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99.1 Press Release dated July 24, 2000
DALLAS - Flowserve Corporation (NYSE: FLS) today reported second quarter 2000
net income of 33 cents a share, a 50 percent increase compared with 22 cents a
share for the second quarter of 1999.
Bookings from comparable operations, excluding acquisitions, increased 5 percent
on a year-over-year basis. Overall, the company's bookings increased 23 percent
to $309.4 million compared with the second quarter of 1999. Excluding a 2
percent negative impact from currency translation, second quarter 2000 bookings
would have been $315.7 million. Second quarter 2000 bookings include orders
received by Invatec, the valve service and repair company acquired by Flowserve
in January.
Second quarter 2000 sales increased 9 percent to $299.2 million compared with
$275.2 million in the prior year period. Sales from comparable operations,
excluding acquisitions, were $256.4 million, a 7 percent decrease from the
second quarter of 1999. A lower opening backlog and a 3 percent negative impact
from currency translation contributed to the sales shortfall for comparable
operations.
Consolidated operating income in the second quarter of 2000 was $26.4 million,
up 56 percent compared with $16.9 million in the prior year period. When
calculated on a comparable basis, second quarter 2000 consolidated operating
income was up 35 percent from the second quarter of 1999. In 1999, expenses for
Flowserver, the company's process improvement initiative, were treated as a
special item. In the second quarter of 2000, such expenses fell 73 percent to
$1.2 million compared with $4.4 million in the second quarter of 1999.
Net income was $12.6 million in the second quarter of 2000, an increase of 49
percent compared with $8.5 million in the prior year period. Excluding
Flowserver expenses in both periods, second quarter 2000 net income would have
been $13.4 million, or 35 cents a share, compared with $11.4 million, or 30
cents a share, in the second quarter of the prior year.
Second quarter 2000 results were affected by an after-tax expense of $0.5
million, or one cent a share, from the marking-to-market of company stock held
in a deferred compensation trust. Interest expense was $7.1 million compared
with $4.1 million in the second quarter of 1999 due to the debt associated with
the Invatec acquisition and higher interest rates.
"I am pleased with our operating trends for the second quarter," said Flowserve
Chairman, President and Chief Executive Officer C. Scott Greer. "Though sales
from comparable operations were down year-over-year, total sales and profits
were up. Our cost reduction and efficiency improvement programs continued to
positively affect our operations. In addition, bookings continued to improve,
reflecting strengthening fundamentals in a number of key process industries,
including petroleum, chemicals and power. We remain decidedly optimistic about
2000 and the coming years."
For the first six months of 2000, net income was $24.5 million, or 65 cents a
share, compared with $18.9 million, or 50 cents a share, in the first six months
of 1999. Sales for the first six months of 2000 were $584.5 million, up 7
percent compared with $544.6 million in the first six months of the prior year.
Excluding Invatec, net income in the 2000 period would have been $22.5 million,
or 59 cents a share, on sales of $501.2 million.
Flowserve's Rotating Equipment Division (RED), which engineers and manufactures
pumps, had second quarter 2000 operating income of $6.2 million, a 24 percent
increase compared with $5.0 million for the year-ago period. Second quarter
revenues were $82.3 million compared with $98.2 million in the second quarter of
1999. Despite this sales decline, gross margin improved more than 300 basis
points over the year-ago period. Operating margin improved to 7.5 percent, an
increase of nearly 250 basis points over the second quarter of 1999. These
improvements were primarily due to ongoing cost reduction efforts and a higher
mix of parts.
The Flow Control Division (FCD), which develops and manufactures control and
manual valves, actuation systems and accessories, posted second quarter 2000
operating income of $8.4 million, an increase of 18 percent compared with $7.2
million in the second quarter of 1999. FCD's second quarter 2000 revenues were
$67.4 million, compared with $76.1 million in the prior year period. Despite
lower sales, gross margin improved more than 250 basis points in the second
quarter of 2000 compared with the year-ago period. Operating margin improved to
12.6 percent, an increase of more than 300 basis points over the second quarter
of 1999. These improvements were primarily due to ongoing cost reduction
efforts.
"Our pump and flow control businesses performed well in the second quarter of
2000," Greer said. "I am particularly impressed with the substantial margin
increases despite the year-over-year declines in sales."
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The Flow Solutions Division (FSD), which provides services and engineered
mechanical seals for flow control equipment, recorded second quarter 2000
operating income of $18.7 million, an increase of 42 percent compared with $13.1
million for the year-ago period. Revenues in the second quarter of 2000 were
$159.6 million compared with $109.2 million in the prior year period. These
increases were primarily due to the acquisition of Invatec. Second quarter 2000
operating margin dipped slightly to 11.7 percent compared with 12.0 percent in
the prior year period. Second quarter 2000 operating margin would have been 13.3
percent compared with the same period of last year absent the acquisition of
Invatec.
"Thus far, we are extremely pleased with our acquisition of Invatec," Greer
said. "It is starting to contribute to our results and should be modestly
accretive this year.
"We are making considerable headway on our previously announced restructuring
program," Greer continued. "While associated period costs are likely to increase
in the near term, as previously stated, our company-wide expense reduction and
streamlining initiatives are having a positive effect on our overall cost
structure. In addition, the continuing increases in bookings, expected increases
in capital spending in several of our end-user industries, and our pending
acquisition of Ingersoll-Dresser Pump Co., which we expect to close in the
current quarter, make us very optimistic for the future."
Flowserve Corporation is one of the world's leading providers of industrial flow
management services. Operating in 28 countries, with 1999 sales of $1.1 billion
and about 7,000 employees, the company produces engineered pumps for the process
industries, precision mechanical seals, automated and manual quarter-turn
valves, control valves and valve actuators, and provides a range of related flow
management services.
More information about Flowserve Corporation can be obtained by visiting the
company's website at www.flowserve.com.
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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: further changes in the already competitive
environment for the company's products or competitors' responses to Flowserve's
strategies; the company's ability to integrate IDP and Invatec into its
management operations; political risks or trade embargoes affecting important
country markets; the health of the petroleum, chemical and power industries;
economic turmoil in areas outside the United States; continued economic growth
within the United States; unanticipated difficulties or costs or reduction in
benefits associated with the implementation of the company's "Flowserver"
business process improvement initiative, including software; and the recognition
of significant expenses associated with adjustments to realign the combined
company's facilities and other capabilities with its strategies and business
conditions, including, without limitation, expenses incurred in restructuring
the company's operations to incorporate IDP facilities, and the cost of
financing to be assumed by acquiring IDP.
