Good morning. My name is Christie and I will be your conference operator today. At this time, I would like to welcome everyone to the Flowserve First Quarter 2009 Earnings Release Conference Call. All lines have been place on mute to prevent any background noise. After the speakers' remarks there will be a question-and-answer session. (Operator Instructions). Thank you. I will now turn today's conference over to Mr. Paul Fehlman, Treasurer and Vice President of Investor Relations.

Thank you, Christie. Hello everyone and thank you for joining us. Welcome to Flowserve's first quarter 2009 earnings conference call. Today's call is being webcast with our earnings presentation via our website at flowserve.com. Simply click on the Investor Relations tab to access the webcast and the accompanying presentation. Before we get started with the presentation, I want to point out a couple of important items. Firstly, for those of you that have accessed today's call through our dial-in phone number, and also wish to follow along with the earnings presentation slides via our website, please click on the click here to listen via phone icon at the bottom of the event details page. I'd also like to note that our webcast will be posted on our website for replay approximately two hours following the end of this call. The replay will stay on the site for on-demand review over the next few months. Joining us today are Lew Kling, President and CEO of Flowserve; Mark Blinn, Senior Vice President, Chief Financial Officer in Latin American Operations; Tom Pajonas, the President of our Flow Control Division; and Dick Guiltinan, our Chief Accounting Officer. Following our commentary, we will begin the Q&A session. Regarding any forward-looking statements, I'll refer you to yesterday's earnings release and 10-Q filing and today's earnings presentation deck for the Flowserve's Safe Harbor statement on this topic. All of this information can be found on Flowserve's website under the Investor Relations section. I encourage you to read these statements carefully with respect to our conference call this morning. The information in this conference call including all statements by management plus their answers to questions related in anyway to projections or other forward-looking statements are subject to Flowserve's Safe Harbor. Now I'd like to turn it over to Lew to begin the formal presentation. Lew?

Thanks, Paul and good morning. It's a pleasure to welcome you to our 2009 first quarter conference call. During the next few slides, I plan to discuss many of the company highlights for the first quarter as well as many of the primary performance metrics was achieved during this period. I also plan to discuss what we're seeing in our major markets oil, gas, power, water and chemical, and also spend some time not only on the current situation, but also on the long-term drivers of demand, which we have discussed in detail during the 2008 year-end conference call that we still believe is still applicable today. We have also continued to evaluate our operating environment and continue to gather a wide array of both internal and external data to support our operating and investment decisions. While it's fair to say that there continues to be uncertainty in the global marketplace such as the broad base hesitation we saw in the fourth quarter of last year and into the first quarter of this year, I can also say that we continue to see benefits and opportunities that companies like Flowserve that can differentiate themselves through superior product and service offerings, on-time delivery, strong customer partnerships and the latest differentiate, a solid balance sheet. We also remain cautiously optimistic based on our relatively stronger pump booking performance during the latter part of the first quarter, which has continued into the early part of the second quarter. As we announced last quarter, we have also begun to execute plans using our strong cash position to reduce or optimize certain non-strategic manufacturing facilities as well as more aggressively driving further initiatives that will better support lowering our overall cost structure. While we see projected 2009 realignment cost of up to $40 million during…

Thank you, Lew and good morning everyone. Before I review our full financials, I want to briefly review some results for the quarter which highlight our bookings in aftermarket, our strong operating platform and our strong balance sheet. First, with respect to bookings, bookings were slightly less than 1 billion for the quarter at 968 million, down 32% year-over-year, but down 21% if you adjust for currency and the thruster orders. We did maintain a good book-to-bill ratio of 0.95, resulting in a strong backlog of $2.67 billion. We also saw continued performance in aftermarket with increases in Asia-Pacific, Latin America and the power sector, offsetting our exposure in the chemical markets in North American oil and gas. In the aftermarket during the quarter, we saw the impact from uncertainty in the markets in fewer commissioning spares, but we did see bookings begin to strengthen in March. A great indicator of our strong operating platform is our operating margin which expanded 240 basis points to 14.4%, or 330 basis points to 15.3%, if you exclude realignment. This was driven by strong gross margin improvement of 110 basis points, including 60 basis points of realignment. And also despite a 200 basis point shift mix to original equipment. We also saw continued SG&A reduction as a percent of sales, down 140 basis points, including 30 basis points of realignment. And we saw an improvement in corporate expense year-over-year of 50 basis points to 2.3% of sales. Looking at our balance sheet, the first quarter is historically a net cash flow use; you see (ph) our largest, yet we finished the quarter with over $200 million in cash. The next slide looks further at our strong operating platform and the trends over the last four years. You can see sales were up 60%…

Operator, if you'd please open it up for Q&A.

(Operator Instructions). Your first question comes from the line of Charlie Brady of BMO Capital Markets.

Hi, thanks. Good morning guys. And congratulations on a pretty strong quarter and hitting that 15% margin, though... the much earlier than we thought. I just had a question, Mark, on the... can you give us a little more detail with regards to gross profit improvement, gross margin improvement, kind of breakdown... how much of that is coming from the higher volume versus pricing and CIP initiatives and then specifically to pumps, the impact on the specialty pumps shipments in the quarter and is that something that those type kind of pump products are going to be shipped throughout the remaining of 2009 or was that a one-off type of event.

Let me start with the latter one. No, those aren't one-off. If you recall, we've been talking about specialty pump equipment over the last couple of years. And if you would respect to loose comments around complex recovery and complex processes, these specialty pumps and specialty equipment are becoming more prevalent around refineries and some of the caustic opportunities, cryogenic, all the things that we've been talking about, for example the CALDER technology that we have is around the complex process. As to your question around gross margin, a significant contributor is still operational excellence in this business. We have seen a benefit from pricing and volume leverage in our business. But we've seen a significant contribution from operational excellence. So we still have a lot of opportunity in terms of our gross margin because we're still levering the initiatives that we have on the operational excellence side.

Thanks. I'll get back in queue.

Thanks.

Your next question comes from the line of Scott Graham of Ladenburg.

Hey, good morning.

Good morning, Scott.

Hey. Just really, one question, one follow-up. The bookings number in the pumps business was obviously a number that we were somewhat disappointed and if you can kind of maybe get us little bit behind. I know the thrusters bookings on the OEM side, I suspect had an impact on that minus 50. But, what does that minus 50 look like on the OEM side, ex that? And what would you say that the pick up in March makes that number look like now?

Well, I don't want to give any detail on what we provided. But if you look at year-over-year, couple of things. One, we had obviously a very difficult compare. You had thruster orders that were in last year. But as we look at the bookings in terms of the view, you have to remember, I mean these bookings adjusted for currency at levels we saw in 2007 when the market was still growing quite a bit. And so when -- as you look behind that. A lot of this was in projects, projects as Lewis talked about that we saw delays in. But also what you saw in the first quarter and we talked about this briefly in last call is a tremendous amount of uncertainty in January and February. I mean, even think about it all personally, during January and February personally you just, you did know what was the future was going to be and that created a lot of uncertainty and our comment around March and particularly in the aftermarket was we saw the activity come back on line and normalize as a lot of the uncertainty in the global markets past. I know there are still some going forward, but if you recall in January and February, there was no visibility into the future in the global financial markets.

All right. I guess point my Mark was when you look at the pumps number of minus 50. I was just actually kind of hoping for a little bit more maybe numerical clarity on what that number feels like today?

Yeah, well I mean, the only thing I can do is bring you down to the first quarter and give you the additional information around what we saw beginning in March. And the other thing to talk about is when you looked at the aftermarket orders, you did see a decline in commissioning spares which attach the projects. With that aside in the currency, aftermarket was very stable and I also want to point out, aftermarket was also impacted by the uncertainty in the first two months of the quarter as well, but beyond the truster orders. The fact that you look at our book-to-bill, you look at some other drivers that Lewis talked about out there, you look at how we're positioned in the market place in terms of our global presence in our value add, and I think that's where you can draw your conclusions of what the bookings opportunities will be.

Okay. The next question surrounds the cost opportunity here now. Obviously you guys are really -- looks like your terrific execution mode on this realignment, but let's say for example, that the bookings are maybe closer to reality where they are now or what may be weaker than what you would expect. Maybe it's the best way to put it. Let's say along the lines of a minus 20 as opposed to something better than that. What's the trigger for the next round of cost cutting at the company to adjust the structure particularly for 2010? I don't think that there is much of a concern for '09. But for 2010, what's the next trigger here that you would think Mark would... that we should be looking for? Is it a bookings number? Is it something other than that?

No. We're following bookings. We're following what the market does, but I can assure you that all three divisions do have detailed plans with particular points based on metrics of where they can creating what we would call the next round of changes. So therefore we do have detailed plans in place and we'll trigger those if need be.

All right. Very good. Thanks a lot.

Your next question comes from the line of Kevin Maczka of BB&T Capital Markets. Kevin Maczka - BB&T Capital Market: Gentleman, good morning.

Good morning Kevin. Kevin Maczka - BB&T Capital Market: I guess I'll ask my question around the aftermarket. You saw the deceleration flattish aftermarket revenues and pump after market revenues declining. So I guess my question is how of that business is replacement demand from customers. Customers just saying, hey, I've got a worn part. I need you to replace it versus I want to outsource my entire maintenance function or something along those lines. That maybe might not be a sensitive to the slowdown that's going on right now?

Well, the after market has a number of components to it. It does have replacement parts. It has service. It has spares. But, also as you talked about it as the outsourcing, really the reliability contract and efficiency contract that they put on us which has been an increasing amount of our business. And so, again what you saw in the first quarter around the aftermarket and you look year-over-year its still a very, very stable business, but people were just holding up off on our purchase decisions, even around and they even deferred some of there maintenance activities. They can't defer them forever, but they certainly defer them just trying to get an outlook on the environment. So what you saw during the one thing we did seen impact on as I mentioned earlier is a commissioning spares and what those are basically when you start up the facility you have spares there because there are anticipated breakages on certain pieces of equipment as you start up a system and you have the spares there. Those obviously -- those orders attached to new projects, but we still seen strength around service. These things have to stay in a state of repair. People still need replacement parts and also what we've seen is an increasing desire to really in a sense outsource for the lack of a better term, the service work to us and this will be in the form of reducing fixed cost if they have their own maintenance capabilities. Really looking to Flowserve to make sure they maintain the efficiency of the process in the state of repair.

I would have to that Kevin that over the last several years we see more and more of our clients taken the position of outsourcing more they work as their resources retire and so on and so forth. So that trend is continuing and is some what escalated based on the current situation out there and the overall market. And the other thing I would add is, we also see a lot emphasis now on increased efficiency requirements in the refinery, the power business and that also tends to drive a lot of the aftermarket work in our business. Kevin Maczka - BB&T Capital Market: Okay. And then as a follow-up to that, you had a couple of big announcements lately about new QRCs opening in the Middle East. I'm just wondering if you can quantify all your expectations, maybe not this year but longer term or in anyway that you can in terms of how that roll out will continue to progress?

We're not going into forward numbers. I was over there to open up the one in Dahalan (ph) and one in Dubai. These are large QRCs, pretty much almost full factories with learning centers and test equipment especially in the Saudi unit. That's because our customers there need this equipment, they need the QRC nearby. In fact at the presentation ceremony when we opened up the one in Saudi Arabia, we had probably 70 customers there and on the day as besides our partner, were two higher ranking members of Ramco who made speeches also on public TV, CNBC and every other channel that's in the Middle East. So very, very well received and the one in Dubai, I think had 70 customers. So it's going to actually promote an awful lot of usage of Flowserve product in the region going forward. Kevin Maczka - BB&T Capital Market: Okay gentlemen. Thank you.

Your next question comes from the line of Hamza Mazari of Credit Suisse.

Thank you. Just a question surrounding your costs -- the cost side, as well. Could you give us little more color on how to think about your cost structure going forward in terms of fixed deposits variable and going forward as well how much low hanging fruit do you have on the cost side remaining? How should we be thinking about that?

Couple of things on the, in the SG&A line, just keep in mind generally about half of that cost is selling related, which is variable with in a sense with our top line. In terms of the opportunity, we still have plenty of opportunity and we talked about the metric of driving SG&A to 20% as a percent of sales. We still have some work to do there on the corporate side as well. So, there is still an opportunity to leverage that. Some of which you see in the realignment is aimed at that in terms accelerating some of the initiatives that we had before to drive that level of fixed cost leverage. So, we still have plenty of opportunity. As I mentioned on the gross margin line, we have opportunity around some operational excellence initiatives as well. So really, we're fall along (ph) a lot of these processes but there is still as Lew mentioned a lot of work to do to drive costs out of this business.

I mean, I would also add to that Mark that we've been working on Six Sigma for the last several years, and we'll continue to work on that aspect. But there is other areas that are newer areas that are looking at producing additional gross margin opportunities lean remanufacturing, value engineering. We continue to drive our low cost sourcing models both across all three divisions. So we have not exhausted as Mark has indicated, our opportunities in the business and we'll continue to drive those accordingly.

Okay. Thank you. Just one follow-up. Could you talk a little bit about the resiliency of your backlogs? How much of your exposure is late cycled to projects that are already near completion, where your product is say 3, 4% of the total cost of that project. So you're cancellation rate remains pretty low relative to maybe some of your competitors?

I think your question answered the question. It's right on. I mean, a couple of things when you look at our backlog first. We are related cycle. There is a tremendous amount of work that's been done on a project by the time they put orders on Flowserve. The other thing to keep in mind is the advance cash balance that we have. It was $408 million at the end of quarter, and also the terms and conditions that we have in our contracts. So we're very confident in the strength of our backlog. And as you look again as I mentioned earlier, you looked at the book-to-bill, we delivered tremendous earnings with 0.95 book-to-bill, which mean we didn't erode a lot of our backlog this quarter.

All right, very good. Thanks.

Your next question comes from the line of Jamie Sullivan of RBC Capital Markets.

Hey, this is Nice Christie (ph) here filling in for Jamie today. I've got one quick question for you. I know in your last call, you mentioned some of your cost realignment you were trying do them sooner rather than later. And in the first quarter, it only went through about a quarter of your intended amount for the year. Could you give us some kind of update on the timing of what's left to do, what will have in next quarter, what we'll have in back half of the year?

Yeah, we planned to probably have most of it done by the end of the second quarter, because we really buy the -- getting near the end of the year, we want to have our run rate of savings up to where we want be and obviously get full impact in 2010. So we are accelerating to get it done by the first half.

Great. And just a follow-up, does that include that little less that you mentioned, above and beyond the 36,500 on that slide?

Well, that was the 4 million in seal. Yes, that's included.

Great. Thank you so much.

Your next question comes from the line of John Moore of Robert W. Baird.

Good morning, guys.

Good morning.

Good morning.

First question within projects, I know the multipliers been rising for about the past two to three years or so are your coated multipliers now declining? And if not, at what point would you expect that to start happening?

Well, a couple of things. I mean these are and always have been competitive bids and what you saw, let's talk generally about pricing. As you certainly saw an increase in the pricing environment last year, a lot of that was driven by materials and input costs as well. And we did see accordingly multipliers rise. A lot of that was because of our operational excellence initiatives as well. So certainly, as you can imagine in this environment, you see pressure on pricing but we've also been able to turn to our suppliers and drive pricing to sustain very good multipliers in our business. So, we're not suggesting that the multipliers are going to completely evaporate, because we're able to drive a lot of benefit though our cost structure as well.

Okay. All right, and then just one follow-up here with, I guess with the pump orders down 25% this quarter, I am just trying to figure out how we should think about that in terms of organic revenue growth? Does that translate into organic revenue growth being down 20% to 25% in the back half of this year in pumps?

Well, again, don't call a year by the quarter, first and foremost, and we don't give revenue guidance going forward. We've stuck to our earnings guidance as we talked about earlier. I think, more of I look at the book-to-bill, we didn't erode a lot of our backlog. Look at what we've been able to deliver on our backlog when we generated through revenue in terms of earnings. And also, I think we need to take in consideration what happens to the market. One of the reasons we specially don't want to consider the first quarter in isolation is a lot of the uncertainty that existed in January and February. So, I think as usual as we talked about, you need to look at this business over a period of a couple of quarters. A lot of it depends on what happens in the markets, which are certainly out of our control, what is within our control is how we execute in those markets, our ability to take market share and get closer to the customer, which we've had a lot of success.

Okay. That's helpful guys. Thank you.

Thank you.

Your next question comes from the line of Kerry Kelly of Ironworks Capital. Kerry Kelly, your line is now open. (Operator Instructions) Your next question comes from the line of William Bremer of Maxim Group.

Good morning, gentleman. Nice quarter.

Thank you.

Thanks.

Can you touch a little bit on possibly the timing of the SG&A towards the 20% figure?

As soon as possible, ASAP. I think that's the answer to the question now. Let me comment a little more generally. We have been working on that quite a bit over the last couple of years. One thing to keep in mind is and we talked about this historically. That number certainly could have been lower, if we'd have decided not to invest in QRCs, not to invest in some of our aftermarket initiatives. So, I think the point is, is we're going to balance growth opportunities which will impact SG&A to a certain degree against driving cost out of the business as well. I mean we've invested and brought a lot of capabilities into this business that we don't want to let go off because the markets are going to be there for us going forward. So, I would say we are driving. In this environment it's given the opportunity for us to accelerate some of the initiatives. We're committed to getting it down to 20% or below.

Okay, great. Also can we touch upon the pricing in the environment right now, in term of contracts having to be re-bid in this environment? Can you give us a little more color on that?

Well, I mean there are ... a lot of our business goes through the distributors and the distributor pricing is over our tops. If we take a look at the metal prices, most of the metal prices have also come down from their 2008 levels. So, there is continued price pressure overall from our clients. Now with that said, I would also indicate that our clients in this day and age are still looking for on-time delivery which is one of the basic tenants that we have as a business and our on-time delivery is up significantly and probably one of the best in the industries. So that continues to be an important driver. Our positioning relative to the aftermarket as more of these companies switch to looking at their operational cost, they also are looking at that component now. So, while we're seeing price pressure we also see other drivers coming into the equation as they evaluate these proposals and we are very positioned ... we're positioned very well considering those other drivers.

And it's Mark. A lot of that is consistent with what we see in pump and seals, although there is less content that goes through distributors in those businesses. And around price as we talked about when price was going up I mean they still are willing to pay a fair price, but they want an engineered product that works and can be supported and so we're still seeing the value from our ability to deliver that even though as I commented earlier, in this environment you certainly see a pressure on pricing is much because the cost of the inputs have gone down is anything else.

Okay. And finally maybe a little color on the acquisition of CALDER. That market is extremely robust, a lot of strong multiples in that market and can you give us the opportunity of how quickly you believe you can ramp that business up?

Well, CALDER was a smaller business in Europe and we feel through our distribution because remember we have hundreds and hundreds of sales people, I think they had about one, we feel we can probably ramp it up pretty quickly. They had a tremendous technology and when you add that to our flow control ability and our distribution ability, one plus one should equal somewhere north of five I mean it should work out very well.

Let me add a little bit to that Bill, we have got a history of taking technology and complex applications like this and levering them on our platform. And one thing to understand about this business and this technology is, it is basically one of primary drivers that is made wide use commercial application of DeCell basically viable as it reduced the cost of the whole process. So that's why we are very exited about this because as Lew mentioned, they definitely have a platform that we can leverage. It's right in our sweet spot in terms of complexity. It's right in our sweet spot in terms of aftermarket opportunity.

Can you give us senses of how many potential projects are in queue there?

Did you say projects, well I mean it's really this is a core process around any of the desalination processes worldwide. So it really attaches to the opportunity around global DeCcell projects.

Hey. Gentlemen thank you. I will hop back in queue.

Your next question comes from the line of Kerry Kelly (ph) of Ironworks Capital.

Hi can you hear me this time?

Yes. We can.

Sorry about that before. Are you seeing a pick up in re-bidding then from customers trying to capture some of the lower commodity costs? Is it I have been hearing that a lot in the oil and gas area?

No. Its let so on the re-bidding out of the backlog, determine when we uses re-bidding as we talked about before, a lot of this projects are fairly far a long when they put orders on us. What we do see our customers now realizing that the labor cost and material cost have gone down, are basically going back and re-budgeting and some times re-bidding on the general contracting firms. We see from time to time things re-bid out of a backlog but that hasn't been a significant amount.

Okay. In the margins that are in the backlog are you expecting them to be similar what you're experienced here in Q1?

Well. I don't want to give margin guidance, revenue guidance what we out there is EPS guidance. But keep in mind what we do focus on our multipliers and on our margins. We still have room on the operational excellence side, which gives us the ability to respond to the pricing environment that's out there. So we're focused on driving margins not only through operational excellence, but also in fixed cost controls.

Okay, great thank you.

There are no further questions at this time. Gentlemen, are there any closing remarks.

No, but I'd like to thank everyone for joining us on the call today and we hope to see you at one of our many investment events this year. Thank you very much.

Thank you very much.

This concludes today's conference call and you may now disconnect.