Flowserve Provides Update on Realignment Initiatives

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Nov 02, 2009 (Close-Up Media via COMTEX) -- FLS | Quote | Chart | News | PowerRating -- Flowserve Corp., a company in the fluid motion and control industry, on October 28 confirmed 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.

"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 issued, 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.

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