Market Overview

Flowserve Corporation Reports Second Quarter 2018 Results

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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,
2018.

Second Quarter 2018 Highlights (all
comparisons to 2017 second quarter, unless otherwise noted)

  • Reported Earnings Per Share (EPS) of $0.10 and Adjusted EPS[1]
    of $0.41
    • Reported EPS includes pre-tax adjusted items of approximately $47
      million, primarily related to realignment expenses, an asset
      impairment charge associated with an expected divestiture,
      transformation costs and below-the-line foreign exchange impacts
  • Sales were $973 million, up 10.9%, or 9.0% on a constant currency
    basis and included approximately 1.0% negative impact related to
    divested businesses
    • Aftermarket sales were $488 million, up 12.4%, or 10.2% on a
      constant currency basis
    • Original equipment sales were $485 million, up 9.5%, or 7.9%
      constant currency
  • Reported gross and operating margins of 29.4% and 4.8%
    • Adjusted gross and operating margins[2] increased 40
      and 110 basis points to 31.9% and 9.3%, respectively
  • Total bookings were over $1.0 billion, up 6.8%, or 5.0% on a constant
    currency basis, and included approximately 1.0% negative impact
    related to divested businesses
    • Aftermarket bookings were $504 million, or 49% of total bookings,
      up 10.2%, or 8.1% on a constant currency basis
  • Backlog at June 30, 2018 was $1.8 billion, essentially flat with March
    31, 2018 backlog

"We delivered solid results in the second quarter, highlighted by total
bookings over $1 billion and a double-digit percentage increase in
revenues, while also delivering improvement in our adjusted profit
margins and reducing past due backlog," said Scott Rowe, Flowserve's
president and chief executive officer. "We continue to execute on our
multi-year Flowserve 2.0 transformation strategy to drive operational
excellence, reduce complexity, accelerate growth and better leverage our
global platform. While we have more work ahead on our initiatives,
Flowserve remains well-positioned to profitably capture opportunities as
our markets continue to improve."

"Based on our first half 2018 financial performance and outlook for the
remainder of the year, Flowserve today reaffirmed its full year
guidance, including its Adjusted EPS[3] target range of $1.50
to $1.70, which includes expected revenue growth of approximately 3 to 6
percent and an adjusted tax rate of 27 to 28 percent," added Lee Eckert,
Flowserve's senior vice president and chief financial officer.

Rowe concluded, "As we look ahead, we continue to believe there is
significant opportunity available within our business and I am pleased
with the progress made to date. Importantly, as we further implement our
Flowserve 2.0 strategies, we believe the Company will deliver enhanced
long-term value for our customers, employees and shareholders."

Second Quarter 2018 Results Conference Call

Flowserve will host its conference call with the financial community on
Thursday, August 9th 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 2018 EPS will exclude the Company's realignment expenses,
the impact from other specific discrete events and below-the-line
foreign currency effects and utilizes year-end 2017 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 2017 spot rates
both as applied to our 2018 expectations, divided by the number of
shares expected for 2018.

 

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; 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 or trade embargoes
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; 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; 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;
if we are not able to successfully execute and realize the expected
financial benefits from our strategic realignment and other cost-savings
initiatives, our business could be adversely affected; 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.

         
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended June 30,
(Amounts in thousands, except per share data) 2018 2017
 
Sales $ 973,129 $ 877,063
Cost of sales   (687,072 )   (631,603 )
Gross profit 286,057 245,460
Selling, general and administrative expense (240,791 ) (252,530 )
Gain on sale of business - 131,294
Net earnings from affiliates   1,445     2,654  
Operating income 46,711 126,878
Interest expense (14,939 ) (14,951 )
Interest income 1,330 641
Other expense, net   (4,770 )   (9,496 )
Earnings before income taxes 28,332 103,072
Provision for income taxes   (13,545 )   (60,887 )
Net earnings, including noncontrolling interests 14,787 42,185
Less: Net earnings attributable to noncontrolling interests   (1,567 )   (307 )
Net earnings attributable to Flowserve Corporation $ 13,220   $ 41,878  
 
Net earnings per share attributable to Flowserve Corporation common
shareholders:
Basic $ 0.10 $ 0.32
Diluted 0.10 0.32
 
Cash dividends declared per share $ 0.19 $ 0.19
 

                     
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 IPD divestiture write-down of
assets
(4) Represents $9.7 million related to IPD 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
 

                     
RECONCILIATION OF NON-GAAP MEASURES
(Unaudited)
 
Three Months Ended June 30, 2017
(Amounts in thousands, except per share data) As Reported (a) Realignment (1) Other Items As Adjusted
 
Sales $ 877,063 $ - $ - $ 877,063
Gross profit 245,460 (14,114 ) (16,928 ) (3 ) 276,502
Gross margin 28.0 % - - 31.5 %
 
Selling, general and administrative expense (252,530 ) (17,591 ) (27,868 ) (4 ) (207,071 )
Gain on sale of business 131,294 - 131,294 (5 ) -
 
Operating income 126,878 (31,705 ) 86,498 72,085
Operating income as a percentage of sales 14.5 % - - 8.2 %
 
Interest and other expense, net (23,806 ) - (7,136 ) (6 ) (16,670 )
 
Earnings before income taxes 103,072 (31,705 ) 79,362 55,415
Provision for income taxes (60,887 ) 7,641 (2 ) (42,864 ) (7 ) (25,664 )
Tax Rate 59.1 % 24.1 % 54.0 % 46.3 %
 
Net earnings attributable to Flowserve Corporation $ 41,878 $ (24,064 ) $ 36,498 $ 29,444
 
Net earnings per share attributable to Flowserve Corporation common
shareholders:
Basic $ 0.32 $ (0.18 ) $ 0.28 $ 0.23
Diluted $ 0.32 $ (0.18 ) $ 0.28 $ 0.22
 
Basic number of shares used for calculation 130,732 130,732 130,732 130,732
Diluted number of shares used for calculation 131,341 131,341 131,341 131,341
 
(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 reserve for costs incurred related to a contract to
supply oil and gas platform equipment to an end user in Latin America
(4) Represents $1.4 million of SIHI integration costs and purchase
price adjustments ("PPA"), $26.0 million of Brazil property, plant
and equipment impairment charge and $0.4 million reserve for costs
incurred related to a contract to supply oil and gas platform
equipment to an end user in Latin America
(5) Represents gain related to the sale of Gestra business
(6) Represents below-the-line foreign exchange impacts
(7) Includes tax impact of items above. There is no tax impact
associated with the Brazil property, plant and equipment impairment
charge
 

         
SEGMENT INFORMATION
(Unaudited)
ENGINEERED PRODUCT DIVISION Three Months Ended June 30,
(Amounts in millions, except percentages) 2018 2017
Bookings $ 505.7 $ 465.1
Sales 480.7 427.7
Gross profit 148.2 130.8
Gross profit margin 30.8 % 30.6 %
SG&A 99.0 123.6
Segment operating income 51.0 9.8
Segment operating income as a percentage of sales 10.6 % 2.3 %
 
INDUSTRIAL PRODUCT DIVISION Three Months Ended June 30,
(Amounts in millions, except percentages) 2018 2017
Bookings $ 235.0 $ 213.3
Sales 205.7 191.8
Gross profit 37.2 24.1
Gross profit margin 18.1 % 12.6 %
SG&A 58.0 52.9
Segment operating loss (20.5 ) (28.6 )
Segment operating loss as a percentage of sales (10.0 %) (14.9 %)
 
FLOW CONTROL DIVISION Three Months Ended June 30,
(Amounts in millions, except percentages) 2018 2017
Bookings $ 318.6 $ 316.2
Sales 306.5 275.4
Gross profit 101.0 87.9
Gross profit margin 33.0 % 31.9 %
SG&A 53.9 54.6
Segment operating income 46.4 164.4
Segment operating income as a percentage of sales 15.1 % 59.7 %
 

         

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)
Six Months Ended June 30,
(Amounts in thousands, except per share data) 2018 2017
 
Sales $ 1,893,083 $ 1,743,381
Cost of sales   (1,335,593 )   (1,228,934 )
Gross profit 557,490 514,447
Selling, general and administrative expense (469,966 ) (474,304 )
Gain on sale of business - 131,294
Net earnings from affiliates   4,613     6,109  
Operating income 92,137 177,546
Interest expense (29,818 ) (29,646 )
Interest income 2,968 1,265
Other expense, net   (11,925 )   (21,483 )
Earnings before income taxes 53,362 127,682
Provision for income taxes   (22,116 )   (66,208 )
Net earnings, including noncontrolling interests 31,246 61,474
Less: Net earnings attributable to noncontrolling interests   (2,883 )   (545 )
Net earnings attributable to Flowserve Corporation $ 28,363   $ 60,929  
 
Net earnings per share attributable to Flowserve Corporation common
shareholders:
Basic $ 0.22 $ 0.47
Diluted 0.22 0.46
 
 
Cash dividends declared per share $ 0.38 $ 0.38
 

                     
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 )
Gain on sale of business - - - -
 
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 IPD divestiture write-down of
assets
(4) Represents $9.7 million related to IPD 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
 

                     
RECONCILIATION OF NON-GAAP MEASURES
(Unaudited)
 
Six Months Ended June 30, 2017
(Amounts in thousands, except per share data) As Reported (a) Realignment (1) Other Items As Adjusted
 
Sales $ 1,743,381 $ - $ - $ 1,743,381
Gross profit 514,447 (19,151 ) (16,928 ) (3 ) 550,526
Gross margin 29.5 % - - 31.6 %
 
Selling, general and administrative expense (474,304 ) (23,065 ) (28,494 ) (4 ) (422,745 )
Gain on sale of business 131,294 - 131,294 (5 ) -
 
Operating income 177,546 (42,216 ) 85,872 133,890
Operating income as a percentage of sales 10.2 % - - 7.7 %
 
Interest and other expense, net (49,864 ) - (18,118 ) (6 ) (31,746 )
 
Earnings before income taxes 127,682 (42,216 ) 67,754 102,144
Provision for income taxes (66,208 ) 10,689 (2 ) (39,498 ) (7 ) (37,399 )
Tax Rate 51.9 % 25.3 % 58.3 % 36.6 %
 
Net earnings attributable to Flowserve Corporation $ 60,929 $ (31,527 ) $ 28,256 $ 64,200
 
Net earnings per share attributable to Flowserve Corporation common
shareholders:
Basic $ 0.47 $ (0.24 ) $ 0.22 $ 0.49
Diluted $ 0.46 $ (0.24 ) $ 0.22 $ 0.49
 
Basic number of shares used for calculation 130,647 130,647 130,647 130,647
Diluted number of shares used for calculation 131,308 131,308 131,308 131,308
 
(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 reserve for costs incurred related to a contract to
supply oil and gas platform equipment to an end user in Latin America
(4) Represents $2.0 million of SIHI integration costs and purchase
price adjustments ("PPA"), $26.0 million of Brazil property, plant
and equipment impairment charge and $0.4 million reserve for costs
incurred related to a contract to supply oil and gas platform
equipment to an end user in Latin America
(5) Represents gain related to the sale of Gestra business
(6) Represents below-the-line foreign exchange impacts
(7) Includes tax impact of items above. There is no tax impact
associated with the Brazil property, plant and equipment impairment
charge
 

         
SEGMENT INFORMATION
(Unaudited)
ENGINEERED PRODUCT DIVISION Six months Ended June 30,
(Amounts in millions, except percentages) 2018 2017
Bookings $ 930.6 $ 925.1
Sales 948.4 852.4
Gross profit 288.1 267.7
Gross profit margin 30.4 % 31.4 %
SG&A 202.9 218.0
Segment operating income 90.4 55.7
Segment operating income as a percentage of sales 9.5 % 6.5 %
 
INDUSTRIAL PRODUCT DIVISION Six months Ended June 30,
(Amounts in millions, except percentages) 2018 2017
Bookings $ 433.4 $ 420.0
Sales 403.8 370.2
Gross profit 83.1 58.9
Gross profit margin 20.6 % 15.9 %
SG&A 105.9 101.3
Segment operating loss (22.7 ) (42.3 )
Segment operating loss as a percentage of sales (5.6 %) (11.4 %)
 
FLOW CONTROL DIVISION Six months Ended June 30,
(Amounts in millions, except percentages) 2018 2017
Bookings $ 645.3 $ 625.6
Sales 583.7 555.8
Gross profit 189.2 186.1
Gross profit margin 32.4 % 33.5 %
SG&A 108.2 111.0
Segment operating income 80.3 206.3
Segment operating income as a percentage of sales 13.8 % 37.1 %
 

                         
Second Quarter and Year-to-Date 2018 - Segment Results
(dollars in millions, comparison vs. 2017 second quarter and
year-to-date, unaudited)
 
EPD IPD FCD
2nd Qtr YTD 2nd Qtr YTD 2nd Qtr YTD
Bookings $ 505.7 $ 930.6 $ 235.0 $ 433.4 $ 318.6 $ 645.3
- vs. prior year 8.7 % 0.6 % 10.2 % 3.2 % 0.8 % 3.1 %
- on constant currency 7.9 % -2.0 % 7.1 % -1.3 % -1.4 % -0.4 %
 
Sales $ 480.7 $ 948.4 $ 205.7 $ 403.8 $ 306.5 $ 583.7
- vs. prior year 12.4 % 11.3 % 7.2 % 9.1 % 11.3 % 5.0 %
- on constant currency 11.4 % 7.9 % 4.2 % 4.3 % 8.9 % 1.5 %
 
Gross Profit $ 148.2 $ 288.1 $ 37.2 $ 83.1 $ 101.0 $ 189.2
- vs. prior year 13.3 % 7.6 % 54.4 % 41.1 % 14.9 % 1.7 %
 
Gross Margin (% of sales) 30.8 % 30.4 % 18.1 % 20.6 % 33.0 % 32.4 %
- vs. prior year (in basis points) 20 -100 550 470 110 -110
 
Operating Income / (Loss) $ 51.0 $ 90.4 $ (20.5 ) $ (22.7 ) $ 46.4 $ 80.3
- vs. prior year 420.4 % 62.3 % 28.3 % 46.3 % -71.8 % -61.1 %
- on constant currency 397.3 % 51.0 % 31.5 % 49.9 % -72.0 % -61.6 %
 
Operating Margin (% of sales) 10.6 % 9.5 % -10.0 % -5.6 % 15.1 % 13.8 %
- vs. prior year (in basis points) 830 300 490 580 -4460 -2330
 

Adjusted Operating Income*

$ 64.5 $ 110.9 $ 1.4 $ 0.3 $ 48.2 $ 84.4
- vs. prior year 29.0 % 17.6 % 75.0 % 112.5 % 24.9 % 3.4 %
- on constant currency 24.5 % 10.9 % 188.2 % 176.1 % 23.6 % 1.7 %
 
Adj. Oper. Margin (% of sales)* 13.4 % 11.7 % 0.7 % 0.1 % 15.7 % 14.5 %
- vs. prior year (in basis points) 170 60 30 70 170 -20
 
Backlog $ 808.6 $ 419.2 $ 634.3
 

* Adjusted Operating Income and Adjusted Operating Margin exclude
realignment charges, below-the-line FX impacts and other specific
discrete items

 

         
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
June 30, December 31,
(Amounts in thousands, except par value) 2018 2017
 
ASSETS
Current assets:
Cash and cash equivalents $ 517,442 $ 703,445
Accounts receivable, net of allowance for doubtful accounts of
$57,281 and $59,113, respectively
815,708 856,711
Contract assets, net 257,224 -
Inventories, net 675,325 884,273
Prepaid expenses and other   107,292     114,316  
Total current assets 2,372,991 2,558,745
Property, plant and equipment, net of accumulated depreciation of
$983,074 and $968,033, respectively
625,979 671,796
Goodwill 1,206,877 1,218,188
Deferred taxes 54,576 51,974
Other intangible assets, net 200,253 210,049
Other assets, net   189,946     199,722  
Total assets $ 4,650,622   $ 4,910,474  
 
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable $ 428,835 $ 443,113
Accrued liabilities 382,157 724,196
Contract liabilities 171,940 -
Debt due within one year   69,923     75,599  
Total current liabilities 1,052,855 1,242,908
Long-term debt due after one year 1,454,947 1,499,658
Retirement obligations and other liabilities 501,269 496,954
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 483,477 488,326
Retained earnings 3,502,006 3,503,947
Treasury shares, at cost – 46,241 and 46,471 shares, respectively (2,049,549 ) (2,059,558 )
Deferred compensation obligation 6,933 6,354
Accumulated other comprehensive loss   (542,198 )   (505,473 )
Total Flowserve Corporation shareholders' equity 1,621,660 1,654,587
Noncontrolling interests   19,891     16,367  
Total equity   1,641,551     1,670,954  
Total liabilities and equity $ 4,650,622   $ 4,910,474  
 

         
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended June 30,
(Amounts in thousands) 2018 2017
 
Cash flows – Operating activities:
Net earnings, including noncontrolling interests $ 31,246 $ 61,474
Adjustments to reconcile net earnings to net cash provided (used) by
operating activities:
Depreciation 49,169 50,252
Amortization of intangible and other assets 8,467 7,143
Gain on disposition of business - (131,294 )
Stock-based compensation 8,395 15,743
Foreign currency, asset impairments and other non-cash adjustments 35,037 31,573
Change in assets and liabilities:
Accounts receivable, net (32,235 ) 71,078
Inventories, net (57,414 ) (17,277 )
Contract assets, net (48,907 ) -
Prepaid expenses and other assets, net 2,353 29,106
Accounts payable (10,550 ) (55,928 )
Contract liabilities (384 ) -
Accrued liabilities and income taxes payable (44,756 ) (9,777 )
Retirement obligations and other 4,478 (8,624 )
Net deferred taxes   (1,636 )   3,131  
Net cash flows (used) provided by operating activities   (56,737 )   46,600  
Cash flows – Investing activities:
Capital expenditures (31,747 ) (29,447 )
Proceeds from disposal of assets and other 908 2,383
Proceeds from disposition of business   -     181,838  
Net cash flows (used) provided by investing activities   (30,839 )   154,774  
Cash flows – Financing activities:
Payments on long-term debt (30,000 ) (30,000 )
Proceeds under other financing arrangements 2,253 6,644
Payments under other financing arrangements (6,282 ) (2,690 )
Payments related to tax withholding for stock-based compensation (2,931 ) (6,593 )
Payments of dividends (49,681 ) (49,579 )
Other   (607 )   (244 )
Net cash flows used by financing activities (87,248 ) (82,462 )
Effect of exchange rate changes on cash   (11,179 )   19,087  
Net change in cash and cash equivalents (186,003 ) 137,999
Cash and cash equivalents at beginning of period   703,445     367,162  
Cash and cash equivalents at end of period $ 517,442   $ 505,161  

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