SPX FLOW Reports First Quarter 2017 Results

CHARLOTTE, N.C., May 3, 2017 /PRNewswire/ --  SPX FLOW, Inc. (NYSE: FLOW) today reported results for the quarter ended April 1, 2017 and reaffirmed its 2017 full year guidance.

"Our first quarter results reflect positive momentum on our initiatives to drive order growth, an improved cost structure and cash generation. Orders were up 2% over the prior year and up 18% sequentially, highlighted by key order wins in the North American oil pipeline market and several small-to-mid-size system orders for food and beverage applications. Our backlog increased 16% to $913 million, up $129 million from the end of 2016," said Marc Michael, President and Chief Executive Officer.

"Our global realignment program remains on track. We realized $17 million of year-over-year cost savings in the first quarter. Segment income margins expanded 40 points despite a 12% organic decline in revenue year-over-year, underscoring the benefits of our realignment program and improved cost structure. Adjusted free cash flow was $28 million and we generated an additional $20 million of cash proceeds from asset sales. As a result, we reduced net debt by 5% and net leverage to 3.9x," continued Michael.

"I am encouraged by the strong start to orders this year and continued signs that we are in the early stages of a cyclical recovery in our key end markets. Despite this growing confidence, we continue to plan prudently. Today we reaffirmed our 2017 financial guidance. Barring any unforeseen market headwinds, we believe we are in good position to achieve the upper half of our 2017 guidance range."

Michael concluded, "We continue to transform SPX FLOW into a streamlined operating company and are still in the early stages of this journey. We believe there is great potential for the team to improve our operating performance, grow our business and drive significant value for our customers and shareholders." 

First Quarter 2017 Overview:

• Orders for the quarter increased 1.9% to $535.2 million, as compared to $525.4 million in the year-ago quarter. Organic orders increased 4.2% or $22.2 million, driven by an increase in Power and Energy orders. The impact of the U.S. Dollar versus foreign currencies decreased orders by 2.4%, or $12.4 million.
• Sequentially, orders increased 18.1% or $81.9 million from Q4 2016, with orders up organically across all three segments, led by Power and Energy. Currency was a modest benefit.
• Revenues declined 14.2% to $433.2 million, as compared to $505 million in the year-ago quarter. Organic revenues* decreased 12.0%, or $60.9 million, largely due to a lower opening backlog, particularly in oil and dairy markets. The impact of the U.S. dollar versus foreign currencies decreased revenues by 2.2%, or $10.9 million.
• Operating income and margin were $10.6 million and 2.4%, compared to an operating loss of $21.4 million and 4.2% in the year-ago quarter.
• The company recorded $8.6 million of special charges in the first quarter related to its previously announced realignment program, compared to $41.0 million in the year-ago quarter.
• Excluding special charges, adjusted operating income* and margin were $19.2 million and 4.4% respectively, compared to $19.6 million and 3.9% in the year-ago quarter.
• Diluted net earnings per share were ($0.18) including special charges of ($0.17) per share related to the company's global realignment program.
• Excluding special charges, adjusted earnings per share* were ($0.01), net of a ($0.03) per share tax charge related to the vesting of certain restricted stock shares and restricted stock units during the period.
• Net cash from operating activities was $23.1 million in the period including ($9.4) million of cash outflows in support of the company's realignment program.
• Free cash flow* was $18.3 million and included the net cash from operating activities described above less $4.8 million in capital expenditures.
• Adjusted free cash flow* for the period was $27.7 million.
• The total loss for the quarter was $7.4 million and the adjusted net loss* was $0.4 million.
• Adjusted EBITDA* was $32.7 million.

First Quarter 2017 Results by Segment:

Food and Beverage

Revenues for Q1 2017 were $165.9 million, compared to $184.8 million in Q1 2016, a decrease of $18.9 million, or 10.2%.  Organic revenues* declined 8.8%, or $16.3 million, and currency fluctuations decreased revenues by 1.4%, or $2.6 million. The decline in organic revenues was due primarily to lower revenue from large systems projects.

Segment income was $15.5 million, or 9.3% of revenues, compared to $17.4 million, or 9.4% of revenues, in Q1 2016. Segment income and margin decreased primarily due to the organic revenue decline described above, largely offset by savings from restructuring actions and cost reduction initiatives.

Power and Energy

Revenues for Q1 2017 were $105.9 million, compared to $149.7 million in Q1 2016, a decrease of $43.8 million, or 29.3%.  Organic revenues* declined 25.4%, or $38.0 million, and currency fluctuations decreased revenues by 3.9%, or $5.8 million.  The decline in organic revenue was due primarily to reduced customer spending for original equipment used in upstream and midstream oil applications and, to a lesser extent, lower aftermarket sales.

Segment income was a loss of $1.5 million, or 1.4% of revenues, compared to income of $2.2 million, or 1.5% of revenues, in Q1 2016.  The decrease in segment income and margin was due primarily to the organic revenue decline described above, and lower absorption at certain manufacturing facilities, partially offset by savings from restructuring actions and cost reduction initiatives.

Industrial

Revenues for Q1 2017 were $161.4 million, compared to $170.5 million in Q1 2016, a decline of $9.1 million, or 5.3%.  Organic revenues* declined 3.8%, or $6.6 million, and currency fluctuations decreased revenues by 1.5%, or $2.5 million.  The organic revenue decline was due primarily to lower sales of hydraulic tools and dehydration equipment.

Segment income was $21.1 million, or 13.1% of revenues, compared to $19.4 million, or 11.4% of revenues, in Q1 2016.  The increase in segment income and margin was driven by savings from restructuring actions and cost reduction initiatives, which more than offset the organic revenue decline described above.

OTHER ITEMS

Global Realignment Program:  As previously disclosed, the company is optimizing its global footprint, streamlining business processes and reducing selling, general and administrative expense through a global realignment program. The realignment program is intended to reduce costs across operating sites and corporate and global functions, in part by making structural changes and process enhancements to help the company operate more efficiently.  The realignment program was initiated in 2015 and is expected to be complete by the end of 2018.  The total cost of the program is expected to be approximately $160.0 million with annualized savings of approximately $140.0 million, fully realized by the end of 2018.

Form 10-Q: The company expects to file its quarterly report on Form 10-Q for the quarter ended April 1, 2017 with the Securities and Exchange Commission on May 3, 2017. This press release should be read in conjunction with that filing, which will be available on the company's website at www.spxflow.com, in the Investor Relations section.

About SPX FLOW, Inc.:  Based in Charlotte, North Carolina, SPX FLOW is a global supplier of highly engineered solutions, process equipment and turn-key systems, along with the related aftermarket parts and services, into the food and beverage, power and energy and industrial end markets. SPX FLOW has approximately $2 billion in annual revenues with operations in over 30 countries and sales in over 150 countries around the world. To learn more about SPX FLOW, please visit www.spxflow.com.

*Non-GAAP number. See attached schedules for reconciliation from most comparable GAAP number.  Management believes these Non-GAAP metrics are commonly used financial measures for investors to evaluate our operating performance for the periods presented, and when read in conjunction with our condensed consolidated financial statements, present a useful tool to evaluate our ongoing operations and provide investors with metrics they can use to evaluate our management of the business from period to period. In addition, these are some of the factors we use in internal evaluations of the overall performance of our business.

Management acknowledges that there are many items that impact a company's reported results and the adjustments reflected in these Non-GAAP metrics are not intended to present all items that may have impacted these results. In addition, these Non-GAAP metrics are not necessarily comparable to similarly-titled measures used by other companies.

Certain statements in this press release are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and are subject to the safe harbor created thereby. Please read these results in conjunction with the company's documents filed with the Securities and Exchange Commission. These filings identify important risk factors and other uncertainties that could cause actual results to differ from those contained in the forward-looking statements. Actual results may differ materially from these statements. The words "expect", "anticipate", "plan", "target", "project", "believe" and similar expressions identify forward-looking statements. Although the company believes that the expectations reflected in its forward-looking statements are reasonable, it can give no assurance that such expectations will prove to be correct. In addition, estimates of future operating results are based on the company's current complement of businesses, which is subject to change.  Statements in this press release speak only as of the date of this press release, and SPX FLOW disclaims any responsibility to update or revise such statements.

Investor and Media Contact:
Ryan Taylor, Vice President, Communications and Investor Relations
Phone:  704-752-4486
E-mail: [email protected]

SOURCE SPX FLOW, Inc.