News Details

DALLAS--(BUSINESS WIRE)--Feb. 18, 2016-- Flowserve Corporation (NYSE: FLS), a leading provider of flow control products and services for the global infrastructure markets, today reported its financial results for the fourth quarter and full year ended December 31, 2015.

Fourth Quarter 2015 Highlights

• Adjusted Earnings Per Share (EPS)^[1] was $0.89 inclusive of $0.06 of negative currency translation and $0.06 of reserves established for an at-risk customer, which was previously excluded from expected Adjusted EPS in our preliminary results release on February 1, 2016
• Sales were $1.29 billion, including $76.4 million from SIHI, up 1.2% on a constant currency basis
  • Aftermarket sales were $563 million in the fourth quarter, up 5.5% on a constant currency basis
• Total Bookings were $969 million, down 20.7% on a constant currency basis
  • Aftermarket bookings were $455 million, or 47% of total bookings, down approximately 10.8% on a constant currency
• Announces expanded realignment program to now reduce a total of approximately $215 million in annualized costs at completion in late 2017

Full Year 2015 and Other Highlights

• Adjusted Earnings Per Share (EPS)^[1] was $3.07 for full year 2015, inclusive of $0.22 of negative currency translation and $0.09 of allowance for doubtful accounts and reserves for an at-risk customer
• Full year total Bookings were $4.18 billion, representing a full year book-to-bill of 92%
  • Full year aftermarket bookings were $1.88 billion, or 45% of total bookings
• Backlog at December 31, 2015 was $2.17 billion, including SIHI backlog of $94 million
• Returned $397 million to shareholders in 2015 through share repurchases and dividends
• Declares upcoming dividend at $0.19 per share, representing a 5.6% per share increase over previous quarter, and marks 9 consecutive years of dividend growth

“During 2015 and into the fourth quarter, our end-markets deteriorated further than anticipated a year ago and we are not currently forecasting near-term improvement. However, Flowserve’s operating results for the fourth quarter were solid, which generated full year Adjusted EPS in-line with our third quarter guidance. SIHI, which was acquired in the 2015 first quarter, also delivered on our expectations for the year,” said Mark Blinn, Flowserve’s president and chief executive officer. “In light of current business conditions, we are using this as an opportunity to accelerate our longer-term plans by implementing key strategic and structural changes to our operating platform and cost structure, which we anticipate will enable continued success in varied market conditions.

“Following the significant progress we have made in our 2015 initiatives, we have expanded our previously announced $125 million realignment program to achieve further structural improvements to our operating platform. Beyond the approximate $80 million of 2015 expense recognized on the program, we now expect to invest an additional $270 million in identified initiatives through 2017, of which approximately $50 million will be below-the-line expenses. We believe the newly expanded program will achieve annualized cost reductions of approximately $215 million in total once fully implemented.

“Along with our strategic growth priorities, this enhanced realignment initiative reflects confidence in our ability to structurally improve, and increase efficiency within, our business. Our actions will be transformational, as we drive towards a significant increase in our manufacturing capabilities and labor hours in low cost regions, improving plant and machine utilization while reducing our manufacturing footprint by approximately 30 percent. Once implemented, our highly engineered manufacturing business is expected to derive the most benefit from these actions, with a more profitable installed base yielding increased future aftermarket opportunities. We expect Flowserve to emerge even stronger, in order to further capitalize on long-term growth and deliver meaningful shareholder value,” Blinn concluded.

Fourth Quarter 2015

For the fourth quarter of 2015, Flowserve announced Adjusted EPS of $0.89 on revenues of $1.21 billion, excluding SIHI’s contribution. Adjusted gross and operating margins were 33.5% and 14.9%, respectively. Fourth quarter Adjusted EPS includes $0.06 of reserves established for an at-risk customer and excludes the impact of realignment expense of $0.31, negative below-the-line currency impact of $0.06, discrete tax item of $0.02 and SIHI’s net loss of $0.01, partially offset by the reduction of contingent consideration for a 2013 acquisition of $0.05. On a reported basis, earnings for the fourth quarter were $0.54 per share.

Full Year 2015

For full year 2015, Flowserve announced Adjusted EPS of $3.07 on revenues of $4.56 billion, including SIHI’s contribution. Adjusted gross and operating margins were 34.8% and 15.2%, respectively. Full year Adjusted EPS includes $0.09 of allowance for doubtful accounts and reserves for an at-risk customer and excludes the impact of realignment expense of $0.45, SIHI net loss of $0.30, Venezuela currency remeasurement of $0.15, negative below-the-line currency impact of $0.11 and other discrete items totaling $0.06. On a reported basis, earnings for the full year were $2.00 per share. As of December 31, 2015, the company’s cash and cash equivalents were $366 million.

Realignment Programs

In full year 2015, Flowserve expensed approximately $80 million of its previously announced $125 million realignment program, including approximately $50 million in the fourth quarter. In addition, the company expensed approximately $31 million under its SIHI realignment program. The company today announced it is expanding the $125 million program, and anticipates approximately $270 million of additional charges through 2017, including approximately $50 million below the operating income line item. Including 2015 amounts, this combined $350 million program is expected to reduce the company’s cost structure by approximately $215 million annually when complete. Flowserve expects to recognize cost savings of $125 million during 2016 and $185 million in 2017.

Segment Performance

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 fourth quarter and full year include:

Reaffirms 2016 Guidance

Flowserve reaffirmed its 2016 Adjusted ^[2] EPS target range of $2.40 to $2.75 with expected revenues declining 7 to 14 percent year-over-year, including a forecasted 2 percent currency headwind. The company expects its 2016 Adjusted EPS to be weighted toward the second half of 2016, reflecting normal seasonality.

Increase in Quarterly Dividend

Flowserve announced today that its Board of Directors has authorized the payment of a quarterly cash dividend of $0.19 per share on the company's outstanding shares of common stock. This dividend represents a 5.6% increase compared to the $0.18 per share amount paid in January 2016.

The dividend is payable on April 8, 2016, to shareholders of record as of the close of business on March 25, 2016.

While Flowserve currently intends to pay regular quarterly cash dividends for the foreseeable future, any future dividends, whether at this $0.19 per share quarterly rate or otherwise, will be reviewed individually and declared by the Board at its discretion, dependent upon the Board's assessment of the company's financial condition and business outlook at the applicable time.

Fourth Quarter 2015 Results Conference Call

Flowserve will host its conference call with the financial community on Friday, February 19th 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.

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

^[2] Adjusted 2016 EPS will include SIHI’s operational results and will exclude the Company’s realignment expenses, SIHI purchase price accounting/integration costs, the impact from other specific one-time events and below-the-line foreign currency effects

About Flowserve

Flowserve Corp. is one of the world’s leading providers of fluid motion and control products and services. Operating in more than 55 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; 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; our ability to execute and realize the expected financial benefits from our strategic manufacturing optimization and realignment initiatives; 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; 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; 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 ability to anticipate and manage cybersecurity risk, including the risk of potential business disruptions or financial losses; 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.

(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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Source: Flowserve Corporation

Flowserve Corporation
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