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| Updates 2011 Full Year EPS Target Range to $7.45 to $7.85 |
DALLAS, TX, Oct 28, 2011 - (ACN Newswire) - Flowserve Corp. (NYSE:FLS), a leading provider of flow control products and services for the global infrastructure markets, announced today financial results for the third quarter of 2011 in its Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission.
HIGHLIGHTS
Third Quarter of 2011 (all comparisons versus the third quarter of 2010 unless otherwise noted):
- Fully diluted EPS of $1.92, up 4.3%, including $0.08 of negative currency effects
- Fully diluted EPS up 19.8% excluding after tax currency effects in the current and prior periods
- Bookings of $1.16 billion, up 15.9%, or 10.2% excluding currency benefits of $57 million, reflecting solid chemical, oil & gas and general industry orders and strong aftermarket activity
- Sales of $1.12 billion, up 15.4%, or 9.9% excluding currency benefits of $54 million, driven by increased short cycle original equipment sales and strong aftermarket sales
- Gross margin decrease of 70 basis points to 33.6%
- SG&A as a percentage of sales down 130 basis points to 20.1%
- Operating income of $155.0 million, up 20.0%, including realignment charges of $1.2 million
- Operating margin increase of 50 basis points to 13.8%
- Tax rate of 22.9% for the quarter
- Cash balance of $227.9 million at September 30, 2011
- Backlog at September 30, 2011 of $2.81 billion, including negative currency effects of $43 million, compared to $2.59 billion in backlog at December 31, 2010
Year-to-Date 2011 (all comparisons versus year-to-date 2010 unless otherwise noted):
- Fully diluted EPS of $5.40, up 10.4%, including $0.20 of charges from realignment activity and a Spanish regulatory penalty, partially offset by $0.10 of net currency benefits
- Bookings of $3.53 billion, up 10.1%, or 5.2% excluding currency benefits of $157 million, reflecting solid short cycle original equipment activity and increased aftermarket activity
- Sales of $3.24 billion, up 12.2%, or 7.0% excluding currency benefits of $152 million, driven by increased short cycle original equipment sales and strong aftermarket sales
- Gross margin decrease of 180 basis points to 33.7%, or 34.0% excluding realignment charges
- SG&A as a percentage of sales down 50 basis points to 21.0%
- Operating income of $425.3 million, up 1.9%, including realignment charges of $10.4 million and a Spanish regulatory penalty of $3.9 million
- Operating margin decrease of 130 basis points to 13.1%, or 13.4% excluding realignment charges
Mark Blinn, Flowserve president and chief executive officer, said, "I am pleased with our performance this quarter, with top line growth and improved operating performance driving earnings up about 20%, excluding currency effects. We posted double digit growth in bookings, led primarily by our short cycle business but overall by broad based increases in activity in the chemical, general industries and oil and gas industries and across most regions. Our short cycle business remains strong, and our smaller project long cycle business is steady to improving, which balances continued competitiveness in large long-cycle project activity.
"We saw our strongest ever aftermarket performance in the quarter, as our focus on expanding our global QRC footprint and growing our service capabilities continues to deepen our customer relationships. In addition, the continued dedication of our outstanding workforce on executing on our key strategies helped drive both year over year and sequential operating margin improvement. This generated positive operating momentum across the organization that we plan to build on as we close out the year and move into 2012."
Blinn added, "We remained focused on executing our strategic growth initiatives and serving our customers in spite of an uncertain macroeconomic and geopolitical environment, and we are proud of what we have accomplished in positioning our company to deliver sustainable earnings growth and long-term shareholder value. During the quarter, we announced a new $300 million share repurchase program, reflecting our ongoing commitment to returning cash to our shareholders and increasing our flexibility to pursue additional value-enhancing opportunities. Our recently announced acquisition of Lawrence Pumps exemplifies our inorganic growth strategy, where we view incremental, disciplined leverage of our diverse global platform with 'bolt on' acquisitions as the best way to drive growth and create value for our shareholders. Looking forward, I am confident that through our continued disciplined execution of our strategic plan, broad product capabilities, strong backlog, high-margin aftermarket business and global presence - particularly in high-growth markets - we are well positioned for 2012 and beyond."
FINANCIAL PERFORMANCE AND GUIDANCE
Dick Guiltinan, senior vice president, finance and chief accounting officer, said, "Our earnings and margins this quarter were positively influenced by increased sales volumes, driven primarily by the continued strength of our short cycle and aftermarket business, operational improvements and benefits from a lower tax rate, which offset headwinds from currency. We also benefitted from our disciplined cost-control initiatives in achieving sequential and year over year improvement in SG&A as a percentage of sales.
"Solid growth across our company, and in particular in our short cycle original equipment business, has continued to drive increased working capital levels. This continued growth in our business remains a significant driver of our raw materials and work in process inventory balances over year end. While we began to see our past due backlog trend down towards the end of the third quarter, our inventory levels also continue to be influenced by isolated project delays and customer-driven delays on certain large projects, most of which we plan to ship by year end. Receivables balances continued to be impacted by shipment delays and longer negotiated payment terms. General market conditions, in which companies are increasingly mindful of cash flow, led to slower than anticipated payments from certain customers, although we have not seen any real deterioration in credit quality or collectability. As we move into the fourth quarter, which historically has been our best operating cash flow quarter of the year, we remain focused on optimizing working capital levels.
"In considering our full year guidance, we expect the lost opportunity related to ongoing disruptions in the Middle East and North Africa will extend through year end. We also expect a small dilutive effect in 2011 relating to the Lawrence Pumps acquisition. As such, we have narrowed our full year EPS target range to between $7.45 and $7.85, which anticipates a continuation of the recent currency rate environment."
FLOW SOLUTIONS GROUP
Tom Ferguson, president, Flow Solutions Group, said, "The Engineered Product Division (EPD) continued to deliver solid aftermarket performance this quarter, as we used our Integrated Services Group, our global QRC network and end user focus to drive growth. Our smaller project original equipment volumes are steady to improving, although large project activity remains highly competitive, where we have been more selective in the projects we choose to pursue. We believe these factors should help support our margins going forward, as we simultaneously work to ship and clear out some delayed projects that have weighed down EPD margins this year.
"I am excited that we will very soon close our acquisition of Lawrence Pumps, an industry leader in highly engineered critical slurry pumps in our core markets. This acquisition is an excellent example of our 'bolt on' acquisition strategy, which is focused on highly engineered products with close strategic fit, meaningful potential synergies and attractive aftermarket opportunities that can be significantly grown through our global sales and distribution network.
"I am pleased with the Industrial Product Division's (IPD) performance this quarter, as we capitalized on continued end market strength and gained traction on operational improvements as part of IPD's recovery plan. IPD's bookings growth was broadly based, primarily driven by the chemical, power generation and oil and gas industries. Our stronger backlog and improved short cycle market conditions provide the opportunity to drive further performance improvements."
FLOW CONTROL DIVISION
Tom Pajonas, president, Flow Control Division, said, "I am proud that the FCD team delivered another solid quarter of overall performance, demonstrating our ability to execute in the current macroeconomic environment and our continued efforts to drive growth and value-added solutions for our customers. Bookings activity increased substantially in the third quarter, driven by broad based growth in the chemical and general industries, as well as growth in the oil and gas industry with the support of our 2010 Valbart acquisition. Sales increased notably over the same period last year, with strong growth in most regions. I am pleased by the strong performance of the division across a number of key financial performance metrics, including operating margins and overall aftermarket growth."
SEGMENT OVERVIEW (all comparisons versus the third quarter of 2010 unless otherwise noted)
FSG Engineered Product Division (EPD)
EPD bookings for the third quarter of 2011 were $567.6 million, an increase of $69.7 million, up 14.0%, or up 9.2% excluding currency benefits of approximately $24 million. EPD sales for the third quarter of 2011 were $574.3 million, an increase of $63.0 million, up 12.3%, or up 7.4% excluding currency benefits of approximately $25 million. EPD gross profit was $193.1 million, up $8.3 million or 4.5%. Gross margin for the third quarter of 2011 decreased 250 basis points to 33.6%. The gross margin decrease was primarily due to the negative impact of currency on U.S. dollar denominated sales produced in non-U.S. facilities and the effect on revenue of certain large projects at very low margins, partially offset by a sales mix shift towards higher margin aftermarket sales.
EPD operating income for the third quarter of 2011 was $91.9 million, a decrease of $0.9 million or 1.0%, including currency benefits of approximately $4 million. The decrease was primarily due to increased SG&A, driven by currency effects and increased selling and marketing related expenses, substantially offset by increased gross profit. Operating margin decreased 210 basis points to 16.0%.
FSG Industrial Product Division (IPD)
IPD bookings for the third quarter of 2011 were $223.2 million, an increase of $20.3 million, up 10.0%, or up 4.6% excluding currency benefits of approximately $11 million. IPD sales for the third quarter of 2011 were $215.6 million, an increase of $39.1 million, up 22.2%, or 15.9% excluding currency benefits of approximately $11 million. IPD gross profit was $50.9 million, up $8.9 million or 21.2%. Gross margin for the third quarter of 2011 decreased 20 basis points to 23.6%, or decreased 40 basis points to 24.1% when realignment charges in the current and comparison periods are excluded. The gross margin decrease was primarily due to increased material costs, substantially offset by the impact of increased sales on the absorption of fixed manufacturing costs and a mix shift to higher margin aftermarket sales.
IPD operating income for the third quarter of 2011 was $16.5 million, up $7.0 million or 73.7%, including currency benefits of approximately $1 million and realignment charges of $1.0 million. The increase was primarily attributable to the increase in gross profit, partially offset by an increase in SG&A, which was driven by currency effects. Operating margin increased 230 basis points to 7.7%, or increased 210 basis points to 8.1% excluding realignment charges in the current and comparison periods.
Flow Control Division (FCD)
FCD Bookings for the third quarter of 2011 were $409.9 million, an increase of $74.9 million, up 22.4%, or 16.1% excluding currency benefits of approximately $21 million. FCD sales for the third quarter of 2011 were $368.3 million, an increase of $55.7 million, up 17.8%, or 12.1% excluding currency benefits of approximately $18 million. FCD gross profit was $131.3 million, up $23.9 million or 22.3%. Gross margin for the third quarter of 2011 increased 130 basis points to 35.7%. The gross margin increase was primarily due to the impact of increased sales on the absorption of fixed manufacturing costs and a favorable product line and maintenance, repair and overhaul mix.
FCD operating income for the third quarter of 2011 was $63.8 million, up $18.1 million or 39.6%, including currency benefits of approximately $2 million. The increase was primarily attributable to the increase in gross profit, partially offset by an increase in SG&A, which was driven by increased selling and marketing-related expenses and increased research and development costs. Operating margin increased 270 basis points to 17.3%.
Conference Call
The conference call will take place on Friday, October 28 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 at the Flowserve Web site at www.flowserve.com under the "Investor Relations" section.
Contact Information:
Investor Contact: Mike Mullin, director, investor relations +1 (972) 443-6636
Media Contact: Steve Boone, director, global communications +1 (972) 443-6644
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," "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 the global financial markets and the availability of capital 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 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; our exposure to fluctuations in foreign currency exchange rates, particularly 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; expectations regarding acquisitions and the integration of acquired businesses; our foreign subsidiaries autonomously conducting limited business operations and sales in certain countries identified by the U.S. State Department as state sponsors of terrorism; 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.
This announcement is distributed by Thomson Reuters on behalf of Thomson Reuters clients.
The owner of this announcement warrants that:
(i) the releases contained herein are protected by copyright and other applicable laws; and
(ii) they are solely responsible for the content, accuracy and originality of the information contained therein.
Source: Flowserve Corporation via Thomson Reuters ONE
Copyright (c) Thomson Reuters 2011. All rights reserved.
Topic: Press release summary
Source: Flowserve Corporation
http://www.acnnewswire.com
From the Asia Corporate News Network
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