Slide 1: 2010 Fourth Quarter & Full Year Results
2010 Fourth Quarter & Full Year Results GLOBAL INFRASTRUCTURE X PROCESS EQUIPMENT X DIAGNOSTIC TOOLS February 17, 2011 1
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 and are thus prospective. These forward‐looking statements are subject to risks,
Slide 3: Introductory Comments
Introductory Comments GLOBAL INFRASTRUCTURE X PROCESS EQUIPMENT X DIAGNOSTIC TOOLS February 2011 3
Slide 4: 2010 Highlights
2010 Highlights 25% of total revenue from sales into emerging markets: Revenue into China grew 39% Revenue into Africa ggrew 36% Test & Measurement segment achieved 15% organic revenue growth and 200 points of margin expansion Thermal Equipment’s segment income margin improved 130 points t
Slide 5: Q4 2010 Financial Results
Q4 2010 Financial Results Revenue $1.3b Flat versus Q4 2009 Segment Margins 12.1% 70 point year‐over‐year decline primarily due to power related businesses Adjusted EPS $1.13 Exceeded top end of guidance range *Excludes $0.17 tax benefit 17% year‐over‐year decline primarily due to powe
Slide 6: Q4 Year-Over-Year Revenue Change by Region
Q4 Year‐Over‐Year Revenue Change by Region Q4 2010 Q4 2010 +5% (13%) Q4 2010 +2% Note: Data from continuing operations Revenue Growth in the Americas and Asia‐Pacific Offset a Decline in EMEA; 52% of Q4 2010 Revenue From Sales Outside of North America February 2011 6
Slide 7: Full Year 2010 Financial Results
Full Year 2010 Financial Results Revenue $4.9b 1% increase versus 2009 Segment Margins 11.5% 60 point year‐over‐year decline primarily due to power transformer business Adjusted EPS $3.62 Exceeded top end of guidance range *Excludes $0.57 of tax benefits 8% year‐over‐year decline prima
Slide 8: Backlog
Backlog Aging of Q4 2010 Ending Backlog 2011 Quarter End Backlog 70% ($ billions) 2012 and $3.1 Beyond $2.9 $ $3.0 $2.9 30% $2.7 Q4 2010 Ending Backlog by Geography South Africa Americas 26% 34% Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 EEurope 22% Middle East Asia 4% Pacific 14% Note: Data from conti
Slide 9: Balance Sheet and Debt Ratios
Balance Sheet and Debt Ratios ($ millions) Debt to Capital 40% Key Balance Sheet Accounts 36% 12/31/09 12/31/10 Ca s h $523 $455 Tota l As s ets $5,725 $5,883 2009 2010 Debt to Bank EBITDA (1) Tota l Debt $1,279 $1,198 2.1x 2.1x 1.3x 1.4x Tota l Equi ty $1,882 $2,104 2009 2010 ( ) Net and Gross Debt
Slide 10: Teradyne Diagnostics Solutions
Teradyne Diagnostics Solutions 2010 Service Diagnostics Revenue by OEM Daimler Ford A leading global supplier of diagnostic solutions to 40% 16% vehicle OEMs Honda 13% ~$40m of annual revenue GM Others 10% 21% Supports more than 25,000 dealerships worldwide Strategic St t i rationale: ti l
Slide 11: Financial Analysis
Financial Analysis GLOBAL INFRASTRUCTURE X PROCESS EQUIPMENT X DIAGNOSTIC TOOLS February 2011 11
Slide 12: Earnings Per Share
Earnings Per Share 2010 Q1 Q2 Q3 Q4 Full Year GAAP EPS from continuing operations $ 0.37 $ 1.40 $ 0.78 $ 1.30 $ 3.86 Refinancing charges ‐ ‐ 0.33 0.33 Tax benefits ‐ (0.40) ‐ (0.17) (0.57) Adjusted EPS from continuing operations $ 0.37 $ 1.00 $ 1.11 $ 1.13 $ 3.62 Q4 2010 Adjusted EPS of $1.13 Per
Slide 13: Earnings Per Share
Earnings Per Share 2010 EEarnings i P Per Sh Share Q4 Adjusted Adj d Earnings E i Per P Share Sh Bridge B id $1.11 $1.13 Q4 2009 adjusted EPS $1.36 $1.00 $1 00 Power transformer operating profit ($0.18) Other items, net ($0.05) $0.37 Q4 2010 adjusted EPS $1.13 Q1 Q2* Q3* Q4* *as adjusted; see ap
Slide 14: Consolidated Q4 Financial Analysis
Consolidated Q4 Financial Analysis ($ millions) Revenue Flat Fl t revenue: Segment Margins 4% increase from acquisitions $1,323 $1,325 (3%) organic decline (1%) currency impact 12.8% 5% decline in segment income 12.1% 70 points of margin contraction: 90 points of margin contraction due
Slide 15: Flow Technology Q4 Analysis
Flow Technology Q4 Analysis ($ millions) Revenue 11% revenue growth: th Segment Margins 9% increase from acquisitions $486 3% organic growth $438 (1%) currency impact 14.6% 13% increase in segment income 14.3% 30 points of margin expansion: Leverage on organic revenue growth Favorabl
Slide 16: Flow Technology Full Year Analysis
Flow Technology Full Year Analysis ($ millions) Revenue 2010 vs. 2009 Segment Margins +10% to +15% 2% revenue growth: 6% increase from acquisitions $1,634 $1,662 (4%) organic decline 13.0% to 13.5% 13.0% 12.9% 2% increase in segment income 10 points of margin expansion: 50 points of dilu
Slide 17: Thermal Equipment & Services Q4 Analysis
Thermal Equipment & Services Q4 Analysis ($ millions) Revenue 14% revenue decline: d li Segment Margins 4% increase from acquisitions $487 (16%) organic decline (2%) currency impact $419 13.0% 17% decrease in segment income 12.6% 40 points of margin contraction: Reduced volume of power
Slide 18: Thermal Equipment & Services Full Year Analysis
Thermal Equipment & Services Full Year Analysis ($ millions) Revenue 2010 vs. 2009 Segment Margins +2% to 0.4% revenue growth: +7% 6% increase from acquisitions $1,596 $1,602 (4%) organic decline (1%) currency impact 12 1% 12.1% Segment income increased 13% and 10.8% 10.3% to segment margi
Slide 19: Test & Measurement Q4 Analysis
Test & Measurement Q4 Analysis ($ millions) Revenue 15% revenue ggrowth: Segment Margins 17% organic growth (2%) currency impact $252 $219 12% increase in segment income 8.9% 8.6% Year‐end LIFO credit: Q4 2009 2009: $4 Q4 2010: $1 30 p points of margin g contraction: 2009 2010 Due
Slide 20: Test & Measurement Full Year Analysis
Test & Measurement Full Year Analysis ($ millions) Revenue Segment Margins 2010 vs. 2009 +1% to 14% revenue growth: +6% 15% organic growth $924 (1%) currency impact 8.7% to $810 9.2% 8.3% Segment income increased 49% and segment margins expanded 200 points: 6.3% Leverage on organic growth
Slide 21: Industrial Products & Services Q4 Analysis
Industrial Products & Services Q4 Analysis ($ millions) Revenue Segment Margins $179 6% revenue decline $168 36% decrease in segment income 13.1% 8.9% 420 points of margin contraction: Lower pricing on power transformer shipments Q4 2009 Q4 2010 Note: Data from continuing operations Revenue
Slide 22: Industrial Products & Services Full Year Analysis
Industrial Products & Services Full Year Analysis ($ millions) Revenue g Segment g Margins 2010 vs. 2009 (13%) revenue decline: $806 +4% to (14%) organic decline +9% 0.4% acquisition growth $699 19.1% Segment income decreased 52% and segment margins contracted 840 points: Reduced volume an
Slide 23: Free Cash Flow
Free Cash Flow GLOBAL INFRASTRUCTURE X PROCESS EQUIPMENT X DIAGNOSTIC TOOLS February 2011 23
Slide 24: Free Cash Flow
Free Cash Flow ($ millions) 190% 113% 110% $174 of Free Cash Flow in Q4 2010 $370 Q4 2010 Pension Funding ($100) $206 of adjusted Free Cash Flow in 2010: $220 to Net of $100 Q4 2010 pension contribution $206 $260 2011E Free Cash Flow is $220 to $260 and includes: Elevated capital spending
Slide 25: Projected Liquidity
Projected Liquidity ($ millions) Cash on hand at 12/31/2010 / / $455 Available credit lines $555 Liquidity at 12/31/2010 $1,010 2011E free cash flow $240 Planned debt payments ($50) Expected dividend payments ($51) Projected liquidity at 12/31/2011 $1 149* $1,149 *Excludes future acquisitions and di
Slide 26: 2011 Guidance and Summary
2011 Guidance and Summary GLOBAL INFRASTRUCTURE X PROCESS EQUIPMENT X DIAGNOSTIC TOOLS February 2011 26
Slide 27: 2011 Consolidated Financial Targets
2011 Consolidated Financial Targets Revenue $5.2b to $5.4b total growth: +5% to 10% Segment Income Margin 10.8% to 11.3% Earnings Per Share $4.20 to $4.50 +16% to +24% EPS mid‐point: $4.35 Free Cash Flow $220m to $260m 100% to 120% of net income Capital Spending ~$150m transformer plant expansion &
Slide 28: Cyclical Analysis by End Market
Cyclical Analysis by End Market % of 2010 Revenue Power 35% Generation 30% Diagnostics Tools & 25% HVAC & Other Equipment for Infrastructure Other Vehicle Service Markets 20% Food & Beverage Components 15% 10% Oil & Gas Food & Beverage Systems Power 5% T&D 0% Late Cycle Mid Cycle Early Cycle Cyclica
Slide 29: Executive Summary
Executive Summary Earnings Per Share* Solid operating execution in 2010 p peak earnings g was in 2008 Expect to return to organic revenue $6.53 and earnings growth in 2011 $4.85 Investing in: $4.35 Innovation $3.90 $3.62 Large power transformer capacity $3.07 China manufacturing campus
Slide 30: Questions
Questions GLOBAL INFRASTRUCTURE X PROCESS EQUIPMENT X DIAGNOSTIC TOOLS February 2011 30
Slide 31: Appendix
Appendix GLOBAL INFRASTRUCTURE X PROCESS EQUIPMENT X DIAGNOSTIC TOOLS February 2011 31
Slide 32: EPS Mid-Point Model
EPS Mid‐Point Model ($ millions millions, except per share data) 2010 2011E Revenue $4,887 $5,280 Segment income margin 11.5% 11.1% Corporate expense (96) (100) P Pension i / PRHC (52) (40) Stock‐based compensation (31) (35) Impairment of goodwill and other intangibles (2) 0 Special charges (36) (25
Slide 33: 2011E Segment Revenue and Margin Targets
2011E Segment Revenue and Margin Targets % Revenue Growth 20% 15% Flow 10% Thermal Industrial 5% T&M 0% Margin Change ‐150 ‐100 ‐50 0 50 100 (in bps) ‐5% ‐10% Revenue Margins Flow +10% to +15% 13.0% to 13.5% Th Thermal l +2% to t +7% 10 3% tto 10 10.3% 10.8% 8% T&M +1% to +6% 8.7% to 9.2% Industrial
Slide 34: Q4 2010 Backlog by Segment
Q4 2010 Backlog by Segment 12/31/2010 Ba ckl og Va ri a nce to Q3 2010 Va ri a nce to Q4 2009 Flow Technology $789 2 3% 2.3% 36 3% 36.3% Thermal Equipment & Services $1,625 ‐2.5% ‐17.6% Test & Measurement $148 ‐6.6% 5.5% Industrial Products & Services $359 0.2% ‐8.6% Consolidated SPX $2,922 ‐1.1% ‐5
Slide 35: 2011 Guidance Upsides & Downsides
2011 Guidance Upsides & Downsides 2011 Guidance potential negative impacts potential positive impacts earnings per share: – dispositions $4.20 to $4.50 ⁺ acquisitions – Flow market slowdowns ⁺ transformer pricing – large project timing delays ⁺ wireless commercialization – delayed vehicle launches f
Slide 36: Non-GAAP Reconciliations
Non-GAAP Reconciliations GLOBAL INFRASTRUCTURE X PROCESS EQUIPMENT X DIAGNOSTIC TOOLS February 2011 36
Slide 37: Q4 2010 Organic Revenue Growth Reconciliation
Q4 2010 Organic Revenue Growth Reconciliation Quarter Ended December 31,, 2010 Q Net Revenue Acqui s i ti ons / Forei gn Cha nge Di ves ti tures Currency Orga ni c Flow Technology 11 0% 11.0% 9 2% 9.2% ‐1.0% 1 0% 2 8% 2.8% Thermal Equipment & Services ‐14.1% 3.5% ‐1.5% ‐16.1% Test & Measurement 15.0
Slide 38: 2010 Organic Revenue Growth Reconciliation
2010 Organic Revenue Growth Reconciliation Year Ended December 31,, 2010 Net Revenue Acqui s i ti ons / Cha nge Di ves ti tures Forei gn Currency Orga ni c Flow Technology 1 7% 1.7% 5 6% 5.6% 0 2% 0.2% ‐4.1% 4 1% Thermal Equipment & Services 0.4% 5.5% ‐1.1% ‐4.0% Test & Measurement 14.0% 0.0% ‐1.1%
Slide 39: 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) ‐ ‐
Slide 40: Q4 Free Cash Flow Reconciliation
Q4 Free Cash Flow Reconciliation ($ millions) Q4 2009 Q4 2010 Net ca s h from conti nui ng opera ti ons $ 226 $ 214 Ca pi ta l expendi tures $ (33) $ (40) Free ca s h fl ow from conti nui ng opera ti ons $ 193 $ 174 February 2011 40
Slide 41: Full Year Free Cash Flow Reconciliation
Full Year Free Cash Flow Reconciliation 2009 2010 2011E Guidance Range ($ millions) Net cash from continuing operations $ 463 $ 257 $ 370 to $ 410 Capital expenditures $ (93) $ (76) $ (150) $ (150) Free cash flow from continuing operations $ 370 $ 181 $ 220 to $ 260 Add back back: Payments on early
Slide 42: Debt Reconciliations
Debt Reconciliations ($ millions) 12/31/2009 12/31/2010 Short-term debt $ 74 $ 36 Current maturities of long-term debt 76 51 g Long-term debt 1,129 1,111 Gross Debt $ 1,279 $ 1,198 Less: Puchase card program and extended A/P programs $ (26) $ (36) j Adjusted Gross Debt $ 1,253 , $ 1,162 , Less: Cash
Slide 43: Bank EBITDA Reconciliations
Bank EBITDA Reconciliations ($ millions) 2010 2011E Revenues $4,887 $5,280 Net Income $194 $222 Income tax provision (benefit) 53 105 Interest expense 82 89 Income before interest and taxes $329 $417 Depreciation D i ti and d iintangible t ibl amortization ti ti expense 113 130 EBITDA from continuin