Slide 1: SPX Corporation Investor Presentation
SPX Corporation Investor Presentation March 2020 SPX Corporation 2019 Investor Event - New York
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, products introductions, and financial projections, are forward-looking statements within the meaning of Section 27A of the Securities Act
Slide 3: Executive Management
Executive Management Gene Lowe Scott Sproule President and CEO Treasurer and CFO March 2020 3
Slide 4: SPX Corporation Overview
SPX4 SPX Corporation Overview
Slide 5: Company Overview
Company Overview Headquartered in Charlotte, NC 2019 Adjusted Revenue* by Region A leading supplier of: 89% 89% 6% 6% HVAC products Detection & Measurement technologies, and Engineered Solutions 5% ~$1.5b Adjusted Revenue* in 2019 ~4,500 employees NYSE Ticker: SPXC SPX is a Leading S
Slide 6: Why SPX?
Why SPX? Attractive Core Well positioned key platforms in growth markets Growth Favorable secular trends and business mix; growth initiatives in early innings Cash Flow 100-110% conversion of adjusted net income* Business System Consistent repeatable process to drive improvement Anticipate ~$400m of
Slide 7: Strong Product Offerings and Attractive Market Dynamics
Strong Product Offerings and Attractive Market Dynamics 2019 ADJUSTED 2019 REVENUE FROM REPLACEMENT SALES† REVENUE EBITDA MARGIN* Cooling towers Refrigeration $593m 17% 70% Boilers Electrical heating 2019 REVENUE FROM #1 OR #2 MARKET POSITION† Location & inspection Fare collection $385m
Slide 8: Transformation of SPX – 2015 Through 2020
Transformation of SPX – 2015 Through 2020 Adjusted Operating Income Margin Revenue ~$1.5B $1.6B 12% 10% 8% 11.3% 11.5% 6% 10.1% 8.8% 4% 7.0% 2% 3.7% 0% 2015* 2016* 2017* 2018* 2019* 2020E 2015* 2016* (as 2017* 2018* 2019* 2020E (as reported (as reported Guidance (as reported reported Guidance 2/25/1
Slide 9: Value Creation Framework
Value Creation Framework Organic Growth SPX Business System • New products • Policy deployment • Channel expansion • Operational excellence • Adjacent markets • Due diligence/integration Inorganic Growth Culture & Values • Focus in HVAC and D&M • Employee development • Significant capital to deploy
Slide 10: Segment Overview
Segment Overview HVAC Detection & Measurement Engineered Solutions
Slide 11: HVAC
SPX4 HVAC
Slide 12: HVAC Segment Overview
HVAC Segment Overview Revenue 2019 Revenue by Product Adjusted segment income* % $582 $593 $630-640 Heating 2019 Cooling Products Products $510 $511 Revenue 52% $593m 48% 16.0- 15.7% 16.3% 16.5% 15.5% 14.5% 2019 Revenue by Geography ($ millions) 4% 2016† 2017† 2018† 2019 2020E Segment GM% 34% 32% 32
Slide 13: Strategic Growth Initiatives
Strategic Growth Initiatives New Product Commercialize NC Everest (Cooling) Development Grow Evergreen (high-efficiency boiler) Adjacent Expand refrigeration – Evaporative Condenser; LS Fluid Cooler Markets Grow combi-boilers (AquabalanceTM) Expand geographic and vertical market channels C
Slide 14: Cooling Products Overview
Cooling Products Overview 2019 Revenue by Product Parts & Service Cooling products used in non-residential, commercial 14% construction, process cooling and refrigeration applications 2019 Package Cooling Revenue Towers & Well-recognized product brands: Marley and Recold $284m Refrigeration 86%
Slide 15: Cooling Product Examples
Cooling Product Examples Marley NC Cooling Tower Recold Fluid Cooler High efficiency High performance design Low drift rates Low cost of ownership Quiet by design Long-life construction Strong Product Portfolio of Cooling Technologies with Opportunity for Expansion March 2020 15
Slide 16: Cooling - Key New Products
Cooling - Key New Products Marley MH Element Fluid Cooler Marley MD Everest Tower Marley LW Fluid Cooler Launched in Early 2020 for Industrial and Launched in Early 2019 for larger Launched in 2016 process cooling applications applications High efficiency, low height fluid High performance
Slide 17: Heating Products Overview
Heating Products Overview 2019 Revenue by Product North American businesses with strong brands Electrical Heating Products used in residential and non-residential 2019 Products markets and sold primarily through distributors 33% Boiler Revenue Systems $309m 67% Demand for boiler systems is sea
Slide 18: 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 Unique hybrid design Gas Combi boilers Wash-down, corrosion resistant heaters Tre
Slide 19: Heating – Key New Products
Heating – Key New Products SVF Commercial Stainless Steel Boiler Growth Oriented Initiatives - New Product Development: In 2019, we added four new sizes to our SVF boiler portfolio to accommodate larger commercial applications New launches have expanded addressable market coverage from 64% to 95
Slide 20: Detection & Measurement
SPX4 Detection & Measurement
Slide 21: Detection & Measurement Segment Overview
Detection & Measurement Segment Overview Adjusted revenue* 2019 Revenue by Product Adjusted segment income* % Fare Collection Technologies 15% $395-415 $385 2019 Location & Revenue Inspection $321 $385m Equipment Communication 50% $260 $226 23.0- Technologies 25.3% 23.7% 24.0% 35% 24.4% 20.0% 2019 R
Slide 22: Strategic Growth Initiatives
Strategic Growth Initiatives New Product Scale new GPS-enabled locator Development Grow fare-collection solutions platform Adjacent Build out geographic and vertical channels Markets Leverage global footprint to expand CUES sales Upgrade Aged bus fleet (fare collection) Installed Base Co
Slide 23: Location & Inspection Overview
Location & Inspection Overview 2019 Revenue by Product A leading global supplier of location & inspection Location equipment for underground infrastructure 2019 53% Revenue Inspection $194m 47% Continuous new product enhancement and loyal customer base 2019 Revenue by Geography Key demand driv
Slide 24: Location & Inspection – Key New Products
Location & Inspection – Key New Products Pipeline Mapper Cable Avoidance Inspection Equipment New Product Introduction Continues to Drive Performance March 2020 24
Slide 25: Communication Technologies Overview
Communication Technologies Overview 2019 Revenue by Product TCI : A leading global supplier of spectrum monitoring, Obstruction communication intelligence and geolocation technology Lighting 2019 SMS & 56% Revenue Comm. Int. Obstruction Lighting: A leading global supplier of Flash Technology $13
Slide 26: Communication Technologies Products
Communication Technologies Products SMS & Communications Flash Lighting Systems Marine Obstruction Lighting Intelligence Our Communication Technologies Solutions are Adapting to Serve Evolving and Complex Customer Needs March 2020 26
Slide 27: Transportation
Transportation Genfare is 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 “farebox supplier” to “fare collection system
Slide 28: Transportation Products: Next Generation Fare Collection
Transportation Products: Next Generation Fare Collection Mobile Legacy Farebox Fast Fare Farebox Fast Fare-e Ticketing Point-of-Sale e-Fare Cloud-Based Infrastructure Software Service and as a Service Support Fare Collection Suite of Products Integrated with Back-End Support; We Believe This is The
Slide 29: Engineered Solutions
SPX4 Engineered Solutions
Slide 30: Engineered Solutions Segment Overview
Engineered Solutions Segment Overview Engineered Solutions revenue 2019 Revenue by Product Segment income % Process Cooling (Project Selectivity 26% $653 and Exit of Heat 2019 Transfer/South Revenue $561 African Ops.) $549m Transformers $537 $549 $550-560 74% 7.8% ~8.5% 7.9% 6.5% 4.9% 2019 Revenue b
Slide 31: Strategic Growth Initiatives
Strategic Growth Initiatives New Product Broaden Process Cooling component offerings Development Expand Transformers Service and Components offerings Evolve Business Expand service and components Model More selective on process cooling projects Expand Market Large voltage/EHV transformers
Slide 32: Transformers Overview
Transformers Overview Transformer Business 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 Large industrial sites Two primary manufacturing locations: Waukes
Slide 33: Transformers Overview - North American Market
Transformers Overview - North American Market Demand largely driven by replacement of aging installed base: Average age of installed base is ~40 years Electricity demand has been flat over the past decade, however new T&D construction continues driving demand for power transformers: Utility-
Slide 34: Transformer Product and Service Examples
Transformer Product and Service Examples Transformer Service Large Power (High Voltage) Transformer March 2020 34
Slide 35: Process Cooling Overview
Process Cooling Overview 2019 Revenue by Product Other Based in the U.S., a leading global manufacturer of cooling 27% towers and parts & components 2019 Cooling Revenue $145m Towers Continuous new product enhancements and exceptional 73% quality equipment for more than a century Large install
Slide 36: Process Cooling – Key New Products
Process Cooling – Key New Products Gear Reducer Air Flow Components Heat Transfer Media Aftermarket Service and Components is Focus Area of New Product Initiatives March 2020 36
Slide 37: Financial Performance & Capital Allocation
Financial Performance & Capital Allocation
Slide 38: Capital Allocation Discipline
Capital Allocation Discipline Methodology Expected Outcome 1) Utilize strategic planning process to evaluate Quantify projected future cash flows and future revenue and earnings growth estimate total company valuation 2) Maintain target capital structure Net Debt to EBITDA(1) target range: 1.5x
Slide 39: Capital Structure
Capital Structure Leverage Ratios* ($millions) Q4 2018 Q4 2019 Short-term debt $31.9 $142.6 Current maturities of long-term debt 18.0 1.0 1.5-2.5x Long-term debt 331.9 249.9 1.9x 1.9x 1.7x 1.6x Total Debt $381.8 $393.5 Less: Cash on hand (68.8) (54.7) Net Debt $313.0 $338.8 Q4 2018 Q4 2019 LT Target
Slide 40: Cash Flow & Liquidity
Cash Flow & Liquidity Targeting 100-110% Free Cash Flow ($ in millions) Conversion of adjusted net income* Term Loan Repayment Schedule Substantial capital available after $219 addressing bank debt and South African Project obligations Projecting ~$400m of capacity for capital allocation in 20
Slide 41: SPX Acquisition Approach
SPX Acquisition Approach Qualitative Quantitative Focused on building existing platforms Revenue transaction size $20-$200 million Existing markets or close adjacencies (primary focus); opportunistically consider larger targets Engineered products Cash ROIC ≥ double digits 3-5 yrs Attrac
Slide 42: Detection & Measurement Inorganic Investments
Detection & Measurement Inorganic Investments Global Leader in Inspection Equipment Radiodetection CUES Market Leading Inspection Equipment Inspection Equipment Strengthens Global Leadership in Engineered Specialty Lighting Flash Technology Obstruction Sabik Market Leading Lighting Equipment Marine
Slide 43: HVAC Inorganic Investments
HVAC Inorganic Investments Strengthens Industrial Refrigeration Solutions Accelerates Growth Strategy in Commercial High Efficiency Boilers March 2020 43
Slide 44: Schonstedt Overview
Schonstedt Overview Company Profile 2017 Sales: $9M XTpc Pipe and Cable Locator Purchase multiple*: <7x post-synergies Description: Manufacturer of magnetic locator products used for locating underground utilities and other buried objects. Acquisition Rationale: Strengthens Detection & Measurement
Slide 45: CUES Overview
CUES Overview Company Profile CUES Digital Universal Camera 2017 Sales: ~$86M Purchase multiple*: <10x post-synergies Mobile Inspection Units Description: Leading manufacturer of inspection and rehabilitation equipment. Acquisition Rationale: CUES SPiDER Scanner Strengthens Detection & Measurement
Slide 46: Sabik Overview
Sabik Overview Company Profile 2019 Sales: ~$27M Purchase multiple*: <10x post-synergies Description: Leading manufacturer of marine and obstruction lighting Acquisition Rationale: Complementary fit with our Flash Technology business Strengthens aids-to-navigation specialty lighting solutions
Slide 47: SGS Refrigeration Overview
SGS Refrigeration Overview Company Profile Headquarters: Dixon, Illinois 2019 Sales: ~$12M (net of intercompany sales) Evaporative Condensers Description: Manufacturer and distributor of industrial DTC Condenser and commercial refrigeration equipment and products Purchase multiple*: <7x post-synergi
Slide 48: Patterson Kelley Overview
Patterson Kelley Overview Company Profile Headquarters: East Stroudsburg, PA 2019 Sales: ~$35M High Efficiency Commercial Condensing Boiler Description: Trusted leader in commercial high efficiency heating solutions Purchase multiple*: ~8x post-synergies Acquisition Rationale: Highly complementary
Slide 49: 2016-2020E Adjusted Profit Measures
2016-2020E Adjusted Profit Measures ADJUSTED SEGMENT INCOME ($M) ADJUSTED EPS ADJUSTED EBITDA ($M) 250 20% 4 200 $198 ~$231 $2.98 $171 $207 $2.76 $139 13% 13% 15% 200 $182 3 $2.27 150 $126 12% $157 10% $1.74 9% 10% 2 $1.47 100 100 1 50 5% 0 0 0 0% 2016* 2017* 2018* 2019* 2020E 2016* 2017* 2018* 2019
Slide 50: 2020 Guidance
SPX4 2020 Guidance
Slide 51: 2020 Guidance
2020 Guidance: Adjusted Revenue Adjusted Segment Income Margin* HVAC $630-640m (+7% vs 2019 at midpoint) 16-16.5% Detection & $395-415m (+5% vs 2019 at midpoint) 23-24% Measurement Engineered $550-560m (+1% vs 2019 at midpoint) ~8.5% Solutions Total SPX Adjusted ~$1.6 Billion 15-16%
Slide 52: Appendix
SPX4 Appendix
Slide 53: 2020 Adjusted EPS Guidance - Key Drivers
2020 Adjusted EPS Guidance - Key Drivers • Favorable Economic Policy/Infrastructure Stimulus $3.05 • Stronger-Than-Normal Seasonal Heating Demand • Commercial Construction Remains Stable • Significant Commodity Deflation • Accelerated Project-Related Sales $2.98 Base Case • Weaker-Than Normal Season
Slide 54: 2020 Modeling Considerations
2020 Modeling Considerations Metric Commentary/Assumptions Corporate costs Mid $40Ms Long-term incentive comp $14-15M Restructuring costs $1M Interest cost $16-18M Equity earnings, other $3-5M Tax rate Approximately 20-22% Capex $18-20M Cash cost of pension + OPEB Approximately $18M D&A Approximatel
Slide 55: South African Projects Overview
South African Projects Overview Two mega-projects sites: Twelve 800 mega-watt coal-fired plants (six at each project site) ~$1.3B total project value Eskom is a state-owned South African utility Construction substantially complete GE/Alstom and Mitsubishi Hitachi are our customers Boiler
Slide 56: FY 2016 Engineered Solutions Adjusted Revenue Reconciliation
FY 2016 Engineered Solutions Adjusted Revenue, Adjusted Gross Profit and Adjusted Segment Income to U.S. GAAP Reconciliation ($ millions) FY 2016 Engineered Solutions and "All Other"* revenue $ 736.4 Exclude: South African projects 83.3 Engineered Solutions adjusted revenue $ 653.1 Engineered Soluti
Slide 57: Adjusted Segment EBITDA to U.S. GAAP Reconciliation
FY 2019, FY 2018, FY 2017 and FY 2016 Adjusted Segment EBITDA to U.S. GAAP Reconciliation ($ millions) HVAC Segment FY 2019 FY 2018 FY 2017 FY 2016 Segment income $ 95.4 $ 90.0 $ 74.1 $ 80.2 Exclude: Depreciation & amortization (6.9) (5.4) (5.5) (5.3) HVAC Segment EBITDA $ 102.3 $ 95.4 $ 79.6 $ 85.5
Slide 58: FY 2019 Adjusted Earnings Per Share Reconciliation
FY 2019 Adjusted Earnings Per Share to U.S. GAAP Reconciliation GAAP Adjustments Adjusted Segment income (1) $ 174.0 $ 57.0 $ 231.0 Corporate expense (2) (46.7) 2.6 (44.1) ($ millions) Long-term incentive compensation expense (13.6) - (13.6) (3) Special charges, net (4.0) 3.0 (1.0) (4) Other operati
Slide 59: FY 2018 Adjusted Earnings Per Share Reconciliation
FY 2018 Adjusted Earnings Per Share to U.S. GAAP Reconciliation GAAP Adjustments Adjusted ($ millions) (1) Segment income $ 178.5 $ 28.1 $ 206.6 (2) Corporate expense (48.5) 4.9 (43.6) Long-term incentive compensation expense (15.5) - (15.5) (3) Special charges, net (6.3) 5.0 (1.3) Loss on sale of d
Slide 60: FY 2017 Adjusted Earnings Per Share Reconciliation
FY 2017 Adjusted Earnings Per Share to U.S. GAAP Reconciliation GAAP Adjustments Adjusted (1) Segment income $ 124.9 $ 57.4 $ 182.3 ($ millions) Corporate expense (46.2) (0.9) (47.1) Long-term incentive compensation expense (15.8) — (15.8) Pension service cost (0.3) — (0.3) Special charges, net (2)
Slide 61: FY 2016 Adjusted Earnings Per Share Reconciliation
FY 2016 Adjusted Earnings Per Share to U.S. GAAP Reconciliation GAAP Adjustme nts Adjuste d Segment income (1) $ 142.8 $ 14.5 $ 157.3 Corporate expense (41.7) — (41.7) ($ millions) Pension and postretirement income (expense) (2) (15.4) 16.0 0.6 Long-term incentive compensation expense (13.7) — (13.7
Slide 62: FY 2019 and FY 2018 Adjusted Revenue and Segment Income Reconciliation
FY 2019 and FY 2018 Adjusted Revenue and Adjusted Segment Income to U.S. GAAP Reconciliation CONSOLIDATED SPX: Twelve months ended December 31, 2019 December 31, 2018 ($ millions) Consolidated revenue $ 1,525.4 $ 1,538.6 Exclude: "All Other" operating segments(1) (1.6) 98.6 Acquisition accounting ad
Slide 63: Adjusted Revenue and Consolidated EBITDA Reconciliation
FY 2019, FY 2018, FY2017, and FY 2016 Adjusted Revenue and Consolidated EBITDA to U.S. GAAP Reconciliation ($ millions) ` FY 2019 FY 2018 FY 2017 FY 2016 GAAP Revenue $ 1,525.4 $ 1,538.6 $ 1,425.8 $ 1,472.3 Exclude: "All Other" operating segment (1) (1.6) 98.6 93.8 - Exclude: South African projects