0000950134-01-507897.txt : 20011112
0000950134-01-507897.hdr.sgml : 20011112
ACCESSION NUMBER: 0000950134-01-507897
CONFORMED SUBMISSION TYPE: 424B3
PUBLIC DOCUMENT COUNT: 1
FILED AS OF DATE: 20011105
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: FLOWSERVE CORP
CENTRAL INDEX KEY: 0000030625
STANDARD INDUSTRIAL CLASSIFICATION: PUMPS & PUMPING EQUIPMENT [3561]
IRS NUMBER: 310267900
STATE OF INCORPORATION: NY
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: 424B3
SEC ACT: 1933 Act
SEC FILE NUMBER: 333-62044
FILM NUMBER: 1774643
BUSINESS ADDRESS:
STREET 1: 222 W LAS COLINAS BLVD
STREET 2: SUITE 1500
CITY: IRVING
STATE: TX
ZIP: 75039
BUSINESS PHONE: 9724436500
MAIL ADDRESS:
STREET 1: 222 W LAS COLINAS BLVD
STREET 2: SUITE 1500
CITY: IRVING
STATE: TX
ZIP: 75039
FORMER COMPANY:
FORMER CONFORMED NAME: DURCO INTERNATIONAL INC
DATE OF NAME CHANGE: 19970508
FORMER COMPANY:
FORMER CONFORMED NAME: DURIRON CO INC
DATE OF NAME CHANGE: 19920703
FORMER COMPANY:
FORMER CONFORMED NAME: THE DURIRON CO INC
DATE OF NAME CHANGE: 19900509
424B3
1
d91707b3e424b3.txt
PROSPECTUS SUPPLEMENT - FILE NUMBER 333-62044
Filed Pursuant to Rule 424(b)(3)
Registration No. 333-62044
The information in this preliminary prospectus supplement is not complete and
may be changed. This preliminary prospectus supplement and the accompanying
prospectus are not an offer to sell these securities and they are not soliciting
an offer to buy these securities in any jurisdiction where the offer or sale is
not permitted.
PROSPECTUS SUPPLEMENT (Subject to Completion) Issued November 5, 2001
(To Prospectus dated July 2, 2001)
6,500,000 Shares
(Flowserve Logo)
COMMON STOCK
------------------------
FLOWSERVE CORPORATION IS OFFERING 6,500,000 SHARES OF ITS COMMON STOCK.
------------------------
OUR COMMON STOCK IS LISTED ON THE NEW YORK STOCK EXCHANGE UNDER THE SYMBOL
"FLS." ON NOVEMBER 2, 2001, THE REPORTED LAST SALE PRICE OF OUR COMMON STOCK ON
THE NEW YORK STOCK EXCHANGE WAS $24.90 PER SHARE.
------------------------
INVESTING IN OUR COMMON STOCK INVOLVES RISKS. SEE "SUPPLEMENTAL RISK FACTORS"
BEGINNING ON PAGE S-10 OF THIS PROSPECTUS SUPPLEMENT AND "RISK FACTORS"
BEGINNING ON PAGE 6 OF THE ACCOMPANYING PROSPECTUS.
------------------------
PRICE $ A SHARE
------------------------
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS FLOWSERVE
-------- ------------- -----------
Per Share................................................. $ $ $
Total..................................................... $ $ $
Flowserve Corporation has granted the underwriters the right to purchase up to
an additional 975,000 shares to cover over-allotments.
The Securities and Exchange Commission and state securities regulators have not
approved or disapproved these securities, or determined if this prospectus
supplement or the accompanying prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
Morgan Stanley & Co. Incorporated expects to deliver the shares to purchasers on
, 2001.
------------------------
MORGAN STANLEY CREDIT SUISSE FIRST BOSTON
BANC OF AMERICA SECURITIES LLC
BEAR, STEARNS & CO. INC.
ABN AMRO ROTHSCHILD LLC
ROBERT W. BAIRD & CO.
, 2001
TABLE OF CONTENTS
PAGE
PROSPECTUS SUPPLEMENT ----
About This Prospectus Supplement..... ii
Prospectus Supplement Summary........ S-1
Supplemental Risk Factors............ S-10
Forward-Looking Statements........... S-11
Use of Proceeds...................... S-12
Capitalization....................... S-13
Price Range of Common Stock.......... S-14
Dividend Policy...................... S-14
Management........................... S-15
Underwriters......................... S-18
Legal Matters........................ S-20
Where You Can Find More Information
About The Company.................. S-20
PAGE
PROSPECTUS ----
About This Prospectus................ 2
Where You Can Find More
Information........................ 3
Incorporation of Information We File
With The SEC....................... 3
Forward-Looking Statements........... 4
About Flowserve Corporation.......... 5
Risk Factors......................... 6
Use of Proceeds...................... 10
Ratio of Earnings to Fixed Charges... 10
Description of Debt Securities and
Guarantees......................... 11
Description of Capital Stock......... 19
Plan of Distribution................. 22
Validity of Securities............... 24
Experts.............................. 24
------------------------
THIS DOCUMENT IS IN TWO PARTS. THE FIRST PART IS THIS PROSPECTUS
SUPPLEMENT, WHICH DESCRIBES THE TERMS OF THE OFFERING OF COMMON STOCK AND ALSO
ADDS TO AND UPDATES INFORMATION CONTAINED IN THE ACCOMPANYING PROSPECTUS AND THE
DOCUMENTS INCORPORATED BY REFERENCE INTO THE ACCOMPANYING PROSPECTUS. THE SECOND
PART IS THE ACCOMPANYING PROSPECTUS, WHICH GIVES MORE GENERAL INFORMATION, SOME
OF WHICH MAY NOT APPLY TO THE COMMON STOCK. TO THE EXTENT THERE IS A CONFLICT
BETWEEN THE INFORMATION CONTAINED IN THIS PROSPECTUS SUPPLEMENT, ON THE ONE
HAND, AND THE INFORMATION CONTAINED IN THE ACCOMPANYING PROSPECTUS OR ANY
DOCUMENT INCORPORATED BY REFERENCE THEREIN, ON THE OTHER HAND, THE INFORMATION
IN THIS PROSPECTUS SUPPLEMENT SHALL CONTROL.
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS
SUPPLEMENT AND CONTAINED, OR INCORPORATED BY REFERENCE, IN THE ACCOMPANYING
PROSPECTUS. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT
IS DIFFERENT. WE ARE OFFERING TO SELL, AND SEEKING OFFERS TO BUY, SHARES OF
COMMON STOCK ONLY IN JURISDICTIONS WHERE OFFERS AND SALES ARE PERMITTED. THE
INFORMATION CONTAINED IN THIS PROSPECTUS SUPPLEMENT AND CONTAINED, OR
INCORPORATED BY REFERENCE, IN THE ACCOMPANYING PROSPECTUS IS ACCURATE ONLY AS OF
THE RESPECTIVE DATES THEREOF, REGARDLESS OF THE TIME OF DELIVERY OF THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS, OR ANY SALE OF COMMON
STOCK.
i
ABOUT THIS PROSPECTUS SUPPLEMENT
This prospectus supplement contains the terms of this offering. A
description of our capital stock is contained in the accompanying prospectus.
This prospectus supplement, or the information incorporated by reference in the
accompanying prospectus, may add, update or change information in the
accompanying prospectus.
It is important for you to read and consider all information contained in
this prospectus supplement and the accompanying prospectus, including the
documents incorporated by reference therein, in making your investment decision.
You should also read and consider the information in the documents we have
referred you to in "Where You Can Find More Information About The Company"
below.
ii
PROSPECTUS SUPPLEMENT SUMMARY
This summary highlights selected information about us and this offering.
This summary is not complete and does not contain all of the information that is
important to you. You should carefully read this entire prospectus supplement,
the accompanying prospectus and the other documents we refer to and incorporate
by reference for a more complete understanding of this offering. In addition, we
incorporate important business and financial information in the accompanying
prospectus by reference. Unless otherwise indicated, all information in this
prospectus supplement assumes that the underwriters do not exercise their
over-allotment option.
FLOWSERVE
OVERVIEW
We believe that we are the largest manufacturer and aftermarket service
provider of comprehensive flow control systems in the world. We have been in the
flow control industry for over 125 years. We develop and manufacture
precision-engineered flow control equipment for critical service applications
requiring high reliability. The flow control system components we produce
include pumps, valves and mechanical seals. Our products and services are used
in industrial applications, including in the petroleum, chemical, power
generation and water resources industries. We believe that we have the most
comprehensive product portfolio and most geographically diversified scope of
operations in the industry.
In 2000, we had sales of $1.5 billion, EBITDA, before integration and
restructuring charges, of $205.1 million and net earnings of $13.2 million. On a
pro forma basis in 2000, reflecting our acquisition of Ingersoll-Dresser Pump
Company, or IDP, a leading pump manufacturer, we had sales of $2.0 billion,
EBITDA, before integration and restructuring charges, of $229.1 million and a
net loss of $26.3 million. For the nine months ended September 30, 2001, we had
sales of $1.4 billion, EBITDA, before integration and restructuring charges, of
$196.8 million and a net loss of $0.1 million.
We sell our products and services to more than 1,000 companies, including
some of the world's leading engineering and construction firms, original
equipment manufacturers, or OEMs, distributors and end users. Our sales mix by
industry of end use in 2000, on a pro forma basis, consisted of petroleum (31%),
chemical (23%), power generation (19%), general industrial (7%), water resources
(6%) and other industries (14%). Some of our top customers include Asea Brown
Boveri, BASF, Bayer, Bechtel, BP Amoco, Dow Chemical, Duke Energy, DuPont,
Eastman Chemical, ExxonMobil, Royal Dutch/Shell, Saudi Aramco, Texaco,
TotalFinaElf and the United States Navy. No single customer accounted for more
than 3% of our total revenues in 2000. Our revenues by geographic region in
2000, on a pro forma basis, consisted of the United States (52%), Europe, Middle
East and Africa (26%), Latin America (9%), Asia (9%) and Canada (4%).
We have an installed base of approximately 1,100,000 pumps worldwide, which
we believe represents the most extensive installed base of industrial pumps in
the industry. Our aftermarket parts and services business provides us with a
steady source of revenues at higher margins than original equipment sales and
allows us to be in frequent contact with our customers, provide better customer
service and generate additional sales. In 2000, we derived 51% of our pro forma
sales from aftermarket products and services.
OUR COMPETITIVE STRENGTHS
GLOBAL LEADER IN FLOW CONTROL MARKET. We believe we are the largest
provider of comprehensive flow control systems in the world, offering an
extensive range of pumps, valves, mechanical seals and aftermarket services. We
are the largest pump manufacturer serving the petroleum, chemical and power
generation industries and the second largest overall pump manufacturer in the
world. We believe we are also the largest independent provider of aftermarket
products and services for the flow control industry. Many of our large customers
operate globally and seek providers that can offer a broad range of products and
services on a global
S-1
basis. Our widely recognized global brands, extensive breadth of product and
service offerings and worldwide presence position us well to serve our
customers' flow control needs and capture additional business.
LARGE INSTALLED EQUIPMENT BASE WITH STABLE, CONSISTENT AFTERMARKET
REVENUE. We believe our global installed base of approximately 1,100,000 pumps
is the largest in the industry and provides us with a unique platform to grow
our aftermarket services business. A large installed equipment base is critical
to securing on-going incremental revenues as industry analysts suggest that a
high percentage of the total lifecycle cost of a pump consists of aftermarket
products and services, such as replacement parts, mechanical seals and
maintenance. In addition, our installed base continues to require maintenance
and the installation of replacement parts. This provides us with a steady source
of aftermarket revenues at higher margins than our original equipment business.
When outsourced, a majority of replacement parts orders and aftermarket services
business is awarded to the original equipment manufacturer. Our acquisition of
IDP nearly tripled our installed pump base and we are continuing to leverage our
extensive service network of approximately 150 service and repair centers to
cross-sell aftermarket products and services to IDP's pump customers.
GLOBAL MANUFACTURING AND SERVICE CAPABILITIES. We believe we have one of
the most extensive global manufacturing, marketing and service networks in the
industry, with approximately 50 manufacturing facilities and approximately 150
service centers located in 30 countries. Our global operations help us serve our
customers' manufacturing and aftermarket service needs on a 24-hour basis.
Because of the critical nature of the applications in which our products are
used, immediate response times are important to capture and retain our
customers' business. Original equipment sales benefit from our global presence,
as our customers often require real-time design and engineering assistance for
new projects.
BROAD AND DIVERSE CUSTOMER BASE. We sell our products and services to more
than 1,000 companies globally, including the world's leading engineering and
construction firms, OEMs, distributors and end users. In 2000, no one customer
accounted for more than 3% of our revenues and our top ten customers accounted
for approximately 10% of our revenues. Our customers operate in many industries
throughout the world, including petroleum, chemical, power generation and water
resources. Our acquisition of IDP significantly increased our pump market share
in the power generation and water resources industries, both of which are
expected to continue to grow faster than the overall flow control industry.
COMPREHENSIVE PRODUCT OFFERINGS WITH LEADING BRANDS. We offer the most
comprehensive array of products and services in the industry. This breadth
enables us to provide a "one-stop shop" for our customers, who increasingly
require comprehensive flow control solutions including pumps, valves, seals and
services. Many of our brands have an extensive history within our industry and
are well-known for their superior quality, reliability and high performance,
including Flowserve(R), Byron Jackson(R), Durco(R), Valtek(R), IDP, BW Seals(R)
and Durametallic(R). Our brand identity has created customer loyalty and helps
us capture additional business, as well as maintain existing business,
particularly as our customers look to procure equipment from fewer
manufacturers.
EXPERIENCED MANAGEMENT TEAM. Our senior management team has significant
experience in industrial manufacturing. In addition, this team has substantial
experience in the acquisition and integration of businesses, supply chain
management and lean manufacturing techniques, all of which represent activities
that are critical to our long-term growth strategy. Our operating division
managers are among the most experienced in the flow control industry, with an
average of more than 20 years of experience.
OUR BUSINESS STRATEGY
BECOME THE LOW COST PRODUCER. We continue to lower costs, enhance product
quality, reduce manufacturing inefficiency and increase product throughput. We
believe the initiatives that we have in process will improve the efficiency of
our overall operations and help increase our margins and profitability. The
initiatives we have in process include the following:
-- Complete the Integration of IDP and Capitalize on Operating
Synergies. We have substantially integrated IDP into our business
and have begun to capitalize on the significant operating and
financial benefits of the acquisition. As of September 30, 2001, we
have generated cost savings of
S-2
approximately $66 million since the completion of the IDP
acquisition. This amount represents an annual run rate of
approximately $90 million, which is 20% higher than our originally
announced target of $75 million. We have achieved, and are continuing
to achieve, cost savings and operating synergies through: (i)
eliminating redundant administrative overhead, (ii) cutting
overlapping sales personnel, (iii) shifting production to lower cost
facilities, and (iv) realizing volume procurement savings and other
opportunities.
-- Focus on Supply Chain Management. We utilize supply chain management
to reduce procurement costs. We have implemented several initiatives,
including consolidating vendors to receive a higher quantity-based
discount, creating alliances, standardizing procedures, negotiating
more favorable contract terms and conditions and forming dedicated
teams for procurement of raw materials on a company-wide basis.
-- Increase Operational Efficiency. In 2001, we introduced a Continuous
Improvement Process, or CIP, throughout our company to increase our
operational efficiency. CIP utilizes tools such as lean
manufacturing, 6 Sigma Methodology and constraint management to
improve quality and processes, reduce product cycle times and lower
costs. The 6 Sigma Methodology is a statistically-based method of
improving product quality and streamlining manufacturing and
transactional processes, while constraint management identifies and
assists in alleviating bottlenecks in the production process. For
example, in 2001, as a result of our introduction of CIP, we were
able to close our Temecula, California seal manufacturing facility
and integrate it into our Kalamazoo, Michigan and Tlaxcala, Mexico
facilities, which resulted in significant productivity improvements
and reductions in fixed costs and inventory. In addition, in our
Springville, Utah and Coslada, Spain facilities, we reduced set-up
times by 40-60% and improved productivity and decreased inventories,
each by 15-25%. Furthermore, we plan to utilize e-business tools to
digitize our processes and activities to reduce cost.
-- Improve Working Capital Management. We are currently making
improvements to our utilization of working capital, with a particular
focus on improving the management of our inventory and accounts
receivable. Our efforts are comprehensive, involving all areas of our
operations. In the near term, we expect to achieve improved results
in inventory turns and accounts receivable days outstanding.
GROW REVENUES ORGANICALLY IN EXCESS OF MARKET RATE. Our "customer first"
philosophy, customer partnering relationships and emphasis on providing customer
solutions should enable us to grow our revenues. Our specific organic growth
initiatives include:
-- Grow Our Aftermarket Services Business. Our aftermarket products and
services business provides us with recurring revenues and margins
that are higher than those on our original equipment sales. It also
enables us to remain close to our customers, quickly address their
requirements and identify potential new sales opportunities.
Historically, many of our customers have utilized their in-house
service capabilities and outsourced only the most technical portion
of their service needs. However, customers are increasingly utilizing
third-party aftermarket service providers like us to reduce their
fixed costs and improve profitability and we are aggressively
pursuing these opportunities. In addition, the substantial installed
pump base we gained through our acquisition of IDP provides us with a
strong platform from which to expand our aftermarket services
business. IDP's installed pump base represents significant and highly
attractive untapped potential, as IDP had traditionally been focused
on manufacturing pumps for the original equipment market without
providing significant aftermarket services.
-- Introduce New Products. We are continuing to expand our business by
developing new, differentiated products in each of our business
segments. We work closely with our customers to develop new products
or enhancements to existing products that improve performance and
meet their needs. For example, we have introduced, and have in
service, a multi-phase engineered pump that pumps both gases and
liquids, thereby reducing the need for separation plants used in the
petroleum industry. This product may be used in onshore, offshore and
sub-sea applications. In addition, we have developed and introduced
the Mach I valve for use in the chemical industry. This quarter-turn
S-3
manual valve requires lower turning torque, provides higher standard
temperature and pressure ratings and provides ease of repair
features.
-- Sell Our Existing Products to New Geographic Markets and to New
Industries. We are continuing to expand our geographic and industry
reach with existing products. For example, through our cross-
selling, we recently introduced our StarPac control valve for use in
oil and gas production as a gas lift automation solution. This
solution increases the overall production of a well by providing
constant optimal gas flow rates, stabilizing casing pressure and
preventing surging. We believe there are also attractive growth
opportunities in international markets, particularly in Latin America
and the Asia-Pacific region, and we will continue to leverage our
global presence to further penetrate these markets.
PURSUE STRATEGIC ACQUISITIONS. We intend to be a consolidator in our
fragmented industry and to pursue complementary strategic acquisitions to grow
our business. We will continue to evaluate acquisitions in each of our business
segments. In evaluating potential acquisitions we will focus on opportunities to
expand our customer base, broaden our product line, realize operating synergies
and enter new markets. Our management team has extensive experience in acquiring
and integrating companies, having completed 23 acquisitions since 1990 and
having closed or consolidated more than a dozen facilities.
BUSINESS SEGMENTS
We conduct our operations through three complementary segments: pumps, flow
solutions and flow control.
PUMPS (53% OF 2000 PRO FORMA SALES). Our pump division designs,
manufactures and distributes engineered pumps and pump systems, replacement
parts and related equipment principally to the petroleum, water resources and
power generation industries. We also make and sell specialized industrial pumps
which serve corrosive applications in the chemical process industry, and similar
pumps for general industry. We believe we are the largest pump manufacturer
serving the petroleum, chemical and power generation industries.
FLOW SOLUTIONS (33% OF 2000 PRO FORMA SALES). Our flow solutions division
designs, manufactures and distributes mechanical seals and sealing systems and
repairs, services and provides parts for flow control equipment. Most industrial
pumps require mechanical seals to be replaced throughout the products' useful
lives. The replacement of mechanical seals is an integral part of aftermarket
services. Our mechanical seals are used on a variety of pumps, mixers,
compressors, steam turbines and specialty equipment, primarily in the petroleum,
chemical, processing, power generation and water resources industries, as well
as in general industrial end-markets. Through our global network of
approximately 150 service and quick response centers, we provide service, repair
and diagnostic services for maintaining flow control systems components. We
believe we are the largest independent provider of aftermarket products and
services for the flow control industry.
FLOW CONTROL (14% OF 2000 PRO FORMA SALES). Our flow control division
designs, manufactures and distributes control valves, manual valves, actuators
(which control the valves) and related equipment. Our valve products are an
integral part of a flow control system and are used to control the flow of
liquids and gases. Substantially all of our control valves are specialized and
engineered to perform specific functions within a flow control system. Our valve
products are primarily used by companies that operate in the petroleum, chemical
and power generation industries.
INDUSTRY OVERVIEW
The flow control industry generates $50-57 billion per year in worldwide
sales and includes pumps, valves, mechanical seals and aftermarket services.
According to industry sources, engineered pumps account for approximately $23
billion, valves approximately $21 billion, seals approximately $2-3 billion and
aftermarket services approximately $8-10 billion of annual worldwide sales. The
engineered and industrial pump segment in which we operate excludes
non-industrial applications, such as residential, which represent a market of
S-4
approximately equivalent size to the industrial segment. Products and services
in the flow control industry are sold to engineering and construction firms,
OEMs, distributors and end users throughout the world.
Quality and reliability of equipment are critical to our customers'
operations because the failure of a pump, valve or seal may halt the flow
process, thereby reducing productivity and plant efficiency while increasing
costs. Of our product types, at the time of the original equipment purchase,
engineered pumps are generally the most expensive followed by control valves,
specialized industrial pumps, mechanical seals and manual valves. During the
replacement cycle, seals may have to be replaced every few days in highly
corrosive applications, while pumps and valves can run for months or years
before needing parts, repairs or replacement.
The flow control industry remains highly fragmented, despite consolidation
activity over the past ten years. Competition for original equipment sales is
primarily among a select group of large companies that are industry leaders
operating on a global scale. This competition is generally based on price,
engineering expertise, delivery times, breadth of product offering, contract
terms, previous installation history, application expertise and reputation for
quality. In the pump segment, there are more than 500 companies, with the top
ten pump companies accounting for less than 40% of total 2000 estimated
worldwide annual pump sales. In the valves segment, we believe that the top ten
domestic manufacturers generate less than 25% of domestic sales. The aftermarket
services sector is extremely fragmented as many end users either use in-house
resources or buy service from small, local operators.
RECENT DEVELOPMENTS
On October 22, 2001, we reported earnings for the nine months ended
September 30, 2001 of $0.83 per share, excluding integration expenses. This
compares with a prior period net loss of $0.22 per share on a pro forma basis,
and reported net income of $0.84 per share, calculated on the same basis. For
the nine months ended September 30, 2001, we had sales of $1,378.2 million,
compared with pro forma sales of $1,418.4 million and reported sales of $996.6
million in the same period last year. In addition, in the nine months ended
September 30, 2001, our net loss was $0.1 million, compared with pro forma net
loss of $28.1 million and reported net earnings of $11.5 million for the same
period last year. Our EBITDA, before integration and restructuring charges, for
the nine months ended September 30, 2001 was $196.8 million, compared with
$142.7 million on a pro forma basis and $118.7 million as reported during the
same period last year.
------------------------
Our executive offices are located at 222 West Las Colinas Boulevard, Suite
1500, Irving, Texas 75039, and our telephone number is (972) 443-6500.
S-5
THE OFFERING
Common stock offered by us.... 6,500,000 shares
Common stock to be outstanding
after this offering........... 44,331,979 shares
Use of proceeds............... We intend to use the net proceeds from this
offering to repay indebtedness. We are
currently seeking consents from lenders under
our senior credit facilities to allow us to use
the net proceeds from this offering to
repurchase or redeem a portion of our
outstanding senior subordinated notes. See "Use
of Proceeds."
New York Stock Exchange
symbol...................... "FLS"
The number of shares of our common stock to be outstanding after this
offering is based on 37,831,979 shares outstanding as of September 30, 2001, and
excludes:
- 3,652,393 shares of treasury stock;
- 3,615,614 shares of common stock issuable upon the exercise of
outstanding stock options at a weighted average exercise price of $21.14
per share; and
- 776,868 shares of common stock reserved for issuance under our stock
option plans.
------------------------
Unless we specifically state otherwise, the information in this prospectus
supplement does not take into account the sale of up to 975,000 shares of common
stock which the underwriters have the option to purchase from us to cover
over-allotments.
S-6
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
We are providing the following consolidated financial information to aid
you in your analysis of the financial aspects of Flowserve Corporation. You
should read this information in conjunction with our consolidated financial
statements and the related notes contained in our annual, quarterly and other
reports that we have filed with the Securities and Exchange Commission.
The following summary consolidated financial information for each of the
years in the three-year period ended December 31, 2000 has been derived from our
audited historical consolidated financial statements. The following summary
unaudited pro forma consolidated financial information for the year ended
December 31, 2000 has been derived from the unaudited pro forma consolidated
financial statement contained in our Current Report on Form 8-K filed with the
Securities and Exchange Commission on May 31, 2001, which gives effect to the
August 8, 2000 acquisition of Ingersoll-Dresser Pump Company as if such
transaction had been consummated on January 1, 2000. The following summary
consolidated financial information for the latest 12 months ended September 30,
2001 has been derived using our unaudited historical consolidated financial
statements for the nine months ended September 30, 2000 and 2001 and our audited
historical consolidated financial statements for the year ended December 31,
2000.
The following summary consolidated financial information for the nine
months ended September 30, 2000 and 2001 has been derived from our unaudited
historical consolidated financial statements. The following summary unaudited
pro forma consolidated financial information for the nine months ended September
30, 2000 has been derived from the unaudited pro forma consolidated financial
information contained in our Quarterly Report on Form 10-Q for the nine months
ended September 30, 2001, which gives effect to the August 8, 2000 acquisition
of IDP as if such transaction had been consummated on January 1, 2000.
The unaudited pro forma financial information for the nine months ended
September 30, 2000 and for the year ended December 31, 2000 does not reflect any
operating efficiencies and cost savings that we may achieve with respect to the
combined entities nor any expense associated with achieving these benefits. The
unaudited pro forma consolidated financial information does not purport to
represent the operating results that would have occurred had the transaction
been consummated on January 1, 2000, or to project our results of operations for
any future period.
S-7
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
LATEST 12
YEAR ENDED DECEMBER 31, MONTHS ENDED
-------------------------------------------- SEPTEMBER 30,
1998 1999 2000 2000 2001
ACTUAL ACTUAL ACTUAL PRO FORMA ACTUAL
-------- -------- -------- ----------- -------------
(IN MILLIONS, EXCEPT PER COMMON SHARE DATA)
RESULTS OF OPERATIONS:
Sales..................................... $1,083.1 $1,061.3 $1,538.3 $1,960.1 $1,919.9
Cost of sales............................. 667.7 697.9 1,031.4 1,360.2 1,299.9
-------- -------- -------- -------- --------
Gross profit.............................. 415.4 363.4 506.9 599.9 620.0
Selling, general and administrative
expense............................... 292.0 301.5 360.3 452.5 414.6
Restructuring and integration expense... 38.3 30.1 54.6 54.6 76.8
-------- -------- -------- -------- --------
Operating income.......................... 85.1 31.8 92.0 92.8 128.6
Interest expense, net................... 11.4 14.7 70.3 130.9 125.5
Other (income) expense, net............. 0.5 (1.2) (1.5) (0.3) 0.5
-------- -------- -------- -------- --------
Earnings (loss) before income taxes....... 73.2 18.3 23.2 (37.8) 2.6
Provision (benefit) for income taxes.... 25.5 6.1 7.9 (13.6) 1.0
Extraordinary items, net of income
taxes................................. -- -- 2.1 2.1 --
Cumulative effect of change in
accounting principle, net of income
taxes................................. (1.2) -- -- -- --
-------- -------- -------- -------- --------
Net earnings (loss)....................... $ 48.9 $ 12.2 $ 13.2 $ (26.3) $ 1.6
======== ======== ======== ======== ========
PER COMMON SHARE:
Net earnings (loss) (basic and
diluted).............................. $ 1.23 $ 0.32 $ 0.35 $ (0.70) $ 0.04
Dividends paid.......................... 0.56 0.56 -- -- --
Book value(1)........................... 9.15 8.24 8.14 7.65
OTHER FINANCIAL DATA:
Bookings................................ $1,082.5 $1,039.3 $1,521.6 $2,036.8 $2,024.9
EBITDA(2)............................... 162.2 102.7 205.1 229.1 283.2
Depreciation and amortization........... 39.3 39.6 57.0 81.4 78.3
Capital expenditures.................... 38.2 40.5 27.7 33.0 39.7
Net earnings per common share (diluted)
before special items(3)............... 1.88 1.04 1.35 0.28 1.32
BALANCE SHEET DATA (as of end of period):
Working capital......................... $ 268.2 $ 258.1 $ 464.0
Total assets............................ 870.2 838.2 2,110.1
Long-term debt.......................... 186.3 198.0 1,111.1
Shareholders' equity.................... 344.8 308.3 304.9
------------
(1)Calculated as shareholders' equity as of the end of the period divided by
common shares issued, less shares held in treasury.
(2)EBITDA means net earnings before interest, income taxes, depreciation,
amortization, restructuring and integration expense, cumulative effect of
change in accounting principles and extraordinary items. EBITDA is commonly
used as an analytical indicator and also serves as a measure of leverage
capacity and debt servicing ability. EBITDA should not be considered as an
alternative to net income, cash flows or any other items calculated in
accordance with generally accepted accounting principles or as an indicator
of our operating performance. The definition of EBITDA used herein may differ
from the definition of EBITDA used by other companies.
(3)Special items in 1998 include restructuring and integration expense of $38.3
million, an obligation under an executive employment agreement of $3.8
million and the benefit of the cumulative effect of an accounting change of
$1.2 million. Special items in 1999 include restructuring and integration
expense of $30.1 million, other nonrecurring items for inventory and fixed
asset impairment of $5.1 million and certain costs related to facility
closures of $5.8 million. Special items in 2000 include restructuring and
integration expense of $54.6 million and an extraordinary item of $2.1
million net of tax. Special items for the latest 12 months ended September
30, 2001 include restructuring and integration expense of $76.8 million. Net
earnings per common share before special items should not be considered an
alternative to net earnings (loss) per share calculated in accordance with
generally accepted accounting principles or as an indicator of our operating
performance.
S-8
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
NINE MONTHS ENDED
SEPTEMBER 30,
-------------------------------
2000 2000 2001
ACTUAL PRO FORMA ACTUAL
-------- --------- --------
(IN MILLIONS, EXCEPT PER COMMON
SHARE DATA)
RESULTS OF OPERATIONS:
Sales....................................................... $ 996.6 $1,418.4 $1,378.2
Cost of sales............................................... 664.1 992.9 932.7
-------- -------- --------
Gross profit................................................ 332.5 425.5 445.5
Selling, general and administrative expense............... 250.4 342.6 304.7
Restructuring and integration expense..................... 27.6 27.6 49.8
-------- -------- --------
Operating income............................................ 54.5 55.3 91.0
Interest expense, net..................................... 36.3 96.9 91.5
Other (income) expense, net............................... (2.2) (1.0) (0.3)
-------- -------- --------
Earnings (loss) before income taxes......................... 20.4 (40.6) (0.2)
Provision (benefit) for income taxes...................... 6.8 (14.6) (0.1)
Extraordinary items, net of income taxes.................. 2.1 2.1 --
-------- -------- --------
Net earnings (loss)......................................... $ 11.5 $ (28.1) $ (0.1)
======== ======== ========
PER COMMON SHARE:
Net earnings (loss) (basic and diluted)................... $ 0.30 $ (0.74) $ --
Book value(1)............................................. 7.46 7.65
OTHER FINANCIAL DATA:
Bookings.................................................. $1,019.3 $1,534.5 $1,522.7
EBITDA(2)................................................. 118.7 142.7 196.8
Depreciation and amortization............................. 34.4 58.8 55.7
Capital expenditures...................................... 16.4 21.7 28.3
Net earnings (loss) per common share before special
items(3)............................................... 0.84 (0.22) 0.83
BALANCE SHEET DATA (as of end of period):
Working capital........................................... $ 462.1 $ 514.5
Total assets.............................................. 2,046.3 2,098.5
Long-term debt............................................ 1,121.0 1,158.9
Shareholders' equity...................................... 279.2 289.6
------------
(1)Calculated as shareholders' equity as of the end of the period divided by
common shares issued, less shares held in treasury.
(2)EBITDA means net earnings before interest, income taxes, depreciation,
amortization, restructuring and integration expense, cumulative effect of
change in accounting principles and extraordinary items. EBITDA is commonly
used as an analytical indicator and also serves as a measure of leverage
capacity and debt servicing ability. EBITDA should not be considered as an
alternative to net income, cash flows or any other items calculated in
accordance with generally accepted accounting principles or as an indicator
of our operating performance. The definition of EBITDA used herein may differ
from the definition of EBITDA used by other companies.
(3)Special items for the nine months ended September 30, 2000, on an actual and
pro forma basis, include restructuring and integration expense of $27.6
million and an extraordinary item of $2.1 million net of tax. Special items
for the nine months ended September 30, 2001 include integration expense of
$49.8 million. Net earnings (loss) per common share before special items
should not be considered an alternative to net earnings (loss) per share
calculated in accordance with generally accepted accounting principles or as
an indicator of our operating performance.
S-9
SUPPLEMENTAL RISK FACTORS
Before making an investment in shares of our common stock, you should
carefully consider the following Supplemental Risk Factors and the Risk Factors
contained in the accompanying prospectus, in addition to the other information
included or incorporated by reference in this prospectus supplement and the
accompanying prospectus.
REPERCUSSIONS FROM THE TERRORIST ACTS COMMITTED IN THE UNITED STATES COULD HARM
OUR BUSINESS OPERATIONS AND ADVERSELY IMPACT OUR ABILITY TO MEET OUR
EXPECTATIONS AND OTHER FORWARD-LOOKING STATEMENTS CONTAINED IN THIS PROSPECTUS
SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS.
The terrorist attacks on September 11, 2001, have caused instability in the
world's markets. There can be no assurance that the current armed hostilities
will not escalate or that these terrorist attacks, or the United States'
responses to them, will not lead to further acts of terrorism and civil
disturbances in the United States or elsewhere, which may further contribute to
the economic instability in the United States and the other markets we serve.
Specifically, such continued instability could cause a reduction in, or impact
the timing of, product sales to companies in certain industries from which we
derive substantial revenues. We believe that we have already experienced some
negative effects on our business from the events of September 11. For example,
certain of our customers implemented heightened security measures at their
plants and placed additional restrictions on the ability of our sales engineers
to meet with their employees in these plants. Armed conflict, civil unrest,
additional terrorist activities and the attendant political instability and
societal disruption may reduce demand for our products, which could harm our
business.
SUBSTANTIAL SALES OF OUR COMMON STOCK COULD CAUSE OUR STOCK PRICE TO DECLINE.
If our existing shareholders sell a large number of shares of our common
stock or the public market perceives that existing shareholders might sell
shares of common stock, the market price of our common stock could significantly
decline. All of the shares offered by this prospectus supplement and the
accompanying prospectus will be freely tradable without restriction or further
registration under the federal securities laws unless purchased by an
"affiliate" as that term is defined in Rule 144 under the Securities Act of
1933. The outstanding shares subject to lock-up agreements between certain of
our directors and executive officers and the underwriters may be sold 90 days
after the effective date of this offering.
OUR STOCK PRICE HAS BEEN, AND MAY CONTINUE TO BE, VOLATILE, WHICH COULD RESULT
IN SUBSTANTIAL LOSSES FOR INVESTORS PURCHASING SHARES IN THIS OFFERING.
INVESTORS MAY NOT BE ABLE TO RESELL THEIR SHARES AT OR ABOVE THE PRICE TO THE
PUBLIC.
The trading price of our common stock has been, and may continue to be,
volatile. The stock market in general and the market for companies with
significant sales to clients in cyclical industries, such as petroleum and
chemicals, have experienced volatility. Many factors contribute to this
volatility, including, but not limited to:
-- changes in marketing, product pricing and sales strategies or
development of new products by us or our competitors;
-- changes in domestic or foreign governmental regulations;
-- variations in our results of operations;
-- perceptions about market conditions in the industries we serve; and
-- general market conditions.
This volatility may have a significant impact on the market price of our
common stock. Moreover, the possibility exists that the stock market could
experience extreme price and volume fluctuations unrelated to operating
performance. Such volatility makes it difficult to ascribe a stable valuation to
a shareholder's holdings of our common stock.
S-10
FORWARD-LOOKING STATEMENTS
This prospectus supplement, the accompanying prospectus and the documents
incorporated by reference therein contain various "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, and include assumptions about future
market conditions, operations and results. You can identify these statements by
forward-looking words such as "anticipate," "believe," "could," "estimate,"
"expect," "intend," "may," "should," "will" and "would" or similar words. You
should read statements that contain these words carefully because they discuss
our future expectations, contain projections of our future results of operations
or of our financial position or state other "forward-looking information". We
believe that it is important to communicate our future expectations to our
investors. However, there may be events in the future that we are not able to
accurately predict or control. The factors listed in the "Supplemental Risk
Factors" section in this prospectus supplement, in the "Risk Factors" section in
the accompanying prospectus, as well as any cautionary language in this
prospectus supplement, the accompanying prospectus and documents incorporated by
reference therein provide examples of risks, uncertainties and events that may
cause our actual results to differ materially from the expectations we describe
in our forward-looking statements.
We undertake no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
Before you invest in our common stock, you should be aware that the occurrence
of the events described in these risk factors, and those discussed elsewhere in
this prospectus supplement, the accompanying prospectus and in the documents
incorporated by reference therein could have a material adverse effect on our
business, results of operations, financial position and the value of our common
stock. Accordingly, you should not rely on the accuracy of predictions contained
in forward-looking statements.
S-11
USE OF PROCEEDS
We expect to receive net proceeds from the sale of our common stock in this
offering of approximately $153.3 million, or $176.3 million if the underwriters'
over-allotment option is exercised in full, assuming a public offering price of
$24.90 per share and after deducting the underwriting discounts and commissions
and estimated offering expenses payable by us.
We are currently seeking consents from lenders under our existing senior
credit facilities to allow us to use the net proceeds from this offering to
repurchase or redeem a portion of our outstanding 12 1/4% senior subordinated
notes due 2010. While we currently expect to receive such consents, there can be
no assurance that we will receive them on a timely basis or at all. To the
extent we do not receive the necessary consents to allow such repurchases or
redemption, we will use the net proceeds from this offering to repay a portion
of the amounts outstanding under our senior credit facilities. Our senior credit
facilities are composed of a $275 million term A loan maturing in 2006, a $475
million term B loan maturing in 2008 and a $300 million revolving line of credit
maturing in 2006. At November 2, 2001, interest rates for the various components
of our senior credit facilities ranged from approximately 5.06% to 7.00%.
S-12
CAPITALIZATION
The following table sets forth our cash and capitalization as of September
30, 2001, (1) on an actual basis and (2) on an as adjusted basis to give effect
to the sale of 6,500,000 shares of our common stock in this offering at an
assumed offering price of $24.90 per share and the application of the net
proceeds, assuming such proceeds are applied to redeem a portion of our
outstanding senior subordinated notes pursuant to the optional redemption
provisions of such notes. This table should be read in conjunction with our
consolidated financial statements and related notes incorporated by reference
herein.
AS OF
SEPTEMBER 30, 2001
-------------------
AS
ACTUAL ADJUSTED
-------- --------
(IN MILLIONS)
Cash and cash equivalents................................... $ 24.9 $ 24.9
======== ========
Long-term debt:
Senior credit facilities:
Revolving credit facility(1)......................... $ 86.0 $ 86.0
Term loan facilities................................. 732.9 729.4
Senior subordinated notes(2)(3)........................... 376.4 244.7(4)
Other long-term debt...................................... 0.2 0.2
-------- --------
Total long-term debt.............................. 1,195.5 1,060.3
-------- --------
Shareholders' equity:
Serial preferred stock, $1.00 par value:
Shares authorized--1,000,000
Shares issued and outstanding--None.................. -- --
Common shares, $1.25 par value:
Shares authorized--120,000,000
Shares issued and outstanding--41,484,372, actual;
47,984,372, as adjusted........................... 51.8 59.9
Capital in excess of par value............................ 65.6 210.7
Retained earnings......................................... 357.4 341.8
Treasury stock, at cost--3,652,393 shares................. (83.5) (83.5)
Deferred compensation obligation.......................... 6.8 6.8
Accumulated other comprehensive loss...................... (108.5) (108.5)
-------- --------
Total shareholders' equity........................ 289.6 427.2
-------- --------
Total capitalization.............................. $1,485.1 $1,487.5
======== ========
------------
(1) Borrowings of up to $300.0 million are available under the revolving credit
facility until 2006. We currently have approximately $25.7 million in
undrawn letters of credit issued under the revolving credit facility. As a
result, under our revolving credit facility we have unused borrowing
capacity, net of issued letters of credit, of $188.3 million.
(2) Reflects outstanding $290.0 million senior subordinated dollar notes and
E100.0 million senior subordinated euro notes, each at 98.75% of face value.
(3) Assuming a conversion rate of euro into U.S. dollars of E1.097 to $1.00,
which was the rate in effect on September 30, 2001.
(4) Reflects redemption of $133.4 million of our senior subordinated notes, less
unamortized original issue discount of $1.7 million, pursuant to the
optional redemption provisions of such notes at a price of 112.25% of the
principal amount of such notes, plus accrued but unpaid interest to the date
of redemption. We may instead elect to repurchase notes in the open market
or in negotiated transactions. In addition, if we do not receive consents
from the requisite lenders under our senior credit facilities to permit us
to redeem or repurchase a portion of our outstanding notes, we will use the
proceeds from this offering to repay a portion of the amounts outstanding
under our senior credit facilities. The as adjusted column does not give
effect to the payment of any fee that we may agree to pay to our senior
lenders in connection with obtaining their consent to allow us to redeem or
repurchase a portion of our outstanding notes.
S-13
PRICE RANGE OF COMMON STOCK
Our common stock is listed for trading on the New York Stock Exchange under
the symbol "FLS." The following table sets forth on a per share basis the high
and low sales prices for our common stock for the quarters indicated.
HIGH LOW
------ ------
1999:
First Quarter............................................. $17.50 $15.00
Second Quarter............................................ 21.56 15.31
Third Quarter............................................. 20.00 15.50
Fourth Quarter............................................ 17.88 15.38
2000:
First Quarter............................................. $17.00 $10.56
Second Quarter............................................ 17.69 12.00
Third Quarter............................................. 18.88 14.50
Fourth Quarter............................................ 23.50 16.13
2001:
First Quarter............................................. $24.35 $19.22
Second Quarter............................................ 33.20 20.76
Third Quarter............................................. 31.15 18.90
Fourth Quarter (through November 2, 2001)................. 25.10 18.70
On November 2, 2001, the reported last sale price for our common stock on
the New York Stock Exchange was $24.90 per share. Stockholders should obtain
current market quotations before making any decision with respect to an
investment in our common stock. As of October 31, 2001, there were 1,829 holders
of record of our common stock. This number excludes beneficial owners of common
stock held in street name.
DIVIDEND POLICY
In 1999, we paid a dividend of $0.14 per share each calendar quarter. In
February 2000, we announced the suspension of this dividend as a result of our
decision to acquire IDP. The policy of our board of directors is to retain
earnings to finance the operations and expansion of our business. The board has
no current plans to change this policy.
S-14
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The table below sets forth, as of September 30, 2001, the names and ages of
each of the executive officers and directors of Flowserve, as well as the
positions and offices held by such persons.
MANAGEMENT AND BOARD OF DIRECTORS
NAME AGE POSITION
---- --- --------
C. Scott Greer............................ 50 Chairman, President, Chief Executive Officer
and Director
Carlos M. Cardoso......................... 43 Vice President and President of Pump Division
Mark D. Dailey............................ 43 Vice President, Supply Chain and Continuous
Improvement
Renee J. Hornbaker........................ 49 Vice President and Chief Financial Officer
Rory E. MacDowell......................... 51 Vice President and Chief Information Officer
Cheryl D. McNeal.......................... 50 Vice President, Human Resources
George A. Shedlarski...................... 57 Vice President and President of Flow Solutions
Division and President of Flow Control
Division
Ronald F. Shuff........................... 49 Vice President, Secretary and General Counsel
David F. Chavenson........................ 49 Vice President and Treasurer
Kathleen A. Giddings...................... 38 Vice President and Controller
Diane C. Harris........................... 58 Director
James O. Rollans.......................... 59 Director
Hugh K. Coble............................. 67 Director
George T. Haymaker, Jr. .................. 63 Director
William C. Rusnack........................ 57 Director
Michael F. Johnston....................... 54 Director
Charles M. Rampacek....................... 58 Director
Kevin E. Sheehan.......................... 56 Director
C. SCOTT GREER has been our President since 1999, our Chief Executive
Officer since January 2000 and our Chairman since April 2000. He has also been a
director since 1999. Mr. Greer was Chief Operating Officer from July 1999 until
January 2000. Mr. Greer had been President of UT Automotive, a subsidiary of
United Technologies Corporation, a supplier of automotive systems and
components, from 1997 to 1999. He was President and a director of Echlin, Inc.,
an automotive parts supplier, from 1990 to 1997, and its Chief Operating Officer
from 1994 to 1997. He is also a director of ECOAIR Corp., a technology
development company.
CARLOS M. CARDOSO has been our Vice President and President of our Pump
Division since August 2001. Mr. Cardoso had been Vice President and General
Manager of the Engine Systems and Accessories Division of Honeywell
International Inc. (formerly Allied Signal Inc.) from 1999 to August 2001. Prior
to that, he served as Vice President and General Manager of Marketing Sales and
Services/Aerospace Services of Allied Signal Inc. from 1998 to 1999. He was Vice
President of Operations for Aerospace Equipment Systems, a division of the
Allied Signal Aerospace sector from 1996 to 1999.
MARK D. DAILEY has been our Vice President, Supply Chain and Continuous
Improvement since September 1999. He was Vice President, Supply Chain and held
other supply chain management positions, from 1992 to 1999, for the North
American Power Tools Division of The Black and Decker Company, a manufacturer of
power tools, fastening and assembly systems, security hardware and plumbing
products.
RENEE J. HORNBAKER has been our Vice President and Chief Financial Officer
since December 1997. She was Vice President, Business Development and Chief
Information Officer in 1997. She served as Vice President, Finance and Chief
Financial Officer of BW/IP, Inc. in 1997 and Vice President, Business
S-15
Development of BW/IP from 1996 to 1997. She also served as Director-Business
Analysis and Planning of Phelps Dodge Industries, the diversified international
manufacturing business of Phelps Dodge Corporation in 1996 and
Director-Financial Analysis and Control from 1991 to 1996.
RORY E. MACDOWELL has been our Vice President and Chief Information Officer
since 1998. He served as Chief Information Officer of Keystone International,
Inc., a manufacturer and distributor of flow control products, from 1993 to
1997.
CHERYL D. MCNEAL has been our Vice President, Human Resources since 1996.
She was Assistant Vice President, Human Resources and held other human resource
management positions at NCR from 1978 to 1996.
GEORGE A. SHEDLARSKI has been our Vice President since 1987, President of
Flow Solutions Division since January 1999 and President of Flow Control
Division since August 1999. He was President of Fluid Sealing Division from 1997
to 1999, President of Service Repair Division in 1997, President of Rotating
Equipment Group in 1997 and Group Vice President, Industrial Products Group from
1994 to 1997.
RONALD F. SHUFF has been our Vice President since 1990 and Secretary and
General Counsel since 1988. He was a Sloan Fellow at the Massachusetts Institute
of Technology from 1987 to 1988 and the Secretary and General Counsel of AccuRay
Corporation, a manufacturer of computer-based process control systems, from 1981
to 1987.
DAVID F. CHAVENSON has been our Vice President and Treasurer since October
2001. Formerly, he was Senior Vice President and Chief Financial Officer for
Worldwide Flight Services, Inc. from 1999 to October 2001, Vice President,
Finance and Chief Financial Officer of Rutherford-Moran Oil Corporation from
1996 to 1999, and served as Treasurer of Oryx Energy Company from 1992 to 1996.
KATHLEEN A. GIDDINGS has been our Vice President and Controller since
October 2000. She served as Vice President and Controller of the Pump Division
from 1997 to October 2000, and as Controller from 1993 to 1997.
DIANE C. HARRIS has been a director since 1993. She is President of
Hypotenuse Enterprises, Inc., a merger and acquisition service and corporate
development outsourcing company. She was Vice President, Corporate Development,
of Bausch & Lomb, an optics and health care products company, from 1981 to 1996,
when she left to form Hypotenuse Enterprises, Inc.
JAMES O. ROLLANS has been a director since 1997. He is President and Chief
Executive Officer of Fluor Signature Services, a subsidiary of Fluor
Corporation, a major engineering and construction firm. He was Senior Vice
President of Fluor from 1992 to 1999. He was also its Chief Financial Officer
from 1998 to 1999 and 1992 to 1994, Chief Administrative Officer from 1994 to
1998 and Vice President, Corporate Communications from 1982 to 1992. Mr. Rollans
is also a director of Fluor Corporation.
HUGH K. COBLE has been a director since 1994. He is Vice Chairman Emeritus
of Fluor Corporation. Mr. Coble was a director of Fluor Corporation from 1984
and Vice Chairman from 1994 until his retirement in 1997. He joined Fluor
Corporation in 1966 and most recently was Group President of Fluor Daniel, Inc.,
a subsidiary of Fluor Corporation, from 1986 to 1994. He is also a director of
Beckman Coulter, Inc., a company that sells medical instruments, and Escend
Technologies, a software development company.
GEORGE T. HAYMAKER, JR. has been a director since 1997. Mr. Haymaker has
been the non-executive Chairman of the Board of Kaiser Aluminum Corporation, a
company that operates in all principal aspects of the aluminum industry, since
October 2001. He was Chairman of Kaiser Aluminum Corporation from 1994 until May
2001. Mr. Haymaker was Chief Executive Officer of Kaiser Aluminum from 1994 to
1999. Prior to joining Kaiser Aluminum in 1993 as President and Chief Operating
Officer, Mr. Haymaker worked with a private partner in the acquisition and
redirection of several metal fabricating companies. He was Executive Vice
President of Alumax, Inc. from 1984 to 1986, and was Vice
President -- International Operations for Alcoa, Inc. from 1982 to 1984. He is
also a director of CII Carbon, LLC, a supplier for aluminum smelters; a director
of Mid-America Holdings, Ltd., an aluminum extruder; and Non-Executive Chairman
and a director of Safelite Auto Glass, a provider of automotive replacement
windshields.
S-16
WILLIAM C. RUSNACK has been a director since 1997. He is President, Chief
Executive Officer and a director of Premcor, Inc., a company which refines crude
oil to manufacture petroleum products, since 1998. Before joining Premcor, Inc.,
Mr. Rusnack was Senior Vice President of ARCO, an integrated petroleum company,
from 1990 to 1998, and President of ARCO Products Company from 1993 to 1998. He
is also a director of Premcor USA, Inc., The Premcor Refining Group Inc. and
Sabine River Holding Corporation.
MICHAEL F. JOHNSTON has been a director since 1997. He has been President
and Chief Operating Officer of Visteon Corporation, an automotive parts
supplier, since September 2000. He was President of North America/Asia Pacific
Automotive Systems Group of Johnson Controls, Inc., a company serving the
automotive and building services industries, from 1999 to September 2000. At
Johnson Controls, Inc., Mr. Johnston was President of Americas Automotive Group
from 1997 to 1999, Vice President and General Manager of ASG Interior Systems
Business during 1997, Vice President and General Manager of the Johnson Controls
Battery Group from 1993 to 1997, Vice President and General Manager of SLI
Battery Division from 1991 to 1993.
CHARLES M. RAMPACEK has been a director since 1998. He has been Chairman
of the Board of Probex Corp., a provider of proprietary oil recovery services,
since December 2000, and its President and Chief Executive Officer since August
2000. He was President and Chief Executive Officer of Lyondell-Citgo Refining
LP, a manufacturer of petroleum products, from 1996 to 2000. Before joining
Lyondell-Citgo Refining, Mr. Rampacek served as President of Tenneco Gas
Transportation Company from 1992 to 1996, Executive Vice President of Tenneco
Gas operations from 1989 to 1992 and Senior Vice President of Refining of
Tenneco Oil Company from 1982 to 1988. He is also a director of Orion Refining
Corporation, a petroleum refinery.
KEVIN E. SHEEHAN has been a director since 1990. He is a general partner
of CID Equity Partners, a venture capital firm that concentrates on early-stage
and high-growth entrepreneurial companies. Before joining CID Equity Partners,
he was a Vice President of Cummins Engine Company, a manufacturer of diesel
engines and related components, from 1980 to 1993. He is also a director of the
Auburn Foundry Group.
S-17
UNDERWRITERS
Under the terms and subject to the conditions contained in an underwriting
agreement dated the date of this prospectus supplement, the underwriters named
below, for whom Morgan Stanley & Co. Incorporated, Credit Suisse First Boston
Corporation, Banc of America Securities LLC, Bear, Stearns & Co. Inc., ABN AMRO
Rothschild LLC and Robert W. Baird & Co. Incorporated are acting as
representatives, have severally agreed to purchase, and we have agreed to sell
to them, severally, the number of shares of our common stock indicated below:
NAME NUMBER OF SHARES
---- ----------------
Morgan Stanley & Co. Incorporated...........................
Credit Suisse First Boston Corporation......................
Banc of America Securities LLC..............................
Bear, Stearns & Co. Inc. ...................................
ABN AMRO Rothschild LLC.....................................
Robert W. Baird & Co. Incorporated .........................
---------
Total....................................................... 6,500,000
=========
The underwriters are offering the shares of common stock subject to their
acceptance of the shares from us and subject to prior sale. The underwriting
agreement provides that the obligations of the several underwriters to pay for
and accept delivery of the shares of common stock offered by this prospectus
supplement are subject to the approval of certain legal matters by their counsel
and to certain other conditions. The underwriters are obligated to take and pay
for all of the shares of common stock offered by this prospectus supplement if
any such shares are purchased. However, the underwriters are not required to
take or pay for the shares covered by the underwriters' over-allotment option
described below.
The underwriters initially propose to offer part of the shares of common
stock directly to the public at the public offering price listed on the cover
page of this prospectus supplement and part to certain dealers at a price that
represents a concession not in excess of $ a share under the public
offering price. After the initial offering of the shares of our common stock,
the offering price and other selling terms may from time to time be varied by
the representatives.
We have granted to the underwriters an option, exercisable for 30 days from
the date of this prospectus supplement, to purchase up to an aggregate of
975,000 additional shares of common stock at the public offering price listed on
the cover page of this prospectus supplement, less underwriting discounts and
commissions. The underwriters may exercise this option solely for the purpose of
covering over-allotments, if any, made in connection with the offering of the
shares of common stock offered hereby. To the extent the option is exercised,
each underwriter will become obligated, subject to certain conditions, to
purchase about the same percentage of the additional shares of common stock as
the number listed next to the underwriter's name in the preceding table bears to
the total number of shares of common stock listed next to the names of all
underwriters in the preceding table. If the underwriters' option is exercised in
full, the total price to the public would be $ , the total
underwriters' discounts and commissions would be $ and total proceeds
to Flowserve would be $ .
Each of us and certain of our directors and executive officers have agreed
that, without the prior written consent of Morgan Stanley & Co. Incorporated on
behalf of the underwriters, we, he or she will not, during the period ending 90
days after the date of this prospectus supplement:
-- offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option,
right or warrant to purchase, lend or otherwise transfer or dispose
of, directly or indirectly, any shares of our common stock or any
securities convertible into or exercisable or exchangeable for our
common stock; or
-- enter into any swap or other arrangement that transfers to another,
in whole or in part, any of the economic consequences of ownership of
the common stock;
S-18
whether any transaction described above is to be settled by delivery of common
stock or such other securities, in cash or otherwise. In addition, those
directors and executive officers have agreed that, without the prior consent of
Morgan Stanley & Co. Incorporated on behalf of the underwriters, they will not,
during the period ending 90 days after the date of this prospectus supplement,
make any demand for, or exercise any right with respect to, the registration of
any shares of our common stock or any securities convertible into or exercisable
or exchangeable for our common stock.
The restrictions described in the preceding paragraph do not apply to:
-- the sale of shares to the underwriters pursuant to the underwriting
agreement;
-- transactions by any person other than us relating to shares of our
common stock or other securities acquired in open market transactions
after the completion of this offering;
-- the grant of options or stock under our stock and incentive plans as
in effect at the date hereof; or
-- the issuance by us of shares of our common stock upon the exercise of
an option or a warrant or the conversion of a security outstanding on
the date hereof of which the underwriters have been advised in
writing.
In order to facilitate the offering of the common stock, the underwriters
may engage in transactions that stabilize, maintain or otherwise affect the
price of the common stock. Specifically, the underwriters may sell more shares
than they are obligated to purchase under the underwriting agreement, creating a
short position. A short sale is covered if the short position is no greater than
the number of shares available for purchase by the underwriters under the
over-allotment option. The underwriters can close out a covered short sale by
exercising the over-allotment option or purchasing shares in the open market. In
determining the source of shares to close out a covered short sale, the
underwriters will consider, among other things, the open market price of shares
compared to the price available under the over-allotment option. The
underwriters may also sell shares in excess of the over-allotment option,
creating a naked short position. The underwriters must close out any naked short
position by purchasing shares in the open market. A naked short position is more
likely to be created if the underwriters are concerned that there may be
downward pressure on the price of the common stock in the open market after
pricing that could adversely affect investors who purchase in the offering. As
an additional means of facilitating the offering, the underwriters may bid for,
and purchase, shares of common stock in the open market to stabilize the price
of the common stock. The underwriting syndicate may also reclaim selling
concessions allowed to an underwriter or a dealer for distributing the common
stock in the offering, if the syndicate repurchases previously distributed
common stock to cover syndicate short positions or to stabilize the price of the
common stock. These activities may raise or maintain the market price of the
common stock above independent market levels or prevent or retard a decline in
the market price of the common stock. The underwriters are not required to
engage in these activities and may end any of these activities at any time.
In the ordinary course of their business, certain of the underwriters and
their respective affiliates have provided, or may in the future provide,
investment banking and other financial services to us or our subsidiaries,
including underwriting, the provision of financial advice and the extension of
credit. These underwriters and their affiliates have received, and may in the
future receive, customary fees and commissions for their services.
Affiliates of certain of the underwriters participate in our senior credit
facilities. Because affiliates of certain of the underwriters may receive more
than 10% of the net proceeds of this offering, this offering is being made in
compliance with the applicable provisions of Rule 2720 of the Conduct Rules of
the National Association of Securities Dealers.
We and the underwriters have agreed to indemnify each other against a
variety of liabilities, including liabilities under the Securities Act.
S-19
LEGAL MATTERS
Certain legal matters with respect to the validity of the common stock
offered hereby will be passed upon by Cravath, Swaine & Moore, New York, New
York. The underwriters have been represented by Davis Polk & Wardwell, New York,
New York.
WHERE YOU CAN FIND MORE INFORMATION ABOUT THE COMPANY
We file annual, quarterly and current reports, proxy statements and other
information with the SEC under the Securities Exchange Act of 1934. You may read
and copy any document we file at the following SEC public reference rooms:
450 Fifth Street, N.W. Citicorp Center
Judiciary Plaza 500 West Madison Street
Room 1024 Suite 1400
Washington, D.C. 20549 Chicago, IL 60661
You may also inspect and copy our SEC filings, the complete registration
statement and other information at the offices of the New York Stock Exchange
located at 20 Broad Street, 16th Floor, New York, New York 10005.
You may obtain information on the operation of the public reference room in
Washington, D.C. by calling the SEC at 1-800-SEC-0330.
We file information electronically with the SEC. Our SEC filings also are
available from the SEC's Internet site at http://www.sec.gov, which contains
reports, proxy and information statements, and other information regarding
issuers that file electronically.
S-20
PROSPECTUS
$500,000,000
FLOWSERVE CORPORATION
We may sell, from time to time, any of the following securities:
- Common stock
- Preferred stock
- Debt securities
Our common stock is listed on the New York Stock Exchange under the symbol
"FLS."
The debt securities of Flowserve Corporation may be fully, unconditionally
and irrevocably guaranteed by one or more of Flowserve US Inc., Flowserve
International, Inc., Flowserve Holdings, Inc., BW/IP-New Mexico, Inc.,
Ingersoll-Dresser Pump Company, Flowserve International L.L.C., Flowserve
Management Company, CFM-V.R. Tesco Inc., Flowserve International Limited and
Flowserve Finance B.V.
We will provide the specific terms of these securities in one or more
prospectus supplements to this prospectus. You should read this prospectus and
any applicable prospectus supplement carefully before you invest.
The securities offered by this prospectus may be issued in one or more
series or issuances and will be limited to $500,000,000 in aggregate public
offering price (or its equivalent, based on the applicable exchange rate, to the
extent debt securities are issued for one or more foreign currencies or currency
units). The securities may be sold for U.S. dollars, or any foreign currency or
currencies or currency units, and the principal of, any premium on, and any
interest on, the debt securities may be payable in U.S. dollars, or any foreign
currency or currencies or currency units.
SEE "RISK FACTORS" BEGINNING ON PAGE 6 FOR A DISCUSSION OF CERTAIN MATTERS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
We may offer these securities to or through underwriters, through dealers
or agents, directly to you or through a combination of these methods. You can
find additional information about our plan of distribution for the securities
under the heading "Plan of Distribution" in this prospectus. We also may
describe the plan of distribution for any particular offering of these
securities in any applicable prospectus supplement. This prospectus may not be
used to sell our securities unless it is accompanied by a prospectus supplement.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION ("SEC") NOR ANY STATE
SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THE SECURITIES OR
DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The date of this prospectus is July 2, 2001.
TABLE OF CONTENTS
ABOUT THIS PROSPECTUS....................................... 2
WHERE YOU CAN FIND MORE INFORMATION......................... 3
INCORPORATION OF INFORMATION WE FILE WITH THE SEC........... 3
FORWARD-LOOKING STATEMENTS.................................. 4
ABOUT FLOWSERVE CORPORATION................................. 5
RISK FACTORS................................................ 6
USE OF PROCEEDS............................................. 10
RATIO OF EARNINGS TO FIXED CHARGES.......................... 10
DESCRIPTION OF DEBT SECURITIES AND GUARANTEES............... 11
DESCRIPTION OF CAPITAL STOCK................................ 19
PLAN OF DISTRIBUTION........................................ 22
VALIDITY OF SECURITIES...................................... 24
EXPERTS..................................................... 24
---------------------
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we filed with the
SEC utilizing a "shelf" registration process, which allows us to offer and sell
any combination of the securities described in this prospectus in one or more
offerings. Using this prospectus, we may offer up to a total dollar amount of
$500,000,000 of securities.
This prospectus provides you with a general description of the securities
we may offer. Each time we sell securities, we will provide a prospectus
supplement that will describe the specific terms of the securities we are
offering. Each supplement will also contain specific information about the terms
of the offering it describes. The prospectus supplement may also add to, update
or change the information contained in this prospectus. In addition, as we
describe in the section entitled "Where You Can Find More Information,"
Flowserve Corporation has filed and plans to continue to file other documents
with the SEC that contain information about it and the business conducted by it
and its subsidiaries. Before you decide whether to invest in any of the
securities offered by this prospectus, you should read this prospectus, the
prospectus supplement that further describes the offering of those securities
and the information Flowserve Corporation otherwise files with SEC.
---------------------
You should rely only on the information contained or incorporated by
reference in this prospectus. We have not authorized any other person to provide
you with different information. We will not make an offer to sell these
securities in any jurisdiction where the offer or sale is not permitted. You
should assume that the information appearing in this prospectus is accurate only
as of the date on the cover page.
In this prospectus, references to "Company," "we," "us" and "our," refer to
Flowserve Corporation and its subsidiaries, unless the context otherwise
requires. References to "Flowserve" refer to Flowserve Corporation. The phrase
"this prospectus" refers to this prospectus and any applicable prospectus
supplement, unless the context otherwise requires. References to "securities"
refer collectively to the common stock, preferred stock, debt securities and
guarantees of debt securities offered by this prospectus.
2
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements and other
information with SEC under the Securities Exchange Act of 1934. You may read and
copy any document we file at the following SEC public reference rooms:
450 Fifth Street, N.W. Seven World Trade Center Citicorp Center
Judiciary Plaza Suite 1300 500 West Madison Street
Room 1024 New York, NY 10048 Suite 1400
Washington, D.C. 20549 Chicago, IL 60661
You may also inspect and copy our SEC filings, the complete registration
statement and other information at the offices of the New York Stock Exchange
located at 20 Broad Street, 16th Floor, New York, New York 10005.
You may obtain information on the operation of the public reference room in
Washington, D.C. by calling the SEC at 1-800-SEC-0330.
We file information electronically with the SEC. Our SEC filings also are
available from the SEC's Internet site at http://www.sec.gov, which contains
reports, proxy and information statements, and other information regarding
issuers that file electronically.
INCORPORATION OF INFORMATION WE FILE WITH THE SEC
The SEC allows us to "incorporate by reference" the information we file
with them, which means that we may disclose important information to you by
referring you to those documents. The information incorporated by reference is
an important part of this prospectus, and information that we file after the
date of this prospectus will automatically update and supersede this
information. We incorporate by reference the documents listed below and any
future filings made with the SEC under Section 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934 until all of the securities described in this
prospectus are sold:
- The audited financial statements of Ingersoll-Dresser Pump Company,
contained on pages F-70 through F-99 in our Registration Statement on
Form S-4, as amended (File No. 333-46760), filed on September 27, 2000;
- Our Annual Report on Form 10-K for the year ended December 31, 2000;
- Our Quarterly Report on Form 10-Q for the quarter ended March 31, 2001;
and
- Our Current Report on Form 8-K, filed May 31, 2001.
You may request a copy of these filings (other than an exhibit to a filing
unless that exhibit is specifically incorporated by reference into that filing)
at no cost, by writing or telephoning us at the following address:
Flowserve Corporation
222 West Las Colinas Boulevard, Suite 1500
Irving, Texas 75039
Attention: Corporate Secretary
972-443-6543
This prospectus is part of a registration statement we filed with the SEC.
This prospectus does not contain all of the information contained in the
registration statement and all of the exhibits and schedules thereto. For
further information about Flowserve, please see the complete registration
statement. Any statement made in this prospectus concerning the contents of any
agreement or other document is only a summary of the actual document. If we have
filed any agreement or other document as an exhibit to the registration
statement, you should read the exhibit for a more complete understanding of the
document or the matter involved. Each statement regarding an agreement or other
document is qualified in its entirety by reference to the actual document.
3
FORWARD-LOOKING STATEMENTS
This prospectus contains various forward-looking statements and includes
assumptions about future market conditions, operations and results. Any
statement that is not historical fact is a forward-looking statement. These
statements are based on current expectations and are subject to significant
risks and uncertainties. They are made pursuant to safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. Among the many factors that
could cause actual results to differ materially from the forward-looking
statements are:
- changes in the already competitive environment for our products or
competitors' responses to our strategies;
- the health of the petroleum, chemical, water treatment and power
generation industries and general industrial markets;
- economic conditions and the extent of economic growth in areas outside
and inside the United States;
- political risks or trade embargoes affecting important country markets;
- our ability to successfully complete the integration of the acquisition
of Ingersoll-Dresser Pump Company ("IDP") into our management and
operations and fully realize anticipated synergies and cost savings;
- the recognition of remaining expenses associated with adjustments to
realign our combined Flowserve and IDP facilities and other capabilities
with our strategic objectives and business conditions including, without
limitation, expenses incurred in restructuring and integrating our
operations to incorporate IDP's facilities;
- our ability to meet the financial covenants and other requirements of our
financing agreements;
- technological developments in our products as compared to those of our
competitors;
- changes in prevailing interest rates and the effective interest cost
which we bear; and
- adverse changes in the regulatory climate and other legal obligations
imposed on Flowserve.
Accordingly, you should not rely on the accuracy of predictions contained
in forward-looking statements. Further, we undertake no obligation to publicly
update or revise any forward-looking statement as a result of new information,
future events or otherwise.
4
ABOUT FLOWSERVE CORPORATION
We are among the largest manufacturers and aftermarket service providers of
comprehensive flow control systems in the world. We have been in the flow
control industry for over 125 years. We develop and manufacture
precision-engineered flow control equipment for critical service applications
where high reliability is required. The flow control system components we
produce include pumps, valves and mechanical seals. Our products and services
are used in several industries, including petroleum, chemical, power generation
and water treatment.
We conduct our operations through three divisions that encompass our
primary product types: (1) Pump Division, (2) Flow Solutions Division and (3)
Flow Control Division. Our Pump Division supplies engineered and industrial
pumps. Through our Flow Solutions Division, we provide mechanical seals and
aftermarket services. Our Flow Control Division supplies valves and related
products. Through each of our segments, we provide aftermarket replacement
parts.
Through our Pump Division ("Pump"), we design, manufacture and distribute
engineered and industrial pumps and pump systems, replacement parts and related
equipment principally to industrial markets. Pump's products and services are
primarily used by companies that operate in the petroleum, chemical processing,
power generating, water treatment and general industrial markets. Following the
completion of the facilities rationalization in connection with the acquisition
of IDP, we will manufacture our pump systems and components at eight plants in
the United States, one in Canada, three in Latin America, ten in Europe and the
Middle East and one in Asia. We also manufacture a small portion of our pumps
through several foreign joint ventures. We market our pump products, which are
primarily sold to end users and engineering and construction companies, through
our worldwide sales force, regional service and repair centers, independent
distributors and sales representatives.
Through our Flow Solutions Division ("FSD"), we design, manufacture and
distribute mechanical seals and sealing systems and provide parts, repair and
services for flow control equipment used in process industries. Flow control
products require mechanical seals to be replaced throughout the products' useful
lives as the function of a seal is to prevent leakage of a fluid. The
replacement of mechanical seals is an integral part of aftermarket services. Our
mechanical seals are used on a variety of pumps, mixers, compressors, steam
turbines and specialty equipment, primarily in the petroleum, chemical
processing, power generation, water treatment industries and general industrial
end-markets. We manufacture mechanical seals through two plants in the United
States, three in Europe and the Middle East, two in Latin America and three in
Asia. Through FSD's global network of service and quick response centers, we
provide service, repair and diagnostic services for maintaining flow control
systems components.
Through our Flow Control Division ("FCD"), we design, manufacture and
distribute valves, actuators and related equipment. FCD's valve products are an
integral part of a flow control system and are used to control the flow of
liquids and gases. Substantially all of FCD's valves are specialized and
engineered to perform specific functions within a flow control system. FCD's
products are primarily used by companies that operate in the petroleum, chemical
and power generation industries. We manufacture valves and actuators through
four plants in the United States, six in Europe and three in other regions. We
also manufacture a small portion of our valves through a foreign joint venture.
Manual valve products and valve actuators are distributed through our sales
force personnel and a network of distributors. Automatic control valves are
marketed through sales engineers and service and repair centers or, on a
commission basis, through sales representatives in our principal markets.
Our executive offices are located at 222 West Las Colinas Boulevard, Suite
1500, Irving, Texas 75039 and our telephone number is (972) 443-6500.
5
RISK FACTORS
You should carefully consider the risks described below in addition to the
other information set forth or incorporated by reference in this prospectus
before making an investment in the securities.
ECONOMIC, POLITICAL AND OTHER RISKS ASSOCIATED WITH INTERNATIONAL SALES AND
OPERATIONS COULD ADVERSELY AFFECT OUR BUSINESS.
Since we sell our products worldwide, our business is subject to risks
associated with doing business internationally. Our sales originating outside
the United States, as a percentage of our total sales, were 42% in 1999 and 38%
in 2000. On a pro forma basis, (which includes IDP for the full year) our sales
originating outside the United States, as a percentage of total sales, were 40%
in 2000. Accordingly, our future results could be harmed by a variety of
factors, including:
- changes in foreign currency exchange rates;
- changes in a specific country's or region's political or economic
conditions, particularly in emerging markets;
- trade protection measures and import or export licensing requirements;
- potentially negative consequences from changes in tax laws;
- difficulty in staffing and managing widespread operations;
- differing labor regulations;
- differing protection of intellectual property; and
- unexpected changes in regulatory requirements.
OUR OPERATING RESULTS COULD BE HARMED DURING ECONOMIC DOWNTURNS.
The businesses of most of our industrial customers, particularly
refineries, chemical companies and power plants, are, to varying degrees,
cyclical and have historically experienced periodic downturns. Margins in those
industries are highly sensitive to demand cycles, and our customers in those
industries historically have tended to delay large capital projects, including
expensive maintenance and upgrades, during economic downturns. For example, due
to the simultaneous decline in oil and chemical prices in 1998 and 1999, many of
our key customers significantly reduced their capital spending, which resulted
in declines in our revenues and net earnings during those years. These industry
downturns have been characterized by diminished product demand, excess
manufacturing capacity and subsequent accelerated erosion of average selling
prices in the flow control industry. Therefore, any significant downturn in our
customers' markets or in general economic conditions could result in a reduction
in demand for our products and services and could harm our business.
WE FACE INTENSE COMPETITION.
We encounter intense competition in all areas of our business.
Additionally, customers for our products are attempting to reduce the number of
vendors from which they purchase in order to reduce the size and diversity of
their inventory. To remain competitive, we will need to invest continuously in
manufacturing, marketing, customer service and support and our distribution
networks. We anticipate that we may have to adjust the prices of some of our
products to stay competitive. We cannot assure you that we will have sufficient
resources to continue to make such investments or that we will maintain our
competitive position.
ENVIRONMENTAL COMPLIANCE COSTS AND LIABILITIES COULD ADVERSELY AFFECT OUR
FINANCIAL CONDITION.
Our operations and properties are subject to increasingly stringent laws
and regulations relating to environmental protection, including laws and
regulations governing air emissions, water discharges, waste management and
workplace safety. Such laws and regulations can impose substantial fines and
sanctions for violations and require the installation of costly pollution
control equipment or operational changes to limit
6
pollution emissions and/or decrease the likelihood of accidental hazardous
substance releases. We must conform our operations and properties to these laws,
and adapt to regulatory requirements in all countries as these requirements
change. In connection with the IDP acquisition, we believe that we may be
required to incur costs to bring the former IDP properties into compliance with
applicable requirements.
We use and generate hazardous substances and wastes in our manufacturing
and foundry operations. In addition, many of our current and former properties
are or have been used for industrial purposes. Accordingly, we are conducting
investigation and remediation activities at several on-site and off-site
locations. We also may be subject to potentially material liabilities relating
to the investigation and clean-up of contaminated properties and to claims
alleging personal injury.
We have experienced, and expect to continue to experience, operating costs
to comply with environmental laws and regulations. In addition, new laws and
regulations, stricter enforcement of existing laws and regulations, the
discovery of previously unknown contamination or the imposition of new clean-up
requirements could require us to incur costs or become the basis for new or
increased liabilities that could have a material adverse effect on our business,
financial condition or results of operations.
OUR BUSINESS COULD SUFFER IF WE ARE UNSUCCESSFUL IN NEGOTIATING NEW COLLECTIVE
BARGAINING AGREEMENTS.
As of December 31, 2000, we had approximately 10,000 employees. Our
operations in the following countries are unionized: Argentina, Austria,
Belgium, Brazil, Canada, France, Germany, Italy, Mexico, The Netherlands, Spain
and the United Kingdom. We also have five unionized plants in the U.S.
Approximately 8% of our 6,000 U.S. employees are represented by unions. Although
we believe that our relations with our employees are good and we have not
experienced any recent strikes or work stoppages, we cannot assure you that we
will be successful in negotiating new collective bargaining agreements, that
such negotiations will not result in significant increases in the cost of labor
or that a breakdown in such negotiations will not result in the disruption of
our operations. In addition, our closures of certain facilities may create the
risk of strikes or work stoppages at those and other facilities.
THIRD PARTIES MAY INFRINGE OUR INTELLECTUAL PROPERTY, AND WE MAY EXPEND
SIGNIFICANT RESOURCES ENFORCING OUR RIGHTS OR SUFFER COMPETITIVE INJURY.
Our success depends in part on our proprietary technology. We rely on a
combination of patents, copyrights, trademarks, trade secrets, confidentiality
provisions and licensing arrangements to establish and protect our proprietary
rights. If we fail to successfully enforce our intellectual property rights, our
competitive position could suffer, which could harm our operating results. We
may be required to spend significant resources to monitor and police our
intellectual property rights.
OUR SUCCESS WILL CONTINUE TO DEPEND TO A SIGNIFICANT EXTENT ON OUR EXECUTIVES
AND OTHER KEY PERSONNEL.
Our future success depends to a significant degree on the skills,
experience and efforts of our senior management and other key personnel. The
loss of the services of any of these individuals could adversely affect our
results of operations and our ability to implement our business strategy.
WE ARE DEPENDENT ON THE AVAILABILITY OF RAW MATERIALS AND ELECTRIC POWER.
We require substantial amounts of raw materials and electric power.
Substantially all raw materials and all electric power we require are purchased
from outside sources. The availability and prices of raw materials and electric
power may be subject to curtailment or change due to, among other things, new
laws or regulations, suppliers' allocations to other purchasers, interruptions
in production by suppliers, changes in exchange rates and prevailing price
levels. Any change in the supply of, or price for, these raw materials or
electric power could materially affect our operating results.
7
WE ARE SUBJECT TO THE EFFECTS OF FLUCTUATIONS IN FOREIGN EXCHANGE RATES.
We are exposed to fluctuations in foreign currencies as a significant
portion of our revenue, and certain of our costs, assets and liabilities, are
denominated in currencies other than U.S. dollars. Our ability to pay interest
and principal on dollar-denominated indebtedness when due is dependent on the
then current exchange rates between U.S. dollars, on the one hand, and the euro
and other European as well as Asian currencies, on the other hand, which rates
are and will be subject to fluctuation. During 2000, approximately 38% of our
actual revenue and 40% of our pro forma revenue (which includes IDP for the full
year) were from sales originating outside the United States. Our share of
revenue in non-dollar denominated currencies may continue to increase in future
periods. We can offer no assurance, however, that exchange rate fluctuations
will not have a material adverse effect on our results of operations and
financial condition and therefore on our ability to make principal and interest
payments on our indebtedness, including any dollar-denominated debt securities
we may issue, when due.
OUR LEVERAGE COULD ADVERSELY AFFECT OUR FINANCIAL HEALTH, MAKE US VULNERABLE TO
ADVERSE ECONOMIC AND INDUSTRY CONDITIONS AND PREVENT US FROM FULFILLING OUR
OBLIGATIONS UNDER DEBT SECURITIES CURRENTLY OUTSTANDING OR ISSUED PURSUANT TO
THIS PROSPECTUS.
We have incurred significant indebtedness that is substantial in relation
to shareholder's equity. As of March 31, 2001, we had approximately $1,168.1
million outstanding consolidated debt. Total net debt (total debt less cash and
equivalents) was 81.9% of our capital structure as of March 31, 2001.
Our substantial indebtedness could have important consequences to you. For
example, it could:
- make it more difficult for us to satisfy our obligations with respect to
any additional debt securities;
- increase our vulnerability to general adverse economic and industry
conditions;
- require us to dedicate a substantial portion of our cash flow from
operations to payments on our indebtedness, thereby reducing the
availability of our cash flow to fund working capital, capital
expenditures, research and development efforts and other general
corporate purposes;
- limit our flexibility in planning for, or reacting to, changes in our
business and the industry in which we operate;
- place us at a competitive disadvantage relative to our competitors that
have less debt; and
- limit, along with the financial and other restrictive covenants in our
indebtedness, our ability to borrow additional funds, among other things.
Subject to the restrictions in our debt agreements, we may also borrow more
money from time to time, which could further exacerbate the effect of any of the
consequences described above. Furthermore, failing to comply with those
covenants could result in an event of default which, if not cured or waived,
could have a material adverse effect on our business, financial condition and
results of operations.
THE SENIOR CREDIT FACILITIES AND THE INDENTURES GOVERNING OUR OUTSTANDING DEBT
SECURITIES CONTAIN VARIOUS COVENANTS WHICH LIMIT MANAGEMENT'S DISCRETION IN THE
OPERATION OF OUR BUSINESS.
The senior credit facilities and the indentures governing our current
outstanding debt contain various provisions that limit management's discretion
in operating our businesses by restricting their ability, among other things,
to:
- incur additional debt;
- pay dividends and make other distributions;
- prepay subordinated debt, make investments and other restricted payments;
- enter into sale and leaseback transactions;
- create liens;
8
- sell assets; and
- enter into transactions with affiliates.
WE MAY NOT BE ABLE TO FULLY INTEGRATE THE BUSINESS OF IDP TO ACHIEVE ALL
EXPECTED SYNERGIES.
Our future success will depend in part on our ability to successfully
complete the integration of the businesses of IDP into Flowserve's operations.
The combination of Flowserve and IDP involves the integration of companies that
had previously operated independently. The remaining integration process may be
disruptive to the businesses and may cause an interruption of, or a loss of
momentum in, the businesses as a result of a number of obstacles such as:
- loss of key employees or customers;
- failure to maintain the quality of customer service that such companies
have historically provided;
- the need to coordinate geographically diverse organizations;
- retooling and reprogramming of equipment; and
- the resulting diversion of management's attention from our day-to-day
business and the need to hire additional management personnel to address
integration obstacles.
If we are not able to successfully complete this combination, if the
combination takes longer than anticipated, or if our integrated product and
service offering fails to achieve market acceptance, our business could be
adversely affected.
WE MAY NOT BE ABLE TO FULLY REALIZE THE ANTICIPATED COST SAVINGS, SYNERGIES OR
REVENUE ENHANCEMENTS FROM COMBINING FLOWSERVE AND IDP, ALTHOUGH WE HAVE INCURRED
SIGNIFICANT CASH INTEGRATION COSTS TO ACHIEVE THESE COST SAVINGS AND WE
ANTICIPATE INCURRING ADDITIONAL COSTS.
Even if we are able to complete the integration of the operations of IDP
into Flowserve successfully, we cannot assure you that we will fully realize the
cost savings, synergies or revenue enhancements that we anticipate from such
integration or that we will fully realize such benefits within the time frame
that we currently expect.
- Whether we can effectively eliminate all redundant administrative
overhead and overlapping sales personnel, rationalize manufacturing
capacity and shift production to more economic facilities is difficult to
predict. Accordingly, the amount and timing of the remaining available
cost savings are inherently difficult to estimate.
- Any remaining cost savings and other synergies from the transactions may
be offset by remaining costs incurred in integrating the companies.
- The remaining cost savings, or any cost savings achieved to date, and
other synergies may also be offset by increases in other expenses, by
operating losses or by problems unrelated to the IDP integration.
- Labor cost savings depend on the ability of the personnel at our
remaining plants to handle their increased workloads at planned
efficiency levels.
- We will still incur significant cash integration costs to fully achieve
these cost savings, in addition to our reported integration costs to
date.
In addition, the Company's existing senior credit facilities require us to
maintain certain financial performance ratios, which will become more
restrictive over time.
If we fail to comply with the restrictions contained in these senior credit
facilities or our existing indentures, the indentures governing any debt
securities issued under this prospectus or any other subsequent financing
agreements, a default may occur. This default may allow some creditors, if their
respective agreements so provide, to accelerate payments owed on such debt as
well as any other indebtedness as to which a cross-acceleration or cross-default
provision applies. In addition, our lenders may be able to terminate any
commitments they had made to supply us with further funds. See "Description of
the Debt Securities and Guarantees."
9
USE OF PROCEEDS
We intend to use the net proceeds from the sale of the securities offered
by this prospectus for general corporate purposes, which may include repaying
indebtedness, funding future acquisitions or for any other purposes as may be
described in an accompanying prospectus supplement.
RATIO OF EARNINGS TO FIXED CHARGES
The Company was in compliance with all specified financial covenants as
defined in its Credit Agreements at March 31, 2001 and December 31, 2000. These
financial covenants include a fixed charge coverage ratio, an interest coverage
ratio and a leverage ratio.
The following table shows our ratio of earnings to fixed charges for the
periods indicated:
THREE MONTHS
YEARS ENDED DECEMBER 31, ENDED
-------------------------------- MARCH 31,
1996 1997 1998 1999 2000 2001
---- ---- ---- ---- ---- ------------
Ratio of Earnings to Fixed Charges....... 7.3 5.9 5.2 1.8 1.3 --
We computed these ratios by dividing fixed charges into the sum of earnings
from continuing operations before income taxes and fixed charges. Fixed charges
consist of interest expense on all indebtedness, amortization of deferred
financing fees and the estimated interest portion of rental expense.
The Company's debt increased in 2000 primarily as the result of financing
the acquisitions of IDP and Innovative Valve Technologies, Inc. and related
integration costs. The ratio of earnings to fixed charges for the year ended
December 31, 2000, was 2.0 excluding integration and restructuring expenses
related to the acquisition of IDP.
The ratio of earnings to fixed charges was adversely impacted in the first
quarter of 2001 by the normal seasonal softness in the engineered pump business
and integration costs associated with the acquisition of IDP. For the three
months ended March 31, 2001, additional earnings of $13.3 million would have
been required to provide a one-to-one coverage ratio during the period. The
ratio of earnings to fixed charges was 1.2, excluding IDP integration expenses,
for the three months ended March 31, 2001.
Because we do not have any preferred stock outstanding, our ratio of
earnings to fixed charges and preferred stock dividends was the same as our
ratio of earnings to fixed charges.
10
DESCRIPTION OF DEBT SECURITIES AND GUARANTEES
The following is a summary of certain general terms and provisions of the
indenture and is not complete. The particular terms of any series of debt
securities we may offer, including the extent to which the general terms and
provisions may apply to that series of debt securities, will be described in a
prospectus supplement relating to those debt securities.
We may issue debt securities from time to time in one or more series. Any
series of debt securities offered by us may be offered together with the
unconditional guarantee of one or more of Flowserve US Inc., Flowserve
International, Inc., Flowserve Holdings, Inc., BW/IP-New Mexico, Inc.,
Ingersoll-Dresser Pump Company, Flowserve International L.L.C., Flowserve
Management Company, CFM-V.R. Tesco Inc., Flowserve International Limited and
Flowserve Finance B.V. (collectively, the "guarantors").
Debt securities may be issued under one or more indentures between
Flowserve, the guarantors and one or more trustees named in the prospectus
supplement (collectively, the "Trustee"). A copy of the form of the indenture is
filed as an exhibit to the registration statement. You should read all of the
provisions of the indenture, including the definitions contained in the
indenture which are not otherwise defined in this prospectus, and the applicable
prospectus supplement. Wherever we refer to particular provisions or defined
terms of the indenture, these provisions or defined terms are incorporated in
this prospectus by reference.
GENERAL
The debt securities will be our general obligations and may be subordinated
to "senior indebtedness" we have or may incur. The prospectus supplement will
define senior indebtedness and describe the terms of any subordination. Any, or
all of, the guarantors may unconditionally guarantee the payment of the
principal, premium, if any, and interest on the debt securities when due and
payable, whether by acceleration, required repurchase, call for redemption or
otherwise. See "-- Guarantees." The prospectus supplement will define the
relative priority of any guarantees. The indenture does not limit the aggregate
principal amount of debt securities which may be issued under it. Debt
securities may be issued under the indenture from time to time in one or more
series. Unless the applicable prospectus supplement relating to the original
offering of a particular series of debt securities indicates otherwise, the
issuer of that series of debt securities will have the ability to reopen the
previous issue of that series of debt securities and issue additional debt
securities of that series pursuant to an indenture supplement.
The applicable prospectus supplement will describe, among other things, the
following terms, to the extent they are applicable to that series of debt
securities:
- title and denominations in which that series of debt securities will be
issued;
- price or prices at which that series of debt securities will be issued;
- aggregate principal amount and, if applicable, the terms on which the
principal amount of the series may be increased by a subsequent offering
of additional debt securities of the same series;
- the interest rate, the date or dates from which interest, if any, will
accrue and the circumstances, if any, in which the issuer may defer
interest payments;
- any special provisions for the payment of any additional amounts with
respect to the debt securities;
- the date or dates on which principal and premium, if any, are payable or
the method of determining those dates;
- the dates and times at which interest, if any, will be payable, the
record date for any interest payment and the person to whom interest will
be payable if other than the person in whose name the debt security is
registered at the close of business on the record date for the interest
payment; the place or places where principal of, premium, if any, and
interest, if any, will be payable;
11
- the terms applicable to any "original issue discount" (as defined in the
Internal Revenue Code of 1986, as amended, and the related regulations),
including the rate or rates at which the original issue discount will
accrue;
- our right or obligation, if any, to redeem or purchase debt securities
under any sinking fund or analogous provisions or at the option of a
holder of debt securities, or otherwise, the conditions, if any, giving
rise to the right or obligation and the period or periods within which,
and the price or prices at which and the terms and conditions upon which,
debt securities will be redeemed or purchased, in whole or in part, and
any provisions for the marketing of the debt securities;
- if the amount of payments of principal, premium, if any, and interest, if
any, is to be determined by reference to an index, formula or other
method, the manner in which these amounts are to be determined and the
calculation agent, if any, with respect to the payments;
- if other than the principal amount of the debt securities, the portion of
the principal amount of the debt securities which will be payable upon
declaration or of acceleration of the stated maturity of the debt
securities pursuant to an event of default, as defined in the applicable
indenture;
- whether the debt securities will be issued in registered or bearer form
and the terms of these forms;
- whether the debt securities will be issue in certificated or book-entry
form and, if applicable, the identity of the depositary;
- any provision for electronic issuance or issuances in uncertificated
form;
- any listing of the debt securities on a securities exchange;
- any events of default or covenants in addition to or in place of those
described in this prospectus;
- whether and upon what terms the debt securities may be defeased or
discharged;
- the currency or currencies, including composite currencies, in which
payment of the principal of, premium, if any, and interest on the offered
debt securities of the series will be payable (if other than the currency
of the United States of America), which unless otherwise specified will
be the currency of the United States of America as at the time of payment
is the legal tender for payment of public or private debts;
- the names of any guarantors, if any, and the terms of the guarantees;
- with respect to the offered debt securities of the series, any deletions
from, modifications of or additions to the events of default or any
covenants, whether or not such events of default or covenants are
consistent with the events of default or covenants set forth in the
indenture;
- any U.S. Federal income tax consequences applicable to the offered debt
securities; and
- any other material terms of that series of debt securities.
Debt securities of a series may be issued in registered form or bearer form
or both as specified in the terms of the series, may be issued in whole or in
part in the form of one or more global securities and may be issued as
book-entry securities that will be deposited with, or on behalf of a depositary
named by us and identified in a prospectus supplement with respect to such
series. The prospectus supplement will specify whether the offered debt
securities will be registered, bearer, global or book-entry form.
GUARANTEES
In connection with an offering of a particular series of debt securities,
the prospectus supplement relating to such debt securities will specify whether
any guarantors are providing guarantees with respect to such series of debt
securities. In such event, each of the guarantors that are providing guarantees,
as primary obligors and not merely as sureties, will fully, irrevocably and
unconditionally guarantee to each holder of debt securities of such series, and
to the trustee on behalf of the holders, (i) the due and punctual payment of
principal of, premium, if any, on and interest on the debt securities when due
and payable, whether by acceleration,
12
required repurchase, redemption or otherwise, the due and punctual payment of
interest on the overdue principal of and interest, if any, on the debt
securities, to the extent lawful, and the due and punctual performance of all
other obligations of Flowserve to the holders and the trustee, in accordance
with the terms of the debt securities of such series and the indenture and (ii)
in the case of any extension of time of payment or renewal of any debt security
of such series or any of such other obligations, that the same will be promptly
paid in full when due or performed in accordance with the terms of the extension
or renewal, by acceleration, required repurchase, redemption or otherwise.
The obligations of any guarantor under its guarantee may be limited as
necessary to prevent that guarantee from constituting a fraudulent conveyance
under applicable law.
Unless otherwise specified in the applicable prospectus supplement, the
guarantee of a guarantor will be released:
(1) upon the sale or other disposition (including by way of
consolidation or merger) of a guarantor; or
(2) upon the sale or disposition of all or substantially all the
assets of a guarantor; other than to Flowserve or a subsidiary of Flowserve
and as permitted by the indenture.
GLOBAL SECURITIES
The debt securities of a series may be issued in whole or in part in the
form of one or more global debt securities. A global security is a security,
typically held by a depositary, that represents and is denominated in an amount
equal to the aggregate principal amount of all outstanding debt securities of a
series or any portion thereof, in either case having the same original issue
date, date or dates on which principal and interest are due, and interest rate
or method of determining interest. Any global debt securities will be deposited
with, or on behalf of, a depositary or its nominee, which will be identified in
the applicable prospectus supplement. Global securities may be issued in either
registered or bearer form and in either temporary or definitive form.
Unless and until a global security is exchanged in whole or in part for the
individual debt securities represented thereby, a global security may not be
transferred except as a whole:
- by the depositary for the global security to a nominee for the
depository;
- by a nominee of the depositary to the depositary or to another nominee of
the depositary; or
- by the depositary or its nominee to a successor depositary or a nominee
of a successor depositary.
The prospectus supplement relating to a particular series of debt
securities which may be so issued hereunder, will describe the specific terms of
the depositary arrangement with respect to a series of debt securities. We
anticipate that the following provisions will generally apply to all depositary
arrangements for debt securities:
- ownership of beneficial interests in a global security will be limited to
persons that have accounts with the depositary for the global security
(each a "participant" and, collectively, the "participants") or persons
holding interests through the participants;
- after the issuer of a series of debt securities issues the registered
global security for the series, the depositary will credit, on its
book-entry registration and transfer system, the participants' accounts
in an amount equal to the respective principal amounts of the debt
securities of that series represented by the global security beneficially
owned by the participants;
- the underwriters, agents or dealers participating in the distribution of
the debt securities will designate the accounts to be credited unless
such debt securities are offered by us or through our agents, in which
case we will designate the accounts to be credited;
- only a participant or a person that may hold an interest through a
participant may be the beneficial owner of a global security; and
13
- ownership of beneficial interests in the global security will be shown
on, and the transfer of that ownership interest will be effected only
through, records maintained by the depositary for the global security for
interests of the participants, and on the records of the participants for
interests of persons holding through the participants.
The laws of some states may require that specified purchasers of securities
take physical delivery of the securities in definitive form. These laws may
limit the ability of those persons to own, transfer or pledge beneficial
interests in global securities.
So long as the depositary for a global security, or its nominee, is the
registered owner of the global security, the depositary or its nominee, as the
case may be, will be considered the sole owner or holder of the debt securities
represented by the global security for all purposes under the indenture. Except
as stated below, owners of beneficial interests in a global security:
- will not be entitled to have the debt securities represented by a
registered global security registered in their names;
- will not receive or be entitled to receive physical delivery of the debt
securities in definitive form; and
- will not be considered the owners or holders of the debt securities under
the indenture.
Accordingly, each person owning a beneficial interest in a registered
global security must rely on the procedures of the depositary for the registered
global security and, if the person is not a participant, on the procedures of
the participant through which the person owns its interests, to exercise any
rights of a holder under the indenture applicable to the registered global
security.
We understand that, under existing industry practices, if we request any
action of holders, or if an owner of a beneficial interest in a registered
global security desires to give or take any action which a holder is entitled to
give or take under the indenture, the depositary for the registered global
security would authorize the participants holding the relevant beneficial
interests to give or take the action, and the participants would authorize
beneficial owners owning through the participants to give or take the action or
would otherwise act upon the instructions of beneficial owners holding through
them.
Subject to the restrictions applicable to bearer securities described in
the applicable prospectus supplement (See "-- Limitations on Issuance of Bearer
Securities"), principal, premium, if any, and interest payments on individual
debt securities represented by a global security will be made to the depositary
or its nominee, as the case may be, as the registered owner or holder of such
global security. Neither we, the trustee, or any registrar or paying agent nor
any other agent of any of us will be responsible or liable for any aspect of the
records relating to, or payments made on account of, beneficial ownership
interests in the global security for the series or for maintaining, supervising
or reviewing any records relating to the beneficial ownership interests.
We expect that the depositary for any such debt securities represented by a
global security, upon receipt of any payment of principal, premium, if any, or
interest in respect of the global security, will immediately credit participants
accounts with payments in amounts proportionate to their respective beneficial
interests in the principal amount of the global security as shown on the
depositary's records. We also expect that payments by participants to owners of
beneficial interests in a global security held through the participants will be
governed by standing customer instructions and customary practices, as is now
the case with the securities held for the accounts of customers and registered
in "street name." Such payments will be the responsibility of the participants.
Receipt by owners of beneficial interests in a temporary global security of
payments of principal, premium or interest with respect thereto will be subject
to the restrictions described in an applicable prospectus supplement (see
"-- Limitations on Issuance of Bearer Securities" below).
If the depositary for any debt securities represented by a global security
is at any time unwilling or unable to continue as depositary or ceases to be a
clearing agency registered under the Securities Exchange Act of 1934, we will
appoint an eligible successor depositary. If we fail to appoint an eligible
successor depositary within 90 days, individual debt securities of such series
will be issued in exchange for the global security. In addition, we may at any
time and in our sole discretion determine not to have any debt securities of a
series
14
represented by one or more global securities. In that event, individual debt
securities of such series will be issued in exchange for the global security
representing such series debt securities. Furthermore, if we so specify with
respect to the debt securities of a series, an owner of a beneficial interest in
a global security representing debt securities of such series may, on terms
acceptable to us, the trustee, and the depositary for such global security,
receive individual debt securities of such series in exchange for such
beneficial interests, subject to any limitations described in the prospectus
supplement relating to such debt securities. In any such instance, an owner of a
beneficial interest in a global security will be entitled to physical delivery
of individual debt securities of the series represented by such global security
equal in principal amount to such beneficial interest and to have such debt
securities registered in its name (if the debt securities are issuable as
registered securities). Individual debt securities of such series so issued will
be issued (a) as registered securities in denominations, unless otherwise
specified by us, of $1,000 and integral multiples thereof if the debt securities
are issuable as registered securities, (b) as bearer securities in the
denomination or denominations specified by us if the debt securities are
issuable as bearer securities or (c) as either registered securities or bearer
securities as described above if the debt securities are issuable in either
form.
LIMITATIONS ON ISSUANCE OF BEARER SECURITIES
The debt securities of a series may be issued as registered securities
(which will be registered as to principal and interest in the register
maintained by the registrar for such debt securities) or bearer securities
(which will be transferable only by delivery). If such debt securities are
issuable as bearer securities, the applicable prospectus supplement will
describe certain special limitations and considerations that will apply to such
debt securities.
COVENANTS
If debt securities are issued, the indenture, as supplemented for a
particular series of debt securities, will contain certain covenants for the
benefit of the holders of such series of debt securities, which will be
applicable (unless waived or amended) so long as any of the debt securities of
such series are outstanding, unless stated otherwise in the prospectus
supplement. The specific terms of the covenants, and summaries thereof, will be
set forth in the prospectus supplement relating to such series of debt
securities.
MERGERS AND SALES OF ASSETS
The indenture provides that Flowserve may not consolidate with or merge
into any other person or convey, transfer or lease all or substantially all of
its properties and assets to another person, unless among other items: (i) the
resulting, surviving or transferee person (if other than the relevant issuer) is
organized and existing under the laws of the United States, any state thereof or
the District of Columbia and such person expressly assumes, by supplemental
indenture, all obligations of the relevant issuer under the indenture and either
the debt securities or the guarantees, as the case may be; (ii) Flowserve or
such successor person shall not immediately thereafter be in default under the
indenture and either the debt securities or the guarantees, as the case may be;
and (iii) Flowserve shall have provided the trustee with an opinion of counsel
and officer's certificate confirming compliance with the indenture. Upon the
assumption of the obligations of Flowserve by such a person in such
circumstances, subject to certain exceptions, Flowserve shall be discharged from
all obligations under all debt securities and the indenture (except in the case
of a lease).
SUBORDINATION
Debt securities of a series, and any guarantees, may be subordinated
("subordinated debt securities") to senior indebtedness (as defined in the
applicable prospectus supplement) to the extent set forth in the prospectus
supplement relating thereto. We conduct substantially all of our operations
through subsidiaries, and the holders of debt securities (whether or not
subordinated debt securities) will be structurally subordinated to the creditors
of our subsidiaries except to the extent such subsidiary is a guarantor of such
series of debt securities.
15
EVENTS OF DEFAULT
Each of the following constitutes an event of default under the form of
indenture with respect to any series of debt securities which may be issued,
except as may be specified in the prospectus supplement:
1. default for 30 days in the payment of interest when due on the debt
securities;
2. default in the payment of principal or premium, if any, when due on
the debt securities;
3. our failure to comply with the obligations described under
"-- Mergers and Sales of Assets" above;
4. our failure to comply for 30 days after notice with any of the
obligations in the covenants set forth in the prospectus supplement;
5. our failure or failure of any guarantor to comply for 60 days after
notice with other agreements contained in the indenture or any supplemental
indenture relating to that series of debt securities;
6. indebtedness (as defined) of us, a guarantor or any significant
subsidiary (as defined), is not paid within the applicable grace period
after final maturity or is accelerated by the holders of such indebtedness
because of a default and the total amount of such indebtedness unpaid or
accelerated exceeds $10.0 million;
7. certain events of bankruptcy, insolvency or reorganization
affecting us;
8. any judgment for the payment of money the uninsured amount of which
is in excess of $10.0 million is entered against us, a guarantor or a
significant subsidiary (as defined) and remains outstanding for a period of
60 days;
9. a guarantee ceases to be in full force and effect in any material
respect (other than in accordance with the terms of the applicable
indenture) or a guarantor denies or disaffirms its obligations under its
guarantee; and
10. any other event of default provided with respect to that series of
debt securities.
A prospectus supplement may omit, modify or add to the foregoing events of
default.
However, a default under clauses (4), (5) and (8) will not constitute an
event of default until the trustee or the holders of 25% in principal amount of
the outstanding debt securities notify us of the default and we do not cure such
default within the time specified after receipt of such notice.
If an event of default (other than certain events of bankruptcy, insolvency
or reorganization) occurs and is continuing, the trustee or the holders of at
least 25% in aggregate principal amount of the outstanding applicable series of
debt securities may declare the principal of and accrued but unpaid interest on
all the applicable debt securities to be due and payable. Upon such a
declaration, such principal of (or, in the case of original issue discount debt
securities, the portion thereby specified in the terms thereof), premium, if
any, and accrued interest shall be due and payable immediately. In the case that
certain events of bankruptcy, insolvency or reorganization occur and are
continuing, the principal of (or, in the case of original issue discount debt
securities, the portion thereby specified in the terms thereof), premium, if
any, and accrued interest on all the applicable debt securities will
automatically become and be immediately due and payable without any declaration
or other act on the part of the trustee or any holders of such debt securities.
Subject to the provisions of the indenture relating to the duties of the
trustee, in case an event of default occurs and be continuing, the trustee is
under no obligation to exercise any of the rights or powers under the indenture
at the request or direction of any of the holders of the applicable debt
securities unless such holders have offered to the trustee reasonable indemnity
or security against any loss, liability or expense. Except to enforce the right
to receive payment of principal, premium, if any, or interest when due, no
holder of a debt security may pursue any remedy with respect to the indenture or
debt securities unless:
1. such holder has previously given the trustee written notice that an
event of default is continuing with respect to such series of debt
securities;
16
2. holders of at least 25% in aggregate principal amount of the
outstanding debt securities of the applicable series have made a written
request to the trustee to pursue the remedy;
3. such holders have offered the trustee reasonable security or
indemnity against any loss, liability or expense;
4. the trustee has not complied with such request within 60 days after
the receipt thereof and the offer of security or indemnity; and
5. holders of a majority in aggregate principal amount of the
outstanding debt securities of such series have not given the trustee a
direction inconsistent with such request within such 60-day period.
Subject to certain restrictions, the holders of a majority in principal
amount of the outstanding debt securities of such series are given the right
under the indenture to direct the time, method and place of conducting any
proceeding for any remedy available to the trustee or of exercising any trust or
power conferred on the trustee. The trustee, however, may refuse to follow any
direction that conflicts with law or the indenture or that the trustee
determines is unduly prejudicial to the rights of any other holder of such
series of debt securities or that would involve the trustee in personal
liability.
If a default with respect to a series of debt securities occurs, is
continuing and is known to the trustee, such trustee must mail to each holder of
such debt securities notice of the default within 90 days after it occurs.
Except in the case of a default in the payment of principal, premium, if any, or
interest on any debt security, the trustee may withhold notice if and so long as
a committee of its trust officers in good faith determines that withholding
notice is in the interests of the holders of the debt securities. In addition,
we are required to deliver to each trustee, within 120 days after the end of
each fiscal year, a certificate indicating whether the signers thereof know of
any default under the related indenture that occurred during the previous year.
MODIFICATION OF THE INDENTURE
We and the trustee may enter into supplemental indentures without the
consent of the holders of debt securities for one or more of the following
purposes:
(a) to evidence the succession of another person to us pursuant to the
provisions of the indenture relating to consolidations, mergers and sales
of assets and the assumption by such successor of our covenants, agreements
and obligations in the indenture and in the debt securities;
(b) to surrender any right or power conferred upon us by the
indenture, to add to our covenants such further covenants, restrictions,
conditions or provisions for the protection of the holders of all or any
series of debt securities as our board of directors shall consider to be
for the protection of the holders of such debt securities, and to make the
occurrence, or the occurrence and continuance, of a default in any of such
additional covenants, restrictions, conditions or provisions a default or
an event of default under the indenture (provided, however, that with
respect to any such additional covenant, restriction, condition or
provision, such supplemental indenture may provide for a period of grace
after default, which may be shorter or longer than that allowed in the case
of other defaults, may provide for an immediate enforcement upon such
default, may limit the remedies available to the trustee upon such default
or may limit the right of holders of a majority in aggregate principal
amount of any or all series of debt securities to waive such default);
(c) to cure any ambiguity or correct or supplement any provision
contained in the indenture, in any supplemental indenture or in any debt
securities that may be effective or inconsistent with any other provision
contained therein, to convey, transfer, assign, mortgage or pledge any
property to or with the trustee, or to make such other provisions in regard
to matters or questions arising under the indenture as shall not adversely
affect the interests of any holders of debt securities of any series;
(d) to modify or amend the indenture in such a manner as to permit the
qualification of the indenture or any supplemental indenture under the
Trust Indenture Act as then in effect;
17
(e) to add or change any of the provisions of the indenture to provide
that bearer securities may be registerable as to principal, to change or
eliminate any restrictions on the payment of principal or premium with
respect to registered securities or of principal, premium or interest with
respect to bearer securities, or to permit registered securities to be
exchanged for bearer securities, so as to not adversely affect the
interests of the holders of debt securities or any coupons of any series in
any material respect or permit or facilitate the issuance of debt
securities of any series in uncertificated form;
(f) to comply with the provisions of the indenture relating to
consolidations, mergers and sales of assets;
(g) in the case of subordinated debt securities, to make any change in
the provisions of the indenture relating to subordination that would limit
or terminate the benefits available to any holder of senior indebtedness
under such provision (but only if each such holder of senior indebtedness
consents to such change);
(h) to add guarantees with respect to the debt securities or to secure
the debt securities;
(i) to make any change that does not adversely affect the rights of
any holder;
(j) to add to, change, or eliminate any of the provisions of the
indenture with respect to one or more series of debt securities, so long as
any such addition, change or elimination not otherwise permitted under the
indenture shall (1) neither apply to any debt security of any series
created prior to the execution of such supplemental indenture and entitled
to the benefit of such provision nor modify the rights of the holders of
any such debt security with respect to such provision or (2) become
effective only when there is no such debt security outstanding;
(k) to evidence and provide for the acceptance of appointment by a
successor or separate trustee with respect to the debt securities of one or
more series and to add to or change any of the provisions of the indenture
as shall be necessary to provide for or facilitate the administration of
the indenture by more than one trustee; and
(l) to establish the form or terms of debt securities and coupons of
any series, as described under "-- General" above.
With the consent of the holders of a majority in aggregate principal amount
of the outstanding debt securities of each series affected thereby, we and the
trustee may from time to time and at any time enter into a supplemental
indenture for the purpose of adding any provisions to, changing in any manner or
eliminating any of the provisions of the indenture or of any supplemental
indenture or modifying in any manner the rights of the holder of the debt
securities of such series; provided, however, that without the consent of the
holders of each debt security so affected, no such supplemental indenture shall
(a) reduce the percentage in principal amount of debt securities of any series
whose holders must consent to an amendment, (b) reduce the rate of or extend the
time for payment of interest on any debt security or coupon or reduce the amount
of any payment to be made with respect to any coupon, (c) reduce the principal
of or extend the stated maturity of any debt security, (d) reduce the premium
payable upon the redemption of any debt security or change the time at which any
debt security may or shall be redeemed, (e) make any debt security payable in a
currency other than that stated in the debt security, (f) in the case of any
subordinated debt security or coupons appertaining thereto, make any change in
the provisions of the indenture relating to subordination that adversely affects
the rights of any holder under such provision, (g) release any security that may
have been granted with respect to the debt securities, (h) make any change in
the provisions of the indenture relating to waivers of defaults or amendments
that require unanimous consent, (i) change any obligation of ours provided for
in the indenture to pay additional interest with respect to bearer securities or
(j) limit our obligation to maintain a paying agency outside the United States
for payment on bearer securities or limit our obligation to redeem certain
bearer securities.
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SATISFACTION AND DISCHARGE OF THE INDENTURE; DEFEASANCE
Unless otherwise provided in the prospectus supplement, the indenture shall
cease to be of any further effect with respect to a series of debt securities if
(a) we have delivered to the trustee for cancellation all debt securities of
such series (with certain limited exceptions) or (b) all debt securities of such
series not theretofore delivered to the trustee for cancellation shall have
become due and payable, or are by their terms to become due and payable within
one year or are to be called for redemption within one year, and we shall have
deposited with the trustee as trust funds the entire amount sufficient to pay at
maturity or upon redemption all such debt securities and coupons (and if, in
either case, we shall also pay or cause to be paid all other sums payable under
the indenture by us).
In addition, we shall have a "legal defeasance option" (pursuant to which
we may terminate, with respect to the debt securities of a particular series,
all of our obligations under such debt securities, the indenture and the
applicable indenture supplement with respect to such debt securities) and a
"covenant defeasance option" (pursuant to which we may terminate, with respect
to the debt securities of a particular series, our obligations with respect to
such debt securities under certain specified covenants contained in the
indenture). If we exercise our legal defeasance option with respect to a series
of debt securities, payment of such debt securities may not be accelerated
because of an event of default. If we exercise our covenant defeasance option
with respect to a series of debt securities, payment of such debt securities may
not be accelerated because of an event of default related to the specified
covenants.
The applicable prospectus supplement will describe the procedures we must
follow in order to exercise our defeasance options.
REGARDING THE TRUSTEE
The indenture provides that, except during the continuance of an event of
default, the trustee will perform only such duties as are specifically set forth
in the indenture. During the existence of an event of default, the trustee will
exercise such rights and powers vested in it under the indenture the use the
same degree of care and skill in its exercise as a prudent person would exercise
under the circumstances in the conduct of such person's own affairs.
The indenture and provisions of the Trust Indenture Act that are
incorporated by reference therein contain limitations on the rights of the
trustee, should it become one of our creditors, to obtain payment of claims in
certain cases or to realize on certain property received by it in respect of any
such claim as security or otherwise. The trustee is permitted to engage in other
transactions with us or any of our affiliates; provided, however, that if it
acquires any conflicting interest (as defined in the indenture or in the Trust
Indenture Act), it must eliminate such conflict or resign.
GOVERNING LAW
The indenture, the debt securities and the guarantees will be governed by
the laws of the State of New York.
DESCRIPTION OF CAPITAL STOCK
Our authorized capital stock consists of 120,000,000 shares of common
stock, par value $1.25 per share, and 1,000,000 shares of preferred stock, par
value $1.00 per share. As of May 1, 2001, we had outstanding 37,967,468 shares
of common stock and no shares of preferred stock. Our common stock is listed on
the New York Stock Exchange under the symbol "FLS."
COMMON STOCK
Subject to any special voting rights of any preferred stock that we may
issue in the future, each share of common stock has one vote on all matters
voted on by our stockholders, including election of our directors. No share of
common stock affords any cumulative voting or preemptive rights. Holders of
common stock will be
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entitled to dividends in the amounts and at the times declared by our board of
directors, after payment of any dividends on any outstanding preferred stock and
subject to limitations for dividends contained in certain of Flowserve's
outstanding debt instruments. No dividends are currently paid to holders of the
common stock.
Holders of common stock will share equally in our assets on liquidation
after payment or provision for all liabilities and any preferential liquidation
rights of any preferred stock then outstanding. All issued and outstanding
shares of common stock are fully paid and non-assessable and are not subject to
redemption or conversion and have no conversion rights.
The transfer agent for our common stock is National City Bank, in
Cleveland, Ohio.
PREFERRED STOCK
At the direction of our board of directors, we may issue shares of
preferred stock from time to time. Our board of directors may, without any
action by holders of the common stock, adopt resolutions to issue preferred
stock in one or more series and establish or change the rights of the holders of
any series of preferred stock.
The rights of any series of preferred stock may include:
- voting rights;
- liquidation preferences;
- dividend rights;
- redemption rights;
- conversion or exchange rights; and
- sinking funds.
The issuance of such preferred stock could, among other things:
- adversely affect the voting, dividend, and liquidation rights with
respect to the common stock;
- discourage an unsolicited proposal to acquire us; or
- facilitate a particular business combination involving us.
Any of these actions, plus those which follow in the remainder of this
"Description of Capital Stock" section, could discourage a transaction that some
or a majority of our stockholders might believe to be in their best interests or
in which our stockholders might receive a premium for their stock over its then
market price.
FLOWSERVE RIGHTS PLAN; SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
In August 1986, Flowserve's board of directors adopted a rights agreement.
Under this agreement, one preferred stock purchase right was distributed in
August 1986 with respect to each outstanding share of Flowserve common stock.
The rights agreement provides that, unless the rights have been redeemed, one
right will be granted for each additional share of Flowserve common stock issued
after August 1986 and prior to the earlier of the time the rights become
exercisable or August 13, 2006, the termination date of the rights agreement.
The rights are not currently exercisable and trade in tandem with the
common stock. The rights become exercisable and trade separately from the common
stock ten days after a person or group acquires 20% or more of the outstanding
shares of common stock or commences a tender offer which would result in the
ownership of 30% or more of the outstanding shares of common stock. Upon their
becoming exercisable, each right entitles the registered holder to purchase a
fraction of a share of Series A Junior Participating Preferred Stock. Generally,
each share of Series A Junior Participating Preferred Stock carries voting,
dividend and liquidation rights equal to 100 shares of common stock. The rights
provide that if Flowserve were to be acquired in a merger or business
combination after the rights become exercisable, each right may be exercised to
purchase
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common stock of the acquiring company at a 50% discount. In addition, if a 20%
shareholder (determined as provided in the rights agreement) either acquires by
means of a reverse merger in which Flowserve survives or engages in certain
other transactions with Flowserve, each right (other than rights held by the 20%
shareholder) may be exercised to purchase shares of Series A Junior
Participating Preferred Stock at a price equal to 50% of the market value of the
shares. The rights are redeemable by Flowserve at any time prior to becoming
exercisable and will expire on August 13, 2006.
The summary description of the rights set forth above does not purport to
be complete and is qualified in its entirety by reference to the rights
agreement.
CERTAIN ANTI-TAKEOVER PROVISIONS
Under the Certificate of Incorporation of Flowserve, as amended, the board
of directors is divided into three classes of directors serving staggered terms
of three years each. Each class is to be as nearly equal in number as possible,
with one class being elected each year. The Certificate of Incorporation, as
amended, also provides that:
- directors may be removed from office only for cause and only with the
affirmative vote of two-thirds of the voting power of the voting stock;
- any vacancy on the board of directors or any newly created directorship
will be filled by the remaining directors then in office, though less
than a quorum; and
- advance notice of not less than fifty days of shareholder nominations for
the elections of directors must be given in the manner provided by the
By-Laws of Flowserve.
Under the New York Business Corporation Law (NYBCL), the "merger
moratorium" statute would prohibit any business combination with an "interested
shareholder" (as defined in the statute) for a five year period, unless the
combination is approved by the Flowserve board of directors. In addition,
amendments which make changes relating to the capital stock by increasing or
decreasing the par value or the aggregate number of authorized shares of a
class, or otherwise adversely affecting the rights of such class, must be
approved by the majority vote of each class or series of stock affected, even if
such stock would not otherwise have such voting rights. The Flowserve
Certificate of Incorporation additionally requires (i) a four-fifths vote of the
outstanding stock of Flowserve entitled to vote thereon to amend certain
provisions in the Flowserve Certificate restricting transactions with a Related
Corporation (as defined therein) and (ii) a two-thirds vote to amend certain
provisions in the Flowserve Certificate and Flowserve Corporation By-laws
relating to the Flowserve Corporation board of directors.
The noted merger moratorium statute and the noted required supermajority
shareholder vote necessary to alter, amend or repeal these provisions of the
Flowserve Certificate of Incorporation, as amended, the related amendments to
the By-laws and all other provisions of the By-laws, or to adopt any provisions
relating to the classification of the board of directors and the other matters
described above may make it more difficult to change the composition of the
board of directors of Flowserve and may discourage or make difficult any attempt
by a person or group to obtain control of Flowserve.
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PLAN OF DISTRIBUTION
The securities may be distributed under this prospectus from time to time
in one or more transactions:
- at a fixed price or prices, which may be changed;
- at market prices prevailing at the time of sale;
- at prices related to prevailing market prices; or
- at negotiated prices.
Each time we sell securities, we will describe the method of distribution
of the securities in the prospectus supplement relating to the transaction.
We may offer and sell securities to which this prospectus relates in any
one or more of the following ways:
- through underwriters or dealers;
- through agents;
- directly to purchasers; or
- through a combination of such methods of sale.
Each time we sell securities, we will provide a prospectus supplement that
will name any underwriter, dealer or agent involved in the offer and sale of the
securities. The prospectus supplement will also set forth the terms of the
offering, including the purchase price of the securities and the proceeds we
will receive from the sale of the securities, any underwriting discounts and
other items constituting underwriters' compensation, public offering or purchase
price and any discounts or commissions allowed or paid to dealers, any
commissions allowed or paid to agents and any securities exchanges on which the
securities may be listed.
If underwriters or dealers are used in the sale, the securities will be
acquired by the underwriters or dealers for their own account and may be resold
from time to time in one or more transactions, at a fixed price or prices, which
may be changed, or at market prices prevailing at the time of sale, or at prices
related to such prevailing market prices, or at negotiated prices. The
securities may be offered to the public either through underwriting syndicates
represented by one or more managing underwriters or directly by one or more of
such firms. Unless otherwise set forth in the prospectus supplement, the
obligations of underwriters or dealers to purchase the securities offered will
be subject to certain conditions precedent and the underwriters or dealers will
be obligated to purchase all the offered securities if any are purchased. Any
public offering price and any discounts or concessions allowed or reallowed or
paid by underwriters or dealers to other dealers may be changed from time to
time.
The securities may be sold directly by us or through agents designated by
us from time to time. Any agent involved in the offer or sale of the securities
in respect of which this prospectus is delivered will be named, and any
commissions payable by us to such agent will be set forth in the prospectus
supplement. Unless otherwise indicated in the prospectus supplement, any such
agent will be acting on a best efforts basis for the period of its appointment.
Offers to purchase the securities offered by this prospectus may be
solicited, and sales of the securities may be made, by us of those securities
directly to institutional investors or others, who may be deemed to be
underwriters within the meaning of the Securities Act of 1933 with respect to
any resales of the securities. The terms of any offer made in this manner will
be included in the prospectus supplement relating to the offer.
If indicated in the applicable prospectus supplement, we will authorize
underwriters, dealers or agents to solicit offers by certain institutional
investors to purchase securities from us pursuant to contracts providing for
payment and delivery at a future date. Institutional investors with which these
contracts may be made include, among others:
- commercial and savings banks;
- insurance companies;
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- pension funds;
- investment companies; and
- educational and charitable institutions.
In all cases, these purchasers must be approved by us. Unless otherwise set
forth in the applicable prospectus supplement, the obligations of any purchaser
under any of these contracts will not be subject to any conditions except that
(a) the purchase of the securities must not at the time of delivery be
prohibited under the laws of any jurisdiction to which that purchaser is subject
and (b) if the securities are also being sold to underwriters, we must have sold
to these underwriters the securities not subject to delayed delivery.
Underwriters and other agents will not have any responsibility in respect of the
validity or performance of these contracts.
Some of the underwriters, dealers or agents used by us in any offering of
securities under this prospectus may be customers of, engage in transactions
with, and perform services for us in the ordinary course of business.
Underwriters, dealers, agents and other persons may be entitled under agreements
which may be entered into with us to indemnification against and contribution
toward certain civil liabilities, including liabilities under the Securities Act
of 1933 and to be reimbursed by us for certain expenses.
Subject to any restrictions relating to debt securities in bearer form, any
securities initially sold outside the United States may be resold in the United
States through underwriters, dealers or otherwise.
Each series of securities other than common stock will be new issue of
securities with no established trading market. Any underwriters to whom offered
securities are sold by us for public offering and sale may make a market in such
securities, but such underwriters will not be obligated to do so and may
discontinue any market making at any time.
The anticipated date of delivery of the securities offered by this
prospectus will be described in the applicable prospectus supplement relating to
the offering. The securities offered by this prospectus may or may not be listed
on a national securities exchange or a foreign securities exchange. No assurance
can be given as to the liquidity or activity of any trading in the offered
securities.
If more than 10% of the net proceeds of any offering of securities made
under this prospectus will be received by NASD members participating in the
offering or affiliates or associated persons of such NASD members, the offering
will be conducted in accordance with NASD Conduct Rule 2710(c)(8).
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VALIDITY OF SECURITIES
The validity of the common stock and the preferred stock offered by this
prospectus will be passed upon by Ronald F. Shuff, Vice President, Secretary and
General Counsel of Flowserve Corporation. The validity of the debt securities
offered by this prospectus will be passed upon by Cravath, Swaine & Moore, New
York, New York. Mr. Shuff owns beneficially approximately 63,991 shares of
Flowserve's common stock. He holds options to purchase 69,740 additional shares
of Flowserve's common stock that were granted to him pursuant to Flowserve's
1989, 1997 and 1999 stock option plans.
EXPERTS
The consolidated financial statements incorporated in this Prospectus by
reference to the Annual Report on Form 10-K for the year ended December 31,
2000, have been so incorporated in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants given on the authority of
said firm as experts in auditing and accounting.
The financial statements of Ingersoll-Dresser Pump Company as of December
31, 1999 and for each of the two years in the period ended December 31, 1999,
incorporated in this Prospectus by reference to the Registration Statement on
Form S-4 (File No. 333-46760) have been so incorporated in reliance on the
report of PricewaterhouseCoopers LLP, independent accountants, given on the
authority of said firm as experts in auditing and accounting.
The consolidated balance sheet of Flowserve Corporation and subsidiaries as
of December 31, 1999 and the related consolidated statements of income,
comprehensive (loss) income, shareholders' equity and cash flows for each of the
two years in the period then ended, incorporated by reference in Flowserve
Corporation's Annual Report (Form 10-K) for the year ended December 31, 2000,
and the related financial statement schedule included in the Annual Report (Form
10-K) for the year ended December 31, 2000, have been audited by Ernst & Young
LLP, independent auditors, as set forth in their reports thereon included or
incorporated by reference therein and incorporated herein by reference. Such
consolidated financial statements and schedule are incorporated herein by
reference in reliance upon such reports given on the authority of such firm as
experts in accounting and auditing.
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