Spx Technologies, Inc. · NYSE:SPXC

Spx Technologies — Q2 2015 Earnings Presentation

44 slides from Spx Technologies's earnings presentation, Jul 29, 2015

1. Slide 1: 2015 Second Quarter Results

   2015 Second Quarter Results July 29, 2015

2. 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 and financial projections, are forward-looking statements and are thus prospective. These forward-looking statements are subject to risks,

3. Slide 3: Housekeeping Items

   Housekeeping Items  Today’s speakers:  Chris Kearney: future Chairman, President and CEO of SPX FLOW, Inc.  Jeremy Smeltser: future VP and Chief Financial Officer of SPX FLOW, Inc.  Gene Lowe, future President and CEO of the “New” SPX Corporation  We plan to complete the spin-off of SPX FLOW, I

4. Slide 4: Introductory Comments

   Introductory Comments Chris Kearney July 29, 2015

5. Slide 5: Update on Spin-Off of Flow

   Update on Spin-Off of Flow  Accomplishments to Date:  Determined company names: SPX Corporation and SPX FLOW, Inc.  Appointed IBM executive Anne Altman to the current Board of Directors  Determined corporate organizational structures for both companies  Filed amended Form 10 with SEC on July 13

6. Slide 6: Consolidated Q2 Results

   Consolidated Q2 Results Q2 Year-Over-Year Analysis ($ millions) Revenue Revenue: Segment Income Margin  (10.1%) year-over-year decline:  (6.5%) currency impact $1,195 $1,074  (3.6%) organic decline 10.7% Segment Income and Margin: 9.9%  ($22m) decline in segment income  (80) points of margin de

7. Slide 7: Restructuring Actions

   Restructuring Actions ($ millions) 1H 2015 Q3 2015E FY 2015E 2H 2015E Annualized Expense Expense Expense Savings Savings SPX FLOW, Inc. $7 $12 to $15 $20 to $23 ~$10 $20 to $25 SPX Corporation $6 $9 to $11 $15 to $17 ~$5 $15 to $20 Consolidated $13 $21 to $26 $35 to $40 ~$15 $35 to $45 Additional St

8. Slide 8: Q2 Financial Review

   Q2 Financial Review Jeremy Smeltser and Gene Lowe July 29, 2015

9. Slide 9: Q2 2015 Earnings Per Share

   Q2 2015 Earnings Per Share Q2 2015 EPS Analysis EPS EPS from continuing operations $0.96  As reported  ($4m) net after-tax costs: Spin related items $0.10  ($7m) of after-tax costs in corporate expense - ($9m) pre-tax  +$3m of tax benefit related to legal entity reorganization EPS from continuin

10. Slide 10: Flow Segment Q2 Results

    Flow Segment Q2 Results Breakdown by End Market Year-Over-Year Year-Over-Year ($ millions) Revenue Organic Variance Currency Impact Food & Beverage $237 +8% (10%) Power & Energy $181 (22%) (7%) Industrial $160 +5% (8%) Flow Reportable Segment $578 (4%) (8%) Year-Over-Year Operating Profit Margin Mar

11. Slide 11: Flow Food & Beverage Q2 Results

    Flow Food & Beverage Q2 Results Q2 Year-Over-Year Analysis ($ millions) Revenue Revenue decreased (2%): Operating Profit Margins  (10%) currency impact  +8% organic growth driven by higher systems revenue $243 $237 Operating profit increased $7m, or 32%:  12.3% operating profit margins 12.3%  32

12. Slide 12: Flow Food & Beverage Backlog

    Flow Food & Beverage Backlog Sequential Backlog Analysis ($ millions) Quarter End Backlog  Q2 backlog down (11%) sequentially: $483 $430  Solid execution of system projects in backlog  Timing of large system orders  Frontlog of system opportunities is robust  Component and aftermarket orders in

13. Slide 13: Flow Power & Energy Q2 Results

    Flow Power & Energy Q2 Results Q2 Year-Over-Year Analysis ($ millions) Revenue Revenue decreased (29%):  (7%) currency impact Operating Profit Margins  (22%) organic decline:  Organic revenue decline concentrated in upstream and $254 midstream markets, reflecting impact of lower oil prices $181 O

14. Slide 14: Flow Power & Energy Backlog

    Flow Power & Energy Backlog Sequential Backlog Analysis ($ millions) Quarter End Backlog  Q2 backlog up 3%, or $15m, sequentially:  +2% due to currency benefit $489 $474  +1% organic growth  Orders flat quarter-to-quarter:  Notable uptick in pipeline valve orders  Upstream pump orders stable,

15. Slide 15: Flow Industrial Q2 Results

    Flow Industrial Q2 Results Q2 Year-Over-Year Analysis ($ millions) Revenue Revenue decreased (3%): Operating Profit Margins  (8%) currency impact  +5% organic growth $165 $160 Operating profit flat year-over-year:  10 points of margin improvement 14.5% 14.4%  Unfavorable mix offset leverage on o

16. Slide 16: Flow Industrial Backlog

    Flow Industrial Backlog Sequential Backlog Analysis ($ millions) Quarter End Backlog  Q2 backlog down (5%) sequentially: $205 $195  Solid backlog execution in Q2  Delayed capital orders across industrial markets  Short cycle orders steady quarter-to-quarter Q1 2015 Q2 2015 Backlog Decline Reflec

17. Slide 17: Thermal Equipment & Services Q2 Results

    Thermal Equipment & Services Q2 Results As Reported Core Thermal Segment* ($ millions) ($ millions) Revenue Revenue Segment Income Margin Segment Income Margins $327 South Africa Projects $306 $298 Profit/ $271 Revenue (Loss)  (7%) organic revenue decline due primarily to lower power Q2 2014 $21 ($

18. Slide 18: Thermal Equipment & Services Backlog

    Thermal Equipment & Services Backlog Sequential Backlog Analysis ($ millions) Core Backlog South Africa Backlog  Core backlog up +4% or $25m, sequentially:  +1% currency benefit $588 $563  +3% organic growth, primarily driven by HVAC orders  South Africa:  Q2 ending backlog at $59m  Negotiatio

19. Slide 19: South Africa Power Project: Kusile Site

    South Africa Power Project: Kusile Site Good Progress Made This Year on 3 of the 6 Dry Cooling Units at the Kusile Site July 29, 2015 19

20. Slide 20: Industrial Products & Services Q2 Results

    Industrial Products & Services Q2 Results Q2 Year-Over-Year Analysis ($ millions) Revenue Revenue decreased (4%): Segment Income Margins  (2%) currency impact  (2%) organic decline: $206 $198  Lower sales of hydraulic technologies, fare collection systems and communication technologies…  …partia

21. Slide 21: Industrial Products & Services Backlog

    Industrial Products & Services Backlog Sequential Backlog Analysis ($ millions) Quarter End Backlog  Backlog down (5%), or ($16m), sequentially primarily due to a decline in the power transformer backlog $339 $323  Replacement demand for power transformers is steady at high volumes and competitive

22. Slide 22: "New" SPX Corporation

    “New” SPX Corporation HVAC Detection & Measurement Power  2015E Revenue: ~$550m  2015E Revenue: ~$245m  2015E Revenue: ~$1,045m  Mid-teens EBITDA margins  >20% EBITDA margins  Low-single digit EBITDA margins  Scalable growth platform  Niche businesses with market  Focused on improving profi

23. Slide 23: "New" SPX Corporation

    “New” SPX Corporation Strategic Priorities  Grow HVAC platform  Expand niche detection and measurement businesses  Improve operating efficiency of power transformer business  Reduce costs and enhance margins in the power generation business Opportunity to Drive Value Through Growth in Higher Pro

24. Slide 24: Financial Position and Financial Modeling Targets

    Financial Position and Financial Modeling Targets Jeremy Smeltser July 29, 2015

25. Slide 25: Financial Position

    Financial Position Capital Structure Update ($ millions)  Q2 ending cash of $329 ($ millions)  Gross leverage (1) at 2.7x at the end of Q2 2015 6/27/2015 Short-term debt $ 294 Current maturities of long-term debt 38  Q2 dividend expected to be final cash dividend as Long-term debt 1,143 combined

26. Slide 26: SPX FLOW: Q3 2015 Financial Modeling Targets

    SPX FLOW: Q3 2015 Financial Modeling Targets Financial Metric Q3 2014 Q3 2015 Targets Commentary ($ millions)  ~(7%), or $45m, currency headwind Revenue $682 $615 to $635  Flat to (3%) organic variance  Organic decline in Power & Energy Segment Income $105 $75 to $80  ~$7m currency headwind  Ex

27. Slide 27: SPX Corporation: Q3 2015 Financial Modeling Targets

    SPX Corporation: Q3 2015 Financial Modeling Targets Financial Metric Q3 2014 Q3 2015 Targets Commentary ($ millions)  ~(4%), or $20m, currency headwind Revenue $490 $445 to $465  (5%) to (1%) organic decline  Primarily due to reduced profitability in power Segment Income $38 $32 to $37 generation

28. Slide 28: 2015 Full Year Financial Modeling Targets

    2015 Full Year Financial Modeling Targets 2015 Financial Target SPX FLOW SPX Corporation Consolidated Total Revenue Variance To Prior Year (9%) to (11%) (5%) to (7%) (7%) to (9%) Currency Impact To Revenue ~(7%) ~ (3%) ~(5%) Organic Revenue Growth (2%) to (4%) (2%) to (4%) (2%) to (4%) Segment Incom

29. Slide 29: Sequential Analysis

    Sequential Analysis Segment Income Phasing ($ millions) Key Q4 2015 segment income drivers:  SPX FLOW: 2013 2014 2015 Mid-Point  Seasonality of aftermarket and components sales  Backlog conversion of food & beverage systems 37% 34%  Restructuring savings 32% 26% 26% 24% 23% 23% 24%  “New” SPX C

30. Slide 30: Executive Summary

    Executive Summary Chris Kearney July 29, 2015

31. Slide 31: Executive Summary

    Executive Summary Key Investor Messages  We have made significant progress over the last several years to simplify and strengthen SPX  The spin-off will result in two independent, publicly traded companies with increased strategic flexibility:  SPX FLOW, Inc.: Pure-play flow company with diversif

32. Slide 32: Questions

    SIP>d<. Questions : “planning — = OP imvent : STRATEGY =: management =. . =—= = =: sar a

33. Slide 33: Appendix

    SIP>d<. Appendix : “planning — = OP imvent : STRATEGY =: management =. . =—= = =: sar a

34. Slide 34: Future Company Profiles

    Future Company Profiles SPX FLOW Inc. New SPX Corporation  Chairman, President and CEO: Chris Kearney  President and CEO: Gene Lowe  VP and Chief Financial Officer: Jeremy Smeltser  VP and Chief Financial Officer: Scott Sproule  2015E Consolidated EBITDA (1): ~$360m  2015E Consolidated EBITDA

35. Slide 35: 2015E Pro Forma Future Company Mid-Point Targets

    2015E Pro Forma Future Company Mid-Point Targets SPX FLOW, Inc. SPX Corporation Revenue Revenue Current Flow Segment $2,340 Current Thermal Segment $1,219 (2) Hydraulic Technologies $150 Other Industrial businesses $621 Total 2015E Pro Forma Revenue $2,490 Total 2015E Pro Forma Revenue $1,840 EBITDA

36. Slide 36: Consolidated EBITDA Reconciliation

    Consolidated EBITDA Reconciliation ($ mi l l i ons ) LTM 2015E Net Income $60 $173 Income tax provision 54 69 Net interest expense 69 70 Income before interest and taxes $183 $312 Depreciation and amortization expense, including intangibles 102 103 EBITDA $286 $415 Adjustments: Non-cash compensation

37. Slide 37: Debt Reconciliation

    Debt Reconciliation Debt Reconciliation as of June 27, 2015 ($ millions) 6/27/2015 Short-term debt $ 294 Current maturities of long-term debt 38 Long-term debt 1,143 Gross Debt $ 1,475 Less: Purchase card program and extended A/P programs (30) 3 Adjusted Gross Debt $ 1,445 Less: Cash in excess of $5

38. Slide 38: Q2 2015 Organic Revenue Reconciliation

    Q2 2015 Organic Revenue Reconciliation Q2 2015 Organic Revenue Reconciliation Three months ended June 27, 2015 Net Revenue Foreign Organic Revenue Decline Currency Decline Flow Technology (12.6) % (8.4) % (4.2) % Thermal Equipment and Services (9.0) % (5.3) % (3.7) % Industrial Products and Services

39. Slide 39: Q2 2015 Flow Organic Revenue Reconciliation by End Market

    Q2 2015 Flow Organic Revenue Reconciliation by End Market Q2 2015 Flow Organic Revenue by End Market Three months ended June 27, 2015 Net Revenue Foreign Organic Revenue Decline Currency Decline Food & Beverage (2.4) % (10.4) % 8.1 % Power & Energy (28.9) % (6.7) % (22.2) % Industrial (2.9) % (8.2)

40. Slide 40: Flow Food & Beverage Financial Analysis

    Flow Food & Beverage Financial Analysis Full Year Analysis ($ millions) Revenue Segment Income Margin $970 $969 (3%) to $947 (5%) 2015 Targets:  (~9%) currency impact to revenue 12.0 % to  4% to 6% organic revenue growth 12.5%  180 to 230 points of margin expansion 10.2% 9.7% 9.3% 2012 2013 2014

41. Slide 41: Flow Power & Energy Financial Analysis

    Flow Power & Energy Financial Analysis Revenue and Operating Income ($ millions) Revenue Segment Income Margin $1,011 $998 $962 2015 Targets: (20%) to (22%)  (~5%) currency impact to revenue 17.5% 14.5% to  (15%) to (17%) organic revenue decline 15.0% 12.8%  250 to 300 points of margin contractio

42. Slide 42: Flow Industrial Financial Analysis

    Flow Industrial Financial Analysis Revenue and Operating Income ($ millions) Revenue Segment Income Margin $888 2015 Targets: $837 $839 (5%) to (7%)  (~7%) currency impact to revenue 14.5% 14.2% 14.7% 14.0% to  0% to 2% organic revenue growth 14.5%  Targeting 14.0% to 14.5% margins, relatively in

43. Slide 43: Reconciliation of "Thermal Core" Results

    Reconciliation of “Thermal Core” Results Three months ended June 27, 2015 June 28, 2014 Δ %/bps Thermal Equipment and Services Revenues $ 298.0 $ 327.3 $ (29.3) -9.0% Operating Profit (Loss) 6.1 9.5 (3.4) as a percent of revenues 2.0% 2.9% -90 bps South Africa Projects (1) Revenues $ 26.6 $ 21.3 $ 5

44. Slide 44: Pro-forma Free Cash Flow Analysis

    Pro-forma Free Cash Flow Analysis ($millions) 2013 2014 2015E 10K Form 10 10K Form 10 SPX FLOW "New" SPX SPX FLOW "New" SPX FLOW "New" SPX Net Cash From Operating Activities $ 112 $ 263 $ (152) $ 82 $ 303 $ (221) $ 175 $ (18) Capital Expenditures (55) (23) (32) (61) (41) (20) (62) (21) Free Cash Flo

SPX — Q2 2015 Earnings Presentation on 6ix