Upload
docong
View
216
Download
0
Embed Size (px)
Citation preview
Flowserve Corporation
Morgan Stanley Global Industrials CEOs Unplugged Conference
September 11, 2008
Lew Kling, President and Chief Executive OfficerMark Blinn, SVP, CFO and Latin America OperationsTom Pajonas, President, Flow Control DivisionZac Nagle, VP Investor Relations
Flowserve Corporation Proprietary & Confidential Page 2
Special NoteSAFE 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 Litigation Reform Act of 1995, as amended. Words or phrases such as, “may,” “should,” “expects,” “could,” “intends,” “plans,” “anticipates,” “estimates,” “believes,” “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 presentation 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; risks associated with cost overruns on fixed-fee projects and in taking customer orders for large complex custom engineered products requiring sophisticated program management skills and technical expertise for completion; the substantial dependence of our sales on the success of the petroleum, chemical, power and water 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 or trade embargoes that could affect customer markets, particularly Middle Eastern markets and global petroleum producers, and non-compliance with U.S. export/re-export control, foreign corrupt practice laws, economic sanctions and import laws and regulations; our furnishing of products and services to nuclear power plant facilities; potential adverse consequences resulting from litigation to which we are a party, such as litigation involving asbestos-containing material claims; a foreign government investigation regarding our participation in the United Nations Oil-for-Food Program; risks associated with certain of our foreign subsidiaries conducting business operations and sales in certain countries that have been identified by the U.S. State Department as state sponsors of terrorism; our relative geographical profitability and its impact on our utilization of deferred tax assets, including foreign tax credits, and tax liabilities that could result from audits of our tax returns by regulatory authorities in various tax jurisdictions; the potential adverse impact of an impairment in the carrying value of goodwill or other intangibles; our dependence upon third-party suppliers whose failure to perform timely could adversely affect our business operations; our dependence on our customers’ ability to make required capital investment and maintenance expenditures; the highly competitive nature of the markets in which we operate; environmental compliance costs and liabilities; potential work stoppages and other labor matters; our inability to protect our intellectual property in the U.S., as well as in foreign countries; obligations under our defined benefit pension plans; and other factors described from time to time in our filings with the Securities and Exchange Commission.
All forward-looking statements included in this presentation are based on information available to us on the date hereof, and we assume no obligation to update any forward-looking statement.
Mining Pulp & PaperOil & Gas Power Chemical Water
Page 3Flowserve Proprietary & Confidential
INFRASTRUCTURE INDUSTRIES
North America Latin America Europe Middle East Africa China India Rest of Asia
GLOBAL PRESENCE
GENERAL INDUSTRIESFood & Bev
A Historical Overview
An Eleven Year Old Company With Over 200 Years of History
Mining Pulp & PaperOil & Gas Power Chemical Water
Page 4Flowserve Proprietary & Confidential
INFRASTRUCTURE INDUSTRIES
North America Latin America Europe Middle East Africa China India Rest of Asia
GLOBAL PRESENCE
GENERAL INDUSTRIESFood & Bev
A Leading Portfolio of Products, Solutions & Services
Flowserve Products Play a Key Role in Infrastructure Build-out Around the Globe
A Broad Set of Product Capabilities Critical IndustryApplication SolutionsPumps - Valves - Seals
AftermarketSupport Services
Global Quick Response Center (QRC) Footprint
Manufacturing Support
Engineering Support
Spare Parts Support
Oil / Gas
Chemical Water
General Industry
Power
Mining Pulp & PaperOil & Gas Power Chemical Water
Page 5Flowserve Proprietary & Confidential
INFRASTRUCTURE INDUSTRIES
North America Latin America Europe Middle East Africa China India Rest of Asia
GLOBAL PRESENCE
GENERAL INDUSTRIESFood & Bev
WCC Multistage Pump and System
Typical Applications
•Pipeline Service•Onshore Oil Production•Offshore Oil Production•Refining
Mining Pulp & PaperOil & Gas Power Chemical Water
Page 6Flowserve Proprietary & Confidential
INFRASTRUCTURE INDUSTRIES
North America Latin America Europe Middle East Africa China India Rest of Asia
GLOBAL PRESENCE
GENERAL INDUSTRIESFood & Bev
Typical Applications
• Pipeline Service• Onshore Oil Production• Offshore Oil Production• Refining
HDO Multistage Pump and System
Mining Pulp & PaperOil & Gas Power Chemical Water
Page 7Flowserve Proprietary & Confidential
INFRASTRUCTURE INDUSTRIES
North America Latin America Europe Middle East Africa China India Rest of Asia
GLOBAL PRESENCE
GENERAL INDUSTRIESFood & Bev
DMX Multistage Pump and System
Typical Applications
• Oil and Gas• Power Generation• Mining• Desalination• Metal Processing
Mining Pulp & PaperOil & Gas Power Chemical Water
Page 8Flowserve Proprietary & Confidential
INFRASTRUCTURE INDUSTRIES
North America Latin America Europe Middle East Africa China India Rest of Asia
GLOBAL PRESENCE
GENERAL INDUSTRIESFood & Bev
Market leader in Large Oil and Gas Valve Applications
Mining Pulp & PaperOil & Gas Power Chemical Water
Page 9Flowserve Proprietary & Confidential
INFRASTRUCTURE INDUSTRIES
North America Latin America Europe Middle East Africa China India Rest of Asia
GLOBAL PRESENCE
GENERAL INDUSTRIESFood & Bev
Market Leader in Cryogenic Valve Applications
Mining Pulp & PaperOil & Gas Power Chemical Water
Page 10Flowserve Proprietary & Confidential
INFRASTRUCTURE INDUSTRIES
North America Latin America Europe Middle East Africa China India Rest of Asia
GLOBAL PRESENCE
GENERAL INDUSTRIESFood & Bev
Driving For Growth
Organic Growth
Globalization
Strategic Acquisitions
Organizational Capability
Process Excellence
Technology/Innovation
Key Strategies
Sustainable ProfitableGrowth
Sustainable Sustainable ProfitableProfitableGrowthGrowth
Flowserve is…
a multinational industrial products company that …
… targets major capital projects in the oil & gas, power, chemical, water, and
general industries that meet our financial and operational criteria …
… leverages our aftermarket services to reduce our customers total cost of
ownership …
… capitalizes on our global footprint of local expertise …
… and utilizes our integrated competencies on a global scale
Our Competencies Drive Our Strategies to Achieve Sustainable Profitable Growth
Portfolio Management
Mining Pulp & PaperOil & Gas Power Chemical Water
Page 11Flowserve Proprietary & Confidential
INFRASTRUCTURE INDUSTRIES
North America Latin America Europe Middle East Africa China India Rest of Asia
GLOBAL PRESENCE
GENERAL INDUSTRIESFood & Bev
Everything Starts With Our Customers
Product is Delivered On-Time
CUSTOMER REQUIREMENTS
Product Performs as Expected
Product is Supported
The Customer is Willing to Purchase Products at a “Fair” Price
Mining Pulp & PaperOil & Gas Power Chemical Water
Page 12Flowserve Proprietary & Confidential
INFRASTRUCTURE INDUSTRIES
North America Latin America Europe Middle East Africa China India Rest of Asia
GLOBAL PRESENCE
GENERAL INDUSTRIESFood & Bev
Flowserve’s Global Presence
Flowserve Has Operations in More Than 55 Countries with Over 14,000 Employees
Mining Pulp & PaperOil & Gas Power Chemical Water
Page 13Flowserve Proprietary & Confidential
INFRASTRUCTURE INDUSTRIES
North America Latin America Europe Middle East Africa China India Rest of Asia
GLOBAL PRESENCE
GENERAL INDUSTRIESFood & Bev
2004 2005 2006 2007 2008
+28%
• Q2 2008 bookings included currency benefit of approximately $97 million and Niigata Worthington acquisition bookings of $16 million compared to Q2 2007.
Continued Strong Bookings Growth
$1,429
$686
$879
$1,089
+24%
+31%
+16%
+15%
+19%
+21%
+20%$696
$912
$1,053
$774
$892
$1,061
$771
$934
$1,116
Q2 Q3 Q4
$621
+10% +9% +22% +23%
$638 $634 $628
Q1
$1,311
+24%
($ millions) +31%
Mining Pulp & PaperOil & Gas Power Chemical Water
Page 14Flowserve Proprietary & Confidential
INFRASTRUCTURE INDUSTRIES
North America Latin America Europe Middle East Africa China India Rest of Asia
GLOBAL PRESENCE
GENERAL INDUSTRIESFood & Bev
2004 2005 2006 2007 2008
+6%
• Q2 2008 sales included currency benefit of approximately $85 million and Niigata Worthington acquisition sales of $29 million compared to Q2 2007.
Strong Bookings Growth Drives Future Sales
$993
$616$654
$803
+24%
+23%
+9%
+24%
+4%
+19%
+20%
+26%
$691$753
$931
$649
$771
$919
$739
$884
$1,109
$577$618 $623
$704
+7%
Q2 Q3 Q4
+12%
+19%
+5%
Q1
$1,158
($ millions) +24%
MiningOil & Gas Power Chemical Water
Page 15Flowserve Proprietary & Confidential
INFRASTRUCTURE INDUSTRIES
North America Latin America Europe Middle East Africa China India Rest of Asia
GLOBAL PRESENCE
Food & Bev Pulp & PaperGENERAL INDUSTRIES
MiningOil & Gas Power Chemical Water
Page 16Flowserve Proprietary & Confidential
INFRASTRUCTURE INDUSTRIES
North America Latin America Europe Middle East Africa China India Rest of Asia
GLOBAL PRESENCE
Food & Bev Pulp & PaperGENERAL INDUSTRIES
MiningOil & Gas Power Chemical Water
Page 17Flowserve Proprietary & Confidential
INFRASTRUCTURE INDUSTRIES
North America Latin America Europe Middle East Africa China India Rest of Asia
GLOBAL PRESENCE
Food & Bev Pulp & PaperGENERAL INDUSTRIES
*From Continuing Operations (Diluted); All monetary figures in this report are calculated in US Dollars.
MiningOil & Gas Power Chemical Water
Page 18Flowserve Proprietary & Confidential
INFRASTRUCTURE INDUSTRIES
North America Latin America Europe Middle East Africa China India Rest of Asia
GLOBAL PRESENCE
Food & Bev Pulp & PaperGENERAL INDUSTRIES
On 7/30/2008, Raised Full Year 2008 EPS Guidance to $7.20-$7.50
2008 Q2 – Consolidated Financial Results
2nd Quarter Year-to-Date2007 2008 Delta ($) Delta (%) 2007 2008 Delta ($) Delta (%)
Bookings 1,053.3$ 1,310.6$ 257.3$ 24.4% 2,142.1$ 2,740.0$ 597.9$ 27.9%
Sales 930.7$ 1,157.6$ 226.9$ 24.4% 1,734.1$ 2,150.9$ 416.8$ 24.0%
Gross Profit 302.4$ 418.0$ 115.6$ 38.2% 567.9$ 763.8$ 195.9$ 34.5%Gross Margin (%) 32.5% 36.1% 360 bps 32.7% 35.5% 280 bps
SG&A 209.5$ 250.9$ 41.4$ 19.8% 413.1$ 484.0$ 70.9$ 17.2%SG&A (%) 22.5% 21.7% (80 bps) 23.8% 22.5% (130 bps)
Income from Affiliates 4.0$ 4.5$ 0.5$ 12.5% 9.6$ 10.5$ 0.9$ 9.4%
Operating Income 96.9$ 171.6$ 74.7$ 77.1% 164.3$ 290.3$ 126.0$ 76.7%Operating Margin (%) 10.4% 14.8% 440 bps 9.5% 13.5% 400 bps
Net Earnings 63.2$ 122.9$ 59.7$ 94.5% 96.8$ 210.9$ 114.1$ 117.9%
Diluted EPS* 1.11$ 2.13$ 1.02$ 91.9% 1.69$ 3.66$ 1.97$ 116.6%
* As of 6/30/08, 0.3 million shares had been repurchased in conjunction with the company’s previously announced $300 million share buyback program. * As of 6/30/08, 0.3 million shares had been repurchased in conjunction with the company’s previously announced $300 million share buyback program.
($ millions)
Mining Pulp & PaperOil / Gas Power Chemical Water
Page 19Flowserve Proprietary & Confidential
INFRASTRUCTURE INDUSTRIES
North America Latin America Europe Middle East Africa China India Rest of Asia
GLOBAL PRESENCE
GENERAL INDUSTRIESFood & Bev
Domestic32%
International73%
Bookings
Flowserve Global Presence – Q2 Year-to-Date 2008
Global Diversified Infrastructure Company
Revenue
International68%
Domestic30%
Plant Locations
International70%
Domestic32%
QRC Locations
International68%
Flowserve Internal Data
Oil and Gas36%
Power16%
Chemical20%
Water7%
GI21%
Mining Pulp & PaperOil & Gas Power Chemical Water
Page 20Flowserve Proprietary & Confidential
INFRASTRUCTURE INDUSTRIES
North America Latin America Europe Middle East Africa China India Rest of Asia
GLOBAL PRESENCE
GENERAL INDUSTRIESFood & Bev
The Oil & Gas Industry Remains Strong and is Forecasted to MaintainIts Strength for the Foreseeable Future
Flowserve 1H 08 Bookings Split
36%Oil & Gas
Sources: FLS Internal Data, WEO 2007, Global Insights, Oil & Gas Journal, Industrial Info Resources, Wall Street Journal, Financial Times – Market Chart Source is EIF adjusted to nominal dollars
Oil & Gas Industry
Total Market - Pumps, Valves & Seals
02468
101214161820
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
$ Bi
llions
Mature Markets Developing Markets
Global demand continues to drive significant infrastructure investments particularly in Asia and the Middle East
Upstream project growth is being supported by both consumption growth and projected depletion rates of mature fields
“New” oil finds will likely come predominately from fields requiring complex recovery methodologies such as tar sands, heavy oil and deep water
Downstream project growth includes increases in refining capacity to meet demand growth and refurbishment of outdated infrastructure to handle “new” oil
Pursuit of cleaner fuels continues to drive increased investments in natural gas developments
Market Perspective
Mining Pulp & PaperOil & Gas Power Chemical Water
Page 21Flowserve Proprietary & Confidential
INFRASTRUCTURE INDUSTRIES
North America Latin America Europe Middle East Africa China India Rest of Asia
GLOBAL PRESENCE
GENERAL INDUSTRIESFood & Bev
The Power Industry is Projected to be in the Early Stages of a Strong Growth Period on a Global Scale
Sources: FLS Internal Data, WEO 2007, Global Insights, Industrial Info Resources, Wall Street Journal, Financial Times – Market Chart Source is EIF adjusted to nominal dollars (fossil and nuclear only)
Power Industry
Capital spending for increased capacity is forecasted to remain robust on a global scale driven by the infrastructure expansionin developing economies
In mature markets, the aging infrastructure coupled with themore stringent emissions standards are supporting strong capital spending in the refurbishment of existing operations
Globally, a majority of the planned new generation unit projects are forecasted to be coal-fired
Environmental concerns are challenging utilities to look at natural gas and nuclear power generation
According to the World Nuclear Association, more than 100 nuclear power plants may be built by 2020
Flowserve 1H 08 Bookings Split
16%Power
Total Market - Pumps, Valves & Seals
0123456789
10
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
$ Bi
llions
Mature Markets Developing Markets
Market Perspective
Mining Pulp & PaperOil & Gas Power Chemical Water
Page 22Flowserve Proprietary & Confidential
INFRASTRUCTURE INDUSTRIES
North America Latin America Europe Middle East Africa China India Rest of Asia
GLOBAL PRESENCE
GENERAL INDUSTRIESFood & Bev
The Chemical Industry Continues to Show Strength
Sources: FLS Internal Data, Global Insights, Industrial Info Resources, Wall Street Journal, Financial Times – Market Chart Source is EIF adjusted to nominal dollars
Chemical Industry
Aggressive investments plans are forecasted for petrochemical plants in the Middle East and most of Asia, particularly China and India
China is experiencing ethylene shortages which is driving increased investments in large integrated projects placing petrochemical plants adjacent to refineries
India’s petrochemical industry is projected to increase total production 12-15% by 2012
Investments in coal gasification projects are forecasted to remain robust as the demand for oil alternatives grows
The chemical manufacturing base is projected to continue its shift to low cost regions driving investments in new plants in the Middle East and Asia
* Chemical percentage includes
Pharmaceutical
Flowserve 1H 08 Bookings Split
20%Chemical
Total Market - Pumps, Valves & Seals
0
2
4
6
8
10
12
14
16
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
$ Bi
llions
Mature Markets Developing Markets
Market Perspective
Mining Pulp & PaperOil & Gas Power Chemical Water
Page 23Flowserve Proprietary & Confidential
INFRASTRUCTURE INDUSTRIES
North America Latin America Europe Middle East Africa China India Rest of Asia
GLOBAL PRESENCE
GENERAL INDUSTRIESFood & Bev
The Water Industry Continues to Show Planned Investment Growth with Significant Investments Forecasted in the Middle East and Asia
Water IndustryGlobal demand for fresh water continues to drive strong investments in water infrastructure
Capital investments are required for increased capacity as well as refurbishment of aging and non-compliant infrastructure
The developing economies of China, India and the Middle Eastare driving significant capital spending plans for water infrastructure
Worldwide desalination capacity is projected to double between now and 2015
Desalination is becoming a more viable approach to providing potable water for many regions of the world
Initial research is showing desalination may be a better environmental choice than diverting fresh water from rivers
Flowserve 1H 08 Bookings Split
7%Water
Sources: FLS Internal Data, Global Insights, Global Water Intelligence, Industrial Info Resources, Wall Street Journal, Financial Times– Market Chart Source is EIF adjusted to nominal dollars
Total Market - Pumps, Valves & Seals
024
68
1012
141618
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
$ Bi
llions
Mature Markets Developing Markets
Market Perspective
Mining Pulp & PaperOil & Gas Power Chemical Water
Page 24Flowserve Proprietary & Confidential
INFRASTRUCTURE INDUSTRIES
North America Latin America Europe Middle East Africa China India Rest of Asia
GLOBAL PRESENCE
GENERAL INDUSTRIESFood & Bev
Flowserve Continues Achieving Successful Organic Growth in this Collection of Growing Industries with Its Application Specific Products & Services
General IndustriesStrong investments continue to be forecasted for the mining and ore processing industry particularly in Asia, Latin America and South Africa
Increasing demand for electricity in developing markets is driving an increased need for coal which is opening closed mines and increasing investments in new mines
The rising price of oil is providing support for continuedinvestments in alternative fuels which is forecasted to drive growth in biofuels
The significant investment plans for the economic development of the Middle East is projected to drive increased investments in district cooling
Specialty products designed for pulp and paper applications continue to grow in Asia and Latin America
Sources: FLS Internal Data, Global Insights, Global Water Intelligence, Industrial Info Resources, Wall Street Journal, Financial Times – Market Chart Source is EIF adjusted to nominal dollars (mining, pulp & paper and food & beverage only)
*This category includes mining & ore processing, pulp & paper, food & beverage, steam systems, district heating & cooling, agriculture and government orders. Genera l industries also includes sales to distributors, whose end customers operate in the industries we primarily serve.
Flowserve 1H 08 Bookings Split
21%General
Industries *
Total Market - Pumps, Valves & Seals
0
2
4
6
8
10
12
14
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
$ Bi
llions
Mature Markets Developing Markets
Market Perspective
MiningOil & Gas Power Chemical Water
Page 25Flowserve Proprietary & Confidential
INFRASTRUCTURE INDUSTRIES
North America Latin America Europe Middle East Africa China India Rest of Asia
GLOBAL PRESENCE
Food & Bev Pulp & PaperGENERAL INDUSTRIES
Strength in Large Projects Around the World Continues
Mining Pulp & PaperOil & Gas Power Chemical Water
Page 26Flowserve Proprietary & Confidential
INFRASTRUCTURE INDUSTRIES
North America Latin America Europe Middle East Africa China India Rest of Asia
GLOBAL PRESENCE
GENERAL INDUSTRIESFood & Bev
Market OutlookStrong global infrastructure investment should continue to drive significant opportunities for growthStrong momentum from 2007, using our global footprint and Quick Response Centers (QRCs) to support our customers’ growth
Financial FocusStrong financial performance in Bookings, Revenue, Operating Income, Operating Margin and Earnings-Per-ShareEffective operational excellence initiatives such as On-Time Delivery, Product Performance and Reliability
Business FocusBuild sustainable, long term relationships with our customersCreate a win-win, low cost of ownership model for our customersStrategic Deployment of Assets and Resources to provide “local” support with global expertise for our customers worldwideShareholder and employee goals are tightly aligned by continuing to link compensation to performance
Execution, Execution, Execution!
Continuing to Execute on Our Strategies
Mining Pulp & PaperOil & Gas Power Chemical Water
Page 27Flowserve Proprietary & Confidential
INFRASTRUCTURE INDUSTRIES
North America Latin America Europe Middle East Africa China India Rest of Asia
GLOBAL PRESENCE
GENERAL INDUSTRIESFood & Bev
Financial Update
Mining Pulp & PaperOil & Gas Power Chemical Water
Page 28Flowserve Proprietary & Confidential
INFRASTRUCTURE INDUSTRIES
North America Latin America Europe Middle East Africa China India Rest of Asia
GLOBAL PRESENCE
GENERAL INDUSTRIESFood & Bev
Continuing Record Financial Performance
2008 Q2 – Consolidated Financial Results
2nd Quarter Year-to-Date2007 2008 Delta ($) Delta (%) 2007 2008 Delta ($) Delta (%)
Bookings 1,053.3$ 1,310.6$ 257.3$ 24.4% 2,142.1$ 2,740.0$ 597.9$ 27.9%
Sales 930.7$ 1,157.6$ 226.9$ 24.4% 1,734.1$ 2,150.9$ 416.8$ 24.0%
Gross Profit 302.4$ 418.0$ 115.6$ 38.2% 567.9$ 763.8$ 195.9$ 34.5%Gross Margin (%) 32.5% 36.1% 360 bps 32.7% 35.5% 280 bps
SG&A 209.5$ 250.9$ 41.4$ 19.8% 413.1$ 484.0$ 70.9$ 17.2%SG&A (%) 22.5% 21.7% (80 bps) 23.8% 22.5% (130 bps)
Income from Affiliates 4.0$ 4.5$ 0.5$ 12.5% 9.6$ 10.5$ 0.9$ 9.4%
Operating Income 96.9$ 171.6$ 74.7$ 77.1% 164.3$ 290.3$ 126.0$ 76.7%Operating Margin (%) 10.4% 14.8% 440 bps 9.5% 13.5% 400 bps
Net Earnings 63.2$ 122.9$ 59.7$ 94.5% 96.8$ 210.9$ 114.1$ 117.9%
Diluted EPS* 1.11$ 2.13$ 1.02$ 91.9% 1.69$ 3.66$ 1.97$ 116.6%
* As of 6/30/08, 0.3 million shares had been repurchased in conjunction with the company’s previously announced $300 million share buyback program.
($ millions)
Mining Pulp & PaperOil & Gas Power Chemical Water
Page 29Flowserve Proprietary & Confidential
INFRASTRUCTURE INDUSTRIES
North America Latin America Europe Middle East Africa China India Rest of Asia
GLOBAL PRESENCE
GENERAL INDUSTRIESFood & Bev
Flowserve Pump Division – Q2 Segment Results
Strong Q2 Bookings, Sales, Gross Margin and Operating Margin
($ millions)
2nd Quarter Year-to-Date2007 2008 Delta ($) Delta (%) 2007 2008 Delta ($) Delta (%)
Bookings 616.2$ 736.4$ 120.2$ 19.5% 1,274.4$ 1,626.7$ 352.3$ 27.6%
Sales 525.2$ 633.2$ 108.0$ 20.6% 943.8$ 1,194.3$ 250.5$ 26.5%
Gross Profit 144.1$ 206.0$ 61.9$ 43.0% 261.1$ 380.6$ 119.5$ 45.8%Gross Margin (%) 27.4% 32.5% 510 bps 27.7% 31.9% 420 bps
SG&A 80.0$ 103.8$ 23.8$ 29.7% 156.9$ 200.4$ 43.5$ 27.7%SG&A (%) 15.2% 16.4% 120 bps 16.6% 16.8% 20 bps
Income from Affiliates 1.3$ 1.2$ (0.1)$ (7.7%) 2.8$ 1.7$ (1.1)$ (39.3%)
Operating Income 65.2$ 103.4$ 38.2$ 58.6% 107.0$ 181.8$ 74.8$ 69.9%Operating Margin (%) 12.4% 16.3% 390 bps 11.3% 15.2% 390 bps
Mining Pulp & PaperOil & Gas Power Chemical Water
Page 30Flowserve Proprietary & Confidential
INFRASTRUCTURE INDUSTRIES
North America Latin America Europe Middle East Africa China India Rest of Asia
GLOBAL PRESENCE
GENERAL INDUSTRIESFood & Bev
+32% AM Growth
Significant growth in both OE and AM
Flowserve Pump Division – Q2 Segment Results
200 bps shift in AM sales
2nd Quarter Year-to-Date2007 2008 Delta ($) Delta (%) 2007 2008 Delta ($) Delta (%)
OE 394 461 67 17% 825 1,084 259 31%Bookings 64% 63% 65% 67%
MixAM 222 275 53 24% 449 543 94 21%
36% 37% 35% 33%OE 322 374 52 17% 566 695 129 23%
Sales 61% 59% 60% 58%Mix
AM 203 259 56 29% 378 499 121 32%39% 41% 40% 42%
($ millions)
Mining Pulp & PaperOil & Gas Power Chemical Water
Page 31Flowserve Proprietary & Confidential
INFRASTRUCTURE INDUSTRIES
North America Latin America Europe Middle East Africa China India Rest of Asia
GLOBAL PRESENCE
GENERAL INDUSTRIESFood & Bev
Flow Control Division – Q2 Segment Results
Strong Q2 Bookings, Sales, Gross Margin and Operating Margin
($ millions)
2nd Quarter Year-to-Date2007 2008 Delta ($) Delta (%) 2007 2008 Delta ($) Delta (%)
Bookings 314.9$ 429.6$ 114.7$ 36.4% 624.0$ 819.5$ 195.5$ 31.3%
Sales 285.1$ 370.2$ 85.1$ 29.8% 553.7$ 670.5$ 116.8$ 21.1%
Gross Profit 101.4$ 132.9$ 31.5$ 31.1% 194.5$ 239.1$ 44.6$ 22.9%Gross Margin (%) 35.6% 35.9% 30 bps 35.1% 35.7% 60 bps
SG&A 61.4$ 71.7$ 10.3$ 16.8% 120.0$ 138.5$ 18.5$ 15.4%SG&A (%) 21.5% 19.4% (210 bps) 21.7% 20.7% (100 bps)
Income from Affiliates 1.0$ 1.5$ 0.5$ 50.0% 3.1$ 5.4$ 2.3$ 74.2%
Operating Income 41.1$ 62.8$ 21.7$ 52.8% 77.5$ 106.0$ 28.5$ 36.8%Operating Margin (%) 14.4% 17.0% 260 bps 14.0% 15.8% 180 bps
Mining Pulp & PaperOil & Gas Power Chemical Water
Page 32Flowserve Proprietary & Confidential
INFRASTRUCTURE INDUSTRIES
North America Latin America Europe Middle East Africa China India Rest of Asia
GLOBAL PRESENCE
GENERAL INDUSTRIESFood & Bev
Investment in QRC Expansion Supporting Strong Bookings and Sales Growth
Flow Solutions Division – Q2 Segment Results ($ millions)
2nd Quarter Year-to-Date2007 2008 Delta ($) Delta (%) 2007 2008 Delta ($) Delta (%)
Bookings 138.4$ 169.5$ 31.1$ 22.5% 279.0$ 340.8$ 61.8$ 22.2%
Sales 134.5$ 174.0$ 39.5$ 29.4% 263.7$ 324.6$ 60.9$ 23.1%
Gross Profit 61.2$ 79.6$ 18.4$ 30.1% 118.4$ 145.6$ 27.2$ 23.0%Gross Margin (%) 45.5% 45.7% 20 bps 44.9% 44.9% 0 bps
SG&A 36.9$ 43.8$ 6.9$ 18.7% 71.1$ 85.4$ 14.3$ 20.1%SG&A (%) 27.5% 25.2% (230 bps) 27.0% 26.3% (70 bps)
Income from Affiliates 1.7$ 1.8$ 0.1$ 5.9% 3.7$ 3.7$ -$ 0.0%
Operating Income 25.9$ 37.5$ 11.6$ 44.8% 51.0$ 63.9$ 12.9$ 25.3%Operating Margin (%) 19.2% 21.6% 240 bps 19.3% 19.7% 40 bps
Mining Pulp & PaperOil & Gas Power Chemical Water
Page 33Flowserve Proprietary & Confidential
INFRASTRUCTURE INDUSTRIES
North America Latin America Europe Middle East Africa China India Rest of Asia
GLOBAL PRESENCE
GENERAL INDUSTRIESFood & Bev
Working Capital to Support Growth in Bookings*** Advance cash commitments from customers to fund working capital; Q2 2008 YTD included $7 million related to Niigata Worthington acquisition** Q2 2008 YTD included impact of $25 million primary working capital related to Niigata Worthington acquisition
Balances for Quarter-End Periods as a % of Trailing Twelve Months Sales
Q2 Primary Working Capital
Q2 2007 12/31/07 Q2 2008($Mil) $ % $ % $ %
Receivables* 664 19.6% 667 17.7% 920 22.0%
Inventory 681 20.1% 680 18.1% 893 21.4%
Payables (405) (12.0%) (513) (13.6%) (491) (11.7%)
Primary Working Capital** 940 27.7% 834 22.2% 1,322 31.7%
Advance Cash*** (178) (5.3%) (252) (6.7%) (348) (8.3%)
Total 762 22.4% 582 15.5% 974 23.4%
Backlog 2,074 2,277 3,047
($ millions)
* Q2 2008 YTD included impact of receivable factoring elimination of approximately $67 million
Mining Pulp & PaperOil & Gas Power Chemical Water
Page 34Flowserve Proprietary & Confidential
INFRASTRUCTURE INDUSTRIES
North America Latin America Europe Middle East Africa China India Rest of Asia
GLOBAL PRESENCE
GENERAL INDUSTRIESFood & Bev
Q1 Q2 Year-to-Date2008 2008 2007 2008
Net Income 88 123 97 211 Non-cash expenses 10 32 39 42
Increase in Working Capital* (272) (116) (212) (388) Other** 1 (44) 14 (43)
Total Operating Activities (173) (5) (62) (178)
Capital expenditures (14) (24) (46) (38) Other 1 4 2 5
Total Investing Activities (13) (20) (44) (33)
Net borrowings under lines of credit - - 115 - Dividends (9) (14) (9) (23)
Proceeds of debt or other 8 10 11 18 Repurchase of common shares - (35) (45) (35)
Proceeds from stock option activity 8 2 13 10 Total Financing Activities 7 (37) 85 (30)
Effect of exchange rates 6 1 2 7 Net Decrease in Cash (173) (61) (19) (234)
Q2 Cash Flows
** Q2 2008 included $50 million optional contribution to U.S. pension plan
($ millions)
* Q2 2008 included $27 million impact of receivable factoring elimination; Q2 2008 YTD included $67 million impact of receivable factoring elimination and $25 million of primary working capital impact related to Niigata Worthington acquisition
Mining Pulp & PaperOil / Gas Power Chemical Water
Page 35Flowserve Proprietary & Confidential
INFRASTRUCTURE INDUSTRIES
North America Latin America Europe Middle East Africa China India Rest of Asia
GLOBAL PRESENCE
GENERAL INDUSTRIESFood & Bev
FY2008 Outlook
Mining Pulp & PaperOil / Gas Power Chemical Water
Page 36Flowserve Proprietary & Confidential
INFRASTRUCTURE INDUSTRIES
North America Latin America Europe Middle East Africa China India Rest of Asia
GLOBAL PRESENCE
GENERAL INDUSTRIESFood & Bev
YEYE
YE
YE
YE
$0
$1
$2
$3
$4
$5
$6
$7
$8
2004 2005 2006 2007 2008 Target
(As of 7/30/2008)2008 EPS Target
$7.20 - $7.50
$0.52$0.91
$2.00
$4.46
EPS ImprovementTraction on Key Initiatives
-
+ + ++
Business Segment Mix
OE/ AftermarketMix
Material Price Increase
Volume Leverage
Low Cost Sourcing
Operational Excellence
Pricing
- -
Negative impact Positive impact
- -
++
ERP Implementation
Selling Exp. Tied to Strong Bookings
ReducedCompliance Costs
Tight HC Mgmt
-
OE/AM &Segment mix
Division SG&A Red’n
- -
Scaling on Corp. Overhead
Estimated
structural
tax rate of
29% plus
benefits of
200 - 400
basis points
in 2008
resulting
from certain
tax items
OrganicSales Growth
SG&
AG
ross
Mar
gin
+End User Strategy
+
Tax Rate
-
Drivers of EPS Growth
Mining Pulp & PaperOil / Gas Power Chemical Water
Page 37Flowserve Proprietary & Confidential
INFRASTRUCTURE INDUSTRIES
North America Latin America Europe Middle East Africa China India Rest of Asia
GLOBAL PRESENCE
GENERAL INDUSTRIESFood & Bev
Raising our 2008 EPS target to between $7.20 and $7.50 based on strength of Q2 performance, improved visibility and strengthened outlook for FY 2008
Expect ongoing global infrastructure investments in core markets to present significant future opportunities in 2008 and beyond
Maintain focus on globalizing our assets to drive capacity needed to support growth of developing markets around the world
Continued focus on driving strong end-user aftermarket strategy and taking share
Driving cost containment, gross margin improvement and tax planning strategies to deliver strong operating profit and EPS
Maintain financial flexibility (stock buyback, dividends, acquisitions, etc.) through focus on delivering strong cash flow
Expect FY 2008 structural tax rate of approximately 29% or less going forward, and in addition we see benefits of 200-400 basis points in 2008 resulting from certain tax planning strategies and other tax items
Execution remains biggest key to success
Very Positive Outlook for FY 2008 with Continued Focus on Execution
Looking Forward (As of 7/30/2008)