NEWS RELEASE
Flowserve Corporation Reports Fourth Quarter and Full Year 2018 Results; Issues 2019 Financial Guidance
02/20/19
- Strong bookings growth for the fourth quarter and full year
- Significant quarterly expansion in gross and operating margins
- Continued progress on
Flowserve 2.0 transformation
Fourth Quarter 2018 Highlights (all comparisons to the 2017 fourth quarter, unless otherwise noted)
-
Reported Earnings Per Share (EPS) of
$0.48 and Adjusted EPS[1] of$0.58 -
Reported EPS includes pre-tax adjusted items of approximately
$27 million , including realignment and transformation expenses and below-the-line foreign exchange impacts - Adjusted EPS increased 16%, and 18% on a sequential basis
-
Reported EPS includes pre-tax adjusted items of approximately
-
Total bookings were
$1.05 billion , up 6.1%, or 8.8% on a constant currency basis, and included approximately 1% negative impact related to divested businesses. Book-to-bill was 1.06-
Aftermarket bookings were
$533 million , or 51% of total bookings, up 14.9%, or 18.2% on a constant currency basis
-
Aftermarket bookings were
-
Sales were
$987 million , down 4.6%, or 2.0% on a constant currency basis and included approximately 1% negative impact related to divested businesses-
Aftermarket sales were
$496 million , down 1.2%, or up 1.9% on a constant currency basis
-
Aftermarket sales were
-
Reported gross and operating margins were 32.6% and 9.4%, respectively
- Adjusted gross and operating margins[2] increased 300 and 170 basis points to 33.7% and 11.9%, respectively
Full Year 2018 Highlights (all comparisons to full year 2017, unless otherwise noted)
-
Reported EPS of
$0.91 and Adjusted EPS[1] of$1.75 -
Reported EPS includes pre-tax adjusted items of approximately
$146 million , primarily related to realignment and transformation expenses, a loss on divested assets and below-the-line foreign exchange impacts
-
Reported EPS includes pre-tax adjusted items of approximately
-
Total bookings were
$4.02 billion , up 5.7%, or 4.9% on a constant currency basis, and included approximately 1% negative impact related to divested businesses. Book-to-bill was 1.05.-
Aftermarket bookings were
$2.03 billion , or 50% of total bookings, up 10.6%, or 11.0% on a constant currency basis
-
Aftermarket bookings were
-
Backlog at
December 31, 2018 was$1.90 billion , up 5.3% versus 2018 beginning backlog -
Sales were
$3.83 billion , up 4.7%, or 3.8% on a constant currency basis and included approximately 1% negative impact related to divested businesses.-
Aftermarket sales were
$1.90 billion , up 6.3%, or 5.2% on a constant currency basis
-
Aftermarket sales were
-
Reported gross and operating margins of 31.0% and 6.5%, respectively
- Adjusted gross and operating margins[2] increased 90 and 100 basis points to 32.3% and 9.8%, respectively
“The Flowserve 2.0 transformation continues to drive significant
improvement as seen by the 29% increase in our full year 2018 adjusted
EPS. Improved operational performance drove adjusted gross and operating
margin expansion for both the quarter and full year, including IPD’s
highest adjusted operating margin since 2015,” said
Rowe concluded, “As we look to this year, we remain focused on advancing
our
2019 Initial Guidance[3]
2019 Target Range | |||||
Revenues | Up 4.0% to 6.0% | ||||
Reported Earnings Per Share | $1.60 - $1.80 | ||||
Adjusted Earnings Per Share | $1.95 - $2.15 | ||||
Net interest expense | $55 - $57 million | ||||
Adjusted Tax rate | 26% - 28% | ||||
Flowserve’s 2019 Adjusted EPS target range excludes expected realignment
and transformation charges of approximately
Fourth Quarter 2018 Results Conference Call
[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 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 131 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
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
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) | 2018 | 2017 | ||||||
Sales | $ | 986,867 | $ | 1,034,069 | ||||
Cost of sales | (665,022 | ) | (727,575 | ) | ||||
Gross profit | 321,845 | 306,494 | ||||||
Selling, general and administrative expense | (231,869 | ) | (221,422 | ) | ||||
Gain on sale of businesses | - | 159 | ||||||
Net earnings from affiliates | 3,235 | 3,564 | ||||||
Operating income | 93,211 | 88,795 | ||||||
Interest expense | (14,516 | ) | (15,041 | ) | ||||
Interest income | 2,228 | 1,056 | ||||||
Other expense, net | (2,362 | ) | (7,855 | ) | ||||
Earnings before income taxes | 78,561 | 66,955 | ||||||
Provision for income taxes | (14,197 | ) | (172,843 | ) | ||||
Net earnings (loss), including noncontrolling interests | 64,364 | (105,888 | ) | |||||
Less: Net (earnings) loss attributable to noncontrolling interests | (1,261 | ) | 6 | |||||
Net earnings (loss) attributable to Flowserve Corporation | $ | 63,103 | $ | (105,882 | ) | |||
Net earnings per share attributable to Flowserve Corporation common shareholders: | ||||||||
Basic | $ | 0.48 | $ | (0.81 | ) | |||
Diluted | 0.48 | (0.81 | ) |
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 |
RECONCILIATION OF NON-GAAP MEASURES | |||||||||||||||||||
(Unaudited) | |||||||||||||||||||
Three Months Ended December 31, 2017 | |||||||||||||||||||
(Amounts in thousands, except per share data) | As Reported (a) | Realignment (1) | Other Items | As Adjusted | |||||||||||||||
Sales | $ | 1,034,069 | $ | - | $ | - | $ | 1,034,069 | |||||||||||
Gross profit | 306,494 | (10,575 | ) | - | 317,069 | ||||||||||||||
Gross margin | 29.6 | % | - | - | 30.7 | % | |||||||||||||
Selling, general and administrative expense | (221,422 | ) | (1,672 | ) | (4,115 | ) | (3) | (215,635 | ) | ||||||||||
Gain on sale of businesses | 159 | - | 159 | (4) | - | ||||||||||||||
Operating income | 88,796 | (12,247 | ) | (3,956 | ) | 104,999 | |||||||||||||
Operating income as a percentage of sales | 8.6 | % | - | - | 10.2 | % | |||||||||||||
Interest and other expense, net | (21,841 | ) | - | (4,294 | ) | (5) | (17,547 | ) | |||||||||||
Earnings before income taxes | 66,955 | (12,247 | ) | (8,250 | ) | 87,452 | |||||||||||||
Provision for income taxes | (172,843 | ) | 4,361 | (2) | (155,538 | ) | (6) | (21,666 | ) | ||||||||||
Tax Rate | 258.1 | % | 35.6 | % | -1885.3 | % | 24.8 | % | |||||||||||
Net (loss) earnings attributable to Flowserve Corporation | $ | (105,882 | ) | $ | (7,886 | ) | $ | (163,788 | ) | $ | 65,792 | ||||||||
Net (loss) earnings per share attributable to Flowserve Corporation common shareholders: | |||||||||||||||||||
Basic | $ | (0.81 | ) | $ | (0.06 | ) | $ | (1.25 | ) | $ | 0.50 | ||||||||
Diluted | $ | (0.81 | ) | $ | (0.06 | ) | $ | (1.25 | ) | $ | 0.50 | ||||||||
Basic number of shares used for calculation | 130,681 | 130,758 | 130,758 | 130,758 | |||||||||||||||
Diluted number of shares used for calculation | 130,681 | 131,417 | 131,417 | 131,417 |
(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 $1.2 million of SIHI integration costs and purchase price adjustments ("PPA") and $2.9 million of Mexico asset impairment charge |
(4) Represents gain related to the sale of Vogt business |
(5) Represents below-the-line foreign exchange impacts |
(6) Includes tax impact of items above, a $115.3 million tax charge related to the U.S. Tax Cuts and Jobs Act of 2017 and certain tax valuation allowances totaling $43.1 million |
SEGMENT INFORMATION | ||||||||
(Unaudited) | ||||||||
ENGINEERED PRODUCT DIVISION | Three Months Ended December 31, | |||||||
(Amounts in millions, except percentages) | 2018 | 2017 | ||||||
Bookings | $ | 545.0 | $ | 485.5 | ||||
Sales | 484.6 | 498.9 | ||||||
Gross profit | 146.6 | 141.7 | ||||||
Gross profit margin | 30.3 | % | 28.4 | % | ||||
SG&A | 90.6 | 93.9 | ||||||
Segment operating income | 59.1 | 51.5 | ||||||
Segment operating income as a percentage of sales | 12.2 | % | 10.3 | % | ||||
INDUSTRIAL PRODUCT DIVISION | Three Months Ended December 31, | |||||||
(Amounts in millions, except percentages) | 2018 | 2017 | ||||||
Bookings | $ | 203.2 | $ | 205.8 | ||||
Sales | 196.4 | 215.3 | ||||||
Gross profit | 59.2 | 45.9 | ||||||
Gross profit margin | 30.1 | % | 21.3 | % | ||||
SG&A | 40.5 | 49.1 | ||||||
Segment operating income (loss) | 18.9 | (2.9 | ) | |||||
Segment operating income (loss) as a percentage of sales | 9.6 | % | (1.4 | %) | ||||
FLOW CONTROL DIVISION | Three Months Ended December 31, | |||||||
(Amounts in millions, except percentages) | 2018 | 2017 | ||||||
Bookings | $ | 318.0 | $ | 314.1 | ||||
Sales | 325.9 | 344.6 | ||||||
Gross profit | 118.3 | 118.8 | ||||||
Gross profit margin | 36.3 | % | 34.5 | % | ||||
SG&A | 53.8 | 49.7 | ||||||
Gain on sale of businesses | - | 0.2 | ||||||
Segment operating income | 64.5 | 68.8 | ||||||
Segment operating income as a percentage of sales | 19.8 | % | 20.0 | % |
CONSOLIDATED STATEMENTS OF INCOME | ||||||||||||
Year Ended December 31, | ||||||||||||
(Amounts in thousands, except per share data) | 2018 | 2017 | 2016 | |||||||||
Sales | $ | 3,832,666 | $ | 3,660,831 | $ | 3,990,487 | ||||||
Cost of sales | (2,644,830 | ) | (2,571,878 | ) | (2,753,689 | ) | ||||||
Gross profit | 1,187,836 | 1,088,953 | 1,236,798 | |||||||||
Selling, general and administrative expense | (943,714 | ) | (901,727 | ) | (965,376 | ) | ||||||
(Loss) gain on sale of businesses | (7,727 | ) | 141,317 | (7,664 | ) | |||||||
Net earnings from affiliates | 11,143 | 12,592 | 12,926 | |||||||||
Operating income | 247,538 | 341,135 | 276,684 | |||||||||
Interest expense | (58,160 | ) | (59,730 | ) | (60,137 | ) | ||||||
Interest income | 6,465 | 3,429 | 2,804 | |||||||||
Other expense, net | (19,569 | ) | (21,827 | ) | (6,439 | ) | ||||||
Earnings before income taxes | 176,274 | 263,007 | 212,912 | |||||||||
Provision for income taxes | (51,224 | ) | (258,679 | ) | (77,380 | ) | ||||||
Net earnings, including noncontrolling interests | 125,050 | 4,328 | 135,532 | |||||||||
Less: Net earnings attributable to noncontrolling interests | (5,379 | ) | (1,676 | ) | (3,077 | ) | ||||||
Net earnings attributable to Flowserve Corporation | $ | 119,671 | $ | 2,652 | $ | 132,455 | ||||||
Net earnings per share attributable to Flowserve Corporation common shareholders: | ||||||||||||
Basic | $ | 0.91 | $ | 0.02 | $ | 1.02 | ||||||
Diluted | 0.91 | 0.02 | 1.01 |
RECONCILIATION OF NON-GAAP MEASURES | |||||||||||||||||||
(Unaudited) | |||||||||||||||||||
12 Months 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 |
RECONCILIATION OF NON-GAAP MEASURES | |||||||||||||||||||
(Unaudited) | |||||||||||||||||||
Twelve Months Ended December 31, 2017 | |||||||||||||||||||
(Amounts in thousands, except per share data) | As Reported (a) | Realignment (1) | Other Items | As Adjusted | |||||||||||||||
Sales | $ | 3,660,831 | $ | - | $ | - | $ | 3,660,831 | |||||||||||
Gross profit | 1,088,953 | (43,946 | ) | (16,928 | ) | (3) | 1,149,827 | ||||||||||||
Gross margin | 29.7 | % | - | - | 31.4 | % | |||||||||||||
Selling, general and administrative expense | (901,727 | ) | (27,308 | ) | (33,798 | ) | (4) | (840,621 | ) | ||||||||||
Gain on sale of businesses | 141,317 | - | 141,317 | (5) | - | ||||||||||||||
Operating income | 341,135 | (71,254 | ) | 90,591 | 321,798 | ||||||||||||||
Operating income as a percentage of sales | 9.3 | % | - | - | 8.8 | % | |||||||||||||
Interest and other expense, net | (78,128 | ) | - | (13,965 | ) | (6) | (64,163 | ) | |||||||||||
Earnings before income taxes | 263,007 | (71,254 | ) | 76,626 | 257,635 | ||||||||||||||
Provision for income taxes | (258,679 | ) | 17,003 | (2) | (198,264 | ) | (7) | (77,418 | ) | ||||||||||
Tax Rate | 98.4 | % | 23.9 | % | 258.7 | % | 30.0 | % | |||||||||||
Net earnings attributable to Flowserve Corporation | $ | 2,652 | $ | (54,251 | ) | $ | (121,638 | ) | $ | 178,541 | |||||||||
Net earnings per share attributable to Flowserve Corporation common shareholders: | |||||||||||||||||||
Basic | $ | 0.02 | $ | (0.42 | ) | $ | (0.93 | ) | $ | 1.37 | |||||||||
Diluted | $ | 0.02 | $ | (0.41 | ) | $ | (0.93 | ) | $ | 1.36 | |||||||||
Basic number of shares used for calculation | 130,703 | 130,703 | 130,703 | 130,703 | |||||||||||||||
Diluted number of shares used for calculation | 131,358 | 131,358 | 131,358 | 131,358 |
(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 reserve for costs incurred related to a contract to supply oil and gas platform equipment to an end user in Latin America |
(4) Represents $4.4 million of SIHI integration costs and purchase price adjustments ("PPA"), $29.0 million of asset impairment charges and $0.4 million reserve for costs incurred related to a contract to supply oil and gas platform equipment to an end user in Latin America |
(5) Represents gain related to the sale of Gestra and Vogt businesses |
(6) Represents below-the-line foreign exchange impacts |
(7) Includes tax impact of items above, a $115.3 million tax charge related to the U.S. Tax Cuts and Jobs Act of 2017 and certain tax valuation allowances totaling $43.1 million |
SEGMENT INFORMATION | ||||||||||||
ENGINEERED PRODUCT DIVISION | Year Ended December 31, | |||||||||||
(Amounts in millions, except percentages) | 2018 | 2017 | 2016 | |||||||||
Bookings | $ | 1,995.1 | $ | 1,842.1 | $ | 1,823.8 | ||||||
Sales | 1,899.2 | 1,775.4 | 1,996.0 | |||||||||
Gross profit | 586.0 | 545.9 | 624.0 | |||||||||
Gross profit margin | 30.9 | % | 30.7 | % | 31.3 | % | ||||||
SG&A | 390.5 | 399.3 | 457.6 | |||||||||
Loss on sale of business | - | - | (7.7 | ) | ||||||||
Segment operating income | 206.9 | 159.1 | 171.1 | |||||||||
Segment operating income as a percentage of sales | 10.9 | % | 9.0 | % | 8.6 | % | ||||||
INDUSTRIAL PRODUCT DIVISION | Year Ended December 31, | |||||||||||
(Amounts in millions, except percentages) | 2018 | 2017 | 2016 | |||||||||
Bookings | $ | 838.5 | $ | 821.7 | $ | 797.7 | ||||||
Sales | 799.4 | 775.2 | 835.1 | |||||||||
Gross profit | 189.4 | 144.1 | 183.2 | |||||||||
Gross profit margin | 23.7 | % | 18.6 | % | 21.9 | % | ||||||
SG&A | 188.4 | 193.7 | 189.3 | |||||||||
Loss on sale of business | (7.7 | ) | - | - | ||||||||
Segment operating loss | (6.2 | ) | (48.8 | ) | (5.2 | ) | ||||||
Segment operating loss as a percentage of sales | -0.8 | % | -6.3 | % | -0.6 | % | ||||||
FLOW CONTROL DIVISION | Year Ended December 31, | |||||||||||
(Amounts in millions, except percentages) | 2018 | 2017 | 2016 | |||||||||
Bookings | $ | 1,274.3 | $ | 1,225.7 | $ | 1,216.8 | ||||||
Sales | 1,215.8 | 1,188.1 | 1,233.7 | |||||||||
Gross profit | 416.9 | 396.7 | 429.9 | |||||||||
Gross profit margin | 34.3 | % | 33.4 | % | 34.8 | % | ||||||
SG&A | 215.0 | 213.6 | 226.9 | |||||||||
Gain on sale of businesses | - | 141.3 | - | |||||||||
Segment operating income | 201.2 | 323.7 | 202.6 | |||||||||
Segment operating income as a percentage of sales | 16.5 | % | 27.2 | % | 16.4 | % |
Fourth Quarter and Year-to-Date 2018 - Segment Results | ||||||||||||||||||||||||||
(dollars in millions, comparison vs. 2017 fourth quarter and year-to-date, unaudited) | ||||||||||||||||||||||||||
EPD | IPD | FCD | ||||||||||||||||||||||||
4th Qtr | YTD | 4th Qtr | YTD | 4th Qtr | YTD | |||||||||||||||||||||
Bookings | $ | 545.0 | $ | 1,995.1 | $ | 203.2 | $ | 838.5 | $ | 318.0 | $ | 1,274.3 | ||||||||||||||
- vs. prior year | 12.3 | % | 8.3 | % | -1.3 | % | 2.0 | % | 1.2 | % | 4.0 | % | ||||||||||||||
- on constant currency | 15.3 | % | 7.9 | % | 1.0 | % | 0.5 | % | 3.5 | % | 3.0 | % | ||||||||||||||
Sales | $ | 484.6 | $ | 1,899.2 | $ | 196.4 | $ | 799.4 | $ | 325.9 | $ | 1,215.8 | ||||||||||||||
- vs. prior year | -2.9 | % | 7.0 | % | -8.8 | % | 3.1 | % | -5.4 | % | 2.3 | % | ||||||||||||||
- on constant currency | - | 6.3 | % | -6.8 | % | 1.7 | % | -3.2 | % | 1.7 | % | |||||||||||||||
Gross Profit | $ | 146.6 | $ | 586.0 | $ | 59.2 | $ | 189.4 | $ | 118.3 | $ | 416.9 | ||||||||||||||
- vs. prior year | 3.4 | % | 7.3 | % | 29.0 | % | 31.4 | % | -0.4 | % | 5.1 | % | ||||||||||||||
Gross Margin (% of sales) | 30.3 | % | 30.9 | % | 30.1 | % | 23.7 | % | 36.3 | % | 34.3 | % | ||||||||||||||
- vs. prior year (in basis points) | 190 bps | 20 bps | 880 bps | 510 bps | 180 bps | 90 bps | ||||||||||||||||||||
Operating Income / (Loss) | $ | 59.1 | $ | 206.9 | $ | 18.9 | $ | (6.2 | ) | $ | 64.5 | $ | 201.2 | |||||||||||||
- vs. prior year | 14.8 | % | 30.0 | % | 751.7 | % | 87.3 | % | -6.3 | % | -37.8 | % | ||||||||||||||
- on constant currency | 19.6 | % | 29.3 | % | 765.6 | % | 91.0 | % | -3.9 | % | -37.4 | % | ||||||||||||||
Operating Margin (% of sales) | 12.2 | % | 10.9 | % | 9.6 | % | -0.8 | % | 19.8 | % | 16.5 | % | ||||||||||||||
- vs. prior year (in basis points) | 190 bps | 190 bps | 1090 bps | 550 bps | 20 bps | (1070) bps | ||||||||||||||||||||
Adjusted Operating Income / (Loss) * | $ | 70.3 | $ | 245.1 | $ | 20.1 | $ | 26.0 | $ | 62.8 | $ | 204.1 | ||||||||||||||
- vs. prior year | 17.6 | % | 14.7 | % | NM | NM | -10.8 | % | 3.7 | % | ||||||||||||||||
- on constant currency | 21.7 | % | 14.2 | % | NM | NM | -8.5 | % | 4.4 | % | ||||||||||||||||
Adj. Oper. Margin (% of sales)* | 14.5 | % | 12.9 | % | 10.2 | % | 3.3 | % | 19.3 | % | 16.8 | % | ||||||||||||||
- vs. prior year (in basis points) | 250 bps | 90 bps | 950 bps | 350 bps | (110) bps | 20 bps | ||||||||||||||||||||
Backlog | $ | 922.6 | $ | 394.0 | $ | 608.4 | ||||||||||||||||||||
* Adjusted Operating Income and Adjusted Operating Margin exclude realignment and transformation charges, below-the-line FX impacts and other specific discrete items |
CONSOLIDATED BALANCE SHEETS | ||||||||
December 31, | ||||||||
(Amounts in thousands, except per share data) | 2018 | 2017 | ||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 619,683 | $ | 703,445 | ||||
Accounts receivable, net | 792,434 | 856,711 | ||||||
Contract assets, net | 228,579 | - | ||||||
Inventories, net | 633,871 | 884,273 | ||||||
Prepaid expenses and other | 108,578 | 114,316 | ||||||
Total current assets | 2,383,145 | 2,558,745 | ||||||
Property, plant and equipment, net | 610,096 | 671,796 | ||||||
Goodwill | 1,197,640 | 1,218,188 | ||||||
Deferred taxes | 44,682 | 51,974 | ||||||
Other intangible assets, net | 190,550 | 210,049 | ||||||
Other assets, net | 190,164 | 199,722 | ||||||
Total assets | $ | 4,616,277 | $ | 4,910,474 | ||||
LIABILITIES AND EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable | 418,893 | 443,113 | ||||||
Accrued liabilities | 391,406 | 724,196 | ||||||
Contract liabilities | 202,458 | - | ||||||
Debt due within one year | 68,218 | 75,599 | ||||||
Total current liabilities |
1,080,975 | 1,242,908 | ||||||
Long-term debt due after one year | 1,414,829 | 1,499,658 | ||||||
Retirement obligations and other liabilities | 459,693 | 496,954 | ||||||
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 | 494,551 | 488,326 | ||||||
Retained earnings | 3,543,007 | 3,503,947 | ||||||
Treasury shares, at cost — 46,237 and 46,471 shares, respectively | (2,049,404 | ) | (2,059,558 | ) | ||||
Deferred compensation obligation | 7,117 | 6,354 | ||||||
Accumulated other comprehensive loss | (573,947 | ) | (505,473 | ) | ||||
Total Flowserve Corporation shareholders' equity | 1,642,315 | 1,654,587 | ||||||
Noncontrolling interests | 18,465 | 16,367 | ||||||
Total equity | 1,660,780 | 1,670,954 | ||||||
Total liabilities and equity | $ | 4,616,277 | $ | 4,910,474 |
CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||||||
Year Ended December 31, | ||||||||||||
(Amounts in thousands) | 2018 | 2017 | 2016 | |||||||||
Cash flows – Operating activities: | ||||||||||||
Net earnings, including noncontrolling interests | $ | 125,050 | $ | 4,328 | $ | 135,532 | ||||||
Adjustments to reconcile net earnings to net cash provided by operating activities: | ||||||||||||
Depreciation | 95,820 | 101,438 | 99,897 | |||||||||
Amortization of intangible and other assets | 16,653 | 17,016 | 16,855 | |||||||||
Loss (gain) on disposition of businesses | 7,727 | (141,317 | ) | 7,664 | ||||||||
Stock-based compensation | 19,912 | 22,820 | 30,213 | |||||||||
Provision for U.S. Tax Cuts and Jobs Act of 2017 and Latin America accounts receivable reserve | (5,654 | ) | 115,320 | 73,452 | ||||||||
Foreign currency, asset impairments and other non-cash adjustments | 36,052 | 33,087 | (8,127 | ) | ||||||||
Change in assets and liabilities: | ||||||||||||
Accounts receivable, net | (25,448 | ) | 60,216 | 36,927 | ||||||||
Inventories, net | (29,314 | ) | 48,642 | 52,892 | ||||||||
Contract assets, net | (23,693 | ) | - | - | ||||||||
Prepaid expenses and other assets, net | (7,869 | ) | 32,935 | (45,475 | ) | |||||||
Contract liabilities | 33,710 | - | - | |||||||||
Accounts payable | (4,823 | ) | 12,403 | (71,008 | ) | |||||||
Accrued liabilities and income taxes payable | (18,248 | ) | (3,383 | ) | (88,770 | ) | ||||||
Retirement obligations and other | (44,314 | ) | (43,431 | ) | 16,372 | |||||||
Net deferred taxes | 15,270 | 50,992 | (15,948 | ) | ||||||||
Net cash flows provided by operating activities | 190,831 | 311,066 | 240,476 | |||||||||
Cash flows – Investing activities: | ||||||||||||
Capital expenditures | (83,993 | ) | (61,602 | ) | (89,699 | ) | ||||||
Proceeds from disposal of assets | 6,190 | 5,435 | 3,294 | |||||||||
(Payments for) proceeds from disposition of businesses | (3,663 | ) | 232,767 | (5,064 | ) | |||||||
Net cash flows (used) provided by investing activities | (81,466 | ) | 176,600 | (91,469 | ) | |||||||
Cash flows – Financing activities: | ||||||||||||
Payments on long-term debt | (60,000 | ) | (60,000 | ) | (60,000 | ) | ||||||
Payments of deferred loan costs | - | (1,503 | ) | - | ||||||||
Proceeds under other financing arrangements | 3,377 | 7,359 | 35,680 | |||||||||
Payments under other financing arrangements | (9,853 | ) | (19,030 | ) | (12,636 | ) | ||||||
Payments related to tax withholding for stock-based compensation | (3,061 | ) | (6,238 | ) | (10,405 | ) | ||||||
Payments of dividends | (99,416 | ) | (99,233 | ) | (97,746 | ) | ||||||
Other | (4,331 | ) | (6,708 | ) | 1,386 | |||||||
Net cash flows used by financing activities | (173,284 | ) | (185,353 | ) | (143,721 | ) | ||||||
Effect of exchange rate changes on cash | (19,843 | ) | 33,970 | (4,568 | ) | |||||||
Net change in cash and cash equivalents | (83,762 | ) | 336,283 | 718 | ||||||||
Cash and cash equivalents at beginning of period | 703,445 | 367,162 | 366,444 | |||||||||
Cash and cash equivalents at end of period | $ | 619,683 | $ | 703,445 | $ | 367,162 | ||||||
Income taxes paid (net of refunds) | $ | 87,009 | $ | 59,409 | $ | 151,191 | ||||||
Interest paid | 54,576 | 56,808 | 57,393 |
CONSOLIDATED QUARTERLY FINANCIAL DATA | ||||||||||||||
(Unaudited) | ||||||||||||||
(Amounts in millions, except per share data) | ||||||||||||||
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 | ||||||
2017 | ||||||||||||||
Quarter | 4th | 3rd | 2nd | 1st | ||||||||||
Sales | $ | 1,034.1 | $ | 883.4 | $ | 877.1 | $ | 866.3 | ||||||
Gross profit | 304.4 | 267.5 | 245.0 | 268.4 | ||||||||||
Earnings before income taxes | 67.0 | 68.4 | 103.0 | 24.6 | ||||||||||
Net (loss) earnings attributable to Flowserve Corporation | (105.9 | ) | 47.6 | 41.9 | 19.1 | |||||||||
(Loss) earnings per share (1): | ||||||||||||||
Basic | ($0.81 | ) | $ | 0.36 | $ | 0.32 | $ | 0.15 | ||||||
Diluted | ($0.81 | ) | $ | 0.36 | $ | 0.32 | $ | 0.15 | ||||||
(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. |
View source version on businesswire.com: https://www.businesswire.com/news/home/20190220005917/en/
Source:
Flowserve
Investor Contacts:
Jay Roueche, Vice President,
Investor Relations & Treasurer, (972) 443-6560
Mike Mullin,
Director, Investor Relations, (972) 443-6644
Media Contact:
Lars Rosene, Vice President, Corporate & Marketing
Communications, (972) 443-6636