Slide 1: SPX Corporation Investor Presentation
SPX Corporation Investor Presentation May 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, and financial projections, are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as am
Slide 3: Executive Management
Executive Management Gene Lowe Scott Sproule President and CEO Treasurer and CFO May 2019 3
Slide 4: SPX Corporation Overview
SPX4 SPX Corporation Overview
Slide 5: Company Overview
Company Overview Headquartered in Charlotte, NC 2018 Adjusted Revenue* by Region A leading supplier of: 89% 89% 6% 6% HVAC products Detection & Measurement technologies, and Engineered Solutions 5% ~$1.4b Adjusted Revenue* in 2018 ~4,000 employees NYSE Ticker: SPXC SPX is a Leading S
Slide 6: Why SPX?
Why SPX? Attractive Core Well positioned key platforms in growth markets Growth Favorable secular trends and business mix; growth initiatives in early innings Cash Flow >110% conversion of adjusted net income* Business System Consistent repeatable process to drive improvement Anticipate ~$500m of ca
Slide 7: Strong Product Offerings and Attractive Market Dynamics
Strong Product Offerings and Attractive Market Dynamics 2018 REVENUE EBITDA MARGIN* 2018 REVENUE FROM REPLACEMENT SALES† Cooling towers Boilers $582m 16% 70% Electrical heating 2018 REVENUE FROM #1 OR #2 MARKET POSITION† Location & inspection * Fare collection $321m 27% Communication tec
Slide 8: Transformation of SPX – 2015 Through 2018
Transformation of SPX – 2015 Through 2018 Adjusted Operating Income Margin ~$1.6B Revenue ~$1.5B 12% 10% ~12.0% 8% ~11.0% 10.2% 6% 8.8% 4% 7.0% 5.1% 2% 3.7% 0% 2015*2015* 2016 2016 2017* 2016* 2017* 2016* 2018* 2018* 2019E 2019E 2020E 2020E (as reported (as reported Guidance (as reported Guidance (a
Slide 9: Segment Revenue Transformation
Segment Revenue Transformation SPX CORPORATION ENGINEERED SOLUTIONS SEGMENT REVENUE CHANGES ($M) SEGMENT REVENUE CHANGES ($M) * ~3% $931 $537 CAGR Substantial Growth in $321* HVAC and $232 Detection & $529 $582 Measurement Underlying 2015* 2018 Growth† Model Shift Strategic exits† Divestitures/ Busi
Slide 10: 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 11: Segment Overview
Segment Overview HVAC Detection & Measurement Engineered Solutions
Slide 12: HVAC
SPX4 HVAC
Slide 13: HVAC Segment Overview
HVAC Segment Overview Revenue 2018 Revenue by Product Segment income % Organic CAGR $582 $570-580 2.0-4.0% Heating Cooling 2018 $511 Products Products $510 Revenue 52% 48% $582m 15.5- 15.5- 15.7% 16.5% 15.5% 16.0% 14.5% 2018 Revenue by Geography ($ millions) 4% 2016 2017 2018 2019E 2020E Segment GM%
Slide 14: Strategic Growth Initiatives
Strategic Growth Initiatives New Product Commercialize NC Everest (Cooling) Development Grow Evergreen (high-efficiency boiler) Adjacent Expand refrigeration – Evaporative Condenser; LS Fluid Cooler Markets Grow combi-boilers (AquabalanceTM) Expand geographic and vertical market channels C
Slide 15: Cooling Products Overview
Cooling Products Overview 2018 Revenue by Product Parts & Service Cooling products used in non-residential, commercial 10% construction, process cooling and refrigeration applications 2018 Package Cooling Revenue Towers Well-recognized product brands: Marley and Recold $282m 90% Well-establish
Slide 16: Cooling Product Examples
Cooling Product Examples Marley NC Cooling Tower Recold Fluid Cooler High efficiency High performance design Low drift rates Low cost of ownership Quiet by design Long-life construction Strong Product Portfolio of Cooling Technologies with Opportunity for Expansion May 2019 16
Slide 17: Cooling - Key New Products
Cooling - Key New Products Marley MD Everest Tower Marley LW Fluid Cooler Evaporative Condenser Launched in Early 2018 for larger Launched in Q4 2016 Launched in 2015 applications High efficiency, low height fluid Adjacent product and market 85% more cooling capacity than cooler (refrige
Slide 18: Heating Products Overview
Heating Products Overview 2018 Revenue by Product North American businesses with strong brands Electrical Heating Products used in residential and non-residential Products 2018 35% markets and sold primarily through distributors Boiler Revenue Systems $300m 65% Demand for boiler systems is sea
Slide 19: Heating Product Examples
Heating Product Examples Residential Boilers Commercial Boilers Electrical Heating Products High efficiency natural gas High efficiency natural gas Digital Standard cast iron Standard cast iron wall heaters Unique hybrid design Gas Combi boilers Wash-down, corrosion resistant heaters Alu
Slide 20: Heating – Key New Products
Heating – Key New Products SVF Commercial Stainless Steel Boiler Growth Oriented Initiatives - New Product Development: Seven new product introductions in the high efficiency boiler category since 2015 New launches have expanded addressable market coverage from 64% to 95%* AquaBalance Residentia
Slide 21: Detection & Measurement
SPX4 Detection & Measurement
Slide 22: Detection & Measurement Segment Overview
Detection & Measurement Segment Overview Adjusted revenue* 2018 Revenue by Product Adjusted segment income* % Fare Collection Technologies Organic CAGR 20% $385-395 2.0-6.0% 2018 Location & Inspection $321 Revenue $321m Equipment $260 23.0- Communication 50% $226 23.0- Technologies 25.3% 24.0% 26.0%
Slide 23: Strategic Growth Initiatives
Strategic Growth Initiatives New Product Scale new GPS-enabled locator Development Grow fare-collection solutions platform Adjacent Build out geographic and vertical channels Markets Leverage global footprint to expand CUES sales Upgrade Aged bus fleet (fare collection) Installed Base Co
Slide 24: Location & Inspection Overview
Location & Inspection Overview 2018 Revenue by Product A leading global supplier of location & inspection Inspection equipment for underground infrastructure 2018 33% Location Revenue 67% $160m Continuous new product enhancement and loyal customer base 2018 Revenue by Geography Key demand driv
Slide 25: Location & Inspection – Key New Products
Location & Inspection – Key New Products Pipeline Mapper Cable Avoidance Inspection Equipment New Product Introduction Continues to Drive Performance May 2019 25
Slide 26: Communication Technologies Overview
Communication Technologies Overview 2018 Revenue by Product TCI : A leading global supplier of spectrum monitoring, Obstruction communication intelligence and geolocation technology Lighting 2018 SMS & 45% Revenue Comm. Int. Obstruction Lighting: A leading global supplier of Flash Technology $97
Slide 27: Communication Technologies Products
Communication Technologies Products SMS & Communications Flash Lighting Systems Marine Obstruction Lighting Intelligence Our Communication Technologies Solutions are Adapting to Serve Evolving and Complex Customer Needs May 2019 27
Slide 28: Transportation
Transportation Genfare is a leading North American supplier in fare collection: Historical market position concentrated on fare box installations Rapidly evolving technology in the market has driven a transformation in our business: Evolved from “farebox supplier” to “fare collection system
Slide 29: Transportation Products: Next Generation Fare Collection
Transportation Products: Next Generation Fare Collection Mobile Legacy Farebox Fast Fare Farebox Fast Fare-e Ticketing Point-of-Sale e-Fare Cloud-Based Infrastructure Software Service and as a Service Support Fare Collection Suite of Products Integrated with Back-End Support; We Believe This is The
Slide 30: Engineered Solutions
SPX4 Engineered Solutions
Slide 31: Engineered Solutions Segment Overview
Engineered Solutions Segment Overview Engineered Solutions revenue 2018 Revenue by Product Segment income % Process Cooling (Project Selectivity 30% $653 and Exit of Heat 2018 Transfer/South Revenue $561 African Ops.) Organic CAGR Transformers $537 $537m $530-540 2.0-3.0% 70% 8.0% 9-10% 7.9% 6.5% 4.
Slide 32: Strategic Growth Initiatives
Strategic Growth Initiatives New Product Broaden Process Cooling component offerings Development Expand Transformers Service and Components offerings Evolve Business Expand service and components Model More selective on process cooling projects Expand Market Large voltage/EHV transformers
Slide 33: Transformers Overview
Transformers Overview Transformer Business SPX is a leading supplier of power transformers into North America with strong brand equity Customers include: Public and private electric utilities Independent power producers Large industrial sites Two primary manufacturing locations: Waukes
Slide 34: Transformers Overview - North American Market
Transformers Overview - North American Market Demand largely driven by replacement of aging installed base: Average age of installed base is ~40 years Electricity demand has been flat over the past decade, however new T&D construction continues driving demand for power transformers: Utility-
Slide 35: Transformer Product and Service Examples
Transformer Product and Service Examples Transformer Service Large Power (High Voltage) Transformer May 2019 35
Slide 36: Process Cooling Overview
Process Cooling Overview 2018 Revenue by Product Other Based in the U.S., a leading global manufacturer of cooling 26% towers and parts & components 2018 Cooling Revenue $163m Towers Continuous new product enhancements and exceptional 74% quality equipment for more than a century Large install
Slide 37: Process Cooling – Key New Products
Process Cooling – Key New Products Gear Reducer Air Flow Components Heat Transfer Media Aftermarket Service and Components is Focus Area of New Product Initiatives May 2019 37
Slide 38: Financial Performance & Capital Allocation
Financial Performance & Capital Allocation
Slide 39: Capital Allocation Discipline
Capital Allocation Discipline Methodology Expected Outcome 1) Utilize strategic planning process to evaluate Quantify projected future cash flows and future revenue and earnings growth estimate total company valuation 2) Maintain target capital structure Net Debt to EBITDA(1) target range: 1.5x
Slide 40: Capital Structure
Capital Structure Leverage Ratios* ($millions) 2.1x 1.5-2.5x Q4 2018 Q1 2019 1.9x 1.9x 1.7x Short-term debt $31.9 $75.0 Current maturities of long-term debt 18.0 14.2 Long-term debt 331.9 332.3 Total Debt $381.8 $421.5 Less: Cash on hand (68.8) (39.0) Net Debt $313.0 $382.5 Q4 2018 Q1 2019 LT Target
Slide 41: Cash Flow & Liquidity
Cash Flow & Liquidity Targeting more than 110% Free Cash Flow* Conversion ($ in millions) Term Debt Repayment Schedule Substantial capital available after addressing bank debt and South African Project obligations $298 Projecting ~$500 million of capacity for capital allocation through 2020
Slide 42: SPX Acquisition Approach
SPX Acquisition Approach Qualitative Quantitative Focused on building existing platforms Revenue transaction size $20-$200 million Existing markets or close adjacencies (primary focus); opportunistically consider larger targets Engineered products Cash ROIC ≥ double digits 3-5 yrs Attrac
Slide 43: Recent Inorganic Investments
Recent Inorganic Investments Global Leader in Inspection Equipment Radiodetection CUES Market Leading Inspection Equipment Inspection Equipment Strengthens Global Leadership in Engineered Specialty Lighting Flash Technology Obstruction Sabik Market Leading Lighting Equipment Marine Lighting Products
Slide 44: Schonstedt Overview
Schonstedt Overview Company Profile 2017 Sales: $9M XTpc Pipe and Cable Locator Purchase multiple*: <7x post-synergies Description: Manufacturer of magnetic locator products used for locating underground utilities and other buried objects. Acquisition Rationale: Strengthens Detection & Measurement
Slide 45: CUES Overview
CUES Overview Company Profile CUES Digital Universal Camera 2017 Sales: ~$86M Purchase multiple*: <10x post-synergies Mobile Inspection Units Description: Leading manufacturer of inspection and rehabilitation equipment. Acquisition Rationale: CUES SPiDER Scanner Strengthens Detection & Measurement
Slide 46: Sabik Overview
Sabik Overview Company Profile 2018 Sales: ~$27M Purchase multiple*: <10x post-synergies Description: Leading manufacturer of marine and obstruction lighting Acquisition Rationale: Complementary fit with our Flash Technology business Strengthens aids-to-navigation specialty lighting solutions
Slide 47: 2016-2020E Adjusted Profit Measures
2016-2020E Adjusted Profit Measures ADJUSTED SEGMENT INCOME ($M) 4 ADJUSTED EPS 250 $3.00 $207 ~$225 3 $2.58 200 $182 $2.27 Includes $157 Some Capital 2 $1.75 150 $1.47 Deployment 100 1 50 0 0 2016* 2017* 2018* 2019E 2020E 2016* 2017* 2018* 2019E 2020E Continuous Delivery of Value Creation *Non-GAAP
Slide 48: 2016-2020E Adjusted Profit Measures
2016-2020E Adjusted Profit Measures 175 250 ADJUSTED EBITDA ($M) ADJUSTED FREE CASH FLOW ($M) 190% 155 20% ~$200 135 $123 200 170% CONVERSION % $170 14% 115 $139 13% 15% 150 $125 12% 95 150% 10% $75 $82 EBITDA % 9% 10% 75 >110% 100 120% 122% 130% 55 50 5% 35 107% 110% 15 0 0% -5 90% 2016* 2017* 2018
Slide 49: Financial Targets
SPX4 Financial Targets
Slide 50: 2020 Financial Targets
2020 Financial Targets $1.6B adjusted revenue* 12% adjusted operating income margin* $2.90 - $3.10 adjusted EPS* excluding amortization >110% Free cash flow* conversion of adjusted net income ~$500M of Capital Available to Deploy Through 2020; Clear Line of Sight to Sustainable Double Digit
Slide 51: Appendix
SPX4 Appendix
Slide 52: 2019 Adjusted EPS Guidance - Key Drivers
2019 Adjusted EPS Guidance - Key Drivers • Favorable Economic Policy/Infrastructure Stimulus $2.65 • Stronger-Than-Normal Seasonal Heating Demand • Commercial Growth Accelerates • Greater-Than-Anticipated Price-Cost Tailwinds • Accelerated Project-Related Sales $2.58 Base Case • Weaker-Than-Anticipa
Slide 53: 2019 Modeling Considerations
2019 Modeling Considerations Metric Commentary/Assumptions Corporate costs Low $40Ms Long-term incentive comp $14-15M Restructuring costs $1M Interest cost $20-21M Equity earnings, other $4-5M Tax rate 22-23% Capex $15-17M Cash cost of pension + OPEB Approximately $16M D&A Approximately $32M, mostly
Slide 54: Organic Segment Financial Targets
Organic Segment Financial Targets Adjusted Detection & Engineered SPX Total HVAC Measurement Solutions (Adjusted) 2019 Revenue ~$575m ~$390m ~$535m ~$1.5b Long-term Modeling Target Total Organic Revenue Growth 2% to 4% 2% to 6% 2% to 3% 2% to 4% 2019 Segment Income† % 15.5-16.0% 23-24% ~8% ~15% Long
Slide 55: South African Projects Overview
South African Projects Overview Medupi & Kusile Power Stations Two mega-projects sites: Twelve 800 mega-watt coal-fired plants (six at each project site) Total project value of ~$1.3B Eskom is a state-owned South African utility Boiler Island Turbine Island GE/Alstom and Mitsubishi Hitachi
Slide 56: 2015 Adjusted Revenue and Segment Income to U.S. GAAP Reconciliation
2015 Adjusted Revenue and Segment Income to U.S. GAAP Reconciliation ($ millions) FY 2015 GAAP SA Projects Adjusted Revenue HVAC 529.1 529.1 D&M 232.3 232.3 Engineered Solutions 957.9 (27.3) 930.6 Total SPX $1,719.3 ($27.3) $1,692.0 Segment Income HVAC 80.2 80.2 D&M 46.0 46.0 Engineered Solutions (1
Slide 57: FY 2016 Engineered Solutions Adjusted Revenue, Gross Profit and Segment Income
FY 2016 Engineered Solutions Adjusted Revenue, Adjusted Gross Profit and Adjusted Segment Income to U.S. GAAP Reconciliation ($ millions) FY 2016 Engineered Solutions revenue $ 736.4 Exclude: South African projects 83.3 Engineered Solutions adjusted revenue $ 653.1 Engineered Solutions gross profit
Slide 58: FY 2016 Consolidated EBITDA to U.S. GAAP Reconciliation
FY 2016 Consolidated EBITDA to U.S. GAAP Reconciliation ($ millions) FY 2016 Consolidated Revenue $ 1,472.3 Exclude: South African projects 83.3 Adjusted revenues $ 1,389.0 Adjusted operating income $ 96.7 as a percent of adjusted revenue 7.1% Adjustments: Depreciation & amortization 26.5 Other inco
Slide 59: FY 2018, FY 2017 and FY 2016 Segment EBITDA Reconciliation
FY 2018, FY 2017 and FY 2016 Segment EBITDA to U.S. GAAP Reconciliation ($ millions) HVAC Segment FY 2018 FY 2017 FY 2016 Segment income $ 90.0 $ 74.1 $ 80.2 Depreciation & amortization 5.4 5.5 5.3 HVAC Segment EBITDA $ 95.4 $ 79.6 $ 85.5 Detection & Measurement Segment Adjusted Segment income $ 78.
Slide 60: FY 2018 Adjusted Earnings Per Share Reconciliation
FY 2018 Adjusted Earnings Per Share to U.S. GAAP Reconciliation GAAP Adjustments Adjusted (1) Segment income $ 178.5 $ 24.8 $ 203.3 ($ millions) (2) Corporate expense (48.5) 4.9 (43.6) Long-term incentive compensation expense (15.5) — (15.5) Special charges, net (3) (6.3) 5.0 (1.3) Loss on sale of d
Slide 61: FY 2017 Adjusted Earnings Per Share Reconciliation
FY 2017 Adjusted Earnings Per Share to U.S. GAAP Reconciliation GAAP Adjustments Adjusted ($ millions) Segment income (1) $ 124.9 $ 56.8 $ 181.7 Corporate expense (46.2) (0.9) (47.1) Long-term incentive compensation expense (15.8) — (15.8) Pension service cost (0.3) — (0.3) Special charges, net (2)
Slide 62: FY 2016 Adjusted Earnings Per Share Reconciliation
FY 2016 Adjusted Earnings Per Share to U.S. GAAP Reconciliation GAAP Adjustme nts Adjuste d Segment income (1) $ 142.8 $ 14.5 $ 157.3 Corporate expense (41.7) — (41.7) ($ millions) Pension and postretirement income (expense) (2) (15.4) 16.0 0.6 Long-term incentive compensation expense (13.7) — (13.7
Slide 63: FY 2018 and FY 2017 Adjusted Revenue and Segment Income Reconciliation
FY 2018 and FY 2017 Adjusted Revenue and Adjusted Segment Income to U.S. GAAP Reconciliation Twelve months ended ($ millions) December 31, 2018 December 31, 2017 Consolidated revenue $ 1,538.6 $ 1,425.8 Exclude: "All Other" operating segments (1) 98.6 93.8 Acquisition accounting adjustment to acquir
Slide 64: FY 2018 and FY 2017 Adjusted Income and EBITDA Reconciliation
FY 2018 and FY 2017 Adjusted Segment Income, Adjusted Operating Income, Adjusted Net Income and Adjusted EBITDA to U.S. GAAP Reconciliation ` FY 2018 FY 2017 ($ millions) GAAP Revenue $ 1,538.6 $ 1,425.8 Exclude: "All Other" operating segments 98.6 93.8 Exclude: Acquisition accounting adjustment to
Slide 65: FY 2018 and FY 2017 Adjusted Free Cash Flow Reconciliation
FY 2018 and FY 2017 Adjusted Free Cash Flow from Continuing Operations to U.S. GAAP Reconciliation ($ millions) FY 2018 FY 2017 Net operating cash flow from continuing operations $ 112.9 $ 53.5 Capital expenditures - continuing operations (12.4) (11.0) Free cash flow used in continuing operations 10
Slide 66: FY 2016 Adjusted Free Cash Flow Reconciliation
FY 2016 Adjusted Free Cash Flow from Continuing Operations to U.S. GAAP Reconciliation ($ millions) FY 2016 Net operating cash flow from continuing operations $ 53.4 Capital expenditures - continuing operations (11.7) Free cash flow used in continuing operations 41.7 Adjustment for South African pro