Flowserve Corporation Reports Third Quarter 2019 Results

  • Expanded margins through Flowserve 2.0 transformation program
  • Completed the sixth consecutive quarter with bookings in excess of $1 billion
  • Delivered over $120 million of free cash flow improvement year-to-date
  • Revised 2019 Adjusted EPS target range to $2.15 - $2.20

DALLAS--()--Flowserve Corporation (NYSE: FLS), a leading provider of flow control products and services for the global infrastructure markets, today announced its financial results for the third quarter ended September 30, 2019.

Third Quarter 2019 Highlights (all comparisons to the 2018 third quarter, unless otherwise noted)

  • Reported Earnings Per Share (EPS) were $0.52, and Adjusted[1] EPS of $0.59
    • Pre-tax adjusted items included $9.9 million of realignment and transformation activities and $0.9 million of negative below-the-line FX impact
    • Adjusted EPS increased approximately 20% year-over-year
  • Total bookings were $1.02 billion, up 1.3%, or 3.5% on a constant currency basis, and included approximately 0.6% negative impact related to divested businesses
    • Original equipment bookings were $531.7 million, up 5.6%, or 7.7% on a constant currency basis
    • Aftermarket bookings were $491.7 million, down 3.0%, or 0.7% on a constant currency basis
  • Backlog as of September 30, 2019 was $2.1 billion, up 13.0% versus year-end 2018, on 1.11 book-to-bill year-to-date
  • Sales were $996.5 million, up 4.6%, or 6.9% on a constant currency basis and included approximately 0.5% negative impact related to divested businesses
    • Aftermarket sales were $487.6 million, up 6.7%, or 9.4% on a constant currency basis
  • Reported gross and operating margins were 33.5% and 11.0%, up 110 basis points and 450 basis points, respectively
    • Adjusted gross and operating margins[2] were 33.8% and 12.0%, up 60 basis points and 100 basis points, respectively

“Flowserve delivered strong results for the 2019 third quarter, highlighted by top-line growth, margin expansion and a 20% improvement in our adjusted earnings,” said Scott Rowe, Flowserve’s president and chief executive officer. “We produced the sixth consecutive quarter of year-over-year bookings growth, as late-cycle project activity continued to advance. Despite the current geopolitical uncertainty and slow-down in North American oil and gas, we were able to deliver strong bookings in the quarter by leveraging our commercial intensity and strike zone initiatives within the Flowserve 2.0 transformation.”

Lee Eckert, Flowserve’s senior vice president and chief financial officer, added, “Based on our results through the first three quarters and our outlook, Flowserve today revised its full year EPS guidance ranges, including our Adjusted EPS[3] target range to $2.15 to $2.20. Additionally, our Flowserve 2.0 transformation initiatives continued to drive improvement in our free cash flow metrics, including a year-over-year increase of over $120 million through September 30.”

Rowe concluded, “As we look forward, we expect to build on the momentum of our Flowserve 2.0 transformation program and continue driving performance in any market environment. I am increasingly confident in Flowserve’s ability to deliver enhanced value for our customers, employees and shareholders.”

Full Year 2019 Guidance[3]

Flowserve today updated its 2019 EPS guidance ranges. The revised Reported EPS target range is now $1.85 to $1.90, with an Adjusted EPS target range of $2.15 to $2.20. Both the Reported and the Adjusted EPS target ranges are based on an expected full year revenue increase of approximately 2.5% to 3.5% year-over-year, including FX and divestiture headwinds totaling approximately 3%. Please reference Flowserve’s 2019 third quarter earnings presentation, available on our website, for updates to other guidance metrics.

Third Quarter 2019 Results Conference Call

Flowserve will host its conference call with the financial community on Thursday, October 31st at 11:00 AM Eastern. Scott Rowe, president and chief executive officer, as well as other members of the management team will be presenting. The call can be accessed by shareholders and other interested parties at www.flowserve.com under the “Investor Relations” section.

[1] See Reconciliation of Non-GAAP Measures table for detailed reconciliation of reported results to adjusted measures.

[2] Adjusted gross and operating margins are calculated by dividing adjusted gross profit and operating income, respectively, by revenues. Adjusted gross profit and adjusted operating income are derived by excluding the adjusted items. See reconciliation of Non-GAAP Measures table for detailed reconciliation.

[3] Adjusted 2019 EPS will exclude the Company’s realignment expenses, the impact from other specific one-time events and below-the-line foreign currency effects and utilizes year-end 2018 FX rates and approximately 132 million fully diluted shares.

_ FX headwind is calculated by comparing the difference between the actual average FX rates of 2018 and the year-end 2018 spot rates both as applied to our 2019 expectations, divided by the number of shares expected for 2019.

About Flowserve

Flowserve Corp. is one of the world’s leading providers of fluid motion and control products and services. Operating in more than 50 countries, the company produces engineered and industrial pumps, seals and valves as well as a range of related flow management services. More information about Flowserve can be obtained by visiting the company’s Web site at www.flowserve.com.

Safe Harbor Statement: This news release includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, as amended. Words or phrases such as, "may," "should," "expects," "could," "intends," "plans," "anticipates," "estimates," "believes," "forecasts," "predicts" or other similar expressions are intended to identify forward-looking statements, which include, without limitation, earnings forecasts, statements relating to our business strategy and statements of expectations, beliefs, future plans and strategies and anticipated developments concerning our industry, business, operations and financial performance and condition.

The forward-looking statements included in this news release are based on our current expectations, projections, estimates and assumptions. These statements are only predictions, not guarantees. Such forward-looking statements are subject to numerous risks and uncertainties that are difficult to predict. These risks and uncertainties may cause actual results to differ materially from what is forecast in such forward-looking statements, and include, without limitation, the following: a portion of our bookings may not lead to completed sales, and our ability to convert bookings into revenues at acceptable profit margins; changes in global economic conditions and the potential for unexpected cancellations or delays of customer orders in our reported backlog; our dependence on our customers’ ability to make required capital investment and maintenance expenditures; if we are not able to successfully execute and realize the expected financial benefits from our strategic transformation and realignment initiatives, our business could be adversely affected; risks associated with cost overruns on fixed-fee projects and in taking customer orders for large complex custom engineered products; the substantial dependence of our sales on the success of the oil and gas, chemical, power generation and water management industries; the adverse impact of volatile raw materials prices on our products and operating margins; economic, political and other risks associated with our international operations, including military actions, trade embargoes or changes to tariffs or trade agreements that could affect customer markets, particularly North African, Russian and Middle Eastern markets and global oil and gas producers, and non-compliance with U.S. export/re-export control, foreign corrupt practice laws, economic sanctions and import laws and regulations; increased aging and slower collection of receivables, particularly in Latin America and other emerging markets; our exposure to fluctuations in foreign currency exchange rates, including in hyperinflationary countries such as Venezuela and Argentina; our furnishing of products and services to nuclear power plant facilities and other critical processes; potential adverse consequences resulting from litigation to which we are a party, such as litigation involving asbestos-containing material claims; expectations regarding acquisitions and the integration of acquired businesses; our relative geographical profitability and its impact on our utilization of deferred tax assets, including foreign tax credits; the potential adverse impact of an impairment in the carrying value of goodwill or other intangible assets; our dependence upon third-party suppliers whose failure to perform timely could adversely affect our business operations; the highly competitive nature of the markets in which we operate; environmental compliance costs and liabilities; potential work stoppages and other labor matters; access to public and private sources of debt financing; our inability to protect our intellectual property in the U.S., as well as in foreign countries; obligations under our defined benefit pension plans; our internal control over financial reporting may not prevent or detect misstatements because of its inherent limitations, including the possibility of human error, the circumvention or overriding of controls, or fraud; 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 affect our operating results; our information technology infrastructure could be subject to service interruptions, data corruption, cyber-based attacks or network security breaches, which could disrupt our business operations and result in the loss of critical and confidential information; ineffective internal controls could impact the accuracy and timely reporting of our business and financial results; and other factors described from time to time in our filings with the Securities and Exchange Commission.

All forward-looking statements included in this news release are based on information available to us on the date hereof, and we assume no obligation to update any forward-looking statement.

The Company reports its financial results in accordance with U.S. generally accepted accounting principles (GAAP). However, management believes that non-GAAP financial measures which exclude certain non-recurring items present additional useful comparisons between current results and results in prior operating periods, providing investors with a clearer view of the underlying trends of the business. Management also uses these non-GAAP financial measures in making financial, operating, planning and compensation decisions and in evaluating the Company's performance. Throughout our materials we refer to non-GAAP measures as “Adjusted.” Non-GAAP financial measures, which may be inconsistent with similarly captioned measures presented by other companies, should be viewed in addition to, and not as a substitute for, the Company’s reported results prepared in accordance with GAAP.

FLOWSERVE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)

Three Months Ended September 30,

(Amounts in thousands, except per share data)

2019

 

2018

 
Sales

$

996,544

 

$

952,716

 

Cost of sales

 

(662,855

)

 

(644,215

)

Gross profit

 

333,689

 

 

308,501

 

Selling, general and administrative expense

 

(226,216

)

 

(241,878

)

Loss on sale of businesses

 

-

 

 

(7,727

)

Net earnings from affiliates

 

2,087

 

 

3,295

 

Operating income

 

109,560

 

 

62,191

 

Interest expense

 

(13,981

)

 

(13,826

)

Interest income

 

2,253

 

 

1,269

 

Other income (expense), net

 

(1,622

)

 

(5,283

)

Earnings before income taxes

 

96,210

 

 

44,351

 

Provision for income taxes

 

(25,647

)

 

(14,912

)

Net earnings, including noncontrolling interests

 

70,563

 

 

29,439

 

Less: Net earnings attributable to noncontrolling interests

 

(2,120

)

 

(1,234

)

Net earnings attributable to Flowserve Corporation

$

68,443

 

$

28,205

 

 
Net earnings per share attributable to Flowserve Corporation common shareholders:
Basic

$

0.52

 

$

0.22

 

Diluted

 

0.52

 

 

0.21

 

RECONCILIATION OF NON-GAAP MEASURES
(Unaudited)
 

Three Months Ended September 30, 2019

(Amounts in thousands, except per share data)

As Reported (a)

 

Realignment (1)

 

Other Items

 

As Adjusted

 
Sales

$

996,544

 

$

-

 

$

-

 

$

996,544

 

Gross profit

 

333,689

 

 

(3,420

)

 

-

 

 

337,109

 

Gross margin

 

33.5

%

 

-

 

 

-

 

 

33.8

%

 
Selling, general and administrative expense

 

(226,216

)

 

(1,374

)

 

(5,058

)

(3

)

 

(219,784

)

 
Operating income

 

109,560

 

 

(4,794

)

 

(5,058

)

 

119,412

 

Operating income as a percentage of sales

 

11.0

%

 

-

 

 

-

 

 

12.0

%

 
Interest and other expense, net

 

(13,350

)

 

-

 

 

(948

)

(4

)

 

(12,402

)

 
Earnings before income taxes

 

96,210

 

 

(4,794

)

 

(6,006

)

 

107,010

 

Provision for income taxes

 

(25,647

)

 

978

 

(2

)

 

1,078

 

(5

)

 

(27,703

)

Tax Rate

 

26.7

%

 

20.4

%

 

17.9

%

 

25.9

%

 
Net earnings attributable to Flowserve Corporation

$

68,443

 

$

(3,816

)

$

(4,928

)

$

77,187

 

 
Net earnings per share attributable to Flowserve Corporation common shareholders:
Basic

$

0.52

 

$

(0.03

)

$

(0.04

)

$

0.59

 

Diluted

 

0.52

 

 

(0.03

)

 

(0.04

)

 

0.59

 

 
Basic number of shares used for calculation

 

131,145

 

 

131,145

 

 

131,145

 

 

131,145

 

Diluted number of shares used for calculation

 

131,846

 

 

131,846

 

 

131,846

 

 

131,846

 

 
(a) Reported in conformity with U.S. GAAP
Notes:
(1) Represents realignment expense incurred as a result of realignment programs
(2) Includes tax impact of items above
(3) Represents Flowserve 2.0 transformation efforts
(4) Represents below-the-line foreign exchange impacts
(5) Includes tax impact of items above
RECONCILIATION OF NON-GAAP MEASURES
(Unaudited)
 

Three Months Ended September 30, 2018

(Amounts in thousands, except per share data)

As Reported (a)

 

Realignment (1)

 

Other Items

 

As Adjusted

 
Sales

$

952,716

 

$

-

 

$

-

 

$

952,716

 

Gross profit

 

308,501

 

 

(8,208

)

 

-

 

 

316,709

 

Gross margin

 

32.4

%

 

-

 

 

-

 

 

33.2

%

 
Selling, general and administrative expense

 

(241,878

)

 

(2,919

)

 

(23,986

)

(3

)

 

(214,973

)

Loss on sale of business

 

(7,727

)

 

-

 

 

(7,727

)

(4

)

 

-

 

 
Operating income

 

62,191

 

 

(11,127

)

 

(31,713

)

 

105,031

 

Operating income as a percentage of sales

 

6.5

%

 

-

 

 

-

 

 

11.0

%

 
Interest and other expense, net

 

(17,840

)

 

-

 

 

(4,335

)

(5

)

 

(13,505

)

 
Earnings before income taxes

 

44,351

 

 

(11,127

)

 

(36,048

)

 

91,526

 

Provision for income taxes

 

(14,912

)

 

2,636

 

(2

)

 

8,857

 

(6

)

 

(26,405

)

Tax Rate

 

33.6

%

 

23.7

%

 

24.6

%

 

28.8

%

 
Net earnings attributable to Flowserve Corporation

$

28,205

 

$

(8,491

)

$

(27,191

)

$

63,887

 

 
Net earnings per share attributable to Flowserve Corporation common shareholders:
Basic

$

0.22

 

$

(0.06

)

$

(0.21

)

$

0.49

 

Diluted

$

0.21

 

$

(0.06

)

$

(0.21

)

$

0.49

 

 
Basic number of shares used for calculation

 

130,843

 

 

130,843

 

 

130,843

 

 

130,843

 

Diluted number of shares used for calculation

 

131,350

 

 

131,350

 

 

131,350

 

 

131,350

 

 
(a) Reported in conformity with U.S. GAAP
Notes:
(1) Represents realignment expense incurred as a result of realignment programs
(2) Includes tax impact of items above
(3) Represents Flowserve 2.0 transformation efforts
(4) Represents FPD loss on sale of businesses
(5) Represents below-the-line foreign exchange impacts
(6) Includes tax impact of items above

FLOWSERVE CORPORATION

SEGMENT INFORMATION

(Unaudited)

 

FLOWSERVE PUMP DIVISION

Three Months Ended September 30,

(Amounts in millions, except percentages)

2019

 

2018

Bookings

$

742.1

 

$

698.4

 

Sales

 

682.7

 

 

648.0

 

Gross profit

 

230.4

 

 

199.9

 

Gross profit margin

 

33.7

%

 

30.8

%

SG&A

 

147.1

 

 

139.0

 

Loss on sale of businesses

 

-

 

 

(7.7

)

Segment operating income

 

85.5

 

 

56.5

 

Segment operating income as a percentage of sales

 

12.5

%

 

8.7

%

 

FLOW CONTROL DIVISION

Three Months Ended September 30,

(Amounts in millions, except percentages)

2019

2018

Bookings

$

282.7

 

$

314.2

 

Sales

 

314.8

 

 

306.2

 

Gross profit

 

102.6

 

 

109.4

 

Gross profit margin

 

32.6

%

 

35.7

%

SG&A

 

52.6

 

 

52.9

 

Segment operating income

 

50.0

 

 

56.4

 

Segment operating income as a percentage of sales

 

15.9

%

 

18.4

%

FLOWSERVE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)

Nine Months Ended September 30,

(Amounts in thousands, except per share data)

2019

 

2018

 
Sales

$

2,876,679

 

$

2,845,798

 

Cost of sales

 

(1,930,881

)

 

(1,979,807

)

Gross profit

 

945,798

 

 

865,991

 

Selling, general and administrative expense

 

(655,046

)

 

(711,845

)

Loss on sale of businesses

 

-

 

 

(7,727

)

Net earnings from affiliates

 

8,057

 

 

7,908

 

Operating income

 

298,809

 

 

154,327

 

Interest expense

 

(42,025

)

 

(43,645

)

Interest income

 

6,494

 

 

4,237

 

Other income (expense), net

 

(8,098

)

 

(17,206

)

Earnings before income taxes

 

255,180

 

 

97,713

 

Provision for income taxes

 

(64,646

)

 

(37,028

)

Net earnings, including noncontrolling interests

 

190,534

 

 

60,685

 

Less: Net earnings attributable to noncontrolling interests

 

(6,659

)

 

(4,117

)

Net earnings attributable to Flowserve Corporation

$

183,875

 

$

56,568

 

 
Net earnings per share attributable to Flowserve Corporation common shareholders:
Basic

$

1.40

 

$

0.43

 

Diluted

 

1.40

 

 

0.43

 

RECONCILIATION OF NON-GAAP MEASURES
(Unaudited)
 

Nine Months Ended September 30, 2019

(Amounts in thousands, except per share data)

As Reported (a)

 

Realignment (1)

 

Other Items

 

As Adjusted

 
Sales

$

2,876,679

 

$

-

 

$

-

 

$

2,876,679

 

Gross profit

 

945,798

 

 

(12,783

)

 

-

 

 

958,581

 

Gross margin

 

32.9

%

 

-

 

 

-

 

 

33.3

%

 
Selling, general and administrative expense

 

(655,046

)

 

13,619

 

 

(21,044

)

(3

)

 

(647,621

)

 
Operating income

 

298,809

 

 

836

 

 

(21,044

)

 

319,017

 

Operating income as a percentage of sales

 

10.4

%

 

-

 

 

-

 

 

11.1

%

 
Interest and other expense, net

 

(43,629

)

 

-

 

 

(6,734

)

(4

)

 

(36,895

)

 
Earnings before income taxes

 

255,180

 

 

836

 

 

(27,778

)

 

282,122

 

Provision for income taxes

 

(64,646

)

 

1,939

 

(2

)

 

6,341

 

(5

)

 

(72,926

)

Tax Rate

 

25.3

%

 

-231.9

%

 

22.8

%

 

25.8

%

 
Net earnings attributable to Flowserve Corporation

$

183,875

 

$

2,775

 

$

(21,437

)

$

202,537

 

 
Net earnings per share attributable to Flowserve Corporation common shareholders:
Basic

$

1.40

 

$

0.02

 

$

(0.16

)

$

1.54

 

Diluted

 

1.40

 

 

0.02

 

 

(0.16

)

 

1.54

 

 
Basic number of shares used for calculation

 

131,092

 

 

131,092

 

 

131,092

 

 

131,092

 

Diluted number of shares used for calculation

 

131,697

 

 

131,697

 

 

131,697

 

 

131,697

 

 
(a) Reported in conformity with U.S. GAAP
Notes:
(1) Represents realignment (expense) income incurred as a result of realignment programs. Income in selling, general and administrative due to gains from the sales of non-strategic manufacturing facilities that are included in our Realignment Programs.
(2) Includes tax impact of items above
(3) Represents Flowserve 2.0 transformation efforts
(4) Represents below-the-line foreign exchange impacts
(5) Includes tax impact of items above
RECONCILIATION OF NON-GAAP MEASURES
(Unaudited)
 

Nine Months Ended September 30, 2018

(Amounts in thousands, except per share data)

As Reported (a)

 

Realignment (1)

 

Other Items

 

As Adjusted

 
Sales

$

2,845,798

 

$

-

 

$

-

 

$

2,845,798

 

Gross profit

 

865,991

 

 

(31,593

)

 

(7,713

)

(3

)

 

905,297

 

Gross margin

 

30.4

%

 

-

 

 

-

 

 

31.8

%

 
Selling, general and administrative expense

 

(711,845

)

 

(11,747

)

 

(44,365

)

(4

)

 

(655,733

)

Gain on sale of business

 

(7,727

)

 

-

 

 

(7,727

)

(5

)

 

-

 

 
Operating income

 

154,327

 

 

(43,340

)

 

(59,805

)

 

257,472

 

Operating income as a percentage of sales

 

5.4

%

 

-

 

 

-

 

 

9.0

%

 
Interest and other expense, net

 

(56,614

)

 

-

 

 

(16,349

)

(6

)

 

(40,265

)

 
Earnings before income taxes

 

97,713

 

 

(43,340

)

 

(76,154

)

 

217,207

 

Provision for income taxes

 

(37,028

)

 

9,652

 

(2

)

 

13,211

 

(7

)

 

(59,891

)

Tax Rate

 

37.9

%

 

22.3

%

 

17.3

%

 

27.6

%

 
Net earnings attributable to Flowserve Corporation

$

56,568

 

$

(33,688

)

$

(62,943

)

$

153,199

 

 
Net earnings per share attributable to Flowserve Corporation common shareholders:
Basic

$

0.43

 

$

(0.26

)

$

(0.48

)

$

1.17

 

Diluted

$

0.43

 

$

(0.26

)

$

(0.48

)

$

1.17

 

 
Basic number of shares used for calculation

 

130,816

 

 

130,816

 

 

130,816

 

 

130,816

 

Diluted number of shares used for calculation

 

131,224

 

 

131,224

 

 

131,224

 

 

131,224

 

 
(a) Reported in conformity with U.S. GAAP
Notes:
(1) Represents realignment expense incurred as a result of realignment programs
(2) Includes tax impact of items above
(3) Represents $7.7 million related to FPD divestiture write-down of assets
(4) Represents $9.7 million related to FPD divestiture write-down of assets, $7.3 million related to implementation costs for the adoption of ASC 606 and $27.4 million related to Flowserve 2.0 transformation efforts
(5) Represents IPD loss on sale of businesses
(6) Represents below-the-line foreign exchange impacts
(7) Includes tax impact of items above

FLOWSERVE CORPORATION

SEGMENT INFORMATION

(Unaudited)

 

FLOWSERVE PUMP DIVISION

Nine Months Ended September 30,

(Amounts in millions, except percentages)

2019

2018

Bookings

$

2,253.5

 

$

2,023.2

 

Sales

 

1,966.8

 

 

1,960.8

 

Gross profit

 

653.8

 

 

569.6

 

Gross profit margin

 

33.2

%

 

29.0

%

SG&A

 

419.7

 

 

447.8

 

Loss on sale of businesses

 

-

 

 

(7.7

)

Segment operating income

 

242.1

 

 

122.8

 

Segment operating income as a percentage of sales

 

12.3

%

 

6.3

%

 

 

FLOW CONTROL DIVISION

Nine Months Ended September 30,

(Amounts in millions, except percentages)

2019

2018

Bookings

$

942.8

 

$

957.9

 

Sales

 

913.9

 

 

889.9

 

Gross profit

 

299.8

 

 

298.6

 

Gross profit margin

 

32.8

%

 

33.6

%

SG&A

 

159.2

 

 

161.1

 

Segment operating income

 

140.6

 

 

136.7

 

Segment operating income as a percentage of sales

 

15.4

%

 

15.4

%

 

Third Quarter and Year-to-Date 2019 - Segment Results

(dollars in millions, comparison vs. 2018 third quarter and year-to-date, unaudited)

 

FPD

FCD

3rd Qtr

YTD

3rd Qtr

YTD

Bookings

$

742.1

 

$

2,253.5

 

$

282.7

 

$

942.8

 

- vs. prior year

 

6.3

%

 

11.4

%

 

-10.0

%

 

-1.6

%

- on constant currency

 

8.7

%

 

14.9

%

 

-8.3

%

 

1.2

%

 
Sales

$

682.7

 

$

1,966.8

 

$

314.8

 

$

913.9

 

- vs. prior year

 

5.4

%

 

0.3

%

 

2.8

%

 

2.7

%

- on constant currency

 

7.7

%

 

3.3

%

 

4.9

%

 

5.5

%

 
Gross Profit

$

230.4

 

$

653.8

 

$

102.6

 

$

299.8

 

- vs. prior year

 

15.3

%

 

14.8

%

 

-6.2

%

 

0.4

%

 
Gross Margin (% of sales)

 

33.7

%

 

33.2

%

 

32.6

%

 

32.8

%

- vs. prior year (in basis points) 290 bps 420 bps (310) bps (80) bps
 
Operating Income

$

85.5

 

$

242.1

 

$

50.0

 

$

140.6

 

- vs. prior year

 

51.3

%

 

97.1

%

 

-11.3

%

 

2.9

%

- on constant currency

 

55.0

%

 

104.7

%

 

-10.6

%

 

4.8

%

 
Operating Margin (% of sales)

 

12.5

%

 

12.3

%

 

15.9

%

 

15.4

%

- vs. prior year (in basis points) 380 bps 600 bps (250) bps - bps
 
Adjusted Operating Income *

$

88.5

 

$

237.2

 

$

50.8

 

$

142.4

 

- vs. prior year

 

24.5

%

 

31.1

%

 

-10.7

%

 

0.8

%

- on constant currency

 

27.4

%

 

36.2

%

 

-10.0

%

 

2.7

%

 
Adj. Oper. Margin (% of sales)*

 

13.0

%

 

12.1

%

 

16.1

%

 

15.6

%

- vs. prior year (in basis points) 200 bps 290 bps (250) bps (30) bps
 
Backlog

$

1,514.6

 

$

627.0

 

 
* Adjusted Operating Income and Adjusted Operating Margin exclude realignment charges
and other specific discrete items
FLOWSERVE CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)

September 30,

 

December 31,

(Amounts in thousands, except par value)

2019

2018

 
ASSETS
Current assets:
Cash and cash equivalents

$

547,270

 

$

619,683

 

Accounts receivable, net of allowance for doubtful accounts of $52,013 and $51,501, respectively

 

789,448

 

 

792,434

 

Contract assets, net

 

258,299

 

 

228,579

 

Inventories, net

 

687,239

 

 

633,871

 

Prepaid expenses and other

 

113,404

 

 

108,578

 

Total current assets

 

2,395,660

 

 

2,383,145

 

Property, plant and equipment, net of accumulated depreciation of $989,117 and
$956,634, respectively

 

575,845

 

 

610,096

 

Operating lease right-of-use assets, net

 

182,273

 

 

-

 

Goodwill

 

1,178,248

 

 

1,197,640

 

Deferred taxes

 

44,113

 

 

44,682

 

Other intangible assets, net

 

182,162

 

 

190,550

 

Other assets, net

 

206,191

 

 

190,164

 

Total assets

$

4,764,492

 

$

4,616,277

 

 
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable

$

398,215

 

$

418,893

 

Accrued liabilities

 

385,520

 

 

391,406

 

Contract liabilities

 

219,680

 

 

202,458

 

Debt due within one year

 

9,739

 

 

68,218

 

Operating lease liabilities

 

35,042

 

 

-

 

Total current liabilities

 

1,048,196

 

 

1,080,975

 

Long-term debt due after one year

 

1,350,265

 

 

1,414,829

 

Operating lease liabilities

 

146,839

 

 

-

 

Retirement obligations and other liabilities

 

449,388

 

 

459,693

 

Shareholders’ equity:
Common shares, $1.25 par value

 

220,991

 

 

220,991

 

Shares authorized – 305,000
Shares issued – 176,793
Capital in excess of par value

 

499,930

 

 

494,551

 

Retained earnings

 

3,651,126

 

 

3,543,007

 

Treasury shares, at cost – 46,053 and 46,237 shares, respectively

 

(2,042,140

)

 

(2,049,404

)

Deferred compensation obligation

 

8,277

 

 

7,117

 

Accumulated other comprehensive loss

 

(593,849

)

 

(573,947

)

Total Flowserve Corporation shareholders' equity

 

1,744,335

 

 

1,642,315

 

Noncontrolling interests

 

25,469

 

 

18,465

 

Total equity

 

1,769,804

 

 

1,660,780

 

Total liabilities and equity

$

4,764,492

 

$

4,616,277

 

FLOWSERVE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

Nine Months Ended September 30

(Amounts in thousands)

2019

 

2018

 
Cash flows – Operating activities:
Net earnings, including noncontrolling interests

$

190,534

 

$

60,685

 

Adjustments to reconcile net earnings to net cash provided (used) by operating activities:
Depreciation

 

69,007

 

 

72,668

 

Amortization of intangible and other assets

 

10,134

 

 

12,548

 

Loss on disposition of businesses

 

-

 

 

7,727

 

Stock-based compensation

 

22,507

 

 

14,130

 

Foreign currency, assets impairments and other non-cash adjustments

 

(8,284

)

 

31,678

 

Change in assets and liabilities:
Accounts receivable, net

 

(13,351

)

 

(9,481

)

Inventories, net

 

(68,695

)

 

(46,699

)

Contract assets, net

 

(36,325

)

 

(54,822

)

Prepaid expenses and other assets, net

 

3,786

 

 

(16,340

)

Accounts payable

 

(17,889

)

 

(29,963

)

Contract liabilities

 

21,323

 

 

3,410

 

Accrued liabilities and income taxes payable

 

(6,407

)

 

(13,690

)

Retirement obligations and other

 

(27,660

)

 

(1,480

)

Net deferred taxes

 

5,311

 

 

(4,033

)

Net cash flows provided (used) by operating activities

 

143,991

 

 

26,338

 

Cash flows – Investing activities:
Capital expenditures

 

(44,624

)

 

(49,976

)

Proceeds from disposal of assets and other

 

40,773

 

 

4,062

 

(Payments) proceeds from disposition of businesses

 

-

 

 

(3,663

)

Net cash flows provided (used) by investing activities

 

(3,851

)

 

(49,577

)

Cash flows – Financing activities:
Payments on long-term debt

 

(105,000

)

 

(45,000

)

Proceeds from short-term financing

 

75,000

 

 

-

 

Payments on short-term financing

 

(75,000

)

 

-

 

Proceeds under other financing arrangements

 

2,572

 

 

2,720

 

Payments under other financing arrangements

 

(8,903

)

 

(9,093

)

Repurchases of common shares

 

(5,432

)

 

-

 

Payments related to tax withholding for stock-based compensation

 

(3,835

)

 

(2,972

)

Payments of dividends

 

(74,695

)

 

(74,548

)

Other

 

(251

)

 

(4,333

)

Net cash flows provided (used) by financing activities

 

(195,544

)

 

(133,226

)

Effect of exchange rate changes on cash

 

(17,009

)

 

(17,038

)

Net change in cash and cash equivalents

 

(72,413

)

 

(173,503

)

Cash and cash equivalents at beginning of period

 

619,683

 

 

703,445

 

Cash and cash equivalents at end of period

$

547,270

 

$

529,942

 

 

Contacts

Flowserve
Investor Contacts:
Jay Roueche, Vice President, Investor Relations & Treasurer (972) 443-6560
Mike Mullin, Director, Investor Relations (972) 443-6636

Media Contact:
Lars Rosene, Vice President, Corporate & Marketing Communications (972) 443-6644

Contacts

Flowserve
Investor Contacts:
Jay Roueche, Vice President, Investor Relations & Treasurer (972) 443-6560
Mike Mullin, Director, Investor Relations (972) 443-6636

Media Contact:
Lars Rosene, Vice President, Corporate & Marketing Communications (972) 443-6644