Spx Technologies, Inc. · NYSE:SPXC
Spx Technologies — Morgan Stanley China Industrials Summit (June 2012)
57 slides from Spx Technologies's conference presentation, Jun 19, 2012
Slide 1: Morgan Stanley China Industrials Summit
Morgan Stanley China Industrials Summit questions??? June 19, 2012
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, financial projections and acquisitions, are forward-looking statements and are thus prospective. These forward-looking statements are subje
Slide 3: Strategic Transformation
Strategic Transformation 2005-2011 2012 & Beyond 1997-2004 Global, Multi-Industry Supplier Global Supplier of Diversified Industrial Manufacturer of Engineered Solutions Flow Technology Solutions Diversification, >100 Acquisitions; Legacy divestitures ClydeUnion APV Acquisition Acquisition Service S
Slide 4: Strategic Transformation: Revenue Mix
Strategic Transformation 2004 Revenue Mix (1) 2012E Revenue Mix Industrial Products Vehicle Infrastructure & Services Service 24% 19% 15% Security 10% $5.7b 14% FLOW ~$5.3b 53% FLOW TECHNOLOGY 28% TECHNOLOGY 9% 6% Compaction 8% 7% 7% Niche Industrial Machinery Thermal Equipment Auto Other & Services
Slide 5: Strategic Transformation: Revenue Growth
Strategic Transformation ($ billions) Revenue $5.9 $5.5 $5.3 Flow Technology has averaged 6% organic $4.8 $4.8 $4.9 revenue growth from 2005-2012E $4.3 $4.3 Since 2005, ~85% of acquisition capital 80% 78% 77% 47% has been focused on building the Flow 66% 66% 66% 63% Technology segment 53% Flow Techn
Slide 6: 2012 Strategic Actions
2012 Strategic Actions Flow Power Divestiture Technology Infrastructure & Capital Allocation ClydeUnion integration: Production underway at Service Solutions sale new large power pending regulatory Q1 working capital transformer plant: approval: investment 22 units in order backlog expected to close
Slide 7: Revenue by End Market
Revenue by End Market 2011 Pro Forma Revenue by End Market Power Generation 28% Other 27% Power & Oil & Gas Energy 11% 44% HVAC 10% Power T&D Food & 5% Beverage 19% Note: Pro Forma to include ClydeUnion’ s 2011 revenue and exclude Service Solutions 2011 revenue ~2/3rd of Revenue From Sales into Powe
Slide 8: U.S. Transmission & Distribution
U.S. Transmission & Distribution ($ billions) Estimated U.S. Investment in T&D Infrastructure Key Market Drivers 2011 to 2035: $1 trillion Electricity Demand: Load growth $486 New capacity: natural gas, wind, solar New New housing starts Replacement Replacement of aging equipment $210 $172 Regulator
Slide 9: SPX Large Power Transformer Expansion
SPX Large Power Transformer Expansion ($ millions; except per share data) Revenue Forecast Production & EPS Targets $150 to $200 Targeting annual production of ~50 units at full capacity: $100 to $150 Expect to ship ~15 in 2012 5 units in order backlog for 2013 delivery $50 to $75 Estimated Earnings
Slide 10: SPX Transformer Solutions Financial Results
SPX Transformer Solutions Financial Results ($ millions) Prior Investment Cycle 2004-2008 Current Investment Cycle 2011-???? Revenue Large Power Expansion ~$200 Operating Profit % $481 $393 ~$500 $283 ~$35 $224 >20% $239 $209 >20% ~$300 <5% <5% 2004 2005 2006 2007 2008 2011 2012E Future Potential No
Slide 11: SPX Key Growth Drivers
SPX Key Growth Drivers Key Growth Drivers Details Integrating ClydeUnion, building Power & Energy platform 1. Expansion of Flow Technology segment Continued growth in Food & Beverage Additional strategic acquisitions Next investment cycle for U.S. power transformers Expansion into large-power market
Slide 12: Flow Technology
Flow Technology questions???
Slide 13: SPX Flow Technology
SPX Flow Technology Business Model 1. Supply a mix of high-value and standard, engineered products, process solutions and services while striving to 2012E Revenue: $2.8b increase our value creation and relevance for our customers Food ~$1b 2. Focused on expanding our presence in growth oriented mark
Slide 14: Core Flow Technologies
Core Flow Technologies pumps valves heat transfer mixers separation drying and dispersion filtration dehydration full line system evaporation Diversified Product & Service Offering Provides Robust Portfolio to Customers in Key End Markets June 2012 14
Slide 15: Geographic Profile
Geographic Profile 2011 Pro Forma Emerging Market Revenue % Revenue % by Geography of Total Reported Revenue 29% 29% 38% 35% 31% 30% 23% 22% 19% 27% 2005 2006 2007 2008 2009 2010 2011* 6% 9% *2011 data pro forma for ClydeUnion acquisition Globalization Has Improved Growth Prospects; Emerging Markets
Slide 16: Strategic Development
Strategic Development 2004 -2009 2010-2012 1997-2003 Consolidated & Integrated Invested for Growth Aquired Niche Flow Product Lines Established Global Food & Beverage Platform Established Global Power & Energy Platform Acquisitions by primary end market 2012E Food & Beverage ~$2.8b Revenue Power & E
Slide 17: End Market Development
End Market Development 2012E Revenue by End Market Food & Power & Industrial Beverage: Energy: Processes: 36% 35% 29% ($ billions) ~$1.0 ~$1.0 ~$0.8 $0.3 $0.2 $0.2 Food & Beverage Power & Energy Industrial Markets 2005 2012E Revenue Note: 2012E as of 5/2/2012 Revenue Balanced Across 3 End Market Pla
Slide 18: Food & Beverage Expansion
Food & Beverage Expansion 2008 2009 2010 2011 2012 Gerstenberg Murdoch Seital butter, fats & oils engineering separation defining processing expertise technology acquisition New Zealand Anhydro customer expands F&B expanded niche liquid to powder relationships “component” position into dehydration p
Slide 19: Path to Customer Relevance
Path to Customer Relevance Typical Process Technology found in a Food & Beverage Plant Fluid Handling Filling Products Specialty Dry Heat Systems Oils Powder & (Pumps, Valves, Year Homogenizers) Exchange Mixers Metering (Liquid) Automation Processing Processing Separation Packaging 1997 2001 2008 20
Slide 20: Butter Process
Butter Process Integrated Technologies Have Increased Our Customer Relevance June 2012 20
Slide 21: Butter Process
Butter Process Migrating Historical Brands Under SPX Global Brand June 2012 21
Slide 22: Flow Technology Power & Energy Expansion
Flow Technology Power & Energy Expansion 2010 2011 2012 2013 2014 Existing offerings ClydeUnion future expectations defining margin improvement valves acquisition multi-product offerings / expanded niche revenue synergies filtration position into global platform bolt-on acquisitions dehydration adde
Slide 23: SPX & ClydeUnion Product Offering
SPX & ClydeUnion Product Offering SPX Flow Technology ClydeUnion Pump Technology valves filtration pumps dehydration chemical injection Developing Strategic Approach to Multi-Product Offerings Into Oil & Gas and Power Generation Applications June 2012 23
Slide 24: Oil & Gas Pipeline Content
Oil & Gas Pipeline Content ClydeUnion Pump Technology P ClydeUnion Pumps SPX Flow Technology V Valves & Closures D Dehydration F Filtration M Mixers H Heat Exchangers P Pumps June 2012 24
Slide 25: Typical Process Pump Lifecycle
Typical Process Pump Lifecycle 25 Year Pump Timeline Original Customer Value Add Equipment Upgrade / Re-rate Purchase Insurance Consumable Stock Consumable Shelf Stock Consumable Spares Spare Spares Spare Spares Spares Spare 0 5 10 15 20 25 years years years years years o Site Site Overhaul Site Ove
Slide 26: Flow Technology Backlog Analysis
Flow Technology Backlog Analysis ($ millions) Quarter End Backlog Year-Over-Year commentary Components Systems ClydeUnion $1,524 Systems backlog increased 42% driven by Food & Beverage orders in Asia Pacific $530 Component backlog increased 4% driven $848 by increased demand in Asia Pacific and $415
Slide 27: Flow Technology Organic Revenue Profile
Flow Technology Organic Revenue Profile Annual Organic Revenue Change 10% CAGR Recession 11% CAGR 15% 15% 9% 6% to 8% 8% 8% 2009 2010 2005 2006 2007 2008 2011 2012E -4% -14% Note: 2012E as of 5/2/2012; see appendix for reconciliation to GAAP Organic Revenue Profile Reflects Strategic Actions, Global
Slide 28: Flow Technology Segment Income and Margin Development
Flow Technology Segment Income and Margin Development Annual Segment Income and Margin >$300 $268 $243 16.4% $211 $216 15.6% 14.4% $175 12.9% 13.0% 13.1% 12.2% 11.2% to $128 11.7% $106 acquisition acquisition acquisition dilution: 550 pts dilution: 50 pts dilution: ~100 pts 2005 2006 2007 2008 2009
Slide 29: Flow Technology - Asia Pacific
Flow Technology questions??? -Asia Pacific
Slide 30: Flow Technology Asia Pacific Revenue & Backlog
Flow Technology Asia Pacific Revenue & Backlog Flow Technology Flow Technology Asia Pacific Revenue Asia Pacific Backlog ClydeUnion Acquisition Q4 2011 APV Acquisition $285 Q4 2007 $112 $247 $548 $437 $406 $423 $138 $207 $97 $169 2006 2007 2008 2009 2010 2011* Q4 2009 Q4 2010 Q4 2011 Q1 2012 *2011 R
Slide 31: Flow Technology Asia Pacific Revenue Breakdown
Flow Technology Asia Pacific Revenue Breakdown 2011 Pro Forma Revenue by End Market 2011 Pro Forma Revenue by Geography Dairy, Food 10% 21% & Beverage 41% Power & 9% 42% Energy 32% 7% Industrial 27% 11% *2011 data pro forma for ClydeUnion acquisition Food & Beverage is our Largest End Market in Asia
Slide 32: Flow Technology Localization
Flow Technology Localization 2011 Revenue by Customer* Advancing localization efforts Indigenous Customer Continue to develop local talent 80% to support growth Leverage food & beverage combined technology offerings Multi- National Customer ClydeUnion acquisition provides 20% platform to expand in p
Slide 33: Flow Technology Localization Example
Flow Technology Localization Example (Food & Beverage Systems) Customer benefits: Asia Pacific Quicker time to market Localization Progress Increased production consistency Reduced cost of ownership Material 100% Engineering Reduced level of training 90% Assembly 80% 70% Key results: 60% 50% Average
Slide 34: Recent Asia Pacific Food & Beverage System Awards
Recent Asia Pacific Food & Beverage System Awards Yogurt (8 Plants) Dairy Yogurt Notable Contracts: Coffee Coffee Yogurt ~$40m Yogurt Plant (China) Infant Water Infant Powder ~$35m Infant Powder Plant (New Zealand) Powder Infant Powder SCM ~$25m Infant Powder Plant (China) SCM ~$15m Coffee Plant (Th
Slide 35: Shanghai Bright Dairy Project: ~$40m Yogurt Plant
Shanghai Bright Dairy Project: ~$40m Yogurt Plant pumps valves mixers vacuum mixer heat transfer dispersion separation Shanghai Bright Dairy Project Utilizes Multiple SPX Flow Technologies June 2012 35
Slide 36: Infant Formula Market
Infant Formula Market Infant Formula Consumption by Region $3,000 12% Annual Growth Expectation: ~6% $2,500 10% $2,000 8% $1,500 6% $1,000 4% $500 2% $0 0% 2005 2006 2007 2008 2009 2010 2011E 2012E 2013E 2014E 2015E AsiaPac EMEA Americas Global YoY Growth Milk Powder Exports is Driving Dairy Growth
Slide 37: New Zealand Infant Formula Plant
New Zealand Infant Formula Plant SPX Awarded Contract to Establish Powder Infant Formula Plant in New Zealand Contract valued at >$30m SPX scope: Designing and installing all technologies required to convert fresh milk into dry powder infant formula Constructing 27,000 square foot facility Utilizes
Slide 38: New Zealand Infant Formula Plant Rendering
New Zealand Infant Formula Plant Rendering Expected to Be Completed in 2012 June 2012 38
Slide 39: Nuclear Power Plant
Nuclear Power Plant SPX Flow Technology Combined Product Offering CLYDEUNION Pumps: diverse pumping solutions represents CLYDEUNION pump SPX Flow Technology: Nuclear squib valve control valves plate heat exchangers ClydeUnion Pump Technologies are Used at Multiple Points of a Nuclear Power Plant SPX
Slide 40: Nuclear Squib Valve
Nuclear Squib Valve SPX’s Squib Valve is a key part of the automatic depressurization system in Westinghouse’s nuclear AP1000 design. Passive Containment Cooling Tank SPX Designed and is Manufacturing Nuclear Squib Valves for Westinghouse’s AP1000 Nuclear Plants Being Built in China and the United S
Slide 41: SPX Flow Technology Summary
SPX Flow Technology Summary 1. Buidling out 3 global platforms to expand customer 2012E Revenue: $2.8b relevance Food ~$1b 2. Diversified offering of highly engineered products 3. Fragmented supplier universe provides continued Energy acquisition opportunities ~$1b 4. Innovation efforts and emerging
Slide 42: Questions?
WHERE IDEAS MEET INDUSTRY questions?
Slide 43: Appendix
WHERE IDEAS MEET INDUSTRY appendix
Slide 44: SPX Consolidated Geographic Profile
SPX Consolidated Geographic Profile 2011 Pro Forma Emerging Market Revenue % Revenue % by Geography of Total Reported Revenue 44% 23% 32% 30% 22% 23% 17% 15% 14% 18% 2005 2006 2007 2008 2009 2010 2011 4% 11% Note: 2011 pro forma for ClydeUnion acquisition and Service Solutions divestiture Globalizat
Slide 45: 2012 Pro Forma Modeling Framework
2012 Pro Forma Modeling Framework ($ millions) 2012 Pro Forma Modeling Framework (1) Revenue $5,150 to $5,400 Segment Income % 10.5% to 11.0% Interest Expense $105m Tax Rate 28% Share Count ~47m Cash on Hand ~$900 Projected Liquidity ~$1,423 Gross Debt (2) & Leverage ~$1,585 & 2.5x Net Debt (2) & Le
Slide 46: SPX Revenue by Segment
SPX Revenue by Segment 2012E Pro Forma Revenue Breakdown Food & Beverage Thermal ~$1b Equipment & Services 28% Flow Power & Energy Technology ~$1b 53% Industrial Products & Industrial Processes Services ~$800m 19% Note: 2012E as of 5/2/2012 Flow Technology Well Positioned in 3 End Markets June 2012
Slide 47: 2012 Full Year Segment Targets
2012 Full Year Segment Targets Thermal Equipment Industrial Products Flow Technology & Services & Services Revenue Revenue Revenue +35% to +40% (7%) to (12%) +10% to +15% Segment Income Margin Segment Income Margin Segment Income Margin 11.2% to 11.7% 7.6% to 8.1% 13.2% to 13.7% Note: ~100 points of
Slide 48: Flow Technology Financial Information
Flow Technology Financial Information ($ millions) Revenue Segment Margins +35% to Excluding ClydeUnion +40% Target revenue growth: 35% to 40% Acquisition: 31% to 33% $2,042 Organic: mid-to-high single digits $1,634 $1,662 Currency: ~(4%) 13.1% 12.2% to 12.9% 13.0% 12.7% Key 2012 Drivers: Emerging m
Slide 49: Thermal Equipment & Services Financial Information
Thermal Equipment & Services Financial Information ($ millions) Revenue Segment Margins 2012E Comments $1,644 $1,601 $1,602 Expect (7%) to (12%) total revenue decline: (7%) to organic: (5%) to (10%) (12%) currency: ~(2%) 12.1% 10.7% 8.6% 7.6% to Key 2012 Drivers: 8.1 % Expect slow growth HVAC revenu
Slide 50: Industrial Products & Services Financial Information
Industrial Products & Services Financial Information ($ millions) Revenue Segment Margins 2012E Comments +10% to +15% $945 Targeting 10% to 15% revenue growth $850 $865 21.3% Key 2012 Drivers: 13.2% to Year-over-year revenue growth in 14.9% 13.0% 13.7% medium power transformer business: Expect volum
Slide 51: Projected Liquidity
Projected Liquidity ($ millions) Estimated Cash on Hand at 3/31/2012 $337 Available Credit Lines $431 Estimated Q2-Q4 2012 Free Cash Flow ~$350 Regular Quarterly Dividend (2) ~($38) After-Tax Proceeds from Sale of Service Solutions ~$1,000 Estimated Debt Repayment ($350) Estimated Remaining Share Re
Slide 52: Debt Repayment Schedule
Debt Repayment Schedule ($ millions) $600 Entered into a new 5-year $2,600 $600 $500 syndicated credit facility in 2011: $500 $600 Domestic and global revolver $400 $1,200 Credit instrument facility $500 Term loan A – ClydeUnion $300 $300 $300 $300 Term loan X – ClydeUnion $200 Accelerated debt repa
Slide 53: Leverage Ratios
Leverage Ratios Debt to EBITDA* Gross Leverage > 2.5x Gross Leverage Capital allocation focus: Net Leverage 3.5x Debt repayment Non-leveraging strategic 2.5x Gross Leverage acquisitions using cash on hand Target Range: 1.5x 1.5x to 2.5x Capital allocation focus: Strategic acquisitions 0.5x Share rep
Slide 54: 2005 to 2012 Capital Allocation
2005 to 2012 Capital Allocation Share Repurchases* & Dividends 39m shares repurchased (2005-2012*) Annual dividend of $1 per share $2.8b Total Capital Allocated: $5.6b Acquisitions Primary financial criteria: EPS accretion $1.9b Divestiture Returns in excess of our cost of capital proceeds*: $4.3b N
Slide 55: Debt Reconciliations
Debt Reconciliations ($ millions) 3/31/2012 Short-term debt $ 191 Current maturities of long-term debt 331 Long-term debt 1,597 Gross Debt $ 2,119 Less: Puchase card program and extended A/P programs $ (38) Adjusted Gross Debt $ 2,081 Less: Cash in excess of $50 $ (287) Adjusted Net Debt $ 1,794 Not
Slide 56: Bank EBITDA Reconciliations
Bank EBITDA Reconciliations ($ millions) LTM Net Income $171 Income tax provision (benefit) 34 Interest expense 102 Income before interest and taxes $307 Depreciation and intangible amortization expense 120 EBITDA from continuing operations $426 Adjustments: Amortization and write-off of intangibles
Slide 57: 2005 to 2012E Organic Growth
2005 to 2012E Organic Growth Flow Segment - Organic Revenue Reconciliation 2005 2006 2007 2008 2009 2010 2011 2012E Net Revenue Change 8.4% 11.2% 31.2% 86.8% -18.2% 1.7% 22.8% 35% to 40% Acquisitions/Divestitures 0.0% 0.9% 14.0% 78.9% 0.0% 5.6% 4.3% 31% to 34% Currency 0.1% 1.0% 2.5% -0.1% -4.3% 0.2
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