Flowserve (FLS) Q4 2009 earnings summary

Executive summary

• 2009 sales fell 2.4% YoY to $4.37B amid recession-related weakness in equipment orders; stable aftermarket activity helped cushion the decline.

• Operating income rose to $629.5M, while net earnings declined to $427.9M; results included $68.1M of realignment charges.

Financial highlights

• Sales were $4,365.3M vs. $4,473.5M in 2008; gross profit was $1,548.1M vs. $1,580.3M.

• Operating income was $629.5M vs. $615.7M; net earnings were $427.9M vs. $442.4M, and diluted EPS was $7.59 vs. $7.71.

• Operating cash flow rose to $431.3M from $408.8M; cash at year-end increased to $654.3M from $472.1M.

Outlook and guidance

• Outlook remained cautious: lower 2009 bookings and backlog may reduce 2010 revenue excluding currency effects, amid continued uncertainty in global markets.

• Gross-margin pressure from price competition and mix away from higher-margin specialty pumps may be partly offset by operational improvements, aftermarket strength and realignment savings.

• 2010 investing cash outflows forecast at $110M–$125M before acquisitions; U.S. pension contributions expected at $30M–$40M and non-U.S. contributions at ~$10M.

• 2010 interest expense expected comparable to 2009; up to $20M of realignment charges expected in 2010.