Q3 2011 Earnings Call
October 28, 2011 11:00 am ET
Thomas E. Ferguson - Senior Vice President and President of Flowserve Pump Division
Tom L. Pajonas - Senior Vice President and President of Flow Control Division
Richard J. Guiltinan - Principal Financial Officer, Chief Accounting Officer, Senior Vice President of Finance and Controller
Mike Mullin - Director of Investor Relations
Mark A. Blinn - Chief Executive Officer, President and Director
William D. Bremer - Maxim Group LLC, Research Division
Hamzah Mazari - Crédit Suisse AG, Research Division
Jamie Sullivan - RBC Capital Markets, LLC, Research Division
R. Scott Graham - Jefferies & Company, Inc., Research Division
Kevin R. Maczka - BB&T Capital Markets, Research Division
Robert Barry - UBS Investment Bank, Research Division
Charles D. Brady - BMO Capital Markets U.S.
Jeffrey L. Beach - Stifel, Nicolaus & Co., Inc., Research Division
Previous Statements by FLS
» Flowserve's CEO Discusses Q2 2011 Results - Earnings Call Transcript
» Flowserve's CEO Discusses Q1 2011 Results - Earnings Call Transcript
» Flowserve's CEO Discusses Q4 2010 Results - Earnings Call Transcript
Good morning. My name is Michael, and I will be your conference operator today. At this time, I would like to welcome everyone to the Q3 2011 Earnings Conference Call. [Operator Instructions] Thank you. I would now like to turn today's conference over to Mr. Mike Mullin.
[Audio Gap] 2011 Earnings Conference Call. Today's call is being webcast with our earnings presentation via our website at flowserve.com. Simply click on the Investor Relations tab to access the webcast and the accompanying presentation. For those of you that are listening to today's call through our dial-in phone number and also wish to follow along with the earnings presentation slides via our website, please click on the Click Here to Listen Via Phone icon at the bottom of the Events Detail page. The webcast will be posted at flowserve.com for replay approximately 2 hours following the end of the call. The replay will stay on the site for on-demand review over the next few months.
Joining us today are Mark Blinn, President and CEO of Flowserve; Tom Ferguson, President of the Flow Solutions Group; Tom Pajonas, President of the Flow Control Division; and Dick Guiltinan, Senior Vice President of Finance and Chief Accounting Officer. Following our commentary, we will begin the Q&A session.
Regarding any forward-looking statements, I refer you to yesterday's earnings release and the 10-Q filing and today's earnings presentation slide deck for Flowserve's Safe Harbor statement on this topic. All of this information can be found on Flowserve's website under the Investor Relations section. I encourage you to read these statements carefully with respect to the conference call this morning. The information in this conference call, including all statements by management, plus our answers to questions related in any way to projections or any other forward-looking statements, are subject to Flowserve's Safe Harbor.
Now I would like to turn it over to Mark to begin the formal presentation. Mark?
Mark A. Blinn
Thank you, Mike, and good morning, everyone. I am pleased with our solid third quarter performance, despite continuing challenging macroeconomic conditions. We had high revenues across each of our 3 business segments, improved our operating income and reported higher earnings per share over last year. We also posted double-digit growth in our bookings versus prior year as demand improved in several key markets. I thank our employees whose hard work played a significant role in our solid performance this quarter.
Our short cycle business remains strong, with increased volume in the chemical, general industries and oil and gas markets and stable opportunities in our power market. In our long cycle business, we saw a steady improvement with smaller projects, but the very large projects remain competitive. Although our long cycle business is stabilized, we continue to see some customers delay the release of certain large infrastructure projects, which we expect will ultimately go forward. Selective bidding on the large infrastructure projects, which have been released, has helped us firm up our pricing. We delivered record quarterly aftermarket bookings, underscoring the success of our end-user strategies, which are focused on supporting our customers' repair, service and upgrade need. These strategies, which include our global QRC footprint, allow us to offer our customers' repair and upgrade services when and where those services are needed. Bottom line, is that our focus on expanding our global QRC footprint and growing our service capabilities is paying off.
Operating margins and overall profitability were up in the quarter as a result, in part, to our continued discipline in driving SG&A efficiency and controlling costs. One real success in this area has been the reduction of our corporate SG&A expenses. We were also pleased by the improvement we saw on our IPD operations where our recovery plan is starting to take affect. We continue to work towards achieving our goal of IPD operating margins between 14% and 15% by 2015.
Overall, I am very proud of what we accomplish this quarter and the progress we have made, but we still have areas for improvement. We are very focused on our operating metrics, including cash flow and working capital, both of which dick will discuss in detail later in the call. And we are also very focused on improving our operational performance, which is a key driver in our organization.
During the quarter, we announced an agreement to acquire Lawrence Pumps, which we expect to close shortly. Lawrence Pumps provides us with engineered severe service technologies, which are critical to many of our oil and gas and petrochemical customers. We are excited to welcome Lawrence Pumps into Flowserve, and we believe we can leverage our global QRC network and global sales force to expand the reach of the Lawrence products and capture unrealized aftermarket potential. The Lawrence transaction is a good example of our disciplined acquisition strategy as we remain focused on bolt-on acquisitions that have a close strategic fit, provide new flow control technologies to our product portfolio, contain synergy and unserved aftermarket opportunities and are positioned for rapid growth by leveraging our strong global sales and manufacturing capabilities. We currently believe that we can best enhance shareholder value through these types of tuck-in acquisitions. While we always look at newly arising opportunities, we have no major acquisitions in our current plan since they are inconsistent with this bolt-on strategy.
We also continue to focus on increasing shareholder value by returning cash to shareholders through share repurchases. As many of our long-term holders know, since 2007, we have essentially completed our first 2 share repurchase programs, even during the financial crisis in the fall of 2008. We've done this while continuing to invest in positioning the company for future growth around the world by realigning operations in mature markets and investing in new facilities in emerging markets. Given our strong anticipated liquidity position, we have the flexibility to take full advantage of this repurchase program to return more value to our shareholders.