Â鶹´«Ã½ÔÚÏß

CHARLOTTE, N.C.,ÌýAug. 3, 2016Ìý// --ÌýÂ鶹´«Ã½ÔÚÏß, Inc. (NYSE: FLOW) today reported results for the quarter endedÌýJuly 2, 2016.

Second Quarter 2016 Overview:

• Revenues declined 14.0% toÌý$528.8 million, fromÌý$615.1 millionÌýin the year-ago quarter. The impact of the stronger U.S. dollar versus foreign currencies decreased revenues by 2.1%, orÌý$12.8 million, and organic revenues* decreased 11.9%, primarily due to the impact of lower oil and dairy prices on customers' spending and investment decisions.
• Operating loss and margin wereÌý($394.1) millionÌýand (74.5%), compared to operating income and margin ofÌý$62.8 millionÌýand 10.2% in the year-ago quarter.
  • During the second quarter of 2016, the company recordedÌý$426.4 millionÌýof non-cash impairment charges to reduce the goodwill and certain intangible assets in its Power and Energy segment.
  • The company also recordedÌý$10.8 millionÌýof special charges related to its previously announced realignment program.
• Excluding impairment and special charges, adjusted operating income* and margin wereÌý$43.1 millionÌýand 8.2%.
• Diluted net loss per share wasÌý($8.52)Ìýand included non-cash impairment charges ofÌý($8.77)Ìýper share and special charges ofÌý($0.21)Ìýper share related to the realignment program.
• Excluding impairment and realignment charges, adjusted earnings per share* wasÌý$0.46.
• Net cash from operating activities wasÌý$39.7 millionÌýin the period and includedÌý$16.4 millionÌýof cash outflows in support of the company's realignment program.
• Free cash flow* wasÌý$26.1 millionÌýand included the net cash from operating activities described above andÌý$13.6 millionÌýin capital expenditures, of whichÌý$6.6 millionÌýrelated to the new manufacturing facility in Bydgoszcz,ÌýPoland.

"Coming into this year we were faced with the challenges of an uncertain macro environment and cyclical downturns in two of our key end markets, oil and dairy.Ìý Although we saw some pockets of stabilization in the first half of 2016, overall orders were lower than the second half of 2015, particularly in our oil and industrial related product lines," saidÌýMarc Michael, President and Chief Executive Officer.

"Despite the challenging demand environment, I'm pleased with the effort by our employees across the enterprise to aggressively execute our realignment program.Ìý During the first half of the year, we made significant progress reducing our cost structure, realigning our footprint and streamlining our functional support globally," Michael continued.Ìý "That said, given current order trends, and consistent with our original commitments, we are accelerating our realignment program.Ìý We are also evaluating and intend to take additional actions.Ìý As such, we have increased the annualized savings target from our realignment program to approximatelyÌý$135 million, up from our previous target ofÌý$110 million.Ìý And we now expectÌý$60 millionÌýof savings to be achieved in 2016, up from our previous target ofÌý$40 million."

"Additionally, during the third quarter, we plan to refinance all of ourÌý$600 millionÌýsenior notes due in 2017.Ìý We believe this will give us greater financial flexibility going forward and lower annual interest costs," said Michael.

"We have updated our 2016 guidance to reflect our first half results and revised expectations for the second half of the year.Ìý At the bottom line, we narrowed our full year 2016 EPS guidance range toÌý$1.85 to $2.05Ìýper share, as compared to our previous guidance range ofÌý$1.85 to $2.15Ìýper share.Ìý We are firmly committed to meeting our financial guidance for 2016 and believe the actions we are taking to realign the company and refinance our debt will significantly improve our ability to efficiently and competitively serve our customers," Michael concluded.

Second Quarter 2016 Results by Segment:

Food and Beverage
Revenues for Q2 2016 wereÌý$188.0 million, compared toÌý$234.8 millionÌýin Q2 2015, a decrease ofÌý$46.8 million, or 19.9%.Ìý Organic revenues* declined 18.5%, orÌý$43.6 million, and currency fluctuations decreased revenues 1.4%, orÌý$3.2 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 wasÌý$19.9 million, or 10.6% of revenues, in Q2 2016, compared toÌý$28.6 million, or 12.2% of revenues, in Q2 2015. Segment income and margin decreased primarily due to the organic revenue declines described above, which were partially offset by savings from restructuring actions and cost reduction initiatives.

Power and Energy

Revenues for Q2 2016 wereÌý$155.8 million, compared toÌý$184.1 millionÌýin Q2 2015, a decrease ofÌý$28.3 million, or 15.4%.Ìý Organic revenues* declined 11.9%, orÌý$21.9 million, and currency fluctuations decreased revenues 3.5%, orÌý$6.4 million.Ìý The decline in organic revenue was due largely to the impact of lower oil prices on customers' spending behavior, particularly for original equipment in the upstream and midstream. ÌýAdditionally, Q2 2015 revenue benefitted from a large nuclear project which did not repeat in Q2 2016.ÌýÌýÌýÌýÌý

Segment income wasÌý$10.0 million, or 6.4% of revenues, in Q2 2016, compared toÌý$23.0 million, or 12.5% of revenues, in Q2 2015.Ìý The decrease in segment income and margin was due primarily to the organic revenue decline described above, as well as shipment of lower margin backlog and low utilization rates at certain manufacturing locations.Ìý These declines were partially offset by savings from restructuring actions and cost reduction initiatives.

Industrial

Revenues for Q2 2016 wereÌý$185.0 million, compared toÌý$196.2 millionÌýin Q2 2015, a decline ofÌý$11.2 million, or 5.7%.Ìý Organic revenues* declined 4.2%, orÌý$8.2 million, and currency fluctuations decreased revenues 1.5%, orÌý$3.0 million.Ìý The organic revenue decline was due primarily to lower sales of hydraulic tools, heat exchangers and dehydration equipment.Ìý

Segment income wasÌý$26.9 million, or 14.5% of revenues, in Q2 2016, compared toÌý$27.9 million, or 14.2% of revenues, in Q2 2015.Ìý The decline in segment income was due primarily to the revenue declines described above.Ìý These declines were partially 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 first half 2016 results and revised outlook for the second half of 2016.Ìý In addition to the Q2 results, key changes to the company's full year 2016 GAAP financial guidance include:

• Reduced revenue and segment income in the second half of 2016 due to lower than anticipated orders in the first half;
• Increased cost savings target byÌý$20.0 millionÌýto approximatelyÌý$60.0 million;
• Increased special charges byÌý$20.0 millionÌýto approximatelyÌý$80.0 million;
• An early extinguishment of debt charge of approximatelyÌý$38 millionÌýand cash outflows of approximatelyÌý$50 millionÌýrelated to the company's plans to refinance itsÌý$600 millionÌýof outstanding 6.875% senior notes during the third quarter;
• A tax benefit of approximatelyÌý$22.0 millionÌýrelated to the manufacturing expansion inÌýPoland. This benefit is expected to be recorded in the fourth quarter of 2016, with the cash benefit expected to be realized over time as income is earned inÌýPoland.

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OTHER ITEMS

Global Realignment Program:ÌýÌý 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. ÌýThe realignment program was initiated in 2015 and is expected to be largely compete by the end of 2017.Ìý The total cost of the program is now expected to be approximatelyÌý$160 millionÌýwith annualized savings of approximatelyÌý$130 millionÌýfully realized by 2018.Ìý These estimates have been increased from prior estimates of approximatelyÌý$140 millionÌýin total cost and approximatelyÌý$110 millionÌýof annualized savings.Ìý

Debt Refinancing:ÌýÌý OnÌýAugust 3, 2016Ìýthe company announced that it intends to offerÌý$600.0 millionÌýin aggregate principal amount of senior unsecured notes split between eight and ten year tranches, subject to market conditions, to qualified institutional buyers pursuant to rule 144A under the Securities Act of 1933, as amended, and outsideÌýthe United StatesÌýin compliance with Regulation S under the Securities Act.Ìý The notes will be guaranteed by the company's existing and future domestic subsidiaries that guarantee its senior credit facilities, subject to certain exceptions.Ìý The company expects to use the net proceeds of this offering, together with borrowings under the company's revolving credit facility, to repurchase and/or redeem and retire theÌý$600.0 millionÌýoutstanding aggregate principal amount of its 6.875% senior notes due 2017 pursuant to its previously announced tender offer, including prepayment premiums with respect to such purchase.Ìý

Impairment of Goodwill and Intangible Assets:ÌýÌý In connection with the preparation of its second quarter financial statements, the company performed an interim goodwill impairment test and determined that the fair value of its Power and Energy reporting unit was less than the carrying value of its net assets. As a result of this determination, the company recorded an impairment charge ofÌý$252.8 millionÌýto reduce the goodwill of the reporting unit to its implied fair value.Ìý It also recorded an additional impairment charge ofÌý$173.6 millionÌýrelated to certain intangible assets within its Power and Energy reportable segment.Ìý Further discussion on this matter is provided in the Form 10-Q filedÌýAugust 3, 2016Ìýwith the Securities and Exchange Commission.

2015 Results:ÌýThe company's condensed combined statements of operations, comprehensive income (loss), equity and cash flows for the three and six months endedÌýJune 27, 2015, were prepared on a "carve out" basis and were derived from the condensed consolidated financial statements and accounting records of SPX Corporation 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 Â鶹´«Ã½ÔÚÏß operated as an independent company for the historical periods reported.

Form 10-Q:ÌýThe company filed its quarterly report on Form 10-Q for the quarter endedÌýJuly 2, 2016Ìýwith the Securities and Exchange Commission onÌýAugust 3, 2016. 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.:ÌýÌýÌýBased inÌýCharlotte, North Carolina, Â鶹´«Ã½ÔÚÏß, Inc. (NYSE: FLOW) is a global supplier of highly engineered flow components, 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 more thanÌý$2 billionÌýin annual revenues, operations in over 35 countries and sales in over 150 countries. To learn more about Â鶹´«Ã½ÔÚÏß, please visit our website atÌý.

*Non-GAAP number. See attached schedules for reconciliation to most comparable GAAP number.

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 Finance
Phone:Ìý 704-752-4486
E-mail: Ìýinvestor@spxflow.com

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SOURCE Â鶹´«Ã½ÔÚÏß, Inc.