Slide 1: Q4 2019 Earnings Presentation
Q4 2019 Earnings Presentation February 13, 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: Introductory Comments
Introductory Comments Gene Lowe
Slide 4: Performance Highlights Full-Year 2019
Performance Highlights Full-Year 2019 Adjusted EPS* of $2.76 for FY 2019, a 22% increase vs FY 2018 Increased adjusted operating income $26m with improvement in all three segments Expanded adjusted operating margin by 120 basis points Solid financial condition provides substantial capital fo
Slide 5: Adjusted Q4 and FY 2019 Year-Over-Year Summary
Adjusted Q4 and FY 2019 Year-Over-Year Summary ($ millions) Q4 Full-Year Q4 2019 adjusted operating income $1,527 growth of 4% Adjusted Revenue Adjusted Operating Income Margin Adjusted Q4 operating income $1,441 increase driven by Engineered $445 Solutions and HVAC segments $429 11.3% 10.1% F
Slide 6: 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 • Leadership development • Significant capital to deplo
Slide 7: 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 8: Q4 Financial Review
Q4 Financial Review Scott Sproule
Slide 9: Adjusted Earnings Per Share
Adjusted Earnings Per Share Q4 2019 Q4 2018 FY 2019 FY 2018 GAAP EPS from continuing operations $0.75 $0.88 $1.67 $1.75 South Africa and Heat Transfer $0.00 ($0.03) $0.80 $0.26 Acquisition-related $0.01 $0.07 $0.09 $0.22 Non-service pension & other* $0.15 ($0.03) $0.05 ($0.03) Amortization $0.05 $0.
Slide 10: Adjusted Q4 and FY 2019 Year-Over-Year Results
Adjusted Q4 and FY 2019 Year-Over-Year Results ($ millions) Q4 Adjusted Revenue: Q4 Full-Year Adjusted Revenue 3.8% year-over-year increase: Adjusted Segment Income Margin $1,527 3.7% acquisition impact $1,441 Q4 Adjusted Segment Income and Margin: $429 $445 $4m increase in adjusted segment 15
Slide 11: HVAC Q4 and FY 2019 Year-over-Year Results
HVAC Q4 and FY 2019 Year-over-Year Results ($ millions) Q4 Revenue: Q4 Full-Year Revenue 6.1% year-over-year increase: Adjusted Segment Income Margin* $582 $593 4.1% increase from acquisitions 2.1% organic increase* driven by increased $194 cooling product sales $183 Modest unfavorable curre
Slide 12: Detection & Measurement Q4 and FY 2019 Year-Over-Year Results
Detection & Measurement Q4 and FY 2019 Year-Over-Year Results ($ millions) Q4 Adjusted Revenue: Q4 Full-Year Adjusted Revenue* $385 3.7% year-over-year increase: Adjusted Segment Income Margin* 8.7% increase from acquisitions $321 (5.0%) organic decrease* primarily due to project timing in Com
Slide 13: Engineered Solutions Q4 and FY 2019 Year-Over-Year Results
Engineered Solutions Q4 and FY 2019 Year-Over-Year Results ($ millions) Q4 Full-Year Q4 Revenue: $537 $549 1.1% year-over-year increase: Revenue Segment Income Margin Driven by higher Transformer revenues Q4 Segment Income and Margin: $151 $149 $4.8m increase in segment income 7.8% 6.5% 310
Slide 14: Financial Position and Liquidity Review
Financial Position and Liquidity Review Scott Sproule
Slide 15: Financial Position - Capital Structure & Liquidity Update
Financial Position - Capital Structure & Liquidity Update Leverage Ratios* ($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
Slide 16: New Credit Agreement Summary
New Credit Agreement Summary Key Terms $800m facility ($850m prior) ($ in millions) $450m revolver ($350m prior) Term Loan Repayment Schedule $250m term-loan ($350m prior) $219 $100m bond facility ($150m prior) Increased flexibility: Moved $100m of capacity from term loan to revolver I
Slide 17: 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 18: End Market Overview and Closing Remarks
End Market Overview and Closing Remarks Gene Lowe
Slide 19: Market Commentary
Market Commentary Market Comments Cooling: Overall demand “flattish” with regional variances HVAC Heating: Improved position in higher growth commercial high efficiency Detection & Healthy frontlog – continue to monitor project timing Measurement Run-rate markets stable overall; some moderat
Slide 20: Executive Summary
Executive Summary Successfully executing on value creation initiatives Substantial available liquidity and strong balance sheet Robust pipeline of strategic acquisition targets Well-positioned for continued strong growth in earnings and cash flow February 13, 2020 20
Slide 21: Questions
SPX4 Questions
Slide 22: 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 $2.98 Base Case • Weaker-Than Normal Season
Slide 23: Adjusted Segment Income Phasing and Reconciliations
Adjusted Segment Income Phasing and Reconciliations ($ millions) Q1 2019 Q2 2019 Q3 2019 Q4 2019 GAAP 20.8 41.4 42.9 68.9 37% Exclude: "All other" (22.6) (10.0) (5.7) (7.4) 34% Exclude: One time acquisition (1.3) (0.9) - (0.2) related costs Exclude: Intangible amortization (1.6) (2.4) (2.0) (2.9) 23
Slide 24: 2020 Modeling Considerations
2020 Modeling Considerations Metric Commentary/Assumptions Corporate costs Mid $40Ms Long-term incentive comp $14-15M Restructuring costs $1-2M Interest cost $16-18M Equity earnings, other $3-5M Tax rate 20-22% Capex $18-20M Cash cost of pension + OPEB $14-15M D&A Approximately $36-38M, mostly in CO
Slide 25: Q4 2019 U.S. GAAP to Adjusted EPS Reconciliation
Q4 2019 U.S. GAAP to Adjusted EPS Reconciliation GAAP Adjustments Adjusted ($ millions) (1) Segment income $ 68.9 $ 10.5 $ 79.4 Corporate expense (2) (13.8) 0.6 (13.2) Long-term incentive compensation expense (3.5) - (3.5) (3) Special charges, net (0.6) 0.5 (0.1) Operating income 51.0 11.6 62.6 (4)
Slide 26: Q4 2018 U.S. GAAP to Adjusted EPS Reconciliation
Q4 2018 U.S. GAAP to Adjusted EPS Reconciliation ($ millions) GAAP Adjustments Adjusted (1) Segment income $ 70.9 $ 4.6 $ 75.5 Corporate expense (2) (13.7) 2.4 (11.3) Long-term incentive compensation expense (3.1) - (3.1) Special charges, net (3) (1.7) 1.0 (0.7) Loss on sale of dry cooling (0.2) 0.2
Slide 27: FY 2019 U.S. GAAP to Adjusted EPS Reconciliation
FY 2019 U.S. GAAP to Adjusted EPS Reconciliation ($ millions) GAAP Adjustments Adjusted (1) Segment income $ 174.0 $ 57.0 $ 231.0 (2) Corporate expense (46.7) 2.6 (44.1) Long-term incentive compensation expense (13.6) - (13.6) (3) Special charges, net (4.0) 3.0 (1.0) (4) Other operating expenses (1.
Slide 28: FY 2018 U.S. GAAP to Adjusted EPS Reconciliation
FY 2018 U.S. GAAP to Adjusted EPS Reconciliation ($ millions) GAAP Adjustments Adjusted (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 dry cooling (0.6
Slide 29: Q4 and FY 2019 and 2018 U.S. GAAP to Adjusted Operating Income Reconciliation
Q4 and FY 2019 and 2018 U.S. GAAP to Adjusted Operating Income Reconciliation ($ millions) Three months ended Twelve months ended December 31, 2019 December 31, 2018 December 31, 2019 December 31, 2018 Operating income $ 51.0 $ 52.2 $ 107.9 $ 107.6 Exclude: (1) Aggregate operating losses of the Sout
Slide 30: Q4 and FY 2019 Non-GAAP Reconciliation - Organic Revenue
Q4 and FY 2019 Non-GAAP Reconciliation - Organic Revenue ($ millions) Three months ended December 31, 2019 Detection & Engineered HVAC Measurement Solutions Adjusted SPX Net Revenue Growth 6.1 % 3.7 % 1.1 % 3.8 % Exclude: Foreign Currency (0.1) % - % - % - % Exclude: Acquisitions 4.1 % 8.7 % - % 3.7
Slide 31: U.S. GAAP to Adjusted Revenue and Adjusted Segment Income Reconciliation
Q4 and FY 2019 and 2018 U.S. GAAP to Adjusted Revenue and Adjusted Segment Income Reconciliation ($ millions) CONSOLIDATED SPX: Three months ended Twelve months ended December 31, 2019 December 31, 2018 December 31, 2019 December 31, 2018 Consolidated revenue $ 444.6 $ 445.0 $ 1,525.4 $ 1,538.6 Excl
Slide 32: U.S. GAAP to Adjusted Segment Income Reconciliations
Q4 and FY 2019 and 2018 U.S. GAAP to Adjusted Segment Income Reconciliations ($ millions) HVAC REPORTABLE SEGMENT: Three months ended Twelve months ended December 31, 2019 December 31, 2018 December 31, 2019 December 31, 2018 HVAC segment income $ 38.1 $ 37.3 $ 95.4 $ 90.0 Exclude: One time acquisit
Slide 33: Q4 2019 Debt Reconciliation
Q4 2019 Debt Reconciliation ($ millions) Q4 2019 Short-term debt $ 142.6 Current maturities of long-term debt 1.0 Long-term debt (1) 251.7 Gross debt 395.3 Less: Purchase card program and extended payables (2.6) Adjusted gross debt 392.7 Less: Cash and equivalents (54.7) Adjusted net debt $ 338.0 1)
Slide 34: Q4 2019 Consolidated Adjusted EBITDA Reconciliation
Q4 2019 Consolidated Adjusted EBITDA* Reconciliation ($ millions) FY 2019 Net income attributable to SPX Corporation common shareholders $ 65.3 Income tax provision 13.5 Interest expense 21.0 Income before interest and taxes 99.8 Depreciation and amortization 34.5 EBITDA 134.3 Adjustments: Non-cash
Slide 35: Q4 and FY 2019 Adjusted Free Cash Flow Reconciliation
Q4 and FY 2019 Adjusted Free Cash Flow Reconciliation ($ millions) FY 2019 Operating cash flow from continuing operations $ 152.9 Capital expenditures - continuing operations (17.8) Free cash flow from continuing operations 135.1 Adjustments* 5.4 Adjusted free cash flow $ 140.5 * Adjustments align w