Flowserve Corporation · NYSE:FLS
Flowserve — Gabelli 27th Annual Pump, Valve and Water Systems Symposium (March 2017)
29 slides from Flowserve's conference presentation, Mar 1, 2017
Slide 1: Flowserve Corporation at Gabelli 27th Annual Pump, Valve and Water Systems Symposium
FLOWSERVE CORPORATION (NYSE: FLS) Gabelli 27th Annual Pump, Valve and Water Systems Symposium March 1, 2017
Slide 2: Safe Harbor Statement
Safe Harbor Statement 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 harbor provisions of the Private Securities L
Slide 3: Flowserve Overview
Flowserve Overview Leading manufacturer and aftermarket service provider of comprehensive flow control systems History dates back to 1790 with more than 50 well-respected brands such as Worthington, IDP, Valtek, Limitorque, Durco and Edward Design, develop, manufacture and repair precision-enginee
Slide 4: Serving Attractive Global Infrastructure Markets
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 the Long-Term, Steady-State long-term positive driver
Slide 5: Diversified Business Model
Diversified Business Model Segment Breakdown Operating Segments 2016 Sales - $4.0B • Engineered Product Division (EPD) Highly-engineered pumps, seals and systems • Industrial Product Division (IPD) Pre-configured pumps and systems • Flow Control Division (FCD) Industrial valves and automation
Slide 6: Existing Global Infrastructure Enhances Resiliency
Existing Global Infrastructure Enhances Resiliency Recent years’ Traditional mix of sales mix of sales Long-Term Drivers • New capacity – greenfield / brownfield Has trended lower: • Highly engineered solutions ~20% OE large only 10-15% • E&C driven projects • Tend to cut across multiple FLS segment
Slide 7: 2017 Strategic Priorities
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 through lean structure and platform consolidation Tar
Slide 8: Realignment Program Structurally Transforming Flowserve
Realignment Program Structurally Transforming Flowserve Program Targets Expected Completion: Late 2017 • Increase manufacturing capabilities and labor hours in low cost regions $400M (Includes $50M below-the- line site exit taxes) • Enhance ability to serve growth in emerging markets ~15-20% • Reduc
Slide 9: Positioning for Continued Industry Leadership
Positioning for Continued Industry Leadership Regional Plan No Mfg Ops Reduce Maintain Grow 2015: 81 2018: 57 • • Increased manufacturing focus Reduced complexity Manufacturing sites Manufacturing sites • Increased scale at sites (includes SIHI) (includes SIHI) • Retaining full capabilities Shifting
Slide 10: Executing Realignment Initiative
Executing 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-thirds of facilities expected to be closed, repurposed or
Slide 11: Focused on Disciplined, Profitable Growth
Focused on Disciplined, Profitable Growth Focused on opportunities to drive above Large available market market profitability and growth FLS Share: 2015 Pump, Valve, Seal • Aftermarket-intensive products Total Available Market <4% $130B Capex 60% / Opex 40% • Original equipment with potential to ear
Slide 12: Hard-to-Replicate Competitive Differentiators
Hard-to-Replicate Competitive Differentiators Aftermarket Franchise Operational Excellence Product and Technology Leadership • Serves an installed base built • Global, flexible manufacturing • Industry-leading products, over decades network (LPO/SPO) respected brands • Deep customer relationships •
Slide 13: Acquisitions to Leverage Competitive Advantages
Acquisitions to Leverage Competitive Advantages Acquisition strategy seeks to pursue growth in: • Markets/units that have “earned the right to grow” • High profitability and strong growth 2014 Acquisition Cash Paid - $373M Price/EBITDA ~10x • Attractive businesses (profitable, growing, filling “gaps
Slide 14: Consistent Returns to Shareholders
Consistent Returns to Shareholders • Total diluted share count has been reduced by approximately 23% since 2005 • Cumulative annual declared dividends increased 280% to the anticipated $0.76 per share in 2017 from $0.20 per share in 2007 175 $0.80 $0.70 $0.60 150 $0.50 $0.40 $0.30 125 $0.20 $0.10 10
Slide 15: Current Conditions Overview
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%, primarily due to 8.2% lower original equipment booking
Slide 16: EPS Seasonally Second-Half Weighted
EPS Seasonally Second-Half Weighted (Quarterly EPS - diluted) Full Year EPS Full Year EPS Full Year EPS Full Year EPS Full Year EPS Full Year Adj. Full Year Adj. $2.29 $2.55 $2.84 $3.41 $3.76 EPS $3.07 EPS $2.19 $1.25 $1.00 $0.75 $0.50 $0.25 $0.00 2010 2011 2012 2013 2014 2015 2016 Earnings continue
Slide 17: 2017 Guidance Assumptions
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 Guidance Reported EPS Guidance $0.72 - $1.02 Adjusted E
Slide 18: Investment Highlights
Investment Highlights • Focused flow control provider engaged primarily in energy infrastructure markets • Diversified business model provides foundation for long-term earnings growth – Broad portfolio of distinguished brand names, with over 10,000 customers globally – Diversified business platform
Slide 19: New Executive Leadership Announced
New Executive Leadership Announced R. Scott Rowe named President & CEO (anticipated effective date of April 1, 2017) Industry experience: 20 years experience – knows our business & customers Current employment: President, Cameron Group at Schlumberger Prior CEO tenure: President & CEO of Camer
Slide 20: Flowserve Investor Relations Contacts
Flowserve Investor Relations Contacts: Jay Roueche Mike Mullin 972.443.6560 972.443.6636 jroueche@flowserve.com mmullin@flowserve.com
Slide 21: Appendix
-~ FLOWSERVE > APPENDIX Experience In Motion
Slide 22: Global Provider of OEM & Aftermarket Services
Global Provider of OEM & Aftermarket Services Lead Secondary Quick Response Product Operation Product Operation Centers • “Product line custodian” and • Implements the manufacturing • Local service and repair recognized as the world wide and aftermarket support within product leader the designated g
Slide 23: 2016 Bookings & Industry Outlook
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 promoting some market stabilization • Challenges in key
Slide 24: 2016 Sales & Regional Outlook
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% $4.56B NORTH AMERICA • Oil & Gas capital and maintenance spending remains low; investment in ethylene & derivatives continues, slowing through 201
Slide 25: Q4 2016 - Consolidated Financial Results
Q4 2016 - Consolidated Financial Results 4th Quarter 4th Quarter Adjusted 2016 2016 2015 ($ millions) 2016 2015 Delta ($) Delta (%) Constant Adjusted Adjusted Comparable Delta ($) Delta (%) Constant FX (%)* Items Results Results FX (%)* Bookings $ 907.6 $ 969.0 $ (61.4) (6.3)% (4.2)% $ — $ 907.6 $ 9
Slide 26: 2016 - Consolidated Financial Results
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 (%)* Bookings $ 3,760.4 $ 4,176.8 $ (416.4) (10.0)% (7.4)% $ — $ 3,76
Slide 27: Q4 & YTD 2016 Cash Flows
Q4 & YTD 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) Other (27) 80 26 9 88 87 Total Operating Activities 170 55 11 (8
Slide 28: 2017 Cash Use Priorities
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 40 – 50% of running 2-year average net earnings to sha
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-~ FLOWSERVE > Ser, FLOWSERVE ee Experience In Motion
Flowserve — Gabelli 27th Annual Pump, Valve and Water Systems Symposium (March 2017) on 6ix