FLOWSERVE CORP

Previous wording

We are a world-leading manufacturer and aftermarket service provider of comprehensive flow control systems. We develop and manufacture precision-engineered flow control equipment integral to the movement, control and protection of the flow of materials in our customers’ critical processes. Our product portfolio of pumps, valves, seals, automation and aftermarket services supports global infrastructure industries, including oil and gas, chemical, power generation, nuclear and water management, as well as general industrial markets where our products and services enable customers to achieve their goals. Through our manufacturing platform and global network of Quick Response Centers ("QRCs"), we offer a broad array of aftermarket equipment services, such as installation, advanced diagnostics and turnkey maintenance programs. We currently have approximately 16,000 employees globally and a footprint of manufacturing facilities and QRCs in more than 50 countries.

Current wording

We are a world-leading manufacturer and aftermarket service provider of comprehensive flow control systems. We develop and manufacture precision-engineered flow control equipment integral to the movement, control and protection of the flow of materials in our customers’ critical processes. Our product portfolio of pumps, valves, seals, automation and aftermarket services support global industries, including energy, chemical, power generation and general, which includes water management and pharmaceuticals, where our products and services enable customers to achieve their goals. Through our manufacturing platform and global network of Quick Response Centers ("QRCs"), we offer a broad array of aftermarket equipment services, such as installation, advanced diagnostics and turnkey maintenance programs. We currently have approximately 16,000 employees globally and a footprint of manufacturing facilities and QRCs in approximately 50 countries.

Previous wording

Our business model is significantly influenced by the capital and operating spending of global infrastructure industries for the placement of new products into service and maintenance spending for aftermarket services for existing operations. The worldwide installed base of our products is an important source of aftermarket revenue, where products are relied upon to maximize operating time of many key industrial processes. We continue to invest in our aftermarket strategy to provide local support to drive customer investments in our offerings and use of our services to replace or repair installed products. The aftermarket portion of our business also helps provide business stability during various economic periods. The aftermarket business, which is primarily served by our network of 155 QRCs (some of which are shared by our two business segments) located around the globe, provides a variety of service offerings for our customers including spare parts, service solutions, product life cycle solutions and other value-added services. It is generally a higher margin business compared to our original equipment business and a key component of our profitable growth strategy.

Current wording

Our business model is significantly influenced by the capital and operating spending of global infrastructure industries for the placement of new products into service and maintenance spending for aftermarket services for existing operations. The worldwide installed base of our products is an important source of aftermarket revenue, where products are relied upon to maximize the operating time of many key industrial processes. We continue to invest in our aftermarket strategy to provide local support to drive customer investments in our offerings and use of our services to replace or repair installed products. The aftermarket portion of our business also helps provide business stability during various economic periods. The aftermarket business, which is primarily served by our network of 155 QRCs (some of which are shared by our two business segments) located around the globe, provides a variety of service offerings for our customers including spare parts, service solutions, product life cycle solutions and other value-added services. It is generally a higher margin business compared to our original equipment business and a key component of our profitable growth strategy.

Previous wording

•FPD designs and manufactures custom, highly engineered pumps, pre-configured industrial pumps, pump systems, mechanical seals, auxiliary systems and replacement parts and related services; and

Current wording

•FPD designs, manufactures, pretests, distributes and services highly custom engineered pumps, pre-configured industrial pumps, pump systems, mechanical seals, auxiliary systems and replacement parts and related services; and

Previous wording

Our business segments share a focus on industrial flow control technology and have a number of common customers. These segments also have complementary product offerings and technologies that are often combined in applications that provide us a net competitive advantage. Our segments also benefit from our global footprint, our economies of scale in reducing administrative and overhead costs to serve customers more cost effectively and our shared leadership for operational support functions, such as research and development, marketing, and supply chain.

Current wording

Our business segments share a focus on industrial flow control technology and have a high number of common customers. These segments also have complementary product offerings and technologies that are often combined in applications that provide us a net competitive advantage. Our segments also benefit from our global footprint, our economies of scale in reducing administrative and overhead costs to serve customers more cost effectively and our shared leadership for operational support functions, such as research and development marketing and supply chain.

Previous wording

We continuously strive to enhance our global supply chain capability to increase our ability to meet global customer demands and improve the quality and timely delivery of our products over the long-term. Additionally, we continue to devote resources to improving the supply chain processes across our business segments to find areas of synergy and cost reduction and to improve our supply chain management capability to meet global customer demands. We also remain focused on improving on-time delivery and quality, while managing warranty costs as a percentage of sales across our global operations, through our operational excellence program. The goal of the program, which includes lean manufacturing, six sigma business management strategy and value engineering, is to maximize service fulfillment to customers through on-time delivery, reduced cycle time and quality at the highest internal productivity.

Current wording

Through the Flowserve Business System, we are committed to operational excellence, which includes continuous enhancements of our global supply chain capability to increase our ability to meet global customer demands and improve the quality and timely delivery of our products over the long term. Additionally, we continue to devote resources to improving the supply chain processes across our business segments to find areas of synergy and cost reduction and to improving our supply chain management capabilities to meet global customer demands. We also remain focused on improving on-time delivery and quality, while managing warranty costs across our global operations, through our operational excellence program. The goal of the program, which includes lean manufacturing, six sigma business management strategy and value engineering, is to maximize service fulfillment to customers through on-time delivery, reduced cycle time and quality at the highest internal productivity. Another main focus area of the Flowserve Business System is portfolio excellence. As part of these efforts, in 2024, we launched the complexity reduction ("CORE") program that focuses on product rationalization and continuous improvement of our overall product portfolio.

Previous wording

In the first quarter of 2023, we identified and initiated certain realignment activities concurrent with the consolidation of our FPD aftermarket and pump operations into a single operating model. This consolidated operating model was designed to better align our go-to-market strategy with our product offerings, enable end-to-end lifecycle responsibility and accountability, and to facilitate more efficient operations. Additionally, we committed to an estimated $50 million in cost reduction efforts to begin in 2023. Collectively, the above realignment activities are referred to as the "2023 Realignment Programs." The activities of the 2023 Realignment Programs were identified and implemented in phases throughout 2023 and are continuing through 2024.

Current wording

In the first quarter of 2023, we identified and initiated certain realignment activities concurrent with the consolidation of our FPD aftermarket and pump operations into a single operating model. This consolidated operating model was designed to better align our go-to-market strategy with our product offerings, enable end-to-end lifecycle responsibility and accountability, and to facilitate more efficient operations. Collectively, the above realignment activities are referred to as the "2023 Realignment Programs." The activities of the 2023 Realignment Programs were identified and implemented in phases throughout 2023 and 2024 and are substantially completed. In the fourth quarter of 2024, we launched the CORE program within the portfolio excellence category of the Flowserve Business System. During 2025 we also initiated certain other portfolio and footprint optimization activities. These optimization activities, together with the CORE program are referred to as the "2025 Realignment Programs."

Previous wording

We have seen growth from the end-markets we serve and continue to focus on our strategic plan that takes a balanced approach to integrating both short-term and long-term initiatives and aims to accelerate growth through three key areas: diversification, decarbonization, and digitization, the "3D Strategy." Our sales volume is expected to deliver sustainable and healthy growth, while our 2023 Realignment Programs and the new operating model have unlocked gains in organizational efficiency. With our strong backlog and supportive market environment, we expect to deliver annual revenue growth in 2024.

Current wording

We continue to see growth from the end-markets we serve and focus on our strategic plan that takes a balanced approach to integrating both short-term and long-term initiatives and aims to accelerate growth through three key areas: diversification, decarbonization, and digitization, the "3D Strategy." Our strategy is expected to deliver sustainable growth, while the Flowserve Business System is expected to unlock gains in organizational and operational efficiency. The current macroeconomic environment is dynamic and uncertainty exists given the trade policy actions introduced through April, including higher import tariffs in a number of countries in which we operate, the potential implementation of modified or new tariffs and related retaliatory actions. We plan to leverage our global footprint, expansive manufacturing network, flexible supply chain and ability to incorporate tariff impacts into pricing decisions to minimize the economic impact of this uncertainty to our business. We will continue to monitor and manage macroeconomic trends and uncertainties, including inflationary and recessionary pressures resulting from the ongoing tariffs and geopolitical climate; however, with our strong backlog, improved execution and recent acquisition of MOGAS, we expect to deliver annual revenue growth in 2025.

Previous wording

As of September 30, 2024, we have cash and cash equivalents of $611.7 million and $615.2 million of borrowings available under our Senior Credit Agreement. During the second quarter of 2024, the Company borrowed on the Revolving Credit Facility for general corporate purposes and as of September 30, 2024 had $50.0 million outstanding. We do not currently anticipate, nor are we aware of, any significant market conditions or commitments that would change any of our conclusions of the liquidity available to us. We will continue to actively monitor the credit markets in order to maintain sufficient liquidity and access to capital.

Current wording

As of March 31, 2025, we have cash and cash equi valents of$540.8 million and $662.2 million of borr owings available under our Second Amended and Restated Credit Agreement. We do not currently anticipate, nor are we aware of, any significant market conditions or commitments that would change any of our conclusions of the liquidity currently available to us. We will continue to actively monitor the credit markets in order to maintain sufficient liquidity and access to capital throughout 2025.

Previous wording

The activities of the 2023 Realignment Programs were identified and implemented in phases throughout 2023 and are continuing into 2024. We currently anticipate a total investment in realignment activities that have been evaluated and initiated of approximately $123 million of which $37 million is estimated to be non-cash. Based on the activities of the 2023 Realignment Programs initiated to date, we estimate that we recognized cost savings of approximately $89 million through September 30, 2024. Upon completion of the activities of the 2023 Realignment Programs that have been identified and initiated to date, we expect to achieve annualized cost savings in excess of $100 million. Actual savings could vary from expected savings, which represent management's best estimate to date. There are certain remaining realignment activities that are currently being evaluated, but have not yet been approved and therefore are not included in the above anticipated total investment or estimated savings.

Current wording

Our realignment activities are implemented in phases. We currently anticipate a total investment of approximately $23 million in the 2025 Realignment Programs that have been evaluated and initiated, of which $8 million is estimated to be non-cash. We are evaluating the annualized cost savings expected to be achieved upon completion of the activities of the 2025 Realignment Programs that have been identified and initiated to date. Actual savings could vary from expected savings. There are certain remaining realignment activities that are currently being evaluated, but have not yet been approved and therefore are not included in the above anticipated total investment or estimated savings.

Previous wording

The following tables present our realignment activity by segment related to our 2023 Realignment Programs:

Current wording

The following tables present our realignment activity by segment.

Previous wording

We define a booking as the receipt of a customer order that contractually engages us to perform activities on behalf of our customer with regard to manufacturing, service or support. Bookings recorded and subsequently canceled within the year-to-date period are excluded from year-to-date bookings. Bookings for the three months ended September 30, 2024 increased by $136.1 million, or 12.7%, as compared with the same period in 2023. The increase included negative currency effects of approximately $7 million. The increase was driven by increased customer orders of $60 million in the water management industry, $34 million in the power generation industry, $31 million in the oil and gas industry and $22 million in general industries, partially offset by a decrease of $15 million in the chemical industry. The increase in customer bookings was driven substantially by original equipment bookings.

Current wording

We define a booking as the receipt of a customer order that contractually engages us to perform activities on behalf of our customer with regard to manufacturing, service or support. Bookings recorded and subsequently canceled within the year-to-date period are excluded from year-to-date bookings. Bookings for the three months ended March 31, 2025 increased by $188.1 million, or 18.1%, as compared to the same period in 2024. The increase included negative currency effects of $25 million. The increased bookings were driven by increased customer orders of $88 million in the general industries, $58 million in the power generation industry and $41 million in the energy industry, partially offset by a decrease of $4 million in the chemical industry. The increase in customer bookings was driven by both original equipment and aftermarket bookings.

Previous wording

Sales for the three months ended September 30, 2024 increased by $38.4 million, or 3.5%, as compared with the same period in 2023. The increase included negative currency effects of approximately $5 million. The increased sales were driven by both aftermarket and original equipment customer sales, with increased customer sales of $25 million into the Middle East, $13 million into Europe, $9 million into Latin America and $6 million into Asia Pacific, partially offset by decreased customer sales of $4 million into both Africa and North America. Net sales to international customers, including export sales from the United States, were approximately 64% and 63% of total sales for the three months ended September 30, 2024 and 2023, respectively. Aftermarket sales represented approximately 51% of total sales, as compared with approximately 52% of total sales for the same period in 2023.

Current wording

Sales for the three months ended March 31, 2025 increased by $57.0 million, or 5.2%, as compared to the same period in 2024. The increase included negative currency effects of approximately $24 million. The increased sales were driven by both aftermarket and original equipment customer sales, with increased customer sales of $27 million into North America, $21 million into the Middle East, $20 million into Asia Pacific and $7 million into Latin America, partially offset by decreased customer sales of $9 million into both Europe and Africa, respectively. Net sales to international customers, including export sales from the United States, were approxim ately 63% and 64% of total salesfor the three months ended March 31, 2025 and 2024, respectively. Aftermarket sales represented approximately 51% of total sales for both periods.

Previous wording

Backlog represents the aggregate value of booked but uncompleted customer orders and is influenced primarily by bookings, sales, cancellat ions and currency effects. Backlog of $2,783.8 million at September 30, 2024 increased by $88.7 million, or 3.3%, as compared with December 31, 2023. Currency effects provided an increase of less than $1 million. Approximately 38% and 37% of the backlog at September 30, 2024 and December 31, 2023, respectively, was related to aftermarket orders. Backlog includes our unsatisfied (or partially unsatisfied) performance obligations related to contracts having an original expected duration in excess of one year of approxi mately $924 million, as discussed in Note 2, "Revenue Recognition," to our condensed consolidated financial statements included in this Quarterly Report.

Current wording

Backlog represents the aggregate value of booked but uncompleted customer orders and is influenced primarily by bookings, sales, cancellat ions and currency effects. Backlog of $2,902.9 million at March 31, 2025 increased by $113.3 million, or 4.1%, as compared to December 31, 2024. Currency effects provided an increase of approximately $49 million (currency effects on backlog are calculated using the change in period end exchange rates). Approximately 40% of the backlog at March 31, 2025 and 37% of the backlog at December 31, 2024 was related to aftermarket orders. Backlog includes our unsatisfied (or partially unsatisfied) performance obligations of approximately$962 million related to contracts having an original expected duration of over one year as discussed in Note 3, "Revenue Recognition," to our condensed consolidated financial statements included in this Quarterly Report.

Previous wording

SG&A for the nine months ended September 30, 2024 decreased by $0.3 million, or less than one percent, as compared with the same period in 2023. Currency effects yielded a decrease of approximately $2 million. SG&A decreased due to decreased charges of $35.7 million related to our 2023 Realignment Programs, $8.5 million of expense related to the terminated Velan acquisition incurred in 2023 that did not recur, a $2.9 million impairment of a licensing intangible in 2023 that did not recur, the reversal of previously recognized expenses of $2.0 million related to our financial exposure in Russia and lower broad-based annual incentive compensation, partially offset by an increase in research and development costs of $20.2 million which includes the $7.2 million strategic acquisition of intellectual property related to certain LNG technology, an increase in bad debt expense of $5.6 million, asbestos-related costs of $3.4 million for IBNR asbestos liability accruals, $2.8 million of expense related to the MOGAS acquisition and a $1.8 million discrete software asset impairment as compared with the same period in 2023. SG&A as a percentage of sales for the nine months ended September 30, 2024 decreased 150 basis points primarily due to increased sales leverage and cost decreases.

Current wording

SG&A for the three months ended March 31, 2025 increased by $14.8 million, or 6.5%, as compared to the same period in 2024. Currency effects yielded a decrease of approximately $5 million. SG&A increased due to higher broad-based annual incentive compensation, increased bad debt expense of $2.2 million, a reversal of previously recognized expenses of $2.0 million related to our financial exposure in Russia in the first quarter of 2024 that did not recur, $1.3 million of acquisition and integration expense related to the MOGAS acquisition and $1.3 million in amortization of step-up in value of acquisition related intangible assets associated with the MOGAS acquisition, partially offset by a decrease in research and development costs of $3.1 million and decreased charges of $2.8 million related to our realignment activities as compared to the same period in 2024. SG&A as a percentage of sales for the three months ended March 31, 2025 increased 20 basis points driven by cost increases.

Previous wording

Net earnings from affiliates for the three months ended September 30, 2024 increased by $0.6 million, or 13.0%, as compared with the same period in 2023. The increase in net earnings was primarily a result of increased earnings of our FPD joint venture in South Korea.

Current wording

Net earnings from affiliates for the three months ended March 31, 2025 increased by $3.2 million, or 128.0%, as compared to the same period in 2024. The increase in net earnings was primarily a result of increased earnings of our FPD joint ventures in South Korea.

Previous wording

Operating income for the nine months ended September 30, 2024 increased by $113.5 million, or 50.6%, as compared with the same period in 2023. The increase included negative currency effects of approximately $4 million. The increase was primarily a result of the $124.8 million increase in gross profit and $0.3 million decrease in SG&A, partially offset by $13.0 million loss on sale of business.

Current wording

Operating income for the three months ended March 31, 2025 increased by $18.8 million, or 16.6%, as compared to the same period in 2024. The increase included negative currency effects of approximately $4 million. The increase was primarily a result of the $30.3 million increase in gross profit, partially offset by $14.8 million increase in SG&A.

Previous wording

Interest expense for the three months ended September 30, 2024 decreased by $0.7 million, as compared with the same period in 2023, primarily due to lower outstanding debt during the period and lower effective interest rates as compared with the same period in 2023.

Current wording

Interest expense for the three months ended March 31, 2025 increased $3.9 million, as compared to the same period in 2024, primarily due to higher outstanding debt during the period. Interest income for the three months ended March 31, 2025 increased by $0.5 million primarily due to higher average balance as compared to the same period in 2024.

Previous wording

Other expense, net for the nine months ended September 30, 2024 decreased by $15.2 million as compared with the same period in 2023, primarily due to a $14.0 million decrease in losses from transactions in currencies other than our sites' functional currencies and a $8.3 million decrease in losses arising from transactions on foreign exchange forward contracts. The net change was primarily due to the foreign currency exchange rate movements in the Euro, Argentine peso, Mexican peso, and Brazilian real during the nine months ended September 30, 2024, as compared with the same period in 2023.

Current wording

Other expense, net for the three months ended March 31, 2025 increased $16.4 million as compared to the same period in 2024, primarily due to a $9.8 million increase in losses arising from transactions on foreign exchange forward contracts and a $2.9 million increase in losses from transactions in currencies other than our sites' functional currencies. The net change was primarily due to the foreign currency exchange rate movements in the Euro, Swedish krona, Singapore dollar and Brazilian real during the three months ended March 31, 2025, as compared to the same period in 2024. The three-month period ended March 31, 2025 also includes a pension settlement loss of $1.5 million incurred in conjunction with the freeze of our U.S. Qualified pension plan, which represents a portion of the estimated full year expected settlement loss of $6 million - $7 million triggered due to expected cash outflows exceeding service and interest costs.

Previous wording

The effective tax rate of 22.8% for the three months ended September 30, 2024 increased from (27.0)% for the same period in 2023. The effective tax rate varied from the U.S. federal statutory rate for the three months ended September 30, 2024 primarily due to the net impact of foreign operations. Refer to Note 13, "Income Taxes," to our condensed consolidated financial statements included in this Quarterly Report for further discussion.

Current wording

The effective tax rate of 18.3% for the three months ended March 31, 2025 decreased from 20.5% for the same period in 2024. The effective tax rate varied from the U.S. federal statutory rate for the three months ended March 31, 2025 primarily due to the net impact of U.S. discrete items, partially offset by state income taxes. Refer to Note 15, "Income Taxes," to our condensed consolidated financial statements included in this Quarterly Report for further discussion.

Previous wording

Other comprehensive income for the three months ended September 30, 2024 increased by $91.5 million from a loss of $40.8 million in the same period in 2023. The income was primarily due to foreign currency translation adjustments resulting primarily from exchange rate movements of the Euro, Great British pound, Chinese yuan, Malaysian ringgits and Mexican peso versus the U.S. dollar during the three months ended September 30, 2024, as compared with the same period in 2023.

Current wording

Other comprehensive income for the three months ended March 31, 2025 increased by $74.8 million from a loss of $26.9 million in the same period in 2024. The income was due to foreign currency translation adjustments resu lting primarily from exchange rate movements of the Euro, British pound and Brazilian real versus the U.S. dollar during the three months ended March 31, 2025, as compared to the same period in 2024.

Previous wording

Our largest business segment is FPD, through which we design, manufacture, distribute and service highly custom engineered pumps, pre-configured industrial pumps, pump systems, mechanical seals, and auxiliary systems (collectively referred to as "original equipment") and related services. FPD includes highly engineered pump products with longer lead times and mechanical seals, which are generally manufactured within shorter lead times. FPD also manufactures replacement parts and related equipment and provides aftermarket services. FPD primarily operates in the oil and gas, power generation, chemical, water management and general industries. FPD operates in 49 countries with 36 manufacturing facilities worldwide, 11 of which are located in Europe and the Middle East, 11 in North America, eight in Asia and six in Latin America, and it operates 131 QRCs, including those co-located in manufacturing facilities and/or shared with FCD.

Current wording

Our largest business segment is FPD, through which we design, manufacture, pretest, distribute and service highly custom engineered pumps, pre-configured industrial pumps, pump systems, mechanical seals and auxiliary systems (collectively referred to as "original equipment") and related services. FPD includes highly engineered pump products with longer lead times and mechanical seals that are generally manufactured within shorter lead times. FPD also manufactures replacement parts and related equipment and provides aftermarket services. FPD primarily operates in the energy, power generation, chemical, and general industries. FPD operates in 49 countries with 37 manufacturing facilities worldwide, 12 of which are located in North America, 11 in Europe and the Middle East, eight in Asia Pacific and six in Latin America, and it operates 130 QRCs, including those co-located in manufacturing facilities and/or shared with FCD.

Previous wording

Sales for the three months ended September 30, 2024 increased by $15.9 million, or 2.1% as compared with the same period in 2023 and included negative currency effects of approximately $6 million. The increase was driven by aftermarket customer sales. Increased customer sales of $9.4 million into Latin America, $8.5 million into the Middle East, $7.9 million into Europe and $3.4 million into Asia Pacific were partially offset by decreased sales of $4.3 million into North America and $3.3 million into Africa.

Current wording

Sales for the three months ended March 31, 2025 increased by $13.7 million, or 1.8% as compared to the same period in 2024 and included negative currency effects of approximately $19 million. The increase was driven by aftermarket customer sales. Increased customer sales of approximately $16.3 million into North America, $9.6 million into the Middle East and $1.2 million into Latin America were partially offset by decreased customer sales of $9.3 million into Asia Pacific, $4.2 million into Europe and $2.4 million into Africa.

Previous wording

SG&A for the nine months ended September 30, 2024 decreased by $1.6 million, or 0.4%, as compared with the same period in 2023. Currency effects provided a decrease of approximately $1.1 million. The decrease in SG&A was primarily due to realized cost savings associated with previously implemented 2023 Realignment Programs, decreased charges of $11.0 million related to our 2023 Realignment Programs, $2.9 million impairment of a licensing intangible in 2023 that did not recur and the reversal of previously recognized expenses of $2.0 million related to our financial exposure in Russia, partially offset by a $18.5 million increase in research and development costs which includes the strategic acquisition of intellectual property related to certain LNG technology, $3.2 million increase in bad debt expense, higher broad-based annual incentive compensation and $0.8 million in one-time U.S. pension plan transition benefit expense as compared to the same period in 2023.

Current wording

SG&A for the three months ended March 31, 2025 decreased by $2.0 million, or 1.4%, as compared to the same period in 2024. Currency effects yielded a decrease of approximately $4 million. The decrease in SG&A was primarily due to decreased research and development costs of $2.8 million, decreased charges of $2.0 million related to our realignment activities and decreased bad debt expense of $0.4 million, partially offset by higher broad-based annual incentive compensation and a reversal of previously recognized expenses of $2.0 million related to our financial exposure in Russia in the first quarter of 2024 that did not recur as compared to the same period in 2024.

Previous wording

FCD designs, manufactures and distributes a broad portfolio ofengineered-to-order and configured-to-order isolation valves, control valves, valve automation products and related equipment. FCD leverages its experience and application know-how by offering a complete menu of engineered services to complement its expansive product portfolio. FCD has a total of 42 manufacturing facilities and QRCs in 22 countries around the world, with five of its 18 manufacturing operations located in the United States, seven located in Europe and the Middle East, five located in Asia Pacific and one located in Latin America. Based on independent industry sources, we believe that FCD is the second largest industrial valve supplier on a global basis.

Current wording

FCD designs, manufactures and distributes a broad portfolio of engineered-to-order and configured-to-order isolation valves, control valves, valve automation products and related equipment. FCD leverages its experience and application know-how by offering a complete menu of engineered services to complement its expansive product portfolio. FCD has a total of 44 manufacturing facilities and QRCs in 22 countries around the world, with seven of its 19 manufacturing operations located in Europe and the Middle East, six located in the United States, five located in Asia Pacific and one located in Latin America. Based on independent industry sources, we believe that FCD ranks among the top three largest industrial valve suppliers worldwide.

Previous wording

Sales for thenine months ended September 30, 2024 increased by $132.0 million, or 5.9% as compared with the same period in 2023 and included negative currency effects of approximately $8 million. The increase was driven by both aftermarket and original equipment customer sales. Increased customer sales of $50.1 million into North America, $39.8 million into Europe, $38.8 million into the Middle East and $26.0 million into Latin America were partially offset by decreased sales of $7.9 million into Asia Pacific and $6.6 million into Africa.

Current wording

Sales for the three months ended March 31, 2025 increased $43.6 million, or 13.6%, as compared to the same period in 2024. The increase included negative currency effects of approximately $5 million. The increase was driven by both aftermarket and original equipment customer sales. Increased customer sales of $29.7 million into Asia Pacific, $11.5 million into the Middle East, $10.9 million into North America and $5.7 million into Latin America were partially offset by decreased sales of $6.7 million into Africa and $4.7 million into Europe.

Previous wording

Operating income for the three months ended September 30, 2024 increased by $3.2 million, or 7.4%, as compared with the same period in 2023. The increase included negative currency effects of less than $1 million. The increase was primarily due to $8.9 million increase in gross profit, partially offset by $5.8 million increase in SG&A.

Current wording

Operating income for the three months ended March 31, 2025 decreased by $3.2 million, or 9.2%, as compared to the same period in 2024. The decrease included negative currency effects of approximately $1 million. The decrease was primarily due to the $10.7 million increase in SG&A partially offset by $7.5 million increase in gross profit.

Previous wording

Existing cash, cash generated by operations and borrowings available under the Second Amended and Restated Credit Agreement are our primary sources of short-term liquidity. We monitor the depository institutions that hold our cash and cash equivalents on a regular basis, and we believe that we have placed our deposits with creditworthy financial institutions. Our sources of operating cash generally include the sale of our products and services and the conversion of our working capital, particularly accounts receivable and inventories. Our cash balance at September 30, 2024 was $611.7 million as compared with $545.7 million at December 31, 2023.

Current wording

Existing cash, cash generated by operations and borrowings available under our Second Amended and Restated Credit Agreement are our primary sources of short-term liquidity. We monitor the depository institutions that hold our cash and cash equivalents on a regular basis, and we believe that we have placed our deposits with creditworthy financial institutions. Our sources of operating cash generally include the sale of our products and services and the conversion of our working capital, particularly accounts receivable and inventories.

Previous wording

Our cash balance increased by $66.0 million to $611.7 million at September 30, 2024, as compared with December 31, 2023. The cash activity during the first nine months of 2024 included cash provided by operating activities, $82.8 million in dividend payments, $52.2 million in capital expenditures, $45.0 million of payments on our Term Loan and $20.1 million of share repurchases.

Current wording

Our cash balance decreased by $134.6 million to $540.8 million at March 31, 2025, as compared to December 31, 2024. The cash activity during the first three months of 2025 included cash used by operating activities, $27.6 million in dividend payments, $21.1 million of share repurchases, $15.0 million contingent consideration payment related to the MOGAS acquisition, $11.7 million in capital expenditures and $9.4 million of payments on our $500.0 million unsecured term loan facility (the "Term Loan").

Previous wording

For the nine months ended September 30, 2024, our cash provided by operating activities was $228.0 million, as compared to cash provided of $131.1 million for the same period in 2023. Working capital levels vary from period to period and are primarily affected by our volume of work, and can be impacted by billing schedules on our projects. Cash flows used by working capital accounts increased for the nine months ended September 30, 2024, primarily due to increased cash flows used by or decreased cash flows provided by accounts receivable, contract assets, contract liabilities and accrued liabilities, partially offset by increased cash flows provided by or decreased cash flows used by inventories, prepaid expenses and other assets and accounts payable as compared to the same period in 2023.

Current wording

For the three months ended March 31, 2025, our cash used by operating activities was $49.9 million, as compared to cash provided of $62.3 million for the same period in 2024. Cash flow used for working capital increased for the three months ended March 31, 2025, primarily due to increased cash flows used by, or decreased cash flows provided by, accounts receivable, contract assets, accounts payable and accrued liabilities, partially offset by increased cash flows provided by, or decreased cash flows used by, inventories, prepaid expenses and other assets, and contract liabilities as compared to the same period in 2024.

Previous wording

Increases in accounts receivable used $96.4 million of cash flow for the nine months ended September 30, 2024, as compared to $1.5 million provided for the same period in 2023. As of September 30, 2024, our days’ sales outstanding ("DSO") was 77 days as compared with 71 days as of September 30, 2023.

Current wording

Increases in accounts receivable used $50.7 million of cash flow for the three months ended March 31, 2025, compared to cash used of $39.7 million for the same period in 2024. As of March 31, 2025, our days’ sales outstanding ("DSO") was 82 days as compared to 76 days as of March 31, 2024.

Previous wording

Increases in contract assets used $23.3 million of cash flow for the nine months ended September 30, 2024, as compared with cash flows used of $10.2 million for the same period in 2023.

Current wording

Increases in contract assets used $9.4 million of cash flow for the three months ended March 31, 2025, as compared to cash used of $8.1 million for the same period in 2024.

Previous wording

Decreases in inventory provided $2.9 million of cash flow for the nine months ended September 30, 2024, as compared with cash flows used of $114.6 million for the same period in 2023. Inventory turns were 3.5 times at September 30, 2024, as compared to 3.3 times as of September 30, 2023.

Current wording

Changes in inventory provided $8.8 million of cash flow for the three months ended March 31, 2025, as compared to cash used of $11.5 million for the same period in 2024. Inventory turns were 3.6 times at March 31, 2025, as compared to 3.3 times as of March 31, 2024.

Previous wording

Cash flows used by investing activities during the nine months ended September 30, 2024 were $54.1 million, as compared to cash flows used of $48.4 million for the same period in 2023. Cash outflows in the nine months ended September 30, 2024 resulted primarily from capital expenditures of $52.2 million, an increase of $4.6 million, and payment for disposition of business of $2.6 million as compared with the same period in 2023. Our capital expenditures are generally focused on strategic initiatives to pursue information technology infrastructure, ongoing scheduled replacements and upgrades and cost reduction opportunities. In 2024, we currently estimate capital expend itures to be between $75 million and $85 million before consideration of any acquisition activity.

Current wording

Cash flows used by investing activities during the three months ended March 31, 2025 were $11.3 million, as compared to cash used of $13.6 million for the same period in 2024. Capital expenditures during the three months ended March 31, 2025 were $11.7 million, a decrease of $1.9 million as compared to the same period in 2024. Our capital expenditures are generally focused on strategic initiatives to pursue information technology infrastructure, ongoing scheduled replacements and upgrades and cost reduction opportunities. In 2025, we currently estimate capital expenditures to be between $80 million and $90 million, before consideration of any acquisition activity.

Previous wording

Cash flows used by financing activities during the nine months ended September 30, 2024 were $107.4 million, as compared to $32.1 million of cash flows used for the same period in 2023. Cash outflows in the nine months ended September 30, 2024 resulted primarily from the $45.0 million of payments on our Term Loan, $82.8 million of dividend payments, $50.0 million of payments on our Revolving Credit Facility and $20.1 million of share repurchases, partially offset by $100.0 million of cash proceeds from our Revolving Credit Facility. Cash outflows during the nine months ended September 30, 2023 resulted primarily from $30.0 million of payments on our Term Loan, $145.0 million repayments under our Revolving Credit Facility and $78.7 million of dividend payments, partially offset by cash inflows of $230.0 million from our Revolving Credit Facility.

Current wording

Cash flows used by financing activities during the three months ended March 31, 2025 were $84.2 million, as compared to $54.2 million of cash flow used for the same period in 2024. Cash outflows in the three months ended March 31, 2025 resulted primarily from the $27.6 million of dividend payments, $21.1 million in stock repurchases, $15.0 million contingent consideration payment related to the MOGAS acquisition, $11.1 million in payments related to tax withholding for stock-based compensation and $9.4 million of payments on our Term Loan. Cash outflows during the three months ended March 31, 2024 resulted primarily from the $27.7 million of dividend payments and $15.0 million of payments on our Term Loan.

Previous wording

As of September 30, 2024, we had an available capacity of $615.2 million on our Senior Credit Agreement, which provided for a $800.0 million unsecured revolving credit facility with a maturity date of September 13, 2026. On October 10, 2024, we amended and restated our Senior Credit Agreement and entered into the Second Amended and Restated Credit Agreement to (i) retain from the Senior Credit Agreement the $800.0 million Revolving Credit Facility, and the right, subject to certain conditions including a Lender approving such increase, to increase the amount of such Revolving Credit Facility by an aggregate amount not to exceed $400.0 million, (ii) increase our Term Loan from $300.0 million to $500.0 million, and (iii) extend the maturity date to October 10, 2029. As of September 30, 2024, approximately $15.0 million of our outstanding Term Loan is due to mature in the remainder of 2024 and approximately $59.9 million in 2025. However, under the Second Amended and Restated Credit Agreement signed October 10, 2024, the scheduled repayments due in each of the next four quarters on our Term Loan have been reduced to $9.4 million per quarter. Our borrowing capacity is subject to financial covenant limitations based on the terms of our Second Amended and Restated Credit Agreement and is also reduced by outstanding letters of credit. Our Second Amended and Restated Credit Agreement is committed and held by a diversified group of financial institutions. Refer to Note 6, "Debt and Finance Lease Obligations," to our condensed consolidated financial statements included in this Quarterly Report for additional information concerning our Second Amended and Restated Credit Agreement.

Current wording

As of March 31, 2025, we had an available capacity of$662.2 million on our Second Amended and Restated Credit Agreement, which provides fora $800.0 million unsecured revolving credit facility with a maturity date of October 10, 2029. Our borrowing capacity is subject to financial covenant limitations based on the terms of our Second Amended and Restated Credit Agreement and is also reduced by outstanding letters of credit. Our Second Amended and Restated Credit Agreement is committed and held by a diversified group of financial institutions. Refer to Note 7, "Debt and Finance Lease Obligations," to our condensed consolidated financial statements included in this Quarterly Report for additional information concerning our Second Amended and Restated Credit Agreement.

Previous wording

During thenine months ended September 30, 2024, we contributed $20.0 millionto our U.S. pension plan, compared to $2.0 million contributions for the same period in 2023. At December 31, 2023, our U.S. pension plan was fully funded as defined by applicable law. We continue to maintain an asset allocation consistent with our strategy to maximize total return, while reducing portfolio risks through asset class diversification.

Current wording

During thethree months ended March 31, 2025, we have made no cash contributions to our U.S. pension plan. We have no obligation to make contributions to our U.S. pension plans in 2025, but have authorization for contributions up to $10 million. At December 31, 2024, our U.S. pension plan was fully funded as defined by applicable law. We continue to maintain an asset allocation consistent with our strategy to maximize total return, while reducing portfolio risks through asset class diversification.

Previous wording

As of September 30, 2024, we have $279.9 million of remaining capacity for Board of Directors approved share repurchases. While we currently intend to continue to return cash through dividends and/or share repurchases for the foreseeable future, any future returns of cash through dividends will be reviewed individually, declared by our Board of Directors at its discretion and implemented by management.

Current wording

As of March 31, 2025, we have $258.8 million of remaining capacity for Board of Directors approved share repurchases. While we currently intend to continue to return cash through dividends and/or share repurchases for the foreseeable future, any future returns of cash through dividends will be reviewed individually, declared by our Board of Directors at its discretion and implemented by management.

Previous wording

See Note 6, "Debt and Finance Lease Obligations," to our condensed consolidated financial statements included in this Quarterly Report for a discussion of our Senior Credit Agreement, Second Amended and Restated Credit Agreement, and related covenants. We were in compliance with all applicable covenants under the Senior Notes and the Senior Credit Agreement as of September 30, 2024.

Current wording

See Note 7, "Debt and Finance Lease Obligations," to our condensed consolidated financial statements included in this Quarterly Report for a discussion of our Second Amended and Restated Credit Agreement and related covenants. We were in compliance with all applicable covenants under our Second Amended and Restated Credit Agreement as of March 31, 2025.

Previous wording

As of September 30, 2024, we have cash and cash equivalents of $611.7 million and $615.2 million of borrowings available under our Senior Credit Agreement. On October 10, 2024, we entered into the Second Amended and Restated Credit Agreement, which includes a $800.0 million Revolving Credit Facility and $500.0 million Term Loan. We do not currently anticipate, nor are we aware of, any significant market conditions or commitments that would change any of our conclusions of the liquidity available to us. We expect the liquidity discussed above coupled with the costs savings measures planned and already in place will further enable us to maintain adequate liquidity over the short-term (next 12 months) and long-term (beyond the next 12 months). We will continue to actively monitor the credit markets in order to maintain sufficient liquidity and access to capital.

Current wording

As of March 31, 2025, we have cash and cash equi valents of $540.8 million and $662.2 million of borrowings available under our Second Amended and Restated Credit Agreement. We do not currently anticipate, nor are we aware of, any significant market conditions or commitments that would change any of our conclusions of the liquidity currently available to us. We expect the liquidity discussed above coupled with the costs savings measures planned and already in place will further enable us to maintain adequate liquidity over the short-term (next 12 months) and long-term (beyond the next 12 months). We will continue to actively monitor the credit markets in order to maintain sufficient liquidity and access to capital throughout 2025.

Previous wording

Management’s discussion and analysis of financial condition and results of operations are based on our condensed consolidated financial statements and related footnotes contained within this Quarterly Report. Our critical accounting policies used in the preparation of our condensed consolidated financial statements were discussed in "Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" of our 2023 Annual Report. The critical policies, for which no significant changes have occurred in the nine months ended September 30, 2024, include:

Current wording

Management’s discussion and analysis of financial condition and results of operations are based on our condensed consolidated financial statements and related footnotes contained within this Quarterly Report. Our critical accounting policies used in the preparation of our condensed consolidated financial statements were discussed in "Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" of our 2024 Annual Report. The critical policies, for which no significant changes have occurred in the three months ended March 31, 2025, include: