- Raised full-year Revenue and Adjusted EPS guidance range
following strong year-to-date performance and expectations for the
2023 fourth quarter
- Reported and Adjusted1 Earnings Per Share (EPS)2 of 35 cents
and 50 cents, respectively, continuing strong operational
performance
- Delivered solid bookings of $1.07 billion, including strong
aftermarket awards in excess of $580 million, maintaining
near-record backlog levels at $2.77 billion
- Drove revenue growth of 25.4% and generated a 630 basis
point improvement in adjusted operating margin compared to prior
year
- Improved operating cash flow by over $240 million
year-to-date, with $81 million of operating cash flow generated in
the 2023 third quarter
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 third
quarter ended September 30, 2023.
Third Quarter 2023
Highlights (all comparisons to the 2022 third quarter,
unless otherwise noted)
- Reported Earnings Per Share (EPS) of $0.35 and Adjusted
Earnings Per Share (EPS)1 of $0.50, compared to $0.29 and $0.09,
respectively
- Third quarter 2023 Reported EPS includes after-tax adjusted
expenses of $20.5 million, comprised primarily of realignment
charges, below-the-line foreign exchange, and the release of a tax
valuation allowance benefit
- Both Reported and Adjusted EPS were impacted by an $10.7
million (6 cents per share3) non-cash expense, resulting from an
actuarial-determined assessment of certain long-term
liabilities
- Total bookings were $1.07 billion, down $155.8 million or
12.7%. On a constant currency basis4, total bookings were down
$175.4 million or 14.3%
- Third quarter 2022 bookings included over $210 million of
original equipment orders related to a Middle East gas project,
representing one of Flowserve’s largest awards ever
- Original equipment bookings were $485.3 million, down $194.4
million or 28.6%. On a constant currency basis4, original equipment
bookings were down $202.0 million or 29.7%
- Aftermarket bookings were $582.2 million, up $38.6 million or
7.1%. On a constant currency basis4, aftermarket bookings were up
$26.6 million or 4.9%
- Sales were $1.09 billion, up $221.8 million or 25.4%. On a
constant currency basis4, sales were up $200.7 million or 23.0%
- Original equipment sales were $529.2 million, up $117.1 million
or 28.4%. On a constant currency basis4, original equipment sales
were up $106.8 million or 25.9%
- Aftermarket sales were $565.5 million, up $104.7 million or
22.7%. On a constant currency basis4, aftermarket sales were up
$94.0 million or 20.4%
- Reported gross and operating margins were 29.0% and 6.4%, up
160 and 360 basis points, respectively
- Adjusted gross and operating margins5 were 29.7% and 8.7%, up
230 and 630 basis points, respectively
- Both Reported and Adjusted third quarter 2023 operating margins
were impacted by the $10.7 million non-cash expense, which reduced
operating margins by approximately 100 basis points6
- Backlog of $2.77 billion, up $170.9 million or 6.6% compared to
the 2022 third quarter
- Book-to-bill solid at 1.03x year-to-date
- Completed actions to achieve the 2023 cost-reduction target of
$50 million annualized savings
“We delivered strong third quarter results, including
significant revenue and earnings growth, while building on the
operating momentum of the last year,” said Scott Rowe, Flowserve’s
President and Chief Executive Officer. “Our new organizational
model is driving speed, accountability, and cost efficiency
throughout the company. The combination of our improved operating
performance and our positive market outlook gives us the confidence
to increase our full year revenue and adjusted EPS guidance range
for the third time this year.”
Rowe concluded, “Driven by our 3D strategy, Flowserve is
well-positioned to capture accelerated growth from energy
transition investments and decarbonization initiatives. Flowserve
is also competitively differentiated to capitalize in our
traditional markets by ensuring global energy security.
Additionally, we expect both aftermarket and MRO opportunities will
remain strong through 2024 and beyond. As a result of these
combined dynamics, we continue to believe we are in the early
stages of a multi-year upcycle. Our focus remains on profitably
converting our near-record $2.8 billion backlog to deliver solid
revenue and earnings growth over the coming years, while creating
long-term value for our shareholders, associates and
customers.”
Revised 2023 Guidance2
Flowserve is raising its Revenue and Adjusted EPS guidance
metrics for 2023, as well as updating or re-affirming certain other
financial metrics, as shown in the table below:
Prior
Target Range7
Revised
Target Range
Revenue Growth
Up 16.0% to 18.0%
Up 18% to 19%
Reported Earnings Per Share
$1.40 - $1.65
$1.40 - $1.50
Adjusted Earnings Per Share
$1.85 - $2.00
$1.95 - $2.05
Net Interest Expense
~$60 million
Re-affirmed
Adjusted Tax Rate
~20%
Re-affirmed
Capital Expenditures
$75 - $85 million
Re-affirmed
Flowserve’s 2023 Adjusted EPS target range excludes expected
adjusted items including identified realignment charges of
approximately $55 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, including the
potential for additional realignment expense.
Third Quarter 2023 Results Conference
Call
Flowserve will host its conference call with the financial
community on Thursday, October 26th at 11:00 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 “Investor Relations” 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 2023 EPS excludes identified
realignment expenses, the impact from other specific discrete items
(including terminated Velan acquisition) and below-the-line foreign
currency effects and utilizes current FX rates and approximately
132 million fully diluted shares.
3 EPS impact calculated by tax effecting
the $10.7 million expense at 25.6% effective tax rate and dividing
by 132 million 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 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..
6 Basis point impact calculated as the
$10.7 million non-cash charge in SG&A divided by total
sales
7 Prior target range was provided as of
August 1, 2023, and included revisions from Flowserve’s initial
guidance range provided February 10, 2023 and its previously
revised range on May 2, 2023
CONDENSED CONSOLIDATED STATEMENTS OF
INCOME
(Unaudited)
Three Months Ended September
30,
(Amounts in thousands, except per share
data)
2023
2022
Sales
$
1,094,718
$
872,881
Cost of sales
(777,024
)
(633,304
)
Gross profit
317,694
239,577
Selling, general and administrative
expense
(252,065
)
(221,142
)
Net earnings from affiliates
4,627
5,782
Operating income
70,256
24,217
Interest expense
(17,273
)
(11,582
)
Interest income
2,134
1,141
Other income (expense), net
(13,710
)
28,676
Earnings before income taxes
41,407
42,452
Benefit from (provision for) income
taxes
11,186
(1,817
)
Net earnings, including noncontrolling
interests
52,593
40,635
Less: Net earnings attributable to
noncontrolling interests
(6,437
)
(2,235
)
Net earnings attributable to Flowserve
Corporation
$
46,156
$
38,400
Net earnings per share attributable to
Flowserve Corporation common shareholders:
Basic
$
0.35
$
0.29
Diluted
0.35
0.29
Weighted average shares – basic
131,183
130,703
Weighted average shares – diluted
132,026
131,402
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 September 30,
2023
Gross Profit
Selling, General
& Administrative
Expense
Operating
Income
Other Income
(Expense),
Net
Income
Taxes
Earnings
Attributable to
Noncontrolling
Interests
Net
Earnings
(Loss)
Effective
Tax Rate
Diluted EPS
Reported
$
317,694
$
252,065
$
70,256
$
(13,710
)
$
(11,186
)
$
6,437
$
46,156
-27.0
%
$
0.35
Reported as a percent of sales
29.0
%
23.0
%
6.4
%
-1.3
%
-1.0
%
0.6
%
4.2
%
Realignment charges (a)
7,240
(14,954
)
22,194
-
4,250
-
17,944
19.1
%
0.14
Acquisition related (b)
-
(2,539
)
2,539
-
443
-
2,096
17.4
%
0.02
Correction of prior period errors (c)
-
-
-
-
-
(3,559
)
3,559
0
%
0.03
Discrete tax benefit (d)
-
-
-
-
13,000
-
(13,000
)
0
%
-0.10
Below-the-line foreign exchange impacts
(e)
-
-
-
12,164
2,276
-
9,888
18.7
%
0.07
Adjusted
$
324,934
$
234,572
$
94,989
$
(1,546
)
$
8,783
$
2,878
$
66,643
11.2
%
$
0.50
Adjusted as a percent of sales
29.7
%
21.4
%
8.7
%
-0.1
%
0.8
%
0.3
%
6.1
%
Note: Amounts may not calculate due to
rounding
(a) Charges represent realignment costs
incurred as a result of realignment programs.
(b) Charges represent costs associated
with a terminated acquisition
(c) Represents the amount to correct the
cumulative impact of prior period errors
(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.
(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.
Three Months Ended September 30,
2022
Gross Profit
Selling, General
& Administrative
Expense
Operating
Income
Other Income
(Expense),
Net
Income
Taxes
Net Earnings
(Loss)
Effective
Tax Rate
Diluted
EPS
Reported
$
239,577
$
221,142
$
24,217
$
28,676
$
1,817
$
38,400
4.2
%
$
0.29
Reported as a percent of sales
27.4
%
25.3
%
2.8
%
3.3
%
0.2
%
4.4
%
Realignment charges (a)
(395
)
(99
)
(296
)
-
(94
)
(202
)
31.8
%
0.00
Discrete asset write-downs (b)
(209
)
2,523
(2,732
)
-
(624
)
(2,108
)
22.8
%
-0.02
Below-the-line foreign exchange impacts
(c)
-
-
-
(30,482
)
(6,730
)
(23,752
)
22.1
%
-0.18
Adjusted
$
238,973
$
223,566
$
21,189
$
(1,806
)
$
(5,631
)
$
12,338
-63.0
%
$
0.09
Adjusted as a percent of sales
27.4
%
25.6
%
2.4
%
-0.2
%
-0.6
%
1.4
%
Note: Amounts may not calculate due to
rounding
(a) Charges represent realignment costs
credit as a result of realignment programs of which $89 is
non-cash.
(b) Represents reversals of expenses that
were adjusted for Non-GAAP measures in previous periods
(c) 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.
SEGMENT INFORMATION
(Unaudited)
FLOWSERVE PUMP DIVISION
Three Months Ended September
30,
(Amounts in millions, except
percentages)
2023
2022
Bookings
$
734.7
$
925.8
Sales
766.2
592.6
Gross profit
220.3
170.0
Gross profit margin
28.8
%
28.7
%
SG&A
146.7
136.9
Segment operating income
78.3
38.9
Segment operating income as a percentage
of sales
10.2
%
6.6
%
FLOW CONTROL DIVISION
Three Months Ended September
30,
(Amounts in millions, except
percentages)
2023
2022
Bookings
$
330.5
$
300.0
Sales
330.7
282.6
Gross profit
97.6
78.2
Gross profit margin
29.5
%
27.7
%
SG&A
54.0
48.5
Segment operating income
43.5
29.7
Segment operating income as a percentage
of sales
13.2
%
10.5
%
Segment Reconciliation of Non-GAAP
Financial Measures to the Most Directly Comparable GAAP Financial
Measure (Unaudited)
(Amounts in thousands)
Flowserve Pump
Division
Three Months Ended September 30,
2023
Gross Profit
Selling, General
& Administrative
Expense
Operating
Income
Three Months Ended September 30,
2022
Gross Profit
Selling, General
& Administrative
Expense
Operating
Income
Reported
$
220,321
$
146,679
$
78,269
Reported
$
170,046
$
136,915
$
38,912
Reported as a percent of sales
28.8
%
19.1
%
10.2
%
Reported as a percent of sales
28.7
%
23.1
%
6.6
%
Realignment charges (a)
6,141
(9,929
)
16,070
Realignment charges (a)
(417
)
(74
)
(343
)
Adjusted
$
226,462
$
136,750
$
94,339
Discrete asset write-downs (b)
(209
)
2,523
(2,732
)
Adjusted as a percent of sales
29.6
%
17.8
%
12.3
%
Adjusted
$
169,420
$
139,364
$
35,837
Adjusted as a percent of sales
28.6
%
23.5
%
6.0
%
Flow Control
Division
Three Months Ended September 30,
2023
Gross Profit
Selling, General
& Administrative
Expense
Operating
Income
Three Months Ended September 30,
2022
Gross Profit
Selling, General
& Administrative
Expense
Operating
Income
Reported
$
97,563
$
54,016
$
43,547
Reported
$
78,173
$
48,454
$
29,718
Reported as a percent of sales
29.5
%
16.3
%
13.2
%
Reported as a percent of sales
27.8
%
17.2
%
10.6
%
Realignment charges (a)
1,099
(1,572
)
2,671
Realignment charges (a)
22
(7
)
29
Acquisition related (b)
-
(2,539
)
2,539
Adjusted
$
78,195
$
48,447
$
29,747
Adjusted
$
98,662
$
49,905
$
48,757
Adjusted as a percent of sales
27.8
%
17.2
%
10.6
%
Adjusted as a percent of sales
29.8
%
15.1
%
14.7
%
Note: Amounts may not calculate due to
rounding
Note: Amounts may not calculate due to
rounding
(a) Charges represent realignment costs
incurred as a result of realignment programs.
(a) Charges represent realignment costs
credit as a result of realignment programs of which $89 is
non-cash.
(b) Charges represent costs associated
with a terminated acquisition
(b) Represents reversal of expenses that
were adjusted for Non-GAAP measures in previous periods.
CONDENSED CONSOLIDATED STATEMENTS OF
INCOME
(Unaudited)
Nine Months Ended September
30,
(Amounts in thousands, except per share
data)
2023
2022
Sales
$
3,155,399
$
2,576,161
Cost of sales
(2,218,114
)
(1,877,108
)
Gross profit
937,285
699,053
Selling, general and administrative
expense
(726,424
)
(621,956
)
Net earnings from affiliates
13,229
14,821
Operating income
224,090
91,918
Interest expense
(50,039
)
(33,337
)
Interest income
5,535
2,938
Other income (expense), net
(27,271
)
28,152
Earnings before income taxes
152,315
89,671
Benefit from (provision for) income
taxes
(14,571
)
(16,618
)
Net earnings, including noncontrolling
interests
137,744
73,053
Less: Net earnings attributable to
noncontrolling interests
(13,618
)
(5,694
)
Net earnings attributable to Flowserve
Corporation
$
124,126
$
67,359
Net earnings per share attributable to
Flowserve Corporation common shareholders:
Basic
$
0.95
$
0.52
Diluted
0.94
0.51
Weighted average shares – basic
131,095
130,604
Weighted average shares – diluted
131,864
131,233
Consolidated Reconciliation of Non-GAAP
Financial Measures to the Most Directly Comparable GAAP Financial
Measure (Unaudited)
(Amounts in thousands, except per share
data)
Nine Months Ended September 30,
2023
Gross
Profit
Selling, General
& Administrative
Expense
Operating
Income
Other
Income
(Expense),
Net
Income
Taxes
Earnings
Attributable to
Noncontrolling
Interests
Net
Earnings
(Loss)
Effective
Tax Rate
Diluted EPS
Reported
$
937,285
$
726,424
$
224,090
$
(27,271
)
$
14,571
$
13,618
$
124,126
9.6
%
$
0.94
Reported as a percent of sales
29.7
%
23.0
%
7.1
%
-0.9
%
0.5
%
0.4
%
3.9
%
Realignment charges (a)
11,548
(39,076
)
50,624
-
10,415
-
40,209
20.6
%
0.30
Acquisition related (b)
-
(8,491
)
8,491
-
1,997
-
6,494
23.5
%
0.05
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)
-
-
-
24,328
2,669
-
21,659
0.0
%
0.16
Correction of prior period errors (g)
-
-
-
-
-
(3,559
)
3,559
0.0
%
0.03
Discrete tax benefit (h)
-
-
-
-
13,000
-
(13,000
)
0.0
%
-0.10
Adjusted
$
950,802
$
674,902
$
289,129
$
(2,943
)
$
44,169
$
10,059
$
187,454
18.3
%
$
1.42
Adjusted as a percent of sales
30.1
%
21.4
%
9.2
%
-0.1
%
1.4
%
0.3
%
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 reserved
for 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.
Nine Months Ended September 30,
2022
Gross
Profit
Selling, General
& Administrative
Expense
Operating
Income
Other
Income
(Expense),
Net
Income
Taxes
Net Earnings
(Loss)
Effective
Tax Rate
Diluted EPS
Reported
$
699,053
$
621,956
$
91,918
$
28,152
$
16,618
$
67,359
18.5
%
$
0.51
Reported as a percent of sales
27.1
%
24.1
%
3.6
%
1.1
%
0.6
%
2.6
%
Realignment charges (a)
(126
)
40
(166
)
-
(67
)
(99
)
40.4
%
0.00
Discrete asset write-downs (b)(c)(d)
9,844
(10,706
)
20,550
-
(694
)
21,244
-3.4
%
0.16
Below-the-line foreign exchange impacts
(e)
-
-
-
(34,900
)
(7,761
)
(27,139
)
0.0
%
-0.20
Adjusted
$
708,771
$
611,290
$
112,302
$
(6,748
)
$
8,096
$
61,365
10.8
%
$
0.47
Adjusted as a percent of sales
27.5
%
23.7
%
4.4
%
-0.3
%
0.3
%
2.4
%
Note: Amounts may not calculate due to
rounding
(a) Charges represent realignment costs
incurred as a result of realignment programs of which $170 is
non-cash.
(b) Charge represents a $3,036 non-cash
asset write-down associated with the impairment of a trademark.
(c) Charges represent a $20,246 reserve of
Russia-related financial exposures.
(d) Includes reversal of expenses that
were adjusted for Non-GAAP measures in previous periods of
$2,732
(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.
SEGMENT INFORMATION
(Unaudited)
FLOWSERVE PUMP DIVISION
Nine Months Ended September
30,
(Amounts in millions, except
percentages)
2023
2022
Bookings
$
2,222.3
$
2,433.6
Sales
2,231.7
1,783.1
Gross profit
668.6
510.9
Gross profit margin
30.0
%
28.7
%
SG&A
426.4
408.4
Segment operating income
255.3
117.3
Segment operating income as a percentage
of sales
11.4
%
6.6
%
FLOW CONTROL DIVISION
Nine Months Ended September
30,
(Amounts in millions, except
percentages)
2023
2022
Bookings
$
1,022.1
$
923.2
Sales
930.0
798.8
Gross profit
270.9
218.0
Gross profit margin
29.1
%
27.3
%
SG&A
172.7
142.7
Segment operating income
98.2
75.3
Segment operating income as a percentage
of sales
10.6
%
9.4
%
Segment Reconciliation of Non-GAAP
Financial Measures to the Most Directly Comparable GAAP Financial
Measure (Unaudited)
(Amounts in thousands)
Flowserve Pump
Division
Nine Months Ended September 30,
2023
Gross Profit
Selling, General
& Administrative
Expense
Operating
Income
Nine Months Ended September 30,
2022
Gross Profit
Selling, General
& Administrative
Expense
Operating
Income
Reported
$
668,562
$
426,438
$
255,345
Reported
$
510,949
$
408,439
$
117,259
Reported as a percent of sales
30.0
%
19.1
%
11.4
%
Reported as a percent of sales
28.7
%
22.9
%
6.6
%
Realignment charges (a)
7,484
(11,996
)
19,480
Realignment charges (a)
(121
)
(151
)
30
Discrete asset write-downs (b)(c)(d)
1,969
(3,955
)
5,924
Discrete asset write-downs (b)(c)
8,730
(6,588
)
15,318
Adjusted
$
678,015
$
410,487
$
280,749
Adjusted
$
519,558
$
401,700
$
132,607
Adjusted as a percent of sales
30.4
%
18.4
%
12.6
%
Adjusted as a percent of sales
29.1
%
22.5
%
7.4
%
Flow Control
Division
Nine Months Ended September 30,
2023
Gross Profit
Selling, General
& Administrative
Expense
Operating
Income
Nine Months Ended September 30,
2022
Gross Profit
Selling, General
& Administrative
Expense
Operating
Income
Reported
$
270,914
$
172,718
$
98,196
Reported
$
218,012
$
142,688
$
75,324
Reported as a percent of sales
29.1
%
18.6
%
10.6
%
Reported as a percent of sales
27.3
%
17.9
%
9.4
%
Realignment charges (a)
4,263
(10,478
)
14,741
Realignment charges (a)
56
(57
)
113
Acquisition related (e)
-
(8,491
)
8,491
Discrete asset write-downs (b)(d)
1,114
(4,118
)
5,232
Adjusted
$
275,177
$
153,749
$
121,428
Adjusted
$
219,182
$
138,513
$
80,669
Adjusted as a percent of sales
29.6
%
16.5
%
13.1
%
Adjusted as a percent of sales
27.4
%
17.3
%
10.1
%
Note: Amounts may not calculate due to
rounding
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.
(a) Charges represent realignment costs
incurred as a result of realignment programs of which $170 is
non-cash.
(b) Charge represents a further expense of
$1,834 associated with a sales contract that was initially reserved
for in 2017.
(b) Charges represent the reserve of
Russia-related financial exposures of $20,246.
(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.
(c) Includes reversal of expenses that were adjusted for Non-GAAP
measures in previous periods of $2,732
(d) Charge represents a $2,917 non-cash
write-down of a licensing agreement.
(d) Charge represents a non-cash asset
write-down of $3,036 associated with the impairment of a
trademark.
(e) Charges represent costs associated
with a terminated acquisition
Third Quarter and Year-to-Date
2023 - Segment Results
(dollars in millions, comparison
vs. 2022 third quarter and year-to-date, unaudited)
FPD
FCD
3rd Qtr
YTD
3rd Qtr
YTD
Bookings
$
734.7
$
2,222.3
$
330.5
$
1,022.1
- vs. prior year
-191.1
-20.6
%
-211.3
-8.7
%
30.5
10.2
%
98.9
10.7
%
- on constant currency
-191.1
-22.4
%
-211.3
-8.8
%
30.5
9.2
%
98.9
11.7
%
Sales
$
766.2
$
2,231.7
$
-
$
930.0
- vs. prior year
173.6
29.3
%
448.6
25.2
%
48.1
17.0
%
131.2
16.4
%
- on constant currency
173.6
26.3
%
448.6
25.1
%
48.1
15.8
%
131.2
17.3
%
Gross Profit
$
220.3
$
668.6
$
97.6
$
270.9
- vs. prior year
29.6
%
30.9
%
24.8
%
24.3
%
Gross Margin (% of sales)
28.8
%
30.0
%
29.5
%
29.1
%
- vs. prior year (in basis points)
10 bps
130 bps
180 bps
180 bps
Operating Income
$
78.3
$
255.3
$
43.5
$
98.2
- vs. prior year
39.4
101.3
%
138.0
117.6
%
13.8
46.5
%
22.9
30.4
%
- on constant currency
39.4
93.9
%
138.0
121.7
%
13.8
46.6
%
22.9
32.8
%
Operating Margin (% of sales)
10.2
%
11.4
%
13.2
%
10.6
%
- vs. prior year (in basis points)
360 bps
480 bps
270 bps
120 bps
Adjusted Operating Income *
$
94.3
$
280.7
$
48.8
$
121.4
- vs. prior year
58.5
163.4
%
148.1
111.7
%
19.1
64.3
%
40.8
50.6
%
- on constant currency
58.5
155.5
%
148.1
115.2
%
19.1
64.3
%
40.8
52.9
%
Adj. Oper. Margin (% of sales)*
12.3
%
12.6
%
14.7
%
13.1
%
- vs. prior year (in basis points)
630 bps
520 bps
420 bps
300 bps
Backlog
$
1,959.0
$
829.7
* 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)
2023
2022
ASSETS
Current assets:
Cash and cash equivalents
$
480,458
$
434,971
Accounts receivable, net of allowance for
expected credit losses of $83,513 and $83,062, respectively
868,855
868,632
Contract assets, net of allowance for
expected credit losses of $4,867 and $5,819, respectively
245,133
233,457
Inventories, net
916,107
803,198
Prepaid expenses and other
127,972
110,714
Total current assets
2,638,525
2,450,972
Property, plant and equipment, net of
accumulated depreciation of $1,133,913 and $1,172,957,
respectively
492,323
500,945
Operating lease right-of-use assets,
net
156,784
174,980
Goodwill
1,164,388
1,168,124
Deferred taxes
171,387
149,290
Other intangible assets, net
122,549
134,503
Other assets, net of allowance for
expected credit losses of $66,879 and $66,377, respectively
219,257
211,820
Total assets
$
4,965,213
$
4,790,634
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable
$
481,337
$
476,747
Accrued liabilities
461,841
427,578
Contract liabilities
270,725
256,963
Debt due within one year
61,213
49,335
Operating lease liabilities
31,699
32,528
Total current liabilities
1,306,815
1,243,151
Long-term debt due after one year
1,266,423
1,224,151
Operating lease liabilities
138,907
155,196
Retirement obligations and other
liabilities
339,777
309,529
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
501,378
507,484
Retained earnings
3,818,392
3,774,209
Treasury shares, at cost – 45,893 and
46,359 shares, respectively
(2,014,879
)
(2,036,882
)
Deferred compensation obligation
7,878
6,979
Accumulated other comprehensive loss
(659,653
)
(647,788
)
Total Flowserve Corporation shareholders'
equity
1,874,107
1,824,993
Noncontrolling interests
39,184
33,614
Total equity
1,913,291
1,858,607
Total liabilities and equity
$
4,965,213
$
4,790,634
CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS
(Unaudited)
Nine Months Ended September
30,
(Amounts in thousands)
2023
2022
Cash flows – Operating
activities:
Net earnings, including noncontrolling
interests
$
137,744
$
73,053
Adjustments to reconcile net earnings to
net cash provided (used) by operating activities:
Depreciation
55,292
59,207
Amortization of intangible and other
assets
7,782
10,051
Stock-based compensation
22,127
23,757
Foreign currency, asset write downs and
other non-cash adjustments
(11,827
)
(24,085
)
Change in assets and liabilities:
Accounts receivable, net
1,524
(78,376
)
Inventories, net
(114,596
)
(151,938
)
Contract assets, net
(10,239
)
(21,912
)
Prepaid expenses and other assets, net
(6,727
)
(14,881
)
Accounts payable
1,910
29,307
Contract liabilities
15,879
27,237
Accrued liabilities and income taxes
payable
21,429
(32,735
)
Retirement obligations and other
38,838
24,123
Net deferred taxes
(27,996
)
(32,293
)
Net cash flows provided (used) by
operating activities
131,140
(109,485
)
Cash flows – Investing
activities:
Capital expenditures
(47,544
)
(45,831
)
Other
(833
)
184
Net cash flows provided (used) by
investing activities
(48,377
)
(45,647
)
Cash flows – Financing
activities:
Payments on term loan
(30,000
)
(24,239
)
Proceeds under revolving credit
facility
230,000
-
Payments under revolving credit
facility
(145,000
)
-
Proceeds under other financing
arrangements
242
1,135
Payments under other financing
arrangements
(2,098
)
(356
)
Payments related to tax withholding for
stock-based compensation
(6,203
)
(4,578
)
Payments of dividends
(78,712
)
(78,406
)
Other
(320
)
(5,334
)
Net cash flows provided (used) by
financing activities
(32,091
)
(111,778
)
Effect of exchange rate changes on
cash
(5,185
)
(39,672
)
Net change in cash and cash
equivalents
45,487
(306,582
)
Cash and cash equivalents at beginning of
period
434,971
658,452
Cash and cash equivalents at end of
period
$
480,458
$
351,870
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: the impact of the global
outbreak of COVID-19 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; 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; 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/20231025190658/en/
Flowserve
Investor: Jay Roueche, Vice President, Investor Relations &
Treasurer, (972) 443-6560 Mike Mullin, Director, Investor
Relations, (214) 697-8568
Media: Wes Warnock, Vice President, Corporate Communications
& Public Affairs, (972) 443-6900
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