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The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and notes thereto, and the other financial data included elsewhere in this Quarterly Report. The following discussion should also be read in conjunction with our audited consolidated financial statements, and notes thereto, and "Management’s Discussion and Analysis of Financial Condition and Results of Operations" ("MD&A") included in our 2025 Annual Report.
EXECUTIVE OVERVIEW
Our Company
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 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 48 countries.
Our business model is significantly influenced by the operating and capital 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.
Our operations are conducted through two business segments that are referenced throughout this MD&A:
•Flowserve Pumps Division ("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
•Flow Control Division ("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.
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.
The reputation of our product portfolio is built on more than 50 well-respected brand names such as Worthington, IDP, SIHI, INNOMAG, Valtek, Limitorque, Durco, Argus and Durametallic, which we believe to be one of the most comprehensive in the industry. Our products and services are sold either directly or through designated channels to more than 10,000 companies, including some of the world’s leading engineering, procurement and construction ("EPC") firms, original equipment manufacturers, distributors and end users.
Through the Flowserve Business System, we are committed to advancing our strategy through a culture of strong execution. Our Operational Excellence program within the Flowserve Business System, focuses on 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. We continue to devote resources to improving the supply chain and our operational processes across our business segments including lean manufacturing, six sigma business management strategy, and value engineering, to find areas of synergy and cost reduction while also improving on-time delivery, reducing cycle time, and delivering quality at the highest internal productivity. Portfolio Excellence within the Flowserve Business System was launched in 2024, specifically with the complexity reduction (“CORE”) program that focuses on product rationalization and continuous improvement of our overall product portfolio. The CORE program has now been implemented in all of our main product
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segments with a focus on optimizing our product portfolio, improving speed, and reducing space requirements through fewer products and required inventory levels.
Both the CORE program within the Portfolio Excellence and the initiation of certain other portfolio and footprint optimization activities under Operational Excellence are referred to as the "Realignment Programs."
2026 Outlook
We have seen growth from the end-markets we serve and continue to advance our strategy by driving operational excellence and efficiency throughout the organization supported by the Flowserve Business System. The current macroeconomic environment is dynamic and uncertainty exists given the current armed conflict with Iran, ongoing geopolitical instability, and continued trade policy actions, 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. While we will continue to monitor and manage macroeconomic trends and uncertainties, including inflationary and recessionary pressures resulting from the ongoing tariffs and geopolitical climate, our existing backlog, improved execution and announced acquisitions activity, provide a solid revenue base for 2026.
As of June 30, 2026, we have cash and cash equivalents of $731.0 million and $763.3 million of borrowings available under our Third Amended and Restated Credit Agreement. On April 15, 2026, we entered into the Third Amended and Restated Credit Agreement, which includes a $1,000 million Revolving Credit Facility and $450.0 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 currently available to us. We will continue to actively monitor the credit markets in order to maintain sufficient liquidity and access to capital throughout 2026.
OUR RESULTS OF OPERATIONS — Three and Six months ended June 30, 2026 and 2025
Throughout this discussion of our results of operations, we discuss the impact of fluctuations in foreign currency exchange rates. We have calculated currency effects on operations by translating current year results on a monthly basis at prior year exchange rates for the same periods.
As discussed in Note 1, "Basis of Presentation and Accounting Policies," to our condensed consolidated financial statements included in this Quarterly Report, on February 20, 2026, the U.S. Supreme Court held in Learning Resources, Inc. v. Trump that the International Emergency Economic Powers Act (“IEEPA”) does not authorize a U.S. President to impose tariffs during peacetime national emergencies and that the challenge to the legality of the tariffs imposed under IEEPA was within the exclusive jurisdiction of the U.S. Court of International Trade (“CIT”), thus affirming the prior decision of the CIT in V.O.S. Selections, Inc. v. United States that the tariffs imposed under IEEPA were invalid. As a result of this ruling, the CIT issued an order directing the U.S. Customs and Border Protection (“CBP”) agency to begin formalizing a process for refunds. On April 20, 2026, the CBP launched an online portal to process tariff refund requests and the Company was able to submit its tariff refund requests through this portal. We have paid IEEPA tariffs to the U.S. government since the enactment on February 1, 2025, and accordingly we submitted our request covering our Phase 1 entries for refund of $35.4 million related to IEEPA tariffs paid during the period from February 1, 2025 to February 20, 2026. The timing for submitting claims related to our Phase 3 entries has not yet been established. We did not have any entries eligible for refunds under CBP’s Phase 2. The timing and amount of any recoveries remain uncertain and subject to execution by the CBP.
Based on the U.S. Supreme Court's ruling, related CIT proceedings, and the Company's submission of tariff refund requests and assessment of the recoverability of amounts paid, the Company concluded as of March 31, 2026 that the recovery of previously incurred Phase 1 IEEPA tariffs was probable. Under a loss recovery accounting method, we recognized a receivable of $35.4 million for the IEEPA tariffs incurred in Other assets within the condensed consolidated balance sheet and a corresponding reversal of cost of sales ("COS") and inventory for $30.4 million and $5.0 million within our condensed consolidated statement of income for the three-month period ended March 31, 2026 and the condensed consolidated balance sheet for the period ended March 31, 2026, respectively.
Beginning on May 6, 2026 and through June 30, 2026, we received cash of $20.9 million for a portion of our refund claims, with applicable interest. Accordingly, we reclassified the remaining receivable from other assets to accounts receivable, net, a current asset, within our condensed consolidated balance sheet as of June 30, 2026. Through July 29, 2026, we have received substantially all cash refunds that were previously submitted and recognized in the consolidated financial statements. We continue to monitor developments, including those that impact our Phase 3 entries, and assess the potential impact on the consolidated financial statements and results of operations.
As discussed in Note 2, "Acquisitions," to our condensed consolidated financial statements included in this Quarterly Report, effective October 15, 2024, we acquired for inclusion in FCD, all of the equity interests of MOGAS Industries, Inc.,
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MOGAS Real Estate LLC and MOGAS Systems & Consulting LLC (such entities collectively, "MOGAS"). We incurred $5.2 million in acquisition and integration related costs for the six-month period ended June 30, 2025 associated with the acquisition which are included within selling, general and administrative expense ("SG&A") in our condensed consolidated statement of income. The impact of the acquisition of MOGAS was not material for the six-months ended June 30, 2025.
As discussed in Note 2, "Acquisitions," to our condensed consolidated financial statements included in this Quarterly Report, effective December 16, 2025, Flowserve acquired for inclusion in FPD, United Kingdom-based Greenray Turbine Solutions, Ltd. ("Greenray"), a comprehensive provider of aftermarket products and services for industrial gas turbines. We incurred $0.6 million in acquisition and integration-related costs for the six-month period ended June 30, 2026, associated with the acquisition which is included within SG&A in our condensed consolidated statements of income. The impact of the acquisition of Greenray is not material for the three and six-month periods ended June 30, 2026.
As discussed in Note 2, "Acquisitions," to our condensed consolidated financial statements included in this Quarterly Report, effective May 11, 2026, Flowserve acquired for inclusion in FPD, the remaining 51% equity interest in Flowserve Al Mansoori Services Company ("FAMCO") a joint venture company between Flowserve Corporation and Abu Dhabi based Al Mansoori Specialized Engineering, for the service and repair of all Flowserve pumps, mechanical seals and systems in the region. We incurred an immaterial amount in acquisition and integration-related costs for the three and six-month periods ended June 30, 2026. The impact of the acquisition of FAMCO is not material for the three and six-month periods ended June 30, 2026.
As discussed in Note 2, "Acquisitions," to our condensed consolidated financial statements included in this Quarterly Report, effective June 30, 2026, we acquired for inclusion in FCD and FPD, all of the equity interests of Trillium Flow Technologies’ Valves Division ("TVD"). TVD is a market leading provider of highly engineered mission-critical valves used in nuclear and traditional power generation, industrial, and critical infrastructure applications. We incurred $8.4 million and $15.1 million in acquisition and integration-related costs for the three and six-month periods ended June 30, 2026, respectively, associated with the acquisition which are included within SG&A in our condensed consolidated statements of income. The impact of the acquisition of TVD is not material for the three and six-month periods ended June 30, 2026.
Our realignment activities are implemented in phases. We currently anticipate a total investment in the 2025 Realignment Programs, which have been evaluated and initiated, of approximately $170 million of which $23 million is estimated to be non-cash. Upon completion of the 2025 Realignment Programs that have been identified and initiated to date, we expect to achieve annualized cost savings of $140.0 million. 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.
Realignment Activity
The following tables present our realignment activity by segment.
Three Months Ended June 30, 2026
(Amounts in thousands) FPD FCD Subtotal - Reportable Segments All Other Consolidated Total
Total Realignment Charges
COS $ 10,521 $ 22,458 $ 32,979 $ — $ 32,979
SG&A 5,392 $ 1,735 7,127 624 7,751
Total $ 15,913 $ 24,193 $ 40,106 $ 624 $ 40,730
Three Months Ended June 30, 2025
(Amounts in thousands) FPD FCD Subtotal - Reportable Segments All Other Consolidated Total
Total Realignment Charges
COS $ 1,888 $ 3,217 $ 5,105 $ — $ 5,105
SG&A 1,749 $ (3,504) (1,755) (32) (1,787)
Total $ 3,637 $ (287) $ 3,350 $ (32) $ 3,318
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Six Months Ended June 30, 2026
(Amounts in thousands) FPD FCD Subtotal–Reportable Segments Eliminations and All Other Consolidated Total
Total Realignment Charges
COS (1) $ 20,609 $ 28,872 $ 49,481 $ — $ 49,481
SG&A (2) 9,533 (3,286) 6,247 13,969 20,216
Total $ 30,142 $ 25,586 $ 55,728 $ 13,969 $ 69,697
Six Months Ended June 30, 2025
(Amounts in thousands) FPD FCD Subtotal–Reportable Segments Eliminations and All Other Consolidated Total
Total Realignment Charges
COS $ 4,867 $ 10,318 $ 15,185 $ (66) $ 15,119
SG&A 752 (3,625) (2,873) (217) (3,090)
Total $ 5,619 $ 6,693 $ 12,312 $ (283) $ 12,029
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(1) Includes within FPD a $3.5 million non-cash gain recognized on the early cancellation of a certain lease agreement and the resulting write-off of the remaining operating lease liability associated with our 2023 Realignment Programs. Our 2023 Realignment Programs are substantially completed.
(2) Includes within FCD a $5.3 million gain from the sale and leaseback of a certain facility associated with our 2025 Realignment Programs.
Consolidated Results
Bookings, Sales and Backlog
Three Months Ended June 30,
(Amounts in millions) 2026 2025
Bookings $ 1,348.1 $ 1,073.9
Sales 1,169.2 1,188.1
Six Months Ended June 30,
(Amounts in millions) 2026 2025
Bookings $ 2,495.7 $ 2,299.4
Sales 2,237.4 2,332.6
We revised the end market categories for bookings during the first quarter of 2025 to better reflect the end markets of our customers and better align with Flowserve's strategic focus. All bookings by industry amounts discussed below have been reclassified from five categories (i.e., oil and gas, chemical, power generation, water management and general industries) to four categories (i.e., energy, chemical, power generation and general industries) to conform to our current classification of end markets. The revisions implemented are as follows:
•the oil and gas end market is now referred to as the energy end market;
•the chemical end market no longer includes pharmaceuticals; and
•the general industries end market now includes pharmaceuticals and water management.
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-
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date period are excluded from year-to-date bookings. Bookings for the three months ended June 30, 2026 increased by $274.2 million, or 25.5%, as compared with the same period in 2025. The increase included currency benefits of approximately $14.4 million. The increased bookings were driven by increased customer orders of $169.6 million in the energy industry, $50.5 million in the power generation industry, $37.8 million in general industries and $16.2 million in the chemical industry. The increase in customer bookings was driven by original equipment and aftermarket bookings.
Bookings for the six months ended June 30, 2026 increased by $196.3 million, or 8.5%, as compared with the same period in 2025. The increase included currency benefits of approximately $57.1 million. The increased bookings were driven by increased customer orders of $132.3 million in the energy industry, $23.7 million in the power generation industry, $23.2 million in the chemical industry, and $21.6 million in general industries. The increase in customer bookings was driven by original equipment and aftermarket bookings.
Sales for the three months ended June 30, 2026 decreased by $18.9 million, or 1.6%, as compared to the same period in 2025. The decrease included currency benefits of approximately $9.5 million. The decreased sales were driven by original equipment sales, with decreased customer sales of $16.4 million into Europe, $14.2 million into the Middle East, $12.0 million into Asia Pacific, $3.0 million into Africa and $1.0 million into North America, partially offset by increased customer sales of $21.2 million into Latin America. Net sales to international customers, including export sales from the United States, were approximately 61% and 62% of total sales for the three-months ended June 30, 2026 and 2025, respectively. Aftermarket sales represented approximately 58% of total sales, as compared with approximately 53% of total sales for the same period in 2025.
Sales for the six months ended June 30, 2026 decreased by $95.2 million, or 4.1%, as compared to the same period in 2025. The decrease included currency benefits of approximately $50 million. The decreased sales were driven by original equipment customer sales, with decreased customer sales of $67.4 million into Asia Pacific, $55.4 million into the Middle East and $17.8 million into Europe, partially offset by increased customer sales of $16.0 million into North America, $14.7 million into Latin America and $4.1 million into Africa. Net sales to international customers, including export sales from the United States, were approximately 61% and 62% of total sales for the six months ended June 30, 2026 and 2025, respectively. Aftermarket sales represented approximately 58% of total sales, as compared with approximately 52% of total sales for the same period in 2025.
Backlog represents the aggregate value of booked but uncompleted customer orders and is influenced primarily by bookings, sales, cancellations and currency effects. Backlog of $3.3 billion at June 30, 2026 increased by $468.2 million, or 16.3%, as compared to December 31, 2025. Currency effects provided an increase of approximately $25.7 million (currency effects on backlog are calculated using the change in period end exchange rates). Approximately 41.1% of the backlog at June 30, 2026 and 42.0% of the backlog at December 31, 2025 was related to aftermarket orders. Backlog includes our unsatisfied (or partially unsatisfied) performance obligations of approximately $1.1 billion 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.
Gross Profit and Gross Profit Margin
Three Months Ended June 30,
(Amounts in millions, except percentages) 2026 2025
Gross profit $ 384.7 $ 406.6
Gross profit margin 32.9 % 34.2 %
Six Months Ended June 30,
(Amounts in millions, except percentages) 2026 2025
Gross profit $ 764.6 $ 775.9
Gross profit margin 34.2 % 33.3 %
Gross profit for the three months ended June 30, 2026 decreased by $21.9 million, or 5.4%, as compared with the same period in 2025. Gross profit margin for the three months ended June 30, 2026 of 32.9% decreased from 34.2% for the same period in 2025. The decrease in gross profit margin was primarily due to increased charges of $27.9 million related to our realignment activities, higher broad-based annual incentive compensation and disruptions in the Middle East, partially offset by decreased amortization expense on intangible assets, including acquisition related intangible assets, of $1.1 million and continued execution of the Flowserve Business System and our Operational Excellence and Portfolio Excellence programs, with a focus on complexity reduction and product rationalization.
Gross profit for the six months ended June 30, 2026 decreased by $11.3 million, or 1.5%, as compared with the same period in 2025. Gross profit margin for the six months ended June 30, 2026 of 34.2% increased from 33.3% for the same period in 2025. The increase in gross profit margin was primarily due to continued execution of the Flowserve Business System and
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our Operational Excellence and Portfolio Excellence programs, with a focus on complexity reduction and product rationalization, lower broad-based annual incentive compensation, decreased amortization expense on intangible assets, including acquisition related intangible assets, of $3.6 million and lower sales volume, partially offset by a $7.9 million charge incurred during the first quarter of 2026 related to a taxing authority matter in Latin America, increased charges of $34.4 million related to our realignment activities and disruptions in the Middle East. The increase in gross profit margin also includes the impact of $30.4 million in IEEPA tariff refunds recorded during the first quarter of 2026.
Selling, General and Administrative Expense
Three Months Ended June 30,
(Amounts in millions, except percentages) 2026 2025
SG&A $ 266.3 $ 265.9
SG&A as a percentage of sales 22.8 % 22.4 %
Six Months Ended June 30,
(Amounts in millions, except percentages) 2026 2025
SG&A $ 529.7 $ 509.1
SG&A as a percentage of sales 23.7 % 21.8 %
SG&A for the three months ended June 30, 2026 increased by $0.4 million, or 0.2%, as compared with the same period in 2025. Currency effects yielded an increase of approximately $3.1 million. SG&A increased due to increased charges of $9.5 million related to our realignment activities, increased charges of $6.1 million for acquisition and integration related costs associated with the TVD and FAMCO acquisitions and transaction costs associated with the PMV Divestiture incurred in the second quarter of 2026 compared to MOGAS acquisition and integration related charges incurred in the comparative period, higher broad-based annual incentive compensation, increased amortization expense on intangible assets, including acquisition related intangible assets of $1.8 million and an increase in bad debt expense of $1.1 million, partially offset by $15.5 million in transaction costs incurred during the comparative period associated with the terminated Chart Merger that did not recur and decreased research and development costs of $2.3 million, as compared to the same period in 2025. SG&A as a percentage of sales for the three months ended June 30, 2026 increased 40 basis points driven by cost increases and lower sales volume.
SG&A for the six months ended June 30, 2026 increased by $20.6 million, or 4.0%, as compared with the same period in 2025. Currency effects yielded an increase of approximately $12.2 million. SG&A increased due to increased charges of $23.3 million related to our realignment activities, increased charges of $13.4 million for acquisition and integration related costs associated with the Greenray, TVD and FAMCO acquisitions and transaction costs associated with the PMV Divestiture incurred in 2026 compared to MOGAS acquisition and integration related charges incurred in the comparative period, increased amortization expense on intangible assets, including acquisition related intangible assets, of $2.7 million and a $1.4 million charge incurred during the first quarter of 2026 related to a taxing authority matter in Latin America, partially offset by $15.5 million in transaction costs incurred during the comparative period associated with the terminated Chart Merger that did not recur, lower broad-based annual incentive compensation, a decrease in research and development costs of $2.1 million, and a decrease in bad debt expense of $1.1 million. SG&A as a percentage of sales for the six months ended June 30, 2026 increased 190 basis points driven by cost increases.
Net Earnings from Affiliates
Three Months Ended June 30,
(Amounts in millions) 2026 2025
Net earnings from affiliates $ 33.0 $ 5.9
Six Months Ended June 30,
(Amounts in millions) 2026 2025
Net earnings from affiliates $ 36.0 $ 11.6
Net earnings from affiliates for the three months ended June 30, 2026 increased by $27.1 million, or 459.3%, as compared with the same period in 2025. The increased net earnings from affiliates was primarily a result of a $27.7 million gain recognized on the remeasurement of our previously held equity interest in FAMCO.
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Net earnings from affiliates for the six months ended June 30, 2026 increased by $24.4 million, or 210.3%, as compared with the same period in 2025. The increased net earnings from affiliates was primarily a result of a $27.7 million gain recognized on the remeasurement of our previously held equity interest in FAMCO, partially offset by decreased earnings of our FPD joint venture in South Korea.
Operating Income
Three Months Ended June 30,
(Amounts in millions, except percentages) 2026 2025
Operating income $ 151.4 $ 146.6
Operating income as a percentage of sales 13.0 % 12.3 %
Six Months Ended June 30,
(Amounts in millions, except percentages) 2026 2025
Operating income $ 270.9 $ 278.5
Operating income as a percentage of sales 12.1 % 11.9 %
Operating income for the three months ended June 30, 2026 increased by $4.8 million, or 3.3%, as compared with the same period in 2025. The increase included negative currency effects of approximately $0.4 million. The increase was primarily a result of the $27.1 million increase in net earnings from affiliates, partially offset by the $21.9 million decrease in gross profit and the $0.4 million increase in SG&A.
Operating income for the six months ended June 30, 2026 decreased by $7.6 million, or 2.7%, as compared with the same period in 2025. The decrease included negative currency effects of approximately $1 million. The decrease was primarily a result of the $11.3 million decrease in gross profit and the $20.6 million increase in SG&A, partially offset by the $24.4 million increase in net earnings from affiliates.
Interest Expense and Interest Income
Three Months Ended June 30,
(Amounts in millions) 2026 2025
Interest expense $ (25.7) $ (20.3)
Interest income 5.0 2.5
Six Months Ended June 30,
(Amounts in millions) 2026 2025
Interest expense $ (46.1) $ (39.4)
Interest income 6.5 4.3
Interest expense for the three months ended June 30, 2026 increased by $5.4 million, as compared with the same period in 2025, primarily due to higher outstanding debt during the period. Interest income for the three months ended June 30, 2026 increased by $2.5 million primarily due to interest income earned on IEEPA tariff refunds and a higher average balance as compared to the same period in 2025.
Interest expense for the six months ended June 30, 2026 increased by $6.7 million, as compared with the same period in 2025, primarily due to higher outstanding debt during the period. Interest income for the six months ended June 30, 2026 increased by $2.2 million primarily due to interest income earned on IEEPA tariff refunds and a higher average balance as compared to the same period in 2025.
Other Expense, Net
Three Months Ended June 30,
(Amounts in millions) 2026 2025
Other expense, net $ (12.1) $ (25.0)
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Six Months Ended June 30,
(Amounts in millions) 2026 2025
Other expense, net $ (5.1) $ (42.3)
Other expense, net for the three months ended June 30, 2026 decreased $12.9 million as compared to the same period in 2025 primarily due to a $14.1 million decrease in losses from transactions in currencies other than our sites' functional currencies partially offset by a $0.4 million loss arising from transactions on foreign exchange forward contracts. The net currency change was primarily due to the foreign currency exchange rate movements in the Euro, Singaporean dollar, Swedish krona and Mexican peso during the three months ended June 30, 2026, as compared to the same period in 2025. The three months ended June 30, 2026 also includes a pension settlement loss of $3.1 million incurred in conjunction with pension plans in the United States and Canada.
Other expense, net for the six months ended June 30, 2026 decreased $37.2 million as compared to the same period in 2025 primarily due to a $28.9 million decrease in losses from transactions in currencies other than our sites' functional currencies and a $5.2 million decrease in losses arising from transactions on foreign exchange forward contracts. The net currency change was primarily due to the foreign currency exchange rate movements in the Euro, Singaporean dollar, and Swedish krona during the six months ended June 30, 2026, as compared to the same period in 2025. The six months ended June 30, 2026 also includes a pension settlement loss of $4.6 million incurred in conjunction with pension plans in the United States and Canada.
Income Taxes and Tax Rate
Three Months Ended June 30,
(Amounts in millions, except percentages) 2026 2025
Provision for (benefit from) income taxes $ 17.1 $ 15.6
Effective tax rate 14.4 % 15.1 %
Six Months Ended June 30,
(Amounts in millions, except percentages) 2026 2025
Provision for (benefit from) income taxes $ 38.2 $ 33.4
Effective tax rate 16.9 % 16.6 %
The effective tax rate of 14.4% for the three months ended June 30, 2026 decreased from 15.1% for the same period in 2025. The effective tax rate varied from the U.S. federal statutory rate for the three months ended June 30, 2026 primarily due to the net impact of the non-taxable FAMCO acquisition gain and foreign operations, 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.
The effective tax rate of 16.9% for the six months ended June 30, 2026 increased from 16.6% for the same period in 2025. The effective tax rate varied from the U.S. federal statutory rate for the six months ended June 30, 2026 primarily due to the net impact of U.S. discrete items, the non-taxable FAMCO acquisition gain and foreign operations, 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.
Other Comprehensive Income (Loss)
Three Months Ended June 30,
(Amounts in millions) 2026 2025
Other comprehensive income (loss): $ (8.9) $ 110.4
Six Months Ended June 30,
(Amounts in millions) 2026 2025
Other comprehensive income (loss): $ (32.0) $ 158.3
Other comprehensive income for the three months ended June 30, 2026 decreased by $119.3 million to a loss of $8.9 million from income of $110.4 million in the same period in 2025. The decrease was due to foreign currency translation
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adjustments resulting primarily from exchange rate movements of the Euro, Indian rupee and Mexican peso versus the U.S. dollar during the three months ended June 30, 2026, as compared to the same period in 2025.
Other comprehensive income for the six months ended June 30, 2026 decreased by $190.3 million to a loss of $32.0 million from income of $158.3 million in the same period in 2025. The decrease was due to foreign currency translation adjustments resulting primarily from exchange rate movements of the Euro and Indian rupee versus the U.S. dollar during the six months ended June 30, 2026, as compared to the same period in 2025.
Business Segments
We conduct our operations through two business segments based on the type of product and how we manage the business. We evaluate segment performance and allocate resources based on each segment’s operating income. The key operating results for our two business segments, FPD and FCD, are discussed below.
Flowserve Pumps Division Segment Results
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 48 countries with 38 manufacturing facilities worldwide, 13 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 126 QRCs, including those co-located in manufacturing facilities and/or shared with FCD.
Three Months Ended June 30,
(Amounts in millions, except percentages) 2026 2025
Bookings $ 938.1 $ 723.8
Sales 814.1 818.9
Gross profit 296.1 299.2
Gross profit margin 36.4 % 36.5 %
SG&A 148.0 142.4
Segment operating income 181.2 162.7
Segment operating income as a percentage of sales 22.3 % 19.9 %
Six Months Ended June 30,
(Amounts in millions, except percentages) 2026 2025
Bookings $ 1,711.4 $ 1,576.1
Sales 1,558.6 1,602.1
Gross profit 566.1 567.7
Gross profit margin 36.3 % 35.4 %
SG&A 295.2 280.1
Segment operating income 306.9 299.3
Segment operating income as a percentage of sales 19.7 % 18.7 %
As discussed above, we revised the end market categories for bookings during the first quarter of 2025. All bookings by industry amounts discussed below, including the 2025 comparative period, have been reclassified from five categories (i.e., oil and gas, chemical, power generation, water management, and general industries) to four categories (i.e., energy, chemical, power generation and general industries) to conform to our current classification of end markets.
Bookings for the three months ended June 30, 2026 increased by $214.4 million, or 29.6%, as compared to the same period in 2025. The increase included currency benefits of approximately $12.5 million. The increase in customer bookings was primarily driven by increased customer orders of $134.7 million in the energy industry, $39.3 million in general industries, $22.5 million in the power generation industry and $10.5 million in the chemical industry. Customer bookings increased $120.0 million into North America, $31.7 million into Latin America, $29.9 million into the Middle East, $11.1 million into Africa, $9.4 million into Europe and $5.3 million into Asia Pacific. The increase in customer bookings was driven by original equipment bookings.
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Bookings for the six months ended June 30, 2026 increased by $135.3 million, or 8.6%, as compared to the same period in 2025. The increase included currency benefits of approximately $46.5 million. The increase in customer bookings was primarily driven by increased customer orders of $141.7 million in the energy industry, $15.1 million in general industries, and $9.5 million in the chemical industry, partially offset by decreased customer orders of $32.8 million in the power generation industry. Customer bookings increased $110.0 million into North America, $27.8 million into Latin America, $16.6 million into the Middle East and $11.5 million into Asia Pacific, partially offset by decreased customer orders of $21.1 million into Europe, $11.1 million into Africa. The increase in customer bookings was driven by original equipment bookings.
Sales for the three months ended June 30, 2026 decreased by $4.8 million, or 0.6% as compared to the same period in 2025 and included currency benefits of approximately $9.4 million. The decrease was driven by original equipment customer sales. Decreased customer sales of approximately $18.2 million into the Middle East, $6.1 million into Europe, $5.7 million into Asia Pacific and $5.4 million into Africa were partially offset by increased customer sales of approximately $21.4 million into Latin America and $4.1 million into North America.
Sales for the six months ended June 30, 2026 decreased by $43.5 million, or 2.7% as compared to the same period in 2025 and included currency benefits of approximately $43 million. The decrease was driven by original equipment customer sales. Decreased customer sales of approximately $56.6 million into the Middle East, $20.0 million into Asia Pacific and $7.7 million into Europe were partially offset by increased customer sales of approximately $17.6 million into North America, $15.4 million into Latin America and $2.1 million into Africa.
Gross profit for the three months ended June 30, 2026 decreased by $3.1 million, or 1.0%, as compared to the same period in 2025. Gross profit margin for the three months ended June 30, 2026 of 36.4% decreased from 36.5% for the same period in 2025. The decrease in gross profit margin was primarily due to increased charges of $8.6 million related to our realignment activities, higher broad-based annual incentive compensation, increased amortization expense on intangible assets, including acquisition related intangible assets, of $1.4 million and disruptions in the Middle East, partially offset by continued execution of the Flowserve Business System and our Operational Excellence and Portfolio Excellence programs, with a focus on complexity reduction and product rationalization as compared to the same period in 2025.
Gross profit for the six months ended June 30, 2026 decreased by $1.6 million, or 0.3%, as compared to the same period in 2025. Gross profit margin for the six months ended June 30, 2026 of 36.3% increased from 35.4% for the same period in 2025. The increase in gross profit margin was primarily due to continued execution of the Flowserve Business System and our Operational Excellence and Portfolio Excellence programs, with a focus on complexity reduction and product rationalization, lower broad-based annual incentive compensation and lower sales volume, partially offset by increased charges of $15.7 million related to our realignment activities, a $7.9 million charge incurred during the first quarter of 2026 related to a taxing authority matter in Latin America, increased amortization expense on intangible assets, including acquisition related intangible assets, of $2.5 million and disruptions in the Middle East as compared to the same period in 2025. The increase in gross profit margin also includes the impact of $14.0 million in IEEPA tariff refunds recorded during the first quarter of 2026.
SG&A for the three months ended June 30, 2026 increased by $5.6 million, or 3.9%, as compared to the same period in 2025. Currency effects yielded an increase of approximately $1.7 million. The increase in SG&A was primarily due to increased charges of $3.6 million related to our realignment activities, higher broad-based annual incentive compensation and increased amortization expense on intangible assets, including acquisition related intangible assets, of $1.8 million, partially offset by decreased charges of $0.8 million for bad debt expense and decreased research and development expense of $0.6 million as compared to the same period in 2025.
SG&A for the six months ended June 30, 2026 increased by $15.1 million, or 5.4%, as compared to the same period in 2025. Currency effects yielded an increase of approximately $8.0 million. The increase in SG&A was primarily due to increased charges of $8.8 million related to our realignment activities, increased amortization expense on intangible assets, including acquisition related intangible assets, of $2.7 million, a $1.4 million charge incurred during the first quarter of 2026 related to a taxing authority matter in Latin America and $0.8 million in acquisition and integration related costs associated with the Greenray and FAMCO acquisitions, partially offset by decreased charges of $0.9 million for bad debt expense and decreased research and development expense of $0.6 million as compared to the same period in 2025.
Operating income for the three months ended June 30, 2026 increased by $18.5 million, or 11.4%, as compared to the same period in 2025. The increase included currency benefits of approximately $2 million. The increase was a result of the $27.1 million increase in net earnings from affiliates driven primarily by the gain on remeasurement of our previously held equity interest in FAMCO, partially offset by the decrease in gross profit of $3.1 million and $5.6 million increase in SG&A.
Operating income for the six months ended June 30, 2026 increased by $7.6 million, or 2.5%, as compared to the same period in 2025. The increase included currency benefits of approximately $3 million. The increase was a result of the $24.4 million increase in net earnings from affiliates driven primarily by the gain on remeasurement of our previously held equity interest in FAMCO, partially offset by the decrease in gross profit of $1.6 million and $15.1 million increase in SG&A.
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Backlog of $2.2 billion at June 30, 2026 increased by $158.7 million, or 7.8%, as compared to December 31, 2025. Currency effects provided an increase of approximately $21.9 million.
Flow Control Division Segment Results
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. Not including the recently acquired TVD facilities, FCD has a total of 48 manufacturing facilities and QRCs in 23 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 is the second largest industrial valve supplier on a global basis.
Three Months Ended June 30,
(Amounts in millions, except percentages) 2026 2025
Bookings $ 417.1 $ 354.7
Sales 357.3 371.5
Gross profit 88.5 107.7
Gross profit margin 24.8 % 29.0 %
SG&A 77.5 69.9
Segment operating income 11.0 37.8
Segment operating income as a percentage of sales 3.1 % 10.2 %
Six Months Ended June 30,
(Amounts in millions, except percentages) 2026 2025
Bookings $ 791.3 $ 730.4
Sales 684.9 735.6
Gross profit 197.5 207.9
Gross profit margin 28.8 % 28.3 %
SG&A 144.8 138.6
Segment operating income 52.7 69.3
Segment operating income as a percentage of sales 7.7 % 9.4 %
As discussed above, we revised the end market categories for bookings during the first quarter of 2025. All bookings by industry amounts discussed below, including the 2025 comparative period, have been reclassified from five categories (i.e., oil and gas, chemical, power generation, water management, and general industries) to four categories (i.e., energy, chemical, power generation and general industries) to conform to our current classification of end markets.
Bookings for the three months ended June 30, 2026 increased by $62.5 million, or 17.6%, as compared with the same period in 2025. Bookings included currency benefits of approximately $1.9 million. The increase in customer bookings was driven by increased customer orders of $34.9 million in the energy industry, $28.0 million in the power generation industry and $5.6 million in the chemical industry, partially offset by decreased customer orders of $1.4 million in general industries. Increased customer bookings were driven by increased orders of $34.4 million into Asia Pacific, $27.3 million into North America and $14.2 million into Europe, partially offset by decreased orders of $3.5 million into Latin America, $3.3 million into Africa and $2.1 million into the Middle East. The increase in customer bookings was driven by both original equipment and aftermarket bookings.
Bookings for the six months ended June 30, 2026 increased by $60.9 million, or 8.3%, as compared with the same period in 2025. Bookings included currency benefits of approximately $10.7 million. The increase in customer bookings was primarily driven by increased customer orders of $56.6 million in the power generation industry, $13.7 million in the chemical industry and $6.5 million in general industries, partially offset by decreased customer orders of $9.4 million in the energy industry. Increased customer bookings were driven by increased orders of $55.3 million into Asia Pacific, $31.8 million into Europe, $17.5 million into North America and $0.4 million into Africa, partially offset by decreased orders of $37.5 million into the Middle East and $0.2 million into Latin America. The increase in customer bookings was driven by both original equipment and aftermarket bookings.
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Sales for the three months ended June 30, 2026 decreased $14.2 million, or 3.8%, as compared with the same period in 2025. The decrease included currency benefits of approximately $0.1 million. Decreased sales were driven by original equipment customer sales. The decrease was primarily driven by decreased customer sales of $10.4 million into Europe, $6.3 million into Asia Pacific, $5.2 million into North America and $0.1 million into Latin America, partially offset by increased customer sales of $4.0 million into the Middle East and $2.3 million into Africa.
Sales for the six months ended June 30, 2026 decreased $50.7 million, or 6.9%, as compared with the same period in 2025. The decrease included currency benefits of approximately $7.4 million. Decreased sales were driven by original equipment customer sales. The decrease was primarily driven by decreased customer sales of $47.4 million into Asia Pacific, $10.1 million into Europe, $1.5 million into North America and $1 million into Latin America, partially offset by increased customer sales of $2.0 million into Africa and $1.2 million into the Middle East.
Gross profit for the three months ended June 30, 2026 decreased by $19.2 million, or 17.8%, as compared with the same period in 2025. Gross profit margin for the three months ended June 30, 2026 of 24.8% decreased from 29.0% for the same period in 2025. The decrease in gross profit margin was primarily due to increased charges of $19.2 million related to our realignment activities, higher broad-based annual incentive compensation and disruptions in the Middle East, partially offset by continued execution of the Flowserve Business System and our Operational Excellence and Portfolio Excellence programs, with a focus on complexity reduction and product rationalization and decreased amortization expense on intangible assets, including acquisition related intangible assets, of $2.5 million as compared to the same period in 2025.
Gross profit for the six months ended June 30, 2026 decreased by $10.4 million, or 5.0%, as compared with the same period in 2025. Gross profit margin for the six months ended June 30, 2026 of 28.8% increased from 28.3% for the same period in 2025. The increase in gross profit margin was primarily due to continued execution of the Flowserve Business System and our Operational Excellence and Portfolio Excellence programs, with a focus on complexity reduction and product rationalization, decreased amortization expense on intangible assets, including acquisition related intangible assets of $6.0 million, lower broad-based annual incentive compensation and lower sales volume, partially offset by increased charges of $18.6 million related to our realignment activities and disruptions in the Middle East as compared to the same period in 2025. The increase in gross profit margin also includes the impact of $16.4 million in IEEPA tariff refunds recorded during the first quarter of 2026.
SG&A for the three months ended June 30, 2026 increased by $7.6 million, or 10.9%, as compared with the same period in 2025. Currency effects provided an increase of approximately $0.3 million. The increase in SG&A was primarily due to increased charges of $5.2 million related to our realignment activities, increased charges of $5.2 million for acquisition and integration related costs associated with the TVD acquisition incurred in the second quarter of 2026 compared to MOGAS related charges incurred in the comparative period, a $2.0 million increase in bad debt expense and higher broad-based annual incentive compensation, partially offset by a $0.2 million decrease in research and development costs as compared to the same period in 2025.
SG&A for the six months ended June 30, 2026 increased by $6.2 million, or 4.5%, as compared with the same period in 2025. Currency effects provided an increase of approximately $1.9 million. The increase in SG&A was primarily due to increased charges of $11.7 million for acquisition and integration related costs associated with the TVD acquisition compared to MOGAS related charges incurred in the comparative period, higher broad-based annual incentive compensation and increased charges of $0.3 million related to our realignment activities, partially offset by a $1.2 million decrease in research and development costs and $0.3 million decrease in bad debt expense as compared to the same period in 2025.
Operating income for the three months ended June 30, 2026 decreased by $26.8 million, or 70.9%, as compared with the same period in 2025. The decrease included negative currency effects of approximately $1.9 million. The decrease was primarily due to the $19.2 million decrease in gross profit and the $7.6 million increase in SG&A.
Operating income for the six months ended June 30, 2026 decreased by $16.6 million, or 24.0%, as compared with the same period in 2025. The decrease included negative currency effects of approximately $1 million. The decrease was primarily due to the $10.4 million decrease in gross profit and the $6.2 million increase in SG&A.
Backlog of $1.2 billion at June 30, 2026 increased by $324.9 million, or 39.2%, as compared to December 31, 2025. Currency effects provided an increase of approximately $4 million.
LIQUIDITY AND CAPITAL RESOURCES
Cash Flow Analysis
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Six Months Ended June 30,
(Amounts in millions) 2026 2025
Net cash flows provided by operating activities $ 86.2 $ 104.2
Net cash flows (used) by investing activities (543.7) (27.5)
Net cash flows (used) provided by financing activities 434.7 (154.4)
Existing cash, cash generated by operations and borrowings available under our Third 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 decreased by $29.2 million to $731.0 million at June 30, 2026, as compared with December 31, 2025. The cash activity during the first six months of 2026 included cash provided by operating activities, $517.7 million in payments for acquisitions, net of cash acquired, $100.0 million in payments under our revolving credit facility, $77.9 million of payments on our $450.0 million unsecured term loan facility (the "Term Loan"), $54.8 million in dividend payments, $33.8 million in capital expenditures, $25.0 million in repurchases of common shares, $23.0 million of payments related to tax withholdings for stock-based compensation, $5.3 million in payments under other financing arrangements and $4.9 million in deferred loan costs, partially offset by $499.3 million proceeds from the issuance of senior notes, $150.0 million proceeds under the Revolving Credit Facility, $74.8 million proceeds from our Term Loan, and $9.9 million proceeds from the disposal of assets.
For the six months ended June 30, 2026, our cash provided by operating activities was $86.2 million, as compared to cash provided of $104.2 million for the same period in 2025. Cash flow used by working capital increased for the six months ended June 30, 2026, primarily due to decreased cash flows provided by, or increased cash flows used by, inventories and accounts payable, partially offset by increased cash flows provided by, or decreased cash flows used by, accounts receivable, contract assets, contract liabilities, prepaid expenses and other assets and accrued liabilities, as compared to the same period in 2025.
Increases in accounts receivable provided $6.9 million of cash flow for the six months ended June 30, 2026, compared to cash used of $22.6 million for the same period in 2025. As of June 30, 2026, our days’ sales outstanding ("DSO") was 82 days as compared to 80 days as of June 30, 2025.
Increases in contract assets used $11.2 million of cash flow for the six months ended June 30, 2026, as compared to cash used of $28.9 million for the same period in 2025.
Changes in inventories used $4.3 million of cash flow for the six months ended June 30, 2026, as compared to cash provided of $14.2 million for the same period in 2025. Inventory turns were 3.6 times at June 30, 2026, as compared to 3.5 times as of June 30, 2025.
Decreases in accounts payable used $52.3 million of cash flow for the six months ended June 30, 2026, as compared to cash used of $10.4 million for the same period in 2025. Decreases in accrued liabilities used $80.8 million of cash flow for the six months ended June 30, 2026, as compared to cash used of $84.5 million for the same period in 2025.
Changes in contract liabilities used $10.4 million of cash flow for the six months ended June 30, 2026, as compared to cash used of $15.3 million for the same period in 2025.
Cash flows used by investing activities during the six months ended June 30, 2026 were $543.7 million, as compared to cash used of $27.5 million for the same period in 2025. The increase in cash used resulted primarily from the $517.7 million payment for the acquisitions of TVD and FAMCO. Capital expenditures during the six months ended June 30, 2026 were $33.8 million, an increase of $5.5 million as compared with the same period in 2025. Our capital expenditures are generally focused on strategic initiatives to pursue information technology infrastructure, ongoing scheduled replacements and upgrades and cost reduction opportunities. In 2026, we currently estimate capital expenditures to be approximately $100.0 million, before consideration of any merger and acquisition activity.
Cash flows provided by financing activities during the six months ended June 30, 2026 were $434.7 million, as compared to $154.4 million of cash flows used for the same period in 2025. Cash inflows in the six months ended June 30, 2026 resulted primarily from the $499.3 million proceeds from the issuance of the 2036 senior notes, $150.0 million of proceeds from our Revolving Credit Facility and $74.8 million of proceeds from our long-term debt, partially offset by cash outflows of $100.0 million payment on our Revolving Credit Facility, $77.9 million for payments on our Term Loan, $54.8 million for dividend payments, $25.0 million in repurchases of common shares, $23.0 million in payments related to tax withholding for stock-based compensation, $5.3 million of payments on other financing arrangements and $4.9 million for payments of deferred loan costs.
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As of June 30, 2026, we had an available capacity of $763.3 million on our Third Amended and Restated Credit Agreement (the "Third Amended and Restated Credit Agreement"), which we entered into with Bank of America, N.A., as administrative agent, and the other lenders (together, the "Lenders") and letter of credit issurers party therto, on April 15, 2026. The Third Amended and Restated Credit Agreement, among other things, (i) provides a $1,000 million Revolving Credit Facility, and retain the right, subject to certain conditions including Lenders' approval of such increase, to increase the amount of such Revolving Credit Facility by an aggregate amount not to exceed $400.0 million, (ii) decreases our Term Loan from $500.0 million to $450.0 million, and (iii) extends the maturity date to April 15, 2031. We believe this Third Amended and Restated Credit Agreement will provide greater flexibility and additional liquidity as we continue to pursue our business goals and strategy. Most other terms and conditions under the previous Second Amended and Restated Credit Agreement remained unchanged.
During the six months ended June 30, 2026, we have made no contributions to our U.S. pension plan. We have no obligation to make contributions to our U.S. pension plans in 2026, but have authorization for contributions up to $10 million. At December 31, 2025, 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.
Considering our current debt structure and cash needs, we currently believe cash flows generated from operating activities combined with availability under our Third Amended and Restated Credit Agreement and our existing cash balance will be sufficient to meet our cash needs for our short-term (next 12 months) and long-term (beyond the next 12 months) business needs. However, cash flows from operations could be adversely affected by a decrease in the rate of general global economic growth and an extended decrease in capital spending of our customers, as well as economic, political and other risks associated with sales of our products, operational factors, competition, regulatory actions, fluctuations in foreign currency exchange rates and fluctuations in interest rates, among other factors. See "Financing" and "Cautionary Note Regarding Forward-Looking Statements" below.
As of June 30, 2026, we had $172.9 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.
Financing
Credit Facilities
See Note 7, "Debt and Finance Lease Obligations," to our condensed consolidated financial statements included in this Quarterly Report for a discussion of our Third Amended and Restated Credit Agreement and related covenants. We were in compliance with all applicable covenants under our Third Amended and Restated Credit Agreement as of June 30, 2026.
As of June 30, 2026, we had cash and cash equivalents of $731.0 million and $763.3 million of borrowings available under our Third 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 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 2026.
OUR CRITICAL ACCOUNTING ESTIMATES
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 2025 Annual Report. The critical policies, for which no significant changes have occurred in the six months ended June 30, 2026, include:
•Revenue Recognition;
•Deferred Taxes, Tax Valuation Allowances and Tax Reserves;
•Reserves for Contingent Loss;
•Pension and Postretirement Benefits; and
•Valuation of Goodwill, Indefinite-Lived Intangible Assets and Other Long-Lived Assets.
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The process of preparing condensed consolidated financial statements in conformity with U.S. GAAP requires the use of estimates and assumptions to determine certain of the assets, liabilities, revenues and expenses. These estimates and assumptions are based upon what we believe is the best information available at the time of the estimates or assumptions. The estimates and assumptions could change materially as conditions within and beyond our control change. Accordingly, actual results could differ materially from those estimates. The significant estimates are reviewed quarterly with the Audit Committee of our Board of Directors.
Based on an assessment of our accounting policies and the underlying judgments and uncertainties affecting the application of those policies, we believe that our condensed consolidated financial statements provide a meaningful and fair perspective of our consolidated financial condition and results of operations. This is not to suggest that other general risk factors, such as changes in worldwide demand, changes in material costs, performance of acquired businesses and others, could not adversely impact our consolidated financial condition, results of operations and cash flows in future periods. See "Cautionary Note Regarding Forward-Looking Statements" below.
ACCOUNTING DEVELOPMENTS
We have presented the information about pronouncements not yet implemented in Note 1, "Basis of Presentation and Accounting Policies," to our condensed consolidated financial statements included in this Quarterly Report.
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), 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," "predicts" or other similar expressions are intended to identify forward-looking statements, which include, without limitation, statements concerning our future financial performance, future debt and financing levels, investment objectives, implications of litigation and regulatory investigations and other management plans for future operations and performance.
The forward-looking statements included in this Quarterly Report 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. Specific factors that might cause such a difference include, without limitation, the following:
•economic, political and other risks associated with our international operations, including military actions, trade embargoes, blockades or other closures of major trade lanes, epidemics or pandemics and changes to tariffs or trade agreements that could affect customer and supply markets, particularly North African, Latin American, Asian and Middle Eastern markets and global oil and gas producers, and non-compliance with U.S. export/re-export control, foreign corrupt practice laws, economic sanctions and import laws and regulations;
•global supply chain disruptions and the current inflationary environment could adversely affect the efficiency of our manufacturing and increase the cost of providing our products to customers;
•a portion of our bookings may not lead to completed sales, and our ability to convert bookings into revenues at acceptable profit margins;
•changes in the 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 restructuring, realignment and other cost-saving initiatives, our business could be adversely affected;
•the substantial dependence of our sales on the success of the energy, chemical, power generation and general industries;
•the adverse impact of volatile raw materials prices on our products and operating margins;
•the impact of public health emergencies, such as outbreaks of epidemics, pandemics, and contagious diseases, on our business and operations;
•increased aging and slower collection of receivables, particularly in Latin America and other emerging markets;
•potential adverse effects resulting from the implementation of new tariffs and related retaliatory actions and changes to
or uncertainties related to tariffs and trade agreements;
•our exposure to fluctuations in foreign currency exchange rates, including in hyperinflationary countries such as Argentina;
•potential adverse consequences resulting from litigation to which we are a party;
•expectations regarding acquisitions and the integration of acquired businesses;
•the potential adverse impact of an impairment in the carrying value of goodwill or other intangible assets;
•our dependence upon third-party suppliers whose failure to perform timely could adversely affect our business operations;
•the highly competitive nature of the markets in which we operate;
•if we are not able to maintain our competitive position by successfully developing and introducing new products and integrate new technologies, including artificial intelligence and machine learning;
•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 United States, 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; and
•ineffective internal controls could impact the accuracy and timely reporting of our business and financial results.
These and other risks and uncertainties are more fully discussed in the risk factors identified in "Item 1A. Risk Factors" in Part I of our 2025 Annual Report and Part II of this Quarterly Report, and may be identified in our Quarterly Reports on Form 10-Q and our other filings with the SEC and/or press releases from time to time. All forward-looking statements included in this document are based on information available to us on the date hereof, and we assume no obligation to update any forward-looking statement.
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