Flowserve Corporation Reports Second Quarter 2019 Results

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 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.

^[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.