CHARLOTTE, N.C., May 12, 2020 /PRNewswire/ -- SPX FLOW, Inc. (NYSE: FLOW), a leading provider of process solutions, today reported results for the quarter ended March 28, 2020.

"Our first quarter results demonstrate our nimble operating structure, maturing business operating system and emphasis on driving high-quality revenue.  Specifically, the team was able to deliver significant year-over-year improvements in gross margin despite revenues being down over 20% driven by solid execution, cost reductions and productivity savings. This strong operating foundation, underpinned by a people-first culture, has driven an effective and resilient response to the dynamic impacts of COVID-19.  I am impressed with the way our team is working together across the globe to navigate these challenges, rapidly implementing new protocols that prioritize the health and well-being of our team members and maintain business continuity to fully support customers.  And I am inspired by the acts of kindness our team has demonstrated in support of local communities and front-line workers," said Marc Michael, President and Chief Executive Officer.

"As we navigate through this historic situation, our guiding principles are to ensure a safe and healthy work environment, support our customers with excellence, maintain long-term financial strength and execute our long-term strategy.  To this end, it is vital that we keep our talented workforce intact to provide continuity and ensure the technical skills and process knowledge are in place to support our customers and capitalize on opportunities to create value through this economic cycle."

"Importantly, we are in a strong financial position that was fortified with the net proceeds from the sale of Power and Energy.  Available liquidity is over $1.1 billion, and our net leverage and interest coverage ratios are well below the debt covenants.  We have flexibility to maintain a strong balance sheet, invest in our long-term strategy and create value through disciplined, opportunistic capital allocation."

"The global pandemic and economic downturn underscore the importance of our strategy to focus on process solutions for sanitary and industrial applications.  We support everyday life, including food and beverage, pharmaceutical, water, personal care, specialty chemical and condensed air markets.  This positions SPX FLOW as an essential part of the supply chain that helps feed and enhance the world.  With this as our purpose, our global operations have remained open throughout this pandemic, with limited, temporary restrictions. That said, consistent with the broader economy, orders slowed significantly in March and April."  

"We are managing the near-term demand environment prudently and have conducted a robust cash sensitivity analysis across various economic scenarios.  Currently, we are operating with the assumption that revenue will decrease 15%-20% year-over-year.  Considering this, we curtailed discretionary spend, variable costs and paused hiring, apart from customer support roles, select strategic positions and early career programs.  Should the economic downturn decline further, we have identified subsequent cost actions that can be rapidly implemented to adjust our cost structure in accordance with volume, while maintaining the ability to support customers and fully participate in economic recovery."

"In summary, SPX FLOW is better positioned today than in previous industrial economic recessions to support our team, serve our customers with excellence and maintain financial strength, liquidity and strategic optionality.  I am proud of our team members across the world for their united effort and fortitude in navigating through this global pandemic.  And I am confident we will effectively manage through this economic downturn and be in a stronger position capitalize on growth and value creation opportunities when the economy recovers," said Marc Michael, SPX FLOW President and Chief Executive Officer.

First Quarter 2020 Consolidated Results (continuing operations unless otherwise noted)

Note: The commentary below is compared to the prior-year period. Organic changes exclude the effects of currency fluctuations.

• Backlog decreased (2.2)% organically due in large part the company's strategy to methodically reduce its exposure to large, dry-dairy applications and focus on growing orders in higher value, liquid-processing applications. These declines were partially offset by an increase in the Industrial backlog associated with strong mixer orders and certain shipment delays related to COVID-19.
• Orders declined (10.1)% organically. The decline was broad based and largely driven by a lower level of Food and Beverage systems orders, along with a lower order run-rate of components and aftermarket parts across both reporting segments. From a geographic perspective, order declines were concentrated in Europe and North America for the company's industrial product offerings while Food and Beverage liquid-processing systems declines were concentrated in Asia Pacific.
• Revenues declined (19.6)% organically, due to a lower level of revenue from large dry-dairy projects, broad based weakness across most industrial product lines, largely attributable to current market conditions, along with a lower starting backlog year-over-year.
• Gross profit decreased $(22.3) million due primarily to lower volume. Gross margins expanded 190 points to 34.9% driven by a higher quality of revenue, improved operating execution and favorable net price/cost benefits.
• Operating income was $8.6 million, or 3.0% of revenues. This included $2.6 million of restructuring charges, a $1.9 million non-cash impairment charge and $0.8 million dollars of professional fees supporting the company's enterprise strategy and long-term value creation planning. Excluding these items, adjusted operating income* was $13.9 million, or 4.8% of revenues.
• Diluted earnings per share from continuing operations were $(0.01) and included:
• A non-cash impairment charge of $(0.03) per share related to the rationalization of a product line.
• Professional fees of $(0.01) per share related primarily to strategic actions.
• Restructuring and other related charges of $(0.05).
• Discrete and other tax items totaling a net credit of $0.02 per share as compared to the Company's expected tax rate of 29%.
• Excluding the items noted above, adjusted earnings per share* from continuous operations were $0.06.
• Free cash flow* utilized across all operations was $(42.9) million, including investments of $10.2 million on capital expenditures and $2.3 million on restructuring actions. The majority of the year-over-year change in free cash flow related to the lower level of earnings along with higher working capital levels partially related to shipment delays.

First Quarter 2020 Results by Segment

Food and Beverage

Note: The commentary below is compared to the prior-year period. Organic changes exclude the effects of currency fluctuations.

• Backlog decreased (8.7)% organically due to strong project execution combined with a lower level of new system orders, consistent with the Company's strategy to methodically reduce its exposure to dry-dairy applications and increase its focus on liquid-processing applications. Reduced orders for process components and aftermarket parts also contributed to the decline.
• Orders declined (18.8)% organically, primarily driven by timing of order in-take in liquid-processing systems in Asia Pacific. Additionally, process components and aftermarket orders declined largely driven by lower levels of demand in Europe.
• Revenues declined (17.0)% organically, primarily due to a lower level of revenue from large dry-dairy systems, as anticipated, along with lower components and aftermarket sales.
• Segment income of $19.4 million was up ~5% year-over-year as margins expanded 340 points to 14.1%. The margin improvement was primarily driven by strong operational and project execution on a higher quality of revenue, savings from cost reduction actions and net price benefits.

Industrial

Note: The commentary below is compared to the prior-year period. Organic changes exclude the effects of currency fluctuations.

• Backlog increased 4.9% organically reflecting improved demand for mixers in the quarter along with some delayed shipments primarily in China due to COVID-19.
• Orders declined (3.5)% organically. This decline was broad-based across the majority of industrial product lines, most notably in dehydration equipment and hydraulic tools, reflecting the broader global industrial slowdown. Partially offsetting these declines was the double-digit growth in mixer projects for customers in China and in the Middle East.
• Revenues declined (21.8)% organically primarily due to a lower level of demand across the majority of short cycle product categories and end markets, primarily associated with global macro conditions. Additionally, opening backlog entering the quarter was down year-over-year contributing to the revenue decline.
• Segment income decreased $(20.1) million and margins contracted 800 points to 6.2%. The decline in segment income and margin was largely related to volume declines in high margin product categories.

OTHER ITEMS

Form 10-Q: The company expects to file its quarterly report on Form 10-Q for the quarter ended March 28, 2020 with the Securities and Exchange Commission on or about May 12, 2020. This news 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, Inc. (NYSE: FLOW) innovates with customers to help feed and enhance the world by designing, delivering and servicing high value process solutions at the heart of growing and sustaining our diverse communities. The company's product offering is concentrated in process technologies that perform mixing, blending, fluid handling, separation, thermal heat transfer and other activities that are integral to processes performed across a wide variety of sanitary and industrial markets. SPX FLOW has approximately $1.5 billion in annual revenues with operations in more than 30 countries and sales in more than 140 countries. To learn more about SPX FLOW, please visit www.spxflow.com.

*Non-GAAP measure. See attached schedules for reconciliation from most comparable GAAP measure. 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 continuing 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 measures are not intended to present all items that may have impacted these results. In addition, these Non-GAAP measures are not necessarily comparable to similarly-titled measures used by other companies.

Note: Net leverage is as defined by the company's credit facility.

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, including its annual report on form 10-K for the year ended December 31, 2019. 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. These statements are only predictions. Actual events or results may differ materially because of market conditions or other factors, and forward-looking statements should not be relied upon as a prediction of actual results. All the forward-looking statements in this press release are qualified in their entirety by reference to the factors discussed under the heading "Risk Factors" in the company's most recent Form 10-K and in any other documents filed by the company with the Securities and Exchange Commission that describe risks and factors that could cause actual results to differ materially from those projected in these forward-looking statements. These risk factors may not be exhaustive. In addition to these factors, the matters addressed in these forward-looking statements are subject to uncertainties arising from the current COVID-19 pandemic, including the impact of the pandemic or related government responses on our businesses, the businesses of our customers and vendors and the global economy generally, other impacts to our supply chain and employee mobility, and whether our businesses and those of our customers will continue to be treated as "essential" operations under government orders restricting business activities or, even if so treated, whether health and safety concerns might otherwise require operations to be halted for some period of time. Further, the company operates in a continually changing business environment and cannot predict new risk factors that may arise as a result of these and other changes. 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 Contacts:

Scott Gaffner
VP, Investor Relations and Strategic Insights
704-752-4485
investor@spxflow.com

Stewart Honeycutt
Director, FP&A and Investor Relations
704-752-4472

Media Contact:
Melissa Buscher
Chief Communications Officer
704-540-2160

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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SOURCE SPX FLOW, Inc.