Spx Technologies, Inc. · NYSE:SPXC
Spx Technologies — Electrical Products Group Conference 2012
38 slides from Spx Technologies's conference presentation, May 21, 2012
Slide 1: Electrical Products Group Conference
Electrical Products Group Conference May 21, 2012 1 May 2012 1
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 acquisitions, are forward-looking statements and are thus prospective. These forward-looking statements are subje
Slide 3: SPX Key Growth Drivers
SPX Key Growth Drivers Key Growth Drivers Details Integrating ClydeUnion, building Power & Energy platform 1. Expansion of Flow Technology segment Continued growth in Food & Beverage Additional strategic acquisitions Next investment cycle for U.S. power transformers Expansion into large-power market
Slide 4: Strategic Transformation
Strategic Transformation 2005-2011 2012 & Beyond 1997-2004 Global, Multi-Industry Supplier Global Supplier of Diversified Industrial Manufacturer of Engineered Solutions Flow Technology Solutions Diversification, >100 Acquisitions; Legacy divestitures ClydeUnion APV Acquisition Acquisition Service S
Slide 5: Strategic Transformation: Revenue Mix
Strategic Transformation 2004 Revenue Mix (1) 2012E Revenue Mix Thermal Equipment Vehicle Infrastructure & Services Service 24% 19% 15% Security 10% $5.7b 14% FLOW ~$5.3b 53% FLOW TECHNOLOGY 28% TECHNOLOGY 9% 6% Compaction 8% 7% 7% Niche Industrial Machinery Industrial Products Auto Other & Services
Slide 6: Strategic Transformation: Flow Technology Revenue Growth
Strategic Transformation ($ billions) Revenue $5.9 $5.5 $5.3 Flow Technology has averaged 6% organic $4.8 $4.8 $4.9 revenue growth from 2005-2012E $4.3 $4.3 Since 2005, ~85% of acquisition capital 80% 78% 77% 47% has been focused on building the Flow 66% 66% 66% 63% Technology segment 53% Flow Techn
Slide 7: 2012 Strategic Actions
2012 Strategic Actions Flow Power Divestiture Technology Infrastructure & Capital Allocation ClydeUnion integration: Production underway at Service Solutions sale new large power pending regulatory Q1 working capital transformer plant: approval: investment 20 units in order backlog expected to close
Slide 8: Leverage Ratios
Leverage Ratios Debt to EBITDA* Gross Leverage > 2.5x Gross Leverage Capital allocation focus: Net Leverage 3.5x Debt repayment Non-leveraging strategic 2.5x Gross Leverage acquisitions using cash on hand Target Range: 1.5x 1.5x to 2.5x Capital allocation focus: Strategic acquisitions 0.5x Share rep
Slide 9: 2005 to 2012 Capital Allocation
2005 to 2012 Capital Allocation Share Repurchases* & Dividends 39m shares repurchased (2005-2012*) 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 N
Slide 10: Revenue by End Market
Revenue by End Market 2011 Pro Forma Revenue by End Market Power Generation 28% Other 27% Power & Oil & Gas Energy 11% 44% HVAC 10% Power T&D Food & 5% Beverage 19% Note: Pro Forma to include ClydeUnion’ s 2011 revenue and exclude Service Solutions 2011 revenue ~2/3rd of Revenue From Sales into Powe
Slide 11: End Market Trends
End Market Trends 1. Flow End Markets Food & Beverage: Strong component demand in Americas & Asia; Quoting activity for systems remains robust Oil & Gas: Price of oil continuing to drive capital investment Industrial: Emerging markets continue to drive investment; North America gaining momentum 2. P
Slide 12: SPX Revenue by Segment
SPX Revenue by Segment 2012E Pro Forma Revenue Breakdown Food & Beverage Thermal ~$1b Equipment & Services 28% Flow Power & Energy Technology ~$1b 53% Industrial Products & Industrial Processes Services ~$800m 19% Note: 2012E as of 5/2/2012 and from continuing operations Flow Technology Well Positio
Slide 13: Flow Technology End Market Structure
Flow Technology End Market Structure Food & Beverage Power & Energy Industrial Processes Design, manufacture and Design and manufacture highly Supply highly engineered service highly engineered food engineered components and components into various processing components, modular systems used in the
Slide 14: Flow Technology Food & Beverage Expansion
Flow Technology Food & Beverage Expansion 2008 2009 2010 2011 2012 Gerstenberg e&e Seital butter, fats & oils extraction & separation defining processing evaporation technology acquisition technology Anhydro coffee industry expands F&B expanded niche liquid to powder “component” position into dehydr
Slide 15: Butter Process
Butter Process Integrated Technologies Have Increased Our Customer Relevance May 2012 15
Slide 16: Flow Technology Food & Beverage Business
Flow Technology Food & Beverage Business Primary Applications 2011 Revenue by End Market liquid dairy products Dairy powder dairy products Products 49% beverages coffee Food & Beverage 46% processed foods Pharma & Personal pharmaceuticals Care 5% A Global Market Leader in Dairy Processing Equipment;
Slide 17: Flow Technology Power & Energy Expansion
Flow Technology Power & Energy Expansion 2010 2011 2012 2013 2014 legacy offerings ClydeUnion future expectations defining margin improvement valves acquisition multi-product offerings / expanded niche revenue synergies filtration position into global platform bolt-on acquisitions dehydration added
Slide 18: ClydeUnion Integration Update
ClydeUnion Integration Update Business Challenges Improvement Initiatives streamlined management structure; organizational alignment initiated restructuring actions market approach & implemented contract approval process; increased pricing; order acceptance process realigning sales team in Q2 supply
Slide 19: ClydeUnion Commercial Update
ClydeUnion Commercial Update ($ millions) Revenue +30% to +40% Q1 orders up 7% year over year driven $402 $430 by aftermarket orders Q1 ending backlog up 4% sequentially: 73% of Q2-Q4 revenue forecast is in the ending Q1 backlog 2010 2011 2012E Backlog Integration of ClydeUnion provides a $530 found
Slide 20: SPX & ClydeUnion Product Offering
SPX & ClydeUnion Product Offering SPX Flow Technology ClydeUnion Pump Technology valves filtration pumps dehydration chemical injection Developing Strategic Approach to Multi-Product Offerings Into Oil & Gas and Power Generation Applications May 2012 20
Slide 21: Typical ClydeUnion Pump Lifecycle
Typical ClydeUnion Pump Lifecycle 25 Year Pump Timeline Original Customer Value Add Equipment Upgrade / Re-rate Purchase Insurance Consumable Stock Consumable Shelf Stock Consumable Spares Spare Spares Spare Spares Spares Spare 0 5 10 15 20 25 years years years years years o Site Site Overhaul Site
Slide 22: Flow Technology Organic Revenue Profile
Flow Technology Organic Revenue Profile Annual Organic Revenue Change 10% CAGR Recession 11% CAGR 15% 15% 9% 6% to 8% 8% 8% 2009 2010 2005 2006 2007 2008 2011 2012E -4% -14% Note: 2012E as of 5/2/2012; see appendix for reconciliation to GAAP Organic Revenue Profile Reflects Strategic Actions, Global
Slide 23: Flow Technology Segment Income and Margin Development
Flow Technology Segment Income and Margin Development Annual Segment Income and Margin >$300 $268 $243 16.4% $211 $216 15.6% 14.4% $175 12.9% 13.0% 13.1% 12.2% 11.2% to $128 11.7% $106 acquisition acquisition acquisition dilution: 550 pts dilution: 50 pts dilution: ~100 pts 2005 2006 2007 2008 2009
Slide 24: Electric Power Transmission & Distribution Grid
Electric Power Transmission & Distribution Grid Transmission Lines: 765, 500, 345, 230 and 138 kV o Large power transformers: o Base rating of at least 100 MVA o Voltage >= 230 kV o Average age of installed base: 40 years o Medium power transformers: o Base rating at 10 to 100 MVA o Voltage <= 230 k
Slide 25: U.S. Transmission & Distribution
U.S. Transmission & Distribution ($ billions) Estimated U.S. Investment in T&D Infrastructure Key Market Drivers 2011 to 2035: $1 trillion Electricity Demand: Load growth $486 New capacity: natural gas, wind, solar New New housing starts Replacement Replacement of aging equipment $210 $172 Regulator
Slide 26: SPX Large Power Transformer Expansion
SPX Large Power Transformer Expansion ($ millions; except per share data) Revenue Forecast Production & EPS Targets $150 to $200 Targeting annual production of ~50 units at full capacity: $100 to $150 Expect to ship ~15 in 2012 5 units in order backlog for 2013 delivery $50 to $75 Estimated Earnings
Slide 27: U.S. Large Power Transformer Market Overview
U.S. Large Power Transformer Market Overview Key Customers Customers are large electric utilities and power producers U.S. large power transformer demand estimated at 500 to 600 units per year ~80% of units produced outside North America: Key suppliers: ABB, Siemens, Hyundai, Hico, Smit, CG Pauwels
Slide 28: SPX Competitive Advantages
SPX Competitive Advantages Strong brand recognition: Recognized for quality, reliability and service Domestic supplier: Preference to buy from U.S. supplier Lower shipping costs Shorter lead times Reduced supply chain risk for our customers Already a qualified supplier with some utilities for larger
Slide 29: SPX Transformer Solutions Financial Results
SPX Transformer Solutions Financial Results ($ millions) Prior Investment Cycle 2004-2008 Current Investment Cycle 2011-???? Revenue Large Power Expansion ~$200 Operating Profit % $481 $393 ~$500 $283 ~$35 $224 >20% $239 $209 >20% ~$300 <5% <5% 2004 2005 2006 2007 2008 2011 2012E Future Potential No
Slide 30: Executive Summary
Executive Summary FLOW TECHNOLOGYX XPROCESS INFRASTRUCTURE INFRASTRUCTURE X VEHICLE SOLUTIONS SERVICE SOLUTIONS X DIAGNOSTIC SYSTEMS COMPANY CONFIDENTIAL May 2012 30
Slide 31: SPX Key Growth Drivers
SPX Key Growth Drivers Key Growth Drivers Details Integrating ClydeUnion, building Power & Energy platform 1. Expansion of Flow Technology segment Continued growth in Food & Beverage Additional strategic acquisitions Next investment cycle for U.S. power transformers Expansion into large-power market
Slide 32: Appendix
appendix May 2012 32 May 2012 32
Slide 33: Projected Liquidity
Projected Liquidity ($ millions) Estimated Cash on Hand at 3/31/2012 $337 Available Credit Lines $431 Estimated Q2-Q4 2012 Free Cash Flow ~$350 Regular Quarterly Dividend (2) ~($38) After-Tax Proceeds from Sale of Service Solutions ~$1,000 Estimated Debt Repayment ($350) Estimated Remaining Share Re
Slide 34: 2012 Full Year Segment Targets
2012 Full Year Segment Targets Thermal Equipment Industrial Products Flow Technology & Services & Services Revenue Revenue Revenue +35% to +40% (7%) to (12%) +10% to +15% Segment Income Margin Segment Income Margin Segment Income Margin 11.2% to 11.7% 7.6% to 8.1% 13.2% to 13.7% Note: ~100 points of
Slide 35: 2012 Pro Forma Modeling Framework
2012 Pro Forma Modeling Framework ($ millions) Previous 2012 Pro Forma Updated 2012 Pro Forma Modeling Framework (1) Modeling Framework (1) Revenue $5,050 to $5,300 $5,150 to $5,400 Segment Income % 10.9% to 11.4% 10.5% to 11.0% Interest Expense $105m Tax Rate 28% 28% Share Count ~47m ~47m Cash on H
Slide 36: Debt Reconciliations
Debt Reconciliations ($ millions) 3/31/2012 Short-term debt $ 191 Current maturities of long-term debt 331 Long-term debt 1,597 Gross Debt $ 2,119 Less: Puchase card program and extended A/P programs $ (38) Adjusted Gross Debt $ 2,081 Less: Cash in excess of $50 $ (287) Adjusted Net Debt $ 1,794 Not
Slide 37: Bank EBITDA Reconciliations
Bank EBITDA Reconciliations ($ millions) LTM Net Income $171 Income tax provision (benefit) 34 Interest expense 102 Income before interest and taxes $307 Depreciation and intangible amortization expense 120 EBITDA from continuing operations $426 Adjustments: Amortization and write-off of intangibles
Slide 38: 2005 to 2012E Organic Growth
2005 to 2012E Organic Growth Flow Segment - Organic Revenue Reconciliation 2005 2006 2007 2008 2009 2010 2011 2012E Net Revenue Change 8.4% 11.2% 31.2% 86.8% -18.2% 1.7% 22.8% 35% to 40% Acquisitions/Divestitures 0.0% 0.9% 14.0% 78.9% 0.0% 5.6% 4.3% 31% to 34% Currency 0.1% 1.0% 2.5% -0.1% -4.3% 0.2