Flowserve Corporation Reports Fourth Quarter and Full-Year 2023 Results; Initiates 2024 Guidance

Rhea-AI Summary

Flowserve Corporation (FLS) reports strong fourth-quarter and full-year financial results for 2023, with increased earnings per share, solid bookings, and revenue growth. The company also announced a 5% dividend increase and replenished its stock repurchase authorization. Full-year 2024 guidance includes revenue growth of 4%-6% and EPS projections.

Insights

Financial Analyst

The financial results of Flowserve Corporation for the fourth quarter and full-year ended December 31, 2023, reveal several critical aspects for stakeholders to consider. The company reported a decrease in fourth quarter bookings by 5.7% and a decline in original equipment bookings by 11.8%, which may signal a potential slowdown in new business acquisition. However, this is partially offset by a slight increase in aftermarket bookings, suggesting resilience in the service and maintenance revenue streams.

Flowserve's reported EPS of $0.47 and adjusted EPS of $0.68 for the fourth quarter, compared to $0.92 and $0.63 respectively in the previous year, indicates a mixed performance. The decrease in reported EPS could raise concerns among investors, while the increase in adjusted EPS might reflect underlying operational improvements. The company's increased quarterly cash dividend by 5% and the replenishment of the stock repurchase authorization to $300 million are positive signals of confidence in future financial health and a commitment to returning value to shareholders.

Looking at the full year, the reported EPS of $1.42 and adjusted EPS of $2.10, compared to $1.44 and $1.10 respectively in the previous year, demonstrate a significant improvement in adjusted earnings. This improvement in adjusted EPS suggests effective cost management and operational efficiency. The reported and adjusted gross and operating margins have also seen an uptick, which is a positive indicator of the company's profitability.

Flowserve's guidance for 2024, with projected revenue growth of 4%-6% and an adjusted EPS range of $2.40 to $2.60, sets a positive outlook for the company. However, it is crucial for investors to monitor the company's ability to convert its backlog into revenue and to maintain or improve margins amidst the potential challenges of currency fluctuations and global economic conditions.

Market Research Analyst

Flowserve's operational performance and strategic positioning within the global infrastructure markets are key factors to consider. The company's 3D strategy, aimed at accelerating growth through energy security and decarbonization investments, taps into the growing trends of sustainable energy and infrastructure development. This is particularly relevant as businesses and governments worldwide are increasingly focusing on environmental sustainability.

The company's book-to-bill ratio of 0.99x, although slightly below 1, indicates a relatively balanced relationship between bookings and billings, which is essential for maintaining revenue consistency. The increase in aftermarket and MRO (Maintenance, Repair and Overhaul) opportunities is a promising sign, as these services typically provide higher margins and recurring revenue.

Flowserve's backlog of $2.70 billion, albeit down 1.5% compared to the prior year-end, represents a significant pipeline of future revenue. The ability to convert this backlog efficiently into billings will be a critical factor for the company's success in 2024 and beyond. The aftermarket sales growth is also indicative of a robust customer base and a potentially stable stream of revenue that is less susceptible to economic cycles compared to new equipment sales.

Economist

The financial results and projections provided by Flowserve Corporation should be contextualized within the broader economic environment. The foreign exchange impacts highlighted in the report are a testament to the challenges multinational companies face due to currency volatility. Investors should note that such volatility can significantly affect reported earnings and the company's efforts to manage these effects through hedging or other financial instruments are crucial to maintaining stable financial results.

The company's performance in the infrastructure sector, which is often seen as a bellwether for the broader economy, suggests that there may be continued investment in this area despite potential economic headwinds. The solid year-over-year growth in revenue and adjusted earnings could indicate robust demand for Flowserve's products and services, which may bode well for the sector's outlook.

Lastly, the capital expenditures target of $75 to $85 million for 2024 should be viewed as an indicator of the company's commitment to investing in its future growth. However, it is essential to balance these investments with the need for financial prudence, especially in an uncertain economic climate.

• Fourth quarter Reported and Adjusted¹ Earnings Per Share (EPS)² of 47 cents and 68 cents, respectively, reflects continued strong operational performance
• Delivered solid fourth quarter bookings of $1.04 billion, including strong aftermarket awards exceeding $550 million
• Increased quarterly cash dividend 5% to $0.21 per share and replenished total stock repurchase authorization to $300 million
• Initiated full year 2024 guidance³, including revenue growth between 4%-6% and Reported and Adjusted EPS of $2.25 to $2.45 and $2.40 to $2.60, respectively

DALLAS--(BUSINESS WIRE)-- 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 fourth quarter and full-year ended December 31, 2023.

Fourth Quarter 2023 Highlights (all comparisons to the 2022 fourth quarter, unless otherwise noted)

• Reported EPS of $0.47 and Adjusted EPS¹ of $0.68, compared to $0.92 and $0.63, respectively
  • Fourth quarter 2023 Reported EPS includes after-tax adjusted expenses of $27.6 million, comprised primarily of realignment charges and below-the-line foreign exchange

• Total bookings were $1.04 billion, down $63.1 million or 5.7%. On a constant currency basis⁴, total bookings were down $78.5 million or 7.1%
  • Original equipment bookings were $490.3 million, down $65.8 million or 11.8%. On a constant currency basis, original equipment bookings were down $72.1 million or 13.0%

  • Aftermarket bookings were $553.3 million, up $2.7 million or 0.5%. On a constant currency basis⁴, aftermarket bookings were down $6.4 million or 1.2%

• Sales were $1.17 billion, up $126.2 million or 12.1%. On a constant currency basis⁴, sales were up $104.4 million or 10.1%
  • Original equipment sales were $576.1 million, up $76.3 million or 15.3%. On a constant currency basis⁴, original equipment sales were up $65.3 million or 13.1%
  • Aftermarket sales were $589.1 million, up $49.9 million or 9.3%. On a constant currency basis⁴, aftermarket sales were up $39.1 million or 7.2%

• Reported gross and operating margins were 29.1% and 9.4%, respectively

  • Adjusted gross and operating margins⁵ were 29.8% and 10.5%, respectively

Full Year 2023 Highlights (all comparisons to full year 2022, unless otherwise noted)

• Reported EPS of $1.42 and Adjusted EPS¹ of $2.10, compared to $1.44 and $1.10, respectively
  • Full-year 2023 Reported EPS includes after-tax adjusted expenses of $90.9 million, comprised primarily of realignment charges, below-the-line foreign exchange, and terminated acquisition costs, partially offset by the release of tax valuation allowances

• Total bookings were $4.27 billion, down $175.8 million or 4.0%. On a constant currency basis⁴, total bookings were down $185.2 million or 4.2%
  • 2022 full-year bookings included over $230 million of original equipment orders related to a Middle East gas project, representing one of Flowserve’s largest awards ever
  • Original equipment bookings were $1.99 billion, down $289.9 million or 12.7%. On a constant currency basis⁴, original equipment bookings were down $292.4 million or 12.8%
  • Aftermarket bookings were $2.28 billion, up $114.1 million or 5.3%. On a constant currency basis⁴, aftermarket bookings were up $107.2 million or 5.0%

• Sales were $4.32 billion, up $705.5 million or 19.5%. On a constant currency basis⁴, sales were up $690.3 million or 19.1%
  • Original equipment sales were $2.09 billion, up $379.7 million or 22.3%. On a constant currency basis⁴, original equipment sales were up $371.8 million or 21.8%
  • Aftermarket sales were $2.23 billion, up $325.8 million or 17.1%. On a constant currency basis⁴, aftermarket sales were up $318.5 million or 16.7%

• Reported gross and operating margins were 29.6% and 7.7%, up 210 and 220 basis points, respectively
  • Adjusted gross and operating margins⁵ were 30.1% and 9.5%, up 220 and 330 basis points, respectively

• Backlog of $2.70 billion, down 1.5% compared to prior year-end
  • Full year 2023 book-to-bill solid at 0.99x

“I am incredibly pleased with our progress and the results that we delivered in 2023, as evidenced by our significant year-over-year growth in revenue, adjusted earnings, and cash flow,” said Scott Rowe, Flowserve’s President and Chief Executive Officer. “The organizational design and operational discipline that we implemented last year delivered as expected and positions the company extremely well for 2024. Our strong performance in 2023 is a testament to the hard work of our associates who continue to execute at a high-level and position Flowserve for long term success.”

Rowe concluded, “Flowserve’s 3D strategy is the catalyst for accelerated growth and positions us to capture the increased spending levels on energy security and decarbonization investments. Additionally, we expect both aftermarket and MRO opportunities to remain at elevated levels in 2024 and beyond. In 2024, we intend to increase the conversion percentage of our strong $2.7 billion backlog, continue to deliver outsized growth, and expand operating margins through improved operational excellence and enhanced product management. As we build on the momentum established last year, we are confident in Flowserve’s future and believe that executing on our objectives will create long-term value for our customers, associates, and shareholders.”

2024 Guidance³

Flowserve today also initiated Reported and Adjusted EPS guidance for 2024, as well as certain other financial metrics, as shown in the table below.

	2024 Target Range
Revenue Growth	Up 4.0% to 6.0%
Reported Earnings Per Share	$2.25 to $2.45
Adjusted Earnings Per Share	$2.40 to $2.60
Net Interest Expense	$60 to $65 million
Adjusted Tax Rate	~20%
Capital Expenditures	$75 to $85 million

Flowserve’s 2024 Adjusted EPS target range excludes expected adjusted items including realignment charges of approximately $30 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.

Amy Schwetz, Flowserve’s Senior Vice President and Chief Financial Officer said, “We believe our 2024 guidance range has Flowserve well-positioned on its trajectory towards the long-term financial targets unveiled at our 2023 analyst day. We remain confident in our ability to drive further Adjusted margin improvement and Adjusted EPS growth as we pursue a disciplined capital allocation approach to deliver long-term shareholder value creation.”

Buyback Authorization Replenished to $300 Million and Quarterly Cash Dividend Increased

Flowserve’s Board of Directors authorized a 5% increase in the quarterly cash dividend to $0.21 per share on the company's outstanding shares of common stock and replenished the total share repurchase authorization under the current share repurchase program to $300 million, inclusive of approximately $96 million of capacity remaining.

The dividend is payable on April 12, 2024, to shareholders of record as of the close of business on March 28, 2024. While Flowserve currently intends to pay regular quarterly cash dividends for the foreseeable future, any future dividends, at this $0.21 per share rate or otherwise, will be reviewed individually and declared by the Board at its discretion.

Fourth Quarter and Full Year 2023 Results Conference Call

Flowserve will host its conference call with the financial community on Wednesday, February 21^st 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/investors.

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 and below-the-line foreign currency effects and utilizes the then-applicable FX rates and approximately 132 million fully diluted shares.
3		Adjusted 2024 EPS excludes realignment expenses as well as the impact of below-the-line foreign currency effects and certain other discrete items which may arise during the year and utilizes year-end 2023 FX 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		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.

CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
	Three Months Ended December 31,
(Amounts in thousands, except per share data)	2023				2022
Sales	$	1,165,179			$	1,038,959
Cost of sales		(825,635	)			(743,718	)
Gross profit		339,544				295,241
Selling, general and administrative expense		(234,744	)			(193,588	)
Net earnings from affiliates		4,663				3,647
Operating income		109,463				105,300
Interest expense		(16,886	)			(12,909	)
Interest income		1,457				1,025
Other income (expense), net		(22,599	)			(28,711	)
Earnings before income taxes		71,435				64,705
Benefit from (provision for) income taxes		(3,991	)			60,257
Net earnings, including noncontrolling interests		67,444				124,962
Less: Net earnings attributable to noncontrolling interests		(4,827	)			(3,633	)
Net earnings attributable to Flowserve Corporation	$	62,617			$	121,329
Net earnings per share attributable to Flowserve Corporation common shareholders:
Basic	$	0.48			$	0.93
Diluted		0.47				0.92
Weighted average shares – basic		131,184				130,710
Weighted average shares – diluted		132,132				131,560

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 December 31, 2023	Gross Profit			Selling, General & Administrative Expense			Operating Income			Other Income (Expense), Net			Provision For (Benefit From) Income Taxes			Net Earnings (Loss)			Effective Tax Rate		Diluted EPS
Reported	$	339,544		$	234,744		$	109,463		$	(22,599	)	$	3,991		$	62,617		5.6	%	0.47
Reported as a percent of sales		29.1	%		20.1	%		9.4	%		-1.9	%		0.3	%		5.4	%
Realignment charges (a)		9,464			(5,949	)		15,413			-			4,534			10,879		29.4	%	0.08
Discrete asset write-downs (b)(c)		(1,254	)		-			(1,254	)		2,000			94			652		12.6	%	0.01
Acquisition related (d)		-			1,244			(1,244	)		-			(293	)		(951	)	23.6	%	(0.01	)
Below-the-line foreign exchange impacts (e)		-			-			-			16,764			(274	)		17,038		-1.6	%	0.13
Adjusted	$	347,754		$	230,039		$	122,378		$	(3,835	)	$	8,052		$	90,235		7.8	%	0.68
Adjusted as a percent of sales		29.8	%		19.7	%		10.5	%		-0.3	%		0.7	%		7.7	%
Note: Amounts may not calculate due to rounding
(a) Charges represent realignment costs incurred as a result of realignment programs of which $2,100 is non-cash.
(b) Includes reversals of expenses that were adjusted for Non-GAAP measures in previous periods of $1,254.
(c) Charge represents a non-cash asset write-down of $2,000 associated with the impairment of an equity investment.
(d) Represents reversal of costs associated with a terminated acquisition that were adjusted for Non-GAAP measures in previous periods.
(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 December 31, 2022	Gross Profit			Selling, General & Administrative Expense			Operating Income			Other Income (Expense), Net			Provision For (Benefit From) Income Taxes			Net Earnings (Loss)			Effective Tax Rate		Diluted EPS
Reported	$	295,241		$	193,588		$	105,300		$	(28,711	)	$	(60,257	)	$	121,329		-93.1	%	0.92
Reported as a percent of sales		28.4	%		18.6	%		10.1	%		-2.8	%		-5.8	%		11.7	%
Realignment charges (a)		481			480			1			-			1,866			(1,865	)	N/A		(0.01	)
Discrete asset write-downs (b)(c)		3,646			(2,885	)		6,531			-			2,661			3,870		40.7	%	0.03
Below-the-line foreign exchange impacts (d)		-			-			-			25,206			6,170			19,036		24.5	%	0.14
Discrete tax benefit (e)		-			-			-			-			59,313			(59,313	)	0.0	%	(0.45	)
Adjusted	$	299,368		$	191,183		$	111,832		$	(3,505	)	$	9,753		$	83,057		10.1	%	0.63
Adjusted as a percent of sales		28.8	%		18.4	%		10.8	%		-0.3	%		0.9	%		8.0	%
Note: Amounts may not calculate due to rounding
(a) Charges represent realignment costs incurred and cost credits as a result of realignment programs.
(b) Includes reversals of expenses that were adjusted for Non-GAAP measures in previous periods of $7,111.
(c) Charges represent a $13,642 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.
(e) Represents a discrete tax benefit due to release of tax valuation allowance on the net deferred tax assets in foreign jurisdictions. The associated tax expense was adjusted out in 2017.

SEGMENT INFORMATION
(Unaudited)
FLOWSERVE PUMPS DIVISION	Three Months Ended December 31,
(Amounts in millions, except percentages)	2023				2022
Bookings	$	722.2			$	786.2
Sales		832.8				739.4
Gross profit		238.2				217.1
Gross profit margin		28.6	%			29.4	%
SG&A		149.4				130.1
Segment operating income		93.5				90.7
Segment operating income as a percentage of sales		11.2	%			12.3	%
FLOW CONTROL DIVISION	Three Months Ended December 31,
(Amounts in millions, except percentages)	2023				2022
Bookings	$	326.9			$	324.9
Sales		336.0				301.8
Gross profit		101.9				87.5
Gross profit margin		30.3	%			29.0	%
SG&A		52.1				49.4
Segment operating income		49.8				38.1
Segment operating income as a percentage of sales		14.8	%			12.6	%

Segment Reconciliation of Non-GAAP Financial Measures to the Most Directly Comparable GAAP Financial Measure (Unaudited)
(Amounts in thousands)
Flowserve Pumps Division
Three Months Ended December 31, 2023	Gross Profit			Selling, General & Administrative Expense			Operating Income					Three Months Ended December 31, 2022	Gross Profit			Selling, General & Administrative Expense			Operating Income
Reported	$	238,213		$	149,354		$	93,522				Reported	$	217,134		$	130,084		$	90,698
Reported as a percent of sales		28.6	%		17.9	%		11.2	%			Reported as a percent of sales		29.4	%		17.6	%		12.3	%
Realignment charges (a)		3,313			(2,537	)		5,850				Realignment charges (a)		358			2			356
Discrete asset write-downs (b)		(1,254	)		-			(1,254	)			Discrete asset write-downs (b)(c)		3,342			(2,247	)		5,589
Adjusted	$	240,272		$	146,817		$	98,118				Adjusted	$	220,834		$	127,839		$	96,643
Adjusted as a percent of sales		28.9	%		17.6	%		11.8	%			Adjusted as a percent of sales		29.9	%		17.3	%		13.1	%
Flow Control Division
Three Months Ended December 31, 2023	Gross Profit			Selling, General & Administrative Expense			Operating Income					Three Months Ended December 31, 2022	Gross Profit			Selling, General & Administrative Expense			Operating Income
Reported	$	101,894		$	52,056		$	49,838				Reported	$	87,501		$	49,409		$	38,093
Reported as a percent of sales		30.3	%		15.5	%		14.8	%			Reported as a percent of sales		29.0	%		16.4	%		12.6	%
Realignment charges (a)		6,313			(915	)		7,228				Realignment charges (a)		123			452			(329	)
Acquisition related (c)		-			1,244			(1,244	)			Discrete asset write-downs (c)		304			(638	)		942
Adjusted	$	108,207		$	52,385		$	55,822				Adjusted	$	87,928		$	49,223		$	38,706
Adjusted as a percent of sales		32.2	%		15.6	%		16.6	%			Adjusted as a percent of sales		29.1	%		16.3	%		12.8	%
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 $2,100 is non-cash.												(a) Charges represent realignment costs incurred and cost credits as a result of realignment programs.
(b) Represents reversals of expenses that were adjusted for Non-GAAP measures in previous periods.												(b) Includes reversals of expenses that were adjusted for Non-GAAP measures in previous periods of $7,111.
(c) Represents reversal of costs associated with a terminated acquisition that were adjusted for Non-GAAP measures in previous periods.												(c) Charges represent the reserve of Russia-related financial exposures of $13,642.

CONSOLIDATED STATEMENTS OF INCOME
	Year Ended December 31,
(Amounts in thousands, except per share data)	2023				2022				2021
Sales	$	4,320,577			$	3,615,120			$	3,541,060
Cost of sales		(3,043,749	)			(2,620,825	)			(2,491,335	)
Gross profit		1,276,828				994,295				1,049,725
Selling, general and administrative expense		(961,169	)			(815,545	)			(797,076	)
Gain on sale of business		-				-				1,806
Net earnings from affiliates		17,894				18,469				16,304
Operating income		333,553				197,219				270,759
Interest expense		(66,924	)			(46,247	)			(57,617	)
Loss on extinguishment of debt		-				-				(46,176	)
Interest income		6,991				3,963				2,764
Other income (expense), net		(49,870	)			(559	)			(36,142	)
Earnings before income taxes		223,750				154,376				133,588
Benefit from (provision for) income taxes		(18,562	)			43,639				2,594
Net earnings, including noncontrolling interests		205,188				198,015				136,182
Less: Net earnings attributable to noncontrolling interests		(18,445	)			(9,326	)			(10,233	)
Net earnings attributable to Flowserve Corporation	$	186,743			$	188,689			$	125,949
Net earnings per share attributable to Flowserve Corporation common shareholders:
Basic	$	1.42			$	1.44			$	0.97
Diluted		1.42				1.44				0.96
Weighted average shares – basic		131,117				130,630				130,305
Weighted average shares – diluted		131,931				131,315				130,857

Consolidated Reconciliation of Non-GAAP Financial Measures to the Most Directly Comparable GAAP Financial Measure (Unaudited)
(Amounts in thousands, except per share data)
Twelve Months Ended December 31, 2023	Gross Profit			Selling, General & Administrative Expense			Operating Income			Other Income (Expense), Net			Provision For (Benefit From) Income Taxes			Net Earnings Attributable to Noncontrolling Interests			Net Earnings (Loss)			Effective Tax Rate			Diluted EPS
Reported	$	1,276,828		$	961,169		$	333,553		$	(49,870	)	$	18,562		$	18,445		$	186,743			8.3	%	1.42
Reported as a percent of sales		29.6	%		22.2	%		7.7	%		-1.2	%		0.4	%		0.4	%		4.3	%
Realignment charges (a)		21,012			(45,025	)		66,037			-			14,949			-			51,088			22.6	%	0.39
Discrete asset write-downs (b)(c)(d)(e)		715			(3,955	)		4,670			2,000			1,611			-			5,059			24.2	%	0.04
Acquisition related (f)		-			(7,247	)		7,247			-			1,704			-			5,543			23.5	%	0.04
Below-the-line foreign exchange impacts (g)		-			-			-			41,092			2,395			-			38,697			5.8	%	0.29
Correction of prior period errors (h)		-			-			-			-			-			(3,559	)		3,559			0.0	%	0.03
Discrete tax benefit (i)		-			-			-			-			13,000			-			(13,000	)		0.0	%	(0.10	)
Adjusted	$	1,298,555		$	904,942		$	411,507		$	(6,778	)	$	52,221		$	14,886		$	277,689			15.1	%	2.10
Adjusted as a percent of sales		30.1	%		20.9	%		9.5	%		-0.2	%		1.2	%		0.3	%		6.4	%
Note: Amounts may not calculate due to rounding
(a) Charges represent realignment costs incurred as a result of realignment programs of which $9,701 is non-cash.
(b) Charge represents a further expense of $1,834 associated with a sales contract that was initially adjusted out of Non-GAAP measures in 2017.
(c) Includes reversals of expenses that were adjusted for Non-GAAP measures in previous periods of $81.
(d) Charge represents a $2,917 non-cash write-down of a licensing agreement.
(e) Charge represents a non-cash asset write-down of $2,000 associated with the impairment of an equity investment.
(f) Charges represent costs associated with a terminated acquisition.
(g) 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.
(h) Represents the amount to correct the cumulative impact of immaterial prior period errors.
(i) 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 on Non-GAAP measures in 2015.
Twelve Months Ended December 31, 2022	Gross Profit			Selling, General & Administrative Expense			Operating Income			Other Income (Expense), Net			Provision For (Benefit From) Income Taxes			Net Earnings (Loss)			Effective Tax Rate			Diluted EPS
Reported	$	994,295		$	815,545		$	197,219		$	(559	)	$	(43,639	)	$	188,689			-28.3	%	$	1.44
Reported as a percent of sales		27.5	%		22.6	%		5.5	%		0.0	%		-1.2	%		5.2	%
Realignment charges (a)		355			520			(165	)		-			1,799			(1,964	)		-1090.3	%		(0.01	)
Discrete asset write-downs (b)(c)(d)		13,490			(13,591	)		27,081			-			1,967			25,114			7.3	%		0.19
Below-the-line foreign exchange impacts (e)		-			-			-			(9,694	)		(1,591	)		(8,103	)		16.4	%		(0.06	)
Discrete tax benefit (f)		-			-			-			-			59,313			(59,313	)		0.0	%		(0.45	)
Adjusted	$	1,008,140		$	802,474		$	224,135		$	(10,253	)	$	17,849		$	144,423			10.4	%	$	1.10
Adjusted as a percent of sales		27.9	%		22.2	%		6.2	%		-0.3	%		0.5	%		4.0	%
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) Includes reversals of expenses that were adjusted for Non-GAAP measures in previous periods of $9,843.
(c) Charges represent a $33,888 reserve of Russia-related financial exposures.
(d) Charge represents a $3,036 non-cash asset write-down associated with the impairment of a trademark.
(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.
(f) Represents a discrete tax benefit due to release of tax valuation allowance on the net deferred tax assets in foreign jurisdictions. The associated tax expense was adjusted out of Non-GAAP measures in 2017.

SEGMENT INFORMATION
(Unaudited)
FLOWSERVE PUMPS DIVISION	Year Ended December 31,
(Amounts in millions, except percentages)	2023				2022
Bookings	$	2,941.2			$	3,214.7
Sales		3,064.5				2,522.5
Gross profit		906.8				728.1
Gross profit margin		29.6	%			28.9	%
SG&A		575.8				538.5
Segment operating income		348.9				208.0
Segment operating income as a percentage of sales		11.4	%			8.2	%
FLOW CONTROL DIVISION	Year Ended December 31,
(Amounts in millions, except percentages)	2023				2022
Bookings	$	1,345.9			$	1,247.2
Sales		1,266.0				1,100.6
Gross profit		372.8				305.5
Gross profit margin		29.4	%			27.8	%
SG&A		224.8				192.1
Segment operating income		148.0				113.4
Segment operating income as a percentage of sales		11.7	%			10.3	%

Segment Reconciliation of Non-GAAP Financial Measures to the Most Directly Comparable GAAP Financial Measure (Unaudited)
(Amounts in thousands)
Flowserve Pumps Division
Twelve Months Ended December 31, 2023	Gross Profit				Selling, General & Administrative Expense						Operating Income							Twelve Months Ended December 31, 2022															Gross Profit									Selling, General & Administrative Expense						Operating Income
Reported	$		906,775		$				575,792		$				348,867			Reported															$							728,083		$				538,523		$			207,957
Reported as a percent of sales			29.6	%					18.8	%					11.4	%		Reported as a percent of sales																						28.9	%					21.3	%				8.2	%
Realignment charges (a)			10,797						(14,533	)					25,330			Realignment charges (a)																						237						(149	)				386
Discrete asset write-downs (b)(c)(d)			715						(3,955	)					4,670			Discrete asset write-downs (b)(c)																						12,072						(8,835	)				20,907
Adjusted	$		918,287		$				557,304		$				378,867			Adjusted															$							740,392		$				529,539		$			229,250
Adjusted as a percent of sales			30.0	%					18.2	%					12.4	%		Adjusted as a percent of sales																						29.4	%					21.0	%				9.1	%
Flow Control Division
Twelve Months Ended December 31, 2023	Gross Profit				Selling, General & Administrative Expense						Operating Income							Twelve Months Ended December 31, 2022															Gross Profit									Selling, General & Administrative Expense						Operating Income
Reported	$		372,808		$				224,774		$				148,034			Reported															$							305,514		$				192,097		$			113,417
Reported as a percent of sales			29.4	%					17.8	%					11.7	%		Reported as a percent of sales																						27.8	%					17.5	%				10.3	%
Realignment charges (a)			10,576						(11,393	)					21,969			Realignment charges (a)																						179						395					(216	)
Acquisition related (e)			-						(7,247	)					7,247			Discrete asset write-downs (b)(d)																						1,418						(4,756	)				6,174
Adjusted	$		383,384		$				206,134		$				177,250			Adjusted															$							307,111		$				187,736		$			119,375
Adjusted as a percent of sales			30.3	%					16.3	%					14.0	%		Adjusted as a percent of sales																						27.9	%					17.1	%				10.8	%
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 $9,701 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 adjusted out of Non-GAAP measures in 2017.																		(b) Charges represent the reserve of Russia-related financial exposures of $33,888.
(c) Includes reversals of expenses that were adjusted for Non-GAAP measures in previous periods of $81.																		(c) Includes reversals of expenses that were adjusted for Non-GAAP measures in previous periods of $9,843.
(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.
Fourth Quarter and Year-to-Date 2023 - Segment Results
(dollars in millions, comparison vs. 2022 fourth quarter and year-to-date, unaudited)
		FPD																							FCD
		4th Qtr												YTD											4th Qtr											YTD
Bookings		$				722.2								$					2,941.2						$				326.9							$							1,345.9
- vs. prior year						-64.0					-8.1	%							-273.5		-8.5		%						2.0		0.6			%									98.7					7.9	%
- on constant currency						-75.8					-9.6	%							-288.1		-9.0		%						-1.6		-0.5			%									103.9					8.3	%
Sales		$				832.8								$					3,064.5						$				336.0							$							1,266.0
- vs. prior year						93.4					12.6	%							542.0		21.5		%						34.2		11.3			%									165.4					15.0	%
- on constant currency						75.8					10.2	%							523.7		20.8		%						30.0		10.0			%									168.6					15.3	%
Gross Profit		$				238.2								$					906.8						$				101.9							$							372.8
- vs. prior year						9.7	%												24.5	%									16.5	%													22.0	%
Gross Margin (% of sales)						28.6	%												29.6	%									30.3	%													29.4	%
- vs. prior year (in basis points)		(80) bps												70 bps											130 bps											160 bps
Operating Income		$				93.5								$					348.9						$				49.8							$							148.0
- vs. prior year						2.8					3.1	%							140.9		67.7		%						11.7		30.7			%									34.6					30.5	%
- on constant currency						0.2					0.2	%							142.9		68.7		%						11.4		30.0			%									36.1					31.9	%
Operating Margin (% of sales)						11.2	%												11.4	%									14.8	%													11.7	%
- vs. prior year (in basis points)		(110) bps												320 bps											220 bps											140 bps
Adjusted Operating Income *		$				98.1								$					378.9						$				55.8							$							177.3
- vs. prior year						1.5					1.6	%							149.6		65.2		%						17.1		44.2			%									57.9					48.5	%
- on constant currency						-1.1					-1.2	%							151.6		66.1		%						16.8		43.4			%									59.4					49.8	%
Adj. Oper. Margin (% of sales)*						11.8	%												12.4	%									16.6	%													14.0	%
- vs. prior year (in basis points)		(130) bps												330 bps											380 bps											320 bps
Backlog		$				1,891.7																			$				826.8
* Adjusted Operating Income and Adjusted Operating Margin exclude realignment charges and other specific discrete items
CONSOLIDATED BALANCE SHEETS
																						December 31,										December 31,
(Amounts in thousands, except par value)																						2023										2022
ASSETS
Current assets:
Cash and cash equivalents																						$				545,678						$					434,971
Accounts receivable, net																										881,869											868,632
Contract assets, net																										280,228											233,457
Inventories, net																										879,937											803,198
Prepaid expenses and other																										116,065											110,714
Total current assets																										2,703,777											2,450,972
Property, plant and equipment, net																										506,158											500,945
Operating lease right-of-use assets, net																										156,430											174,980
Goodwill																										1,182,225											1,168,124
Deferred taxes																										218,358											149,290
Other intangible assets, net																										122,248											134,503
Other assets, net																										219,523											211,820
Total assets																						$				5,108,719						$					4,790,634
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable																						$				547,824						$					476,747
Accrued liabilities																										504,430											427,578
Contract liabilities																										287,697											256,963
Debt due within one year																										66,243											49,335
Operating lease liabilities																										32,382											32,528
Total current liabilities																										1,438,576											1,243,151
Long-term debt due after one year																										1,167,307											1,224,151
Operating lease liabilities																										138,665											155,196
Retirement obligations and other liabilities																										389,120											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																										506,525											507,484
Retained earnings																										3,854,717											3,774,209
Treasury shares, at cost – 45,885 and 46,359 shares, respectively																										(2,014,474	)										(2,036,882	)
Deferred compensation obligation																										7,942											6,979
Accumulated other comprehensive loss																										(639,601	)										(647,788	)
Total Flowserve Corporation shareholders' equity																										1,936,100											1,824,993
Noncontrolling interests																										38,951											33,614
Total equity																										1,975,051											1,858,607
Total liabilities and equity																						$				5,108,719						$					4,790,634

CONSOLIDATED STATEMENTS OF CASH FLOWS
	Year Ended December 31,
(Amounts in thousands)	2023				2022				2021
Cash flows – Operating activities:
Net earnings, including noncontrolling interests	$	205,188			$	198,015			$	136,182
Adjustments to reconcile net earnings to net cash provided (used) by operating activities:
Depreciation		73,464				77,636				85,175
Amortization of intangible and other assets		10,283				13,317				14,647
Loss on extinguishment of debt		-				-				46,176
Stock-based compensation		27,808				25,530				29,478
Foreign currency, asset write downs and other non-cash adjustments		(17,331	)			(27,758	)			29,772
Change in assets and liabilities:
Accounts receivable, net		4,744				(152,011	)			(8,675	)
Inventories, net		(59,831	)			(147,492	)			(32,124	)
Contract assets, net		(41,149	)			(41,768	)			74,333
Prepaid expenses and other assets, net		7,825				17,461				1,302
Accounts payable		53,065				78,968				(19,505	)
Contract liabilities		26,837				61,684				14,196
Accrued liabilities and income taxes payable		59,213				(5,226	)			(13,948	)
Retirement obligations and other		38,497				(1,430	)			(15,690	)
Net deferred taxes		(62,841	)			(136,936	)			(91,200	)
Net cash flows provided (used) by operating activities		325,772				(40,010	)			250,119
Cash flows – Investing activities:
Capital expenditures		(67,359	)			(76,287	)			(54,936	)
Proceeds from disposal of assets		2,057				4,422				2,663
Proceeds from termination of cross-currency swap		-				66,004				-
Net affiliate investment activity		(3,278	)			(225	)			(7,204	)
Net cash flows provided (used) by investing activities		(68,580	)			(6,086	)			(59,477	)
Cash flows – Financing activities:
Payments on senior notes		-				-				(1,243,548	)
Proceeds from issuance of senior notes		-				-				498,280
Payments on term loan		(40,000	)			(32,500	)			(7,500	)
Proceeds from issuance of long-term debt		-				-				300,000
Payment of deferred loan cost		-				-				(6,739	)
Proceeds from short-term financing		280,000				45,000				-
Payments on short-term financing		(280,000	)			(45,000	)			-
Proceeds under other financing arrangements		1,114				1,733				1,408
Payments under other financing arrangements		(2,604	)			(1,790	)			(2,086	)
Payments related to tax withholding for stock-based compensation		(6,245	)			(4,683	)			(5,984	)
Repurchases of common shares		-				-				(17,531	)
Payments of dividends		(104,955	)			(104,549	)			(104,604	)
Other		(324	)			(8,223	)			(11,403	)
Net cash flows provided (used) by financing activities		(153,014	)			(150,012	)			(599,707	)
Effect of exchange rate changes on cash		6,529				(27,373	)			(27,757	)
Net change in cash and cash equivalents		110,707				(223,481	)			(436,822	)
Cash and cash equivalents at beginning of period		434,971				658,452				1,095,274
Cash and cash equivalents at end of period	$	545,678			$	434,971			$	658,452
Income taxes paid (net of refunds)	$	119,275			$	60,085			$	65,621
Interest paid		64,865				41,629				72,247

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/20240220188620/en/

Investor Contacts:

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

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



Media Contact:

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

Source: Flowserve Corporation

FAQ

What were Flowserve's Reported and Adjusted EPS for the fourth quarter of 2023?

Flowserve reported EPS of 47 cents and Adjusted EPS of 68 cents for the fourth quarter of 2023.

What was the total bookings amount for Flowserve in the fourth quarter of 2023?

Flowserve's total bookings were $1.04 billion in the fourth quarter of 2023.

What was the percentage increase in quarterly cash dividend announced by Flowserve?

Flowserve increased its quarterly cash dividend by 5% to $0.21 per share.

What is Flowserve's revenue growth guidance for the full year 2024?

Flowserve's revenue growth guidance for the full year 2024 is between 4% to 6%.

What was the backlog amount for Flowserve at the end of full-year 2023?

Flowserve's backlog at the end of full-year 2023 was $2.70 billion, down 1.5% compared to the prior year-end.