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| Reports First Quarter EPS of $1.69 and Bookings of $1.25 Billion; Reaffirms 2012 Full Year EPS Target Range of $8.00 to $8.80 |
DALLAS, TX, May 1, 2012 - (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 first quarter of 2012 in its Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission. Highlights are as follows:
First Quarter 2012 (all comparisons versus first quarter 2011 unless otherwise noted):
- Fully diluted EPS of $1.69, down 1.7%, including $0.05 of net benefit from gain on sale of operating assets, partially offset by negative currency effects and other discrete charges
-- Fully diluted EPS up 8.7% excluding below the line currency effects year over year
- Bookings of $1.25 billion, up 7.1%, or 9.4% excluding negative currency effects of $27 million, reflecting solid long cycle original equipment orders in the chemical and oil and gas industries
-- Highest quarterly bookings since third quarter of 2008
-- Aftermarket bookings up 7.1%, or 8.8% excluding negative currency effects
- Sales of $1.07 billion, up 7.8%, or 10.1% excluding negative currency effects of $23 million, reflecting increased original equipment sales and solid aftermarket sales in all divisions
- Gross margin decrease of 150 basis points to 33.4% reflecting sales mix shift to original equipment and shipments of low margin legacy backlog
- SG&A as a percentage of sales down 170 basis points to 20.6%, or down 80 basis points to 21.5% excluding net impact of gain on sale of operating assets and discrete charges
- Operating income of $142.5 million, up 9.4%
- Operating margin increase of 20 basis points to 13.3%
- Tax rate of 27.5% compared to 25.7% for first quarter 2011
- Backlog of $2.9 billion at March 31, 2012, including currency benefits of approximately $35 million, compared to $2.7 billion in backlog at December 31, 2011
Mark Blinn, Flowserve president and chief executive officer, said, "I am pleased with our performance in in the first quarter, as we continued to drive top line growth and improve our operating results. Our strongest bookings quarter since the third quarter of 2008 was led by improvement in our longer and later cycle project business in the chemical and oil and gas industries. We also saw sustained strength in our short cycle business and aftermarket activity, where executing on our strategies has enabled us to capture opportunities.
"We continued driving internal improvements under our "One Flowserve" initiative to better support our customers and improve operations in support of reaching our longer-term operating margin target. As an example, we centralized the leadership of our operational support areas, such as research and development, marketing and supply chain, under our COO organization to leverage operational excellence across our global platform and increase shareholder value. I am pleased with the progress I have seen from our new leadership structure in such a short time and its positive impact on the quality of orders going into backlog."
Blinn added, "Looking forward to the balance of 2012, I am encouraged by how the cycle is progressing. Increased project bidding levels and progress on long planned mega infrastructure projects have heightened our confidence in the present state of our end markets. As such, we are more optimistic in our view of business opportunities this year and next. With our new operational leadership in place and our strategic investments in emerging markets and QRCs continuing to support growth in project opportunities and aftermarket activity, we are well positioned to achieve our 5% to 7% revenue growth target for 2012."
Financial Performance and Guidance
Mike Taff, senior vice president and chief financial officer, said, "We are encouraged by our results this first quarter, which benefitted from improved execution in more favorable business conditions. As expected, our first quarter earnings and margins were impacted by several large, low margin project shipments booked in prior periods flowing through revenue. We also continue to expect margins in the second quarter of 2012 to be similarly challenged, with margin improvement anticipated in the second half of the year. Increased sales volumes, and continued improvements in SG&A leverage resulting from tight cost controls, helped offset the first quarter impact. We also saw continued improvement of expected margins in our backlog, driven by disciplined bid selectivity across all our operations.
"Supported by our solid first quarter results, we remain confident in the earnings generation capability of our operating platform and are reaffirming our 2012 earnings guidance of $8.00 to $8.80 per share. This guidance still anticipates approximately $0.50 of above and below the line negative currency effects compared to 2011. We continue to expect our earnings performance for the balance of 2012 to be weighted towards the second half of the year."
Taff added, "We returned over $39 million in cash to our shareholders in the first quarter through the repurchase of our common stock and the payment of dividends. This demonstrates our commitment to returning cash to shareholders under our announced capital allocation policy and reflects our confidence in the cash flow generation capability of our business.
"We remain focused on disciplined cash management and creating shareholder value going forward, where reducing our levels of working capital appropriately is a high priority for improvement in 2012. Inventory levels rose this quarter in line with our revenue forecast and increased backlog as we focused on improving on-time delivery and customer care. However, we still have work to do to increase inventory efficiencies, and we are continuing to work diligently to reduce targeted past due backlog that we discussed at year end."
Operational Performance
Tom Pajonas, senior vice president and chief operating officer, said, "I was encouraged by the increased levels of activity in our long cycle business this quarter. This business remains competitive, but our increased long cycle project visibility and the continued stabilization of end markets provides optimism for continued improving business conditions in the near term. Also encouraging was the continued positive momentum in short cycle and aftermarket business that we have seen in recent quarters, where business conditions remain favorable.
"The Engineered Product Division (EPD) capitalized on improving business conditions, driving bookings growth of almost 14% on a constant currency basis, with strong original equipment growth in the chemical, oil and gas and general industries and continued solid aftermarket activity. Despite stronger sales in Europe, the Middle East and Africa (EMA) and North America, margins were challenged by the shipment of certain large, low margin projects booked during more challenging markets as well as currency. As we continue to work through the remaining low margin legacy backlog, we believe our renewed operational focus on this business and improving business conditions provide the opportunity for margin improvement going forward. Additionally, our recent Lawrence Pumps acquisition is off to an excellent start, with its strong first quarter performance demonstrating the benefits of applying our aftermarket strategy to its highly engineered pump products."
Pajonas added, "The Industrial Product Division (IPD) delivered a solid increase in bookings on the strength of the oil and gas and chemical industries. Sales increased significantly, up over 20%, driven primarily by original equipment shipments in the Americas, EMA and Australia. While the sales mix shift to original equipment pressured gross margin, operating margin increased 80 basis points, increasing our confidence that IPD's recovery plan remains on track, as business conditions appear to be strengthening and its realigned operations gain momentum.
"The Flow Control Division (FCD) continued to deliver solid performance in the first quarter, with bookings increasing primarily on the strength of the chemical industry, and sales increasing primarily on the strength of the oil and gas industry, across all regions with the exception of EMA. Pricing actions taken in 2011 continued to produce tangible benefits, with continued traction on low cost sourcing and cost control initiatives supporting improvements in gross margin and operating margin."
Segment Overview (all comparisons versus first quarter 2011 unless otherwise noted)
Engineered Product Division (EPD)
EPD bookings for the first quarter of 2012 were $670.7 million, an increase of $68.0 million, up 11.3%, or 13.9% excluding negative currency effects of approximately $16 million. EPD sales for the first quarter of 2012 were $534.8 million, an increase of $11.0 million, up 2.1%, or 4.6% excluding negative currency effects of approximately $13 million.
EPD gross profit for the first quarter of 2012 was $183.4 million, down $4.8 million. Gross margin for the first quarter of 2012 decreased 160 basis points to 34.3%, which was primarily attributable to the effect on revenue of certain large projects that shipped from backlog at low margins and a sales mix shift to original equipment.
EPD operating income for the first quarter of 2012 increased to $92.2 million, up $0.4 million or 0.4%, including negative currency effects of approximately $3 million. The slight increase was primarily attributable to decreased SG&A, which included a $10.4 million gain on the sale of operating assets, substantially offset by decreased gross profit. Operating margin decreased 30 basis points to 17.2%.
Industrial Product Division (IPD)
IPD bookings for the first quarter of 2012 were $232.0 million, an increase of $7.0 million, up 3.1%, which includes negative currency effects of approximately $4 million. IPD sales for the first quarter of 2012 were $213.2 million, an increase of $36.9 million, up 20.9%, or 22.6% excluding negative currency effects of approximately $3 million.
IPD gross profit for the first quarter of 2012 increased to $49.6 million, up $4.4 million or 9.7%. Gross margin for the first quarter of 2012 decreased 230 basis points to 23.3%, which was primarily attributable to a sales mix shift to lower margin original equipment, partially offset by improved absorption of fixed manufacturing costs.
IPD operating income for the first quarter of 2012 increased to $17.4 million, up $4.3 million or 32.8%, which includes negative currency effects of less than $1 million. The increase was primarily attributable to the increase in gross profit, partially offset by a small increase in SG&A. Operating margin increased 80 basis points to 8.2%.
Flow Control Division (FCD)
FCD bookings for the first quarter of 2012 were $380.1 million, an increase of $2.8 million, up 0.7%, or 2.6% excluding negative currency effects of approximately $7 million. FCD sales for the first quarter of 2012 were $363.9 million, an increase of $26.3 million, up 7.8%, or 10.2% excluding negative currency effects of approximately $8 million.
FCD gross profit for the first quarter of 2012 increased to $127.2 million, up $11.6 million or 10.0%. Gross margin for the first quarter of 2012 increased 80 basis points to 35.0%, which was primarily attributable to favorable product line and maintenance, repair and overhaul mix, improved absorption of fixed manufacturing costs, continued progress on low cost sourcing initiatives and benefits from pricing actions taken in 2011.
FCD operating income for the first quarter of 2012 increased to $55.7 million, up $8.2 million or 17.3%, including negative currency effects of approximately $1 million. The increase was primarily attributable to the increase in gross profit, partially offset by an increase in SG&A due to increased selling expenses in support of increased sales and increased research and development costs. Operating margin increased 120 basis points to 15.3%.
Conference Call
The conference call will take place on Tuesday, May 1 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.
About Flowserve
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," "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 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, including in hyperinflationary countries such as Venezuela; our furnishing of products and services to nuclear power plant facilities; 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 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 2012. All rights reserved.
Topic: Earnings
Source: Flowserve Corporation
https://www.acnnewswire.com
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