Flowserve Corporation Reports Fourth Quarter and Full Year 2019 Results; Issues 2020 Financial Guidance

DALLAS--(BUSINESS WIRE)--February 17, 2020--Flowserve Corporation (NYSE: FLS), a leading provider of flow control products and services for the global infrastructure markets, today announced its financial results for the fourth quarter and full year ended December 31, 2019.

Fourth Quarter 2019 Highlights (all comparisons to the 2018 fourth quarter, unless otherwise noted)

• Reported Earnings Per Share (EPS) of $0.53, up 10.4% and Adjusted EPS^[1] of $0.66, up 13.8%
  • Reported EPS includes pre-tax adjusted items of approximately $27 million, including realignment, transformation, voluntary retirement plan expenses and below-the-line foreign exchange impacts
  • Adjusted EPS increased 11.9% on a sequential basis
• Total bookings were $1.05 billion, up 0.7%, or 1.7% on a constant currency basis
  • Original equipment bookings were $535 million, or 51% of total bookings, up 4.5%, or 5.3% on a constant currency basis
  • Aftermarket bookings were $517 million, or 49% of total bookings, down 2.9%, or 1.8% on a constant currency basis
• Sales were $1.07 billion, up 8.2%, or 9.3% on a constant currency basis
  • Original equipment sales were $546 million, up 11.3%, or 12.1% on a constant currency basis
  • Aftermarket sales were $522 million, up 5.3%, or 6.6% on a constant currency basis
• Reported gross and operating margins were 32.7% and 10.0%, respectively
  • Adjusted gross and operating margins^[2] decreased 50 and 10 basis points to 33.2% and 11.8%, respectively

Full Year 2019 Highlights (all comparisons to full year 2018, unless otherwise noted)

• Reported EPS of $1.93, up 112.1% and Adjusted EPS^[1] of $2.20, up 25.7%
  • Reported EPS includes pre-tax adjusted items of approximately $54 million, primarily related to realignment and transformation expenses and below-the-line foreign exchange impacts
• Total bookings were $4.24 billion, up 5.4%, or 8.1% on a constant currency basis, and included approximately 0.8% negative impact related to divested businesses. Book-to-bill was 1.07.
  • Original equipment bookings were $2.21 billion, or 52% of total bookings, up 10.9%, or 13.4% on a constant currency basis
  • Aftermarket bookings were $2.03 billion, or 48% of total bookings, up 0.1%, or 2.9% on a constant currency basis
• Backlog at December 31, 2019 was $2.16 billion, up 14.0% versus 2018 beginning backlog
• Sales were $3.94 billion, up 2.9%, or 5.4% on a constant currency basis and included approximately 0.8% negative impact related to divested businesses
  • Original equipment sales were $1.97 billion, up 1.6%, or 3.6% on a constant currency basis
  • Aftermarket sales were $1.98 billion, up 4.3%, or 7.3% on a constant currency basis
• Reported gross and operating margins of 32.8% and 10.3%, respectively
  • Adjusted gross and operating margins^[2] increased 100 and 150 basis points to 33.3% and 11.3%, respectively

“We delivered strong results in 2019 thanks to the hard work and unwavering commitment of our associates,” said Scott Rowe, Flowserve’s president and chief executive officer. “Together, we delivered improved performance for our customers and shareholders, as evidenced by our second consecutive year of adjusted EPS growth exceeding 25%. Flowserve also generated solid cash flow from operations and free cash flow conversion, as we remain committed to continuous improvement in our working capital performance.”

Rowe concluded, “As we begin the second half of the Flowserve 2.0 journey, we now have a strong foundation in place to capitalize on the opportunities in front of us to further transform our operating model and continue our progress towards our long-term targets. While macroeconomic and geopolitical uncertainty remains, Flowserve’s strong backlog and expectations for continued traction from our growth-oriented transformation initiatives, such as commercial intensity and strike zone, position us well to drive enhanced performance in 2020. We remain fully committed to driving long-term value creation for our customers, associates and shareholders.”

2020 Initial Guidance^[3]

Flowserve is providing Reported and Adjusted EPS guidance for 2020, as well as certain other financial metrics, as shown in the table below.

					2020 Target Range
Revenues					Up 3.0% to 5.0%
Reported Earnings Per Share					$2.05 - $2.20
Adjusted Earnings Per Share					$2.30 - $2.45
Net interest expense					$45 - $50 million
Adjusted Tax rate					24% - 26%

Flowserve’s 2020 Adjusted EPS target range excludes expected realignment and transformation charges of approximately $40 million, as well as the potential impact of below-the-line foreign currency effects and certain other discrete items. Both the Reported and the Adjusted EPS target range includes the expected revenue increase of approximately 3.0 to 5.0 percent year-over-year, and is based on current foreign currency rates and commodity prices, 2019 year-end backlog, expected bookings levels and market conditions, the reset of annual incentive performance goals, a broad-based merit increase, modest above-the-line negative foreign currency impacts, net interest expense in the range of $45 to $50 million and an adjusted tax rate of 24 to 26 percent. The quarterly phasing of expected 2020 earnings is anticipated to be slightly more second half weighted than Flowserve’s traditional seasonality.

Fourth Quarter 2019 Results Conference Call

Flowserve will host its conference call with the financial community on Tuesday, February 18^th at 11:00 AM Eastern. Scott Rowe, president and chief executive officer, as well as other members of the management team will be presenting. The call can be accessed by shareholders and other interested parties at www.flowserve.com under the “Investor Relations” section.

[1] See Reconciliation of Non-GAAP Measures table for detailed reconciliation of reported results to adjusted measures.

[2] Adjusted gross and operating margins are calculated by dividing adjusted gross profit and adjusted operating income, respectively, by revenues. Adjusted gross profit and adjusted operating income are derived by excluding the adjusted items. See reconciliation of Non-GAAP Measures table for detailed reconciliation.

[3] Adjusted 2020 EPS will exclude the Company’s realignment expenses, the impact from other specific one-time events and below-the-line foreign currency effects and utilizes year-end 2019 FX rates and approximately 132 million fully diluted shares.

– FX headwind is calculated by comparing the difference between the actual average FX rates of 2018 and the year-end 2018 spot rates both as applied to our 2019 expectations, divided by the number of shares expected for 2019.

About Flowserve

Flowserve Corp. is one of the world’s leading providers of fluid motion and control products and services. Operating in more than 50 countries, the company produces engineered and industrial pumps, seals and valves as well as a range of related flow management services. More information about Flowserve can be obtained by visiting the company’s Web site at www.flowserve.com.

Safe Harbor Statement: This news release 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 Litigation Reform Act of 1995, as amended. Words or phrases such as, "may," "should," "expects," "could," "intends," "plans," "anticipates," "estimates," "believes," "forecasts," "predicts" or other similar expressions are intended to identify forward-looking statements, which include, without limitation, earnings forecasts, statements relating to our business strategy and statements of expectations, beliefs, future plans and strategies and anticipated developments concerning our industry, business, operations and financial performance and condition.

The forward-looking statements included in this news release are based on our current expectations, projections, estimates and assumptions. These statements are only predictions, not guarantees. Such forward-looking statements are subject to numerous risks and uncertainties that are difficult to predict. These risks and uncertainties may cause actual results to differ materially from what is forecast in such forward-looking statements, and include, without limitation, the following: a portion of our bookings may not lead to completed sales, and our ability to convert bookings into revenues at acceptable profit margins; changes in global economic conditions and the potential for unexpected cancellations or delays of customer orders in our reported backlog; our dependence on our customers’ ability to make required capital investment and maintenance expenditures; if we are not able to successfully execute and realize the expected financial benefits from our strategic transformation and realignment initiatives, our business could be adversely affected; risks associated with cost overruns on fixed-fee projects and in taking customer orders for large complex custom engineered products; the substantial dependence of our sales on the success of the oil and gas, chemical, power generation and water management industries; the adverse impact of volatile raw materials prices on our products and operating margins; economic, political and other risks associated with our international operations, including military actions, trade embargoes, epidemics or pandemics or changes to tariffs or trade agreements that could affect customer markets, particularly North African, Russian and Middle Eastern markets and global oil and gas producers, and non-compliance with U.S. export/re-export control, foreign corrupt practice laws, economic sanctions and import laws and regulations; increased aging and slower collection of receivables, particularly in Latin America and other emerging markets; our exposure to fluctuations in foreign currency exchange rates, including in hyperinflationary countries such as Venezuela and Argentina; our furnishing of products and services to nuclear power plant facilities and other critical processes; potential adverse consequences resulting from litigation to which we are a party, such as litigation involving asbestos-containing material claims; expectations regarding acquisitions and the integration of acquired businesses; our relative geographical profitability and its impact on our utilization of deferred tax assets, including foreign tax credits; the potential adverse impact of an impairment in the carrying value of goodwill or other intangible assets; our dependence upon third-party suppliers whose failure to perform timely could adversely affect our business operations; the highly competitive nature of the markets in which we operate; environmental compliance costs and liabilities; potential work stoppages and other labor matters; access to public and private sources of debt financing; our inability to protect our intellectual property in the U.S., as well as in foreign countries; obligations under our defined benefit pension plans; our internal control over financial reporting may not prevent or detect misstatements because of its inherent limitations, including the possibility of human error, the circumvention or overriding of controls, or fraud; the recording of increased deferred tax asset valuation allowances in the future or the impact of tax law changes on such deferred tax assets could affect our operating results; our information technology infrastructure could be subject to service interruptions, data corruption, cyber-based attacks or network security breaches, which could disrupt our business operations and result in the loss of critical and confidential information; ineffective internal controls could impact the accuracy and timely reporting of our business and financial results; and other factors described from time to time in our filings with the Securities and Exchange Commission.

All forward-looking statements included in this news release are based on information available to us on the date hereof, and we assume no obligation to update any forward-looking statement.

The Company reports its financial results in accordance with U.S. generally accepted accounting principles (GAAP). However, management believes that non-GAAP financial measures which exclude certain non-recurring items present additional useful comparisons between current results and results in prior operating periods, providing investors with a clearer view of the underlying trends of the business. Management also uses these non-GAAP financial measures in making financial, operating, planning and compensation decisions and in evaluating the Company's performance. Throughout our materials we refer to non-GAAP measures as “Adjusted.” Non-GAAP financial measures, which may be inconsistent with similarly captioned measures presented by other companies, should be viewed in addition to, and not as a substitute for, the Company’s reported results prepared in accordance with GAAP.

CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
		Three Months Ended December 31,
(Amounts in thousands, except per share data)			2019				2018
Sales		$	1,068,171			$	986,867
Cost of sales			(718,598	)			(665,022	)
Gross profit			349,573				321,845
Selling, general and administrative expense			(244,768	)			(231,869	)
Net earnings from affiliates			2,425				3,235
Operating income			107,230				93,211
Interest expense			(12,954	)			(14,516	)
Interest income			1,915				2,228
Other income (expense), net			(9,521	)			(2,362	)
Earnings before income taxes			86,670				78,561
Provision for income taxes			(15,424	)			(14,196	)
Net earnings, including noncontrolling interests			71,246				64,365
Less: Net earnings attributable to noncontrolling interests			(1,453	)			(1,262	)
Net earnings attributable to Flowserve Corporation		$	69,793			$	63,103
Net earnings per share attributable to Flowserve Corporation common shareholders:
Basic		$	0.53			$	0.48
Diluted			0.53				0.48

RECONCILIATION OF NON-GAAP MEASURES
(Unaudited)
		Three Months Ended December 31, 2019
(Amounts in thousands, except per share data)		As Reported (a)				Realignment (1)					Other Items					As Adjusted
Sales		$	1,068,171			$	-				$	-				$	1,068,171
Gross profit			349,573				(4,451	)				(196	)	(3)			354,220
Gross margin			32.7	%			-					-					33.2	%
Selling, general and administrative expense			(244,768	)			(4,315	)				(10,287	)	(4)			(230,166	)
Operating income			107,230				(8,766	)				(10,483	)				126,479
Operating income as a percentage of sales			10.0	%			-					-					11.8	%
Interest and other expense, net			(20,560	)			-					(7,726	)	(5)			(12,834	)
Earnings before income taxes			86,670				(8,766	)				(18,209	)				113,645
Provision for income taxes			(15,425	)			5,679		(2)			4,122		(6)			(25,226	)
Tax Rate			17.8	%			64.8	%				22.6	%				22.2	%
Net earnings attributable to Flowserve Corporation		$	69,793			$	(3,087	)			$	(14,087	)			$	86,967
Net earnings per share attributable to Flowserve Corporation common shareholders:
Basic		$	0.53			$	(0.02	)			$	(0.11	)			$	0.66
Diluted			0.53				(0.02	)				(0.11	)				0.66
Basic number of shares used for calculation			130,863				130,863					130,863					130,863
Diluted number of shares used for calculation			131,667				131,667					131,667					131,667
(a) Reported in conformity with U.S. GAAP

Notes:

(1) Represents realignment expense incurred as a result of realignment programs

(2) Includes tax impact of items above and exit tax benefit of $4.0 million

(3) Represents Voluntary Retirement Program expense

(4) Represents $7.0 million related to Flowserve 2.0 transformation efforts and $3.3 million related to voluntary retirement program expense

(5) Represents below-the-line foreign exchange impacts

(6) Includes tax impact of items above

RECONCILIATION OF NON-GAAP MEASURES
(Unaudited)
		Three Months Ended December 31, 2018
(Amounts in thousands, except per share data)		As Reported (a)				Realignment (1)					Other Items					As Adjusted
Sales		$	986,867			$	-				$	-				$	986,867
Gross profit			321,845				(11,104	)				-					332,949
Gross margin			32.6	%			-					-					33.7	%
Selling, general and administrative expense			(231,869	)			513					(13,815	)	(3)			(218,567	)
Loss on sale of business			-				-					-					-
Operating income			93,211				(10,591	)				(13,815	)				117,617
Operating income as a percentage of sales			9.4	%			-					-					11.9	%
Interest and other expense, net			(14,650	)			-					(2,337	)	(4)			(12,313	)
Earnings before income taxes			78,561				(10,591	)				(16,152	)				105,304
Provision for income taxes			(14,197	)			3,211		(2)			10,062		(5)			(27,470	)
Tax Rate			18.1	%			30.3	%				62.3	%				26.1	%
Net earnings attributable to Flowserve Corporation		$	63,103			$	(7,380	)			$	(6,090	)			$	76,573
Net earnings per share attributable to Flowserve Corporation common shareholders:
Basic		$	0.48			$	(0.06	)			$	(0.05	)			$	0.59
Diluted			0.48				(0.06	)				(0.05	)				0.58
Basic number of shares used for calculation			130,845				130,845					130,845					130,845
Diluted number of shares used for calculation			131,413				131,413					131,413					131,413
(a) Reported in conformity with U.S. GAAP

Notes:

(1) Represents realignment expense incurred as a result of realignment programs

(2) Includes tax impact of items above

(3) Represents Flowserve 2.0 transformation efforts

(4) Represents below-the-line foreign exchange impacts

(5) Includes tax impact of items above and a $5.7 million tax benefit related to the U.S. Tax Cuts and Jobs Act of 2017

SEGMENT INFORMATION
(Unaudited)
FLOWSERVE PUMP DIVISION		Three Months Ended December 31,
(Amounts in millions, except percentages)			2019				2018
Bookings		$	756.0			$	728.6
Sales			739.5				662.5
Gross profit			245.6				206.1
Gross profit margin			33.2	%			31.1	%
SG&A			146.6				131.1
Segment operating income			101.4				78.2
Segment operating income as a percentage of sales			13.7	%			11.8	%
FLOW CONTROL DIVISION		Three Months Ended December 31,
(Amounts in millions, except percentages)			2019				2018
Bookings		$	298.6			$	318.0
Sales			330.2				325.9
Gross profit			111.8				118.3
Gross profit margin			33.9	%			36.3	%
SG&A			54.4				53.8
Segment operating income			57.3				64.5
Segment operating income as a percentage of sales			17.4	%			19.8	%

CONSOLIDATED STATEMENTS OF INCOME
		Year Ended December 31,
(Amounts in thousands, except per share data)			2019				2018				2017
Sales		$	3,944,850			$	3,832,666			$	3,660,831
Cost of sales			(2,649,480	)			(2,644,830	)			(2,571,878	)
Gross profit			1,295,370				1,187,836				1,088,953
Selling, general and administrative expense			(899,813	)			(943,714	)			(901,727	)
Gain (loss) on sale of businesses			-				(7,727	)			141,317
Net earnings from affiliates			10,483				11,143				12,592
Operating income			406,040				247,538				341,135
Interest expense			(54,980	)			(58,160	)			(59,730	)
Interest income			8,409				6,465				3,429
Other income (expense), net			(17,619	)			(19,569	)			(21,827	)
Earnings before income taxes			341,850				176,274				263,007
Provision for income taxes			(80,070	)			(51,224	)			(258,679	)
Net earnings, including noncontrolling interests			261,780				125,050				4,328
Less: Net earnings attributable to noncontrolling interests			(8,112	)			(5,379	)			(1,676	)
Net earnings attributable to Flowserve Corporation		$	253,668			$	119,671			$	2,652
Net earnings per share attributable to Flowserve Corporation common shareholders:
Basic		$	1.94			$	0.91			$	0.02
Diluted			1.93				0.91				0.02

RECONCILIATION OF NON-GAAP MEASURES
(Unaudited)
		Year Ended December 31, 2019
(Amounts in thousands, except per share data)		As Reported (a)				Realignment (1)						Other Items						As Adjusted
Sales		$	3,944,850			$	-					$	-					$	3,944,850
Gross profit			1,295,370				(17,234	)					(196	)	(3	)			1,312,800
Gross margin			32.8	%			-						-						33.3	%
Selling, general and administrative expense			(899,813	)			9,304						(31,331	)	(4	)			(877,786	)
Operating income			406,040				(7,930	)					(31,527	)					445,497
Operating income as a percentage of sales			10.3	%			-						-						11.3	%
Interest and other expense, net			(64,190	)			-						(14,460	)	(5	)			(49,730	)
Earnings before income taxes			341,850				(7,930	)					(45,987	)					395,767
Provision for income taxes			(80,070	)			7,618		(2	)			10,463		(6	)			(98,151	)
Tax Rate			23.4	%			96.1	%					22.8	%					24.8	%
Net earnings attributable to Flowserve Corporation		$	253,668			$	(312	)				$	(35,524	)				$	289,504
Net earnings per share attributable to Flowserve Corporation common shareholders:
Basic		$	1.94			$	-					$	(0.27	)				$	2.21
Diluted			1.93				-						(0.27	)					2.20
Basic number of shares used for calculation			131,034				131,034						131,034						131,034
Diluted number of shares used for calculation			131,689				131,689						131,689						131,689
(a) Reported in conformity with U.S. GAAP

Notes:

(1) Represents realignment (expense) income incurred as a result of realignment programs. Income in selling, general and administrative due to gains from the sales of non-strategic manufacturing facilities that are included in our Realignment Programs

(2) Includes tax impact of items above and exit tax benefit of $4.0 million

(3) Represents Voluntary Retirement Program expense

(4) Represents $28.0 million related to Flowserve 2.0 transformation efforts and $3.3 million related to voluntary retirement program expense

(5) Represents below-the-line foreign exchange impacts

(6) Includes tax impact of items above

RECONCILIATION OF NON-GAAP MEASURES
(Unaudited)
		Year Ended December 31, 2018
(Amounts in thousands, except per share data)		As Reported (a)				Realignment (1)						Other Items						As Adjusted
Sales		$	3,832,666			$	-					$	-					$	3,832,666
Gross profit			1,187,836				(42,697	)					(7,713	)	(3	)			1,238,246
Gross margin			31.0	%			-						-						32.3	%
Selling, general and administrative expense			(943,714	)			(11,235	)					(58,180	)	(4	)			(874,299	)
Gain on sale of business			(7,727	)			-						(7,727	)	(5	)			-
Operating income			247,538				(53,932	)					(73,620	)					375,090
Operating income as a percentage of sales			6.5	%			-						-						9.8	%
Interest and other expense, net			(71,264	)			-						(18,686	)	(6	)			(52,578	)
Earnings before income taxes			176,274				(53,932	)					(92,306	)					322,512
Provision for income taxes			(51,225	)			12,863		(2	)			23,273		(7	)			(87,361	)
Tax Rate			29.1	%			23.9	%					25.2	%					27.1	%
Net earnings attributable to Flowserve Corporation		$	119,671			$	(41,069	)				$	(69,033	)				$	229,773
Net earnings per share attributable to Flowserve Corporation common shareholders:
Basic		$	0.91			$	(0.31	)				$	(0.53	)				$	1.76
Diluted			0.91				(0.31	)					(0.53	)					1.75
Basic number of shares used for calculation			130,823				130,823						130,823						130,823
Diluted number of shares used for calculation			131,271				131,271						131,271						131,271
(a) Reported in conformity with U.S. GAAP

Notes:

(1) Represents realignment expense incurred as a result of realignment programs

(2) Includes tax impact of items above

(3) Represents $7.7 million related to IPD divestiture write-down of assets

(4) Represents $9.7 million related to IPD divestiture write-down of assets, $7.3 million related to implementation costs for the adoption of ASC 606 and $41.2 million related to Flowserve 2.0 transformation efforts

(5) Represents IPD loss on sale of business

(6) Represents below-the-line foreign exchange impacts

(7) Includes tax impact of items above and a $5.7 million tax benefit related to the U.S. Tax Cuts and Jobs Act of 2017

SEGMENT INFORMATION
(Unaudited)
FLOWSERVE PUMP DIVISION		Year Ended December 31,
(Amounts in millions, except percentages)			2019				2018				2017
Bookings		$	3,007.9			$	2,753.5			$	2,587.4
Sales			2,706.3				2,623.3				2,478.7
Gross profit			899.3				775.7				692.1
Gross profit margin			33.2	%			29.6	%			27.9	%
SG&A			566.3				578.9				593.0
Loss on sale of businesses			-				(7.7	)			-
Segment operating income			343.5				201.0				112.3
Segment operating income as a percentage of sales			12.7	%			7.7	%			4.5	%
FLOW CONTROL DIVISION		Year Ended December 31,
(Amounts in millions, except percentages)			2019				2018				2017
Bookings		$	1,240.9			$	1,274.3			$	1,225.7
Sales			1,244.0				1,215.8				1,188.1
Gross profit			411.6				416.9				396.7
Gross profit margin			33.1	%			34.3	%			33.4	%
SG&A			213.6				215.0				213.6
Gain on sale of businesses			-				-				141.3
Segment operating income			198.0				201.2				323.7
Segment operating income as a percentage of sales			15.9	%			16.5	%			27.2	%

Fourth Quarter and Full Year 2019 - Segment Results
(dollars in millions, comparison vs. 2018 fourth quarter and full year, unaudited)
			FPD								FCD
			4th Qtr				YTD				4th Qtr				YTD
Bookings			$	756.0			$	3,007.9			$	298.6			$	1,240.9
- vs. prior year				3.8	%			9.2	%			-6.1	%			-2.6	%
- on constant currency				4.9	%			12.1	%			-5.3	%			-0.4	%
Sales			$	739.5			$	2,706.3			$	330.2			$	1,244.0
- vs. prior year				11.6	%			3.2	%			1.3	%			2.3	%
- on constant currency				12.7	%			5.7	%			2.2	%			4.6	%
Gross Profit			$	245.6			$	899.3			$	111.8			$	411.6
- vs. prior year				19.2	%			15.9	%			-5.5	%			-1.3	%
Gross Margin (% of sales)				33.2	%			33.2	%			33.9	%			33.1	%
- vs. prior year (in basis points)			210 bps				360 bps				(240) bps				(120) bps
Operating Income			$	101.4			$	343.5			$	57.3			$	198.0
- vs. prior year				29.7	%			70.9	%			-11.2	%			-1.6	%
- on constant currency				31.1	%			76.0	%			-10.5	%			-0.1	%
Operating Margin (% of sales)				13.7	%			12.7	%			17.4	%			15.9	%
- vs. prior year (in basis points)			190 bps				500 bps				(240) bps				(60) bps
Adjusted Operating Income *			$	104.7			$	341.9			$	61.7			$	204.3
- vs. prior year				15.6	%			25.9	%			-1.8	%			0.1	%
- on constant currency				16.8	%			29.7	%			-1.2	%			1.6	%
Adj. Oper. Margin (% of sales)*				14.2	%			12.6	%			18.7	%			16.4	%
- vs. prior year (in basis points)			50 bps				230 bps				(60) bps				(40) bps
Backlog			$	1,560.9							$	600.1
* Adjusted Operating Income and Adjusted Operating Margin exclude realignment charges and other specific discrete items

CONSOLIDATED BALANCE SHEETS
		December 31,				December 31,
(Amounts in thousands, except par value)			2019				2018
ASSETS
Current assets:
Cash and cash equivalents		$	670,980			$	619,683
Accounts receivable, net			795,538				792,434
Contract assets, net			272,914				228,579
Inventories, net			660,837				633,871
Prepaid expenses and other			105,101				108,578
Total current assets			2,505,370				2,383,145
Property, plant and equipment, net			572,175				610,096
Operating lease right-of-use assets, net			186,218				-
Goodwill			1,193,010				1,197,640
Deferred taxes			54,879				44,682
Other intangible assets, net			180,805				190,550
Other assets, net			227,185				190,164
Total assets		$	4,919,642			$	4,616,277
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable		$	447,582			$	418,893
Accrued liabilities			401,385				391,406
Contract liabilities			216,541				202,458
Debt due within one year			11,272				68,218
Operating lease liabilities			36,108				-
Total current liabilities			1,112,888				1,080,975
Long-term debt due after one year			1,365,977				1,414,829
Operating lease liabilities			151,523				-
Retirement obligations and other liabilities			473,295				459,693
Shareholders’ equity:
Common shares, $1.25 par value			220,991				220,991
Shares authorized – 305,000
Shares issued — 176,793 and 176,793, respectively
Capital in excess of par value			501,045				494,551
Retained earnings			3,695,862				3,543,007
Treasury shares, at cost – 46,262 and 46,237 shares, respectively			(2,051,583	)			(2,049,404	)
Deferred compensation obligation			8,334				7,117
Accumulated other comprehensive loss			(584,292	)			(573,947	)
Total Flowserve Corporation shareholders' equity			1,790,357				1,642,315
Noncontrolling interests			25,602				18,465
Total equity			1,815,959				1,660,780
Total liabilities and equity		$	4,919,642			$	4,616,277

CONSOLIDATED STATEMENTS OF CASH FLOWS
		Year Ended December 31,
(Amounts in thousands)			2019				2018				2017
Cash flows – Operating activities:
Net earnings, including noncontrolling interests		$	261,780			$	125,050			$	4,328
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation			90,619				95,820				101,438
Amortization of intangible and other assets			13,862				16,653				17,016
Loss (gain) on disposition of businesses			-				7,727				(141,317	)
Stock-based compensation			23,882				19,912				22,820
Provision for U.S. Tax Cuts and Jobs Act of 2017			-				(5,654	)			115,320
Foreign currency, assets impairment and other non-cash adjustments			(11,224	)			36,052				33,087
Change in assets and liabilities:
Accounts receivable, net			2,883				(25,448	)			60,216
Inventories, net			(31,058	)			(29,314	)			48,642
Contract assets, net			(45,939	)			(23,693	)			-
Prepaid expenses and other assets, net			13,289				(7,869	)			32,935
Contract liabilities			22,870				(4,823	)			12,403
Accounts payable			14,390				33,710				-
Accrued liabilities and income taxes payable			4,184				(18,248	)			(3,383	)
Retirement obligations and other			(39,881	)			(44,314	)			(43,431	)
Net deferred taxes			(6,916	)			15,270				50,992
Net cash flows provided (used) by operating activities			312,741				190,831				311,066
Cash flows – Investing activities:
Capital expenditures			(66,170	)			(83,993	)			(61,602	)
Proceeds from disposal of assets			42,333				6,190				5,435
(Payments for) proceeds from disposition of businesses			-				(3,663	)			232,767
Net cash flows provided (used) by investing activities			(23,837	)			(81,466	)			176,600
Cash flows – Financing activities:
Payments on long-term debt			(105,000	)			(60,000	)			(60,000	)
Payments of deferred loan costs			-				-				(1,503	)
Proceeds from short-term financing			75,000				-				-
Payments on short-term financing			(75,000	)			-				-
Proceeds under other financing arrangements			4,639				3,377				7,359
Payments under other financing arrangements			(9,281	)			(9,853	)			(19,030	)
Payments related to tax withholding for stock-based compensation			(3,900	)			(3,061	)			(6,238	)
Repurchases of common shares			(15,000	)			-				-
Payments of dividends			(99,557	)			(99,416	)			(99,233	)
Other			(1,555	)			(4,331	)			(6,708	)
Net cash flows provided (used) by financing activities			(229,654	)			(173,284	)			(185,353	)
Effect of exchange rate changes on cash			(7,953	)			(19,843	)			33,970
Net change in cash and cash equivalents			51,297				(83,762	)			336,283
Cash and cash equivalents at beginning of year			619,683				703,445				367,162
Cash and cash equivalents at end of year		$	670,980			$	619,683			$	703,445
Income taxes paid (net of refunds)		$	66,372			$	87,009			$	59,409
Interest paid			53,607				54,576				56,808

CONSOLIDATED QUARTERLY FINANCIAL DATA
(Unaudited)
(Amounts in millions, except per share data)
		2019
Quarter		4th			3rd			2nd			1st
Sales		$	1,068.2		$	996.5		$	990.1		$	890.1
Gross profit			349.6			333.7			318.0			294.1
Earnings before income taxes			86.7			96.2			82.9			76.1
Net earnings attributable to Flowserve Corporation			69.8			68.4			58.2			57.3
Earnings per share (1):
Basic		$	0.53		$	0.52		$	0.44		$	0.44
Diluted		$	0.53		$	0.52		$	0.44		$	0.44
		2018
Quarter		4th			3rd			2nd			1st
Sales		$	986.9		$	952.7		$	973.1		$	920.0
Gross profit			321.8			308.5			286.1			271.4
Earnings before income taxes			78.6			44.4			28.3			25.0
Net earnings attributable to Flowserve Corporation			63.1			28.2			13.2			15.1
Earnings per share (1):
Basic		$	0.48		$	0.22		$	0.10		$	0.12
Diluted		$	0.48		$	0.21		$	0.10		$	0.12

(1) Earnings per share is computed independently for each of the quarters presented. The sum of the quarters may not equal the total year amount due to the impact of changes in weighted average quarterly shares outstanding.