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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported):
May 31, 2001
FLOWSERVE CORPORATION
(Exact name of registrant as specified in its charter)
New York 1-13179 31-0267900
(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation) Identification No.)
222 W. Las Colinas Blvd., Suite 1500 75039
Irving, Texas (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: 972-443-6500
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ITEM 5. OTHER EVENTS
The pro forma financial information described below is being provided
concurrently in connection with a Registration Statement on Form S-3 being filed
as a shelf registration on May 31, 2001, for the offer and sale of any
combination of the common stock, preferred stock or debt securities described in
the registration statement.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(b) PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma consolidated financial statement (the
"Unaudited Pro Forma Consolidated Financial Statement") is based on the
historical consolidated financial statements of Flowserve Corporation
("Flowserve") and Ingersoll-Dresser Pump Company ("IDP") adjusted to give effect
to Flowserve's acquisition of IDP. The statement has been prepared as if the
acquisition had occurred on January 1, 2000. Flowserve acquired IDP on August 8,
2000 and, accordingly, its historical financial statements include IDP results
of operations from the acquisition date, including purchase accounting
adjustments and financing costs.
The transaction and the related adjustments are described in the
accompanying notes. The pro forma adjustments are based upon available
information and certain assumptions that we believe are reasonable. In our
opinion, all adjustments that are necessary to present fairly the pro forma data
have been made. The Unaudited Pro Forma Consolidated Financial Statement does
not purport to represent what our results of operations would actually have been
had the transactions in fact occurred on such date or to project our results of
operations for any future period or date. The Unaudited Pro Forma Consolidated
Financial Statement should be read in conjunction with the historical
consolidated financial statements of Flowserve and IDP as well as Management's
Discussion and Analysis included in the Company's Annual Report.
The unaudited pro forma information with respect to the IDP acquisition is
based on the historical financial statements of Flowserve and IDP. The IDP
acquisition has been accounted for under the purchase method of accounting. The
total purchase price for the IDP acquisition has been allocated to the tangible
and identifiable intangible assets and liabilities of the acquired businesses
based upon our estimates of their fair value with the remainder allocated to
goodwill. The purchase price allocation for the IDP acquisition is preliminary
and further refinements are likely to be made based on the resolution of
remaining contingencies.
The historical consolidated financial statements of Flowserve and IDP were
prepared in accordance with accounting principles generally accepted in the
United States.
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UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 2000
HISTORICAL IDP
---------------------------- FLOWSERVE/ ACQUISITION/FINANCING PRO FORMA
FLOWSERVE (A) IDP (B) IDP ADJUSTMENTS (1) CONSOLIDATED
------------- ----------- ----------- --------------------- ------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Net sales ............................ $ 1,538,293 $ 421,828 $ 1,960,121 $ -- $ 1,960,121
Cost of sales ........................ 1,031,381 328,233 1,359,614 (817)(a) 1,360,215
1,835(b)
225(c)
(642)(d)
------------- ----------- ----------- ----------- ------------
Gross profit ......................... 506,912 93,595 600,507 (601) 599,906
Selling and administrative
expense .......................... 335,506 88,275 423,781 (350)(a) 425,643
(2,100)(e)
(647)(f)
3,382(g)
1,577(c)
Research, engineering and
development expense .............. 24,800 2,045 26,845 -- 26,845
Restructuring expense .............. 19,364 -- 19,364 -- 19,364
Integration expense ................ 35,211 -- 35,211 -- 35,211
------------- ----------- ----------- ----------- ------------
Operating income ..................... 92,031 3,275 95,306 (2,463) 92,843
Net interest expense ............... 70,321 633 70,954 59,979(h) 130,933
Other (income) expense, net......... (1,474) 1,230 (244) -- (244)
------------- ----------- ----------- ----------- ------------
Earnings (loss) before
income taxes ....................... 23,184 1,412 24,596 (62,442) (37,846)
Provision (benefit) for
income taxes ..................... 7,876 8,023 15,899 (29,464)(i) (13,565)
------------- ----------- ----------- ----------- ------------
Earnings (loss) before
extraordinary items .............. 15,308 (6,611) 8,697 (32,978) (24,281)
Extraordinary items, net of
income taxes ..................... 2,067 -- 2,067 -- 2,067
------------- ----------- ----------- ----------- ------------
Net earnings (loss) ................ $ 13,241 $ (6,611) $ 6,630 $ (32,978) $ (26,348)
============= =========== =========== =========== ============
NET LOSS PER SHARE (BASIC AND DILUTED):
Before extraordinary items................................................................................ $ (0.64)
Extraordinary items, net of income taxes.................................................................. (0.06)
Net loss per share........................................................................................ $ (0.70)
------------
Average shares outstanding................................................................................... 37,842
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(A) Includes results of IDP from August 8, 2000, including purchase accounting
adjustments and financing costs.
(B) Reflects results of IDP for pre-acquisition period prior to August 8, 2000.
The accompanying notes are an integral part of the unaudited pro forma
consolidated financial statement.
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NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
NOTE 1: PRO FORMA ADJUSTMENTS
The following pro forma adjustments have been applied to the accompanying
historical consolidated statements of operations of Flowserve and IDP to give
effect to the IDP acquisition and the financing transactions as if they had all
occurred on January 1, 2000.
(a) Represents actuarially determined adjustment to retiree pension and
post-retirement benefits expense for hourly and salaried personnel of IDP
that, pursuant to the IDP purchase agreement, were retained by
Ingersoll-Rand, IDP's predecessor parent, net of the pension benefits
provided to IDP employees under the Flowserve plans.
(b) Represents incremental increase in depreciation expense in cost of sales
based on estimated fair market value of property, plant and equipment over
estimated useful lives of 3 to 40 years.
This adjustment is based on a preliminary allocation of the purchase price
for the IDP acquisition. The final allocation of the purchase price is
contingent upon valuations that have not been completed.
(c) Represents incremental increase in amortization expense based on estimated
fair value of other intangible assets acquired over their estimated useful
lives of approximately 17 years.
(d) Represents estimated rental expense for the Phillipsburg plant for
Flowserve's planned usage prior to the shutdown of the facility, net of
direct costs related to the facility historically incurred by IDP which are
not incremental costs to Flowserve as the Phillipsburg plant was not
acquired under the terms of the Agreement.
(e) Represents the elimination of corporate overhead expenses allocated by
Ingersoll-Rand to IDP. Pursuant to the IDP purchase agreement, this
allocation was eliminated upon closing of the IDP acquisition on August 8,
2000. Flowserve will assume and provide services with no significant
incremental cost above what it cost Flowserve to provide such services
prior to the acquisition for tax services, information technology support,
pensions and benefits administration and other overhead costs.
(f) Represents the elimination of expense recorded by IDP related to a phantom
stock incentive plan that was eliminated upon consummation of the
Acquisition. IDP personnel losing these previous incentives may be eligible
to participate in Flowserve's established stock option incentive scheme,
which generally does not result in any compensation charge.
(g) Represents incremental increase in annual goodwill amortization based on
$230.0 million of estimated goodwill over an estimated useful life of 40
years related to the IDP acquisition.
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NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(CONTINUED)
FOR THE PERIOD FROM
JANUARY 1, 2000
THROUGH
AUGUST 8, 2000
----------------------
(DOLLARS IN MILLIONS)
(h) Represents the following:
Interest on Term Loan A ($275.0 @ 9.4%) ........................................ $ 15.7
Interest on Term Loan B ($475.0 @ 10.1%) ....................................... 29.1
Interest expense associated with notes offered hereby ($380.3 @ 12.25%) ........ 28.2
Letter of credit fee ($110.0 @ 1.64% weighted average, including $30.0 under the
Revolving Credit Facility) .................................................. 1.1
--------
Cash interest expense ..................................................... 74.1
Non-cash increase in amortization associated with $46.5 million in deferred
financing costs and $5.4 million discount on the note offerings incurred in
connection with entering into the Senior Credit Facilities and issuance of
the notes offered hereby, amortized over terms ranging from 6 to 10 years ... 3.9
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Sub-total interest expense ................................................ 78.0
Elimination of interest and associated fees on borrowings repaid in connection
with the financings ......................................................... (18.0)
--------
Net Adjustment ............................................................ $ 60.0
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For each 0.125% change in the interest rates payable on the outstanding
balance under the Senior Credit Facilities and the notes offered hereby,
annual interest expense would change by $1.4 million before the effect of
income taxes.
(i) Represents income tax adjustment required to arrive at the expected pro
forma effective tax rate of 36.0% and to provide U.S. taxes on IDP
partnership earnings.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
FLOWSERVE CORPORATION
(Registrant)
/s/ Kathleen A. Giddings
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Kathleen A. Giddings
Corporate Controller (Principal Accounting Officer)
Date: May 31, 2001.
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