News Details

• 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

DALLAS--(BUSINESS WIRE)--Feb. 20, 2019-- 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, 2018.

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
• 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
• 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
• 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
• 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
• 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
• 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 Scott Rowe, Flowserve’s president and chief executive officer. “Double-digit growth in aftermarket bookings in the quarter, combined with an increased backlog at year-end provides a solid foundation for growth in 2019.”

Lee Eckert, Flowserve’s senior vice president and chief financial officer, added, “Flowserve delivered solid operating cash flow of $164 million in the 2018 fourth quarter, continuing the momentum of the second and third quarters. Working capital efficiency remains a key priority and we delivered improvement in 2018, including both inventory and accounts receivables declines since the beginning of 2018, even with growth in bookings and sales.”

Rowe concluded, “As we look to this year, we remain focused on advancing our Flowserve 2.0 initiatives to capitalize on the momentum we achieved in 2018. Our priorities include further operating improvements and driving strategic and deliberate growth. Despite the current market uncertainties from ongoing geopolitical headwinds, including tariffs, sanctions and certain regional challenges, we believe in our ability to deliver continued operational improvements together with top- and bottom-line growth. We look forward to our continued progress in 2019 as we remain committed to driving long-term value creation for our customers, employees and shareholders.”

2019 Initial Guidance^[3]

Flowserve is providing Reported and Adjusted EPS guidance for 2019, as well as certain other financial metrics, as shown in the table below.

Flowserve’s 2019 Adjusted EPS target range excludes expected realignment and transformation charges of approximately $65 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 4.0 to 6.0 percent year-over-year, and is based on current foreign currency rates and commodity prices, 2018 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 $55 to $57 million and an adjusted tax rate of 26 to 28 percent. The quarterly phasing of expected 2019 earnings is anticipated to reflect Flowserve’s traditional seasonality, although more pronounced in its second half weighting as additional transformation benefits are expected to be realized.

Fourth Quarter 2018 Results Conference Call

Flowserve will host its conference call with the financial community on Thursday, February 21^st 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 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 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.

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Source: Flowserve Corporation

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