Flowserve delivered adjusted earnings per share of $0.50, in line with our expectations.
In the quarter, adjusted SG&A decreased $30.8 million year-over-year to $193 million.
We continue to track ahead of our $100 million cost-out program for full-year 2020, compared to last year's cost structure.
Our Flowserve 2.0 Transformation program continued to deliver solid operational execution, limiting the decline in our adjusted operating margin to 60 basis points on a $71.4 million revenue decrease versus third quarter 2019, resulting in decremental margins of 19.5% in the quarter.
We are confident, as additional Flowserve 2.0 process improvement initiatives are implemented within the organization, we will capture more margin enhancement opportunities through further cost actions, manufacturing productivity and product cost reductions.
FPD's bookings decreased 22.6%, while sales decreased 1.8% as we executed on its strong backlog.
The bookings decline was driven by original equipment down 37%, while aftermarket bookings were more resilient at a decline of 12%.
Oil and gas bookings were down 45% year-over-year, primarily due to a nearly $60 million decline in project awards.
FPD's adjusted margins were in line with expectations, including the 110 basis point improvement in adjusted operating margin to 14.1%.
Despite the modest revenue decline, adjusted operating income increased approximately 6.8% to $94.5 million, demonstrating solid operating performance, which more than offset the headwind of a 400 basis point mix shift toward original equipment.
Aggressive cost actions drove a $22 million decrease in adjusted SG&A and a 280 basis point decrease in adjusted SG&A as a percentage of sales to 18.7%.
FCD's bookings and sales were down 16% and 18.7%, respectively.
Oil and gas, power and general industries were both primary drivers or were the primary drivers, down 30%, 20% and 12%, respectively.
FCD's adjusted gross and operating margins were 30.3% and 12.2%, respectively.
As expected, our third quarter bookings of $806 million was generally in line with second quarter levels and represented a 21% decline year-over-year.
As you may recall, last year's third quarter included strong oil and gas project activity in the Middle East and Asia Pacific, as well as the number of smaller projects awards, which together totaled roughly $140 million.
By contrast, the largest award we received in the 2020 third quarter was $12 million and when combined with our other small- to medium-sized project awards, the sum represented less than $60 million of project awards.
Third quarter aftermarket activity remained relatively stable with bookings up $424 million, down 32.5%, modestly better -- modestly below our expectations.
Original equipment bookings in the quarter were $381 million, down 28% versus prior year and up about 4% sequentially.
Large projects, which typically accounts for 10% to 15% of our business, remain the most challenged.
We are beginning to see signs of increased aftermarket spending in 2021 as operators are planning for maintenance and turnaround events.
Third quarter bookings declined 42% year-over-year and were roughly flat sequentially.
2019 third quarter included over $90 million of project awards.
This quarter, our largest project award in oil and gas was just $12 million.
Third quarter chemical bookings were down 21.6% in the quarter, primarily driven by FPD's 31% decline, while FCD's bookings were down only 5%.
The quarter included one small award of $4 million in Asia Pacific.
Third quarter and year-to-date bookings are down just 7.5% and 9.2%, respectively.
The quarter includes a few small nuclear awards totaling $9 million and a $4 million fossil fuel award in Asia.
The general industries market, which includes a significant level of distribution and was our most challenging market in 2019, continued to show signs of recovery in the third quarter with bookings up 18.6% and up 5.9% year-to-date.
FPD's 31% increase was partially offset by FCD's 11.5% decline, driven by the continued MRO slowdown in North America.
Finally, representing our smallest market, water bookings decreased $41 million or 66%.
Last year's third quarter was particularly strong, including over $20 million in awards for a large Middle East desalination project.
While the 2020 third quarter included only one project award of $6 million in North America, we continue to expect investment opportunities from desalination, flood control and municipal water markets.
Only Latin America has delivered constant-currency bookings growth in 2020, up 6% and 9% in the third quarter and year-to-date, respectively.
Looking at Flowserve's third quarter financial results in greater detail, our reported earnings per share of $0.39 included realignment and transformation expenses, as well as below the line FX charges totaling $0.11.
Adjusted earnings per share of $0.50 was solid, considering we continued to experience ongoing COVID-related headwinds.
Third quarter revenues of $924 million were flat sequentially and down 7.2% versus the prior year.
FPD's revenue declined 1.8% on reduced aftermarket activity, which more than offset strong original equipment sales growth of 10% through backlog execution.
Consolidated OE revenues of $479 million were down 5.6%, where FCD's 21% year-over-year decrease more than offset FPD strength.
Aftermarket revenue of $445 million was down 8.8%, with both segments down in that general range.
Third quarter adjusted gross margin decreased 230 basis points to 31.5%, including declines of 180 basis points and 240 basis points at FPD and FCD, respectively.
In addition to the previously mentioned cost increases related to COVID and the associated disruption with our sites, margins were also negatively impacted by a 100 basis point mix shift toward original equipment revenues as a percentage of our total sales, driven by FPD's 400 basis point mix shift.
On a reported basis, Flowserve's third quarter gross margins decreased 250 basis points to 30.9%, again due to COVID disruptions and mix headwinds, and a $2 million increase in realignment expenses versus last year's third quarter.
Third quarter adjusted SG&A decreased $30.8 million or 13.8%, demonstrating our cost control and the aggressive cost actions we took in the first half of the year.
These measures brought our $193 million of adjusted SG&A down 160 basis points as a percentage of sales to 20.9% versus prior year, which was flat sequentially.
On a reported basis, SG&A as a percentage of sales decreased 140 basis points, primarily due to the cost actions we implemented considering our adjusted items were relatively flat with prior year.
Third quarter adjusted operating margin decreased 60 basis points versus last year's 10.9%.
With third quarter adjusted operating income of $100.6 million and a $71.4 million year-over-year revenue decline, it represents an adjusted decremental margin of approximately 19.5%.
As a result, FPD drove 110 basis points increase in its adjusted operating margin to 14.1%.
FCD's adjusted operating margin of 12.2% was below our expectations, driven by a higher mix of lower margin project work.
Reported third quarter operating margin decreased 110 basis points to 9.4%, driven primarily by a loss of leverage on lower revenues and included the benefit of modestly lower adjusted items.
Based on our operating cash flow of $70 million to $75 million and quarterly capex spending, free cash flow for the quarter will be about $57 million.
This performance as well as the $300 million of net proceeds after our note issuance and tender offer, brought Flowserve's cash and cash equivalents balance at September 30 to over $921 million.
Even absent the net proceeds of the bond issuance, Flowserve increased its cash position $59 million in the quarter.
However, primary working capital as a percent of sales grew to 30%, as inventory, including contract assets and liabilities, increased roughly $100 million versus the prior year.
DSO was 73 days in the quarter versus 74 in each of the first two quarters of 2020, although we still see opportunities for improvement.
Despite some COVID-driven slow pay impacted this year, we have made significant improvement in the last three years when DSO was 87 days in the third quarter of 2017, and we expect our transformation initiatives will enable us to reach our target of below 70 days, which given the competitive environment for payment terms in certain of our end markets would represent strong performance.
In addition to the $500 million note issuance and tender offer during the third quarter, we also amended our $800 million senior credit facility to provide Flowserve increased flexibility and ample access to this source of liquidity.
In total, our quarter-end liquidity position increased roughly $370 million sequentially to $1.7 billion, which includes our cash balance as well as nearly $750 million of available capacity under our amended credit facility which remains undrawn.
With the continued progress on our $100 million cost reduction program, combined with the anticipated working capital improvements, disciplined capital spending, and discretionary cost management, we expect to deliver significant cash from operations in the seasonally strong fourth quarter.
Our expected major cash usages in 2020 remain consistent with our prior guidance, including funding our structural cost-out actions and the realignment and transformation programs.
We continue to expect full-year capital expenditures in the $60 million range and annual dividends of roughly $100 million.
As a result, we increased our liability by $74 million to $101 million in total.
This liability is partially offset by $87 million of insurance coverage booked as a receivable.
We are managing through the COVID pandemic, and our operational efforts with Flowserve 2.0 are positively impacting our downturn performance.
The Flowserve 2.0 work is not done and we continue to remain committed to our transformational program.
In fact, the speed with which we reduced our cost structure by $100 million versus 2019 was possible because of our success over the last few years, creating a more flexible Flowserve 2.0 operating model.
Most of the structural cost initiatives we implemented mid-year were comprised of measures previously planned as part of the Flowserve 2.0 program that we accelerated.
Over the last 18 months, we've put a lot of effort in analyzing our end markets and evaluating our overall product portfolio.
This year, we have launched five new products, introduced 10 product upgrades and put six existing products through the design-to-value process.
Today, oil and gas represents about 60% of the global energy mix.
With significant investment in renewables through 2040, most still expect oil and gas to provide more than 50% of the global energy mix.
We also specifically announced a new target for reducing global CO2 emissions intensity by 40% by 2030 using 2015 as a baseline.
We expect to make significant progress converting our $2 billion backlog in the fourth quarter and deliver our largest revenue quarter of this year.
Fourth quarter decrementals should be around the 20% level.
Finally, we are forecasting to finish the last quarter of the year with free cash flow generation of at least $100 million, as we reduce primary working capital from the third quarter levels.

Summary:
Flowserve delivered adjusted earnings per share of $0.50, in line with our expectations.
We are beginning to see signs of increased aftermarket spending in 2021 as operators are planning for maintenance and turnaround events.
Looking at Flowserve's third quarter financial results in greater detail, our reported earnings per share of $0.39 included realignment and transformation expenses, as well as below the line FX charges totaling $0.11.
Adjusted earnings per share of $0.50 was solid, considering we continued to experience ongoing COVID-related headwinds.
Our expected major cash usages in 2020 remain consistent with our prior guidance, including funding our structural cost-out actions and the realignment and transformation programs.