Slide 1: Q2 2016 Earnings Presentation
Q2 2016 Earnings Presentation August 4, 2016
Slide 2: Forward-looking statements and non-GAAP 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 within the meaning of Section 21E of the Securities Exchange Act of 1934, as ame
Slide 3: Introductory Comments
Introductory Comments Gene Lowe August 4, 2016
Slide 4: Quarter Highlights
Quarter Highlights Performance and Accomplishments Solid organic revenue growth* and more than 250 basis points of margin expansion in both HVAC and Detection & Measurement segments Continued margin improvement in the Transformer business; raising 2016 margin target Further headwinds in power
Slide 5: Core Q2 2016 Results
Core Q2 2016 Results Year-over-Year Analysis ($ millions) Q2 Year-to-Date ~2/3rds of revenue decline driven by the Revenue Dry Cooling business (sold in Q1 2016) Adjusted Operating Income Margin* $433 $795 Organic revenue* decline primarily driven $393 $762 by recent completion of a large, uniqu
Slide 6: Value Creation in Core Businesses
Value Creation in Core Businesses Grow HVAC platform: Grow Detection & Measurement platform: Measurement New product development Continue to upgrade installed base Detection & HVAC New product launches in 2016 Channel development Expand vertically and geographically Geographic expansion
Slide 7: Market Commentary
Market Commentary Segment/Business Commentary Cooling: Continued strength from commercial markets HVAC Segment Heating: Slow 1H 2016 due to the mild 2015/2016 winter Detection & Demand for run-rate products remains steady; healthy frontlog activity Measurement Segment Elongated sales cycle f
Slide 8: Q2 Financial Review
Q2 Financial Review Scott Sproule August 4, 2016
Slide 9: Earnings Per Share
Earnings Per Share Q2 2016 Adjusted EPS GAAP EPS from Continuing Operations ($0.33) In addition to usual adjustments: Adjustment to Redeemable Noncontrolling Interest $0.44 Adjustment for redeemable South African Projects $0.09 noncontrolling interest Arbitration decision regarding Non-Service P
Slide 10: Core Q2 2016 Results
Core Q2 2016 Results Year-over-Year Analysis ($ millions) Q2 Revenue: Revenue (9.1%) year-over-year decline: Segment Income Margin (6.0%) decline from sale of Dry Cooling business (1.9%) organic decline*, with declines in power $433 generation business more than offsetting growth in HVAC $393
Slide 11: HVAC Q2 2016 Results
HVAC Q2 2016 Results Year-over-Year Analysis ($ millions) Revenue Q2 Revenue: Segment Income Margin +3.0% year-over-year improvement: +4.5% organic growth* due to the strength of $118 $122 cooling products sales in commercial markets (1.5%) currency impact 14.0% Q2 Segment Income and Margin: 1
Slide 12: Detection & Measurement Q2 2016 Results
Detection & Measurement Q2 2016 Results Year-over-Year Analysis ($ millions) Q2 Revenue: Revenue +3.3% year-over-year growth: Segment Income Margin +5.0% organic growth*, largely due to higher $60 sales of fare collection products $58 (1.7%) currency impact Q2 Segment Income and Margin: 20.1%
Slide 13: Base Power Q2 2016 Results
Base Power Q2 2016 Results Year-over-Year Analysis ($ millions) Q2 Revenue: Revenue Segment Income Margin (17.6%) year-over-year decline: (10.2%) decline from sale of Dry Cooling business $256 (6.5%) organic decline* primarily driven primarily by $211 the completion of a large, unique power pr
Slide 14: Financial Position & Guidance
Financial Position & Guidance Scott Sproule August 4, 2016
Slide 15: Financial Position
Financial Position Capital Structure Update ($ millions) Q2 2016 Leverage Ratios Short-term debt $22 2.8x 2.7x 2.5x 1.5-2.5x 2.3x Current maturities of long-term debt 18 Long-term debt 334 Gross Debt $374 Less: Cash on hand ($102) Q1'16 Q2'16 LT Target Net Debt $272 Bank Net Leverage† Gross Leverage
Slide 16: 2016 Core Guidance Update (Changes in Bold)
2016 Core Guidance Update (Changes in Bold) Revenue Segment Income Margin Towards the lower-end of LT annual HVAC Approaching 16% growth targets of 2-4% At least 100 bps increase driven by Detection & In-line with LT annual growth targets of commercial efforts in fare collection Measurement
Slide 17: Executive Summary
Executive Summary Gene Lowe August 4, 2016
Slide 18: Executive Summary
Executive Summary Q2 2016 Recap: Segment Income and margin growth in HVAC, Detection & Measurement and Transformer business Value Creation Initiatives: Committed to eliminating losses in power generation business to drive full earnings potential of strategic platforms – Power generation headwind
Slide 19: Questions
Questions August 4, 2016
Slide 20: Appendix
Appendix August 4, 2016
Slide 21: 2016 Modeling Considerations
2016 Modeling Considerations Metric Commentary/Assumptions Corporate costs ~$40M Long-term incentive comp $13-15M Restructuring costs ~$6M Interest cost $13-14M Tax rate 35-40%, jurisdictionally sensitive Capex $18-20M Cash cost of pension + OPEB ~$16M ongoing cash cost D&A ~$30M, mostly in COGS Sha
Slide 22: Core Revenue & Segment Income Reconciliation
Core Revenue & Segment Income Reconciliation Q2 2016 Q2 2015 ($ millions) GAAP SA Projects Core GAAP SA Projects Core Revenue HVAC 121.9 121.9 118.3 118.3 D&M 60.1 60.1 58.2 58.2 Power 230.9 (19.6) 211.3 282.9 (26.5) 256.4 Total SPX $412.9 ($19.6) $393.3 $459.4 ($26.5) $432.9 Segment Income HVAC 17.
Slide 23: Core Segment Income Phasing
Core Segment Income Phasing ($ millions) Q1 2014 Q2 2014 Q3 2014 Q4 2014 GAAP 25.6 30.5 38.0 35.5 Less: South (0.4) 6.3 0.3 27.7 39% African Projects 37% Core $25.2 $36.8 $38.3 $63.2 % of full-year 15% 23% 23% 39% 24% 23% 25% 23% 15% Q1 2015 Q2 2015 Q3 2015 Q4 2015 14% GAAP 10.4 24.8 (64.7) 45.2 Les
Slide 24: Core Revenue and Segment Income Phasing
Core Revenue and Segment Income Phasing ($ millions) 2015 Q1 Q2 Q3 Q4 Revenue HVAC 107.7 118.3 142.7 160.4 D&M 51.9 58.2 55.9 66.3 Base Power 202.7 256.4 211.9 259.5 Core SPX $362.3 $432.9 $410.5 $486.2 Segment Income HVAC 12.9 13.0 23.5 30.8 D&M 8.9 10.2 8.3 18.6 Base Power (3.0) 9.9 1.7 1.4 Core S
Slide 25: Q2 2016 GAAP to Adjusted Earnings Per Share Reconciliation
Q2 2016 GAAP to Adjusted Earnings Per Share Reconciliation ($ millions, except GAAP Adjustments Adjusted per share values) Segment income $ 27.4 $ 2.9 $ 30.3 Corporate expense (8.2) — (8.2) Pension and postretirement income (expense) (2.8) 2.9 0.1 Long-term incentive compensation expense (3.5) — (3.
Slide 26: Adjusted Operating Income Reconciliation
Adjusted Operating Income Reconciliation ($ millions) Three months ended Six months ended July 2, 2016 June 27, 2015 July 2, 2016 June 27, 2015 Operating income (loss) $ 9.7 $ (8.7) $ 30.0 $ (53.3) Adjustments: South African projects 2.9 8.3 6.3 16.7 Non-service pension and postretirement items 2.9
Slide 27: Q2 2016 Organic Revenue Reconciliation
Q2 2016 Organic Revenue Reconciliation Detection & HVAC Measurement Power Consolidated Net Revenue Growth (Decline) 3.0 % 3.3 % (18.4) % (10.1) % Adjustment for South African projects - % - % (0.8) % (1.0) % Core Revenue Growth (Decline) 3.0 % 3.3 % (17.6) % (9.1) % Foreign Currency (1.5) % (1.7) %
Slide 28: Debt Reconciliation
Debt Reconciliation ($ millions) July 2, 2016 Short-term debt $ 21.5 Current maturities of long-term debt 17.9 (1) Long-term debt 336.3 Gross Debt 375.7 Less: Purchase card program and extended payables (4.3) Adjusted Gross Debt 371.4 Less: Cash in excess of $50.0 (52.0) Adjusted Net Debt $ 319.4 (1
Slide 29: Consolidated EBITDA Reconciliation
Consolidated EBITDA Reconciliation ($ millions) 2H 2015 Q 1 2016 Q 2 2016 LTM $ (114.5) $ 13.0 $ 4.0 Net income (loss) attributable to SPX Corporation common shareholders Income tax provision 2.3 3.5 2.6 Interest expense 9.8 3.5 3.8 Income (loss) before interest and taxes (102.4) 20.0 10.4 Depreciat
Slide 30: Free Cash Flow
Free Cash Flow ($ millions) Q 2 2016 Net cash from continuing operations $ 22.9 Capital expenditures - continuing operations (2.3) Free cash flow from continuing operations $ 20.6 August 4, 2016 30