Slide 1: Q2 2019 Earnings Presentation
Q2 2019 Earnings Presentation August 1, 2019 SPX Corporation 2019 Investor Event - New York
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
Slide 4: Performance Highlights
Performance Highlights Q2 2019 results reflect strong execution and favorable project activity Significant growth in revenue and operating profit ~170 bps of adjusted operating margin expansion Strong first half driven by Detection & Measurement and Engineered Solutions Progress on dispute
Slide 5: Adjusted Q2 2019 Year-Over-Year Summary
Adjusted Q2 2019 Year-Over-Year Summary ($ millions) Q2 Year-to-Date $723 Adjusted Revenue Adjusted Operating Income Margin Detection & Measurement and $671 Engineered Solutions were primary $372 $350 drivers of increases in revenue and 8.8% 10.0% adjusted operating income 11.0% 9.3% 6.3% adjust
Slide 6: Value Creation Framework
Value Creation Framework Organic Growth SPX Business System • New products • Policy deployment • Channel expansion • Operational excellence • Adjacent markets • Due diligence/integration Inorganic Growth Culture & Values • Focus in HVAC and D&M • Leadership development • Significant capital to deplo
Slide 7: SGS Refrigeration Overview
SGS Refrigeration Overview Company Profile Headquarters: Dixon, Illinois 2018 Sales: ~$12M (net of intercompany sales) Evaporative Condensers Description: Manufacturer and distributor of industrial DTC Condenser and commercial refrigeration equipment and products Purchase multiple*: <7x post-synergi
Slide 8: Q2 Financial Review
Q2 Financial Review Scott Sproule
Slide 9: Adjusted Earnings Per Share
Adjusted Earnings Per Share Q2 2019 Q2 2018 GAAP EPS from continuing operations $0.43 $0.44 South Africa and Heat Transfer* $0.19 $0.01 Acquisition-related $0.02 $0.06 Non-service pension & other** ($0.01) $0.01 Amortization $0.04 $0.01 Adjusted EPS from continuing operations $0.67 $0.53 Adjusted EP
Slide 10: Adjusted Q2 2019 Year-Over-Year Results
Adjusted Q2 2019 Year-Over-Year Results ($ millions) Q2 Adjusted Revenue: Q2 Year-to-Date 6.3% year-over-year increase: Adjusted Revenue $723 7.0% acquisition impact Adjusted Segment Income Margin (0.3%) organic decrease* $671 (0.4%) unfavorable currency impact $372 $350 Q2 Adjusted Segment
Slide 11: HVAC Q2 2019 Year-Over-Year Results
HVAC Q2 2019 Year-Over-Year Results ($ millions) Q2 Year-to-Date Q2 Revenue: (6.3%) year-over-year decrease: Revenue $267 Adjusted Segment Income Margin* $259 (5.7%) organic decrease* driven by timing of cooling shipments (0.6%) unfavorable currency impact $140 13.9% 13.6% $131 Q2 Adjusted Seg
Slide 12: Detection & Measurement Q2 2019 Year-Over-Year Results
Detection & Measurement Q2 2019 Year-Over-Year Results ($ millions) Q2 Revenue: Q2 Year-to-Date 36.3% year-over-year increase: Revenue 33.8% increase from acquisitions Adjusted Segment Income Margin* $187 3.2% organic increase* primarily due to strong project activity in Communications $140 Te
Slide 13: Engineered Solutions Q2 2019 Year-Over-Year Results
Engineered Solutions Q2 2019 Year-Over-Year Results ($ millions) Q2 Year-to-Date Q2 Revenue: $277 2.7% year-over-year increase: Revenue $263 Segment Income Margin Improved volumes in Transformers Q2 Segment Income and Margin: 7.6% $135 $139 6.5% $2.6m increase in segment income 9.4% 7.7% ~17
Slide 14: Financial Position and Liquidity Review
Financial Position and Liquidity Review Scott Sproule
Slide 15: Financial Position - Capital Structure & Liquidity Update
Financial Position - Capital Structure & Liquidity Update Leverage Ratios* ($millions) 2.7x Q2 2018 Q2 2019 Short-term debt $124.1 $59.5 2.3x Current maturities of long-term debt 9.2 14.1 2.0x 1.5-2.5x 1.9x Long-term debt 340.6 328.0 Total Debt $473.9 $401.6 Less: Cash on hand (66.7) (34.6) Net Debt
Slide 16: 2019 Adjusted Guidance (Changes in Bold)
2019 Adjusted Guidance (Changes in Bold) Revenue Segment Income Margin In a range of $576-586 million HVAC In a range of 15.5-16% (previously $570-580 million) Detection & In a range of a $390-400 million In a range of 23-24% (ex Measurement (previously $385-395 million) amortization) Engine
Slide 17: End Market Overview and Closing Remarks
End Market Overview and Closing Remarks Gene Lowe
Slide 18: Market Commentary
Market Commentary Market Comments Cooling: Steady near-term demand; solid backlog HVAC Heating: Seasonal demand remains key driver; commercial markets steady Detection & Favorable run-rate markets Measurement Frontlog activity remains strong for project markets Transformers Key customer ac
Slide 19: Executive Summary
Executive Summary On track for 15-20% Adjusted EPS* growth Revenue growth and margin expansion continued during Q2 Strong balance sheet and liquidity profile Opportunities in our M&A pipeline remain significant Making progress on wind-down of exposure to South African projects Successful E
Slide 20: Questions
SPX4 Questions
Slide 21: Appendix
SPX4 Appendix
Slide 22: 2019 Adjusted EPS Guidance - Key Drivers
2019 Adjusted EPS Guidance - Key Drivers • Favorable Economic Policy/Infrastructure Stimulus $2.72 • Stronger-Than-Normal Seasonal Heating Demand • Commercial Growth Accelerates • Greater-Than-Anticipated Price-Cost Tailwinds • Accelerated Project-Related Sales $2.66 Base Case • Weaker-Than-Anticipa
Slide 23: Adjusted Segment Income Phasing
Adjusted Segment Income Phasing ($ millions) Q1 2018 Q2 2018 Q3 2018 Q4 2018 GAAP 37.0 41.0 29.6 70.9 Exclude: "All other" (4.1) (4.4) (8.0) (2.4) 37% Exclude: One time acquisition (0.3) (1.6) (2.9) (0.9) related costs 31% Exclude: Intangible amortization (0.1) (0.8) (1.3) (1.3) Adjusted $41.5 $47.8
Slide 24: 2019 Modeling Considerations
2019 Modeling Considerations Metric Commentary/Assumptions Corporate costs Mid $40Ms Long-term incentive comp $14-15M Restructuring costs $1M Interest cost $19-20M Equity earnings, other $4-5M Tax rate Approximately 21% Capex $15-17M Cash cost of pension + OPEB Approximately $16M D&A Approximately $
Slide 25: Q2 2019 U.S. GAAP to Adjusted Earnings Per Share Reconciliation
Q2 2019 U.S. GAAP to Adjusted Earnings Per Share Reconciliation ($ millions) GAAP Adjustments Adjusted (1) Segment income $ 41.4 $ 13.3 $ 54.7 (2) Corporate expense (10.5) 0.2 (10.3) Long-term incentive compensation expense (3.3) — (3.3) (3) Special charges, net (1.3) 0.9 (0.4) Operating income 26.3
Slide 26: Q2 2018 U.S. GAAP to Adjusted Earnings Per Share Reconciliation
Q2 2018 U.S. GAAP to Adjusted Earnings Per Share Reconciliation ($ millions) GAAP Adjustments Adjusted (1) Segment income $ 41.0 $ 6.8 $ 47.8 Corporate expense (2) (12.5) 1.4 (11.1) Long-term incentive compensation expense (4.2) — (4.2) (3) Special charges, net (1.6) 1.6 — Operating income 22.7 9.8
Slide 27: Q2 and YTD 2019 and 2018 Adjusted Operating Income Reconciliation
Q2 and YTD 2019 and 2018 U.S. GAAP to Adjusted Operating Income Reconciliation ($ millions) Three months ended Six months ended June 29, 2019 June 30, 2018 June 29, 2019 June 30, 2018 Operating income $ 26.3 $ 22.7 $ 29.3 $ 42.0 Exclude: Aggregate operating losses of the South Africa and Heat Transf
Slide 28: Q2 2019 U.S. GAAP Revenue to Organic Revenue Reconciliation
Q2 2019 U.S. GAAP Revenue to Organic Revenue Reconciliation ($ millions) Three months ended June 29, 2019 Detection & HVAC Measurement Engineered Solutions Adjusted SPX Net Revenue Growth (Decline) (6.3) % 36.3 % 2.7 % 6.3 % Exclude: Foreign Currency (0.6) % (0.7) % 0.1 % (0.4) % Exclude: Acquisitio
Slide 29: Adjusted Revenue and Adjusted Segment Income Reconciliation
Q2 and YTD 2019 and 2018 U.S. GAAP to Adjusted Revenue and Adjusted Segment Income Reconciliation ($ millions) CONSOLIDATED SPX: Three months ended Six months ended June 29, 2019 June 30, 2018 June 29, 2019 June 30, 2018 Consolidated revenue $ 372.4 $ 379.2 $ 716.0 $ 731.1 Exclude: "All Other" opera
Slide 30: Adjusted Segment Income Reconciliations
Q2 and YTD 2019 and 2018 U.S. GAAP to Adjusted Segment Income Reconciliations ($ millions) HVAC REPORTABLE SEGMENT: Thre e months e nde d Six months e nde d June 29, 2019 June 30, 2018 June 29, 2019 June 30, 2018 HVAC segment income $ 16.7 $ 18.5 $ 35.1 $ 37.1 (1) Exclude: Amortization expense (0.1)
Slide 31: Q2 2019 Debt Reconciliation
Q2 2019 Debt Reconciliation ($ millions) Q2 2019 Short-term debt* $ 69.5 Current maturities of long-term debt 14.1 Long-term debt (1) 329.6 Gross debt 413.2 Less: Purchase card program and extended payables (2.6) Adjusted gross debt 410.6 Less: Cash and equivalents (34.6) Adjusted net debt $ 376.0 *
Slide 32: Q2 2019 Consolidated Adjusted EBITDA Reconciliation
Q2 2019 Consolidated Adjusted EBITDA* Reconciliation ($ millions) Last 12 Months Net income attributable to SPX Corporation common shareholders $ 64.2 Income tax provision (benefit) 5.6 Interest expense 22.7 Income before interest and taxes 92.5 Depreciation and amortization 32.4 EBITDA 124.9 Adjust
Slide 33: Q2 2019 Adjusted Free Cash Flow Reconciliation
Q2 2019 Adjusted Free Cash Flow from Continuing Operations to U.S. GAAP Reconciliation ($ millions) Q2 2019 Net operating cash flow from continuing operations $ 16.5 Capital expenditures - continuing operations (2.5) Free cash flow used in continuing operations 14.0 Adjustment for "All other" 1.1 Ad