Flowserve Reports Second Quarter 2013 Earnings
(Thomson Reuters ONE) -
Second Quarter EPS of $0.84 increased 27.3% from prior year
Increased bookings, sales, gross profit and operating income year-over-year;
margins improved
Reaffirmed 2013 Full Year EPS Target Range of $3.20 to $3.53 (split-adjusted)
DALLAS, July 24, 2013 - Flowserve Corporation (NYSE:FLS), a leading provider of
flow control products and services for the global infrastructure markets,
announced today its financial results for the 2013 second quarter. In addition,
Flowserve also today filed its Form 10-Q with the Securities and Exchange
Commission for the period ending June 30, 2013.
Highlights of 2013 Second Quarter (all comparisons versus prior year quarter,
unless otherwise noted):
* Fully diluted EPS of $0.84, up 27.3% compared to split-adjusted $0.66 per
share
* Bookings of $1.23 billion, up 1.3%, or 1.8% on a constant currency basis.
Sequentially, second quarter 2013 bookings increased 3.3%
* Aftermarket bookings of $505.0 million, essentially flat, and up
sequentially 5.7%
* Sales of $1.24 billion, up 4.8%, or 5.1% on a constant currency basis, and
up sequentially 13.0%
* Aftermarket sales of $492.5 million, up 3.7%, or 4.1% on a constant
currency basis
* Gross profit increased $37.0 million to $421.6 million, up 9.6%
* Gross margin improved 150 basis points to 34.0%
* SG&A as a percentage of sales increased 50 basis points to 19.4%, including
approximately 70 basis points net negative impact of certain discrete items
in the second quarter of 2012 and 2013
* Operating income increased $18.7 million to $183.5 million, up 11.3%
* Operating margin of 14.8% increased 90 basis points, or up approximately
150 basis points excluding the net negative impact of certain discrete items
year-over-year
"Our solid results in the 2013 second quarter further validate our strategies
and initiatives we have implemented," indicated Mark Blinn, Flowserve's
president and chief executive officer. "Disciplined bookings, increasing sales,
improving margins and enhanced capital structure efficiency are the formula for
our strong EPS improvement. Flowserve's 17,000 associates are customer focused
and producing results for our shareholders, driving robust first half 2013
performance that continues to support our full year EPS target range. We
appreciate their ongoing efforts and commitment, as well as the foundation they
have provided as we proceed into the second half of the year. Key takeaways
from the 2013 second quarter include:
* Recent initiatives, including 'One Flowserve', have added to higher gross
margins, overall operating margin and EPS growth for the quarter as well as
year-to-date compared to 2012;
* Bookings remained solid and disciplined, with larger project opportunities
on the horizon;
* Diversity in geographic exposure, business mix, customer base and end
markets is a major strength;
* Aftermarket strategies and run-rate original equipment projects again
delivered increased sales and gross profits;
* Earnings leverage realized on volume and gross margin increases, as single-
digit sales growth delivered double-digit profit improvement;
* SG&A expense and fixed cost leverage through ongoing cost control remains a
key focus;
* Additional internal initiatives and operational improvements represent
continued earnings opportunity; and
* While global economic conditions remain uncertain, we are confident that the
strength of our business model and served energy markets provide the
characteristics for continued long-term earnings growth."
"In the near term, we will remain focused on the customer and internal
operational opportunities within our control to further improve the operational
platform and end-user strategies. We are prepared for the large project
opportunities as they begin to reach award stage, expected later this year, but
will maintain our selectivity and discipline as we anticipate a competitive
environment for the early work."
Flowserve's financial results for the first six months of 2013 are highlighted
by fully diluted EPS of $1.51 per split-adjusted share, up 23.8%, on a 3.5%
increase in total sales to $2.3 billion. Gross profit of $794.9 million and
operating income of $354.0 million, during the first half of 2013, represented
margins of 34.0%, up 100 basis points, and 15.2%, up 160 basis points,
respectively. Bookings for the six months ended June 30, 2013 totaled over $2.4
billion.
Financial Performance and Guidance
"During the second quarter and first half of 2013, we have leveraged single-
digit revenue increases into mid-20% EPS growth through improving operations,
including a combination of solid revenue flow-through, margin improvement and
cost leverage, as well as share count," said Mike Taff, Flowserve's senior vice
president and chief financial officer. "With these attributes and our normal
earnings seasonality, we remain confident in reaffirming our 2013 split-adjusted
EPS guidance of $3.20 to $3.53."
"SG&A expense ticked up during the 2013 second quarter, as compared to 2012, due
primarily to certain discrete expenses this year and some one-time benefits a
year ago. These items represented a net impact of approximately $8 million
year-over-year, representing approximately 50% of the increase."
"While we are pleased with our income statement performance, we do recognize
additional internal opportunities remain available to us, primarily through
organic growth, further operational efficiencies, capital deployment and working
capital metrics. The 2013 second quarter realized an improvement in operating
cash flow sequentially with a 3-day reduction in DSO compared to prior year.
However year-to-date operating cash flow remains below 2012 levels. We have
identified a number of opportunities for working capital improvement that are
moving towards implementation, and we continue to believe significant cash flow
can be released and employed in our business or returned to shareholders, as we
continue to improve the operations and methodically pursue our long-term working
capital and cash flow goals."
"We remain strategically focused on deploying cash to the most accretive long-
term alternatives, and therefore, we remain committed to returning excess
capital to our shareholders while maintaining a solid balance sheet. In the
first half of 2013, Flowserve returned approximately $344 million in share
repurchases and dividends, and effectively completed last year's $1 billion
share repurchase program. Going forward, we will remain faithful to this
disciplined approach to capital deployment."
Operational Commentary and Segment Performance (all comparisons versus second
quarter 2012 unless otherwise noted)
Tom Pajonas, senior vice president and chief operating officer, said, "The
strength of our operating model, particularly the benefits of our
diversification, was evident this quarter. In a mixed market and while awaiting
the release of larger projects, our operational performance was solid. We
recognized significant improvement in gross margin, primarily at the IPD and FCD
segments, as we continue to leverage the 'One Flowserve' initiative across the
supply chain, contract management and research and development processes. EPD
gross margins improved on a solid sales increase and preliminary benefits from
ongoing operational improvements, though discrete SG&A items minimized the full
flow through to operating income. Disciplined and selective pursuit of new
bookings has resulted in a solid level of new work, as we continue to expect the
beginnings of larger orders to reach our markets in the second half of 2013. We
remain encouraged by the progress these larger original equipment projects are
making through the pre-FEED and FEED stages, while our core aftermarket and run-
rate business continues to provide the solid foundation for earnings stability."
Flowserve reports its operations through three segments: Engineered Product
Division (EPD), Industrial Product Division (IPD) and Flow Control Division
(FCD). Key financial highlights of segment performance for the second quarter
of 2013 include:
Second Quarter 2013 - Segment Results
(dollars in millions, comparison vs. 2012 second quarter, unaudited)
EPD IPD FCD
Bookings $ 606.5 $ 209.1 $ 447.0
- vs. prior year 0.6% -13.9% 8.6%
- on constant 1.9% -13.9% 8.4%
currency
Sales $ 625.0 $ 238.9 $ 411.2
- vs. prior year 6.5% 3.1% 2.4%
- on constant 7.2% 3.1% 2.4%
currency
Gross Profit $ 210.0 $ 62.2 $ 147.1
- vs. prior year 7.3% 11.5% 11.2%
Gross Margin (% of 33.6% 26.0% 35.8%
sales)
- vs. prior year (in basis 20 190 280
points)
Operating Income $ 98.2 $ 30.5 $ 72.9
- vs. prior year 3.3% 28.2% 20.7%
- on constant 3.3% 28.2% 20.7%
currency
Operating Margin (% of sales) 15.7% 12.8% 17.7%
- vs. prior year (in basis -50 250 270
points)
Backlog $ 1,383.7 $ 539.3 $ 795.7
Second Quarter 2013 Results Conference Call
Flowserve will host its conference call with the financial community on
Thursday, July 25, at 11:00 AM Eastern. Mark Blinn, 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.
Flowserve Contacts
Investor Contacts:
Mike Mullin, director, Investor Relations, (972) 443-6636
Jay Roueche, vice president, Investor Relations & Treasurer, (972) 443-6560
Media Contact:
Amy Allen, manager, Global Communications, (972) 443-6501
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; 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; 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 or trade embargoes that
could affect customer markets, particularly 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; our exposure to fluctuations in foreign currency exchange rates,
including in hyperinflationary countries such as Venezuela; 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; a
foreign government investigation regarding our participation in the United
Nations Oil-for-Food Program; 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; our inability to protect our intellectual property in the U.S., as well
as in foreign countries; obligations under our defined benefit pension plans;
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.
# # #
CONDENSED CONSOLIDATED STATEMENTS OF
INCOME
(Unaudited)
(Amounts in thousands, except per Three Months Ended June 30,
share data)
2013 2012
Sales $1,239,526 $ 1,182,225
Cost of sales (817,950) (797,623)
Gross profit 421,576 384,602
Selling, general and administrative (240,200) (223,892)
expense
Net earnings from affiliates 2,145 4,086
Operating income 183,521 164,796
Interest expense (13,125) (8,922)
Interest income 277 237
Other income (expense), net 616 (8,046)
Earnings before income taxes 171,289 148,065
Provision for income taxes (50,395) (39,580)
Net earnings, including 120,894 108,485
noncontrolling interests
Less: Net earnings attributable to (508) (1,169)
noncontrolling interests
Net earnings attributable to $ 120,386 $ 107,316
Flowserve Corporation
Net earnings per share attributable
to Flowserve Corporation common
shareholders:
Basic $ 0.85 $ 0.66
Diluted(1) 0.84 0.66
Cash dividends declared per share $ 0.14 $ 0.12
(1)Calculated using fully diluted
shares of 142,882 and 162,797
shares, respectively
CONDENSED CONSOLIDATED STATEMENTS OF
INCOME
(Unaudited)
(Amounts in thousands, except per Six Months Ended June 30,
share data)
2013 2012
Sales $2,336,122 $ 2,257,205
Cost of sales (1,541,238) (1,513,420)
Gross profit 794,884 743,785
Selling, general and administrative (474,708) (445,781)
expense
Net earnings from affiliates 33,824 9,315
Operating income 354,000 307,319
Interest expense (25,216) (17,731)
Interest income 551 519
Other expense, net (10,412) (12,985)
Earnings before income taxes 318,923 277,122
Provision for income taxes (99,128) (75,095)
Net earnings, including 219,795 202,027
noncontrolling interests
Less: Net earnings attributable to (1,619) (1,586)
noncontrolling interests
Net earnings attributable to $ 218,176 $ 200,441
Flowserve Corporation
Net earnings per share attributable
to Flowserve Corporation common
shareholders:
Basic $ 1.52 $ 1.23
Diluted(2) 1.51 1.22
Cash dividends declared per share $ 0.28 $ 0.24
(2)Calculated using fully diluted
shares of 144,256 and 163,945
shares, respectively
CONDENSED CONSOLIDATED BALANCE
SHEETS
(Unaudited)
(Amounts in thousands, except par June 30, December 31,
value)
2013 2012
ASSETS
Current assets:
Cash and cash equivalents $ 104,712 $ 304,252
Accounts receivable, net of
allowance for doubtful accounts of 1,080,240 1,103,724
$24,796
and $21,491, respectively
Inventories, net 1,184,242 1,086,663
Deferred taxes 148,273 151,093
Prepaid expenses and other 94,399 94,484
Total current assets 2,611,866 2,740,216
Property, plant and equipment, net
of accumulated depreciation of 660,119 654,179
$806,862
and $784,864, respectively
Goodwill 1,045,958 1,053,852
Deferred taxes 25,385 26,706
Other intangible assets, net 144,165 150,075
Other assets, net 150,650 185,930
Total assets $4,638,143 $ 4,810,958
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable $ 526,116 $ 616,900
Accrued liabilities 805,929 906,593
Debt due within one year 277,873 59,478
Deferred taxes 10,172 7,654
Total current liabilities 1,620,090 1,590,625
Long-term debt due after one year 849,211 869,116
Retirement obligations and other 446,893 456,742
liabilities
Shareholders' equity:
Common shares, $1.25 par value 220,991 220,991
Shares authorized - 305,000
Shares issued - 176,793 and
176,793, respectively
Capital in excess of par value 455,984 467,856
Retained earnings 2,757,262 2,579,308
Treasury shares, at cost - 37,300 (1,447,399) (1,164,496)
and 32,389 shares, respectively
Deferred compensation obligation 10,663 10,870
Accumulated other comprehensive loss (281,369) (224,310)
Total Flowserve Corporation 1,716,132 1,890,219
shareholders' equity
Noncontrolling interest 5,814 4,256
Total equity 1,721,949 1,894,475
Total liabilities and equity $4,638,143 $ 4,810,958
CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS
(Unaudited)
(Amounts in thousands) Six Months Ended June 30,
2013 2012
Cash flows - Operating activities:
Net earnings, including $ 219,795 $ 202,027
noncontrolling interests
Adjustments to reconcile net
earnings to net cash (used) provided
by operating
activities:
Depreciation 43,769 44,340
Amortization of intangible and other 7,854 10,172
assets
Net gain (loss) on disposition of 347 (10,549)
assets
Gain on sale of equity investment in (12,995) -
affiliate
Gain on remeasurement of acquired (15,315) -
assets
Excess tax benefits from stock-based (8,399) (10,946)
compensation arrangements
Stock-based compensation 16,285 15,425
Net earnings from affiliates, net of (2,748) (4,723)
dividends received
Change in assets and liabilities:
Accounts receivable, net 5,892 (13,317)
Inventories, net (120,671) (155,739)
Prepaid expenses and other (9,991) (16,617)
Other assets, net (2,032) (7,219)
Accounts payable (94,326) (46,763)
Accrued liabilities and income taxes (69,784) 49,908
payable
Retirement obligations and other 7,848 5,140
liabilities
Net deferred taxes 1,645 (764)
Net cash flows (used) provided by (32,826) 60,375
operating activities
Cash flows - Investing activities:
Capital expenditures (61,159) (56,885)
Proceeds from disposal of assets 336 7,902
Payments for acquisitions, net of (10,143) (3,996)
cash acquired
Proceeds from (contributions to) 46,240 (1,620)
equity investments in affiliates
Net cash flows used by investing (24,726) (54,599)
activities
Cash flows - Financing activities:
Excess tax benefits from stock-based 8,399 10,946
compensation arrangements
Payments on long-term debt (10,000) (12,500)
Short-term financing, net 209,000 300,000
Borrowings under other financing 629 4,826
arrangements, net
Repurchase of common shares (306,317) (432,898)
Payments of dividends (37,621) (37,082)
Other (73) (460)
Net cash flows used by financing (135,983) (167,168)
activities
Effect of exchange rate changes on (6,005) (751)
cash
Net change in cash and cash (199,540) (162,143)
equivalents
Cash and cash equivalents at 304,252 337,356
beginning of year
Cash and cash equivalents at end of $ 104,712 $ 175,213
period
SEGMENT INFORMATION
ENGINEERED PRODUCT DIVISION Three Months Ended June 30,
(Amounts in millions, except 2013 2012
percentages)
Bookings $ 606.5 $ 602.8
Sales 625.0 586.7
Gross profit 210.0 195.7
Gross profit margin 33.6% 33.4%
Operating income 98.2 95.1
Operating margin 15.7% 16.2%
INDUSTRIAL PRODUCT DIVISION Three Months Ended June 30,
(Amounts in millions, except 2013 2012
percentages)
Bookings $ 209.1 $ 242.9
Sales 238.9 231.7
Gross profit 62.2 55.8
Gross profit margin 26.0% 24.1%
Operating income 30.5 23.8
Operating margin 12.8% 10.3%
FLOW CONTROL DIVISION Three Months Ended June 30,
(Amounts in millions, except 2013 2012
percentages)
Bookings $ 447.0 $ 411.6
Sales 411.2 401.5
Gross profit 147.1 132.3
Gross profit margin 35.8% 33.0%
Operating income 72.9 60.4
Operating margin 17.7% 15.0%
SEGMENT INFORMATION
ENGINEERED PRODUCT DIVISION Six Months Ended June 30,
(Amounts in millions, except 2013 2012
percentages)
Bookings $ 1,182.3 $ 1,265.7
Sales 1,164.6 1,121.5
Gross profit 398.2 379.1
Gross profit margin 34.2% 33.8%
Operating income 182.8 187.2
Operating margin 15.7% 16.7%
INDUSTRIAL PRODUCT DIVISION Six Months Ended June 30,
(Amounts in millions, except 2013 2012
percentages)
Bookings $ 416.2 $ 474.8
Sales 450.2 444.9
Gross profit 115.2 105.4
Gross profit margin 25.6% 23.7%
Operating income 51.8 41.2
Operating margin 11.5% 9.3%
FLOW CONTROL DIVISION Six Months Ended June 30,
(Amounts in millions, except 2013 2012
percentages)
Bookings $ 877.6 $ 791.6
Sales 795.2 765.4
Gross profit 281.0 259.5
Gross profit margin 35.3% 33.9%
Operating income 160.0 116.0
Operating margin 20.1% 15.2%
This announcement is distributed by Thomson Reuters on behalf of
Thomson Reuters clients. The owner of this announcement warrants that:
(i) the releases contained herein are protected by copyright and
other applicable laws; and
(ii) they are solely responsible for the content, accuracy and
originality of the information contained therein.
Source: Flowserve Corporation via Thomson Reuters ONE
[HUG#1718490]
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Datum: 24.07.2013 - 22:17 Uhr
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News-ID 281623
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