Industrial Utility Efficiency    

SPX FLOW Reports Second Quarter 2017 Results

SPX FLOW, Inc. (NYSE: FLOW) reported results for the quarter ending on July 1, 2017.

"Through the first six months of 2017, we achieved positive results on many fronts, including solid order growth, strong cash generation and strengthened financial position. As a result, our backlog has grown 19% since the end of 2016, net debt has been reduced by 12% year-to-date and net leverage is down to 3.8x. In the second half of this year, we are targeting mid-single digit organic revenue growth with approximately 100 points of segment income margin expansion versus the prior year," said Marc Michael, SPX FLOW’s president and chief executive officer.

Michael continued, "In 2015 we initiated a global realignment program, which we expect to be substantially complete by year end. I appreciate the effort and dedication of our team across the enterprise during this multi-year transformation. We've made significant progress optimizing our global footprint, streamlining business processes and improving our cost position. The majority of the actions we've taken have been structural in nature and focused on building a strong foundation for sustainable, long-term growth and margin expansion. Thus far, we have realized a total of $98 million of cost savings and are progressing on actions that will realize the full benefit of our $140 million savings target in 2018."

"With line-of-sight to completing our realignment program combined with the order and backlog growth we achieved in the first half of the year, we have clearer visibility to our 2018 financial framework, which targets EBITDA in the range of $240 to $260 million,” Michael added.

"In summary, we continue to successfully transition to an operating structure that enables greater transparency to areas where we can improve execution more rapidly and serve customers more effectively. We are still in the early stages of our journey to transform SPX FLOW into a high performing operating enterprise. And as we look out to 2018 and beyond, we are excited about the many opportunities to execute at a higher level, expand our market share and strategically grow our business," concluded Michael.

 

Second Quarter 2017 Overview

  • Orders for the quarter increased 3.8% to $503.6 million, as compared to $485.1 million in the year-ago quarter. Organic orders increased 5.2% or $25.1 million, driven by order growth in the Industrial and Power and Energy segments. The impact of the U.S. dollar versus foreign currencies decreased orders by 1.4%, or $6.6 million.
  • Revenues declined 5.8% to $498 million, as compared to $528.8 million in the year-ago quarter. Organic revenues* decreased 4.7%, or $25.1 million, largely due to a lower opening backlog. The impact of the U.S. dollar versus foreign currencies decreased revenues by 1.1%, or $5.7 million.
  • Operating income and margin were $29 million and 5.8%.
    • The company recorded ($6.7) million of special charges in the second quarter related to its previously announced realignment program.
  • Excluding special charges, adjusted operating income* and margin were $35.7 million and 7.2% respectively.
  • Diluted net earnings per share were $0.24 including special charges of ($0.13) per share related to the company's global realignment program and a $0.04 per share tax benefit related primarily to discrete items.
  • Excluding special charges and the tax benefit described above, adjusted earnings per share* were $0.33 during the period.
  • Net cash from operating activities was $48.8 million in the quarter including ($9.1) million of cash outflows in support of the company's realignment program.
  • Free cash flow* was $42.2 million and included the net cash from operating activities described above less ($6.6) million in capital expenditures.
  • Adjusted free cash flow* for the quarter was $51.3 million.
  • Net income for the quarter was $10.3 million and adjusted net income* was $14.1 million.
  • Adjusted EBITDA* was $50.5 million.

Second Quarter 2017 Results by Segment

Food and Beverage
Revenues for Q2 2017 were $176.5 million, compared to $188 million in Q2 2016, a decrease of $11.5 million, or 6.1%.  Organic revenues* declined 5.3%, or $9.9 million, and currency fluctuations decreased revenues by 0.8%, or $1.6 million. The decline in organic revenues was due primarily to lower revenue from large systems projects.

Segment income was $17.3 million, or 9.8% of revenues, compared to $19.9 million, or 10.6% of revenues, in Q2 2016.  Segment income and margin decreased primarily due to the organic revenue decline described above and increased variable incentive compensation.  These items were largely offset by improved productivity in the Bydgoszcz, Poland facility and savings from restructuring actions and cost reduction initiatives.

Power and Energy
Revenues for Q2 2017 were $145 million, compared to $155.8 million in Q2 2016, a decrease of $10.8 million, or 6.9%.  Organic revenues* declined 5.1%, or $7.9 million, and currency fluctuations decreased revenues by 1.8%, or $2.9 million.  The decline in organic revenue was due to lower original equipment revenue related to valves and pumps used in midstream and upstream oil applications, as well as lower aftermarket sales.  These declines were partially offset by an increase in shipments of lower margin filtration products.

Segment income was $10 million, or 6.9% of revenues, compared to $10 million, or 6.4% of revenues, in Q2 2016.  Segment margins expanded 50 points and segment income was flat year-over-year as savings from restructuring actions and cost reduction initiatives offset a decrease in profit related to the organic revenue decline described above, increased warranty expense and variable incentive compensation. 

Industrial
Revenues for Q2 2017 were $176.5 million, compared to $185 million in Q2 2016, a decline of $8.5 million, or 4.6%.  Organic revenues* declined 3.9%, or $7.3 million, and currency fluctuations decreased revenues by 0.7%, or $1.2 million.  The organic revenue decline was due primarily to lower sales of mixers, hydraulic tools, industrial pumps, and heat exchangers.

Segment income was $20.8 million, or 11.8% of revenues, compared to $26.9 million, or 14.5% of revenues, in Q2 2016.  The decrease in segment income and margin was driven by the organic revenue decline described above, higher costs on shipments of heat exchangers, other discrete operational items and increased variable incentive compensation.  These declines were partially offset by improved efficiency in the Bydgoszcz, Poland facility and savings from restructuring actions and cost reduction initiatives.

 

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 the vast majority of the planned actions are expected to be complete by the end of 2017.  The total cost of the program is expected to be approximately $160 million with annualized savings of approximately $140 million, fully realized by the end of 2018.

 

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.