FLOWSERVE CORPFLS
FLOWSERVE CORP Stock Compensation Disclosure
STOCK-BASED COMPENSATION PLANS
We maintain the Flowserve Corporation 2020 Long-Term Incentive Plan (“2020 Plan”), which is a shareholder approved plan authorizing the issuance of 12,500,000 shares of our common stock in the form of restricted shares, restricted share units and performance-based units (collectively referred to as "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, 5,457,089 were available for issuance as of December 31, 2025. 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, 2025, no stock options were outstanding and exercisable. Compensation cost associated with these stock options has been fully recognized. All of the remaining 114,943 stock options outstanding were exercised during 2025, compared to no stock options exercised during the years ended, December 31, 2024 and December 31, 2023. No stock options were granted, canceled or vested during years ended December 31, 2024 or December 31, 2023. The weighted average remaining contractual life of options outstanding at December 31, 2024 and December 31, 2023 was 2.3 years and 3.3 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 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, 2025 and 2024, we had $24.5 million and $19.2 million, respectively, of unearned compensation cost related to unvested Restricted Shares, which is expected to be recognized over the 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, 2025, 2024 and 2023 was $26.6 million, $28.7 million and $24.2 million, respectively.
We awarded a one-time grant of approximately $5.0 million in the form of restricted shares to a group of employees during the first quarter of 2025 in conjunction with the freeze of our Company-sponsored qualified defined benefit pension plan in the United States. The restricted shares are subject to three-year cliff-vesting. See Note 15, "Pension and Postretirement Benefits," for additional details.
We recorded stock-based compensation for Restricted Shares as follows:
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| (Amounts in millions) | |||||||||||||||||
| Stock-based compensation expense | $ | 38.3 | $ | 30.5 | $ | 27.8 | |||||||||||
| Related income tax benefit | (8.8) | (6.9) | (6.3) | ||||||||||||||
| Net stock-based compensation expense | $ | 29.5 | $ | 23.6 | $ | 21.5 | |||||||||||
The following table summarizes information regarding Restricted Shares:
| Year Ended December 31, 2025 | |||||||||||
| Shares | Weighted Average Grant-Date Fair Value | ||||||||||
| Number of unvested Restricted Shares: | |||||||||||
| Outstanding as of January 1, 2025 | 1,666,683 | $ | 39.18 | ||||||||
| Granted | 859,246 | 57.97 | |||||||||
| Vested | (707,304) | 37.57 | |||||||||
| Cancelled | (112,598) | 50.21 | |||||||||
| Outstanding as of December 31, 2025 | 1,706,027 | $ | 48.59 | ||||||||
Unvested Restricted Shares outstanding as of December 31, 2025, includes approximately 502,000 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 annual return on invested capital and free cash flow as a percent of net income over a three-year period. Performance units issued in 2025, 2024 and 2023 include a secondary measure, relative total shareholder return, which can increase or decrease the number of vesting units by up to 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 1,154,000 shares based on performance targets. As of December 31, 2025, we estimate vesting of approximately 822,000 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 impact of the ESPP is immaterial to our consolidated financial statements.Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 17, 2026 | Showing above |
| 2024 | Feb 26, 2025 | |
| 2023 | Feb 20, 2024 | |
| 2022 | Mar 7, 2023 | |
| 2021 | Feb 23, 2022 | |
About Stock Compensation Disclosures
Stock-based compensation disclosures detail the equity awards granted to employees and executives — including stock options, restricted stock units (RSUs), and performance shares — along with the valuation methods and assumptions used to expense them. This section reveals the true cost of talent retention and the alignment between management incentives and shareholder interests.
Key signals: total unrecognized compensation expense and its expected recognition period signal future earnings headwinds from already-granted awards. For stock options, examine Black-Scholes assumptions — expected volatility, risk-free rate, and expected term — as understating any of these reduces reported compensation expense. Compare stock compensation expense as a percentage of revenue against peers to assess dilution cost. Watch vesting schedules for acceleration clauses tied to change-of-control events. Performance-based awards with undemanding targets may indicate weak governance. Add back stock compensation to operating cash flow to calculate a more conservative free cash flow figure.