Slide 1: Q2 2017 Earnings Presentation
Q2 2017 Earnings Presentation August 3, 2017
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 within the meaning of Section 21E of the Securities Exchange Act of 1934, as am
Slide 3: Introductory Comments
Introductory Comments Gene Lowe August 3, 2017
Slide 4: Quarter Highlights
Quarter Highlights Performance and Accomplishments Solid execution in Core businesses Operating initiatives making significant impact Core margin up 330 basis points year over year Strong performance from Detection & Measurement and Engineered Solutions Active inorganic growth pipeline A
Slide 5: Core Q2 2017 Results
Core Q2 2017 Results Year-over-Year Analysis ($ millions) Q2 Year-to-Date Core Revenue $692 Increase in Adjusted operating profit* Adjusted Operating Income Margin* $670 driven by operating model changes in Engineered Solutions and strong performance in Detection & $352 $348 8.3% Measurement 9.2%
Slide 6: Value Creation Roadmap
Value Creation Roadmap Organic Growth SPX Business System New products Policy deployment New channels Operational excellence Adjacent markets Due diligence/integration Inorganic Growth Culture & Values Focus in HVAC and D&M Leadership development Significant capital to deploy Res
Slide 7: South African Projects Update
South African Projects Update Significant progress achieved since spin in 2015 to accelerate schedule and reduce risk Achieved agreement to de-scope SPX’s construction responsibilities (late 2015) Only one of the five original scopes remaining by end of 2017 During the first half of 2017, to
Slide 8: Q2 Financial Review
Q2 Financial Review Scott Sproule August 3, 2017
Slide 9: Earnings Per Share
Earnings Per Share Q2 2017 Adjusted EPS Q2 2017 YTD 2017 GAAP EPS from continuing operations ($0.19) $0.05 South African projects $0.61 $0.71 Non-service pension items & other** $0.02 $0.06 Adjusted EPS from continuing operations $0.44 $0.82 *Non-GAAP financial measure. Reconciliations from US GAAP
Slide 10: South African Projects Results and Financial Update
South African Projects Results and Financial Update (in millions) Q2 2017 1H 2017 Revenues** $2.0 $20.2 Operating losses** ($26.6) ($31.0) Net cash used in operations ($13.7) ($27.0) Note: Quarterly operational losses of $3-$4 million expected during 2H 2017. **Includes impact of Q2 charge of $22.9
Slide 11: South African Projects Timeline
South African Projects Timeline Pre-2015 2015 2015 2016 2016 2017 2017 2018 2018 2019 2019 2020+ 2020 Scope 1 Scope 2 Scope 3 Scope 4 Acceleration of timeline Scope 5 Cash Usage: $33M $27M ~$60-$70M 2H’17 - Completion 2016 1H’17 Substantially Complete by End of 2019 August 3, 2017 11
Slide 12: Core Q2 2017 Results
Core Q2 2017 Results Year-over-Year Analysis ($ millions) Q2 Core Revenue: Q2 Year-to-Date (1.2%) year-over-year decline: Core Revenue $692 (0.9%) organic decline*, primarily due to Core Segment Income Margin $670 timing of transformer shipments partially offset by solid growth in Detection & $3
Slide 13: HVAC Q2 2017 Results
HVAC Q2 2017 Results Year-over-Year Analysis ($ millions) Q2 Revenue: Q2 Year-to-Date Revenue (1.3%) year-over-year decline: Segment Income Margin (0.7%) organic decline* primarily driven by $234 $230 timing of cooling product shipments $122 $120 (0.6%) currency impact 14.0% 14.1% Q2 Segment I
Slide 14: Detection & Measurement Q2 2017 Results
Detection & Measurement Q2 2017 Results Year-over-Year Analysis ($ millions) Q2 Revenue: Q2 Year-to-Date Revenue $118 7.3% year-over-year increase: Segment Income Margin $116 8.8% organic increase* primarily due to higher sales of fare collection systems and $65 $60 obstruction lighting products
Slide 15: Engineered Solutions (Core) Q2 2017 Results
Engineered Solutions (Core) Q2 2017 Results Year-over-Year Analysis Q2 Core Revenue: Q2 Year-to-Date ($ millions) (4.1%) year-over-year decline: Core Revenue Core Segment Income Margin $343 (4.4%) organic decline*, driven by transformer $322 project timing 0.3% currency impact $170 $163 Q2 Cor
Slide 16: Financial Position & Liquidity Review
Financial Position & Liquidity Review Scott Sproule August 3, 2017
Slide 17: Financial Position
Financial Position Capital Structure Update Leverage Ratios* ($ millions) Q2 2017 Short-term debt $ 33.9 2.5x 2.4x 2.2x 2.2x 1.5-2.5x Current maturities of long-term debt 18.1 Long-term debt 315.4 Total Debt $ 367.4 Less: Cash on hand (83.5) Q1'17 Q2'17 LT Target Net Debt $ 283.9 Bank Net Leverage G
Slide 18: Financial Position: Cash Flow & Liquidity
Financial Position Cash Flow & Liquidity ($ in millions) Core Free Cash Flow* usage of approximately Term Debt Repayment Schedule $4.0 million during second quarter; YTD free ($ in millions) cash generation of $12.5 million Projecting $400 million of capacity for capital allocation through 2020
Slide 19: Market Outlook & Executive Summary
Market Outlook & Executive Summary Gene Lowe August 3, 2017
Slide 20: Market Commentary
Market Commentary Market Comments Cooling: Favorable commercial market trends continue HVAC Heating: Demand consistent with typical seasonality Detection & Steady demand in run-rate end markets Measurement Project bookings continue to trend in positive direction Transformers Stable lead ti
Slide 21: 2017 Core Guidance (Changes Bolded)
2017 Core Guidance (Changes Bolded) Revenue Segment Income Margin HVAC Organic growth* at lower end of LT range of 2.0-4.0% ~16.0% Detection & Organic growth* above (previously middle of) LT range of ~22.5-23.0% (previously Measurement 2.0-6.0% 21.0-22.0%) Segment revenue decline in mid-si
Slide 22: Executive Summary
Executive Summary Strong YTD performance – raising Core guidance Continued healthy margin expansion Strong Core cash flow outlook and balance sheet, despite South Africa actions Strategic initiatives strengthing business for double digit earnings growth Note: Core results are non-GAAP financ
Slide 23: Questions
Questions August 3, 2017
Slide 24: Appendix
Appendix August 3, 2017
Slide 25: 2017 Modeling Considerations
2017 Modeling Considerations Metric Commentary/Assumptions Corporate costs Mid $40M range – Higher professional fees and performance comp Long-term incentive comp $14-15M Restructuring costs $1.5-2.0M Interest cost $15-16M Tax rate Approximately 27% full-year (2H 2017 ~30%) Capex $14-18M Cash cost o
Slide 26: Engineered Solutions Business Model Shift – Pro Forma Revenues
Engineered Solutions Business Model Shift – Pro Forma Revenues $60-80m Business model Baseline Baseline change growth Baseline Baseline of 2-3% $540-560m 2017 Future Note: Pro Forma for illustrative purposes only. Based on management estimates. Baseline Growth of 2% to 3% August 3, 2017 26
Slide 27: Core Revenue & Segment Income U.S. GAAP Reconciliation
Core Revenue & Segment Income U.S. GAAP Reconciliation ($ millions) Q2 2016 Q2 2017 GAAP SA Projects Core GAAP SA Projects Core Revenue HVAC 121.9 121.9 120.3 120.3 D&M 60.1 60.1 64.5 64.5 Engineered Solutions 189.4 (19.6) 169.9 164.9 (2.0) 162.9 Total SPX $371.4 ($19.6) $351.8 $349.7 ($2.0) $347.7
Slide 28: Core Segment Income Phasing
Core Segment Income Phasing ($ millions) Q1 2016 Q2 2016 Q3 2016 Q4 2016 GAAP 29.8 32.2 26.0 54.8 Less: South 40% 38% African 3.4 2.9 3.5 4.7 Projects Core $33.2 $35.1 $29.5 $59.5 24% % of full-year 21% 22% 19% 38% 21% 21% 22% 19% 16% Q1 2015 Q2 2015 Q3 2015 Q4 2015 GAAP 17.2 24.6 (60.4) 57.4 Less:
Slide 29: Q2 2017 U.S. GAAP to Adjusted EPS Reconciliation
Q2 2017 U.S. GAAP to Adjusted Earnings Per Share Reconciliation ($ millions, except GAAP Adjustments Adjusted per share values) (1) Segment income $ 20.7 $ 26.6 $ 47.3 Corporate expense (11.3) — (11.3) Pension and postretirement income (expense) (2) (1.2) 1.3 0.1 Long-term incentive compensation exp
Slide 30: YTD U.S. GAAP to Adjusted EPS Reconciliation
YTD U.S. GAAP to Adjusted Earnings Per Share Reconciliation ($ millions, except per share values) GAAP Adjustments Adjusted (1) Segment income $ 55.0 $ 31.0 $ 86.0 Corporate expense (22.7) — (22.7) Pension and postretirement income (expense) (2) (2.6) 2.8 0.2 Long-term incentive compensation expense
Slide 31: Q2 2016 U.S. GAAP to Adjusted EPS Reconciliation
Q2 2016 U.S. GAAP to Adjusted Earnings Per Share Reconciliation GAAP Adjustme nts Adjuste d ($ millions, except Segment income (1) $ 32.2 $ 2.9 $ 35.1 per share values) Corporate expense (8.6) — (8.6) Pension and postretirement income (expense) (2) (2.8) 2.9 0.1 Long-term incentive compensation expe
Slide 32: Q2 2017 Adjusted Operating Income U.S. GAAP Reconciliation
Q2 2017 Adjusted Operating Income U.S. GAAP Reconciliation ($ millions) Three months ended Six months ended July 1, 2017 July 2, 2016 July 1, 2017 July 2, 2016 Operating income $ 4.1 $ 13.8 $ 21.9 $ 41.9 Exclude: South African projects 26.6 2.9 31.0 6.3 Non-service pension and postretirement items 1
Slide 33: Q2 2017 Organic Revenue U.S. GAAP Reconciliation
Q2 2017 Organic Revenue U.S. GAAP Reconciliation Detection & Engineered HVAC Measurement Solutions Consolidated Net Revenue Decline (1.3) % 7.3 % (12.9) % (5.8) % Adjustment to Exclude South African projects - % - % (8.8) % (4.6) % Core Revenue Decline (1.3) % 7.3 % (4.1) % (1.2) % Exclude: Foreign
Slide 34: Debt Reconciliation
Debt Reconciliation ($ millions) July 1, 2017 Short-term debt $ 33.9 Current maturities of long-term debt 18.1 Long-term debt(1) 316.8 Gross debt 368.8 Less: Purchase card program and extended payables (3.0) Adjusted gross debt 365.8 Less: Cash in excess of $50.0 (33.5) Adjusted net debt $ 332.3 (1)
Slide 35: Consolidated EBITDA Reconciliation
Consolidated EBITDA Reconciliation ($ millions) Q3 2016 Q4 2016 Q1 2017 Q2 2017 LTM Net income (loss) from continuing operations attributable to SPX $ 2.6 $ (3.0) $ 10.3 $ (8.3) Corporation common shareholders Income tax provision (benefit) - (1.0) 3.2 6.0 Interest expense 3.8 3.7 4.0 4.6 Income (lo
Slide 36: U.S. GAAP to Core Free Cash Flow Used in Continuing Operations
U.S. GAAP to Core Free Cash Flow Used in Continuing Operations ($ millions) Q2 2017 Net operating cash flow used in continuing operations $ (15.1) Capital expenditures - continuing operations (2.6) Free cash flow used in continuing operations (17.7) Adjustment for South African projects 13.7 Core fr