Spx Technologies, Inc. · NYSE:SPXC

Spx Technologies — Q1 2013 Earnings Presentation

37 slides from Spx Technologies's earnings presentation, May 1, 2013

1. Slide 1: 2013 First Quarter Results

   2013 First Quarter Results May 1, 2013

2. 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,

3. Slide 3: Introductory Comments

   Introductory Comments Executive Summary Q1 financial performance  EPS from continuing operations of $0.20, at the low end of guidance  Revenue and segment income were lower than expected Improvement actions implemented  Leadership changes made at two underperforming businesses  Restructuring act

4. Slide 4: Q1 Results Versus Targets

   Q1 Results Versus Targets ($ millions, except per share data) EPS Bridge from Guidance to Actual  Q1 mid-point target range $0.25  Thermal (Balcke-Dürr) operating profit ($0.10) Q1 2013 Q1 2013  ClydeUnion legacy contract charges ($0.08) Targets Results  Industrial segment income $0.06 Revenue $

5. Slide 5: Q1 Underperformance and Actions Taken

   Q1 Underperformance and Actions Taken First quarter performance: 1) Thermal (Balcke-Dürr) business in Germany:  Significant Q1 underperformance  Aftermarket service demand for power plants in Germany has declined rapidly 2) ClydeUnion:  $5m of charges recorded on legacy contracts that were part o

6. Slide 6: ClydeUnion

   ClydeUnion Strategic Assessment New President Profile  Diverse offering of highly-engineered pump Tony Renzi: technologies for power & energy applications  Key operational leader for Flow Technology over the past decade  Serves large, global end markets with fundamentally positive, long-term dema

7. Slide 7: Thermal Equipment & Services Segment

   Thermal Equipment & Services Segment Strategic Assessment New President Profile Gene Lowe:  Evaluated strategic alternatives for power-  Key operational leader for Thermal Segment related businesses which are primarily long- over the last 5 years cycle, project oriented  Strong knowledge of power

8. Slide 8: 2013 Restructuring Actions

   2013 Restructuring Actions ($ millions)  2013E restructuring expense: $30m+  Estimated savings:  2013E: ~$15m Restructuring  Annualized: ~$30m Expense $15 to $20  Key 2013 actions: $10 to  Thermal Segment: $15 o Reduce fixed cost base at power-related businesses located in Europe  Flow Segmen

9. Slide 9: Flow End Market Trends

   Flow End Market Trends Food & Beverage Power & Energy Industrial Flow  Steady aftermarket and Oil & Gas component order trends globally  Aftermarket and component  Demand for pipeline valves orders steady  Increased quoting activity in continues to be strong Europe and New Zealand for  Capital

10. Slide 10: Power-Related End Market Trends

    Power-Related End Market Trends Power Transformers (U.S.)  Replacement demand for power transformers remains stable  Market pricing and lead times remain steady  Low growth economy and electricity conservation intiatives leading utilities to pace replacement investment Power Generation  U.S.: Re

11. Slide 11: Consolidated Backlog

    Consolidated Backlog Sequential Backlog Analysis ($ millions) $2,593 $2,538  Total backlog declined (2%), primarily due to currency Ending Backlog  Organic backlog was flat sequentially:  Industrial and Flow backlogs increased  …offset by decline in Thermal backlog Q4 2012 Q1 2013 ~50% of Revenu

12. Slide 12: 2013 Full Year EPS Guidance

    2013 Full Year EPS Guidance Full Year EPS Guidance Bridge  Previous guidance range $4.60 to $5.10  Thermal segment income ($0.38)  Execution challenges and end market conditions at Thermal  Currency ($0.10)  Q1 charges on ClydeUnion legacy contracts ($0.08)  Currency impact to full year target

13. Slide 13: Capital Allocation

    Capital Allocation 2013 Capital Allocation Priorities 1) Operational improvements and organic growth initiatives: Historical Capital Allocation Methodology  Restructuring actions Target Gross Leverage:  Capital expenditures 1.5x to 2.5x  Innovation 2) Annual dividend ($1 per share, paid quarterly

14. Slide 14: Financial Analysis

    Financial Analysis Jeremy Smeltser

15. Slide 15: Consolidated Q1 Results

    Consolidated Q1 Results Revenue and Segment Income ($ millions) Revenue Revenue: Operating Margins  (2%) year-over-year decline due to currency $1,154 $1,134  Organic revenue flat versus prior year Segment Income: 7.2% 7.3%  Consolidated segment income of $82m, or 7.3% of revenue  Increase in Fl

16. Slide 16: Flow Technology Q1 Results

    Flow Technology Q1 Results Q1 Year-Over-Year Analysis  Revenue declined (2.4%): ($ millions) Revenue  (1.7%) organic decline  (1.3%) currency impact Operating Margins  +0.6% acquisition $628 $613  Segment Income:  Increased $9m, or 19%  160 points of margin improvement driven by improved exec

17. Slide 17: Flow Technology Backlog

    Flow Technology Backlog Sequential Backlog Analysis ($ millions)  Total backlog declined (2%) due to currency $1,360 $1,337  Modest organic growth:  Strong demand for oil & gas valves and components was partially offset by declines in ClydeUnion’s OE backlog due to customer Ending delays and disc

18. Slide 18: Thermal Equipment & Services Q1 Results

    Thermal Equipment & Services Q1 Results Q1 Year-Over-Year Analysis Revenue: Revenue ($ millions)  (5%) revenue decline due to currency Operating Margins  Flat organic revenue: $320  Increased boiler sales in support of $305 Hurricane Sandy relief efforts  Decreased power generation revenue due t

19. Slide 19: Thermal Equipment & Services Backlog

    Thermal Equipment & Services Backlog Sequential Backlog Analysis ($ millions) $787 $717  Total backlog declined (9%):  (4%) decline due to currency Ending  (5%) organic decline due primarily to Backlog execution on South Africa projects Q4 2012 Q1 2013 Power Generation Demand in the U.S. and Euro

20. Slide 20: Industrial Products & Services Q1 Results

    Industrial Products & Services Q1 Results Q1 Year-Over-Year Analysis ($ millions) Revenue Revenue: Operating Margins  5% organic revenue growth:  Double-digit organic growth in power transformer sales $216 $205 Segment Income: 12.7% 11.9%  Segment income flat  80 points of margin decline:  Lowe

21. Slide 21: Industrial Products & Services Backlog

    Industrial Products & Services Backlog Sequential Backlog Analysis ($ millions) $484 $446  Backlog increased 9% driven by:  Power transformers Ending Backlog  Aerospace components Q4 2012 Q1 2013 Industrial Backlog Increased 9% Sequentially and 13% Over the Prior Year Period May 1, 2013 21

22. Slide 22: 2013 Financial Targets

    SIPd<. 2013 Financial Targets

23. Slide 23: Q2 2013 Consolidated Financial Targets

    Q2 2013 Consolidated Financial Targets ($ millions, except per share data) Q2 2013 Targets Comments flat to low-single digit organic growth Revenue $1,245 to $1,275 modest currency headwind Segment Income $113 to $118 flat to modest growth Segment Income % 9.0% to 9.4% Special Charges $15 to $20 rep

24. Slide 24: 2013 Full Year Segment Targets

    2013 Full Year Segment Targets ($ millions) 2012 Revenue & Previous Updated Description of Changes Segment Income 2013 Targets 2013 Targets %  Currency impact on revenue and profit $2,682 +2% to +7% +1% to +5% Flow Technology  Modestly lower organic revenue growth 10.6% 11.9% to 12.4% 11.6% to 12.

25. Slide 25: 2013 Full Year EPS Guidance

    2013 Full Year EPS Guidance ($ millions, except per share data) Full Year EPS Mid-Point Model 2013E Revenue $5,100 Segment income % 10.5% Corporate expense ($104) Pension & post retirement health care ($25) 2013E EPS Guidance Range: Stock-based compensation ($34) Special charges ($30) $4.25 to $4.65

26. Slide 26: Capital Allocation

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27. Slide 27: Financial Position

    Financial Position ($ millions) 12/31/2012 3/30/2013 variance 2013 Activity Cash $984 $755 (23%)  $131m of share repurchases in Q1:  Completed 2012 share repurchase plan: $104m Accounts $1,333 $1,284 (4%) Additional open-market purchases: $27m Receivable  Total Assets $7,130 $6,805 (5%)  $115m t

28. Slide 28: Q1 Free Cash Flow

    Q1 Free Cash Flow Q1 2013 Adjusted Free Cash Flow ($ millions) Q1 2013 Net cash from continuing operations ($57) Taxes payable on the gain from the sale of Service Solutions $115 Tax benefit associated with voluntary pension funding (1) ($90) Adjusted cash from operations from continuing operations

29. Slide 29: 2013 Projected Liquidity

    2013 Projected Liquidity Projected Liquidity ($ millions) Amount Expected Timing Cash on Hand at March 30, 2013 $755 2013E Cash Outflows 2013 voluntary pension contribution ($250) completed April 2013 2013 targeted share repurchases, net of Q1 repurchases ($173) opportunistic Planned dividend paymen

30. Slide 30: Executive Summary

    Executive Summary Chris Kearney

31. Slide 31: Key 2013 Messages

    Key 2013 Messages Key 2013 Messages  Focused on operating margin improvement, free cash flow generation:  Targeting 40 to 80 points of improvement in segment income margins  $450m capital allocation plans for 2013:  $250m voluntary pension contribution ($160m net of tax benefit)  $200m of share

32. Slide 32: Questions?

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33. Slide 33: Appendix

    SIPd<. Appendix

34. Slide 34: Q1 2013 Organic Revenue Growth Reconciliation

    Q1 2013 Organic Revenue Growth Reconciliation Three Months Ended March 30, 2013 Net Revenue Acquisitions/ Change Divestitures Currency Organic Flow Technology -2.4% 0.6% -1.3% -1.7% Thermal Equipment & Services -4.7% 0.0% -4.5% -0.2% Industrial Products & Services 5.0% 0.0% -0.3% 5.3% Consolidated S

35. Slide 35: 2013 Adjusted Free Cash Flow Guidance Reconciliation

    2013 Adjusted Free Cash Flow Guidance Reconciliation 2013 Adjusted Free Cash Flow Guidance ($ millions) Q1 2013 Q2 to Q4 2013E Full Year 2013E Net cash from operations ($57) $112 to $152 $55 to $95 Estimated tax payment on the gain from the sale of Service Solutions $115 $0 $0 $115 $115 Planned volu

36. Slide 36: Bank EBITDA Reconciliation

    Bank EBITDA Reconciliation ($ millions) LTM 2013E Net Income $248 $206 Income tax provision (benefit) 15 65 Interest expense 115 107 Income before interest and taxes $378 $379 Depreciation, intangible amortization expense and write off of goodwill and intangibles 401 119 EBITDA from continuing opera

37. Slide 37: Debt Reconciliation

    Debt Reconciliation ($ millions) 3/30/2013 Short-term debt $ 31 Current maturities of long-term debt 9 Long-term debt 1,652 Gross Debt $ 1,691 Less: Puchase card program and extended A/P programs (26) Adjusted Gross Debt $ 1,665 Less: Cash in excess of $50 (705) Adjusted Net Debt $ 960 Note: Debt as

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