Slide 1: Q3 2018 Earnings Presentation
Q3 2018 Earnings Presentation November 1, 2018
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 within the meaning of Section 21E of the Securities Exchange Act of 1934, as am
Slide 3: Introductory Comments
Introductory Comments Gene Lowe November 1, 2018
Slide 4: Quarter Highlights
Quarter Highlights Performance and Accomplishments On track to achieve earning and cash flow guidance metrics - Adjusted EPS* of $2.15-$2.25 - Core Free Cash Flow of at least 110% of adjusted net income Detection & Measurement and HVAC driving year-to-date profit growth - Sales growth in both HV
Slide 5: Core Q3 2018 Results
Core Q3 2018 Results Year-over-Year Analysis ($ millions) Q3 Year-to-Date Core Revenue Core revenue increased 7.5% Adjusted Operating Income Margin* $1,033 $974 Adjusted operating income* grew 6% $346 8.4%†* $322 7.9%†* 8.1% 8.2% Adjusted operating income margin* 7.6% 7.5% similar to prior-yea
Slide 6: Value Creation Roadmap
Value Creation Roadmap Organic Growth SPX Business System New products Policy deployment New channels Operational excellence Adjacent markets Due diligence/integration Inorganic Growth Culture & Values Focus in HVAC and D&M Leadership development Significant capital to deploy Res
Slide 7: Q3 Financial Review
Q3 Financial Review Scott Sproule November 1, 2018
Slide 8: Earnings Per Share
Earnings Per Share Q3 2018 Adjusted EPS Q3 2018 Q3 2017 GAAP EPS from continuing operations $0.15 $0.50 South African projects $0.14 $0.11 Heat Transfer $0.01 - Acquisitions costs $0.06 - Non-service pension items & other** $0.01 ($0.25) Adjusted EPS from continuing operations $0.37 $0.36 Adjusted E
Slide 9: Core Q3 2018 Results
Core Q3 2018 Results Year-over-Year Analysis ($ millions) Q3 Core Revenue: Q3 Year-to-Date 7.5% year-over-year increase: Core Revenue 8.2% acquisition impact Core Segment Income Margin* (0.5%) decrease, net of acquisitons: $1,033 $346 $974 Growth in HVAC offset by project timing in $322 Detect
Slide 10: HVAC Q3 2018 Results
HVAC Q3 2018 Results Year-over-Year Analysis ($ millions) Q3 Revenue: Q3 Year-to-Date 10.6% year-over-year increase: Revenue Segment Income Margin $399 10.8% organic increase* driven by cooling product and, to a lesser extent, heating $132 product shipments $350 $119 (0.2%) unfavorable currenc
Slide 11: Detection & Measurement Adjusted Q3 2018 Results
Detection & Measurement Adjusted Q3 2018 Results Year-over-Year Analysis ($ millions) Q3 Revenue: Q3 Year-to-Date Revenue $225 26.0% year-over-year increase: Adjusted Segment Income Margin* 39.6% impact of Schonstedt and CUES acquisitions $84 $185 (13.3%) organic decrease* due primarily to pro
Slide 12: Engineered Solutions (Core) Q3 2018 Results
Engineered Solutions (Core) Q3 2018 Results Year-over-Year Analysis Q3 Core Revenue: Q3 Year-to-Date ($ millions) (4.3%) year-over-year decline: Core Revenue Core Segment Income Margin (4.5%) decline* ‒ Business model shift in Process Cooling ‒ Hurricane impact $439 (0.2%) unfavorable currency
Slide 13: Financial Position & Liquidity Review
Financial Position & Liquidity Review Scott Sproule November 1, 2018
Slide 14: Financial Position
Financial Position Capital Structure Update Leverage Ratios* ($ millions) Q3 2018 Short-term debt $ 113.1 2.7x 2.7x 2.3x 2.3x 1.5-2.5x Current maturities of long-term debt 9.3 Long-term debt 340.6 Total Debt $ 463.0 Less: Cash on hand (61.9) Q2'18 Q3'18 LT Target Net Debt $ 401.1 Bank Net Leverage G
Slide 15: 2018 Core Guidance (Changes in Bold)
2018 Core Guidance (Changes in Bold) Revenue Segment Income Margin Organic growth in a range of 11-12% ~15% HVAC (~$570 at the midpoint) (vs ~15.5% prior) (vs up 7-8% prior) ~24% Detection & In a range of $320-325 million (~25% ex deal amortization) Measurement (vs $325-335 million prior) (v
Slide 16: Market Outlook & Executive Summary
Market Outlook & Executive Summary Gene Lowe November 1, 2018
Slide 17: Market Commentary
Market Commentary Market Comments Cooling: Continued healthy activity in commercial and institutional markets HVAC Heating: Solid run rate orders; initial pre-season indications favorable Detection & Significant frontlog activity; large projects converting Measurement Run-rate markets remain
Slide 18: Executive Summary
Executive Summary On track to achieve 2018 Core EPS and Free Cash Flow guidance HVAC and Detection & Measurement driving year-to-date profit growth Continued strength in end markets Balance sheet and liquidity support capital allocation optionality Executing on plans to drive sustainable d
Slide 19: Questions
Questions November 1, 2018
Slide 20: Appendix
Appendix November 1, 2018
Slide 21: 2018 Adjusted EPS Guidance - Key Drivers
2018 Adjusted EPS* Guidance - Key Drivers • Favorable Economic Policy/Infrastructure Stimulus • Timing of project revenues $2.25 • Lower Interest Rates • Colder Winter Weather • Commercial Growth Accelerates $2.20 Base Case • Commercial Growth Decelerates • Commodity Inflation/Pass-throughs • Warmer
Slide 22: 2018/Full Year Adjusted EPS Excluding Acquisition Amortization
2018/Full Year Adjusted EPS* Excluding Acquisition Amortization $2.40 ~$0.08 Pro-forma full year $2.35 amortization related to $2.38 acquisitions $2.30 $2.30 $2.25 $0.05 2018 amortization related to acquisitions $2.25 $2.20 $2.20 $2.15 $2.10 2018 Guidance† 2018 Guidance† midpoint Pro-forma full year
Slide 23: Cash Flow & Liquidity
Cash Flow & Liquidity ($ in millions) Core Free Cash Flow* generation of ($ in millions) ~$16M during third quarter Term Debt Repayment Schedule Targeting at least 110% Core Free Cash Flow* Conversion Projecting $400 million of capacity for capital allocation through 2020 $298 Growth investm
Slide 24: Core Segment Income Phasing
Core Segment Income Phasing ($ millions) Q1 2017 Q2 2017 Q3 2017 Q4 2017 GAAP 34.3 20.7 45.4 24.5 38% Exclude: South African (4.4) (26.6) (4.2) (32.8) Projects 31% Exclude: Heat Transfer (0.4) 0.4 (0.3) 0.7 26% Exclude: Contract - - 10.2 - Settlement 21% 21% 22% 22% 19% Core 39.1 46.9 $39.7 56.6 % o
Slide 25: 2018 Modeling Considerations
2018 Modeling Considerations Metric Commentary/Assumptions Corporate costs $42-44M Long-term incentive comp $16M Restructuring costs $1M Interest cost $20M, including $2.5M related to acquisition financing Equity earnings, other $2-3M Tax rate 21% effective rate for 2018, including 1% of favorable i
Slide 26: Engineered Solutions Business Model Shift – Pro Forma Revenues
Engineered Solutions Business Model Shift – Pro Forma Revenues $60-80m Business Baseline model Baseline growth Baseline change Baseline of 2-3% $540-560m 2017 2018 2019 Forward Note: Pro Forma for illustrative purposes only. Based on management estimates. Growth to Resume in 2019 November 1, 2018 26
Slide 27: Q3 2018 GAAP to Adjusted Earnings Per Share Reconciliation
Q3 2018 GAAP to Adjusted Earnings Per Share U.S. GAAP Reconciliation ($ millions, except per share values) GAAP Adjustments Adjusted Segment income (1) $ 29.6 $ 11.1 $ 40.7 Corporate expense (2) (10.5) 0.3 (10.2) Long-term incentive compensation expense (4.3) — (4.3) (3) Special charges, net (1.0) 0
Slide 28: Q3 2017 GAAP to Adjusted Earnings Per Share Reconciliation
Q3 2017 GAAP to Adjusted Earnings Per Share Reconciliation ($ millions, except per share values) GAAP Adjustments Adjusted Segment income (1) $ 45.4 $ (5.8) $ 39.6 Corporate expense (2) (11.0) (0.2) (11.2) Pension and postretirement expense (0.1) — (0.1) Long-term incentive compensation expense (3.6
Slide 29: Q3 2018 and YTD Adjusted Operating Income Reconciliation
Q3 2018 and YTD Adjusted Operating Income U.S. GAAP Reconciliation Three months ended Nine months ended ($ millions) September 29, 2018 September 30, 2017 September 29, 2018 September 30, 2017 Operating income $ 13.4 $ 29.7 $ 55.4 $ 54.0 Exclude: Losses from South African projects (1) (8.1) (5.0) (1
Slide 30: Q3 2018 Organic Revenue Reconciliation
Q3 2018 Organic Revenue U.S. GAAP Reconciliation Three months ended September 29, 2018 Detection & HVAC Measurement Net Revenue Growth 10.6 % 26.0 % Exclude: Foreign Currency (0.2) % (0.3) % Exclude: Acquisitions — % 39.6 % Organic Revenue Growth (Decline) 10.8 % (13.3) % November 1, 2018 30
Slide 31: Core Revenue and Segment Income Reconciliation
Core Revenue and Segment Income U.S. GAAP Reconciliation CONSOLIDATED SPX: Three months ended Nine months ended September 29, 2018 September 30, 2017 September 29, 2018 September 30, 2017 Consolidated revenue $ 362.5 $ 348.5 $ 1,093.6 $ 1,038.8 Exclude: South African projects 9.8 17.7 38.8 37.9 Excl
Slide 32: Q3 and YTD Adjusted Income Excluding Deal Related Amortization
Q3 and YTD Adjusted Income Excluding Deal Related Amortization CORE OPERATING INCOME Q 3 2018 YTD 2018 ($ millions) Core operating income $ 26.0 $ 85.1 Exclude: Deal related amortization cost 1.2 1.7 Core operating income excluding deal amortization cost $ 27.2 $ 86.8 as a percent of Core revenues 7
Slide 33: Debt Reconciliation
Debt Reconciliation ($ millions) Q3 2018 Short-term debt $ 113.1 Current maturities of long-term debt 9.3 Long-term debt (1) 340.6 Gross debt 463.0 Less: Purchase card program and extended payables (2.4) Adjusted gross debt 460.6 Less: Cash and equivalents (61.9) Adjusted net debt $ 398.7 1) Exclude
Slide 34: Consolidated EBITDA Reconciliation
Consolidated EBITDA Reconciliation ($ millions) Q4 2017 Q1 2018 Q2 2018 Q3 2018 LTM Net income from continuing operations attributable to SPX Corporation $ 60.0 $ 12.4 $ 19.7 $ 6.8 common shareholders Income tax provision (benefit) (61.9) 4.1 0.4 1.7 Interest expense 4.2 4.3 5.1 5.9 Income from cont
Slide 35: U.S. GAAP to Core Free Cash Flow from Continuing Operations
U.S. GAAP to Core Free Cash Flow from Continuing Operations ($ millions) Q3 2018 Net operating cash flow from continuing operations $ 9.2 Capital expenditures - continuing operations (2.6) Free cash flow used in continuing operations 6.6 Adjustment for South African projects 9.1 Core free cash flow