Spx Technologies, Inc. · NYSE:SPXC
Spx Technologies — 2010 Electrical Products Group Conference
33 slides from Spx Technologies's conference presentation, May 2010
Slide 1: 2010 Electrical Products Group
2010 Electrical Products Group GLOBAL INFRASTRUCTURE X PROCESS EQUIPMENT X DIAGNOSTIC TOOLS May 2010 1
Slide 2: Forward Looking Statements
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 state
Slide 3: Current Environment
Current Environment GLOBAL INFRASTRUCTURE X PROCESS EQUIPMENT X DIAGNOSTIC TOOLS May 2010 3
Slide 4: Q1 End Market Review
Q1 End Market Review Early cycle businesses in various stages of recovery: • General industrial 2010E Revenue • Vehicle service aftermarket • Food & beverage: “components” Early Cycle 33% Mid-to-late cycle businesses remain impacted by the $5B recession: • Power generation • Power transmission &
Slide 5: Strategic Focus
Strategic Focus GLOBAL INFRASTRUCTURE X PROCESS EQUIPMENT X DIAGNOSTIC TOOLS May 2010 5
Slide 6: SPX Overview
SPX Overview 2009 % Revenue by Region 27% 49% Infrastructure power & energy 14% Process Diagnostic Equipment Tools 8% food & beverage vehicle service 2% 3 strategic end markets 51% international 2010E revenue: $5b Note: Data from continuing operations and pro forma for acquisitions; 2010E as of 5/5/
Slide 7: Primary Technology Offerings
Primary Technology Offerings infrastructure process equipment diagnostic tools power & energy food & beverage vehicle service Cooling Systems Engineered Components OEM Professional Heat Exchangers Skidded Systems Aftermarket Professional Power Transformers Full-Line Systems Aftermarket Do-it-Yoursel
Slide 8: Strategic Transformation
Strategic Transformation 2004 Revenue Mix INFRASTRUCTURE Security Cooling Systems, Heat Exchangers, EDWARDS, VANCE Power Transformers, HVAC Equipment 24% 10% Compaction Machinery BOMAG 9% Exited $5.7b 15% DIAGNOSTIC TOOLS Focus Service Solutions Businesses Auto Components CONTECH, FILTRAN 8% for Gro
Slide 9: Capital Allocation
Capital Allocation 2005 to 2009 Capital Allocation Share Acquisition criteria: Repurchases 44% 9 Strategic to three core end markets: Globalization Dividends Expand into adjacent markets 7% $4.6B Increase technology offerings 9 Accretive to earnings within the first Acquisitions 20% 12 month
Slide 10: Strategic Acquisitions and Joint Venture
Strategic Acquisitions and Joint Venture infrastructure process equipment diagnostic tools power & energy food & beverage vehicle service 2010 2008 ~$70m ~$10m Year Acquired: 2009 Annual Revenue: ~$125m Johnson Controls European Diagnostics 2007 ~$80m 2007 ~$800m Joint venture formed in 2009 Thermax
Slide 11: Key End Markets
Key End Markets 2009 Pro Forma Revenue by End Market Primary Demand Drivers General Industrial Growing world population with 16% emerging middle class Infrastructure Food & 55% Beverage Advancement of emerging countries 14% Replacement of aged infrastructure Tools & Diagnostics 15% Governmen
Slide 12: Infrastructure: Power & Energy
Infrastructure: Power & Energy 2009 Power & Energy Revenue Mining 4% Key drivers: Oil & Gas Power Generation 13% 65% Electricity demand $2b U.S. Transmission & Distribution New power generation capacity in 18% emerging regions 2009 Power & Energy Replacement of aged infrastructure Revenue by P
Slide 13: Process Equipment: Food & Beverage
Process Equipment: Food & Beverage 2009 Process Equipment Revenue Key Food & Beverage revenue drivers: Food & Beverage 39% Replacement of used components Economic expansion in emerging regions Production of value added or higher $1.6b General Industrial quality products Mining 5% 24% Chemical
Slide 14: Diagnostic Tools: Vehicle Service
Diagnostic Tools: Vehicle Service 2009 Revenue Key drivers: Aftermarket OEMs & Dealers 37% $0.7b 63% New vehicle platforms Increasing electronic complexity of vehicles 2009 Revenue by Product Environmental considerations: Electronic U.S. CAFE standards Diagnostics 46% New air conditioning
Slide 15: SPX Advantages
SPX Advantages Global capabilities A leading position in three strategic markets Infrastructure Engineered solutions power & energy Brand recognition Process Diagnostic Equipment Tools food & beverage vehicle service Large installed base Financial strength Well Positioned for Growth Acro
Slide 16: Global Business Systems and Services
Global Business Systems and Services Emerging Market New Product Expansion Development Placeholder Placeholder text text LEAN Placeholder Operational Placeholder Supply-Chain Management Improvements text Excellence text Placeholder Placeholder text text IT Infrastructure Organizational and Improveme
Slide 17: Innovation
Innovation Established Centralized Innovation Council in 2010 To Identify and Prioritize Top Innovation Opportunities May 2010 17
Slide 18: Power Transformer Plant Expansion
Power Transformer Plant Expansion Focused on Increasing Large Power Capacity GLOBAL INFRASTRUCTURE X PROCESS EQUIPMENT X DIAGNOSTIC TOOLS May 2010 18
Slide 19: SPX Power Transformer Overview
SPX Power Transformer Overview A leading provider of medium power transformers into the United States Custom engineering and strong brand name >800 employees 2 manufacturing facilities: Waukesha, WI Goldsboro, NC SPX is a Leading, U.S. Provider of Medium Power Transformers May 2010 19
Slide 20: Electric Power Transmission & Distribution Grid
Electric Power Transmission & Distribution Grid Transmission Lines: 765, 500, 345, 230 and 138 kV o Primarily large power transformers: o Base rating of at least 100 MVA o Voltage >= 230 kV o Primarily medium power transformers: o Base rating at 10 to 100 MVA o Voltage <= 230 kV SPX currently supp
Slide 21: SPX Transformer Manufacturing Facilities
SPX Transformer Manufacturing Facilities Waukesha, WI 292k square feet Medium and large power transformers: Up to 250 MVA, 345kV Goldsboro, NC 225k square feet Medium power transformers: Up to 40 MVA, 230 kV The Majority of Transformers We Manufacture Today are Medium Power Currently, Li
Slide 22: Fundamental Demand Drivers in the U.S. Market
Fundamental Demand Drivers in the U.S. Market Base Giga-Voltage Ampere (GVA) per Year Additions 200 180 160 Electricity demand: Transformer GVA Installed 140 120 Load growth on the grid 100 80 New housing starts 60 40 20 0 Aging infrastructure: 1964 1966 1968 1970 1972 1974 1976 1978 1980 19
Slide 23: U.S. Electricity Consumption
U.S. Electricity Consumption U.S. Electricity Demand Expected to Increase 4% by 2011 May 2010 23
Slide 24: Waukesha's Financial Performance
Waukesha’s Financial Performance Revenue & Operating Profit Margins Enron Collapse Global Recession $481 ($ millions) $390 $393 $376 $348 $283 ~$250 $224 $194 $209 20% 0% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010E Note: 2010E as of 5/5/2010 Electricity Demand and Specific Events have Influen
Slide 25: Investment Overview
Investment Overview Planned 140k square foot (~50%) expansion of Waukesha, WI facility: • Increases capability to manufacture transformers up to 1,200 MVA at 345kv • Provides structural support to manufacture transformers up to 1,200 MVA and 765 kV Estimated total investment: ~$70m • Government
Slide 26: U.S. Large Power Transformer Overview
U.S. Large Power Transformer Overview U.S. large power transformer demand estimated at 500 to 600 units per year: • Average price is between $3m and $4m per unit 80% of units are currently produced outside North America: • Key competitors: ABB, Siemens, Hyundai, Hico, Smit, CG Pauwels & Prolec/G
Slide 27: U.S. Installed Base: Transformers >100 MVA
U.S. Installed Base: Transformers >100 MVA Power Transformers >100 MVA 700 (excluding replacement demand) Average transformer size 600 also increased 500 400 Units 300 200 100 0 Steam Turbine Gas Turbine Combined Cycle Transmission Source: Energy Information Administration; Waukesha analysis Aging L
Slide 28: >100 MVA Forecast
>100 MVA Forecast Source: Energy Information Administration; Emerging Energy Research; Waukesha analysis Expect Growth Between 2012 and 2024 May 2010 28 28
Slide 29: SPX Large Power Transformer Advantages
SPX Large Power Transformer Advantages Key Customers Strong brand recognition: • Recognized for quality, reliability and service Domestic supplier: • Preference to buy from U.S. supplier • Lower shipping costs • Reduced supply chain risk for our customers Waukesha already a qualified supplier
Slide 30: Impact to SPX Financial Results
Impact to SPX Financial Results No impact to 2010 EPS or Free Cash Flow guidance Expect majority of the capital investment to occur in 2011 Earnings per share impact: • 2011 to 2012: neutral tax incentives expected to largely offset fixed cost increases as production ramps • 2013: modest pos
Slide 31: Strategic Rationale
Strategic Rationale Aligned with SPX’s strategy Expands manufacturing capability for large power transformers: • Also provides flexibility to produce additional medium power transformers Leverages existing customer base Government subsidies make the investment attractive Proposed Expansion C
Slide 32: Executive Summary
Executive Summary Successful transformation to a focused multi-industry company: • 84% of 2009 revenue from three strategic markets Managed prudently through 2009 and expect recovery to lag the broader economy: • Early cycle businesses at various stages of recovery • Mid-to-late cycle businesses
Slide 33: GLOBAL INFRASTRUCTURE X PROCESS EQUIPMENT X DIAGNOSTIC TOOLS
GLOBAL INFRASTRUCTURE X PROCESS EQUIPMENT X DIAGNOSTIC TOOLS May 2010 33