NEWS RELEASE

CHARLOTTE, N.C., Feb. 8, 2017 /PRNewswire/ -- SPX FLOW, Inc. (NYSE: FLOW) today reported results for the quarter and full year ended December 31, 2016 and issued its 2017 full year guidance.

"In 2016 we made great progress on our goal to transition to an operating company despite challenging end markets and currency head winds," said Marc Michael, President and CEO. "I'm pleased with the strong effort by our teams across the enterprise to aggressively execute our realignment program resulting in a reduced cost structure, more flexible footprint and streamlined functional support. We have built a solid foundation for success and I firmly believe we are better positioned to more efficiently serve our customers and grow our business going forward."

Michael continued, "In 2016 we realized $60 million of year-over-year cost savings, which was in-line with our target, and brought our program-to-date savings to $70 million. In 2017 and 2018, we are targeting incremental savings of $55 million and $15 million, respectively. We increased our total savings target to $140 million, up from the previous target of $135 million."

"We also took significant actions to secure our capital structure in 2016, refinancing $600 million of senior notes and expanding the leverage ratio in our senior credit facility. And we are enhancing our incentive compensation by adding EBITDA and ROIC targets to certain incentive plans beginning in 2017."

"For 2017, we are targeting revenue between $1.825 billion and $1.900 billion, down 5% to 9% versus the prior year, primarily due to a lower opening backlog position and a currency head wind of approximately $65 million, or 3%, from the strengthening of the U.S. dollar against foreign currencies. Although we are encouraged by recent economic data, we have yet to see a meaningful increase in our order run-rates. Our 2017 guidance assumes a consistent order rate to the second half of 2016. Despite lower revenue expectations this year, we are targeting 2017 adjusted EBITDA to grow 10% to approximately $220 million at the mid-point of our guidance," Michael concluded.

Fourth Quarter 2016 Overview:

• Revenues declined 19.1% to $495.4 million, from $612.7 million in the year-ago quarter.  Organic revenues* decreased 16.0%, or $98.5 million, largely due to reduced customer capital investments, particularly in oil and dairy related markets.  The impact of the stronger U.S. dollar versus foreign currencies decreased revenues by 3.1%, or $18.8 million.
• Operating Income and margin were $9.1 million and 1.8%, compared to operating income and margin of $40.5 million and 6.6% in the year-ago quarter. 
  • The company recorded $15.5 million of special charges related to its previously announced realignment program, compared to $0.9 million in the year-ago quarter.
  • The company recorded $15.8 million of non-cash impairment charges, compared to $7.7 million in the year-ago quarter.
• Excluding special charges and non-cash impairment charges, adjusted operating income* and margin were $40.4 million and 8.2%.
• Diluted net earnings per share were $0.16 including discrete and other tax benefits of $0.23 per share, non-cash impairment charges of ($0.26) per share, and special charges of ($0.27) per share related to the company's global realignment program. 
• Excluding discrete and other tax benefits, impairment charges and special charges, adjusted earnings per share* were $0.46. 
• Net cash from operating activities was $22.1 million in the period including ($15.7) million of cash outflows in support of the company's realignment program.
• Free cash flow* was $15.4 million and included the net cash from operating activities described above and ($6.7) million in capital expenditures, ($1.1) million of which was related to the company's manufacturing expansion in Poland.
• Adjusted free cash flow* for the period was $32.2 million.
• Net income for the period was $6.8 million.
• Adjusted EBITDA* for the period was $56.1 million

Fourth Quarter 2016 Results by Segment:

Food and Beverage

Revenues for Q4 2016 were $182.5 million, compared to $219.0 million in Q4 2015, a decrease of $36.5 million, or 16.7%. Organic revenues* declined 15.5%, or $33.9 million, and currency fluctuations decreased revenues 1.2%, or $2.6 million. The decline in organic revenues was due primarily to lower revenue from large systems projects.

Segment income was $18.2 million, or 10.0% of revenues, in Q4 2016, compared to $26.3 million, or 12.0% of revenues, in Q4 2015. Segment income and margin decreased primarily due to the organic revenue decline described above and increased cost estimates related to certain large projects. These items were partially offset by savings from restructuring actions and cost reduction initiatives.

Power and Energy

Revenues for Q4 2016 were $129.9 million, compared to $194.2 million in Q4 2015, a decrease of $64.3 million, or 33.1%. Organic revenues* declined 26.9%, or $52.2 million, and currency fluctuations decreased revenues 6.2%, or $12.1 million. The decline in organic revenue was due largely to reduced customer spending, particularly for original equipment used in upstream and midstream oil applications, and to a lesser extent, lower aftermarket sales.

Segment income was $7.7 million, or 5.9% of revenues, in Q4 2016, compared to $18.3 million, or 9.4% of revenues, in Q4 2015. The decrease in segment income and margin was due primarily to the organic revenue decline described above, partially offset by savings from restructuring actions and cost reduction initiatives.

Industrial

Revenues for Q4 2016 were $183.0 million, compared to $199.5 million in Q4 2015, a decline of $16.5 million, or 8.3%. Organic revenues* declined 6.2%, or $12.4 million, and currency fluctuations decreased revenues 2.0%, or $4.1 million. The organic revenue decline was due primarily to lower sales of dehydration equipment and hydraulic tools.

Segment income was $29.5 million, or 16.1% of revenues, in Q4 2016, compared to $25.6 million, or 12.8% of revenues, in Q4 2015. The increase in segment income and margin was driven primarily by savings from restructuring actions and cost reduction initiatives.

Full Year 2016 Overview:

• Revenues declined 16.4% to $1.99 billion from $2.39 billion in the prior year. The impact of the stronger U.S. dollar on foreign currencies decreased revenues by 2.2%, or $52.3 million. Organic revenues* decreased 14.2%, due largely to the impact of lower oil and dairy prices on customers' capital spending decisions.
• Operating Income (loss) was ($385.1) million as compared to $145.5 million in the prior year. 
• Segment income and margin declined to $199.3 million and 10.0%, compared to $293.2 million and 12.3% in the prior year, due primarily to the revenue decline described above as well as low utilization rates at certain large facilities, transition costs related to the new Poland facility and incremental execution costs on certain Food and Beverage projects. These declines were partially offset by the $60 million of cost savings driven by the company's global realignment program. 
• Impairment of goodwill and intangible assets was $442.2 million as compared to $22.7 million in the prior year. The 2016 impairment charges related primarily to goodwill and certain intangible assets within the Power and Energy reportable segment. These charges resulted largely from the impact of lower oil prices on the spending behavior of customers within oil and gas markets.
• Special charges were $79.8 million, compared to $42.6 million in the prior year, and substantially related to the company's global realignment program.
• Diluted net earnings (loss) per share were ($9.23) and included:
  • Non-cash impairment charges of ($9.03) per share
  • Special charges of ($1.46) per share related to the company's global realignment program
  • Early extinguishment of debt charges of ($0.59) per share
  • Discrete and other tax benefits of $0.57 per share, primarily related to the company's expansion in Poland
• Excluding the items noted above, adjusted earnings per share* were $1.28. 
• Net cash used in operating activities was ($27.9) million and included:
  • $58.9 million of cash outflows in support of the company's realignment program
  • $41.0 million of net pension payments
• Free cash flow used was ($71.9) million and included the net cash from operating activities described above and ($44.0) million in capital expenditures, ($19.5) million of which was related to the company's manufacturing expansion in Poland. 
• Adjusted free cash flow* for the full year 2016 was $47.5 million.
• Net income (loss) for the full year 2016 was ($381.8) million. 
• Adjusted EBITDA* for the full year 2016 was $199.9 million.

2017 Full Year Financial Guidance:

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 largely complete by the end of 2017. 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. In 2016, the company incurred $79.8 million of special charges, $78.4 million of cash funding and realized approximately $60.0 million of savings associated with its realignment program.

Impairment Charges:   In the fourth quarter of 2016, the company recorded impairment charges of $15.8 million. A $10.3 million charge related to trademarks within its Power and Energy reportable segment and a $5.5 million charge related to a certain technology investment within its Food and Beverage reportable segment.

Amendment to Credit Facility:   In the fourth quarter of 2016 the company completed an amendment to its $1.35 billion senior secured credit facilities which, among other things, provides a period of covenant relief through December 31, 2018.

Key elements of the amendment include:

• Net leverage covenant increased from 4.00x to 4.75x with step-downs:
  • 4.50x from 10/1/17 through 3/31/18
  • 4.25x from 4/1/18 through 9/30/18
  • 4.00x from 10/1/18 through 12/31/2018
• Interest coverage ratio decreased from 3.50x to 3.00x with step-ups:
  • 3.25x from 4/1/18 through 9/30/18
  • 3.50x from 10/1/18 through 12/31/2018
• A modest increase in the pricing grid during the covenant relief period
• Option for the company to terminate the covenant relief at any time if the consolidated leverage ratio is less than or equal to 3.25x and the interest coverage ratio is greater than or equal to 3.50x.

Form 10-K:   The company expects to file its annual report on Form 10-K for the year ended December 31, 2016 with the Securities and Exchange Commission on February 8, 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. 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 consolidated and combined 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:  investor@spxflow.com

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SOURCE SPX FLOW, Inc.