• Delivered Reported Fourth Quarter EPS of $0.43 and Adjusted EPS of $0.53

• Generated strong fourth quarter and full-year free cash flow of $185 million and $253 million, respectively

• Flowserve 2.0 transformation efforts limited fourth quarter decremental adjusted margins to 14%

• Commercialized RedRaven, a global IoT offering, to help reduce customer operating costs

DALLAS--(BUSINESS WIRE)--Flowserve Corporation (NYSE: FLS), a leading provider of flow control products and services for the global infrastructure markets, today announced its financial results for the fourth quarter and full year ended December 31, 2020.

Fourth Quarter 2020 Highlights (all comparisons to the 2019 fourth quarter, unless otherwise noted)¹

• Reported Earnings Per Share (EPS) of $0.43 and Adjusted EPS² of $0.53
  • Reported EPS includes after-tax adjusted items of approximately $12.9 million, including realignment, transformation and below-the-line foreign exchange impacts

• Total bookings were $825.1 million, down 21.6%, or 22.7% on a constant currency basis and up modestly sequentially
  • Original equipment bookings were $404.7 million, or 49% of total bookings, down 24.4%, or 25.8% on a constant currency basis
  • Aftermarket bookings were $420.4 million, or 51% of total bookings, down 18.7%, or 19.5% on a constant currency basis

• Sales were $985.3 million, down 7.8%, or 8.9% on a constant currency basis
  • Original equipment sales were $506.9 million, down 7.1%, or 9.4% on a constant currency basis
  • Aftermarket sales were $478.4 million, down 8.4%, or 9.3% on a constant currency basis

• Reported gross and operating margins were 30.0% and 9.7%, respectively
  • Adjusted gross and operating margins³ were 30.7% and 11.3%, respectively

• Backlog at December 31, 2020 was $1.9 billion, down 14.0% versus prior year

Full Year 2020 Highlights (all comparisons to full year 2019, unless otherwise noted)

• Reported EPS of $0.89 and Adjusted EPS² of $1.74
  • Reported EPS includes after-tax adjusted items of approximately $111.1 million, including realignment, transformation, below-the-line foreign exchange impacts and certain non-cash impairments

• Total bookings were $3.41 billion, down 19.5%, or 18.9% on a constant currency basis
  • Original equipment bookings were $1.62 billion, or 48% of total bookings, down 26.7%, or 26.4% on a constant currency basis
  • Aftermarket bookings were $1.79 billion, or 52% of total bookings, down 11.7%, or 10.9% on a constant currency basis

• Sales were $3.73 billion, down 5.4%, or 4.9% on a constant currency basis
  • Original equipment sales were $1.90 billion, down 3.1%, or 2.9% on a constant currency basis
  • Aftermarket sales were $1.83 billion, down 7.6%, or 6.9% on a constant currency basis

• Reported gross and operating margins of 30.0% and 6.7%, respectively
  • Adjusted gross and operating margins³ were 31.2% and 9.8%, respectively

“In a challenging market environment, we delivered solid performance in the fourth quarter including meaningful working capital improvements and free cash flow of $185 million. Additionally, our associates continued to operate safely and efficiently throughout the pandemic to meet the needs of our customers, while also delivering meaningful progress on our transformation program,” said Scott Rowe, Flowserve’s president and chief executive officer. “In light of the ongoing COVID-induced market headwinds over the past year, we accelerated our Flowserve 2.0 transformation cost reduction initiatives and took over $100 million of costs out of the business during 2020. This swift and decisive action and our ongoing operational performance enabled us to limit decremental adjusted operating margins to only 14 percent in the fourth quarter.”

“In 2021 we are returning our focus to the growth and optimization aspects of the Flowserve 2.0 agenda,” added Rowe. “Innovation and new product development are key aspects of our growth strategy, and we expect to build upon the momentum we achieved in 2020, which included 21 commercial launches of new, redesigned or upgraded products. Additionally, this year we further differentiated our product offering by commercializing RedRaven, Flowserve’s IoT offering to optimize our customers’ flow control processes and lower their operating costs.”

2021 Guidance⁴

Flowserve is providing Reported and Adjusted EPS guidance for 2021, as well as certain other financial metrics, as shown in the table below.

Flowserve’s 2021 Adjusted EPS target range excludes expected realignment charges of approximately $25 million, as well as the potential impact of below-the-line foreign currency effects and certain other discrete items. In a change of our approach in 2021, Flowserve 2.0 transformation-related expenses of approximately 5 cents per share will now be included in both our reported and adjusted EPS. Additionally, both the Reported and the Adjusted EPS target range includes the expected revenue decrease of approximately 4.0 to 7.0 percent year-over-year, and is based on current foreign currency rates and commodity prices, 2020 year-end backlog, expected bookings levels and market conditions, the reset of annual incentive performance goals, a broad-based merit increase, modest above-the-line foreign currency benefit, net interest expense in the range of $55 to $60 million and an adjusted tax rate of 22 to 24 percent. The quarterly phasing of expected 2021 earnings is anticipated in-line with Flowserve’s traditional seasonality.

Comment on Outlook

Rowe concluded, “The impact of the COVID-driven downturn impacted our financial performance in 2020, but due to our late-cycle nature, it will have a larger impact to our business in 2021 given our lower starting backlog and the ongoing management of the pandemic across our global footprint. However, I am increasingly optimistic, as the pandemic gets further contained, that our end markets will be well-positioned for significant growth.”

“We are encouraged by the progress of the vaccines, increased global mobility, stability in commodity prices, and the pent-up demand for our parts and services to existing infrastructure. Since we cannot accurately predict the timing of the inflection, our guidance only reflects modest end-market improvement. We do believe, assuming progress continues against the pandemic, that we will return to bookings growth this calendar year which would position us for improved financial performance in 2022.”

Fourth Quarter 2020 Results Conference Call

Flowserve will host its conference call with the financial community on Wednesday, February 24^th 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.

About Flowserve

Flowserve Corp. is one of the world’s leading providers of fluid motion and control products and services. Operating in more than 50 countries, the company produces engineered and industrial pumps, seals and valves as well as a range of related flow management services. More information about Flowserve can be obtained by visiting the company’s Web site at www.flowserve.com.

Safe Harbor Statement: This news release includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, as amended. Words or phrases such as, "may," "should," "expects," "could," "intends," "plans," "anticipates," "estimates," "believes," "forecasts," "predicts" or other similar expressions are intended to identify forward-looking statements, which include, without limitation, earnings forecasts, statements relating to our business strategy and statements of expectations, beliefs, future plans and strategies and anticipated developments concerning our industry, business, operations and financial performance and condition.

The forward-looking statements included in this news release are based on our current expectations, projections, estimates and assumptions. These statements are only predictions, not guarantees. Such forward-looking statements are subject to numerous risks and uncertainties that are difficult to predict. These risks and uncertainties may cause actual results to differ materially from what is forecast in such forward-looking statements, and include, without limitation, the following: the impact of the global outbreak of COVID-19 on our business and operations; a portion of our bookings may not lead to completed sales, and our ability to convert bookings into revenues at acceptable profit margins; changes in global economic conditions and the potential for unexpected cancellations or delays of customer orders in our reported backlog; our dependence on our customers’ ability to make required capital investment and maintenance expenditures; if we are not able to successfully execute and realize the expected financial benefits from our strategic transformation and realignment initiatives, our business could be adversely affected; risks associated with cost overruns on fixed-fee projects and in taking customer orders for large complex custom engineered products; the substantial dependence of our sales on the success of the oil and gas, chemical, power generation and water management industries; the adverse impact of volatile raw materials prices on our products and operating margins; economic, political and other risks associated with our international operations, including military actions, trade embargoes, epidemics or pandemics or changes to tariffs or trade agreements that could affect customer markets, particularly North African, Russian and Middle Eastern markets and global oil and gas producers, and non-compliance with U.S. export/re-export control, foreign corrupt practice laws, economic sanctions and import laws and regulations; increased aging and slower collection of receivables, particularly in Latin America and other emerging markets; our exposure to fluctuations in foreign currency exchange rates, including in hyperinflationary countries such as Venezuela and Argentina; our furnishing of products and services to nuclear power plant facilities and other critical processes; potential adverse consequences resulting from litigation to which we are a party, such as litigation involving asbestos-containing material claims; expectations regarding acquisitions and the integration of acquired businesses; our relative geographical profitability and its impact on our utilization of deferred tax assets, including foreign tax credits; the potential adverse impact of an impairment in the carrying value of goodwill or other intangible assets; our dependence upon fourth-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.

Investor Contacts:
Jay Roueche, Vice President, Investor Relations & Treasurer, (972) 443-6560
Mike Mullin, Director, Investor Relations, (972) 443-6636

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