EX-99.2 3 a04-4906_2ex99d2.htm EX-99.2

Exhibit 99.2

 

 

Investor Contact:

Michael E. Conley

 

(972) 443-6557

 

 

 

Media Contact:

Sean S. Clancy

 

(972) 443-6546

 

FOR IMMEDIATE RELEASE — Revised (change underlined)

 

 

Flowserve Announces Financial Results For 2003 And Prior Years

 

Increases Earnings Guidance Range For 2004

 

 

DALLAS — April 27, 2004  — Flowserve Corp.  (NYSE: FLS)  today announced financial results for 2003 and restated results for 2002 through 2000 and for the nine months ended Sept. 30, 2003.

 

For full year 2003, net income was $52.9 million, or 96 cents a share, compared with restated $45.5 million, or 87 cents a share, in the prior year.  Before special items, full year 2003 net income was $69.1 million, or $1.25 a share, compared with restated $69.6 million, or $1.33 a share, in 2002.

 

Restated results for the first nine months of 2003 and full years 2002 through 2000 include aggregate pretax charges of $21.0 million (revised from $21.4 million) for adjustments related to the restatement.  These adjustments represent less than 5 percent of aggregate operating income during the affected periods.  In announcing preliminary financial information on Feb. 3, 2004, the company estimated aggregate pretax charges of approximately $11 million in these periods, predominantly to correct inventory and related balances that resulted in

 

Exhibit 99.2

 

cost of sales adjustments.  Subsequent to that announcement, additional pretax charges were identified, principally related to the same issues.  The effect of the restatement on prior periods is detailed in the attached schedules.  The company believes the adjustments do not affect its operations going forward.

 

Reported results for 2003 include post-closing adjustments, including increasing reserves for pre-existing legal contingencies.  These post-closing adjustments had the effect of reducing 2003 reported results by about 22 cents a share.

 

Partially offsetting these post-closing adjustments was the effect of a tax benefit of 7 cents a share for a refund previously not benefited that reduced the full year 2003 effective tax rate to 28.4 percent.  The tax rate for 2004 is currently expected to range between 35 percent and 37 percent.

 

Special items in all periods of 2003 and 2002 generally relate to the May 2002 acquisition of the flow control division of Invensys plc (IFC) and early debt reduction in 2002.

 

The company also increased its earnings guidance for full year 2004.  Chairman, President and Chief Executive Officer C. Scott Greer said, “With 2003 results now announced, I want to make clear our positive view for 2004.  We are encouraged by our strong bookings trends thus far in 2004.  Therefore, we are increasing our full year earnings per share forecast to a range of $1.25 to $1.40.

 

2

Exhibit 99.2

 

If our business further improves, we plan to adjust this range accordingly.  For the first quarter of 2004, our earnings per share forecast remains unchanged.”  Greer emphasized that these forecasts exclude any special items and that no special items are expected in 2004.

 

Flowserve Corp. will hold its annual meeting of shareholders at its Learning Resource Center in Irving, Texas on June 22, 2004.  The record date for the meeting is April 29, 2004.

 

Flowserve Corp. is one of the world’s leading providers of fluid motion and control products and services.  Operating in 56 countries, the company produces engineered and industrial pumps, seals and valves as well as a range of related flow management services.

 

 

SAFE HARBOR STATEMENT: This news release contains various forward-looking statements and includes assumptions about Flowserve’s future market conditions, operations and results. These statements are based on current expectations and are subject to significant risks and uncertainties. They are made pursuant to safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Among the many factors that could cause actual results to differ materially from the forward-looking statements are: material adverse events in the national financial markets; changes in the already competitive environment for the company’s products or competitors’ responses to Flowserve’s strategies; the company’s ability to integrate past and future acquisitions into its management operations; political risks, military actions or trade embargoes affecting customer markets, including continuing conflict in Iraq with its potential impact on Middle Eastern markets and global oil producers; the health of the company’s various customer industries, including the petroleum, chemical, power and water industries; economic turmoil in areas outside the United States; global economic growth; unanticipated difficulties or costs associated with new systems, including software; the company’s relative geographical profitability and its impact on the company’s utilization of foreign tax credits; and the recognition of significant expenses associated with adjustments to realign the company’s facilities and other capabilities with its strategies and business conditions, including, without limitation, expenses incurred in restructuring the company’s operations and the cost of financing, including increases in interest costs, and

 

3

Exhibit 99.2

 

litigation developments.  Flowserve undertakes no obligation to update or revise any forward-looking statements contained herein as a result of new information, future events or otherwise occurring after the date on which such forward-looking statements are made.  New factors emerge from time-to-time, and it is not possible for Flowserve to predict all such factors.

 

(Tables Follow)

 

4

Exhibit 99.2

 

Flowserve Corporation

Restated Financial Results

Amounts in thousands except per share amounts

 

 

 

2003

 

2002

 

2001

 

2000

 

 

 

 

 

Original

 

Adjustments

 

Restated

 

Original

 

Adjustments

 

Restated

 

Original

 

Adjustments

 

Restated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales

 

$

2,404,371

 

$

2,251,331

 

$

(183

)

$

2,251,148

 

$

1,917,507

 

$

(175

)

$

1,917,332

 

$

1,538,293

 

 

 

$

1,538,293

 

Cost of sales

 

1,681,950

 

1,565,800

 

7,678

 

1,573,478

 

1,302,955

 

10,835

 

1,313,790

 

1,031,381

 

2,199

 

1,033,580

 

Gross profit

 

722,421

 

685,531

 

(7,861

)

677,670

 

614,552

 

(11,010

)

603,542

 

506,912

 

(2,199

)

504,713

 

Selling, general & administrative expense

 

539,782

 

476,923

 

510

 

477,433

 

410,563

 

775

 

411,338

 

360,306

 

1,313

 

361,619

 

Integration expense

 

19,768

 

16,179

 

 

 

16,179

 

63,043

 

 

 

63,043

 

35,211

 

 

 

35,211

 

Restructuring expense

 

2,879

 

4,347

 

—

 

4,347

 

(1,208

)

—

 

(1,208

)

19,364

 

—

 

19,364

 

Operating income

 

159,992

 

188,082

 

(8,371

)

179,711

 

142,154

 

(11,785

)

130,369

 

92,031

 

(3,512

)

88,519

 

Loss on debt repayment and extinguishment

 

1,346

 

11,237

 

 

 

11,237

 

24,974

 

 

 

24,974

 

3,229

 

 

 

3,229

 

Net interest expense

 

80,221

 

92,932

 

 

 

92,932

 

118,128

 

 

 

118,128

 

70,488

 

 

 

70,488

 

Other expense (income), net

 

4,590

 

3,543

 

(302

)

3,241

 

(1,577

)

(79

)

(1,656

)

(1,641

)

(92

)

(1,733

)

Earnings (loss) before income taxes

 

73,835

 

80,370

 

(8,069

)

72,301

 

629

 

(11,706

)

(11,077

)

19,955

 

(3,420

)

16,535

 

Provision (benefit) for income taxes

 

20,947

 

27,345

 

(541

)

26,804

 

2,126

 

(2,715

)

(589

)

6,714

 

(1,001

)

5,713

 

Net earnings (loss)

 

$

52,888

 

$

53,025

 

$

(7,528

)

$

45,497

 

$

(1,497

)

$

(8,991

)

$

(10,488

)

$

13,241

 

$

(2,419

)

$

10,822

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average shares outstanding - diluted

 

55,250

 

52,193

 

52,193

 

52,193

 

39,330

 

39,330

 

39,330

 

37,842

 

37,842

 

37,842

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings (loss) per share diluted

 

$

0.96

 

$

1.02

 

$

(0.15

)

$

0.87

 

$

(0.04

)

$

(0.23

)

$

(0.27

)

$

0.35

 

$

(0.06

)

$

0.29

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SPECIAL ITEMS:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings (loss) before income taxes

 

$

73,835

 

$

80,370

 

$

(8,069

)

$

72,301

 

$

629

 

$

(11,706

)

$

(11,077

)

$

19,955

 

$

(3,420

)

$

16,535

 

Special items:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Integration expense

 

19,768

 

16,179

 

—

 

16,179

 

63,043

 

—

 

63,043

 

35,211

 

—

 

35,211

 

Restructuring expense

 

2,879

 

4,347

 

—

 

4,347

 

(1,208

)

—

 

(1,208

)

19,364

 

—

 

19,364

 

Inventory purchase accounting adjustment

 

—

 

5,246

 

—

 

5,246

 

—

 

 

 

 

 

 

 

 

 

 

 

Loss on debt repayment and extinguishment

 

—

 

11,237

 

—

 

11,237

 

24,974

 

—

 

24,974

 

3,229

 

—

 

3,229

 

Earnings (loss) before special items

 

96,482

 

117,379

 

(8,069

)

109,310

 

87,438

 

(11,706

)

75,732

 

77,759

 

(3,420

)

74,339

 

Provision (benefit) for income taxes

 

27,371

 

40,081

 

(325

)

39,756

 

31,653

 

(3,846

)

27,807

 

26,749

 

(773

)

25,976

 

Net earnings before special items

 

$

69,111

 

$

77,298

 

$

(7,744

)

$

69,554

 

$

55,785

 

$

(7,860

)

$

47,925

 

$

51,010

 

$

(2,647

)

$

48,363

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Earnings per share diluted, before special items

 

$

1.25

 

$

1.48

 

$

(0.15

)

$

1.33

 

$

1.42

 

$

(0.20

)

$

1.22

 

$

1.35

 

$

(0.07

)

$

1.28

 

 

Note: Flowserve’s management believes that the integration and restructuring expenses and the purchase accounting inventory adjustment included in the results above, while indicative of efforts to integrate the Invensys plc (IFC)  and Ingersoll Dresser Pump (IDP) acquisitions into Flowserve’s business, do not reflect ongoing business results. Management has defined these expenses as special items, along with items that were treated as extraordinary items in prior years. Management believes that investors can better evaluate and analyze historical and future business trends if they also consider results of operations without these special items. Management utilizes earnings excluding these special items to evaluate corporate and segment performance and in determining certain performance-based compensation. Earnings before special items are not a recognized measure under generally accepted accounting principles (GAAP) and should not be viewed as an alternative to GAAP measures of performance. The reconciliation table above reconciles earnings per share before special items to earnings per share on a GAAP basis.

 

Exhibit 99.2

 

 

 

Q1-2003

 

Q2-2003

 

Q3-2003

 

Q4-2003

 

 

 

Original

 

Adjustments

 

Restated

 

Original

 

Adjustments

 

Restated

 

Original

 

Adjustments

 

Restated

 

 

 

Sales

 

$

564,011

 

$

258

 

$

564,269

 

$

614,036

 

$

411

 

$

614,447

 

$

565,146

 

$

445

 

$

565,591

 

$

660,063

 

Cost of sales

 

394,509

 

1,205

 

395,714

 

434,068

 

(1,394

)

432,674

 

392,253

 

624

 

392,877

 

460,685

 

Gross profit

 

169,502

 

(947

)

168,555

 

179,968

 

1,805

 

181,773

 

172,893

 

(179

)

172,714

 

199,378

 

Selling, general & administrative expense

 

128,324

 

215

 

128,539

 

130,447

 

(1,406

)

129,041

 

132,942

 

(329

)

132,613

 

149,591

 

Integration expense

 

6,410

 

—

 

6,410

 

5,662

 

—

 

5,662

 

3,836

 

—

 

3,836

 

3,860

 

Restructuring expense

 

1,012

 

—

 

1,012

 

808

 

—

 

808

 

—

 

—

 

—

 

1,059

 

Operating income

 

33,756

 

(1,162

)

32,594

 

43,051

 

3,211

 

46,262

 

36,115

 

150

 

36,265

 

44,868

 

Loss on debt repayment and extinguishment

 

159

 

 

 

159

 

480

 

 

 

480

 

369

 

 

 

369

 

338

 

Net interest expense

 

20,247

 

 

 

20,247

 

20,703

 

 

 

20,703

 

19,152

 

 

 

19,152

 

20,119

 

Other expense (income), net

 

768

 

1

 

769

 

1,674

 

—

 

1,674

 

412

 

—

 

412

 

1,733

 

Earnings before income taxes

 

12,582

 

(1,163

)

11,419

 

20,194

 

3,211

 

23,405

 

16,182

 

150

 

16,332

 

22,678

 

Provision for income taxes

 

4,341

 

(401

)

3,940

 

6,967

 

1,108

 

8,075

 

5,583

 

(3,459

)

2,124

 

6,808

 

Net earnings

 

$

8,241

 

$

(762

)

$

7,479

 

$

13,227

 

$

2,103

 

$

15,330

 

$

10,599

 

$

3,609

 

$

14,208

 

$

15,870

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average shares outstanding - diluted

 

55,233

 

55,233

 

55,233

 

55,313

 

55,313

 

55,313

 

55,375

 

55,375

 

55,375

 

55,458

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share diluted

 

$

0.15

 

$

(0.01

)

$

0.14

 

$

0.24

 

$

0.04

 

$

0.28

 

$

0.19

 

$

0.07

 

$

0.26

 

$

0.29

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SPECIAL ITEMS:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings before income taxes

 

$

12,582

 

$

(1,163

)

$

11,419

 

$

20,194

 

$

3,211

 

$

23,405

 

$

16,182

 

$

150

 

$

16,332

 

$

22,678

 

Special items:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Integration expense

 

6,410

 

—

 

6,410

 

5,662

 

—

 

5,662

 

3,836

 

—

 

3,836

 

3,860

 

Restructuring expense

 

1,012

 

—

 

1,012

 

808

 

—

 

808

 

—

 

—

 

—

 

1,059

 

Earnings before special items

 

20,004

 

(1,163

)

18,841

 

26,664

 

3,211

 

29,875

 

20,018

 

150

 

20,168

 

27,597

 

Provision for income taxes

 

6,902

 

(402

)

6,500

 

9,199

 

1,108

 

10,307

 

6,906

 

(4,283

)

2,623

 

8,285

 

Net earnings before special items

 

$

13,102

 

$

(761

)

$

12,341

 

$

17,465

 

$

2,103

 

$

19,568

 

$

13,112

 

$

4,433

 

$

17,545

 

$

19,312

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share diluted, before special items

 

$

0.24

 

$

(0.02

)

$

0.22

 

$

0.32

 

$

0.03

 

$

0.35

 

$

0.24

 

$

0.08

 

$

0.32

 

$

0.35

 

 

Note: Flowserve’s management believes that the integration and restructuring expenses included in the results above, while indicative of efforts to integrate the Invensys plc (IFC) acquisition into Flowserve’s business, do not reflect ongoing business results. Management has defined these expenses as special items. Management believes that investors can better evaluate and analyze historical and future business trends if they also consider results of operations without these special items. Management utilizes earnings excluding these special items to evaluate corporate and segment performance and in determining certain performance-based compensation. Earnings before special items are not a recognized measure under generally accepted accounting principles (GAAP) and should not be viewed as an alternative to GAAP measures of performance. The reconciliation table above reconciles earnings per share before special items to earnings per share on a GAAP basis.

 

Exhibit 99.2

 

Flowserve Corporation

Segment Operating Income

Amounts in millions

 

 

 

2003

 

2002

 

 

 

 

 

 

 

Operating Income, before special items: *

 

 

 

 

 

 

 

 

 

 

 

FPD:

 

 

 

 

 

Originally reported

 

$

84.5

 

$

134.9

 

Restated

 

97.2

 

130.1

 

 

 

 

 

 

 

FCD:

 

 

 

 

 

Originally reported

(1)

 

63.5

 

48.3

 

Restated

(1)

 

68.0

 

44.7

 

 

 

 

 

 

 

FSD:

 

 

 

 

 

Originally reported

 

74.2

 

64.9

 

Restated

 

74.2

 

64.9

 

 

(1) Special items excluded include:

 

 

 

 

 

Integration expense

 

19.7

 

16.2

 

Restructuring expense

 

2.9

 

4.3

 

Inventory purchase accounting adjustment

 

—

 

5.2

 

 

* Effective January 1, 2003, we realigned certain small sites between segments.  Accordingly, the segment information for all periods presented herein has been reported under the new organizational structure.

 

Note: Flowserve’s management believes that the integration and restructuring expenses and the purchase accounting inventory adjustment which are excluded in the results above, while indicative of efforts to integrate the Invensys plc (IFC)  acquisition into Flowserve’s business, do not reflect ongoing business results. Management has defined these expenses as special items, along with items that were treated as extraordinary items in prior years. Management believes that investors can better evaluate and analyze historical and future business trends if they also consider results of operations without these special items. Management utilizes earnings excluding these special items to evaluate corporate and segment performance and in determining certain performance-based compensation. Earnings before special items are not a recognized measure under generally accepted accounting principles (GAAP) and should not be viewed as an alternative to GAAP measures of performance.