Slide 1: 2014 Fourth Quarter Results and 2015 Financial Modeling Targets
2014 Fourth Quarter Results and 2015 Financial Modeling Targets February 12, 2015 COMPANY CONFIDENTIAL
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 and financial projections, are forward-looking statements and are thus prospective. These forward-looking statements are subject to risks,
Slide 3: Summary of Q4 Accounting and Other Notable Items
Summary of Q4 Accounting and Other Notable Items Q4 2014 EPS Adjustments Mark-to-market pension adjustment Annual impairment testing Taxes related to cash repatriation and discrete tax benefits Additional costs/accruals for the Medupi and Kusile power projects in South Africa (“the South Afr
Slide 4: 2015 Financial Modeling Approach
2015 Financial Modeling Approach In 2015 we are focused on both continued operational improvement and achieving the strategic milestone of separating SPX into two, strong standalone public companies. We are providing financial modeling targets for revenue, segment income, EBITDA and other reason
Slide 5: Introductory Comments
Introductory Comments Chris Kearney, Chairman, President and CEO COMPANY CONFIDENTIAL
Slide 6: Q4 2014 Financial Review
Q4 2014 Financial Review Summary of Key Q4 Results Adjusted EPS from continuing operations of $2.36 Adjusted free cash flow of $204m 2.6% organic revenue growth, excluding the South Africa projects Adjusted segment income increased 3% over the prior year to $177m Flow segment income margin
Slide 7: Key Accomplishments in 2014
Key Accomplishments in 2014 Operational Performance: SPX Consolidated Year-Over-Year Segment Margin Improvement Successful transition to new operational alignment 180+ Progress on restructuring actions Basis Points Traction on global manufacturing initiatives 90+ 80+ 70+ 70+ 7 consecutive qu
Slide 8: Key Accomplishments in 2014
Key Accomplishments in 2014 Strategic / Corporate Actions: Generated $683m in gross divestiture proceeds from the sales of our interest in the EGS joint venture and our Precision Components and TPS businesses Increased annual dividend 50% and repurchased ~$500m of SPX common stock: Returned $5
Slide 9: SPX Consolidated Revenue Profile
SPX Consolidated Revenue Profile 2014 Revenue by End Market 2014 Revenue by Geography Oil & Gas Food & Beverage 18% 47% 24% 20% Power Generation 16% Specialty $4.7b Infrastructure 19% 6% Chemical General 5% Industrial 15% 8% Power 2% T&D HVAC 9% 11% 18% of Total Revenue is From Sales into Oil & Gas
Slide 10: SPX Oil & Gas Overview
SPX Oil & Gas Overview 2014 Oil & Gas Revenue by End Market Upstream a) Upstream: Midstream 25% 24% Expect new investments to be delayed $874m b) Midstream: Downstream 9% Expect new pipeline projects to be delayed Aftermarket 36% Gas Where permits are in place, there is likely incentive to mov
Slide 11: Flow End Market Trends
Flow End Market Trends Food & Beverage Power & Energy Industrial Flow Oil & Gas Components Book and turn business steady Q4 2014 marked highest bookings Component and aftermarket quarter last year for upstream oil orders increased sequentially and and oil pipeline projects Capital bookings t
Slide 12: Thermal End Market Trends
Thermal End Market Trends HVAC Power Generation Notable orders for power generation projects: Personal comfort heating: ~$70m order in Algeria to provide dry cooling systems for new coal plants Commercial initiatives continue to drive growth ~$25m order in Germany to provide condensers D
Slide 13: Backlog
Backlog Sequential Backlog Analysis ($ millions) Total Backlog* $2,200 $2,249 $2,256 $2,146 $2,100 Ending Q4 total backlog* down 5%, or $100m, year-over-year: $286 $318 $338 Industrial $366 $336 ($115m) currency impact Thermal * $527 $538 $566 $588 $615 +$15m organic growth Flow $1,387 $1,393
Slide 14: 2015 Revenue and Segment Income % Targets
2015 Revenue and Segment Income % Targets Total Revenue Currency Impact Organic Revenue Segment Income Variance to Prior Year on Revenue Growth Margin Expansion Flow (8%) to (3%) ~(6%) (2%) to +3% ~40 points Thermal (3%) to +0% ~(4%) +1% to +4% ~270 points Industrial +2% to +5% ~(2%) +4% to +7% ~40
Slide 15: Financial Analysis
Financial Analysis Jeremy Smeltser COMPANY CONFIDENTIAL COMPANY CONFIDENTIAL
Slide 16: Q4 Earnings Per Share
Q4 Earnings Per Share Q4 2014 Adjusted Earnings Per Share EPS EPS from continuing operations ($0.78) Non-service cost pension items (non-cash) $1.45 $86m pre-tax mark-to-market adjustment Impairments of intangible assets (non-cash) $0.74 $38m pre-tax expense Taxes on cash repatriation $0.46 $19m of
Slide 17: Consolidated Q4 Results
Consolidated Q4 Results Q4 Year-Over-Year Analysis Revenue ($ millions) Revenue: Reported Segment Income Margin (3.9%) year-over-year decline: Adjusted Segment Income Margin (3.4%) South Africa projects $1,329 $1,278 (3.1%) currency impact +2.6% organic growth 13.6% 13.0% Segment Income and
Slide 18: Flow Technology Q4 Results
Flow Technology Q4 Results Q4 Year-Over-Year Analysis Revenue decreased (5.6%): Revenue ($ millions) (4.4%) currency impact Operating Margins (1.2%) organic decline: Lower component sales in Asia Pacific, which offset… $720 …growth across the ROW in Food & Beverage and Industrial $680 Powe
Slide 19: Flow Technology Backlog
Flow Technology Backlog Sequential Backlog Analysis ($ millions) Q4 backlog down (3.5%) sequentially: Quarter End Backlog Decline due to currency Excluding currency, Flow’s backlog was flat $1,387 $1,393 $1,352 $1,191 $1,149 Food & Beverage backlog +9%, excluding currency Q4 backlog down (
Slide 20: Flow Technology Full Year Analysis
Flow Technology Full Year Analysis Full Year Analysis ($ millions) Revenue 2014 Analysis: Operating Margins (1.6%) revenue decline: A lower level of pump revenue at Flow P&E $2,682 $2,638 +4% to 220 points of margin expansion $2,596 +6% (8%) to Driven by Flow P&E and Flow Industrial (3%) 14%
Slide 21: Thermal Equipment & Services Q4 Results
Thermal Equipment & Services Q4 Results As Reported Core Thermal Segment* ($ millions) ($ millions) Revenue Revenue Operating Margins Operating Margins $384 South Africa Projects $365 $387 Profit/ Revenue Loss $324 22% organic revenue growth Q4 2013 $41 $1 8.9% 9.6% 9.9% Q4 2014 ($3) ($28) 30 po
Slide 22: Thermal Equipment & Services Full Year Analysis
Thermal Equipment & Services Full Year Analysis As Reported Core Thermal Segment* ($ millions) ($ millions) Revenue Revenue Operating Margins Operating Margins $1,344 South Africa Projects $1,330 $1,255 Profit/ $1,150 Revenue (Loss) 9% organic 6.9% revenue growth 6.1% 2013 $194 $20 5.4% 3.9% 2014
Slide 23: Thermal Equipment & Services Backlog
Thermal Equipment & Services Backlog Sequential Backlog Analysis ($ millions) Core Backlog South Africa Backlog Estimated future contract adjustments in South Africa Core backlog up 17% year-over-year: Improved revenue visibility $588 $615 into 2015 and 2016 $566 $527 $538 Steady sequential in
Slide 24: Thermal Equipment & Services 2015 Targets
Thermal Equipment & Services 2015 Targets Full Year Analysis South Africa Projects Revenue ($ millions) 2015 Targets: Total Revenue Combined Operating Margin +1% to +4% organic revenue growth (~4%) currency impact $1,491 (3%) to +3% to $1,344 $1,330 +0% +5% +270 points of margin expansion 8% t
Slide 25: Industrial Products & Services Q4 Results
Industrial Products & Services Q4 Results Q4 Year-Over-Year Analysis ($ millions) Revenue Revenue decreased (12.4)%: Operating Margins (0.7%) currency impact (11.7%) organic decline: $244 Decline in sales of fare collection systems $214 Reduced shipments of power transformers 15.2% 14.9% Inc
Slide 26: Industrial Products & Services Backlog
Industrial Products & Services Backlog Sequential Backlog Analysis ($ millions) Quarter End Backlog $366 $338 $336 $318 $286 Total backlog up 17% year-over-year: Driven by power transformers and communications technologies Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Industrial Backlog Increased 17%
Slide 27: Industrial Products & Services Full Year Analysis
Industrial Products & Services Full Year Analysis Full Year Analysis Revenue 2014 Analysis: ($ millions) 0.5% revenue growth: Operating Margins Increased sales of power transformers, hydraulic +3% to +2% to technologies and Radiodetection equipment… +5% $795 +5% …offset by lower sales of fare
Slide 28: 2015 Financial Modeling Targets
2015 Financial Modeling Targets 2015 Financial Target SPX Consolidated FLOW THERMAL INDUSTRIAL Total Revenue Variance To Prior Year (5%) to (1%) (8%) to (3%) (3%) to flat +2% to +5% Currency Impact To Revenue ~(5%) ~(6%) ~(4%) ~(2%) Organic Revenue Growth flat to +4% (2%) to +3% +1% to +4% +4% to +7
Slide 29: Q1 2015 Financial Modeling Targets
Q1 2015 Financial Modeling Targets Financial Metric Q1 2014 Q1 2015 Targets Comments ($ millions) (6%) currency impact Revenue $1,077 (10%) to (8%) (4%) to (2%) organic decline ~($5m) currency impact Segment Income $99 $73 to $83 Organic decline in Flow Power & Energy Unfavorable revenue m
Slide 30: Financial Position
Financial Position Leverage Review Gross Leverage Net Leverage $281m of adjusted free cash flow in 2014 4.0x 3.1x 3.1x 3.0x 2.8x $428m of cash on hand at the end of 2014: 2.1x 2.1x 2.4x Repatriated $92 million dollars in Q4 2.0x 1.6x 2.3x 1.7x 1.7x Total debt reduced 18% in 2014 to $1.37b 1.
Slide 31: Executive Summary
Executive Summary COMPANY CONFIDENTIAL COMPANY CONFIDENTIAL
Slide 32: Strategic Transformation: Select Key Acquisitions
Strategic Transformation 1997-2004 2005-2007 2008-2014 2015 + General Signal + Johnson Pump + APV SPX FLOW, Inc. + United Dominion + Anhydro SPX Corporation Select Key Acquisitions + Gerstenberg + ClydeUnion Flow Spin-Off Flow Market Development ‒ Service Solutions Strategic Market ‒ EGS JV Interest
Slide 33: Strategic Transformation
Strategic Transformation 1997 to 2004 2005 to 2011 2012 to 2014 2015 future and state Beyond 9 Growth Platforms 3 Core Platforms 3 Key End Markets 2 Independent 5 Reporting Segments 4 Reporting Segments 3 Reporting Segments Companies 2004 Revenue* 2011 Revenue 2013 Revenue 2015E Revenue Industrial I
Slide 34: SPX FLOW, Inc.
SPX FLOW, Inc. Key Executives and Pro Forma 2015E EBITDA (1) Pro Forma 2014 Revenue by End Market Power & Chairman, President and CEO: Chris Kearney Energy Food & 35% VP and Chief Financial Officer: Jeremy Smeltser Beverage $2.8B 33% 2015E Consolidated EBITDA (1): $375m to $405m Industrial (1)
Slide 35: SPX Corporation
SPX Corporation Key Executives and Pro Forma 2015E EBITDA (1) Pro Forma 2014 Revenue by End Market Chairman: Michael Mancuso Power T&D HVAC 20% 24% President and CEO: Gene Lowe ~$2B VP and Chief Financial Officer: Scott Sproule Power Specialty 2015E Consolidated EBITDA (1): $175m to $195m Ge
Slide 36: Update on Spin-Off of Flow Business
Update on Spin-Off of Flow Business Accomplishments to date: Determined company names: SPX Corporation and SPX FLOW, Inc. Designated Chairman, CEO and CFO for both companies Identified additional Board of Director candidates Obtained requisite consents from bondholders for SPX FLOW, Inc. t
Slide 37: Executive Summary
Executive Summary Key Investor Messages Significant progress has been made over the last several years to simplify and strengthen SPX The spin-off will result in two independent, publicly traded companies with increased strategic flexibility: SPX FLOW, Inc.: Pure-play flow company with diversi
Slide 38: Questions
Questions COMPANY CONFIDENTIAL
Slide 39: Appendix
Appendix COMPANY CONFIDENTIAL
Slide 40: Pro Forma Future Company Reconciliations
Pro Forma Future Company Reconciliations NOTE: Pro Forma 2015 estimates for revenue and consolidated EBITDA are based on SPX’s 2015 mid-point financial targets as categorized in the proposed future structure and inclusive of estimated stand alone costs SPX FLOW, Inc. SPX Corporation Revenue Revenue
Slide 41: Q4 2014 Organic Revenue Growth Reconciliation
Q4 2014 Organic Revenue Growth Reconciliation Q4 2014 Organic Growth Reconciliation Three Months Ended December 31, 2014 Net Revenue Change Currency Organic Flow Technology -5.6% -4.4% -1.2% Thermal Equipment & Services 5.3% -3.3% 8.6% Industrial Products & Services -12.4% -0.7% -11.7% Consolidated
Slide 42: Free Cash Flow
Free Cash Flow Reconciliation to GAAP Cash Flow Statement Q4 ($ millions) 2014 FY 2014 Net cash from continuing operations $140 $82 Tax payments on asset sale gains $58 $235 Tax payments related to cash repatriation $19 $19 Costs related to planned spin-off of Flow $7 $7 Capital expenditures ($20) (
Slide 43: Debt Reconciliation
Debt Reconciliation Debt Reconciliation as of December 31, 2014 ($ millions) 12/31/2014 Short-term debt $ 181 Current maturities of long-term debt 31 Long-term debt 1,158 Gross Debt $ 1,370 Less: Purchase card program and extended A/P programs (32)3 Adjusted Gross Debt $ 1,338 Less: Cash in excess o
Slide 44: Consolidated EBITDA Reconciliation
Consolidated EBITDA Reconciliation ($ mil l i ons ) 2014 2015E Net Income $398 $230 Income tax provision 211 89 Net interest expense 102 69 Income before interest and taxes $711 $387 Depreciation and intangible amortization expense 109 108 EBITDA $820 $495 Adjustments: Non-cash compensation expense
Slide 45: Thermal Segment Results, Excluding South Africa Projects
Thermal Segment Results, Excluding South Africa Projects Three months ended Twelve months ended December 31, 2014 December 31, 2013 Δ % /bps December 31, 2014 December 31, 2013 Δ % /bps Thermal Equipment and Services reportable segment Revenues $ 384.2 $ 364.7 $ 19.5 5.3% $ 1,329.9 $ 1,344.2 $ (14.3
Slide 46: SPX Consolidated Results, Excluding the Q4 South Africa Charge
SPX Consolidated Results, Excluding the Q4 South Africa Charge Q4 2014 SPX Consolidated Revenues $ 1,277.7 Operating Profit (Loss) 152.3 as a percent of revenues 11.9% South Africa Q4 Charge Revenues $ (25.0) Operating Profit (Loss) (25.0) Adjusted SPX Consolidated Revenues $ 1,302.7 Operating Profi