Flowserve Corporation Reports Third Quarter 2021 Results

  • Reported and Adjusted Earnings Per Share of 38 cents and 29 cents, respectively
  • Financial results adversely affected by late-quarter supply chain and logistics challenges
  • Bookings increased 13.1% year-over-year to $912 million, Backlog up 6.2% year-to-date
  • Year-to-date operating cash flow of $151 million, up over 32 percent versus prior year
  • Revised full-year 2021 financial guidance metrics, including Revenue and Adjusted EPS

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, 2021.

Third Quarter 2021 Highlights (all comparisons to the 2020 third quarter, unless otherwise noted)1

  • Reported Earnings Per Share (EPS) of $0.38 and Adjusted EPS2 of $0.29
    • Reported EPS includes a net after-tax adjusted gain of $12.1 million, comprised of certain discrete tax items partially offset by realignment and financing costs and below-the-line foreign exchange impacts

  • Total bookings were $911.6 million, up 13.1%, or 11.8% on a constant currency basis
    • Original equipment bookings were $417.0 million, or 46% of total bookings, up 9.4%, or 7.9% on a constant currency basis
    • Aftermarket bookings were $494.6 million, or 54% of total bookings, up 16.3%, or 15.3% on a constant currency basis

  • Sales were $866.1 million, down 6.3%, or 7.3% on a constant currency basis
    • Original equipment sales were $425.2 million, down 11.3%, or 12.5% on a constant currency basis
    • Aftermarket sales were $440.9 million, down 0.9%, or 1.8% on a constant currency basis

  • Reported gross and operating margins were 29.3% and 6.6%, respectively
    • Adjusted gross and operating margins3 were 29.6% and 7.0%, respectively
  • Backlog at September 30, 2021 was $1.97 billion, up 6.2% versus December 31, 2020

“We are encouraged that the visibility into our project funnel continues to improve, including numerous energy transition related opportunities. In the third quarter, we captured a number of energy transition awards, including bio-diesel, solar power and desalination projects,” said Scott Rowe, Flowserve’s president and chief executive officer. “Additionally, our aftermarket and MRO activity are expected to remain at or near pre-pandemic levels, while our capabilities to support our customers’ decarbonization and other energy transition initiatives will further support the increased project activity we see ahead. We are confident in our near-term outlook for year-over-year bookings growth which should position Flowserve well to deliver revenue and earnings growth in 2022.”

Rowe concluded, “Flowserve’s third quarter results reflected substantial global supply chain, logistics, and labor availability issues which deferred approximately $60 million of revenue and $20 million of gross profit out of the quarter. The global nature of our business and our operations network amplified the impact of these disruptions. We strongly believe in our ability to work through these challenges to restore a more normal backlog conversion rate in the coming quarters.”

Updated 2021 Guidance4

Flowserve today revised certain of the full-year metrics of our 2021 target range.

 

Revised Target Range

Prior Target Range

Revenues

Down 3.5% to 4.5%

Down 2.0% to 4.0%

Reported Earnings Per Share

$1.05 - $1.10

$1.15 - $1.40

Adjusted Earnings Per Share

$1.40 - $1.45

$1.45 - $1.65

Net Interest Expense

$55 - $60 million

$55 - $60 million

Adjusted Tax Rate

~20%

21%-23%

Capital Expenditures

~$65 million

$70 - $80 million

Consistent with the prior range, Flowserve’s 2021 Adjusted EPS target range excludes expected net after tax adjusted items of approximately $45 million, including realignment charges, the potential impact of below-the-line foreign currency effects and certain other discrete items. In a change to the approach for 2021, Flowserve 2.0 transformation-related expenses of approximately 5 cents per share will now be included in both the Company’s reported and adjusted EPS.

Third Quarter 2021 Results Conference Call

Flowserve will host its conference call with the financial community on Thursday, October 28th 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 Prior period comparisons are impacted by certain accounting revisions. Reference Flowserve’s Form 8-K filed on November 5, 2020 and Form 10-Q for the period ending September 30, 2021 for additional details.

2 See Reconciliation of Non-GAAP Measures table for detailed reconciliation of reported results to adjusted measures.

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 reconciliation of Non-GAAP Measures table for detailed reconciliation.

4 Adjusted 2021 EPS excludes realignment expenses, the impact from other specific discrete items and below-the-line foreign currency effects and utilizes year-end 2020 FX rates and approximately 131 million fully diluted shares.

_ FX impact is calculated by comparing the difference between the actual average FX rates of 2020 and the year-end 2020 spot rates both as applied to our 2021 expectations, divided by the number of shares expected for 2021.

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; 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 our strategic transformation and realignment initiatives, our business could be adversely affected; risks associated with cost overruns on fixed-fee projects and in taking customer orders for large complex custom engineered products; 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, Russian 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; our furnishing of products and services to nuclear power plant facilities and other critical processes; 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; our relative geographical profitability and its impact on our utilization of deferred tax assets, including foreign tax credits; 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. Throughout our materials we refer to non-GAAP measures as “Adjusted.” 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 September 30,

(Amounts in thousands, except per share data)

2021

 

2020

 
Sales

$

866,118

 

$

924,301

 

Cost of sales

 

(612,626

)

 

(639,092

)

Gross profit

 

253,492

 

 

285,209

 

Selling, general and administrative expense

 

(200,862

)

 

(200,729

)

Net earnings from affiliates

 

4,732

 

 

2,842

 

Operating income

 

57,362

 

 

87,322

 

Interest expense

 

(14,746

)

 

(13,509

)

Loss on extinguishment of debt

 

(563

)

 

(1,201

)

Interest income

 

827

 

 

673

 

Other income (expense), net

 

(1,504

)

 

4,673

 

Earnings before income taxes

 

41,376

 

 

77,958

 

(Provision for) benefit from income taxes

 

10,433

 

 

(19,196

)

Net earnings, including noncontrolling interests

 

51,809

 

 

58,762

 

Less: Net earnings attributable to noncontrolling interests

 

(2,024

)

 

(2,647

)

Net earnings attributable to Flowserve Corporation

$

49,785

 

$

56,115

 

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

$

0.38

 

$

0.43

 

Diluted

 

0.38

 

 

0.43

 

RECONCILIATION OF NON-GAAP MEASURES
(Unaudited)
 
Three Months Ended September 30, 2021
(Amounts in thousands, except per share data) As Reported (a) Realignment (1) Other Items As Adjusted
 
Sales

$

866,118

 

$

-

 

$

-

 

$

866,118

 

Gross profit

 

253,492

 

 

(2,582

)

 

-

 

 

256,074

 

Gross margin

 

29.3

%

 

-

 

 

-

 

 

29.6

%

 
Selling, general and administrative expense

 

(200,862

)

 

(368

)

 

-

 

 

(200,494

)

Gain on sale of business

 

-

 

 

-

 

 

-

 

 

-

 

Net earnings from affiliates

 

4,732

 

 

-

 

 

-

 

 

4,732

 

 
Operating income

 

57,362

 

 

(2,950

)

 

-

 

 

60,312

 

Operating income as a percentage of sales

 

6.6

%

 

-

 

 

-

 

 

7.0

%

 
Interest and other expense, net

 

(15,986

)

 

-

 

 

(2,520

)

(3)

 

(13,466

)

 
Earnings before income taxes

 

41,376

 

 

(2,950

)

 

(2,520

)

 

46,846

 

(Provision for) benefit from income taxes

 

10,433

 

 

624

 

(2)

 

16,935

 

(4)

 

(7,126

)

Tax Rate

 

-25.2

%

 

21.2

%

 

672.0

%

 

15.2

%

 
Net earnings attributable to Flowserve Corporation

$

49,785

 

$

(2,326

)

$

14,415

 

$

37,696

 

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

$

0.38

 

$

(0.02

)

$

0.11

 

$

0.29

 

Diluted

 

0.38

 

 

(0.02

)

 

0.11

 

 

0.29

 

 
Basic number of shares used for calculation

 

130,242

 

 

130,242

 

 

130,242

 

 

130,242

 

Diluted number of shares used for calculation

 

130,789

 

 

130,789

 

 

130,789

 

 

130,789

 

 
(a) Reported in conformity with U.S. GAAP
Notes:
(1) Represents realignment expense incurred as a result of realignment programs.
(2) Includes tax impact of items above.
(3) Represents below-the-line foreign exchange impacts and $1.5 million of expense as a result of early extinguishment of debt and duplicate interest expense.
(4) Includes tax impact of items above and $16.6 million benefit related to legal entity restructuring of foreign holding companies.
RECONCILIATION OF NON-GAAP MEASURES
(Unaudited)
 
Three Months Ended September 30, 2020
(Amounts in thousands, except per share data) As Reported (a) Realignment (1) Other Items As Adjusted
 
Sales

$

924,301

 

$

-

 

$

-

 

$

924,301

 

Gross profit

 

285,209

 

 

(5,659

)

 

-

 

 

290,868

 

Gross margin

 

30.9

%

 

-

 

 

-

 

 

31.5

%

 
Selling, general and administrative expense

 

(200,729

)

 

(1,773

)

 

(5,856

)

(3)

 

(193,100

)

 
Operating income

 

87,322

 

 

(7,432

)

 

(5,856

)

 

100,610

 

Operating income as a percentage of sales

 

9.4

%

 

-

 

 

-

 

 

10.9

%

 
Interest and other expense, net

 

(9,364

)

 

-

 

 

3,307

 

(4)

 

(12,671

)

 
Earnings before income taxes

 

77,958

 

 

(7,432

)

 

(2,549

)

 

87,939

 

Provision for income taxes

 

(19,196

)

 

(1,552

)

(2)

 

2,343

 

(5)

 

(19,987

)

Tax Rate

 

24.6

%

 

-20.9

%

 

91.9

%

 

22.7

%

 
Net earnings attributable to Flowserve Corporation

$

56,115

 

$

(8,984

)

$

(206

)

$

65,305

 

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

$

0.43

 

$

(0.07

)

$

-

 

$

0.50

 

Diluted

 

0.43

 

 

(0.07

)

 

-

 

 

0.50

 

 
Basic number of shares used for calculation

 

130,313

 

 

130,313

 

 

130,313

 

 

130,313

 

Diluted number of shares used for calculation

 

130,900

 

 

130,900

 

 

130,900

 

 

130,900

 

 
(a) Reported in conformity with U.S. GAAP
Notes:
(1) Represents realignment expense incurred as a result of realignment programs.
(2) Includes tax impact of items above.
(3) Represents Flowserve 2.0 transformation efforts and $1.1 million related to discrete asset write-downs.
(4) Represents below-the-line foreign exchange impacts.
(5) Includes tax impact of items above and $0.4 million benefit related to tax reform.
SEGMENT INFORMATION
(Unaudited)
 
FLOWSERVE PUMP DIVISION

Three Months Ended September 30,

(Amounts in millions, except percentages)

2021

 

2020

Bookings

$

660.9

 

$

574.1

 

Sales

 

601.8

 

 

670.2

 

Gross profit

 

182.9

 

 

210.0

 

Gross profit margin

 

30.4

%

 

31.3

%

SG&A

 

128.5

 

 

126.2

 

Segment operating income

 

59.1

 

 

86.7

 

Segment operating income as a percentage of sales

 

9.8

%

 

12.9

%

 
FLOW CONTROL DIVISION

Three Months Ended September 30,

(Amounts in millions, except percentages)

2021

 

2020

Bookings

$

253.6

 

$

237.6

 

Sales

 

266.1

 

 

255.2

 

Gross profit

 

77.0

 

 

78.1

 

Gross profit margin

 

28.9

%

 

30.6

%

SG&A

 

49.3

 

 

47.3

 

Segment operating income

 

27.7

 

 

30.8

 

Segment operating income as a percentage of sales

 

10.4

%

 

12.1

%

CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)

Nine Months Ended September 30,

(Amounts in thousands, except per share data)

2021

 

2020

 
Sales

$

2,621,604

 

$

2,742,826

 

Cost of sales

 

(1,838,974

)

 

(1,921,451

)

Gross profit

 

782,630

 

 

821,375

 

Selling, general and administrative expense

 

(609,965

)

 

(675,523

)

Gain on sale of business

 

1,806

 

 

-

 

Net earnings from affiliates

 

11,157

 

 

9,125

 

Operating income

 

185,628

 

 

154,977

 

Interest expense

 

(45,847

)

 

(39,407

)

Loss on extinguishment of debt

 

(8,173

)

 

(1,201

)

Interest income

 

1,893

 

 

3,571

 

Other income (expense), net

 

(20,717

)

 

23,969

 

Earnings before income taxes

 

112,784

 

 

141,909

 

(Provision for) benefit from income taxes

 

3,929

 

 

(60,650

)

Net earnings, including noncontrolling interests

 

116,713

 

 

81,259

 

Less: Net earnings attributable to noncontrolling interests

 

(7,495

)

 

(6,890

)

Net earnings attributable to Flowserve Corporation

$

109,218

 

$

74,369

 

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

$

0.84

 

$

0.57

 

Diluted

 

0.83

 

 

0.57

 

RECONCILIATION OF NON-GAAP MEASURES
(Unaudited)
 
Nine Months Ended September 30, 2021
(Amounts in thousands, except per share data) As Reported (a) Realignment (1) Other Items As Adjusted
 
Sales

$

2,621,604

 

$

-

 

$

-

 

$

2,621,604

 

Gross profit

 

782,630

 

 

(15,813

)

 

-

 

 

798,443

 

Gross margin

 

29.9

%

 

-

 

 

-

 

 

30.5

%

 
Selling, general and administrative expense

 

(609,965

)

 

(6,454

)

 

-

 

 

(603,511

)

Gain on sale of business

 

1,806

 

 

-

 

 

1,806

 

(3)

 

-

 

Net earnings from affiliates

 

11,157

 

 

-

 

 

-

 

 

11,157

 

 
Operating income

 

185,628

 

 

(22,267

)

 

1,806

 

 

206,089

 

Operating income as a percentage of sales

 

7.1

%

 

-

 

 

-

 

 

7.9

%

 
Interest and other expense, net

 

(72,844

)

 

-

 

 

(23,833

)

(4)

 

(49,011

)

 
Earnings before income taxes

 

112,784

 

 

(22,267

)

 

(22,027

)

 

157,078

 

(Provision for) benefit from income taxes

 

3,929

 

 

8,466

 

(2)

 

22,734

 

(5)

 

(27,271

)

Tax Rate

 

-3.5

%

 

38.0

%

 

103.2

%

 

17.4

%

 
Net earnings attributable to Flowserve Corporation

$

109,218

 

$

(13,801

)

$

707

 

$

122,312

 

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

$

0.84

 

$

(0.11

)

$

0.01

 

$

0.94

 

Diluted

 

0.83

 

 

(0.11

)

 

0.01

 

 

0.93

 

 
Basic number of shares used for calculation

 

130,325

 

 

130,325

 

 

130,325

 

 

130,325

 

Diluted number of shares used for calculation

 

130,867

 

 

130,867

 

 

130,867

 

 

130,867

 

 
(a) Reported in conformity with U.S. GAAP
Notes:
(1) Represents realignment expense incurred as a result of realignment programs.
(2) Includes tax impact of items above and realignment related tax release.
(3) Represents final settlement gain on sale of business in 2018.
(4) Represents below-the-line foreign exchange impacts and $9.1 million of expense as a result of early extinguishment of debt and duplicate interest expense.
(5) Includes tax impact of items above and $17.9 million benefit related to legal entity restructuring of foreign holding companies.
RECONCILIATION OF NON-GAAP MEASURES
(Unaudited)
 
Nine Months Ended September 30, 2020
(Amounts in thousands, except per share data) As Reported (a) Realignment (1) Other Items As Adjusted
 
Sales

$

2,742,826

 

$

-

 

$

-

 

$

2,742,826

 

Gross profit

 

821,375

 

 

(40,636

)

 

-

 

 

862,011

 

Gross margin

 

29.9

%

 

-

 

 

-

 

 

31.4

%

 
Selling, general and administrative expense

 

(675,523

)

 

(31,681

)

 

(27,557

)

(3)

 

(616,285

)

 
Operating income

 

154,977

 

 

(72,317

)

 

(27,557

)

 

254,851

 

Operating income as a percentage of sales

 

5.7

%

 

-

 

 

-

 

 

9.3

%

 
Interest and other expense, net

 

(13,068

)

 

-

 

 

25,663

 

(4)

 

(38,731

)

 
Earnings before income taxes

 

141,909

 

 

(72,317

)

 

(1,894

)

 

216,120

 

Provision for income taxes

 

(60,650

)

 

10,146

 

(2)

 

(19,138

)

(5)

 

(51,658

)

Tax Rate

 

42.7

%

 

14.0

%

 

-1010.5

%

 

23.9

%

 
Net earnings attributable to Flowserve Corporation

$

74,369

 

$

(62,171

)

$

(21,032

)

$

157,572

 

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

$

0.57

 

$

(0.48

)

$

(0.16

)

$

1.21

 

Diluted

 

0.57

 

 

(0.47

)

 

(0.16

)

 

1.20

 

 
Basic number of shares used for calculation

 

130,413

 

 

130,413

 

 

130,413

 

 

130,413

 

Diluted number of shares used for calculation

 

131,068

 

 

131,068

 

 

131,068

 

 

131,068

 

 
(a) Reported in conformity with U.S. GAAP
Notes:
(1) Represents realignment expense incurred as a result of realignment programs.
(2) Includes tax impact of items above.
(3) Includes $16.0 million related to Flowserve 2.0 transformation efforts and $11.6 million related to discrete asset write-downs.
(4) Represents below-the-line foreign exchange impacts.
(5) Includes tax impact of items above, $25.7 million related to Italian tax valuation allowance and $2.4 million benefit related to tax reform.
SEGMENT INFORMATION
(Unaudited)
 
FLOWSERVE PUMP DIVISION

Nine Months Ended September 30,

(Amounts in millions, except percentages)

2021

 

2020

Bookings

$

1,982.5

 

$

1,792.3

 

Sales

 

1,821.9

 

 

1,979.9

 

Gross profit

 

562.1

 

 

603.7

 

Gross profit margin

 

30.9

%

 

30.5

%

SG&A

 

394.7

 

 

426.1

 

Gain on sale of business

 

1.8

 

 

-

 

Segment operating income

 

180.7

 

 

186.7

 

Segment operating income as a percentage of sales

 

9.9

%

 

9.4

%

 
 
FLOW CONTROL DIVISION

Nine Months Ended September 30,

(Amounts in millions, except percentages)

2021

 

2020

Bookings

$

834.0

 

$

807.8

 

Sales

 

803.1

 

 

766.9

 

Gross profit

 

236.4

 

 

229.1

 

Gross profit margin

 

29.4

%

 

29.9

%

SG&A

 

147.1

 

 

154.9

 

Segment operating income

 

89.7

 

 

74.2

 

Segment operating income as a percentage of sales

 

11.2

%

 

9.7

%

 
Third Quarter and Year-to-Date 2021 - Segment Results
(dollars in millions, comparison vs. 2020 third quarter and year-to-date, unaudited)
 
FPD FCD
Bookings

$

660.9

 

$

1,982.5

 

$

253.6

 

$

834.0

 

- vs. prior year

 

15.1

%

 

10.6

%

 

6.7

%

 

3.2

%

- on constant currency

 

13.9

%

 

7.6

%

 

5.4

%

 

0.5

%

 
Sales

$

601.8

 

$

1,821.9

 

$

266.1

 

$

803.1

 

- vs. prior year

 

-10.2

%

 

-8.0

%

 

4.3

%

 

4.7

%

- on constant currency

 

-11.2

%

 

-10.6

%

 

3.2

%

 

1.7

%

 
Gross Profit

$

182.9

 

$

562.1

 

$

77.0

 

$

236.4

 

- vs. prior year

 

-12.9

%

 

-6.9

%

 

-1.4

%

 

3.2

%

 
Gross Margin (% of sales)

 

30.4

%

 

30.9

%

 

28.9

%

 

29.4

%

- vs. prior year (in basis points) (90) bps 40 bps (170) bps (50) bps
 
Operating Income

$

59.1

 

$

180.7

 

$

27.7

 

$

89.7

 

- vs. prior year

 

-31.8

%

 

-3.2

%

 

-10.1

%

 

20.9

%

- on constant currency

 

-33.5

%

 

-7.2

%

 

-11.6

%

 

17.4

%

 
Operating Margin (% of sales)

 

9.8

%

 

9.9

%

 

10.4

%

 

11.2

%

- vs. prior year (in basis points) (310) bps 50 bps (170) bps 150 bps
 
Adjusted Operating Income *

$

61.1

 

$

193.6

 

$

28.0

 

$

91.9

 

- vs. prior year

 

-35.3

%

 

-18.8

%

 

-10.3

%

 

2.2

%

- on constant currency

 

-36.9

%

 

-21.9

%

 

-12.1

%

 

-0.7

%

 
Adj. Oper. Margin (% of sales)*

 

10.2

%

 

10.6

%

 

10.5

%

 

11.4

%

- vs. prior year (in basis points) (390) bps (140) bps (170) bps (30) bps
 
Backlog

$

1,339.2

 

$

636.9

 

 
* 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)

2021

2020

 
ASSETS
Current assets:
Cash and cash equivalents

$

1,457,269

 

$

1,095,274

 

Accounts receivable, net of allowance for expected credit losses of $75,966 and

$75,176, respectively

 

710,782

 

 

753,462

 

Contract assets, net of allowance for expected credit losses of $2,778 and $3,205, respectively

 

235,917

 

 

277,734

 

Inventories, net

 

698,046

 

 

667,228

 

Prepaid expenses and other

 

121,209

 

 

110,635

 

Total current assets

 

3,223,223

 

 

2,904,333

 

Property, plant and equipment, net of accumulated depreciation of $1,117,487 and $1,093,348, respectively

 

513,168

 

 

556,873

 

Operating lease right-of-use assets, net

 

194,306

 

 

208,125

 

Goodwill

 

1,202,598

 

 

1,224,886

 

Deferred taxes

 

57,849

 

 

30,538

 

Other intangible assets, net

 

155,994

 

 

168,496

 

Other assets, net of allowance for expected credit losses of $67,697 and $67,842, respectively

 

248,778

 

 

221,426

 

Total assets

$

5,595,916

 

$

5,314,677

 

 
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable

$

370,977

 

$

440,199

 

Accrued liabilities

 

468,153

 

 

463,222

 

Contract liabilities

 

199,103

 

 

194,227

 

Debt due within one year

 

836,618

 

 

8,995

 

Operating lease liabilities

 

34,034

 

 

34,990

 

Total current liabilities

 

1,908,885

 

 

1,141,633

 

Long-term debt due after one year

 

1,272,246

 

 

1,717,911

 

Operating lease liabilities

 

165,588

 

 

176,246

 

Retirement obligations and other liabilities

 

457,964

 

 

517,566

 

Shareholders’ equity:
Common shares, $1.25 par value

 

220,991

 

 

220,991

 

Shares authorized – 305,000
Shares issued – 176,793
Capital in excess of par value

 

501,122

 

 

502,227

 

Retained earnings

 

3,700,507

 

 

3,670,543

 

Treasury shares, at cost – 46,804 and 46,768 shares, respectively

 

(2,058,168

)

 

(2,059,309

)

Deferred compensation obligation

 

7,145

 

 

6,164

 

Accumulated other comprehensive loss

 

(612,093

)

 

(609,625

)

Total Flowserve Corporation shareholders' equity

 

1,759,504

 

 

1,730,991

 

Noncontrolling interests

 

31,729

 

 

30,330

 

Total equity

 

1,791,233

 

 

1,761,321

 

Total liabilities and equity

$

5,595,916

 

$

5,314,677

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

Nine Months Ended September 30,

(Amounts in thousands)

2021

 

2020

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

$

116,713

 

$

81,259

 

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

 

66,316

 

 

63,887

 

Amortization of intangible and other assets

 

10,643

 

 

8,788

 

Loss on extinguishment of debt

 

8,173

 

 

1,201

 

Stock-based compensation

 

23,610

 

 

24,104

 

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

 

9,897

 

 

1,880

 

Change in assets and liabilities:
Accounts receivable, net

 

24,361

 

 

24,324

 

Inventories, net

 

(47,533

)

 

(51,974

)

Contract assets, net

 

35,358

 

 

(37,328

)

Prepaid expenses and other assets, net

 

2,429

 

 

6,168

 

Accounts payable

 

(58,600

)

 

(21,756

)

Contract liabilities

 

9,379

 

 

(22,468

)

Accrued liabilities and income taxes payable

 

9,136

 

 

22,762

 

Retirement obligations and other

 

(23,842

)

 

22,729

 

Net deferred taxes

 

(34,933

)

 

(9,325

)

Net cash flows provided (used) by operating activities

 

151,107

 

 

114,251

 

Cash flows – Investing activities:
Capital expenditures

 

(34,034

)

 

(46,424

)

Proceeds from disposal of assets and other

 

2,525

 

 

13,759

 

Net affiliate investment activity

 

(7,204

)

 

-

 

Net cash flows provided (used) by investing activities

 

(38,713

)

 

(32,665

)

Cash flows – Financing activities:
Payments on senior notes

 

(407,473

)

 

(191,258

)

Proceeds from issuance of senior notes

 

498,280

 

 

498,280

 

Proceeds from long-term debt

 

300,000

 

 

-

 

Payments of deferred loan cost

 

(5,399

)

 

(4,572

)

Proceeds under other financing arrangements

 

1,408

 

 

603

 

Payments under other financing arrangements

 

(6,215

)

 

(7,145

)

Repurchases of common shares

 

(17,531

)

 

(32,112

)

Payments related to tax withholding for stock-based compensation

 

(5,899

)

 

(4,521

)

Payments of dividends

 

(78,551

)

 

(78,106

)

Other

 

(6,276

)

 

(2,314

)

Net cash flows provided (used) by financing activities

 

272,344

 

 

178,855

 

Effect of exchange rate changes on cash

 

(22,743

)

 

(10,243

)

Net change in cash and cash equivalents

 

361,995

 

 

250,198

 

Cash and cash equivalents at beginning of period

 

1,095,274

 

 

670,980

 

Cash and cash equivalents at end of period

$

1,457,269

 

$

921,178

 

 

Contacts

Investor Contacts:

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

Mike Mullin, Director, Investor Relations, (972) 443-6636

Media Contact:

Lars Rosene, Vice President, Corporate Communications & Public Affairs, (972) 443-6644

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