Flowserve Corporation (NYSE: FLS) (“Flowserve” or the “Company”), a leading provider of flow control products and services for the global infrastructure markets, today announced its financial results for the third quarter ended September 30, 2024.

Third Quarter 2024 Highlights (all comparisons to the 2023 third quarter, unless otherwise noted)

Total bookings were $1.20 billion, up $136.1 million or 12.7%. On a constant currency basis 4, total bookings were up $142.8 million or 13.4%
Original equipment bookings were $589.0 million, up $103.8 million or 21.4%. On a constant currency basis, original equipment bookings were up $106.1 million or 21.9%
Aftermarket bookings were $614.6 million, up $32.3 million or 5.6%. On a constant currency basis, aftermarket bookings were up $36.7 million or 6.3%

Sales were $1.13 billion, up $38.4 million or 3.5%. On a constant currency basis, sales were up $43.4 million or 4.0%
Original equipment sales were $555.8 million, up $26.6 million or 5.0%. On a constant currency basis, original equipment sales were up $27.6 million or 5.2%
Aftermarket sales were $577.3 million, up $11.7 million or 2.1%. On a constant currency basis, aftermarket sales were up $15.7 million or 2.8%

Reported gross and operating margins were 31.5% and 9.1%, respectively, up 250 basis points and 270 basis points, respectively
Adjusted gross and operating margins were 32.4% and 11.1%, respectively, up 270 basis points and 240 basis points, respectively
Both Reported and Adjusted third quarter 2024 operating margins were impacted by a $12.0 million expense charge from an actuarial-determined assessment of certain long-term liabilities, which reduced operating margins by approximately 106 basis points

Reported EPS of $0.44 and Adjusted EPS of $0.62, compared to $0.35 and $0.50, respectively
Third quarter 2024 Reported EPS includes after-tax adjusted expenses of $23.5 million, comprised of realignment charges, an in-process R&D technology purchase, pension plan transition expense, below-the-line foreign currency impact and MOGAS Industries acquisition expense
Both Reported and Adjusted EPS were impacted by a $9.2 million (7 cents per share) expense charge resulting from an actuarial-determined assessment of certain long-term liabilities

Backlog of $2.8 billion was up 3.7% sequentially with a third quarter book-to-bill of 1.06x

“Our third quarter results reflect strong operational performance, including meaningful year-over-year improvements in margins, EPS and cash flow. The Flowserve Business System is beginning to deliver results as we advance our operational excellence and portfolio excellence initiatives. We generated $1.2 billion in bookings during the quarter, which included a healthy mix of project awards, strong aftermarket activity and record bookings from our 3D strategic initiatives,” said Scott Rowe, Flowserve’s President and Chief Executive Officer. “We believe our 3D strategy, combined with the Flowserve Business System, are the key drivers to accelerating growth and continuing to expand our margins.”

Rowe concluded, “With backlog at near-record levels of $2.8 billion and our successful closing of the MOGAS Industries acquisition earlier this month, we expect to exit 2024 with positive momentum. We are well-positioned to continue our meaningful progress in 2025 toward our 2027 financial targets. I am confident that our sustained progress will enable us to create long-term value for our customers, associates, and shareholders.”

2024 Guidance5

Flowserve today reaffirmed its previously announced Adjusted EPS target range, as well as certain other financial metrics, provided in its full-year 2024 guidance issued on July 29, 2024. Flowserve’s 2024 Adjusted EPS target range excludes expected adjusted items including realignment charges of approximately $45 million and the potential impact of below-the-line foreign currency effects and certain other discrete items which may arise during the course of the year. In addition, Flowserve lowered its full-year 2024 Reported EPS target range. 2024 Guidance excludes the recently completed MOGAS Industries acquisition.

Target Range

Revenue Growth

Up 4.0% to 6.0%

Reported Earnings Per Share

$2.15 - $2.35

Adjusted Earnings Per Share

$2.60 - $2.75

Net Interest Expense

$60 to $65 million

Adjusted Tax Rate

~21%

Capital Expenditures

$75 - $85 million

Third Quarter 2024 Results Conference Call

Flowserve will host its conference call with the financial community on Tuesday, October 29 th 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 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.

2 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.

3 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.

4 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.

5 2024 Adjusted EPS excludes realignment expenses, the recently completed MOGAS Industries acquisition, the impact of below-the-line foreign currency effects and certain other discrete items which may arise during the year and utilizes September 2024 foreign exchange rates and approximately 132 million fully diluted shares.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

Three Months Ended September 30,

(Amounts in thousands, except per share data)

2024

2023

Gross profit

357,067

317,694

Net earnings from affiliates

5,150

4,627

Operating income

103,192

70,256

Interest income

1,403

2,134

Earnings (loss) before income taxes

82,088

41,407

Net earnings (loss), including noncontrolling interests

63,349

52,593

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

Diluted

0.44

0.35

Weighted average shares – basic

131,395

131,183

Weighted average shares – diluted

132,247

132,026

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

(Amounts in thousands, except per share data)

Note: Amounts may not calculate due to rounding

(a) Charges represent realignment costs incurred as a result of realignment programs of which $5,100 is non-cash.

(b) Charge represents a one-time $5,000 discretionary cash transition benefit provided to certain employees in conjunction with the freeze of our US Qualified pension plan.

(c) Charge represents the $7,200 strategic acquisition of intellectual property related to certain liquefied natural gas technology.

(d) Charge represents acquisition-related costs associated with the MOGAS acquisition.

(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.

Note: Amounts may not calculate due to rounding

(a) Charges represent realignment costs incurred as a result of realignment programs of which $0 is non-cash.

(b) Charges represent costs associated with a terminated acquisition.

(d) Represents a discrete tax benefit due to release of tax valuation allowance on the net deferred tax assets in a foreign jurisdiction. The associated tax expense was adjusted out in 2015.

SEGMENT INFORMATION

(Unaudited)

FLOWSERVE PUMPS DIVISION

Three Months Ended September 30,

(Amounts in millions, except percentages)

2024

2023

Sales

782.1

766.2

Gross profit

253.2

220.3

SG&A

149.1

146.7

Segment operating income

109.3

78.3

FLOW CONTROL DIVISION

Three Months Ended September 30,

(Amounts in millions, except percentages)

2024

2023

Sales

353.1

330.7

Gross profit

106.5

97.6

SG&A

59.8

54.0

Segment operating income

46.7

43.5

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

(Amounts in thousands)

Flowserve Pumps Division

Flow Control Division

(c) Charge represents the $7,200 strategic acquisition of intellectual property related to certain liquefied natural gas technology.

(d) Charge represents acquisition-related costs associated with the MOGAS acquisition.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

Nine Months Ended September 30,

(Amounts in thousands, except per share data)

2024

2023

Gross profit

1,062,132

937,285

Net earnings from affiliates

14,494

13,229

Operating income

337,575

224,090

Interest income

3,746

5,535

Earnings (loss) before income taxes

280,444

152,315

Net earnings (loss), including noncontrolling interests

217,716

137,744

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

Diluted

1.55

0.94

Weighted average shares – basic

131,520

131,095

Weighted average shares – diluted

132,343

131,864

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

(Amounts in thousands, except per share data)

Note: Amounts may not calculate due to rounding

(a) Charges represent realignment costs incurred as a result of realignment programs of which $25,100 is non-cash.

(b) Charge 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 a one-time $5,000 discretionary cash transition benefit provided to certain employees in conjunction with the freeze of our US Qualified pension plan.

(d) Charge represents the $7,200 strategic acquisition of intellectual property related to certain liquefied natural gas technology.

(e) Charge represents acquisition-related costs associated with the MOGAS acquisition.

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

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

(h) 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.

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.

(g) Represents the amount to correct the cumulative impact of prior period errors.

(h) Represents a discrete tax benefit due to release of tax valuation allowance on the net deferred tax assets in a foreign jurisdiction. The associated tax expense was adjusted out in 2015.

SEGMENT INFORMATION

(Unaudited)

FLOWSERVE PUMPS DIVISION

Nine Months Ended September 30,

(Amounts in millions, except percentages)

2024

2023

Sales

2,363.7

2,231.7

Gross profit

761.3

668.6

SG&A

424.8

426.4

Segment operating income

351.1

255.3

FLOW CONTROL DIVISION

Nine Months Ended September 30,

(Amounts in millions, except percentages)

2024

2023

Sales

1,021.4

930.0

Gross profit

305.5

270.9

SG&A

178.8

172.7

Segment operating income

113.7

98.2

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

(Amounts in thousands)

Flowserve Pumps Division

Flow Control Division

(b) Charge represents a one-time $3,700 discretionary cash transition benefit provided to certain employees in conjunction with the freeze of our US Qualified pension plan.

(b) Charge represents a further expense of $1,834 associated with a sales contract that was initially reserved for in 2017.

(c) Charge 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 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.

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

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

FPD

FCD

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

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

September 30,

December 31,

(Amounts in thousands, except par value)

2024

2023

ASSETS

Current assets:

Accounts receivable, net of allowance for expected credit losses of $80,757 and $80,013, respectively

971,261

881,869

Contract assets, net of allowance for expected credit losses of $4,808 and $4,993, respectively

299,421

280,228

Inventories

862,477

879,937

Prepaid expenses and other

124,883

116,065

Total current assets

2,869,787

2,703,777

Property, plant and equipment, net of accumulated depreciation of $1,184,833 and $1,158,451, respectively

502,430

506,158

Operating lease right-of-use assets, net

170,395

156,430

Goodwill

1,188,609

1,182,225

Deferred taxes

216,241

218,358

Other intangible assets, net

117,999

122,248

Other assets, net of allowance for expected credit losses of $65,989 and $66,864, respectively

209,097

219,523

LIABILITIES AND EQUITY

Current liabilities:

Accrued liabilities

472,454

504,430

Contract liabilities

294,222

287,697

Debt due within one year

66,919

66,243

Operating lease liabilities

33,995

32,382

Total current liabilities

1,440,366

1,438,576

Long-term debt due after one year

1,172,771

1,167,307

Operating lease liabilities

158,216

138,665

Retirement obligations and other liabilities

397,684

389,120

Shareholders’ equity:

Common shares, $1.25 par value

220,991

Shares authorized – 305,000

Shares issued – 176,793 and 176,793, respectively

Capital in excess of par value

496,673

506,525

Retained earnings

3,976,016

3,854,717

Deferred compensation obligation

8,076

7,942

Total Flowserve Corporation shareholders' equity

2,054,295

1,936,100

Noncontrolling interests

51,226

38,951

Total equity

2,105,521

1,975,051

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

Nine Months Ended September 30,

(Amounts in thousands)

2024

2023

Cash flows – Operating activities:

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

Depreciation

56,765

55,292

Amortization of intangible and other assets

6,482

7,782

Loss on sale of business

12,981

Stock-based compensation

24,608

22,127

Change in assets and liabilities:

Accounts payable

24,654

1,910

Contract liabilities

8,466

15,879

Retirement obligations and other liabilities

8,696

38,838

Net cash flows provided (used) by operating activities

227,960

131,140

Cash flows – Investing activities:

Cash flows – Financing activities:

Proceeds under revolving credit facility

100,000

230,000

Proceeds under other financing arrangements

1,001

242

Net change in cash and cash equivalents

66,067

45,487

Cash and cash equivalents at beginning of period

545,678

434,971

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.

View source version on businesswire.com:https://www.businesswire.com/news/home/20241028698418/en/

CONTACT: Investor Contacts:

Brian Ezzell, Vice President, Investor Relations, Treasurer & Corporate Finance (469) 420-3222

Tarek Zeni, Director, Investor Relations (469) 420-4045Media Contact:

Wes Warnock, Vice President, Marketing, Communications & Public Affairs (972) 443-6900

KEYWORD: TEXAS UNITED STATES NORTH AMERICA

INDUSTRY KEYWORD: MANUFACTURING OTHER ENERGY UTILITIES OTHER MANUFACTURING OIL/GAS COAL STEEL ENERGY ENGINEERING MACHINERY CHEMICALS/PLASTICS

SOURCE: Flowserve Corporation

PUB: 10/28/2024 04:05 PM/DISC: 10/28/2024 04:05 PM

http://www.businesswire.com/news/home/20241028698418/en