Flowserve's adjusted earnings per share of $0.28 increased over 47% compared to last year's first quarter.
And our bookings for the first three months of 2021 were up by over 16% compared to the average of last year's final three quarters.
With an improving environment, combined with our Flowserve 2.0 growth initiatives, we were encouraged to book $945 million in the first quarter, which represented over 15% growth sequentially and was driven primarily by increased MRO and aftermarket activity.
In addition to increased aftermarket and MRO-related activity, we were pleased that project bookings levels approached approximately 85% of 2020's first quarter.
We saw a number of smaller projects get awarded with the largest of these in the $10 million to $15 million range.
But we did see increased repair and replacement work in the storm's aftermath which drove an estimated $20 million of incremental repair in replacement business as we supported more than 30 customer installations in the region.
Currently, our project funnel is about 12% higher than a year ago, and the compare period includes many of the projects that were placed on hold due to the pandemic.
Our adjusted earnings per share was up significantly compared to last year, and the margins we delivered in our SG&A levels continue to reflect the benefit of the decisive cost actions we took in 2020 and the ongoing Flowserve 2.0 transformation program.
For the first quarter, we delivered solid results, including an adjusted earnings per share of $0.28, which represents an increase of nearly 50% versus prior year.
On a reported basis, earnings per share of $0.11 included $0.08 of realignment, $0.04 of costs related to early retirement of debt and $0.05 of below-the-line FX currency impact.
First quarter revenue of $857 million was down 4.1% versus the prior year primarily driven by the 10% sales decline in original equipment, including FPD's 15% original equipment decrease.
We were pleased to see modest aftermarket sales growth as revenue of $450 million increased 2%, with both FPD and FCD contributing.
Our first quarter performance was largely driven by the significant cost actions we took in the middle of 2020 as well as ongoing transformation-driven operational improvements and a 400 basis point mix shift toward higher-margin aftermarket revenue, partially offset by increased under-absorption.
Adjusted gross margin of 30.4% was roughly flat versus prior year and the sequential quarter, driven by FPD's 60 basis point increase offset by FCD's 170 basis point decline, both as compared to 2020's first quarter.
On a reported basis, first quarter gross margin decreased 50 basis points to 29.3% due primarily to absorption headwinds and higher realignment costs versus the first quarter of 2020.
First quarter adjusted SG&A decreased $34 million to $194 million versus prior year and was largely flat on a sequential basis.
As a percent of sales, first quarter adjusted SG&A declined 290 basis points year-over-year.
Reported SG&A decreased $47 million versus prior year, where in addition to cost action benefits, adjusted items were down $13 million compared to the first quarter of 2020.
We delivered a $20 million increase in adjusted operating income in the first quarter, a strong performance considering the $36 million decrease in revenue.
As a result, adjusted operating margin improved 250 basis points versus last year to 8.1%, driven by the previously mentioned cost actions, ongoing operational progress and the mix shift to higher-margin aftermarket products and services.
FPD and FCD improved 230 and 60 basis points to 10.3% and 10.4%, respectively.
First quarter reported operating margin increased 380 basis points year-over-year to 6.5%, including the roughly $12 million reduction of adjusted items.
Our first quarter adjusted tax rate of 23.2% is in line with our full year guidance of 22% to 24%.
Our first quarter cash balance of $659 million decreased $436 million compared to the year-end 2020 level.
The primary use of cash was for debt reduction, with the $407 million payment to retire the remaining portion of our euro notes.
Additionally, we returned over $30 million to shareholders through dividends and share repurchases.
Total debt at quarter end was $1.3 billion compared to over $1.7 billion at year-end.
Compared to last year's first quarter, gross debt is down over $50 million, while the cash balance is up over $35 million.
Flowserve's quarter end liquidity position remained strong at over $1.4 billion, including $742 million of availability under our undrawn senior credit facility.
First quarter free cash flow was approximately $25 million.
And for the second year in a row and only the third time in the last 15 years, Flowserve delivered positive free cash flow in the first quarter.
As is typical, working capital was a use of cash in the first quarter of $40 million driven primarily by a reduction in accounts payable.
Inventory was also a use of $17 million, but I was pleased that our focus and improved processes to control inventory drove a 60% reduction versus last year's first quarter use.
Taking a look at primary working capital as a percent of sales, we saw 110 basis point sequential increase to 29.6%, again, driven primarily by accounts payable and a lower top line.
Although our backlog increased over $30 million, we were pleased that inventory, when including contract assets and liabilities, decreased $4 million versus the fourth quarter of 2020.
And importantly, we remain confident in achieving free cash flow conversion in excess of 100% in 2021.
Based on our strong first quarter bookings and visibility into improving end markets, Flowserve increased and tightened our adjusted earnings per share guidance range for the full year to $1.40 to $1.60 per share and reaffirmed all other guidance metrics.
Based on the expected increase in short-cycle activity, we now expect the revenue decline in the 3% to 5% range versus our initial guide of down 4% to 7%.
The adjusted earnings per share target range continues to exclude expected realignment expenses of approximately $25 million as well as below-the-line foreign currency effects and the impact of potential other discrete items which may occur during the year.
On a quarterly basis, we expect our adjusted earnings per share to increase sequentially over the course of 2021 as we see the benefit of our first quarter bookings flow through and from the expected increase in short-cycle activity.
With our Flowserve 2.0 transformation program and its elements now embedded in our operations and functional teams, we expect 2021 transformation expenses of roughly $10 million, representing a decline of over 50% versus the prior year.
Additional guidance components remain unchanged with expected net interest expense in the range of $55 million to $60 million and an adjusted tax rate between 22% and 24%.
Major planned cash usages this year include the recently completed retirement of our euro notes and an expectations to return over $100 million to shareholders through dividends and share repurchases.
We also intend to invest in our business as we return to the growth aspects of our Flowserve 2.0 program, including capital expenditures in the $70 million to $80 million range which includes spending for enterprisewide IT systems to further consolidate our ERP platform and support our transformation-driven productivity improvements.
Our ongoing Flowserve 2.0 transformation and how Flowserve will support energy transition.
Let me first provide an update on our Flowserve 2.0 transformation progress.
All of these enhancements support the new Flowserve 2.0 operating model.
As we look to fully embed the transformation into our operations by the end of 2021, I am confident that our Flowserve 2.0 process improvements will continue to provide benefit to Flowserve and our customers for years to come.
Since introduction, we have already received over $30 million of orders for the product, and we see growing demand for years to come.
After three years of hard work on our Flowserve 2.0 transformation program, we are now operating at a higher level and we are well positioned to transition to growth.

Summary:
Flowserve's adjusted earnings per share of $0.28 increased over 47% compared to last year's first quarter.
For the first quarter, we delivered solid results, including an adjusted earnings per share of $0.28, which represents an increase of nearly 50% versus prior year.
On a reported basis, earnings per share of $0.11 included $0.08 of realignment, $0.04 of costs related to early retirement of debt and $0.05 of below-the-line FX currency impact.
Based on our strong first quarter bookings and visibility into improving end markets, Flowserve increased and tightened our adjusted earnings per share guidance range for the full year to $1.40 to $1.60 per share and reaffirmed all other guidance metrics.
On a quarterly basis, we expect our adjusted earnings per share to increase sequentially over the course of 2021 as we see the benefit of our first quarter bookings flow through and from the expected increase in short-cycle activity.