FLOWSERVE CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS See accompanying notes to consolidated financial statements. 60 Year Ended December 31, 2018 2017 2016 (Amounts in thousands) Cash flows — Operating activities: Net earnings, including noncontrolling interests $ 125,050 $ 4,328 $ 135,532 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation 95,820 101,438 99,897 Amortization of intangible and other assets 16,653 17,016 16,855 Loss (gain) on disposition of businesses 7,727 (141,317) 7,664 Stock-based compensation 19,912 22,820 30,213 Provision for U.S. Tax Cuts and Jobs Act of 2017 and Latin America accounts receivable reserve (5,654) 115,320 73,452 Foreign currency, asset impairment and other non-cash adjustments 36,052 33,087 (8,127 ) Change in assets and liabilities: Accounts receivable, net (25,448 ) 60,216 36,927 Inventories, net (29,314) 48,642 52,892 Contract assets, net (23,693 ) — — Prepaid expenses and other assets, net (7,869) 32,935 (45,475) Contract liabilities 33,710 — — Accounts payable (4,823) 12,403 (71,008) Accrued liabilities and income taxes payable (18,248 ) (3,383 ) (88,770 ) Retirement obligations and other (44,314) (43,431) 16,372 Net deferred taxes 15,270 50,992 (15,948 ) Net cash flows provided by operating activities 190,831 311,066 240,476 Cash flows — Investing activities: Capital expenditures (83,993) (61,602) (89,699) Proceeds from disposal of assets 6,190 5,435 3,294 (Payments for) proceeds from disposition of businesses (3,663) 232,767 (5,064) Net cash flows (used) provided by investing activities (81,466 ) 176,600 (91,469 ) Cash flows — Financing activities: Payments on long-term debt (60,000 ) (60,000 ) (60,000 ) Payments of deferred loan costs — (1,503) — Proceeds under other financing arrangements 3,377 7,359 35,680 Payments under other financing arrangements (9,853) (19,030) (12,636) Payments related to tax withholding for stock-based compensation (3,061 ) (6,238 ) (10,405 ) Payments of dividends (99,416) (99,233) (97,746) Other (4,331 ) (6,708 ) 1,386 Net cash flows used by financing activities (173,284) (185,353) (143,721) Effect of exchange rate changes on cash (19,843 ) 33,970 (4,568 ) Net change in cash and cash equivalents (83,762) 336,283 718 Cash and cash equivalents at beginning of year 703,445 367,162 366,444 Cash and cash equivalents at end of year $ 619,683 $ 703,445 $ 367,162 Income taxes paid (net of refunds) $ 87,009 $ 59,409 $ 151,191 Interest paid 54,576 56,808 57,393