Spx Technologies, Inc. · NYSE:SPXC
Spx Technologies — Investor Day (February 2013)
76 slides from Spx Technologies's investor day presentation, Feb 14, 2013
Slide 1: SPX Annual Investor Meeting
SPX Annual Investor Meeting questions??? February 14, 2013
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, financial projections and capital allocation plans, are forward- looking statements and are thus prospective. These forward-looking stateme
Slide 3: Agenda & Introductions
Agenda & Introductions Topic Speaker 1) Opening Remarks Chris Kearney - Chairman, President & CEO 2) Strategy Review Chris Kearney - Chairman, President & CEO 3) Segment Financial Analysis Jeremy Smeltser - VP & CFO 4) Consolidated Financial Analysis Jeremy Smeltser - VP & CFO 5) Capital Structure U
Slide 4: Q4 2012 Summary
Q4 2012 Summary Q4 2012 Summary 2012 Key was a year consolidated of strategic financial results:transformation $1,436 million of revenue, up 14% year-over-year Enter $174 2013 millionwith a strong of segment balance income, up 8% sheet and financial flexibility year-over-year $1.57 adjusted earnings
Slide 5: Strategic Accomplishments
Strategic Accomplishments 1. Completed the Sale of Service Solutions ~$1.15b in gross proceeds Completed transformation out of automotive industry 2. Completed 2012 Capital Allocation Plan Repurchased 5m shares for $350m ($104m completed in early January 2013) Reduced total debt by $309m year-over-y
Slide 6: Key 2013 Messages
Key 2013 Messages Key 2013 Messages 2012 Enter wasasaayear 2013 moreoffocused strategic transformation company in a strong financial position: >50% of revenue from Flow Technology segment Enter >$1b 2013 with a strong balance sheet and financial flexibility of liquidity 2013 Keycapital allocation pl
Slide 7: Historical Capital Allocation
Historical Capital Allocation Share Repurchases & Dividends 43m shares repurchased (2005-today) Annual dividend of $1 per share $2.8b Total Capital Allocated: $5.6b Acquisitions Primary financial criteria: EPS accretion $1.9b Divestiture Returns in excess of our cost of capital proceeds: $4.3b Net D
Slide 8: Strategy Review
Strategy Review questions???
Slide 9: Strategic Transformation
Strategic Transformation 1997-2004 2005-2011 2012 & Beyond Focus on Diversification Focus on Strategic Markets Focus on Expanding Flow Platforms Diversification: >100 acquisitions; divestitures of legacy businesses ClydeUnion Acquisition APV Acquisition Service Solutions United Dominion Divestiture
Slide 10: Strategic Transformation
Strategic Transformation 2004 Revenue Breakdown 2012 Revenue Breakdown Laboratory Equipment Other Flow Auto 7% 7% 8% 53% Compaction Flow Equipment 14% Industrial 9% 18% $5.7b $5.1b Security 10% Infrastructure Vehicle 24% Service Niche 15% Industrial Thermal 6% 29% Exited businesses Continue to Focus
Slide 11: Revenue Profile
Revenue Profile 2012 Revenue by End Market 2012 Revenue by Geography Food & Beverage 19% T&D 46% 21% 6% Oil & Gas 14% Industrial Flow $5.1b Markets Power 19% Generation 17% 23% HVAC 2% 12% 8% Other 13% SPX is a Leading Global Supplier of Engineered Products and Solutions In the Global Power & Energy
Slide 12: SPX Long Term Strategy
Strategy SPX Long Term Strategy SPX is focused on meeting critical needs of a growing world population by providing highly engineered products & solutions to our customers in the global power & energy, food & beverage, and industrial flow end markets 12 Power Oil & Gas Food & Beverage Industrial Flo
Slide 13: Growth & Operating Initiatives
Growth & Operating Initiatives Growth Initiatives Operating Initiatives Develop innovative solutions Continue LEAN journey Broaden geographic presence Leverage global supply chain Localize capabilities Migrate to Shared Services Expand customer relevance Migrate to improved, consistent IT systems Pr
Slide 14: Acquisition Criteria
Acquisition Criteria Acquisition Criteria 1. Consistent with our strategy 2. Primary financial criteria: $1.9 billion total capital invested in 14 acquisitions since 2004 a) Accretive to EPS within first year b) Returns > cost of capital within a short period of time ~85% of acquisition capital focu
Slide 15: Attractiveness of Flow Space
Attractiveness of Flow Space Definition of Flow Space Technology Examples pumps valves Market sectors that require highly engineered system solutions and components that enable our customers to: process, transport, meter, filter or dehydrate… …fluids, gases and powders across a variety of applicatio
Slide 16: Flow Technology Segment Overview
Flow Technology Segment Overview 2012 Revenue by End Market 2012 Revenue by Geography Food & Beverage Power & 33% 26% 35% Energy 33% $2.7b 28% 4% 9% Industrial Flow Processes 32% SPX Flow Technology is a Leading Global Supplier of Engineered Products and Solutions In the Food & Beverage, Power & Ene
Slide 17: Flow Technology Segment Overview
Flow Technology Segment Overview Food & Beverage Power & Energy Industrial Flow 2012 Revenue: $947m 2012 Revenue: $876m 2012 Revenue: $859m Key Products Key Products Key Products Pumps Pumps Pumps Valves Valves Heat Exchangers Heat Exchangers Heat Exchangers Mixers Mixers Filtration Filtration Dispe
Slide 18: Flow Technology: Food & Beverage Market
Flow Technology: Food & Beverage Market Flow’s 2012 Food & Beverage Revenue Market Overview Non-Dairy Food & Regulated, global industry in which Beverage customers demand highly engineered, turn- Dairy 46% key solutions 48% $947m Competitors include GEA, Tetra Pak, Alfa Personal Care Laval, Sudmo (P
Slide 19: Food & Beverage Application Capabilities
Food & Beverage Application Capabilities Dairy Foods Beverages Other Fresh & UHT Milk Vegetable Fats Soft Drinks Healthcare Pressed Cheese Margarines Fruit Juices Cosmetics Soft Cheese Baby Food Flavored Water Detergents Butter & Spreads Yeast Tea & Coffee Drinks Silica & Industrial powders Infant F
Slide 20: Key Flow Technology Food & Beverage Offerings
Key Flow Technology Food & Beverage Offerings Full Line Systems Components Liquid Processing Separation & Dispersion Mixing Clarification Drying & Evaporation Pumps Valves Heat Exchangers Extraction & Distillation Our Technology Offerings Include Full-Line Process Systems and Process Components Febr
Slide 21: Flow Technology Food & Beverage Expansion
Flow Technology Food & Beverage Expansion 2013 and 2008 2009 2010 2011 2012 beyond Gerstenberg Murdoch Seital Acquisition opportunities are butter, fats & engineering separation focused on bolt-ons defining oils processing expertise technology acquisition Focus on organic New Zealand expands F&B gro
Slide 22: Food & Beverage Systems Business
Food & Beverage Systems Business Food & Beverage System Revenue Example Cost Breakdown of a Typical System ($ millions) SPX Process Food & Beverage Equipment System Revenue 25% 3rd Party $528 Pass-Through $466 Content 50% $293 SPX $232 Engineering 25% 2009 2010 2011 2012 Integrated Technologies Have
Slide 23: Aftermarket Opportunity for a Typical Food & Beverage System
First 10 Years of Aftermarket Opportunity for a Typical Food & Beverage System Customer Value Add Original System Consumable Upgrade / Re-rate Purchase Consumable Periodic Consumable Spares Cheese Belt Spares HMG Block Automation Membranes Hardware Critical PHE Pack Upgrade Spares 5-7 years 0 5 10 y
Slide 24: Dairy Project in Shanghai
Dairy Project in Shanghai Project Details End Market: Liquid Dairy in China Customer: Bright Dairy & Food Co., Inc. SPX Scope: Design and install all technologies required to produce stirred and set yoghurt, pastuerized and UHT milk Expect to produce 1,200 tons of yoghurt per day which would make th
Slide 25: Dairy Project in Shanghai
Dairy Project in Shanghai pumps valves mixers vacuum mixer heat transfer dispersion separation Dairy Project in Shanghai Utilizes Multiple SPX Flow Technologies February 2013 25
Slide 26: Flow Technology: Power & Energy Market
Flow Technology: Power & Energy Market Flow’s 2012 Power & Energy Revenue Power & Energy Overview Upstream Oil & Gas Large, global markets in which customers 32% demand highly engineered technology Downstream solutions $876m Oil & Gas 40% Power Competitors include Flowserve, Sulzer, Generation KSB,
Slide 27: Key Flow Technology Power & Energy Offerings
Key Flow Technology Power & Energy Offerings multi-stage pumps valves closures high horsepower multi-stage, vertical dehydration & filtration reciprocating oil pump turbine pump Complementary Products With Very Good Potential for Revenue Synergies Through Cross-Selling Opportunities, Channel Combina
Slide 28: SPX Flow Technology Oil & Gas Offerings
SPX Flow Technology Oil & Gas Offerings P ClydeUnion Pumps V Valves & Closures D Dehydration F Filtration M Mixers H Heat Exchangers P Pumps February 2013 28
Slide 29: Typical Oil & Gas Pump Lifecycle
Typical Oil & Gas Pump Lifecycle 25 Year Pump Timeline Original Customer Value Add Equipment Upgrade / Re-rate Purchase Insurance Consumable Stock Consumable Shelf Stock Consumable Spares Spares Spares Spares Spares Spares Spares 0 5 10 15 20 25 years years years years years o Site Site Overhaul Sit
Slide 30: Flow Technology Power & Energy Expansion
Flow Technology Power & Energy Expansion 2010 2011 2012 2013 2014 ClydeUnion future expectations defining margin improvement valves acquisition multi-product offerings / expanded niche revenue synergies filtration position into global platform acquisitions dehydration added highly engineered pump te
Slide 31: ClydeUnion Integration Update
ClydeUnion Integration Update 2012 Review Full year revenue of $571m with a 2012 Sequential Analysis 5% operating margin (1) ($ millions) Revenue Executed 5% headcount reduction Adjusted Operating Margins (1) $176 Increased discipline on order acceptance: $144 >50% of 2012 order intake was for $125
Slide 32: Flow Technology: Industrial Flow Markets
Flow Technology: Industrial Flow Markets Flow’s 2012 Industrial Revenue Industrial Flow Markets Overview General Industrial; 32% Large, global markets in which customers Compressed Air; demand highly engineered technology 20% $859m solutions Other; 5% $860m Water; 6% Chemical; 18% Fragmented, region
Slide 33: Key Flow Technology Industrial Offerings
Key Flow Technology Industrial Offerings Strategic Growth mixers pumps heat exchangers air treatment Opportunities Expand product offerings geographically Add adjacent technologies to broaden product portfolio Extend vertically in select end markets Fragmented competitor and adjacent supplier enviro
Slide 34: Segment Financial Review
Segment Financial Review questions??? Jeremy Smeltser, SPX Chief Financial Officer SF PowerPoint Template 03-27-08/34 34 Gardner Denver – Proprietary and Confidential
Slide 35: Flow Technology Q4 Analysis
Flow Technology Q4 Analysis Q4 2012 Analysis ($ millions) 29% revenue growth: Revenue 30% acquisition growth Operating Margins (1%) organic decline $728 Q4 2011 benefited from $17m of revenue from a higher margin nuclear squib valve project $565 Segment income increased 6%, year-over-year, to $91m 1
Slide 36: Flow Technology Sequential Analysis
Flow Technology Sequential Analysis ($ millions) Sequential Revenue & Margins Revenue $728 $677 Q4 revenue up $80m or 12% sequentially: Operating $649 Margins $628 Record revenue quarter for Flow Technology 12.0% 12.5% 10.3% 7.4% Increased throughput at ClydeUnion Increased revenue across all key re
Slide 37: Flow Technology Full Year Financial Review
Flow Technology Full Year Financial Review Full Year Financial Review ($ millions) 2012 Analysis: Revenue 31% revenue growth: Operating Margins 29% acquisition growth +4% to 5% organic growth +2% to +6% (3%) currency impact $2,682 +7% 210 points of margin dilution from $2,042 ClydeUnion acquisition
Slide 38: Thermal Equipment & Services Segment
questions??? Thermal Equipment & Services Segment
Slide 39: Thermal Equipment & Services Segment Overview
Thermal Equipment & Services Segment Overview 2012 Revenue by End Market Segment Overview HVAC 2012 revenue: $1.5b 28% Power $1.5b Generation Power & Energy markets: 57% A leading provider of cooling systems and Oil & Gas / heat exchangers for power & energy Other applications 15% Generally long-cyc
Slide 40: Key Thermal Product and System Offerings
Key Thermal Product and System Offerings dry and evaporative cooling systems package (evaporative) cooling heat exchangers pollution control filters boilers heating products Broad Offering of Thermal Heat Transfer Technologies for Power Generation, HVAC and Industrial Applications February 2013 40
Slide 41: Thermal Equipment & Services Q4 Analysis
Thermal Equipment & Services Q4 Analysis Q4 2012 Analysis ($ millions) Revenue (1%) revenue decline: Operating Margins 2% organic growth (3%) currency and other (1) $450 $447 Segment income increased 15% year-over-year, to $51m 11.4% 160 points of margin expansion: 9.8% Leverage on increased sales o
Slide 42: Thermal Equipment & Services Sequential Analysis
Thermal Equipment & Services Sequential Analysis ($ millions) Sequential Revenue & Margins Revenue $447 $349 $375 Q4 revenue up $71m or 19% sequentially: Operating $320 Margins Revenue and profit in personal comfort heating 11.4% businesses seasonal to the fourth quarter 7.7% 3.3% 4.6% Increased sal
Slide 43: Thermal Equipment Full Year Financial Review
Thermal Equipment Full Year Financial Review Full Year Financial Review ($ millions) Revenue 2012 Analysis: Operating Margins (9%) revenue decline: (4%) organic decline $1,636 (5%) currency and other impact (1) (3%) to +3% to $1,491 +5% (8%) 150 points of margin decline 8% to 8.7% 6.5% to 10% 2013 T
Slide 44: Industrial Products & Services
Industrial Products & Services questions???
Slide 45: Industrial Products & Services Overview
Industrial Products & Services Overview Segment Overview 2012 Revenue by Business 2012 revenue: $927m Transformer Niche businesses concentrated in the Solutions United States with leading market positions 33% and attractive profitability and cash flow characteristics Genfare 6% Hydraulic $927m Techn
Slide 46: Key Industrial Products
Key Industrial Products Power Transformers Hydraulic Communication Specialty Lighting Technologies Technologies Underground Cable Precision Aerospace Fare Collection Detection Equipment Components Systems Highly Engineered Products With Leading Positions in Their Respective Markets February 2013 46
Slide 47: Industrial Products & Services Q4 Analysis
Industrial Products & Services Q4 Analysis Q4 2012 Analysis ($ millions) Revenue 8% organic revenue growth: Segment Margins 24% increase in power transformer revenue Partially offset by lower sales of $261 communication technologies and fare $243 collection systems Segment income increased 4% to $32
Slide 48: Industrial Products & Services Sequential Analysis
Industrial Products & Services Sequential Analysis ($ millions) Sequential Revenue & Margins $261 Revenue $232 $219 $216 Q4 revenue up $42m or 19% sequentially: Operating Margins Increased shipments of power transformers and 13.0% fare collection systems 12.0% 11.9% 12.3% Q1 2012 Q2 2012 Q3 2012 Q4
Slide 49: SPX Transformer Solutions
SPX Transformer Solutions ($ millions) Key Market Drivers SPX Transformer Solutions Revenue Electricity Demand: Load growth +20% to Medium Power New capacity: natural gas, wind, solar +30% Large Power New housing starts $23 Replacement of aging equipment $287 Average age of installed base is ~38 yea
Slide 50: Industrial Products Full Year Financial Review
Industrial Products Full Year Financial Review Full Year Financial Review ($ millions) 2012 Analysis: Revenue 8% organic revenue growth: Operating Margins 30% growth in power +4% to transformer revenue +6% to +6% +11% $927 50 points of margin decline: $859 15% to 22% Increase in power transformer sa
Slide 51: Consolidated Financial Review
Consolidated Financial Review questions??? Jeremy Smeltser, SPX Chief Financial Officer
Slide 52: Q4 2012 Earnings Per Share
Q4 2012 Earnings Per Share Q4 2012 Earnings Per Share Analysis notes Earnings from continuing operations ($3.62) includes ($5.19) of impairment charges Earnings from discontinued operations $6.45 includes $6.32 gain on sale of Service Solutions Net earnings per share $2.83 Earnings from continuing o
Slide 53: Q4 Consolidated Financial Results
Q4 Consolidated Financial Results Q4 2012 Analysis ($ millions) Revenue 14% revenue growth: Segment Income Margins 13% acquisition growth 2% organic growth $1,436 (1%) currency impact $1,258 Segment income increased 8% to $174m 12.8% 12.1% 70 points of margin dilution: 20 points of dilution related
Slide 54: Full Year Consolidated Financial Results
Full Year Consolidated Financial Results Full Year 2012 Analysis ($ millions) 2012 Analysis: Revenue Segment Income Margins 12.4% revenue growth: 12.6% acquisition growth 0% to 2.5% organic growth $5,100 +5% (2.7%) currency impact $4,537 160 points of margin decline: 90 points of dilution related to
Slide 55: 2013 EPS Mid-Point Model
2013 EPS Mid-Point Model ($ millions, except per share data) Revenue $5,225 Segment income % 11% Corporate expense ($101) Pension & post retirement health care ($29) Stock-based compensation ($37) Special charges ($28) Targeting $25m to $30m Operating Income $376 Equity earnings in joint ventures $4
Slide 56: Q1 2013 Consolidated Targets
Q1 2013 Consolidated Targets Q1 Analysis ($ millions, except per share data) Revenue growth of +3% to +6%: Revenue Segment Income Margins ~(1%) impact from currency +3% to Segment income of $90m to $95m: +6% $1,164 ~16% of estimated full year segment income 7.4% to ~60% of full year stock-based 7.9%
Slide 57: Capital Allocation
Capital Allocation questions??? Jeremy Smeltser, SPX Chief Financial Officer SF PowerPoint Template 03-27-08/57 57 Gardner Denver – Proprietary and Confidential
Slide 58: Financial Position
Financial Position ($ millions, except per share data) year-over- December 31, December 31, year 2011 2012 variance Key 2012 Capital Sources and Uses Cash $551 $984 +79% Divestiture proceeds: $1.15b Accounts $1,221 $1,333 +9% Reduced total debt by $309m Receivable Total Assets $7,392 $7,130 (4%) Sha
Slide 59: Debt Structure
Debt Structure Debt Structure at 12/31/2012 Debt Repayment Schedule $1.1b in senior notes: ($ millions) $500m @ 7.625% $600m @ 7.875% $600 $600 $500 5-year syndicated credit facility: $400 $475m Term loan A @ ~2.3% $500 $300 $300 $600m domestic and global revolver $200 $1.2b performance bond facilit
Slide 60: Debt to EBITDA Ratio
Debt to EBITDA Ratio (1) Gross Leverage target gross leverage: Net Leverage 1.5x to 2.5x 4.5x 3.9x 3.6x 3.4x 3.5x 3.1x 3.1x 3.1x 2.8x to 2.6x 2.5x 2.3x 2.1x 2.1x 1.7x 1.6x 1.6x 1.5x 0.5x 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013E -0.5x (1) As defined by our credit facility agr
Slide 61: Capital Allocation
Capital Allocation Historical Capital Allocation Breakdown 2013 Capital Allocation Plan Share 1) $250m voluntary pension contribution: Repurchases • $160m net of tax benefit 42% Acquisitions 2) $200m of share repurchases 34% $5.6b Following these actions we are projecting ~$1.2b of liquidity in 2013
Slide 62: U.S. Qualified Pension Review
U.S. Qualified Pension Review U.S. Qualified Pension Plan Benefits of Voluntary Pension Funding Discontinued providing pension benefits to Increases GAAP funded status to ~100% newly hired employees in 2001: >91% of our pension participants inactive Reduces future funding obligation Plan assets as o
Slide 63: Share Repurchase History
Share Repurchase History Share Repurchase History Share Repurchases 14.7 Repurchased 43m shares since the beginning of 2005 9.0 7.6 Total investment of $2.7b at 5.1 an average repurchase price 3.6 2.4 $200m of $63 per share 2005 2006 2007 2008 2009 2010 2011 2012(1) 2013E (1) 3.6m shares repurchased
Slide 64: 2013 Free Cash Flow Guidance
2013 Free Cash Flow Guidance 2013 Adjusted Free Cash Flow Guidance ($ millions) 2013 Guidance Range Adjusted net cash from operations $350 to $390 Capital expenditures ($90) ($90) Adjusted free cash flow $260 to $300 Note: Adjusted cash from operations and free cash flow excludes a planned tax payme
Slide 65: 2013 Projected Liquidity
2013 Projected Liquidity Projected Liquidity ($ millions) Amount Expected Timing Cash on Hand at December 31, 2012 $984 2013E Cash Outflows 2012 share repurchase plan ($104) completed in early January Estimated tax payment related to gain on sale of Service Solutions ($115) Q1 2013 2013 voluntary pe
Slide 66: Executive Summary
Executive Summary questions??? Chris Kearney, Chairman, President and CEO
Slide 67: Key 2013 Messages
Key 2013 Messages Key 2013 Messages 2012 Enter wasasaayear 2013 moreoffocused strategic transformation company in a strong financial position: >50% of revenue from Flow Technology segment Enter >$1b 2013 with a strong balance sheet and financial flexibility of liquidity 2013 Keycapital allocation pl
Slide 68: Questions?
questions? questions???
Slide 69: Appendix
appendix questions???
Slide 70: 2013 Adjusted Free Cash Flow Guidance Reconciliation
2013 Adjusted Free Cash Flow Guidance Reconciliation 2013 Adjusted Free Cash Flow Guidance ($ millions) 2013 Guidance Range Net cash from operations $75 to $115 Estimated tax payment on the gain from the sale of Service Solutions $115 $115 Planned voluntary pension contribution, net of ~$90m tax ben
Slide 71: Bank EBITDA Reconciliation
Bank EBITDA Reconciliation ($ millions) LTM 2013E Net Income $259 $226 Income tax provision (benefit) 32 80 Interest expense 114 105 Income before interest and taxes $406 $412 Depreciation and intangible amortization expense 112 125 EBITDA from continuing operations $517 $537 Adjustments: Amortizati
Slide 72: Debt Reconciliation
Debt Reconciliation ($ millions) 12/31/2012 Short-term debt $ 33 Current maturities of long-term debt 9 Long-term debt 1,650 Gross Debt $ 1,692 Less: Puchase card program and extended A/P programs (28) Adjusted Gross Debt $ 1,664 Less: Cash in excess of $50 (934) Adjusted Net Debt $ 730 Note: Debt a
Slide 73: Q4 2012 Organic Revenue Growth Reconciliation
Q4 2012 Organic Revenue Growth Reconciliation Three Months Ended December 31, 2012 Net Revenue Acquisitions/ Change Divestitures Currency Organic Flow Technology 28.8% 29.8% -0.3% -0.7% Thermal Equipment & Services -0.7% -1.3% -1.5% 2.1% Industrial Products & Services 7.5% 0.0% 0.0% 7.5% Consolidate
Slide 74: Full Year 2012 Organic Revenue Growth Reconciliation
Full Year 2012 Organic Revenue Growth Reconciliation Twelve Months Ended December 31, 2012 Net Revenue Acquisitions/ Change Divestitures Currency Organic Flow Technology 31.3% 29.2% -3.0% 5.1% Thermal Equipment & Services -8.9% -1.6% -3.6% -3.7% Industrial Products & Services 8.0% 0.0% -0.4% 8.4% Co
Slide 75: ClydeUnion Adjusted Operating Profit
ClydeUnion Adjusted Operating Profit ($ millions) ClydeUnion Adjusted Operating Profit Reconciliation Q1 Q2 Q3 Q4 2012 Revenues $125 $144 $127 $176 $571 Operating Profit ($9) $2 $5 $19 $18 % of Revenues -6.9% 1.5% 3.9% 11.0% 3.1% Purchase Accounting Adj. ($7) ($3) ($1) $1 ($9) Adjusted Operating Pro
Slide 76: May 2011
May 2011 76