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Flowserve Corporation Reports First Quarter 2019 Results

Flowserve Corporation a leading provider of flow control products and services for the global infrastructure markets, announced its financial results for the first quarter ended March 31, 2019.

First Quarter 2019 Highlights (all comparisons to the 2018 first quarter, unless otherwise noted)

  • Reported Earnings Per Share (EPS) were $0.44, and Adjusted[1] EPS of $0.41
    • Pre-tax adjusted items include an approximate $3.5 million net gain on realignment and transformation activities and approximately $2.7 million of negative below-the-line FX impact
    • Adjusted EPS increased approximately 52 percent year-over-year

  • Total bookings were $1.07 billion, up 14.9 percent, or 19.3 percent on a constant currency basis, and included approximately 1.5 percent negative impact related to divested businesses
    • Aftermarket bookings were $511 million, or 48 percent of total bookings, up 5.8 percent, or 10.4 percent on a constant currency basis
    • Original equipment bookings were up 24.5 percent, or 28.5 percent on a constant currency basis

  • Backlog as of March 31, 2019 was $2.1 billion, up 9.2 percent versus 2018 year-end, on 1.2 book-to-bill
  • Sales were $890 million, down 3.3 percent, or up 0.4 percent on a constant currency basis and included approximately 1.0 percent negative impact related to divested businesses
    • Aftermarket sales were $470 million, up 3.4 percent, or 7.9 percent on a constant currency basis

  • Reported gross and operating margins were 33.0 percent and 10.2 percent, up 350 basis points and 530 basis points, respectively
    • Adjusted gross and operating margins[2] were 33.7 percent and 9.9 percent, up 340 basis points and 310 basis points, respectively

“Flowserve’s 2019 first quarter results represent a good start to the year. Execution on our ongoing Flowserve 2.0 transformation, including the commercial intensity initiatives, has allowed us to capture an increased rate of customer aftermarket spending and project investment, driving a 19.3 percent increase in constant currency bookings for the quarter,” said Scott Rowe, Flowserve’s president and chief executive officer. “Additionally, we have improved the quality of our backlog and lowered product cost through our operations workstream, resulting in strong year-over-year improvement in our reported and adjusted gross and operating margins.”

Lee Eckert, Flowserve’s senior vice president and chief financial officer, added, “Our first quarter 2019 results support our full-year outlook, including our expectations for strong growth in full-year 2019 Adjusted EPS[1]. We were especially pleased that our Flowserve 2.0 transformation efforts and continued focus on cash flow generation resulted in solid working capital performance and free cash flow improvement of $160 million compared to the 2018 first quarter.”

Rowe concluded, “We are building momentum with our Flowserve 2.0 program to drive additional operational and productivity improvements across all levels of the organization. We expect to further leverage our recently combined pump segments to better serve our customers and capitalize on improving markets. I am confident that our ongoing transformation initiatives will position the Company to deliver on our 2019 full-year expectations and create significant long-term value for our customers, employees and shareholders.”

Full Year 2019 Guidance[3]
Flowserve reaffirmed its 2019 guidance, including its Reported and Adjusted EPS target range of $1.60 to $1.80 and $1.95 to $2.15, respectively. Both the Reported and the Adjusted EPS target range includes the expected revenue increase of approximately 4.0 percent to 6.0 percent year-over-year, and are based on previously announced assumptions, including net interest expense in the range of $55 to $57 million and an adjusted tax rate of 26 percent to 28 percent. While Flowserve expects 2019 earnings to reflect our traditional seasonality, the Company expects the greater weighting in the second half of the year, as additional transformation benefits are realized.

[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 2019 expectations, divided by the number of shares expected for 2019.

Source: Flowserve Corporation

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