Slide 1: Q4 2017 Earnings Presentation
Q4 2017 Earnings Presentation February 15, 2018
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 February 15, 2018
Slide 4: Performance Highlights Full-Year 2017
Performance Highlights Full-Year 2017 Overall solid execution drove strong full-year results Adjusted segment income growth* of ~16% Core Free cash flow* conversion of ~118% of adjusted net income* Strongest financial condition since spin Strong balance sheet positions company for sustaina
Slide 5: Core Results Q4 2017 and Full-Year 2017
Core Results Q4 2017 and Full-Year 2017 Year-over-Year Analysis Q4 Full-Year ($ millions) Core Revenue Overall full-year results towards upper Adjusted Operating Income Margin* end of 2017 guidance range Adjusted operating income* $396 $1,389 $1,397 growth of ~24% $378 Strong Detection & Measu
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: New Product Initiatives
New Product Initiatives HVAC Detection & Measurement Engineered Solutions New Marley® MD Everest™ Cooling Tower New gCAT4 Plus Underground Cable Locator New Marley M Series Gear Reducer New Aquabalance™ Boiler New Drone Detection System New Ultraquiet Fan February 15, 2018 7
Slide 8: Q4 Financial Review
Q4 Financial Review Scott Sproule February 15, 2018
Slide 9: Earnings Per Share
Earnings Per Share Q4 and Full-Year 2017 Adjusted EPS Q4 2017 FY 2017 FY 2016 GAAP EPS from continuing operations $1.35 $1.91 $0.30 South African projects related ($0.75) $0.06 $0.34 Gain related to contract settlement NA ($0.17) NA Non-service pension items & other** $0.00 ($0.03) $0.83 Adjusted EP
Slide 10: South African Projects Update
South African Projects Update Pre-2015 2015 2015 2016 2016 2017 2017 2018 2018 2019 2019 2020+ 2020 Scope 1 Scope 2 Scope 3 Scope 4 Substantial Completion Scope 5 by End of 2019 $25-$30M Cash Usage*: $33M $49M 2016 2017 2018 through Completion *Net of U.S. tax benefits related to South Africa for 20
Slide 11: Core Results Q4 2017 and Full-Year 2017
Core Results Q4 2017 and Full-Year 2017 Year-over-Year Analysis Q4 Core Revenue: Q4 Full-Year ($ millions) Core Revenue 4.8% year-over-year increase: Core Segment Income Margin 4.1% organic increase* from strong $396 $1,389 $1,397 performance in Detection & $378 Measurement segment, partially of
Slide 12: HVAC Results Q4 2017 and Full-Year 2017
HVAC Results Q4 2017 and Full-Year 2017 Year-over-Year Analysis Q4 Revenue: ($ millions) Q4 Full-Year 1.3% year-over-year increase Revenue 0.5% organic growth*, with solid increase Segment Income Margin in Cooling partially offset by decline in $510 $511 Heating sales volumes 0.8% currency imp
Slide 13: Detection & Measurement Results Q4 2017 and Full-Year 2017
Detection & Measurement Results Q4 2017 and Full-Year 2017 Year-over-Year Analysis ($ millions) Q4 Revenue: Q4 Full-Year 28.5% year-over-year increase: Revenue Segment Income Margin 26.8% organic increase* due to higher $260 sales across all businesses, with $75 particular strength in fare colle
Slide 14: Engineered Solutions (Core) Q4 2017 and Full-Year 2017 Results
Engineered Solutions (Core) Q4 2017 and Full-Year 2017 Results Year-over-Year Analysis Q4 Full-Year ($ millions) Q4 Core Revenue: Core Revenue Core Segment Income Margin (0.3%) year-over-year decline: $653 $625 (0.6%) organic decline* primarily due to business model shift in Process Cooling $160
Slide 15: Financial Position and Liquidity Review
Financial Position and Liquidity Review Scott Sproule February 15, 2018
Slide 16: Financial Position
Financial Position Cash Flow & Liquidity ($ in millions) 2017 Core Free Cash Flow* generation of $93M Term Debt Repayment Schedule during 2017 reflecting 118% conversion of (New Credit Agreement) Adjusted Net Income* Targeting 110% Core Free Cash Flow* Conversion Extended Maturity by Two Years a
Slide 17: Financial Position - Increasing Estimate of Available Capital Through 2020
Financial Position - Increasing Estimate of Available Capital Through 2020 Capital Structure Update Net Leverage* 3.0x 2.5x 2.7x 2.0x 1.5x 2.1x 1.8x 1.0x (new C/A) 1.5x** 0.5x 0.0x Q3'15 2016 2017 • Calculated as defined by SPX’s credit facility agreement. ** Net leverage of 1.8x under prior credit
Slide 18: 2018 Guidance Executive Summary
2018 Guidance Executive Summary February 15, 2018
Slide 19: Market Commentary
Market Commentary Market Comments Cooling: Commercial market trends continue to be favorable HVAC Heating: Demand improving with colder winter weather Detection & Steady demand in run-rate Measurement Continued solid project frontlog and order conversion Transformers Steady lead times and
Slide 20: Transformation of SPX (Core) – 2015 Through 2017
Transformation of SPX (Core) – 2015 Through 2017 $ Ms (except per share data) 2015 1 2017 Core revenue $1,692 $1,397 % Power generation end markets >30% <10% Core segment income % 8.0% 13.1% Adjusted operating income 2 % 3.7% 8.6% South African projects (Status) 3 of 5 scopes remaining 1 of 5 scopes
Slide 21: 2018 Core Guidance
2018 Core Guidance Revenue Segment Income Margin 100 basis points increase HVAC Organic growth* within LT range of 2.0-4.0% (~15.5%) Detection & 50-100 basis points increase Organic growth* within LT range of 2.0-6.0% Measurement (~25.0-25.5%) Segment revenue decline* in high-single digits
Slide 22: 2016-2018 Core Performance
2016-2018 Core Performance $180 31% $160 30% $140 $120 29% $ in millions $100 28% $80 $60 27% $40 26% $20 $- 25% FYE 2016A FYE 2017A FYE 2018 E Adjusted Operating Profit* Adjusted EBITDA* Adjusted Gross Margin* (right axis) Note: Core results are non-GAAP financial measures that exclude the results
Slide 23: Updating Long-Term Financial Targets
Updating Long-Term Financial Targets 2020 (Prior) 2020 (New) $1.5 - $1.7B Core Revenue* $1.7 - $1.8B Core Revenue* 10.0-11.0% Adjusted Operating 10.5-11.5% Adjusted Operating Income Margin* Income Margin* $2.25 - $2.50 Adjusted EPS* $2.65 - $2.90 Adjusted EPS* >100% FCF* Conversion of
Slide 24: Executive Summary
Executive Summary Strong operational and cash flow performance Well-positioned to invest for sustainable double digit earnings growth 50% increase in available capital to deploy by end of 2020 Continue working attractive M&A pipeline and anticipate results in 2018 Continuing to Execute on Pl
Slide 25: Questions
Questions February 15, 2018
Slide 26: Appendix
Appendix February 15, 2018
Slide 27: 2018 Modeling Considerations
2018 Modeling Considerations Metric Commentary/Assumptions Corporate costs Low $40Ms Long-term incentive comp $16-17M Restructuring costs $1-2M Interest cost $17M Tax rate Approximately 23% due to new tax laws Capex $12-14M Cash cost of pension + OPEB Approximately $18M: ongoing cash cost approximat
Slide 28: 2018 Adjusted EPS Guidance - Key Drivers
2018 Adjusted EPS* Guidance - Key Drivers • Favorable Economic Policy/Infrastructure Stimulus $2.18 • Lower Interest Rates • Colder Winter Weather • Commercial Growth Accelerates $2.11 Base Case • Commercial Growth Decelerates • Commodity Inflation/Pass-Throughs • Warmer Winter Weather $2.03 • Unfav
Slide 29: Organic Segment Financial Targets (Core)
Organic Segment Financial Targets (Core) ($ millions) Detection & Engineered SPX Total HVAC Measurement Solutions (Core)* (Core)* 2017 Revenue $511 $260 $625 $1,397 Long-term Modeling Target Organic Revenue* CAGR +2% to +4% +2% to +6% +2% to +3% +2% to +3% Business Model Change - - ~(5%) ~(2%) Total
Slide 30: South African Projects Results and Financial Update
South African Projects Results and Financial Update (in millions) Q4 2017 FY 2017 Revenues** ($8.8) $29.1 Operating losses** ($32.8) ($68.0) Net cash used in operations ($12.6) ($56.5) Tax benefit, cash $7.0 $7.0 Net South African cash usage ($5.6) ($49.5) **Includes impact of charges of $29.9 milli
Slide 31: Core Revenue & Segment Income U.S. GAAP Reconciliation
Core Revenue & Segment Income U.S. GAAP Reconciliation ($ millions) Q4 2016 Q4 2017 GAAP SA Projects Core GAAP SA Projects Core Revenue HVAC 159.1 159.1 161.2 161.2 D&M 58.6 58.6 75.3 75.3 Engineered Solutions 177.6 (17.8) 159.8 150.5 8.8 159.3 Total SPX $395.3 ($17.8) $377.5 $387.0 $8.8 $395.8 Segm
Slide 32: Core Segment Income Phasing
Core Segment Income Phasing ($ millions) 38% Q1 2017 Q2 2017 Q3 2017 Q4 2017 GAAP 34.3 20.7 45.4 24.5 31% Exclude: South African 4.4 26.6 4.2 32.8 26% Projects Exclude: Contract 21% 21% 22% 22% - - (10.2) - Settlement 19% Core $38.7 $47.3 $39.4 $57.3 % of full-year 21% 26% 22% 31% Q1 2016 Q2 2016 Q3
Slide 33: Q4 2017 U.S. GAAP to Adjusted Earnings Per Share Reconciliation
Q4 2017 U.S. GAAP to Adjusted Earnings Per Share Reconciliation GAAP Adjustments Adjusted ($ millions, except per share values) Segment income (1) $ 24.5 $ 32.8 $ 57.3 Corporate expense (12.5) — (12.5) Pension and postretirement income (expense) (2) (4.2) 5.2 1.0 Long-term incentive compensation exp
Slide 34: Full-Year 2017 U.S. GAAP to Adjusted Earnings Per Share Reconciliation
Full-Year 2017 U.S. GAAP to Adjusted Earnings Per Share Reconciliation GAAP Adjustments Adjusted ($ millions, except per share values) (1) Segment income $ 124.9 $ 57.8 $ 182.7 Corporate expense (46.2) — (46.2) Pension and postretirement income (expense) (2) (5.4) 6.8 1.4 Long-term incentive compens
Slide 35: Q4 2016 U.S. GAAP to Adjusted Earnings Per Share Reconciliation
Q4 2016 U.S. GAAP to Adjusted Earnings Per Share Reconciliation GAAP Adjustments Adjusted ($ millions) Segment income (1) $ 54.8 $ 4.7 $ 59.5 Corporate expense (12.1) — (12.1) Pension and postretirement income (expense) (2) (10.8) 11.0 0.2 Long-term incentive compensation expense (3.5) — (3.5) Impai
Slide 36: Full-Year 2016 U.S. GAAP to Adjusted Earnings Per Share Reconciliation
Full-Year 2016 U.S. GAAP to Adjusted Earnings Per Share Reconciliation GAAP Adjustme nts Adjuste d Segment income (1) $ 142.8 $ 14.5 $ 157.3 ($ millions) Corporate expense (41.7) — (41.7) Pension and postretirement income (expense) (2) (15.4) 16.0 0.6 Long-term incentive compensation expense (13.7)
Slide 37: Q4 and Full-Year Adjusted Operating Income U.S. GAAP Reconciliation
Q4 and Full-Year Adjusted Operating Income U.S. GAAP Reconciliation ($ millions) Three months ended Twelve months ended December 31, 2017 December 31, 2016 December 31, 2017 December 31, 2016 Operating income $ 1.7 $ 1.8 $ 54.8 $ 55.0 Adjustments: South African projects (1) 33.4 4.7 69.4 14.5 Non-se
Slide 38: Full-Year Adjusted EBITDA to U.S. GAAP Reconciliation
Full-Year Adjusted EBITDA to U.S. GAAP Reconciliation ($ millions) FY 2017 FY 2016 Operating income $ 54.8 $ 55.0 Adjustments: South African projects (1) 69.4 14.5 Non-service pension and postretirement items 6.8 16.0 Contract settlement gain (10.2) — Gain on sale of Dry Cooling — (18.4) Non-cash im
Slide 39: Full-Year Adjusted Gross Margin to U.S. GAAP Reconciliation
Full-Year Adjusted Gross Margin to U.S. GAAP Reconciliation ($ millions) FY 2017 FY 2016 Gross profit (loss) 330.2 375.6 as a percent of revenues 23% 26% (1) Exclude: South African Projects 59.1 5.8 Adjusted Gross profit (loss) 389.3 381.4 as a percent of Core revenues 28% 27% (1) For the three and
Slide 40: Q4 2017 Organic Revenue U.S. GAAP Reconciliation
Q4 2017 Organic Revenue U.S. GAAP Reconciliation Detection & Engineered HVAC Measurement Solutions Consolidated Net Revenue Growth (Decline) 1.3 % 28.5 % (15.3) % (2.1) % Adjustment to Exclude South African projects - % - % (15.0) % (6.9) % Core Revenue Growth (Decline) 1.3 % 28.5 % (0.3) % 4.8 % Ex
Slide 41: Debt Reconciliation
Debt Reconciliation ($ millions) Q4 2017 Short-term debt $ 7.0 Current maturities of long-term debt 0.5 Long-term debt (1) 351.6 Gross debt 359.1 Less: Purchase card program and extended payables (2.8) Adjusted gross debt 356.3 Less: Cash not in excess of $150.0 (124.3) Adjusted net debt $ 232.0 (1)
Slide 42: Capital Structure
Capital Structure Leverage Ratios ($millions) Q3 2017 Q4 2017 2.3x 2.3x Short-term debt $39.0 $7.0 2.1x (old C/A) Current maturities of long-term debt 18.0 0.5 1.5-2.5x Long-term debt 311.0 349.3 1.8x Total Debt $368.0 $356.8 (new C/A) 1.5x Less: Cash on hand (87.2) (124.3) Net Debt $280.8 $232.5 Q3
Slide 43: Consolidated EBITDA Reconciliation
Consolidated EBITDA Reconciliation ($ millions) Q1 2017 Q2 2017 Q3 2017 Q4 2017 LTM Net income (loss) from continuing operations attributable to SPX $ 10.3 $ (8.3) $ 22.0 $ 60.0 Corporation common shareholders Income tax provision (benefit) 3.2 6.0 4.8 (61.9) Interest expense 4.0 4.6 4.3 4.2 Income
Slide 44: U.S. GAAP to Core Free Cash Flow from Continuing Operations
U.S. GAAP to Core Free Cash Flow from Continuing Operations ($ millions) FY 2017 Net operating cash flow from continuing operations $ 54.2 Capital expenditures - continuing operations (11.0) Free cash flow used in continuing operations 43.2 Adjustment for South African projects 49.5 Core free cash f