Slide 1: 2014 Third Quarter Results and Flow Spin-Off Announcement
2014 Third Quarter Results and Flow Spin-Off Announcement October 29, 2014 COMPANY CONFIDENTIAL
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,
Slide 3: Introductory Comments
Introductory Comments Chris Kearney, Chairman, President and CEO COMPANY CONFIDENTIAL
Slide 4: Overview
Overview Q3 Summary of Key Results Earnings per share from continuing operations of $1.52, up 7% year-over-year Adjusted earnings per share from continuing operations of $1.62, up 14% year-over-year Revenue up 1% year-over-year, driven by 1.5% organic revenue growth Segment margins improved
Slide 5: Flow End Market Trends
Flow End Market Trends Food & Beverage Power & Energy Industrial Flow Oil & Gas Components Q3 orders up modestly over prior Demand for oil pipeline valves Steady incremental growth in year period: remains at a high level in North component and aftermarket America chemical processing orders c
Slide 6: Floating Production Storage and Offloading (FPSO) Project
Floating Production Storage and Offloading (FPSO) Project ~$40m of awards won in October for multiple SPX technologies to be used on an FPSO already being developed for use off the coast of Nigeria: ClydeUnion water injection pumps Bran & Luebbe positive displacement pumps Plenty process fil
Slide 7: Notable Flow Power & Energy Awards in October
Notable Flow Power & Energy Awards in October Notable Flow Power & Energy Awards in October Flow Power & Energy: 2014E Revenue by End Market ~$40m of awards for an FPSO project Pipeline Oil & Gas 21% Multiple awards for filtration technology to be used in refineries in Saudi Arabia Aftermarket U
Slide 8: Flow Power & Energy Growth Initiatives
Flow Power & Energy Growth Initiatives Organic Growth Initatives Increase penetration in profitable market segments (i.e. aftermarket, pipeline, FPSO, nuclear power) Expand global service center footprint and aftermarket capabilities Leverage combined technology offerings Transition mix from
Slide 9: End Market Trends for Power Transformers and Thermal Equipment
End Market Trends for Power Transformers and Thermal Equipment Power Transformers (U.S.) Replacement demand for power transformers remains at a high level Market pricing remains challenging; market lead times for medium power transformers increased modestly Adjacent markets providing increment
Slide 10: Financial Analysis
Financial Analysis Jeremy Smeltser COMPANY CONFIDENTIAL COMPANY CONFIDENTIAL
Slide 11: Q3 Earnings Per Share
Q3 Earnings Per Share Q3 EPS Bridge to Guidance Mid-Point Q3 EPS Guidance Mid-Point $1.35 EPS guidance range was $1.30 to $1.40 per share Segment income $0.04 Flow/Thermal better than expected; Industrial lower than expected Currency Impact ($0.04) Strengthening of the dollar; ~($18m) impact to reve
Slide 12: Consolidated Q3 Results
Consolidated Q3 Results Q3 Year-Over-Year Analysis ($ millions) Revenue: Revenue 1.1% increase year-over-year: Segment Income Margins 1.5% organic growth: $1,146 $1,158 • Driven by Thermal and Industrial (0.4%) currency impact 12.1% 11.3% Segment Income: Consolidated segment income of $140m,
Slide 13: Flow Technology Q3 Results
Flow Technology Q3 Results Q3 Year-Over-Year Analysis Revenue decreased (2.0%): Revenue ($ millions) (2.0%) organic decline: Operating Margins Lower sales of power & energy pumps Timing of shipments largely related to changes in customer or supplier schedules $652 $639 0% currency impact 15.
Slide 14: Flow Technology Backlog
Flow Technology Backlog Sequential Backlog Analysis ($ millions) Quarter End Backlog Q3 backlog down 12% sequentially: ~$45m of the decline due to currency $1,392 $1,387 $1,393 $1,352 $1,191 Timing of orders for mid-large capital projects in Power & Energy and Food & Beverage Slowdown in Asi
Slide 15: Thermal Equipment & Services Q3 Results
Thermal Equipment & Services Q3 Results Q3 Year-Over-Year Analysis ($ millions) Revenue increased 4.5%: Revenue 6.2% organic growth: Operating Margins Increased sales of cooling equipment in the U.S. and Asia Pacific $339 Strong pre-season sales of personal $324 comfort heating equipment ($1
Slide 16: Thermal Equipment & Services Backlog
Thermal Equipment & Services Backlog Sequential Backlog Analysis ($ millions) Core Backlog South Africa Backlog Estimated future contract price adjustments in South Africa Core backlog up 16% year-over-year $588 $539 $566 Steady sequential increase in core backlog $507 $526 South Africa backlo
Slide 17: Industrial Products & Services Q3 Results
Industrial Products & Services Q3 Results Q3 Year-Over-Year Analysis ($ millions) Revenue increased 6.3%: Revenue 5.8% organic growth: Operating Margins >20% organic growth in power transformer revenue… $181 …partially offset by decline in fare collection systems $170 0.5% currency benefit I
Slide 18: Industrial Products & Services Backlog
Industrial Products & Services Backlog Sequential Backlog Analysis ($ millions) Quarter End Backlog Q3 2014 backlog up 11% versus the prior year period and up 9% sequentially $365 $328 $335 $313 Strong order volume for power transformers and $285 communication technologies In contrast, several
Slide 19: Q4 Consolidated Financial Analysis
Q4 Consolidated Financial Analysis ($ millions, except per share data) Q4 2014 Q4 2013 Targets Comments ~($30m) impact from currency Revenue $1,329 (1%) to +3% Low-mid single digit organic growth Segment Income $173 $173 to $188 ~($4m) impact from currency Segment Income % 13.0% +40 points I
Slide 20: 2014 Financial Guidance
2014 Financial Guidance ($ millions, except per share data) 2014 Adjusted EPS Mid-Point Guidance Model 2014E Segment Adjusted Adjusted Revenue $4,790 Revenue Margin EPS* FCF** Segment income % 11.5% Flow ~$2,640 ~13.6% Corporate expense ($106) (variance to 2013) 0% to +1% +190 points Pension service
Slide 21: 2014 Adjusted EPS Guidance: Bridge vs. Prior Guidance
2014 Adjusted EPS Guidance: Bridge vs. Prior Guidance Notable Changes to 2014 Adjusted EPS Guidance Prior Adjusted EPS Guidance Mid-Point $5.25 EPS guidance range was $5.00 to $5.50 per share Flow segment income $0.14 Improved operational performance and favorable sales mix Industrial segment income
Slide 22: Financial Position
Financial Position Leverage and Balance Sheet Review Gross Leverage $78m of adjusted free cash flow in Q3 Net Leverage Gross leverage at 2.55x 4.0x $502m of cash on hand at end of Q3 3.1x 3.1x 3.0x 2.8x Key cash inflows expected in Q4 2014: 2.1x 2.1x 2.5x $155m to $205m of adjusted free ca
Slide 23: Executive Summary
Executive Summary Key Investor Messages Actions taken over the past two years have simplified our organization, improved our operational performance and aligned us more closely to our customers: New operational alignment and restructuring actions Divestitures of non-core businesses Share rep
Slide 24: Appendix
Appendix COMPANY CONFIDENTIAL
Slide 25: Q3 2014 Organic Revenue Growth Reconciliation
Q3 2014 Organic Revenue Growth Reconciliation Q3 2014 Organic Growth Reconciliation Three Months Ended September 27, 2014 Net Revenue Acquisitions/ Change Divestitures Currency Organic Flow Technology -2.0% 0.0% 0.0% -2.0% Thermal Equipment & Services 4.5% 0.0% -1.7% 6.2% Industrial Products & Servi
Slide 26: Adjusted Free Cash Flow
Adjusted Free Cash Flow Reconciliation to GAAP Cash Flow Statement ($ millions) 2014 Adjusted Free Cash Flow from Continuing Operations Q4 2014E Q1 2014 Q2 2014 Q3 2014 Mid-Point Full Year 2014E Net cash from continuing operations ($59) ($40) $33 $155 $63 to $113 Tax payments on asset sale gains $0
Slide 27: Debt Reconciliation
Debt Reconciliation Debt Reconciliation as of September 27, 2014 ($ millions) 9/27/2014 Short-term debt $ 264 Current maturities of long-term debt 17 Long-term debt 1,173 Gross Debt $ 1,454 Less: Puchase card program and extended A/P programs (29)3 Adjusted Gross Debt $ 1,424 Less: Cash in excess of
Slide 28: Bank EBITDA Reconciliation
Bank EBITDA Reconciliation LTM as of ($ mil l i ons ) 9/27/2014 2014E Net Income $524 $523 Income tax provision (benefit) 226 234 Net interest expense 114 102 Income before interest and taxes $864 $859 Depreciation, intangible amortization expense and write off of goodwill and intangibles 112 110 EB
Slide 29: Industrial Products and Services and Other Restated to Include Flash Technologies
Industrial Products and Services and Other Restated to Include Flash Technologies Restated 2013 & 2014 Quarterly Results ($ millions) Industrial Products & Services & Other Q4 2014E FY 2014E Q1 2013 Q2 2013 Q3 2013 Q4 2013 FY 2013 Q1 2014 Q2 2014 Q3 2014 Mid-Point Mid-Point Revenue $183 $177 $187 $2
Slide 30: COMPANY CONFIDENTIAL
COMPANY CONFIDENTIAL