Flowserve Corporation Reports Second Quarter 2019 Results

DALLAS--(BUSINESS WIRE)--July 31, 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 second quarter ended June 30, 2019.

Second Quarter 2019 Highlights (all comparisons to the 2018 second quarter, unless otherwise noted)

• Reported Earnings Per Share (EPS) were $0.44, and Adjusted^[1] EPS of $0.54
  • Pre-tax adjusted items include $13.9 million of realignment and transformation activities and approximately $3.1 million of negative below-the-line FX impact
  • Adjusted EPS increased approximately 32% year-over-year

• Total bookings were $1.11 billion, up 6.5%, or 9.9% on a constant currency basis, and included approximately 1.0% negative impact related to divested businesses
  • Aftermarket bookings were $508.2 million, or 46% of total bookings, up 0.8%, or 4.5% on a constant currency basis
  • Original equipment bookings were up 11.9%, or 15.0% on a constant currency basis

• Backlog as of June 30, 2019 was $2.2 billion, up 14.0% versus 2018 year-end, on 1.12 book-to-bill

• Sales were $990.1 million, up 1.7%, or 4.7% on a constant currency basis and included approximately 1.5% negative impact related to divested businesses
  • Aftermarket sales were $497.5 million, up 2.0%, or 5.4% on a constant currency basis

• Reported gross and operating margins were 32.1% and 9.9%, up 270 basis points and 510 basis points, respectively
  • Adjusted gross and operating margins^[2] were 32.5% and 11.3%, up 60 basis points and 200 basis points, respectively

“Flowserve delivered strong results in the second quarter, including year-over-year growth in bookings, sales, margins and net income,” said Scott Rowe, Flowserve’s president and chief executive officer. “Our results demonstrate that we are building momentum as we continued to drive operational improvements while delivering solid margin enhancement and increased backlog quality. Our bookings this quarter, the highest quarterly level in over three years, included important new awards across a range of end markets such as midstream pipeline, LNG, refinery regulation driven upgrades and solar, which helped drive strong original equipment order growth. At the same time, our Flowserve 2.0 commercial intensity initiative supported increased capture of customer’s aftermarket spending.”

“In addition to our strong top- and bottom-line performance, our focus on cash flow and working capital improvements, driven by Flowserve 2.0 transformation initiatives, delivered first-half 2019 free cash flow improvement of $113 million compared to the prior year,” added Lee Eckert, Flowserve’s senior vice president and chief financial officer. “As a result of our solid first half 2019 financial results and confidence in the remainder of the year, we are increasing our full year Reported and Adjusted EPS^[1] target range.”

Rowe concluded, “I am pleased with the continued progress of our Flowserve 2.0 transformation program, including the early benefits of our recent pumps platform combination to better leverage Flowserve’s scale and drive value for our customers. Our transformation journey continues to gain momentum, which provides confidence in achieving our revised 2019 outlook, as well as our longer-term financial targets. We remain focused on executing our strategy to drive long-term value for our customers, employees and shareholders.”

Full Year 2019 Guidance^[3]

Flowserve today revised its 2019 guidance, including increasing its Reported and Adjusted EPS target to a range of $1.75 to $1.90 and $2.05 to $2.20, respectively. Both the Reported and the Adjusted EPS target range now include an expected revenue increase of approximately 4.0% to 5.0% year-over-year and remain based on the other previously announced assumptions.

Second Quarter 2019 Results Conference Call

Flowserve will host its conference call with the financial community on Thursday, August 1^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.

^[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 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 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 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.

FLOWSERVE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
	Three Months Ended June 30,
(Amounts in thousands, except per share data)	2019				2018
Sales	$	990,084			$	973,129
Cost of sales		(672,051	)			(687,072	)
Gross profit		318,033				286,057
Selling, general and administrative expense		(223,676	)			(240,791	)
Net earnings from affiliates		3,661				1,445
Operating income		98,018				46,711
Interest expense		(14,013	)			(14,939	)
Interest income		2,218				1,330
Other income (expense), net		(3,336	)			(4,770	)
Earnings before income taxes		82,887				28,332
Provision for income taxes		(22,413	)			(13,545	)
Net earnings, including noncontrolling interests		60,474				14,787
Less: Net earnings attributable to noncontrolling interests		(2,302	)			(1,567	)
Net earnings attributable to Flowserve Corporation	$	58,172			$	13,220
Net earnings per share attributable to Flowserve Corporation common shareholders:
Basic	$	0.44			$	0.10
Diluted		0.44				0.10

RECONCILIATION OF NON-GAAP MEASURES
(Unaudited)
	Three Months Ended June 30, 2019
(Amounts in thousands, except per share data)	As Reported (a)				Realignment (1)					Other Items					As Adjusted
Sales	$	990,084			$	-				$	-				$	990,084
Gross profit		318,033				(3,863	)				-					321,896
Gross margin		32.1	%			-					-					32.5	%
Selling, general and administrative expense		(223,676	)			(2,437	)				(7,573	)	(3	)		(213,666	)
Operating income		98,018				(6,300	)				(7,573	)				111,891
Operating income as a percentage of sales		9.9	%			-					-					11.3	%
Interest and other expense, net		(15,131	)			-					(3,079	)	(4	)		(12,052	)
Earnings before income taxes		82,887				(6,300	)				(10,652	)				99,839
Provision for income taxes		(22,413	)			980		(2	)		2,552		(5	)		(25,945	)
Tax Rate		27.0	%			15.6	%				24.0	%				26.0	%
Net earnings attributable to Flowserve Corporation	$	58,172			$	(5,320	)			$	(8,100	)			$	71,592
Net earnings per share attributable to Flowserve Corporation common shareholders:
Basic	$	0.44			$	(0.04	)			$	(0.06	)			$	0.55
Diluted		0.44				(0.04	)				(0.06	)				0.54
Basic number of shares used for calculation		131,147				131,147					131,147					131,147
Diluted number of shares used for calculation		131,754				131,754					131,754					131,754
(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

RECONCILIATION OF NON-GAAP MEASURES
(Unaudited)
	Three Months Ended June 30, 2018
(Amounts in thousands, except per share data)	As Reported (a)				Realignment (1)					Other Items					As Adjusted
Sales	$	973,129			$	-				$	-				$	973,129
Gross profit		286,057				(16,229	)				(7,713	)	(3	)		309,999
Gross margin		29.4	%			-					-					31.9	%
Selling, general and administrative expense		(240,791	)			(4,511	)				(14,912	)	(4	)		(221,368	)
Operating income		46,711				(20,740	)				(22,625	)				90,076
Operating income as a percentage of sales		4.8	%			-					-					9.3	%
Interest and other expense, net		(18,379	)			-					(4,062	)	(5	)		(14,317	)
Earnings before income taxes		28,332				(20,740	)				(26,687	)				75,759
Provision for income taxes		(13,545	)			4,721		(2	)		1,516		(6	)		(19,782	)
Tax Rate		47.8	%			22.8	%				5.7	%				26.1	%
Net earnings attributable to Flowserve Corporation	$	13,220			$	(16,019	)			$	(25,171	)			$	54,410
Net earnings per share attributable to Flowserve Corporation common shareholders:
Basic	$	0.10			$	(0.12	)			$	(0.19	)			$	0.42
Diluted	$	0.10			$	(0.12	)			$	(0.19	)			$	0.41
Basic number of shares used for calculation		130,844				130,844					130,844					130,844
Diluted number of shares used for calculation		131,226				131,226					131,226					131,226
(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 FPD divestiture write-down of assets
(4) Represents $9.7 million related to FPD divestiture write-down of assets, $2.4 million related to implementation costs for the adoption of ASC 606 and $2.9 million related to Flowserve 2.0 transformation efforts
(5) Represents below-the-line foreign exchange impacts
(6) Includes tax impact of items above

FLOWSERVE CORPORATION
SEGMENT INFORMATION
(Unaudited)
FLOWSERVE PUMP DIVISION	Three Months Ended June 30,
(Amounts in millions, except percentages)	2019				2018
Bookings	$	761.9			$	720.8
Sales		674.6				668.4
Gross profit		222.7				186.4
Gross profit margin		33.0	%			27.9	%
SG&A		150.2				157.0
Segment operating income		76.2				31.6
Segment operating income as a percentage of sales		11.3	%			4.7	%
FLOW CONTROL DIVISION	Three Months Ended June 30,
(Amounts in millions, except percentages)	2019				2018
Bookings	$	346.4			$	318.6
Sales		316.9				306.5
Gross profit		99.4				101.0
Gross profit margin		31.4	%			33.0	%
SG&A		53.3				53.9
Segment operating income		46.2				46.4
Segment operating income as a percentage of sales		14.6	%			15.1	%

FLOWSERVE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
	Six Months Ended June 30,
(Amounts in thousands, except per share data)	2019				2018
Sales	$	1,880,135			$	1,893,083
Cost of sales		(1,268,026	)			(1,335,593	)
Gross profit		612,109				557,490
Selling, general and administrative expense		(428,830	)			(469,966	)
Net earnings from affiliates		5,970				4,613
Operating income		189,249				92,137
Interest expense		(28,044	)			(29,818	)
Interest income		4,241				2,968
Other income (expense), net		(6,476	)			(11,925	)
Earnings before income taxes		158,970				53,362
Provision for income taxes		(38,999	)			(22,116	)
Net earnings, including noncontrolling interests		119,971				31,246
Less: Net earnings attributable to noncontrolling interests		(4,538	)			(2,883	)
Net earnings attributable to Flowserve Corporation	$	115,433			$	28,363
Net earnings per share attributable to Flowserve Corporation common shareholders:
Basic	$	0.88			$	0.22
Diluted		0.88				0.22

RECONCILIATION OF NON-GAAP MEASURES
(Unaudited)
	Six Months Ended June 30, 2019
(Amounts in thousands, except per share data)	As Reported (a)				Realignment (1)					Other Items					As Adjusted
Sales	$	1,880,135			$	-				$	-				$	1,880,135
Gross profit		612,109				(9,363	)				-					621,472
Gross margin		32.6	%			-					-					33.1	%
Selling, general and administrative expense		(428,830	)			14,993					(15,986	)	(3	)		(427,837	)
Operating income		189,249				5,630					(15,986	)				199,605
Operating income as a percentage of sales		10.1	%			-					-					10.6	%
Interest and other expense, net		(30,279	)			-					(5,786	)	(4	)		(24,493	)
Earnings before income taxes		158,970				5,630					(21,772	)				175,112
Provision for income taxes		(39,000	)			961		(2	)		5,263		(5	)		(45,224	)
Tax Rate		24.5	%			-17.1	%				24.2	%				25.8	%
Net earnings attributable to Flowserve Corporation	$	115,433			$	6,591				$	(16,509	)			$	125,351
Net earnings per share attributable to Flowserve Corporation common shareholders:
Basic	$	0.88			$	0.05				$	(0.13	)			$	0.96
Diluted		0.88				0.05					(0.13	)				0.95
Basic number of shares used for calculation		131,065				131,065					131,065					131,065
Diluted number of shares used for calculation		131,643				131,643					131,643					131,643
(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
(3) Represents Flowserve 2.0 transformation efforts
(4) Represents below-the-line foreign exchange impacts
(5) Includes tax impact of items above

RECONCILIATION OF NON-GAAP MEASURES
(Unaudited)
	Six Months Ended June 30, 2018
(Amounts in thousands, except per share data)	As Reported (a)				Realignment (1)					Other Items					As Adjusted
Sales	$	1,893,083			$	-				$	-				$	1,893,083
Gross profit		557,490				(23,385	)				(7,713	)	(3	)		588,588
Gross margin		29.4	%			-					-					31.1	%
Selling, general and administrative expense		(469,966	)			(8,829	)				(20,379	)	(4	)		(440,758	)
Operating income		92,137				(32,214	)				(28,092	)				152,443
Operating income as a percentage of sales		4.9	%			-					-					8.1	%
Interest and other expense, net		(38,775	)			-					(12,014	)	(5	)		(26,761	)
Earnings before income taxes		53,362				(32,214	)				(40,106	)				125,682
Provision for income taxes		(22,116	)			7,016		(2	)		4,354		(6	)		(33,486	)
Tax Rate		41.4	%			21.8	%				10.9	%				26.6	%
Net earnings attributable to Flowserve Corporation	$	28,363			$	(25,198	)			$	(35,752	)			$	89,313
Net earnings per share attributable to Flowserve Corporation common shareholders:
Basic	$	0.22			$	(0.19	)			$	(0.27	)			$	0.68
Diluted	$	0.22			$	(0.19	)			$	(0.27	)			$	0.68
Basic number of shares used for calculation		130,803				130,803					130,803					130,803
Diluted number of shares used for calculation		131,161				131,161					131,161					131,161
(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 FPD divestiture write-down of assets
(4) Represents $9.7 million related to FPD divestiture write-down of assets, $7.3 million related to implementation costs for the adoption of ASC 606 and $3.4 million related to Flowserve 2.0 transformation efforts
(5) Represents below-the-line foreign exchange impacts
(6) Includes tax impact of items above

FLOWSERVE CORPORATION
SEGMENT INFORMATION
(Unaudited)
FLOWSERVE PUMP DIVISION	Six Months Ended June 30,
(Amounts in millions, except percentages)	2019				2018
Bookings	$	1,512.0			$	1,324.9
Sales		1,284.0				1,312.9
Gross profit		423.3				369.8
Gross profit margin		33.0	%			28.2	%
SG&A		272.6				308.7
Segment operating income		156.6				66.3
Segment operating income as a percentage of sales		12.2	%			5.0	%
FLOW CONTROL DIVISION	Six Months Ended June 30,
(Amounts in millions, except percentages)	2019				2018
Bookings	$	659.6			$	645.3
Sales		599.1				583.7
Gross profit		197.2				189.2
Gross profit margin		32.9	%			32.4	%
SG&A		106.6				108.2
Segment operating income		90.6				80.3
Segment operating income as a percentage of sales		15.1	%			13.8	%

Second Quarter and Year-to-Date 2019 - Segment Results
(dollars in millions, comparison vs. 2018 second quarter and year-to-date, unaudited)
	FPD							FCD
	2nd Qtr			YTD				2nd Qtr			YTD
Bookings	$	761.9		$	1,512.0			$	346.4		$	659.6
- vs. prior year		5.7	%		14.1	%			8.7	%		2.2	%
- on constant currency		9.2	%		18.2	%			11.9	%		5.4	%
Sales	$	674.6		$	1,284.0			$	316.9		$	599.1
- vs. prior year		0.9	%		-2.2	%			3.4	%		2.6	%
- on constant currency		3.9	%		1.1	%			6.3	%		5.8	%
Gross Profit	$	222.7		$	423.3			$	99.4		$	197.2
- vs. prior year		19.5	%		14.5	%			-1.6	%		4.2	%
Gross Margin (% of sales)		33.0	%		33.0	%			31.4	%		32.9	%
- vs. prior year (in basis points)	510 bps			480 bps				(160) bps			50 bps
Operating Income	$	76.2		$	156.6			$	46.2		$	90.6
- vs. prior year		141.1	%		136.2	%			-0.4	%		12.8	%
- on constant currency		149.8	%		146.9	%			1.8	%		15.7	%
Operating Margin (% of sales)		11.3	%		12.2	%			14.6	%		15.1	%
- vs. prior year (in basis points)	660 bps			720 bps				(50) bps			130 bps
Adjusted Operating Income *	$	81.6		$	148.7			$	46.4		$	91.6
- vs. prior year		21.8	%		35.4	%			-3.7	%		8.5	%
- on constant currency		25.9	%		41.9	%			-1.5	%		11.3	%
Adj. Oper. Margin (% of sales)*		12.1	%		11.6	%			14.6	%		15.3	%
- vs. prior year (in basis points)	210 bps			320 bps				(110) bps			80 bps
Backlog	$	1,494.9						$	665.6
* Adjusted Operating Income and Adjusted Operating Margin exclude realignment charges

FLOWSERVE CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
	June 30,				December 31,
(Amounts in thousands, except par value)	2019				2018
ASSETS
Current assets:
Cash and cash equivalents	$	596,470			$	619,683
Accounts receivable, net of allowance for doubtful accounts of $53,251 and $51,501, respectively		806,724				792,434
Contract assets, net		215,440				228,579
Inventories, net		680,898				633,871
Prepaid expenses and other		109,792				108,578
Total current assets		2,409,324				2,383,145
Property, plant and equipment, net of accumulated depreciation of $992,196 and $956,634, respectively		590,213				610,096
Operating lease right-of-use assets, net		189,966				-
Goodwill		1,195,116				1,197,640
Deferred taxes		54,576				44,682
Other intangible assets, net		183,113				190,550
Other assets, net		198,901				190,164
Total assets	$	4,821,209			$	4,616,277
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	402,118			$	418,893
Accrued liabilities		339,297				391,406
Contract liabilities		209,689				202,458
Debt due within one year		71,495				68,218
Operating lease liabilities		36,272				-
Total current liabilities		1,058,871				1,080,975
Long-term debt due after one year		1,386,475				1,414,829
Operating lease liabilities		153,401				-
Retirement obligations and other liabilities		472,674				459,693
Shareholders’ equity:
Common shares, $1.25 par value		220,991				220,991
Shares authorized – 305,000
Shares issued – 176,793
Capital in excess of par value		493,037				494,551
Retained earnings		3,607,928				3,543,007
Treasury shares, at cost – 45,943 and 46,237 shares, respectively		(2,036,857	)			(2,049,404	)
Deferred compensation obligation		8,219				7,117
Accumulated other comprehensive loss		(567,007	)			(573,947	)
Total Flowserve Corporation shareholders' equity		1,726,311				1,642,315
Noncontrolling interests		23,477				18,465
Total equity		1,749,788				1,660,780
Total liabilities and equity	$	4,821,209			$	4,616,277

FLOWSERVE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
	Six Months Ended June 30
(Amounts in thousands)	2019				2018
Cash flows – Operating activities:
Net earnings, including noncontrolling interests	$	119,971			$	31,246
Adjustments to reconcile net earnings to net cash provided (used) by operating activities:
Depreciation		46,666				49,169
Amortization of intangible and other assets		8,003				8,467
Stock-based compensation		15,354				8,395
Foreign currency and other non-cash adjustments		(20,206	)			35,037
Change in assets and liabilities:
Accounts receivable, net		(13,445	)			(32,235	)
Inventories, net		(47,610	)			(57,414	)
Contract assets, net		12,432				(48,907	)
Prepaid expenses and other assets, net		4,949				2,353
Accounts payable		(20,660	)			(10,550	)
Contract liabilities		6,744				(384	)
Accrued liabilities and income taxes payable		(56,935	)			(44,756	)
Retirement obligations and other		(6,824	)			4,478
Net deferred taxes		911				(1,636	)
Net cash flows provided (used) by operating activities		49,350				(56,737	)
Cash flows – Investing activities:
Capital expenditures		(25,267	)			(31,747	)
Proceeds from disposal of assets and other		40,302				908
Net cash flows provided (used) by investing activities		15,035				(30,839	)
Cash flows – Financing activities:
Payments on long-term debt		(30,000	)			(30,000	)
Proceeds under other financing arrangements		1,699				2,253
Payments under other financing arrangements		(5,124	)			(6,282	)
Payments related to tax withholding for stock-based compensation		(3,441	)			(2,931	)
Payments of dividends		(49,772	)			(49,681	)
Other		(190	)			(607	)
Net cash flows provided (used) by financing activities		(86,828	)			(87,248	)
Effect of exchange rate changes on cash		(770	)			(11,179	)
Net change in cash and cash equivalents		(23,213	)			(186,003	)
Cash and cash equivalents at beginning of period		619,683				703,445
Cash and cash equivalents at end of period	$	596,470			$	517,442