FLS Flowserve Corp - 10-K

ITEM 1A. RISK FACTORS

Please carefully consider the following discussion of material factors, events, and uncertainties that make an investment in our securities risky. If any of the factors, events and contingencies discussed below or elsewhere in this Annual Report materialize, our business, financial condition, results of operations, cash flows, reputation, prospects, or stock price could be materially adversely affected. While we believe all known material risks are disclosed, additional risks and uncertainties not presently known to us, or that we currently deem immaterial, may also materially adversely affect our business, financial condition, results of operations, cash flows, reputation, prospects, or stock price. The disclosures in this section reflect our beliefs and opinions as to factors that could materially and adversely affect us in the future. References to past events are provided by way of example only and are not intended to be a complete listing or a representation as to whether or not such factors have occurred in the past. Because of the risk factors discussed below and elsewhere in this Annual Report and in other filings we make with the SEC, as well as other variables affecting our operating results, past financial performance may not be a reliable indicator of future performance, historical trends should not be used to anticipate results or trends in future periods and actual results could differ materially from those projected in the forward-looking statements contained in this Annual Report.

Business and Operating Risks

Our business depends on our customers’ levels of capital investment and maintenance expenditures, which in turn are affected by numerous factors, including changes in the state of domestic and global economies, global energy demand, and the liquidity cyclicality and condition of global credit and capital markets, which have impacted and which could continue to impact the ability or willingness of our customers to invest in our products and services and adversely affect our financial condition, results of operations, and cash flow.

Demand for most of our products and services depends on the level of new capital investment and planned maintenance expenditures by our customers. The level of capital expenditures by our customers depends, in turn, on general economic conditions, availability of credit, economic conditions within their respective industries and expectations of future market behavior. Additionally, volatility in commodity prices can negatively affect the level of these activities and can result in postponement of capital spending decisions or the delay or cancellation of existing orders. The ability of our customers to finance capital investment and maintenance is also affected by factors independent of the conditions in their industry, such as the condition of global credit and capital markets.

The businesses of many of our customers, particularly energy companies, chemical companies and general industrial companies, are to varying degrees cyclical and have experienced periodic downturns. Our customers in these industries, particularly those whose demand for our products and services is primarily profit-driven, tend to delay large capital projects, including expensive maintenance and upgrades, during economic downturns. For example, our chemical customers generally tend to reduce their spending on capital investments and operate their facilities at lower levels in a soft economic environment, which reduces demand for our products and services. An economic slowdown or recession in the United States or in any other country that significantly affects the supply of or demand for oil or natural gas could negatively impact our operations and therefore adversely affect our results. Additionally, fluctuating energy demand forecasts and lingering uncertainty concerning commodity pricing, specifically the price of oil, have caused, and may in the future cause, our customers to be more conservative in their capital planning, reducing demand for our products and services. Reduced demand for our products and services from time to time results in the delay or cancellation of existing orders or leads to excess manufacturing capacity, which unfavorably impacts our absorption of fixed manufacturing costs. This reduced demand has in the past and may continue in the future to also erode average selling prices in our industry. Any of these results could continue to adversely affect our business, financial condition, results of operations and cash flows.

Volatile regional and global economic conditions stemming from public health emergencies, such as outbreaks of epidemics, pandemics, and contagious diseases, including actions taken by governments in response, could in the future cause a substantial curtailment of business activities (including the decrease in demand for a broad variety of goods and services), weakened economic conditions, supply chain disruptions, significant economic uncertainty, and volatility in the financial and commodity markets, including global volatility in supply and demand for energy, may precipitate and aggravate many of the factors described above, and could cause these factors to adversely impact our operations and financial performance as well as those of many of our customers and suppliers.

Additionally, our customers sometimes delay capital investment and maintenance even during favorable conditions in their industries or markets. Despite these favorable conditions, the general health of global credit and capital markets and our customers' ability to access such markets impacts investments in large capital projects, including necessary maintenance and upgrades. In addition, the liquidity and financial position of our customers impacts capital investment decisions and their ability to pay in full and/or on a timely basis. Any of these factors, whether individually or in the aggregate, could have a material adverse effect on our customers and, in turn, our business, financial condition, results of operations and cash flows.

Volatility in commodity prices, effects from credit and capital market conditions and global economic growth forecasts have in the past prompted and may in the future prompt customers to delay or cancel existing orders, which could adversely affect the viability of our backlog and could impede our ability to realize revenues on our backlog.

Our backlog represents the value of uncompleted customer orders. While we cannot be certain that reported backlog will be indicative of future results, our ability to accurately value our backlog can be adversely affected by numerous factors, including the health of our customers' businesses and their access to capital, volatility in commodity prices (e.g., copper, nickel, stainless steel) and economic uncertainty. While we attempt to mitigate the financial consequences of order delays and cancellations through contractual provisions and other means, if we were to experience a significant increase in order delays or cancellations, which can occur as a result of the aforementioned economic conditions or other factors beyond our control, it could impede or delay our ability to realize anticipated revenues on our backlog. Such a loss of anticipated revenues could have a material adverse effect on our business, financial condition, results of operations and cash flows.

Our inability to deliver our backlog on time could affect our revenues, future sales and profitability and our relationships with customers.

At December 31, 2025, our backlog was $2.9 billion. In 2026, our ability to meet customer delivery schedules for backlog is dependent on a number of factors including, but not limited to, sufficient manufacturing plant capacity, adequate supply channel access to the raw materials and other inventory required for production, an adequately trained and capable workforce, project engineering expertise for certain large projects and appropriate planning and scheduling of manufacturing resources. Our manufacturing plant operations, capacity and supply chain are subject to disruption as a result of equipment failure, severe weather conditions and other natural or manmade disasters, including power outages, fires, explosions, terrorism, cyber-based attacks, conflicts or unrest, epidemics or pandemics, labor disputes, trade protection measures, including tariffs or import-export restrictions, acts of God, or other reasons. We may also encounter capacity limitations due to changes in demand despite our forecasting efforts. Many of the contracts we enter into with our customers require long manufacturing lead times and contain penalty clauses related to late delivery. Failure to deliver in accordance with contract terms and customer expectations could subject us to financial penalties, damage existing customer relationships, increase our costs, reduce our sales and have a material adverse effect on our business, financial condition, results of operations and cash flows.

Failure to successfully execute and realize the expected financial benefits from any restructuring and strategic realignment and other cost-saving initiatives could adversely affect our business.

Adverse effects from our execution of any current or future restructuring and realignment activities could interfere with our realization of anticipated synergies, customer service improvements and cost savings from these strategic initiatives. Moreover, because such expenses are difficult to predict and are necessarily inexact, we may incur substantial expenses in connection with the execution of any current or future restructuring and realignment plans in excess of what is currently anticipated. Further, restructuring and realignment activities are a complex and time-consuming process that can place substantial demands on management, which could divert attention from other business priorities or disrupt our daily operations. Any of these failures could, in turn, materially adversely affect our business, financial condition, results of operations and cash flows, which could constrain our liquidity.

If these measures are not successful or sustainable, we may undertake additional realignment and cost reduction efforts, which could result in future charges. Moreover, our ability to achieve our other strategic goals and business plans may be adversely affected, and we could experience business disruptions with customers and elsewhere if any restructuring and realignment efforts prove ineffective.

We sell our products in highly competitive markets, which results in pressure on our profit margins and limits our ability to maintain or increase the market share of our products.

The markets for our products and services are geographically diverse and highly competitive. We compete against large and well-established national and global companies, as well as regional and local companies, low-cost replicators of spare parts and in-house maintenance departments of our end-user customers. We compete based on price, technical expertise, delivery timeliness, contractual terms, project management, proximity to service centers, previous installation history and reputation for quality and reliability. Competitive environments in slow-growth industries and for original equipment orders have been inherently more influenced by pricing and domestic and global economic conditions and current economic forecasts suggest that the competitive influence of pricing has broadened. Additionally, some of our customers have been attempting to reduce the number of vendors from which they purchase in order to reduce the size and diversity of their supply chain. To remain competitive, we must invest in manufacturing, technology, such as artificial intelligence and machine learning, marketing, customer service and support and our distribution networks. No assurances can be made that we will have sufficient resources to continue to make the investment required to maintain or increase our market share or that our investments will be successful. A relatively strong U.S. dollar in recent years has made and can continue to make our products more expensive overseas, which can make our ability to meet our international customers’ pricing expectations particularly challenging and may result in erosion of product margin and market share. In addition, negative publicity or other organized campaigns critical of us, through social media or otherwise, could negatively affect our reputation and competitive position. If we do not compete successfully, our business, financial condition, results of operations and cash flows could be materially adversely affected.

Failure to successfully develop and introduce new products and integrate new technologies, including artificial intelligence and machine learning, could limit our ability to grow and maintain our competitive position and adversely affect our financial condition, results of operations and cash flow.

The success of new and improved products and services depends on their initial and continued acceptance by our customers. Our businesses are affected by varying degrees of technological change and corresponding shifts in customer demand, which result in unpredictable product transitions, shortened life cycles and increased importance of being first to market with new products and services. Difficulties or delays in the research, development, production and/or marketing of new products and services or adoption of new technologies, such as artificial intelligence and machine learning, may negatively impact our operating results and prevent us from recouping or realizing a return on the investments required to continue to bring these products and services to market.

In addition, the continued creation, development and advancement of new technologies, such as artificial intelligence, machine learning, quantum computing, data analytics, 3-D printing, robotics, sensor technology, data storage, neural networks, and augmented reality, amongst others, as well as other technologies in the future that are not foreseen today, continue to transform the Company’s processes, products, and services. In order to remain competitive, the Company will need to stay abreast of such technologies, require its employees to continue to learn and adapt to new technologies and be able to integrate them into its current and future business models, products, services and processes and also guard against disruptions to its business by existing and new competitors using such technologies. The Company’s strategy, operating model and new product innovation pipeline all have important technological elements and many of the Company’s products and services are based on technological advances. In addition, the Company will need to compete for talent that is familiar with such technologies, including upskilling its workforce. There can be no assurance that the Company will continue to compete effectively with its industry peers as new technology evolves, which could result in a material adverse effect on the Company's business and results of operations.

Our inability to obtain raw materials at favorable prices may adversely affect our operating margins and results of operations.

We purchase substantially all electric power and other raw materials we use in the manufacturing of our products from outside sources. The costs of these raw materials have been historically volatile and are influenced by factors that are outside our control. For example, in recent years, the prices for energy, metal alloys, nickel, and certain other of our raw materials have been volatile. Our operating margins and results of operations and cash flows may be adversely affected if

we are unable to pass increases in the costs of our raw materials on to our customers or if other methods to offset our increased costs through supply chain management, contractual provisions, and gains in operational efficiencies are not achieved.

Inflation has the potential to adversely affect our business, financial condition and results of operations by increasing our overall cost structure, including with respect to purchased parts, commodity and raw material costs. Our operating costs are subject to fluctuations, particularly due to changes in prices for commodities, parts, raw materials, energy and related utilities, freight, and cost of labor which have been and may continue to be driven by inflation, tightening labor markets, prevailing price levels, exchange rates, and other economic factors. Throughout 2025, our operating costs were impacted by tariff actions as well as price inflation, including with respect to the cost of certain raw materials, commodities, freight and logistics, and we expect this to continue for the foreseeable future. In order to remain competitive, we may not be able to recover all or a portion of these higher costs from our customers through price increases, which would reduce our profit margins and cash flows. Actions we take to mitigate volatility in manufacturing and operating costs may not be successful and, as a result, our business, financial condition, cash flows and results of operations could be materially and adversely affected.

Terrorist acts, conflicts, wars, natural or manmade disasters, epidemics or pandemics, acts of God and other such events around the world at times materially adversely affect our business, financial condition and results of operations and the market for our common stock.

As a global company with a large international footprint, we are subject to increased risk of damage or disruption to us, our employees, facilities, partners, suppliers, distributors, resellers or customers due to, among other things, terrorist acts, conflicts (including as a result of geopolitical uncertainty and/or conflicts in the countries and/or regions where we operate, including the Middle East, Ukraine, the European Union and the Trans-Pacific region), severe weather conditions, the potential physical effects of climate change, and other natural or manmade disasters, including power outages, fires, floods, earthquakes, hurricanes, storms, rising sea levels, explosions, cyber-based attacks, epidemics or pandemics, labor disputes, and acts of God wherever located around the world. The potential for future such events, the national and international responses to such events or perceived threats to national security, and other actual or potential conflicts or wars, such as the Russia-Ukraine conflict, the Israel-Hamas war, ongoing instability in Middle East, and heightened political and economic tensions involving the United States and Venezuela, have created many economic and political uncertainties. In addition, as a global company with headquarters and significant operations located in the United States, actions against or by the United States, such as the imposition of new U.S. tariffs and any retaliatory tariffs, may impact our business or employees. Changes in general economic conditions or any of the foregoing events, or our inability to accurately forecast these changes or events or mitigate the impact of these conditions on our business, could materially adversely affect us. See also the discussion below under the heading "Economic, political and other risks associated with international operations could adversely affect our business."

Global sustainability issues and our commitments to reduce our carbon emissions presents challenges to our business which could materially adversely affect us.

The potential effects of global sustainability issues create financial and operational risks to our business, both directly and indirectly. Increased concern regarding global sustainability issues and greenhouse gas ("GHG") emissions has and will result in more regulations designed to reduce GHG emissions. As a result, and as discussed hereafter in our risk factor entitled “We are exposed to certain regulatory and financial risks related to sustainability issues, which could adversely affect our financial condition, results of operations and cash flows,” we may be required to make increased capital expenditures to adapt our business and operations to meet new regulations and standards.

Over the years, we have made several public commitments regarding our intended reduction of carbon emissions including other short- and mid-term environmental sustainability goals. We may be required to expend significant resources to meet these commitments, which could significantly increase our operational costs. Further, there can be no assurance of the extent to which any of our ambitions will be achieved, or that any future investments we make in furtherance of achieving our sustainability goals will meet customer expectations and needs, investor expectations or any binding or non-binding legal standards regarding sustainability performance. In particular, our ability to meet those commitments depends in part on innovations and significant technological advancements with respect to the development and availability of reliable, affordable and sustainable alternative solutions. Moreover, we may determine that it is in the best interest of our company and our shareholders to prioritize other business, social, governance or sustainable investments over the achievement of our current commitments based on economic, regulatory and social factors, business strategy or pressure from investors, activist groups or other stakeholders.

If we are unable to meet these commitments, or if these commitments do not meet the rapidly evolving, varied and often times conflicting expectations of our stakeholders, then, in addition to regulatory and legal risks related to compliance, we could incur adverse publicity and reaction from investors, customers or other stakeholders, which could adversely impact our reputation, which could in turn adversely impact our results of operations. While we have taken steps to adopt sustainability goals and reduce our carbon emissions, there can be no assurance that our commitments and current and future strategic plans to achieve those commitments will be successful, that the costs related to these efforts may not be higher than expected, that the technological advancements and innovations we are relying upon will come to fruition in the timeframe we expect, or at all, or that proposed regulation or deregulation related to climate change will not have a negative competitive impact, any one of which could have a material adverse effect on our capital expenditures, operating margins and results of operations.

Our business may be adversely impacted by work stoppages and other labor matters.

As of December 31, 2025, w e had approximat ely 16,000 empl oyees, of which approximately 4,600 were located in the United States . Approximatel y 3% of our U.S. employees are represented by unions. We also have unionized employees or employee work councils in Argentina, Australia, Austria, Brazil, Finland, France, Germany, India, Italy, Japan, Mexico, the Netherlands, South Africa, Spain, and Sweden. Although we believe that our relations with our employees are generally satisfactory and we have not experienced any material strikes or work stoppages recently, no assu rances can be made that we will not in t he future experience these and other types of conflicts with labor unions, works councils, other groups representing employees or our employees generally, or that any future negotiations with our labor unions will not result in significant increases in our cost of labor. Our ability to successfully negotiate new and acceptable agreements when the existing agreements with employees covered by collective bargaining expire could result in business disruptions or increased costs.

Our ability to implement our business strategy and serve our customers is dependent upon the continuing ability to employ talented professionals and attract, train, develop and retain a skilled workforce. We are subject to the risk that we will not be able to effectively replace the knowledge and expertise of an aging workforce as workers retire. Without a properly skilled and experienced workforce, our costs, including productivity costs and costs to replace employees may increase, and this could negatively impact our earnings.

We may also encounter additional costs from claims made and/or legal proceedings brought against us with respect to alleged workplace harassment or discrimination, and we could suffer reputational harm.

Our growth strategy depends on our ability to continue to expand our market presence through acquisitions, and any future acquisitions may present unforeseen integration difficulties or costs which could materially affect our business.

Since 1997, we have expanded through a number of acquisitions, and we may pursue strategic acquisitions of businesses in the future. Our ability to implement this growth strategy may be limited by our ability to identify appropriate acquisition candidates, secure the requisite regulatory approvals, covenants in our credit agreement and other debt agreements and our financial resources, including available cash and borrowing capacity. Acquisitions may require additional debt financing, resulting in higher leverage and an increase in interest expense or may require equity financing, resulting in ownership dilution to existing shareholders. In addition, acquisitions sometimes require large one-time charges and can result in the incurrence of contingent liabilities, adverse tax consequences, substantial depreciation or deferred compensation charges, the amortization of identifiable purchased intangible assets or impairment of goodwill, any of which could have a material adverse effect on our business, financial condition, results of operations and cash flows.

When we acquire another business, the process of integrating acquired operations into our existing operations creates operating challenges and requires significant financial and managerial resources that would otherwise be available for the ongoing development or expansion of existing operations. Some of the more common challenges associated with acquisitions that we may experience, and have experienced in the past, include:

• loss of key employees or customers of the acquired company;

• conforming the acquired company's standards, processes, procedures and controls, including accounting systems and controls, with our operations, which could cause deficiencies related to our internal control over financial reporting;

• coordinating operations that are increased in scope, geographic diversity and complexity;

• retooling and reprogramming of equipment;

• integrating the acquired company's information systems, which may increase the scope and complexity of our information technology networks and related systems, resulting in new security vulnerabilities or increased exposure to cyber-attacks;

• hiring additional management and other critical personnel; and

• the diversion of management's attention from our day-to-day operations.

Further, no guarantees can be made that we would realize the cost savings, synergies or revenue enhancements that we may anticipate from any acquisition, or that we will realize such benefits within the time frame that we expect. If we are not able to timely address the challenges associated with acquisitions and successfully integrate acquired businesses, or if our integrated product and service offerings fail to achieve market acceptance, our business could be adversely affected.

A significant data breach or disruption to our information technology infrastructure could materially adversely affect our business operations.

Our information technology networks and related systems and devices and those technology systems under control of third parties with whom we do business are critical to the operation of our business and essential to our ability to successfully perform day-to-day operations. These information technology networks and related systems and devices and those under control of third parties are susceptible to damage, disruptions or shutdowns due to programming errors, defects or other vulnerabilities, power outages, hardware failures, computer viruses, cyber-attacks, malware attacks, ransomware attacks, theft, misconduct by employees or other insiders, misuse, human errors or other cybersecurity incidents. If any of the aforementioned cybersecurity incidents or disruptions occur and our business continuity plans do not effectively resolve the issues in a timely manner, our business, financial condition, results of operations, and liquidity could be materially adversely affected.

In addition, any of the aforementioned cybersecurity incidents or disruptions could expose us to a risk of loss, disclosure, misuse, corruption, or interruption of sensitive and critical data, information and functions, including our proprietary and confidential information and information related to our customers, suppliers and employees. It is also possible a cybersecurity incident could result in theft of material trade secrets or other material intellectual property. While we devote substantial resources to maintaining adequate levels of cybersecurity, there can be no assurance that we will be able to prevent all of the rapidly evolving forms of increasingly sophisticated and frequent cyberattacks, or avoid or limit a material adverse impact on our systems after such incidents or attacks occur. The rapid evolution and increased availability of artificial intelligence technologies, including generative artificial intelligence models, may intensify cybersecurity risks by making targeted attacks more sophisticated and cybersecurity incidents more difficult to detect, contain, and mitigate, which may inhibit our ability to provide prompt, full, and reliable information about such incidents to our customers, regulators, and the public. Furthermore, businesses which we have acquired, or may in the future acquire, may have cybersecurity weaknesses which could subject us to increased risks of cybersecurity incidents. The potential consequences of a material cybersecurity incident include reputational damage, loss of customers, litigation with third parties, regulatory actions and fines, theft of intellectual property, systems disruption, disruption of manufacturing plant operations and increased cybersecurity protection and remediation costs. Any of the foregoing can be exacerbated by a delay or failure to detect a cybersecurity incident or the full extent of such incident. In addition, our liability insurance, which includes cyber insurance, might not be sufficient in type or amount to cover us against claims related to cybersecurity incidents, attacks and other related incidents. If we are unable to prevent, anticipate, detect or adequately respond to cybersecurity incidents, our operations could be disrupted and our business could be materially and adversely affected.

Developments in the applicable legal standards for the handling of personal data from time to time require changes to our business practices, penalties, increased cost of operations, or otherwise harm our business. To conduct our operations, we regularly move data across national borders and must comply with increasingly complex and rigorous regulatory standards enacted to protect business and personal data in the United States and elsewhere. For example, the European Union has adopted the General Data Protection Regulation (the “GDPR”). The GDPR imposes additional obligations on companies regarding the handling of personal data and provides certain individual privacy rights to persons whose data is stored. Compliance with GDPR, new state laws, and other current and future applicable U.S. and international privacy, data protection, cybersecurity, artificial intelligence and other data-related laws can be costly and time-consuming; any failure to comply with these regulatory standards could subject us to legal and reputational risks, including proceedings against the Company by governmental entities or others, fines and penalties, damage to our reputation and credibility and could have a negative impact on our business and results of operations.

Risks Related to International Operations

Economic, political and other risks associated with our international operations could adversely affect our business.

A substantial portion of our operations is conducted and located outside the United States. We have manufacturing, sales or service facilities in approximately 50 countries and sell to customers in over 90 countries, i n addition to the United States. Moreover, we primarily source certain of our manufacturing and engineering functions, raw materials and components from China, Eastern Europe, India and Latin America. Accordingly, our business and results of operations are subject to risks associated with doing business internationally, including :

• instability in a specific country's or region's political or economic conditions, particularly economic conditions in Europe and Latin America, and political conditions in the Middle East, Asia, North Africa, Latin America, the Trans-Pacific region and other emerging markets;

• trade protection measures, such as the threat of imposition of tariffs, and import and export licensing and control requirements, or other trade restrictions, as well as any retaliatory actions;

• political, financial market or economic instability relating to epidemics or pandemics;

• uncertainties related to any geopolitical, economic and regulatory effects or changes due to recent or upcoming domestic and international elections;

• the imposition of governmental economic sanctions on countries in which we do business;

• potentially negative consequences from changes in tax laws or tax examinations;

• difficulty in staffing and managing widespread operations;

• increased aging and slower collection of receivables, particularly in Latin America and other emerging markets;

• difficulty of enforcing agreements and collecting receivables through some foreign legal systems;

• differing and, in some cases, more stringent labor regulations;

• potentially negative consequences from fluctuations in foreign currency exchange rates;

• partial or total expropriation;

• differing protection of intellectual property;

• inability to repatriate income or capital; and

• difficulty in administering and enforcing corporate policies, which may be different than the customary business practices of local cultures.

For example, political unrest or work stoppages negatively impact the demand for our products from customers in affected countries and other customers, such as U.S. oil refineries, that are affected by the resulting disruption in the supply of crude oil. Similarly, military conflicts in Russia/Ukraine, the Middle East, Asia and North Africa, as well as the current and developing geopolitical tensions between the United States and Venezuela, could soften the level of capital investment and demand for our products and services. We have experienced logistics disruptions as a result of the Israel-Hamas war that have increased expenses and delayed import of our products in the region. The conflict is ongoing and the length, impact, and outcome is highly unpredictable. If the conflict further intensifies or develops, it could have an adverse impact on our business operations in the Middle East or other affected areas. In response to the Russia-Ukraine conflict, several countries, including the United States, have imposed economic sanctions and export controls on certain industry sectors and parties in Russia. As a result of this conflict, including the aforementioned sanctions and overall instability in the region, in March 2022 we permanently ceased all Company operations in Russia. See Note 1, "Significant Accounting Policies and Accounting Developments," to our consolidated financial statements included in "Item 8. Financial Statements and Supplemental Data" of this Annual Report for further discussion of the termination of our Russian operations.

In order to manage our day-to-day operations, we must overcome cultural and language barriers and assimilate different business practices. In addition, we are required to create compensation programs, employment policies and other administrative programs that comply with laws of multiple countries. We also must communicate and monitor standards and directives across our global network. In addition, emerging markets pose other uncertainties, including challenges to our ability to protect our intellectual property, pressure on the pricing of our products and increased risk of political

instability, and may prefer local suppliers because of existing relationships, local restrictions or incentives. Our failure to successfully manage our geographically diverse operations could impair our ability to react quickly to changing business and market conditions and to enforce compliance with standards and procedures.

Additionally, increasing tensions between the United States and China may result in further restrictions or actions by the U.S. government with respect to doing business in China or by the Chinese government with respect to business conducted by foreign entities in China, which could impact certain of our manufacturing operations, as well as supply for our raw materials and components.

Our future success will depend, in large part, on our ability to anticipate and effectively manage these and other risks associated with our international operations. Any of these factors could, however, materially adversely affect our international operations and, consequently, our financial condition, results of operations and cash flows.

Implementation of new tariffs and changes to or uncertainties related to tariffs and trade agreements could adversely affect our business.

The United States continues to implement certain trade actions, including imposing tariffs on certain goods imported from China, India, Mexico, and other countries, which have also resulted in certain retaliatory tariffs being imposed. For example, in 2025, the United States expanded and increased existing tariffs on steel and aluminum, imposing 50% tariffs on steel, aluminum, and products containing steel and aluminum from a range of U.S. trading partners. More significant tariffs have been proposed by the current U.S. Presidential administration, although it is not possible to predict the extent or focus of any such tariffs at this time. In addition, there have been changes and uncertainty with respect to trade agreements, including the United States-Mexico-Canada Agreement, and more changes may be forthcoming under the current U.S. administration. Uncertainties with respect to tariffs, trade agreements, or any potential trade wars may negatively impact the global economic markets and could affect our customers’ ability to invest in capital expenditures, which may in turn result in reduced demand for our products and services, and could have a material adverse effect on our financial condition, results of operations and cash flows. Changes in tariffs, export controls, and sanctions laws could also result in changes in supply and demand of our raw material needs, affect our manufacturing capabilities and lead to increased prices that we may not be able to effectively pass on to customers, each of which could materially adversely affect our operating margins, results of operations and cash flows.

Our international operations expose us to fluctuations in foreign currency exchange rates which could adversely affect our business.

A significant portion of our revenue and certain of our costs, assets and liabilities, are denominated in currencies other than the U.S. dollar. The primary currencies to which we have exposure are the Euro, British pound, Mexican peso, Brazilian real, Indian rupee, Japanese yen, Singapore dollar, Argentine peso, Canadian dollar, Australian dollar, Chinese yuan, Colombian peso, Hungarian forint and Malaysian ringgit. Certain of the foreign currencies to which we have exposure, such as the Argentine peso, have undergone significant devaluation in the past, which reduce the value of our local monetary assets, reduce the U.S. dollar value of our local cash flow, generate local currency losses that may impact our ability to pay future dividends from our subsidiary to the parent company and potentially reduce the U.S. dollar value of future local net income. Although we enter into forward exchange contracts to economically hedge some of our risks associated with transactions denominated in certain foreign currencies, no assurances can be made that exchange rate fluctuations will not adversely affect our financial condition, results of operations and cash flows.

We could be adversely affected by violations of the U.S. Foreign Corrupt Practices Act and similar worldwide anti-bribery laws and regulations.

The U.S. Foreign Corrupt Practices Act ("FCPA") and similar anti-bribery laws and regulations in other jurisdictions, such as the UK Bribery Act, generally prohibit companies and their intermediaries from making improper payments to government officials for the purpose of obtaining or retaining business or securing an improper advantage. Because we operate in many parts of the world and sell to industries that have experienced corruption to some degree, our policies mandate compliance with applicable anti-bribery laws worldwide. Violation of the FCPA or other similar anti-bribery laws or regulations, whether due to our or others' actions or inadvertence, could subject us to civil and criminal penalties or other sanctions that could have a material adverse impact on our business, financial condition, results of operations and cash flows. In addition, actual or alleged violations could damage our reputation or ability to do business.

Regulatory and Legal Risks

Our operations are subject to a variety of complex and continually changing laws, regulations and policies, both internationally and domestically, which could adversely affect our business.

Due to the international scope of our operations, the system of laws, regulations and policies to which we are subject is complex and includes, without limitation, regulations issued by the U.S. Customs and Border Protection, the U.S. Department of Commerce's Bureau of Industry and Security, the U.S. Treasury Department's Office of Foreign Assets Control and various foreign governmental agencies, including applicable export controls, customs, currency exchange control and transfer pricing regulations, as applicable. No assurances can be made that we will continue to be found to be operating in compliance with, or be able to detect violations of, any such laws, regulations or policies. In addition, we cannot predict the nature, scope or effect of future regulatory requirements to which our international operations might be subject or the manner in which existing laws might be administered or interpreted. Compliance with laws and any new laws or regulations may increase our operations costs or require significant capital expenditures. Any failure to comply with applicable laws, regulations or policies in the United States or in any other country in which we operate could result in substantial fines and penalties, which could adversely affect our business.

In particular, there is uncertainty related to new or existing treaty and trade relationships with other countries which may affect restrictions or tariffs imposed on products we buy or sell. These factors, together with other key global events during 2025 and beyond (such as the ongoing conflicts and terrorist activity), may adversely impact the ability or willingness of non-U.S. companies to transact business in the United States. This uncertainty may also affect regulations and trade agreements affecting U.S. companies, global stock markets (including the NYSE, on which our common shares are traded), currency exchange rates, and general global economic conditions. All of these factors are outside of our control, but may nonetheless cause us to adjust our strategy in order to compete effectively in global markets. For further discussion of the impact of tariffs and trade agreements on our business, please see the discussion above under the heading "Implementation of new tariffs and changes to or uncertainties related to tariffs and trade agreements could adversely affect our business."

Environmental compliance costs and liabilities could adversely affect our financial condition, results of operations and cash flows.

Our operations and properties are subject to regulation under environmental laws, which can impose substantial sanctions for violations. We must conform our operations to applicable regulatory requirements and adapt to changes in such requirements in all countries in which we operate.

We use hazardous substances and generate hazardous wastes in many of our manufacturing and foundry operations. Most of our current and former properties are or have been used for industrial purposes, and some may require clean-up of historical contamination. We are currently conducting investigation and/or remediation activities at a number of locations where we have known environmental concerns. In addition, we have been identified as one of many PRPs at five Superfund sites. The projected cost of remediation at these sites, as well as our alleged "fair share" allocation, while not anticipated to be material, has been reserved. However, until all studies have been completed and the parties have either negotiated an amicable resolution or the matter has been judicially resolved, some degree of uncertainty remains with respect to the anticipated impact.

We have incurred, and expect to continue to incur, operating and capital costs to comply with environmental requirements. In addition, new laws and regulations, stricter enforcement of existing requirements, the discovery of previously unknown contamination or the imposition of new clean-up requirements could require us to incur costs or become the basis for new or increased liabilities. Moreover, environmental and sustainability initiatives, practices, rules and regulations are under increasing scrutiny of both governmental and non-governmental bodies, which can cause rapid change in operational practices, standards and expectations and, in turn, increase our compliance costs. Any of these factors could have a material adverse effect on our financial condition, results of operations and cash flows.

We are exposed to certain regulatory and financial risks related to sustainability issues, which could adversely affect our financial condition, results of operations and cash flows.

Emissions of carbon dioxide and other greenhouse gases and their role in global sustainability issues continue to garner attention globally, which has led to significant legislative and regulatory efforts to limit GHG emissions. Existing or future legislation and regulations related to GHG emissions and climate by the U.S. Congress, state and foreign legislatures and federal, state, local and foreign governmental agencies could adversely affect our business. Additionally, it is uncertain whether, when and in what form mandatory carbon dioxide emissions reduction programs may be adopted. Similarly, certain countries, have adopted the Paris Climate Agreement and these and other existing international

initiatives, such as the agreement resulting from the 2023 United Nations Climate Change Conference, or those under consideration may affect our operations.

As regulators and investors increasingly focus on climate and sustainability issues, we are subject to new disclosure frameworks and regulatory reporting obligations. For example, the Corporate Sustainability Reporting Directive (“CSRD”), one of the key directives of the European Union sustainability legal framework, mandates enhanced corporate responsibility reporting that will affect both our E.U. and non-E.U. business operations in the coming years (i.e., E.U. operations by 2028 and non-E.U. operations by 2029). The new reporting obligations under the CSRD require in-scope companies to provide expansive disclosures on various sustainability topics including climate change, biodiversity, workforce, supply chain, and business ethics, all of which will significantly increase our reporting obligations and costs of compliance. As regulatory requirements such as CSRD and other sustainability regulations continue to evolve, the anticipated costs and operational impacts could adversely affect our financial condition and results of operations.

When our customers, particularly those involved in the energy, power generation, petrochemical processing or petroleum refining industries, are subject to any of these or other similar proposed or newly enacted laws and regulations, we are exposed to risks that the additional costs by customers to comply with such laws and regulations could impact their ability or desire to continue to operate at similar levels in certain jurisdictions as historically seen or as currently anticipated, which could negatively impact their demand for our products and services. In addition, new laws and regulations that might favor the increased use of non-fossil fuels, including nuclear, wind, solar and bio-fuels or that are designed to increase energy efficiency, could dampen demand for energy production or power generation resulting in lower spending by customers for our products and services. These actions could also increase costs associated with our operations, including costs for raw materials and transportation. There is also increased focus, including by governmental and non-governmental organizations, environmental advocacy groups, investors and other stakeholders on these and other sustainability matters, and adverse publicity in the global marketplace about the levels of GHG emissions by companies in the manufacturing and energy industry could reduce customer demand for our products and services or harm our reputation. Because it is uncertain what laws will be enacted, we cannot predict the potential impact of such laws on our future financial condition, results of operations and cash flows, but such new or additional laws could adversely affect our business.

Inability to protect our intellectual property could negatively affect our competitive position.

We cannot guarantee that the steps we have taken to protect our intellectual property will be adequate to prevent infringement of our rights or misappropriation of our technology. For example, effective patent, trademark, copyright and trade secret protection are unavailable or limited in some of the foreign countries in which we operate. In addition, confidentiality agreements which we enter into with employees and third parties could be breached or otherwise may not provide meaningful protection for our trade secrets and know-how related to the design, manufacture or operation of our products. Resorting to litigation to protect our intellectual property rights is burdensome and costly, and we may not always prevail. Further, adequate remedies are not always available in the event of an unauthorized use or disclosure of our trade secrets and manufacturing expertise. Failure to successfully enforce our intellectual property rights could harm our competitive position, business, financial condition, results of operations and cash flows.

Increased costs as a result of product liability and warranty claims could adversely affect our financial condition, results of operations and cash flows.

From time to time, we are exposed to product liability and warranty claims when the use of one of our products results in, or is alleged to result in, bodily injury and/or property damage or our products actually or allegedly fail to perform as expected. Some of our products are designed to support the most critical, severe service applications in the markets that we serve and any failure of such products could result in significant product liability and warranty claims, as well as damage to our reputation in the marketplace. While we maintain insurance coverage with respect to certain product liability claims, we may not be able to obtain such insurance on acceptable terms in the future, and any such insurance may not provide adequate coverage against product liability claims. In addition, product liability claims can be expensive to defend and can divert the attention of management and other personnel for significant periods of time, regardless of the ultimate outcome. An unsuccessful defense of a product liability claim could have an adverse effect on our business, financial condition, results of operations and cash flows. Even if we are successful in defending against a claim relating to our products, claims of this nature could cause our customers to lose confidence in our products and our company. Warranty claims are not generally covered by insurance, and we may incur significant warranty costs that are not reimbursable, which could adversely affect our financial condition, results of operations and cash flows.

Financial and Accounting Risks

Significant changes in pension fund investment performance or assumptions changes may have a material effect on the valuation of our obligations under our defined benefit pension plans, the funded status of these plans and our pension expense.

We maintain funded defined benefit pension plans that are either currently funded in accordance with local requirements in the United States, Belgium, Canada, the Netherlands, Switzerland and the United Kingdom, or above funded requirements in India and Mexico, and defined benefit plans that are not required to be funded and are not funded in Austria, Saudi Arabia, Qatar, UAE, France, Germany, Italy and Japan. Our pension liability is materially affected by the discount rate used to measure our pension obligations and, in the case of the plans that are required to be funded, the level of plan assets available to fund those obligations and the expected long-term rate of return on plan assets. A change in the discount rate can result in a significant increase or decrease in the valuation of pension obligations, affecting the reported status of our pension plans and our pension expense. Significant changes in investment performance or a change in the portfolio mix of invested assets can result in increases and decreases in the valuation of plan assets or in a change of the expected rate of return on plan assets. Changes in the expected return on plan assets assumption can result in significant changes in our pension expense and future funding requirements. We also continually monitor global pension regulations in the jurisdictions where we sponsor defined benefit plans as complex laws can present financial risks in the event of non-compliance. While we were not a party to or involved in the case, we are monitoring further developments related to the United Kingdom's High Court ruling in the case of Virgin Media Ltd v. NTL Pensions Trustees II Limited.

We regularly review our funding policy related to our U.S. pension plan in accordance with applicable laws and regulations. U.S. regulations have increased the minimum level of funding for U.S. pension plans in prior years, which has at times required significant contributions to our pension plans. Contributions to our pension plans reduce the availability of our cash flows to fund working capital, capital expenditures, R&D efforts and other general corporate purposes.

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 adversely affect our operating results.

We currently have significant net deferred tax assets resulting from tax credit carryforwards, net operating losses and other deductible temporary differences that are available to reduce taxable income in future periods. Based on our assessment of our def erred tax assets, we determined, based on projected future income and certain available tax planning strategies, that approximately $264 million of our deferred tax assets will more likely than not be realized in the future, and no valuation allowance is currently required for this portion of our deferred tax assets. Should we determine in the future that these assets are not more likely than not to be realized, we will be required to record an additional valuation allowance in connection with these deferred tax assets and our operating results would be adversely affected in the period such determination is made. In addition, tax law changes could negatively impact our deferred tax assets.

Our outstanding indebtedness and the restrictive covenants in the agreements governing our indebtedness limit our operating and financial flexibility.

Under certain events of default, mandatory repayments on our outstanding indebtedness, which requires us to dedicate a substantial portion of our cash flows from operations to payments on our indebtedness, thereby reducing the availability of our cash flows to fund working capital, capital expenditures, R&D efforts and other general corporate purposes, such as dividend payments and share repurchases, and could generally limit our flexibility in planning for, or reacting to, changes in our business and industry. In addition, we may need new or additional financing in the future to expand our business or refinance our existing indebtedness. Our current Second Amended and Restated Credit Agreement matures on October 10, 2029 and our senior notes are due in 2030 and 2032. Additionally, we have drawn amounts under a term loan fund. For additional information regarding our current indebtedness refer to Note 13, "Debt and Finance Lease Obligations," to our consolidated financial statements included in "Item 8. Financial Statements and Supplementary Data" of this Annual Report. Our inability to timely access capital on satisfactory terms, including as a result of market disruptions, could limit our ability to expand our business as desired and refinance our indebtedness.

In addition, the agreements governing our indebtedness impose certain operating and financial restrictions on us and somewhat limit management's discretion in operating our businesses. These agreements limit or restrict our ability, among other things, to: incur additional debt; fully utilize the capacity under the senior credit facility; pay dividends and make other distributions; repurchase shares of our common stock in certain circumstances; prepay subordinated debt; make investments and other restricted payments; create liens; sell assets; and enter into transactions with affiliates.

We are also required to maintain debt ratings, comply with leverage and interest coverage financial covenants and deliver to our lenders audited annual and unaudited quarterly financial statements. Our ability to comply with these

covenants may be affected by events beyond our control. Failure to comply with these covenants could result in an event of default which, if not cured or waived, may have a material adverse effect on our business, financial condition, results of operations and cash flows.

Goodwill impairment could negatively impact our net income and shareholders' equity.

Goodwill is not amortized, but is tested for impairment at the reporting unit level, which is an operating segment or one level below an operating segment. Goodwill is required to be tested for impairment annually and between annual tests if events or circumstances indicate that it is more likely than not that the fair value of a reporting unit is less than its carrying value. Reductions in or impairment of the value of our goodwill or other intangible assets will result in charges against our earnings, which could have a material adverse effect on our reported results of operations and financial position in future periods.

There are numerous risks that may cause the fair value of a reporting unit to fall below its carrying amount, which could lead to the measurement and recognition of goodwill impairment. These risks include, but are not limited to, lowered expectations of future financial results, adverse changes in the business climate, increase in the discount rate, an adverse action or assessment by a regulator, the loss of key personnel, a more-likely-than-not expectation that all or a significant portion of a reporting unit may be disposed of, failure to realize anticipated synergies from acquisitions, a sustained decline in the Company’s market capitalization, and significant, prolonged negative variances between actual and expected financial results. In past years, the estimated fair value of our pump reporting unit has fluctuated, partially due to broad-based capital spending declines and heightened pricing pressures experienced in the energy markets. Although we have concluded that there is no impairment on the goodwill associated with our pump reporting unit as of December 31, 2025, we will continue to monitor its performance and related market conditions for future indicators of potential impairment. For additional information, see the discussion in "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" of this Annual Report and under Note 1, "Significant Accounting Policies and Accounting Developments," to our consolidated financial statements included in "Item 8. Financial Statements and Supplementary Data" of this Annual Report.

The failure to maintain effective internal controls could impact the accuracy and timely reporting of our business and financial results.

Our internal control over financial reporting has not always prevented or detected misstatements because of its inherent limitations, including the possibility of human error, the circumvention or overriding of controls or fraud. We have in the past discovered, and may in the future discover, areas of our internal controls that need improvement, including material weaknesses in internal controls. We have devoted significant resources to remediate and improve our internal controls and to monitor the effectiveness of these remediated measures. There can be no assurance that these measures will ensure that we maintain at all times effective internal controls over our financial processes and reporting in the future. Even effective internal controls can provide only reasonable assurance with respect to the preparation and fair presentation of financial statements. Any future failures to maintain the adequacy of our internal controls, including any failure to implement required new or improved controls, or difficulties in their implementation, could harm our business and financial results and we could fail to meet our financial reporting obligations.

General Risks

We depend on key personnel, the loss of whom would harm our business.

Our future success will depend in part on the continued service of key executive officers and personnel. The loss of the services of any key individual could harm our business. Our future success also depends on our ability to recruit, retain and engage our personnel sufficiently, both to maintain our current business and to execute our strategic initiatives. Competition in our industry for officers and employees is intense and we may not be successful in attracting and retaining such personnel.

Changes in accounting principles and guidance could result in unfavorable accounting charges or effects.

We prepare our consolidated financial statements in conformity with accounting principles generally accepted in the United States. A change in these principles can have a significant effect on our reported financial position and financial results. The adoption of new or revised accounting principles may require us to make changes to our systems, processes and internal controls, which could have a significant effect on our reported financial results and internal controls, cause

unexpected financial reporting fluctuations, retroactively affect previously reported results or require us to make costly changes to our operational processes and accounting systems upon adopting these standards.

Forward-Looking Information is Subject to Risk and Uncertainty

This Annual Report and other written reports and oral statements we make from time-to-time include “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934 and the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical facts included in this Annual Report regarding our financial position, business strategy and expectations, plans and objectives of management for future operations, industry conditions, market conditions and indebtedness covenant compliance are forward-looking statements. Forward-looking statements may include, among others, statements about our goals and strategies, new product introductions, plans to cultivate new businesses, future economic conditions, revenue, pricing, gross profit margin and costs, capital spending, expected cost savings from our realignment programs, depreciation and amortization, research and development expenses, potential impairment of assets, tax rate and pending tax and legal proceedings. In some cases forward-looking statements can be identified by terms such as "may," "should," "expects," "could," "intends," "projects," "predicts," "plans," "anticipates," "estimates," "believes," "forecasts," "seeks" or other comparable terminology. These statements are not historical facts or guarantees of future performance, but instead are based on current expectations and are subject to material risks, uncertainties and other factors, many of which are outside of our control.

We have identified factors that could cause actual plans or results to differ materially from those included in any forward-looking statements. These factors include those described above under this "Risk Factors" heading, or as may be identified in our other SEC filings from time to time. These uncertainties are beyond our ability to control, and in many cases, it is not possible to foresee or identify all the factors that may affect our future performance or any forward-looking information, and new risk factors can emerge from time to time. Given these risks and uncertainties, undue reliance should not be placed on forward-looking statements as a prediction of actual results.

All forward-looking statements included in this Annual Report are based on information available to us on the date of this Annual Report and the risk that actual results will differ materially from expectations expressed in this report will increase with the passage of time. We undertake no obligation, and disclaim any duty, to publicly update or revise any forward-looking statement or disclose any facts, events or circumstances that occur after the date hereof that may affect the accuracy of any forward-looking statement, whether as a result of new information, future events, changes in our expectations or otherwise. This discussion is provided as permitted by the Private Securities Litigation Reform Act of 1995 and all of our forward-looking statements are expressly qualified in their entirety by the cautionary statements contained or referenced in this section.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations is provided to increase the understanding of, and should be read in conjunction with, the accompanying consolidated financial statements and notes. See “Item 1A. Risk Factors” and the section titled “Forward-Looking Information is Subject to Risk and Uncertainty” included in this Annual Report on Form 10-K for the year ended December 31, 2025 ("Annual Report") for a discussion of the risks, uncertainties and assumptions associated with these statements. Unless otherwise noted, all amounts discussed herein are consolidated.

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 QRCs, we offer a broad array of aftermarket equipment services, such as installation, advanced diagnostics and turnkey maintenance programs. As of December 31, 2025, we have approximately 16,000 employees globally and a footprint of manufacturing facilities and QRCs in approximately 48 countries.

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 152 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 Management’s Discussion and Analysis of Financial Condition and Results of Operations ("MD&A"):

• 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

• 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 R&D, 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, w hich we believe to be one of the most comprehensive in the industry. Our products and services are sold either directly or through designated channels t o 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 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. One of the main focus areas 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. The CORE program has now been implemented in all of our main product segments. 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.

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 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," and collectively with the 2023 Realignment Programs are referred to as the "Realignment Programs."

Our Markets

Our products and services are used in several distinct industries: energy, chemical, power generation, and several other industries, such as water management, pharmaceuticals, mining, food and beverage, steel, and pulp and paper, that are collectively referred to as "general industries."

General Industries

General industries represented, in the aggregate, approximately 34% and 31% of our bookings in 2025 and 2024, respectively. General industries comprise a variety of different businesses, including water management, pharmaceuticals, mining and ore processing, pulp and paper, food and beverage, steel, and other smaller applications. General industries also include sales to distributors, whose end customers operate in the industries we primarily serve. General industry activity levels increased in 2025 for the third consecutive year, primarily due to customers' increased repair and maintenance budgets and the demand for fresh water, water treatment and re-use, desalination and flood control considerations that impact the water management component of this industry group.

The outlook for this group of industries is heavily dependent upon the condition of global economies and consumer confidence levels. The long-term fundamentals of many of these industries remain sound, as many of the products produced by these industries are common staples of industrialized and urbanized economies. We believe that our specialty product offerings designed for these industries and our aftermarket service capabilities will provide continued business opportunities.

Energy

The energy industry represented approximately 33% and 37% of our bookings in 2025 and 2024, respectively. Customer repair and maintenance spending improved during 2025 supported by strong asset utilization, while short cycle investments continued at a reduced level to support global demand.

The outlook for the energy industry is dependent on the overall macroeconomic environment, including fuel demand, demand growth from both mature markets and developing geographies as well as changes in the regulatory environment. We currently expect continued growth in our business, including increased investment related to energy security and decarbonization efforts in 2026. We further believe consistent asset utilization at our customers' facilities provides support for increased demand for our aftermarket products and services. We believe the medium and long-term fundamentals for this industry remain attractive and see a stabilized environment with expected increased fuel demand on expected global

economic growth. In addition, we believe projected depletion rates of existing fields and forecasted long-term demand growth will require additional investments. With our long-standing reputation in providing successful solutions for upstream, mid-stream and downstream applications, along with the advancements in our portfolio of offerings, we believe that we continue to be well-positioned to assist our customers in this improving environment.

Chemical

The chemical industry represented approximately 19% of our bookings in both 2025 and 2024. The chemical industry is comprised of petrochemical and specialty chemical products. Customer spending in 2025 remained resilient for the fourth consecutive year following the pandemic's negative impact on demand for chemical products in 2020. Bookings levels increased modestly in 2025 as customers increased their repair and maintenance budgets and lowered project work.

The outlook for the chemical industry remains heavily dependent on global economic conditions. As global economies and unemployment conditions improve, a rise in consumer spending should follow. An increase in spending would drive greater demand for petrochemical and specialty chemical products supporting improved levels of capital investment. We believe the chemical industry will continue to invest in North America and Middle East capacity additions, maintenance and upgrades for optimization of existing assets and that developing regions will selectively invest in capital infrastructure to meet current and future indigenous demand. We believe our global presence and our localized aftermarket capabilities are well-positioned to serve the potential growth opportunities in this industry.

Power Generation

The power generation industry represented approximately 14% and 13% of our bookings in 2025 and 2024, respectively. In 2025, energy security concerns drove continued investment in the power generation industry, including nuclear new build and life extensions as well as traditional thermal power sources.

Natural gas-fired combined cycle (“NGCC”) plants have increased their share of the energy mix, driven by market prices for gas remaining low and stable (partially due to the increasing global availability of LNG), low capital expenditures, and the ability of NGCC to stabilize unpredictable renewable sources provide base-load power. With the potential of unconventional sources of gas, the global power generation industry is forecasting an increased use of this form of fuel for power generation plants.

As countries around the world look for opportunities to gain additional energy independence and satisfy increasing energy demands, nuclear power remains an important contributor to the global energy mix and is a key factor in our Diversification strategy. We continue to support our significant installed base in the global nuclear fleet by providing aftermarket and life extension products and services. Due to our extensive history and proven product portfolio, we believe we are well positioned to take advantage of this ongoing source of aftermarket and new project opportunities.

Global efforts to limit the emissions of carbon dioxide may have some adverse effect on thermal power investment plans depending on the potential requirements imposed and the timing of compliance by country. However, many proposed methods of capturing and limiting carbon dioxide emissions offer business opportunities for our products and services. At the same time, we continue to take advantage of new investments in concentrated solar power generating capacity, where our pumps, valves, and seals are uniquely positioned for both molten salt applications as well as the traditional steam cycle.

We believe the long-term fundamentals for the power generation industry remain solid positive based on projected increases in demand for electricity driven by the continued use and proliferation of artificial intelligence systems and machine learning, global population growth, growth of urbanization in developing markets and the increased use of electricity driven transportation. We also believe that our long-standing reputation in the power generation industry, our portfolio of offerings for the various generating methods, our advancements in serving the renewable energy market and carbon capture methodologies, as well as our global service and support structure, position us well for the future opportunities in this important industry.

Outlook for 2026

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 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 current geopolitical climate 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. 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 acquisitions activity, we expect to deliver annual revenue growth in 2026.

Our bookings were $4.7 billion during the year ended December 31, 2025. Because a booking represents a contract that can be, in certain circumstances, modified or canceled, and can include varying lengths between the time of booking and the time of revenue recognition, there is no guarantee that bookings will result in comparable revenues or otherwise be indicative of future results. Assuming a positive general macroeconomic environment and continued supportive environments in our end markets, we expect full-year bookings growth in 2026.

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. On December 31, 2025, we had $992.7 million of fixed-rate Senior Notes outstanding.  We expect our interest expense in 2026 will be relatively consistent with amounts incurred in 2025. Our results of operations may also be impacted by unfavorable foreign currency exchange rate movements. See “Item 7A. Quantitative and Qualitative Disclosures about Market Risk” of this Annual Report.

We expect to generate sufficient cash from operations and have sufficient capacity under our Senior Credit Facility to fund any working capital, capital expenditures, dividend payments, share repurchases, debt payments and pension plan contributions in 2026. The amount of cash generated or consumed by working capital is dependent on our level of revenues, customer cash advances, backlog, customer-driven delays and other factors. We will seek to improve our working capital utilization, with a particular focus on improving the management of accounts receivable and inventory. In 2026, our cash flows for investing activities will be focused on strategic initiatives, information technology infrastructure, general upgrades and cost reduction opportunities and we currently estimate capital expenditures to be between $90 million and $100 million, before consideration of any acquisition activity. We currently anticipate that our contributions to our non-U.S. pension plans will be approximately $3 million in 2026, excluding direct benefits paid. We have no obligation to make contributions to our U.S. pension plans in 2025, but have authorization for contributions up to $10 million.

OUR RESULTS OF OPERATIONS

The following is the discussion and analysis of changes in the financial condition and results of operations for fiscal year December 31, 2025 compared to fiscal year 2024. The discussion and analysis of changes in the financial condition and results of operations for fiscal year 2024 compared to fiscal year 2023 that are not included in this Form 10-K may be found in Part II, "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations," of our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, filed with the SEC on February 26, 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 2, "Acquisitions," to our consolidated financial statements included in "Item 8. Financial Statements and Supplementary Data" of this Annual Report, effective October 15, 2024, we acquired for inclusion in FCD, all of the equity interests of MOGAS Industries, Inc., MOGAS Real Estate LLC and MOGAS Systems & Consulting LLC (such entities collectively, "MOGAS"). We incurred $12.8 million in acquisition and integration related costs for fiscal year December 31, 2025 associated with the acquisition which are included within selling, general and administrative expense ("SG&A") and cost of sales ("COS") in our consolidated statements of income. A full year of MOGAS operating results are included within the consolidated statement of income for the period ended December 31, 2025.

Our realignment activities are implemented in phases. We currently anticipate a total investment of approximately $93 million in the 2025 Realignment Programs that have been evaluated and initiated, of which $17 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.

Realignment Activity

The following tables present our realignment activity by segment:

December 31, 2025

(Amounts in thousands)

FPD

FCD

Subtotal–Reportable Segments

All Other

Consolidated Total

Total Realignment Charges

COS

Total

December 31, 2024

(Amounts in thousands)

FPD

FCD

Subtotal - Reportable Segments

All Other

Consolidated Total

Total Realignment Charges

COS

Loss on sale of business (2)

Total

10K only - Pulls from 12/31/2023

December 31, 2023

(Amounts in thousands)

FPD

FCD

Subtotal - Reportable Segments

All Other

Consolidated Total

Total Realignment Charges

COS

Total

(1) Includes the immaterial reversal of previously recognized realignment charges associated with our 2023 Realignment Programs and an immaterial non-cash gain recognized on the early cancellation of certain lease agreements and the resulting write-off of the remaining operating lease liabilities associated with our 2023 Realignment Programs, which were recognized in the first and second quarters of 2025, respectively. Our 2023 Realignment Programs are substantially completed. Also includes within FPD a gain of $6.9 million from the sale of a pump product line in the fourth quarter of 2025 associated with our 2025 Realignment Programs.

(2) Loss on sale of business related to NAF AB control valves business as described within Note 1, "Significant Accounting Policies and Accounting Developments," to our consolidated financial statements included in this Annual Report.

Restructuring charges are included within Total Realignment charges and include charges related to approved, but not yet announced, site closures.

Bookings and Backlog

(Amounts in millions)

Bookings

Backlog (at period end)

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, including the 2024 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. 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-date period are excluded from year-to-date bookings. Bookings cancelled from the prior fiscal periods are excluded from the reported bookings and represent less than 1% for all periods presented. Bookings of $4.7 billion in 2025 increased by $52.2 million, or 1.1%, as compared with 2024. The increase included currency benefits of approximately $32 million and was driven by increased customer bookings of $157.2 million in general industries, $93.5 million in power generation and $6.0 million in chemical, partially offset by decreased customer bookings of $193.9 million in the energy industry. The increase in customer bookings was driven by aftermarket bookings.

Backlog represents the aggregate value of booked but uncompleted customer orders and is influenced primarily by bookings, sales, cancellations and currency effects. Backlog of $2.9 billion at December 31, 2025 increased by $78.1 million, or 2.8%, as compared with December 31, 2024. Currency effects provided an increase of approximately $154 million (curren cy effects on backlog are calculated using the change in period end exchange rates). Approximately 42% of the backlog at December 31, 2025 and 37% of the backlog at December 31, 2024 were related to aftermarket orders. We expect to recognize revenue on approximately 76% of the December 31, 2025 backlog during 2026. Backlog includes our unsatisfied (or partially unsatisfied) performance obligations related to contracts having an original expected duration in excess of one year of approximately $1.0 billion as discussed in Note 3, "Revenue Recognition," to our consolidated financial statements included in "Item 8. Financial Statements and Supplementary Data" of this Annual Report.

Sales

(Amounts in millions)

Sales

Sales in 2025 increased by $171.5 million, or 3.8%, as compared with 2024. The increase included currency benefits of approximately $31 million. The increased sales were driven by aftermarket customer sales, with increased customer sales of $152 million into North America, $35 million into Africa and $34 million into the Middle East, partially offset by decreased customer sales of $46 million into Asia Pacific, $10 million into Latin America and $2 million in Europe. Aftermarket sales represented approximately 53% of total sales in 2025 and 51% of total sales in 2024.

Sales to international customers, including export sales from the United States, were approximately 63% in 2025 and 64% in 2024. Sales into Europe, the Middle East and Africa ("EMA") were approximately 36% of total sales in 2025 and 35% in 2024. Sales into Asia Pacific were approximately 16% of total sales in 2025 and 17% in 2024. Sales into Latin America were approximately 7% of total sales in both 2025 and 2024.

Gross Profit and Gross Profit Margin

(Amounts in millions, except percentages)

Gross profit

Gross profit margin

Gross profit in 2025 increased by $147.2 million, or 10.3%, as compared with 2024. Gross profit margin in 2025 of 33.4% increased from 31.5% in 2024. The increase in gross profit margin was primarily due to the favorable impact of previously implemented sales price increases, an improved selective bidding approach, lower broad-based annual incentive compensation and $2.7 million in one-time U.S. pension transition benefit expense incurred in 2024 that did not recur, partially offset by increased charges of $23.1 million related to our realignment activities and $9.8 million of integration costs and amortization of step-up in value of acquired inventories and acquisition related intangible assets associated with the MOGAS acquisition as compared to the same period in 2024.

(Amounts in millions, except percentages)

SG&A as a percentage of sales

SG&A in 2025 increased by $84.1 million, or 8.6%, as compared with 2024. Currency effects yielded an increase of approximately $5.6 million. SG&A increased due to $41.2 million in transaction costs incurred associated with the termination of the planned merger with Chart Industries, Inc. ("Chart") (see Note 1, " Significant Accounting Policies and Accounting Developments," to our consolidated financial statements for further information), increased asbestos-related costs of $14.8 million for Incurred But Not Reported ("IBNR") asbestos liability activity prior to the Asbestos Divestiture, acquisition and integration costs and amortization of acquisition related intangibles assets associated with the MOGAS acquisition of $18.0 million and $1.7 million of other merger and acquisition costs, partially offset by a decrease in R&D costs of $15.8 million, lower broad-based annual incentive compensation, a decrease in bad debt expense of $5.3 million, $2.3 million in one-time U.S. pension plan transition benefit expense incurred in 2024 that did not recur and decreased charges of $1.3 million related to our realignment activities. SG&A as a percentage of sales for the twelve months ended increased 100 basis points driven by cost increases, including those associated with the termination of the planned merger with Chart.

Loss on Sale of Business

(Amounts in millions, except percentages)

Loss on sale of business

The loss on sale of business decreased by $13.0 million in 2025 due to the divestiture of NAF AB in 2024, a previously wholly owned subsidiary and control valves business within our FCD segment, including the NAF AB facility located in Linkoping, Sweden, that did not recur. See Note 1, "Significant Accounting Policies and Accounting Developments," to our consolidated financial statements included in this Quarterly Report for additional information on this transaction.

Loss on Divestiture of Asbestos-Related Assets and Liabilities

(Amounts in millions)

Loss on divestiture of asbestos-related assets and liabilities

The loss on divestiture of asbestos-related assets and liabilities was $140.1 million in 2025 due to the sale of BW/IP - New Mexico, Inc., a Delaware corporation and a previously wholly owned subsidiary of Flowserve that held the legacy

asbestos liabilities and related insurance assets. The sale occurred in the fourth quarter of 2025. The transaction included a $199.0 million contribution of cash and the loss on divestiture includes transaction costs of $8.3 million incurred during the twelve-month period ended December 31, 2025. Refer to Note 17 Legal Matters and Contingencies to the consolidated financial statements in Part II Item 8 of this Form 10-K for further information.

Net Earnings from Affiliates

(Amounts in millions)

Net earnings from affiliates

Net earnings from affiliates represents our net income from investments in five joint ventures (one located in each of Chile, India, Saudi Arabia, South Korea and the United Arab Emirates) that are accounted for using the equity method of accounting. Net earnings from affiliates in 2025 increased by $1.6 million, or 8.5%, as compared to the prior year, primarily as a result of increased earnings from our FPD joint venture in South Korea.

Operating Income

(Amounts in millions, except percentages)

Operating income

Operating income as a percentage of sales

Operating income in 2025 decreased by $62.4 million, or (13.5)%, as compared with 2024. The decrease included currency benefits of approximately $7 million. The decrease was primarily a result of the $147.2 million increase in gross profit, offset by the $84.1 million increase in SG&A and the loss on divestiture of asbestos-related assets and liabilities of $140.1 million.

Interest Expense and Interest Income

(Amounts in millions)

Interest expense

Interest income

Interest expense in 2025 increased by $8.4 million as compared with 2024. The increase was primarily attributable to higher outstanding debt during the period as compared to 2024. Interest income in 2025 increased by $2.2 million as compared to 2024. The increase in interest income was primarily attributed to higher interest rates on our average cash balances compared with same period in 2024.

Other Income (Expense), net

(Amounts in millions)

Other income (expense), net

Other income (expense), net increased $207.9 million as compared to 2024, due primarily to the $266.0 million payment received per the Mutual Termination Agreement in connection with the termination of the planned merger with Chart (see Note 1, “Significant Accounting Policies and Accounting Developments,” to our consolidated financial statements for further information), partially offset by a $28.2 million increase in losses from transactions in currencies other than our sites' functional currencies and a $18.0 million increase in losses arising from transactions on foreign exchange forward contracts. The net currency related change was primarily due to the foreign currency exchange rate movements in the Mexican peso, Euro, Swedish krona, Brazilian real, and Singapore dollar during the year ended December 31, 2025, as compared to the same period in 2024. This was further offset by $13.1 million in pension settlement

accounting losses incurred in conjunction with the freeze of our U.S. Qualified pension plan and on a United Kingdom based pension plan.

Income Tax and Tax Rate

(Amounts in millions, except percentages)

Provision for income taxes

Effective tax rate

Our effective tax rate of 29.6% for the year ended December 31, 2025 increased from 22.0% in 2024 and differed from the federal statutory tax rate of 21% primarily due to the impacts pursuant to the enactment of the One Big Beautiful Bill Act (OBBBA) and its related impacts, the Asbestos Divestiture and, state income taxes, partially offset by the net impact of foreign operations.

The 2024 effective tax rate differed from the federal statutory rate of 21% primarily due to the net impact of foreign divestiture and foreign operations.

Our effective tax rate is based upon current earnings and estimates of future taxable earnings for each domestic and international location. The assumptions about future taxable income require the use of significant judgment and are consistent with the plans and estimates used in the underlying business. Changes in any of these and other factors, including our ability to utilize foreign tax credits and net operating losses or results from tax audits, could impact the tax rate in future periods. As of December 31, 2025, we had U.S. foreign tax credit carryforwards of $77.1 million, expiring in 2028-2035 tax years, against which we recorded a full valuation allowance. Additionally, we have recorded other net deferred tax assets of $147.8 million, which relate to net operating losses, tax credits and other deductible temporary differences that are available to reduce taxable income in future periods, most of which do not have a definite expiration. Should we not be able to utilize all or a portion of these credits and losses, our effective tax rate would increase.

Net Earnings and Earnings Per Share

(Amounts in millions, except per share amounts)

Net earnings attributable to Flowserve Corporation

Net earnings per share - diluted

Average diluted shares

Net earnings in 2025 increased by $63.5 million to $346.2 million, or to $2.64 per diluted share, as compared with 2024. The increase was primarily attributable to a $207.9 million increase in other income, net, partially offset by a decrease in operating income of $62.4 million, a $8.4 million increase in interest expense, a $70.7 million increase in income tax expense and a $5.1 million increase in net earnings attributable to noncontrolling interests.

Other Comprehensive Income (Loss)

(Amounts in millions)

Other comprehensive income (loss):

Other comprehensive income (loss) in 2025 increased by $268.1 million from a loss of $102.2 million in 2024. The net income in 2025 was primarily due to foreign currency translation adjustments resulting primarily from exchange rate movements of the Euro, British pound and Mexican peso versus the U.S. dollar at December 31, 2025 as compared with 2024, and pension and other postretirement activity.

Business Segments

We conduct our operations through two business segments based on type of product and how we manage the business. We evaluate segment performance and allocate resources based on each segment’s operating income. See Note 21,

"Business Segment Information," to our consolidated financial statements included in "Item 8. Financial Statements and Supplementary Data" of this Annual Report for further discussion of our segments. 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 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 operates in the energy, power generation, chemical and general industries. FPD operates in 48 countries with 37 manufacturing facilities worldwide, 12 of which are located in North America, 11 in Europe, eight in Asia Pacific and six in Latin America, and we have 126 QRCs, including those co-located in manufacturing facilities and/or shared with FCD.

FPD

(Amounts in millions, except percentages)

Bookings

Sales

Gross profit

Gross profit margin

Segment operating income

Segment operating income as a percentage of sales

Backlog (at period end)

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 2024 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 in 2025 decreased by $31.0 million, or 0.9%, as compared with 2024. The decrease included currency benefits of approximately $29 million. The decrease in customer bookings was driven by a decrease in orders of $199.5 million from energy and $4.4 million from chemical, partially offset by increased bookings of $129.2 million from general industries and $48.5 million from power generation. Decreased customer orders of $142.1 million into the Middle East, $72.8 million into Europe, and $13.7 million into Asia Pacific were partially offset by increased customer orders of $172.1 million into North America and $28.7 million into Africa. The decrease in customer bookings was substantially driven by original equipment bookings, including the impact of original equipment orders booked in the second quarter of 2024 in excess of $150 million to supply pumps and related equipment to support the continued development of an onshore unconventional gas project and a petrochemical project in the Middle East. Of the $3.3 billion of bookings in 2025, approximately 38% were from general industries, 33% were from energy, 15% from chemical and 14% from power generation.

Sales in 2025 increased $76.7 million, or 2.4%, as compared with 2024. The increase included currency benefits of approximately $26 million. The increase was driven by aftermarket customer sales, resulting from increased customer sales of $97.3 million into North America, $43.6 million into Africa and $14.5 million into the Middle East, partially offset by decreased customer sales of $42.4 million into Asia Pacific, $24.1 million into Latin America and $19.9 million into Europe.

Gross profit in 2025 increased by $121.7 million, or 12.0%, as compared with 2024. Gross profit margin in 2025 of 35.2% increased from 32.2% in 2024. The increase in gross profit margin was primarily due to strategic sourcing decisions, an improved selective bidding approach, favorable mix, lower broad-based annual incentive compensation and a $1.7 million one-time U.S. pension plan transition benefit charge incurred in 2024 that did not recur as compared to the same period in 2024.

SG&A in 2025 increased by $2.3 million, or 0.4%, as compared with 2024. Currency effects provided an increase of approximately $3 million. The increase in SG&A was primarily due to increased volume, a $2.8 million increase related to

our Realignment Programs and $0.7 million of transaction costs incurred in conjunction with the acquisition of Greenray Turbine Solutions, Ltd. ("Greenray"), partially offset by a $12.8 million decrease in research and development expense, $3.5 million decrease in bad debt expense, lower broad-based annual incentive compensation and a $0.8 million one-time U.S. pension plan transition benefit charge incurred in 2024 that did not recur as compared to the same period in 2024.

Operating income in 2025 increased by $120.7 million, or 25.1%, as compared with 2024. The increase included currency benefits of approximately $9 million. The increase was primarily due to the $121.7 million increase in gross profit partially offset by the $2.3 million increase in SG&A.

Backlog of $2.0 billion at December 31, 2025 increased by $114.4 million, or 5.9%, as compared with December 31, 2024. Currency effects provided an increase of approximately $130 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. FCD has a total of 44 manufacturing facilities and 26 QRCs, including those shared with FPD, in 23 countries around the world, with seven of its 18 manufacturing operations located in Europe, five located in the United States , five located in Asia Pacific, and one located in the Latin America. Based on independent industry sources, we believe that FCD is the second largest industrial valve supplier on a global basis.

FCD

(Amounts in millions, except percentages)

Bookings

Sales

Gross profit

Gross profit margin

Gain (loss) on sale of business

Segment operating income

Segment operating income as a percentage of sales

Backlog (at period end)

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 2024 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 in 2025 increased $83.6 million, or 6.1%, as compared with 2024. The increase included currency benefits of approximately $3 million. The increase in customer bookings was driven by increased orders of $44.9 million in power generation, $28.0 million in general industries, $10.4 million in chemical and $5.6 million in energy. There were increased customer orders of $72.3 million into North America, $43.5 million into the Middle East, $11.4 million into Africa and $6.5 million into Latin America, partially offset by decreased bookings of $34.3 million into Asia Pacific and $10.7 million into Europe. The increase in customer bookings was driven by both original equipment and aftermarket bookings. Of the $1.5 billion of bookings in 2025, approximately 32% were from energy, 27% were from chemical, 25% from general industries and 16% from power generation.

Sales in 2025 increased by $95.2 million, or 6.8%, as compared with 2024. The increase included currency benefits of approximately $5 million. The increase was driven by both increased customer original equipment and aftermarket sales, resulting from increased customer sales of $54.5 million into North America, $19.5 million into the Middle East, $18.2 million into Europe and $14.2 million into Latin America, partially offset by decreased customer sales of $8.9 million into Africa and $3.5 million into Asia Pacific.

Gross profit in 2025 increased by $21.7 million, or 5.1%, as compared with 2024. Gross profit margin in 2025 of 29.6% decreased from 30.1% in December 31, 2024. The decrease in gross profit margin was primarily due to increased charges of $23.0 million related to our realignment activities and an increase of $9.8 million of acquisition and integration

costs and amortization of step-up in value of acquired inventories and acquisition related intangibles assets associated with the MOGAS acquisition, partially offset by the favorable impact of previously implemented sales price increases and lower broad-based annual incentive compensation as compared to the same period in 2024.

SG&A in 2025 increased by $13.3 million, or 5.3% as compared with 2024. Currency effects provided an increase of less than a million. The increase in SG&A was primarily due to acquisition and integration costs and amortization of acquisition related intangibles assets associated with the MOGAS acquisition of $17.4 million, partially offset by decreased charges of $5.6 million related to our realignment activities, decreased charges of bad debt expense of $1.8 million and lower broad-based annual incentive compensation as compared to the same period in 2024.

The loss on sale of business decreased by $13.0 million in 2025 due to the divestiture of NAF AB in 2024, a previously wholly owned subsidiary and control valves business within our FCD segment, including the NAF AB facility located in Linkoping, Sweden, that did not recur. The loss on sale of business is included within charges related to our realignment activities.

Operating income in 2025 increased by $21.4 million, or 13.5%, as compared with 2024. The increase included negative currency effects of approximately $1 million. The increase was primarily due to the $21.7 million increase in gross profit and the $13.0 million loss on sale of business in 2024 that did not recur, partially offset by the increase in SG&A of $13.3 million.

Backlog of $828.6 million at December 31, 2025 decreased by $41.0 million, or 4.7%, as compared with December 31, 2024. Currency effects provided an increase of approximately $24 million.

LIQUIDITY AND CAPITAL RESOURCES

Cash Flow Analysis

December 31, 2025

December 31, 2024

December 31, 2023

(Amounts in millions)

Net cash flows provided by operating activities

Net cash flows used by investing activities

Net cash flows (used) provided by financing activities

The following is a discussion and analysis of the Company’s liquidity and capital resources for the years ended December 31, 2025 and 2024. A discussion of changes in the Company’s liquidity and capital resources for the year ended December 31, 2024 and 2023 can be found in Part II, “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, filed with the SEC on February 26, 2025.

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. Our total cash balance at December 31, 2025 was $760.2 million, compared to $675.4 million at December 31, 2024.

At December 31, 2025, our cash provided by operating activities was $505.9 million, as compared to cash provided of $425.3 million in 2024. 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 flow used by working capital decreased in 2025, primarily due to increased cash flows provided by, or decreased cash flows used by, accounts receivable, inventories and contract assets, partially offset by decreased cash flows provided by, or increased cash flows used by, prepaid expenses and other assets, accounts payable, contract liabilities and accrued liabilities as compared to the same period in 2024.

Increases in accounts receivable provided $0.7 million of cash flow in 2025, compared to cash used of $82.2 million in December 31, 2024. For the fourth quarter of 2025, our days' sales outstanding ("DSO") was 76 days as compared to 74 days in 2024. We have not experienced a significant increase in customer payment defaults in 2025.

Decreases in inventory provided $86.7 million of cash flow in 2025, compared with cash provided of $38.9 million in December 31, 2024. Inventory turns were 3.9 times at December 31, 2025 and 3.8 times at December 31, 2024. Our calculation of inventory turns does not reflect the impact of advanced cash received from our customers.

Increases in contract assets used $13.3 million of cash flow and decreases in contact liabilities used $23.5 million of cash flow in 2025.

Increases in accounts payable used $28.9 million of cash flow in 2025 compared with cash used of $12.3 million in 2024. Increases in accrued liabilities provided $25.2 million of cash flow in 2025 compared to cash provided of $49.6 million in 2024.

Cash flows used by investing activities were $125.2 million in 2025, as compared to $387.2 million in 2024. Capital expenditures were $70.9 million in 2025, as compared to $81.0 million in 2024. The decrease in cash used in 2025 resulted primarily from the $305.9 million payment for the acquisition of MOGAS in 2024, which was partially offset by the $65.9 million payment for the Greenray acquisition. In 2026, we currently estimate capital expenditures to be between $90 million and $100 million, before consideration of any merger and acquisition activity.

Cash flows used by financing activities were $326.9 million in 2025 compared to cash provided of $117.5 million in 2024. Cash outflows during 2025 resulted primarily from $254.9 million in stock repurchases, $109.6 million of dividend payments, $37.5 million in payments on our Term Loan, $15.0 million contingent consideration payment related to the MOGAS acquisition and $11.8 million in payments related to tax withholding for stock-based compensation.

In 2025, we repurchased 4,850,887 shares of our outstanding common stock during the year. As of December 31, 2025, we had $197.9 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.

Our material cash requirements for the next 12 months, include our estimated 2026 capital expenditures described above and our contractual obligations summarized below under the subheading "Contractual Obligations". In the aggregate, our cash needs vary based on working capital activity and will be evaluated throughout 2026. Considering our current debt structure and cash needs, we currently believe cash flows generated from operating activities combined with availability under our Second 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. We believe that cash flows from operating activities and our expectation of continuing availability to draw upon our credit agreements are also sufficient to meet our cash flow needs for periods beyond the next 12 months.

Financing

On September 13, 2021, we amended and restated our credit agreement (the "Senior Credit Agreement") under our Senior Credit Facility ("Credit Facility") with Bank of America, N.A. and the other lenders to provide greater flexibility in maintaining adequate liquidity and access to available borrowings (the "Amended and Restated Credit Agreement"). The Amended and Restated Credit Agreement, (i) retained, from the previous credit agreement, the $800.0 million unsecured Revolving Credit Facility (the "Revolving Credit Facility"), which included a $750.0 million sublimit for the issuance of letters of credit and a $30.0 million sublimit for swing line loans, (ii) provided for an up to $300 million unsecured Term Loan Facility (the "Term Loan"), (iii) extended the maturity date of the agreement to September 13, 2026, (iv) reduced commitment fees, (v) extended net leverage ratio covenant definition through the maturity of the agreement, and (vi) provided the ability to make certain adjustments to the otherwise applicable commitment fee, interest rate and letter of credit fees based on the Company’s performance against to-be-established key performance indicators with respect to certain of the Company’s environmental, social and governance targets. On February 3, 2023, we entered into an amendment to the Credit Facility (the “Amendment”) which (i) replaced LIBOR with Secured Overnight Financing Rate (“SOFR”) as the benchmark reference rate, (ii) lowered the Material Acquisition (as defined in the Credit Facility) threshold from $250 million to $200 million and, (iii) extended compliance dates for certain financial covenants. Subsequently, on October 10, 2024, we amended and restated our Senior Credit Agreement and entered into the Second Amended and Restated Credit Agreement (the "Second Amended and Restated Credit Agreement") with Bank of America, N.A., as administrative agent, and the other lenders (together, the "Lenders") and letter of credit issuers party thereto 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 December 31, 2025, we had an available capacity of $615.8 million under our Second Amended and Restated Credit Agreement, which provided for a $800.0 million unsecured revolving credit facility. We believe this Second Amended and Restated Credit Agreement will provide greater flexibility and additional liquidity under our Credit Facility as we continue to pursue our business goals and strategy. Most other terms and conditions under the previous Credit Facility remained unchanged.

Under the terms and conditions of the Second Amended and Restated Credit Agreement, the interest rates per annum applicable to the Revolving Credit Facility and Term Loan, other than with respect to swing line loans, are adjusted Term Secured Overnight Financing Rate ("Adjusted Term SOFR") plus between 1.000% to 1.750%, depending on our debt rating by either Moody’s Investors Service, Inc. ("Moody's") or Standard & Poor’s Financial Services LLC ("S&P"), or, at our option, the Base Rate (as defined in the Second Amended and Restated Credit Agreement) plus between 0.000% to 0.750% depending on our debt rating by either Moody’s or S&P. At December 31, 2025, the interest rate on the Revolving Credit Facility was the Adjusted Term Secured Overnight Financing Rate ("SOFR") plus 1.375% in the case of Adjusted Term SOFR loans and the Base Rate plus 0.375% in the case of Base Rate loans. In addition, a commitment fee is payable quarterly in arrears on the daily unused portions of the Revolving Credit Facility. The commitment fee will be between 0.080% and 0.250% of unused amounts under the Revolving Credit Facility depending on our debt rating by either Moody’s or S&P. The commitment fee was 0.175% (per annum) during the period ended December 31, 2025.

A discussion of our debt and related covenants is included in Note 13, "Debt and Finance Lease Obligations," to our consolidated financial statements included in "Item 8. Financial Statements and Supplementary Data" of this Annual Report. We were in compliance with the covenants as of December 31, 2025.

Liquidity Analysis

Our cash balance increased by $84.7 million to $760.2 million as of December 31, 2025 as compared to December 31, 2024. The cash increase included $505.9 million in operating cash inflows, including the $266.0 million for the termination of the planned merger with Chart (See Note 1, “Significant Accounting Policies and Accounting Developments,” to our consolidated financial statements for further information), partially offset by $254.9 million in repurchases of common shares, $199.0 million payment for the divestiture of our asbestos-related assets and liabilities, $109.6 million in dividend payments, $70.9 million in capital expenditures, $65.9 million payment for the acquisition of Greenray and $37.5 million in payments on long-term debt.

During 2025, we made $10.0 million cash contributions to our U.S. pension plan, compared to $20.0 million cash contributions in 2024. At December 31, 2025 and 2024, as a result of the values of the plan’s assets and our contributions to the plan, our U.S. pension plan was fully-funded as defined by applicable law. As of December 31, 2025 direct benefits paid by the U.S. pension plan were 2.0 million. We continue to maintain an asset allocation consistent with our strategy to maximize total return, while reducing portfolio risks through asset class diversification.

As of December 31, 2025, we had approximately $1,376 million of liquidity, consisting of cash and cash equivalents of $760 million and $616 million of borrowings available under our Credit Facility. In light of the liquidity currently available to us, and the costs savings measures planned and already in place, we expect to be able to maintain adequate liquidity over the next 12 months. 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.

Contractual Obligations

The following table presents a summary of our contractual obligations at December 31, 2025:

Payments Due By Period

(Amounts in millions)

Within 1 Year

1-3 Years

3-5 Years

Beyond 5 Years

Total

Senior Notes and Term Loan Facility

Fixed interest payments (1)

Variable interest payments(4)

Other Debt

Leases:

Operating

Finance

Purchase obligations:(2)

Inventory

Non-inventory

Pension and postretirement benefits(3)

Total

(1) Fixed interest payments represent interest payments on the Senior Notes as defined in Note 13, "Debt and Finance Lease Obligations," to our consolidated financial statements included in "Item 8. Financial Statements and Supplementary Data" of this Annual Report.

(2) Purchase obligations are presented at the face value of the purchase order, excluding the effects of early termination provisions. Actual payments could be less than amounts presented herein.

(3) Pension and postretirement benefits represent estimated benefit payments for our U.S. and non-U.S. defined benefit plans and our postretirement medical plans, as more fully described below and in Note 15, "Pension and Postretirement Benefits," to our consolidated financial statements included in "Item 8. Financial Statements and Supplementary Data" of this Annual Report.

(4) Variable interest payments represent interest payments on the Term Loan Facility as defined in Note 13, "Debt and Finance Lease Obligations," to our consolidated financial statements included in "Item 8. Financial Statements and Supplementary Data" of this Annual Report.

The following table presents a summary of our commercial commitments at December 31, 2025:

Commitment Expiration By Period

Within 1 Year

1-3 Years

3-5 Years

Beyond 5 Years

Total

(Amount in millions)

Letters of credit

Surety bonds

Total

We expect to satisfy these commitments through performance under our contracts.

PENSION AND POSTRETIREMENT BENEFITS OBLIGATIONS

Plan Descriptions

We and certain of our subsidiaries have defined benefit pension plans and defined contribution plans for full-time and part-time employees. Approximately 69% of total defined benefit pension plan assets and approximately 57% of defined

benefit pension obligations are related to the U.S. qualified plan as of December 31, 2025. Unless specified otherwise, the references in this section are to all of our U.S. and non-U.S. plans. None of our common stock is directly held by these plans.

In August 2023, we amended the Company-sponsored qualified defined benefit pension plan in the United States (the "Qualified Plan") for non-union employees to discontinue future benefit accruals under the Qualified Plan and freeze existing accrued benefits effective January 1, 2025. Benefits earned by participants under the Qualified Plan prior to January 1, 2025, are not affected. We also amended the Company-sponsored non-qualified defined benefit pension plan in the United States (the "Non-Qualified Plan") that provides enhanced retirement benefits to select members of management. The Qualified Plan and the Non-Qualified Plan were closed to new entrants effective January 1, 2024, and September 1, 2023, respectively. The amendments resulted in a curtailment of both plans, and the curtailment loss incurred and the change in projected benefit obligation was immaterial.

In conjunction with the amendment of the Qualified Plan, the Organization and Compensation Committee of our Board of Directors approved certain transition benefits associated with freezing the Qualified Plan. During the first quarter of 2025, a one-time cash transition benefit was paid to a limited group of employees in the United States that met certain criteria. We recorded a $5.0 million liability for this obligation prior to payment which is included within accrued liabilities in our consolidated balance sheet at December 31, 2024. We also issued approximately the same amount of value in the form of restricted shares to an additional group of employees in the United States during the first quarter of 2025. The restricted shares are subject to three year cliff-vesting.

Our U.S. defined benefit plan assets consist of a portfolio of equity and fixed income securities. Our non-U.S. defined benefit plan assets include a significant concentration of United Kingdom fixed income securities , as discussed in Note 15, " Pension and Postretirement Benefits," to our consolidated financial statements included in "Item 8. Financial Statements and Supplementary Data" of this Annual Report. We monitor investment allocations and manage plan assets to maintain an acceptable level of risk. At December 31, 2025, the estimated fair market value of U.S. and non-U.S. plan assets for our defined ben efit pension plans increased to $528.4 million from $520.0 million at December 31, 2024. Assets were allocated as follows:

U.S. Plan

Asset category

December 31, 2025

December 31, 2024

Cash and Cash Equivalents

Global Equity

Global Real Assets

Equity securities

Diversified Credit

Liability-Driven Investment

Fixed income

Non-U.S. Plans

Asset category

December 31, 2025

December 31, 2024

Cash and Cash Equivalents

U.K. Government Gilt Index

Liability-Driven Investment

Fixed income

Multi-asset

Buy-in Contract

Other

Other types

The projected benefit obligation ("Benefit Obligation") for our defined benefit pension plans was $700.3 million and $700.7 million as of December 31, 2025 and December 31, 2024, respectively. Benefits under our defined benefit pension plans are based primarily on participants’ compensation and years of credited service.

We sponsor defined benefit postretirement medical plans covering certain current retirees and a limited number of future retirees in the United States. These plans provide for medical and dental benefits and are administered through insurance companies. We fund the plans as benefits are paid, such that the plans hold no assets in any period presented. Accordingly, we have no investment strategy or targeted allocations for these plans. The benefits under the plans are not available to new employees or most existing employees.

The Benefit Obligation for our defined benefit postretirement medical plans was $7.9 million and $11.8 million as of December 31, 2025 and December 31, 2024, respectively.

Accrual Accounting and Significant Assumptions

We account for pension benefits using the accrual method, recognizing pension expense before the payment of benefits to retirees. The accrual method of accounting for pension benefits requires actuarial assumptions concerning future events that will determine the amount and timing of the benefit payments.

Our key assumptions used in calculating our cost of pension benefits are the discount rate, the rate of compensation increase and the expected long-term rate of return on plan assets. We, in consultation with our actuaries, evaluate the key actuarial assumptions and other assumptions used in calculating the cost of pension and postretirement benefits, such as discount rates, expected return on plan assets for funded plans, mortality rates, retirement rates and assumed rate of compensation increases, and determine such assumptions as of December 31 of each year to calculate liability information as of that date and pension and postretirement expense for the following year. See discussion of our accounting for and assumptions related to pension and postretirement benefits in the “Our Critical Accounting Estimates” section of this MD&A.

In 2025, the service cost component of the pension expense for our defined benefit pension plans included in operating income was $7.1 million compared to $30.3 million in 2024. The non-service cost portion of net pension expense (e.g., interest cost, actuarial gains and losses and expected return on plan assets) for our defined benefit pensi on plans included in other income (expense), net was $20.6 million in 2025, compared to $6.0 million in 2024.

The following are assumptions related to our defined benefit pension plans as of December 31, 2025:

U.S. Plan

Non-U.S. Plans

Weighted average assumptions used to determine Benefit Obligation:

Discount rate

Rate of increase in compensation levels

Weighted average assumptions used to determine 2025 net pension expense:

Long-term rate of return on assets

Discount rate

Rate of increase in compensation levels

Weighted-average interest crediting rates

The following provides a sensitivity analysis of alternative assumptions on the U.S. qualified, aggregate non-U.S. pension plans and U.S. postretirement plans.

Effect of Discount Rate Changes and Constancy of Other Assumptions:

0.5% Increase

0.5% Decrease

(Amounts in millions)

U.S. defined benefit pension plan:

Effect on net pension expense

Effect on Benefit Obligation

Non-U.S. defined benefit pension plans:

Effect on net pension expense

Effect on Benefit Obligation

U.S. Postretirement medical plans:

Effect on Benefit Obligation

Effect of Changes in the Expected Return on Assets and Constancy of Other Assumptions:

0.5% Increase

0.5% Decrease

(Amounts in millions)

U.S. defined benefit pension plan:

Effect on net pension expense

Non-U.S. defined benefit pension plans:

Effect on net pension expense

As discussed below, accounting principles generally accepted in the U.S. (“U.S. GAAP”) provide that differences between expected and actual returns are recognized over the average future service of employees or over the remaining expected lifetime for plans with only inactive participants.

At December 31, 2025, as compared with December 31, 2024, we decreased our discount rate for the U.S. plan from 5.73% to 5.58% based on an analysis of publicly traded investment grade U.S. corporate bonds, which had lower yields due to current market conditions. The average discount rate for the non-U.S. plans increased from 4.71% to 4.94% based on analysis of bonds and other publicly traded instruments, by country, which had higher yields due to market conditions. The average assumed rate of compensation for the U.S. plan was 4.00% for both 2025 and 2024, and for our non-U.S. plans decreased to 3.39% from 3.51% in 2025. To determine the 2025 pension expense, the expected rate of return on U.S. plan assets increased to 6.25% from 6.00% in 2024, and the expected rate of return on non-US plan assets increased to 4.82% from 4.65% in 2024, based on our target allocations and expected long-term asset returns. As the expected rate of return on plan assets is long-term in nature, short-term market fluctuations do not significantly impact the rate. For all U.S. plans, we adopted the Pri-2012 mortality tables and the MP-2021 improvement scale published in October 2021. We applied the Pri-2012 tables based on the constituency of our plan population for union and non-union participants. We adjusted the improvement scale to utilize the Proxy SSA Long Term Improvement Rates, consistent with assumptions adopted by the Social Security Administration trustees, based on long-term historical experience. Currently, we believe this approach provides the best estimate of our future obligation. Most plan participants elect to receive plan benefits as a lump sum at the end of service, rather than an annuity. As such, the updated mortality tables had an immaterial effect on our pension obligation.

We expect that the net pension expense for our defined benefit pension plans included in earnings before income taxes will be approximately $7.2 million lower in 2026 than the $27.7 million in 2025, primarily due to settlement charges incurred in 2025 on non-U.S. pension plans. We have used discount rates of 5.58%, 4.94% and 5.25% at December 31, 2025, in calculating our estimated 2026 net pension expense for the U.S. pension plans, non-U.S. pension plans and postretirement medical plans, respectively.

The assumed ranges for the annual rates of increase in health care costs were 7.00% for both 2024 and 2023. As of December 31, 2025, medical benefits have reached the Plan’s medical benefit cap and changes in assumed medical cost trend rates no longer affect the postretirement obligation.

Plan Funding

Our funding policy for defined benefit plans is to contribute at least the amounts required under applicable laws and local customs. In 2025 , we contributed $24.4 million , to our defined benefit plans, compared to $32.6 million in 2024 . We have no obligation to make contributions to our U.S. pension plans in 2026, but have authorization for contributions up to $10 million. We expect to contribute approximately $3 million to our non-U.S. pension plans in 2026, excluding direct benefits paid.

For further discussion of our pension and postretirement benefits, see Note 15, "Pension and Postretirement Benefits," to our consolidated financial statements included in "Item 8. Financial Statements and Supplementary Data" of this Annual Report.

OUR CRITICAL ACCOUNTING ESTIMATES

The process of preparing financial statements in conformity with U.S. GAAP requires the use of estimates and assumptions to determine reported amounts of certain assets, liabilities, revenues and expenses and the disclosure of related contingent assets and liabilities. These estimates and assumptions are based upon information available at the time of the estimates or assumptions, including our historical experience, where relevant. The most significant estimates made by

management include: timing and amount of 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. The significant estimates are reviewed at least annually if not quarterly by management. Because of the uncertainty of factors surrounding the estimates, assumptions and judgments used in the preparation of our financial statements, actual results may differ from the estimates, and the difference may be material.

Our critical accounting policies are those policies that are both most important to our financial condition and results of operations and require the most difficult, subjective or complex judgments on the part of management in their application, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. We believe that the following represent our critical accounting policies. For a summary of all of our significant accounting policies, see Note 1, "Significant Accounting Policies and Accounting Developments," to our consolidated financial statements included in "Item 8. Financial Statements and Supplementary Data" of this Annual Report. Management and our external auditors have discussed our critical accounting estimates and policies with the Audit Committee of our Board of Directors.

Business Combinations

We allocate the purchase price of acquired businesses to the estimated fair values of the assets acquired and liabilities assumed, as well as any contingent consideration, as of the date of acquisition. The fair values of the long-lived assets acquired, primarily intangible assets, are determined using calculations which can be complex and require significant judgment. Estimates include many factors such as the nature of the acquired company’s business, its historical financial position and results, technology obsolescence, customer retention rates, discount rates, royalty rates and expected future performance. Independent valuation specialists are used to assist in determining certain fair value calculations.

While we use our best estimates and assumptions, especially at the acquisition date, including estimates for intangible assets, pre-acquisition contingencies and contingent considerations, the fair value estimates are inherently uncertain and subject to refinement. As a result, during the measurement period, which may be up to one year from the acquisition date, we may record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill. Any adjustments required after the measurement period are recorded in the Consolidated Statements of Income. The judgments required in determining the estimated fair values and expected useful lives assigned to each class of assets and liabilities acquired can affect net income.

Revenue Recognition

We recognize revenue when (or as) we satisfy a performance obligation by transferring control to a customer. Transfer of control is evaluated based on the customer’s ability to direct the use of and obtain substantially all of the benefits of a performance obligation. Revenue is recognized either over time or at a point in time, depending on the specific facts and circumstances for each contract, including the terms and conditions of the contract as agreed with the customer and the nature of the products or services to be provided. Service-related revenues do not typically represent a significant portion of the contracts with our customers and do not meet the thresholds requiring separate disclosure.

Our primary method for recognizing revenue over time is the percentage of completion ("POC") method, whereby progress towards completion is measured by applying an input measure based on costs incurred to date relative to total estimated costs at completion. If control of the products and/or services does not transfer over time, then control transfers at a point in time. We determine the point in time that control transfers to a customer based on the evaluation of specific indicators, such as title transfer, risk of loss transfer, customer acceptance and physical possession. For a discussion related to revenue recognition refer to Note 3, "Revenue Recognition" included in "Item 8. Financial Statements and Supplementary Data" of this Annual Report.

Deferred Taxes, Tax Valuation Allowances and Tax Reserves

We recognize valuation allowances to reduce the carrying value of deferred tax assets to amounts that we expect are more likely than not to be realized. Our valuation allowances primarily relate to the deferred tax assets established for certain tax credit carryforwards, capital loss carryforwards, and net operating loss carryforwards for non-U.S. subsidiaries, and we evaluate the realizability of our deferred tax assets and adjust the amount of the valuation allowances, if necessary. We assess such factors as our forecast of future taxable income and available tax planning strategies that could be implemented to realize the net deferred tax assets in determining the sufficiency of our valuation allowances. Failure to achieve forecasted taxable income in the applicable tax jurisdictions could affect the ultimate realization of deferred tax

assets and could result in an increase in our effective tax rate on future earnings. Implementation of different tax structures in certain jurisdictions could, if successful, result in future reductions of certain valuation allowances.

The amount of income taxes we pay is subject to ongoing audits by federal, state and foreign tax authorities, which often result in proposed assessments. Significant judgment is required in determining income tax provisions and evaluating tax positions. We establish reserves for open tax years for uncertain tax positions that may be subject to challenge by various tax authorities. The consolidated tax provision and related accruals include the impact of such reasonably estimable losses and related interest and penalties as deemed appropriate. Tax benefits recognized in the financial statements from uncertain tax positions are measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement.

While we believe we have adequately provided for any reasonably foreseeable outcomes related to these matters, our future results may include favorable or unfavorable adjustments to our estimated tax liabilities. To the extent that the expected tax outcome of these matters changes, such changes in estimate will impact the income tax provision in the period in which such determination is made. For a discussion related to deferred taxes, tax valuation allowances and tax reserves refer to Note 20, "Income Taxes," included in "Item 8. Financial Statements and Supplementary Data" of this Annual Report.

Reserves for Contingent Loss

On December 11, 2025, Flowserve completed the divestiture of all our legacy asbestos liabilities by selling BW/IP - New Mexico, Inc. ("BWIP"), a Delaware corporation and previously wholly owned subsidiary of the Company that held the liabilities and related insurance assets, to Ajax HoldCo LLC (“Buyer”), an affiliate of Acorn Investment Partners, a portfolio company of funds managed by Oaktree Capital Management L.P. (the "Asbestos Divestiture"). As a result of the Asbestos Divestiture, the divested asbestos liabilities and related insurance assets were removed from the Company's consolidated balance sheet. The buyer has assumed management of BWIP, including the management of its claims and insurance policy reimbursements, and Flowserve is fully indemnified.

Prior to the Asbestos Divestiture we were a defendant in a number of lawsuits that sought to recover damages for personal injury allegedly resulting from exposure to asbestos-containing products formerly manufactured and/or distributed by heritage companies of the Company. We previously estimated the liability for pending and future claims not yet asserted, and which are probable and estimable, could be experienced through 2054, which represented the expected end of the asbestos liability exposure with no further ongoing claims expected beyond that date.

Prior to the Asbestos Divestiture, we also reviewed the amount of potential insurance coverage for such claims, taking into account the remaining limits of such coverage, the number and amount of claims on our insurance from co-insured parties, ongoing litigation against the Company’s prior insurers, potential remaining recoveries from insolvent insurers, the impact of previous insurance settlements and coverage available from solvent insurers not party to the coverage litigation. We reviewed ongoing insurance coverage available for a significant amount of the potential future asbestos-related claims and in the future could secure additional insurance coverage as deemed necessary. For a discussion pertaining to asbestos claims refer to Note 17, "Legal Matters and Contingencies," included in "Item 8. Financial Statements and Supplementary Data" of this Annual Report.

Liabilities are recorded for various non-asbestos contingencies arising in the normal course of business when it is both probable that a loss has been incurred and such loss is reasonably estimable. Assessments of reserves are based on information obtained from our independent and in-house experts, including recent legal decisions and loss experience in similar situations. The recorded legal reserves are susceptible to changes due to new developments regarding the facts and circumstances of each matter, changes in political environments, legal venue and other factors. Recorded environmental reserves could change based on further analysis of our properties, technological innovation and regulatory environment changes.

Pension and Postretirement Benefits

We provide pension and postretirement benefits to certain of our employees, including former employees, and their beneficiaries. The assets, liabilities and expenses we recognize and disclosures we make about plan actuarial and financial information are dependent on the assumptions and estimates used in calculating such amounts. The assumptions include factors such as discount rates, health care cost trend rates, inflation, expected rates of return on plan assets, retirement rates, mortality rates, turnover, rates of compensation increases and other factors.

The assumptions utilized to compute expense and benefit obligations are shown in Note 15, "Pension and Postretirement Benefits," to our consolidated financial statements included in "Item 8. Financial Statements and

Supplementary Data" of this Annual Report. These assumptions are assessed annually in consultation with independent actuaries and investment advisors as of December 31 and adjustments are made as needed. We evaluate prevailing market conditions and local laws and requirements in countries where plans are maintained, including appropriate rates of return, interest rates and medical inflation (health care cost trend) rates. We ensure that our significant assumptions are within the reasonable range relative to market data. The methodology to set our significant assumptions includes:

• Discount rates are estimated using high quality debt securities based on corporate or government bond yields with a duration matching the expected benefit payments. For the United States, the discount rate is obtained from an analysis of publicly-traded investment-grade corporate bonds to establish a weighted average discount rate. For plans in the United Kingdom and the Eurozone we use the discount rate obtained from an analysis of AA-graded corporate bonds used to generate a yield curve. For other countries or regions without a corporate AA bond market, government bond rates are used. Our discount rate assumptions are impacted by changes in general economic and market conditions that affect interest rates on long-term high-quality debt securities, as well as the duration of our plans’ liabilities.

• The expected rates of return on plan assets are derived from reviews of asset allocation strategies, expected long-term performance of asset classes, risks and other factors adjusted for our specific investment strategy. These rates are impacted by changes in general market conditions, but because they are long-term in nature, short-term market changes do not significantly impact the rates. Changes to our target asset allocation also impact these rates.

• The expected rates of increase in compensation levels reflect estimates due to general price levels, seniority, age and other factors.

Depending on the assumptions used, the pension and postretirement expense could vary within a range of outcomes and have a material effect on reported earnings. In addition, the assumptions can materially affect benefit obligations and future cash funding. Actual results in any given year may differ from those estimated because of economic and other factors.

We evaluate the funded status of each retirement plan using current assumptions and determine the appropriate funding level considering applicable regulatory requirements, tax deductibility, reporting considerations, cash flow requirements and other factors. We discuss our funding assumptions with the Technology, Innovation and Risk Committee of our Board of Directors.

Valuation of Goodwill, Indefinite-Lived Intangible Assets and Other Long-Lived Assets

The initial recording of goodwill and intangible assets requires subjective judgments concerning estimates of the fair value of the acquired assets. We test the value of goodwill, indefinite-lived intangible assets and long-lived assets for impairment as of December 31 each year or whenever events or circumstances indicate such assets may be impaired. The test for goodwill impairment involves significant judgment in estimating projections of fair value generated through future performance of each of the reporting units. We did not record a material impairment for goodwill, indefinite-lived intangible assets or long-lived assets in 2025, 2024 or 2023.

Due to uncertain market conditions and potential changes in strategy and product portfolio, it is possible that forecasts used to support asset carrying values may change in the future, which could result in non-cash charges that would adversely affect our financial condition and results of operations. For a discussion pertaining to goodwill, indefinite-lived intangible assets and long-lived assets refer to Note 1, "Significant Accounting Policies and Accounting Developments," included in "Item 8. Financial Statements and Supplementary Data" of this Annual Report.

ACCOUNTING DEVELOPMEN TS

We have presented the informati on about accounting pronouncements not yet implemented in Note 1, "Significant Accounting Policies and Accounting Developments," to our consolidated financial statements included in "Item 8. Financial Statements and Supplementary Data" of this Annual Report.