Flowserve Updates Costs and Benefits of Previously Announced Realignment Initiatives

October 28, 2009 4:32 PM EDT

Announces Expanded 2009 Realignment Initiatives with Additional 2009 Charges of Up to $30 Million and 2010 Realignment Charges of up to $15 Million

Projects Combined Initial and Expanded Realignment Initiatives to Generate Full Year Run Rate Benefits of Approximately $110 Million

Full Year 2009 EPS Forecast to be in the Updated Target Range of Between $7.20 and $7.50, Including Approximately $70 Million, or Approximately $0.90 Per Share, in Realignment Charges

Previous Target Range Was $7.15 to $7.75 Per Share, Including Up to Approximately $0.50 Per Share in Realignment Charges

DALLAS--(BUSINESS WIRE)-- Flowserve Corp. (NYSE: FLS), a global leader in the fluid motion and control industry, confirmed today that it has already seen substantial benefits from its previously announced realignment initiatives, achieving 2009 benefits of approximately $17 million year to date and delivering a projected full year run rate savings of about $60 million, on about $41 million of planned initial 2009 realignment expense. As part of its previously communicated realignment initiatives, the Company improved its global cost structure and manufacturing efficiency through headcount reductions and several facility closures.

The Company announced that it will embark on an expansion of these realignment initiatives involving additional charges of up to $30 million, or approximately $0.40 in EPS, in the remainder of 2009 and up to $15 million in 2010. These additional initiatives are designed to allow the Company to drive towards capacity optimization, more efficiently and effectively serve customers, drive structural costs out of the business and respond to reduced orders. Flowserve also expects these expanded initiatives to add another approximately $50 million of annual run rate savings, the majority of which will be structural in nature, with the expected additional benefits generally beginning in the latter half of 2010. In these expanded realignment initiatives, the Company plans to focus more resources on its customer interface and aftermarket delivery capabilities to drive additional business growth opportunities. The Company plans to also continue to make structural changes in its global manufacturing footprint through additional migration to low cost regions, additional consolidation of product manufacturing and further headcount reductions to reduce overhead, including SG&A expense.

Combined, the Company believes that the previously and newly announced realignment initiatives should provide full annual run rate savings of approximately $110 million, a majority of which will be structural in nature.

"We continue to see strong execution and benefits from our previously announced realignment initiatives aimed at further improving our operational excellence results," said Mark Blinn, Flowserve President and Chief Executive Officer. "In fact, we now expect the previously announced realignment initiatives to provide approximately $60 million of full year run rate savings, about $50 million of which should be structural. Based on this success and the fact that we have substantially completed it well before year end, we now plan on expanding our realignment work to continue to drive to strategically optimize our capacity and reduce our overall cost structure going into 2010 and beyond. We view these expanded realignment initiatives as an opportunity to use our strong balance sheet to fund a long-term realignment investment that should improve our operating platform efficiency, better support our customers and have lower execution risk with higher expected return than other potential investments available at this time," Blinn added.

2009 Outlook

"We are seeing continued opportunity in growth regions and in emerging technology areas such as renewable energy, as well as strength in our traditionally more profitable aftermarket business," Blinn said. "Despite the challenges we are seeing in some of our markets, we are also seeing opportunities in large projects, which we believe is an increased sign of stabilization."

Blinn added, "We are also making progress in increasing our structural efficiencies and operational excellence initiatives, including our recently expanded realignment initiatives. I am proud that our organization has been able to maintain high levels of customer service while substantially completing the initial realignment work. Through effective continuation of structural cost reduction initiatives, we are positioning the company to be better prepared to effectively respond to the current competitive pricing environment, the delayed timing of some global projects and overall global market conditions. These initiatives should help position the company to perform well in 2010, without being dependent on an upturn in our markets."

"We are able to expand this realignment work with its projected substantial future benefits and still maintain our 2009 EPS forecast within our updated EPS target range of $7.20 to $7.50, now including up to approximately $0.90 per share of 2009 realignment charges for the year, versus the prior forecast of $7.15 to $7.75, which included up to approximately $0.50 in realignment charges," concluded Blinn.

In a separate press release also issued today, the Company announced 2009 third quarter financial results, including third quarter EPS of $2.07, bookings of $975 million and sales of $1.05 billion.

About Flowserve Corp.

Flowserve Corp. is one of the world's leading providers of fluid motion and control products and services. Operating in more than 55 countries, the company produces engineered and industrial pumps, seals and valves as well as a range of related flow management services. More information about Flowserve can be obtained by visiting the company's Web site at www.flowserve.com.

SAFE HARBOR STATEMENT: This news release includes 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, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, as amended. Words or phrases such as "may," "should," "expects," "could," "intends," "plans," "anticipates," "estimates," "believes," "predicts" or other similar expressions are intended to identify forward-looking statements, which include, without limitation, earnings forecasts, statements relating to our business strategy and statements of expectations, beliefs, future plans and strategies and anticipated developments concerning our industry, business, operations and financial performance and condition.

The forward-looking statements included in this news release are based on our current expectations, projections, estimates and assumptions. These statements are only predictions, not guarantees. Such forward-looking statements are subject to numerous risks and uncertainties that are difficult to predict. These risks and uncertainties may cause actual results to differ materially from what is forecast in such forward-looking statements, and include, without limitation, the following: a portion of our bookings may not lead to completed sales, and our ability to convert bookings into revenues at acceptable profit margins; risks associated with cost overruns on fixed-fee projects and in taking customer orders for large complex custom engineered products requiring sophisticated program management skills and technical expertise for completion; the substantial dependence of our sales on the success of the petroleum, chemical, power and water industries; the adverse impact of volatile raw materials prices on our products and operating margins; economic, political and other risks associated with our international operations, including military actions or trade embargoes that could affect customer markets, particularly Middle Eastern markets and global petroleum producers, and non-compliance with U.S. export/re-export control, foreign corrupt practice laws, economic sanctions and import laws and regulations; our furnishing of products and services to nuclear power plant facilities; potential adverse consequences resulting from litigation to which we are a party, such as shareholder litigation and litigation involving asbestos-containing material claims; a foreign government investigation regarding our participation in the United Nations Oil-for-Food Program; risks associated with certain of our foreign subsidiaries conducting business operations and sales in certain countries that have been identified by the U.S. State Department as state sponsors of terrorism; our relative geographical profitability and its impact on our utilization of deferred tax assets, including foreign tax credits, and tax liabilities that could result from audits of our tax returns by regulatory authorities in various tax jurisdictions; the potential adverse impact of an impairment in the carrying value of goodwill or other intangibles; our dependence upon third-party suppliers whose failure to perform timely could adversely affect our business operations; changes in the global financial markets and the availability of capital and the potential for unexpected cancellations or delays of customer orders in our reported backlog; our dependence on our customers' ability to make required capital investment and maintenance expenditures; the highly competitive nature of the markets in which we operate; environmental compliance costs and liabilities; potential work stoppages and other labor matters; our inability to protect our intellectual property in the U.S., as well as in foreign countries; obligations under our defined benefit pension plans; and other factors described from time to time in our filings with the Securities and Exchange Commission.

All forward-looking statements included in this news release are based on information available to us on the date hereof, and we assume no obligation to update any forward-looking statement.

    Source: Flowserve Corp.

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