Flowserve Reports Third Quarter 2013 Results
(Thomson Reuters ONE) -
Third Quarter EPS of $0.90 increased 30.4%
from prior year
Increased bookings, sales, gross profit and
operating income year-over-year; margins
improved
Narrowed 2013 Full Year EPS Target Range to
$3.33 to $3.53
DALLAS, October 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 third quarter. In addition,
Flowserve also today filed its Form 10-Q
with the Securities and Exchange Commission
for the period ended September 30, 2013.
Highlights of 2013 Third Quarter (all
comparisons versus prior year quarter,
unless otherwise noted):
* Fully diluted EPS of $0.90, up 30.4%
compared to $0.69 per share
* Fully diluted EPS up approximately
22% excluding below the line FX
currency effects year over year
* Bookings of $1.23 billion, up 3.7%, or
3.4% on a constant currency basis
* Original equipment bookings of
$750.3 million, up 5.6%, or 4.4% on
a constant currency basis, and up
sequentially 3.6%
* Aftermarket bookings of $479.5
million, up 0.9%, or 1.9% on a
constant currency basis
* Sales of $1.23 billion, up 5.4%, or
6.4% on a constant currency basis
* Aftermarket sales of $464.7
million, up 1.4%, or 2.5% on a
constant currency basis
* Gross profit increased $33.1 million to
$422.7 million, up 8.5%
* Gross margin improved 100 basis points
to 34.4%
* SG&A spend essentially flat, and as a
percentage of sales decreased 70 basis
points to 18.8%
* Operating income increased $27.7
million to $193.4 million, up 16.7%
* Operating margin of 15.7% increased
150 basis points
"We are pleased with the progress and
momentum demonstrated thus far in 2013,
evidenced by these strong third quarter
results," said Mark Blinn, Flowserve's
president and chief executive officer.
"Our continued internal improvement
initiatives have the company well-
positioned for disciplined profitable
growth, continued operational improvement
and project opportunities. Key takeaways
from the 2013 third quarter include:
* Ongoing operational excellence
initiatives, including 'One Flowserve,'
buoyed our margin improvements and
supported EPS growth for the quarter as
well as year-to-date compared to 2012;
* Solid year-over-year and sequential OE
bookings growth, particularly in EPD,
is a positive indicator despite a
difficult 2012 compare quarter that
included large IPD orders exceeding $90
million;
* Continued bidding discipline remains
paramount, as initial large project
opportunities anticipated to be highly
competitive;
* Diversity in geographic exposure,
business mix, customer base and end
markets remains a major strength;
* Aftermarket strategies and run-rate
original equipment projects again
contributed to increased sales and
gross profits, and producing an
improved level-loading of our business
during the year;
* Significant shipments of "legacy"
projects suppressed EPD margins this
quarter, but improved past-due metrics
and enhanced the quality of quarter-end
backlog;
* Earnings leverage on volume in EPD and
gross margin increases in FCD, again
drove single-digit sales growth into
double-digit profit improvement for the
third consecutive quarter;
* IPD gross margin increase of 120 basis
points is encouraging progress,
solidifying the operational platform to
pursue growth;
* Strong SG&A expense and fixed cost
leverage realized and remains a key
focus; and
* While some uncertainty remains within
the global economy, the strength of our
business model and the energy markets
we serve provide confidence to our
outlook for long-term earnings growth."
"In summary, our strong third quarter
results again demonstrate that our internal
initiatives, disciplined approach and end-
user strategies are delivering value to our
customers, and in turn to Flowserve
shareholders."
Financial Performance and Guidance
"For the third quarter of 2013, our single-
digit revenue increase produced solid
operating leverage and incremental
margins. These improvements, when combined
with the share count reduction, delivered
EPS growth over 30%," commented Mike Taff,
Flowserve's senior vice president and chief
financial officer. "Focused cost control
yielded impressive SG&A leverage during the
2013 third quarter, as compared to 2012,
driving SG&A as a percent of sales to
18.8%, as each segment delivered a
reduction in absolute dollar SG&A spend."
"Even with our strong third quarter
financial results, we continue to address
opportunities to improve our performance.
Initiatives to improve our working capital
are an example and are gaining traction. In
the 2013 third quarter, we realized solid
operating cash flow improvement both year-
over-year and sequentially. We also showed
progress in a five day reduction in DSO
compared to prior year, which builds on the
three day improvement in the second
quarter. With meaningful "legacy"
shipments, we also saw significant
improvement in our past due backlog,
although our inventory turns were
essentially flat. Overall, this progress
validates that our focus is well-placed and
that opportunities remain available."
"As we pursue our long-term working capital
and cash flow goals, we remain
strategically focused on deploying cash to
the most accretive long-term alternatives,
including organic and acquisitive
investments or by returning excess capital
to our shareholders, all while maintaining
a solid balance sheet. Through the first
nine months of 2013, Flowserve returned
approximately $427 million in share
repurchases and dividends. Going forward,
we will remain faithful to this disciplined
approach to capital deployment."
"We are encouraged by the year-to-date
results we have delivered with a more
level-loaded business, but we still
anticipate the fourth quarter to be the
pinnacle of the full year. As such, we
have increased the lower-end of our prior
guidance range, and now expect 2013 EPS
between $3.33 and $3.53."
Operational Commentary and Segment
Performance (all comparisons versus third
quarter 2012 unless otherwise noted)
"Our strong and improved operational
performance was validated by these solid
third quarter results," said Tom Pajonas,
senior vice president and chief operating
officer. "In particular, the benefits from
our 'One Flowserve' initiatives continue to
enhance our operations, while our
commitment to a disciplined and selective
pursuit of project work is designed to
generate sales with the desired outcomes.
Together, this formula in the 2013 third
quarter delivered significant flow through
to the operating income line in EPD, with
continued strong income and margin growth
in FCD. As we look ahead, these ongoing
essentials are positioning the business to
maximize project opportunities as the cycle
gains momentum."
"In the third quarter 2013, Flowserve
customers entrusted us with our highest
level of original equipment bookings since
the first quarter of 2012, representing
continued strong run-rate activity plus a
few medium size awards. With regard to
larger orders, we remain encouraged by the
size and number of projects that are
progressing through the pre-FEED and FEED
stages, including a few which have already
been officially awarded to EPC firms. Our
larger OE bookings typically follow this
process, and therefore the vast majority of
opportunities are still on the horizon. We
anticipate that initial bidding
opportunities for larger projects will
prove very competitive. As such, we will
maintain our discipline and selectivity to
ensure the quality of our backlog."
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 third quarter of 2013 include:
Third Quarter 2013 - Segment Results
------------------------------------------
(dollars in millions, comparison vs.
2012 third quarter, unaudited)
EPD IPD FCD
Bookings $ $ $
665.3 228.5 373.2
- vs.
prior 20.2% -19.4% -2.1%
year
- on
constant 20.9% -20.5% -3.2%
currency
Sales $ 651.4 $ $
222.4 394.4
- vs.
prior 14.8% -8.7% -0.1%
year
- on
constant 17.8% -9.5% -1.1%
currency
Gross $ $ 56.8 $
Profit 219.2 147.4
- vs.
prior 14.0% -3.9% 5.6%
year
Gross
Margin (% 33.7% 25.5% 37.4%
of sales)
- vs. prior
year (in -20 120 200
basis points)
Operating $ $ 25.2 $
Income 114.0 76.7
- vs.
prior 31.0% -5.3% 12.3%
year
- on
constant 36.8% -9.0% 13.8%
currency
Operating
Margin (% of 17.5% 11.3% 19.4%
sales)
- vs. prior
year (in 220 40 210
basis points)
Backlog $ $ $
1,411.8 561.5 781.1
Third Quarter 2013 Year-to-Date Highlights
For the first nine months of 2013,
Flowserve's fully diluted EPS was $2.41 per
share, up 26.2%, on a 4.2% increase in
total sales to $3.57 billion. Gross profit
of $1.22 billion and operating income of
$547.4 million, during the first nine
months of 2013, represented margins of
34.2%, up 110 basis points, and 15.4%, up
160 basis points, respectively. Bookings
for the nine months ended September
30, 2013 totaled over $3.6 billion.
Third Quarter 2013 Results Conference Call
Flowserve will host its conference call
with the financial community on Friday,
October 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:
Lars Rosene, vice president, Global
Communications & Public Affairs, (972)
443-6644
Amy Allen, manager, Global Communications &
Public Affairs, (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; changes in the global financial
markets and the availability of capital 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;
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 share Three Months Ended September 30,
data)
-----------------------------------------------
2013 2012
------------------------ ----------------------
Sales $ 1,229,057 $ 1,165,923
Cost of sales (806,318) (776,319)
------------------------ ----------------------
Gross profit 422,739 389,604
Selling, general and administrative expense (231,569) (227,797)
Net earnings from affiliates 2,218
3,899
------------------------ ----------------------
Operating income 193,388 165,706
Interest expense (13,046)
(12,144)
Interest income
325 208
Other income (expense), net 1,733
(9,167)
------------------------ ----------------------
Earnings before income taxes 182,400 144,603
Provision for income taxes (55,870)
(37,769)
------------------------ ----------------------
Net earnings, including noncontrolling 126,530 106,834
interests
Less: Net earnings attributable to
noncontrolling interests (259) (538)
------------------------ ----------------------
Net earnings attributable to Flowserve $ 126,271 $ 106,296
Corporation
------------------------ ----------------------
Net earnings per share attributable to
Flowserve Corporation common shareholders:
Basic $ 0.90 $ 0.70
Diluted(1)
0.90 0.69
Cash dividends declared per share $ 0.14 $ 0.12
(1)Calculated using fully diluted shares of 141,085 and 153,855
shares, respectively
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(Amounts in thousands, except per share Nine Months Ended September 30,
data)
-----------------------------------------------
2013 2012
------------------------ ----------------------
Sales $ 3,565,179 $ 3,423,128
Cost of sales (2,347,555) (2,289,739)
------------------------ ----------------------
Gross profit 1,217,624 1,133,389
Selling, general and administrative expense (706,278) (673,578)
Net earnings from affiliates 36,043 13,214
------------------------ ----------------------
Operating income 547,389 473,025
Interest expense (38,262)
(29,876)
Interest income
877 727
Other expense, net
(8,679) (22,151)
------------------------ ----------------------
Earnings before income taxes 501,325 421,725
Provision for income taxes (154,998) (112,864)
------------------------ ----------------------
Net earnings, including noncontrolling 346,327 308,861
interests
Less: Net earnings attributable to
noncontrolling interests (1,878) (2,124)
------------------------ ----------------------
Net earnings attributable to Flowserve $ 344,449 $ 306,737
Corporation
------------------------ ----------------------
Net earnings per share attributable to
Flowserve Corporation common shareholders:
Basic $ 2.42 $ 1.92
Diluted(2)
2.41 1.91
Cash dividends declared per share $ 0.42 $ 0.36
(2)Calculated using fully diluted shares of 143,199 and 160,581
shares, respectively
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Amounts in thousands, except par value) September 30, December 31,
2013 2012
------------------------ ----------------------
ASSETS
Current assets:
Cash and cash equivalents $ 113,751 $ 304,252
Accounts receivable, net of allowance for
doubtful accounts of $25,916 and $21,491, 1,089,748 1,103,724
respectively
Inventories, net 1,184,188 1,086,663
Deferred taxes 150,760 151,093
Prepaid expenses and other 88,204 94,484
------------------------ ----------------------
Total current assets 2,626,651 2,740,216
Property, plant and equipment, net of
accumulated depreciation of $837,476 and 678,934 654,179
$784,864, respectively
Goodwill 1,058,802 1,053,852
Deferred taxes 26,241 26,706
Other intangible assets, net 143,067 150,075
Other assets, net 162,499 185,930
------------------------ ----------------------
Total assets $ 4,696,194 $ 4,810,958
------------------------ ----------------------
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable $ 495,295 $ 616,900
Accrued liabilities 822,414 906,593
Debt due within one year 268,934 59,478
Deferred taxes 7,606
7,654
------------------------ ----------------------
Total current liabilities 1,594,249 1,590,625
Long-term debt due after one year 839,224 869,116
Retirement obligations and other 452,254 456,742
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 464,990 467,856
Retained earnings 2,863,863 2,579,308
Treasury shares, at cost - 38,357 and (1,511,768) (1,164,496)
32,389 shares, respectively
Deferred compensation obligation 9,359 10,870
Accumulated other comprehensive loss (242,778) (224,310)
------------------------ ----------------------
Total Flowserve Corporation shareholders' 1,804,657 1,890,219
equity
Noncontrolling interest 5,810
4,256
------------------------ ----------------------
Total equity 1,810,467 1,894,475
------------------------ ----------------------
Total liabilities and equity $ 4,696,194 $ 4,810,958
------------------------ ----------------------
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Amounts in thousands) Nine Months Ended September 30,
-----------------------------------------------
2013 2012
------------------------ ----------------------
Cash flows - Operating activities:
Net earnings, including noncontrolling $ 346,327 $ 308,861
interests
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation 66,700 66,027
Amortization of intangible and other assets 11,884 14,751
Loss on early extinguishment of debt
- 1,293
Net gain on disposition of assets
(248) (10,461)
Gain on sale of equity investment in (12,995)
affiliate -
Gain on remeasurement of acquired assets (15,315)
-
Excess tax benefits from stock-based (10,104)
compensation arrangements (11,056)
Stock-based compensation 24,395 25,942
Net earnings from affiliates, net of
dividends received (3,397) (5,798)
Change in assets and liabilities:
Accounts receivable, net 10,828
(45,566)
Inventories, net (101,745) (149,254)
Prepaid expenses and other
(6,870) (8,968)
Other assets, net (12,574)
(11,609)
Accounts payable (126,976)
(75,169)
Accrued liabilities and income taxes (61,139) 26,057
payable
Retirement obligations and other
liabilities (8,512) (6,737)
Net deferred taxes 8,629
4,251
------------------------ ----------------------
Net cash flows provided by operating 108,888 122,564
activities
------------------------ ----------------------
Cash flows - Investing activities:
Capital expenditures (94,702)
(84,180)
Proceeds from disposal of assets 11,473
969
Payments for acquisitions, net of cash (10,143)
acquired (3,996)
Proceeds from (contributions to) equity 46,240
investments in affiliates (3,825)
------------------------ ----------------------
Net cash flows used by investing activities (57,636)
(80,528)
------------------------ ----------------------
Cash flows - Financing activities:
Excess tax benefits from stock-based 10,104 11,056
compensation arrangements
Payments on long-term debt (15,000) (475,000)
Proceeds from issuance of senior notes 498,075
-
Proceeds from issuance of long-term debt 400,000
-
Proceeds from short-term financing, net 196,000
-
(Payments) borrowings under other financing (571) 294
arrangements, net
Repurchases of common shares (370,127) (533,864)
Payments of dividends (57,337)
(55,569)
Payment of deferred loan costs
- (9,657)
Other
(78) (248)
------------------------ ----------------------
Net cash flows used by financing activities (237,009) (164,913)
Effect of exchange rate changes on cash
(4,744) 2,941
------------------------ ----------------------
Net change in cash and cash equivalents (190,501) (119,936)
Cash and cash equivalents at beginning of 304,252 337,356
period
------------------------ ----------------------
Cash and cash equivalents at end of period $ 113,751 $ 217,420
------------------------ ----------------------
SEGMENT INFORMATION
ENGINEERED PRODUCT DIVISION Three Months Ended September 30,
-----------------------------------------------
(Amounts in millions, except percentages) 2013 2012
-----------------------------------------------
Bookings $ 665.3 $ 553.7
Sales 651.4
567.5
Gross profit 219.2
192.3
Gross profit margin 33.7% 33.9%
Operating income 114.0
87.0
Operating margin 17.5% 15.3%
INDUSTRIAL PRODUCT DIVISION Three Months Ended September 30,
-----------------------------------------------
(Amounts in millions, except percentages) 2013 2012
-----------------------------------------------
Bookings $ 228.5 $ 283.5
Sales 222.4
243.6
Gross profit
56.8 59.1
Gross profit margin 25.5% 24.3%
Operating income
25.2 26.6
Operating margin 11.3% 10.9%
FLOW CONTROL DIVISION Three Months Ended September 30,
-----------------------------------------------
(Amounts in millions, except percentages) 2013 2012
-----------------------------------------------
Bookings $ 373.2 $ 381.4
Sales 394.4
394.7
Gross profit 147.4
139.6
Gross profit margin 37.4% 35.4%
Operating income
76.7 68.3
Operating margin 19.4% 17.3%
SEGMENT INFORMATION
ENGINEERED PRODUCT DIVISION Nine Months Ended September 30,
-----------------------------------------------
(Amounts in millions, except percentages) 2013 2012
-----------------------------------------------
Bookings $ 1,845.5 $ 1,818.2
Sales 1,816.0 1,689.0
Gross profit 617.4
571.4
Gross profit margin 34.0% 33.8%
Operating income 296.8
274.2
Operating margin 16.3% 16.2%
INDUSTRIAL PRODUCT DIVISION Nine Months Ended September 30,
-----------------------------------------------
(Amounts in millions, except percentages) 2013 2012
-----------------------------------------------
Bookings $ 643.3 $ 758.1
Sales 672.6
688.4
Gross profit 172.0
164.6
Gross profit margin 25.6% 23.9%
Operating income
77.1 67.8
Operating margin 11.5% 9.8%
FLOW CONTROL DIVISION Nine Months Ended September 30,
-----------------------------------------------
(Amounts in millions, except percentages) 2013 2012
-----------------------------------------------
Bookings $ 1,250.8 $ 1,173.0
Sales 1,189.6 1,160.1
Gross profit 428.4
399.1
Gross profit margin 36.0% 34.4%
Operating income 236.7
184.4
Operating margin 19.9% 15.9%
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#1737813]
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Datum: 24.10.2013 - 22:07 Uhr
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