Le Lézard
Classified in: Business
Subjects: EARNINGS, Conference Call, Webcast

Flowserve Corporation Reports Fourth Quarter and Full Year 2019 Results; Issues 2020 Financial Guidance


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 fourth quarter and full year ended December 31, 2019.

Fourth Quarter 2019 Highlights (all comparisons to the 2018 fourth quarter, unless otherwise noted)

Full Year 2019 Highlights (all comparisons to full year 2018, unless otherwise noted)

"We delivered strong results in 2019 thanks to the hard work and unwavering commitment of our associates," said Scott Rowe, Flowserve's president and chief executive officer. "Together, we delivered improved performance for our customers and shareholders, as evidenced by our second consecutive year of adjusted EPS growth exceeding 25%. Flowserve also generated solid cash flow from operations and free cash flow conversion, as we remain committed to continuous improvement in our working capital performance."

Rowe concluded, "As we begin the second half of the Flowserve 2.0 journey, we now have a strong foundation in place to capitalize on the opportunities in front of us to further transform our operating model and continue our progress towards our long-term targets. While macroeconomic and geopolitical uncertainty remains, Flowserve's strong backlog and expectations for continued traction from our growth-oriented transformation initiatives, such as commercial intensity and strike zone, position us well to drive enhanced performance in 2020. We remain fully committed to driving long-term value creation for our customers, associates and shareholders."

2020 Initial Guidance[3]

Flowserve is providing Reported and Adjusted EPS guidance for 2020, as well as certain other financial metrics, as shown in the table below.

2020 Target Range

Revenues

Up 3.0% to 5.0%

Reported Earnings Per Share

 

 

$2.05 - $2.20

Adjusted Earnings Per Share

$2.30 - $2.45

Net interest expense

$45 - $50 million

Adjusted Tax rate

 

 

 

24% - 26%

Flowserve's 2020 Adjusted EPS target range excludes expected realignment and transformation charges of approximately $40 million, as well as the potential impact of below-the-line foreign currency effects and certain other discrete items. Both the Reported and the Adjusted EPS target range includes the expected revenue increase of approximately 3.0 to 5.0 percent year-over-year, and is based on current foreign currency rates and commodity prices, 2019 year-end backlog, expected bookings levels and market conditions, the reset of annual incentive performance goals, a broad-based merit increase, modest above-the-line negative foreign currency impacts, net interest expense in the range of $45 to $50 million and an adjusted tax rate of 24 to 26 percent. The quarterly phasing of expected 2020 earnings is anticipated to be slightly more second half weighted than Flowserve's traditional seasonality.

Fourth Quarter 2019 Results Conference Call

Flowserve will host its conference call with the financial community on Tuesday, February 18th 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 adjusted 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 2020 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 2019 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, epidemics or pandemics 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.

 
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)

Three Months Ended December 31,

(Amounts in thousands, except per share data)

 

2019

 

 

 

2018

 

 
Sales

$

1,068,171

 

$

986,867

 

Cost of sales

 

(718,598

)

 

(665,022

)

Gross profit

 

349,573

 

 

321,845

 

Selling, general and administrative expense

 

(244,768

)

 

(231,869

)

Net earnings from affiliates

 

2,425

 

 

3,235

 

Operating income

 

107,230

 

 

93,211

 

Interest expense

 

(12,954

)

 

(14,516

)

Interest income

 

1,915

 

 

2,228

 

Other income (expense), net

 

(9,521

)

 

(2,362

)

Earnings before income taxes

 

86,670

 

 

78,561

 

Provision for income taxes

 

(15,424

)

 

(14,196

)

Net earnings, including noncontrolling interests

 

71,246

 

 

64,365

 

Less: Net earnings attributable to noncontrolling interests

 

(1,453

)

 

(1,262

)

Net earnings attributable to Flowserve Corporation

$

69,793

 

$

63,103

 

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

$

0.53

 

$

0.48

 

Diluted

 

0.53

 

 

0.48

 

 
RECONCILIATION OF NON-GAAP MEASURES
(Unaudited)
 

Three Months Ended December 31, 2019

(Amounts in thousands, except per share data)

As Reported (a)

 

Realignment (1)

 

 

Other Items

 

 

As Adjusted

 
Sales

$

1,068,171

 

$

-

 

$

-

 

$

1,068,171

 

Gross profit

 

349,573

 

 

(4,451

)

 

(196

)

(3)

 

354,220

 

Gross margin

 

32.7

%

 

-

 

 

-

 

 

33.2

%

 
Selling, general and administrative expense

 

(244,768

)

 

(4,315

)

 

(10,287

)

(4)

 

(230,166

)

 
Operating income

 

107,230

 

 

(8,766

)

 

(10,483

)

 

126,479

 

Operating income as a percentage of sales

 

10.0

%

 

-

 

 

-

 

 

11.8

%

 
Interest and other expense, net

 

(20,560

)

 

-

 

 

(7,726

)

(5)

 

(12,834

)

 
Earnings before income taxes

 

86,670

 

 

(8,766

)

 

(18,209

)

 

113,645

 

Provision for income taxes

 

(15,425

)

 

5,679

 

(2)

 

4,122

 

(6)

 

(25,226

)

Tax Rate

 

17.8

%

 

64.8

%

 

22.6

%

 

22.2

%

 
Net earnings attributable to Flowserve Corporation

$

69,793

 

$

(3,087

)

$

(14,087

)

$

86,967

 

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

$

0.53

 

$

(0.02

)

$

(0.11

)

$

0.66

 

Diluted

 

0.53

 

 

(0.02

)

 

(0.11

)

 

0.66

 

 
Basic number of shares used for calculation

 

130,863

 

 

130,863

 

 

130,863

 

 

130,863

 

Diluted number of shares used for calculation

 

131,667

 

 

131,667

 

 

131,667

 

 

131,667

 

 
(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 and exit tax benefit of $4.0 million
(3) Represents Voluntary Retirement Program expense
(4) Represents $7.0 million related to Flowserve 2.0 transformation efforts and $3.3 million related to voluntary retirement program expense
(5) Represents below-the-line foreign exchange impacts
(6) Includes tax impact of items above
 
RECONCILIATION OF NON-GAAP MEASURES
(Unaudited)
 

Three Months Ended December 31, 2018

(Amounts in thousands, except per share data)

As Reported (a)

 

Realignment (1)

 

 

Other Items

 

 

As Adjusted

 
Sales

$

986,867

 

$

-

 

$

-

 

$

986,867

 

Gross profit

 

321,845

 

 

(11,104

)

 

-

 

 

332,949

 

Gross margin

 

32.6

%

 

-

 

 

-

 

 

33.7

%

 
Selling, general and administrative expense

 

(231,869

)

 

513

 

 

(13,815

)

(3)

 

(218,567

)

Loss on sale of business

 

-

 

 

-

 

 

-

 

 

-

 

 
Operating income

 

93,211

 

 

(10,591

)

 

(13,815

)

 

117,617

 

Operating income as a percentage of sales

 

9.4

%

 

-

 

 

-

 

 

11.9

%

 
Interest and other expense, net

 

(14,650

)

 

-

 

 

(2,337

)

(4)

 

(12,313

)

 
Earnings before income taxes

 

78,561

 

 

(10,591

)

 

(16,152

)

 

105,304

 

Provision for income taxes

 

(14,197

)

 

3,211

 

(2)

 

10,062

 

(5)

 

(27,470

)

Tax Rate

 

18.1

%

 

30.3

%

 

62.3

%

 

26.1

%

 
Net earnings attributable to Flowserve Corporation

$

63,103

 

$

(7,380

)

$

(6,090

)

$

76,573

 

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

$

0.48

 

$

(0.06

)

$

(0.05

)

$

0.59

 

Diluted

 

0.48

 

 

(0.06

)

 

(0.05

)

 

0.58

 

 
Basic number of shares used for calculation

 

130,845

 

 

130,845

 

 

130,845

 

 

130,845

 

Diluted number of shares used for calculation

 

131,413

 

 

131,413

 

 

131,413

 

 

131,413

 

 
(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 and a $5.7 million tax benefit related to the U.S. Tax Cuts and Jobs Act of 2017
 
SEGMENT INFORMATION
(Unaudited)
 

FLOWSERVE PUMP DIVISION

Three Months Ended December 31,

(Amounts in millions, except percentages)

 

2019

 

 

 

2018

 

Bookings

$

756.0

 

$

728.6

 

Sales

 

739.5

 

 

662.5

 

Gross profit

 

245.6

 

 

206.1

 

Gross profit margin

 

33.2

%

 

31.1

%

SG&A

 

146.6

 

 

131.1

 

Segment operating income

 

101.4

 

 

78.2

 

Segment operating income as a percentage of sales

 

13.7

%

 

11.8

%

 

FLOW CONTROL DIVISION

Three Months Ended December 31,

(Amounts in millions, except percentages)

 

2019

 

 

 

2018

 

Bookings

$

298.6

 

$

318.0

 

Sales

 

330.2

 

 

325.9

 

Gross profit

 

111.8

 

 

118.3

 

Gross profit margin

 

33.9

%

 

36.3

%

SG&A

 

54.4

 

 

53.8

 

Segment operating income

 

57.3

 

 

64.5

 

Segment operating income as a percentage of sales

 

17.4

%

 

19.8

%

 
CONSOLIDATED STATEMENTS OF INCOME
 

Year Ended December 31,

(Amounts in thousands, except per share data)

 

2019

 

 

 

2018

 

 

 

2017

 

 
Sales

$

3,944,850

 

$

3,832,666

 

$

3,660,831

 

Cost of sales

 

(2,649,480

)

 

(2,644,830

)

 

(2,571,878

)

Gross profit

 

1,295,370

 

 

1,187,836

 

 

1,088,953

 

Selling, general and administrative expense

 

(899,813

)

 

(943,714

)

 

(901,727

)

Gain (loss) on sale of businesses

 

-

 

 

(7,727

)

 

141,317

 

Net earnings from affiliates

 

10,483

 

 

11,143

 

 

12,592

 

Operating income

 

406,040

 

 

247,538

 

 

341,135

 

Interest expense

 

(54,980

)

 

(58,160

)

 

(59,730

)

Interest income

 

8,409

 

 

6,465

 

 

3,429

 

Other income (expense), net

 

(17,619

)

 

(19,569

)

 

(21,827

)

Earnings before income taxes

 

341,850

 

 

176,274

 

 

263,007

 

Provision for income taxes

 

(80,070

)

 

(51,224

)

 

(258,679

)

Net earnings, including noncontrolling interests

 

261,780

 

 

125,050

 

 

4,328

 

Less: Net earnings attributable to noncontrolling interests

 

(8,112

)

 

(5,379

)

 

(1,676

)

Net earnings attributable to Flowserve Corporation

$

253,668

 

$

119,671

 

$

2,652

 

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

$

1.94

 

$

0.91

 

$

0.02

 

Diluted

 

1.93

 

 

0.91

 

 

0.02

 

 
RECONCILIATION OF NON-GAAP MEASURES
(Unaudited)
 
Year Ended December 31, 2019
(Amounts in thousands, except per share data) As Reported (a) Realignment (1) Other Items As Adjusted
 
Sales

$

3,944,850

 

$

-

 

$

-

 

$

3,944,850

 

Gross profit

 

1,295,370

 

 

(17,234

)

 

(196

)

(3

)

 

1,312,800

 

Gross margin

 

32.8

%

 

-

 

 

-

 

 

33.3

%

 
Selling, general and administrative expense

 

(899,813

)

 

9,304

 

 

(31,331

)

(4

)

 

(877,786

)

 
Operating income

 

406,040

 

 

(7,930

)

 

(31,527

)

 

445,497

 

Operating income as a percentage of sales

 

10.3

%

 

-

 

 

-

 

 

11.3

%

 
Interest and other expense, net

 

(64,190

)

 

-

 

 

(14,460

)

(5

)

 

(49,730

)

 
Earnings before income taxes

 

341,850

 

 

(7,930

)

 

(45,987

)

 

395,767

 

Provision for income taxes

 

(80,070

)

 

7,618

 

(2

)

 

10,463

 

(6

)

 

(98,151

)

Tax Rate

 

23.4

%

 

96.1

%

 

22.8

%

 

24.8

%

 
Net earnings attributable to Flowserve Corporation

$

253,668

 

$

(312

)

$

(35,524

)

$

289,504

 

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

$

1.94

 

$

-

 

$

(0.27

)

$

2.21

 

Diluted

 

1.93

 

 

-

 

 

(0.27

)

 

2.20

 

 
Basic number of shares used for calculation

 

131,034

 

 

131,034

 

 

131,034

 

 

131,034

 

Diluted number of shares used for calculation

 

131,689

 

 

131,689

 

 

131,689

 

 

131,689

 

 
(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 and exit tax benefit of $4.0 million
(3) Represents Voluntary Retirement Program expense
(4) Represents $28.0 million related to Flowserve 2.0 transformation efforts and $3.3 million related to voluntary retirement program expense
(5) Represents below-the-line foreign exchange impacts
(6) Includes tax impact of items above
 
RECONCILIATION OF NON-GAAP MEASURES
(Unaudited)
 
Year Ended December 31, 2018
(Amounts in thousands, except per share data) As Reported (a) Realignment (1) Other Items As Adjusted
 
Sales

$

3,832,666

 

$

-

 

$

-

 

$

3,832,666

 

Gross profit

 

1,187,836

 

 

(42,697

)

 

(7,713

)

(3

)

 

1,238,246

 

Gross margin

 

31.0

%

 

-

 

 

-

 

 

32.3

%

 
Selling, general and administrative expense

 

(943,714

)

 

(11,235

)

 

(58,180

)

(4

)

 

(874,299

)

Gain on sale of business

 

(7,727

)

 

-

 

 

(7,727

)

(5

)

 

-

 

 
Operating income

 

247,538

 

 

(53,932

)

 

(73,620

)

 

375,090

 

Operating income as a percentage of sales

 

6.5

%

 

-

 

 

-

 

 

9.8

%

 
Interest and other expense, net

 

(71,264

)

 

-

 

 

(18,686

)

(6

)

 

(52,578

)

 
Earnings before income taxes

 

176,274

 

 

(53,932

)

 

(92,306

)

 

322,512

 

Provision for income taxes

 

(51,225

)

 

12,863

 

(2

)

 

23,273

 

(7

)

 

(87,361

)

Tax Rate

 

29.1

%

 

23.9

%

 

25.2

%

 

27.1

%

 
Net earnings attributable to Flowserve Corporation

$

119,671

 

$

(41,069

)

$

(69,033

)

$

229,773

 

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

$

0.91

 

$

(0.31

)

$

(0.53

)

$

1.76

 

Diluted

 

0.91

 

 

(0.31

)

 

(0.53

)

 

1.75

 

 
Basic number of shares used for calculation

 

130,823

 

 

130,823

 

 

130,823

 

 

130,823

 

Diluted number of shares used for calculation

 

131,271

 

 

131,271

 

 

131,271

 

 

131,271

 

 
(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 IPD divestiture write-down of assets
(4) Represents $9.7 million related to IPD divestiture write-down of assets, $7.3 million related to implementation costs for the adoption of ASC 606 and $41.2 million related to Flowserve 2.0 transformation efforts
(5) Represents IPD loss on sale of business
(6) Represents below-the-line foreign exchange impacts
(7) Includes tax impact of items above and a $5.7 million tax benefit related to the U.S. Tax Cuts and Jobs Act of 2017
 
SEGMENT INFORMATION
(Unaudited)
 
FLOWSERVE PUMP DIVISION

Year Ended December 31,

(Amounts in millions, except percentages)

 

2019

 

 

 

2018

 

 

 

2017

 

Bookings

$

3,007.9

 

$

2,753.5

 

$

2,587.4

 

Sales

 

2,706.3

 

 

2,623.3

 

 

2,478.7

 

Gross profit

 

899.3

 

 

775.7

 

 

692.1

 

Gross profit margin

 

33.2

%

 

29.6

%

 

27.9

%

SG&A

 

566.3

 

 

578.9

 

 

593.0

 

Loss on sale of businesses

 

-

 

 

(7.7

)

 

-

 

Segment operating income

 

343.5

 

 

201.0

 

 

112.3

 

Segment operating income as a percentage of sales

 

12.7

%

 

7.7

%

 

4.5

%

 
 
FLOW CONTROL DIVISION

Year Ended December 31,

(Amounts in millions, except percentages)

 

2019

 

 

 

2018

 

 

 

2017

 

Bookings

$

1,240.9

 

$

1,274.3

 

$

1,225.7

 

Sales

 

1,244.0

 

 

1,215.8

 

 

1,188.1

 

Gross profit

 

411.6

 

 

416.9

 

 

396.7

 

Gross profit margin

 

33.1

%

 

34.3

%

 

33.4

%

SG&A

 

213.6

 

 

215.0

 

 

213.6

 

Gain on sale of businesses

 

-

 

 

-

 

 

141.3

 

Segment operating income

 

198.0

 

 

201.2

 

 

323.7

 

Segment operating income as a percentage of sales

 

15.9

%

 

16.5

%

 

27.2

%

Fourth Quarter and Full Year 2019 - Segment Results
(dollars in millions, comparison vs. 2018 fourth quarter and full year, unaudited)
 
FPD FCD
4th Qtr YTD 4th Qtr YTD
Bookings

$

756.0

 

$

3,007.9

 

$

298.6

 

$

1,240.9

 

- vs. prior year

 

3.8

%

 

9.2

%

 

-6.1

%

 

-2.6

%

- on constant currency

 

4.9

%

 

12.1

%

 

-5.3

%

 

-0.4

%

 
Sales

$

739.5

 

$

2,706.3

 

$

330.2

 

$

1,244.0

 

- vs. prior year

 

11.6

%

 

3.2

%

 

1.3

%

 

2.3

%

- on constant currency

 

12.7

%

 

5.7

%

 

2.2

%

 

4.6

%

 
Gross Profit

$

245.6

 

$

899.3

 

$

111.8

 

$

411.6

 

- vs. prior year

 

19.2

%

 

15.9

%

 

-5.5

%

 

-1.3

%

 
Gross Margin (% of sales)

 

33.2

%

 

33.2

%

 

33.9

%

 

33.1

%

- vs. prior year (in basis points) 210 bps 360 bps (240) bps (120) bps
 
Operating Income

$

101.4

 

$

343.5

 

$

57.3

 

$

198.0

 

- vs. prior year

 

29.7

%

 

70.9

%

 

-11.2

%

 

-1.6

%

- on constant currency

 

31.1

%

 

76.0

%

 

-10.5

%

 

-0.1

%

 
Operating Margin (% of sales)

 

13.7

%

 

12.7

%

 

17.4

%

 

15.9

%

- vs. prior year (in basis points) 190 bps 500 bps (240) bps (60) bps
 
Adjusted Operating Income *

$

104.7

 

$

341.9

 

$

61.7

 

$

204.3

 

- vs. prior year

 

15.6

%

 

25.9

%

 

-1.8

%

 

0.1

%

- on constant currency

 

16.8

%

 

29.7

%

 

-1.2

%

 

1.6

%

 
Adj. Oper. Margin (% of sales)*

 

14.2

%

 

12.6

%

 

18.7

%

 

16.4

%

- vs. prior year (in basis points) 50 bps 230 bps (60) bps (40) bps
 
Backlog

$

1,560.9

 

$

600.1

 

 
* Adjusted Operating Income and Adjusted Operating Margin exclude realignment charges and other specific discrete items
 
CONSOLIDATED BALANCE SHEETS
 

December 31,

 

December 31,

(Amounts in thousands, except par value)

 

2019

 

 

2018

 

 
ASSETS
Current assets:
Cash and cash equivalents

$

670,980

 

$

619,683

 

Accounts receivable, net

 

795,538

 

 

792,434

 

Contract assets, net

 

272,914

 

 

228,579

 

Inventories, net

 

660,837

 

 

633,871

 

Prepaid expenses and other

 

105,101

 

 

108,578

 

Total current assets

 

2,505,370

 

 

2,383,145

 

Property, plant and equipment, net

 

572,175

 

 

610,096

 

Operating lease right-of-use assets, net

 

186,218

 

 

-

 

Goodwill

 

1,193,010

 

 

1,197,640

 

Deferred taxes

 

54,879

 

 

44,682

 

Other intangible assets, net

 

180,805

 

 

190,550

 

Other assets, net

 

227,185

 

 

190,164

 

Total assets

$

4,919,642

 

$

4,616,277

 

 
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable

$

447,582

 

$

418,893

 

Accrued liabilities

 

401,385

 

 

391,406

 

Contract liabilities

 

216,541

 

 

202,458

 

Debt due within one year

 

11,272

 

 

68,218

 

Operating lease liabilities

 

36,108

 

 

-

 

Total current liabilities

 

1,112,888

 

 

1,080,975

 

Long-term debt due after one year

 

1,365,977

 

 

1,414,829

 

Operating lease liabilities

 

151,523

 

 

-

 

Retirement obligations and other liabilities

 

473,295

 

 

459,693

 

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

 

501,045

 

 

494,551

 

Retained earnings

 

3,695,862

 

 

3,543,007

 

Treasury shares, at cost ? 46,262 and 46,237 shares, respectively

 

(2,051,583

)

 

(2,049,404

)

Deferred compensation obligation

 

8,334

 

 

7,117

 

Accumulated other comprehensive loss

 

(584,292

)

 

(573,947

)

Total Flowserve Corporation shareholders' equity

 

1,790,357

 

 

1,642,315

 

Noncontrolling interests

 

25,602

 

 

18,465

 

Total equity

 

1,815,959

 

 

1,660,780

 

Total liabilities and equity

$

4,919,642

 

$

4,616,277

 

 
CONSOLIDATED STATEMENTS OF CASH FLOWS
 

Year Ended December 31,

(Amounts in thousands)

 

2019

 

 

 

2018

 

 

 

2017

 

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

$

261,780

 

$

125,050

 

$

4,328

 

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

 

90,619

 

 

95,820

 

 

101,438

 

Amortization of intangible and other assets

 

13,862

 

 

16,653

 

 

17,016

 

Loss (gain) on disposition of businesses

 

-

 

 

7,727

 

 

(141,317

)

Stock-based compensation

 

23,882

 

 

19,912

 

 

22,820

 

Provision for U.S. Tax Cuts and Jobs Act of 2017

 

-

 

 

(5,654

)

 

115,320

 

Foreign currency, assets impairment and other non-cash adjustments

 

(11,224

)

 

36,052

 

 

33,087

 

Change in assets and liabilities:
Accounts receivable, net

 

2,883

 

 

(25,448

)

 

60,216

 

Inventories, net

 

(31,058

)

 

(29,314

)

 

48,642

 

Contract assets, net

 

(45,939

)

 

(23,693

)

 

-

 

Prepaid expenses and other assets, net

 

13,289

 

 

(7,869

)

 

32,935

 

Contract liabilities

 

22,870

 

 

(4,823

)

 

12,403

 

Accounts payable

 

14,390

 

 

33,710

 

 

-

 

Accrued liabilities and income taxes payable

 

4,184

 

 

(18,248

)

 

(3,383

)

Retirement obligations and other

 

(39,881

)

 

(44,314

)

 

(43,431

)

Net deferred taxes

 

(6,916

)

 

15,270

 

 

50,992

 

Net cash flows provided (used) by operating activities

 

312,741

 

 

190,831

 

 

311,066

 

Cash flows ? Investing activities:
Capital expenditures

 

(66,170

)

 

(83,993

)

 

(61,602

)

Proceeds from disposal of assets

 

42,333

 

 

6,190

 

 

5,435

 

(Payments for) proceeds from disposition of businesses

 

-

 

 

(3,663

)

 

232,767

 

Net cash flows provided (used) by investing activities

 

(23,837

)

 

(81,466

)

 

176,600

 

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

 

(105,000

)

 

(60,000

)

 

(60,000

)

Payments of deferred loan costs

 

-

 

 

-

 

 

(1,503

)

Proceeds from short-term financing

 

75,000

 

 

-

 

 

-

 

Payments on short-term financing

 

(75,000

)

 

-

 

 

-

 

Proceeds under other financing arrangements

 

4,639

 

 

3,377

 

 

7,359

 

Payments under other financing arrangements

 

(9,281

)

 

(9,853

)

 

(19,030

)

Payments related to tax withholding for stock-based compensation

 

(3,900

)

 

(3,061

)

 

(6,238

)

Repurchases of common shares

 

(15,000

)

 

-

 

 

-

 

Payments of dividends

 

(99,557

)

 

(99,416

)

 

(99,233

)

Other

 

(1,555

)

 

(4,331

)

 

(6,708

)

Net cash flows provided (used) by financing activities

 

(229,654

)

 

(173,284

)

 

(185,353

)

Effect of exchange rate changes on cash

 

(7,953

)

 

(19,843

)

 

33,970

 

Net change in cash and cash equivalents

 

51,297

 

 

(83,762

)

 

336,283

 

Cash and cash equivalents at beginning of year

 

619,683

 

 

703,445

 

 

367,162

 

Cash and cash equivalents at end of year

$

670,980

 

$

619,683

 

$

703,445

 

Income taxes paid (net of refunds)

$

66,372

 

$

87,009

 

$

59,409

 

Interest paid

 

53,607

 

 

54,576

 

 

56,808

 

 
CONSOLIDATED QUARTERLY FINANCIAL DATA
(Unaudited)
(Amounts in millions, except per share data)

2019

Quarter

4th

 

3rd

 

2nd

 

1st

Sales

$

1,068.2

$

996.5

$

990.1

$

890.1

Gross profit

 

349.6

 

333.7

 

318.0

 

294.1

Earnings before income taxes

 

86.7

 

96.2

 

82.9

 

76.1

Net earnings attributable to Flowserve Corporation

 

69.8

 

68.4

 

58.2

 

57.3

Earnings per share (1):
Basic

$

0.53

$

0.52

$

0.44

$

0.44

Diluted

$

0.53

$

0.52

$

0.44

$

0.44

 
 

2018

Quarter

4th

 

3rd

 

2nd

 

1st

Sales

$

986.9

$

952.7

$

973.1

$

920.0

Gross profit

 

321.8

 

308.5

 

286.1

 

271.4

Earnings before income taxes

 

78.6

 

44.4

 

28.3

 

25.0

Net earnings attributable to Flowserve Corporation

 

63.1

 

28.2

 

13.2

 

15.1

Earnings per share (1):
Basic

$

0.48

$

0.22

$

0.10

$

0.12

Diluted

$

0.48

$

0.21

$

0.10

$

0.12

(1) Earnings per share is computed independently for each of the quarters presented. The sum of the quarters may not equal the total year amount due to the impact of changes in weighted average quarterly shares outstanding.

 


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