Slide 1: Q3 2019 Earnings Presentation
Q3 2019 Earnings Presentation October 30, 2019 SPX Corporation 2019 Investor Event - New York
Slide 2: Forward-looking statements
Certain statements contained in this presentation that are not historical facts, including any statements as to future market conditions, results of operations, products introductions, and financial projections, are forward-looking statements within the meaning of Section 27A of the Securities Act
Slide 3: Introductory Comments
Introductory Comments Gene Lowe
Slide 4: Performance Highlights
Performance Highlights Strong overall Q3 2019 results Significant growth in adjusted revenue and operating profit ~240 bps of adjusted operating margin expansion Significant growth in HVAC and Detection & Measurement Increasing lower end of 2019 Adjusted EPS guidance Substantial capital
Slide 5: Adjusted Q3 2019 Year-Over-Year Summary
Adjusted Q3 2019 Year-Over-Year Summary ($ millions) Q3 Year-to-Date Adjusted Revenue Adjusted Operating Income Margin $1,082 HVAC and Detection & Measurement $1,012 were primary drivers of increases in $341 $359 revenue and adjusted operating 10.1% 8.5% income 10.3% 5.2% adjusted revenue growth
Slide 6: Value Creation Framework
Value Creation Framework Organic Growth SPX Business System • New products • Policy deployment • Channel expansion • Operational excellence • Adjacent markets • Due diligence/integration Inorganic Growth Culture & Values • Focus in HVAC and D&M • Leadership development • Significant capital to deplo
Slide 7: Q3 Financial Review
Q3 Financial Review Scott Sproule
Slide 8: Adjusted Earnings Per Share
Adjusted Earnings Per Share Q3 2019 Q3 2018 GAAP EPS from continuing operations $0.47 $0.15 South Africa and Heat Transfer $0.07 $0.15 Acquisition-related $0.01 $0.06 Non-service pension & other* $0.02 $0.01 Amortization $0.03 $0.02 Adjusted EPS from continuing operations $0.60 $0.39 Adjusted EPS Gr
Slide 9: Adjusted Q3 2019 Year-Over-Year Results
Adjusted Q3 2019 Year-Over-Year Results ($ millions) Q3 Adjusted Revenue: Q3 Year-to-Date 5.2% year-over-year increase: Adjusted Revenue 3.1% organic increase* Adjusted Segment Income Margin $1,082 $1,012 2.6% acquisition impact (0.5%) unfavorable currency impact $359 $341 Q3 Adjusted Segmen
Slide 10: HVAC Q3 2019 Year-Over-Year Results
HVAC Q3 2019 Year-Over-Year Results ($ millions) Q3 Revenue: Q3 Year-to-Date 6.1% year-over-year increase: 4.2% organic increase* driven by higher Revenue pricing and heating volumes Adjusted Segment Income Margin* $399 $399 2.5% increase from SGS acquisition (0.6%) unfavorable currency impa
Slide 11: Detection & Measurement Q3 2019 Year-Over-Year Results
Detection & Measurement Q3 2019 Year-Over-Year Results ($ millions) Q3 Revenue: Q3 Year-to-Date 15.8% year-over-year increase: Revenue $284 10.2% organic increase* primarily due to Adjusted Segment Income Margin* strong project activity in Communication Technologies $225 6.6% increase from Sab
Slide 12: Engineered Solutions Q3 2019 Year-Over-Year Results
Engineered Solutions Q3 2019 Year-Over-Year Results ($ millions) Q3 Year-to-Date Q3 Revenue: (3.0%) year-over-year decrease: Revenue Segment Income Margin Lower Process Cooling volumes, partially offset by higher Transformer revenues $388 $398 Q3 Segment Income and Margin: $125 $121 6.1% 6.8%
Slide 13: Financial Position and Liquidity Review
Financial Position and Liquidity Review Scott Sproule
Slide 14: Financial Position - Capital Structure & Liquidity Update
Financial Position - Capital Structure & Liquidity Update Leverage Ratios* 2.7x ($millions) Q3 2018 Q3 2019 Short-term debt $113.1 $40.6 2.3x 1.5-2.5x Current maturities of long-term debt 9.3 18.5 1.8x 1.6x Long-term debt 340.6 323.8 Total Debt $463.0 $382.9 Less: Cash on hand (61.9) (49.3) Net Debt
Slide 15: 2019 Adjusted Guidance (Changes in Bold)
2019 Adjusted Guidance (Changes in Bold) Revenue Segment Income Margin In a range of $576-586 million HVAC In a range of 15.5-16% Detection & In a range of 23-24% (ex In a range of a $390-400 million Measurement amortization) Engineered In a range of $530-540 million ~8%, or +150 bps vs
Slide 16: End Market Overview and Closing Remarks
End Market Overview and Closing Remarks Gene Lowe
Slide 17: Market Commentary
Market Commentary Market Comments Cooling: Stable near-term demand; some uncertainty around macro-data HVAC Heating: Well-balanced channel; initial seasonal demand solid Detection & Frontlog activity remains solid for project sales Measurement Brexit uncertainty moderating demand in select m
Slide 18: Executive Summary
Executive Summary On track for 17-20% Adjusted EPS growth Revenue growth and margin expansion continued during Q3 Strong balance sheet and liquidity profile Significant opportunities in M&A pipeline Continued Focus on Shareholder Value Creation Note: Adjusted results are non-GAAP financial m
Slide 19: Questions
SPX4 Questions
Slide 20: Appendix
SPX4 Appendix
Slide 21: 2019 Adjusted EPS Guidance - Key Drivers
2019 Adjusted EPS Guidance - Key Drivers • Favorable Economic Policy/Infrastructure Stimulus $2.72 • Stronger-Than-Normal Seasonal Heating Demand • Commercial Growth Accelerates • Greater-Than-Anticipated Price-Cost Tailwinds • Accelerated Project-Related Sales $2.69 Base Case • Weaker-Than-Anticipa
Slide 22: Adjusted Segment Income Phasing
Adjusted Segment Income Phasing ($ millions) Q1 2018 Q2 2018 Q3 2018 Q4 2018 GAAP 37.0 41.0 29.6 70.9 37% Exclude: "All other" (4.1) (4.4) (8.0) (2.4) Exclude: One time acquisition (0.3) (1.6) (2.5) (0.7) 31% related costs Exclude: Intangible amortization (0.1) (0.8) (1.7) (1.5) 25% Adjusted $41.5 $
Slide 23: 2019 Modeling Considerations
2019 Modeling Considerations Metric Commentary/Assumptions Corporate costs Low $40Ms Long-term incentive comp $14-15M Restructuring costs $1M Interest cost $19-20M Equity earnings, other $4-5M Tax rate Approximately 21% Capex $15-17M Cash cost of pension + OPEB Approximately $16M D&A Approximately $
Slide 24: Q3 2019 U.S. GAAP to Adjusted Earnings Per Share Reconciliation
Q3 2019 U.S. GAAP to Adjusted Earnings Per Share Reconciliation GAAP Adjustments Adjusted ($ millions) (1) Segment income $ 42.9 $ 7.7 $ 50.6 Corporate expense (2) (10.0) 0.2 (9.8) Long-term incentive compensation expense (3.3) — (3.3) Special charges, net (3) (2.0) 1.6 (0.4) Operating income 27.6 9
Slide 25: Q3 2018 U.S. GAAP to Adjusted Earnings Per Share Reconciliation
Q3 2018 U.S. GAAP to Adjusted Earnings Per Share Reconciliation ($ millions) GAAP Adjustments Adjusted Segment income (1) $ 29.6 $ 12.2 $ 41.8 Corporate expense (2) (10.5) 0.3 (10.2) Long-term incentive compensation expense (4.3) — (4.3) Special charges, net (3) (1.0) 0.8 (0.2) Loss on sale of dry c
Slide 26: Q3 and YTD U.S. GAAP to Adjusted Operating Income Reconciliation
Q3 and YTD 2019 and 2018 U.S. GAAP to Adjusted Operating Income Reconciliation ($ millions) Three months ended Nine months ended September 28, 2019 September 29, 2018 September 28, 2019 September 29, 2018 Operating income $ 27.6 $ 13.4 $ 56.9 $ 55.4 Exclude: Aggregate operating losses of the South A
Slide 27: Q3 2019 U.S. GAAP Revenue to Organic Revenue Reconciliation
Q3 2019 U.S. GAAP Revenue to Organic Revenue Reconciliation ($ millions) Three months ended September 28, 2019 Detection & HVAC Measurement Engineered Solutions Adjusted SPX Net Revenue Growth (Decline) 6.1 % 15.8 % (3.0) % 5.2 % Exclude: Foreign Currency (0.6) % (1.0) % — % (0.5) % Exclude: Acquisi
Slide 28: U.S. GAAP to Adjusted Revenue and Adjusted Segment Income Reconciliation
Q3 and YTD 2019 and 2018 U.S. GAAP to Adjusted Revenue and Adjusted Segment Income Reconciliation ($ millions) CONSOLIDATED SPX: Three months ended Nine months ended September 28, 2019 September 29, 2018 September 28, 2019 September 29, 2018 Consolidated revenue $ 364.8 $ 362.5 $ 1,080.8 $ 1,093.6 E
Slide 29: U.S. GAAP to Adjusted Segment Income Reconciliations
Q3 and YTD 2019 and 2018 U.S. GAAP to Adjusted Segment Income Reconciliations ($ millions) Three months ended Nine months ended HVAC REPORTABLE SEGMENT: September 28, 2019 September 29, 2018 September 28, 2019 September 29, 2018 HVAC segment income $ 22.2 $ 15.6 $ 57.3 $ 52.7 Exclude: One time acqui
Slide 30: Q3 2019 Debt Reconciliation
Q3 2019 Debt Reconciliation ($ millions) Q3 2019 Short-term debt $ 40.6 Current maturities of long-term debt 18.5 Long-term debt (1) 325.3 Gross debt 384.4 Less: Purchase card program and extended payables (3.8) Adjusted gross debt 380.6 Less: Cash and equivalents (49.3) Adjusted net debt $ 331.3 1)
Slide 31: Q3 2019 Consolidated Adjusted EBITDA Reconciliation
Q3 2019 Consolidated Adjusted EBITDA* Reconciliation Last 12 Months ($ millions) Net income attributable to SPX Corporation common shareholders $ 79.1 Income tax provision 6.7 Interest expense 21.8 Income before interest and taxes 107.6 Depreciation and amortization 32.6 EBITDA 140.2 Adjustments: No
Slide 32: Q3 2019 Adjusted Free Cash Flow Reconciliation
Q3 2019 Adjusted Free Cash Flow Reconciliation ($ millions) Q3 2019 YTD 2019 Operating cash flow from continuing operations $ 45.3 $ 73.3 Capital expenditures - continuing operations (4.5) (10.7) Free cash flow from continuing operations 40.8 62.6 Adjustment for "All other" (7.0) (0.3) Adjusted free