Stock-Based Compensation Plans

12 Months Ended

Dec. 31, 2024

Share-Based Payment Arrangement [Abstract]

STOCK-BASED COMPENSATION PLANS

Effective January 1, 2020, our shareholders approved the Flowserve Corporation 2020 Long-Term Incentive Plan (“2020 Plan”). The 2020 Plan replaces and supersedes the Flowserve Corporation Equity and Incentive Compensation Plan ("2010 Plan") in its entirety. The 2020 Plan authorizes the issuance of 12,500,000 shares of our common stock in the form of Restricted Shares, incentive stock options, non-statutory stock options, stock appreciation rights and bonus stock. Of the shares of common stock authorized under the 2020 Plan, 7,075,917 were available for issuance as of December 31, 2024. Restricted Shares primarily vest over a three-year period. Restricted Shares granted to employees who retire and have achieved at least 55 years of age and 10 years of service continue to vest over the original vesting period ("55/10 Provision").

Stock Options — Options granted to officers, other employees and directors allow for the purchase of common shares at the market value of our stock on the date the options are granted. Options generally become exercisable after three years. Options generally expire ten years from the date of the grant or within a short period of time following the termination of employment or cessation of services by an option holder. As of December 31, 2024, 114,943 stock options were outstanding and exercisable, with a grant date fair value of $2.0 million recognized over three years and a weighted average exercise price of $48.63. Compensation cost associated with these stock options has been fully recognized. Using the Black-Scholes option pricing model to estimate the fair value of each option award, as of December 31, 2024 the total fair value of stock options vested was $2.0 million. No stock options were exercised during the years ended December 31,

2024, 2023 or 2022. No stock options were granted, canceled or vested during years ended December 31, 2024, 2023 or 2022. The weighted average remaining contractual life of options outstanding at December 31, 2024, 2023 and 2022 was 2.3 years, 3.3 years and 4.3 years, respectively.

Restricted Shares — Generally, the restrictions on Restricted Shares do not expire for a minimum of one year and a maximum of three years, and shares are subject to forfeiture during the restriction period. Most typically, Restricted Share grants have staggered vesting periods over one to three years from grant date. The intrinsic value of the Restricted Shares, which is typically the product of share price at the date of grant and the number of Restricted Shares granted, is amortized on a straight-line basis to compensation expense over the periods in which the restrictions lapse.

Awards of Restricted Shares are valued at the closing market price of our common stock on the date of grant. The unearned compensation is amortized to compensation expense over the vesting period of the restricted shares, except for awards related to the 55/10 Provision which are expensed in the period granted for awards issued prior to 2024. For awards of Restricted Shares granted beginning in 2024 and subject to the 55/10 Provision, compensation expense is recognized over a required six-month service period. As of December 31, 2024 and 2023, we had $19.2 million and $18.5 million, respectively, of unearned compensation cost related to unvested Restricted Shares, which is expected to be recognized over a remaining weighted-average period of approximately one year, for both periods. This amount will be recognized into net earnings in prospective periods as the awards vest. The total fair value of Restricted Shares vested during the years ended December 31, 2024, 2023 and 2022 was $28.7 million, $24.2 million and $23.5 million, respectively.

We recorded stock-based compensation for Restricted Shares as follows:


	Year Ended December 31,
	2024		2023		2022
	(Amounts in millions)
Stock-based compensation expense	$	30.5	$	27.8	$	25.5
Related income tax benefit	(6.9)		(6.3)		(5.8)
Net stock-based compensation expense	$	23.6	$	21.5	$	19.7

The following table summarizes information regarding Restricted Shares:


	Year Ended December 31, 2024
	Shares	Weighted Average Grant-Date Fair Value
Number of unvested Restricted Shares:
Outstanding — beginning of year	1,741,486	$	36.06
Granted	823,703	42.73
Vested	(787,870)	36.40
Canceled	(110,636)	36.30
Outstanding — end of year	1,666,683	$	39.18

Unvested Restricted Shares outstanding as of December 31, 2024, includes approximately 520,000 units with performance-based vesting provisions issuable in common stock and vest upon the achievement of pre-defined performance metrics. Targets for outstanding performance awards are based on our average return on invested capital and free cash flow as a percent of net income over a three-year period. Performance units issued in 2024, 2023 and 2022 include a secondary measure, relative total shareholder return, which can increase or decrease the number of vesting units by 15% depending on the Company's performance versus peers. Performance units issued have a vesting percentage up to 230%. Compensation expense is recognized ratably over a cliff-vesting period of 36 months, based on the fair value of our common stock on the date of grant, adjusted for actual forfeitures. During the performance period, earned and unearned compensation expense is adjusted based on changes in the expected achievement of the performance targets for all

performance-based units granted. Vesting provisions range from 0 to approximately 1,196,000 shares based on performance targets. As of December 31, 2024, we estimate vesting of approximately 520,000 shares based on expected achievement of performance targets.

Employee Stock Purchase Plan — Effective in 2024, we established an employee stock purchase plan ("ESPP") as a means for employees to acquire an equity interest in the Company. The plan is considered compensatory for accounting purposes. Employees may participate in our ESPP provided they meet certain eligibility requirements and may enroll in the ESPP on a monthly basis. The first enrollment period occurred during the fourth quarter of 2024. The current year impact of the ESPP is immaterial, and the impact to future years is also expected to be immaterial.