NEWS RELEASE

CHARLOTTE, N.C., Nov. 2, 2016 /PRNewswire/ -- SPX FLOW, Inc. (NYSE: FLOW) today reported results for the quarter ended October 1, 2016.

Third Quarter 2016 Overview:

• Revenues declined 20.8% to $466.8 million, from $589.5 million in the year-ago quarter.  Organic revenues* decreased 19.6%, or $115.4 million, primarily due to the continued impact of lower oil and dairy prices on customers' spending and investment decisions.  The impact of the stronger U.S. Dollar versus foreign currencies decreased revenues by 1.2%, or $7.3 million.
• Operating Income and margin were $21.8 million and 4.7%, compared to operating income and margin of $6.6 million and 1.1% in the year-ago quarter. 
  • The company recorded $12.5 million of special charges related to its previously announced realignment program, compared to $34.6 million in the year-ago quarter.
• Excluding special charges, adjusted operating income* and margin were $34.3 million and 7.3%.
• Diluted net loss per share was ($0.11) including discrete and other tax items of $0.35 per share primarily related to the company's expansion in Poland, early extinguishment of debt charges of ($0.59) per share, and special charges of ($0.21) per share related to the global realignment program. 
• Excluding discrete and other tax items, early extinguishment of debt and special charges, adjusted earnings per share* was $0.34. 
• Net cash used in operating activities was ($21.4) million in the period including ($33.0) million of net pension payments, and ($20.3) million of cash outflows in support of the company's realignment program.
• Free cash flow* was a usage of ($28.6) million and included the net cash from operating activities described above and ($7.2) million in capital expenditures, of which ($1.7) million related to the new manufacturing facility in Bydgoszcz, Poland.

"We have made good progress this year executing on our realignment program and transitioning to an operating structure that will establish a strong foundation for long-term success.  We realized $16 million of year-over-year cost savings in the third quarter and accelerated actions to streamline our functions globally.  We remain on track to achieve our goal of $135 million of annualized cost savings by 2018.  In addition, during the third quarter we refinanced $600 million of debt and amended our credit facility," said Marc Michael, President and CEO.

Michael continued, "Despite the continued solid progress on our realignment program, our third quarter results were impacted by a deceleration of short cycle Industrial orders at the outset of the quarter and delayed shipments in our Power and Energy segment.  Total orders in the third quarter declined 6% sequentially, reflecting lower levels of original equipment orders in energy markets and lower orders for systems in food and beverage markets."

"We revised our 2016 financial guidance to reflect our third quarter results, the impact of the sequential order decline and elevated project costs in our Food and Beverage segment.  For the full year, we now expect revenue to be just over $2 billion, adjusted earnings per share to be between $1.27 and $1.47 and adjusted EBITDA to be approximately $206 million."

"Given ongoing weakness broadly across our end markets and our order development through the first nine months of 2016, we anticipate organic revenue headwinds in 2017.  As we plan for next year, we are evaluating additional footprint and cost reduction actions incremental to our current global realignment program," Michael concluded. 

Third Quarter 2016 Results by Segment:

Food and Beverage

Revenues for Q3 2016 were $173.0 million, compared to $205.9 million in Q3 2015, a decrease of $32.9 million, or 16.0%.  Organic revenues* declined 16.6%, or $34.1 million, and currency fluctuations increased revenues 0.6%, or $1.2 million. The decline in organic revenues was due primarily to lower revenue from large systems projects as low dairy prices have delayed customer spending and investment decisions, particularly for milk powder projects.

Segment income was $19.6 million, or 11.3% of revenues, in Q3 2016, compared to $27.1 million, or 13.2% of revenues, in Q3 2015. Segment income and margin decreased primarily due to the organic revenue declines 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 Q3 2016 were $127.3 million, compared to $198.5 million in Q3 2015, a decrease of $71.2 million, or 35.9%.  Organic revenues* declined 32.5%, or $64.4 million, and currency fluctuations decreased revenues 3.4%, or $6.8 million.  The decline in organic revenue was due largely to the impact of lower oil prices on customers' spending behavior, particularly for upstream and midstream original equipment, and to a lesser extent, lower aftermarket sales.

Segment income was $5.5 million, or 4.3% of revenues, in Q3 2016, compared to $26.5 million, or 13.4% of revenues, in Q3 2015.  The decrease in segment income and margin was due primarily to a lower volume of revenue from high margin aftermarket and valve sales as well as low utilization rates at certain manufacturing locations.  These declines were partially offset by savings from restructuring actions and cost reduction initiatives.

Industrial

Revenues for Q3 2016 were $166.5 million, compared to $185.1 million in Q3 2015, a decline of $18.6 million, or 10.0%.  Organic revenues* declined 9.0%, or $16.7 million, and currency fluctuations decreased revenues 1.0%, or $1.9 million.  The organic revenue decline was due primarily to lower sales of hydraulic tools into the oil and gas market, as well as lower sales of heat exchangers, mixers and dehydration equipment.

Segment income was $23.0 million, or 13.8% of revenues, in Q3 2016, compared to $25.7 million, or 13.9% of revenues, in Q3 2015.  The decline in segment income was due primarily to the revenue declines described above which were largely offset by savings from restructuring actions and cost reduction initiatives.

2016 Full Year Financial Guidance:

The company updated its consolidated full year 2016 GAAP and adjusted financial guidance to reflect its year to date 2016 results and revised outlook for fourth quarter of 2016. 

O THER ITEMS

Global Realignment Program:  As previously disclosed, the company announced its intent to further optimize its global footprint, streamline business processes and reduce 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 which are designed to help the company operate more efficiently.  The realignment program was initiated in 2015 and is expected to be largely compete by the end of 2017.  The total cost of the program is expected to be approximately $160 million with annualized savings of approximately $135 million fully realized by 2018. 

Debt Refinancing:   In August 2016, the company completed its issuance and sale of $600 million in aggregate principal amount of senior unsecured notes comprised of one tranche of $300 million aggregate principal amount of 5.625% senior notes due 2024 and one tranche of $300 million aggregate principal amount of 5.875% senior notes due 2026.  The Company used the net proceeds of this offering, together with borrowings under its credit facility, to tender and redeem the $600 million of outstanding aggregate principal, plus prepayment premiums, of its 6.875% senior notes due 2017.

2015 Results:  The company's condensed combined statements of operations, comprehensive income (loss), equity and cash flows for the three and nine months ended September 26, 2015, were prepared on a "carve out" basis and were derived from the condensed consolidated financial statements and accounting records of SPX Corporation and SPX Flow for the historical periods presented. These condensed combined statements do not necessarily reflect what the results of operations, financial position, and cash flows would have been had SPX FLOW operated as an independent company for the historical periods reported.

Form 10-Q:  The company filed its quarterly report on Form 10-Q for the quarter ended October 1, 2016 with the Securities and Exchange Commission on November 2, 2016. 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 35 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.

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.