Slide 1: Flowserve Fourth Quarter 2016 Earnings Conference Call
Flowserve Fourth Quarter 2016 Earnings Conference Call February 17, 2017 SOLAR REFINING CHEMICAL DESALINATION COAL-FIRED POWER NUCLEAR
Slide 2: Special Note
Flowserve Q4 2016 Earnings Conference Call : Page 2 Special Note Safe Harbor Statement: This presentation includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, which are made pursuant to the safe ha
Slide 3: Current Conditions Overview
Flowserve Q4 2016 Earnings Conference Call : Page 3 Current Conditions Overview • Reported 2016 fourth quarter EPS* of $0.50, Adjusted EPS of $0.72 (1) • Adjusted EPS excludes $0.22 of adjusted items and includes $0.03 of negative currency translation • Constant currency bookings decline of 4.2%, pr
Slide 4: 2017 Strategic Priorities
Flowserve Q4 2016 Earnings Conference Call : Page 4 2017 Strategic Priorities Competitive cost structure • Right-size to market conditions • Accelerate our previously planned manufacturing migration to emerging markets • Leverage our LPO/SPO model to facilitate migration • Structurally reduce SG&A t
Slide 5: Serving Attractive Global Infrastructure Markets
Flowserve Q4 2016 Earnings Conference Call : Page 5 Serving Attractive Global Infrastructure Markets Global GDP Long-term growth fueled by Growth By 2025 megatrends Global population growth +55% Rise of emerging market middle class Significant infrastructure demands Markets are cyclical, but t
Slide 6: Realignment Program to Structurally Transform Flowserve
Flowserve Q4 2016 Earnings Conference Call : Page 6 Realignment Program to Structurally Transform Flowserve Program Targets Expected Completion: Late 2017 • Increase manufacturing capabilities and labor hours in low cost regions $400M • Enhance ability to serve growth in emerging markets ~15-20% Wor
Slide 7: 2016 Bookings & Industry Outlook
Flowserve Q4 2016 Earnings Conference Call : Page 7 2016 Bookings & Industry Outlook Oil & Gas Chemical Power General Industries Water 2016 36% 21% 14% 25% 4% $3.76B 2015 36% 22% 14% 24% 4% $4.18B OIL & GAS • Rising but still low oil prices continue to impact global capital investment; OPEC deal pro
Slide 8: 2016 Sales & Regional Outlook
Flowserve Q4 2016 Earnings Conference Call : Page 8 2016 Sales & Regional Outlook North America Europe Asia-Pacific Middle East & Africa Latin America 2016 40% 22% 18% 13% 7% $3.99B 2015 39% 22% 18% 12% 9% $4.56B NORTH AMERICA • Oil & Gas capital and maintenance spending remains low; investment in e
Slide 9: Q4 2016 - Consolidated Financial Results
Flowserve Q4 2016 Earnings Conference Call : Page 9 Q4 2016 - Consolidated Financial Results 4th Quarter 4th Quarter Adjusted 2016 2016 2015 ($ millions) 2016 2015 Delta ($) Delta (%) Constant Adjusted Adjusted Comparable Delta ($) Delta (%) Constant FX (%)* Items Results Results FX (%)* Bookings $
Slide 10: Year-to-Date 2016 - Consolidated Financial Results
Flowserve Q4 2016 Earnings Conference Call : Page 10 Year-to-Date 2016 - Consolidated Financial Results Year to Date Year to Date Adjusted 2016 2016 2015 ($ millions) 2016 2015 Delta ($) Delta (%) Constant Adjusted Adjusted Comparable Delta ($) Delta (%) Constant FX (%)* Items Results Results FX (%)
Slide 11: Q4 & Full Year 2016 – Consolidated Bookings & Sales
Flowserve Q4 2016 Earnings Conference Call : Page 11 Q4 & Full Year 2016 – Consolidated Bookings & Sales Bookings Sales Q4 Bookings • Bookings decreased 6.3%, or 4.2% constant currency • Original equipment bookings decreased 10.2%, or 8.2% constant currency • Aftermarket bookings decreased 2.0%, inc
Slide 12: Executing on Realignment Initiative
Flowserve Q4 2016 Earnings Conference Call : Page 12 Executing on Realignment Initiative • Initiated process to close German facility and transfer certain Actions Taken: product lines from higher cost facilities to Latin America Q4 2016 – Since early 2015 we have initiated action on more than two-th
Slide 13: Q4 & Year-to-Date 2016 Cash Flows
Flowserve Q4 2016 Earnings Conference Call : Page 13 Q4 & Year-to-Date 2016 Cash Flows Q4 Q3 Q2 Q1 YTD ($ millions) 2016 2016 2016 2016 2016 2015 Net Income $ 67 $ (20) $ 63 $ 38 $ 148 $ 273 Depreciation and amortization 30 29 29 29 117 127 Change in working capital 100 (34) (107) (84) (125) (70) Ot
Slide 14: 2017 Guidance Assumptions
Flowserve Q4 2016 Earnings Conference Call : Page 14 2017 Guidance Assumptions (1) Revenue Guidance Assumptions 2017 Guidance Revenue Guidance vs. 2016 -6% to -11% EUR Rate 1.05 (yr-end 2016) FX headwinds vs. 2016 ~2.5% Constant Currency Guidance ~-3.5% to ~-8.5% (1) EPS Guidance Assumptions 2017 Gu
Slide 15: 2017 Cash Use Priorities
Flowserve Q4 2016 Earnings Conference Call : Page 15 2017 Cash Use Priorities • Strategic investment of approximately $140 million in cost efficiency and manufacturing optimization initiatives • Estimate capital expenditures to be $80 – $90 million • Capital allocation policy of annually returning 4
Slide 16: Questions and Answers
Flowserve Q4 2016 Earnings Conference Call : Page 16 Questions and Answers
Slide 17: Appendix
Flowserve Q4 2016 Earnings Conference Call : Page 17 Appendix
Slide 18: Engineered Product Division Q4 & Year-to-Date 2016 Segment Results
Flowserve Q4 2016 Earnings Conference Call : Page 18 Engineered Product Division Q4 & Year-to-Date 2016 Segment Results 4th Quarter Year to Date ($ millions) Constant Constant 2016 2015 Delta ($) Delta (%) FX (%)* 2016 2015 Delta ($) Delta (%) FX (%)* Bookings $ 437.0 $ 460.0 $ (23.0) (5.0)% (2.0)%
Slide 19: Engineered Product Division Q4 & Year-to-Date 2016 Bookings and Sales
Flowserve Q4 2016 Earnings Conference Call : Page 19 Engineered Product Division Q4 & Year-to-Date 2016 Bookings and Sales 4th Quarter Year to Date ($ millions) 2016 2015 Delta (%) Constant 2016 2015 Delta (%) Constant FX (%)* FX (%)* OE 125 131 (5)% —% 524 714 (27)% (22)% Bookings 29% 28% 100 bps 2
Slide 20: Engineered Product Division Q4 Overview
Flowserve Q4 2016 Earnings Conference Call : Page 20 Engineered Product Division Q4 Overview • Bookings decreased 5.0%, or 2.0% on a constant currency basis • Decrease driven primarily by general industries and regional declines in Europe and Latin America • Sales decreased 19.9%, or 17.1% on a cons
Slide 21: Industrial Product Division Q4 2016 Segment Results
Flowserve Q4 2016 Earnings Conference Call : Page 21 Industrial Product Division Q4 2016 Segment Results 4th Quarter 4th Quarter Adjusted 2016 2016 2015 ($ millions) 2016 2015 Delta ($) Delta (%) Constant Adjusted Adjusted Comparable Delta ($) Delta (%) Constant FX (%)* Items Results Results FX (%)*
Slide 22: Industrial Product Division Year-to-Date 2016 Segment Results
Flowserve Q4 2016 Earnings Conference Call : Page 22 Industrial Product Division Year-to-Date 2016 Segment Results Year to Date Year to Date Adjusted 2016 2016 2015 ($ millions) Constant Adjusted Adjusted Comparable Constant 2016 2015 Delta ($) Delta (%) FX (%)* Items Results Results Delta ($) Delta
Slide 23: Industrial Product Division Q4 & Year-to-Date 2016 Bookings and Sales
Flowserve Q4 2016 Earnings Conference Call : Page 23 Industrial Product Division Q4 & Year-to-Date 2016 Bookings and Sales 4th Quarter Year to Date ($ millions) 2016 2015 Delta (%) Constant 2016 2015 Delta (%) Constant FX (%)* FX (%)* OE 106 131 (19)% (18)% 483 595 (19)% (18)% Bookings 56% 66% (1000
Slide 24: Industrial Product Division Q4 Overview
Flowserve Q4 2016 Earnings Conference Call : Page 24 Industrial Product Division Q4 Overview • Bookings decreased 4.7%, or 3.5% on a constant currency basis • Decrease driven primarily by oil and gas and power • Regionally, decline driven primarily by Asia Pacific • Sales decreased 13.5%, or 12.6% o
Slide 25: Flow Control Division Q4 & Year-to-Date 2016 Segment Results
Flowserve Q4 2016 Earnings Conference Call : Page 25 Flow Control Division Q4 & Year-to-Date 2016 Segment Results 4th Quarter Year to Date ($ millions) 2016 2015 Delta ($) Delta (%) Constant 2016 2015 Delta ($) Delta (%) Constant FX (%)* FX (%)* Bookings $ 304.1 $ 332.4 $ (28.3) (8.5)% (7.2)% $ 1,21
Slide 26: Flow Control Division Q4 & Year-to-Date 2016 Bookings and Sales
Flowserve Q4 2016 Earnings Conference Call : Page 26 Flow Control Division Q4 & Year-to-Date 2016 Bookings and Sales 4th Quarter Year to Date Constant Constant ($ millions) 2016 2015 Delta (%) FX (%)* 2016 2015 Delta (%) FX (%)* OE 242 262 (8)% (6)% 966 1,046 (8)% (6)% Bookings 80% 79% 100 bps 79% 7
Slide 27: Flow Control Division Q4 Overview
Flowserve Q4 2016 Earnings Conference Call : Page 27 Flow Control Division Q4 Overview • Bookings decreased 8.5%, or 7.2% on a constant currency basis • Decreased bookings driven primarily by oil and gas and general industries, partially offset by power • Decreased bookings into the Middle East and
Slide 28: Primary Working Capital
Flowserve Q4 2016 Earnings Conference Call : Page 28 Primary Working Capital Balances for All Periods as a % of Trailing Twelve Months Sales Q4 2016 Q4 2015 ($ millions) $ % $ % Receivables 895 22.4% 988 21.7% Inventory 919 23.0% 996 21.8% Payables (412) (10.3)% (491) (10.8)% Primary Working Capital
Slide 29: Flowserve Q4 2016 Earnings Conference Call : Page 29
Flowserve Q4 2016 Earnings Conference Call : Page 29