Flowserve Corporation (FLS) provides pumps, valves, seals and related services to industrial and municipal markets globally. Bookings in Q1 2009 were $968 million, with a backlog of $2.67 billion. FLS initiated a realignment to reduce costs through facility optimization and headcount reductions, expecting $40 million in charges but $56 million in annual savings. Q2 2009 results exceeded projections with EPS of $1.92, excluding $0.25 in realignment charges. Analysts project FLS will continue outperforming competitors due to its diversification and aftermarket services. Top competitors include Crane, Dresser-Rand, KSB and Tyco's flow control division.
5. Bookings in Q1 2009 = $968 millionvalue of all orders received in 2009.
6. Backlog for Q1 2009 = $2.67 billionvalue of all uncompleted orders received over all time.
7.
8. Cash Flow Statement Examination Examination of Cash Flow Statements *Hurt primarily by large increases in A/R, about 100 more than in 2007. Conclusion: quite clear that strong ratio increases and operating cash flows are from improvements in net income.
14. Expect to incur up to $40 million in realignment fees in 2009 ($0.50/share).
15. Claim to have achieved $7 million in benefits already, and expect increased benefits in 2nd half of 2009.
16. Believe that realignment will deliver full annual run rate savings of $56 million (assumes that things will continue as they are).
17. Charges of $10 million ($0.13/share) in Q1 Charges of $19 million ($0.25/share) in Q2
18.
19. Two foreign subsidiaries delivered products to Iraq between 1996 and 2003 under UN Oil-For-Food Program.
20. FLS hired outside counsel in Feb. 2006 to investigate – found that “certain non-U.S. personnel” authorized payments that were not authorized under UN Oil-For-Food Program, and not properly documented in foreign subsidiary accounting records.
21. Without denying or admitting SEC charges, FLS settled with both SEC and DOJ monetarily.
22. Details are somewhat sketchy, still not completely sure what happened…
23.
24. Prior, was employed by SPX Corporation for 7 years.
32. Operating income declined $14 million to $159 million, but this includes realignment charges of $20 million (would have increased $6 million, or 4%).
33. Operating margin of 14.6%, or 16.4% excluding realignment charges (was 14.9% in previous year).
34. Gross margin decreased 70 basis points to 35.4%, including realignment charges of 110 basis points.
35. SG&A improvement, down 40 basis points to 21.2% (this is even including realignment charges of 70 basis points) – due to cost containment initiatives from restructuring.
36. Bookings of $1.04 billion, down 21% (or down 12% excluding negative currency effects).
37. Strong backlog - $2.71 billion. Backlog was $2.83 billion in Dec. 2008.
38.
39. Bookings of $650 million, down 12%, or up 1% excluding negative currency effects and large order for thrusters last year.
43. Operating margin improvement of 80 basis points to 17.2%, or 18.8% excluding realignment charges.
44. Comforting for the following reason:Management says that in the past, pump orders tend to lead both valve and seal orders because pumps take much longer to produce – may be indication that orders for valves and seals will be stronger in the future. Sulzer, a major competitor which solely makes pumps, reported dramatic decrease in bookings for the quarter – that FLS’s were up excluding unusual factors is comforting.
45.
46. Sales of $303 million, down 18%, or down 11% excluding negative currency effects.
47. Gross margin improvement of 10 basis points to 36.0%.
48. SG&A up as percentage of sales 150 basis points to 20.8%.
66. Dresser-Rand Group Inc. (DRC): Global supplier of custom-engineered rotating equipment, operates in new units and aftermarket parts and services.
67. KSB AG (KSBBF): Germany-based producer of pumps, valves, and related systems. Broken into Industry and Building Services, Water and Waste Water, and Energy and Mining.
71. Operates in multiple divisions: Aerospace and Electronics, Engineered Materials, Merchandising Systems, Fluid Handling, and Controls.
72. Fluid Handling group split into three sections: Crane Valve Group, Crane Pumps and Systems, and Crane Supply. Order backlog of $302.7 million (much smaller than FLS); this is the largest segment of CR by sales (1.16B in 2008 relative to 2.6B in sales for whole company).
86. Products are used in building services (Industry and Building Services division), water utilities (Water and Waste Water division), energy sector, and mining (Energy and Mining division).