Q4 2011 Earnings Call
February 23, 2012 11:00 am ET
Mike Mullin - Director of Investor Relations
Mark A. Blinn - Chief Executive Officer, President and Director
Michael S. Taff - Chief Financial Officer and Senior Vice President
Thomas E. Ferguson - Special Advisor To Chief Executive Officer
Thomas L. Pajonas - Chief Operating Officer and Senior Vice President
Hamzah Mazari - Crédit Suisse AG, Research Division
Robert Barry - UBS Investment Bank, Research Division
Charles D. Brady - BMO Capital Markets U.S.
Michael Halloran - Robert W. Baird & Co. Incorporated, Research Division
Kevin R. Maczka - BB&T Capital Markets, Research Division
Jamie Sullivan - RBC Capital Markets, LLC, Research Division
William D. Bremer - Maxim Group LLC, Research Division
David L. Rose - Wedbush Securities Inc., Research Division
Jeffrey L. Beach - Stifel, Nicolaus & Co., Inc., Research Division
Previous Statements by FLS
» Flowserve Corp. - Analyst/Investor Day
» Flowserve's CEO Discusses Q3 2011 Results - Earnings Call Transcript
» Flowserve's CEO Discusses Q2 2011 Results - Earnings Call Transcript
Good morning, my name is Christie, and I will be your conference operator today. At this time, I would like to welcome everyone to the Quarter 4 2011 Earnings Conference Call. [Operator Instructions] Thank you. Mr. Mike Mullin, you may begin your conference.
Thank you, operator. Good morning, and welcome to Flowserve's Fourth Quarter 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.
The webcast will be posted at flowserve.com for replay approximately 2 hours following the end of this call. The replay will stay on the site for on-demand review over the next several months.
Joining us today are Mark Blinn, President and CEO of Flowserve; Tom Pajonas, Our Chief Operating Officer; Mike Taff, our Chief Financial Officer; and Dick Guiltinan, our Chief Accounting Officer.
Following our commentary today, we will begin the Q&A session. Regarding any forward-looking statements, I refer you to yesterday's earnings release and 10-K filing and today's earnings presentation slide deck for Flowserve's Safe Harbor statement on this topic. All of this information can be found at Flowserve's website under the Investor Relations section. We encourage you to read these statements carefully with respect to our conference call this morning.
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 2011 results, and I am proud of the work our employees have done to position us to take advantage of what we believe are improving end markets.
Looking at our 2011 financial results, bookings were $4.7 billion, up 10.2% versus the prior year. We ended 2011 with our highest fourth quarter backlog since 2008, in spite of geopolitical challenges and considerable currency headwinds.
Our after market bookings grew 9% in 2011, demonstrating the success of our end-user strategies, which include ongoing investments in our global QRC's, as well as our strategic localization efforts. Earnings per share were $7.64, up 11% versus prior year. Our margins were negatively impacted by lower margin, large projects booked in 2010 and early 2011, as well as incremental cost associated with the few delayed shipments. Despite these margin headwinds, we had positive operating income improvement on both a year-over-year and sequential basis, as we continue to tightly manage cost.
Our 2011 results demonstrate the execution of our core strategies around global localization near key customers and resource allocations towards higher growth markets. Towards those strategies, we continued our efforts to reposition our people and capabilities in growing regions of the world, and we are seeing the benefits of these efforts in the bookings growth in emerging markets. We expect this trend to continue in 2012 in light of our additional investment in Brazil, China, India and Russia.
We also executed on our inorganic growth strategy in 2011 through the acquisition of Lawrence Pumps. In 2012, we will continue to seek out similar bolt-on opportunities, where we can purchase well-respected engineered technology that complements our product portfolio, has good brand recognition in an underserved markets. We look for opportunities where we can leverage our global sales force and aftermarket platform to grow the business and pull through additional products.
Additionally, we recently set in place a new COO leadership structure, which will help us drive our One Flowserve initiative. We are seeing that increasingly our customers want to face one supplier. Our Shell frame agreements are a great example of that trend. Our new structure will help us leverage our product offering and aftermarket capabilities for our common customers across common markets and more quickly respond to the global trend we are seeing.
We will also drive expense leverage and common processes through our unified organization. Tom will give you more details on his plan around the new structure and where he sees opportunities for leverage and operational improvement. I would just point you to the success we have had in combining our pump and seal groups, as well as Tom's success in improving FCD's operational performance and margins over the last few years. We believe our more unified leadership structure will help us drive a strong culture of operational excellence through a common focus across the company.
Looking forward to 2012, we expect continued momentum in our short cycle and aftermarket businesses, and we expect the long cycle business to remain competitive, but slowly growing. We have seen some increased coating activity around several large mega projects that have been announced or expected to be announced relatively soon. Although we are optimistic about these projects on the horizon, given the long cycle nature of this aspect of our business, we will not see an immediate impact on our results, as we must still produce lower margin, large projects in our backlog in 2012.
We expect the first half of 2012 earnings, particularly the first quarter, will be enough compared to the first half of 2011, primarily due to the impacts of the delayed projects in backlog, the strong dollar and the continuing uncertainty in Europe. Mike will go into the guidance in greater detail later in the call.