843762--5/29/2009--REXNORD

related topics

{condition, economic, financial}

{customer, product, revenue}

{cost, contract, operation}

{debt, indebtedness, cash}

{acquisition, growth, future}

{financial, litigation, operation}

{system, service, information}

{product, market, service}

{cost, regulation, environmental}

{personnel, key, retain}

{cost, operation, labor}

{product, liability, claim}

{property, intellectual, protect}

{operation, international, foreign}

Our substantial leverage exposes us to interest rate risk and could adversely affect our ability to raise additional capital to fund our operations, limit our ability to react to changes in the economy or our industry and prevent us from making debt service payments. Demand for our Water Management products depends on availability of financing. The deteriorating global economic and financial market conditions have impacted our business operations and may adversely affect our results of operations and financial condition. Our business depends upon general economic conditions and other market factors beyond our control, and we serve customers in cyclical industries. As a result, our operating results could further be negatively affected during any continued or future economic downturns. The loss of any significant customer could adversely affect our business. Increases in the cost of our raw materials, in particular bar steel, brass, castings, copper, forgings, high-performance engineered plastic, plate steel, resin, sheet steel and zinc, or the loss of a substantial number of our suppliers, could adversely affect our financial health. We rely on independent distributors. Termination of one or more of our relationships with any of those independent distributors or an increase in the distributors sales of our competitors products could have a material adverse effect on our business, financial condition, results of operations or cash flows. We could be adversely affected if any of our significant customers default in their obligations to us. We are subject to risks associated with changing technology and manufacturing techniques, which could place us at a competitive disadvantage. If we lose certain of our key sales, marketing or engineering personnel, our business may be adversely affected. We may incur significant costs for environmental compliance and/or to address liabilities under environmental laws and regulations. Certain subsidiaries are subject to numerous asbestos claims. Certain Water Management subsidiaries are subject to a number of class action claims. Weather could adversely affect the demand for products in our Water Management platform and decrease its net sales. Our international operations are subject to uncertainties, which could adversely affect our operating results. We may be unable to make necessary capital expenditures. Our debt agreements impose significant operating and financial restrictions, which could have a material adverse effect on our business, financial condition, results of operations or cash flows. Because a substantial portion of our indebtedness bears interest at rates that fluctuate with changes in certain prevailing short-term interest rates, we are vulnerable to interest rate increases. We rely on intellectual property that may be misappropriated or otherwise successfully challenged. We could face potential product liability claims relating to products we manufacture or distribute. We, our customers and our shippers have unionized employees who may stage work stoppages which could seriously impact the profitability of our business. We could incur substantial business interruptions as the result of an expansion of our PeopleSoft platform. We may be unable to successfully realize all of the intended benefits from our past acquisitions, and we may be unable to identify or realize the intended benefits of other potential acquisition candidates. Our required cash contributions to our pension plans has increased and may increase further and we could experience a material change in the funded status of our defined benefit pension plans and the amount recorded in our consolidated balance sheets related to those plans. Additionally, our pension costs could increase in future years. Our historical financial data is not comparable to our current financial condition and results of operations because of our use of purchase accounting in connection with the Merger and the Fontaine, GA, Zurn and Falk acquisitions and due to the different basis of accounting used by us prior to the Merger.

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843762--5/29/2009--REXNORD_LLC