Flowserve (FLS) Q4 2012 earnings summary

Executive summary

• 2012 sales rose 5.3% to $4.75B and net earnings attributable to shareholders increased to $448.3M; operating income grew 9.2% despite currency headwinds and lower gross margin.

• Bookings increased 1.1% to $4.71B, while year-end backlog declined 1.5% to $2.65B; aftermarket sales remained ~41% of total sales.

• Stronger IPD and FCD operating income offset nearly flat EPD results; outlook remained cautious amid global uncertainty and competitive pricing.

Financial highlights

• Sales $4,751.3M, up 5.3% YoY; gross profit $1,581.0M, up 4.5%; operating income $675.8M, up 9.2%.

• Net earnings attributable to shareholders $448.3M, up from $428.6M; diluted EPS $8.51 vs. $7.64.

• Operating cash flow was $517.1M vs. $218.2M; capital expenditures were $135.5M.

• SG&A rose 0.9% to $922.1M, but fell to 19.4% of sales from 20.3%; includes a one-time $10.4M gain on sale of the Rio de Janeiro facility.

Outlook and guidance

• 2013 outlook anticipates continued competitive conditions and uncertainty; results are expected to be weighted toward H2, with support from aftermarket strength, cost management and customer diversity.

• Investing cash outlays expected at $120M–$130M in 2013, before acquisitions; scheduled Senior Credit Facility principal repayments are $25M.

• Expected 2013 pension contributions: ~$20M to the qualified U.S. plan and ~$10M to non-U.S. plans; pension expense expected to be ~$10M higher than 2012.

• Venezuelan bolivar devaluation was expected to cause an after-tax charge of ~$3M in Q1 2013.