UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)


þ	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED ~~SEPTEMBER~~JUNE 30, ~~2016~~2017


¨	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, Irving, Texas		75039
(Address of principal executive offices)		(Zip Code)



	(972) 443-6500
(Registrant’s telephone number, including area code)

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). þ Yes ¨ No

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



Large accelerated filer þ	Accelerated filer ¨	Non-accelerated filer ¨ (do not check if a smaller reporting company)
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 þ No

As of ~~October 19, 2016,~~August 4, 2017 there were ~~130,452,077~~130,637,488 shares 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 – Three Months Ended ~~September~~June 30, ~~2016~~2017 and ~~2015~~2016 (unaudited)	1
Condensed Consolidated Statements of Income and Condensed Consolidated Statements of Comprehensive Income – ~~Nine~~Six Months Ended ~~September~~June 30, ~~2016~~2017 and ~~2015~~2016 (unaudited)	2
Condensed Consolidated Balance Sheets – ~~September~~June 30, ~~2016~~2017 and December 31, ~~2015~~2016 (unaudited)	3
Condensed Consolidated Statements of Cash Flows – ~~Nine~~Six Months Ended ~~September~~June 30, ~~2016~~2017 and ~~2015~~2016 (unaudited)	4
Notes to Condensed Consolidated Financial Statements (unaudited)	5
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.	2223
Item 3. Quantitative and Qualitative Disclosures About Market Risk.	3637
Item 4. Controls and Procedures.	3637

PART II – OTHER INFORMATION
Item 1. Legal Proceedings.	3739
Item 1A. Risk Factors.	3739
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.	3739
Item 6. Exhibits.	3840
SIGNATURES	3941
EX-31.1
EX-31.2
EX-32.1
EX-32.2
EX-101 INSTANCE DOCUMENT
EX-101 SCHEMA DOCUMENT
EX-101 CALCULATION LINKBASE DOCUMENT
EX-101 LABELS LINKBASE DOCUMENT
EX-101 PRESENTATION LINKBASE DOCUMENT
EX-101 DEFINITION LINKBASE DOCUMENT

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,						Three Months Ended June 30,
	2016			2015			2017			2016
Sales	$	943,334		$	1,096,476		$	877,063		$	1,027,393
Cost of sales	(677,891		)	(707,726		)	(632,068		)	(706,728		)
Gross profit	265,443			388,750			244,995			320,665
Selling, general and administrative expense	(271,643		)	(223,516		)	(252,800		)	(228,704		)
Gain on sale of business							131,294			—
Net earnings from affiliates	3,394			2,615			2,654			1,809
Operating (loss) income	(2,806		)	167,849
Operating income							126,143			93,770
Interest expense	(15,141		)	(16,283		)	(14,951		)	(15,274		)
Interest income	924			499			641			645
Other income (expense), net	1,899			(5,430		)
(Loss) earnings before income taxes	(15,124		)	146,635
Other (expense) income, net							(8,761		)	4,735
Earnings before income taxes							103,072			83,876
Provision for income taxes	(4,996		)	(52,099		)	(60,887		)	(29,512		)
Net (loss) earnings, including noncontrolling interests	(20,120		)	94,536
Less: Net earnings attributable to noncontrolling interests	(808		)	(913		)
Net (loss) earnings attributable to Flowserve Corporation	$	(20,928	)	$	93,623
Net (loss) earnings per share attributable to Flowserve Corporation common shareholders:
Net earnings, including noncontrolling interests							42,185			54,364
Less: Net (earnings) loss attributable to noncontrolling interests							(307		)	9
Net earnings attributable to Flowserve Corporation							$	41,878		$	54,373
Net earnings per share attributable to Flowserve Corporation common shareholders:
Basic	$	(0.16	)	$	0.71		$	0.32		$	0.42
Diluted	(0.16		)	0.70			0.32			0.42
Cash dividends declared per share	$	0.19		$	0.18		$	0.19		$	0.19

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(Amounts in thousands) Three Months Ended September 30,
2016 2015
Net (loss) earnings, including noncontrolling interests $ (20,120 ) $ 94,536
Other comprehensive loss:
Foreign currency translation adjustments, net of taxes of $9,373 and $32,543 respectively (15,735 ) (54,494 )
Pension and other postretirement effects, net of taxes of $(925) and $(1,615), respectively 3,719
3,688
Cash flow hedging activity, net of taxes of $(200) and $(663), respectively 560
1,538
Other comprehensive loss (11,456 ) (49,268 )
Comprehensive (loss) income, including noncontrolling interests (31,576 ) 45,268
Comprehensive income attributable to noncontrolling interests (807 ) (829 )
Comprehensive (loss) income attributable to Flowserve Corporation $ (32,383 ) $ 44,439



(Amounts in thousands)	Three Months Ended June 30,
	2017			2016
Net earnings, including noncontrolling interests	$	42,185		$	54,364
Other comprehensive income (loss):
Foreign currency translation adjustments, net of taxes of $(20,389) and $17,566 respectively	34,317			(29,489		)
Pension and other postretirement effects, net of taxes of $(308) and $(1,877), respectively	(1,142		)	3,150
Cash flow hedging activity, net of taxes of $(155) in 2016	(19		)	560
Other comprehensive income (loss)	33,156			(25,779		)
Comprehensive income, including noncontrolling interests	75,341			28,585
Comprehensive (loss) income attributable to noncontrolling interests	(307		)	9
Comprehensive income attributable to Flowserve Corporation	$	75,034		$	28,594

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)	Nine Months Ended September 30,						Six Months Ended June 30,
	2016			2015			2017			2016
Sales	$	2,916,814		$	3,273,342		$	1,743,381		$	1,973,614
Cost of sales	(2,018,646		)	(2,183,770		)	(1,229,948		)	(1,347,795		)
Gross profit	898,168			1,089,572			513,433			625,819
Selling, general and administrative expense	(737,083		)	(707,037		)	(474,885		)	(466,252		)
Gain on sale of business							131,294			—
Net earnings from affiliates	8,522			6,268			6,109			5,128
Operating income	169,607			388,803			175,951			164,695
Interest expense	(44,982		)	(47,712		)	(29,646		)	(29,842		)
Interest income	2,243			1,504			1,265			1,318
Other income (expense), net	2,091			(30,258		)
Other expense, net							(19,888		)	(827		)
Earnings before income taxes	128,959			312,337			127,682			135,344
Provision for income taxes	(47,809		)	(111,525		)	(66,208		)	(46,690		)
Net earnings, including noncontrolling interests	81,150			200,812			61,474			88,654
Less: Net earnings attributable to noncontrolling interests	(1,222		)	(4,515		)	(545		)	(415		)
Net earnings attributable to Flowserve Corporation	$	79,928		$	196,297		$	60,929		$	88,239
Net earnings per share attributable to Flowserve Corporation common shareholders:
Basic	$	0.61		$	1.47		$	0.47		$	0.68
Diluted	0.61			1.46			0.46			0.67
Cash dividends declared per share	$	0.57		$	0.54		$	0.38		$	0.38

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)



(Amounts in thousands)	Nine Months Ended September 30,						Six Months Ended June 30,
	2016			2015			2017			2016
Net earnings, including noncontrolling interests	$	81,150		$	200,812		$	61,474		$	88,654
Other comprehensive (loss) income:
Foreign currency translation adjustments, net of taxes of $6,315 and $87,943, respectively	(10,600		)	(147,262		)
Pension and other postretirement effects, net of taxes of $(3,545) and $(5,140), respectively	9,655			13,359
Cash flow hedging activity, net of taxes of $(620) and $(218), respectively	1,763			(181		)
Other comprehensive income (loss)	818			(134,084		)
Other comprehensive income:
Foreign currency translation adjustments, net of taxes of $(40,463) and $(1,793), respectively							68,103			3,010
Pension and other postretirement effects, net of taxes of $(663) and $(2,619), respectively							(658		)	5,936
Cash flow hedging activity, net of taxes of $(34) and $(420), respectively							84			1,203
Other comprehensive income							67,529			10,149
Comprehensive income, including noncontrolling interests	81,968			66,728			129,003			98,803
Comprehensive income attributable to noncontrolling interests	(2,004		)	(5,909		)	(1,079		)	(1,176		)
Comprehensive income attributable to Flowserve Corporation	$	79,964		$	60,819		$	127,924		$	97,627

See accompanying notes to condensed consolidated financial statements.

Table of Contents

FLOWSERVE CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)


(Amounts in thousands, except par value)	September 30,			December 31,			June 30,			December 31,
	2016			2015			2017			2016
ASSETS
Current assets:
Cash and cash equivalents	$	260,870		$	366,444		$	505,161		$	367,162
Accounts receivable, net of allowance for doubtful accounts of $49,665 and $43,936, respectively	896,755			988,391
Accounts receivable, net of allowance for doubtful accounts of $56,083 and $51,920, respectively							832,036			882,638
Inventories, net	1,038,944			995,565			941,816			897,690
Prepaid expenses and other	186,311			125,410			136,542			150,199
Total current assets	2,382,880			2,475,810			2,415,555			2,297,689
Property, plant and equipment, net of accumulated depreciation of $906,726 and $855,214, respectively	750,128			758,427
Property, plant and equipment, net of accumulated depreciation of $933,834 and $882,151, respectively							678,907			724,805
Goodwill	1,229,817			1,223,986			1,202,156			1,205,054
Deferred taxes	76,095			69,327			93,846			83,722
Other intangible assets, net	219,280			228,777			214,929			214,527
Other assets, net	195,402			224,330			189,722			183,126
Total assets	$	4,853,602		$	4,980,657		$	4,795,115		$	4,708,923

LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	394,600		$	491,378		$	367,347		$	412,087
Accrued liabilities	731,928			796,764			689,137			680,986
Debt due within one year	75,211			60,434			89,839			85,365
Total current liabilities	1,201,739			1,348,576			1,146,323			1,178,438
Long-term debt due after one year	1,535,678			1,560,562			1,500,988			1,485,258
Retirement obligations and other liabilities	402,645			387,786			422,016			407,839
Shareholders’ equity:
Common shares, $1.25 par value	220,991			220,991			220,991			220,991
Shares authorized – 305,000
Shares issued – 176,793
Capital in excess of par value	491,639			494,961			483,782			491,848
Retained earnings	3,591,867			3,587,120			3,612,173			3,598,396
Treasury shares, at cost – 46,977 and 47,703 shares, respectively	(2,078,439		)	(2,106,785		)
Treasury shares, at cost – 46,502 and 46,980 shares, respectively							(2,061,345		)	(2,078,527		)
Deferred compensation obligation	8,369			10,233			6,183			8,507
Accumulated other comprehensive loss	(540,006		)	(540,043		)	(557,792		)	(624,788		)
Total Flowserve Corporation shareholders’ equity	1,694,421			1,666,477			1,703,992			1,616,427
Noncontrolling interests	19,119			17,256			21,796			20,961
Total equity	1,713,540			1,683,733			1,725,788			1,637,388
Total liabilities and equity	$	4,853,602		$	4,980,657		$	4,795,115		$	4,708,923

See accompanying notes to condensed consolidated financial statements.

Table of Contents

FLOWSERVE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


(Amounts in thousands)	Nine Months Ended September 30,						Six Months Ended June 30,
	2016			2015			2017			2016
Cash flows – Operating activities:
Net earnings, including noncontrolling interests	$	81,150		$	200,812		$	61,474		$	88,654
Adjustments to reconcile net earnings to net cash used by operating activities:
Adjustments to reconcile net earnings to net cash provided (used) by operating activities:
Depreciation	74,875			73,652			50,252			50,071
Amortization of intangible and other assets	12,424			25,918			7,143			8,341
Loss on divestiture of business	7,664			—
Excess tax benefits from stock-based payment arrangements	(2,480		)	(6,822		)
(Gain) loss on dispositions of businesses							(131,294		)	7,664
Stock-based compensation	29,966			26,027			15,743			23,965
Latin America accounts receivable reserve and inventory write-downs	79,122			—
Foreign currency and other non-cash adjustments	940			54,635
Change in assets and liabilities, net of acquisition:
Foreign currency, asset impairment and other non-cash adjustments							31,573			3,496
Change in assets and liabilities:
Accounts receivable, net	70,190			66,660			71,078			42,385
Inventories, net	(47,375		)	(119,530		)	(17,277		)	(44,150		)
Prepaid expenses and other	(59,799		)	(42,361		)	39,256			(26,000		)
Other assets, net	(19,512		)	(17,890		)	(10,150		)	(7,308		)
Accounts payable	(97,838		)	(157,930		)	(55,928		)	(77,089		)
Accrued liabilities and income taxes payable	(90,304		)	(2,989		)	(9,777		)	(69,904		)
Retirement obligations and other	7,821			(6,402		)	(8,624		)	3,324
Net deferred taxes	11,349			37,261			3,131			7,247
Net cash flows provided by operating activities	58,193			131,041			46,600			10,696
Cash flows – Investing activities:
Capital expenditures	(64,475		)	(138,532		)	(29,447		)	(36,912		)
Payments for acquisition, net of cash acquired	—			(353,654		)
Proceeds from disposal of assets	632			4,103			2,383			1,427
Payment for divestiture of business	(5,064		)	—
Net cash flows used by investing activities	(68,907		)	(488,083		)
Proceeds from (payments for) dispositions of businesses							181,838			(5,064		)
Net cash flows provided (used) by investing activities							154,774			(40,549		)
Cash flows – Financing activities:
Excess tax benefits from stock-based payment arrangements	2,480			6,822
Payments on long-term debt	(45,000		)	(30,000		)	(30,000		)	(30,000		)
Proceeds from issuance of senior notes	—			526,332
Payments of deferred loan cost	—			(5,108		)
Proceeds under other financing arrangements	24,701			8,157			6,644			19,494
Payments under other financing arrangements	(12,060		)	(15,524		)	(2,690		)	(11,441		)
Repurchases of common shares	—			(249,682		)
Payments related to tax withholding for stock-based compensation							(6,593		)	(8,512		)
Payments of dividends	(72,960		)	(70,000		)	(49,579		)	(48,181		)
Other	1,325			192			(244		)	(142		)
Net cash flows (used) provided by financing activities	(101,514		)	171,189
Net cash flows used by financing activities							(82,462		)	(78,782		)
Effect of exchange rate changes on cash	6,654			(26,655		)	19,087			5,265
Net change in cash and cash equivalents	(105,574		)	(212,508		)	137,999			(103,370		)
Cash and cash equivalents at beginning of period	366,444			450,350			367,162			366,444
Cash and cash equivalents at end of period	$	260,870		$	237,842		$	505,161		$	263,074

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, ~~2016~~2017, the related condensed consolidated statements of income and comprehensive income for the three and ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 and ~~2015~~2016, and the condensed consolidated statements of cash flows for the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 and ~~2015,~~2016, 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, ~~2016~~2017 ("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, ~~2015~~2016 ("~~2015~~2016 Annual Report").

Revision to Previously Reported Financial Information - In the second quarter of 2017, we identified accounting errors focused mainly at two of our non-U.S. sites in the inventory, accounts receivable, cost of sales and selling, general and administrative balances for prior periods through the first quarter of 2017. We have assessed these errors, individually and in the aggregate, and concluded that they are not material to any prior annual or interim period. However, to facilitate comparisons among periods we have revised our previously issued audited consolidated financial information for the fiscal years ended December 31, 2014, 2015 and 2016 and unaudited condensed consolidated financial information for the interim periods of 2016 and the three months ended March 31, 2017. We also corrected the timing of immaterial previously recorded out-of-period adjustments and reflected them in the revised prior period financial statements, where applicable. Prior periods not presented herein will be revised, as applicable, in future filings. See Note 2 for more information.

Brazil Long-Lived Asset Impairment –In the second quarter of 2017, due to continued capital spending declines in the Brazilian oil and gas market and economic and political circumstances, including the indictment of the former president, the decision was made to scale back certain of our operations in Brazil. As a result, we tested our related long-lived assets, which primarily consist of property, plant and equipment, for recoverability and recorded a $26.0 million impairment charge to selling, general and administrative expense ("SG&A") within our Engineered Product Division ("EPD") segment.

Venezuela – Our operations in Venezuela primarily consist of a service center that performs service and repair activities. Our Venezuelan subsidiary's sales for the three and ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 represented less than 0.5% of consolidated sales and its assets at ~~September~~June 30, ~~2016~~2017 represented less than 0.5% of total consolidated assets. Assets primarily consisted of United States ("U.S.") dollar-denominated monetary assets and bolivar-denominated non-monetary assets at ~~September~~June 30, ~~2016.~~2017. In addition, certain of our operations in other countries sell equipment and parts that are typically denominated in U.S. dollars directly to Venezuelan customers.

~~We continue to experience delays in collecting payment on our accounts receivable from~~ In the ~~national oil company in Venezuela, our primary Venezuelan customer. Our total outstanding gross accounts receivable with this customer was approximately 7%~~third quarter of ~~our gross accounts receivable at both September 30,~~ 2016 and December 31, 2015, respectively, of which 100% and 64% has been classified as long-term within other assets, net on our condensed consolidated balance sheet at September 30, 2016 and December 30, 2015, respectively. These accounts receivable are primarily U.S. dollar-denominated and not disputed. However, while we have not historically had write-offs relating to this customer, the accounts receivable continue to be significantly in arrears. The increased deterioration of the social, political, economic and legal climate in 2016 has given rise to significant uncertainties about Venezuela's economic and political stability, and while we continue to conduct business on a prepayment basis with the Venezuelan customer, the volume of activity has diminished significantly throughout 2016 from prior year levels. In September, the Venezuelan customer offered current bondholders the ability to swap their current bonds for new bonds with a delayed maturity, price premium and higher coupon rate due to their current inability to service their debt obligations. As a result of the bond swap offer, S&P Global Ratings downgraded the customer's bonds to CC which potentially indicates that default is imminent with little prospect for recovery. Although we do not currently hold any related bonds, we interpret this action to be indicative of the customer's increasing inability to make future payments on our accounts receivable. Accordingly, due to these actions and the diminished activity of business and payments in 2016, we have estimated that as of September 30, 2016 our ability to fully collect the accounts receivable from our primary Venezuelan customer has become less than probable and we recorded a charge of ~~$63.2~~$73.5 million to ~~selling, general and administrative expense ("~~SG~~&A")~~&A to fully reserve for those potentially uncollectible accounts receivable (classified as other assets, net on the condensed consolidated balance sheet) and a charge to cost of sales ("COS") of $1.9 million to reserve for related net inventory exposures. We continue to pursue payments ~~and on-going business with~~from our Venezuelan customer.

At September 30, 2016 the DICOM exchange rate (formerly SIMADI) was 658.8 bolivars to the U.S. dollar, compared with the official exchange rate of 10.0 bolivars to the U.S. dollar. As of March 31, 2015, we determined, based on our specific facts and circumstances, that the SIMADI exchange rate was the most appropriate for the remeasurement of our Venezuelan subsidiary's bolivar-denominated net monetary assets in U.S. dollars. As a result of the remeasurement, in the first quarter of 2015 we recognized a loss of $20.6 million of which $18.5 million was reported in other income (expense), net and $2.1 million in cost of goods sold in our condensed consolidated statement of income and resulted in no tax benefit. As of September 30, 2016, we believe the DICOM exchange rate continues to be the most appropriate rate to remeasure the U.S. dollar value of the assets, liabilities and results of operations of our Venezuelan subsidiary.

Valuation of Goodwill, Indefinite-Lived Intangible Assets and Other Long-Lived Assets– As discussed in Note 1 to our consolidated financial statements included in our ~~2015~~2016 Annual Report, the value of our goodwill and indefinite-lived intangible

assets is tested for impairment as of December 31 each year or whenever events or circumstances indicate such assets may be impaired.

~~Table of Contents~~

We did not record an impairment of goodwill in 2016, 2015 ~~2014~~ or ~~2013;~~2014; however at December 31, 2016 the estimated fair value of our Engineered Product Operations ("EPO") and Industrial Product Division ("IPD") reporting units reduced significantly ~~in 2015~~ due to broad-based capital spending declines and heightened pricing pressure experienced in the oil and gas markets which are anticipated to continue in the near to mid-term. EPO is a component of our Engineered Product Division ("EPD") reporting segment and is primarily focused on long lead time, custom and other highly-engineered pumps and pump systems. As of December 31, 2015 EPO had approximately $157 million of goodwill and its estimated fair value exceeded its carrying value by approximately 70%. In addition, at December 31, 2015 our Industrial Product Division ("IPD") reporting unit, which is primarily focused on pre-configured industrial pumps and pumps systems, had approximately $301 million of goodwill and its estimated fair value exceeded its carrying value by approximately 70%. Key assumptions used in determining the estimated fair value of EPO and IPD included the annual operating plan and forecasted operating results, successful execution of our current realignment programs and identified strategic initiatives, a constant cost of capital, a short-term stabilization and mid to long-term improvement of the macro-economic conditions of the oil and gas market, and a relatively stable world gross domestic product.

~~We have experienced a deterioration from plan in the operating results of EPO and IPD which we believe was both operationally and market driven.~~ Although we ~~have~~ concluded that there ~~are~~is no ~~current indicators of~~ impairment on the goodwill associated with our EPO and IPD reporting units as of ~~September 30,~~December 31, 2016, ~~conditions are uncertain and can quickly change in the markets in which~~ we ~~operate which could result in sustained or further deterioration and could impact the recoverability of certain of our long-lived assets, including goodwill. We~~ will continue to closely monitor their performance and related market conditions for future indicators of potential impairment and ~~conduct our annual test for impairment as of December 31, 2016.~~reassess accordingly.

Accounting Policies

Significant accounting policies, for which no significant changes have occurred in the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017, are detailed in Note 1 to our consolidated financial statements included in our ~~2015~~2016 Annual Report.

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Accounting Developments

Pronouncements Implemented

In ~~June 2014,~~July 2015, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. ~~2014-12 "Compensation-Stock Compensation~~2015-11, "Inventory (Topic ~~718)~~330): ~~Accounting for Share-Based Payments When~~Simplifying the ~~Terms~~Measurement of Inventory." The ASU updates represent changes to simplify the subsequent measurement of inventory. Previous to the issuance of this ASU, ASC 330 required that an ~~Award Provide That a Performance Target Could Be Achieved after~~entity measure inventory at the ~~Requisite Service Period." This~~lower of cost or market. The amendments of ASU ~~was issued~~2015-11 updates that “market” requirement to ~~address share-based payment awards with a performance target affecting vesting that could be achieved after~~“net realizable value,” which is defined by the ~~employee’s requisite service period.~~ASU as the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. Our adoption of ASU No. ~~2014-12~~2015-11 effective January 1, ~~2016~~2017 did not have an impact on our consolidated financial condition and results of operations.

In ~~November 2014,~~March 2016, the FASB issued ASU No. ~~2014-16, "Derivatives and Hedging~~2016-09, "Compensation - Stock Compensation (Topic ~~815): "Determining Whether the Host Contract in a Hybrid Financial Instrument Issued in the Form of a Share Is More Akin~~718), Improvements to ~~Debt or to Equity.~~Employee Share-Based Payment Accounting." This ASU was issued to clarify and reinforce the practice of evaluating all relevant terms and features when reviewing the nature of a host contract. Our adoption of ASU No. 2014-16 effective January 1, 2016 did not have an impact on our consolidated financial condition and results of operations.

In January 2015, the FASB issued ASU 2015-01, "Income Statement - Extraordinary and Unusual Items (Subtopic 225-20): Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items." In connection with the FASB's efforts to simplify accounting standards, the FASB released new guidance on simplifying Income Statement presentation by eliminating the concept of extraordinary items from accounting principles generally accepted in the U.S. (“U.S. GAAP”). Our adoption of ASU No. 2015-01 effective January 1, 2016 did not have an impact on our consolidated financial condition and results of operations.

In February 2015, the FASB issued ASU No. 2015-02, "Consolidation (Topic 810) - Amendments to the Consolidation Analysis,” which provides guidance on the analysis process companies must perform in order to determine whether a legal entity should be consolidated. Our adoption of ASU No. 2015-02 effective January 1, 2016 did not have an impact on our consolidated financial condition and results of operations.

~~In April 2015, the FASB issued ASU No. 2015-03, "Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs.”~~ The ASU ~~was issued in connection with~~affects the ~~FASB's efforts~~accounting for employee share-based payment transactions as it relates to ~~simplify~~ accounting ~~standards~~ for the presentation of debt issuance costs. The ASU requires companies to present debt issuance costs in the same manner that debt discounts are currently reported, as a direct deduction from the carrying value of that debt liability. The applicability of this requirement does not impact the recognitionincome taxes, accounting for forfeitures, and measurement guidance for debt issuance costs. In August 2015, the FASB issued ASU 2015-15, "Interest - Imputation of Interest (Subtopic 835-30): Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements—Amendments to SEC Paragraphs Pursuant to Staff Announcement at June 18, 2015 EITF Meeting (SEC Update)." In this ASU the SEC staff announced that it would "not object to an entity deferring and presenting debt issuance costs as an asset and subsequently amortizing the deferred debt issuance costs ratably over the term of

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~~the line-of-credit arrangement."~~statutory tax withholding requirements. We adopted the provisions of ASU ~~2015-03 and ASU 2015-15~~2016-09 as of January 1, ~~2016. Prior period amounts have been reclassified~~2017 using the modified retrospective approach. The adoption resulted in the recognition of approximately $1 million of tax expense in our provision of income taxes and an approximately $3 million one-time, cumulative adjustment to ~~conform~~beginning retained earnings related to the ~~current period presentation. As~~change in our accounting policy for estimated forfeitures and share cancellations. In addition, in our statements of ~~December 31, 2015, $10.3~~cash flows we reclassified cash outflows for employee taxes paid from operating to financing and elected to reclassify cash impacts due to excess tax deficiencies and benefits from financing to operating, which resulted in a net reclassification of approximately $10 million of ~~debt issuance costs were reclassified in our consolidated balance sheet~~cash flows used from ~~other assets, net~~operating to ~~long-term debt. Our adoption of ASU No. 2015-03 and ASU No. 2015-15 did not have an impact on our consolidated results of operations.~~

~~In May 2015,~~financing for the FASB issued ASU No. 2015-07, "Fair Value Measurement (Topic 820): Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent) (a consensus of the Emerging Issues Task Force)." The ASU removes the requirement to categorize all investments for which fair value is measured using the net asset value per share practical expedient within the fair value hierarchy. Our adoption of ASU No. 2015-07 effective January 1, 2016 did not have an impact on our consolidated financial condition and results of operations.

In November 2015, the FASB issued ASU No. 2015-17, Balance Sheet Classification of Deferred Taxes to simplify the presentation of deferred income taxes. The ASU requires that deferred tax liabilities and assets be classified as noncurrent on the balance sheet. We adopted ASU No. 2015-17 effective January 1, 2016 and as a result, prior period amounts have been reclassified to conform to the current period presentation. As of December 31, 2015, $156.0 million of deferred tax assets and $11.4 million of deferred tax liabilities were reclassified from current to noncurrent on our balance sheet. Our adoption of ASU No. 2015-17 effective January 1, 2016 did not have an impact on our consolidated results of operations.six months ended June 30, 2016.

Pronouncements Not Yet Implemented

In May 2014, the FASB issued ASU No. 2014-09, "Revenue from Contracts with Customers (Topic 606)" which supersedes most of the revenue recognition requirements in "Revenue Recognition (Topic 605)." The standard is principle-based and provides a five-step model to determine when and how revenue is recognized. The core principle is that a company should recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. ~~There~~Companies are permitted to adopt the new standard using one of two transition methods. Under the full retrospective method, the requirements of the new standard are applied to contracts for each prior reporting period presented and the cumulative effect of applying the standard is recognized in the earliest period presented. Under the modified retrospective method the requirements of the new standard are applied to contracts that are open as of January 1, 2018, the required date of adoption and the cumulative effect of applying the standard is recognized as an adjustment to beginning retained earnings in that same year. The standard also includes significantly expanded disclosure requirements ~~in this ASU. In August 2015,~~for revenue. Since 2014, the FASB has issued ASU No. 2015-14, "Revenue from Contracts with Customers (Topic 606): Deferral of Effective Date." As a result, public entities will apply the new standard for annual reporting periods beginning after December 15, 2017, including interim periods within those reporting periods. Early adoption as of the original public entity effective date is permitted. In March 2016, the FASB issued ASU No. 2016-08, "Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations". This update is simply a clarification of the implementation guidance on principle versus agent considerations. In April 2016, the FASB issued ASU No. 2016-10, “Identifying Performance Obligations and Licensing", which amends certain aspects of ASU No. 2014-09. In May 2016, the FASB issued ASU No. 2016-11, "Rescission of SEC Guidance Because of ASU No. 2014-09 and ASU No. 2014-16;" this ASU rescinds specific SEC guidance on accounting for shipping and handling fees and costs and consideration given by a vendorseveral updates to a customer. Additionally, in May 2016, the FASB issued ASU No. 2016-12, "Revenue from Contracts with Customers (Topic 606), Narrow-Scope Improvements and Practical Expedients." This ASU amends and clarifies the ASU No. 2014-09 guidance on assessing collectibility, presenting sales taxes, measuring non-cash consideration, and certain transition matters. Topic 606.

We are currently evaluating the impact of ASU No. 2014-09 and all related ASU's on our consolidated financial condition and results of operations. ~~Although~~We plan to adopt the new revenue guidance effective January 1, 2018 using the modified retrospective method for transition. In 2015, we ~~are continuing~~established a cross-functional implementation team consisting of representatives from across all of our reportable segments to ~~evaluate, upon initial qualitative~~begin the process of analyzing the impact of the standard on our contracts. The preliminary results of our evaluation, ~~we believe some anticipated key~~which is still in process, indicate that one of the changes upon adoption ~~will~~may be potentially increased “over-time” revenue ~~recognition and potential~~recognition. Historically, revenue recognized under the percentage of completion method is less than 5% of our consolidated sales. We also anticipate changes to the consolidated balance sheet related to accounts receivable, contract assets and contract liabilities.

In August 2014, the FASB issued ASU No. 2014-15, "Presentation of Financial Statements - Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern." This ASU requires management to evaluate whether there Additionally, we are conditions or events that raise substantial doubt about the ability of a company to continue as a going concern for one year from the date the financial statements are issued or within one year after the date that the financial statements are available to be issued when applicable. Further, the ASU provides management guidance regarding its responsibility to disclose the ability of a company to continue as a going concern in the ~~notes to~~process of evaluating and designing the financial statements. This ASU is effective for annual periods ending after December 15, 2016, and interim periods thereafter, with early adoption permitted. The adoption of ASU No. 2014-15 is not expected to have an impact on our consolidated financial condition and results of operations.

~~In July 2015, the FASB issued ASU No. 2015-11, "Inventory (Topic 330): Simplifying the Measurement of Inventory." The ASU updates represent~~necessary changes to ~~simplify~~our business processes, systems and controls to support recognition and disclosure under the ~~subsequent measurement of inventory. Previous~~new standard. We are continuing our evaluation to determine the issuance of this ASU, ASC 330 required that an entity measure inventory at the lower of cost or market. The amendments of ASU 2015-11 update narrows that “market” requirement to “net realizable value,” which is defined by the ASU as the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. This ASU is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2016. Application of this ASU is to be made prospectively, earlier application is permitted as of the beginning of an interim or annual reporting period. The adoption of ASU No. 2015-11 is not expected to have a material impact on our consolidated financial condition and results of operations.

In January 2016, the FASB issued ASU No. 2016-01, "Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities." The ASU requires entities to measure equity investments that do not result in consolidation and are not accounted for under the equity method at fair value with changes in fair value recognized in net

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income. The ASU also requires an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments. The requirement to disclose the method(s) and significant assumptions used to estimate the fair value for financial instruments measured at amortized cost on the balance sheet has been eliminated by this ASU. This ASU is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. We are currently evaluating the impact of ASU No. 2016-01 on our consolidated financial condition and results of operations.

In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842)”. The ASU requires that organizations that lease assets recognize assets and liabilities on the balance sheet for the rights and obligations created by those leases. The ASU will affect the presentation of lease related expenses on the income statement and statement of cash flows and will increase the required

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disclosures related to leases. This ASU is effective for annual periods beginning after December 15, 2018, including interim periods within those fiscal years with early adoption permitted. We are currently evaluating the impact of ASU No. 2016-02 on our consolidated financial condition and results of operations. Although we are continuing to evaluate, upon initial qualitative evaluation, we believe a key change upon adoption will be the balance sheet recognition of leased assets and liabilities. Based on our qualitative evaluation to date, we believe that any changes in income statement recognition will not be material.

In March 2016, the FASB issued ASU No. 2016-09, "Compensation - Stock Compensation (Topic 718), Improvements to Employee Share-Based Payment Accounting." The ASU affects the accounting for employee share-based payment transactions as it relates to accounting for income taxes, accounting for forfeitures, and statutory tax withholding requirements. This ASU is effective for annual periods beginning after December 15, 2016,including interim periods within those fiscal years with early adoption permitted. We are currently evaluating the impact of ASU No. 2016-09 on our consolidated financial condition and results of operations.

In June 2016, the FASB issued ASU No. 2016-13, "Financial ~~Instruments—Credit~~Instruments-Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments." The amendments in this ASU replace the current incurred loss impairment methodology with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. This ASU is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. We are currently evaluating the impact of ASU No. 2016-13 on our consolidated financial condition and results of operations.

In August 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments - A consensus of the FASB Emerging Issues Task Force.” The update was issued with the objective of reducing the existing diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows under Topic 230 and other topics. This ASU is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The adoption of ASU No. 2016-15 is not expected to have a material impact on our consolidated financial condition and results of operations.

In October 2016, the FASB issued ASU No. 2016-16, "Income Taxes (Topic 740) Intra-Entity Transfers of Assets Other Than Inventory." The ASU guidance requires the recognition of the income tax consequences of an intercompany asset transfer, other than transfers of inventory, when the transfer occurs. For intercompany transfers of inventory, the income tax effects will continue to be deferred until the inventory has been sold to a third party. The ASU is effective for reporting periods beginning after December 15, 2017, with early adoption permitted. We are currently evaluating the impact of ASU No. ~~2016-15~~2016-16 on our consolidated financial condition and results of operations.

In November 2016, the FASB issued ASU No. 2016-18, "Statement of Cash Flows (Topic 230): Restricted Cash." The amendments in this ASU require that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The ASU is effective for reporting periods beginning after December 15, 2017, including interim periods with those fiscal years. The adoption of ASU No. 2016-18 is not expected to have a material impact on our consolidated financial condition and results of operations.

In January 2017, the FASB issued ASU No. 2017-01, "Business Combinations (Topic 805): "Clarifying the Definition of a Business." The ASU clarifies the definition of a business and provides guidance on evaluating as to whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The definition clarification as outlined in this ASU affects many areas of accounting including acquisitions, disposals, goodwill, and consolidation. The amendments of the ASU are effective for annual periods beginning after December 15, 2017, including interim periods within those annual periods. The adoption of ASU No. 2017-01 is not expected to have a material impact on our consolidated financial condition and results of operations.

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

In February 2017, the FASB issued ASU No. 2017-05, "Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets." The FASB issued this ASU to clarify the scope of subtopic 610-20, which the FASB had failed to define in its issuance of ASU No. 2014-09, "Revenue from Contracts with Customers (Topic 606)." ASU No. 2017-05 will be effective concurrently with ASU No. 2014-09. Similarly to ASU 2014-09, we are continuing our evaluation of ASU No. 2017-05 to determine the impact on our consolidated financial condition and results of operations.

On March 10, 2017, the FASB issued ASU No. 2017-07, "Compensation-Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost." The amendments of this ASU provide additional guidance intended to improve the presentation of net benefit costs, pension costs and net periodic postretirement costs. The amendments in this ASU must be applied to annual reporting periods beginning after December 15, 2017, and to interim periods in 2018. Early adoption of the standard is permitted. We are currently evaluating the impact of ASU No. 2017- 07 on our consolidated financial condition and results of operations.

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On May 10, 2017, the FASB issued ASU No. 2017-09, "Compensation-Stock Compensation (Topic 718): Scope of Modification Accounting." The amendments in this ASU provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. The amendments of the ASU must be applied to annual reporting periods beginning after December 15, 2017, including interim periods within those annual periods. Early adoption of the standard is permitted. We are currently evaluating the impact of ASU No. 2017- 09 on our consolidated financial condition and results of operations.


2.	~~Acquisition~~Revision to Previously Reported Financial Information

~~SIHI Group B.V.~~In the second quarter of 2017, we identified accounting errors focused mainly at two of our non-U.S. sites in the inventory, accounts receivable, cost of sales and selling, general and administrative balances for prior periods through the first quarter of 2017. We have assessed these errors, individually and in the aggregate, and concluded that they are not material to any prior annual or interim period. However, to facilitate comparisons among periods we have revised our previously issued audited consolidated financial information for the fiscal years ended December 31, 2014, 2015 and 2016 and unaudited condensed consolidated financial information for the interim periods of 2016 and the three months ended March 31, 2017. We also corrected the timing of immaterial previously recorded out-of-period adjustments and reflected them in the revised prior period financial statements, where applicable. Prior periods not presented herein will be revised, as applicable, in future filings.

~~Effective January 7, 2015, we acquired for inclusion in IPD, 100% of SIHI Group B.V. ("SIHI"), a global provider of engineered vacuum and fluid pumps and related services, primarily servicing~~The following table presents the ~~chemical market, as well as the pharmaceutical, food & beverage and other process industries, in a stock purchase for €286.7 million ($341.5 million based on exchange rates in~~ effect at the time the acquisition closed and net of cash acquired) in cash. The acquisition was funded using approximately $110 million in available cash and approximately $255 million in initial borrowings from our Revolving Credit Facility, which was subsequently paid down with a portion of the ~~net proceeds from~~prior period revisions on the affected line items of our ~~2022 EUR Senior Notes. SIHI, based in The Netherlands, has operations primarily in Europe and, to a lesser extent, the Americas and Asia.~~

~~The purchase price was allocated to the assets acquired and liabilities assumed based on estimates~~condensed consolidated balance sheet as of ~~fair values at the date of acquisition and is summarized below:~~December 31, 2016:

(Amounts in millions)
Accounts receivable $ 59.3
Inventories 74.0
Prepaid expenses and other 17.7
Total current assets 151.0
Intangible assets

Trademarks 20.9
Existing customer relationships 45.3
Backlog 8.5
Engineering drawings and other 3.9
Total intangible assets 78.6
Property, plant and equipment 94.5
Long-term deferred tax asset 11.7
Investments in affiliates 7.3
Total assets 343.1
Current liabilities (88.0 )
Noncurrent liabilities (114.7 )
Net assets 140.4
Goodwill 201.1
Purchase price, net of cash acquired of $23.4 million $ 341.5



	December 31, 2016
(Amounts in thousands)	As Reported			Adjustments			As Revised
Accounts receivable, net (1)	894,749			(12,111		)	882,638
Inventories, net (2)	919,251			(21,561		)	897,690
Total current assets	2,331,361			(33,672		)	2,297,689
Property, plant and equipment, net	723,628			1,177			724,805
Deferred taxes (3)	87,178			(3,456		)	83,722
Other assets, net	181,014			2,112			183,126
Total assets	$	4,742,762		$	(33,839	)	$	4,708,923
Accrued liabilities	680,689			297			680,986
Total current liabilities	1,178,141			297			1,178,438
Retirement obligations and other liabilities	410,168			(2,329		)	407,839
Retained earnings (4)	3,632,163			(33,767		)	3,598,396
Accumulated other comprehensive loss	(626,748		)	1,960			(624,788		)
Total Flowserve Corporation shareholders’ equity	1,648,234			(31,807		)	1,616,427
Total equity	1,669,195			(31,807		)	1,637,388
Total liabilities and equity	$	4,742,762		$	(33,839	)	$	4,708,923

(1) The ~~excess of the acquisition date fair value of the total purchase price over the estimated fair value of the~~adjustments to accounts receivable, net assets was recorded as goodwill. Goodwill of $201.1 million represents the value expected to be obtained from strengthening Flowserve’s portfolio of products and services through the addition of SIHI's engineered vacuum and fluid pumps, as well as the associated aftermarket services and parts. The goodwillare primarily related to ~~this acquisition is~~receivables at one non-U.S. manufacturing site of $(9.5) million from our primary Venezuelan customer. These receivables should have been classified as long-term receivables and included in the charge that we recorded in the third quarter of 2016 to fully reserve all the potentially uncollectible receivables. This adjustment related to our EPD segment.

(2) The inventory adjustments primarily include corrections of errors at one non-U.S. manufacturing site related to inventory manufacturing cost variances of $(5.9) million, excess and obsolete reserve of $(2.5) million, inappropriate costs capitalized to projects in process of $(8.3) million and the write-off of non-recoverable work in process of $(3.3) million. The inventory manufacturing cost variances are capitalized to reflect inventory balances at actual cost, however, the non-U.S. site inappropriately overstated the costs subject to capitalization, primarily during 2016. The excess and obsolete reserve did not consider all inventory items resulting in an understatement of the reserve. The inappropriate costs were attributable to multiple projects over multiple periods for which no costs had been incurred or for which costs were incurred for warranty items that should have been expensed. The non-recoverable work in process related to projects which had previously shipped but the related costs were not appropriately removed from inventory. These adjustments were attributable to our IPD segment other than $(3.6) million of the inappropriate capitalized cost and ~~is not expected~~$(2.8) million of write-off of non-recoverable work in progress that were attributable to our EPD segment.

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(3) The deferred tax asset adjustments primarily related to deferred tax assets of $(6.4) million that previously were determined to be ~~deductible~~more likely than not realizable, partially offset by the tax effect of other revision adjustments. However, as a result of the adjustments described above, it was determined the deferred tax assets would not be realized.

(4) The adjustment to retained earnings represents the cumulative effect of the errors that were corrected in current and prior periods.

The following table presents the effect of the prior period revisions on the affected line items of our condensed consolidated statements of income for the three and six months ended June 30, 2016:



(Amounts in thousands, except per share data)	Three Months Ended June 30, 2016
	As Reported			Adjustments			As Revised
Sales	$	1,026,232		$	1,161		$	1,027,393
Cost of sales (1)	(701,508		)	(5,220		)	(706,728		)
Gross profit	324,724			(4,059		)	320,665
Selling, general and administrative expense	(228,529		)	(175		)	(228,704		)
Operating income	98,004			(4,234		)	93,770
Earnings before income taxes	88,110			(4,234		)	83,876
Provision for income taxes (2)	(25,122		)	(4,390		)	(29,512		)
Net earnings, including noncontrolling interests	62,988			(8,624		)	54,364
Net earnings attributable to Flowserve Corporation	$	62,997		$	(8,624	)	$	54,373
Net earnings per share attributable to Flowserve Corporation common shareholders:
Basic	$	0.48		$	(0.06	)	$	0.42
Diluted	0.48			(0.06		)	0.42

(1) The cost of sales adjustments primarily include amounts related to the matters described in footnote (2) to the balance sheet table above.

(2) The provision for income taxes adjustments primarily related to recording a valuation allowance on deferred tax ~~purposes.~~assets, see footnote (3) to the balance sheet table above.



(Amounts in thousands, except per share data)	Six Months Ended June 30, 2016
	As Reported			Adjustments			As Revised
Sales	$	1,973,480		$	134		$	1,973,614
Cost of sales (1)	(1,340,755		)	(7,040		)	(1,347,795		)
Gross profit	632,725			(6,906		)	625,819
Selling, general and administrative expense	(465,439		)	(813		)	(466,252		)
Operating income	172,414			(7,719		)	164,695
Other income (expense), net	193			(1,020		)	(827		)
Earnings before income taxes	144,083			(8,739		)	135,344
Provision for income taxes (2)	(42,812		)	(3,878		)	(46,690		)
Net earnings, including noncontrolling interests	101,271			(12,617		)	88,654
Net earnings attributable to Flowserve Corporation	$	100,856		$	(12,617	)	$	88,239
Net earnings per share attributable to Flowserve Corporation common shareholders:
Basic	$	0.77		$	(0.09	)	$	0.68
Diluted	0.77			(0.10		)	0.67

(1) The ~~trademarks are~~cost of sales adjustments primarily ~~indefinite-lived intangibles. As~~include amounts related to the matters described in footnote (2) to the balance sheet table above.

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(2) The provision for income taxes adjustments primarily relate to recording a valuation allowance on deferred tax assets, see footnote (3) to the balance sheet table above.

The effect of ~~acquisition existing customer relationships, engineering drawings~~the prior period revisions on the condensed consolidated statement of cash flows for the six months ended June 30, 2016 related to net earnings, including noncontrolling interests for the change in net earnings in the table above offset primarily by impacts to changes in assets and ~~backlog had expected weighted average useful lives~~liabilities. The revisions to individual line items within changes in assets and liabilities were below $3 million except for a decrease of ~~10 years, 10 years~~$7.7 million to the change in inventory, net and ~~less than one year, respectively. In total, amortizable intangible assets~~an increase to the change in net deferred taxes of $3.9 million. Additionally, we adopted ASU 2016-09 on January 1, 2017, see Note 1 for further discussion of the impact of that adoption on our statements of cash flows.

The impacts of the revisions have ~~a weighted average useful live of approximately 9 years.~~been reflected throughout the financial statements, including the applicable footnotes, as appropriate.


3.	Disposition

Effective May 2, 2017, we sold our Flow Control Division's ("FCD") Gestra AG ("Gestra") business to a leading provider of steam system solutions for $204.7 million (€179.2 million), which included $181.8 million (€159.2 million) of cash received at closing (net of divested cash). Additionally, we expect to receive $22.8 million (€20.0 million) of cash currently held in escrow before the end of 2017, which we have classified as an other current asset in prepaid expenses and other. The sale resulted in a pre-tax gain of $131.3 million ($81.3 million after-tax) recorded in gain on sale of business in the condensed consolidated statements of income. The sale included Gestra’s manufacturing facility in Germany as well as related operations in the U.S., the United Kingdom ("U.K."), Spain, Poland, Italy, Singapore and Portugal. In 2016, Gestra recorded revenues of approximately $101 million (€92 million) with earnings before interest and taxes of approximately $17 million (€15 million).


4.	Stock-Based Compensation Plans

We maintain the Flowserve Corporation Equity and Incentive Compensation Plan (the "2010 Plan"), which is a shareholder-approved plan authorizing the issuance of up to 8,700,000 shares of our common stock in the form of restricted shares, restricted share units and performance-based units (collectively referred to as "Restricted Shares"), incentive stock options, non-statutory stock options, stock appreciation rights and bonus stock. Of the 8,700,000 shares of common stock authorized under the 2010 Plan, ~~3,209,140~~2,609,675 were available for issuance as of ~~September~~June 30, ~~2016. The~~2017. In 2016 the long-term incentive program was amended to allow Restricted Shares granted after January 1, 2016 to employees who retire and have achieved at least 55 years of age and 10 years of service to continue to vest over the original vesting ~~period.~~period ("55/10 Provision"). Until the second quarter of 2017, no previous stock options were outstanding. On May 4, 2017, 114,943 stock options were granted with a grant date fair value of $2.0 million. No stock options ~~have been granted since 2006.~~vested during the six months ended June 30, 2017.

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.~~shares, except for awards related to the 55/10 Provision which are expensed in the period granted. We had unearned compensation of ~~$26.9~~$26.0 million and ~~$30.2~~$15.2 million at ~~September~~June 30, ~~2016~~2017 and December 31, ~~2015~~,2016, respectively, which

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is expected to be recognized over a weighted-average period of approximately 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, 2017 and 2016 ~~and 2015~~ was ~~$0.6~~$2.3 million and ~~$1.3~~$1.8 million, respectively. The total fair value of Restricted Shares vested during the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 and ~~2015~~2016 was ~~$38.7~~$28.0 million and ~~$40.7~~$38.1 million, respectively.

We recorded stock-based compensation expense of ~~$3.9~~$2.9 million ($~~6.0~~4.3 million pre-tax) and ~~$5.7~~$5.2 million ($~~8.6~~8.0 million pre-tax) for the three months ended ~~September~~June 30, ~~2016~~2017 and ~~2015,~~2016, respectively. We recorded stock-based compensation expense of ~~$19.6~~$10.4 million ($~~30.0~~15.6 million pre-tax) and ~~$17.2~~$15.7 million ($~~26.0~~24.0 million pre-tax) for the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 and ~~2015,~~2016, respectively.

The following table summarizes information regarding Restricted Shares:


	Nine Months Ended September 30, 2016				Six Months Ended June 30, 2017
	Shares		Weighted Average Grant-Date Fair Value		Shares		Weighted Average Grant-Date Fair Value
Number of unvested shares:
Outstanding - January 1, 2016	1,540,843		$	58.14
Outstanding - January 1, 2017					1,259,275		$	50.77
Granted	862,631		38.37		674,632		50.12
Vested	(707,422	)	54.76		(471,132	)	59.34
Canceled	(171,652	)	51.54		(166,050	)	48.14
Outstanding - September 30, 2016	1,524,400		$	49.26
Outstanding as of June 30, 2017					1,296,725		$	47.65

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Unvested Restricted Shares outstanding as of ~~September~~June 30, ~~2016,~~2017, includes approximately ~~850,000~~910,000 units with performance-based vesting provisions. Performance-based units are issuable in common stock and vest upon the achievement of pre-defined performance targets. Performance-based units granted prior to 2017 have performance targets ~~primarily~~ based on our average annual return on net assets over a three-year period as compared with the same measure for a defined peer group for the same period. Performance-based units granted in 2017 have performance targets based on our average return on invested capital and our total shareholder return ("TSR") over a three-year period as compared with the same measures for a defined peer group for the same period. Most units were granted in three annual grants since January 1, ~~2014~~2015 and have a vesting percentage between 0% and 200% depending on the achievement of the specific performance targets. ~~Compensation~~Except for shares granted under the 55/10 Provision, compensation expense is recognized ratably over a cliff-vesting period of 36 months, based on the fair ~~market~~ value of our common stock on the date of grant, as adjusted for ~~anticipated~~actual forfeitures. During the performance period, earned and unearned compensation expense is adjusted based on changes in the expected achievement of the performance ~~targets.~~targets for all performance-based units granted except for the TSR-based units. Vesting provisions range from 0 to approximately ~~1,623,000~~1,745,000 shares based on performance targets. As of ~~September~~June 30, ~~2016,~~2017, we estimate vesting of approximately ~~858,000~~679,000 shares based on expected achievement of performance targets.


4.5.	Derivative Instruments and Hedges

Our risk management and foreign currency derivatives and hedging policy specifies the conditions under which we may enter into derivative contracts. See Notes 1 and 6 to our consolidated financial statements included in our ~~2015~~2016 Annual Report and Note 67 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. ~~All designated foreign~~

During the second quarter of 2017, we discontinued our program to designate forward exchange ~~hedging instruments are highly effective~~contracts. The discontinuance of this program had no impact on our financial position as of ~~September~~June 30, ~~2016.~~

~~Foreign exchange contracts designated as hedging instruments had a notional value of $4.8 million and $21.0 million at September 30, 2016 and December 31, 2015, respectively.~~2017. Foreign exchange contracts with third parties not designated as hedging instruments had a notional value of ~~$422.4~~$234.9 million and ~~$376.3~~$393.2 million at ~~September~~June 30, ~~2016~~2017 and December 31, ~~2015,~~2016, respectively. At ~~September~~June 30, ~~2016,~~2017, the length of foreign exchange contracts currently in place ranged from ~~three day~~10 days to 2417 months.

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

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The fair ~~value~~values of foreign exchange contracts ~~not designated as hedging instruments~~ are summarized below:


	September 30,		December 31,		June 30,		December 31,
(Amounts in thousands)	2016		2015		2017		2016
Current derivative assets	$	1,812	$	2,364	$	2,496	$	682
Noncurrent derivative assets	67		—		83		—
Current derivative liabilities	1,313		3,196		1,623		6,878
Noncurrent derivative liabilities	77		441		—		355

~~The fair value of foreign exchange contracts designated as hedging instruments are summarized below:~~

September 30, December 31,
(Amounts in thousands) 2016 2015
Current derivative assets $ —
$ 26
Current derivative liabilities 29
1,448

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,				Three Months Ended June 30,					Six Months Ended June 30,
(Amounts in thousands)	2016			2015		2016		2015		2017			2016		2017			2016
(Loss) gain recognized in income	$	(774	)	$	4,391	$	5,587	$	31,372	$	(2,226	)	$	4,300	$	(329	)	$	6,361

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

In March 2015, we designated €255.7 million of our €500.0 million Euro senior notes discussed in Note 56 as a net investment hedge of our investments in certain of our international subsidiaries that use the Euro as their functional currency. We used the spot method to measure the effectiveness of our net investment hedge. Under this method, for each reporting period, the change in the carrying value of the Euro senior notes due to remeasurement of the effective portion is reported in accumulated other comprehensive loss on our condensed consolidated balance sheet and the remaining change in the carrying value of the ineffective portion, if any, is recognized in other ~~income (expense),~~expense, net in our condensed consolidated statement of income. We evaluate the effectiveness

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of our net investment hedge on a prospective basis at the beginning of each quarter. We did not record any ineffectiveness for the ~~nine~~six months ended ~~September~~June 30, ~~2016.~~2017.


5.6.	Debt

Debt, including capital lease obligations, consisted of:

September 30,
December 31,
(Amounts in thousands, except percentages) 2016 2015(1)
1.25% EUR Senior Notes due March 17, 2022, net of unamortized discount and debt issuance costs of $6,431 and $7,034 $ 555,469
$ 535,966
4.00% USD Senior Notes due November 15, 2023, net of unamortized discount and debt issuance costs of $3,065 and $3,339 296,935
296,661
3.50% USD Senior Notes due September 15, 2022, net of unamortized discount and debt issuance costs of $4,000 and $4,445 496,000
495,555
Term Loan Facility, interest rate of 2.09% at September 30, 2016 and 1.86% at December 31, 2015, net of debt issuance costs of $845 and $1,181 239,155
283,819
Capital lease obligations and other borrowings 23,330
8,995
Debt and capital lease obligations 1,610,889
1,620,996
Less amounts due within one year 75,211
60,434
Total debt due after one year $ 1,535,678
$ 1,560,562

~~(1)Prior period information has been updated to conform to presentation requirements as prescribed by ASU No. 2015-03, "Interest - Imputation of Interest (Subtopic 835-30).~~



	June 30,		December 31,
(Amounts in thousands, except percentages)	2017		2016
1.25% EUR Senior Notes due March 17, 2022, net of unamortized discount and debt issuance costs of $5,669 and $5,748	$	565,481	$	519,902
4.00% USD Senior Notes due November 15, 2023, net of unamortized discount and debt issuance costs of $2,783 and $2,972	297,217		297,028
3.50% USD Senior Notes due September 15, 2022, net of unamortized discount and debt issuance costs of $3,542 and $3,848	496,458		496,152
Term Loan Facility, interest rate of 2.55% at June 30, 2017 and 2.25% at December 31, 2016, net of debt issuance costs of $810 and $745	194,190		224,255
Capital lease obligations and other borrowings	37,481		33,286
Debt and capital lease obligations	1,590,827		1,570,623
Less amounts due within one year	89,839		85,365
Total debt due after one year	$	1,500,988	$	1,485,258

Senior Credit Facility

As discussed in Note 10 to our consolidated financial statements included in our ~~2015~~2016 Annual Report, our credit agreement provides for an initial ~~$400.0~~$400.0 million term loan (“Term Loan Facility”) and a $1.0 billion revolving credit facility (“Revolving Credit Facility” and, together with the Term Loan Facility, the “Senior Credit Facility”) with a maturity date of October 14, 2020. On June 30, 2017, we amended our existing Senior Credit Facility. The amendment, among other changes, includes the following: (i) a decrease of the Revolving Credit Facility commitment from $1.0 billion to $800 million, (ii) an increase of the leverage ratio from 3.50 to 4.00 times debt to total Consolidated EBITDA, through June 30, 2019, with a step-down to 3.75 for any fiscal quarter ending after July 1, 2019, (iii) the addition of a new pricing level on our senior unsecured long-term debt ratings for Ba2/BB, with an increase in interest rate margin for LIBOR loans to 2.00% and for base rate loans to 1.00% and (iv) a revision to the restrictions on the ability to incur debt by decreasing the maximum principal amount of priority debt allowed from 15% to 7.5% of the consolidated tangible assets and a decrease on the maximum amount of receivables that could be securitized from $200 million to $100 million. All other material terms and conditions of the Senior Credit Facilities agreement remained unchanged as discussed in Note 10 to our consolidated financial statements included in our 2016 Annual Report.

As of ~~September~~June 30, ~~2016~~2017 and December 31, ~~2015~~,2016, we had no amounts outstanding under the Revolving Credit Facility. We had outstanding letters of credit of ~~$98.3~~$89.7 million and ~~$105.2~~$102.6 million at ~~September~~June 30, ~~2016~~2017 and December 31, ~~2015,~~2016, respectively, which ~~together with financial covenant limitations based on the terms of our Senior Credit Facility, contributed to the reduction of~~reduced our borrowing capacity to ~~$608.8~~$710.3 million and ~~$894.8~~$553.5 million, respectively. Our compliance with applicable financial covenants under the Senior Credit Facility is tested quarterly, and we complied with all applicable covenants as of ~~September~~June 30, ~~2016.~~2017.

We may prepay loans under our Senior Credit Facility in whole or in part, without premium or penalty, at any time. A commitment fee, which is payable quarterly on the daily unused portions of the Senior Credit Facility, was 0.150% (per annum) during the period ended ~~September~~June 30, ~~2016.~~2017. During the ~~nine~~six months ended ~~September~~June 30, ~~2016,~~2017, we made scheduled repayments of ~~$45.0~~$30.0 million under our Term Loan Facility. We have scheduled repayments of $15.0 million due in each of the next four quarters on our Term Loan Facility.

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6.7.	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 4.5.

Our financial instruments are presented at fair value in our condensed consolidated balance sheets, with the exception of our long-term debt. The estimated fair value of our long-term debt, excluding the Senior Notes, approximates the carrying value and is classified as Level II under the fair value hierarchy. The carrying value of our debt is included in Note 5.6. The estimated fair value of our Senior Notes at ~~September~~June 30, ~~2016~~2017 was ~~$1,409.8~~$1,388.8 million compared to the carrying value of ~~$1,348.4~~$1,359.2 million. The estimated fair value of the Senior Notes is based on Level I quoted market rates. The carrying amounts of our other financial instruments (e.g., cash and cash equivalents, accounts receivable, net, accounts payable and short-term debt) approximated fair value due to their short-term nature at ~~September~~June 30, ~~2016~~2017 and December 31, ~~2015.~~2016.


7.8.	Inventories

Inventories, net consisted of the following:


	September 30,			December 31,			June 30,			December 31,
(Amounts in thousands)	2016			2015			2017			2016
Raw materials	$	383,623		$	390,998		$	372,745		$	348,012
Work in process	739,493			739,227			697,359			629,766
Finished goods	227,084			235,083			186,971			206,086
Less: Progress billings	(233,358		)	(285,582		)	(235,736		)	(216,783		)
Less: Excess and obsolete reserve	(77,898		)	(84,161		)	(79,523		)	(69,391		)
Inventories, net	$	1,038,944		$	995,565		$	941,816		$	897,690

In the three months ended ~~September~~June 30, ~~2016,~~2017, we recorded a ~~$14.1~~$16.9 million ~~adjustment which~~inventory charge for costs incurred related to a contract to supply oil and gas platform equipment to an end user in Latin America. This charge was primarily related to our ~~EPD~~IPD reporting segment and resulted in a decrease to write down inventory in Brazil of which approximately $8 million related to prior periods (approximately $4 million in 2015). The out of period amounts are not material to the consolidated financial results or our reporting segment results in the current quarter or prior periods.finished goods.

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8.9.	Earnings Per Share

The following is a reconciliation of net ~~(loss)~~ 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)	2016			2015		2017		2016
Net (loss) earnings of Flowserve Corporation	$	(20,928	)	$	93,623
Net earnings of Flowserve Corporation						$	41,878	$	54,373
Dividends on restricted shares not expected to vest	—			3		—		2
(Loss) earnings attributable to common and participating shareholders	$	(20,928	)	$	93,626
Earnings attributable to common and participating shareholders						$	41,878	$	54,375
Weighted average shares:
Common stock	130,299			132,036		130,646		130,180
Participating securities	—			514		86		274
Denominator for basic earnings per common share	130,299			132,550		130,732		130,454
Effect of potentially dilutive securities	—			610		609		456
Denominator for diluted earnings per common share	130,299			133,160		131,341		130,910
(Loss) earnings per common share:
Earnings per common share:
Basic	$	(0.16	)	$	0.71	$	0.32	$	0.42
Diluted	(0.16		)	0.70		0.32		0.42


	Nine Months Ended September 30,				Six Months Ended June 30,
(Amounts in thousands, except per share data)	2016		2015		2017		2016
Net earnings of Flowserve Corporation	$	79,928	$	196,297	$	60,929	$	88,239
Dividends on restricted shares not expected to vest	5		9		—		3
Earnings attributable to common and participating shareholders	$	79,933	$	196,306	$	60,929	$	88,242
Weighted average shares:
Common stock	130,087		133,389		130,520		129,981
Participating securities	298		513		127		318
Denominator for basic earnings per common share	130,385		133,902		130,647		130,299
Effect of potentially dilutive securities	522		747		661		563
Denominator for diluted earnings per common share	130,907		134,649		131,308		130,862
Earnings per common share:
Basic	$	0.61	$	1.47	$	0.47	$	0.68
Diluted	0.61		1.46		0.46		0.67

Diluted earnings per share above is based upon the weighted average number of shares as determined for basic earnings per share plus shares potentially issuable in conjunction with stock options and Restricted Shares. ~~As a result of the net loss for the three months ended September 30, 2016, we excluded 803,251 of unvested Restricted Shares from the calculation of diluted EPS due to their anti-dilutive effect.~~


9.10.	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. While the overall number of asbestos-related claims has generally declined in recent years, there can be no assurance that this trend will continue, or that the average cost per claim will not further increase. Asbestos-containing materials incorporated into any such products were encapsulated and used as internal components of process equipment, and we do not believe that any significant emission of asbestos fibers occurred during the use of this equipment.

Our practice is to vigorously contest and resolve these claims, and we have been successful in resolving a majority of claims with little or no payment. Historically, a high percentage of resolved claims have been covered by applicable insurance or indemnities from other companies, and we believe that a substantial majority of existing claims should continue to be covered by

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insurance or indemnities. Accordingly, we have recorded a liability for our estimate of the most likely settlement of asserted claims and a related receivable from insurers or other companies for our estimated recovery, to the extent we believe that the amounts of recovery are probable and not otherwise in dispute. While unfavorable rulings, judgments or settlement terms regarding these claims could have a material adverse impact on our business, financial condition, results of operations and cash flows, 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. We are currently unable to estimate the impact, if any, of unasserted asbestos-related claims, although future claims would also be subject to then existing indemnities and insurance coverage.

United Nations Oil-for-Food Program

In mid-2006, the French authorities began an investigation of over 170 French companies, of which one of our French subsidiaries was included, concerning suspected inappropriate activities conducted in connection with the United Nations Oil for Food Program. As previously disclosed, the French investigation of our French subsidiary was formally opened in the first quarter of 2010, and our French subsidiary filed a formal response with the French court. In July 2012, the French court ruled against our procedural motions to challenge the constitutionality of the charges and quash the indictment. Hearings occurred on April 1-2, 2015, and the Company presented its defense and closing arguments. On June 18, 2015, the French court issued its ruling dismissing the case against the Company and the other defendants. However, on July 1, 2015, the French prosecutor lodged an appeal. We currently do not expect to incur additional case resolution costs of a material amount in this matter. However, if the French authorities ultimately take enforcement action against our French subsidiary regarding its investigation, we may be subject to monetary and non-monetary penalties, which we currently do not believe will have a material adverse financial impact on our company.

Other

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

As previously disclosed in our ~~2015~~2016 Annual Report, we terminated an employee of an overseas subsidiary after uncovering actions that violated our Code of Business Conduct and may have violated the Foreign Corrupt Practices Act. We completed our internal investigation into the matter, self-reported the potential violation to the United States Department of Justice (the “DOJ”) and the SEC, and continue to cooperate with the DOJ and SEC. We previously received a subpoena from the SEC requesting additional information and documentation related to the matter and have completed our response to the subpoena. We currently believe that this matter will not have a material adverse financial impact on the Company, but there can be no assurance that the Company will not be subjected to monetary penalties and additional costs.

We are also a defendant in a number of other lawsuits, including product liability claims, that are insured, subject to the applicable deductibles, arising in the ordinary course of business, and we are also involved in other uninsured routine litigation incidental to our business. We currently believe none of such litigation, either individually or in the aggregate, is material to our business, operations or overall financial condition. However, litigation is inherently unpredictable, and resolutions or dispositions of claims or lawsuits by settlement or otherwise could have an adverse impact on our financial position, results of operations or cash flows for the reporting period in which any such resolution or disposition occurs.

Although none of the aforementioned potential liabilities can be quantified with absolute certainty except as otherwise indicated above, we have established 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.

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~~10.~~11.	Retirement and Postretirement Benefits

Components of the net periodic cost for retirement and postretirement benefits for the three months ended ~~September~~June 30, ~~2016~~2017 and ~~2015~~2016 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)	2016			2015			2016			2015			2016			2015			2017			2016			2017			2016			2017			2016
Service cost	$	5.6		$	6.0		$	1.8		$	2.1		$	—		$	—		$	4.9		$	5.4		$	1.7		$	1.7		$	—		$	—
Interest cost	4.8			4.3			2.9			3.1			0.3			0.3			4.1			4.7			2.2			3.0			0.2			0.3
Expected return on plan assets	(6.0		)	(6.0		)	(2.7		)	(3.0		)	—			—			(6.0		)	(5.9		)	(2.1		)	(2.6		)	—			—
Amortization of prior service cost	0.2			0.1			—			—			—			—			0.1			0.1			—			—			0.1			0.1
Amortization of unrecognized net loss (gain)	1.2			2.3			1.3			1.3			(0.1		)	(0.1		)	1.5			1.3			0.8			1.1			(0.2		)	(0.1		)
Net periodic cost recognized	$	5.8		$	6.7		$	3.3		$	3.5		$	0.2		$	0.2		$	4.6		$	5.6		$	2.6		$	3.2		$	0.1		$	0.3

Components of the net periodic cost for retirement and postretirement benefits for the ~~nine~~six months months ended ~~September~~June 30, ~~2016~~2017 and ~~2015~~2016 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)	2016			2015			2016			2015			2016			2015			2017			2016			2017			2016			2017			2016
Service cost	$	16.9		$	18.1		$	5.3		$	6.3		$	—		$	—		$	11.1		$	11.3		$	3.4		$	3.5		$	—		$	—
Interest cost	14.3			12.8			8.8			9.3			0.9			0.9			8.4			9.5			4.4			5.9			0.4			0.6
Expected return on plan assets	(18.0		)	(18.1		)	(8.0		)	(9.0		)	—			—			(12.2		)	(12.0		)	(4.2		)	(5.3		)	—			—
Amortization of prior service cost	0.4			0.3			—			—			0.1			0.1			0.1			0.2			—			—			0.1			0.1
Amortization of unrecognized net loss (gain)	3.7			6.9			3.7			3.9			(0.3		)	(0.4		)	3.0			2.5			1.7			2.4			(0.1		)	(0.2		)
Net periodic cost recognized	$	17.3		$	20.0		$	9.8		$	10.5		$	0.7		$	0.6		$	10.4		$	11.5		$	5.3		$	6.5		$	0.4		$	0.5


~~11.~~12.	Shareholders’ Equity

Dividends – On February 15, 2016, our Board of Directors authorized an increase in the payment of quarterly dividends on our common stock from $0.18 per share to $0.19 per share payable beginning on April 8, 2016. On February 16, 2015, our Board of Directors authorized an increase in the payment of quarterly dividends on our common stock from $0.16 per share to $0.18 per share payable beginning on April 10, 2015. Generally, our dividend date-of-record is in the last month of the quarter, and the dividend is paid the following month. Any subsequent dividends will be reviewed by our Board of Directors and declared in its discretion dependent on its assessment of our financial situation and business outlook at the applicable time.

Share Repurchase Program – 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 anytime without notice.

We had no repurchases of shares of our outstanding common stock for the three and six months ended ~~September~~June 30, 2016 compared to 2,378,700 shares repurchased for $110.0 million, during the three months ended September 30, 2015. We had no repurchases of shares of our outstanding common stock for the nine months ended September 30, 2016 compared to 4,833,146 shares repurchased for $249.7 million, during the nine months ended September 30, 2015.2017 and 2016. As of ~~September~~June 30, ~~2016~~2017 we had $160.7 million of remaining capacity under our current share repurchase program.


~~12.~~13.	Income Taxes

For the three months ended ~~September~~June 30, ~~2016, we incurred a pre-tax loss of $15.1 million and provided for income taxes of $5.0 million resulting in an effective tax rate of negative 33.0%. For the nine months ended September 30, 2016,~~2017, we earned ~~$129.0~~$103.1 million before taxes and provided for income taxes of ~~$47.8~~$60.9 million resulting in an effective tax rate of ~~37.1%~~59.1%. For the six months ended June 30, 2017, we earned $127.7 million before taxes and provided for income taxes of $66.2 million resulting in an effective tax rate of 51.8%. The effective tax rate varied from the U.S. federal statutory rate for the three and ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 primarily due to the net impact of foreign operations, ~~tax impacts from our Realignment Programs and~~ losses in certain foreign jurisdictions for which no tax benefit was ~~provided.~~

~~Table~~provided and taxes related to the sale of ~~Contents~~

the Gestra business.

For the three months ended ~~September~~June 30, ~~2015,~~2016, we earned ~~$146.6~~$83.9 million before taxes and provided for income taxes of ~~$52.1~~$29.5 million resulting in an effective tax rate of ~~35.5%~~35.2%. For the ~~nine~~six months ended ~~September~~June 30, ~~2015,~~2016, we earned ~~$312.3~~$135.3 million before taxes and provided for income taxes of ~~$111.5~~$46.7 million resulting in an effective tax rate of ~~35.7%~~34.5%. The effective tax rate varied from the U.S. federal statutory rate for the three and six months ended ~~September~~June 30, ~~2015~~2016 primarily due to the net impact of foreign operations and the establishment of a valuation allowance against our deferred tax assets in Brazil in the amount of $10.0 million. The effective tax rate varied from the U.S. federal statutory rate for the nine months ended September 30, 2015 primarily due to tax impacts of the realignment programs, the Venezuelan exchange rate remeasurement loss and the establishment of a valuation allowance of $10.0 million against our deferred tax assets in Brazil, partially offset by the net impact of foreign operations.

As of ~~September~~June 30, ~~2016,~~2017, the amount of unrecognized tax benefits increased by ~~$3.8~~$5.6 million from December 31, ~~2015.~~2016. With limited exception, we are no longer subject to U.S. federal income tax audits for years through ~~2014,~~2015, state and local income tax audits for years through ~~2009~~2011 or non-U.S. income tax audits for years through ~~2009.~~2010. We are currently under examination for various years in Austria, ~~France,~~ Germany, India, Italy, Singapore, ~~Spain,~~ the U.S. and Venezuela.

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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 ~~$10~~$8 million within the next 12 months.


~~13.~~14.	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, 2016
(Amounts in thousands) Engineered Product Division Industrial Product Division Flow Control Division Subtotal–Reportable Segments Eliminations and All Other Consolidated Total
Sales to external customers $ 448,749
$ 196,172
$ 298,413
$ 943,334
$ —
$ 943,334
Intersegment sales 7,098
7,126
937
15,161
(15,161 ) —
Segment operating (loss) income (25,160 ) (15,668 ) 52,840
12,012
(14,818 ) (2,806 )

Three Months Ended September 30, 2015
(Amounts in thousands) Engineered Product Division Industrial Product Division Flow Control Division Subtotal–Reportable Segments Eliminations and All Other Consolidated Total
Sales to external customers $ 502,208
$ 227,502
$ 366,766
$ 1,096,476
$ —
$ 1,096,476
Intersegment sales 12,298
14,137
1,168
27,603
(27,603 ) —
Segment operating income 78,342
24,985
77,063
180,390
(12,541 ) 167,849


Nine Months Ended September 30, 2016
Three Months Ended June 30, 2017															Three Months Ended June 30, 2017
(Amounts in thousands)	Engineered Product Division		Industrial Product Division			Flow Control Division		Subtotal–Reportable Segments		Eliminations and All Other			Consolidated Total		Engineered Product Division		Industrial Product Division			Flow Control Division		Subtotal–Reportable Segments		Eliminations and All Other			Consolidated Total
Sales to external customers	$	1,415,695	$	591,008		$	910,111	$	2,916,814	$	—		$	2,916,814	$	419,439	$	182,953		$	274,671	$	877,063	$	—		$	877,063
Intersegment sales	25,763		24,772			5,410		55,945		(55,945		)	—		8,272		8,873			732		17,877		(17,877		)	—
Segment operating income (loss)	98,477		(6,185		)	140,140		232,432		(62,825		)	169,607		9,538		(28,690		)	164,153		145,001		(18,858		)	126,143

Nine Months Ended September 30, 2015
Three Months Ended June 30, 2016															Three Months Ended June 30, 2016
(Amounts in thousands)	Engineered Product Division		Industrial Product Division			Flow Control Division		Subtotal–Reportable Segments		Eliminations and All Other			Consolidated Total		Engineered Product Division		Industrial Product Division			Flow Control Division		Subtotal–Reportable Segments		Eliminations and All Other			Consolidated Total
Sales to external customers	$	1,533,955	$	690,873		$	1,048,514	$	3,273,342	$	—		$	3,273,342	$	503,881	$	208,132		$	315,380	$	1,027,393	$	—		$	1,027,393
Intersegment sales	35,479		34,948			2,945		73,372		(73,372		)	—		9,052		6,899			1,805		17,756		(17,756		)	—
Segment operating income(1)	233,264		18,716			186,266		438,246		(49,443		)	388,803		63,574		2,933			48,450		114,957		(21,187		)	93,770

(1) Prior period amounts have been revised to reflect the correction of certain immaterial errors. See Note 2 for more information. Of the $(4.2) million adjustment to consolidated operating income, $(1.7) million related to the EPD segment and $(2.6) million related to the IPD segment.



Six Months Ended June 30, 2017
(Amounts in thousands)	Engineered Product Division		Industrial Product Division			Flow Control Division		Subtotal–Reportable Segments		Eliminations and All Other			Consolidated Total
Sales to external customers	$	836,509	$	352,955		$	553,917	$	1,743,381	$	—		$	1,743,381
Intersegment sales	15,864		17,252			1,923		35,039		(35,039		)	—
Segment operating income (loss)	55,120		(42,465		)	205,623		218,278		(42,327		)	175,951

Six Months Ended June 30, 2016
(Amounts in thousands)	Engineered Product Division		Industrial Product Division			Flow Control Division		Subtotal–Reportable Segments		Eliminations and All Other			Consolidated Total
Sales to external customers	$	967,080	$	394,836		$	611,698	$	1,973,614	$	—		$	1,973,614
Intersegment sales	18,665		17,646			4,473		40,784		(40,784		)	—
Segment operating income (1)	119,384		6,628			86,823		212,835		(48,140		)	164,695

(1) Prior period amounts have been revised to reflect the correction of certain immaterial errors. See Note 2 for more information. Of the $(7.7) million adjustment to consolidated operating income, $(4.2) million related to the EPD segment, $(2.9) million related to the IPD segment, $(0.5) million related to the FCD segment and $(0.2) million related to Eliminations and All Other.

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~~14. Accumulated Other Comprehensive Loss~~


15.	Accumulated Other Comprehensive Loss

The following table presents the changes in accumulated other comprehensive loss ("AOCL"), net of tax for the three months ended ~~September~~June 30, ~~2016~~2017 and ~~2015:~~2016:

2016 2015
(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 $ (408,287 ) $ (114,525 ) $ (2,255 ) $ (525,067 ) $ (331,301 ) $ (125,727 ) $ (6,929 ) $ (463,957 )
Other comprehensive (loss) income before reclassifications (15,735 ) 1,952
39
(13,744 ) (54,494 ) 1,245
(35 ) (53,284 )
Amounts reclassified from AOCL —
1,767
521
2,288
—
2,443
1,573
4,016
Net current-period other comprehensive (loss) income (15,735 ) 3,719
560
(11,456 ) (54,494 ) 3,688
1,538
(49,268 )
Balance - September 30 $ (424,022 ) $ (110,806 ) $ (1,695 ) $ (536,523 ) $ (385,795 ) $ (122,039 ) $ (5,391 ) $ (513,225 )



	2017												2016
(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	$	(449,823	)	$	(136,046	)	$	(1,135	)	$	(587,004	)	$	(379,116	)	$	(117,675	)	$	(2,815	)	$	(499,606	)
Other comprehensive income (loss) before reclassifications	33,765			(2,661		)	(19		)	31,085			(29,489		)	1,317			65			(28,107		)
Amounts reclassified from AOCL	552			1,519			—			2,071			—			1,833			495			2,328
Net current-period other comprehensive income (loss)	34,317			(1,142		)	(19		)	33,156			(29,489		)	3,150			560			(25,779		)
Balance - June 30	$	(415,506	)	$	(137,188	)	$	(1,154	)	$	(553,848	)	$	(408,605	)	$	(114,525	)	$	(2,255	)	$	(525,385	)

(1) Includes foreign currency translation adjustments attributable to noncontrolling interests of ~~$3.5~~$3.9 million ~~and $1.4 million at July 1, 2016 and 2015~~ and $3.5 million at April 1, 2017 and ~~$2.7~~2016, respectively, and $3.9 million ~~at September~~and $3.5 million for June 30, ~~2016~~2017 and ~~2015,~~2016, respectively. Includes net investment hedge ~~loss~~losses of ~~$2.2~~$12.5 million and ~~$0.7~~gains of $4.4 million, net of deferred taxes, for the three months ended ~~September~~June 30, ~~2016~~2017 and ~~2015,~~2016, respectively. Amounts in parentheses indicate debits.

The following table presents the reclassifications out of AOCL:


		Three Months Ended September 30,							Three Months Ended June 30,
(Amounts in thousands)	Affected line item in the statement of income	2016(1)			2015(1)			Affected line item in the statement of income	2017(1)			2016 (1)
Foreign currency translation items
Release of cumulative translation adjustments due to sale of business								Gain on sale of business	$	(552	)	$	—
								Tax benefit	—			—
								Net of tax	$	(552	)	$	—

Cash flow hedging activity
Foreign exchange contracts
	Sales	$	(717	)	$	(1,990	)	Sales	$	—		$	(660	)
	Tax benefit	196			417			Tax benefit	—			165
	Net of tax	$	(521	)	$	(1,573	)	Net of tax	$	—		$	(495	)

Pension and other postretirement effects
Amortization of actuarial losses(2)		$	(2,395	)	$	(3,465	)		$	(2,204	)	$	(2,476	)
Prior service costs(2)		(153		)	(177		)		(57		)	(154		)
	Tax benefit	781			1,199			Tax benefit	742			797
	Net of tax	$	(1,767	)	$	(2,443	)	Net of tax	$	(1,519	)	$	(1,833	)

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

(2) These accumulated other comprehensive loss components are included in the computation of net periodic pension cost. See Note 1011 for additional details.

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The following table presents the changes in AOCL, net of tax for the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 and ~~2015:~~

2016:


	2016												2015												2017												2016
(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)			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	$	(413,422	)	$	(120,461	)	$	(3,458	)	$	(537,341	)	$	(238,533	)	$	(135,398	)	$	(5,210	)	$	(379,141	)	$	(483,609	)	$	(136,530	)	$	(1,238	)	$	(621,377	)	$	(411,615	)	$	(120,461	)	$	(3,458	)	$	(535,534	)
Other comprehensive (loss) income before reclassifications	(10,600		)	4,330			633			(5,637		)	(147,262		)	6,031			(6,739		)	(147,970		)
Other comprehensive income (loss) before reclassifications																									67,551			(3,814		)	61			63,798			3,010			2,378			594			5,982
Amounts reclassified from AOCL	—			5,325			1,130			6,455			—			7,328			6,558			13,886			552			3,156			23			3,731			—			3,558			609			4,167
Net current-period other comprehensive (loss) income	(10,600		)	9,655			1,763			818			(147,262		)	13,359			(181		)	(134,084		)
Balance - September 30	$	(424,022	)	$	(110,806	)	$	(1,695	)	$	(536,523	)	$	(385,795	)	$	(122,039	)	$	(5,391	)	$	(513,225	)
Net current-period other comprehensive income (loss)																									68,103			(658		)	84			67,529			3,010			5,936			1,203			10,149
Balance - June 30																									$	(415,506	)	$	(137,188	)	$	(1,154	)	$	(553,848	)	$	(408,605	)	$	(114,525	)	$	(2,255	)	$	(525,385	)

(1) Includes foreign currency translation adjustments attributable to noncontrolling interests of ~~$2.7 million and $1.3 million at January 1, 2016 and 2015 and $3.5~~$3.4 million and $2.7 million at ~~September 30,~~January 1, 2017 and 2016 and ~~2015,~~$3.9 million and $3.5 million for June 30, 2017 and 2016, respectively. Includes net investment hedge losses of ~~$6.1~~$13.3 million and ~~$9.3~~$8.1 million⁽²⁾, net of deferred taxes, for the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 and ~~2015,~~2016, respectively. Amounts in parentheses indicate debits.

(2) Previously disclosed as a loss of $3.9 million in 2016. No incremental impact on our consolidated financial condition or result of operations.

The following table presents the reclassifications out of AOCL:


		Nine Months Ended September 30,							Six Months Ended June 30,
(Amounts in thousands)	Affected line item in the statement of income	2016(1)			2015(1)			Affected line item in the statement of income	2017(1)			2016 (1)
Foreign currency translation items
Release of cumulative translation adjustments due to sale of business(2)								Gain on sale of business	(552		)	—
								Tax benefit	—			—
								Net of tax	$	(552	)	$	—

Cash flow hedging activity
Foreign exchange contracts	Other expense, net	$	—		$	(3,327	)
	Sales	(1,531		)	(5,694		)	Sales	(30		)	(814		)
	Tax benefit	401			2,463			Tax benefit	7			205
	Net of tax	$	(1,130	)	$	(6,558	)	Net of tax	$	(23	)	$	(609	)

Pension and other postretirement effects
Amortization of actuarial losses(2)		$	(7,184	)	$	(10,396	)		$	(4,601	)	$	(4,789	)
Prior service costs(2)		(458		)	(530		)		(115		)	(305		)
	Tax benefit	2,317			3,598			Tax benefit	1,560			1,536
	Net of tax	$	(5,325	)	$	(7,328	)	Net of tax	$	(3,156	)	$	(3,558	)

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

(2) These accumulated other comprehensive loss components are included in the computation of net periodic pension cost. See Note 1011 for additional details.

At September 30, 2016, we expect to recognize a loss of $0.6 million, net of deferred taxes, into earnings in the next twelve months related to designated foreign exchange contracts based on their fair values at September 30, 2016.

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~~15. Realignment Programs~~


16.	Realignment Programs

In the first quarter of 2015, we initiated a realignment program ("R1 Realignment Program") to reduce and optimize certain non-strategic QRCs and manufacturing facilities ~~from the SIHI acquisition.~~. In the second quarter of 2015, we initiated a second realignment program ("R2 Realignment Program") to better align costs and improve long-term efficiency, including further manufacturing optimization through the consolidation of facilities, a reduction in our workforce, the transfer of activities from high-cost regions to lower-cost facilities and the divestiture of certain non-strategic assets.

The R1 Realignment Program and the R2 Realignment Program (collectively the "Realignment Programs") consist of both restructuring and non-restructuring charges. Restructuring charges represent costs associated with the relocation or reorganization of certain business activities and facility closures and include related severance costs. Non-restructuring charges are primarily employee severance associated with workforce reductions to reduce redundancies. Expenses are primarily reported in COS or SG&A, as applicable, in our condensed consolidated statements of income. We anticipate a total investment in these programs of approximately $400 million, including projects still under final evaluation. We anticipate that the majority of any remaining charges will be incurred ~~throughout 2016 and~~in 2017.

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


	Three Months Ended September 30, 2016															Three Months Ended June 30, 2017
(Amounts in thousands)	Engineered Product Division		Industrial Product Division			Flow Control Division			Subtotal–Reportable Segments		Eliminations and All Other			Consolidated Total		Engineered Product Division		Industrial Product Division		Flow Control Division			Subtotal–Reportable Segments			Eliminations and All Other		Consolidated Total
Restructuring Charges
COS	$	5,711	$	15,599		$	796		$	22,106	$	—		$	22,106	$	2,866	$	1,321	$	1,211		$	5,398		$	—	$	5,398
SG&A	393		3,928			20			4,341		(32		)	4,309		587		97		(778		)	(94		)	64		(30		)
Income tax expense	2,000		2,800			600			5,400		—			5,400
	$	8,104	$	22,327		$	1,416		$	31,847	$	(32	)	$	31,815	$	3,453	$	1,418	$	433		$	5,304		$	64	$	5,368
Non-Restructuring Charges
COS	$	2,707	$	445		$	(749	)	$	2,403	$	(6	)	$	2,397	$	4,071	$	2,377	$	2,268		$	8,716		$	—	$	8,716
SG&A	1,010		(344		)	623			1,289		1,385			2,674		6,710		6,768		2,752			16,230			1,391		17,621
	$	3,717	$	101		$	(126	)	$	3,692	$	1,379		$	5,071	$	10,781	$	9,145	$	5,020		$	24,946		$	1,391	$	26,337
Total Realignment Charges
COS	$	8,418	$	16,044		$	47		$	24,509	$	(6	)	$	24,503	$	6,937	$	3,698	$	3,479		$	14,114		$	—	$	14,114
SG&A	1,403		3,584			643			5,630		1,353			$	6,983	7,297		6,865		1,974			16,136			1,455		$	17,591
Income tax expense	2,000		2,800			600			5,400		—			$	5,400
Total	$	11,821	$	22,428		$	1,290		$	35,539	$	1,347		$	36,886	$	14,234	$	10,563	$	5,453		$	30,250		$	1,455	$	31,705



	Three Months Ended June 30, 2016
(Amounts in thousands)	Engineered Product Division		Industrial Product Division			Flow Control Division			Subtotal–Reportable Segments		Eliminations and All Other		Consolidated Total
Restructuring Charges
COS	$	3,335	$	2,294		$	2,180		$	7,809	$	—	$	7,809
SG&A	6,411		77			177			6,665		32		6,697
	$	9,746	$	2,371		$	2,357		$	14,474	$	32	$	14,506
Non-Restructuring Charges
COS	$	1,038	$	2,489		$	(141	)	$	3,386	$	—	$	3,386
SG&A	1,199		(208		)	126			1,117		1,129		2,246
	$	2,237	$	2,281		$	(15	)	$	4,503	$	1,129	$	5,632
Total Realignment Charges
COS	$	4,373	$	4,783		$	2,039		$	11,195	$	—	$	11,195
SG&A	7,610		(131		)	303			7,782		1,161		$	8,943
Total	$	11,983	$	4,652		$	2,342		$	18,977	$	1,161	$	20,138

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Three Months Ended September 30, 2015
(Amounts in thousands) Engineered Product Division Industrial Product Division Flow Control Division Subtotal–Reportable Segments Eliminations and All Other Consolidated Total
Restructuring Charges
     COS $ 437
$ 57
$ 1,082
$ 1,576
$ —
$ 1,576
     SG&A 909
(434 ) (1,070 ) (595 ) —
(595 )
$ 1,346
$ (377 ) $ 12
$ 981
$ —
$ 981
Non-Restructuring Charges

     COS $ (27 ) $ 91
$ 59
$ 123
$ —
$ 123
     SG&A 453
253
(128 ) 578
—
578
$ 426
$ 344
$ (69 ) $ 701
$ —
$ 701
Total Realignment Charges
     COS $ 410
$ 148
$ 1,141
$ 1,699
$ —
$ 1,699
     SG&A 1,362
(181 ) (1,198 ) (17 ) —
$ (17 )
Total $ 1,772
$ (33 ) $ (57 ) $ 1,682
$ —
$ 1,682


	Nine Months Ended September 30, 2016												Six Months Ended June 30, 2017
(Amounts in thousands)	Engineered Product Division		Industrial Product Division		Flow Control Division		Subtotal–Reportable Segments		Eliminations and All Other		Consolidated Total		Engineered Product Division			Industrial Product Division		Flow Control Division			Subtotal–Reportable Segments			Eliminations and All Other		Consolidated Total
Restructuring Charges
COS	$	10,566	$	17,709	$	3,083	$	31,358	$	—	$	31,358	$	192		$	6,093	$	1,179		$	7,464		$	—	$	7,464
SG&A	9,211		5,717		356		15,284		—		15,284		(195		)	186		(653		)	(662		)	75		(587		)
Income tax expense	2,000		2,800		600		5,400		—		5,400
	$	21,777	$	26,226	$	4,039	$	52,042	$	—	$	52,042	$	(3	)	$	6,279	$	526		$	6,802		$	75	$	6,877
Non-Restructuring Charges
COS	$	3,844	$	4,729	$	2,970	$	11,543	$	8	$	11,551	$	5,172		$	3,816	$	2,701		$	11,689		$	—	$	11,689
SG&A	1,989		56		2,212		4,257		2,644		6,901		7,424			10,374		3,300			21,098			2,555		23,653
	$	5,833	$	4,785	$	5,182	$	15,800	$	2,652	$	18,452	$	12,596		$	14,190	$	6,001		$	32,787		$	2,555	$	35,342
Total Realignment Charges
COS	$	14,410	$	22,438	$	6,053	$	42,901	$	8	$	42,909	$	5,364		$	9,909	$	3,880		$	19,153		$	—	$	19,153
SG&A	11,200		5,773		2,568		19,541		2,644		22,185		7,229			10,560		2,647			20,436			2,630		23,066
Income tax expense	2,000		2,800		600		5,400		—		5,400
Total	$	27,610	$	31,011	$	9,221	$	67,842	$	2,652	$	70,494	$	12,593		$	20,469	$	6,527		$	39,589		$	2,630	$	42,219



	Six Months Ended June 30, 2016
(Amounts in thousands)	Engineered Product Division		Industrial Product Division		Flow Control Division		Subtotal–Reportable Segments		Eliminations and All Other		Consolidated Total
Restructuring Charges
COS	$	4,855	$	2,110	$	2,287	$	9,252	$	—	$	9,252
SG&A	8,818		1,789		336		10,943		32		10,975
	$	13,673	$	3,899	$	2,623	$	20,195	$	32	$	20,227
Non-Restructuring Charges
COS	$	1,137	$	4,283	$	3,719	$	9,139	$	15	$	9,154
SG&A	978		400		1,590		2,968		1,259		4,227
	$	2,115	$	4,683	$	5,309	$	12,107	$	1,274	$	13,381
Total Realignment Charges
COS	$	5,992	$	6,393	$	6,006	$	18,391	$	15	$	18,406
SG&A	9,796		2,189		1,926		13,911		1,291		15,202
Total	$	15,788	$	8,582	$	7,932	$	32,302	$	1,306	$	33,608

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Nine Months Ended September 30, 2015
(Amounts in thousands) Engineered Product Division Industrial Product Division Flow Control Division Subtotal–Reportable Segments Eliminations and All Other Consolidated Total
Restructuring Charges
     COS $ 547
$ 18,696
$ 2,101
$ 21,344
$ —
$ 21,344
     SG&A 1,031
9,811
1,272
12,114
—
12,114
     Income tax expense —
5,500
—
5,500
—
5,500
$ 1,578
$ 34,007
$ 3,373
$ 38,958
$ —
$ 38,958
Non-Restructuring Charges

     COS $ 7,323
$ 1,019
$ 5,150
$ 13,492
$ —
$ 13,492
     SG&A 3,297
2,147
3,795
9,239
—
9,239
$ 10,620
$ 3,166
$ 8,945
$ 22,731
$ —
$ 22,731
Total Realignment Charges
     COS $ 7,870
$ 19,715
$ 7,251
$ 34,836
$ —
$ 34,836
     SG&A 4,328
11,958
5,067
21,353
—
21,353
     Income tax expense —
5,500
—
5,500
—
5,500
Total $ 12,198
$ 37,173
$ 12,318
$ 61,689
$ —
$ 61,689

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


	Inception to Date												Inception to Date
(Amounts in thousands)	Engineered Product Division		Industrial Product Division (1)		Flow Control Division		Subtotal–Reportable Segments		Eliminations and All Other		Consolidated Total		Engineered Product Division		Industrial Product Division (1)		Flow Control Division		Subtotal–Reportable Segments		Eliminations and All Other		Consolidated Total
Restructuring Charges
COS	$	20,529	$	38,155	$	12,384	$	71,068	$	—	$	71,068	$	34,903	$	46,740	$	15,168	$	96,811	$	—	$	96,811
SG&A	16,686		14,976		7,967		39,629		—		39,629		17,623		15,783		8,898		42,304		93		42,397
Income tax expense(2)	5,400		9,300		1,800		16,500		—		16,500		9,400		9,300		1,800		20,500		—		20,500
	$	42,615	$	62,431	$	22,151	$	127,197	$	—	$	127,197	$	61,926	$	71,823	$	25,866	$	159,615	$	93	$	159,708
Non-Restructuring Charges
COS	$	14,110	$	12,890	$	11,553	$	38,553	$	8	$	38,561	$	21,332	$	17,998	$	14,634	$	53,964	$	8	$	53,972
SG&A	8,520		6,204		5,625		20,349		2,644		22,993		17,417		18,584		8,138		44,139		6,987		51,126
	$	22,630	$	19,094	$	17,178	$	58,902	$	2,652	$	61,554	$	38,749	$	36,582	$	22,772	$	98,103	$	6,995	$	105,098
Total Realignment Charges
COS	$	34,639	$	51,045	$	23,937	$	109,621	$	8	$	109,629	$	56,235	$	64,738	$	29,802	$	150,775	$	8	$	150,783
SG&A	25,206		21,180		13,592		59,978		2,644		62,622		35,040		34,367		17,036		86,443		7,080		93,523
Income tax expense(2)	5,400		9,300		1,800		16,500		—		16,500		9,400		9,300		1,800		20,500		—		20,500
Total	$	65,245	$	81,525	$	39,329	$	186,099	$	2,652	$	188,751	$	100,675	$	108,405	$	48,638	$	257,718	$	7,088	$	264,806

____________________________

(1) Includes ~~$43.7~~$48.3 million of restructuring charges, primarily COS, related to the R1 Realignment Program.

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

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 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.

~~Table of Contents~~

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


	Three Months Ended September 30, 2016										Three Months Ended June 30, 2017
(Amounts in thousands)	Severance		Contract Termination		Asset Write-Downs		Other		Total		Severance			Contract Termination		Asset Write-Downs			Other		Total
COS	$	19,674	$	—	$	1,309	$	1,123	$	22,106	$	(462	)	$	88	$	198		$	5,574	$	5,398
SG&A	2,948		—		66		1,295		4,309		(498		)	—		(161		)	629		(30		)
Income tax expense	—		—		—		5,400		5,400
Total	$	22,622	$	—	$	1,375	$	7,818	$	31,815	$	(960	)	$	88	$	37		$	6,203	$	5,368


	Three Months Ended September 30, 2015													Three Months Ended June 30, 2016
(Amounts in thousands)	Severance			Contract Termination		Asset Write-Downs			Other		Total			Severance			Contract Termination		Asset Write-Downs		Other		Total
COS	$	154		$	158	$	1,150		$	114	$	1,576		$	3,311		$	—	$	1,615	$	2,883	$	7,809
SG&A	(44		)	—		(641		)	90		(595		)	(1,897		)	—		2,608		5,986		6,697
Total	$	110		$	158	$	509		$	204	$	981		$	1,414		$	—	$	4,223	$	8,869	$	14,506

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	Nine Months Ended September 30, 2016										Six Months Ended June 30, 2017
(Amounts in thousands)	Severance		Contract Termination		Asset Write-Downs		Other		Total		Severance			Contract Termination		Asset Write-Downs		Other		Total
COS	$	22,975	$	—	$	3,853	$	4,530	$	31,358	$	(4,220	)	$	226	$	5,151	$	6,307	$	7,464
SG&A	5,036		—		103		10,145		15,284		(1,817		)	—		191		1,039		(587		)
Income tax expense	—		—		—		5,400		5,400
Total	$	28,011	$	—	$	3,956	$	20,075	$	52,042	$	(6,037	)	$	226	$	5,342	$	7,346	$	6,877

Nine Months Ended September 30, 2015
(Amounts in thousands) Severance Contract Termination Asset Write-Downs Other Total
     COS $ 19,766
$ 158
$ 1,257
$ 163
$ 21,344
     SG&A 11,955
—
(7 ) 166
12,114
     Income tax expense —
—
—
5,500
5,500
Total $ 31,721
$ 158
$ 1,250
$ 5,829
$ 38,958



	Six Months Ended June 30, 2016
(Amounts in thousands)	Severance		Contract Termination		Asset Write-Downs		Other		Total
COS	$	3,372	$	—	$	2,533	$	3,347	$	9,252
SG&A	1,856		—		2,644		6,475		10,975
Total	$	5,228	$	—	$	5,177	$	9,822	$	20,227

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


	Inception to Date										Inception to Date
(Amounts in thousands)	Severance		Contract Termination		Asset Write-Downs		Other		Total (1)		Severance		Contract Termination		Asset Write-Downs		Other		Total (1)
COS(1)	$	56,947	$	609	$	7,341	$	6,171	$	71,068	$	67,725	$	834	$	14,068	$	14,184	$	96,811
SG&A	28,556		43		147		10,883		39,629		28,950		43		1,619		11,785		42,397
Income tax expense(2)	—		—		—		16,500		16,500		—		—		—		20,500		20,500
Total	$	85,503	$	652	$	7,488	$	33,554	$	127,197	$	96,675	$	877	$	15,687	$	46,469	$	159,708

(1) Includes ~~$43.7~~$48.3 million of restructuring charges, primarily COS, related to the R1 Realignment Program.

~~Table of Contents~~

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

The following represents the activity, primarily severance, related to the restructuring reserve for the Realignment ~~Programs:~~Programs for the six months ended June 30, 2017 and 2016:


										2017									2016
(Amounts in thousands)	R1 Realignment Program			R2 Realignment Program			Total			R1 Realignment Program			R2 Realignment Program			Total			R1 Realignment Program			R2 Realignment Program			Total
Balance at December 31, 2015	$	25,156		$	33,147		$	58,303
Charges	976			3,792			4,768
Balance at December 31										$	12,594		$	47,733		$	60,327		$	25,156		$	33,147		$	58,303
Charges, net of adjustments										(3,422		)	4,729			1,307			3,347			6,473			9,820
Cash expenditures	(1,294		)	(3,999		)	(5,293		)	(10,210		)	(15,012		)	(25,222		)	(4,599		)	(5,347		)	(9,946		)
Other non-cash adjustments, including currency	(877		)	(1,162		)	(2,039		)	2,986			(405		)	2,581			(6,247		)	(5,586		)	(11,833		)
Balance at March 31, 2016	$	23,961		$	31,778		$	55,739
Charges	2,371			2,681			5,052
Cash expenditures	(3,305		)	(1,348		)	(4,653		)
Other non-cash adjustments, including currency	(5,370		)	(4,424		)	(9,794		)
Balance at June 30, 2016	$	17,657		$	28,687		$	46,344
Charges	4,572			21,843			26,415
Cash expenditures	(532		)	(17,539		)	(18,071		)
Other non-cash adjustments, including currency	(1,448		)	4,722			3,274
Balance at September 30, 2016	$	20,249		$	37,713		$	57,962
Balance at June 30										$	1,948		$	37,045		$	38,993		$	17,657		$	28,687		$	46,344


17.	Subsequent Events

On July 5, 2017, we signed a sale and purchase agreement to sell our FCD Vogt product line and related assets and liabilities for approximately $28 million. We believe the sale will be completed in the third quarter of 2017 and currently estimate a gain on the sale of approximately $10 million.


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

Table of Contents

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 ~~2015~~2016 Annual Report.

EXECUTIVE OVERVIEW

Our Company

We believe that 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 ~~18,000~~17,000 employees in more than 50 countries.

Our business model is significantly influenced by the capital spending of global infrastructure industries for the placement of new products into service and aftermarket services for existing operations. The worldwide installed base of our products is an important source of aftermarket revenue, where products are expected to ensure the maximum operating time of many key industrial processes. Over the past several years, we have significantly invested in our aftermarket strategy to provide local support to drive customer investments in our offerings and use of our services to replace or repair installed products. The aftermarket portion of our business also helps provide business stability during various economic periods. The aftermarket business, which is served by our network of ~~185~~183 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 profitable growth strategy.

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

EPD for long lead-time, custom and other highly-engineered pumps and pump systems, mechanical seals, auxiliary systems and replacement parts and related services;

IPD for engineered and pre-configured industrial pumps and pump systems and related products and services; and

FCD for engineered and industrial valves, control valves, actuators and controls and related services.

~~Table of Contents~~

Our business segments share a focus on industrial flow control technology and have a high 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 ~~segment leadership reports to our Chief Operating Officer ("COO") and the~~ segments share leadership for operational support functions, such as 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, Edward, Anchor/Darling, SIHI, Halberg and Durametallic, which we believe to be one of the most comprehensive in the industry. Our products and services are sold either directly or through designated channels to more than 10,000 companies, including some of the world’s leading engineering, procurement and construction ("EPC") firms, original equipment manufacturers, distributors and end users.

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

During ~~2015 and thus far in 2016, we have been~~the first six months of 2017, our financial results continued to be challenged by ~~broad-based~~ capital spending declines, ~~originating~~primarily in the oil and gas industry, ~~heightened~~and pricing ~~pressures and negative currency impacts caused by a stronger U.S. dollar. This was further compounded by economic and geo-political conditions~~pressures. Although there has been stability in ~~Latin America, the Middle East and China. In addition,~~oil prices over recent quarters, we ~~experienced lower than expected activity levels in our aftermarket business due to deferred spending of our customers' repair and maintenance budgets. We expect~~anticipate that the current environment will persist throughout ~~2016.~~2017.

~~We have experienced a deterioration from plan in the operating results~~

Table of EPO and IPD which we believe was both operationally and market driven. Although we have concluded that there are no current indicators of impairment on the goodwill associated with EPO and IPD as of September 30, 2016, conditions are uncertain and can quickly change in the markets in which we operate which could result in sustained or further deterioration and could impact the recoverability of certain of our long-lived assets, including goodwill. We will continue to closely monitor their performance and related market conditions and conduct our annual test for impairment as of December 31, 2016.Contents

To better align costs and improve long-term efficiency, we initiated Realignment Programs to accelerate both short- and long-term strategic plans, including targeted manufacturing optimization through the consolidation of facilities, SG&A efficiency initiatives, transfer of activities from high-cost regions to lower-cost facilities and the divestiture of certain non-strategic assets. At the completion of the programs, we expect ~~a 15% to~~an approximately 20% reduction in our global workforce, relative to early 2015 workforce levels. With an expected near-term investment of approximately $400 million, including projects still under final evaluation, we expect the results of our ~~realignment programs~~Realignment Programs will deliver annualized run-rate savings of approximately $230 million. In addition, we are focusing on our ongoing low-cost sourcing, including greater use of third-party suppliers and increasing our lower-cost, emerging market capabilities.

RESULTS OF OPERATIONS — Three and ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 and ~~2015~~2016

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.

In the second quarter of 2017, we identified accounting errors focused mainly at two of our non-U.S. sites in the inventory, accounts receivable, cost of sales and selling, general and administrative balances for prior periods through the first quarter of 2017. We have assessed these errors, individually and in the aggregate, and concluded that they are not material to any prior annual or interim period. However, to facilitate comparisons among periods we have revised our previously issued audited consolidated financial information for the fiscal years ended December 31, 2014, 2015 and 2016 and unaudited condensed consolidated financial information for the interim periods of 2016 and the three months ended March 31, 2017. We also corrected the timing of immaterial previously recorded out-of-period adjustments and reflected them in the revised prior period financial statements, where applicable. Prior periods not presented herein will be revised, as applicable, in future filings. Refer to Note 2 to our condensed consolidated financial statements included in this Quarterly Report for more information.

As discussed in Note 3 to our condensed consolidated financial statements included in this Quarterly Report, effective May 2, 2017 we sold our FCD Gestra AG business to a leading provider of steam system solutions. In 2016, Gestra recorded revenues of approximately $101 million (€92 million) with earnings before interest and taxes of approximately $17 million (€15 million).

In 2015, we initiated ~~a realignment program~~Realignment Programs that consist of both restructuring and non-restructuring charges that are further discussed in Note 16 to reduce and optimize certain non-strategic QRCs and manufacturing facilities from the SIHI acquisition. In the second quarter of 2015, we initiated a realignment program to better align costs and improve long-term efficiency, including further manufacturing optimization through the consolidation of facilities, a reductionour condensed consolidated financial statements included in ~~our workforce, the transfer of activities from high-cost regions to lower-cost facilities~~this Quarterly Report. The Realignment Programs will continue throughout 2017 and the ~~divestiture of certain non-strategic assets.~~total charges for Realignment Programs by segment are detailed below for the three months ended June 30, 2017 and 2016:



	Three Months Ended June 30, 2017
(Amounts in thousands)	Engineered Product Division		Industrial Product Division		Flow Control Division		Subtotal–Reportable Segments		Eliminations and All Other		Consolidated Total
Total Realignment Program Charges
COS	$	6,937	$	3,698	$	3,479	$	14,114	$	—	$	14,114
SG&A	7,297		6,865		1,974		16,136		1,455		17,591
Total	$	14,234	$	10,563	$	5,453	$	30,250	$	1,455	$	31,705



	Three Months Ended June 30, 2016
(Amounts in thousands)	Engineered Product Division		Industrial Product Division			Flow Control Division		Subtotal–Reportable Segments		Eliminations and All Other		Consolidated Total
Total Realignment Program Charges
COS	$	4,373	$	4,783		$	2,039	$	11,195	$	—	$	11,195
SG&A	7,610		(131		)	303		7,782		1,161		8,943
Total	$	11,983	$	4,652		$	2,342	$	18,977	$	1,161	$	20,138

2325

Table of Contents

The total charges for Realignment Programs by segment are detailed below for the ~~three~~six months ended ~~September~~June 30, ~~2016~~2017 and ~~2015:~~

Three Months Ended September 30, 2016
(Amounts in thousands) Engineered Product Division Industrial Product Division Flow Control Division Subtotal–Reportable Segments Eliminations and All Other Consolidated Total
Total Realignment Program Charges
     COS $ 8,418
$ 16,044
$ 47
$ 24,509
$ (6 ) $ 24,503
     SG&A 1,403
3,584
643
5,630
1,353
6,983
     Income tax expense 2,000
2,800
600
5,400
—
5,400
Total $ 11,821
$ 22,428
$ 1,290
$ 35,539
$ 1,347
$ 36,886

2016:

Three Months Ended September 30, 2015
(Amounts in thousands) Engineered Product Division Industrial Product Division Flow Control Division Subtotal–Reportable Segments Eliminations and All Other Consolidated Total
Total Realignment Program Charges
COS $ 410
$ 148
$ 1,141
$ 1,699
$ —
$ 1,699
SG&A 1,362
(181 ) (1,198 ) (17 ) —
(17 )
Total $ 1,772
$ (33 ) $ (57 ) $ 1,682
$ —
$ 1,682

~~The total charges for Realignment Programs by segment are detailed below for the nine months ended September 30, 2016 and 2015:~~



	Six Months Ended June 30, 2017
(Amounts in thousands)	Engineered Product Division		Industrial Product Division		Flow Control Division		Subtotal–Reportable Segments		Eliminations and All Other		Consolidated Total
Total Realignment Program Charges
COS	$	5,364	$	9,909	$	3,880	$	19,153	$	—	$	19,153
SG&A	7,229		10,560		2,647		20,436		2,630		23,066
Total	$	12,593	$	20,469	$	6,527	$	39,589	$	2,630	$	42,219

Nine Months Ended September 30, 2016
(Amounts in thousands) Engineered Product Division Industrial Product Division Flow Control Division Subtotal–Reportable Segments Eliminations and All Other Consolidated Total
Total Realignment Program Charges
     COS $ 14,410
$ 22,438
$ 6,053
$ 42,901
$ 8
$ 42,909
     SG&A 11,200
5,773
2,568
19,541
2,644
22,185
     Income tax expense 2,000
2,800
600
5,400
—
5,400
Total $ 27,610
$ 31,011
$ 9,221
$ 67,842
$ 2,652
$ 70,494

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	Six Months Ended June 30, 2016
(Amounts in thousands)	Engineered Product Division		Industrial Product Division		Flow Control Division		Subtotal–Reportable Segments		Eliminations and All Other		Consolidated Total
Total Realignment Program Charges
COS	$	5,992	$	6,393	$	6,006	$	18,391	$	15	$	18,406
SG&A	9,796		2,189		1,926		13,911		1,291		15,202
Total	$	15,788	$	8,582	$	7,932	$	32,302	$	1,306	$	33,608

We anticipate a total investment in these Realignment Programs of approximately $400 million, including projects still under final evaluation. Since inception of the Realignment Programs in 2015, we have incurred charges of ~~$188.8~~$264.8 million and we expect to incur the majority of the remaining charges throughout ~~2016 and~~ 2017.

Based on actions under our Realignment Programs, we estimate that we have achieved cost savings of approximately ~~$80~~$93 million for the ~~nine~~six months ended ~~September~~June 30, ~~2016,~~2017, as compared with $43 million in the same period of ~~which approximately half was~~2016. Approximately $60 million of those savings are in COS with the remainder in SG&A. Upon completion of the Realignment Programs, we expect ~~annual~~ run-rate cost savings of approximately $230 million, ~~with a portion achieved in 2016 and a larger portion~~of which approximately $215 million would be achieved in 2017. Actual savings could vary from expected savings, which represent management’s best estimate to date.

Consolidated Results

Bookings, Sales and Backlog


	Three Months Ended September 30,				Three Months Ended June 30,
(Amounts in millions)	2016		2015		2017		2016
Bookings	$	959.5	$	1,056.7	$	971.3	$	975.4
Sales	943.3		1,096.5		877.1		1,027.4


	Nine Months Ended September 30,				Six Months Ended June 30,
(Amounts in millions)	2016		2015		2017		2016
Bookings	$	2,855.0	$	3,213.2	$	1,928.1	$	1,896.7
Sales	2,916.8		3,273.3		1,743.4		1,973.6

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, ~~2016~~2017 decreased by ~~$97.2~~$4.1 million, or ~~9.2%~~0.4%, as compared with the same period in ~~2015.~~2016. The decrease included negative currency effects of approximately ~~$21~~$11 million. The decrease was ~~primarily~~ driven by decreases in the chemical industry, power generation industry and general industries, partially offset by an increase in the oil and gas industry. The decrease was ~~primarily~~ due to customer ~~original equipment~~aftermarket bookings.

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Bookings for the ~~nine~~six months ended ~~September~~June 30, ~~2016 decreased~~2017 increased by ~~$358.2~~$31.4 million, or ~~11.1%~~1.7%, as compared with the same period in ~~2015.~~2016 and included an order for approximately $80 million to provide pumps and related equipment for the Hengli Integrated Refining Complex Project in China. The ~~decrease~~increase included negative currency effects of approximately ~~$88~~$24 million. The ~~decrease~~increase was primarily driven by the oil and gas industry, ~~and to a lesser extent,~~partially offset by decreases in the ~~chemical, general and~~ power generation and general industries. The ~~decrease~~increase was ~~primarily~~ due to customer original equipment bookings.

Sales for the three months ended ~~September~~June 30, ~~2016~~2017 decreased by ~~$153.2~~$150.3 million, or ~~14.0%~~14.6%, as compared with the same period in ~~2015.~~2016. The decrease included negative currency effects of approximately ~~$20~~$11 million. The decrease was ~~more heavily weighted toward~~primarily due to decreased original equipment sales with decreased sales into every region except for Asia Pacific. Net sales to international customers, including export sales from the U.S., were approximately 63% and 64% of total sales for the three months ended June 30, 2017 and 2016, respectively.

Sales for the six months ended June 30, 2017 decreased by $230.2 million, or 11.7%, as compared with the same period in 2016. The decrease included negative currency effects of approximately $18 million. The decrease was primarily due to decreased original equipment sales with decreased sales into every region. Net sales to international customers, including export sales from the U.S., were approximately ~~62% and 68%~~63% of total sales for the ~~three~~six months ended ~~September~~June 30, ~~2016~~2017 and ~~2015, respectively.~~

Sales for the nine months ended September 30, 2016 decreased by $356.5 million, or 10.9%, as compared with the same period in 2015. The decrease included negative currency effects of approximately $90 million. The decrease was more heavily weighted toward original equipment sales with decreased sales into every region except the Middle East. Net sales to international customers, including export sales from the U.S., were approximately 63% and 66% of total sales for the nine months ended September 30, 2016 and 2015, respectively.2016.

Backlog represents the aggregate value of booked but uncompleted customer orders and is influenced primarily by bookings, sales, cancellations and currency effects. Backlog of ~~$2,137.7~~$2,133.5 million at ~~September~~June 30, ~~2016~~2017 ~~decreased~~increased by ~~$35.5~~$235.8 million, or ~~1.6%~~12.4%, as compared with December 31, ~~2015.~~2016. Currency effects provided an increase of approximately ~~$44~~$81 million. Approximately ~~30.4%~~30% of the backlog at ~~September~~June 30, ~~2016~~2017 was related to aftermarket orders.

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Gross Profit and Gross Profit Margin


	Three Months Ended September 30,						Three Months Ended June 30,
(Amounts in millions, except percentages)	2016			2015			2017			2016
Gross profit	$	265.4		$	388.8		$	245.0		$	320.7
Gross profit margin	28.1		%	35.5		%	27.9		%	31.2		%


	Nine Months Ended September 30,						Six Months Ended June 30,
(Amounts in millions, except percentages)	2016			2015			2017			2016
Gross profit	$	898.2		$	1,089.6		$	513.4		$	625.8
Gross profit margin	30.8		%	33.3		%	29.4		%	31.7		%

Gross profit for the three months ended ~~September~~June 30, ~~2016~~2017 decreased by ~~$123.4~~$75.7 million, or ~~31.7%~~23.6%, as compared with the same period in ~~2015.~~2016. Gross profit margin for the three months ended ~~September~~June 30, ~~2016~~2017 of ~~28.1%~~27.9% decreased from ~~35.5%~~31.2% for the same period in 2015. The decrease in gross profit margin was primarily attributed to increased charges related to our Realignment Programs, the negative impact of decreased sales on our absorption of fixed manufacturing costs, unfavorable impacts of short-term operational inefficiencies related to the initial execution of certain realignment programs, lower margin projects that shipped from backlog and a $14.1 million adjustment to write down inventory in Brazil, partially offset by decreased accrued broad-based annual incentive compensation, realignment savings achieved and a mix shift to higher margin aftermarket sales. Aftermarket sales increased to approximately 44% of total sales, as compared with approximately 42% of total sales for the same period in 2015.

Gross profit for the nine months ended September 30, 2016 decreased by $191.4 million, or 17.6%, as compared with the same period in 2015. Gross profit margin for the nine months ended September 30, 2016 of 30.8% decreased from 33.3% for the same period in 2015.2016. The decrease in gross profit margin was primarily attributed to the negative impact of decreased sales on our absorption of fixed manufacturing costs, ~~unfavorable impacts of short-term operational inefficiencies related to the initial execution of certain realignment programs,~~ lower margin projects that shipped from backlog and a ~~$14.1~~$16.9 million ~~adjustment~~charge for costs incurred related to ~~write down inventory~~a contract to supply oil and gas platform equipment to an end user in ~~Brazil,~~Latin America, partially offset by a mix shift to higher margin aftermarket sales and increased ~~charges~~savings related to our Realignment Programs ~~and increased accrued broad-based annual incentive compensation, partially offset by realignment savings achieved and~~compared to the ~~negative impact of SIHI purchase price adjustments~~same period in ~~2015 that did not recur.~~2016. Aftermarket sales increased to approximately ~~44%~~49% of total sales, as compared with approximately ~~43%~~44% of total sales for the same period in ~~2015.~~2016.

Gross profit for the six months ended June 30, 2017 decreased by $112.4 million, or 18.0%, as compared with the same period in 2016. Gross profit margin for the six months ended June 30, 2017 of 29.4% decreased from 31.7% for the same period in 2016. The decrease in gross profit margin was primarily attributed to the negative impact of decreased sales on our absorption of fixed manufacturing costs, lower margin projects that shipped from backlog, and a $16.9 million charge for costs incurred related to a contract to supply oil and gas platform equipment to an end user in Latin America, partially offset by a mix shift to higher margin aftermarket sales and increased savings related to our Realignment Programs compared to the same period in 2016. Aftermarket sales increased to approximately 48% of total sales, as compared with approximately 45% of total sales for the same period in 2016.

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Selling, General and Administrative Expense


	Three Months Ended September 30,						Three Months Ended June 30,
(Amounts in millions, except percentages)	2016			2015			2017			2016
SG&A	$	271.6		$	223.5		$	252.8		$	228.7
SG&A as a percentage of sales	28.8		%	20.4		%	28.8		%	22.3		%


	Nine Months Ended September 30,						Six Months Ended June 30,
(Amounts in millions, except percentages)	2016			2015			2017			2016
SG&A	$	737.1		$	707.0		$	474.9		$	466.3
SG&A as a percentage of sales	25.3		%	21.6		%	27.2		%	23.6		%

SG&A for the three months ended ~~September~~June 30, ~~2016~~2017 increased by ~~$48.1~~$24.1 million, or ~~21.5%~~10.5%, as compared with the same period in ~~2015.~~2016. Currency effects yielded a decrease of approximately $3$2 million. SG&A as a percentage of sales for the three months ended ~~September~~June 30, ~~2016~~2017 increased ~~840~~650 basis points as compared with the same period in ~~2015~~2016 due ~~primarily~~ to ~~increased bad debt expense as~~ a ~~result of the $63.2~~$26.0 million ~~reserve established for~~impairment charge related to our ~~primary Venezuelan customer~~manufacturing facility in ~~the third quarter of 2016,~~Brazil, lower sales leverage and increased charges related to our Realignment Programs, partially offset by ~~decreased accrued broad-based annual incentive compensation and realignment~~increased savings ~~achieved.~~

related to our Realignment Programs compared to the same period in 2016.

SG&A for the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 increased by ~~$30.1~~$8.6 million, or ~~4.3%~~1.8%, as compared with the same period in ~~2015.~~2016. Currency effects yielded a decrease of approximately ~~$14~~$4 million. SG&A as a percentage of sales for the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 increased ~~370~~360 basis points as compared with the same period in ~~2015~~2016 due ~~primarily~~ to ~~increased bad~~

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~~debt expense as~~ a ~~result of the $63.2~~$26.0 million ~~reserve established for~~impairment charge related to our ~~primary Venezuelan customer~~manufacturing facility in ~~the third quarter of 2016 ,~~Brazil, lower sales leverage and increased ~~accrued broad-based annual incentive compensation, partially offset by decreased~~ charges related to our Realignment Programs, ~~realignment~~partially offset by increased savings ~~achieved and lower SIHI integration costs.~~related to our Realignment Programs compared to the same period in 2016.

Net Earnings from Affiliates


	Three Months Ended September 30,				Three Months Ended June 30,
(Amounts in millions)	2016		2015		2017		2016
Net earnings from affiliates	$	3.4	$	2.6	$	2.7	$	1.8


	Nine Months Ended September 30,				Six Months Ended June 30,
(Amounts in millions)	2016		2015		2017		2016
Net earnings from affiliates	$	8.5	$	6.3	$	6.1	$	5.1

Net earnings from affiliates for the three months ended ~~September~~June 30, ~~2016~~2017 increased ~~$0.8~~$0.9 million, or ~~30.8%~~50.0%, as compared with the same period in ~~2015.~~2016. The increase was primarily a result of the non-recurrence of 2016 losses related to our former EPD joint venture in Japan.

Net earnings from affiliates for the six months ended June 30, 2017 increased $1.0 million, or 19.6%, as compared with the same period in 2016. The increase was primarily a result of increased earnings of our EPD joint venture in South ~~Korea and IPD joint venture in Chile.~~

~~Net earnings from affiliates for the nine months ended~~ ~~September 30, 2016~~ ~~increased~~ ~~$2.2 million, or~~ ~~34.9%, as compared with the same period in 2015. The increase was primarily a result of increased earnings of our EPD joint venture in South Korea and IPD joint venture in Chile.~~Korea.

Operating ~~(Loss)~~ Income and Operating Margin

Three Months Ended September 30,
(Amounts in millions, except percentages) 2016 2015
Operating (loss) income $ (2.8 ) $ 167.8
Operating (loss) income as a percentage of sales (0.3 )% 15.3 %



	Three Months Ended June 30,
(Amounts in millions, except percentages)	2017			2016
Operating income	$	126.1		$	93.8
Operating income as a percentage of sales	14.4		%	9.1		%

Nine Months Ended September 30,
(Amounts in millions, except percentages) 2016 2015
Operating income $ 169.6
$ 388.8
Operating income as a percentage of sales 5.8 % 11.9 %

Operating loss for the three months ended September 30, 2016 increased by $170.6 million, as compared with income of $167.8 million in the same period in 2015. The increase included negative currency effects of approximately $4 million. The increase was primarily a result of the $123.4 million decrease in gross profit and a $48.1 million increase in SG&A.

Operating income for the nine months ended September 30, 2016 decreased by $219.2 million, or 56.4%, as compared with the same period in 2015. The decrease included negative currency effects of approximately $13 million. The decrease was primarily a result of the $191.4 million decrease in gross profit and a $30.1 million increase in SG&A.



	Six Months Ended June 30,
(Amounts in millions, except percentages)	2017			2016
Operating income	$	176.0		$	164.7
Operating income as a percentage of sales	10.1		%	8.3		%

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Operating income for the three months ended June 30, 2017 increased by $32.3 million, or 34.4%, as compared with the same period in 2016. The increase included negative currency effects of approximately $5 million. The increase was primarily a result of a $131.3 million pre-tax gain from the sale of the Gestra business, partially offset by the $75.7 million decrease in gross profit and the $24.1 million increase in SG&A. The $26.0 million impairment charge related to our manufacturing facility in Brazil and the $16.9 million write-down of inventory related to a loss on a contract in Brazil contributed to the increase in SG&A and the decrease in gross profit, respectively.

Operating income for the six months ended June 30, 2017 increased by $11.3 million, or 6.9%, as compared with the same period in 2016. The increase included negative currency effects of approximately $5 million. The increase was primarily a result of a $131.3 million pre-tax gain from the sale of the Gestra business, partially offset by the $112.4 million decrease in gross profit and a $8.6 million increase in SG&A. The $26.0 million impairment charge related to our manufacturing facility in Brazil and the $16.9 million write-down of inventory related to a loss on a contract in Brazil contributed to the increase in SG&A and the decrease in gross profit, respectively.

Interest Expense and Interest Income


	Three Months Ended September 30,						Three Months Ended June 30,
(Amounts in millions)	2016			2015			2017			2016
Interest expense	$	(15.1	)	$	(16.3	)	$	(15.0	)	$	(15.3	)
Interest income	0.9			0.5			0.6			0.6


	Nine Months Ended September 30,						Six Months Ended June 30,
(Amounts in millions)	2016			2015			2017			2016
Interest expense	$	(45.0	)	$	(47.7	)	$	(29.6	)	$	(29.8	)
Interest income	2.2			1.5			1.3			1.3

Interest expense for the three and ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 decreased ~~$1.2~~$0.3 million and ~~$2.7~~$0.2 million, respectively as compared with the same periods in ~~2015.~~2016. The ~~$2.7 million decrease~~decreases for the ~~nine months was~~three and six month periods were primarily attributable to decreased commitments and borrowings under ~~our~~ Revolving Credit Facility in ~~2016,~~the first half of 2017, as compared to the same period in ~~2015.~~2016.

Other (Expense) Income, ~~(Expense),~~ Net


	Three Months Ended September 30,					Three Months Ended June 30,
(Amounts in millions)	2016		2015			2017			2016
Other income (expense), net	$	1.9	$	(5.4	)
Other (expense) income, net						$	(8.8	)	$	4.7


	Nine Months Ended September 30,					Six Months Ended June 30,
(Amounts in millions)	2016		2015			2017			2016
Other income (expense), net	$	2.1	$	(30.3	)
Other expense, net						$	(19.9	)	$	(0.8	)

Other ~~income,~~expense, net for the three months ended ~~September~~June 30, ~~2016~~2017 increased ~~$7.3~~$13.5 million from ~~a loss~~income of ~~$5.4~~$4.7 million in ~~2015,~~2016, due primarily to a ~~$11.5~~$6.5 million increase in ~~gains~~losses arising from transactions on foreign exchange contracts and a $6.3 million increase in losses from transactions in currencies other than our sites' functional currencies. The net change was primarily due to the foreign currency exchange rate movements in the Mexican peso, British pound, Euro and Brazilian real in relation to the U.S. dollar during the three months ended June 30, 2017, as compared with the same period in 2016.

Other expense, net for the six months ended June 30, 2017 increased $19.1 million as compared with the same period in 2016, due primarily to a $12.6 million increase in losses from transactions in currencies other than our sites' functional currencies ~~partially offset by~~and a ~~$5.2~~$6.6 million ~~decrease~~increase in ~~gains~~losses arising from transactions on foreign exchange contracts. The net change was primarily due to the foreign currency exchange rate movements in the ~~Brazilian real,~~ Mexican peso, British pound, Euro and ~~Euro~~Brazilian real in relation to the U.S. dollar during the ~~three~~six months ended ~~September~~June 30, ~~2016,~~2017, as compared with the same period in ~~2015.~~

Other income, net for the nine months ended September 30, 2016 increased $32.4 million from a loss of $30.3 million in 2015, due primarily to a $58.5 million decrease in losses from transactions in currencies other than our sites' functional currencies, partially offset by a $25.8 million decrease in gains arising from transactions on foreign exchange contracts. The net change was primarily due to the foreign currency exchange rate movements in the Brazilian real, Canadian dollar, British pound, and Argentine peso in relation to the U.S. dollar during the nine months ended September 30, 2016, as compared with the same period in 2015, and the $18.5 million loss as a result of the remeasurement of our Venezuelan bolivar-denominated net monetary assets in the first quarter of 2015 that did not recur.

~~Tax Expense and Tax Rate~~

Three Months Ended September 30,
(Amounts in millions, except percentages) 2016 2015
Provision for income taxes $ 5.0
$ 52.1
Effective tax rate (33.0 )% 35.5 %

Nine Months Ended September 30,
(Amounts in millions, except percentages) 2016 2015
Provision for income taxes $ 47.8
$ 111.5
Effective tax rate 37.1 % 35.7 %
2016.

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Tax Expense and Tax Rate



	Three Months Ended June 30,
(Amounts in millions, except percentages)	2017			2016
Provision for income taxes	$	60.9		$	29.5
Effective tax rate	59.1		%	35.2		%



	Six Months Ended June 30,
(Amounts in millions, except percentages)	2017			2016
Provision for income taxes	$	66.2		$	46.7
Effective tax rate	51.8		%	34.5		%

The effective tax rate of ~~negative 33.0%~~59.1% for the three months ended ~~September~~June 30, ~~2016 decreased~~2017 increased from ~~35.5%~~35.2% for the same period in ~~2015. The negative rate is caused by comparing the positive tax expense of $5.0 million with the pre-tax loss of $15.1 million.~~2016. The effective tax rate varied from the U.S. federal statutory rate for the three months ended ~~September~~June 30, ~~2016~~2017 primarily due to the net impact of foreign operations, ~~tax impacts from our Realignment Programs and~~ losses in certain foreign jurisdictions for which no tax benefit was ~~provided.~~provided and taxes related to the sale of the Gestra business.

~~Our~~The effective tax rate of ~~37.1%~~51.8% for the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 increased from ~~35.7%~~34.5% for the same period in ~~2015.~~2016. The effective tax rate varied from the U.S. federal statutory rate for the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 primarily due to the net impact of foreign operations, ~~offset by the tax impacts from our Realignment Programs and~~ losses in certain foreign jurisdictions for which no tax benefit was ~~provided.~~provided and taxes related to the sale of the Gestra business.

Other Comprehensive ~~Loss~~Income (loss)


	Three Months Ended September 30,						Three Months Ended June 30,
(Amounts in millions)	2016			2015			2017		2016
Other comprehensive loss	$	(11.5	)	$	(49.3	)
Other comprehensive income (loss)							$	33.2	$	(25.8	)


	Nine Months Ended September 30,					Six Months Ended June 30,
(Amounts in millions)	2016		2015			2017		2016
Other comprehensive income (loss)	$	0.8	$	(134.1	)
Other comprehensive income						$	67.5	$	10.1

Other comprehensive ~~loss~~income for the three months ended ~~September~~June 30, ~~2016 decreased $37.8~~2017 increased $58.9 million from a loss of ~~$49.3~~$25.8 million in ~~2015.~~2016. The ~~decreased loss~~increased income was primarily due to ~~the~~ foreign currency translation adjustments resulting primarily from exchange rate movements of the Euro, ~~Brazilian real,~~ British pound and Mexican peso versus the U.S. dollar during the three months ended ~~September~~June 30, ~~2016,~~2017, as compared with the same period in ~~2015.~~

2016.

Other comprehensive income for the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 increased ~~$134.9~~$57.4 million from ~~a loss of $134.1~~$10.1 million in ~~2015.~~2016. The increased income was primarily due to ~~the~~ foreign currency translation adjustments resulting primarily from exchange rate movements of the Euro, ~~Brazilian real,~~ British pound and Mexican peso versus the U.S. dollar during the ~~nine~~six months ended ~~September~~June 30, ~~2016,~~2017, as compared with the same period in ~~2015.~~2016.

Business Segments

We conduct our operations through three business segments based on 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 three business segments, EPD, IPD and FCD, are discussed below.

Table of Contents

Engineered Product Division Segment Results

Our largest business segment is EPD, through which we design, manufacture, distribute and service custom and other highly-engineered pumps and pump systems, mechanical seals, auxiliary systems and spare parts (collectively referred to as "original equipment"). EPD includes longer lead-time, highly-engineered pump products and shorter cycle engineered pumps and mechanical seals that are generally manufactured more quickly. EPD also manufactures replacement parts and related equipment and provides a full array of replacement parts, repair and support services (collectively referred to as "aftermarket"). EPD primarily operates in the oil and gas, power generation, chemical ~~water management~~ and general industries. EPD operates in 47 countries with 3231 manufacturing facilities worldwide, 109 of which are located in Europe, 10 in North America, seven in Asia and five in Latin America, and it ~~has 126~~operates 123 QRCs, including those co-located in manufacturing facilities and/or shared with FCD.

~~Table of Contents~~



	Three Months Ended June 30,
(Amounts in millions, except percentages)	2017			2016
Bookings	$	465.1		$	465.6
Sales	427.7			512.9
Gross profit	130.6			163.4
Gross profit margin	30.5		%	31.9		%
Segment operating income	9.5			63.6
Segment operating income as a percentage of sales	2.2		%	12.4		%


	Three Months Ended September 30,						Six Months Ended June 30,
(Amounts in millions, except percentages)	2016			2015			2017			2016
Bookings	$	497.5		$	537.5		$	925.1		$	890.2
Sales	455.8			514.5			852.4			985.7
Gross profit	126.9			180.4			267.3			319.2
Gross profit margin	27.8		%	35.1		%	31.4		%	32.4		%
Segment operating (loss) income	(25.2		)	77.7
Segment operating (loss) income as a percentage of sales	(5.5		)%	15.1		%
Segment operating income							55.1			119.4
Segment operating income as a percentage of sales							6.5		%	12.1		%

Nine Months Ended September 30,
(Amounts in millions, except percentages) 2016 2015
Bookings $ 1,387.5
$ 1,608.0
Sales 1,441.5
1,569.4
Gross profit 449.8
535.9
Gross profit margin 31.2 % 34.1 %
Segment operating income 98.5
232.8
Segment operating income as a percentage of sales 6.8 % 14.8 %

Bookings for the three months ended ~~September~~June 30, ~~2016~~2017 decreased by ~~$40~~$0.5 million, or ~~7.4%~~0.1%, as compared with the same period in ~~2015.~~2016. The decrease included negative currency effects of approximately ~~$15~~$6 million. The decrease in customer bookings was primarily driven by the ~~chemical and~~ power generation ~~industries,~~industry, substantially offset by ~~an increase~~increases in the the oil and gas, ~~industry. Bookings decreased $31.0~~chemical and general industries. Decreased bookings of $30.5 million into the Middle East, $17.5 million into Europe and $9.3 million into North America were substantially offset by increased bookings of $36.0 million into Asia Pacific and ~~$14.3~~$17.0 million into Africa. The decrease was primarily due to decreased aftermarket bookings. Interdivision bookings (which are eliminated and are not included in consolidated bookings as disclosed above) increased $3.5 million.

Bookings for the six months ended June 30, 2017 increased by $34.9 million or 3.9%, as compared with the same period in 2016 and included an order for approximately $80 million to provide pumps and related equipment for the Hengli Integrated Refining Complex Project in China. The increase included negative currency effects of approximately $11 million. The increase in customer bookings was primarily driven by the oil and gas and chemical industries, partially offset by a decrease in the power generation and general industries. Increased bookings of $100.9 million into Asia Pacific and $13.8 million into Africa were partially offset by decreased bookings of $36.3 million into the Middle East, $30.8 million into Europe and $15.8 million into North America. The ~~decrease~~increase was more heavily weighted towards customer original equipment bookings. Interdivision bookings (which are eliminated and are not included in consolidated bookings as disclosed above) ~~decreased $3.5~~increased $5.3 million.

~~Bookings~~Sales for the ~~nine~~three months ended ~~September~~June 30, ~~2016~~2017 decreased by ~~$220.5~~$85.2 million,, or ~~13.7%~~16.6%, as compared with the same period in ~~2015~~.2016. The decrease included negative currency effects of approximately $62 million. The decrease in customer bookings was primarily driven by the oil and gas industry and to a lesser extent, the chemical and general industries. Bookings decreased $58.2 million into the Middle East, $45.8 million into Latin America, $44.1 million into North America and $39.7 million into Asia Pacific. The decrease was more heavily weighted towards customer original equipment bookings. Interdivision bookings (which are eliminated and are not included in consolidated bookings as disclosed above) decreased $8.0 million.

~~Sales for the three months ended September 30, 2016 decreased $58.7 million, or 11.4%, as compared with the same period in 2015. The decrease included negative currency effects of approximately $15~~$6 million. The decrease was primarily due to ~~both~~ lower ~~aftermarket and~~customer original equipment sales, resulting from decreased sales of ~~$35.8~~$41.9 million into North America, $20.5 million into Latin America, ~~$12.2 million into Asia Pacific, $3.4~~$18.9 million into the Middle East, ~~and $2.7~~$13.5 million into ~~Africa. Interdivision sales (which are eliminated~~Europe and ~~are not included in consolidated sales as disclosed above) decreased $5.2 million.~~

Sales for the nine months ended September 30, 2016 decreased $127.9 million, or 8.1%, as compared with the same period in 2015. The decrease included negative currency effects of approximately $67 million. The decrease was more heavily weighted towards aftermarket sales, resulting from decreased sales of $82.5 million into Latin America, $20.6 million into North America, $10.0$4.1 million into Africa, ~~and $8.9~~partially offset by increased sales of $16.0 million into Asia Pacific. Interdivision sales (which are eliminated and are not included in consolidated sales as disclosed above) decreased ~~$9.6~~$0.8 million.

Sales for the six months ended June 30, 2017 decreased $133.3 million, or 13.5%, as compared with the same period in 2016. The decrease included negative currency effects of approximately $8 million. The decrease was primarily due to lower customer original equipment sales, resulting from decreased sales of $75.9 million into North America, $33.1 million into Latin America, $19.3 million into the Middle East, $14.8 million into Europe and and $9.9 million into Africa, partially offset by increased sales

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of $19.0 million into Asia Pacific. Interdivision sales (which are eliminated and are not included in consolidated sales as disclosed above) decreased $2.8 million.

Gross profit for the three months ended ~~September~~June 30, ~~2016~~2017 decreased by ~~$53.5~~$32.8 million, or ~~29.7%~~20.1%, as compared with the same period in ~~2015.~~2016. Gross profit margin for the three months ended ~~September~~June 30, ~~2016~~2017 of ~~27.8%~~30.5% decreased from ~~35.1%~~31.9% for the same period in ~~2015.~~2016. The decrease in gross profit margin was primarily attributable to ~~a $13.6 million adjustment to write down inventory in Brazil, increased charges related to our Realignment Programs and~~ the negative impact of decreased sales on our absorption of fixed manufacturing costs, lower margin projects that shipped from backlog and increased charges related to our Realignment Programs, partially offset by ~~realignment savings achieved.~~a mix shift to higher margin aftermarket sales.

Gross profit for the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 decreased by ~~$86.1~~$51.9 million, or ~~16.1%~~16.3%, as compared with the same period in ~~2015.~~2016. Gross profit margin for the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 of ~~31.2%~~31.4% decreased from ~~34.1%~~32.4% for the same period in ~~2015.~~2016. The decrease in gross profit margin was primarily attributable to ~~a $13.6 million adjustment to write down inventory in Brazil, increased charges related to our Realignment Programs and~~ the negative impact of decreased sales on our absorption of fixed manufacturing costs and lower margin projects that shipped from backlog, partially offset by ~~realignment savings achieved.~~a mix shift to higher margin aftermarket sales.

Operating ~~loss~~income for the three months ended ~~September~~June 30, ~~2016 increased~~2017 decreased by ~~$102.9~~$54.1 million, ~~to a loss of $25.2 million,~~or 85.1%, as compared with the same period in ~~2015.~~2016. The ~~increase~~decrease included negative currency effects of approximately $4$2 million. The ~~increase~~

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decrease was due to a ~~$53.5~~$32.8 million decrease in gross profit and a ~~$50.4~~$22.0 million increase in SG&A (including a decrease due to currency effects of approximately $2$1 million). The increase in SG&A is primarily due to a $26.0 million impairment charge related to our manufacturing facility in Brazil, partially offset by increased ~~bad debt expense as a result of EPD's $60.9 million portion of~~savings achieved related to our Realignment Programs compared to the ~~$63.2 million reserve established for our primary Venezuelan customer~~same period in ~~the third quarter of~~ 2016.

Operating income for the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 decreased by ~~$134.3~~$64.3 million, or ~~57.7%~~53.9%, as compared with the same period in ~~2015.~~2016. The decrease included negative currency effects of approximately ~~$10~~$3 million. The decrease was due to a ~~$86.1~~$51.9 million decrease in gross profit and a ~~$50.3~~$13.5 million increase in SG&A (including a decrease due to currency effects of approximately ~~$10~~$1 million). The increase in SG&A is primarily due to a $26.0 million impairment charge related to our manufacturing facility in Brazil, partially offset by decreased charges and increased ~~bad debt expense as a result of EPD's $60.9 million portion of~~savings achieved related to our Realignment Programs compared to the ~~$63.2 million reserve established for our primary Venezuelan customer~~same period in ~~the third quarter of~~ 2016.

Backlog of ~~$1,114.7~~$1,077.2 million at ~~September~~June 30, ~~2016 decreased~~2017 increased by ~~$42.6~~$110.4 million, or ~~3.7%~~11.4%, as compared with December 31, ~~2015~~2016. Currency effects provided an increase of approximately ~~$29~~$46 million. Backlog at ~~September~~June 30, ~~2016~~2017 and December 31, ~~2015~~2016 included ~~$10.8~~$19.1 million and ~~$10.5~~$11.7 million, respectively, of interdivision backlog (which is eliminated and not included in consolidated backlog as disclosed above).

Industrial Product Division Segment Results

Through IPD, we design, manufacture, distribute and service engineered, pre-configured industrial pumps and pump systems, including submersible motors (collectively referred to as "original equipment"). Additionally, IPD manufactures replacement parts and related equipment, and provides a full array of support services (collectively referred to as "aftermarket"). IPD primarily operates in the oil and gas, chemical, ~~water management,~~ power generation and general industries. IPD operates 2017 manufacturing facilities, five of which are located in the U.S, 10eight in Europe and four in Asia ~~one in Latin America~~ and it operates 3231 QRCs worldwide, including 20 sites in Europe, six in the U.S., three in Asia and two in Latin America, ~~and three in Asia,~~ including those co-located in manufacturing facilities.


	Three Months Ended September 30,						Three Months Ended June 30,
(Amounts in millions, except percentages)	2016			2015			2017			2016
Bookings	$	189.6		$	236.5		$	213.3		$	212.3
Sales	203.3			241.6			191.8			215.0
Gross profit	32.1			69.0			24.0			48.0
Gross profit margin	15.8		%	28.6		%	12.5		%	22.3		%
Segment operating (loss) income	(15.7		)	25.0			(28.7		)	2.9
Segment operating (loss) income as a percentage of sales	(7.7		)%	10.3		%	(15.0		)%	1.3		%

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	Nine Months Ended September 30,						Six Months Ended June 30,
(Amounts in millions, except percentages)	2016			2015			2017			2016
Bookings	$	609.5		$	689.9		$	420.0		$	420.0
Sales	615.8			725.8			370.2			412.5
Gross profit	132.8			170.7			58.8			98.0
Gross profit margin	21.6		%	23.5		%	15.9		%	23.8		%
Segment operating (loss) income	(6.2		)	18.7			(42.5		)	6.6
Segment operating (loss) income as a percentage of sales	(1.0		)%	2.6		%	(11.5		)%	1.6		%

Bookings for the three months ended ~~September~~June 30, ~~2016 decreased~~2017 increased by ~~$46.9~~$1.0 million, or ~~19.8%~~0.5%, as compared with the same period in ~~2015.~~2016. The ~~decrease~~increase included negative currency effects of approximately $1$2 million. The ~~decrease~~increase in customer bookings was primarily driven by the ~~chemical industry and, to a lesser extent, the~~ power generation, general and oil and gas ~~industries. Bookings decreased $13.5~~industries, substantially offset by a decrease in the chemical industry. Increased customer bookings of $7.0 million into Europe, $3.6 million into Latin America and $2.7 million into Asia Pacific ~~$12.2~~were substantially offset by decreased customer bookings of $14.3 million into the Middle East and $3.9 million into North ~~America, $11.4 million into Africa and $7.5 million into Europe. The decrease was primarily driven by customer original equipment bookings.~~America. Interdivision bookings (which are eliminated and are not included in consolidated bookings as disclosed above) ~~decreased $4.1~~increased $4.5 million.

Bookings for the ~~nine~~six months ended ~~September~~June 30, ~~2016~~ ~~decreased by~~ ~~$80.4 million, or~~ ~~11.7%~~,2017 were flat as compared with the same period in ~~2015. The decrease~~2016 and included negative currency effects of approximately $7$5 million. ~~The decrease~~Customer bookings decreases in ~~customer bookings was primarily driven~~the chemical industry were substantially offset by increases in the oil and gas, ~~chemical~~general and power generation industries. ~~Bookings decreased $22.1~~Decreased bookings of $18.4 million into the Middle East and $3.9 million into Asia Pacific ~~$18.2~~were substantially offset by increased bookings of $13.2 million into Europe, $6.7 million into North America ~~$16.5 million into Europe, $14.2 million into Africa~~ and ~~$9.1~~$3.3 million into Latin America. ~~The decrease was driven by customer original equipment bookings.~~ Interdivision bookings (which are eliminated and are not included in consolidated bookings as disclosed above) ~~decreased $8.0~~increased $1.8 million.

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Sales for the three months ended ~~September~~June 30, ~~2016~~2017 decreased ~~$38.3~~$23.2 million, or ~~15.9%~~10.8%, as compared with the same period in ~~2015.~~2016. The decrease included negative currency effects of approximately $3$2 million and was ~~primarily~~ driven by decreased customer original equipment sales. Customer sales decreased ~~$19.9 million~~ into ~~Europe, $5.1 million into North America, $4.3 million into~~every region except for the Middle ~~East and $2.0 million into Latin America.~~East. Interdivision sales (which are eliminated and are not included in consolidated sales as disclosed above) ~~decreased $7.0~~increased $2.0 million when compared to the same period in ~~2015.~~2016.

Sales for the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 decreased ~~$110~~$42.3 million, or ~~15.2%~~10.3%, as compared with the same period in ~~2015.~~2016. The decrease included negative currency effects of approximately ~~$10~~$5 million and was ~~primarily~~ driven by decreased customer original equipment sales. Customer sales decreased ~~$47.0 million~~ into ~~Europe, $23.6 million into Asia Pacific, $13.3 million into Latin America, $10.1 million into North America and $4.7 million into Africa.~~every region except for the Middle East. Interdivision sales (which are eliminated and are not included in consolidated sales as disclosed above) ~~decreased $10.2 million~~were flat when compared to the same period in ~~2015.~~2016.

Gross profit for the three months ended ~~September~~June 30, ~~2016~~2017 decreased by ~~$36.9~~$24.0 million, or ~~53.5%~~50.0%, as compared with the same period in ~~2015.~~2016. Gross profit margin for the three months ended ~~September~~June 30, ~~2016~~2017 of ~~15.8%~~12.5% decreased from ~~28.6%~~22.3% for the same period in ~~2015.~~2016. The decrease in gross profit margin was primarily attributable to a $16.9 million charge for costs incurred related to a contract to supply oil and gas platform equipment to an end user in Latin America, the negative impact of decreased sales on our absorption of fixed manufacturing costs ~~increased charges related to our Realignment Programs~~ and ~~the unfavorable impact of short-term operational inefficiencies related to the initial execution of certain realignment programs.~~lower margin projects shipped from backlog.

Gross profit for the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 decreased by ~~$37.9~~$39.2 million, or ~~22.2%~~40.0%, as compared with the same period in ~~2015.~~2016. Gross profit margin for the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 of ~~21.6%~~15.9% decreased from ~~23.5%~~23.8% for the same period in ~~2015.~~2016. The decrease in gross profit margin was primarily attributable to a $16.9 million charge for costs incurred related to a contract to supply oil and gas platform equipment to an end user in Latin America, the negative impact of decreased sales on our absorption of fixed manufacturing costs and increased charges related to our Realignment Programs, ~~and the unfavorable impact of short-term operational inefficiencies related to the initial execution of certain realignment programs,~~ partially offset by ~~the negative impact of SIHI purchase price adjustments in 2015 that did not recur.~~increased savings related to our Realignment Programs.

Operating loss for the three months ended ~~September~~June 30, ~~2016~~2017 increased by ~~$40.7~~$31.6 million, to a loss of ~~$15.7~~$28.7 million, as compared with income of $2.9 million for the same period in ~~2015.~~2016. The increase included negative currency effects of less than one million. The ~~increase~~increased loss was primarily due to the ~~$36.9~~$24.0 million decrease in gross profit and a ~~$4.0~~$7.6 million increase in SG&A ~~related~~(including a decrease due to currency effects of approximately $1 million). The increase in SG&A is primarily due to increased charges related to our Realignment Programs.

Operating loss for the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 increased by ~~$24.9~~$49.1 million, to a loss of ~~$6.2~~$42.5 million, as compared with income of $6.6 million for the same period in ~~2015.~~2016. The increase included ~~negative~~currency benefits of approximately $1 million. The increased loss was primarily due to the $39.2 million decrease in gross profit and a $9.6 million increase in SG&A (including a decrease due to currency effects of approximately $1 ~~million.~~million). The increase ~~was~~in SG&A is primarily due to ~~the $37.9 million decrease in gross profit, partially offset by an $12.2 million decrease in SG&A related primarily to savings achieved and decreased~~increased charges related to our Realignment ~~Programs and lower SIHI integration costs.~~Programs.

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Backlog of ~~$434.1~~$438.9 million at ~~September~~June 30, ~~2016~~2017 increased by ~~$9.5~~$65.4 million, or ~~2.2%~~17.5%, as compared with December 31, ~~2015~~2016. Currency effects provided an increase of approximately ~~$15.4~~$27 million. Backlog at ~~September~~June 30, ~~2016~~2017 and December 31, ~~2015~~2016 included ~~$19.5~~$15.9 million and ~~$15.7~~$14.2 million, respectively, of interdivision backlog (which is eliminated and not included in consolidated backlog as disclosed above).

Flow Control Division Segment Results

Our second largest business segment is FCD, which 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. 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 5758 manufacturing facilities and QRCs in 25 countries around the world, with five of its 26 manufacturing operations located in the U.S., 13 located in Europe, seven located in Asia Pacific and one located in Latin America. Based on independent industry sources, we believe that FCD is the ~~fourth~~third largest industrial valve supplier on a global basis.

Three Months Ended September 30,
(Amounts in millions, except percentages) 2016 2015
Bookings $ 291.9
$ 311.1
Sales 299.3
367.9
Gross profit 107.3
136.6
Gross profit margin 35.9 % 37.1 %
Segment operating income 52.8
77.1
Segment operating income as a percentage of sales 17.6 % 21.0 %

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	Three Months Ended June 30,
(Amounts in millions, except percentages)	2017			2016
Bookings	$	316.2		$	312.9
Sales	275.4			317.2
Gross profit	87.7			108.3
Gross profit margin	31.8		%	34.1		%
Segment operating income	164.2			48.4
Segment operating income as a percentage of sales	59.6		%	15.3		%


	Nine Months Ended September 30,						Six Months Ended June 30,
(Amounts in millions, except percentages)	2016			2015			2017			2016
Bookings	$	913.8		$	988.6		$	625.6		$	622.6
Sales	915.5			1,051.5			555.8			616.2
Gross profit	314.7			379.2			185.7			206.9
Gross profit margin	34.4		%	36.1		%	33.4		%	33.6		%
Segment operating income	140.1			186.3			205.6			86.8
Segment operating income as a percentage of sales	15.3		%	17.7		%	37.0		%	14.1		%

Bookings for the three months ended ~~September~~June 30, ~~2016 decreased $19.2~~2017 increased by $3.3 million, or ~~6.2%~~1.1%, as compared with the same period in ~~2015. The decrease~~2016. Bookings included negative currency effects of approximately $4$3 million. ~~The decrease in~~Increased customer bookings ~~was primarily driven~~in the power generation and oil and gas industries were substantially offset by decreases in the general and chemical industries. ~~Customer~~Increased customer bookings ~~decreased $4.9~~of $22.6 million into Asia Pacific, $16.7 million into the Middle East, ~~$4.2~~$7.0 million into Africa and $4.7 million into North America ~~$2.8~~were substantially offset by decreased customer bookings of $44.4 million into Europe and $7.4 million into Latin ~~America and $2.2 million into Africa.~~America. The ~~decrease~~increase was more heavily weighted ~~toward aftermarket~~towards customer original equipment bookings.

Bookings for the ~~nine~~six months ended ~~September~~June 30, ~~2016 decreased $74.8~~2017 increased by $3.0 million, or ~~7.6%~~0.5%, as compared with the same period in ~~2015. The decrease~~2016. Bookings included negative currency effects of approximately ~~$18~~$7 million. ~~The decrease in~~Increased customer bookings ~~was primarily driven by~~in the power generation and oil and gas ~~industry,~~industries were substantially offset by decreases in the general and ~~to a lesser extent, the~~ chemical industries. Decreased customer bookings of $38.7 million into Europe, $18.5 million into Latin America and ~~general industries. Customer bookings decreased $49.9~~$3.6 million into North America ~~$28.9~~were substantially offset by increased customer bookings of $38.4 million into Asia Pacific, $11.7 million into the Middle East and ~~$5.1~~$8.8 million into ~~Africa, partially offset by an~~Africa. The increase ~~of $13.1 million into Latin America. The decrease~~ was ~~primarily due to original equipment~~more heavily weighted towards aftermarket bookings.

Sales for the three months ended ~~September~~June 30, ~~2016~~2017 decreased ~~$68.6~~$41.8 million, or ~~18.6%~~13.2%, as compared with the same period in ~~2015.~~2016. The decrease included negative currency effects of approximately $3 million and was primarily driven by decreased customer original equipment sales. ~~Sales~~The decrease was primarily driven by decreased ~~$24.0~~customer sales of $14.8 million into Europe, $11.7 million into the Middle East, $6.1 million into Asia Pacific, ~~$21.8 million into Europe, $13.4 million into Latin America, $5.9~~$3.9 million into North America and ~~$3.5~~$2.1 million into ~~the Middle East.~~Latin America.

Sales for the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 decreased ~~$136.0~~$60.4 million, or ~~12.9%~~9.8%, as compared with the same period in ~~2015.~~2016. The decrease included negative currency effects of approximately ~~$12~~$5 million and was primarily driven by decreased customer original equipment sales. ~~Sales~~The decrease was primarily driven by decreased ~~$55.4~~customer sales of $25.1 million into the Middle East , $13.8 million into Asia Pacific, ~~$52.2~~$11.4 million into Europe ~~$36.3~~and $4.4 million into North ~~America and $25.8 million into Latin America, partially offset by increased sales~~America.

Table of ~~$26.9 million into the Middle East.~~Contents

Gross profit for the three months ended ~~September~~June 30, ~~2016~~2017 decreased by ~~$29.3~~$20.6 million, or ~~21.4%~~19.0%, as compared with the same period in ~~2015.~~2016. Gross profit margin for the three months ended ~~September~~June 30, ~~2016~~2017 of ~~35.9%~~31.8% decreased from ~~37.1%~~34.1% for the same period in ~~2015.~~2016. The decrease in gross profit margin was primarily attributable to the negative impact of decreased sales on our absorption of fixed manufacturing costs and lower margin projects ~~that~~ shipped from backlog, partially offset by increased savings achieved ~~and decreased charges~~ related to our Realignment ~~Programs.~~Programs compared to the same period in 2016.

Gross profit for the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 decreased by ~~$64.5~~$21.2 million, or ~~17.0%~~10.2%, as compared with the same period in ~~2015.~~2016. Gross profit margin for the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 of ~~34.4%~~33.4% decreased from ~~36.1%~~33.6% for the same period in ~~2015.~~2016. The decrease in gross profit margin was primarily attributable to the negative impact of decreased sales on our absorption of fixed manufacturing costs and lower margin projects ~~that~~ shipped from backlog, partially offset by decreased charges and savings achieved ~~and decreased charges~~ related to our Realignment Programs compared to the same period in ~~2015.~~2016.

Operating income for the three months ended ~~September~~June 30, ~~2016 decreased~~2017 increased by ~~$24.3~~$115.8 million, or ~~31.5%~~239.3%, as compared with the same period in ~~2015.~~2016. The ~~decrease~~increase included negative currency effects of ~~less than a~~approximately $3 million. The ~~decrease~~increase was primarily attributable to the ~~$29.3~~$131.3 million pre-tax gain from the sale of the Gestra business and a decrease in SG&A of $4.9 million (including a decrease due to currency effects of approximately $1 million). These changes were partially offset by the $20.6 million decrease in gross ~~profit, partially offset by decreased SG&A of $5.0 million.~~profit. The decrease in SG&A was primarily due to savings achieved ~~and decreased charges~~ related to our Realignment Programs ~~and lower selling-related expenses as~~ compared to the same period in ~~2015.~~2016.

Operating income for the ~~nine~~six months ended ~~September~~June 30, ~~2016 decreased~~2017 increased by ~~$46.2~~$118.8 million, or ~~24.8%~~136.9%, as compared with the same period in ~~2015.~~2016. The ~~decrease~~increase included negative currency effects of approximately $2 million. The ~~decrease~~increase was primarily attributable to the ~~$64.5~~$131.3 million pre-tax gain from the sale of the Gestra business and a decrease in SG&A of $8.3 million (including a decrease due to currency effects of approximately $1 million). These changes were partially offset by the $21.2 million decrease in gross ~~profit, partially offset by decreased SG&A of $18.5 million.~~profit. The decrease in SG&A was primarily due to savings achieved ~~and decreased charges~~ related to our Realignment Programs ~~and lower selling-related expenses as~~ compared to the same period in ~~2015.~~2016.

Backlog of ~~$620.7~~$658.8 million at ~~September~~June 30, ~~2016 decreased~~2017 increased by ~~$1.3~~$74.3 million, or ~~0.2%~~12.7%, as compared with December 31, ~~2015.~~2016. Currency effects provided an increase of ~~less than a~~approximately $8 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)	2016			2015			2017			2016
Net cash flows provided by operating activities	$	58.2		$	131.0		$	46.6		$	10.7
Net cash flows used by investing activities	(68.9		)	(488.1		)
Net cash flows (used) provided by financing activities	(101.5		)	171.2
Net cash flows provided (used) by investing activities							154.8			(40.5		)
Net cash flows used by financing activities							(82.5		)	(78.8		)

Existing cash, cash generated by operations and borrowings available under our existing Revolving 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, ~~2016~~2017 was $~~260.9~~505.2 million, as compared with $~~366.4~~367.2 million at December 31, ~~2015~~2016.

Our cash balance ~~decreased~~increased by ~~$105.5~~$138.0 million to $~~260.9~~505.2 million at ~~September~~June 30, ~~2016~~2017 as compared with December 31, ~~2015~~.2016. The cash ~~used~~provided during the first ~~nine~~six months of ~~2016~~2017 included ~~$73.0~~$181.8 million in net cash proceeds from the sale of our Gestra business, partially offset by cash used of $49.6 million in dividend payments, ~~$64.5 million~~ ~~in capital expenditures and $45.0~~$30.0 million of payments on long-term ~~debt.~~debt, and $29.4 million in capital expenditures. See Note 3 to our condensed consolidated financial statements included in this Quarterly Report for more information on the sale of our Gestra business.

For the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017, our cash provided by operating activities was ~~$58.2~~$46.6 million, as compared with ~~$131.0~~$10.7 million for the same period in ~~2015~~.2016. Cash flow used by working capital decreased for the ~~nine~~six months ended ~~September~~June 30, ~~2016~~,2017, due primarily to decreased uses of cash related to accrued liabilities and income taxes payable, inventory and accounts payable ~~partially offset by~~and an increased ~~uses~~source of cash related to ~~accrued liabilities and income tax payable~~accounts receivable as compared to the same period in ~~2015.~~2016.

Decreases in accounts receivable provided ~~$70.2~~$71.1 million of cash flow for the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017, as compared with ~~$66.7~~$42.4 million for the same period in ~~2015.~~2016. The decrease in accounts receivable was ~~partially~~primarily attributable to lower sales during the period as compared to the same period in ~~2015.~~2016. As of ~~September~~June 30, ~~2016 and 2015~~2017, our days’ sales outstanding ("DSO") was 8685 days. We continue to experience delays in collecting payment on our accounts receivable from the national oil company in Venezuela, our primary Venezuelan customer. Our total outstanding gross accounts receivabledays as compared with this customer was approximately 7% of our gross accounts receivable at both September 30, 2016 and December 31, 2015, respectively, of which 100% and 64% has been classified as long-term within other assets, net on our condensed consolidated balance sheet at September 30, 2016 and December 30, 2015, respectively. These accounts receivable are primarily U.S. dollar-denominated and not disputed. However, while we have not historically had write-offs relating to this customer, the accounts receivable continue to be significantly in arrears. The increased deterioration of the social, political, economic and legal climate in 2016 has given rise to significant uncertainties about Venezuela's economic and political stability, and while we continue to conduct business on a prepayment basis with the Venezuelan customer, the volume of activity has diminished significantly throughout 2016 from prior year levels. In September, the Venezuelan customer offered current bondholders the ability to swap their current bonds for new bonds with a delayed maturity, price premium and higher coupon rate due to their current inability to service their debt obligations. As a result of the bond swap offer, S&P Global Ratings downgraded the customer's bonds to CC which potentially indicates that default is imminent with little prospect for recovery. Although we do not currently hold any related bonds, we interpret this action to be indicative of the customer's increasing inability to make future payments on our accounts receivable. Accordingly, due to these actions and the diminished activity of business and payments in 2016, we have estimated that87 days as of ~~September~~June 30, ~~2016 our ability to fully collect the accounts receivable from our primary Venezuelan customer has become less than probable and we recorded a charge~~2016.

Table of $63.2 million to selling, general and administrative expense ("SG&A") to fully reserve for those potentially uncollectible accounts receivable and a charge to cost of sales ("COS") of $1.9 million to reserve for related net inventory exposures. We continue to pursue payments and on-going business with our Venezuelan customer.Contents

Increases in inventory used ~~$47.4~~$17.3 million and ~~$119.5~~$44.2 million of cash flow for the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 and ~~September~~June 30, ~~2015,~~2016, respectively. Inventory turns were ~~2.6~~2.7 times at ~~September~~both June 30, ~~2016 as compared with 2.5 times for the same period in 2015.~~2017 and 2016. Our calculation of inventory turns does not reflect the impact of advanced cash received from our customers. Decreases in accounts payable used ~~$97.8~~$55.9 million of cash flow for the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 as compared with ~~$157.9~~$77.1 million for the same period in ~~2015~~2016. Decreases in accrued liabilities and income taxes payable used ~~$90.3~~$9.8 million of cash flow for the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 as compared with ~~$3.0~~$69.9 million for the same period in ~~2015~~2016.

Cash flows ~~used~~provided by investing activities during the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 were ~~$68.9~~$154.8 million as compared with ~~$488.1~~a use of $40.5 million for the same period in ~~2015~~2016~~. Cash outflows for~~, primarily due to $181.8 million in net proceeds from the ~~same period in 2015 resulted primarily from payments for the SIHI acquisition~~sale of ~~$353.7 million. In the second quarter of 2016 we divested of a non-strategic foundry business which resulted in a cash outflow of $5.1 million and a loss of $7.7 million.~~our Gestra business. Capital expenditures during the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 were ~~$64.5~~$29.4 million, a decrease of ~~$74.1~~$7.5 million as compared with the same period in ~~2015~~2016. Our capital

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expenditures are generally focused on strategic initiatives to pursue new markets, geographic expansion, information technology infrastructure, ongoing scheduled replacements and upgrades and cost reduction opportunities. In ~~2016,~~2017, total capital expenditures are expected to be between ~~$105~~$80 million and ~~$115~~$90 million.

Cash flows used by financing activities during the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 were $~~101.5~~82.5 million as compared with ~~a source of cash of~~ $~~171.2~~78.8 million for the same period in ~~2015~~2016. Cash outflows during the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 resulted primarily from $~~73.0~~49.6 million of dividend payments and ~~$45.0~~$30.0 million of payments on long-term debt. ~~Cash inflows for the same period in~~ ~~2015~~ ~~resulted primarily from the $526.3 million net proceeds from the issuance of the 2022 Euro Senior Notes, partially offset by the repurchase of~~ ~~$249.7 million~~ ~~of common shares and $70.0 million of dividend payments.~~

Our Senior Credit Facility matures in October 2020. Approximately 6%15.4% of our outstanding Term Loan Facility is due to mature in the remainder of ~~2016~~2017 and approximately ~~25%~~30.8% in ~~2017.~~2018. As of ~~September~~June 30, ~~2016,~~2017, we had available capacity of ~~$608.8~~$710.3 million on our ~~$1.0 billion~~$800.0 million Revolving Credit Facility. ~~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 Revolving Credit Facility is committed and held by a diversified group of financial institutions.

During ~~each of~~ the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 and ~~2015~~2016 we contributed ~~$20.0~~$6 million and $7 million, respectively, to our U.S. pension plan. At December 31, ~~2015~~2016 our U.S. pension plan was fully funded as defined by applicable law. After consideration of our funded status, we ~~do not~~currently anticipate making ~~any additional~~$20 million in contributions to our U.S. pension plan in ~~2016,~~2017, 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.

At ~~September~~June 30, ~~2016, $258.8~~2017, $474.3 million of our total cash balance of ~~$260.9~~$505.2 million was held by foreign subsidiaries, ~~$163.8~~$351.8 million of which we consider permanently reinvested outside the U.S. Based on the expected near-term liquidity needs of our various geographies and our currently available sources of domestic short-term liquidity, we currently do not anticipate the need to repatriate any permanently reinvested cash to fund domestic operations that would generate adverse tax results. However, in the event this cash is needed to fund domestic operations, we estimate the full ~~$163.8~~$351.8 million could be repatriated resulting in a U.S. cash tax liability between $5.0 million and $15.0 million. Should we be required to repatriate this cash, it could limit our ability to assert permanent reinvestment of foreign earnings and invested capital in future periods.

Considering our current debt structure and cash needs, we currently believe cash flows generated from operating activities combined with availability under our Revolving 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 "Cautionary Note Regarding Forward-Looking Statements" below.

On November 13, 2014, our Board of Directors approved a $500.0 million share repurchase authorization, of which as of ~~September~~June 30, ~~2016~~2017, we have $160.7 million of remaining capacity. While we 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 and implemented by management at its discretion, depending on our financial condition, business opportunities and market conditions at such time.

~~Acquisition~~

We regularly evaluate acquisition opportunities of various sizes. The cost and terms of any financing to be raised in conjunction with any acquisition, including our ability to raise economical capital, is a critical consideration in any such evaluation.

~~Note 2 to our condensed consolidated financial statements included in this Quarterly Report contains a discussion of our acquisition.~~

Financing

Credit Facilities

See Note 10 to our consolidated financial statements included in our ~~2015~~2016 Annual Report and Note 56 to our condensed consolidated financial statements included in this Quarterly Report for a discussion of our Senior Credit Facility and covenants related to our Senior Credit Facility. We complied with all covenants through ~~September~~June 30, ~~2016.~~2017.

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

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of Financial Condition and Results of Operations" of our ~~2015~~2016 Annual Report. These critical policies, for which no significant changes have occurred in the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017, include:

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Revenue Recognition;

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 include, without limitation, the following:

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;

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 or trade embargoes 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;

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;

a foreign government investigation regarding our participation in the United Nations Oil-For-Food Program;

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;

risks and potential liabilities associated with cyber security threats; and

our inability to execute and realize the expected financial benefits of our strategic manufacturing optimization and other cost-saving initiatives.

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.

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 ~~2015~~2016 Annual Report and Part II of this 10-Q, 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 interest rates and 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.

Interest Rate Risk

Our earnings are impacted by changes in short-term interest rates as a result of borrowings under our Senior Credit Facility, which bear interest based on floating rates. At ~~September~~June 30, ~~2016,~~2017, we had ~~$240.0~~$195.0 million of variable rate debt obligations outstanding under our Senior Credit Facility with a weighted average interest rate of ~~2.09%~~2.55%. A hypothetical change of 100 basis points in the interest rate for these borrowings, assuming constant variable rate debt levels, would have changed interest expense by ~~$1.8~~$1.0 million for the ~~nine~~six months ended ~~September~~June 30, ~~2016.~~2017.

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 a non-U.S. subsidiary’s functional currency. In March 2015, we designated €255.7 million of our €500.0 million 2022 Euro Senior Notes as a net investment hedge of our investments in certain of our international subsidiaries that use the Euro as their functional currency. Generally, we view 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. We realized net ~~losses~~gains (losses) associated with foreign currency translation of ~~$15.7~~$34.3 million and ~~$54.5~~$(29.5) million for the three months ~~September~~June 30, ~~2016~~2017 and ~~2015~~2016~~, respectively,~~ and ~~$10.6~~$68.1 million and ~~$147.3~~$3.0 million for the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 and ~~2015~~2016, respectively, which are included in other comprehensive ~~loss.~~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. Our policy allows foreign currency coverage only for identifiable foreign currency exposures and beginning in the fourth quarter of 2013 instruments that meet certain criteria are designated for hedge accounting. As of ~~September~~June 30, ~~2016~~,2017, we had a U.S. dollar equivalent of ~~$427.2~~$234.9 million in aggregate notional amount outstanding in foreign exchange contracts with third parties, as compared with ~~$397.3~~$393.8 million at December 31, ~~2015~~2016. Transactional currency gains and losses arising from transactions outside of our sites’ functional currencies and changes in fair value of non-designated foreign exchange contracts are included in our consolidated results of operations. We recognized foreign currency net (losses) gains ~~(losses)~~ of ~~$1.4~~$(7.1) million and ~~$(5.0)~~$5.7 million for the three months ended ~~September~~June 30, ~~2016~~2017 and ~~2015,~~2016, respectively, and ~~$3.5~~$(18.1) million and ~~$(29.3)~~$1.1 million for the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 and ~~2015,~~2016, respectively, which are included in other (expense) income, ~~(expense),~~ net in the accompanying condensed consolidated statements of income.

Based on a sensitivity analysis at ~~September~~June 30, ~~2016,~~2017, a 10% change in the foreign currency exchange rates for the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 would have impacted our net earnings by approximately $6$17 million. This 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~~Principal Executive Officer and ~~principal financial officer,~~Principal Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

In connection with the preparation of this Quarterly Report, our management, under the supervision and with the participation of our ~~principal executive officer~~Principal Executive Officer and ~~principal financial officer,~~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, ~~2016~~2017. ~~Based on this evaluation,~~Our management, including our ~~principal executive officer~~current Principal Executive Officer and ~~principal financial officer~~Principal Financial Officer, concluded that our disclosure controls and procedures were not effective as of June 30, 2017 because of the material weaknesses in our internal control over financial reporting described in Item 9A. Controls and Procedures in our Form 10-K/A for the fiscal year ended December 31, 2016.

Remediation Plan

In the second quarter of fiscal 2017, management became actively engaged in the planning for, and implementation of, remediation efforts to address the material weaknesses in our internal control over financial reporting identified above. Management intends to implement the following steps:

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enhance the current business process review control procedures to include additional prior period comparisons and additional key ratios, metrics and risk based criteria as determined by management;

enhance the detailed site and/or process balance sheet reviews based on criteria determined by management’s risk assessment including manual journal entries;

conduct enhanced ethics, controls and policy training for employees at the ~~reasonable assurance level as~~one non-U.S. site where certain employees engaged in conduct that circumvented controls.

Management believes the measures described above and others that may be implemented will remediate the material weaknesses that we have identified. As management continues to evaluate and improve internal control over financial reporting, we may decide to take additional measures to address control deficiencies or determine to modify, or in appropriate circumstances not to complete, certain of ~~September 30, 2016~~.the remediation measures identified.

Changes in Internal Control Over Financial Reporting

There ~~have been~~were no changes in our internal control over financial reporting (as defined in ~~Rules~~Rule 13a-15(f) and 15d-15(f) of the Exchange Act) during the quarter ended ~~September~~June 30, ~~2016~~2017 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 910 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 and results of operations, 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 ~~2015~~2016 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 expected or desired.

There have been no material changes in risk factors discussed in our ~~2015~~2016 Annual Report and subsequent SEC filings. The risks described in this Quarterly Report, our ~~2015~~2016 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 1112 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, ~~2016~~2017 we had no repurchases of common shares. As of ~~September~~June 30, ~~2016,~~2017, we have $160.7 million of remaining 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, ~~2016~~:2017:

Total Number of Shares Tendered Average Price per Share
Total Number of
Shares Purchased as
Part of Publicly Announced Program

Maximum Number of
Shares (or
Approximate Dollar
Value) That May Yet
Be Purchased Under
the Program (in millions)
Period
July 1 - 31 2,305
(1) $ 46.08
—
$ 160.7
August 1 - 31 3,007
(2) 46.85
—
160.7
September 1 - 30 2,652
(1) 46.77
—
160.7
Total 7,964
$ 46.60
—



	Total Number of Shares Tendered		Average Price per Share		Total Number of Shares Purchased as Part of Publicly Announced Program	Maximum Number of Shares (or Approximate Dollar Value) That May Yet Be Purchased Under the Program (in millions)
Period	Total Number of Shares Tendered		Average Price per Share
April 1 - 30	38	(1)	$	48.64	—	$	160.7
May 1 - 31	8,371	(2)	49.39		—	160.7
June 1 - 30	22	(1)	47.45		—	160.7
Total	8,431		$	49.38	—


(1)	Shares tendered by employees to satisfy minimum tax withholding amounts for Restricted Shares.

(2)

Represents 616,162 shares that were tendered by employees to satisfy minimum tax withholding amounts for Restricted Shares at an average price per share of ~~$47.49,~~$49.42, and ~~2,946~~2,209 shares purchased at a price of ~~$46.84~~$49.29 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.

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Item 6.	Exhibits.

A list of exhibits filed or furnished as part of this Quarterly Report on Form 10-Q is set forth on the Exhibits Index immediately following the signature page of this report and is incorporated herein by reference.

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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:	~~October 27, 2016~~August 11, 2017	/s/ ~~Mark A. Blinn~~ R. Scott Rowe
		~~Mark A. Blinn~~ R. Scott Rowe
		President and Chief Executive Officer (Principal Executive Officer)



Date:	~~October 27, 2016~~August 11, 2017	/s/ ~~Karyn F. Ovelmen~~John E. Roueche III
		~~Karyn F. Ovelmen~~John E. Roueche III
		~~Executive~~ Vice President and Interim Chief Financial Officer (Principal Financial Officer)

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Exhibits Index



Exhibit No.		Description

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

3.2		Flowserve Corporation By-Laws, as amended and restated effective ~~August 11, 2016~~May 18, 2017 (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K dated ~~August 16, 2016)~~May 24, 2017).

10.1		Fourth Amendment to Credit Agreement, dated June 30, 2017, among Flowserve Corporation, Bank of America, N.A., as administrative agent, and other lenders referred therein (incorporated by reference to Exhibit 10.1 to Registrant's Current Report on Form 8-K dated July 7, 2017).

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

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

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

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

101.INS		XBRL Instance Document

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

_______________________

+ Filed herewith.

++ Furnished herewith.

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	(Amounts in millions)
Accounts receivable	$	59.3
Inventories	74.0
Prepaid expenses and other	17.7
Total current assets	151.0
Intangible assets
Trademarks	20.9
Existing customer relationships	45.3
Backlog	8.5
Engineering drawings and other	3.9
Total intangible assets	78.6
Property, plant and equipment	94.5
Long-term deferred tax asset	11.7
Investments in affiliates	7.3
Total assets	343.1
Current liabilities	(88.0		)
Noncurrent liabilities	(114.7		)
Net assets	140.4
Goodwill	201.1
Purchase price, net of cash acquired of $23.4 million	$	341.5