million as compared to the same period in 2025 primarily due to the $266.0 million payment we received per the Mutual Termination Agreement for the terminated Chart Merger in the third quarter of 2025 and $3.6 million in losses from transactions in currencies other than our sites' functional currencies, including a $3.1 million foreign exchange loss on the Blue Chip Swap Securities transaction, partially offset by $3.8 million in gains arising from transactions on foreign exchange forward contracts. The net currency change was primarily due to the foreign currency exchange rate movements in the Euro, Hungarian Forint, and Mexican peso during the three months ended September 30, 2026, as compared to the same period in 2025. The three months ended September 30, 2026 also includes a pension settlement loss of $1.0 million incurred in conjunction with the freeze of our Company-sponsored qualified defined benefit pension plan in the United States.

Previous wording

Other expense, net for the three months ended June 30, 2026 decreased $12.9 million as compared to the same period in 2025 primarily due to a $14.1 million decrease in losses from transactions in currencies other than our sites' functional currencies partially offset by a $0.4 million loss arising from transactions on foreign exchange forward contracts. The net currency change was primarily due to the foreign currency exchange rate movements in the Euro, Singaporean dollar, Swedish krona and Mexican peso during the three months ended June 30, 2026, as compared to the same period in 2025. The three months ended June 30, 2026 also includes a pension settlement loss of $3.1 million incurred in conjunction with pension plans in the United States and Canada.

Current wording

Other (expense) income, net for the nine months ended September 30, 2026 decreased $227.3 million as compared to the same period in 2025 primarily due to the $266.0 million payment we received per the Mutual Termination Agreement for the terminated Chart Merger in the third quarter of 2025, partially offset by $25.4 million in gains from transactions in currencies other than our sites' functional currencies, including a $3.1 million foreign exchange loss on the Blue Chip Swap Securities transaction, and $9.0 million in gains arising from transactions on foreign exchange forward contracts. The net currency change was primarily due to the foreign currency exchange rate movements in the Euro, Singaporean dollar, Swedish krona, and Mexican peso during the nine-months ended September 30, 2026, as compared to the same period in 2025. The nine months ended September 30, 2026 also includes pension settlement losses of $5.6 million incurred in conjunction with pension plans in the United States and Canada.

Previous wording

The effective tax rate of 14.4% for the three months ended June 30, 2026 decreased from 15.1% for the same period in 2025. The effective tax rate varied from the U.S. federal statutory rate for the three months ended June 30, 2026 primarily due to the net impact of the non-taxable FAMCO acquisition gain and foreign operations, partially offset by state income taxes. Refer to Note 15, "Income Taxes," to our condensed consolidated financial statements included in this Quarterly Report for further discussion.

Current wording

The effective tax rate of 12.4% for the three months ended September 30, 2026 decreased from 29.5% for the same period in 2025. The effective tax rate varied from the U.S. federal statutory rate for the three months ended September 30, 2026 primarily due to the benefits from the release of the valuation allowance on the net deferred tax assets of $23.1 million in Italy, partially offset by the impacts of the divestiture of the PMV business and a foreign audit settlement. Refer to Note 15, "Income Taxes," to our condensed consolidated financial statements included in this Quarterly Report for further discussion.

Previous wording

The effective tax rate of 16.9% for the six months ended June 30, 2026 increased from 16.6% for the same period in 2025. The effective tax rate varied from the U.S. federal statutory rate for the six months ended June 30, 2026 primarily due to the net impact of U.S. discrete items, the non-taxable FAMCO acquisition gain and foreign operations, partially offset by state income taxes. Refer to Note 15, "Income Taxes," to our condensed consolidated financial statements included in this Quarterly Report for further discussion.

Current wording

The effective tax rate of 15.3% for the nine months ended September 30, 2026 decreased from 24.5% for the same period in 2025. The effective tax rate varied from the U.S. federal statutory rate for the nine-months ended September 30, 2026 primarily due to the benefits from the release of the valuation allowance on the net deferred tax assets of $23.1 million in Italy and the net impact of U.S. discrete items, partially offset by the impacts of the divestiture of the PMV business and a foreign audit settlement. Refer to Note 15, "Income Taxes," to our condensed consolidated financial statements included in this Quarterly Report for further discussion.

Previous wording

Other comprehensive income for the three months ended June 30, 2026 decreased by $119.3 million to a loss of $8.9 million from income of $110.4 million in the same period in 2025. The decrease was due to foreign currency translation adjustments resulting primarily from exchange rate movements of the Euro, Indian rupee and Mexican peso versus the U.S. dollar during the three months ended June 30, 2026, as compared to the same period in 2025.

Current wording

Other comprehensive income for the three months ended September 30, 2026 increased by $30.5 million to income of $16.6 million compared to a loss of $13.9 million in the same period in 2025. The increase was due to foreign currency translation adjustments resulting primarily from exchange rate movements of the Euro, Indian rupee and British pound versus the U.S. dollar during the three months ended September 30, 2026, as compared to the same period in 2025.

Previous wording

Other comprehensive income for the six months ended June 30, 2026 decreased by $190.3 million to a loss of $32.0 million from income of $158.3 million in the same period in 2025. The decrease was due to foreign currency translation adjustments resulting primarily from exchange rate movements of the Euro and Indian rupee versus the U.S. dollar during the six months ended June 30, 2026, as compared to the same period in 2025.

Current wording

Other comprehensive income for the nine months ended September 30, 2026 decreased by $159.9 million to a loss of $15.5 million compared to income of $144.4 million in the same period in 2025. The decrease was due to foreign currency translation adjustments resulting primarily from exchange rate movements of the Euro, Indian rupee, and British pound versus the U.S. dollar during the nine-months ended September 30, 2026, as compared to the same period in 2025.

Previous wording

Sales for the three months ended June 30, 2026 decreased by $4.8 million, or 0.6% as compared to the same period in 2025 and included currency benefits of approximately $9.4 million. The decrease was driven by original equipment customer sales. Decreased customer sales of approximately $18.2 million into the Middle East, $6.1 million into Europe, $5.7 million into Asia Pacific and $5.4 million into Africa were partially offset by increased customer sales of approximately $21.4 million into Latin America and $4.1 million into North America.

Current wording

Sales for the nine months ended September 30, 2026 decreased by $13.4 million, or 0.6% as compared to the same period in 2025 and included currency benefits of approximately $43 million. The decrease was driven by original equipment customer sales. Decreased customer sales of approximately $84.8 million into the Middle East, $21.9 million into Asia Pacific and $3.4 million into Africa were partially offset by increased customer sales of approximately $58.6 million into North America, $24.3 million into Latin America and $6.2 million into Europe.

Previous wording

Gross profit for the six months ended June 30, 2026 decreased by $1.6 million, or 0.3%, as compared to the same period in 2025. Gross profit margin for the six months ended June 30, 2026 of 36.3% increased from 35.4% for the same period in 2025. The increase in gross profit margin was primarily due to continued execution of the Flowserve Business System and our Operational Excellence and Portfolio Excellence programs, with a focus on complexity reduction and product rationalization, lower broad-based annual incentive compensation and lower sales volume, partially offset by increased charges of $15.7 million related to our realignment activities, a $7.9 million charge incurred during the first quarter of 2026 related to a taxing authority matter in Latin America, increased amortization expense on intangible assets, including acquisition related intangible assets, of $2.5 million and disruptions in the Middle East as compared to the same period in 2025. The increase in gross profit margin also includes the impact of $14.0 million in IEEPA tariff refunds recorded during the first quarter of 2026.

Current wording

Gross profit for the nine months ended September 30, 2026 increased by $46.8 million, or 5.6%, as compared to the same period in 2025. Gross profit margin for the nine-months ended September 30, 2026 of 36.8% increased from 34.7% for the same period in 2025. The increase in gross profit margin was primarily due to continued execution of the Flowserve Business System and our Operational Excellence and Portfolio Excellence programs, with a focus on complexity reduction and product rationalization, decreased charges of $6.8 million related to our realignment activities and lower broad-based annual incentive compensation, partially offset by a $7.9 million charge incurred during the first quarter of 2026 related to a taxing authority matter in Latin America, increased amortization expense on intangible assets, including acquisition related intangible assets, of $5.4 million and disruptions in the Middle East as compared to the same period in 2025. The increase in gross profit margin also includes the impact of $14.0 million in IEEPA tariff refunds recorded during the first quarter of 2026.

Previous wording

Operating income for the six months ended June 30, 2026 increased by $7.6 million, or 2.5%, as compared to the same period in 2025. The increase included currency benefits of approximately $3 million. The increase was a result of the $24.4 million increase in net earnings from affiliates driven primarily by the gain on remeasurement of our previously held equity interest in FAMCO, partially offset by the decrease in gross profit of $1.6 million and $15.1 million increase in SG&A.

Current wording

Operating income for the nine months ended September 30, 2026 increased by $40.8 million, or 9.4%, as compared to the same period in 2025. The increase included currency benefits of approximately $3 million. The increase was due to the $46.8 million increase in gross profit, partially offset by the $32.3 million increase in SG&A. The increase also includes the impact of the $27.7 million gain on remeasurement of our previously held equity interest in FAMCO recorded during the second quarter of 2026 and included in net earnings from affiliates.

Previous wording

FCD designs, manufactures and distributes a broad portfolio of engineered-to-order and configured-to-order isolation valves, control valves, valve automation products and related equipment. FCD leverages its experience and application know-how by offering a complete menu of engineered services to complement its expansive product portfolio. Not including the recently acquired TVD facilities, FCD has a total of 48 manufacturing facilities and QRCs in 23 countries around the world, with seven of its 19 manufacturing operations located in Europe and the Middle East, six located in the United States, 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.

Current wording

FCD designs, manufactures and distributes a broad portfolio of engineered-to-order and configured-to-order isolation valves, control valves, valve automation products and related 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 54 manufacturing facilities and QRCs in 24 countries around the world, with nine of its 23 manufacturing operations located in Europe and the Middle East, six located in the United States, seven 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.

Previous wording

Bookings for the six months ended June 30, 2026 increased by $60.9 million, or 8.3%, as compared with the same period in 2025. Bookings included currency benefits of approximately $10.7 million. The increase in customer bookings was primarily driven by increased customer orders of $56.6 million in the power generation industry, $13.7 million in the chemical industry and $6.5 million in general industries, partially offset by decreased customer orders of $9.4 million in the energy industry. Increased customer bookings were driven by increased orders of $55.3 million into Asia Pacific, $31.8 million into Europe, $17.5 million into North America and $0.4 million into Africa, partially offset by decreased orders of $37.5 million into the Middle East and $0.2 million into Latin America. The increase in customer bookings was driven by both original equipment and aftermarket bookings.

Current wording

Bookings for the nine months ended September 30, 2026 increased by $109.9 million, or 9.8%, as compared with the same period in 2025. Bookings included currency benefits of approximately $8.8 million. The increase in customer bookings was primarily driven by increased customer orders of $69.7 million in the power generation industry, $43.7 million in the energy industry and $25.6 million in general industries, partially offset by decreased customer orders of $24.8 million in the chemical industry. Increased customer bookings were driven by increased orders of $93.9 million into North America, $65.2 million into Asia Pacific and $0.9 million into Africa, partially offset by decreased orders of $32.7 million into the Middle East, $14.0 million into Europe and $0.8 million into Latin America. The increase in customer bookings was driven by both original equipment and aftermarket bookings.

Previous wording

Backlog of $1.2 billion at June 30, 2026 increased by $324.9 million, or 39.2%, as compared to December 31, 2025. Currency effects provided an increase of approximately $4 million.

Current wording

Backlog of $1.1 billion at September 30, 2026 increased by $276.2 million, or 33.3%, as compared to December 31, 2025. Currency effects provided a decrease of approximately $4 million.

Previous wording

Our cash balance decreased by $29.2 million to $731.0 million at June 30, 2026, as compared with December 31, 2025. The cash activity during the first six months of 2026 included cash provided by operating activities, $517.7 million in payments for acquisitions, net of cash acquired, $100.0 million in payments under our revolving credit facility, $77.9 million of payments on our $450.0 million unsecured term loan facility (the "Term Loan"), $54.8 million in dividend payments, $33.8 million in capital expenditures, $25.0 million in repurchases of common shares, $23.0 million of payments related to tax withholdings for stock-based compensation, $5.3 million in payments under other financing arrangements and $4.9 million in deferred loan costs, partially offset by $499.3 million proceeds from the issuance of senior notes, $150.0 million proceeds under the Revolving Credit Facility, $74.8 million proceeds from our Term Loan, and $9.9 million proceeds from the disposal of assets.

Current wording

Our cash balance decreased by $18.0 million to $742.1 million at September 30, 2026, as compared with December 31, 2025. The cash activity during the first nine months of 2026 included cash provided by operating activities, $517.7 million in payments for acquisitions, net of cash acquired, $160.0 million in payments under our revolving credit facility, $82.9 million in payments of dividends, $77.9 million of payments on our $450.0 million unsecured term loan facility (the "Term Loan"), $75.0 million in repurchases of common shares, $52.9 million in purchases of Blue Chip Swap Securities, $51.1 million in capital expenditures, $23.3 million of payments related to tax withholdings for stock-based compensation, $4.9 million in deferred loan costs, $4.0 million in payments to affiliates for investment activities and $2.1 million in other financing activities, partially offset by $499.3 million proceeds from the issuance of senior notes, $150.0 million proceeds under the Revolving Credit Facility, $74.8 million proceeds from our Term Loan, $49.8 million in proceeds from the sale of Blue Chip Swap Securities, $34.6 million in proceeds from the PMV Divestiture, net of cash divested, $9.8 million proceeds from the disposal of assets and $1.1 million in proceeds under other financing arrangements.

Previous wording

For the six months ended June 30, 2026, our cash provided by operating activities was $86.2 million, as compared to cash provided of $104.2 million for the same period in 2025. Cash flow used by working capital increased for the six months ended June 30, 2026, primarily due to decreased cash flows provided by, or increased cash flows used by, inventories and accounts payable, partially offset by increased cash flows provided by, or decreased cash flows used by, accounts receivable, contract assets, contract liabilities, prepaid expenses and other assets and accrued liabilities, as compared to the same period in 2025.

Current wording

For the nine months ended September 30, 2026, our cash provided by operating activities was $230.3 million, as compared to cash provided of $506.1 million for the same period in 2025. Cash flow used by working capital increased for the nine months ended September 30, 2026, primarily due to decreased cash flows provided by, or increased cash flows used by, accounts receivable, inventories, accounts payable, accrued liabilities, retirement obligations and other liabilities and net deferred taxes, partially offset by increased cash flows provided by, or decreased cash flows used by, contract assets, prepaid expenses and other assets and contract liabilities, as compared to the same period in 2025.

Previous wording

Increases in accounts receivable provided $6.9 million of cash flow for the six months ended June 30, 2026, compared to cash used of $22.6 million for the same period in 2025. As of June 30, 2026, our days’ sales outstanding ("DSO") was 82 days as compared to 80 days as of June 30, 2025.

Current wording

Increases in accounts receivable used $28.7 million of cash flow for the nine months ended September 30, 2026, compared to cash used of $26.1 million for the same period in 2025. As of September 30, 2026, our days’ sales outstanding ("DSO") was 82 days as compared to 80 days as of September 30, 2025.

Previous wording

Increases in contract assets used $11.2 million of cash flow for the six months ended June 30, 2026, as compared to cash used of $28.9 million for the same period in 2025.

Current wording

Increases in contract assets used $8.2 million of cash flow for the nine months ended September 30, 2026, as compared to cash used of $35.2 million for the same period in 2025.

Previous wording

Changes in inventories used $4.3 million of cash flow for the six months ended June 30, 2026, as compared to cash provided of $14.2 million for the same period in 2025. Inventory turns were 3.6 times at June 30, 2026, as compared to 3.5 times as of June 30, 2025.

Current wording

Changes in inventories used $7.4 million of cash flow for the nine months ended September 30, 2026, as compared to cash provided of $26.7 million for the same period in 2025. Inventory turns were 3.8 times at September 30, 2026, as compared to 3.6 times as of September 30, 2025.

Previous wording

Decreases in accounts payable used $52.3 million of cash flow for the six months ended June 30, 2026, as compared to cash used of $10.4 million for the same period in 2025. Decreases in accrued liabilities used $80.8 million of cash flow for the six months ended June 30, 2026, as compared to cash used of $84.5 million for the same period in 2025.

Current wording

Changes in accounts payable used $34.2 million of cash flow for the nine months ended September 30, 2026, as compared to cash provided of $31.2 million for the same period in 2025. Decreases in accrued liabilities used $60.6 million of cash flow for the nine months ended September 30, 2026, as compared to cash used of $30.5 million for the same period in 2025.