Acquisition

12 Months Ended

Dec. 31, 2024

Business Combination, Asset Acquisition, and Joint Venture Formation [Abstract]

Acquisition

ACQUISITION

On 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"), for a purchase price of $290.0 million, subject to additional closing working capital adjustments of $13.0 million and net of cash acquired of $3.1 million, and an incremental contingent earn-out payment of up to $15.0 million based on MOGAS's achievement of certain financial goals for the calendar year ended December 31, 2024. The additional earn-out consideration will be paid in the first quarter of 2025 and the value was determined based on contractual provisions set forth in the purchase agreement. MOGAS, a privately held provider of mission-critical severe service valves and associated aftermarket services, is based in Houston, Texas and has operations primarily in North America and, to a lesser extent, Europe and Asia Pacific. The acquisition was funded using a combination of cash on hand and term loan financing under our Second Amended and Restated Credit Agreement discussed in Note 13, "Debt and Finance Lease Obligations." MOGAS's differentiated valve products are expected to enhance our installed base, creating meaningful aftermarket opportunities with the addition of MOGAS's strong brand, heritage, and technical expertise in diverse and attractive end markets, including the growing mining industry. The acquisition is accounted for as a business combination under Accounting Standards Codification 805, Business Combinations, using the acquisition method of accounting.

The fair value of assets acquired and liabilities assumed has been recorded on a preliminary basis, including the valuation of intangible assets and opening balance sheet accounts subject to final working capital adjustments. We will continue to evaluate the initial fair values, which may be adjusted as additional information relative to the fair values of the assets and liabilities becomes available. The estimates will be finalized within one year from the date of acquisition. The preliminary allocation of the purchase price is summarized below:

	(Amounts in millions)
Accounts receivable	$	55.0
Contract assets	13.7
Inventories	45.3
Prepaid expenses and other	4.6
Indemnification asset	7.5
Total current assets	126.1
Intangible assets
Trademark	19.0
Existing customer relationships	48.5
Backlog	10.5
Total intangible assets	78.0
Property, plant and equipment	41.9
Right-of-use assets	1.0
Total assets	247.0
Current liabilities	(58.8)
Noncurrent liabilities	(0.5)
Net assets	187.7
Goodwill	127.2
Purchase price, net of cash acquired of $3.1 million	$	314.9

The excess of the acquisition date fair value of the total purchase price over the estimated fair value of the net assets was recorded as goodwill. Goodwill of $127.2 million represents the value expected to be obtained from expanding Flowserve's market presence and strengthening our portfolio of products and services through the addition of MOGAS's valve products. The goodwill related to this acquisition is recorded in the FCD segment and is expected to be fully deductible for tax purposes. The trademark is an indefinite-lived intangible. Existing customer relationships and backlog have expected weighted average useful lives of 10 years and one year, respectively. In total, amortizable intangible assets have a weighted average useful live of approximately 8 years. We recorded an indemnification asset and corresponding liability of $7.5 million related to unresolved legal matters that existed pre-acquisition, for which the seller has agreed to indemnify us. The indemnification asset and liability are included within prepaid expenses and other and accrued liabilities, respectively, in our consolidated balance sheet.

Subsequent to October 15, 2024, the revenues and expenses of MOGAS have been included in our consolidated statement of income. The MOGAS acquisition generated sales of approximately $37 million for the period from October 15, 2024 to December 31, 2024 and decreased Flowserve's earnings by approximately $3 million. No proforma financial information has been presented due to immateriality. Flowserve incurred $10 million in acquisition and integration-related costs in 2024 associated with the transaction which are included within SG&A in our consolidated statement of income.