爆料瓜

CHARLOTTE, N.C., Aug.听6, 2019 // -- 爆料瓜, Inc. (NYSE: FLOW), a leading provider of process solutions, today reported results for the quarter ended June听29, 2019.听 As previously announced, the company is focusing its strategy on building a premier process solutions enterprise and in conjunction, pursuing a sale of its Power and Energy business.听 Notably, the results for the Power and Energy business were reported as discontinued operations for all periods presented, reflecting management's determination that it is probable the sale of this business will be completed within the next twelve months.听 The continuing operations of the company were reported in two segments:听 Food and Beverage and Industrial, the latter of which now includes certain product lines previously reported in the former Power and Energy reportable segment that are not being offered for sale.听听听听听听听听听听听

"During a busy second quarter our team worked diligently to improve customer fulfillment and operating performance while also executing on strategic actions.听 We reduced gross debt by听$20 million听and net leverage declined to 1.8x, a significant milestone.听 Additionally, we amended our credit facility, achieving modestly better pricing, increased revolver capacity and extending maturity out to 2024.听 I'm pleased with the progress made on many fronts and confident in our long-term plan to create value by building a premier process solutions enterprise with a strong balance sheet and customer-centered growth strategy," said听Marc Michael, President and CEO.听听听听听听听听听

"On the strategic front, we have been taking deliberate steps to reduce our exposure to cyclical power and energy markets and large, project-based dry dairy applications.听 These verticals contributed to volatility in our historical operating performance and overshadowed the underlying profitability and quality of revenue generated in our high value product lines."听听听听听听听听听听

"As we begin the second half of 2019, we are at a pivot point in this portfolio transformation.听 In dry dairy, the few remaining large projects in backlog are ramping down, and accordingly we completed actions late in the quarter to reduce our cost structure in that technology category.听听 In parallel, the process to sell our Power and Energy business is moving forward with positive momentum.听 That business performed well in Q2, delivering double-digit operating margins with orders up sharply from Q1, driven by pipeline valve orders in听North America听and global aftermarket.听 We understand the scope of the supporting costs for the Power and Energy business and are well-prepared to reduce overhead in a timely manner upon completing the divestiture.听 Once complete, we intend to deploy the net proceeds from this divestiture to organic growth initiatives, further deleveraging and return to shareholders," continued Michael.

"With an eye on the future, we have begun tailoring our organizational design to emphasize greater customer intimacy, new product development and innovative customer and market analytics.听 We will leverage our "Pathway to Excellence" lean program to increase the speed and efficiency of customer fulfillment with the goal of delivering a world class customer experience while improving our cost productivity by 2%-3% of revenue," continued Michael.

"Turning to the economic environment, moderating macro-economic conditions contributed to year-over-year order declines across most of our business in the first half.听 Second quarter orders declined 13.9% year-over-year on an organic basis, reflecting delayed capital spending broadly across our customer base and a slowdown in short cycle activity across most of our industries.听 From a regional perspective, the order decline was most prominent in听North America, with听Asia Pacific听orders also down versus the prior year."

"On a sequential basis, orders in our Food & Beverage and Industrial segments were stable, an encouraging sign."

"This morning we provided full year 2019 guidance on a continuing operations basis.听 On this basis, we are targeting revenue between听$1,485听and听$1,515 million, adjusted EPS* to be in the range of听$1.75听to听$1.95听per share, adjusted EBITDA* between听$175听and听$185 million听and adjusted free cash flow* between听$80听and听$90 million.听 This includes approximately听$6 million听of annual cost associated with supporting the Power and Energy business that is held for sale.听 It does not include any cost or benefit from our 2%-3% cost productivity goal and does not contemplate use of divestiture proceeds."

"In summary, 2019 represents a significant pivot point for our business as we execute our portfolio strategy, simplify our operating structure and enhance our customer focus.听 I want to thank our teams across the enterprise for their hard work, tireless effort and positive contributions to the quarter.听 We are excited about the future and remain committed to creating long-term value for our shareholders, customers and employees," concluded Michael.

Second Quarter 2019 Consolidated Results (continuing operations unless otherwise noted)

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

• Backlog decreased (18.1)% organically due largely to a lower level of system orders in the Food and Beverage segment, consistent with the company's strategy to methodically reduce its exposure in large, dry dairy applications and focus on growing orders in higher value, liquid processing applications.
• Orders declined (13.9)% organically, broadly reflecting a lower level of customer capital expenditures and a slowdown in short cycle orders, particularly in听North America听and Asia Pacific.听 The majority of the decline was concentrated in Food and Beverage process systems and, to a lesser extent, Food and Beverage components and hydraulic tools in the Industrial segment.
• Revenues declined (2.7)% organically, with organic revenue declines of (3.1)% in the Industrial segment and (2.3)% in the Food and Beverage segment.
• Operating income was听$29.7 million, or 7.7% of revenues, a decrease of听$(2.6) million, or (20) points. The decline in profitability was concentrated in the Food and Beverage segment where profitability declined due to a lower level of high margin component sales and lower margin profile on system revenue as compared to the prior year, specifically related to dry dairy projects.听 These declines were partially offset by improved profitability in the Industrial segment.
• Other income (expense) was听$1.7 million听as compared to听$(0.3) million听in the prior year period primarily due to a mark-to-market gain on an equity security.
• Diluted earnings per share from continuing operations were听$0.27听and included:
  • Strategic restructuring charges of听$(0.04)听per share primarily related to actions taken to close a facility in听South America.
  • A benefit of听$0.03听per share related to a mark-to-market adjustment of an equity investment.
  • Income tax provision of听$11.5 million, or an effective tax rate of 50%, reflecting losses recorded in countries where we do not recognize a tax benefit.
  • On an adjusted basis, earnings per share* were听$0.39.
  • Free cash flow* generation from continuing and discontinued operations was听$14.0 million听and included investments of听$8.4 million听on capital expenditures and听$2.9 million听on restructuring actions in the Food and Beverage and Industrial segments

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

• Backlog decreased (27.9)% organically due largely to the execution of projects in backlog combined with a lower level of system orders, consistent with the company's strategy to methodically reduce its exposure in large, dry dairy applications and focus on growing orders in higher value, liquid processing applications.听 To a lesser extent, the backlog for components also declined.
• Orders declined (20.6)% organically, broadly reflecting customer delays on capital investments for process systems, particularly in听Asia Pacific听and a slowdown in short cycle component orders in听North America听due in large part to food and beverage producers' uncertainty regarding the impact of tariffs.
• Revenues declined (2.3)% organically, due to a decline in component sales in听North America听and a lower level of revenue contribution from large dry dairy systems, consistent with the company's strategy.听 Aftermarket sales were up modestly.
• Segment income declined听$(6.0) million听and margins contracted (290) points.听 The decline in profitability reflects a lower margin mix of system revenue and organic volume declines in high value component sales.

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

• Backlog decreased (4.4)% organically reflecting a lower level of small-to-medium sized capital orders over the past year and softness in short cycle industrial demand through the first half of 2019.
• Orders declined (8.0)% organically with broad-based declines across the majority of the industrial product lines, most notably in hydraulic tools and heat exchangers.听 These declines were partially offset by high-single digit growth in mixer orders.
• Revenues declined (3.1)% organically due to a lower level of capital projects and a decline in shipments of dehydration equipment.听 These declines were partially offset by organic growth in heat exchangers and mixers.
• Segment income increased听$2.2 million听and margins expanded 180 points on a more favorable revenue mix, net benefits from cost/price and improved operational execution.

OTHER ITEMS

Form 10-Q:听The company expects to file its quarterly report on Form 10-Q for the quarter ended June听29, 2019 with the Securities and Exchange Commission on August听7, 2019. This news release should be read in conjunction with that filing, which will be available on the company's website at听听, in the Investor Relations section.

Discontinued Operations:听On听May 2, 2019, the company announced that its Board of Directors initiated a process to divest a substantial portion of the company's Power and Energy segment.听 The results for the Power and Energy business were reported as discontinued operations for all periods presented, reflecting management's determination that it is probable the sale of this business will be completed within the next twelve months.听 The continuing operations of the company were reported in two segments:听 Food and Beverage and Industrial, the latter of which now includes certain product lines previously reported in the former Power and Energy reportable segment that are not being offered for sale.

Debt Repayment:听During the quarter, the company made a voluntary prepayment of听$20.0 million听on its term loan.

Senior Credit Facilities:听On听June 27, 2019听the company, in conjunction with its lenders, amended and restated its senior credit facilities.听 More details can be found within a form 8-K, filed on听July 1, 2019听with the Securities and Exchange Commission which is available on the company's website at听.

About 爆料瓜, Inc.:听Based in听Charlotte, North Carolina, 爆料瓜, Inc.听(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.听爆料瓜听has approximately听$1.5 billion听in annual revenues with operations in more than 30 countries and sales in more than听140听countries. To learn more about 爆料瓜, please visit听听.

*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.

^(1)听During the three months ended June听29, 2019, we recorded an income tax benefit of听$37.8听on听$12.9听of pre-tax income from discontinued operations, resulting in an effective tax rate of (293.0)%. This compares to an income tax provision for the three months ended June听30, 2018 of听$3.7听on听$12.4听of pre-tax income from discontinued operations, resulting in an effective tax rate of 29.8%. The effective tax rate for the second quarter of 2019 was impacted by a benefit of听$40.6听resulting from basis differences that will be realized through the disposition of the held-for-sale assets.

During the six months ended June听29, 2019, we recorded an income tax benefit of听$37.8听on听$17.8听of pre-tax income from discontinued operations, resulting in an effective tax rate of (212.4)%. This compares to an income tax provision for the six months ended June听30, 2018 of听$7.5听on听$19.8听of pre-tax income from discontinued operations, resulting in an effective tax rate of 37.9%. The effective tax rate for the first six months of 2019 was impacted by a benefit of听$40.6听resulting from basis differences that will be realized through the disposition of the held-for-sale assets. The effective tax rate for the first six months of 2018 was impacted by an expense of听$1.1听resulting from an adjustment to the valuation allowance on certain deferred tax assets for which no benefit is expected to be recognized.

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 27A of the Securities Exchange Act of 1933, as amended, and 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听December 31, 2018. 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.听 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 2018 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 results to differ materially from those projected in these forward-looking statements. These risk factors may not be exhaustive. Further, the company operates in a continually changing business environment and cannot predict new risk factors that may arise as a result of these changes. In addition, estimates of future operating results are based on the company's current complement of continuing operations, which is subject to change, and the company cannot assure that the portion of the former Power and Energy reportable segment being held for sale will be sold in the anticipated time period, or at all, and the terms of any such sale if it is completed. Statements in this press release speak only as of the date of this press release, and 爆料瓜 disclaims any responsibility to update or revise such statements.

Investor Contact:
Stewart Honeycutt
Director, FP&A and Investor Relations
704-752-4472听听听听听听听听听听听听听听听听听听听听听听听听听听听听听听听听听听听听听听听听听听听听听听听听听听听听听
investor@spxflow.com

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