Slide 1: Q4 2015 Earnings Presentation
Q4 2015 Earnings Presentation February 25, 2016
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,
Slide 3: Introductory Comments
Introductory Comments Gene Lowe February 25, 2016
Slide 4: Quarter Highlights
Quarter Highlights Performance and Accomplishments Solid performance in HVAC, Detection & Measurement segments and Transformers business Strong pro forma Core free cash flow* generation of more than $85 million Power Generation headwinds continue; continued focus on cost reductions and evaluat
Slide 5: Core Results - Q4 2015
Core Results - Q4 2015 Year-over-Year Analysis ($ millions) Core revenue declined due primarily to power Revenue generation market headwinds (-$49m) and a Adjusted Operating Income Margin stronger US Dollar (-$16m) $559 $486 Solid HVAC operating performance despite seasonally warm heating season
Slide 6: Value Creation in Core Businesses
Value Creation in Core Businesses 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 expan
Slide 7: 2015 Value Creation Key Accomplishments
2015 Value Creation Key Accomplishments Launch of new evaporative New Genfare Link fare collection South African Projects: GE condenser product (industrial system installed in key reference agreement amendment refrigeration) market completed in Q4 2015 Launch of new high-efficiency Launch
Slide 8: South African Projects Update – Q4 2015
South African Projects Update – Q4 2015 GE (Alstom) Agreement Amendment De-scoped our construction activities on the Air Cooled Condensers (ACCs) ‒ De-scoped for the final three units (six total) of the Kusile site ‒ Medupi site not part of our project scope for ACCs Structurally reduces risk pr
Slide 9: Sale of Global Dry Cooling Business
Sale of Global Dry Cooling Business Agreement to sell Dry Cooling business to Paharpur Cooling Towers Limited (a leading cooling solution provider with global operations, headquartered in India) Expected to be finalized in 1H 2016 Purchase price is ~$48m – subject to adjustments for working ca
Slide 10: Q4 Financial Review
Q4 Financial Review Scott Sproule February 25, 2016
Slide 11: Earnings Per Share
Earnings Per Share Q4 2015 Adjusted EPS GAAP EPS ($0.11) First full quarter following spin-off of SPX FLOW Goodwill Impairment 0.32 Adjusted results exclude certain non-cash Non-Service Pension Items 0.17 charges related to: South African Projects 0.10 – Goodwill impairment in power generation –
Slide 12: Core Results Q4 2015 and Full-Year 2015
Core Results Q4 2015 and Full-Year 2015 Year-over-Year Analysis ($ millions) Q4 Revenue: Q4 Full Year (13.0%) year-over-year decline: Revenue Revenue (2.9%) currency impact Segment Income Margin Segment Income Margin (10.1%) organic decline due primarily to lower power generation sales in Euro
Slide 13: HVAC 2015 Results
HVAC 2015 Results Year-over-Year Analysis ($ millions) Q4 Revenue: Q4 Full Year (8.1%) year-over-year decline: Revenue Revenue Segment Income Margin Segment Income Margin (0.5%) currency impact (7.6%) organic decline driven by the $175 $536 negative impact of warm weather on the $529 Heating b
Slide 14: Detection & Measurement 2015 Results
Detection & Measurement 2015 Results Year-over-Year Analysis ($ millions) Q4 Revenue: Q4 Full Year +4.1% year-over-year growth: Revenue Revenue (1.9%) currency impact Segment Income Margin Segment Income Margin +6.0% organic growth driven by timing of $244 Communications Technology product sal
Slide 15: Base Power 2015 Results
Base Power* 2015 Results Year-over-Year Analysis ($ millions) Q4 Revenue: Q4 Full Year (19.0%) year-over-year decline: Revenue Revenue (4.3%) currency impact Segment Income Margin Segment Income Margin (14.7%) organic decline due primarily to $320 lower sales of power generation $1,097 equipme
Slide 16: South African Projects Q4 Update
South African Projects Q4 Update ($ millions) $23 million in revenues and $6 million Segment Revenue loss at project level (recorded in Loss Consolidated Segment Income) Q4 2014* $(3) ($28) Settlement with GE/Alstom achieved during Q4; financial impact in-line with Q4 2015 $23 ($6) Q3 charge N
Slide 17: Financial Position and Capital Allocation
Financial Position and Capital Allocation Scott Sproule February 25, 2016
Slide 18: Financial Position
Financial Position Capital Structure Update ($ millions) Q4'15 Term Debt Cash Other ST Debt Short-term debt $ 24 $58 Current maturities of long-term debt 9 $24 Long-term debt 341 Gross Debt $ 374 $350 $350 Less: Cash on hand (101) $83 $101 Net Debt $ 273 Q3'15 Q4'15 Q4 is Typically Our Strongest Cas
Slide 19: Financial Position
Financial Position Capital Structure Update ($ in millions) Leverage Ratios Term Debt Repayment Schedule 2.9x 300 2.8x 2.7x 250 200 2.5x 1.5-2.5x 150 $289 100 Q3'15 Q4'15 LT Target 50 $9 $18 $18 $18 0 Bank Net Leverage* Gross Leverage** 2016 2017 2018 2019 2020 *Calculated as defined by SPX’s credit
Slide 20: Capital Allocation
Capital Allocation Capital Allocation Strategy Incremental Liquidity of $200m by YE 2018 • Growth Investments in Core Businesses • Return of Capital to Shareholders • Reduction in Debt and Equivalents Evaluating Highest, Risk-Adjusted Return Opportunities February 25, 2016 20
Slide 21: Market Commentary & Outlook
Market Commentary & Outlook Gene Lowe February 25, 2016
Slide 22: Impact of Current Macro Trends
Impact of Current Macro Trends Trend Impact Commentary Low Demand ~2/3 replacement revenue across segments Modest Growth in U.S. HVAC and transformers lag changes in economic indices (e.g., Dodge Index) Little impact on HVAC and D&M; modest exposure on power generation Declining Low Potentia
Slide 23: HVAC Segment Overview
HVAC Segment Overview ($ millions) 2014 2015 3-Yr Target Revenue $536 $529 2-4% CAGR 2015 Segment Income % 13.0% 15.2% 15-16% Heating Cooling Revenue 54% 46% $529 2016 Outlook Considerations EMEA and APAC market environments APAC Timing of start of Q4’15 winter heating EMEA 8% season 5% New Buil
Slide 24: Detection & Measurement Segment Overview
Detection & Measurement Segment Overview Fare Collection Locators & Inspection Technologies ($ millions) 2014 2015 3-Yr Target Equipment 17% 45% Revenue $244 $232 2-6% CAGR 2015 Segment Income % 22.6% 19.8% 22-24% Revenue Communications $232 Technology 38% 2016 Outlook Considerations U.S. federal
Slide 25: Base Power Segment Overview
Base Power* Segment Overview Power Generation Transformers ($ millions) 2014 2015 3-Yr Target 60% 40% Revenue $1,097 $931 (3%)-0% CAGR 2015 Segment Income % 3.5% 1.1% 4-5% Revenue $931 2016 Outlook Considerations Transformer pricing and lead times Impact of transformers’ operational initiatives
Slide 26: 2016 Guidance – Core
2016 Guidance – Core* Revenue Segment Income Margin Towards the lower-end of LT annual Flat (favorable margin project in HVAC growth targets of 2-4% 3Q’15 affects comparisons) At least 100 bps increase driven by Detection & In-line with LT annual growth targets of commercial efforts in fare
Slide 27: Executive Summary
Executive Summary Gene Lowe February 25, 2016
Slide 28: Executive Summary
Executive Summary 2015 Recap: Solid margin improvement in HVAC and transformers 2016 Outlook: Continued execution of operational initiatives to drive margin growth Value Creation: Scale growth platforms and reduce exposure to lower return markets Strategic Review: Actively reviewing strategi
Slide 29: Questions
Questions February 25, 2016
Slide 30: Appendix
Appendix February 25, 2016
Slide 31: 2016 Modeling Considerations
2016 Modeling Considerations Metric Commentary/Assumptions Corporate costs ~$40M Non-cash stock comp $13-15M Restructuring costs ~$5M Interest cost $13-14M Tax rate 35-40%, jurisdictionally sensitive Capex $18-20M Cash cost of pension + OPEB ~$16M ongoing cash cost D&A $30-32M, mostly in COGS Share
Slide 32: Core Revenue & Segment Income Reconciliation
Core Revenue & Segment Income Reconciliation $ in millions Q4 2015 Q4 2014 GAAP SA Projects Core GAAP SA Projects Core Revenue HVAC 160.4 160.4 174.6 174.6 D&M 66.3 66.3 63.7 63.7 Power 282.8 (23.3) 259.5 317.3 3.1 320.4 Total SPX $509.5 ($23.3) $486.2 $555.6 $3.1 $558.7 Segment Income HVAC 30.8 30.
Slide 33: Core Segment Income Phasing
Core Segment Income Phasing $ in millions Q1 2014 Q2 2014 Q3 2014 Q4 2014 GAAP 25.6 30.5 38.0 35.5 Less: South (0.4) 6.3 0.3 27.7 39% African Projects 37% Core $25.2 $36.8 $38.3 $63.2 % of total 15% 23% 23% 39% 24% 23% 25% 23% 15% Q1 2015 Q2 2015 Q3 2015 Q4 2015 14% GAAP 10.3 24.9 (64.7) 45.2 Less:
Slide 34: Core Operating Income Reconciliation
Core Operating Income Reconciliation $ in millions Q 4 2015 Q 4 2014 Full Year 2015 Full Year 2014 Operating Loss $ (3.1) $ (117.0) $ (170.0) $ (179.5) Exclude: South African projects 5.6 27.7 120.5 33.8 Certain corporate expenses (1) 4.0 24.8 80.2 110.0 Spin-related costs (2) 1.2 - 3.5 - Asset impa
Slide 35: Q4 2015 Organic Revenue Reconciliation
Q4 2015 Organic Revenue Reconciliation Detection & HVAC Measurement Power Consolidated Net Revenue Growth (Decline) (8.1) % 4.1 % (10.9) % (8.3) % Exclude: South African projects % - % (8.1) % (4.7) % Core Revenue Growth (Decline) (8.1) % 4.1 % (19.0) % (13.0) % Foreign Currency (0.5) % (1.9) % (4.3
Slide 36: Debt Reconciliation
Debt Reconciliation $ in millions September 26, 2015 December 31, 2015 Short-term debt $ 56.3 $ 22.1 Current maturities of long-term debt 4.8 9.1 Long-term debt 347.0 342.6 Gross Debt 408.1 373.8 Less: Purchase card program and extended payables (5.6) (4.8) Adjusted Gross Debt 402.5 369.0 Less: Cash
Slide 37: Consolidated EBITDA Reconciliation
Consolidated EBITDA Reconciliation $ in millions 1H 2015* Q 3 2015 Q 4 2015 LTM Net loss attributable to SPX Corporation common shareholders $ (105.0) $ (9.5) Income tax provision (benefit) 5.5 (3.2) Net interest expense 6.3 3.5 Income before interest and taxes (93.2) (9.2) Depreciation and amortiza
Slide 38: Free Cash Flow
Free Cash Flow $ in millions Q4 2015 Net cash from continuing operations $71.0 Capital expenditures ($5.1) Free cash flow from continuing operations $65.9 Plus: Cash used for South African projects $16.1 Spin-related cashflows $3.4 Core adjusted free cash flow $85.4 February 25, 2016 38