Establishes Policy to Return Capital to Shareholders and Enhances Corporate Governance
Flowserve Corporation, a provider of flow control products and services for the global infrastructure markets, after a regularly scheduled meeting of its board of directors, issued 2012 earnings guidance and announced other important corporate matters. Highlights include the following:
- Expects 2012 EPS of $8.00 to $8.80
- Establishes Policy to Return 40% to 50% of Two Year Average Net Earnings to Shareholders Annually
- Completes Over One-Third of Previously Announced $300 Million Share Repurchase Program
- Replenishes Capacity of Share Repurchase Program Back to Full $300 Million
- Proposes Elimination of Classified Board Structure
- Announces 2012 Analyst Day Schedule
Flowserve said it expects 2012 EPS of $8.00 to $8.80. This range assumes current exchange rate levels, which would result in negative currency effects of approximately $0.50 when compared to average 2011 exchange rates due to the strengthening dollar.
Mark Blinn, president and chief executive officer, said, “We expect our solid backlog, strong aftermarket business and proven global operating platform to position us well for improved results in 2012. Our well-established presence in emerging high-growth markets enables us to take advantage of some attractive growth opportunities we see across our end markets and regions as we head into 2012. Our aftermarket strength in Europe, and the significant levels of production exported by the region to the Middle East and North Africa, should also help us to continue operating successfully there despite the uncertain macro-economic environment.”
Blinn added, “The proven cash flow generation capability of our business and the support of our board give us confidence that we can fully fund our capital needs and still deliver value by returning significant cash to our shareholders on an annual basis.”
The company announced that its board has endorsed a policy of annually returning to shareholders 40% to 50% of its running two year average net earnings (including the current and prior years) in the form of quarterly dividends or stock repurchases. While the company intends to adhere to this policy for the foreseeable future, any future returns of cash, whether through any combination of dividends or share repurchases, will be reviewed individually, declared by the board and implemented by management at its discretion, depending on Flowserve’s financial condition, business opportunities at the time, and market conditions.
The company also said it has repurchased approximately 1.1 million shares of its common stock for approximately $109 million during the fourth quarter of 2011 through open market transactions, representing over one third of its previously announced $300 million share repurchase authorization. During 2011, the company has repurchased a total of approximately 1.5 million shares for approximately $150 million.
The company further announced that its board at the meeting today approved the replenishment of its share repurchase authorization, providing the company with the full $300 million in remaining authorized capacity at December 15, 2011.
The company’s 2012 earnings forecast stated earlier assumes ratable share repurchases at appropriate times throughout the year in accordance with the new net earnings return policy, although the company reserves the right to take advantage of market opportunities at its discretion.
The company also reported its board intends to submit a proposal for shareholder approval at the 2012 annual meeting of shareholders to eliminate the classified board structure and to provide for the future annual election of all directors with expiring or newly elected terms.
James O. Rollans, non-executive chairman of the board, said, “We are committed to acting in the best interests of all shareholders, and we believe that eliminating the classified board structure further strengthens Flowserve’s corporate governance.”
The company will hold its annual Analyst Day in New York on February 1, 2012. The event is scheduled to start at 9:00 a.m. (ET) with presentations from Flowserve senior management, including Michael Taff, the company’s newly appointed chief financial officer.
Flowserve Corp. is a provider of fluid motion and control products and services. Operating in more than 55 countries, the company produces engineered and industrial pumps, seals and valves as well as a range of related flow management services.