Â鶹´«Ã½ÔÚÏß

CHARLOTTE, N.C.,ÌýFeb. 8, 2017Ìý// --ÌýÂ鶹´«Ã½ÔÚÏß, Inc. (NYSE: FLOW) today reported results for the quarter and full year endedÌýDecember 31, 2016Ìýand 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," saidÌýMarc 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 realizedÌý$60 millionÌýof year-over-year cost savings, which was in-line with our target, and brought our program-to-date savings toÌý$70 million. In 2017 and 2018, we are targeting incremental savings ofÌý$55 millionÌýandÌý$15 million, respectively. We increased our total savings target toÌý$140 million, up from the previous target ofÌý$135 million."

"We also took significant actions to secure our capital structure in 2016, refinancingÌý$600 millionÌýof 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 betweenÌý$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 approximatelyÌý$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 approximatelyÌý$220 millionÌýat the mid-point of our guidance," Michael concluded.

Fourth Quarter 2016 Overview:

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

Fourth Quarter 2016 Results by Segment:

Food and Beverage

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

Segment income wasÌý$18.2 million, or 10.0% of revenues, in Q4 2016, compared toÌý$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 wereÌý$129.9 million, compared toÌý$194.2 millionÌýin Q4 2015, a decrease ofÌý$64.3 million, or 33.1%. Organic revenues* declined 26.9%, orÌý$52.2 million, and currency fluctuations decreased revenues 6.2%, orÌý$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 wasÌý$7.7 million, or 5.9% of revenues, in Q4 2016, compared toÌý$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 wereÌý$183.0 million, compared toÌý$199.5 millionÌýin Q4 2015, a decline ofÌý$16.5 million, or 8.3%. Organic revenues* declined 6.2%, orÌý$12.4 million, and currency fluctuations decreased revenues 2.0%, orÌý$4.1 million. The organic revenue decline was due primarily to lower sales of dehydration equipment and hydraulic tools.

Segment income wasÌý$29.5 million, or 16.1% of revenues, in Q4 2016, compared toÌý$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% toÌý$1.99 billionÌýfromÌý$2.39 billionÌýin the prior year. The impact of the stronger U.S. dollar on foreign currencies decreased revenues by 2.2%, orÌý$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) wasÌý($385.1) millionÌýas compared toÌý$145.5 millionÌýin the prior year.Ìý
• Segment income and margin declined toÌý$199.3 millionÌýand 10.0%, compared toÌý$293.2 millionÌýand 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 newÌýPolandÌýfacility and incremental execution costs on certain Food and Beverage projects. These declines were partially offset by theÌý$60 millionÌýof cost savings driven by the company's global realignment program.Ìý
• Impairment of goodwill and intangible assets wasÌý$442.2 millionÌýas compared toÌý$22.7 millionÌýin 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 wereÌý$79.8 million, compared toÌý$42.6 millionÌýin the prior year, and substantially related to the company's global realignment program.
• Diluted net earnings (loss) per share wereÌý($9.23)Ìýand included:
  • Non-cash impairment charges ofÌý($9.03)Ìýper share
  • Special charges ofÌý($1.46)Ìýper share related to the company's global realignment program
  • Early extinguishment of debt charges ofÌý($0.59)Ìýper share
  • Discrete and other tax benefits ofÌý$0.57Ìýper share, primarily related to the company's expansion inÌýPoland
• Excluding the items noted above, adjusted earnings per share* wereÌý$1.28.Ìý
• Net cash used in operating activities wasÌý($27.9) millionÌýand included:
  • $58.9 millionÌýof cash outflows in support of the company's realignment program
  • $41.0 millionÌýof net pension payments
• Free cash flow used wasÌý($71.9) millionÌýand included the net cash from operating activities described above andÌý($44.0) millionÌýin capital expenditures,Ìý($19.5) millionÌýof which was related to the company's manufacturing expansion in Poland.Ìý
• Adjusted free cash flow* for the full year 2016 wasÌý$47.5 million.
• Net income (loss) for the full year 2016 wasÌý($381.8) million.Ìý
• Adjusted EBITDA* for the full year 2016 wasÌý$199.9 million.

2017 Full Year Financial Guidance:

Ìý

OTHER ITEMS

Global Realignment Program:ÌýÌý 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 approximatelyÌý$160.0 millionÌýwith annualized savings of approximatelyÌý$140.0 million, fully realized by the end of 2018. In 2016, the company incurredÌý$79.8 millionÌýof special charges,Ìý$78.4 millionÌýof cash funding and realized approximatelyÌý$60.0 millionÌýof savings associated with its realignment program.

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

Amendment to Credit Facility:ÌýÌý In the fourth quarter of 2016 the company completed an amendment to itsÌý$1.35 billionÌýsenior secured credit facilities which, among other things, provides a period of covenant relief throughÌýDecember 31, 2018.

Key elements of the amendment include:

• Net leverage covenant increased from 4.00x to 4.75x with step-downs:
  • 4.50x fromÌý10/1/17 through 3/31/18
  • 4.25x fromÌý4/1/18 through 9/30/18
  • 4.00x fromÌý10/1/18 through 12/31/2018
• Interest coverage ratio decreased from 3.50x to 3.00x with step-ups:
  • 3.25x fromÌý4/1/18 through 9/30/18
  • 3.50x fromÌý10/1/18 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:ÌýÌý The company expects to file its annual report on Form 10-K for the year endedÌýDecember 31, 2016Ìýwith the Securities and Exchange Commission onÌýFebruary 8, 2017. This press release should be read in conjunction with that filing, which will be available on the company's website atÌý, in the Investor Relations section.

About Â鶹´«Ã½ÔÚÏß, Inc.:ÌýÌýBased inÌýCharlotte, North Carolina, Â鶹´«Ã½ÔÚÏß 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. Â鶹´«Ã½ÔÚÏß has approximatelyÌý$2 billionÌýin annual revenues with operations in over 30 countries and sales in overÌý150 countries.ÌýTo learn more about Â鶹´«Ã½ÔÚÏß, please visitÌý.

*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.Ìý Statements in this press release speak only as of the date of this press release, and Â鶹´«Ã½ÔÚÏß disclaims any responsibility to update or revise such statements.

Investor and Media Contact:
Ryan Taylor, Vice President, Communications and Investor Relations
Phone:Ìý 704-752-4486
E-mail: Ìýinvestor@spxflow.com

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SOURCE Â鶹´«Ã½ÔÚÏß, Inc.