News Details

DALLAS--(BUSINESS WIRE)--Jul. 27, 2017-- 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 second quarter ended June 30, 2017.

Second Quarter 2017 Highlights (all comparisons to 2016 second quarter, unless otherwise noted)

• Reported Earnings Per Share (EPS) of $0.32
  • Adjusted EPS^[1] was $0.22 and excludes a net gain of $0.10 per share from adjusted items and was impacted by an adjusted tax rate of 46.3%
• Sales were $877 million, down 13.6% on a constant currency basis, including an approximately 2% negative impact related to the previously announced Gestra business divestiture
  • Aftermarket sales were $435 million, down 3.6% on a constant currency basis
• Total bookings were $971 million, up 0.8% on a constant currency basis, including approximately 2% negative impact due to the Gestra divestiture
  • Original equipment bookings were $514 million, up 5.1% on a constant currency basis
  • Aftermarket bookings were $458 million, or 47% of total bookings, down 3.7% on a constant currency basis
  • Total book-to-bill was 1.11
• Reported gross and operating margins of 27.9% and 14.4%
  • Adjusted gross and operating margins^[2] were 31.5% and 8.1%
• Backlog at June 30, 2017 was $2.1 billion, up 12.4% and 1.5% versus 2016 year-end, and prior year second quarter, respectively

“Flowserve’s second quarter results were below our expectations for the period, and do not reflect the underlying potential of our business,” said Scott Rowe, Flowserve’s President and Chief Executive Officer. “A number of factors impacted the quarter’s outcome, including slower than expected progress of the IPD turnaround, customer delays in product pick-up, and a significantly higher than guided tax rate. Despite this performance, we are encouraged by the continued stability of our bookings, and the modest sequential improvement in our operations. As a result, we continue to expect the second half of the year to demonstrate marked improvement, particularly in the fourth quarter.”

Rowe added, “Over the course of my first 100 days with Flowserve, I have focused on our people, customers, and operations. The leadership team now understands my expectations and we are aligned on our approach to achieve our objectives. I am excited about the numerous opportunities ahead for Flowserve, including the ability to simplify and drive further efficiencies in all aspects of our operations. Going forward, we will be market led, customer centric and operationally excellent. I remain confident that the company is well-positioned to drive long-term value for both our customers and shareholders.”

Full Year 2017 Guidance

Flowserve updated its 2017 guidance to reflect its first half results and expectations for the remainder of the year, and now expects Reported and Adjusted^[3] EPS target ranges of $0.85 to $1.05 and $1.30 to $1.50, respectively. Both EPS target ranges are based on an expected 6 to 10 percent decline in revenues year-over-year. Adjusted EPS guidance anticipates a return to the guided tax rate, of 30-to-31%, for the remainder of the year, and it excludes expected realignment expense, as well as the potential impact of below-the-line foreign currency effects and certain other discrete items, such as the gain on sale of our Gestra business, finalized in the second quarter 2017.

Reclassifications and Revision to Prior Periods

The company also announced today that during the 2017 second quarter, certain immaterial accounting errors were identified in prior period financial statements for the period beginning in 2013 through the first quarter of 2017, which occurred primarily at two non-U.S. sites, and principally involved certain inventory and accounts receivable balances. While not material to any prior annual or quarterly period, in order to enhance transparency, the company has determined to amend its 2016 Form 10-K and the March 31, 2017 Form 10-Q to reflect the revisions. Additionally, the company has determined material weakness existed in its internal control structure at year-end 2016 and continued through the end of the 2017 second quarter. The company intends to institute remediation plans as a result of these errors. The cumulative effect of the changes to retained earnings as of March 31, 2017 was a reduction of approximately $30 million.

Second Quarter 2017 Results Conference Call

Flowserve will host its conference call with the financial community on Friday, July 28th 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.

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; the review of the company’s internal financial records and controls that is being conducted, including any additional time that may be required to complete the review; the timing and nature of the final resolution of the accounting issues discussed in this news release; any delay in the filing of required periodic reports with the SEC; the ability of the company to remediate any material weakness in its internal control over financial reporting and ineffectiveness in disclosure controls and procedures; increased regulatory, media, or financial reporting issues and practices, or otherwise; 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.

View source version on businesswire.com: http://www.businesswire.com/news/home/20170727006517/en/

Source: Flowserve Corporation

Flowserve
Investor Contacts:
Jay Roueche, 972-443-6560
Interim Chief Financial Officer
or
Mike Mullin, 972-443-6636
Director, Investor Relations
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Media Contact:
Lars Rosene, 972-443-6644
Vice President, Corporate & Customer Communications