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Published on: 10/6/2008
Last Visited: 4/29/2007
When Mark Blinn became Flowserve Corp.'s finance chief in November 2004 - 10 months after the company uncovered accounting errors and announced that it would restate past results - his first job was to help staffers shake off the negativity."I didn't want them to feel tainted," he says, "or that we all of a sudden wore a scarlet A."
The lesson in positive thinking, not to mention many other restatement-related exercises, lasted another 15 months.Initially attributed to "isolated computer-system implementation difficulties," the problems ultimately extended to numerous material weaknesses in internal controls.By early 2006, when Flowserve, a Dallas-based maker of industrial pumps, seals, and valves, finally filed restated reports going back to 2000, Blinn himself had a new outlook."Restatements aren't something to fear," he says."They're a fact of life."
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At Flowserve, the process that Mark Blinn took over as CFO in 2004 was his first experience with a restatement.He asked the finance team "to adopt a project approach," much like what his prior employer, the Kinko's Office and Print Services unit of FedEx Corp., had used in fighting rival office superstores and challenging the rise of home printing."In a project, there is a beginning, a middle, and an end," Blinn says.
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As they had done after every previous financial report, CFO Blinn and his CEO, Lewis Kling, held a post-news-release conference call with analysts.
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"I'm the one who had to stand up to the public markets and take my lumps," says Blinn.
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Of the stock-price reaction, Blinn says: "Investors are sophisticated.They've seen now that a restatement doesn't necessarily equate to fraud, or that a company is on its last leg or not generating cash flow."He notes that the company was being refinanced during the restatement process, and "people could say, 'The banks know what's going on; maybe it's not that bad.'"
Internally, Flowserve's finance department lightened up as the hardest work ended and the actual restatement approached.A 2005 year-end party for finance staffers was followed by a postfiling bash at the Gaylord Texan Resort.Employees were encouraged to schedule vacations that many had put off."The parties," says Blinn, "were not so much a celebration as giving some people time with their families."Individual efforts were recognized, and T-shirts were distributed bearing the words: "Looking to the Future."For a team just coming off a restatement, it was an inside joke."One of the biggest challenges of a restatement is that you're always looking backwards, not forwards," says Blinn.
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