Flowserve Corporation Reports First Quarter 2017 Results

DALLAS--(BUSINESS WIRE)--May 1, 2017-- 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 first quarter ended March 31, 2017.

First Quarter 2017 Highlights (all comparisons to 2016 first quarter, unless otherwise noted)

• Reported Earnings Per Share (EPS) of $0.11 includes $0.14 per share of adjusted items
  • Adjusted EPS^[1] was $0.25 excluding the adjusted items
  • Both Reported and Adjusted results include approximately $10 million of accelerated non-cash incentive recognition and executive transition expenses
• Sales were $864 million, down 7.8% on a constant currency basis
  • Aftermarket sales were $408 million, down 3.0% on a constant currency basis
• Total bookings were $958 million, up 5.3% on a constant currency basis
  • Aftermarket bookings were $457 million, or 48% of total bookings, up 3.0% on a constant currency basis
  • Original equipment booking were $501 million, up 7.4% on a constant currency basis
  • Book-to-bill of 1.11, highest since the second quarter of 2014
• Reported gross and operating margins of 30.6% and 5.4%
  • Adjusted gross and operating margins^[2] were 31.5% and 7.0%, down 180 basis points and 240 basis points, respectively
• Achieved approximately $28 million of incremental cost savings from the realignment program during the 2017 first quarter
• Backlog at March 31, 2017 was $2.0 billion, up 5.6% versus 2016 year-end

“Flowserve’s results were solid, despite the continued challenges in our end markets and the first quarter’s seasonal effect,” said Scott Rowe, Flowserve’s President and Chief Executive Officer. “Bookings in the period grew both sequentially and year-over-year, which supports our expectation that we are at, or near, the bottom of this cycle.”

Rowe added, “In my first 30 days at Flowserve, I am impressed with our people, broad product offering and extensive installed base of pumps, valves and seals. This foundation, combined with our realignment program to improve cost and efficiencies, provides me confidence that Flowserve is well-positioned to drive long-term value for our customers and shareholders.”

Realignment Programs

Flowserve recognized approximately $28 million of incremental savings and expensed approximately $11 million in the 2017 first quarter. The multi-year $400 million realignment program is expected to be largely completed this year, delivering approximately $70 million of additional savings and including approximately $155 million of expense. The Company remains on track to achieve total expected program savings of $230 million in 2018.

Full Year 2017 Guidance

Flowserve reaffirmed its 2017 guidance, including Reported and Adjusted^[3] EPS target ranges of $0.72 to $1.02 and $1.55 to $1.85, respectively. Both EPS target ranges are based on an expected 6 to 11 percent decline in revenues year-over-year, including an above-the-line foreign currency headwind ^[4] of approximately 10 cents per share. Adjusted EPS guidance 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 recently announced expected sale of our Gestra business. The transaction is expected to close in May 2017 and once complete, is anticipated to have a modest dilutive impact to full year 2017 Adjusted earnings while improving Reported 2017 earnings.

First Quarter 2017 Results Conference Call

Flowserve will host its conference call with the financial community on Tuesday, May 2nd 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; 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, 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 and Customer Communications
or
Amy Allen, 972-443-6501
Manager, Corporate Communications