Flowserve Corporation Reports Fourth Quarter and Full Year 2020 Results; Issues 2021 Financial Guidance

DALLAS–()–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 fourth quarter and full year ended December 31, 2020.

Fourth Quarter 2020 Highlights (all comparisons to the 2019 fourth quarter, unless otherwise noted)1

  • Reported Earnings Per Share (EPS) of $0.43 and Adjusted EPS2 of $0.53

    • Reported EPS includes after-tax adjusted items of approximately $12.9 million, including realignment, transformation and below-the-line foreign exchange impacts
  • Total bookings were $825.1 million, down 21.6%, or 22.7% on a constant currency basis and up modestly sequentially

    • Original equipment bookings were $404.7 million, or 49% of total bookings, down 24.4%, or 25.8% on a constant currency basis
    • Aftermarket bookings were $420.4 million, or 51% of total bookings, down 18.7%, or 19.5% on a constant currency basis
  • Sales were $985.3 million, down 7.8%, or 8.9% on a constant currency basis

    • Original equipment sales were $506.9 million, down 7.1%, or 9.4% on a constant currency basis
    • Aftermarket sales were $478.4 million, down 8.4%, or 9.3% on a constant currency basis
  • Reported gross and operating margins were 30.0% and 9.7%, respectively

    • Adjusted gross and operating margins3 were 30.7% and 11.3%, respectively
  • Backlog at December 31, 2020 was $1.9 billion, down 14.0% versus prior year

Full Year 2020 Highlights (all comparisons to full year 2019, unless otherwise noted)

  • Reported EPS of $0.89 and Adjusted EPS2 of $1.74

    • Reported EPS includes after-tax adjusted items of approximately $111.1 million, including realignment, transformation, below-the-line foreign exchange impacts and certain non-cash impairments
  • Total bookings were $3.41 billion, down 19.5%, or 18.9% on a constant currency basis

    • Original equipment bookings were $1.62 billion, or 48% of total bookings, down 26.7%, or 26.4% on a constant currency basis
    • Aftermarket bookings were $1.79 billion, or 52% of total bookings, down 11.7%, or 10.9% on a constant currency basis
  • Sales were $3.73 billion, down 5.4%, or 4.9% on a constant currency basis

    • Original equipment sales were $1.90 billion, down 3.1%, or 2.9% on a constant currency basis
    • Aftermarket sales were $1.83 billion, down 7.6%, or 6.9% on a constant currency basis
  • Reported gross and operating margins of 30.0% and 6.7%, respectively

    • Adjusted gross and operating margins3 were 31.2% and 9.8%, respectively

“In a challenging market environment, we delivered solid performance in the fourth quarter including meaningful working capital improvements and free cash flow of $185 million. Additionally, our associates continued to operate safely and efficiently throughout the pandemic to meet the needs of our customers, while also delivering meaningful progress on our transformation program,” said Scott Rowe, Flowserve’s president and chief executive officer. “In light of the ongoing COVID-induced market headwinds over the past year, we accelerated our Flowserve 2.0 transformation cost reduction initiatives and took over $100 million of costs out of the business during 2020. This swift and decisive action and our ongoing operational performance enabled us to limit decremental adjusted operating margins to only 14 percent in the fourth quarter.”

“In 2021 we are returning our focus to the growth and optimization aspects of the Flowserve 2.0 agenda,” added Rowe. “Innovation and new product development are key aspects of our growth strategy, and we expect to build upon the momentum we achieved in 2020, which included 21 commercial launches of new, redesigned or upgraded products. Additionally, this year we further differentiated our product offering by commercializing RedRaven, Flowserve’s IoT offering to optimize our customers’ flow control processes and lower their operating costs.”

2021 Guidance4

Flowserve is providing Reported and Adjusted EPS guidance for 2021, as well as certain other financial metrics, as shown in the table below.

2021 Target Range

Revenues

Down 4.0% to 7.0%

Reported Earnings Per Share

$1.15 – $1.40

Adjusted Earnings Per Share

$1.30 – $1.55

Net interest expense

$55 – $60 million

Adjusted Tax rate

22% to 24%

Flowserve’s 2021 Adjusted EPS target range excludes expected realignment charges of approximately $25 million, as well as the potential impact of below-the-line foreign currency effects and certain other discrete items. In a change of our approach in 2021, Flowserve 2.0 transformation-related expenses of approximately 5 cents per share will now be included in both our reported and adjusted EPS. Additionally, both the Reported and the Adjusted EPS target range includes the expected revenue decrease of approximately 4.0 to 7.0 percent year-over-year, and is based on current foreign currency rates and commodity prices, 2020 year-end backlog, expected bookings levels and market conditions, the reset of annual incentive performance goals, a broad-based merit increase, modest above-the-line foreign currency benefit, net interest expense in the range of $55 to $60 million and an adjusted tax rate of 22 to 24 percent. The quarterly phasing of expected 2021 earnings is anticipated in-line with Flowserve’s traditional seasonality.

Comment on Outlook

Rowe concluded, “The impact of the COVID-driven downturn impacted our financial performance in 2020, but due to our late-cycle nature, it will have a larger impact to our business in 2021 given our lower starting backlog and the ongoing management of the pandemic across our global footprint. However, I am increasingly optimistic, as the pandemic gets further contained, that our end markets will be well-positioned for significant growth.”

“We are encouraged by the progress of the vaccines, increased global mobility, stability in commodity prices, and the pent-up demand for our parts and services to existing infrastructure. Since we cannot accurately predict the timing of the inflection, our guidance only reflects modest end-market improvement. We do believe, assuming progress continues against the pandemic, that we will return to bookings growth this calendar year which would position us for improved financial performance in 2022.”

Fourth Quarter 2020 Results Conference Call

Flowserve will host its conference call with the financial community on Wednesday, February 24th 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

Prior period comparisons are impacted by the accounting revision related to incurred but not reported accruals for expected future asbestos litigation as well as certain other non-material adjustments further detailed in “Revisions to Prior Periods” section.

2

See Reconciliation of Non-GAAP Measures table for detailed reconciliation of reported results to adjusted measures.

3

Adjusted gross and operating margins are calculated by dividing adjusted gross profit and adjusted 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.

4

Adjusted 2021 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 2020 FX rates and approximately 131 million fully diluted shares.

FX headwind is calculated by comparing the difference between the actual average FX rates of 2020 and the year-end 2020 spot rates both as applied to our 2021 expectations, divided by the number of shares expected for 2021.

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: the impact of the global outbreak of COVID-19 on our business and operations; 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; if we are not able to successfully execute and realize the expected financial benefits from our strategic transformation and realignment initiatives, our business could be adversely affected; 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, trade embargoes, epidemics or pandemics or changes to tariffs or trade agreements 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; 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 fourth-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; our information technology infrastructure could be subject to service interruptions, data corruption, cyber-based attacks or network security breaches, which could disrupt our business operations and result in the loss of critical and confidential information; 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.

CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)

Three Months Ended December 31,

(Amounts in thousands, except per share data)

2020

 

2019

 
Sales

$

985,308

 

$

1,068,179

 

Cost of sales

 

(689,913

)

 

(718,598

)

Gross profit

 

295,395

 

 

349,581

 

Selling, general and administrative expense

 

(202,722

)

 

(247,576

)

Net earnings from affiliates

 

2,627

 

 

2,425

 

Operating income

 

95,300

 

 

104,430

 

Interest expense

 

(16,779

)

 

(12,954

)

Interest income

 

604

 

 

1,915

 

Other income (expense), net

 

(17,811

)

 

(2,467

)

Earnings before income taxes

 

61,314

 

 

90,924

 

Provision for income taxes

 

(856

)

 

(16,886

)

Net earnings, including noncontrolling interests

 

60,458

 

 

74,038

 

Less: Net earnings attributable to noncontrolling interests

 

(3,565

)

 

(1,453

)

Net earnings attributable to Flowserve Corporation

$

56,893

 

$

72,585

 

 
Net earnings per share attributable to Flowserve Corporation common shareholders:
Basic

$

0.44

 

$

0.55

 

Diluted

 

0.43

 

 

0.55

 

RECONCILIATION OF NON-GAAP MEASURES
(Unaudited)
 

Three Months Ended December 31, 2020

(Amounts in thousands, except per share data)

As Reported (a)

 

Realignment (1)

 

 

Other Items

 

 

As Adjusted

 
Sales

$

985,308

 

$

 

$

 

$

985,308

 

Gross profit

 

295,395

 

 

(6,662

)

 

 

 

302,057

 

Gross margin

 

30.0

%

 

 

 

 

 

30.7

%

 
Selling, general and administrative expense

 

(202,722

)

 

(3,092

)

 

(6,712

)

(3)

 

(192,918

)

 
Operating income

 

95,300

 

 

(9,754

)

 

(6,712

)

 

111,766

 

Operating income as a percentage of sales

 

9.7

%

 

 

 

 

 

11.3

%

 
Interest and other expense, net

 

(33,986

)

 

 

 

(15,106

)

(4)

 

(18,880

)

 
Earnings before income taxes

 

61,314

 

 

(9,754

)

 

(21,818

)

 

92,886

 

Provision for income taxes

 

(856

)

 

2,414

 

(2)

 

16,236

 

(5)

 

(19,506

)

Tax Rate

 

1.4

%

 

24.7

%

 

74.4

%

 

21.0

%

 
Net earnings attributable to Flowserve Corporation

$

56,893

 

$

(7,340

)

$

(5,582

)

$

69,815

 

 
Net earnings per share attributable to Flowserve Corporation common shareholders:
Basic

$

0.44

 

$

(0.06

)

$

(0.04

)

$

0.54

 

Diluted

 

0.43

 

 

(0.06

)

 

(0.04

)

 

0.53

 

 
Basic number of shares used for calculation

 

130,343

 

 

130,343

 

 

130,343

 

 

130,343

 

Diluted number of shares used for calculation

 

130,995

 

 

130,995

 

 

130,995

 

 

130,995

 

 
(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 Flowserve 2.0 transformation efforts
(4) Represents below-the-line foreign exchange impacts
(5) Includes tax impact of items above and $13.2 million benefit related to legal entity simplification and restructuring
RECONCILIATION OF NON-GAAP MEASURES
(Unaudited)
 

Three Months Ended December 31, 2019

(Amounts in thousands, except per share data)

As Reported (a)

 

Realignment (1)

 

 

Other Items

 

 

As Adjusted

 
Sales

$

1,068,179

 

$

 

$

 

$

1,068,179

 

Gross profit

 

349,581

 

 

(4,451

)

 

(196

)

(3)

 

354,228

 

Gross margin

 

32.7

%

 

 

 

 

 

33.2

%

 
Selling, general and administrative expense

 

(247,576

)

 

(4,315

)

 

(10,287

)

(4)

 

(232,974

)

 
Operating income

 

104,430

 

 

(8,766

)

 

(10,483

)

 

123,679

 

Operating income as a percentage of sales

 

9.8

%

 

 

 

 

 

11.6

%

 
Interest and other expense, net

 

(13,506

)

 

 

 

(671

)

(5)

 

(12,835

)

 
Earnings before income taxes

 

90,924

 

 

(8,766

)

 

(11,154

)

 

110,844

 

Provision for income taxes

 

(16,886

)

 

5,679

 

(2)

 

2,001

 

(6)

 

(24,566

)

Tax Rate

 

18.6

%

 

64.8

%

 

17.9

%

 

22.2

%

 
Net earnings attributable to Flowserve Corporation

$

72,585

 

$

(3,087

)

$

(9,153

)

$

84,825

 

 
Net earnings per share attributable to Flowserve Corporation common shareholders:
Basic

$

0.55

 

$

(0.02

)

$

(0.07

)

$

0.65

 

Diluted

 

0.55

 

 

(0.02

)

 

(0.07

)

 

0.64

 

 
Basic number of shares used for calculation

 

130,863

 

 

130,863

 

 

130,863

 

 

130,863

 

Diluted number of shares used for calculation

 

131,783

 

 

131,783

 

 

131,783

 

 

131,783

 

 
(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 and uncertain tax position release of $4.0 million
(3) Represents Voluntary Retirement Program expense
(4) Represents $7.0 million related to Flowserve 2.0 transformation efforts and $3.3 million related to voluntary retirement program expense
(5) Represents below-the-line foreign exchange impacts
(6) Includes tax impact of items above
SEGMENT INFORMATION
(Unaudited)
 
FLOWSERVE PUMP DIVISION

Three Months Ended December 31

(Amounts in millions, except percentages)

2020

 

2019

Bookings

$

566.5

 

$

756.0

 

Sales

 

695.7

 

 

739.5

 

Gross profit

 

207.7

 

 

245.6

 

Gross profit margin

 

29.9

%

 

33.2

%

SG&A

 

126.1

 

 

146.6

 

Segment operating income

 

84.2

 

 

101.4

 

Segment operating income as a percentage of sales

 

12.1

%

 

13.7

%

 
FLOW CONTROL DIVISION

Three Months Ended December 31,

(Amounts in millions, except percentages)

2020

 

2019

Bookings

$

258.4

 

$

298.6

 

Sales

 

290.7

 

 

330.2

 

Gross profit

 

92.8

 

 

111.8

 

Gross profit margin

 

31.9

%

 

33.9

%

SG&A

 

41.4

 

 

54.4

 

Segment operating income

 

51.4

 

 

57.3

 

Segment operating income as a percentage of sales

 

17.7

%

 

17.4

%

CONSOLIDATED STATEMENTS OF INCOME
 

Year Ended December 31,

(Amounts in thousands, except per share data)

2020

 

2019

 

2018

 
Sales

$

3,728,134

 

$

3,939,697

 

$

3,835,699

 

Cost of sales

 

(2,611,365

)

 

(2,650,354

)

 

(2,644,830

)

Gross profit

 

1,116,769

 

 

1,289,343

 

 

1,190,869

 

Selling, general and administrative expense

 

(878,245

)

 

(913,203

)

 

(966,584

)

Loss on sale of business

 

 

 

 

 

(7,727

)

Net earnings from affiliates

 

11,753

 

 

10,483

 

 

11,143

 

Operating income

 

250,277

 

 

386,623

 

 

227,701

 

Interest expense

 

(57,386

)

 

(54,980

)

 

(58,160

)

Interest income

 

4,175

 

 

8,409

 

 

6,465

 

Other income (expense), net

 

(10,254

)

 

(17,619

)

 

(19,569

)

Earnings before income taxes

 

186,812

 

 

322,433

 

 

156,437

 

Provision for income taxes

 

(60,031

)

 

(75,493

)

 

(46,550

)

Net earnings, including noncontrolling interests

 

126,781

 

 

246,940

 

 

109,887

 

Less: Net earnings attributable to noncontrolling interests

 

(10,455

)

 

(8,112

)

 

(5,379

)

Net earnings attributable to Flowserve Corporation

$

116,326

 

$

238,828

 

$

104,508

 

 
Net earnings per share attributable to Flowserve Corporation common shareholders:
Basic

$

0.89

 

$

1.82

 

$

0.80

 

Diluted

 

0.89

 

 

1.81

 

 

0.80

 

RECONCILIATION OF NON-GAAP MEASURES
(Unaudited)
 

Year Ended December 31, 2020

(Amounts in thousands, except per share data)

As Reported (a)

 

Realignment (1)

 

 

Other Items

 

 

As Adjusted

 
Sales

$

3,728,134

 

$

 

$

 

$

3,728,134

 

Gross profit

 

1,116,769

 

 

(47,297

)

 

 

 

1,164,066

 

Gross margin

 

30.0

%

 

 

 

 

 

31.2

%

 
Selling, general and administrative expense

 

(878,245

)

 

(34,773

)

 

(34,269

)

(3)

 

(809,203

)

 
Operating income

 

250,277

 

 

(82,070

)

 

(34,269

)

 

366,616

 

Operating income as a percentage of sales

 

6.7

%

 

 

 

 

 

9.8

%

 
Interest and other expense, net

 

(63,465

)

 

 

 

(5,854

)

(4)

 

(57,611

)

 
Earnings before income taxes

 

186,812

 

 

(82,070

)

 

(40,123

)

 

309,005

 

Provision for income taxes

 

(60,031

)

 

12,560

 

(2)

 

(1,428

)

(5)

 

(71,163

)

Tax Rate

 

32.1

%

 

15.3

%

 

-3.6

%

 

23.0

%

 
Net earnings attributable to Flowserve Corporation

$

116,326

 

$

(69,510

)

$

(41,551

)

$

227,387

 

 
Net earnings per share attributable to Flowserve Corporation common shareholders:
Basic

$

0.89

 

$

(0.53

)

$

(0.32

)

$

1.74

 

Diluted

 

0.89

 

 

(0.53

)

 

(0.32

)

 

1.74

 

 
Basic number of shares used for calculation

 

130,395

 

 

130,395

 

 

130,395

 

 

130,395

 

Diluted number of shares used for calculation

 

131,050

 

 

131,050

 

 

131,050

 

 

131,050

 

 
(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) Includes $22.7 million related to Flowserve 2.0 transformation efforts and $11.5 million related to discrete asset write-downs
(4) Represents below-the-line foreign exchange impacts
(5) Includes tax impact of items above, $25.4 million related to Italian tax valuation allowance and $15.6 million benefit related to legal entity simplification and restructuring
RECONCILIATION OF NON-GAAP MEASURES
(Unaudited)
 

Year Ended December 31, 2019

(Amounts in thousands, except per share data)

As Reported (a)

 

Realignment (1)

 

 

Other Items

 

 

As Adjusted

 
Sales

$

3,939,697

 

$

 

$

 

$

3,939,697

 

Gross profit

 

1,289,343

 

 

(17,234

)

 

(196

)

(3)

 

1,306,772

 

Gross margin

 

32.7

%

 

 

 

 

 

33.2

%

 
Selling, general and administrative expense

 

(913,203

)

 

9,304

 

 

(31,331

)

(4)

 

(891,176

)

 
Operating income

 

386,623

 

 

(7,930

)

 

(31,527

)

 

426,079

 

Operating income as a percentage of sales

 

9.8

%

 

 

 

 

 

10.8

%

 
Interest and other expense, net

 

(64,190

)

 

 

 

(14,459

)

(5)

 

(49,731

)

 
Earnings before income taxes

 

322,433

 

 

(7,930

)

 

(45,986

)

 

376,348

 

Provision for income taxes

 

(75,493

)

 

7,618

 

(2)

 

10,604

 

(6)

 

(93,715

)

Tax Rate

 

23.4

%

 

96.1

%

 

23.1

%

 

24.9

%

 
Net earnings attributable to Flowserve Corporation

$

238,828

 

$

(312

)

$

(35,382

)

$

274,521

 

 
Net earnings per share attributable to Flowserve Corporation common shareholders:
Basic

$

1.82

 

$

 

$

(0.27

)

$

2.10

 

Diluted

 

1.81

 

 

 

 

(0.27

)

 

2.08

 

 
Basic number of shares used for calculation

 

131,034

 

 

131,034

 

 

131,034

 

 

131,034

 

Diluted number of shares used for calculation

 

131,719

 

 

131,719

 

 

131,719

 

 

131,719

 

 
(a) Reported in conformity with U.S. GAAP
 
Notes:
(1) Represents realignment (expense) income incurred as a result of realignment programs. Income in selling, general and administrative due to gains from the sales of non-strategic manufacturing facilities that are included in our Realignment Programs
(2) Includes tax impact of items above and uncertain tax position release of $4.0 million
(3) Represents Voluntary Retirement Program expense
(4) Represents $28.0 million related to Flowserve 2.0 transformation efforts and $3.3 million related to voluntary retirement program expense
(5) Represents below-the-line foreign exchange impacts
(6) Includes tax impact of items above
SEGMENT INFORMATION
(Unaudited)
 
FLOWSERVE PUMP DIVISION

Year Ended December 31,

(Amounts in millions, except percentages)

2020

 

2019

 

2018

Bookings

$

2,358.4

 

$

3,007.9

 

$

2,753.5

 

Sales

 

2,675.7

 

 

2,706.3

 

 

2,623.3

 

Gross profit

 

811.4

 

 

899.3

 

 

775.7

 

Gross profit margin

 

30.3

%

 

33.2

%

 

29.6

%

SG&A

 

552.2

 

 

566.3

 

 

578.9

 

Loss on sale of business

 

 

 

 

 

(7.7

)

Segment operating income

 

271.0

 

 

343.5

 

 

201.0

 

Segment operating income as a percentage of sales

 

10.1

%

 

12.7

%

 

7.7

%

 
 
FLOW CONTROL DIVISION

Year Ended December 31,

(Amounts in millions, except percentages)

2020

 

2019

 

2018

Bookings

$

1,065.8

 

$

1,240.9

 

$

1,274.3

 

Sales

 

1,057.5

 

 

1,238.9

 

 

1,218.8

 

Gross profit

 

321.9

 

 

405.5

 

 

419.9

 

Gross profit margin

 

30.4

%

 

32.7

%

 

34.5

%

SG&A

 

196.3

 

 

213.6

 

 

215.0

 

Segment operating income

 

125.6

 

 

191.9

 

 

204.2

 

Segment operating income as a percentage of sales

 

11.9

%

 

15.5

%

 

16.8

%

Fourth Quarter and Full Year 2020 – Segment Results
(dollars in millions, comparison vs. 2019 fourth quarter and full year, unaudited)
 

FPD

 

FCD

4th Qtr

 

YTD

 

4th Qtr

 

YTD

Bookings

$

566.5

 

$

2,358.4

 

$

258.4

 

$

1,065.8

 

– vs. prior year

 

-25.1

%

 

-21.6

%

 

-13.5

%

 

-14.1

%

– on constant currency

 

-26.0

%

 

-20.9

%

 

-15.1

%

 

-13.8

%

 
Sales

$

695.7

 

$

2,675.7

 

$

290.7

 

$

1,057.5

 

– vs. prior year

 

-5.9

%

 

-1.1

%

 

-12.0

%

 

-14.6

%

– on constant currency

 

-7.4

%

 

-0.4

%

 

-12.3

%

 

-14.7

%

 
Gross Profit

$

207.7

 

$

811.4

 

$

92.8

 

$

321.9

 

– vs. prior year

 

-15.4

%

 

-9.8

%

 

-17.0

%

 

-20.6

%

 
Gross Margin (% of sales)

 

29.9

%

 

30.3

%

 

31.9

%

 

30.4

%

– vs. prior year (in basis points) (330) bps (290) bps (200) bps (230) bps
 
Operating Income

$

84.2

 

$

271.0

 

$

51.4

 

$

125.6

 

– vs. prior year

 

-17.0

%

 

-21.1

%

 

-10.3

%

 

-34.5

%

– on constant currency

 

-16.3

%

 

-18.5

%

 

-2.7

%

 

-34.5

%

 
Operating Margin (% of sales)

 

12.1

%

 

10.1

%

 

17.7

%

 

11.9

%

– vs. prior year (in basis points) (160) bps (260) bps 30 bps (360) bps
 
Adjusted Operating Income *

$

91.1

 

$

329.6

 

$

52.1

 

$

141.9

 

– vs. prior year

 

-13.0

%

 

-3.6

%

 

-15.6

%

 

-28.4

%

– on constant currency

 

-12.3

%

 

-1.0

%

 

-8.6

%

 

-28.3

%

 
Adj. Oper. Margin (% of sales)*

 

13.1

%

 

12.3

%

 

17.9

%

 

13.4

%

– vs. prior year (in basis points) (110) bps (30) bps (80) bps (260) bps
 
Backlog

$

1,236.9

 

$

623.1

 

 
* Adjusted Operating Income and Adjusted Operating Margin exclude realignment charges and other specific discrete items
CONSOLIDATED BALANCE SHEETS
 

December 31,

 

December 31,

(Amounts in thousands, except par value)

2020

 

2019

 
ASSETS
Current assets:
Cash and cash equivalents

$

1,095,274

 

$

670,980

 

Accounts receivable, net

 

753,462

 

 

795,538

 

Contract assets, net

 

277,734

 

 

272,914

 

Inventories, net

 

667,228

 

 

660,837

 

Prepaid expenses and other

 

110,635

 

 

106,478

 

Total current assets

 

2,904,333

 

 

2,506,747

 

Property, plant and equipment, net

 

556,873

 

 

563,564

 

Operating lease right-of-use assets, net

 

208,125

 

 

186,218

 

Goodwill

 

1,224,886

 

 

1,193,010

 

Deferred taxes

 

30,538

 

 

54,879

 

Other intangible assets, net

 

168,496

 

 

180,805

 

Other assets, net

 

221,426

 

 

253,054

 

Total assets

$

5,314,677

 

$

4,938,277

 

 
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable

$

440,199

 

$

447,582

 

Accrued liabilities

 

463,222

 

 

401,385

 

Contract liabilities

 

194,227

 

 

221,095

 

Debt due within one year

 

8,995

 

 

11,272

 

Operating lease liabilities

 

34,990

 

 

36,108

 

Total current liabilities

 

1,141,633

 

 

1,117,442

 

Long-term debt due after one year

 

1,717,911

 

 

1,365,977

 

Operating lease liabilities

 

176,246

 

 

151,523

 

Retirement obligations and other liabilities

 

516,087

 

 

530,994

 

Shareholders’ equity:
Common shares, $1.25 par value

 

220,991

 

 

220,991

 

Shares authorized – 305,000
Shares issued – 176,793 and 176,793, respectfully
Capital in excess of par value

 

502,227

 

 

501,045

 

Retained earnings

 

3,656,449

 

 

3,652,244

 

Treasury shares, at cost – 46,768 and 46,262 shares, respectively

 

(2,059,309

)

 

(2,051,583

)

Deferred compensation obligation

 

6,164

 

 

8,334

 

Accumulated other comprehensive loss

 

(594,052

)

 

(584,292

)

Total Flowserve Corporation shareholders’ equity

 

1,732,470

 

 

1,746,739

 

Noncontrolling interests

 

30,330

 

 

25,602

 

Total equity

 

1,762,800

 

 

1,772,341

 

Total liabilities and equity

$

5,314,677

 

$

4,938,277

 

CONSOLIDATED STATEMENTS OF CASH FLOWS
 

Year Ended December 31,

(Amounts in thousands)

2020

 

2019

 

2018

 
Cash flows – Operating activities:
Net earnings, including noncontrolling interests

$

126,781

 

$

246,940

 

$

109,887

 

Adjustments to reconcile net earnings to net cash provided (used) by operating activities:
Depreciation

 

86,175

 

 

92,042

 

 

95,820

 

Amortization of intangible and other assets

 

14,578

 

 

13,862

 

 

16,653

 

Loss on disposition of business

 

 

 

 

 

7,727

 

Stock-based compensation

 

27,252

 

 

23,882

 

 

19,912

 

Provision for U.S. Tax Cuts and Jobs Act of 2017

 

 

 

 

 

(5,654

)

Foreign currency, asset impairment and other non-cash adjustments

 

21,051

 

 

(11,724

)

 

36,052

 

Change in assets and liabilities:
Accounts receivable, net

 

45,648

 

 

2,883

 

 

(25,448

)

Inventories, net

 

15,306

 

 

(31,058

)

 

(29,314

)

Contract assets, net

 

4,258

 

 

(45,220

)

 

(24,411

)

Prepaid expenses and other assets, net

 

34,262

 

 

(9,455

)

 

(15,491

)

Contract liabilities

 

(34,066

)

 

19,699

 

 

32,955

 

Accounts payable

 

(22,571

)

 

24,678

 

 

7,589

 

Accrued liabilities and income taxes payable

 

50,203

 

 

12,418

 

 

(15,248

)

Retirement obligations and other

 

3,636

 

 

(3,357

)

 

(26,595

)

Net deferred taxes

 

(61,976

)

 

(11,493

)

 

6,397

 

Net cash flows provided (used) by operating activities

 

310,537

 

 

324,097

 

 

190,831

 

Cash flows – Investing activities:
Capital expenditures

 

(57,405

)

 

(75,716

)

 

(83,993

)

Proceeds from disposal of assets

 

15,705

 

 

42,333

 

 

6,190

 

Payments for disposition of business

 

 

 

 

 

(3,663

)

Net cash flows provided (used) by investing activities

 

(41,700

)

 

(33,383

)

 

(81,466

)

Cash flows – Financing activities:
Payments on long-term debt

 

(191,258

)

 

(105,000

)

 

(60,000

)

Proceeds from issuance of senior notes

 

498,280

 

 

 

 

 

Payment of deferred loan cost

 

(4,572

)

 

 

 

 

Proceeds from short-term financing

 

 

 

75,000

 

 

 

Payments on short-term financing

 

 

 

(75,000

)

 

 

Proceeds under other financing arrangements

 

2,285

 

 

3,404

 

 

3,377

 

Payments under other financing arrangements

 

(9,792

)

 

(9,856

)

 

(9,853

)

Payments related to tax withholding for stock-based compensation

 

(4,607

)

 

(3,900

)

 

(3,061

)

Repurchases of common shares

 

(32,112

)

 

(15,000

)

 

 

Payments of dividends

 

(104,159

)

 

(99,557

)

 

(99,416

)

Other

 

(6,478

)

 

(1,555

)

 

(4,331

)

Net cash flows provided (used) by financing activities

 

147,587

 

 

(231,464

)

 

(173,284

)

Effect of exchange rate changes on cash

 

7,870

 

 

(7,953

)

 

(19,843

)

Net change in cash and cash equivalents

 

424,294

 

 

51,297

 

 

(83,762

)

Cash and cash equivalents at beginning of year

 

670,980

 

 

619,683

 

 

703,445

 

Cash and cash equivalents at end of year

$

1,095,274

 

$

670,980

 

$

619,683

 

Income taxes paid (net of refunds)

$

75,342

 

$

66,372

 

$

87,009

 

Interest paid

 

57,041

 

 

53,607

 

 

54,576

 

CONSOLIDATED QUARTERLY FINANCIAL DATA
(Unaudited)
(Amounts in millions, except per share data)

2020

Quarter

4th

 

3rd

 

2nd

 

1st

Sales

$

985.3

$

924.3

$

925.0

$

893.5

 

Gross profit

 

295.4

 

285.2

 

269.7

 

266.5

 

Earnings before income taxes

 

61.3

 

72.3

 

16.7

 

36.5

 

Net earnings (loss) attributable to Flowserve Corporation

 

56.9

 

51.0

 

9.7

 

(1.3

)

Earnings (loss) per share(1):
Basic

$

0.44

$

0.39

$

0.07

$

(0.01

)

Diluted

$

0.43

$

0.39

$

0.07

$

(0.01

)

 
 

2019

Quarter

4th

 

3rd

 

2nd

 

1st

Sales

$

1,068.2

$

995.7

$

990.0

$

885.8

 

Gross profit

 

349.5

 

332.9

 

317.9

 

289.0

 

Earnings before income taxes

 

90.9

 

84.4

 

77.4

 

69.7

 

Net earnings attributable to Flowserve Corporation

 

72.6

 

59.8

 

54.0

 

52.4

 

Earnings per share (1):
Basic

$

0.55

$

0.46

$

0.41

$

0.40

 

Diluted

$

0.55

$

0.45

$

0.41

$

0.40

 

 
(1) Earnings per share is computed independently for each of the quarters presented. The sum of the quarters may not equal the total year amount due to the impact of changes in weighted average quarterly shares outstanding.

 

Source