Slide 1: 2013 Fourth Quarter Results & 2014 Financial Guidance
2013 Fourth Quarter Results & 2014 Financial Guidance February 12, 2014
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, u
Slide 3: Q4 Financial Overview
Q4 Financial Overview Earnings per share from continuing operations of $1.85 Segment operating income margin improved 70 points year-over-year to 12.9%: Flow segment operating margin increased 180 points to 14.3% Industrial segment operating margin increased 200 points to 15.0% $236m of free cash fl
Slide 4: Flow End Market Trends
Flow End Market Trends Food & Beverage Power & Energy Industrial Flow Q4 2013 was a record order Oil & Gas Q4 orders increased sequentially quarter for food & beverage Demand for pipeline valves and year-over-year: continued to be strong Highlighted by ~$10m Components Aftermarket order activity mix
Slide 5: Power-Related End Market Trends
Power-Related End Market Trends Power Transformers (U.S.) No significant changes in market trends during 2013 Replacement demand for power transformers remained strong Market pricing remained competitive, with market lead times for medium power units stable Power Generation Modestly improved market
Slide 6: Year-End Backlog Analysis
Year-End Backlog Analysis Q4 Ending Backlog: 2012 vs. 2013 ($ millions) Flow segment backlog increased 2%: Flow Thermal Industrial Driven largely by food & beverage backlog ClydeUnion distressed backlog substantially $1,359 $1,387 completed (~$40m in ending 2012 backlog) South Africa Rest of World T
Slide 7: Recent Strategic Actions
Recent Strategic Actions Divestitures: Completed sale of joint venture interest in EGS to Emerson Electric for $574m in gross proceeds (~$340m net proceeds) Sale processes are progressing on discontinued industrial assets U.S. Qualified Pension Plan actions: Agreed to transfer monthly plan payment o
Slide 8: Restructuring Actions
Restructuring Actions ($ millions) 2013 Analysis: Restructuring Expense Restructuring actions concentrated in Flow and Thermal segments Total headcount reduction of ~700 $32 ~$25 2014 Target: ~$25m of restructuring expense Q1 action in Europe to further reduce ClydeUnion’s cost structure Evaluating
Slide 9: 2014 Financial Guidance
2014 Financial Guidance 2014 Guidance on a Continuing Operations Basis Revenue Segment Margin Growth Improvement Adjusted Earnings Per Share Flow segment +3% to +6% +100 points $5.00 to $5.50 Thermal segment (2%) to +2% +40 points Adjusted Free Cash Flow Industrial segment +6 to +10% +80 points $225
Slide 10: Financial Analysis
Financial Analysis Jeremy Smeltser
Slide 11: Q4 Earnings Per Share
Q4 Earnings Per Share Diluted EPS from Continuing Operations Notable Variances from Q4 Guidance Pension actions, net (1) $0.14 Reported Q4 2013 EPS: $1.85 Discrete tax benefits $0.09 Q4 2013 EPS Guidance: $1.73 to $1.88 Other expense (primarily currency losses) ($0.11) Miscellaneous trademark impair
Slide 12: Consolidated Q4 Results
Consolidated Q4 Results Revenue and Segment Income ($ millions) Revenue: Revenue Segment Income Margins (3.4%) year-over-year: (3.0%) organic decline $1,366 $1,319 (0.4%) currency impact 12.9% Segment Income: 12.2% Consolidated segment income of $171m, up 3% versus prior year 70 points of margin imp
Slide 13: Flow Technology Q4 Results
Flow Technology Q4 Results Q4 Year-Over-Year Analysis ($ millions) Revenue Revenue decreased $8m, or 1%: Revenue related to ClydeUnion’s distressed OE contracts Operating Margins declined $22m, excluding this decline, revenue increased 2%: $728 $720 Organic growth in oil & gas aftermarket and pipeli
Slide 14: Flow Technology Sequential Analysis
Flow Technology Sequential Analysis Sequential Revenue & Margins Sequential Backlog Change ($ millions) $720 ($ millions) $1,392 $1,387 $1,337 $1,318 $653 $652 Revenue $613 Backlog Operating 14.3% 6% 12.8% Sequential Margins Change 0% 10.3% 9.0% -2% -1% Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2013 Q2 201
Slide 15: Flow Technology Full Year Analysis
Flow Technology Full Year Analysis Full Year Analysis ($ millions) 2013 Analysis: Revenue 1.5% organic revenue decline: Operating Margins $65m decline in revenue related to +4% to ClydeUnion distressed OE contracts +6% +3% to +6% 110 points of margin expansion $2,682 $2,638 13% to +100 15% 2014 Expe
Slide 16: Thermal Equipment & Services Q4 Results
Thermal Equipment & Services Q4 Results Q4 Year-Over-Year Analysis ($ millions) Revenue decreased $82m, or 18%: Revenue (1.5%) currency impact Operating Margins (17%) organic decline: $447 Lower sales of power generation equipment Expected ramp down in power projects in South Africa $365 Expected de
Slide 17: Thermal Equipment & Services Sequential Analysis
Thermal Equipment & Services Sequential Analysis Sequential Revenue & Margins Sequential Backlog Change ($ millions) ($ millions) $365 $501 $507 $527 $350 $465 Revenue Rest of World $324 Backlog Operating $305 8.9% $252 Margins 7.5% 6.7% South Africa $192 $165 $149 0.6% Backlog Q1 2013 Q2 2013 Q3 20
Slide 18: Thermal Equipment & Services Full Year Analysis
Thermal Equipment & Services Full Year Analysis Full Year Analysis ($ millions) 2013 Analysis: Revenue (2%) currency impact on revenue Operating Margins (7%) organic revenue decline: Decrease in power generation equipment and service revenue in North America and Europe +3% to $1,491 (2%) to Expected
Slide 19: Industrial Products & Services Q4 Results
Industrial Products & Services Q4 Results Q4 Year-Over-Year Analysis ($ millions) Revenue Revenue increased $43m, or 23%: Operating Margins Organic growth in each business $234 >20% growth in power transformer sales $191 Segment Income increased $10m, or 42%: 15.0% 200 points of margin improvement d
Slide 20: Industrial Products & Services Sequential Analysis
Industrial Products & Services Sequential Analysis Sequential Revenue & Margins Sequential Backlog Change ($ millions) ($ millions) $234 $328 $296 $303 $285 Revenue Backlog $172 $158 $170 Operating Margins 15.0% 13.8% 14.5% 13.1% Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q4 rev
Slide 21: Industrial Products & Services Full Year Analysis
Industrial Products & Services Full Year Analysis Full Year Analysis ($ millions) 2013 Analysis: Revenue 12% organic revenue growth: Operating Margins Organic growth in each business +4% to +6% to Power transformer and fare collection system sales +6% +10% experienced the highest growth $735 190 poi
Slide 22: 2014 Financial Targets
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Slide 23: 2014 Adjusted EPS Mid-Point Model
2014 Adjusted EPS Mid-Point Model 2014 Adjusted EPS from Continuing Operations ($ millions, except per share data) Mid-Point Guidance Model 2014E Revenue $4,895 Segment income % 11.4% Corporate expense ($101) 2014 adjusted EPS from continuing Pension service costs ($9) operations guidance range: Sto
Slide 24: Quarterly Segment Income Profile
Quarterly Segment Income Profile % of Full Year Segment Income Per Quarter 2012 2013 2014E 35% 35% ~34% 26% 26% ~26% 22% 23% ~24% 16% 16% ~17% Q1 Q2 Q3 Q4 Segment Income Seasonally Stronger in Second Half of the Year February 12, 2014 24
Slide 25: Q1 Consolidated Financial Analysis
Q1 Consolidated Financial Analysis ($ millions, except per share data) Q1 2014 Q1 2013 comments Targets Expect low single digit growth across SPX, partially Revenue $1,091 (1%) to +2% offset by lower revenue from South Africa projects Segment Income $79 $90 to $95 Targeting 14% to 20% growth Segment
Slide 26: Capital Allocation
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Slide 27: Pension Review
Pension Review Key U.S. Qualified Pension Plan Actions: Pension & Post Retirement Healthcare Expense Made $250m voluntary contribution in Q2 2013 ($ millions) In Q4 2013, agreed to transfer monthly pension payment obligations to Mass Mutual Offering lump sum payment option to eligible former $39 emp
Slide 28: Debt Actions & New Debt Structure
Debt Actions & New Debt Structure ($ millions) $600 Redeemed $500m bonds at 7.625% in Q1 2014: $500 Expect to record ~$32m of charges related to the $488 early extinguishment of debt in Q1 2014 Refinanced senior credit facilities: Extended maturity to 2018 $29 $29 $29 Added $100m delayed draw term l
Slide 29: Share Repurchases
Share Repurchases Summary Share Repurchases 13.7 From 2005 through 2013… (in millions) 8.7 9.0 ..we repurchased ~44.5 million shares at an average price of $56 per share…for a total investment of ~$2.5b 4.5 to 5.0 3.4 3.6 3.5 2.6 Targeting an additional $500m of share repurchases in 2014 2005 2006 2
Slide 30: Annual Dividend
Annual Dividend Summary 2004 to 2013: Annual Dividend Per Share $1.00 per share annual dividend paid quarterly $1.50 2014 and beyond: $1.00 Increased annual dividend 50% to $1.50 per share : Increases current dividend yield to ~1.6% Increases cash committed to dividend payment to ~$65m annually or ~
Slide 31: Projected Liquidity
Projected Liquidity ($ millions) Amount Expected Timing Cash on Hand at December 31, 2013 $692 2014E Cash Outflows and Inflows Gross proceeds from sale of EGS joint venture $574 received January 7th Tax payments on gain from sale of EGS joint venture ($236) quarterly Net debt reduction ($300) Q1 201
Slide 32: Executive Summary
Executive Summary Chris Kearney
Slide 33: Capital Allocation
Capital Allocation 2013 Capital Allocation Summary 2014 Capital Allocation Commitments 1) Operational improvements and organic 1) Operational improvements and organic growth initiatives: growth initiatives: Capital expenditures: $55m Capital expenditures: ~$85m Restructuring actions: $29m Restructur
Slide 34: Capital Allocation 2005 thru 2014E
Capital Allocation 2005 thru 2014E Share Repurchases & Dividends Repurchased ~49m shares $3.5b Increased annual dividend 50% to $1.50/share Total Capital Allocated: ~$7b Acquisitions Invested 85% of acquisition capital $1.9b in Flow segment Divestiture proceeds: ~$5b Net Debt Reduction Target gross
Slide 35: 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 and Gross Debt to EBITDA(1) target range: 1.5
Slide 36: Strategic Transformation
Strategic Transformation 2004 Revenue Mix 2013 Revenue Mix Laboratory Auto Equipment Other 7% Flow 8% 7% Compaction Flow 56% Equipment 14% Industrial 9% 16% $5.7b $4.7b Security 10% Infrastructure Vehicle Service 24% 15% Niche Industrial 6% Thermal 28% Exited businesses Significant Transformation Si
Slide 37: Segment Income Development
Segment Income Development Segment Income Earnings Impact $800 ($ millions) Since 2008, growth and investment in $600 Flow segment, combined with capital allocation actions have largely offset… $400 ~25% (1) ~63% (1) … the earnings declines at our Thermal $200 Peak of and Industrial segments related
Slide 38: Revenue Profile
Revenue Profile 2013 Revenue by End Market 2013 Revenue by Geography Food & Beverage 20% T&D 45% 23% 8% Oil & Gas 17% Industrial Flow $4.7b 18% Processes Power 17% Generation 19% 3% 11% HVAC Other 9% 10% SPX is a Leading Global Supplier of Engineered Products and Solutions In the Global Power & Ener
Slide 39: Executive Summary
Executive Summary Key Investor Messages 1) Committed to further improvement in operating performance:: Focused on achieving 2014 and long-term margin targets >100% conversion of net income to free cash flow 2) Committed to a leaner cost structure 3) Focused on profitable growth initiatives: Focus on
Slide 40: Questions?
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Slide 41: Appendix
SF-><. Appendix
Slide 42: Free Cash Flow
Free Cash Flow Reconciliation to GAAP Cash Flow Statement ($ millions) Q4 2013 Full Year 2013 2014E Net cash from continuing operations $249 $99 $74 to $124 Tax payment from gain on sale of assets $115 $236 $236 Voluntary pension contribution, net of ~$90m tax benefit $160 Capital expenditures ($12)
Slide 43: Q4 2013 Organic Revenue Growth Reconciliation
Q4 2013 Organic Revenue Growth Reconciliation Q4 2013 Organic Growth Reconciliation Three Months Ended December 31, 2013 Net Revenue Acquisitions/ Change Divestitures Currency Organic Flow Technology -1.1% 0.0% 0.1% -1.2% Thermal Equipment & Services -18.4% 0.0% -1.5% -16.9% Industrial Products & Se
Slide 44: Full Year 2013 Organic Revenue Growth Reconciliation
Full Year 2013 Organic Revenue Growth Reconciliation Full Year 2013 Organic Growth Reconciliation Twelve Months Ended December 31, 2013 Net Revenue Acquisitions/ Change Divestitures Currency Organic Flow Technology -1.6% 0.1% -0.2% -1.5% Thermal Equipment & Services -9.8% 0.0% -2.4% -7.4% Industrial
Slide 45: Debt Reconciliation
Debt Reconciliation December 31, 2013 Debt Reconciliation ($ millions) 12/31/2013 Short-term debt $ 27 Current maturities of long-term debt 559 Long-term debt 1,090 Gross Debt $ 1,676 Less: Puchase card program and extended A/P programs (25) 3 Adjusted Gross Debt $ 1,650 Less: Cash in excess of $50
Slide 46: Bank EBITDA Reconciliation
Bank EBITDA Reconciliation ($ mi lli ons ) 2013 2014E Net Income $191 $237 Income tax provision (benefit) 45 82 Net interest expense 113 76 Income before interest and taxes $349 $395 Depreciation, intangible amortization expense and write off of goodwill and intangibles 124 113 EBITDA $472 $508 Adju