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Flowserve Corporation Reports Fourth Quarter and Full Year 2022 Results

  • Reported and Adjusted Fourth Quarter Earnings Per Share (EPS) of 92 cents and 63 cents, respectively
  • Fourth quarter bookings increased 14.2% year-over-year to $1.11 billion
  • Full year 2022 Reported and Adjusted EPS of $1.44 and $1.10, respectively
  • 3D growth strategy, combined with supportive project environment, delivered full year 2022 bookings of $4.45 billion, up 17.8% year-over-year
  • Year-end backlog of $2.74 billion increased 36.5% year-over-year, establishing the foundation for strong expected revenue and Adjusted EPS growth in 2023
  • Velan acquisition accelerates 3D strategy and enhances the FCD portfolio; expected to close by the end of the second quarter of 2023

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, 2022.

Fourth Quarter 2022 Highlights (all comparisons to the 2021 fourth quarter, unless otherwise noted)

  • Reported Earnings Per Share (EPS) of $0.92 and Adjusted EPS1 of $0.63
    • Reported EPS includes a net after-tax adjusted gain of $38.3 million, comprised of tax valuation allowance release of $59.3 million, reversal of previous reserve accruals totaling $5.9 million and a net realignment benefit of $1.9 million, partially offset by additional Russia exit related charges of $9.8 million and below-the-line currency expense of $19.0 million
  • Total bookings were $1.11 billion, up 14.2%, or 19.4% on a constant currency basis
    • Original equipment bookings were $556.1 million, or 50% of total bookings, up 18.5%, or 24.0% on a constant currency basis
    • Aftermarket bookings were $550.6 million, or 50% of total bookings, up 10.1%, or 15.1% on a constant currency basis
  • Sales were $1.04 billion, up 13.0%, or 18.6% on a constant currency basis
    • Original equipment sales were $499.8 million, up 14.3%, or 20.3% on a constant currency basis
    • Aftermarket sales were $539.1 million, up 11.9%, or 16.9% on a constant currency basis
  • Reported gross and operating margins were 28.4% and 10.1%, respectively
    • Adjusted gross and operating margins2 were 28.8% and 10.8%, respectively
  • Backlog at December 31, 2022 was $2.74 billion, up 36.5% versus December 31, 2021, or up 39.2% on a constant currency basis

Full Year 2022 Highlights (all comparisons to full year 2021, unless otherwise noted)

  • Reported Earnings Per Share (EPS) of $1.44 and Adjusted EPS1 of $1.10
    • Reported EPS includes a net after-tax adjusted gain of $44.3 million, comprised of tax valuation allowance release of $59.3 million, the reversal of previous reserve accruals totaling $8.0 million, below-the-line currency gain of $8.1 million and realignment net benefit of $2.0 million, partially offset by Russia exit related charges of $30.9 million and a discrete asset write-down of $2.3 million
  • Total bookings were $4.45 billion, up 17.8%, or 22.7% on a constant currency basis
    • Original equipment bookings were $2.28 billion, or 51% of total bookings, up 27.1%, or 32.3% on a constant currency basis
    • Aftermarket bookings were $2.16 billion, or 49% of total bookings, up 9.4%, or 14.0% on a constant currency basis
  • Sales were $3.62 billion, up 2.1%, or 6.8% on a constant currency basis
    • Original equipment sales were $1.71 billion, up 0.1%, or 5.1% on a constant currency basis
    • Aftermarket sales were $1.91 billion, up 3.9%, or 8.4% on a constant currency basis

“We demonstrated improved operational performance in the fourth quarter, resulting in the highest quarterly level of revenue since 2019 and expanded year-over-year adjusted operating margin. In addition, we delivered another quarter of strong bookings that increased our near-record backlog,” said Scott Rowe, Flowserve’s President and Chief Executive Officer. “Our Diversification, Decarbonization and Digitization growth strategy, which is directly aligned to serve the needs of a changing energy landscape, is delivering results and accelerating our growth. Our recently announced acquisition of Velan Inc. will also further our 3D strategy, while enhancing our FCD valve offerings, with highly complementary products in the nuclear, cryogenic and defense markets following close.”

Rowe concluded, “In 2023, I am confident we can build on our fourth quarter momentum while continuing to capitalize on supportive end-markets, which reflect the need for increased energy security and enhanced decarbonization investments. With our near record $2.7 billion backlog, continued executional improvement and planned cost initiatives to address inflationary pressures, we fully expect our results in 2023 will generate significant long-term value for all stakeholders.”

2023 Guidance3

Flowserve reaffirms its Reported and Adjusted EPS guidance for 2023, which was initiated on February 10, 2023, as well as certain other financial metrics, as shown in the table below.

 

         

2023 Target Range

Revenue Growth

         

Up 9.0% to 11.0%

Reported Earnings Per Share

         

$1.40 - $1.65

Adjusted Earnings Per Share

         

$1.50 - $1.75

Net Interest Expense

         

$55 - $60 million

Adjusted Tax Rate

         

18% - 20%

Capital Expenditures

         

$75 - $85 million

 

This outlook excludes any contribution from the expected acquisition of Velan Inc., announced previously. Additionally, Flowserve’s 2023 Adjusted EPS target range also excludes expected adjusted items including realignment charges of approximately $20 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.

Fourth Quarter and Full Year 2022 Results Conference Call

Flowserve will host its conference call with the financial community on Wednesday, February 22nd 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 Reconciliation of Non-GAAP Measures table for detailed reconciliation of reported results to adjusted measures. 

2

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. 

3

Adjusted 2023 EPS excludes realignment expenses, the impact from other specific discrete items and below-the-line foreign currency effects and utilizes year-end 2022 FX rates and approximately 131.5 million fully diluted shares. 

_

FX impact is calculated by comparing the difference between the actual average FX rates of 2022 and the year-end 2022 spot rates both as applied to our 2023 expectations, divided by the number of shares expected for 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; 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 or integrate and realize the synergies of any acquisition, 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.

 
 
 
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)

Three Months Ended December 31, 

(Amounts in thousands, except per share data)

 

2022

 

 

 

2021

 

 
Sales

 $

         1,038,959

 

 $

       919,456

 

Cost of sales

 

              (743,718

)

 

        (652,362

)

Gross profit

 

               295,241

 

 

         267,094

 

Selling, general and administrative expense

 

              (193,588

)

 

        (187,111

)

Net earnings from affiliates

 

                  3,647

 

 

             5,147

 

Operating income

 

               105,300

 

 

           85,130

 

Interest expense

 

                (12,909

)

 

          (11,770

)

Loss on extinguishment of debt

 

                       -

 

 

          (38,003

)

Interest income

 

                  1,025

 

 

                871

 

Other expense, net

 

                (28,711

)

 

          (15,425

)

Earnings before income taxes

 

                 64,705

 

 

           20,803

 

(Provision for) benefit from income taxes

 

                 60,257

 

 

            (1,335

)

Net earnings, including noncontrolling interests

 

               124,962

 

 

           19,468

 

Less: Net earnings attributable to noncontrolling interests

 

                 (3,633

)

 

            (2,738

)

Net earnings attributable to Flowserve Corporation

 $

            121,329

 

 $

        16,730

 

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

 

                    0.93

 

 

               0.13

 

Diluted

 

                    0.92

 

 

               0.13

 

   
Weighted average shares - basic

 

               130,710

 

 

         130,245

 

Weighted average shares - diluted

 

               131,560

 

 

         130,829

 

 
 
 
 
RECONCILIATION OF NON-GAAP MEASURES
(Unaudited)
 

Three Months Ended December 31, 2022

(Amounts in thousands, except per share data)

As Reported (a)

 

Realignment (1)

 

Other Items

 

As Adjusted

 
Sales

 $

       1,038,959

 

 $

                -

 

 $

              -

 

 $

1,038,959

 

Gross profit 

 

            295,241

 

 

               (481

)

 

          (3,646

)

(3)

 

      299,368

 

Gross margin

 

28.4

%

 

                  -

 

 

                -

 

 

 

28.8

%

 

 
Selling, general and administrative expense

 

           (193,588

)

 

                480

 

 

          (2,885

)

(4)

 

     (191,183

)

Net earnings from affiliates

 

                3,647

 

 

                   -

 

 

                -

 

 

 

          3,647

 

 

 
Operating income

 

            105,300

 

 

                   (1

)

 

          (6,531

)

 

 

      111,832

 

Operating income as a percentage of sales

 

10.1

%

 

                  -

 

 

                -

 

 

 

10.8

%

 

 
Interest and other expense, net

 

             (40,595

)

 

                   -

 

 

         (25,206

)

(5)

 

       (15,389

)

 

 
Earnings before income taxes

 

              64,705

 

 

                   (1

)

 

         (31,737

)

 

 

        96,443

 

(Provision for) benefit from income taxes

 

              60,257

 

 

              1,866

 

(2)

 

          68,144

 

(6)

 

         (9,753

)

Tax Rate

 

-93.1

%

 

186600.0

%

 

214.7

%

 

10.1

%

 
Net earnings attributable to Flowserve Corporation

 $

         121,329

 

 $

           1,865

 

 $

       36,407

 

 $

     83,057

 

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

 $

               0.93

 

 $

             0.01

 

 $

          0.28

 

 $

         0.64

 

Diluted

 

                 0.92

 

 

               0.01

 

 

             0.28

 

 

           0.63

 

 
Basic number of shares used for calculation

 

            130,710

 

 

          130,710

 

 

        130,710

 

 

      130,710

 

Diluted number of shares used for calculation

 

            131,560

 

 

          131,560

 

 

        131,560

 

 

      131,560

 

 
(a) Reported in conformity with U.S. GAAP
 
Notes:
(1) Represents realignment adjustments incurred as a result of realignment programs
(2) Includes tax impact of items above and reversal of realignment exit tax ($2.1 million)
(3) Represents incremental reserve of Russia related financial exposures ($8.1 million) and reversals of expenses that were adjusted for Non-GAAP measures in previous periods ($4.5 million)
(4) Represents incremental reserve of Russia related financial exposures ($5.5 million) and reversals of expenses that were adjusted for Non-GAAP measures in previous periods ($2.6 million)
(5) Represents below-the-line foreign exchange impacts
(6) Includes tax impact of items above and tax benefit due to the release of tax valuation allowance ($59.3 million)
 
 
 
 
RECONCILIATION OF NON-GAAP MEASURES
(Unaudited)
 

Three Months Ended December 31, 2021

(Amounts in thousands, except per share data)

As Reported (a)

 

Realignment (1)

 

Other Items

 

As Adjusted

 
Sales

 $

         919,456

 

 $

                -

 

 $

              -

 

 $

   919,456

 

Gross profit 

 

            267,094

 

 

             (1,031

)

 

                -

 

 

      268,125

 

Gross margin

 

29.0

%

 

                  -

 

 

                -

 

 

29.2

%

 
Selling, general and administrative expense

 

           (187,111

)

 

                808

 

 

                -

 

 

     (187,919

)

Gain on sale of business

 

                     -

 

 

                   -

 

 

                -

 

 

               -

 

Net earnings from affiliates

 

                5,147

 

 

                   -

 

 

                -

 

 

          5,147

 

 
Operating income

 

              85,130

 

 

               (223

)

 

                -

 

 

        85,353

 

Operating income as a percentage of sales

 

9.3

%

 

                  -

 

 

                -

 

 

9.3

%

 
Interest and other expense, net

 

             (64,327

)

 

                   -

 

 

         (51,355

)

(3)

 

       (12,972

)

 
Earnings before income taxes

 

              20,803

 

 

               (223

)

 

         (51,355

)

 

        72,381

 

(Provision for) benefit from income taxes

 

               (1,335

)

 

             (1,396

)

(2)

 

          10,788

 

(4)

 

       (10,727

)

Tax Rate

 

6.4

%

 

-626.0

%

 

21.0

%

 

14.8

%

 
Net earnings attributable to Flowserve Corporation

 $

           16,730

 

 $

          (1,619

)

 $

      (40,567

)

 $

     58,916

 

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

 $

               0.13

 

 $

            (0.01

)

 $

         (0.31

)

 $

         0.45

 

Diluted

 

                 0.13

 

 

              (0.01

)

 

            (0.31

)

 

           0.45

 

 
Basic number of shares used for calculation

 

            130,245

 

 

          130,245

 

 

        130,245

 

 

      130,245

 

Diluted number of shares used for calculation

 

            130,829

 

 

          130,829

 

 

        130,829

 

 

      130,829

 

 
(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 of expense as a result of early extinguishment of debt and duplicate interest expense ($38.7 million)
(4) Includes tax impact of items above
 
 
 
 
SEGMENT INFORMATION
(Unaudited)
 
FLOWSERVE PUMP DIVISION

Three Months Ended December 31, 

(Amounts in millions, except percentages)

 

2022

 

 

 

2021

 

Bookings

 $

          786.2

 

 $

            693.5

 

Sales

 

             739.4

 

 

               648.9

 

Gross profit

 

             217.1

 

 

               198.3

 

Gross profit margin

 

29.4

%

 

30.6

%

SG&A

 

             130.1

 

 

               140.9

 

Segment operating income

 

               90.7

 

 

                62.5

 

Segment operating income as a percentage of sales

 

12.3

%

 

9.6

%

 
FLOW CONTROL DIVISION

Three Months Ended December 31, 

(Amounts in millions, except percentages)

 

2022

 

 

 

2021

 

Bookings

 $

          324.9

 

 $

            278.8

 

Sales

 

             301.8

 

 

               272.8

 

Gross profit

 

               87.5

 

 

                80.3

 

Gross profit margin

 

29.0

%

 

29.4

%

SG&A

 

               49.4

 

 

                50.3

 

Segment operating income

 

               38.1

 

 

                30.0

 

Segment operating income as a percentage of sales

 

12.6

%

 

11.0

%

 
 
 
 
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)

Year Ended December 31,

(Amounts in thousands, except per share data)

 

2022

 

 

 

2021

 

 

 

2020

 

 
Sales

 $

         3,615,120

 

 $

    3,541,060

 

 $

    3,728,134

 

Cost of sales

 

           (2,620,825

)

 

      (2,491,335

)

 

      (2,611,365

)

Gross profit

 

               994,295

 

 

       1,049,725

 

 

       1,116,769

 

Selling, general and administrative expense

 

              (815,545

)

 

        (797,076

)

 

        (878,245

)

Gain on sale of business

 

                       -

 

 

             1,806

 

 

                  -

 

Net earnings from affiliates 

 

                 18,469

 

 

           16,304

 

 

           11,753

 

Operating income

 

               197,219

 

 

         270,759

 

 

         250,277

 

Interest expense

 

                (46,247

)

 

          (57,617

)

 

          (56,185

)

Loss on extinguishment of debt

 

                       -

 

 

          (46,176

)

 

            (1,201

)

Interest income

 

                  3,963

 

 

             2,764

 

 

             4,175

 

Other income (expense), net

 

                    (559

)

 

          (36,142

)

 

             5,226

 

Earnings before income taxes

 

               154,376

 

 

         133,588

 

 

         202,292

 

(Provision for) benefit from income taxes

 

                 43,639

 

 

             2,594

 

 

          (61,417

)

Net earnings, including noncontrolling interests

 

               198,015

 

 

         136,182

 

 

         140,875

 

Less: Net earnings attributable to noncontrolling interests

 

                 (9,326

)

 

          (10,233

)

 

          (10,455

)

Net earnings attributable to Flowserve Corporation

 $

            188,689

 

 $

       125,949

 

 $

       130,420

 

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

 $

                 1.44

 

 $

            0.97

 

 $

            1.00

 

Diluted

 

                    1.44

 

 

               0.96

 

 

               1.00

 

     
Weighted average shares - basic

 

               130,630

 

 

         130,305

 

 

         130,395

 

Weighted average shares - diluted

 

               131,315

 

 

         130,857

 

 

         131,050

 

 
 
 
 
RECONCILIATION OF NON-GAAP MEASURES
(Unaudited)
 

Twelve Months Ended December 31, 2022

(Amounts in thousands, except per share data)

As Reported (a)

 

Realignment (1)

 

Other Items

 

As Adjusted

 
Sales

 $

       3,615,120

 

 $

                -

 

 $

              -

 

 $

3,615,120

 

Gross profit 

 

            994,295

 

 

               (355

)

 

         (13,490

)

(3)

 

   1,008,140

 

Gross margin

 

27.5

%

 

                  -

 

 

                -

 

 

27.9

%

 
Selling, general and administrative expense

 

           (815,545

)

 

                520

 

 

         (13,591

)

(4)

 

     (802,474

)

Net earnings from affiliates

 

              18,469

 

 

                   -

 

 

                -

 

 

        18,469

 

 
Operating income

 

            197,219

 

 

                165

 

 

         (27,081

)

 

      224,135

 

Operating income as a percentage of sales

 

5.5

%

 

                  -

 

 

                -

 

 

6.2

%

 
Interest and other expense, net

 

             (42,843

)

 

                   -

 

 

           9,694

 

(5)

 

       (52,537

)

 
Earnings before income taxes

 

            154,376

 

 

                165

 

 

         (17,387

)

 

      171,598

 

(Provision for) benefit from income taxes

 

              43,639

 

 

              1,799

 

(2)

 

          59,689

 

(6)

 

       (17,849

)

Tax Rate

 

-28.3

%

 

-1090.3

%

 

343.3

%

 

10.4

%

 
Net earnings attributable to Flowserve Corporation

 $

         188,689

 

 $

           1,964

 

 $

       42,302

 

 $

   144,423

 

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

 $

               1.44

 

 $

             0.02

 

 $

          0.31

 

 $

         1.11

 

Diluted

 

                 1.44

 

 

               0.01

 

 

             0.33

 

 

           1.10

 

 
Basic number of shares used for calculation

 

            130,630

 

 

          130,630

 

 

        130,630

 

 

      130,630

 

Diluted number of shares used for calculation

 

            131,315

 

 

          131,315

 

 

        131,315

 

 

      131,315

 

 
(a) Reported in conformity with U.S. GAAP
 
Notes:
(1) Represents realignment adjustments incurred as a result of realignment programs
(2) Includes tax impact of items above and reversal of realignment exit tax ($2.1 million)
(3) Represents the reserve of Russia related financial exposures ($18.2 million) and reversals of expenses that were adjusted for Non-GAAP measures in previous periods ($4.7 million)
(4) Represents the reserve of Russia related financial exposures ($15.7 million), a discrete asset write-down ($3.0 million) and reversals of expenses that were adjusted for Non-GAAP measures in previous periods ($5.1 million)
(5) Represents below-the-line foreign exchange impacts
(6) Includes tax impact of items above and tax benefit due to the release of tax valuation allowance ($59.3 million)
 
 
 
 
RECONCILIATION OF NON-GAAP MEASURES
(Unaudited)
 

Year Ended December 31, 2021

(Amounts in thousands, except per share data)

As Reported (a)

 

Realignment (1)

 

Other Items

 

As Adjusted

 
Sales

 $

       3,541,060

 

 $

                -

 

 $

              -

 

 $

3,541,060

 

Gross profit 

 

         1,049,725

 

 

           (16,844

)

 

                -

 

 

   1,066,568

 

Gross margin

 

29.6

%

 

                  -

 

 

                -

 

 

30.1

%

 
Selling, general and administrative expense

 

           (797,076

)

 

             (5,646

)

 

                -

 

 

     (791,431

)

Gain on sale of business

 

                1,806

 

 

                   -

 

 

           1,806

 

(3)

 

               -

 

Net earnings from affiliates

 

              16,304

 

 

                   -

 

 

                -

 

 

        16,304

 

 
Operating income

 

            270,759

 

 

           (22,490

)

 

           1,806

 

 

      291,441

 

Operating income as a percentage of sales

 

7.6

%

 

                  -

 

 

                -

 

 

8.2

%

 
Interest and other expense, net

 

           (137,171

)

 

                   -

 

 

         (75,188

)

(4)

 

       (61,982

)

 
Earnings before income taxes

 

            133,588

 

 

           (22,490

)

 

         (73,382

)

 

      229,459

 

(Provision for) benefit from income taxes

 

                2,594

 

 

              7,070

 

(2)

 

          33,522

 

(5)

 

       (37,997

)

Tax Rate

 

-1.9

%

 

31.4

%

 

45.7

%

 

16.6

%

 
Net earnings attributable to Flowserve Corporation

 $

         125,949

 

 $

        (15,420

)

 $

      (39,860

)

 $

   181,229

 

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

 $

               0.97

 

 $

            (0.12

)

 $

         (0.30

)

 $

         1.39

 

Diluted

 

                 0.96

 

 

              (0.12

)

 

            (0.30

)

 

           1.38

 

 
Basic number of shares used for calculation

 

            130,305

 

 

          130,305

 

 

        130,305

 

 

      130,305

 

Diluted number of shares used for calculation

 

            130,857

 

 

          130,857

 

 

        130,857

 

 

      130,857

 

 
(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 expense as a result of early extinguishment of debt and duplicate interest expense ($47.7 million)
(5) Includes tax impact of items above and tax benefit related to legal entity restructuring of foreign holding companies ($17.9 million)
 
 
 
 
SEGMENT INFORMATION
(Unaudited)
 
FLOWSERVE PUMP DIVISION

Year Ended December 31,

(Amounts in millions, except percentages)

 

2022

 

 

 

2021

 

 

 

2020

 

Bookings

 $

        3,214.7

 

 $

           2,675.7

 

 $

           2,358.4

 

Sales

 

          2,522.5

 

 

              2,470.8

 

 

              2,675.7

 

Gross profit

 

             728.1

 

 

                760.4

 

 

                811.4

 

Gross profit margin

 

28.9

%

 

30.8

%

 

30.3

%

SG&A

 

             538.5

 

 

                535.6

 

 

                552.2

 

Gain on sale of business 

 

                  -

 

 

                    1.8

 

 

                     -

 

Segment operating income

 

             208.0

 

 

                243.2

 

 

                271.0

 

Segment operating income as a percentage of sales

 

8.2

%

 

9.8

%

 

10.1

%

 
 
FLOW CONTROL DIVISION

Year Ended December 31,

(Amounts in millions, except percentages)

 

2022

 

 

 

2021

 

 

 

2020

 

Bookings

 $

        1,247.2

 

 $

           1,112.8

 

 $

           1,065.8

 

Sales

 

          1,100.6

 

 

              1,075.9

 

 

              1,057.5

 

Gross profit

 

             305.5

 

 

                316.7

 

 

                321.9

 

Gross profit margin

 

27.8

%

 

29.4

%

 

30.4

%

SG&A

 

             192.1

 

 

                197.4

 

 

                196.3

 

Segment operating income

 

             113.4

 

 

                119.7

 

 

                125.6

 

Segment operating income as a percentage of sales

 

10.3

%

 

11.1

%

 

11.9

%

 
 
 
 

Fourth Quarter and Full Year 2022 - Segment Results

(dollars in millions, comparison vs. 2021 fourth quarter and full year, unaudited)

 

 

 

 

 

 

 

 FPD 

 

 FCD 

4th Qtr YTD 4th Qtr YTD
Bookings

 $

   786.2

 

 $

3,214.7

 

 $

   324.9

 

 $

      1,247.2

 

- vs. prior year

 

13.4

%

 

20.1

%

 

16.5

%

 

12.1

%

- on constant currency

 

18.7

%

 

25.2

%

 

21.4

%

 

16.5

%

 
Sales

 $

   739.4

 

 $

2,522.5

 

 $

   301.8

 

 $

      1,100.6

 

- vs. prior year

 

13.9

%

 

2.1

%

 

10.6

%

 

2.3

%

- on constant currency

 

19.3

%

 

6.8

%

 

16.6

%

 

6.9

%

 
Gross Profit

 $

   217.1

 

 $

   728.1

 

 $

     87.5

 

 $

        305.5

 

- vs. prior year

 

9.5

%

 

-4.2

%

 

9.0

%

 

-3.5

%

 
Gross Margin (% of sales)

 

29.4

%

 

28.9

%

 

29.0

%

 

27.8

%

- vs. prior year (in basis points)  (120) bps  (190) bps (40) bps (160) bps
 
Operating Income

 $

     90.7

 

 $

   208.0

 

 $

     38.1

 

 $

        113.4

 

- vs. prior year

 

45.1

%

 

-14.5

%

 

27.0

%

 

-5.3

%

- on constant currency

 

52.9

%

 

-9.4

%

 

33.4

%

 

-2.0

%

   
Operating Margin (% of sales)

 

12.3

%

 

8.2

%

 

12.6

%

 

10.3

%

- vs. prior year (in basis points)  270 bps   (160) bps  160 bps (80) bps
   
Adjusted Operating Income *

 $

     96.6

 

 $

   229.3

 

 $

     38.7

 

 $

        119.4

 

- vs. prior year

 

53.1

%

 

-10.7

%

 

26.9

%

 

-2.5

%

- on constant currency

 

60.8

%

 

-5.9

%

 

33.1

%

 

0.7

%

   
Adj. Oper. Margin (% of sales)*

 

13.1

%

 

9.1

%

 

12.8

%

 

10.8

%

- vs. prior year (in basis points) 340 bps (130) bps 160 bps (60) bps
 
Backlog

 $

2,008.9

 

 $

   745.5

 

 
* Adjusted Operating Income and Adjusted Operating Margin exclude realignment charges and other specific discrete items
 
 
 
 
CONSOLIDATED BALANCE SHEETS
(Unaudited)

December 31,

 

December 31,

(Amounts in thousands, except per share data)

 

2022

 

 

 

2021

 

 
ASSETS  
Current assets:  
Cash and cash equivalents

 $

          434,971

 

 $

       658,452

 

Accounts receivable, net 

 

             868,632

 

 

          739,210

 

Contract assets, net 

 

             233,457

 

 

          195,598

 

Inventories, net

 

             803,198

 

 

          678,287

 

Prepaid expenses and other

 

             110,714

 

 

          117,130

 

Total current assets

 

          2,450,972

 

 

       2,388,677

 

Property, plant and equipment, net 

 

             500,945

 

 

          515,927

 

Operating lease right-of-use assets, net

 

             174,980

 

 

          193,863

 

Goodwill

 

          1,168,124

 

 

       1,196,479

 

Deferred taxes

 

             149,290

 

 

           44,049

 

Other intangible assets, net

 

             134,503

 

 

          152,463

 

Other assets, net 

 

             211,820

 

 

          258,310

 

Total assets

 $

        4,790,634

 

 $

    4,749,768

 

   
LIABILITIES AND EQUITY    
Current liabilities:    
Accounts payable

 $

          476,747

 

 $

       410,062

 

Accrued liabilities

 

             427,578

 

 

          445,092

 

Contract liabilities

 

             256,963

 

 

          202,965

 

Debt due within one year

 

               49,335

 

 

           41,058

 

Operating lease liabilities

 

               32,528

 

 

           32,628

 

Total current liabilities

 

          1,243,151

 

 

       1,131,805

 

Long-term debt due after one year

 

          1,224,151

 

 

       1,261,770

 

Operating lease liabilities

 

             155,196

 

 

          166,786

 

Retirement obligations and other liabilities

 

             309,529

 

 

          352,062

 

Shareholders’ equity:    
Common shares, $1.25 par value

 

             220,991

 

 

          220,991

 

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

 

             507,484

 

 

          506,386

 

Retained earnings

 

          3,774,209

 

 

       3,691,023

 

Treasury shares, at cost – 46,359 and 46,794 shares, respectively

 

         (2,036,882

)

 

      (2,057,706

)

Deferred compensation obligation

 

                 6,979

 

 

             7,214

 

Accumulated other comprehensive loss

 

            (647,788

)

 

         (563,589

)

Total Flowserve Corporation shareholders' equity

 

          1,824,993

 

 

       1,804,319

 

Noncontrolling interests

 

               33,614

 

 

           33,026

 

Total equity

 

          1,858,607

 

 

       1,837,345

 

Total liabilities and equity

 $

        4,790,634

 

 $

    4,749,768

 

 
 
 
 
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

Year Ended December 31,

(Amounts in thousands)

 

2022

 

 

 

2021

 

 

 

2020

 

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

$

198,015

 

$

136,182

 

$

140,875

 

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

 

             77,636

 

 

            85,175

 

 

        86,175

 

Amortization of intangible and other assets

 

             13,317

 

 

            14,647

 

 

        14,578

 

Loss on extinguishment of debt

 

                    -

 

 

            46,176

 

 

          1,201

 

Stock-based compensation

 

             25,530

 

 

            29,478

 

 

        27,252

 

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

 

            (27,758

)

 

            29,772

 

 

          4,277

 

Change in assets and liabilities:
Accounts receivable, net

 

          (152,011

)

 

             (8,675

)

 

        45,648

 

Inventories, net

 

          (147,492

)

 

           (32,124

)

 

        15,306

 

Contract assets, net

 

            (41,768

)

 

            74,333

 

 

          4,258

 

Prepaid expenses and other assets, net

 

             17,461

 

 

              1,302

 

 

        34,262

 

Accounts payable

 

             78,968

 

 

           (19,505

)

 

       (22,571

)

Contract liabilities

 

             61,684

 

 

            14,196

 

 

       (34,066

)

Accrued liabilities and income taxes payable

 

              (5,226

)

 

           (13,948

)

 

        50,203

 

Retirement obligations and other 

 

              (1,430

)

 

           (15,690

)

 

          3,636

 

Net deferred taxes 

 

          (136,936

)

 

           (91,200

)

 

       (60,497

)

Net cash flows provided (used) by operating activities

 

            (40,010

)

 

          250,119

 

 

      310,537

 

Cash flows – Investing activities:      
Capital expenditures

 

            (76,287

)

 

           (54,936

)

 

       (57,405

)

Proceeds from disposal of assets

 

               4,422

 

 

              2,663

 

 

        15,705

 

Proceeds from termination of cross-currency swap

 

             66,004

 

 

                   -

 

 

               -

 

Affiliate investment activity

 

                (225

)

 

             (7,204

)

 

               -

 

Net cash flows provided (used) by investing activities

 

              (6,086

)

 

           (59,477

)

 

       (41,700

)

Cash flows – Financing activities:
Payments on senior notes

 

                    -

 

 

       (1,243,548

)

 

     (191,258

)

Proceeds from issuance of senior notes

 

                    -

 

 

          498,280

 

 

      498,280

 

Payments on long-term debt

 

            (32,500

)

 

             (7,500

)

 

               -

 

Proceeds from issuance of long-term debt

 

                    -

 

 

          300,000

 

 

               -

 

Payment of deferred loan cost

 

                    -

 

 

             (6,739

)

 

         (4,572

)

Proceeds from short-term financing

 

             45,000

 

 

                   -

 

 

               -

 

Payments on short-term financing

 

            (45,000

)

 

                   -

 

 

               -

 

Proceeds under other financing arrangements

 

               1,733

 

 

              1,408

 

 

          2,285

 

Payments under other financing arrangements

 

              (1,790

)

 

             (2,086

)

 

         (5,088

)

Payments related to tax withholding for stock-based compensation

 

              (4,683

)

 

             (5,984

)

 

         (4,607

)

Repurchases of common shares

 

                    -

 

 

           (17,531

)

 

       (32,112

)

Payments of dividends

 

          (104,549

)

 

         (104,604

)

 

     (104,159

)

Other

 

              (8,223

)

 

           (11,403

)

 

       (11,182

)

Net cash flows provided (used) by financing activities

 

          (150,012

)

 

         (599,707

)

 

      147,587

 

Effect of exchange rate changes on cash

 

            (27,373

)

 

           (27,757

)

 

          7,870

 

Net change in cash and cash equivalents

 

(223,481

)

 

(436,822

)

 

424,294

 

Cash and cash equivalents at beginning of year

 

           658,452

 

 

        1,095,274

 

 

      670,980

 

Cash and cash equivalents at end of year

 $

        434,971

 

 $

        658,452

 

 $

1,095,274

 

Income taxes paid (net of refunds)

$

60,085

 

$

65,621

 

$

75,342

 

Interest paid

 

             41,629

 

 

            72,247

 

 

        57,041

 

 
 
 
 
CONSOLIDATED QUARTERLY FINANCIAL DATA
(Unaudited)
(Amounts in millions, except per share data)

2022

Quarter

4th

 

3rd

 

2nd

 

1st

Sales

 

         1,039.0

 

      872.9

 

       882.2

 

       821.1

 

Gross profit

 

           295.2

 

      239.6

 

       249.8

 

       209.6

 

Earnings before income taxes

 

             64.7

 

        42.5

 

         57.7

 

        (10.5

)

Net earnings attributable to Flowserve Corporation

 

           121.3

 

        38.4

 

         44.8

 

        (15.8

)

Earnings per share(1):
Basic

$

0.93

$

0.29

$

0.34

 $

     (0.12

)

Diluted

$

0.92

$

0.29

$

0.34

 $

     (0.12

)

 
 
 

2021

Quarter

4th

 

3rd

 

2nd

 

1st

Sales

$

919.5

$

866.1

$

898.2

$

857.3

 

Gross profit

 

           267.1

 

      253.5

 

       278.2

 

       250.9

 

Earnings before income taxes

 

             20.8

 

        41.4

 

         50.5

 

         21.0

 

Net earnings attributable to Flowserve Corporation

 

             16.7

 

        49.8

 

         45.4

 

         14.1

 

Earnings per share (1):
Basic

$

0.13

$

0.38

$

0.35

 $

      0.11

 

Diluted

$

0.13

$

0.38

$

0.35

 $

      0.11

 

 
(1) Earnings per share is computed independently for each of the quarters presented. The sum of the quarters may not equal the total year amount due to the impact of changes in weighted average quarterly shares outstanding or rounding.
 
 

 

Contacts

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

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

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