UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

------------------------

FORM 10-Q

(MARK ONE)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED September 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM __________TO _________

COMMISSION FILE NUMBER: 000-23231

------------------------

INNOVATIVE VALVE TECHNOLOGIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

DELAWARE 76-0530346
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)

2 NORTHPOINT DRIVE, SUITE 300 77060
HOUSTON, TEXAS (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (281) 925-0300

------------------------

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

The number of shares of Common Stock of the Registrant, par value $.001
per share, outstanding at November 22, 1999 was 9,664,562.

=============================================================================

INNOVATIVE VALVE TECHNOLOGIES, INC.

FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1999

INDEX

PAGE
----
Part I -- Financial Information...................................... 2
Item 1 -- Financial Statements..................................... 2
Consolidated Balance Sheets as of December 31, 1998 and
September 30, 1999 (Unaudited).................................. 2
Consolidated Statements of Operations for the Three and Nine
Months Ended September 30, 1999 (Unaudited)..................... 3
Consolidated Statements of Cash Flows for the Nine Months
Ended September 30, 1999 and 1999 (Unaudited)................... 4
Notes to Consolidated Financial Statements (Unaudited)............ 5
Item 2 -- Management's Discussion and Analysis of Financial
Condition and Results of Operations............................ 11
Item 3 -- Quantitative and Qualitative Disclosures About Market
Risk............................................................ 16
Part II -- Other Information........................................ 17
Item 3 -- Defaults Upon Senior Securities.......................... 17
Item 5 -- Other Information........................................ 17
Item 6 -- Exhibits and Reports on Form 8-K......................... 19

PART I - FINANCIAL INFORMATION

ITEM 1 -- FINANCIAL STATEMENTS

INNOVATIVE VALVE TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

DECEMBER 31, SEPTEMBER 30,
1998 1999
------------- -------------
(UNAUDITED)
ASSETS

CURRENT ASSETS:
Cash ................................. $ -- $ --
Accounts receivable, net of allowance
of $1,562,104 and $1,584,308 ....... 29,634,167 23,149,816
Inventories, net ..................... 26,007,804 28,434,465
Prepaid expenses and other current
assets ............................. 2,366,871 2,368,185
Deferred tax asset ................... 4,481,256 5,462,013
------------- -------------
Total current assets ....... 62,490,098 59,414,479
PROPERTY AND EQUIPMENT, net ................ 19,469,804 17,926,387
GOODWILL, net .............................. 96,175,294 92,104,831
OTHER NONCURRENT ASSETS, net ............... 5,564,642 5,460,314
------------- -------------
TOTAL ASSETS ............... $ 183,699,838 $ 174,906,011
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
Credit Facility ...................... $ -- $ 69,029,745
Current maturities of long-term debt . 580,140 602,726
Accounts payable and accrued expenses 19,364,587 20,833,171
Makeup Amount (Note 7) ............... -- 6,516,104
------------- -------------
Total current liabilities .. 19,944,727 96,981,746

CREDIT FACILITY ............................ 70,570,584 --
LONG-TERM DEBT, net ........................ 400,834 208,713
CONVERTIBLE SUBORDINATED DEBT .............. 11,668,875 11,668,875
OTHER LONG-TERM OBLIGATIONS ................ 1,909,774 826,868
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, $0.001 par value,
30,000,000 shares authorized,
9,664,562 shares issued and
outstanding ................. 9,665 9,665
Additional paid-in capital ...... 90,960,972 84,550,969
Retained deficit ................ (11,765,593) (19,340,825)
------------- -------------
Total stockholders' equity 79,205,044 65,219,809
------------- -------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY .... $ 183,699,838 $ 174,906,011
============= =============

The accompanying notes are an integral part of these consolidated financial
statements.

INNOVATIVE VALVE TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)

THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
------------------------------- -------------------------------
1998 1999 1998 1999
------------- ------------- ------------- -------------

REVENUES ................ $ 38,881,382 $ 33,980,761 $ 112,752,859 $ 121,083,767
COST OF OPERATIONS ...... 27,479,428 24,250,265 77,809,092 85,152,308
------------- ------------- ------------- -------------
Gross profit ........ 11,401,954 9,730,496 34,943,767 35,931,459
SELLING, GENERAL AND
ADMINISTRATIVE
EXPENSES ............ 11,239,137 9,567,879 30,235,745 31,629,583
NONRECURRING COSTS ...... 2,189,599 -- 2,189,599 --
------------- ------------- ------------- -------------
Income(loss) from
operations ........ (2,026,782) 162,617 2,518,423 4,301,876

OTHER INCOME (EXPENSE):
Interest expense, net (1,722,375) (3,127,491) (3,855,517) (9,324,887)
Loss on assets held
for sale .......... -- -- -- (3,809,712)
Other ............... 138,114 116,802 226,493 176,959
------------- ------------- ------------- -------------
Total Other ......... (1,584,261) (3,010,689) (3,629,024) (12,957,640)
LOSS BEFORE INCOME
TAXES ................. (3,611,043) (2,848,072) (1,110,601) (8,655,764)
PROVISION (BENEFIT) FOR
INCOME TAXES .......... (697,220) (534,044) 377,970 (1,080,532)
------------- ------------- ------------- -------------
NET LOSS ................ $ (2,913,823) $ (2,314,028) $ (1,488,571) $ (7,575,232)
============= ============= ============= =============
LOSS PER SHARE -
BASIC AND DILUTED ..... $ (0.30) $ (0.24) $ (0.17) $ (0.78)
============= ============= ============= =============
WEIGHTED AVERAGE SHARES
OUSTANDING - BASIC AND
DILUTED ............... 9,664,562 9,664,562 8,809,356 9,664,562
============= ============= ============= =============

The accompanying notes are an integral part of these consolidated financial
statements.

INNOVATIVE VALVE TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

NINE MONTHS ENDED
SEPTEMBER 30
-----------------------------
1998 1999
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:

Net loss ....................................... $ (1,488,571) $ (7,575,232)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities

Depreciation and amortization .................. 3,119,407 3,623,837
Loss on assets held for sale ................... -- 3,809,712
Gain on sale of property and equipment ......... (18,430) (28,545)
Deferred taxes ................................. (667,065) (1,875,254)
Nonrecurring costs write-off ................... 1,989,599 --
(Increase) decrease in -
Accounts receivable ....................... (2,722,234) 6,484,351
Inventories ............................... (4,382,122) (3,158,702)
Prepaid expenses and other current
assets .................................. (1,439,617) (502,732)
Other noncurrent assets ................... (1,706,215) (300,665)
Increase (decrease) in -
Accounts payable and accrued expenses ..... (3,220,773) 1,852,451
------------ ------------
Net cash provided by (used in) operating
activities ........................... (10,536,021) 2,329,221
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of assets ................... 179,325 916,488
Additions to property and
equipment ................................. (3,474,440) (1,501,323)
Business acquisitions, net of cash
acquired of $818,416 and $-- ............. (39,119,264) --
------------ ------------
Net cash used in investing
activities ........................... (42,414,379) (584,835)

CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings of long-term debt ................... 330,814 25,921
Repayments of long-term debt ................... (484,944) (212,544)
Repayments of short-term debt .................. (4,660,924) --
Net borrowings(repayments) under Credit Facility 55,127,800 (1,540,838)
Payments on noncompete obligations ............. (115,293) (16,925)
Proceeds from exercise of stock
options ..................................... 208,497 --
------------ ------------
Net cash provided by (used in)
financing activities ................. 50,405,950 (1,744,386)

NET DECREASE IN CASH ...................................... (2,544,450) --
CASH, beginning of period ................................. 2,544,450 --
------------ ------------
CASH, end of period ....................................... $ -- $ --
============ ============
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest ......................... $ 3,366,665 $ 6,347,767
Cash paid for income taxes ..................... $ 2,020,584 $ 515,622

The accompanying notes are an integral part of these consolidated financial
statements.

INNOVATIVE VALVE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

1. BASIS OF PRESENTATION:

Innovative Valve Technologies, Inc. ("Invatec") was incorporated in
Delaware in March 1997 to create the leading single-source provider of
comprehensive maintenance, repair, replacement and value-added distribution
services for industrial valves and related process-system components throughout
North America. Except for its purchase of an established business in July 1997,
Invatec conducted no operations of its own prior to the closing on October 28,
1997 of (i) its initial public offering (the "IPO") of its common stock ("Common
Stock"), (ii) its purchase of two established businesses and (iii) a merger (the
"SSI Merger") in which The Safe Seal Company, Inc. ("SSI") became its
subsidiary. Earlier in 1997, SSI had purchased three established businesses. SSI
and its subsidiaries were affiliates of Invatec prior to the SSI Merger.

For financial reporting purposes, SSI is presented as the "accounting
acquirer" of the seven businesses it and Invatec purchased through the IPO
closing date (collectively, the "Initial Acquired Businesses"), and, as used
herein, the term "Company" means (i) SSI and its consolidated subsidiaries prior
to October 31, 1997 and (ii) Invatec and its consolidated subsidiaries
(including SSI) on that date and thereafter.

Following the IPO, the Company purchased thirteen businesses (these
businesses, together with the Initial Acquired Businesses, are referred to
herein as the "Acquired Businesses"). The Company is accounting for the
acquisitions of the Acquired Businesses in accordance with the purchase method
of accounting. The allocation of the purchase prices paid to the assets acquired
and the liabilities assumed in the acquisitions of the Acquired Businesses has
been recorded initially on the basis of preliminary estimates of fair value and
may be revised as additional information concerning the valuation of those
assets and liabilities becomes available. Purchase accounting for the
acquisitions have been finalized. The accompanying historical consolidated
financial statements of operations present historical information of the
Company, which gives effect to the acquisitions as of their respective
acquisition dates.

The consolidated financial statements herein have been prepared by the
Company without audit, pursuant to rules and regulations of the Securities and
Exchange Commission which permit certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles to be condensed or omitted. The Company believes
the presentation and disclosures herein are adequate to make the information not
materially misleading, and the financial statements reflect all elimination
entries and normal adjustments that are necessary for a fair presentation of the
results for the interim periods ended September 30, 1998 and 1999. Certain
reclassifications have been made to 1998 amounts to conform with 1999
presentation.

Operating results for interim periods are not necessarily indicative of
the results for full years. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Fluctuations in Operating
Results" in Item 2 of this Part I. Invatec's Annual Report on Form 10-K for the
year ended December 31, 1998, as amended (the "1998 10-K Report"), includes the
Company's consolidated financial statements and related notes for 1998.

INNOVATIVE VALVE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

RECENT DEVELOPMENTS

The Company's customers consist primarily of petroleum refining, chemical,
petrochemical, power and pulp and paper plants, the businesses of which tend to
be cyclical. Margins in those industries are highly sensitive to demand cycles
and the Company's customers in those industries have historically tended to
delay capital projects, expensive turnarounds and other maintenance projects
during slow periods. Commencing with the second quarter of 1998 and continuing
into 1999, the Company's business has been negatively impacted by significant
slowdowns experienced by its customers in the exploration and production,
petroleum refining, petrochemical, chemical and pulp and paper industries.

As a result of the above-described downturns affecting the Company's
customers, the Company's level of business declined during 1998 and 1999 and the
Company's earnings for the last three quarters of 1998 fell significantly short
of expectations. Consequently, this decline in earnings resulted in a severe
reduction in the market price of the Company's Common Stock. Declining earnings
also ultimately resulted in the Company defaulting on its credit facility as a
result of failing to meet certain financial covenants which required specific
levels of earnings in relation to debt. This default left the Company unable to
borrow funds for acquisitions thereunder. The Company remained in default under
the loan agreement from July 20, 1998 through March 25, 1999, when the Company
amended its credit facility. See further discussion of the Company's credit
facility in Footnote 3.

Despite cost cuts and the sale of underperforming non-core assets, the
Company has been unable to improve overall profitability in 1999 due to the high
cost of funds under the Credit Facility and the continued reduced level of its
business during 1999. The Company cannot predict when or whether its business
will rebound. In addition, there can be no assurance that a further
deterioration in the Company's business will not occur. Any significant
additional erosion in the Company's business could further depress earnings and
likely result in additional defaults under the Credit Facility.

The Company's acquisition program has been effectively suspended since July
1998 as a result of the low price of the Company's Common Stock and its
inability to borrow funds for acquisitions. The Company has been working with an
investment banking firm since April of this year to develop a financial
restructuring plan for the Company and otherwise explore strategic alternatives.
After numerous discussions with private investors regarding an infusion of
equity capital and with potential acquirors of the Company regarding a sale of
stock or assets of the Company or certain of its subsidiaries, on November 18,
1999, the Company entered into an Agreement and Plan of Merger (the "Merger
Agreement") with Flowserve Corporation ("Flowserve")and a wholly-owned
subsidiary of Flowserve. The Merger Agreement provides for the acquisition of
Invatec for a price of $1.62 per share in cash pursuant to a tender offer (the
"Tender Offer") by the Flowserve subsidiary for all outstanding shares of
Invatec Common Stock, par value $.001 per share, (the "Flowserve Transaction").
The Tender Offer, which commenced on November 22, 1999, is currently scheduled
to expire at 12:00 midnight, New York City time, on December 21, 1999 (but may
be extended under certain circumstances).

Completion of the Tender Offer is subject to certain conditions, including a
majority of the outstanding shares of Invatec's common stock being validly
tendered and not withdrawn prior to the expiration of the Tender Offer,
compliance with certain covenants, no material adverse change having occurred
and the expiration of all applicable waiting periods under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976. Assuming successful completion of the Tender
Offer, all Invatec shares not tendered and purchased in the Tender Offer will be
converted into the right to receive the price per share paid

INNOVATIVE VALVE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

pursuant to the Tender Offer in cash pursuant to a merger of Invatec with the
Flowserve subsidiary as contemplated by the Merger Agreement (the "Merger"). See
"Item 5 - Other Information" for a description of the Merger.

2. GOODWILL

Goodwill represents the excess of the aggregate purchase price paid by the
Company in the acquisition of businesses accounted for using the purchase method
of accounting over the fair market value of the net assets acquired. Goodwill is
amortized on a straight-line basis over 40 years.

The Company periodically evaluates the recoverability of intangibles
resulting from business acquisitions and measures the amount of impairment, if
any, by assessing current and future levels of income and cash flows, business
trends and prospects and market and economic conditions, assuming the acquired
business continues to operate as a consolidated subsidiary. Management has
continued to evaluate various alternatives, including the potential sale of
certain Company assets, which could result in a potential impairment of the
recorded asset value.

During 1998, Company management designed and implemented a restructuring
plan to improve the Company's cost structure, streamline operations and divest
the Company of underperforming assets. As part of this initiative, management
decided to divest a portion of one of its acquired businesses that was incurring
significant operating losses. This subsidiary was engaged primarily in the
distribution of commodity valve products and related process system components.
Management determined that the products distributed by the subsidiary did not
fit into its long-term vision of providing high quality repair services and
value-added distribution of engineered products. Accordingly, certain assets of
this subsidiary were sold effective July 31, 1999. The carrying value of these
assets held for sale was reduced to fair value based upon the final negotiated
sales price with the buyer, less costs to sell. The resulting adjustment of
approximately $3.8 million to reduce assets held for sale to fair value and
goodwill related to the assets held for sale was recorded in the June 30, 1999
consolidated statements of operations. The Company applied the proceeds from the
sale of the assets to reduce its outstanding balance under the Credit Facility.
Pro forma net sales for the operations associated with the impaired assets were
approximately $11.3 million, $7.8 million, and $3.1 million in 1997, 1998, and
the six month period ended June 30, 1999, respectively. The pro forma operating
losses allocable to such operations for the applicable periods were
approximately ($0.1) million, ($0.3) million, and ($0.4) million, respectively.

As described above, the Tender Offer for all of the outstanding Invatec
shares aggregates approximately $15.7 million, which is approximately $49.5
million below the Company's historical cost basis in its net assets (total
stockholders' equity) of $65.2 million as of September 30, 1999. The proposed
acquisition will be accounted for by Flowserve using the purchase method of
accounting, which requires an allocation of the purchase price to the assets
acquired and liabilities assumed based on fair value as determined by Flowserve.
The Company's consolidated financial statements have been prepared on the
historical cost basis of accounting in accordance with general accepted
accounting principles which may be greater or less than the fair value of the
assets and liabilities as determined by Flowserve. See "Item 5 - Other
Information" for a description of certain terms, conditions and termination
events relating to the Tender Offer and the Merger.

3. CREDIT FACILITY:

In March 1999, the Company and its existing syndicate of lenders restructured
the Company's credit facility to provide for a stationary term component of $35
million and a revolving credit facility of up to $45

INNOVATIVE VALVE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

million, up to a maximum aggregate loan amount of $76.5 million, the proceeds of
which may be used only for general corporate and working capital purposes (the
"Credit Facility"). On October 22, 1999, and in contemplation of the Company's
entering into the Merger Agreement, the syndicate of lenders entered into the
Third Amendment to Loan Agreement (the "Third Amendment") with the Company,
waiving certain defaults and suspending the breach of certain other covenants
constituting an event of default until January 31, 2000. The Third Amendment
also reduced the maximum aggregate loan amount under the Credit Facility to
$76.0 million. The Company's domestic subsidiaries have guaranteed the repayment
of all amounts due under the Credit Facility, and repayment is secured by
pledges of the capital stock, and all or substantially all of the assets, of
those subsidiaries. The Credit Facility prohibits acquisitions and the payment
of cash dividends, restricts the ability of the Company to incur other
indebtedness and requires the Company to comply with certain financial
covenants. These financial covenants include provisions for maintenance of
certain levels of earnings before interest, taxes, depreciation, and
amortization ("EBITDA"), certain levels of cash flows as defined by the Credit
Facility and other items specified in the loan agreement. Immediately prior to
the execution of the Third Amendment, the Company was in default under the
Credit Facility. If the Merger fails to occur prior to
January 31, 2000, the Company will again be in default under the Credit
Facility. In that event, the ability of the Company to continue to operate as a
going concern may be jeopardized, and the Company may be forced to pursue
alternatives under reorganization and bankruptcy laws.

The amount of availability under the Credit Facility is governed by a
borrowing base which consists primarily of the accounts receivable and inventory
of the Company and its subsidiaries. The amount available under the revolving
portion of the Credit Facility will decrease upon the occurrence of certain
specified events, such as a sale of assets outside the ordinary course of
business. In addition, the Company and the subsidiaries are required to (i) meet
stringent reporting covenants, (ii) submit to collateral audits and (iii)
deposit all revenues and receipts into lockbox accounts and (iv) retain a
turnaround consultant. Interest accrues at the prime rate as in effect from time
to time, plus 2%, payable monthly. The Credit Facility provides for increasingly
high overall borrowing costs per quarter equal to 1.5% of the principal balance
under the Credit Facility. These fees of approximately $3.2 million are accrued
at September 30, 1999, but will be waived if the Company repays all obligations
under the Credit Facility by January 31, 2000. The entire Credit Facility
matures on January 31, 2000.

In connection with the restructuring of the Credit Facility in March 1999,
the syndicate of lenders was issued warrants to purchase up to 482,262 shares of
the Common Stock of the Company, exercisable at $0.73 per share (10% below the
market price of such Common Stock as of March 25, 1999), and granted certain
registration rights with respect to the shares issuable upon exercise of the
warrants. The warrants do not have an expiration date. The estimated fair value
of the warrants at the date issued was $0.21 per share using a Black-Scholes
option pricing model. The fair value of the warrants was recorded as deferred
loan costs and is being amortized over the term of the Credit Facility. Under
the Third Amendment, if the Company repays all obligations under the Credit
Facility by January 31, 2000, the syndicate of lenders has agreed to return
these warrants to the Company for cancellation.

At November 19, 1999, the Company's net borrowings under the Credit Facility
were approximately $73.2 million bearing interest at 10.25%, excluding the
effect of contingent fees discussed above.

INNOVATIVE VALVE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

4. NONRECURRING COSTS

Nonrecurring costs reflect approximately $1.4 million in write-offs of
capitalized costs of abandoned projects, including a friction welding system and
$0.8 million of accrued severance costs.

5. INCOME TAXES:

Certain of the Acquired Businesses were subject to the provisions of
Subchapter S of the Internal Revenue Code prior to their acquisition by the
Company. Under these provisions, their former stockholders paid income taxes on
their proportionate share of the earnings of these businesses. Because the
stockholders were taxed directly, their businesses paid no federal income tax
and only certain state income taxes.

The Company files a consolidated federal income tax return that includes the
operations of the Acquired Businesses for periods subsequent to their respective
acquisition dates.

6. EARNINGS (LOSS) PER SHARE:

The computation of earnings (loss) per share of Common Stock for the
interim periods is presented in accordance with SFAS No. 128, "Earnings Per
Share," based on the following shares of Common Stock outstanding:

THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
---------------------- ----------------------
1998 1999 1998 1999
--------- --------- --------- ---------

Issued and outstanding at January 1 7,890,198 9,664,562 7,890,198 9,664,562
Issued to acquire businesses in 1998
(weighted) ....................... 1,749,052 -- 903,086 --
Issued for stock options exercised
and warrants exercised (weighted). 25,312 -- 16,072 --
--------- --------- --------- ---------
Average shares outstanding -
Basic and Diluted ................ 9,664,562 9,664,562 8,809,356 9,664,562
========= ========= ========= =========

Diluted weighted average shares outstanding for 1998 and 1999 do not
reflect the effect of certain options and warrants to purchase common stock,
convertible subordinated notes which were outstanding during the period, and the
potential issuance of additional shares provided in connection with certain
acquisition agreements (as discussed in Note 7) as these items were
anti-dilutive.

7. CONTINGENT CONSIDERATION

Three of the acquisition agreements for the Acquired Businesses contain
provisions requiring the Company to pay additional amounts (the "Makeup Amount")
to the former shareholders of each acquired business on the first anniversary of
that acquisition if the price of Invatec Common Stock on that anniversary date
is below a certain level. Two of those acquisition agreements were entered into
on July 9, 1998, and give Invatec the option of paying up to one-half of the
Makeup Amount in cash, with the remainder paid in Common Stock valued at the
market price on the anniversary date. The third agreement was entered into on
June 29, 1998 and gives Invatec the option of paying the entire Makeup Amount in
cash or Common Stock valued at the market price on the anniversary date.

INNOVATIVE VALVE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

The Makeup Amount is approximately $6.5 million and has been accrued at
September 30, 1999, with a corresponding offset to additional paid in capital.
Shares of Invatec Common Stock have not been issued to the former shareholders
of the certain Acquired Businesses, and the Company's management has negotiated
a discount in the payment of the Makeup Amount with the former shareholders
contingent upon payment to the shareholders by January 31, 2000.

8. SUBSEQUENT EVENTS:

Company management has negotiated with holders of its subordinated debt
and of the Makeup Amount described above, and with its primary lender regarding
certain bank fees and related warrants, resulting in a reduction of these
obligations of approximately $9.6 million, contingent upon payment of the
discounted amounts by January 31, 2000.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.

The following discussion should be read in conjunction with the
consolidated financial statements and the notes thereto which are included in
Item 1 of this Part I. This report contains "forward-looking" statements that
involve a number of risks, uncertainties and assumptions. No assurance can be
given that actual results will not differ materially from these statements as a
result of various factors. See "Factors That May Affect Future Results" in Item
1 of the Company's Annual Report on Form 10-K for the year ended December 31,
1998.

OVERVIEW

The Company derives its revenues principally from (i) sales of industrial
valves and related process-system components to its process-industry customers
and commissions paid by the manufacturers of these products in connection with
the Company's direct sales of these products and (ii) performance of
comprehensive maintenance repair services of industrial valves and related
process-system components for its customers. Costs of operations consist
principally of direct costs of valves and components sold, coupled with labor
and overhead costs connected with the performance of repair services. Selling,
general and administrative expenses consist principally of compensation and
benefits payable to sales, management and administrative personnel, insurance,
depreciation and amortization and other related expenses.

The Company's customers consist primarily of petroleum refining,
petrochemical, chemical, power and pulp and paper plants, the businesses of
which tend to be cyclical. Margins in those industries are highly sensitive to
demand cycles, and the Company's customers in those industries have historically
tended to delay capital projects, expensive turnarounds and other maintenance
projects during slow periods. Commencing with the second quarter of 1998 and
continuing into 1999, the Company's business was negatively impacted by
significant slowdowns experienced by its customers in the exploration and
production, petroleum refining, petrochemical, chemical, and pulp and paper
industries.

As a result of the above-described downturns affecting the Company's
customers, the Company's level of business and earnings declined during 1998 and
1999. This decline in earnings resulted in a severe reduction in the market
price of the Company's Common Stock and ultimately resulted in the Company
defaulting on its credit facility as a result of failing to meet certain
financial covenants which required specific levels of earnings in relation to
debt. The Company remained in default under the loan agreement from July 20,
1998 through March 25, 1999 when the Company amended its Credit Facility. The
Company was again in default under the Credit Facility immediately prior to
entering into the Second Amendment and Third Amendment thereto with its
syndicate of lenders on April 21, 1999 and October 22, 1999, respectively. Under
the Third Amendment, the Company's Credit Facility, expiring on January 31,
2000, consists of a $35 million stationary term component and up to a $45
million revolving line of credit, up to an aggregate maximum of $76 million,
from its existing bank group. The Credit Facility prohibits the Company from
making acquisitions and provides for increasingly high borrowing costs.

Since the suspension of the Company's acquisition program, the Company has
focused on efforts to cut costs and otherwise improve profitabilty. During 1998,
the Company eliminated in excess of $5 million in annualized costs, including
substantial corporate overhead. In 1999, the Company has continued its cost
cutting program, sold underperforming non-core assets of certain subsidiaries,
downsized certain of its operations to fit the current level of business,
consolidated certain locations and consolidated the marketing efforts currently
conducted by different subsidiary companies in an effort to increase operational
efficiency.

Despite these efforts, the Company has been unable to improve overall
profitability in 1999 due to the high cost of funds under the Credit Facility
and the continued reduced level of its business during 1999. The Company cannot
predict when or whether its business will rebound. In addition, there can be no
assurance that a further deterioration in the Company's business will not occur.
Any significant additional erosion in the Company's business would further
depress earnings and result in additional defaults under the Credit Facility.

RESULTS OF OPERATIONS -- HISTORICAL (Unaudited)

The following table sets forth for the Company certain selected
consolidated financial data and that data as a percentage of consolidated
revenues for the periods indicated:

THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
----------------------------------------------- --------------------------------------------------
1998 1999 1998 1999
-------------------- ----------------------- --------------------- -----------------------
(IN THOUSANDS) (IN THOUSANDS)

Revenues ....................$ 38,881 100% $ 33,981 100% $ 112,753 100% $ 121,084 100%
Cost of operations ......... 27,479 71 24,250 71 77,809 69 85,152 70
--------- --------- --------- --------- --------- --------- --------- ---------
Gross profit ............... 11,402 29 9,731 29 34,944 31 35,932 30
Selling, general and
administrative expenses .. 11,239 29 9,568 28 30,236 27 31,630 26
Nonrecurring costs ......... 2,190 6 -- -- 2,190 2 -- --
--------- --------- --------- --------- --------- --------- --------- ---------
Income (loss) from
operations ............... (2,027) (6) 163 1 2,518 2 4,302 4

Interest expense, net ...... (1,722) (4) (3,128) (9) (3,856) (3) (9,325) (8)
Loss on assets held
for sale ................. -- -- -- -- -- -- (3,810) (3)
Other income (expense) ..... 138 -- 117 -- 227 -- 177 --
--------- --------- --------- --------- --------- --------- --------- ---------
Loss from operations
before income taxes ...... $ (3,611) (10)% $ (2,848) (8)% $ (1,111) (1)% $ (8,656) (7)%
========= ========= ========= ========= ========= ========= ========= =========

THREE MONTHS ENDED SEPTEMBER 30

REVENUES -- Revenues decreased $4.9 million, or (13)%, from $38.9
million in the three months ended September 30, 1998 to $34.0 million in the
corresponding period in 1999. This decrease primarily resulted from the sale of
certain assets of a subsidiary coupled with a reduced level of repair and
service revenue as compared with the prior year.

GROSS PROFIT -- Gross profit decreased $1.7 million, or (15)%, from
$11.4 million in the three months ended September 30, 1998 to $9.7 million in
the corresponding period in 1999. This decrease occurred principally as a result
of the reduction in sales volumes previously described. Gross margin as a
percentage of revenues remained flat at 29%.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES -- Selling, general and
administrative expenses decreased $1.7 million, or (15%), from $11.2 million in
the three months ended September 30, 1998 to $9.6 million in the corresponding
period in 1999. This decrease, and the decrease in these expenses as a
percentage of revenues from 29% to 28%, primarily resulted from the cost
reductions previously described.

INTEREST EXPENSE, NET - Interest expense, net increased $1.4 million,
or 82% from $1.7 million in the three months ended September 30, 1998, to $3.1
million in the corresponding period in 1999. This increase is due to the
increased borrowings under the Credit Facility primarily for 1998 acquisitions
and the accrued contingent fees for the third quarter of 1999 of approximately
$1.0 million due under the Credit Facility.

NINE MONTHS ENDED SEPTEMBER 30

REVENUES - Revenues increased $8.3 million, or 7%, from $112.8
million in the nine months ended September 30, 1998 to $121.1 million in the
corresponding period in 1999. This increase primarily resulted from the full

inclusion in the 1999 period of the results of the businesses acquired during
1998, offset by downturns previously described.

GROSS PROFIT - Gross profit increased $1.0 million, or 3%, from $34.9
million in the nine months ended September 30, 1998 to $35.9 million in the
corresponding period in 1999. This increase occurred principally as a result of
the inclusion in the 1999 period of the incremental gross profit of the
businesses acquired during 1998. Gross margin as a percentage of revenues
decreased from 31% to 30%, primarily resulting from lower sales volumes
associated with the downturns previously described.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES - Selling, general and
administrative expenses increased $1.4 million, or 5%, from $30.2 million in the
nine months ended September 30, 1998 to $31.6 million in the corresponding
period in 1999. This increase primarily reflected the incremental selling,
general and administrative expenses in the 1999 period of the businesses
acquired during 1998. As a percentage of revenues, these expenses decreased from
27% to 26% due to the cost reductions described above.

INTEREST EXPENSE, NET - Interest expense, net increased $5.5 million,
or 142%, from $3.9 million in the nine months ended September 30, 1998 to $9.3
million in the corresponding period in 1999. This increase is due to the
increased borrowings under the Credit Facility primarily for 1998 acquisitions
and the accrued contingent fees of approximately $3.2 million due under the
Credit Facility.

LOSS ON ASSETS HELD FOR SALE - A loss on assets held for sale of $3.8
million for the nine months ended September 30, 1999, reflects the reduction of
the carrying value of assets of one of its subsidiaries sold in the third
quarter to their fair value based on the final sales price to the buyer, less
selling costs. This loss was recorded in June 1999.

FLUCTUATIONS IN OPERATING RESULTS

The Company's results of operations may fluctuate significantly from
quarter-to-quarter or year-to-year because of a number of factors, including the
timing of acquisitions, seasonal and cyclical fluctuations in the demand for the
Company's services and competitive factors. Accordingly, quarterly comparisons
of the Company's revenues and operating results should not be relied on as an
indication of future performance, and the results of any quarterly period may
not be indicative of results to be expected for a full year.

LIQUIDITY AND CAPITAL RESOURCES

For the nine months ended September 30, 1999, the Company's
operations generated $2.3 million in cash. Capital expenditures totaled $1.5
million and repayments of debt amounted to $1.7 million.

In March 1999, the Company and its existing syndicate of lenders
amended the Credit Facility to provide for a stationary term component of $35
million and a revolving credit facility of up to $45 million, up to a maximum
aggregate loan amount of $76.5 million, the proceeds of which may be used only
for general corporate and working capital purposes. As amended on October 22,
1999, the maximum aggregate loan amount under the Credit Facility is $76
million. The Company's domestic subsidiaries have guaranteed the repayment of
all amounts due under the facility, and repayment is secured by pledges of the
capital stock, and all or substantially all of the assets, of those
subsidiaries. The Credit Facility prohibits acquisitions and the payment of cash
dividends, restricts the ability of the Company to incur other indebtedness and
requires the Company to comply with certain financial

covenants. These financial covenants include provisions for maintenance of
certain levels of EBITDA and other items specified in the loan agreement.

The amount of availability under the Credit Facility is governed by a
borrowing base which consists primarily of the accounts receivable and inventory
of the Company and its subsidiaries, although the amount available under the
revolving portion of the Credit Facility will decrease upon the occurrence of
certain specified events, such as a sale of assets outside the ordinary course
of business. Interest accrues at the prime rate as in effect from time to time,
plus 2%, payable monthly. In addition, fees accrue each quarter at the rate of
1.5% of the unpaid principal balance under the Credit Facility. These fees of
approximately $3.2 million are accrued at September 30, 1999, but will be waived
if all the Company's obligations under the Credit Facility are repaid in full by
January 31, 2000. The entire Credit Facility matures on January 31, 2000.

Immediately prior to the execution of the Third Amendment, the
Company was in default under the Credit Facility for failure to comply with
certain financial and other covenants. As part of the Third Amendment, the
breach of any such covenant does not and will not constitute a default or event
of default unless the same is continuing on January 31, 2000. If the Merger is
not consummated by January 31, 2000, the Company will be in default under the
Credit Facility. In that event, the ability of the Company to continue to
operate as a going concern may be jeopardized, and the Company may be forced to
pursue alternatives under reorganization and bankruptcy laws.

The Company retained an investment banking firm in April 1999 to
assist it in seeking a significant equity infusion to enable the Company to
reduce its debt, obtain a new credit facility to reduce its borrowing costs and
potentially resume its acquisition program on a scaled down, strategic basis.
After a thorough investigation of those options, on November 18, 1999, the
Company entered into the Merger Agreement with Flowserve, whereby Flowserve will
make a tender offer to acquire all of the Company's outstanding shares of Common
Stock for $1.62 per share and, upon the purchase of a majority of the shares,
merge its subsidiary into the Company with the result that the Company will
become a wholly-owned subsidiary of Flowserve. See "Item 5 - Other Information"
for a description of the Merger.

At September 30, 1999, the Company's outstanding borrowings under the
Credit Facility were $69.0 million, bearing interest at 10.25%. At November 19,
1999, the Company's outstanding borrowings under the Credit Facility were $73.2
million, bearing interest at 10.25% per annum, excluding the effect of the fees
discussed above.

During 1998, Company management designed and implemented a
restructuring plan to reduce the Company's cost structure, streamline operations
and divest the Company of underperforming assets. As part of this initiative,
management decided to divest a portion of one of its acquired businesses that
was incurring significant operating losses. This subsidiary was engaged
primarily in the distribution of commodity valve products and related process
system components. Management determined that the products distributed by the
subsidiary did not fit into its long-term vision of providing high quality
repair services and value-added distribution of engineered products.
Accordingly, certain assets of this subsidiary were sold effective July 31, 1999
for $550,000 in cash. The Company applied the proceeds from the sale of the
assets to reduce its outstanding balance under the Credit Facility.

At September 30, 1999, the Company's capitalization included
approximately $11.7 million aggregate principal amount of convertible
subordinated notes due 2002-04 that bore a weighted average interest rate of
5.3%. The Company issued these notes as partial consideration in

acquisitions of certain Acquired Businesses. These notes are convertible into
Common Stock at initial conversion prices ranging from $16.90 to $22.20 per
share. The Company's management has negotiated a discount in the payment of the
convertible subordinated notes with the holders of the notes if such payment is
made by January 31, 2000.

Three of the acquisition agreements for the Acquired Businesses
contain provisions requiring the Company to pay additional amounts (the "Makeup
Amount") to the former shareholders of each acquired business on the first
anniversary of that acquisition if the price of Invatec Common Stock on that
anniversary date is below a certain level. Two of those acquisition agreements
were entered into on July 9, 1998, and give Invatec the option of paying up to
one-half of the Makeup Amount in cash, with the remainder paid in Common Stock
valued at the market price on the anniversary date. The third agreement was
entered into on June 29, 1998 and gives Invatec the option of paying the entire
Makeup Amount in cash or Common Stock valued at the market price on the
anniversary date.

The Makeup Amount is approximately $6.5 million and has been accrued
at September 30, 1999 with a corresponding entry to additional paid in capital.
Shares of Invatec Common Stock have not been issued to the former shareholders
of the certain Acquired Businesses, and the Company's management has negotiated
a discount in the payment of the Makeup Amount with the former shareholders
contingent upon such payment being made by January 31,2000.

YEAR 2000 ISSUE

The Company has assessed its Year 2000 issues and has developed a
plan to address both the information technology ("IT") and non-IT systems
issues. The plan involves the replacement or modification of some of the
existing operating and financial computer systems utilized by the Company's
operating subsidiaries. The Company has not developed any computer systems for
use in its business; consequently, it believes its Year 2000 issues relate to
systems that different vendors have developed and sold to the Company for which
modifications are or will be available.

The Company has contacted the vendors that provide its telephone
systems and computer systems, as well as its OEMs. The Company has received
confirmation from its major vendors of new valves and other process system
components, telephone systems, and computer systems that their products are Year
2000 compliant. Further, the Company has replaced many computer systems that are
not Year 2000 compliant in the normal course of updating various systems used at
the operating subsidiaries. At this time, the replacement of the systems which
were not Year 2000 compliant is complete and the amount expended was
approximately $400,000.

The Company believes that any temporary disruptions would not be
material to its overall business or results of operations. As a contingency
plan, immediately prior to January 1, 2000, the Company intends to print all
inventory listings in its systems and take other reasonably necessary steps so
that the Company can operate "manually" until such time as any temporary Year
2000 problems related to its operations are cured.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Revolving credit borrowings under the Company's Credit Facility
contain certain market risk exposure. The Company's outstanding borrowings under
the Credit Facility were $69.0 million at September 30, 1999. A change of one
percent in the interest rate would cause a change in interest expense of
approximately $690,000 or $0.07 per share, on an annual basis. The Credit
Facility was not entered into for trading purposes and carries interest at a
pre-agreed upon percentage point spread from either the prime interest rate.

PART II - OTHER INFORMATION

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

The Company has been operating since June 1999 under waivers for
defaults in certain covenants in its Credit Facility. At November 19, 1999, the
Company's net borrowings under the Credit Facility were $73.2 million. See Note
3 to Notes to "Consolidated Financial Statements" in Item 1 and "Management's
Discussion and Analysis of Financial Condition and Results of Operations-
Liquidity and Capital Resources" in Item 2 of Part I of this report.

ITEM 5. OTHER INFORMATION

The following information is included by the Company in this
Quarterly Report on Form 10-Q in lieu of filing a Current Report on Form 8-K.

On November 18, 1999, the Company entered into an Agreement and Plan
of Merger with Flowserve Corporation ("Flowserve") and its wholly owned
subsidiary Forrest Acquisition Sub, Inc.(the "Purchaser"), and certain holders
of Company Common Stock entered into Stockholder Agreements with Purchaser, the
operation of either of which may result in a change in control of the Company.

On November 22, 1999, the Purchaser commenced a cash tender offer to
purchase all shares of Company Common Stock at a price of $1.62 per share, net
to the seller in cash, without interest thereon, upon the terms and subject to
the conditions set forth in Purchaser's Offer to Purchase and the related Letter
of Transmittal sent to all Company stockholders. The Tender Offer is scheduled
to expire at 12:00 midnight (New York City Time) on December 21, 1999, unless
extended in accordance with applicable law and the terms of the Merger
Agreement.

The Tender Offer is being made pursuant to the Merger Agreement among
the Company, Flowserve and Purchaser. The Merger Agreement provides, among other
things, that as soon as practicable after the consummation of the Tender Offer,
and the satisfaction of the other conditions set forth in the Merger Agreement
and in accordance with the relevant provisions of the General Corporation Law of
the State of Delaware, Purchaser will be merged into the Company and the Company
will be a wholly-owned subsidiary of Flowserve. At the effective time of the
Merger (the "Effective Time"), each share of Common Stock issued and outstanding
immediately prior to the Effective Time will be canceled and converted into the
right to receive the price per share paid pursuant to the Tender Offer in cash,
without interest.

Concurrently with the execution and delivery of the Merger Agreement,
Roger L. Miller, William E. Haynes, Charles F. Schugart and Douglas R.
Harrington, Jr. (collectively, the "Granting Stockholders") entered into a
Stockholder Agreement with Purchaser (the "Stockholder/Option Agreement")
pursuant to which they agreed to tender (and not withdraw) their shares in the
Tender Offer, granted an irrevocable proxy to Purchaser's designees with respect
to their shares and granted to Purchaser an option to purchase the shares held
by them at the offer price under specified circumstances. Also on November 18,
1999, each of Philip Industrial Services Group, Inc. and Philip Environmental
Services, Inc. (each a "Chapter 11 Stockholder" and collectively with the
Granting Stockholders, the "Selling Stockholders"), entered into a Stockholder
Agreement (each a "Chapter 11 Stockholder Agreement," and together with the
Stockholder/Option Agreement, the "Stockholder Agreements") with Purchaser. The
Chapter 11 Stockholders are affiliates of Philip Services Corp. and have filed
voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy
Code with the Bankruptcy Court for the District of Delaware (the "Delaware
Bankruptcy Court"). Each Chapter 11 Stockholder Agreement is similar to the
Stockholder/Option Agreement except that it does not contain an option to

purchase provision and it conditions effectiveness on Delaware Bankruptcy Court
approval of that Chapter 11 Stockholder Agreement or the earlier confirmation by
the Delaware Bankruptcy Court of a plan of reorganization for that Chapter 11
Stockholder. The Selling Stockholders collectively own 3,125,400 shares, or
32.3% of the outstanding shares of Company Common Stock.

All discussions of the Merger and related transactions are qualified
in their entirety by the descriptions thereof in the Schedule 14D-9 of the
Company, together with the Exhibits thereto, filed with the Securities and
Exchange Commission on November 22, 1999 and included herein as Exhibit 2.4(b).

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits

EXHIBIT
NUMBER DESCRIPTION
------- -----------

2.1(a)* -- Merger Agreement dated June 29, 1998 among Invatec,
Plant Maintenance, Inc. and the former shareholders thereof
(Form 10-K for the year ended December 31, 1998 (File No.
000-23231) Ex. 2.1(a)).

2.1(b)* -- Amendment to Merger Agreement dated as of September 25, 1998
among Invatec, Plant Maintenance, Inc. and the former
shareholders thereof (Form 10-K for the year ended December 31,
1998 (File No. 000-23231) Ex. 2.1(b)).

2.1(c) -- Second Amendment among Invatec, Plant Maintenance, Inc. and
the former shareholders thereof.

2.1(d) -- Waiver letters dated November 13, 1999 among Invatec and the
former shareholders of Plant Maintenance, Inc.

2.2(a)* -- Merger Agreement dated July 9, 1998 among Invatec, Collier
Equipment Corporation and the former shareholders thereof (Form
10-K for the year ended December 31, 1998 (File No. 000-23231)
Ex. 2.2(a)).

2.2(b)* -- Amendment to Merger Agreement dated as of August 20, 1998
among Invatec, CECORP, Inc. (the successor corporation to
Collier Equipment Corporation), and the former shareholders
thereof (Form 10-K for the year ended December 31, 1998 (File
No. 000-23231) Ex. 2.2(b)).

2.2(c) -- Letter Agreement dated November 9, 1999, among the Company
and the former shareholders of Collier Equipment Corporation.

2.3(a)* -- Merger Agreement dated as of July 9, 1998 among Invatec,
Colonial Process Equipment Co., Inc. and Colonial Service
Company, Inc. and the former shareholder thereof (Form 10-K
for the year ended December 31, 1998 (File No. 000-23231) Ex.
2.3(a)).

2.3(b)* -- Amendment to Merger Agreement dated as of September 22, 1998
among Invatec, Colonial Process Service and Equipment Co., Inc.
(the successor corporation to Colonial Process Equipment Co.
Inc. and Colonial Service Company, Inc.) and the former
shareholder thereof (Form 10-K for the year ended December 31,
1998 (File No. 000-23231) Ex. 2.3(b)).

2.3(c) -- Second Amendment among Invatec, Colonial Process Service &
Equipment Co., Inc. and the former shareholder thereof.

2.4(a)* -- Agreement and Plan of Merger dated at of November 18, 1999
among Invatec, Flowserve Corporation and Flowserve Acquisition
Sub, Inc. (Schedule 14D-9 of the Registrant filed November 22,
1999 (File No. 005-51843)Ex. 3).

2.4(b)* -- Schedule 14D-9 of Registrant filed November 22, 1999 (File
No. 005-51843).

3.1* -- Certificate of Incorporation of Invatec, as amended (Form
10-Q for the quarterly period ended September 31, 1998 (File
No. 000-23231) Ex. 3.1).

3.2* -- Amended and Restated Bylaws of Invatec (Form 10-Q for the
quarterly period ended September 30, 1998 (File No. 000-23231)
Ex. 3.2).

4.1(a)* -- Loan Agreement dated July 7, 1998 among Invatec, Chase Bank
of Texas, National Association, as Agent and as a lender, and
the other lenders referred to therein (Form 10-Q for the
quarterly period ended September 30, 1998 (File No. 000-23231),
Ex. 4.1).

4.1(b)* -- Amendment to Loan Agreement dated March 21, 1999 among
Invatec, Chase Bank of Texas and the other lenders (Form 10-K
for the year ended December 31, 1998 (File No. 000-23231) Ex.
4.6(b)).

4.1(c) -- Second Amendment to Loan Agreement dated as of April 21, 1999
among Invatec, Chase Bank of Texas and the other lenders.

4.1(d) -- Third Amendment to Loan Agreement dated as of October 22, 1999
among Invatec, Chase Bank of Texas and the other lenders.

4.2* -- Registration Rights Agreement dated as of March 21, 1999
by and among Invatec, Chase Bank of Texas and the other lenders
(Form 10-K for the year ended December 31, 1998 (File No.
000-23231) Ex. 4.8).

4.3* -- Form of Warrants dated as of March 21, 1999 to purchase an
aggregate of 482,262 shares of Invatec Common Stock issued by
Invatec to Chase Bank of Texas, and the other lenders (Form
10-K for the year ended December 31, 1998 (File No. 000-23231)
Ex. 4.9). Invatec and certain of its subsidiaries are parties
to certain debt instruments under which the total amount of
securities authorized does not exceed 10% of the total assets
of Invatec and its subsidiaries on a consolidated basis.
Pursuant to paragraph 4(iii)(A) of Item 601(b) of Regulation
S-K, Invatec agrees to furnish a copy of those instruments to
the SEC on request.

4.4* -- Amendment to Rights Agreement dated as of November 18, 1999
between the Company and ChaseMellon Shareholder Services,
L.L.C., as Rights Agent (Schedule 14D-9 of the Registrant filed
November 22, 1999 (File No. 005-51843) Ex. 10).

10.1* -- 1997 Incentive Plan of Invatec, as amended (Form 10-K for
the year ended December 31, 1998 (File No. 000-23231) Ex.
10.1).

10.2* -- Stockholder Agreement by and among Forrest Acquisition Sub,
Inc., Roger L. Miller, William E. Haynes, Charles F. Schugart
and Douglas R. Harrington, Jr., dated as of November 18, 1999.
(Schedule 14D-9 of the Registrant filed November 22, 1999 (File
No. 005-51843) Ex. 12.1).

10.3* -- Stockholder Agreement by and between Forrest

Acquisition Sub., Inc. and Philip Industrial Services Group,
Inc. dated as of November 18, 1999. (Schedule 14D-9 of the
Registrant filed November 22, 1999 (File No. 005-51843)
Ex. 12.2)

10.4* -- Stockholder Agreement by and between Forrest Acquisition
Sub, Inc. and Philip Environmental Services, Inc. dated as of
November 18, 1999. (Schedule 14D-9 of the Registrant filed
November 22, 1999 (File No. 005-51843) Ex. 12.3).

27.1 -- Financial Data Schedule.

- -------------------
* Incorporated by reference to the filing indicated.

(b) Reports on Form 8-K.

This Quarterly Report on Form 10-Q is being filed in lieu of, and
contains the information required by, the Current Report on Form 8-K of the
Company with respect to the execution of the Merger Agreement and the potential
Merger.

SIGNATURE

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

INNOVATIVE VALVE TECHNOLOGIES, INC.

DOUGLAS R. HARRINGTON, JR.
VICE PRESIDENT
CHIEF FINANCIAL OFFICER

Dated: November 22, 1999