Flowserve (FLS) Q4 2007 earnings summary

Executive summary

• Record 2007 results across sales, operating income, EPS, operating cash flow, bookings and backlog; growth supported by operational execution and global demand.

• Strategy centered on major capital projects, global integration, aftermarket services, process excellence, innovation and selective strategic acquisitions.

Financial highlights

• Sales $3.763B in 2007 vs. $3.061B in 2006; gross profit $1.248B vs. $1.007B.

• Operating income $409.9M vs. $239.6M; diluted EPS from continuing operations $4.46 vs. $2.00, up more than 120%.

• Operating cash flow $417.4M vs. $163.2M; bookings $4.319B vs. $3.617B; ending backlog $2.277B vs. $1.630B.

• SG&A decreased to 22.8% of sales, down 2.8 percentage points YoY.

Outlook and guidance

• Continued growth expected from oil and gas, power, chemical and water infrastructure projects, with emerging markets and aftermarket services central to growth plans.

• Power demand and investment in nuclear, geothermal and integrated gasification projects are expected to support strong market growth over the next decade.

• Strong chemical project activity, particularly in Asia, and demand for polymers, petrochemicals and biochemicals expected to create further opportunities.

• Aftermarket growth targeted through new QRCs planned for 2008–2010, existing center expansion and LifeCycle Advantage alliances.