Flowserve Corporation

07/29/2024 | Press release | Distributed by Public on 07/29/2024 15:16

Flowserve Corporation Reports Second Quarter 2024 Results; Raises Full Year Adjusted EPS Form 8 K

Flowserve Corporation Reports Second Quarter 2024 Results;

Raises Full-Year Adjusted EPS

•

Second quarter Reported and Adjusted1 Earnings Per Share (EPS)2 of 55 cents and 73 cents, an increase of 41% and 40%, respectively, driven by strong operational execution

•

Bookings of $1.25 billion were the highest quarterly level since 2014 and includes record aftermarket activity of more than $610 million

•

Adjusted Gross and Operating Margins3 of 32.3% and 12.5%, respectively, increased 200 and 210 basis points compared to prior year

•

Raised full-year 2024 Adjusted EPS guidance4 to $2.60 to $2.75

DALLAS, July 29, 2024 - Flowserve Corporation (NYSE: FLS), a leading provider of flow control products and services for the global infrastructure markets, today announced its financial results for the second quarter ended June 30, 2024.

Second Quarter 2024 Highlights (all comparisons to the 2023 second quarter, unless otherwise noted)

•

Reported EPS of $0.55 and Adjusted EPS of $0.73, compared to $0.39 and $0.52, respectively

•

Second quarter 2024 Reported EPS includes after-tax adjusted expenses of $23.7 million, comprised of realignment charges and write-down of investment among other items

•

Total bookings were $1.25 billion, up $135.1 million or 12.2%. On a constant currency basis5, total bookings were up $144.2 million or 13.0%

•

Original equipment bookings were $632.1 million, up $112.0 million or 21.5%. On a constant currency basis, original equipment bookings were up $115.2 million or 22.2%

•

Aftermarket bookings were $614.0 million, up $23.1 million or 3.9%. On a constant currency basis, aftermarket bookings were up $29.0 million or 4.9%

•

Sales were $1.16 billion, up $76.5 million or 7.1%. On a constant currency basis, sales were up $83.7 million or 7.7%

•

Original equipment sales were $566.4 million, up $48.5 million or 9.4%. On a constant currency basis, original equipment sales were up $51.0 million or 9.8%

•

Aftermarket sales were $590.5 million, up $28.0 million or 5.0%. On a constant currency basis, aftermarket sales were up $32.7 million or 5.8%

•

Reported gross and operating margins were 31.6% and 10.5%, respectively, up 170 basis points and 160 basis points, respectively

•

Adjusted gross and operating margins were 32.3% and 12.5%, respectively, up 200 basis points and 210 basis points, respectively

•

Backlog of $2.7 billion was up 2.8% sequentially with a second quarter book-to-bill of 1.08x

"Our second quarter results further solidify the momentum we have generated over the last several quarters. We delivered meaningful sequential and year-over-year improvements in bookings, revenue and margins driven by our operational excellence program and the effectiveness of organizational design changes implemented last year. We achieved significant bookings of $1.25 billion during the quarter, which included a healthy mix of record quarterly aftermarket bookings and large project bookings," said Scott Rowe, Flowserve's President and Chief Executive Officer. "With accelerating operational performance, our constructive end markets, and a renewed focus on product management, we believe we are well positioned to deliver on our long-term targets."

Rowe concluded, "With our strong financial and operating performance year-to-date, combined with our outlook for the rest of the year and confidence in our execution, we have increased our full-year Adjusted EPS guidance for 2024. Our 3D strategy continues to accelerate our growth, and we remain committed to further capitalizing on opportunities that will deliver long-term value creation for our customers, associates, and shareholders."

Revised 2024 Guidance4

Flowserve is raising its Adjusted EPS guidance metrics for 2024 and reaffirmed most other financial targets, as shown in the table below:

Prior Target Range6 Revised Target Range

Revenue Growth

Up 4.0% to 6.0% Reaffirmed

Reported Earnings Per Share

$2.25 - $2.45 Reaffirmed

Adjusted Earnings Per Share

$2.50 - $2.70 $2.60 - $2.75

Net Interest Expense

$60 to $65 million Reaffirmed

Adjusted Tax Rate

~20% ~21%

Capital Expenditures

$75 - $85 million Reaffirmed

Flowserve's 2024 Adjusted EPS target range excludes expected adjusted items including realignment charges of approximately $45 million, as well as the potential impact of below-the-line foreign currency effects and certain other discrete items which may arise during the course of the year.

2

Second Quarter 2024 Results Conference Call

Flowserve will host its conference call with the financial community on Tuesday, July 30th at 10:00 AM Eastern. Scott Rowe, President and Chief Executive Officer, as well as other members of the management team will be presenting. The call can be accessed by shareholders and other interested parties at www.flowserve.com under the "Investors" section.

1

See Consolidated Reconciliation of Non-GAAP Financial Measures to the Most Directly Comparable GAAP Financial Measure (Unaudited) and Segment Reconciliation of Non-GAAP Financial Measures to the Most Directly Comparable GAAP Financial Measure (Unaudited) tables for a detailed reconciliation of reported results to adjusted measures.

2

Adjusted EPS excludes identified realignment expenses, the impact from other specific discrete items and below-the-line foreign currency effects and utilizes the then-applicable foreign exchange rates and approximately 132 million fully diluted shares.

3

Adjusted gross and operating margins are calculated by dividing adjusted gross profit and adjusted operating income, respectively, by revenues. Adjusted gross profit and adjusted operating income are derived by excluding the adjusted items. See Consolidated Reconciliation of Non-GAAP Financial Measures to the Most Directly Comparable GAAP Financial Measure (Unaudited) and Segment Reconciliation of Non-GAAP Financial Measures to the Most Directly Comparable GAAP Financial Measure (Unaudited) tables for a detailed reconciliation.

4

2024 Adjusted EPS excludes realignment expenses as well as the impact of below-the-line foreign currency effects and certain other discrete items which may arise during the year and utilizes June 2024 foreign exchange rates and approximately 132 million fully diluted shares.

5

Constant currency is a non-GAAP financial measure. We have calculated constant currency amounts and the associated currency effects on operations by translating current year results on a monthly basis at prior year exchange rates for the same periods.

6

Prior target range was provided as of April 29, 2024.

3

CONDENSED CONSOLIDATED STATEMENTS OF INCOME 

(Unaudited) 

Three Months Ended June 30,
(Amounts in thousands, except per share data) 2024 2023

Sales

$ 1,156,892 $ 1,080,376

Cost of sales

(790,796 ) (757,616 )

Gross profit

366,096 322,760

Selling, general and administrative expense

(238,627 ) (230,082 )

Loss on sale of business

(12,981 ) - 

Net earnings from affiliates

6,816 3,970

Operating income

121,304 96,648

Interest expense

(16,917 ) (16,554 )

Interest income

1,174 1,907

Other income (expense), net

(5,263 ) (5,543 )

Earnings (loss) before income taxes

100,298 76,458

Provision for income taxes

(23,846 ) (21,304 )

Net earnings (loss), including noncontrolling interests

76,452 55,154

Less: Net earnings attributable to noncontrolling interests

(3,836 ) (3,951 )

Net earnings (loss) attributable to Flowserve Corporation

$ 72,616 $ 51,203

Net earnings (loss) per share attributable to Flowserve Corporation common shareholders:

Basic

$ 0.55 $ 0.39

Diluted

0.55 0.39

Weighted average shares - basic

131,656 131,171

Weighted average shares - diluted

132,415 131,810

4

Consolidated Reconciliation of Non-GAAP Financial Measures to the Most Directly Comparable GAAP Financial Measure (Unaudited)

(Amounts in thousands, except per share data)

Three Months Ended
June 30, 2024

Gross
Profit 		Selling,
General &
Administrative
Expense 		Loss on
Sale of
Business 		Operating
Income 		Other
Income
(Expense),
Net 		Provision
For
(Benefit
From)
Income
Taxes 		Net
Earnings
(Loss) 		Effective
Tax
Rate 		Diluted
EPS

Reported

$ 366,096 $ 238,627 $ 12,981 $ 121,304 $ (5,263 ) $ 23,846 $ 72,616 23.8 % 0.55

Reported as a percent of sales

31.6 % 20.6 % 1.1 % 10.5 % -0.5 % 2.1 % 6.3 %

Realignment charges (a)

7,521 267 (12,981 ) 20,235 -  1,558 18,677 7.7 % 0.14

Discrete items (b)

-  (1,100 ) -  1,100 -  259 841 23.5 % 0.01

Discrete asset write-downs (c)(d)

-  (1,795 ) -  1,795 3,567 1,342 4,020 25.0 % 0.03

Below-the-line foreign exchange impacts (e)

-  -  -  -  207 29 178 13.9 % 0.00

Adjusted

$ 373,617 $ 235,999 $ -  $ 144,434 $ (1,489 ) $ 27,034 $ 96,332 21.3 % 0.73

Adjusted as a percent of sales

32.3 % 20.4 % 0.0 % 12.5 % -0.1 % 2.3 % 8.3 %

Note: Amounts may not calculate due to rounding

(a)

Charges represent realignment costs incurred as a result of realignment programs of which $19,200 is non-cash.

(b)

Charge represents costs associated with merger and acquisition activity.

(c)

Charge represents a $1,795 non-cash write-down of a software asset.

(d)

Charge represents a $3,567 non-cash write-down of a debt investment.

(e)

Below-the-line foreign exchange impacts represent the remeasurement of foreign exchange derivative contracts as well as the remeasurement of assets and liabilities that are denominated in a currency other than a site's respective functional currency.

5

Three Months Ended June 30, 2023

Gross
Profit 		Selling,
General &
Administrative
Expense 		Operating
Income 		Other
Income
(Expense),
Net 		Provision
For
(Benefit
From)
Income
Taxes 		Net
Earnings
(Loss) 		Effective
Tax
Rate 		Diluted
EPS

Reported

$ 322,760 $ 230,082 $ 96,648 $ (5,543 ) $ 21,304 $ 51,203 27.9 % 0.39

Reported as a percent of sales

29.9 % 21.3 % 8.9 % -0.5 % 2.0 % 4.7 %

Realignment charges (a)

4,106 (7,445 ) 11,551 -  2,982 8,569 25.8 % 0.07

Acquisition related (b)

-  (2,856 ) 2,856 -  732 2,124 25.6 % 0.02

Discrete asset write-downs (c)

796 (1,038 ) 1,834 -  479 1,355 26.1 % 0.01

Below-the-line foreign exchange impacts (d)

-  -  -  4,758 (156 ) 4,914 -3.3 % 0.04

Adjusted

$ 327,662 $ 218,743 $ 112,889 $ (785 ) $ 25,341 $ 68,165 26.0 % 0.52

Adjusted as a percent of sales

30.3 % 20.2 % 10.4 % -0.1 % 2.3 % 6.3 %

Note: Amounts may not calculate due to rounding

(a)

Charges represent realignment costs incurred as a result of realignment programs of which $4 is non-cash.

(b)

Charges represent costs associated with a terminated acquisition.

(c)

Charge represents a further expense of $1,834 associated with a sales contract that was initially adjusted out of Non-GAAP measures in 2017.

(d)

Below-the-line foreign exchange impacts represent the remeasurement of foreign exchange derivative contracts as well as the remeasurement of assets and liabilities that are denominated in a currency other than a site's respective functional currency.

6

SEGMENT INFORMATION

(Unaudited)

FLOWSERVE PUMPS DIVISION Three Months Ended June 30,
(Amounts in millions, except percentages) 2024 2023

Bookings

$ 898.8 $ 760.0

Sales

812.2 765.4

Gross profit

260.2 226.8

Gross profit margin

32.0 % 29.6 %

SG&A

136.1 132.8

Segment operating income

131.0 98.0

Segment operating income as a percentage of sales

16.1 % 12.8 %
FLOW CONTROL DIVISION Three Months Ended June 30,
(Amounts in millions, except percentages) 2024 2023

Bookings

$ 349.2 $ 359.7

Sales

347.7 317.7

Gross profit

106.3 93.1

Gross profit margin

30.6 % 29.3 %

SG&A

61.0 56.9

Loss on sale of business

(13.0 ) - 

Segment operating income

32.3 36.1

Segment operating income as a percentage of sales

9.3 % 11.4 %

7

Segment Reconciliation of Non-GAAP Financial Measures to the Most Directly Comparable GAAP Financial Measure (Unaudited)

(Amounts in thousands)

Flowserve Pumps Division

Three Months Ended

June 30, 2024

Gross Profit Selling,
General &
Administrative
Expense 		Operating
Income

Reported

$ 260,215 $ 136,053 $ 130,978

Reported as a percent of sales

32.0 % 16.8 % 16.1 %

Realignment charges (a)

7,378 720 6,658

Adjusted

$ 267,593 $ 136,773 $ 137,636

Adjusted as a percent of sales

32.9 % 16.8 % 16.9 %

Three Months Ended

June 30, 2023

Gross Profit Selling,
General &
Administrative
Expense 		Operating
Income

Reported

$ 226,814 $ 132,780 $ 98,003

Reported as a percent of sales

29.6 % 17.3 % 12.8 %

Realignment charges (a)

953 (17 ) 970

Discrete asset write-downs (b)

796 (1,038 ) 1,834

Adjusted

$ 228,563 $ 131,725 $ 100,807

Adjusted as a percent of sales

29.9 % 17.2 % 13.2 %

Flow Control Division

Three Months Ended

June 30, 2024

Gross Profit Selling,
General &
Administrative
Expense 		Loss on
Sale of
Business 		Operating
Income

Reported

$ 106,271 $ 61,034 $ 12,981 $ 32,251

Reported as a percent of sales

30.6 % 17.6 % 3.7 % 9.3 %

Realignment charges (a)

221 53 (12,981 ) 13,149

Discrete items (b)

-  (1,100 ) -  1,100

Adjusted

$ 106,492 $ 59,987 $ -  $ 46,500

Adjusted as a percent of sales

30.6 % 17.3 % 0.0 % 13.4 %

Note: Amounts may not calculate due to rounding

(a)

Charges represent realignment costs incurred as a result of realignment programs of which $19,200 is non-cash.

(b)

Charge represents costs associated with merger and acquisition activity.

Three Months Ended

June 30, 2023

Gross
Profit 		Selling,
General &
Administrative
Expense 		Operating
Income

Reported

$ 93,058 $ 56,943 $ 36,115

Reported as a percent of sales

29.3 % 17.9 % 11.4 %

Realignment charges (a)

3,153 -  3,153

Acquisition related (c)

-  (2,856 ) 2,856

Adjusted

$ 96,211 $ 54,087 $ 42,124

Adjusted as a percent of sales

30.3 % 17.0 % 13.3 %

Note: Amounts may not calculate due to rounding

(a)

Charges represent realignment costs incurred as a result of realignment programs of which $4 is non-cash.

(b)

Charge represents a further expense of $1,834 associated with a sales contract that was initially adjusted out of Non-GAAP measures in 2017.

(c)

Charge represents costs associated with a terminated acquisition.

8

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

Six Months Ended June 30,
(Amounts in thousands, except per share data) 2024 2023

Sales

$ 2,244,371 $ 2,060,681

Cost of sales

(1,539,307 ) (1,441,090 )

Gross profit

705,064 619,591

Selling, general and administrative expense

(467,045 ) (474,359 )

Loss on sale of businesses

(12,981 ) - 

Net earnings from affiliates

9,344 8,603

Operating income

234,382 153,835

Interest expense

(32,233 ) (32,766 )

Interest income

2,343 3,401

Other income (expense), net

(6,137 ) (13,562 )

Earnings (loss) before income taxes

198,355 110,908

Benefit from (provision for) income taxes

(43,988 ) (25,757 )

Net earnings (loss), including noncontrolling interests

154,367 85,151

Less: Net earnings attributable to noncontrolling interests

(7,531 ) (7,181 )

Net earnings (loss) attributable to Flowserve Corporation

$ 146,836 $ 77,970

Net earnings (loss) per share attributable to Flowserve Corporation common shareholders:

Basic

$ 1.12 $ 0.59

Diluted

1.11 0.59

Weighted average shares - basic

131,583 131,051

Weighted average shares - diluted

132,392 131,782

9

Consolidated Reconciliation of Non-GAAP Financial Measures to the Most Directly Comparable GAAP Financial Measure (Unaudited)

(Amounts in thousands, except per share data)

Six Months Ended June 30, 2024

Gross
Profit 		Selling,
General &
Administrative
Expense 		Loss on
Sale of
Business 		Operating
Income 		Other Income
(Expense),
Net 		Provision
For
(Benefit
From)
Income
Taxes 		Net
Earnings
(Loss) 		Effective
Tax Rate 		Diluted
EPS

Reported

$ 705,064 $ 467,045 $ 12,981 $ 234,382 $ (6,137 ) $ 43,988 $ 146,836 22.2 % 1.11

Reported as a percent of sales

31.4 % 20.8 % 0.6 % 10.4 % -0.3 % 2.0 % 6.5 %

Realignment charges (a)

13,194 (1,227 ) (12,981 ) 27,402 -  2,281 25,121 8.3 % 0.19

Discrete items (b)(c)

-  900 -  (900 ) -  259 (1,159 ) -28.8 % (0.01 )

Discrete asset write-downs (d)(e)

-  (1,795 ) -  1,795 3,567 1,342 4,020 25.0 % 0.03

Below-the-line foreign exchange impacts (f)

-  -  -  -  (1,116 ) (22 ) (1,094 ) 2.0 % (0.01 )

Adjusted

$ 718,258 $ 464,923 $ -  $ 262,679 $ (3,686 ) $ 47,848 $ 173,724 20.9 % 1.31

Adjusted as a percent of sales

32.0 % 20.7 % 0.0 % 11.7 % -0.2 % 2.1 % 7.7 %

Note: Amounts may not calculate due to rounding

(a)

Charges represent realignment costs incurred as a result of realignment programs of which $20,000 is non-cash.

(b)

Represents a reduction to reserves of $2,000 associated with our ongoing financial exposure in Russia that were adjusted for Non-GAAP measures when established in 2022.

(c)

Charge represents $1,100 of costs associated with merger and acquisition activity.

(d)

Charge represents a $1,795 non-cash write-down of a software asset.

(e)

Charge represents a $3,567 non-cash write-down of a debt investment.

(f)

Below-the-line foreign exchange impacts represent the remeasurement of foreign exchange derivative contracts as well as the remeasurement of assets and liabilities that are denominated in a currency other than a site's respective functional currency.

10

Six Months Ended June 30, 2023

Gross
Profit 		Selling,
General &
Administrative
Expense 		Operating
Income 		Other
Income
(Expense),
Net 		Provision
For
(Benefit
From)
Income
Taxes 		Net
Earnings
(Loss) 		Effective
Tax Rate 		Diluted
EPS

Reported

$ 619,591 $ 474,359 $ 153,835 $ (13,562 ) $ 25,757 $ 77,970 23.2 % 0.59

Reported as a percent of sales

30.1 % 23.0 % 7.5 % -0.7 % 1.2 % 3.8 %

Realignment charges (a)

4,308 (24,122 ) 28,430 -  6,166 22,264 21.7 % 0.17

Acquisition related (b)

-  (5,952 ) 5,952 -  1,554 4,398 26.1 % 0.03

Discrete asset write-downs (c)(d)(e)

1,969 (3,955 ) 5,924 -  1,517 4,407 25.6 % 0.03

Below-the-line foreign exchange impacts (f)

-  -  -  12,164 393 11,771 3.2 % 0.09

Adjusted

$ 625,868 $ 440,330 $ 194,141 $ (1,398 ) $ 35,387 $ 120,810 21.7 % 0.92

Adjusted as a percent of sales

30.4 % 21.4 % 9.4 % -0.1 % 1.7 % 5.9 %

Note: Amounts may not calculate due to rounding

(a)

Charges represent realignment costs incurred as a result of realignment programs of which $7,601 is non-cash.

(b)

Charges represent costs associated with a terminated acquisition.

(c)

Charge represents a further expense of $1,834 associated with a sales contract that was initially adjusted out of Non-GAAP measures in 2017.

(d)

Charge represents a further $1,173 non-cash write-down of inventory associated with a customer sales contract that was originally determined to be uncollectible in 2020.

(e)

Charge represents a $2,917 non-cash write-down of a licensing agreement.

(f)

Below-the-line foreign exchange impacts represent the remeasurement of foreign exchange derivative contracts as well as the remeasurement of assets and liabilities that are denominated in a currency other than a site's respective functional currency.

11

SEGMENT INFORMATION

(Unaudited)

FLOWSERVE PUMPS DIVISION Six Months Ended
June 30,
(Amounts in millions, except percentages) 2024 2023

Bookings

$ 1,602.2 $ 1,487.8

Sales

1,581.6 1,465.5

Gross profit

508.2 448.2

Gross profit margin

32.1 % 30.6 %

SG&A

275.8 279.8

Segment operating income

241.9 177.1

Segment operating income as a percentage of sales

15.3 % 12.1 %
FLOW CONTROL DIVISION Six Months Ended
June 30,
(Amounts in millions, except percentages) 2024 2023

Bookings

$ 689.9 $ 691.6

Sales

668.2 599.3

Gross profit

199.0 173.4

Gross profit margin

29.8 % 28.9 %

SG&A

119.0 118.7

Loss on sale of business

(13.0 ) - 

Segment operating income

67.0 54.6

Segment operating income as a percentage of sales

10.0 % 9.1 %

12

Segment Reconciliation of Non-GAAP Financial Measures to the Most Directly Comparable GAAP Financial Measure (Unaudited)

(Amounts in thousands)

Flowserve Pumps Division

Six Months Ended

June 30, 2024

Gross
Profit 		Selling,
General &
Administrative
Expense 		Operating
Income

Reported

$ 508,153 $ 275,763 $ 241,872

Reported as a percent of sales

32.1 % 17.4 % 15.3 %

Realignment charges (a)

12,422 (321 ) 12,743

Discrete item (b)

-  2,000 (2,000 )

Adjusted

$ 520,575 $ 277,442 $ 252,615

Adjusted as a percent of sales

32.9 % 17.5 % 16.0 %

Six Months Ended

June 30, 2023

Gross
Profit 		Selling,
General &
Administrative
Expense 		Operating
Income

Reported

$ 448,241 $ 279,759 $ 177,076

Reported as a percent of sales

30.6 % 19.1 % 12.1 %

Realignment charges (a)

1,343 (2,067 ) 3,410

Discrete asset write-downs (b)(c)(d)

1,969 (3,955 ) 5,924

Adjusted

$ 451,553 $ 273,737 $ 186,410

Adjusted as a percent of sales

30.8 % 18.7 % 12.7 %

Flow Control Division

Six Months Ended
June 30, 2024

Gross
Profit 		Selling,
General &
Administrative
Expense 		Loss on
Sale of
Business 		Operating
Income

Reported

$ 198,966 $ 119,026 $ 12,981 $ 66,959

Reported as a percent of sales

29.8 % 17.8 % 1.9 % 10.0 %

Realignment charges (a)

988 (61 ) (12,981 ) 14,030

Discrete item (c)

-  (1,100 ) -  1,100

Adjusted

$ 199,954 $ 117,865 $ -  $ 82,089

Adjusted as a percent of sales

29.9 % 17.6 % 0.0 % 12.3 %

Note: Amounts may not calculate due to rounding

(a)

Charges represent realignment costs incurred as a result of realignment programs of which $20,000 is non-cash.

(b)

Represents a reduction to reserves associated with our ongoing financial exposure in Russia that were adjusted for Non-GAAP measures when established in 2022.

(c)

Charge represents costs associated with merger and acquisition activity.

Six Months Ended

June 30, 2023

Gross
Profit 		Selling,
General &
Administrative
Expense 		Operating
Income

Reported

$ 173,351 $ 118,702 $ 54,649

Reported as a percent of sales

28.9 % 19.8 % 9.1 %

Realignment charges (a)

3,164 (8,906 ) 12,070

Acquisition related (e)

-  (5,952 ) 5,952

Adjusted

$ 176,515 $ 103,844 $ 72,671

Adjusted as a percent of sales

29.5 % 17.3 % 12.1 %

Note: Amounts may not calculate due to rounding

(a)

Charges represent realignment costs incurred as a result of realignment programs of which $4 is non-cash.

(b)

Charge represents a further expense of $1,834 associated with a sales contract that was initially adjusted out of Non-GAAP measures in 2017.

(c)

Charge represents a further $1,173 non-cash write-down of inventory associated with a customer sales contract that was originally determined to be uncollectible in 2020.

(d)

Charge represents a $2,917 non-cash write-down of a licensing agreement.

(e)

Charges represent costs associated with a terminated acquisition.

13

Second Quarter and Year-to-Date 2024 - Segment Results

(dollars in millions, comparison vs. 2023 second quarter and year-to-date, unaudited)

FPD FCD
2nd Qtr YTD 2nd Qtr YTD

Bookings

$ 898.8 $ 1,602.2 $ 349.2 $ 689.9

- vs. prior year

138.8 18.3 % 114.4 7.7 % -10.5 -2.9 % -1.7 -0.2 %

- on constant currency

145.6 19.2 % 120.7 8.1 % -8.3 -2.3 % 1.3 0.2 %

Sales

$ 812.2 $ 1,581.6 $ 347.7 $ 668.2

- vs. prior year

46.8 6.1 % 116.1 7.9 % 30.0 9.4 % 68.9 11.5 %

- on constant currency

52.0 6.8 % 118.2 8.1 % 32.0 10.1 % 71.2 11.9 %

Gross Profit

$ 260.2 $ 508.2 $ 106.3 $ 199.0

- vs. prior year

14.7 % 13.4 % 14.2 % 14.8 %

Gross Margin (% of sales)

32.0 % 32.1 % 30.6 % 29.8 %

- vs. prior year (in basis points)

240 bps 150 bps 130 bps 90 bps

Operating Income

$ 131.0 $ 241.9 $ 32.3 $ 67.0

- vs. prior year

33.0 33.7 % 64.8 36.6 % -3.8 -10.5 % 12.4 22.7 %

- on constant currency

34.5 35.2 % 66.6 37.6 % -3.3 -9.4 % 13.2 23.9 %

Operating Margin (% of sales)

16.1 % 15.3 % 9.3 % 10.0 %

- vs. prior year (in basis points)

330 bps 320 bps (210 ) bps 90 bps

Adjusted Operating Income *

$ 137.6 $ 252.6 $ 46.5 $ 82.1

- vs. prior year

36.8 36.5 % 66.2 35.5 % 4.4 10.5 % 9.4 12.9 %

- on constant currency

38.3 38.0 % 68.0 36.5 % 4.9 11.5 % 10.2 14.0 %

Adj. Oper. Margin (% of sales)*

16.9 % 16.0 % 13.4 % 12.3 %

- vs. prior year (in basis points)

370 bps 330 bps 10 bps 20 bps

Backlog

$ 1,857.8 $ 837.5
*

Adjusted Operating Income and Adjusted Operating Margin exclude realignment charges and other specific discrete items 

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CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(Amounts in thousands, except par value) June 30,
2024 		December 31,
2023

ASSETS

Current assets:

Cash and cash equivalents

$ 515,083 $ 545,678

Accounts receivable, net of allowance for expected credit losses of $80,591 and $80,013, respectively

1,031,656 881,869

Contract assets, net of allowance for expected credit losses of $4,815 and $4,993, respectively

287,676 280,228

Inventories

851,305 879,937

Prepaid expenses and other

130,095 116,065

Total current assets

2,815,815 2,703,777

Property, plant and equipment, net of accumulated depreciation of $1,156,824 and $1,158,451, respectively

491,864 506,158

Operating lease right-of-use assets, net

157,797 156,430

Goodwill

1,170,555 1,182,225

Deferred taxes

214,930 218,358

Other intangible assets, net

117,236 122,248

Other assets, net of allowance for expected credit losses of $65,895 and $66,864, respectively

196,287 219,523

Total assets

$ 5,164,484 $ 5,108,719

LIABILITIES AND EQUITY

Current liabilities:

Accounts payable

$ 557,145 $ 547,824

Accrued liabilities

457,697 504,430

Contract liabilities

293,354 287,697

Debt due within one year

66,439 66,243

Operating lease liabilities

31,705 32,382

Total current liabilities

1,406,340 1,438,576

Long-term debt due after one year

1,211,611 1,167,307

Operating lease liabilities

145,016 138,665

Retirement obligations and other liabilities

385,193 389,120

Shareholders' equity:

Common shares, $1.25 par value

220,991 220,991

Shares authorized - 305,000

Shares issued - 176,793 and 176,793, respectively

Capital in excess of par value

489,786 506,525

Retained earnings

3,945,577 3,854,717

Treasury shares, at cost - 45,620 and 45,885 shares, respectively

(2,004,494 ) (2,014,474 )

Deferred compensation obligation

7,979 7,942

Accumulated other comprehensive loss

(689,775 ) (639,601 )

Total Flowserve Corporation shareholders' equity

1,970,064 1,936,100

Noncontrolling interests

46,260 38,951

Total equity

2,016,324 1,975,051

Total liabilities and equity

$ 5,164,484 $ 5,108,719

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

Six Months Ended June 30,
(Amounts in thousands) 2024 2023

Cash flows - Operating activities:

Net earnings (loss), including noncontrolling interests

$ 154,367 $ 85,151

Adjustments to reconcile net earnings (loss) to net cash provided (used) by operating activities:

Depreciation

37,883 37,452

Amortization of intangible and other assets

4,391 5,158

Loss on sale of business

12,981 - 

Stock-based compensation

17,400 15,878

Foreign currency, asset write downs and other non-cash adjustments

10,935 (8,418 )

Change in assets and liabilities:

Accounts receivable, net

(168,540 ) (5,350 )

Inventories

3,603 (99,240 )

Contract assets, net

(13,267 ) 9,917

Prepaid expenses and other assets, net

10,945 (105 )

Accounts payable

14,376 7,118

Contract liabilities

10,894 10,831

Accrued liabilities

(47,795 ) (2,091 )

Retirement obligations and other liabilities

4,402 8,412

Net deferred taxes

(3,100 ) (14,329 )

Net cash flows provided (used) by operating activities

49,475 50,384

Cash flows - Investing activities:

Capital expenditures

(28,289 ) (31,893 )

Payments for disposition of business

(2,352 ) - 

Other

551 (941 )

Net cash flows provided (used) by investing activities

(30,090 ) (32,834 )

Cash flows - Financing activities:

Payments on term loan

(30,000 ) (20,000 )

Proceeds under revolving credit facility

100,000 150,000

Payments under revolving credit facility

(25,000 ) (100,000 )

Proceeds under other financing arrangements

562 197

Payments under other financing arrangements

(1,460 ) (3,458 )

Repurchases of common shares

(16,161 ) - 

Payments related to tax withholding for stock-based compensation

(9,093 ) (6,235 )

Payments of dividends

(55,259 ) (52,471 )

Other

(272 ) (320 )

Net cash flows provided (used) by financing activities

(36,683 ) (32,287 )

Effect of exchange rate changes on cash and cash equivalents

(13,297 ) 2,603

Net change in cash and cash equivalents

(30,595 ) (12,134 )

Cash and cash equivalents at beginning of period

545,678 434,971

Cash and cash equivalents at end of period

$ 515,083 $ 422,837

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About Flowserve

Flowserve Corp. is one of the world's leading providers of fluid motion and control products and services. Operating in more than 50 countries, the company produces engineered and industrial pumps, seals and valves as well as a range of related flow management services. More information about Flowserve can be obtained by visiting the company's Web site at www.flowserve.com.

Safe Harbor Statement: This news release includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, as amended. Words or phrases such as, "may," "should," "expects," "could," "intends," "plans," "anticipates," "estimates," "believes," "forecasts," "predicts" or other similar expressions are intended to identify forward-looking statements, which include, without limitation, earnings forecasts, statements relating to our business strategy and statements of expectations, beliefs, future plans and strategies and anticipated developments concerning our industry, business, operations and financial performance and condition.

The forward-looking statements included in this news release are based on our current expectations, projections, estimates and assumptions. These statements are only predictions, not guarantees. Such forward-looking statements are subject to numerous risks and uncertainties that are difficult to predict. These risks and uncertainties may cause actual results to differ materially from what is forecast in such forward-looking statements, and include, without limitation, the following: economic, political and other risks associated with our international operations, including military actions, trade embargoes, epidemics or pandemics or changes to tariffs or trade agreements that could affect customer markets, particularly North African, Latin American, Asian and Middle Eastern markets and global oil and gas producers, and non-compliance with U.S. export/re-export control, foreign corrupt practice laws, economic sanctions and import laws and regulations; any continued volatile regional and global economic conditions resulting from the COVID-19 pandemic on our business and operations; global supply chain disruptions and the current inflationary environment could adversely affect the efficiency of our manufacturing and increase the cost of providing our products to customers; a portion of our bookings may not lead to completed sales, and our ability to convert bookings into revenues at acceptable profit margins; changes in global economic conditions and the potential for unexpected cancellations or delays of customer orders in our reported backlog; our dependence on our customers' ability to make required capital investment and maintenance expenditures; if we are not able to successfully execute and realize the expected financial benefits from any restructuring and realignment initiatives, our business could be adversely affected; the substantial dependence of our sales on the success of the oil and gas, chemical, power generation and water management industries; the adverse impact of volatile raw materials prices on our products and operating margins; increased aging and slower collection of receivables, particularly in Latin America and other emerging markets; our exposure to fluctuations in foreign currency exchange rates, including in hyperinflationary countries such as Venezuela and Argentina; potential adverse consequences resulting from litigation to which we are a party, such as litigation involving asbestos-containing material claims; expectations regarding acquisitions and the integration of acquired businesses; the potential adverse impact of an impairment in the carrying value of goodwill or other intangible assets; our dependence upon third-party suppliers whose failure to perform timely could adversely affect our business operations; the highly competitive nature of the markets in which we operate; environmental compliance costs and liabilities; potential work stoppages and other labor matters; access to public and private sources of debt financing; our inability to protect our intellectual property in the U.S., as well as in foreign countries; obligations under our defined benefit pension plans; our internal control over financial reporting may not prevent or detect misstatements because of its inherent limitations, including the possibility of human error, the circumvention or overriding of controls, or fraud; the recording of increased deferred tax asset valuation allowances in the future or the impact of tax law changes on such deferred tax assets could affect our operating results; our information technology infrastructure could be subject to service interruptions, data corruption, cyber-based attacks or network security breaches, which could disrupt our business operations and result in the loss of critical and confidential information; ineffective internal controls could impact the accuracy and timely reporting of our business and financial results; and other factors described from time to time in our filings with the Securities and Exchange Commission.

All forward-looking statements included in this news release are based on information available to us on the date hereof, and we assume no obligation to update any forward-looking statement.

The Company reports its financial results in accordance with U.S. generally accepted accounting principles (GAAP). However, management believes that non-GAAP financial measures which exclude certain non-recurring items present additional useful comparisons between current results and results in prior operating periods, providing investors with a clearer view of the underlying trends of the business. Management also uses these non-GAAP financial measures in making financial, operating, planning and compensation decisions and in evaluating the Company's performance. Non-GAAP financial measures, which may be inconsistent with similarly captioned measures presented by other companies, should be viewed in addition to, and not as a substitute for, the Company's reported results prepared in accordance with GAAP.

17

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Flowserve Contacts

Investor Contacts:

Jay Roueche, Vice President, Investor Relations & Treasurer

(972) 443-6560

Tarek Zeni, Director, Investor Relations

(469) 420-4045
Media Contact:

Wes Warnock, Vice President, Marketing, Communications & Public Affairs

(972) 443-6900

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