Slide 1: Q3 2017 Earnings Presentation
Q3 2017 Earnings Presentation November 2, 2017
Slide 2: Forward-looking statements and non-GAAP disclosure
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 within the meaning of Section 21E of the Securities Exchange Act of 1934, as am
Slide 3: Introductory Comments
Introductory Comments Gene Lowe November 2, 2017
Slide 4: Quarter Highlights
Quarter Highlights Performance and Accomplishments Strong YTD performance for segment income ‒ On track to deliver >15% year-over-year Core segment income growth ‒ Solid profit contribution from all three segments Strong Q3 operational execution in Core businesses ‒ 270 basis points of year-over
Slide 5: Core Q3 2017 Results
Core Q3 2017 Results Year-over-Year Analysis ($ millions) Q3 Year-to-Date Core Revenue Increase in Adjusted operating profit* Adjusted Operating Income Margin* $1,012 driven by strong performance in $1,001 Detection & Measurement and operating model changes in Engineered Solutions $331 $320 8.0%
Slide 6: Value Creation Roadmap
Value Creation Roadmap Organic Growth SPX Business System New products Policy deployment New channels Operational excellence Adjacent markets Due diligence/integration Inorganic Growth Culture & Values Focus in HVAC and D&M Leadership development Significant capital to deploy Res
Slide 7: Q3 Financial Review
Q3 Financial Review Scott Sproule November 2, 2017
Slide 8: Earnings Per Share
Earnings Per Share Q3 2017 Adjusted EPS Q3 2017 YTD 2017 GAAP EPS from continuing operations $0.50 $0.55 South African projects $0.11 $0.82 Gain related to contract settlement ($0.17) ($0.17) Gain on post-retirement plan ($0.04) ($0.04) Non-service pension items & other** ($0.04) $0.02 Adjusted EPS
Slide 9: Core Q3 2017 Results
Core Q3 2017 Results Year-over-Year Analysis ($ millions) Q3 Core Revenue: Q3 Year-to-Date 3.5% year-over-year increase: Core Revenue Core Segment Income Margin $1,012 3.2% organic increase*, with growth in Detection & Measurement, partially $1,001 offset by timing of transformer shipments $320
Slide 10: HVAC Q3 2017 Results
HVAC Q3 2017 Results Year-over-Year Analysis ($ millions) Q3 Year-to-Date Q3 Revenue: Revenue 2.1% year-over-year increase: Segment Income Margin 2.0% organic increase* primarily driven by $350 $350 cooling product shipments $117 $119 Modest hurricane impact in Cooling 0.1% favorable currenc
Slide 11: Detection & Measurement Q3 2017 Results
Detection & Measurement Q3 2017 Results Year-over-Year Analysis ($ millions) Q3 Revenue: Q3 Year-to-Date Revenue $185 27.9% year-over-year increase: Segment Income Margin 27.3% organic increase* due to higher sales $67 $168 across all businesses, with particular strength in Communication Technol
Slide 12: Engineered Solutions (Core) Q3 2017 Results
Engineered Solutions (Core) Q3 2017 Results Year-over-Year Analysis Q3 Core Revenue: Q3 Year-to-Date ($ millions) (3.9%) year-over-year decline: Core Revenue Core Segment Income Margin (4.2%) organic decline* $493 ‒ Timing of transformer shipments $466 ‒ Business model shift in Process Cooling ‒
Slide 13: South African Projects Q3 2017 Update
South African Projects Q3 2017 Update Project execution milestones on track Commenced restructuring to reduce overhead costs Q3 cash usage of $16.9m in-line with expectations On Track for Substantial Completion by End of 2019 November 2, 2017 13
Slide 14: Financial Position & Liquidity Review
Financial Position & Liquidity Review Scott Sproule November 2, 2017
Slide 15: Financial Position: Capital Structure Update
Financial Position Capital Structure Update Leverage Ratios* ($ millions) Q3 2017 Short-term debt $ 39.0 2.4x 2.3x Current maturities of long-term debt 18.0 2.2x 2.1x Long-term debt 311.0 1.5-2.5x Total Debt $ 368.0 Less: Cash on hand (87.2) Q2'17 Q3'17 LT Target Net Debt $ 280.8 Bank Net Leverage G
Slide 16: Financial Position: Cash Flow & Liquidity
Financial Position Cash Flow & Liquidity ($ in millions) Core Free Cash Flow* generation of $20.6 Term Debt Repayment Schedule million during Q3; YTD free cash flow of $33.1 ($ in millions) million Projecting $400 million of capacity for capital allocation through 2020 $298 Growth investments
Slide 17: 2017 Guidance Update
2017 Guidance Update Scott Sproule November 2, 2017
Slide 18: 2017 Core Guidance (Changes Bolded)
2017 Core Guidance (Changes Bolded) Revenue Segment Income Margin Organic growth* around the lower end of LT range Similar to 2016 HVAC of 2.0-4.0% (previously ~16%) Detection & Organic growth* of ~10% ~24.0% Measurement (previously above LT range of 2.0-6.0%) (previously 22.5-23.0%) Segme
Slide 19: Market Outlook & Executive Summary
Market Outlook & Executive Summary Gene Lowe November 2, 2017
Slide 20: Market Commentary
Market Commentary Market Comments Cooling: Favorable commercial market trends; modest Q3 hurricane impact HVAC Heating: Steady demand; winter weather influences demand Detection & Steady demand in run-rate end markets Measurement Continued solid project bookings Transformers Stable lead ti
Slide 21: Executive Summary
Executive Summary Strong YTD performance – all three segments contributing meaningfully Continued healthy margin expansion Raising full-year Adjusted EPS* guidance Solid balance sheet and Core cash flow* Business remains positioned for sustainable double digit earnings growth . Note: Core
Slide 22: Questions
Questions November 2, 2017
Slide 23: Appendix
Appendix November 2, 2017
Slide 24: 2017 Modeling Considerations
2017 Modeling Considerations Metric Commentary/Assumptions Corporate costs Mid-to-high $40M range Long-term incentive comp $15-16M Restructuring costs $2M Interest cost $16M Tax rate Approximately 25% full-year (Q4 2017 ~29%) Capex $12-14M Cash cost of pension + OPEB Approximately $19M: ongoing cash
Slide 25: Core Revenue & Segment Income U.S. GAAP Reconciliation
Core Revenue & Segment Income U.S. GAAP Reconciliation ($ millions) Q3 2016 Q3 2017 GAAP SA Projects Core GAAP SA Projects Core Revenue HVAC 116.9 116.9 119.4 119.4 D&M 52.3 52.3 66.9 66.9 Engineered Solutions 175.8 (25.4) 150.4 162.2 (17.7) 144.5 Total SPX $345.0 ($25.4) $319.6 $348.5 ($17.7) $330.
Slide 26: Core Segment Income Phasing
Core Segment Income Phasing ($ millions) Q1 2016 Q2 2016 Q3 2016 Q4 2016 GAAP 29.8 32.2 26.0 54.8 Less: South 40% 38% African 3.4 2.9 3.5 4.7 Projects Core $33.2 $35.1 $29.5 $59.5 24% % of full-year 21% 22% 19% 38% 21% 21% 22% 19% 16% Q1 2015 Q2 2015 Q3 2015 Q4 2015 GAAP 17.2 24.6 (60.4) 57.4 Less:
Slide 27: Q3 2017 U.S. GAAP to Adjusted EPS Reconciliation
Q3 2017 U.S. GAAP to Adjusted Earnings Per Share Reconciliation GAAP Adjustments Adjusted ($ millions, except per share values) (1) Segment income $ 45.4 $ (6.0) $ 39.4 Corporate expense (11.0) — (11.0) Pension and postretirement income (2) 1.4 (1.2) 0.2 Long-term incentive compensation expense (3.6
Slide 28: Q3 2016 U.S. GAAP to Adjusted EPS Reconciliation
Q3 2016 U.S. GAAP to Adjusted Earnings Per Share Reconciliation ($ millions, except GAAP Adjustments Adjusted per share values) Segment income (1) $ 26.0 $ 3.5 $ 29.5 Corporate expense (9.6) — (9.6) (2) Pension and postretirement income (expense) (0.8) 1.0 0.2 Long-term incentive compensation expens
Slide 29: 2017 YTD U.S. GAAP to Adjusted EPS Reconciliation
2017 YTD U.S. GAAP to Adjusted Earnings Per Share Reconciliation ($ millions, except per share values) GAAP Adjustments Adjusted Segment income (1) $ 100.4 $ 25.0 $ 125.4 Corporate expense (33.7) — (33.7) Pension and postretirement income (expense) (2) (1.2) 1.6 0.4 Long-term incentive compensation
Slide 30: 2016 YTD U.S. GAAP to Adjusted EPS Reconciliation
2016 YTD U.S. GAAP to Adjusted Earnings Per Share Reconciliation GAAP Adjustme nts Adjuste d ($ millions, except Segment income (1) $ 88.0 $ 9.8 $ 97.8 per share values) Corporate expense (29.6) — (29.6) Pension and postretirement income (2) (4.6) 5.0 0.4 Long-term incentive compensation expense (10
Slide 31: Q3 2017 and YTD Adjusted Operating Income Reconciliation
Q3 2017 and YTD Adjusted Operating Income U.S. GAAP Reconciliation ($ millions) Three months ended Nine months ended September 30, 2017 O ctober 1, 2016 September 30, 2017 O ctober 1, 2016 Operating income $ 31.2 $ 11.3 $ 53.1 $ 53.2 Exclude: South African projects 5.0 3.5 36.0 9.8 Non-service pensi
Slide 32: Q3 2017 Organic Revenue U.S. GAAP Reconciliation
Q3 2017 Organic Revenue U.S. GAAP Reconciliation Detection & Engineered HVAC Measurement Solutions Consolidated Net Revenue Growth (Decline) 2.1 % 27.9 % (7.7) % 1.0 % Adjustment to Exclude South African projects - % - % (3.8) % 4.5 % Core Revenue Growth (Decline) 2.1 % 27.9 % (3.9) % (3.5) % Exclud
Slide 33: Debt Reconciliation
Debt Reconciliation ($ millions) Q3 2017 Short-term debt $ 39.0 Current maturities of long-term debt 18.0 Long-term debt(1) 312.3 Gross debt 369.3 Less: Purchase card program and extended payables (3.6) Adjusted gross debt 365.7 Less: Cash in excess of $50.0 (37.2) Adjusted net debt $ 328.5 (1) Excl
Slide 34: Consolidated EBITDA Reconciliation
Consolidated EBITDA Reconciliation ($ millions) Q4 2016 Q1 2017 Q2 2017 Q3 2017 LTM Net income (loss) from continuing operations attributable to SPX $ (3.0) $ 10.3 $ (8.3) $ 22.0 Corporation common shareholders Income tax provision (benefit) (1.0) 3.2 6.0 4.8 Interest expense 3.7 4.0 4.6 4.3 Income
Slide 35: U.S. GAAP to Core Free Cash Flow Used in Continuing Operations
U.S. GAAP to Core Free Cash Flow Used in Continuing Operations ($ millions) Q 3 2017 YTD 2017 Net cash from continuing operations $ 7.3 $ (2.4) Capital expenditures - continuing operations (3.6) (8.4) Free cash flow from continuing operations 3.7 (10.8) Adjustment for South African projects 16.9 43.