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Flowserve Corporation Reports Second Quarter 2023 Results; Raises 2023 Financial Guidance

  • Raised full-year Revenue and Adjusted EPS guidance range as a result of strong year-to-date results and increased expectations for the remainder of the year
  • Reported and Adjusted1 Earnings Per Share (EPS)4 grew 15 and 73 percent year-over-year to 39 cents and 52 cents, respectively
  • Achieved sixth consecutive quarter with bookings above $1 billion including the second quarter’s healthy $1.1 billion; driven by aftermarket growth of 12.3%
  • Generated substantial revenue growth of 22.5%, delivering an adjusted operating margin of 10.4%, an increase of 320 bps year-over-year
  • Sizable backlog of $2.84 billion increased 3.9%, or $108 million, versus 2022 year-end, supported by 1.03x book-to-bill in the second quarter
  • Increased year-to-date operating cash flow by $122 million versus prior year

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, 2023.

Second Quarter 2023 Highlights (all comparisons to the 2022 second quarter, unless otherwise noted)

  • Reported Earnings Per Share (EPS) of $0.39 and Adjusted Earnings Per Share (EPS)1 of $0.52, compared to $0.34 and $0.30, respectively
    • Second quarter 2023 Reported EPS includes after-tax adjusted expenses of $17.0 million, comprised of realignment charges, below-the-line foreign exchange, Velan acquisition and integration costs, and additional expense related to a previously reserved sales contract
  • Total bookings were $1.11 billion, up $67.0 million or 6.4%. On a constant currency basis2, total bookings were up $69.0 million or 6.6%
    • Original equipment bookings were $520.1 million, up $2.1 million or 0.4%. On a constant currency basis2, original equipment bookings were up $1.1 million or 0.2%
    • Aftermarket bookings were $590.9 million, up $64.9 million or 12.3%. On a constant currency basis2, aftermarket bookings were up $67.9 million or 12.9%
  • Sales were $1.08 billion, up $198.2 million or 22.5%. On a constant currency basis2, sales were up $202.0 million or 22.9%
    • Original equipment sales were $517.8 million, up $106.5 million or 25.9%. On a constant currency basis2, original equipment sales were up $107.9 million or 26.2%
    • Aftermarket sales were $562.6 million, up $91.7 million or 19.5%. On a constant currency basis2, aftermarket sales were up $94.1 million or 20.0%
  • Reported gross and operating margins were 29.9% and 8.9%, respectively
    • Adjusted gross and operating margins3 were 30.3% and 10.4%, respectively
  • Backlog of $2.84 billion, up $527.0 million or 22.8%, compared to the 2022 second quarter

“We are pleased to report strong revenue growth and enhanced margins in the second quarter, building on the momentum we established over the past several quarters,” said Scott Rowe, Flowserve’s president and chief executive officer. “The improved operating environment, combined with our internal process changes, has Flowserve delivering at a much higher level. My confidence around our operational execution continues to grow, which has led us to increase our full year guidance range for the second time this year.”

Rowe concluded, “Our 3D strategy remains aligned with the current environment, and has the company positioned for growth despite some global economic uncertainty. We fully expect that the strong aftermarket and MRO spending environment will continue at least into next year. Combining these short cycle trends with our solid project funnel supports our expectations for revenue growth through at least 2024. Our significantly improved execution, near-record backlog levels, and healthy market outlook should enable Flowserve to deliver increased value to our customers, shareholders, and associates in 2023 and beyond.”

Revised 2023 Guidance4

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 Range5

Revised Target Range

Revenue Growth

Up 10.0% to 12.0%

Up 16.0% to 18.0%

Reported Earnings Per Share

$1.40 - $1.65

Re-affirmed

Adjusted Earnings Per Share

$1.65 - $1.85

$1.85 - $2.00

Net Interest Expense

$55 - $60 million

~$60 million

Adjusted Tax Rate

18% - 20%

~20%

Capital Expenditures

$75 - $85 million

Re-affirmed

The outlook excludes any contribution from the previously announced pending acquisition of Velan Inc. Additionally, Flowserve’s 2023 Adjusted EPS target range also excludes expected adjusted items including identified realignment charges of approximately $40 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.

Second Quarter 2023 Results Conference Call

Flowserve will host its conference call with the financial community on Wednesday, August 2nd 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 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.

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 Adjusted 2023 EPS excludes identified realignment expenses, the impact from other specific discrete items (including planned Velan acquisition) and below-the-line foreign currency effects and utilizes current FX rates and approximately 131.8 million fully diluted shares.

5 Prior target range was provided as of May 2, 2023, and included revisions from Flowserve’s initial guidance range provided February 10, 2023

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.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended June 30,
(Amounts in thousands, except per share data)

2023

2022

 
Sales

$

1,080,376

 

$

882,222

 

Cost of sales

 

(757,616

)

 

(632,393

)

Gross profit

 

322,760

 

 

249,829

 

Selling, general and administrative expense

 

(230,082

)

 

(194,606

)

Net earnings from affiliates

 

3,970

 

 

5,109

 

Operating income

 

96,648

 

 

60,332

 

Interest expense

 

(16,554

)

 

(11,062

)

Interest income

 

1,907

 

 

854

 

Other income (expense), net

 

(5,543

)

 

7,589

 

Earnings before income taxes

 

76,458

 

 

57,713

 

Provision for income taxes

 

(21,304

)

 

(11,618

)

Net earnings, including noncontrolling interests

 

55,154

 

 

46,095

 

Less: Net earnings attributable to noncontrolling interests

 

(3,951

)

 

(1,318

)

Net earnings attributable to Flowserve Corporation

$

51,203

 

$

44,777

 

 
Net earnings per share attributable to Flowserve Corporation common shareholders:
Basic

$

0.39

 

$

0.34

 

Diluted

 

0.39

 

 

0.34

 

 
Weighted average shares – basic

 

131,171

 

 

130,666

 

Weighted average shares – diluted

 

131,810

 

 

131,245

 

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, 2023 Gross Profit Selling, General & Administrative Expense Operating Income Other Income (Expense), Net 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 and integration-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 acquisition and integration-related costs associated with the pending acquisition of Velan Inc.
(c) Charge represents a further expense of $1,834 associated with a sales contract that was initially reserved for 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.
 
Three Months Ended June 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

$

249,829

 

$

194,606

 

$

60,332

 

$

7,589

 

$

11,618

 

$

44,777

 

20.1

%

$

0.34

Reported as a percent of sales

 

28.3

%

 

22.1

%

 

6.8

%

 

0.9

%

 

1.3

%

 

5.1

%

 
Realignment charges (a)

 

467

 

 

(62

)

 

529

 

 

-

 

 

101

 

 

428

 

19.1

%

 

0.00

Acquisition and integration-related

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

0.0

%

 

0.00

Discrete asset write-downs (b)

 

-

 

 

(3,036

)

 

3,036

 

 

-

 

 

729

 

 

2,307

 

24.0

%

 

0.02

Below-the-line foreign exchange impacts (c)

 

-

 

 

-

 

 

-

 

 

(10,112

)

 

(2,064

)

 

(8,048

)

20.4

%

 

-0.06

Adjusted

$

250,296

 

$

191,508

 

$

63,897

 

$

(2,523

)

$

10,384

 

$

39,464

 

20.3

%

$

0.30

Adjusted as a percent of sales

 

28.4

%

 

21.7

%

 

7.2

%

 

-0.3

%

 

1.2

%

 

4.5

%

 
Note: Amounts may not calculate due to rounding
(a) Charges represent realignment costs incurred as a result of realignment programs of which $19 is non-cash.
(b) Charge represents a non-cash asset write-down associated with the impairment of a trademark.
(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 June 30,
(Amounts in millions, except percentages)

2023

2022

Bookings

$

760.0

 

$

717.8

 

Sales

 

765.4

 

 

614.9

 

Gross profit

 

226.8

 

 

184.0

 

Gross profit margin

 

29.6

%

 

29.9

%

SG&A

 

132.8

 

 

131.7

 

Segment operating income

 

98.0

 

 

57.3

 

Segment operating income as a percentage of sales

 

12.8

%

 

9.3

%

 
FLOW CONTROL DIVISION Three Months Ended June 30,
(Amounts in millions, except percentages)

2023

2022

Bookings

$

359.7

 

$

329.9

 

Sales

 

317.7

 

 

268.4

 

Gross profit

 

93.1

 

 

80.3

 

Gross profit margin

 

29.3

%

 

29.9

%

SG&A

 

56.9

 

 

50.0

 

Segment operating income

 

36.1

 

 

30.4

 

Segment operating income as a percentage of sales

 

11.4

%

 

11.3

%

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 June 30, 2023 Gross Profit Selling, General & Administrative Expense Operating Income Three Months Ended June 30, 2022 Gross Profit Selling, General & Administrative Expense Operating Income
Reported

$

226,814

 

$

132,780

 

$

98,003

 

Reported

$

183,959

 

$

131,722

 

$

57,346

 

Reported as a percent of sales

 

29.6

%

 

17.3

%

 

12.8

%

Reported as a percent of sales

 

29.9

%

 

21.4

%

 

9.3

%

 
Realignment charges (a)

 

953

 

 

(17

)

 

970

 

Realignment charges (a)

 

379

 

 

(2

)

 

381

 

Discrete asset write-downs (b)

 

796

 

 

(1,038

)

 

1,834

 

Discrete asset write-downs

 

-

 

 

-

 

 

-

 

Adjusted

$

228,563

 

$

131,725

 

$

100,807

 

Adjusted

$

184,338

 

$

131,720

 

$

57,727

 

Adjusted as a percent of sales

 

29.9

%

 

17.2

%

 

13.2

%

Adjusted as a percent of sales

 

30.0

%

 

21.4

%

 

9.4

%

 
Flow Control Division
Three Months Ended June 30, 2023 Gross Profit Selling, General & Administrative Expense Operating Income Three Months Ended June 30, 2022 Gross Profit Selling, General & Administrative Expense Operating Income
Reported

$

93,058

 

$

56,943

 

$

36,115

 

Reported

$

80,324

 

$

49,955

 

$

30,369

 

Reported as a percent of sales

 

29.3

%

 

17.9

%

 

11.4

%

Reported as a percent of sales

 

29.9

%

 

18.6

%

 

11.3

%

 
Realignment charges (a)

 

3,153

 

 

-

 

 

3,153

 

Realignment charges (a)

 

88

 

 

(33

)

 

121

 

Acquisition and integration-related (d)

 

-

 

 

(2,856

)

 

2,856

 

Acquisition and integration-related

 

-

 

 

-

 

 

-

 

Discrete asset write-downs

 

-

 

 

-

 

 

-

 

Discrete asset write-downs (b)

 

-

 

 

(3,036

)

 

3,036

 

Adjusted

$

96,211

 

$

54,087

 

$

42,124

 

Adjusted

$

80,412

 

$

46,886

 

$

33,526

 

Adjusted as a percent of sales

 

30.3

%

 

17.0

%

 

13.3

%

Adjusted as a percent of sales

 

30.0

%

 

17.5

%

 

12.5

%

 

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 $4 is non-cash.

 

(a) Charges represent realignment costs incurred as a result of realignment programs of which $19 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) Charge represents a non-cash asset write-down associated with the impairment of a trademark.

(c) Charges represent acquisition and integration-related costs associated with the pending acquisition of Velan Inc.

 

 

 

 

 

CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Six Months Ended June 30,
(Amounts in thousands, except per share data)

2023

2022

 
Sales

$

2,060,681

 

$

1,703,280

 

Cost of sales

 

(1,441,090

)

 

(1,243,803

)

Gross profit

 

619,591

 

 

459,477

 

Selling, general and administrative expense

 

(474,359

)

 

(400,816

)

Net earnings from affiliates

 

8,603

 

 

9,039

 

Operating income

 

153,835

 

 

67,700

 

Interest expense

 

(32,766

)

 

(21,755

)

Interest income

 

3,401

 

 

1,797

 

Other income (expense), net

 

(13,562

)

 

(524

)

Earnings before income taxes

 

110,908

 

 

47,218

 

Provision for income taxes

 

(25,757

)

 

(14,800

)

Net earnings, including noncontrolling interests

 

85,151

 

 

32,418

 

Less: Net earnings attributable to noncontrolling interests

 

(7,181

)

 

(3,458

)

Net earnings attributable to Flowserve Corporation

$

77,970

 

$

28,960

 

 
Net earnings per share attributable to Flowserve Corporation common shareholders:
Basic

$

0.59

 

$

0.22

 

Diluted

 

0.59

 

 

0.22

 

 
Weighted average shares – basic

 

131,051

 

 

130,554

 

Weighted average shares – diluted

 

131,782

 

 

131,148

 

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, 2023 Gross Profit Selling, General & Administrative Expense Operating Income Other Income (Expense), Net 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 and integration-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 acquisition and integration-related costs associated with the pending acquisition of Velan Inc.
(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.
 
Six Months Ended June 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

$

459,477

 

$

400,816

 

$

67,700

 

$

(524

)

$

14,800

 

$

28,960

 

31.4

%

$

0.22

Reported as a percent of sales

 

27.0

%

 

23.5

%

 

4.0

%

 

0.0

%

 

0.9

%

 

1.7

%

 
Realignment charges (a)

 

269

 

 

139

 

 

130

 

 

-

 

 

27

 

 

103

 

20.8

%

 

0.00

Acquisition and integration-related

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

0.0

%

 

0.00

Discrete asset write-downs (b)(c)

 

10,053

 

 

(13,229

)

 

23,282

 

 

-

 

 

(70

)

 

23,352

 

-0.3

%

 

0.18

Below-the-line foreign exchange impacts (d)

 

-

 

 

-

 

 

-

 

 

(4,418

)

 

(1,031

)

 

(3,387

)

23.3

%

 

-0.03

Adjusted

$

469,799

 

$

387,726

 

$

91,112

 

$

(4,942

)

$

13,726

 

$

49,028

 

20.7

%

$

0.37

Adjusted as a percent of sales

 

27.6

%

 

22.8

%

 

5.3

%

 

-0.3

%

 

0.8

%

 

2.9

%

 
Note: Amounts may not calculate due to rounding
(a) Charges represent realignment costs incurred as a result of realignment programs of which $259 is non-cash.
(b) Charge represents a $3,096 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) 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 Six Months Ended June 30,
(Amounts in millions, except percentages)

2023

2022

Bookings

$

1,487.8

 

$

1,513.0

 

Sales

 

1,465.5

 

 

1,190.5

 

Gross profit

 

448.2

 

 

340.9

 

Gross profit margin

 

30.6

%

 

28.6

%

SG&A

 

279.8

 

 

271.5

 

Segment operating income

 

177.1

 

 

78.3

 

Segment operating income as a percentage of sales

 

12.1

%

 

6.6

%

 
FLOW CONTROL DIVISION Six Months Ended June 30,
(Amounts in millions, except percentages)

2023

2022

Bookings

$

691.6

 

$

624.2

 

Sales

 

599.3

 

 

516.3

 

Gross profit

 

173.4

 

 

139.8

 

Gross profit margin

 

28.9

%

 

27.1

%

SG&A

 

118.7

 

 

94.2

 

Segment operating income

 

54.6

 

 

45.6

 

Segment operating income as a percentage of sales

 

9.1

%

 

8.8

%

Segment Reconciliation of Non-GAAP Financial Measures to the Most Directly Comparable GAAP Financial Measure (Unaudited)
(Amounts in thousands)
 
Flowserve Pump Division
Six Months Ended June 30, 2023 Gross Profit Selling, General & Administrative Expense Operating Income Six Months Ended June 30, 2022 Gross Profit Selling, General & Administrative Expense Operating Income
Reported

$

448,241

 

$

279,759

 

$

177,076

 

Reported

$

340,903

 

$

271,523

 

$

78,347

 

Reported as a percent of sales

 

30.6

%

 

19.1

%

 

12.1

%

Reported as a percent of sales

 

28.6

%

 

22.8

%

 

6.6

%

 
Realignment charges (a)

 

1,343

 

 

(2,067

)

 

3,410

 

Realignment charges (a)

 

296

 

 

(77

)

 

373

 

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

 

1,969

 

 

(3,955

)

 

5,924

 

Discrete asset write-downs (b)

 

8,939

 

 

(9,111

)

 

18,050

 

Adjusted

$

451,553

 

$

273,737

 

$

186,410

 

Adjusted

$

350,138

 

$

262,335

 

$

96,770

 

Adjusted as a percent of sales

 

30.8

%

 

18.7

%

 

12.7

%

Adjusted as a percent of sales

 

29.4

%

 

22.0

%

 

8.1

%

 
Flow Control Division
Six Months Ended June 30, 2023 Gross Profit Selling, General & Administrative Expense Operating Income Six Months Ended June 30, 2022 Gross Profit Selling, General & Administrative Expense Operating Income
Reported

$

173,351

 

$

118,702

 

$

54,649

 

Reported

$

139,840

 

$

94,234

 

$

45,606

 

Reported as a percent of sales

 

28.9

%

 

19.8

%

 

9.1

%

Reported as a percent of sales

 

27.1

%

 

18.3

%

 

8.8

%

 
Realignment charges (a)

 

3,164

 

 

(8,906

)

 

12,070

 

Realignment charges (a)

 

34

 

 

(50

)

 

84

 

Acquisition and integration-related (e)

 

-

 

 

(5,952

)

 

5,952

 

Acquisition and integration-related

 

-

 

 

-

 

 

-

 

Discrete asset write-downs

 

-

 

 

-

 

 

-

 

Discrete asset write-downs (b)(c)

 

1,114

 

 

(4,118

)

 

5,232

 

Adjusted

$

176,515

 

$

103,844

 

$

72,671

 

Adjusted

$

140,988

 

$

90,066

 

$

50,922

 

Adjusted as a percent of sales

 

29.5

%

 

17.3

%

 

12.1

%

Adjusted as a percent of sales

 

27.3

%

 

17.4

%

 

9.9

%

 
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 $4 is non-cash. (a) Charges represent realignment costs incurred as a result of realignment programs of which $19 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) Charge represents a non-cash asset write-down of $3,036 associated with the impairment of a trademark.
(d) Charge represents a $2,917 non-cash write-down of a licensing agreement.
(e) Charges represent acquisition and integration-related costs associated with the pending acquisition of Velan Inc.
Second Quarter and Year-to-Date 2023 - Segment Results
(dollars in millions, comparison vs. 2022 second quarter and year-to-date, unaudited)
 
FPD FCD
2nd Qtr YTD 2nd Qtr YTD
Bookings

$

760.0

 

$

1,487.8

 

$

359.7

 

$

691.6

 

- vs. prior year

 

42.2

 

5.9

%

 

-25.2

 

-1.7

%

 

29.8

 

9.0

%

 

67.4

 

10.8

%

- on constant currency

 

41.3

 

5.8

%

 

-11.3

 

-0.7

%

 

32.8

 

10.0

%

 

79.0

 

12.7

%

 
Sales

$

765.4

 

$

1,465.5

 

$

317.7

 

$

599.3

 

- vs. prior year

 

150.5

 

24.5

%

 

275.0

 

23.1

%

 

49.3

 

18.4

%

 

83.0

 

16.1

%

- on constant currency

 

151.4

 

24.6

%

 

292.1

 

24.5

%

 

52.3

 

19.5

%

 

93.7

 

18.2

%

 
Gross Profit

$

226.8

 

$

448.2

 

$

93.1

 

$

173.4

 

- vs. prior year

 

23.3

%

 

31.5

%

 

15.9

%

 

24.0

%

 
Gross Margin (% of sales)

 

29.6

%

 

30.6

%

 

29.3

%

 

28.9

%

- vs. prior year (in basis points)

(30) bps

200 bps

(60) bps

180 bps

 
Operating Income

$

98.0

 

$

177.1

 

$

36.1

 

$

54.6

 

- vs. prior year

 

40.7

 

71.0

%

 

98.8

 

126.2

%

 

5.7

 

18.8

%

 

9.0

 

19.7

%

- on constant currency

 

41.9

 

73.1

%

 

106.2

 

135.5

%

 

6.7

 

22.2

%

 

10.8

 

23.8

%

 
Operating Margin (% of sales)

 

12.8

%

 

12.1

%

 

11.4

%

 

9.1

%

- vs. prior year (in basis points)

350 bps

550 bps

10 bps

30 bps

 
Adjusted Operating Income *

$

100.8

 

$

186.4

 

$

42.1

 

$

72.7

 

- vs. prior year

 

43.1

 

74.7

%

 

89.7

 

92.8

%

 

8.6

 

25.7

%

 

21.8

 

42.8

%

- on constant currency

 

44.3

 

76.8

%

 

97.1

 

100.4

%

 

9.6

 

28.7

%

 

23.6

 

46.4

%

 
Adj. Oper. Margin (% of sales)*

 

13.2

%

 

12.7

%

 

13.3

%

 

12.1

%

- vs. prior year (in basis points)

380 bps

460 bps

80 bps

220 bps

 
Backlog

$

2,026.4

 

$

835.6

 

 
* Adjusted Operating Income and Adjusted Operating Margin exclude realignment charges and other specific discrete items
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
June 30, December 31,
(Amounts in thousands, except par value)

2023

2022

 
ASSETS
Current assets:
Cash and cash equivalents

$

422,837

 

$

434,971

 

Accounts receivable, net of allowance for expected credit losses of $84,358 and $83,062, respectively

 

887,867

 

 

868,632

 

Contract assets, net of allowance for expected credit losses of $4,420 and $5,819, respectively

 

227,636

 

 

233,457

 

Inventories, net

 

914,288

 

 

803,198

 

Prepaid expenses and other

 

126,756

 

 

110,714

 

Total current assets

 

2,579,384

 

 

2,450,972

 

Property, plant and equipment, net of accumulated depreciation of $1,139,149 and $1,172,957, respectively

 

500,075

 

 

500,945

 

Operating lease right-of-use assets, net

 

164,391

 

 

174,980

 

Goodwill

 

1,177,131

 

 

1,168,124

 

Deferred taxes

 

158,835

 

 

149,290

 

Other intangible assets, net

 

125,216

 

 

134,503

 

Other assets, net of allowance for expected credit losses of $66,857 and $66,377, respectively

 

214,983

 

 

211,820

 

Total assets

$

4,920,015

 

$

4,790,634

 

 
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable

$

492,623

 

$

476,747

 

Accrued liabilities

 

441,520

 

 

427,578

 

Contract liabilities

 

269,725

 

 

256,963

 

Debt due within one year

 

55,781

 

 

49,335

 

Operating lease liabilities

 

32,440

 

 

32,528

 

Total current liabilities

 

1,292,089

 

 

1,243,151

 

Long-term debt due after one year

 

1,245,253

 

 

1,224,151

 

Operating lease liabilities

 

146,255

 

 

155,196

 

Retirement obligations and other liabilities

 

314,408

 

 

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

 

495,281

 

 

507,484

 

Retained earnings

 

3,798,984

 

 

3,774,209

 

Treasury shares, at cost – 45,894 and 46,359 shares, respectively

 

(2,014,932

)

 

(2,036,882

)

Deferred compensation obligation

 

7,815

 

 

6,979

 

Accumulated other comprehensive loss

 

(623,687

)

 

(647,788

)

Total Flowserve Corporation shareholders' equity

 

1,884,452

 

 

1,824,993

 

Noncontrolling interests

 

37,558

 

 

33,614

 

Total equity

 

1,922,010

 

 

1,858,607

 

Total liabilities and equity

$

4,920,015

 

$

4,790,634

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

Six Months Ended June 30,

(Amounts in thousands)

2023

 

2022

 
Cash flows – Operating activities:
Net earnings, including noncontrolling interests

$

85,151

 

$

32,418

 

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

 

37,452

 

 

40,034

 

Amortization of intangible and other assets

 

5,158

 

 

6,748

 

Stock-based compensation

 

15,878

 

 

16,896

 

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

 

(8,418

)

 

(3,982

)

Change in assets and liabilities:
Accounts receivable, net

 

(5,350

)

 

(21,638

)

Inventories, net

 

(99,240

)

 

(96,737

)

Contract assets, net

 

9,917

 

 

(7,705

)

Prepaid expenses and other assets, net

 

(105

)

 

(19,769

)

Accounts payable

 

7,118

 

 

33,550

 

Contract liabilities

 

10,831

 

 

9,642

 

Accrued liabilities and income taxes payable

 

(2,091

)

 

(65,773

)

Retirement obligations and other

 

8,412

 

 

10,028

 

Net deferred taxes

 

(14,329

)

 

(5,079

)

Net cash flows provided (used) by operating activities

 

50,384

 

 

(71,367

)

Cash flows – Investing activities:
Capital expenditures

 

(31,893

)

 

(31,012

)

Other

 

(941

)

 

2,015

 

Net cash flows provided (used) by investing activities

 

(32,834

)

 

(28,997

)

Cash flows – Financing activities:
Payments on term loan

 

(20,000

)

 

(15,921

)

Proceeds under revolving credit facility

 

150,000

 

 

-

 

Payments under revolving credit facility

 

(100,000

)

 

-

 

Proceeds under other financing arrangements

 

197

 

 

1,029

 

Payments under other financing arrangements

 

(3,458

)

 

(720

)

Payments related to tax withholding for stock-based compensation

 

(6,235

)

 

(4,497

)

Payments of dividends

 

(52,471

)

 

(52,267

)

Other

 

(320

)

 

(5,334

)

Net cash flows provided (used) by financing activities

 

(32,287

)

 

(77,710

)

Effect of exchange rate changes on cash

 

2,603

 

 

(22,033

)

Net change in cash and cash equivalents

 

(12,134

)

 

(200,107

)

Cash and cash equivalents at beginning of period

 

434,971

 

 

658,452

 

Cash and cash equivalents at end of period

$

422,837

 

$

458,345

 

 

Contacts

Investor Contacts:

Jay Roueche, Vice President, Investor Relations & Treasurer, (972) 443-6560

Mike Mullin, Director, Investor Relations, (214) 697-8568

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