Slide 1: 2011 First Quarter Results
2011 First Quarter Results GLOBAL INFRASTRUCTURE X PROCESS EQUIPMENT X DIAGNOSTIC TOOLS May 4, 2011 1
Slide 2: Forward-looking statements disclaimer
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: Introductory Comments
Introductory Comments GLOBAL INFRASTRUCTURE X PROCESS EQUIPMENT X DIAGNOSTIC TOOLS May 2011 3
Slide 4: Introductory Comments
Introductory Comments Q1 results were in-line with expectations: 11% revenue growth 31% EPS growth Total backlog increased 4% sequentially: Order trends in Flow Technology segment were particularly strong Positive order trends continued for transformers Completed two strategic acquisitions: Teradyne
Slide 5: Q1 2011 Organic Revenue
Q1 2011 Organic Revenue Q1 2011 Organic Revenue Change by Segment 30% 20% 20% 18% Consolidated Organic Revenue Growth: 6% 10% 0% -4% -10% -10% -20% Test & Flow Industrial Products Thermal Equipment Measurement Technology and Services and Services Note: See appendix for non-GAAP reconciliations Organ
Slide 6: Q1 Revenue by Region
Q1 Revenue by Region Q1 Year-Over-Year Change Q1 2011 Revenue Q1 2011 Q1 2011 Q1 2011 by Geography +9% +12% -2% Americas 51% Europe 26% Middle East Asia Pacific & Africa 14% 9% Q1 2011 +38% Q1 Revenue Into Emerging Markets Increased 17% Year-Over-Year May 2011 6
Slide 7: Backlog
Backlog Aging of Q1 2011 Ending Backlog 2011 Quarter End Backlog 68% ($ billions) 2012 and $3.0 Beyond $2.9 $3.0 $2.9 32% $2.7 Q1 2011 Ending Backlog by Geography South Africa Americas 24% 34% Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Europe 24% Middle Asia East Pacific 5% 13% 4% Sequential Increase i
Slide 8: Impact from Events in Japan
Impact from Events in Japan Exposure in Japan: ~1% of annual revenue is generated from sales into Japan Modest level of sourcing from Japan, primarily electronics No manufacturing facilities Exposure to nuclear power: <3% of total annual revenue is from sales of nuclear power generation equipment ~$
Slide 9: 2011 Guidance Update
2011 Guidance Update 2011 EPS Guidance Range $4.80 EPS Mid-Point $4.60 $4.55 $4.50 $4.50 $4.40 $4.40 $4.35 $4.35 $4.25 $4.20 $4.20 $4.20 $4.00 Jan 19 Feb 17 May 4 Note: See appendix for non-GAAP reconciliations Raised EPS Guidance Range to $4.25 to $4.55; Free Cash Flow Guidance Range Remained at $2
Slide 10: Balance Sheet and Debt Ratios
Balance Sheet and Debt Ratios ($ millions) Debt to Capital 36% Key Balance Sheet Accounts 35% 12/31/10 4/2/11 Ca s h $455 $372 Tota l As s ets $5,993 $6,104 Q4 2010 Q1 2011 Debt to Bank EBITDA (1) Tota l Debt $1,198 $1,222 2.1x 2.1x 1.4x 1.5x Tota l Equi ty $2,104 $2,223 Q4 2010 Q1 2011 (1) Net and
Slide 11: Q1 Financial Analysis
Q1 Financial Analysis GLOBAL INFRASTRUCTURE X PROCESS EQUIPMENT X DIAGNOSTIC TOOLS May 2011 11
Slide 12: Q1 Earnings Per Share
Q1 Earnings Per Share Significant Year-Over-Year Drivers Q1 Earnings Per Share Increases: Flow segment income $0.49 Test & Measurement segment income $0.37 Insurance recovery (Industrial segment) Currency benefits Decreases: Thermal & Industrial segment income: − Related primarily to power businesse
Slide 13: Consolidated Q1 Financial Analysis
Consolidated Q1 Financial Analysis ($ millions) Revenue 11% revenue growth: Segment Margins 6% organic growth 3% acquisition growth $1,199 2% currency benefit $1,085 9.8% 8% increase in segment income 9.5% 30 points of margin contraction: Due to declines in higher margin power transformer and dry co
Slide 14: Flow Technology Q1 Analysis
Flow Technology Q1 Analysis ($ millions) Revenue Segment Margins 29% revenue growth: $456 18% organic growth 8% increase from acquisitions $354 3% currency benefit 12.4% 11.7% 37% increase in segment income 70 points of margin expansion: Leverage on organic revenue growth Q1 2010 Q1 2011 30 points o
Slide 15: Flow Technology Backlog Analysis
Flow Technology Backlog Analysis ($ millions) Quarter End Backlog Q1 2011 Backlog Commentary 7% sequential increase: $848 Strong demand for food & beverage $772 $789 components $620 $636 Strong replacement demand in oil and natural gas markets Steady increase in industrial markets driven by aftermar
Slide 16: Thermal Equipment & Services Q1 Analysis
Thermal Equipment & Services Q1 Analysis ($ millions) Revenue Segment Margins $352 8% revenue decline: $325 10% organic decline 2% currency benefit 9.0% 6.5% 33% decrease in segment income 250 points of margin contraction: Decline in higher margin dry cooling projects Q1 2010 Q1 2011 Revenue Growth
Slide 17: Thermal Equipment & Services Backlog Analysis
Thermal Equipment & Services Backlog Analysis ($ millions) Quarter End Backlog Q1 2011 Backlog Commentary Backlog flat sequentially: $1,785 $1,597 $1,666 $1,625 $1,624 Steady demand for smaller scale power projects related to evaporative cooling systems and heat exchangers 1% benefit from currency Y
Slide 18: Test & Measurement Q1 Analysis
Test & Measurement Q1 Analysis ($ millions) Revenue Segment Margins 22% revenue growth: $249 20% organic growth $204 2% currency benefit 7.9% 46% increase in segment income 6.6% 130 points of margin expansion: Leverage on organic growth Q1 2010 Q1 2011 20% Organic Revenue Growth; Margins Increased 1
Slide 19: Industrial Products & Services Q1 Analysis
Industrial Products & Services Q1 Analysis ($ millions) Revenue Segment Margins 3% revenue decline: 4% organic revenue decline $174 1% acquisition growth $169 11.6% 14% decrease in segment income: 10.2% 140 points of margin contraction: Lower pricing on power transformer shipments Partially offset b
Slide 20: Industrial Products & Services Backlog Analysis
Industrial Products & Services Backlog Analysis ($ millions) Quarter End Backlog Q1 2011 Backlog Commentary Segment backlog increased 12% $403 sequentially: $358 $369 $359 $359 Positive order trends across all businesses 15% increase in transformer backlog driven by volume: Lead times have extended
Slide 21: Historical Transformer Data
Historical Transformer Data ($ millions) Quarterly Backlog Value Full Year Revenue Full Year Operating Margin % $481 $393 $376 $348 $283 $250 ~$250 $209 $224 $194 30% 0% 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011E Cyclical Recovery Underway; Volume and Price Have Been Highly Correlated May 20
Slide 22: Free Cash Flow
Free Cash Flow ($ millions) $300 $220 to $260 Q1 2011 Free Cash Flow: $206 $200 Consistent with historical seasonality 113% 107% Conversion of Increased capital investment vs. Net Income Q1 2010 $100 2011E Free Cash Flow: $0 Elevated capital spending at $150m ~$30m of restructuring spend -$37 -$52 -
Slide 23: 2011 Guidance
2011 Guidance GLOBAL INFRASTRUCTURE X PROCESS EQUIPMENT X DIAGNOSTIC TOOLS May 2011 23
Slide 24: Q2 2011 Targets
Q2 2011 Targets ($ millions, except per share data) Q2 2010 Q2 2011E Revenue $1,189 total growth: +10% to 15% Segment Income $136 $133 to $138 Segment Income Margin 11.4% 9.8% to 10.3% Earnings Per Share $1.00* $0.80 to $0.90 *Adjusted EPS excludes $0.41 of tax benefits; see appendix for non-GAAP re
Slide 25: Q2 2011 EPS Guidance Bridge
Q2 2011 EPS Guidance Bridge Q2 2010 Adjusted EPS $1.00 EPS increases: Segment Income (excluding Thermal) $0.22 Reduced power project volume EPS decreases: Fewer retrofit projects Thermal Segment Income ($0.22) Interest expense ($0.07) Potential Q2 refinancing: ($0.03) Restructuring expense ($0.06) N
Slide 26: 2011E 1H vs. 2H EPS Mid-Point Analysis
2011E 1H vs. 2H EPS Mid-Point Analysis Earnings Per Share Second Half 2011 Mid-Point Estimates Drivers vs. First Half $3.04 Thermal segment: ~35% revenue increase with significant margin improvement $1.36 Flow segment: ~10% revenue increase with margin improvement ~$0.16 cents benefit from lower 1H
Slide 27: Full Year Segment Targets
Full Year Segment Targets Previous Revenue Growth Targets Current Revenue Growth Targets +15% to +20% +13% to +18% +10% to +15% +4% to +4% to +9% +9% +3% to +2% to +1% to +8% +7% +6% Flow Technology Test & Measurement Industrial Products Thermal Equipment and Services and Services Margin Target 13.2
Slide 28: 2011 Consolidated Financial Targets
2011 Consolidated Financial Targets Revenue $5.4b to $5.6b total growth: +10% to 15% organic growth: +5% to 9% Segment Income Margin 10.8% to 11.3% modest decline Earnings Per Share $4.25 to $4.55 ~22% increase vs. 2010 EPS mid-point: $4.40 Free Cash Flow $220m to $260m ~107% of net income Capital S
Slide 29: 2011 EPS Guidance Bridge
2011 EPS Guidance Bridge Previous 2011 EPS Mid-Point $4.35 EPS increases: Organic growth expectations $0.17 Currency changes $0.17 2011 completed acquisitions $0.04 EPS decreases: Japan/nuclear impact ($0.13) Stock compensation expense ($0.10) Net other items ($0.10) Current 2011E EPS Mid-Point $4.4
Slide 30: 2011 Guidance Upsides & Downsides
2011 Guidance Upsides & Downsides 2011 Guidance potential negative impacts potential positive impacts earnings per share: – dispositions + acquisitions $4.25 to $4.55 – Flow market slowdowns + stronger short cycle demand – large project timing delays – delayed vehicle launches free cash flow: $220m
Slide 31: Executive Summary
Executive Summary GLOBAL INFRASTRUCTURE X PROCESS EQUIPMENT X DIAGNOSTIC TOOLS May 2011 31
Slide 32: Executive Summary
Executive Summary Earnings Per Share* Q1 results generally in-line with expectations peak earnings was in 2008 Q1 ending backlog increased 4% sequentially $6.53 Expect stronger 2nd half to drive full year 2011 organic revenue and earnings growth $4.85 $4.40 $3.90 $3.62 Investing in: $3.07 Innovation
Slide 33: Questions
Questions GLOBAL INFRASTRUCTURE X PROCESS EQUIPMENT X DIAGNOSTIC TOOLS May 2011 33
Slide 34: Appendix
Appendix GLOBAL INFRASTRUCTURE X PROCESS EQUIPMENT X DIAGNOSTIC TOOLS May 2011 34
Slide 35: EPS Mid-Point Model
EPS Mid-Point Model ($ millions, except share data) 2010 2011E Revenue $4,887 $5,480 Segment income margin 11.5% $560 11.1% $607 Corporate expense (96) (104) Pension / PRHC (52) (37) Stock-based compensation (31) (43) Impairment of goodwill and other intangibles (2) 0 Special charges (36) (25) Opera
Slide 36: 2011E Segment Revenue and Margin Targets
2011E Segment Revenue and Margin Targets % Revenue Growth 25% Flow 20% 15% T&M Thermal 10% Industrial 5% Margin Change 0% (in bps) -200 -150 -100 -50 0 50 100 -5% Revenue Margins -10% Flow +15% to +20% 13.2% to 13.7% Thermal +3% to +8% 10.1% to 10.6% T&M +13% to +18% 8.7% to 9.2% Industrial +4% to +
Slide 37: Q1 2011 Backlog by Segment
Q1 2011 Backlog by Segment 4/2/2011 Ba ckl og Va ri a nce to Q4 2010 Va ri a nce to Q1 2010 Flow Technology $848 7.4% 36.8% Thermal Equipment & Services $1,624 -0.1% -9.0% Test & Measurement $153 3.7% -0.3% Industrial Products & Services $403 12.1% 12.6% Consolidated SPX $3,028 3.6% 3.8% May 2011 37
Slide 38: Non-GAAP Reconciliations
Non-GAAP Reconciliations GLOBAL INFRASTRUCTURE X PROCESS EQUIPMENT X DIAGNOSTIC TOOLS May 2011 38
Slide 39: Q1 2011 Organic Revenue Growth Reconciliation
Q1 2011 Organic Revenue Growth Reconciliation Quarter Ended April 2, 2011 Net Revenue Acqui s i ti ons / Cha nge Di ves ti tures Currency Orga ni c Flow Technology 28.8% 7.5% 3.2% 18.1% Thermal Equipment & Services -7.7% 0.0% 2.2% -9.9% Test & Measurement 21.8% 0.0% 1.6% 20.2% Industrial Products &
Slide 40: Q1 Free Cash Flow Reconciliation
Q1 Free Cash Flow Reconciliation ($ millions) Q1 2010 Q1 2011 Net ca s h from conti nui ng opera ti ons $ (35) $ (25) Ca pi ta l expendi tures $ (16) $ (12) Free ca s h fl ow from conti nui ng opera ti ons $ (52) $ (37) May 2011 40
Slide 41: Full Year Free Cash Flow Reconciliation
Full Year Free Cash Flow Reconciliation 2010 2011E Guidance Range ($ millions) Net cash from continuing operations $ 257 $ 370 to $ 410 Capital expenditures $ (76) $ (150) $ (150) Free cash flow from continuing operations $ 181 $ 220 to $ 260 Add back: Payments on early termination of swap agreeemen
Slide 42: Debt Reconciliations
Debt Reconciliations ($ millions) 12/31/2010 4/2/2011 Short-term debt $ 36 $ 88 Current maturities of long-term debt 51 23 Long-term debt 1,111 1,111 Gross Debt $ 1,198 $ 1,222 Less: Puchase card program and extended A/P programs $ (36) $ (30) Adjusted Gross Debt $ 1,162 $ 1,192 Less: Cash in excess
Slide 43: Bank EBITDA Reconciliations
Bank EBITDA Reconciliations ($ millions) 2010 2011E Revenues $4,887 $5,480 Net Income $194 $226 Income tax provision (benefit) 53 107 Interest expense 82 92 Income before interest and taxes $329 $425 Depreciation and intangible amortization expense 113 123 EBITDA from continuing operations $442 $549
Slide 44: 2006 to 2010 Adjusted EPS
2006 to 2010 Adjusted EPS 2006 2007 2008 2009 2010 GAAP EPS from continuing operations $ 3.74 $ 5.33 $ 4.68 $ 0.95 $ 3.86 refinancing charges - - - - 0.33 asset impairments - 0.05 2.21 3.40 - tax benefits (0.85) (0.59) (0.47) (0.43) (0.57) legal matters 0.27 0.06 0.11 - - other (0.08) - - - - Adjust