Spx Technologies, Inc. · NYSE:SPXC

Spx Technologies — Investor Presentation (September 2015)

76 slides from Spx Technologies's investor presentation, Sep 2, 2015

1. Slide 1: Investor Presentation September 2, 2015

   New York, NY Investor Presentation September 2, 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: Agenda

   Agenda 1) Update on FLOW Spinoff and Introductions Jeremy Smeltser 2) Introductory Comments and Company Overview Gene Lowe 3) Segment Details:  HVAC Gene Lowe  Detection & Measurement Gene Lowe  Power Scott Sproule 4) Financial and Capital Allocation Overview Scott Sproule 5) Executive Summary Ge

4. Slide 4: Spinoff of FLOW Update

   Spinoff of FLOW Update Jeremy Smeltser, VP and CFO, SPX FLOW, Inc. *Contingent on completion of the spinoff of FLOW September September 2, 20152, 2015

5. Slide 5: Update on Spinoff of FLOW

   Update on Spinoff of 2015E Revenue  Finalized Board and corporate structures for both companies  Signed credit facilities for both companies  Filed 2nd amendment of Form 10 with SEC on August 19th (third overall filing)  Determined stock dividend ratio will be 1:1 Upcoming Key Events: ~$1.8b  F

6. Slide 6: New SPX Corporation Board Members

   New SPX Corporation Board Members Committee Assignments Nominating Board Member Compensation & Governance Audit Patrick O’Leary Former EVP and CFO of SPX Corporation for 16 years (non-executive Chairman) David Roberts Chairman, President and CEO of Carlisle Companies Chair X X Dr. Ruth Shaw Former P

7. Slide 7: SPX Corporation CEO and CFO Introductions

   SPX Corporation CEO and CFO Introductions Gene Lowe – President and CEO Scott Sproule – VP, Treasurer and CFO  Gene Lowe will serve as President and CEO  Scott Sproule will serve as VP, Treasurer and and as a member of the Board of Directors CFO of SPX Corporation. of SPX Corporation.  Mr. Lowe j

8. Slide 8: SPX Corporation: Introductory Comments

   SPX Corporation: Introductory Comments Gene Lowe, President and CEO *Contingent on completion of the spinoff of FLOW September September 2, 20152, 2015

9. Slide 9: Executive Management

   Executive Gene Lowe Management President and CEO Scott Sproule John Nurkin Tausha White* Vivek Dhir VP, Treasurer VP, General Counsel VP, Chief Human VP, Marketing and and CFO and Secretary Resources Officer Business Development John Swann J.B. Ballard Darren Dickson President, Weil McLain, Presiden

10. Slide 10: SPX Corporation Introductions

    SPX Corporation Introductions  Gene Lowe President and CEO  Scott Sproule VP, Treasurer and CFO  Paul Clegg VP, Finance and Investor Relations  John Nurkin VP, Secretary and General Counsel  Stefanie Holland Assistant General Counsel, SEC and Compliance  Jerry Tejchma Director of Finance  Jes

11. Slide 11: CORE EBITDA

    CORE EBITDA* 2015E CORE EBITDA* CORE EBITDA* 3-YEAR Target ($ millions) ($ millions) $180 to 2015E Bank EBITDA $150 $200 (July 29th mid-point target) $159 to $169 +~$25 Spin related depreciation adjustment ($9) Net losses on South African projects +$23 2015E CORE EBITDA* $164 2015E CORE 2018 CORE EB

12. Slide 12: Value Creation in Core Business

    Value Creation in Core Business  Grow HVAC platform:  Grow Detection & Measurement platform: Measurement New product development Continue to upgrade installed base Detection &   HVAC  New product launches in 2015-2016  Channel development  Expand vertically and geographically  Geographic exp

13. Slide 13: Executive Summary

    Executive Summary Key Objectives Value Creation in Core Business 1) Create value in core business: HVAC Detection & Measurement  Targeting ~$190m in CORE EBITDA* by 2018 Growth platform Growth platform 2) Manage South African projects +$25m CORE EBITDA* by 2018 3) Disciplined capital allocation Red

14. Slide 14: SPX Corporation: Company Overview

    SPX Corporation: Company Overview Gene Lowe, President and CEO *Contingent on completion of the spinoff of FLOW September September 2, 20152, 2015

15. Slide 15: Company Overview

    Company Overview The “New” SPX Corporation  Headquartered in Charlotte, NC 2014 Revenue by Region  A leading supplier of: 64% 17%  HVAC products,  Detection & Measurement technologies, and  Power equipment 12%  ~$1.8b in estimated revenue for 2015  ~6,000 employees 1%  NYSE Ticker: SPXC* 6%

16. Slide 16: Strengths

    Strengths The “New” SPX Corporation  Experienced and diverse Board of Directors and Senior Management team 2015E Revenue by Segment  Well positioned as a diversified infrastructure company HVAC with market leading positions and strong product brands 30% Power ~$1.8B 57%  Large installed base  Ro

17. Slide 17: Key Product Offerings and Financial Profile by Segment

    Key Product Offerings and Financial Profile by Segment  Package cooling units 2015E:  Fluid coolers  Residential and Non-Residential Boilers  ~$550m revenue  Electrical heating products  mid-teens EBITDA %  Locators 2015E:  Fare collection systems  ~$245m revenue  Communication technologie

18. Slide 18: Key End Market Drivers

    Key End Market Drivers Macro-Economic Drivers 2014 Revenue by End Market 1) Efficiency and environmental regulations 2) Rising living standards in non-residential Power HVAC Generation 27% and residential construction 31% $1.9B 3) Telecommunications investment General Power T&D 4) North American hig

19. Slide 19: HVAC

    HVAC Gene Lowe, President and CEO *Contingent on completion of the spinoff of FLOW September 2, 2015 September 2, 2015

20. Slide 20: HVAC Segment Overview

    HVAC Segment Overview 2015E Revenue by Product HVAC Segment Overview  A leading North American supplier of package cooling products, Heating Cooling boiler systems and electric comfort heating products ~$550m Products Products 55% 45%  Well-recognized product brands and large installed base:  Pro

21. Slide 21: Cooling Products Overview

    Cooling Products Overview 2015E Revenue Breakdown  Cooling products used in non-residential, commercial construction, Package process cooling and refrigeration applications Cooling Towers Parts and  Well-recognized product brands: Marley and Recold ~$250m 85% Service 15%  Well-established sales c

22. Slide 22: Cooling Product Examples

    Cooling Product Examples Marley NC Cooling Tower Recold Fluid Cooler: Evaporative Condenser:  High efficiency  High performance design  Launched in 2015  Low drift rates  Low cost of ownership  Adjacent product and  Quiet by design market (refrigeration)  Long-life construction Strong Produc

23. Slide 23: Cooling Product Examples

    Cooling Product Examples Over 90 Years of Experience Engineering and Manufacturing Cooling Towers; Marley Sets a High Standard for Efficiency and Quality September 2, 2015 23

24. Slide 24: New Product Development Example: Cooling

    New Product Development Example: Cooling Growth Oriented Initiatives Marley MD Package Cooling Tower New Product Development: Package Cooling Tower  Broadened product range by developing new offerings (MD, MHF)  Released new core NC product line with ultra quiet and high efficiency technologies 

25. Slide 25: New Product and Adjacent Market Examples: Cooling

    New Product and Adjacent Market Examples: Cooling Growth Oriented Initiatives Local Market Product Innovation: NX Cooling Tower for Asia Pacific  Designed to meet customer and environmental specifications in Asia Pacific Marley NX Package Cooling Tower  Expanded into a growing market at a competit

26. Slide 26: Heating Products Overview

    Heating Products Overview  North American businesses with strong brands 2015E Revenue Breakdown  Products used in residential and non-residential markets and sold primarily through distributors Boiler  End customers concentrated in the Northeast and Midwest Systems ~$300m 66% Electrical  Demand

27. Slide 27: Heating Product Examples

    Heating Product Examples Residential Boilers Commercial Boilers Electrical Heating Products  High efficiency natural gas  High efficiency natural gas Digital  Standard cast iron  Standard cast iron wall heaters Wash-down, corrosion resistant heaters Aluminum convection heaters Broad Product Offe

28. Slide 28: Heating Product Example

    Heating Product Example Marley Engineered Products Outdoor Heating System Installed at Ralph Wilson Stadium in Orchard Park, NY September 2, 2015 28

29. Slide 29: New Product Development Example: Heating

    New Product Development Example: Heating Growth Oriented Initiatives Weil-McLain(1) New Product Development: ECOTM Wall Mount Condensing Boiler  ECO wall mount condensing boiler, launched in Q2 2013:  95% efficiency meets Department of Energy regulations and achieves Energy Star rating to maximize

30. Slide 30: Strategic Growth Initiatives

    Strategic Growth Initiatives 1. New Product Development:  Target existing and adjacent markets 2. Continued Channel Development:  Broaden channels to market 3. Geographic Expansion:  Develop underserved markets (SE Asia, Latin America, EMEA) 4. Leverage Synergies Across Heating and Cooling:  Com

31. Slide 31: HVAC Financial Profile

    HVAC Financial Profile Financial Profile ($ millions) Revenue Segment income % +2% to +4% CAGR ~$550  ~3% average revenue growth (2013-2015E) $536 $497 15% to 16% ~15%  Expect 200 points of year-over-year margin expansion in 2015E 13.4% 13.0%  Seasonally strong in the second half 2013 2014 2015E

32. Slide 32: Detection & Measurement

    Detection & Measurement Gene Lowe, President and CEO *Contingent on completion of the spinoff of FLOW September 2, 2015 September 2, 2015

33. Slide 33: Detection & Measurement Segment Overview

    Detection & Measurement Segment Overview 2015E Revenue by Product Detection & Measurement Segment Overview Radiodetection Communication 43% Technology  Technology intensive product portfolio 35% ~$245m  Strong new product development and innovation programs Genfare  Leading positions in niche mar

34. Slide 34: Radiodetection

    Radiodetection 2015E Revenue by Product  Based in the U.K., a leading global supplier of underground pipe and Locators Inspection conduit locators and inspection equipment 70% 10% ~$105m  Continuous new product enhancements and loyal customer base Dry Air  ~7% revenue CAGR from 2010-2015E 20%  K

35. Slide 35: Radiodetection

    Radiodetection “Radiodetection’s pioneering products for the location of buried utility infrastructures help reduce the risk of injury to personnel and damage to utilities during excavation and have set the global benchmark for electromagnetic buried service detection.” Radiodetection is the Proud 2

36. Slide 36: Communications Technology

    Communications Technology 2015E Revenue by Product  TCI : A leading global supplier of spectrum monitoring, communication intelligence and geolocation technology TCI 56% ~$85m Flash  Flash Technology: A leading North American supplier of 44% obstruction lighting products  Key demand drivers: 2014

37. Slide 37: Communications Technology

    Communications Technology Spectrum Monitoring (SMS) Communications Intelligence (COMINT) From Borders to Battlefields and From Urban Landscapes to Wide Open Spaces, TCI Technology Empowers Customers to Monitor, Analyze and Manage the RF Spectrum September 2, 2015 37

38. Slide 38: Communications Technology

    Communications Technology Flash Lighting Systems Flash Lighting Systems Flash Technology Provides High-Quality LED and Xenon Lighting Systems for a Variety of Tower Applications September 2, 2015 38

39. Slide 39: Genfare

    Genfare  A leading North American supplier in fare collection:  Historical market position concentrated on fare box installations  Rapidly evolving technology in the market has driven a transformation in our business:  Evolved from “fare box supplier” to “fare collection system provider”  Inves

40. Slide 40: Genfare Innovation: Next Generation Fare Collection

    Genfare Innovation: Next Generation Fare Collection Legacy Farebox Fast Fare Box Fast Fare-eTM e-FareTM E-ticketing Point-of-Sale Cloud-Based Software Support Software Field Support Support Fast Fare Suite of Products Integrated With Back-End Support; We Believe This is The New Industry Standard Sep

41. Slide 41: Strategic Growth Initiatives

    Strategic Growth Initiatives 1. Upgrade and maintain Installed Base:  Fare collection on aged bus fleets in the U.S.  Aged installed base communication technology 2. New product launches in 2015 and 2016:  Genfare: Next generation fare collection system  Radiodetection: GPS enabled locator  TCI

42. Slide 42: Detection & Measurement Financial Profile

    Detection & Measurement Financial Profile Financial Profile ($ millions) Revenue  >20% EBITDA margins Segment income % +2% to +6%  2013 benefited from build-out of $271 CAGR LED obstruction lighting $244 ~$245 28.1% 22% to  We believe 2014 and 2015 represent trough 23.0% 24% ~21% performance for

43. Slide 43: Power

    Power Scott Sproule, VP, Treasurer and CFO *Contingent on completion of the spinoff of FLOW September September 2,2,2015 2015

44. Slide 44: Power Segment Overview

    Power Segment Overview 2015E Revenue by Product Power Segment Overview Power Power Transformers Generation  A leading global supplier of cooling technologies, heat exchangers 36% 57% and pollution control systems ~$1b South African  A leading North American supplier of power transformers Projects

45. Slide 45: Power Transformers

    Power Transformers Power Transformer Business Overview  SPX is a leading supplier of power transformers into North America with strong brand equity  Customers include:  Public and private electric utilities  Independent power producers  Two primary manufacturing locations:  Waukesha, WI  Gold

46. Slide 46: Power Transformers

    Power Transformers SPX Transformer Solutions is a Leading North American Supplier of Medium Power Transformers; We Also Participate in the North American Large Power Transformer Market September 2, 2015 46

47. Slide 47: North American Power Transformer Market

    North American Power Transformer Market  Demand largely driven by replacement of aging installed base:  Average age of installed base is ~40 years  Electricity demand has been lackluster in recent years, but historically has been a driver of replacement demand for transformers:  Load growth  Ne

48. Slide 48: North American Power Transformer Market

    North American Power Transformer Market  Recent end market trends:  Replacement demand has been strong  Market pricing remains competitive  Market lead times are stable  Our focus is on driving higher levels of operational efficiency:  Plant productivity and utilization  Strategic sourcing 

49. Slide 49: Power Generation Equipment – Cooling Technologies

    Power Generation Equipment – Cooling Technologies Wet Cooling Dry Cooling Hybrid Cooling (ModuleAir) (ClearSky) A Leading Global Supplier of Cooling Systems with a Wide Variety of Technology Solutions September 2, 2015 49

50. Slide 50: Power Generation Equipment – Heat Exchange and Pollution Control

    Power Generation Equipment – Heat Exchange and Pollution Control Feedwater Heater Moisture Separator Reheater Pollution Control Filter Rotary Heat Exchanger A Leading Supplier of Large Scale Heat Exchangers and Pollution Control Systems September 2, 2015 50

51. Slide 51: Power Generation Equipment

    Power Generation Equipment Solar Nuclear Natural Gas Our Power Generation Equipment Can be Applied at Many Types of Power Generation Plants September 2, 2015 51

52. Slide 52: Strategic Initiatives

    Strategic Initiatives 1. Value Engineering:  New power transformer design 2. Improve productivity:  Plant efficiency and utilization  Project execution 3. Project selectivity:  Disciplined order acceptance to minimize large project risk 4. Reposition Power Generation Business:  Reduce cost, ris

53. Slide 53: Power Segment Financial Profile

    Power Segment Financial Profile Total Power Segment Base Power Segment (excluding South African projects) Total Revenue ($ millions) Base Power Revenue ($ millions) Segment income % Segment income % South African Projects $1,098 $1,200 $1,173 $1,006 (3%) to 0% ~$1,045 ~$970 CAGR 4% to 5% 3.5% 2.7% ~

54. Slide 54: South Africa

    South Africa Scott Sproule, VP, Treasurer and CFO *Contingent on completion of the spinoff of FLOW September September 2,2,2015 2015

55. Slide 55: South Africa Overview

    South Africa Overview SPX History in South Africa Kusile Medupi Kendall  Established a presence in South Africa as Power Station Power Station Power Station DB Thermal in 1970  Supplied the Dry Cooling System to Eskom’s 4,100 MW Kendall Power Station project, started in DB Thermal HQ 1982 and comp

56. Slide 56: South African Projects Overview

    South African Projects Overview Medupi and Kusile Power Stations  Medupi and Kusile are the two mega-projects:  Twelve 800 mega-watt coal-fired plants (six at each project site)  Eskom is a state-owned South African utility  Alstom and Mitsubishi Hitachi are the primary contractors  SPX awarded

57. Slide 57: South African Projects Overview

    South African Projects Overview Revenue Profile Four primary project phases: $260 1. Manufacturing: ~90% complete today $222 $202 $194 2. Construction:  Medupi currently scheduled through 2019  Kusile currently scheduled through 2021 $92 3. Commissioning: Units to be commissioned at various stages

58. Slide 58: Medupi Unit 6 in Full Commercial Operation

    Medupi Unit 6 in Full Commercial Operation Medupi Unit 6  First synchronized on March 2, 2015  In commercial operation August 30, 2015  Currently providing ~800 megawatts of power to the grid  Reduced load shedding The Commercial Operation of Unit 6 of the Medupi Power Station is a Significant M

59. Slide 59: Kusile Site: Summer 2014

    Kusile Site: Summer 2014 Construction was in the Early Stages One Year Ago… September 2, 2015 59

60. Slide 60: Kusile Site: Summer 2015

    Kusile Site: Summer 2015 …Significant Progress Has Been Made This Year on 3 of the 6 Dry Cooling Units at the Kusile Site September 2, 2015 60

61. Slide 61: South African Project Summary

    South African Project Summary  Taken action to increase our control over the execution of the projects (our scope)  Parties continue to work towards project completion:  Significant motivation for all parties to complete projects  Favorable progress being made:  Commercial operation of Unit 6 a

62. Slide 62: Financial and Capital Allocation Overview

    Financial and Capital Allocation Overview Scott Sproule, VP, Treasurer and CFO *Contingent on completion of the spinoff of FLOW September September 2,2,2015 2015

63. Slide 63: Financial Summary: 3-Year Modeling Targets

    Financial Summary: 3-Year Modeling Targets ($ millions) Detection & HVAC Measurement Base Power (1) SPX Total (1) 2015E Revenue ~$550 ~$245 ~$970 ~$1,765 Organic Revenue CAGR +2% to +4% +2% to +6% (3%) to 0% 0% to +2% 3-Year Modeling Target 2015E Segment Income % ~15% ~21% ~2.5% ~9% Segment Income %

64. Slide 64: Quarterly Earnings Reporting and Guidance Approach

    Quarterly Earnings Reporting and Guidance Approach Earnings and Guidance Approch  Expect to report Q3 2015 results in early November  Expect to report Q4 2015 results in February  Plan to also provide 2016 annual guidance in February:  Full year target ranges for revenue, segment income %, free

65. Slide 65: Estimated Capital Structure at Spin Date

    Estimated Capital Structure at Spin Date Estimated Capital Structure at Spin Date Q4 and Year-End Expectations  Expect strong Q4 cash generation Cash on Hand: ~$50m (consistent with historical seasonality) Term Loan: $350m Revolving Debt: ~$50m  Near-term capital allocation focused on debt reducti

66. Slide 66: Capital Allocation Discipline

    Capital Allocation Discipline Methodology Expected Outcome 1) Utilize strategic planning process to evaluate  Quantify projected future cash flows and future revenue and earnings growth estimate total company valuation 2) Maintain target capital structure  Gross Debt to EBITDA(1) target range: 1.5

67. Slide 67: Executive Summary

    Executive Summary Gene Lowe, President and CEO *Contingent on completion of the spinoff of FLOW September September 2,2,2015 2015

68. Slide 68: Executive Summary

    Executive Summary Key Objectives Value Creation in Core Business 1) Create value in core business: HVAC Detection & Measurement  Targeting ~$190m in CORE EBITDA* by 2018 Growth platform Growth platform 2) Manage South African projects +$25m CORE EBITDA* by 2018 3) Disciplined capital allocation Red

69. Slide 69: Questions?

    questions? *Contingent on completion of the spinoff of FLOW September September 2,2,2015 2015

70. Slide 70: Appendix

    appendix *Contingent on completion of the spinoff of FLOW September September 2,2,2015 2015

71. Slide 71: Quarterly Historical Segment Results

    Quarterly Historical Segment Results (Unaudited) 2014 2015E ($ millions) Mid-Point Targets Q1 Q2 Q3 Q4 Full Year Q1 Q2 Q3E Q4E Full Year Revenue HVAC $105 $119 $137 $175 $536 $108 $118 $550 Detection & Measurement $57 $66 $57 $64 $244 $52 $58 $245 Power $257 $304 $295 $318 $1,173 $217 $283 $1,045 Co

72. Slide 72: 2015E Pro Forma Earnings Mid-Point Model

    2015E Pro Forma Earnings Mid-Point Model 2015E Pro Forma EPS Mid-Point Model ($ millions, except per share data) 2015E Revenue $1,840 Segment income $128 Segment income % 7.0% Corporate expense and other items ($51) Note: Preliminary estimate, includes corporate SG&A, stock compensation and pension

73. Slide 73: 2015E EBITDA Mid-Point Reconciliation

    2015E EBITDA Mid-Point Reconciliation 2015E EBITDA Mid-Point Model ($ millions) 2015E Mid-Point Net Income $41 Income tax provision 15 Net interest expense 11 Income before interest and taxes $67 Depreciation and amortization expense 33 EBITDA $101 Bank Adjustments: Non-cash compensation expense 23

74. Slide 74: 2015E Pro Forma Mid-Point Target & Modeling Assumptions

    2015E Pro Forma Mid-Point Target & Modeling Assumptions ($ millions) "Core" Revenue $1,765 Standalone Company Modeling Assumptions South African Projects $75 Total 2015E Pro Forma Revenue $1,840  ~41m dilutive shares outstanding Segment Income and % margin $128 7.0% Depreciation & Amortization $33

75. Slide 75: Summary of Credit Facility Agreement

    Summary of Credit Facility Agreement (anticipate funding near spin date) Borrower: SPX Corporation (the “Borrower”) and certain foreign subsidiary borrowers Guarantors: Each existing and future direct and indirect domestic subsidiary of the Borrower $1,200 million Senior Secured Credit Facilities $3

76. Slide 76: SPX

    SPX

SPX — Investor Presentation (September 2015) on 6ix