Slide 1: 2013 Second Quarter Results
2013 Second Quarter Results July 31, 2013
Slide 2: Forward-looking statements disclaimer
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, u
Slide 3: Introductory Comments
Introductory Comments Executive Summary Q2 financial performance EPS from continuing operations of $0.80, up 10% over prior year period Improved operational execution drove increase in segment income Progress on restructuring actions by new management teams $18m of charges recorded in Q2, primarily
Slide 4: Consolidated Q2 Results
Consolidated Q2 Results Revenue and Segment Income ($ millions) Revenue: Revenue Segment Income Margins (2.0%) year-over-year decline: (1.4%) organic decline $1,242 $1,217 (0.6%) currency impact 10.2% Segment Income: 9.3% Consolidated segment income of $124m, up 8% versus prior year 90 points of mar
Slide 5: 2013 Restructuring Actions
2013 Restructuring Actions ($ millions) 2013E restructuring expense: $30m+ 2013E Restructuring Expense: $30+ Estimated savings: 2013E: ~$15m Annualized: ~$30m $19 Key 2013 actions: Thermal Segment: $11+ o Reduce fixed cost base at power-related businesses located in Europe Flow Segment: o ClydeUnion
Slide 6: Flow End Market Trends
Flow End Market Trends Food & Beverage Power & Energy Industrial Flow Components Oil & Gas Aftermarket and component Steady aftermarket and Demand for pipeline valves orders steady component order trends globally continues to be strong Decline in commodity pricing has Aftermarket order activity rema
Slide 7: Power-Related End Market Trends
Power-Related End Market Trends Power Transformers (U.S.) Replacement demand for power transformers remains stable Market pricing is competitive, with market lead times for medium power units at ~6 months Flat electricity demand and conservation intiatives leading utilities to pace investments Power
Slide 8: Consolidated Backlog
Consolidated Backlog Sequential Backlog Analysis ($ millions) $2,537 $2,514 Total backlog declined (0.9%): (0.7%) organic decline (0.2%) currency impact Ending Backlog ~60% of second half 2013 revenue target in backlog at the end of Q2: Consistent with past years Q1 2013 Q2 2013 Backlog Stable From
Slide 9: Financial Analysis
Financial Analysis Jeremy Smeltser
Slide 10: Q2 Earnings Per Share from Continuing Operations
Q2 Earnings Per Share from Continuing Operations Year-Over-Year Comparison Q2 2012 EPS $0.73 Segment income $0.13 $0.80 $0.73 Reduced share count $0.08 EPS from Continuing Lower pension expense $0.04 Operations Restructuring ($0.14) Net other items ($0.04) Q2 2013 EPS $0.80 Q2 2012 Q2 2013 Q2 Earnin
Slide 11: Flow Technology Q2 Results
Flow Technology Q2 Results Q2 Year-Over-Year Analysis Revenue: Revenue ($ millions) Revenue declined (3.5%): Income Margins (3.6%) organic decline due to timing of large food & beverage system revenues and lower OE pump sales ClydeUnion reported $123m of revenue in Q2 2013, $677 $653 including ~$8m
Slide 12: Flow Technology Backlog
Flow Technology Backlog Sequential Backlog Analysis ($ millions) $1,337 $1,320 Total backlog declined (1%) Organic decline: Ending Customer order delays for food & beverage Backlog systems and ClydeUnion’s OE pumps Orders for components and aftermarket services remained steady Q1 2013 Q2 2013 Modest
Slide 13: Thermal Equipment & Services Q2 Results
Thermal Equipment & Services Q2 Results Q2 Year-Over-Year Analysis ($ millions) Revenue: Revenue Revenue up modestly: Income Margins Organic revenue increased 2.6% driven by increased revenue recognition on execution of large power projects in South Africa $349 $350 (2.1%) currency impact 7.5% Segme
Slide 14: Thermal Equipment & Services Backlog
Thermal Equipment & Services Backlog Sequential Backlog Analysis ($ millions) $717 $700 Total backlog declined (2%) due to currency Organic backlog flat: Ending Backlog Increase in core backlog offset by execution on South Africa power projects Q1 2013 Q2 2013 Q2 Orders Increased Sequentially and Ye
Slide 15: Industrial Products & Services Q2 Results
Industrial Products & Services Q2 Results Q2 Year-Over-Year Analysis ($ millions) Revenue Revenue: Income Margins (1%) organic revenue decline: Lower sales of communications technology equipment $216 $213 Segment Income: 14.5% 13.5% Segment income increased $2m, or 6% 100 points of margin expansion:
Slide 16: Industrial Products & Services Backlog
Industrial Products & Services Backlog Sequential Backlog Analysis ($ millions) $482 $494 Backlog increased 2.5% driven by: Power transformers Ending Backlog Aerospace components Q1 2013 Q2 2013 Industrial Backlog Increased 2.5% Sequentially July 31, 2013 16
Slide 17: 2013 Financial Targets
SF-><. 2013 Financial Targets
Slide 18: Q3 2013 Consolidated Financial Targets
Q3 2013 Consolidated Financial Targets ($ millions, except per share data) Q3 2013 Q3 2012(1) Comments Targets Low single digit organic growth Revenue $1,229 $1,240 to $1,270 ~(1%) currency impact Expect increased profitability at Flow and Industrial Segment Income $134 $132 to $140 to be offset by
Slide 19: Key Drivers of 2H 2013 Revenue and Segment Income
Key Drivers of 2H 2013 Revenue and Segment Income 1H vs. 2H Analysis ($ millions) Revenue Key 2H 2013 revenue drivers: Segment Margin Flow Technology: seasonal increase in component and aftermarket sales +11% ~+13% $2,393 $2,349 Thermal Equipment: seasonality of personal comfort heating businesses 1
Slide 20: Key Drivers of 2H 2013 EPS from Continuing Operations
Key Drivers of 2H 2013 EPS from Continuing Operations 1H vs. 2H Analysis Key 2013 EPS variances from 1H to 2H: 2012 Adjusted EPS 2013E Mid-Point Guidance Segment income: ~+$1.83 ~$4.38 Restructuring savings: (~$0.25) Revenue seasonality ~$3.41 $3.55 $2.65 Lower stock compensation: +$0.26 Reduced cor
Slide 21: 2013 Full Year Segment Targets
2013 Full Year Segment Targets ($ millions) 2012 Revenue & Previous Updated Description of Changes Segment 2013 Targets 2013 Targets Income % Currency reduced revenue target by 1% $2,682 +1% to +5% +0% to +3% Organic revenue target reduced ~1% due to Flow Technology 10.6% 11.6% to 12.0% 11.4% to 11.
Slide 22: 2013 Full Year EPS Guidance
2013 Full Year EPS Guidance ($ millions, except per share data) Full Year EPS Mid-Point Model 2013E Revenue $5,000 Segment income % 10.6% Corporate expense ($104) Pension & post retirement health care ($25) Stock-based compensation ($35) 2013E EPS Guidance Range: Special charges ($30) $4.25 to $4.50
Slide 23: Capital Allocation
SF-><. Capital Allocation
Slide 24: Financial Position
Financial Position 2013 Capital Allocation Priorities ($ millions) 3/30/2013 6/29/2013 variance 1) Operational improvements and organic Cash $755 $353 (53%) growth initiatives: Restructuring actions Accounts Capital expenditures $1,284 $1,237 (4%) Receivable Innovation Total Assets $6,805 $6,400 (6%
Slide 25: Q2 Free Cash Flow
Q2 Free Cash Flow Q2 2013 Adjusted Free Cash Flow ($ millions) Q2 2013 Net cash from continuing operations ($244) Voluntary pension contribution (1) $250 Adjusted cash from continuing operations $6 Capital expenditures ($18) Adjusted free cash flow from continuing operations ($12) (1) $250m voluntar
Slide 26: 2013 Projected Liquidity
2013 Projected Liquidity Projected Liquidity ($ millions) Amount Cash on Hand at June 29, 2013 $353 2013E Cash Outflows 2013 targeted share repurchases, net of 1H 2013 repurchases ($55) Planned dividend payments ($23) 2013E Cash Inflows 2H 2013 free cash flow guidance mid-point (1) $323 Projected Ca
Slide 27: Executive Summary
Executive Summary Chris Kearney
Slide 28: 2013 Earnings Accretive Actions
2013 Earnings Accretive Actions Action Estimated EPS Benefit Annualized: ~$0.50 per share 1) ~$30m of annual savings from restructuring 2014 Incremental Benefit: ~$0.25 per share Annualized: ~$0.26 per share 2) $200m of share repurchases 2014 Incremental Benefit: ~$0.10 per share 3) $250m voluntary
Slide 29: Closing Comments
Closing Comments Executive Summary Q2 financial performance EPS from continuing operations of $0.80, up 10% over prior year period Improved operational execution drove increase in segment income Progress on restructuring actions by new management teams $18m of charges recorded in Q2, primarily relat
Slide 30: Questions?
SF-><. Questions?
Slide 31: Appendix
SF-><. Appendix
Slide 32: Q2 2013 Organic Revenue Growth Reconciliation
Q2 2013 Organic Revenue Growth Reconciliation Three Months Ended June 29, 2013 Net Revenue Acquisitions/ Change Divestitures Currency Organic Flow Technology -3.5% 0.0% 0.1% -3.6% Thermal Equipment & Services 0.5% 0.0% -2.1% 2.6% Industrial Products & Services -1.4% 0.0% -0.1% -1.3% Consolidated SPX
Slide 33: 2013 Adjusted Free Cash Flow Guidance Reconciliation
2013 Adjusted Free Cash Flow Guidance Reconciliation 2013 Adjusted Free Cash Flow Guidance ($ millions) 1H 2013 2H 2013E Full Year 2013E Net cash from operations ($301) $356 to $396 $55 to $95 Estimated tax payment on the gain from the sale of Service Solutions $115 $0 $0 $115 $115 Planned voluntary
Slide 34: Bank EBITDA Reconciliation
Bank EBITDA Reconciliation ($ millions) LTM 2013E Net Income $240 $201 Income tax provision (benefit) 18 65 Net interest expense 114 113 Income before interest and taxes $372 $379 Depreciation, intangible amortization expense and write off of goodwill and intangibles 112 111 EBITDA from continuing o
Slide 35: Debt Reconciliation
Debt Reconciliation ($ millions) 6/29/2013 Short-term debt $ 34 Current maturities of long-term debt 81 Long-term debt 1,577 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 (303) Adjusted Net Debt $ 1,361 Note: Debt
Slide 36: 2012 Restated Industrial Products & Services Results
2012 Restated Industrial Products & Services Results 2012 Restated Quarterly Revenue & Margins ($ millions) Revenue Segment Income Margin $246 $203 $216 $205 2012 restated full year results: Revenue: $870 13.6% 13.5% Segment Income Margin: 13.3% 13.2% 13.1% Q1 2012 Q2 2012 Q3 2012 Q4 2012 Note: Data
Slide 37: 2012 Restated EPS from Continuing Operations
2012 Restated EPS from Continuing Operations 2012 Restated EPS from Continuing Operations 1H 2012 2H 2012 FY 2012 Earnings from continuing operations $0.91 ($2.59) ($1.68) Less: earnings from businesses discontinued in 2013 $0.00 $0.04 $0.04 Net earnings per share $0.91 ($2.55) ($1.64) Impairment of