1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number 1-13179 FLOWSERVE CORPORATION (Exact name of registrant as specified in its charter) NEW YORK 31-0267900 ------------------------------ ------------------- State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 222 W. LAS COLINAS BOULEVARD SUITE 1500 IRVING, TEXAS 75039 ---------------------------------------- ------------- (Address of principal executive offices) (Zip Code) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (972) 443-6500 -------------- SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NAME OF EACH EXCHANGE ON TITLE OF EACH CLASS WHICH REGISTERED ------------------- ---------------- COMMON STOCK, $1.25 PAR VALUE NEW YORK STOCK EXCHANGE SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE 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 ----- ----- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] The aggregate market value of the common stock held by non-affiliates of the registrant as of February 15, 2000 was approximately $450.3 million. The number of shares outstanding of the registrant's common stock as of February 15, 2000: 37,825,600 shares. DOCUMENTS INCORPORATED BY REFERENCE Portions of the registrant's Proxy Statement dated March 16, 2000 are incorporated by reference into Part III of this Form 10-K. Portions of the registrant's Annual Report to Shareholders for the year ended December 31, 1999, are incorporated by reference into Parts I, II and IV of this Form 10-K.
2 PART I ITEM 1. BUSINESS Flowserve Corporation ("Flowserve") was incorporated in the State of New York on May 1, 1912. On July 22, 1997, Flowserve (formerly known as Durco International Inc. and The Duriron Company, Inc.) merged with BW/IP, Inc. ("BW/IP") creating one of the world's leading providers of industrial flow management services. All references herein to the "Company" or "Flowserve" refer collectively to Flowserve and its subsidiaries unless otherwise indicated by the context. Flowserve is principally engaged in the design, manufacture, distribution and service of industrial flow management equipment throughout the world. The Company provides pumps, valves and mechanical seals primarily for the refinery and pipeline segments of the petroleum industry, the chemical processing industry, the power generation industry and other industries requiring flow management products and services. Flowserve manufactures certain standard products, but specializes in the development of precision engineered equipment for critical service applications where high reliability is required. The Company's materials expertise, design and engineering capabilities and applications know-how have enabled it to develop product lines that are responsive to customers' needs for manufacturing efficiency, reduced maintenance cost, and avoidance of premature equipment failure. An important element of Flowserve's business is its successful emphasis on providing aftermarket products and services. These services consist of supplying parts, making repairs and providing a variety of technical services for the upgrade or retrofit of equipment to extend its useful life or improve its operating characteristics. In January 2000, the Company expanded its service and repair capabilities for process-industry customers through its acquisition of Innovative Valve Technologies, Inc., ("Invatec") at a cost of approximately $100 million, including assumed debt. Invatec is engaged principally in providing comprehensive maintenance, repair, replacement and value-added distribution services for valves, piping systems, instrumentation and other process-system components. In February 2000, the Company announced its agreement to acquire Ingersoll-Dresser Pump Company ("IDP") for $775 million in cash. The transaction is subject to regulatory approval and is expected to close in mid-April 2000. IDP manufactures a broad range of centrifugal, reciprocating and rotary pumps. After this acquisition, the Company expects to be the world's second largest engineered pump company. Unless otherwise specifically stated to the contrary in the following text, the impact of the Invatec acquisition and the agreement to acquire IDP on the Company's business operations or financial performance is not included in this Annual Report on Form 10-K. The Company operates in three business segments: Rotating Equipment, Flow Control and Flow Solutions. Included in Note 13 to the consolidated financial statements on pages 44 and 45 of the 1999 Annual Report to Shareholders, provided as part of Item 8 of this Form 10-K and incorporated herein by reference, is information concerning the Company's sales, operating income and identifiable assets by business and geographic segment for each year in the three-year period ended December 31, 1999. For a significant portion of its products, the Company's domestic operations supply each other and the Company's foreign manufacturing subsidiaries with components and subassemblies. In December 1999, the Company announced a planned restructuring of its operations to streamline the Company for better value and to improve asset utilization. Under this plan, the Company intends to close 10 facilities and incur a restructuring charge of $15.9 million, plus related expenses totaling $10.8 million of special items. 1
3 ROTATING EQUIPMENT PRODUCTS Through its Rotating Equipment Division business segment, the Company designs, manufactures and distributes pumps and related equipment (in addition to the products to be acquired upon the expected closing of the IDP acquisition). Pump products accounted for approximately 33%, 34% and 35% of the Company's sales to external customers in 1999, 1998 and 1997, respectively. Pumps are manufactured to industry-recognized standards, including those set by the American Petroleum Institute (API), the American National Standards Institute (ANSI) and the International Standards Organization (ISO). Pump products for the petroleum industry include horizontal double case pumps used especially for hot oils under high pressure, horizontal multi-stage pumps used in pipelines, vertical pumps used for low specific gravity applications, vertical circulating pumps used for cooling water, submersible pumps used for water or brine injection in oil fields, and submersible water pumps used on offshore platforms to supply water for fire fighting. Pump products for chemical processing industries include metallic and nonmetallic pumps, varying in size, capacity, material components and sealant specifications. These pumps are used primarily to move liquids during processing activities, but also in auxiliary services such as waste removal, water treatment and pollution control. The pumps are modular in design and manufactured to withstand the abrasive and/or corrosive service fluids being processed by customers in these industries. Pump products for the power generating industry include a variety of pumps used in both nuclear and fossil fuel facilities to generate steam. Products for the fossil fuel power generation industry are horizontal double case pumps for high pressure boiler feed applications, horizontal multi-stage pumps for low pressure boiler feed applications, vertical double case pumps and vertical circulating pumps. The Company supplies pumps for other industrial uses, including without limitation industrial production, utility services, pollution control, mining operations and municipal water transport. MARKETING AND DISTRIBUTION Pumps or pump components are produced in plant facilities in the United States, Mexico, Argentina, Belgium and The Netherlands. Pump manufacturing facilities in The Netherlands and Belgium are key sources of pumps sold in Europe, Africa and the Middle East. The Argentine facility provides products primarily for Argentine customers, but also serves customers in other South American countries. The Company's Mexican operation manufactures pumps for export and for Mexican customers. Large vertical circulating pumps manufactured in Mexico are distributed worldwide. A majority-owned joint venture in India, which began production in late 1997, manufactures ANSI and ISO pump components which are generally assembled in Belgium. The two specialized component manufacturing facilities in New Mexico provide a significant portion of pump components (except for ANSI pump components). The component facilities also supply components to other Company plants outside of the U.S. on an economically selective basis. The Company's pump products are primarily marketed to end-users and engineering contractors through the Company's worldwide pump sales force, regional service centers, independent distributors and representatives and, for modular pumps, a national parts distribution center. The majority of the Company's sales of pump products in the nuclear power market are in the United States and Japan, where the Company's large installed base of equipment provides a continuing market for products and services to ensure safety and reliability, major customer concerns. A significant 2
4 characteristic of the nuclear market worldwide is the stringent requirements that must be met in order to sell products to nuclear power plants. For example, the Company maintains a Nuclear Stamp ("N Stamp") from the American Society of Mechanical Engineers, which is required for qualification to supply certain kinds of products to the U.S. nuclear industry. The Company could face liability in excess of its own commercial or government provided insurance if any of its products were found to contribute to an accident at a nuclear power facility or at other industrial facilities. The Company does not maintain nuclear liability insurance for the United States or Canada, but maintains an aggregate of up to $15 million in nuclear liability insurance for all other countries. The Federal Price-Anderson Act of 1954 provides U.S. nuclear utilities with a system of no-fault insurance coverage in an amount up to approximately $8.7 billion for third party losses or damages resulting from a nuclear incident. BACKLOG The Rotating Equipment Division's backlog of orders at December 31, 1999, was $144.0 million, compared to $162.7 million at December 31, 1998. The Company believes that a high percentage of the current backlog will be shipped by December 31, 2000. FLOW CONTROL PRODUCTS Through its Flow Control Division business segment, the Company designs, manufactures and distributes quarter-turn manual valves, automatic control valves, actuators, and related components. Valve products accounted for approximately 27%, 28% and 27% of the Company's sales to external customers in 1999, 1998 and 1997, respectively. Valves are used to control the flow of liquids and gases. Valve products for industrial processing systems include plug and butterfly valves made of various metals, alloys and plastics and lined ball valves. Actuators and other control accessories manufactured by the Company are either sold independently or mounted on valves to move them from open to closed positions and to various specified positions in between. Valve products for the nuclear power market include a complete line of gate, globe and check valves (including valve actuators). Automatic control valves include high pressure valves, rotary valves, and anti-noise and anti-cavitation valves. These valves are generally sold with an actuator. "Smart" valve technologies have been incorporated into various control valve products to provide more efficient process control. Through a technology alliance with Honeywell Inc., a manufacturer of computerized control systems and software for process plants, the Company's "smart" and control valve technologies are being incorporated in Honeywell's distributed control systems. MARKETING AND DISTRIBUTION Valves are produced at facilities in the United States, Australia, France, Germany and Switzerland. Actuators are produced at facilities in the United States, Germany, France and Italy. Two Company majority-owned joint ventures in India manufacture valves for export to U.S., Asian and European markets. In 1999 the Company acquired certain assets and liabilities of Honeywell, Inc.'s industrial control valve business in Maintal, Germany and relocated the production of this product line to its plant in Thiers, France. In 1998 the Company acquired Valtek Engineering Division of Rolls Royce plc, a former licensee with territorial rights covering certain company control valves in parts of Europe, the Middle East and Africa. Manual valve products and valve actuators are distributed through the Company's sales personnel and through a network of independent stocking distributors. Automatic control valves are marketed through specialized sales offices with engineers and service centers or on a commission basis through independent manufacturing representatives in principal marketing centers throughout the United States and other countries. 3
5 BACKLOG The Flow Control Division's backlog of orders at December 31, 1999 was $66.2 million, compared to $69.8 million at December 31, 1998. The Company believes that virtually all of the current backlog will be shipped by December 31, 2000. FLOW SOLUTIONS PRODUCTS Through its Flow Solutions Division business segment, the Company designs, manufactures and distributes mechanical seals and sealing systems and provides service and repair for flow control equipment used in process industries. Mechanical seal products and flow management services and repairs accounted for approximately 40%, 38% and 36% of the Company's sales to external customers in 1999, 1998 and 1997, respectively. The mechanical seal is critical to the smooth operation of centrifugal pumps, compressors and mixers because mechanical seals help prevent leakage between a rotating shaft and a stationary casing. In doing so, mechanical seals reduce shaft wear on pumps, compressors and mixers used in many industries. The Company's seals are used on a variety of pumps, mixers, compressors, steam turbines and specialty equipment, principally in the oil refining and chemical processing industries. The Company also manufactures a dry gas seal used in gas transmission and oil and gas production markets. Under the Flow Solutions Division organization, the Company has established a global network of service facilities throughout the world which has the capability to provide service, repair and diagnostics for rotating equipment, including pumps, turbines, mixers and compressors, as well as numerous types of valves and mechanical seals. In addition to the January 2000 acquisition of Invatec, the Company sees the opportunity to expand this service repair business, as many of its customers look for alternatives to their own in-house maintenance capabilities or to small and independent service facilities with limited expertise. MARKETING AND DISTRIBUTION Mechanical seals are primarily produced in facilities in the United States, The Netherlands, Germany, Mexico, Argentina, Brazil, Singapore, New Zealand, Australia and Japan. Seal manufacturing facilities in The Netherlands and Germany are key sources of seals sold in Europe, Africa and the Middle East. The Company's mechanical seal products are primarily marketed through the Company's worldwide seals sales force directly to end users and engineering and construction firms. A portion of the Company's seal products is sold directly to original equipment ("OE") manufacturers for incorporation into pumps, compressors, mixers or other rotary equipment requiring seals. Distributors, dealers, commissioned representatives and sales agents are also used in the distribution and sale of mechanical seal products. Fully equipped service centers of this Division provide equipment maintenance, including major repairs, advanced diagnostics, installation, commissioning, re-rate and retrofit programs and full machining capabilities. A network of quick response centers provides local engineering, manufacturing and assembly capabilities for mechanical seals, as well as seal inventory. BACKLOG The Flow Solutions Division's backlog of orders at December 31, 1999, was $58.8 million compared to $56.4 million at December 31, 1998. The Company believes that virtually all of the current backlog will be shipped by December 31, 2000. 4
6 GENERAL BUSINESS COMPETITION The markets for the Company's products are highly competitive. Competition occurs on the basis of price, technical expertise, delivery, contractual terms, previous installation history and reputation for quality. Delivery speed and the proximity of service centers are important with respect to aftermarket products. Customers are generally more likely to rely on the Company than competitors for Company aftermarket products relating to its more highly engineered and customized products than for its standard products. Price competition tends to be more significant for OE manufacturers than aftermarket services and has been generally increasing. In the aftermarket portion of its service business, the Company competes against both large and well-established national or global competitors and, in some markets, against smaller regional and local companies, as well as the in-house maintenance departments of the Company's end-user customers. In the sale of aftermarket products and services, the Company benefits from the large installed base of pumps which require maintenance, repair and replacement parts. In the petroleum industry, the competitors for aftermarket services tend to be the customers themselves because of their in-house capabilities. In other industries, except the nuclear power industry, the competitors for aftermarket services tend to be low cost replicators of spare parts and local independent repair shops for the Company's products. The Company has certain competitive advantages in the nuclear power industry because it maintains the N Stamp that is required to service customers in that industry and because the Company has a considerable base of proprietary knowledge. Customers for the Company's products are attempting to reduce the number of vendors from which they purchase in order to reduce the size and diversity of their inventory. Although vendor reduction programs could adversely affect the Company's business, the Company has been successful in entering into "alliance" arrangements with a number of customers both in the United States and overseas which provide competitive advantages to the Company. RESEARCH AND DEVELOPMENT The Company conducts research and development at its own facilities in various locations. In 1999, 1998 and 1997, the Company spent approximately $15.1 million, $14.7 million, and $14.8 million, respectively, on Company-sponsored research and development, primarily for new product development and extensions. The Company's research and development group consists of engineers involved in new product development as well as the support and improvement of existing products. Additionally, the Company sponsors consortium programs for research with various universities and conducts limited development work jointly with certain of its vendors, licensees and customers. Management believes current expenditures are adequate to sustain ongoing research and development activities. CUSTOMERS The Company sells to a wide variety of customers. No individual customer accounted for more than 10% of the Company's 1999 net sales. RISKS OF INTERNATIONAL BUSINESS In 1999, 42% of the Company's sales were outside the United States. The Company's activities thus are subject to the customary risks of operating in an international environment, such as unstable political situations, local laws, the potential imposition of trade restrictions or tariff increases and the relationship of the U.S. dollar to other currencies. The impact of these conditions is mitigated somewhat by the strength and diversity of the Company's product lines and geographic coverage. To minimize the impact of foreign exchange rate movements on its operating results, the Company enters into forward exchange contracts to hedge specific 5
7 foreign currency denominated transactions. See Note 1 to consolidated financial statements on pages 35 and 36 of the 1999 Annual Report to Shareholders, which is incorporated by reference in this Form 10-K. The Company conducts substantial business activities in the Middle East. INTELLECTUAL PROPERTY The Company owns a number of trademarks and patents relating to the name and design of its products. The Company considers its trademarks Byron Jackson(R), Durco(R), United Centrifugal(R), Durametallic(R), BW Seals(R), GASPAC(R), Pacific Wietz(TM), Five Star Seal(R), Wilson-Snyder(R), Valtek(R), Kammer(R), Sereg(TM) and Automax(R) to be important to its business. The patents underlying much of the technology for the Company's products have been in the public domain for many years. Surviving patents are not considered, either individually or in the aggregate, to be material to the Company's business. However, the Company's pool of proprietary information, consisting of know-how and trade secrets relating to the design, manufacture and operation of its products and their use, is considered particularly important and valuable. Accordingly the Company protects such proprietary information. The Company, in general, is the owner of the rights to the products which it manufactures and sells, and the Company is not dependent in any material way upon any license or franchise to operate. RAW MATERIALS The principal raw materials used by the Company in the manufacture of its products are normally readily available. While substantially all raw materials are purchased from outside sources, the Company has been able to obtain an adequate supply of raw materials, and no shortage of such materials is currently anticipated. The Company intends to expand its use of worldwide sourcing to capitalize on low cost sources of purchased goods. The Company is a vertically-integrated manufacturer of certain pump and valve products. Certain corrosion-resistant castings for Company pumps and quarter-turn valves are manufactured at its Dayton, Ohio foundries; other metal castings are purchased from outside sources. The Company also produces most of its highly engineered corrosion resistant plastic parts for certain pump and valve product lines. This includes rotomolding as well as injection and compression molding of a variety of fluorocarbon and other plastic materials. Suppliers of raw materials for nuclear markets must be qualified by the American Society of Mechanical Engineers and, accordingly, are limited in number. However, the Company to date has experienced no significant difficulty in obtaining such materials. EMPLOYEES AND LABOR RELATIONS The Company and its subsidiaries employ approximately 7,000 persons of whom approximately 55% work in the United States. The Company's hourly employees at its three principal U.S. pump manufacturing plants in Vernon, California, Dayton, Ohio, and Tulsa, Oklahoma, plus those at its valve manufacturing plant in Williamsport, Pennsylvania and at its foundries in Dayton, Ohio are represented by unions. The Company's operations in Mexico, The Netherlands, Germany and Belgium are unionized. The Company believes employee relations throughout its operations are generally satisfactory, including those represented by unions. ENVIRONMENTAL REGULATIONS AND PROCEEDINGS The Company is subject to environmental laws and regulations in all jurisdictions in which it has operating facilities. The Company periodically makes capital expenditures for pollution abatement and control to meet environmental requirements. 6
8 At present, the Company has no plans for any material capital expenditures for environmental control facilities. However, the Company has experienced and continues to experience operating costs relating to environmental matters, although certain costs have been offset by the Company's successful waste minimization programs. The Company believes that future environmental compliance expenditures will not have a material adverse effect on its financial position and has established allowances which it believes to be adequate to cover potential environmental liabilities. EXPORTS Licenses are required from U.S. government agencies to export certain of the Company's products from the United States. In particular, products with nuclear applications are restricted, although limitations are placed on the export of certain other pump, valve and mechanical seal products. The Company's export sales from the United States to foreign unaffiliated customers were $142.7 million in 1999, $130.8 million in 1998 and $146.7 million in 1997. FORWARD-LOOKING INFORMATION IS SUBJECT TO RISK AND UNCERTAINTY This 1999 Annual Report on Form 10-K, including Management's Discussion and Analysis, contains various forward-looking statements and includes assumptions about future market conditions, operations and results. These statements are based on current expectations and are subject to significant risks and uncertainties. They are made pursuant to safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Among the many factors that could cause actual results to differ materially from the forward-looking statements are: further changes in the already competitive environment for the Company's products or competitors' responses to Flowserve's strategies; the Company's ability to integrate IDP and Invatec into its management and operations; political risks or trade embargoes affecting important country markets; the health of the petroleum, chemical and power industries; economic turmoil in areas outside the United States; continued economic growth within the United States; unanticipated difficulties or costs or reduction in benefits associated with the implementation of the Company's "Flowserver" business process improvement initiative, including software; and the recognition of significant expenses associated with adjustments to realign the combined Company's facilities and other capabilities with its strategic and business conditions including, without limitation, expenses incurred in restructuring the Company's operations to incorporate IDP facilities and the cost of financing to be assumed in acquiring IDP. The Company undertakes no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise. 7
9 ITEM 2. PROPERTIES The Company's corporate headquarters is a leased facility in Irving, Texas encompassing approximately 34,000 square feet. Information on the principal manufacturing facilities, by segment, is as follows: <TABLE> <CAPTION> No. of Approx. Sq. Plants Footage ------ ------- ROTATING EQUIPMENT <S> <C> <C> Domestic: 6 1,322,900 International: 6 534,700 FLOW SOLUTIONS Domestic: 4 236,800 International: 8 286,400 FLOW CONTROL Domestic: 4 528,400 International: 9 389,850 </TABLE> Most of the Company's principal manufacturing facilities are owned; its leased facilities are subject to long-term lease agreements. On the average, the Company utilizes approximately 80% to 90% of its manufacturing capacity, although there is a variation in usage rate among the facilities. The Company could, in general, increase its capacity through the purchase of new or additional manufacturing equipment without obtaining additional facilities. Pursuant to a restructuring program announced in December 1999, the Company expects to close one of the Flow Solutions Division's manufacturing plants in the U.S. and a number of other U. S. and foreign facilities. The Company maintains a substantial network of domestic and foreign service centers and sales offices. Most of these facilities are leased. ITEM 3. LEGAL PROCEEDINGS The Company is involved in ordinary routine litigation incidental to its business, none of which it believes to be material to its financial condition. For further information about such litigation, see Note 10 of the Financial Statements provided as part of Item 8 of this Form 10-K and incorporated herein by reference. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. 8
10 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The common stock of the Company (FLS) is traded on the New York Stock Exchange. On February 15, 2000, the Company's records showed approximately 2,200 shareholders of record. Based on these records plus requests from brokers and nominees listed as shareholders of record, the Company estimates there are approximately 11,000 beneficial owners of its common stock. In 1999 and 1998, the Company paid a dividend of fourteen cents per share each calendar quarter. In February 2000, the Company announced the suspension of this dividend as part of its agreement to acquire IDP. PRICE RANGE OF FLOWSERVE COMMON STOCK (INTRADAY HIGH/LOW PRICES) <TABLE> <CAPTION> 1999 1998 ---- ---- <S> <C> <C> First Quarter $17.50/$15.00 $33.75/$26.50 Second Quarter $21.56/$15.31 $32.44/$24.25 Third Quarter $20.00/$15.50 $25.50/$17.75 Fourth Quarter $17.88/$15.38 $20.38/$15.38 </TABLE> During 1999, 1998 and 1997, the Company issued 181,213, 10,165 and 21,700 shares of restricted common stock, respectively, pursuant to an exemption from registration under Section 4(2) of the Securities Act of 1933. Shares were issued for the benefit of directors and certain officers and employees of the Company subject to restrictions on transfer. ITEM 6. SELECTED FINANCIAL DATA Selected financial data for the five years ended December 31, 1999, which appears on page 49 of the 1999 Annual Report to Shareholders, is incorporated herein by reference. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS Management's Discussion and Analysis appears on pages 24 through 30 of the 1999 Annual Report to Shareholders and is incorporated herein by reference. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Disclosure about market risk appears on page 29 of the Company's 1999 Annual Report to Shareholders under the heading "Market Risks Associated with Financial Instruments" and is incorporated herein by reference. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The financial statements appearing on pages 31 through 48 of the 1999 Annual Report to Shareholders, together with the report thereon of Ernst & Young LLP, dated February 10, 2000, appearing on page 23 of the 1999 Annual Report to Shareholders, and supplementary data appearing on page 47 of the 1999 Annual Report to Shareholders are incorporated herein by reference. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. 9
11 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information contained under the heading "Election of Directors" in the definitive Proxy Statement for the Annual Meeting of Shareholders to be held on April 20, 2000, (the "2000 Proxy Statement") is incorporated herein by reference. The executive officers of the Company, all positions and offices presently held by each person named, their ages as of February 15, 2000, and their business experience during the last five years are stated below. Executive officers serve at the discretion of the Board of Directors. <TABLE> <CAPTION> Name and Position Age Principal Occupation During Past Five Years - ----------------- --- ------------------------------------------- <S> <C> <C> C. Scott Greer 49 President since July 1999 and Chief Executive President and CEO Officer since January 2000; Chief Operating Officer from July to December 1999; President of UT Automotive, a subsidiary of United Technologies Corporation, a supplier of automotive systems and components, from 1997 to 1999; President and a director of Echlin, Inc., an automotive parts supplier, from 1990 to 1997, and its Chief Operating Officer from 1994 to 1997. Kenneth P. Bell 51 Vice President, Manufacturing Operations, since Vice President, January 2000; General Manager and other executive Manufacturing Operations positions from 1985 to 1999 at UT Automotive, a subsidiary of United Technologies Corporation, a supplier of automotive systems and components. Mark D. Dailey 41 Vice President, Supply Chain Integration, since Vice President, September 1999; Vice President, Supply Chain and Supply Chain Integration other supply chain management positions, from 1992 to 1999 for the North American Power Tools Division of The Black and Decker Company, a manufacturer of power tools, fastening and assembly systems and security hardware and plumbing products. Renee J. Hornbaker 47 Vice President and Chief Financial Officer since Vice President and December 1997; Vice President, Business Development Chief Financial Officer and Chief Information Officer in 1997; Vice President, Finance and Chief Financial Officer of BW/IP in 1997; Vice President, Business Development of BW/IP from 1996 to 1997; Director-Business Analysis and Planning of Phelps Dodge Industries, the diversified international manufacturing business of Phelps Dodge Corporation in 1996 and Director-Financial Analysis and Control from 1991 to 1996. </TABLE> 10
12 <TABLE> <CAPTION> Name and Position Age Principal Occupation During Past Five Years - ----------------- --- ------------------------------------------- <S> <C> <C> Rick L. Johnson 47 Vice President, Business Development since January Vice President, 1998 and Controller since November 1998; Vice Business Development President and Controller of the Industrial Products and Controller Division from 1997 to January 1999; Industrial Products Group Vice President and Controller from 1995 to 1997; President Durco Valtek (Singapore) from 1993 to 1995. Rory E. MacDowell 49 Vice President and Chief Information Officer since Vice President and 1998; Chief Information Officer of Keystone Chief Information Officer International, Inc., a manufacturer and distributor of flow control products from 1993 to 1997. Cheryl D. McNeal 49 Vice President, Human Resources since 1996; Vice President, Assistant Vice President, Human Resources and other Human Resources Human Resource management positions at NCR from 1978 to 1996. George A. Shedlarski 55 President, Flow Solutions Division since January Vice President and 1999 and President, Flow Control Division since President, Flow Solutions Division, and August, 1999; President, Fluid Sealing Division President, Flow Control Division from 1997 to January 1999; President, ServiceRepair Division in 1997; President, Rotating Equipment Group in 1997; Group Vice President, Industrial Products Group from 1994 to 1997. Ronald F. Shuff 47 Vice President since 1990 and Secretary and General Vice President, Secretary and Counsel since 1988; Sloan Fellow at M.I.T. during General Counsel 1987-1988; Secretary and General Counsel of AccuRay Corporation, a manufacturer of computer-based process control systems, from 1981 to 1987. Howard D. Wynn 52 President, Rotating Equipment Division since 1997; Vice President and Vice President of BW/IP, Inc. and President, Pump President, Rotating Equipment Division Division of BW/IP, Inc., from 1996 to 1997; Vice President of the Pump Division of BW/IP from 1993 to 1996. </TABLE> 11
13 ITEM 11. EXECUTIVE COMPENSATION The information required by this Item 11 is set forth in the 2000 Proxy Statement and is incorporated herein by this reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS The information required by this Item 12 is set forth in the 2000 Proxy Statement under the heading "Flowserve Stock Ownership" and is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information required by this Item 13 is set forth to the extent applicable in the 2000 Proxy Statement and is incorporated herein by this reference. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) 1. Financial Statements The financial statements, appearing on pages 32 through 48 of the 1999 Annual Report to Shareholders, together with the report thereon of Ernst & Young LLP, dated February 10, 2000, appearing on page 23 of the 1999 Annual Report to Shareholders are incorporated herein by reference. 2. Financial Statement Schedules The required financial statement schedule together with the report thereon of Ernst & Young LLP dated February 10, 2000 listed in the accompanying index on page F-1, is filed as part of this Form 10-K. 3. Exhibits The exhibits listed on the accompanying index to exhibits on pages 13 through 17 are filed as part of this Form 10-K. (b) Reports on Form 8-K None. (c) See Item 14(a) 3 above. (d) See Item 14(a) 2 above. 12
14 INDEX TO EXHIBITS* Exhibit Description No. 2.1 Agreement and Plan of Merger dated as of May 6, 1997, among the Company, Bruin Acquisition Corp. and BW/IP, Inc. ("BW/IP") was filed as Annex 1 to the Joint Proxy Statement/Prospectus which is part of the Registration Statement on Form S-4, dated June 19, 1997. 2.2 Agreement and Plan of Merger among Flowserve Corporation, Forrest Acquisition Sub., Inc. and Innovative Valve Technologies, Inc., dated as of November 18, 1999, was filed as Exhibit 99(c)(1) to the Schedule 14D-1 Tender Offer Statement and Statement on Schedule 13D dated November 22, 1999. 3.1 1988 Restated Certificate of Incorporation of The Duriron Company, Inc. was filed as Exhibit 3.1 to the Company's Annual Report on Form 10-K for the year ended December 31, 1988. 3.2 1989 Amendment to Certificate of Incorporation was filed as Exhibit 3.2 to the Company's Annual Report on Form 10-K for the year ended December 31, 1989. 3.3 By-Laws of The Duriron Company, Inc. (as restated) were filed as Exhibit 3.2 to the Company's Annual Report on Form 10-K for the year ended December 31, 1987. 3.4 1996 Certificate of Amendment of Certificate of Incorporation was filed as Exhibit 3.4 to the Company's Annual Report on Form 10-K for the year ended December 31, 1995. 3.5 Amendment No. 1 to Restated Bylaws was filed as Exhibit 3.5 to the Company's Annual Report on Form 10-K for the year ended December 31, 1995. 3.6 April 1997 Certificate of Amendment of Certificate of Incorporation was filed as part of Annex VI to the Joint Proxy Statement/Prospectus which is part of the Registration Statement on Form S-4, dated June 19, 1997. 3.7 July 1997 Certificate of Amendment of Certificate of Incorporation was filed as Exhibit 3.6 to the Company's Quarterly Report on Form 10-Q, for the Quarter ended June 30, 1997. 4.1 Lease agreement and indenture, dated as of January 1, 1995 and bond purchase agreement dated January 27, 1995, in connection with an 8% Taxable Industrial Development Revenue Bond, City of Albuquerque, New Mexico. (Relates to a class of indebtedness that does not exceed 10% of the total assets of the Company. The Company will furnish a copy of the documents to the Commission upon request.) 4.2 Rights Agreement dated as of August 1, 1986 between the Company and BankOne, N.A., as Rights Agent, which includes as Exhibit B thereto the Form of Rights Certificate which was filed as Exhibit 1 to the Company's Registration Statement on Form 8-A on August 13, 1986. 4.3 Amendment dated August 1, 1996, to Rights Agreement was filed as Exhibit 4.5 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1996. 13
15 4.4 Amendment No. 2 dated as of June 1, 1998, to the Rights Agreement dated as of August 13, 1986, and amended as of August 1, 1996, was filed as Exhibit 1 to the Company's Form 8-A/A dated June 11, 1998. 4.5 Interest Rate and Currency Exchange Agreement between the Company and Barclays Bank PLC dated November 17, 1992 in the amount of $25,000,000 was filed as Exhibit 4.9 to Company's Annual Report on Form 10-K for year ended December 31, 1992. 4.6 Credit Agreement dated as of October 7, 1999, among Flowserve Corporation, Bank of America, N.A. as Administrative Agent and as Letter of Credit Issuing Bank, Bank One, Texas, NA as Syndication Agent, ABN AMRO Bank N.V. as Documentation Agent, and the other financial institutions party thereto (filed herewith). 4.7 Material Subsidiary Guarantee, dated as of October 7, 1999, by Flowserve FCD Corporation, Flowserve FSD Corporation, Flowserve RED Corporation and Flowserve International, Inc., in favor of and for the benefit of Bank of America, N.A., as Administrative Agent for and representative of itself, the Banks and the Issuing Bank as defined in the Credit Agreement (filed herewith). 4.8 Rate Swap Agreement in the amount of $25,000,000 between the Company and National City Bank dated November 14, 1996 was filed as Exhibit 4.9 to the Company's Annual Report on Form 10-K for the year ended December 31, 1996. 4.9 Rate Swap Agreement in the amount of $25,000,000 between the Company and Key Bank National Association dated October 28, 1996 was filed as Exhibit 4.10 to the Company's Annual Report on Form 10-K for the year ended December 31, 1996. 4.9 Note Agreement, dated as of November 15, 1996, between BW/IP International, Inc. and the Note Purchasers named therein, with respect to $30,000,000 principal amount of 7.14% Senior Notes, Series A, due November 15, 2006, and $20,000,000 principal amount of 7.17% Senior Notes, Series B, due March 31, 2007, was filed as Exhibit 4.1 to BW/IP's Registration Statement on Form S-8 (Registration No. 333-21637) as filed February 12, 1997. 10.1 Flowserve Corporation Incentive Compensation Plan for Senior Executives, as amended and restated effective January 1, 1994 (the "Incentive Plan"), was filed as Exhibit 10.1 to the Company's Annual Report on Form 10-K for the year ended December 31, 1993.** 10.2 Amendment No. 1 to the Incentive Plan was filed as Exhibit 10.2 to the Company's Annual Report on Form 10-K for the year ended December 31, 1995.** 10.3 Amendment No. 2 to the Incentive Plan was filed as Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1998.** 10.4 Amendment No. 3 to the Incentive Plan was filed as Exhibit 10.4 to the Company's Annual Report on Form 10-K for the year ended December 31, 1998.** 10.5 Supplemental Pension Plan for Salaried Employees was filed as Exhibit 10.4 to the Company's Annual Report on Form 10-K for the year ended December 31, 1987.** 10.6 Flowserve Corporation amended and restated Director Deferral Plan was filed as Attachment A to the Company's definitive 1996 Proxy Statement filed on March 10, 1996.** 14
16 10.7 Form of Change in Control Agreement between all executive officers and the Company was filed as Exhibit 10.6 to the Company's Annual Report on Form 10-K for the year ended December 31, 1996.** 10.8 First Master Benefit Trust Agreement dated October 1, 1987 was filed as Exhibit 10.24 to the Company's Annual Report on Form 10-K for the year ended December 31, 1987.** 10.9 Amendment No. 1 to the first Master Benefit Trust Agreement dated October 1, 1987 was filed as Exhibit 10.24 to the Company's Annual Report on Form 10-K for the year ended December 31, 1993.** 10.10 Amendment No. 2 to First Master Benefit Trust Agreement was filed as Exhibit 10.25 to the Company's Annual Report on Form 10-K for the year ended December 31, 1993.** 10.11 Second Master Benefit Trust Agreement dated October 1, 1987 was filed as Exhibit 10.12 to the Company's Annual Report on Form 10-K for the year ended December 31, 1987.** 10.12 First Amendment to Second Master Benefit Trust Agreement was filed as Exhibit 10.26 to the Company's Annual Report on Form 10-K for the year ended December 31, 1993.** 10.13 Long-Term Incentive Plan (the "Long-Term Plan"), as amended and restated effective November 1, 1993 was filed as Exhibit 10.8 to the Company's Annual Report on Form 10-K for the year ended December 31, 1993.** 10.14 Amendment No. 1 to the Long-Term Plan was filed as Exhibit 10.13 to the Company's Annual Report on Form 10-K for the year ended December 31, 1995.** 10.15 Flowserve Corporation 1989 Stock Option Plan as amended and restated effective January 1, 1997 was filed as Exhibit 10.14 to the Company's Annual Report on Form 10-K for the year ended December 31, 1996.** 10.16 Flowserve Corporation Second Amendment to the 1989 Stock Option Plan as previously amended and restated was filed as Exhibit 10.14 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1998.** 10.17 Flowserve Corporation 1989 Restricted Stock Plan (the "1989 Restricted Stock Plan") as amended and restated effective January 1, 1997 was filed as Exhibit 10.15 to the Company's Annual Report on Form 10-K for the year ended December 31, 1996.** 10.18 Amendment No. 1 to the 1989 Restricted Stock Plan as amended and restated was filed as Exhibit 10.33 to the Company's Annual Report on Form 10-K for the year ended December 31, 1997.** 10.19 Flowserve Corporation Retirement Compensation Plan for Directors ("Director Retirement Plan") was filed as Exhibit 10.15 to the Company's Annual Report to Form 10-K for the year ended December 31, 1988.** 10.20 Amendment No. 1 to Director Retirement Plan was filed as Exhibit 10.21 to the Company's Annual Report on Form 10-K for the year ended December 31, 1995.** 15
17 10.21 The Company's Benefit Equalization Pension Plan (the "Equalization Plan") was filed as Exhibit 10.16 to the Company's Annual Report on Form 10-K for the year ended December 31, 1989.** 10.22 Amendment # 1 dated December 15, 1992 to the Equalization Plan was filed as Exhibit 10.18 to the Company's Annual Report on Form 10-K for the year ended December 31, 1992.** 10.23 Flowserve Corporation Executive Equity Incentive Plan as amended and restated effective July 21, 1999, was filed as Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1999.** 10.24 Flowserve Corporation Deferred Compensation Plan for Executives was filed as Exhibit 10.19 to the Company's Annual Report on Form 10-K for the year ended December 31, 1992.** 10.25 Executive Life Insurance Plan of Flowserve Corporation was filed as Exhibit 10.29 to the Company's Annual Report on Form 10-K for the year ended December 31, 1995.** 10.26 Executive Long-Term Disability Plan of The Duriron Company, Inc. was filed as Exhibit 10.30 to the Company's Annual Report on Form 10-K for the year ended December 31, 1995.** 10.27 Flowserve Corporation 1997 Stock Option Plan was included as Exhibit A to the Company's 1997 Proxy Statement which was filed on March 17, 1997.** 10.28 First Amendment to the Flowserve Corporation 1997 Stock Option Plan was filed as Exhibit 10.28 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1998. ** 10.29 Amendment No. 2 to the Flowserve Corporation 1997 Stock Option Plan.** (filed herewith) 10.30 Flowserve Corporation 1999 Stock Option Plan was included as Exhibit A to the Company's 1999 Proxy Statement which was filed on March 15, 1999.** 10.31 Amendment No. 1 to the Flowserve Corporation 1999 Stock Option Plan.** (filed herewith) 10.32 BW/IP International, Inc. Supplemental Executive Retirement Plan as amended and restated was filed as Exhibit 10.27 to the Company's Quarterly Report on Form 10-Q for the quarter entered March 31, 1998.** 10.33 Flowserve Corporation 1998 Restricted Stock Plan was included as Exhibit A to the Company's 1999 Proxy Statement which was filed on April 9, 1998 .** 10.34 Amendment No. 1 to the Flowserve Corporation 1998 Restricted Stock Plan was filed as Exhibit 10 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1999.** 10.35 Amendment No. 2 to the Flowserve Corporation 1998 Restricted Stock Plan was filed as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1999.** 10.36 Amendment No. 1 to the amended and restated Director Deferral Plan was filed as Exhibit 10.32 to the Company's Annual Report on Form 10-K for the year ended December 31, 1997. ** 10.37 Amendment No. 2 to the amended and restated Director Deferral Plan was filed as Exhibit 10.34 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1998.** 16
18 10.38 Form of Employment Agreement between the Company and certain executive officers was filed as Exhibit 10.31 to the Company's Annual Report on Form 10-K for the year ended December 31, 1997. ** 10.39 Employment Agreement, effective July 22, 1997, between the Company and Bernard G. Rethore was filed as Exhibit 10.53 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1997. ** 10.40 Amended Employment Agreement, effective November 24, 1999, between the Company and Bernard G. Rethore.** (filed herewith) 10.41 Amendment No. 1 to Amended Employment Agreement, effective February 29, 2000, between the Company and Bernard G. Rethore.** (filed herewith) 10.42 Employment Agreement, effective July 1, 1999, between the Company and C. Scott Greer was filed as Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1999. ** 10.43 Loan Agreement between the Company and C. Scott Greer was filed as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1999.** 10.44 Amendments to form of change in control agreement between all executive officers and the Company.** (filed herewith) 13.1 1999 Annual Report to Shareholders (filed herewith as part of this report to the extent incorporated herein by reference). 21.1 Subsidiaries of the Company (filed herewith). 23.1 Consent of Ernst & Young LLP (filed herewith). 27.1 Financial Data Schedule submitted to the SEC in electronic format (filed herewith). 17
19 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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 on this 24th day of February, 2000. FLOWSERVE CORPORATION (Registrant) By: /s/ C. Scott Greer ------------------------------------------ C. Scott Greer President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons in the capacities and on the dates indicated. <TABLE> <CAPTION> SIGNATURE TITLE DATE - --------- ----- ---- <S> <C> <C> /s/ C. Scott Greer President and February 24, 2000 - --------------------------------- Chief Executive Officer C. Scott Greer (Principal Executive Officer) /s/ Renee J. Hornbaker Vice President and Chief Financial Officer February 24, 2000 - --------------------------------- (Principal Financial Officer) Renee J. Hornbaker /s/ Rick L. Johnson Vice President Business Development February 24, 2000 - --------------------------------- and Controller Rick L. Johnson (Principal Accounting Officer) /s/ Bernard G. Rethore Chairman of the Board February 24, 2000 - --------------------------------- Bernard G. Rethore /s/ William C. Rusnack Director, Chairman of Audit/Finance February 24, 2000 - --------------------------------- Committee William C. Rusnack /s/ Diane C. Harris Director, Member Audit/Finance Committee February 24, 2000 - --------------------------------- Diane C. Harris /s/ Charles M. Rampacek Director, Member Audit/Finance Committee February 24, 2000 - --------------------------------- Charles M. Rampacek /s/ James O. Rollans Director, Member Audit/Finance Committee February 24, 2000 - --------------------------------- James O. Rollans </TABLE> 18
20 FLOWSERVE CORPORATION INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES Item 14(a)(1) and (2) <TABLE> <CAPTION> Annual Report Annual Report To on Shareholders Form 10-K ------------ --------- <S> <C> <C> Flowserve Corporation Consolidated Financial Statements Report of Independent Auditors 23 Consolidated Balance Sheets at 32 December 31, 1999 and 1998 For each of the three years in the period ended December 31, 1999: Consolidated Statements of Income 31 Consolidated Statements of Comprehensive (Loss) Income 31 Consolidated Statements of Shareholders' Equity 33 Consolidated Statements of Cash Flows 34 Notes to Consolidated Financial Statements 35-48 Flowserve Corporation Financial Statement Schedule for each of the three years in the period ended December 31, 1999 Report of Independent Auditors on Financial Statement Schedule F-2 Schedule II - Valuation and Qualifying Accounts F-3 </TABLE> Financial statement schedules not included in this Annual Report on Form 10-K have been omitted because they are not applicable or the required information is shown in the consolidated financial statements or notes thereto. F-1
21 REPORT OF INDEPENDENT AUDITORS ON FINANCIAL STATEMENT SCHEDULE To the Board of Directors and Shareholders Flowserve Corporation We have audited the consolidated financial statements of Flowserve Corporation and subsidiaries as of December 31, 1999 and 1998, and for each of the three years in the period ending December 31, 1999, and have issued our report thereon dated February 10, 2000 appearing on page 23 of the 1999 Annual Report (which report and consolidated financial statements are incorporated by reference in this Form 10-K). Our audits also included the financial statement schedule listed in Item 14(a) of this Form 10-K. This schedule is the responsibility of the Company's management. Our responsibility is to express an opinion on the schedule based on our audits. In our opinion, based on our audits, the financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. /s/Ernst & Young LLP Dallas, Texas February 10, 2000 F-2
22 FLOWSERVE CORPORATION Schedule II - Valuation and Qualifying Accounts (dollars in thousands) <TABLE> <CAPTION> Column A Column B Column C Column D Column E --------- ---------- ---------- ---------- ---------- Balance at Additions Deductions Balance at Beginning Charged to From reserve end of Of year Earnings year <S> <C> <C> <C> <C> Description Year ended December 31, 1999: Allowance for doubtful accounts (a): $ 4,533 $ 2,214 $ 1,042 $ 5,705 ========== ========== ========== ========== Year ended December 31, 1998: Allowance for doubtful accounts (a): $ 5,059 $ 333 $ 859 $ 4,533 ========== ========== ========== ========== Year ended December 31, 1997: Allowance for doubtful accounts (a): $ 4,826 $ 2,458 $ 2,225 $ 5,059 ========== ========== ========== ========== Year ended December 31, 1999: Inventory reserves (b): $ 16,051 $ 5,254 $ 2,370 $ 18,935 ========== ========== ========== ========== Year ended December 31, 1998: Inventory reserves (b): $ 17,045 $ 3,388 $ 4,742 $ 16,051 ========== ========== ========== ========== Year ended December 31, 1997 Inventory reserves (b): $ 13,716 $ 4,308 $ 619 $ 17,405 ========== ========== ========== ========== </TABLE> (a) Deductions from reserve represent accounts written off net of recoveries. (b) Deductions from reserve represent inventory written off. F-3 19
23 INDEX TO EXHIBITS* <TABLE> <CAPTION> EXHIBIT NO. DESCRIPTION - ------- ----------- <S> <C> 2.1 Agreement and Plan of Merger dated as of May 6, 1997, among the Company, Bruin Acquisition Corp. and BW/IP, Inc. ("BW/IP") was filed as Annex 1 to the Joint Proxy Statement/Prospectus which is part of the Registration Statement on Form S-4, dated June 19, 1997. 2.2 Agreement and Plan of Merger among Flowserve Corporation, Forrest Acquisition Sub., Inc. and Innovative Valve Technologies, Inc., dated as of November 18, 1999, was filed as Exhibit 99(c)(1) to the Schedule 14D-1 Tender Offer Statement and Statement on Schedule 13D dated November 22, 1999. 3.1 1988 Restated Certificate of Incorporation of The Duriron Company, Inc. was filed as Exhibit 3.1 to the Company's Annual Report on Form 10-K for the year ended December 31, 1988. 3.2 1989 Amendment to Certificate of Incorporation was filed as Exhibit 3.2 to the Company's Annual Report on Form 10-K for the year ended December 31, 1989. 3.3 By-Laws of The Duriron Company, Inc. (as restated) were filed as Exhibit 3.2 to the Company's Annual Report on Form 10-K for the year ended December 31, 1987. 3.4 1996 Certificate of Amendment of Certificate of Incorporation was filed as Exhibit 3.4 to the Company's Annual Report on Form 10-K for the year ended December 31, 1995. 3.5 Amendment No. 1 to Restated Bylaws was filed as Exhibit 3.5 to the Company's Annual Report on Form 10-K for the year ended December 31, 1995. 3.6 April 1997 Certificate of Amendment of Certificate of Incorporation was filed as part of Annex VI to the Joint Proxy Statement/Prospectus which is part of the Registration Statement on Form S-4, dated June 19, 1997. 3.7 July 1997 Certificate of Amendment of Certificate of Incorporation was filed as Exhibit 3.6 to the Company's Quarterly Report on Form 10-Q, for the Quarter ended June 30, 1997. 4.1 Lease agreement and indenture, dated as of January 1, 1995 and bond purchase agreement dated January 27, 1995, in connection with an 8% Taxable Industrial Development Revenue Bond, City of Albuquerque, New Mexico. (Relates to a class of indebtedness that does not exceed 10% of the total assets of the Company. The Company will furnish a copy of the documents to the Commission upon request.) 4.2 Rights Agreement dated as of August 1, 1986 between the Company and BankOne, N.A., as Rights Agent, which includes as Exhibit B thereto the Form of Rights Certificate which was filed as Exhibit 1 to the Company's Registration Statement on Form 8-A on August 13, 1986. 4.3 Amendment dated August 1, 1996, to Rights Agreement was filed as Exhibit 4.5 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1996. </TABLE>
24 <TABLE> <S> <C> 4.4 Amendment No. 2 dated as of June 1, 1998, to the Rights Agreement dated as of August 13, 1986, and amended as of August 1, 1996, was filed as Exhibit 1 to the Company's Form 8-A/A dated June 11, 1998. 4.5 Interest Rate and Currency Exchange Agreement between the Company and Barclays Bank PLC dated November 17, 1992 in the amount of $25,000,000 was filed as Exhibit 4.9 to Company's Annual Report on Form 10-K for year ended December 31, 1992. 4.6 Credit Agreement dated as of October 7, 1999, among Flowserve Corporation, Bank of America, N.A. as Administrative Agent and as Letter of Credit Issuing Bank, Bank One, Texas, NA as Syndication Agent, ABN AMRO Bank N.V. as Documentation Agent, and the other financial institutions party thereto (filed herewith). 4.7 Material Subsidiary Guarantee, dated as of October 7, 1999, by Flowserve FCD Corporation, Flowserve FSD Corporation, Flowserve RED Corporation and Flowserve International, Inc., in favor of and for the benefit of Bank of America, N.A., as Administrative Agent for and representative of itself, the Banks and the Issuing Bank as defined in the Credit Agreement (filed herewith). 4.8 Rate Swap Agreement in the amount of $25,000,000 between the Company and National City Bank dated November 14, 1996 was filed as Exhibit 4.9 to the Company's Annual Report on Form 10-K for the year ended December 31, 1996. 4.9 Rate Swap Agreement in the amount of $25,000,000 between the Company and Key Bank National Association dated October 28, 1996 was filed as Exhibit 4.10 to the Company's Annual Report on Form 10-K for the year ended December 31, 1996. 4.9 Note Agreement, dated as of November 15, 1996, between BW/IP International, Inc. and the Note Purchasers named therein, with respect to $30,000,000 principal amount of 7.14% Senior Notes, Series A, due November 15, 2006, and $20,000,000 principal amount of 7.17% Senior Notes, Series B, due March 31, 2007, was filed as Exhibit 4.1 to BW/IP's Registration Statement on Form S-8 (Registration No. 333-21637) as filed February 12, 1997. 10.1 Flowserve Corporation Incentive Compensation Plan for Senior Executives, as amended and restated effective January 1, 1994 (the "Incentive Plan"), was filed as Exhibit 10.1 to the Company's Annual Report on Form 10-K for the year ended December 31, 1993.** 10.2 Amendment No. 1 to the Incentive Plan was filed as Exhibit 10.2 to the Company's Annual Report on Form 10-K for the year ended December 31, 1995.** 10.3 Amendment No. 2 to the Incentive Plan was filed as Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1998.** 10.4 Amendment No. 3 to the Incentive Plan was filed as Exhibit 10.4 to the Company's Annual Report on Form 10-K for the year ended December 31, 1998.** 10.5 Supplemental Pension Plan for Salaried Employees was filed as Exhibit 10.4 to the Company's Annual Report on Form 10-K for the year ended December 31, 1987.** 10.6 Flowserve Corporation amended and restated Director Deferral Plan was filed as Attachment A to the Company's definitive 1996 Proxy Statement filed on March 10, 1996.** </TABLE>
25 <TABLE> <S> <C> 10.7 Form of Change in Control Agreement between all executive officers and the Company was filed as Exhibit 10.6 to the Company's Annual Report on Form 10-K for the year ended December 31, 1996.** 10.8 First Master Benefit Trust Agreement dated October 1, 1987 was filed as Exhibit 10.24 to the Company's Annual Report on Form 10-K for the year ended December 31, 1987.** 10.9 Amendment No. 1 to the first Master Benefit Trust Agreement dated October 1, 1987 was filed as Exhibit 10.24 to the Company's Annual Report on Form 10-K for the year ended December 31, 1993.** 10.10 Amendment No. 2 to First Master Benefit Trust Agreement was filed as Exhibit 10.25 to the Company's Annual Report on Form 10-K for the year ended December 31, 1993.** 10.11 Second Master Benefit Trust Agreement dated October 1, 1987 was filed as Exhibit 10.12 to the Company's Annual Report on Form 10-K for the year ended December 31, 1987.** 10.12 First Amendment to Second Master Benefit Trust Agreement was filed as Exhibit 10.26 to the Company's Annual Report on Form 10-K for the year ended December 31, 1993.** 10.13 Long-Term Incentive Plan (the "Long-Term Plan"), as amended and restated effective November 1, 1993 was filed as Exhibit 10.8 to the Company's Annual Report on Form 10-K for the year ended December 31, 1993.** 10.14 Amendment No. 1 to the Long-Term Plan was filed as Exhibit 10.13 to the Company's Annual Report on Form 10-K for the year ended December 31, 1995.** 10.15 Flowserve Corporation 1989 Stock Option Plan as amended and restated effective January 1, 1997 was filed as Exhibit 10.14 to the Company's Annual Report on Form 10-K for the year ended December 31, 1996.** 10.16 Flowserve Corporation Second Amendment to the 1989 Stock Option Plan as previously amended and restated was filed as Exhibit 10.14 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1998.** 10.17 Flowserve Corporation 1989 Restricted Stock Plan (the "1989 Restricted Stock Plan") as amended and restated effective January 1, 1997 was filed as Exhibit 10.15 to the Company's Annual Report on Form 10-K for the year ended December 31, 1996.** 10.18 Amendment No. 1 to the 1989 Restricted Stock Plan as amended and restated was filed as Exhibit 10.33 to the Company's Annual Report on Form 10-K for the year ended December 31, 1997.** 10.19 Flowserve Corporation Retirement Compensation Plan for Directors ("Director Retirement Plan") was filed as Exhibit 10.15 to the Company's Annual Report to Form 10-K for the year ended December 31, 1988.** 10.20 Amendment No. 1 to Director Retirement Plan was filed as Exhibit 10.21 to the Company's Annual Report on Form 10-K for the year ended December 31, 1995.** </TABLE>
26 <TABLE> <S> <C> 10.21 The Company's Benefit Equalization Pension Plan (the "Equalization Plan") was filed as Exhibit 10.16 to the Company's Annual Report on Form 10-K for the year ended December 31, 1989.** 10.22 Amendment # 1 dated December 15, 1992 to the Equalization Plan was filed as Exhibit 10.18 to the Company's Annual Report on Form 10-K for the year ended December 31, 1992.** 10.23 Flowserve Corporation Executive Equity Incentive Plan as amended and restated effective July 21, 1999, was filed as Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1999.** 10.24 Flowserve Corporation Deferred Compensation Plan for Executives was filed as Exhibit 10.19 to the Company's Annual Report on Form 10-K for the year ended December 31, 1992.** 10.25 Executive Life Insurance Plan of Flowserve Corporation was filed as Exhibit 10.29 to the Company's Annual Report on Form 10-K for the year ended December 31, 1995.** 10.26 Executive Long-Term Disability Plan of The Duriron Company, Inc. was filed as Exhibit 10.30 to the Company's Annual Report on Form 10-K for the year ended December 31, 1995.** 10.27 Flowserve Corporation 1997 Stock Option Plan was included as Exhibit A to the Company's 1997 Proxy Statement which was filed on March 17, 1997.** 10.28 First Amendment to the Flowserve Corporation 1997 Stock Option Plan was filed as Exhibit 10.28 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1998. ** 10.29 Amendment No. 2 to the Flowserve Corporation 1997 Stock Option Plan.** (filed herewith) 10.30 Flowserve Corporation 1999 Stock Option Plan was included as Exhibit A to the Company's 1999 Proxy Statement which was filed on March 15, 1999.** 10.31 Amendment No. 1 to the Flowserve Corporation 1999 Stock Option Plan.** (filed herewith) 10.32 BW/IP International, Inc. Supplemental Executive Retirement Plan as amended and restated was filed as Exhibit 10.27 to the Company's Quarterly Report on Form 10-Q for the quarter entered March 31, 1998.** 10.33 Flowserve Corporation 1998 Restricted Stock Plan was included as Exhibit A to the Company's 1999 Proxy Statement which was filed on April 9, 1998 .** 10.34 Amendment No. 1 to the Flowserve Corporation 1998 Restricted Stock Plan was filed as Exhibit 10 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1999.** 10.35 Amendment No. 2 to the Flowserve Corporation 1998 Restricted Stock Plan was filed as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1999.** 10.36 Amendment No. 1 to the amended and restated Director Deferral Plan was filed as Exhibit 10.32 to the Company's Annual Report on Form 10-K for the year ended December 31, 1997. ** 10.37 Amendment No. 2 to the amended and restated Director Deferral Plan was filed as Exhibit 10.34 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1998.** </TABLE>
27 <TABLE> <S> <C> 10.38 Form of Employment Agreement between the Company and certain executive officers was filed as Exhibit 10.31 to the Company's Annual Report on Form 10-K for the year ended December 31, 1997. ** 10.39 Employment Agreement, effective July 22, 1997, between the Company and Bernard G. Rethore was filed as Exhibit 10.53 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1997. ** 10.40 Amended Employment Agreement, effective November 24, 1999, between the Company and Bernard G. Rethore.** (filed herewith) 10.41 Amendment No. 1 to Amended Employment Agreement, effective February 29, 2000, between the Company and Bernard G. Rethore.** (filed herewith) 10.42 Employment Agreement, effective July 1, 1999, between the Company and C. Scott Greer was filed as Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1999. ** 10.43 Loan Agreement between the Company and C. Scott Greer was filed as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1999.** 10.44 Amendments to form of change in control agreement between all executive officers and the Company.** (filed herewith) 13.1 1999 Annual Report to Shareholders (filed herewith as part of this report to the extent incorporated herein by reference). 21.1 Subsidiaries of the Company (filed herewith). 23.1 Consent of Ernst & Young LLP (filed herewith). 27.1 Financial Data Schedule submitted to the SEC in electronic format (filed herewith). </TABLE>