Date post: | 13-Jul-2015 |
Category: |
Economy & Finance |
Upload: | finance40 |
View: | 585 times |
Download: | 0 times |
3rd Annual Basics & Industrials Conference
New York, New YorkJune 4th, 2008
PAGE 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, uncertainties and other factors which could cause actual results to differ materially from future results expressed or implied by such forward-looking statements.
Particular risks facing SPX include economic, business and other risks stemming from our international operations, legal and regulatory risks, cost of raw materials, pricing pressures, pension funding requirements, integration of acquisitions and changes in the economy. More information regarding such risks can be found in SPX’s SEC filings.
The estimates of future performance and guidance are as presented on April 30, 2008. SPX’s inclusion of estimates and guidance in the presentation is not an update, confirmation, affirmation, or disavowal of the estimates.
Although SPX believes that the expectations reflected in its forward-looking statements are reasonable, it can give no assurance that such expectations will prove to be correct. In addition, estimates of future operating results are based on the company’s current complement of businesses, which is subject to change.
Statements in this presentation are only as of the time made, and SPX does not intend to update any statements made in this presentation except as required by regulatory authorities.
This presentation includes non-GAAP financial measures. A copy of this presentation, including a reconciliation of the non-GAAP financial measures with the most comparable measures calculated and presented in accordance with GAAP, is available on our website at www.spx.com.
PAGE 3
SPX Transformation
PAGE 4
SPX Growth Strategy
Growth Strategy Established in 2005Underpins 34% CAGR of EPS from 2005 to 2008E
*2005 – 2007 adjusted for certain items, see appendix for reconciliations; 2008E as of April 30, 2008
2005 2006 2007 2008E
Earnings Per Share*
$2.62
$4.85
$3.07
$6.20 to $6.40
Strategic Initiatives
Focus growth on three global end markets
Drive continuous improvement culture
Disciplined approach to capital allocation
Achieve profitable and sustainable long-term growth
17%17% 58%58% ~30%~30%
PAGE 5
Focus on Three Global End Markets
Focused Growth Around Three Global End Markets
Global
Infra
struc
ture Process Equipment
Tools & Diagnostics
PAGE 6
SPX Operating Initiatives
Operating Initiatives Supporting Growth and Improvement Within SPX
Growth
Improvement
Resources
Emerging Markets
New Product Development
IT Infrastructure
Lean Organization
Supply-Chain Management
Learning and DevelopmentShared
Services
PAGE 7
Disciplined Capital Allocation
$675
$386
$716
2005 2006 2007
Disciplined Approach to Capital Allocation
15m
8m9m
Share Repurchases
Johnson Controls European Diagnostics
Strategic Acquisitions
5 acquisitions completed
~$1.2B total revenue
$1.8B of total share repurchases
Average purchase price of $58 per share
PAGE 8
Financial Results
The Transformation of SPX is Clearly Reflected in Our Improving Financial Performance
*Excludes dilutive impact of APV
Segment Income Margins
11.1%
12.1%
13.5% to 14.0%*
13.0%
6% 10% ~5-7%10%
Revenue GrowthOrganic growth
($ millions)
2005 2006 2007 2008E
$3,658$4,097
$4,747
$6,175
2005 2006 2007 2008E
12.4% to 12.9%
Including APV
Note: Data from continuing operations; 2008E as of 4/30/2008; See appendix for non-GAAP reconciliations
PAGE 9
Positioned for Future Growth
PAGE 10
SPX Well Positioned for Future Growth
ROW4%
North America
49%
Asia-Pacific15%
Europe32%
> 50% of Revenue Generated Outside North America;> 50% of Revenue Supports Global Infrastructure Growth
Revenue by Geography Revenue by End Market
General Industrial
13%
Global Infrastructure
53%
Sanitary Flow14%
Tools & Diagnostics
20%
PAGE 11
Key External Market Drivers
Global Growth Providing Opportunities for SPX
Global Infrastructure
Process Equipment
Tools & D
iagnostics
Growing world population
Advancement of developing countries
Increasing demand for power and energy
Increasing demand for processed food and beverages
Government regulations
Increasing environmental awareness
PAGE 12
$562$640
$763
$348
$731$799
$1,217$1,254
$1,401
Q12007
Q42007
Q12008
Q12007
Q42007
Q12008
Q12007
Q42007
Q12008
Backlog Development
Strong Global Demand for Power and Energy InfrastructureAnd Process Equipment Driving Backlog Increases
Thermal($ millions)
Note: Data from continuing operations
FlowIndustrial
~3 Months Visibility
~9 MonthsVisibility
> 1 Year Visibility
PAGE 13
Global Energy Infrastructure Investment
$22 Trillion Estimated to be Spent on Energy Infrastructure From 2006 Through 2030
Coal3%
Power53%
Gas19%
Oil25%
$5.4 trillion
$11.6 trillion
Cumulative Expected Investment in Energy Infrastructure, 2006 - 2030
Source: WEO 2007 Copyright OECD/IEA, 2007; Table 1.9, page 95 , as modified by SPX Corporation
$4.3 trillion
PAGE 14
Investment in Power and Energy Infrastructure by Region
Perfect Storm of Aging Infrastructure in Developed Countries andRising Demand for Electricity Throughout the World
$5t
$2t $2t
$2t
$2t
$3t$4t
$1t
Source: WEO 2007 Copyright OECD/IEA, 2007; Figure 1.13, page 96, as modified by SPX Corporation
PAGE 15
Fuel Source Debate
South Africa Represents a Significant Opportunity for SPX
Fuel Source
Abundant, less expensive
Easy to transport
Easy to transport, low pollution rate
Zero CO2 emissions, low fuel cost
Zero CO2 emissions, free inputs
Positive Factors Negative Factors
High emissions, CO2 storage concerns
Availability, inflating price, CO2 emissions
Availability, inflating price, CO2 emissions
High initial capital cost, long-term waste
Low energy density, reliability concerns
PAGE 16
SPX Power and Energy Opportunities
SPX Technologies Serve Customers Across Many Global Power and Energy Applications
Coal Nuclear Solar T&DOil &
Natural Gas
Biofuels Petrochemicals Refinement Mining and Minerals
PAGE 17
SPX Power and Energy Initiatives
Focused on Maximizing Global Power & Energy Opportunities
Profitability improvement
Geographic expansion
New product development
Customer relationships
Increase capacity & optimize global footprint
Strengthen engineering capabilities
$1,495
$1,965
2006 2007
Power & Energy Revenue SPX Focus
PAGE 18
SPX New Product Development: Squib Valves for Nuclear Plants
SPX Designed Squib Valves Supporting Nuclear Power Growth
SPX contracted in 2007 to design and engineer squib valves for Westinghouse
US Department of Energy funded 50% of the design fees
Critical component for the AP1000 nuclear plant design
Expect deployment in the US and Asia
SPX Squib Valve
Permits the rapid exit of fluid from a pressurized fluid source
PAGE 19
SPX Leading Technology: Crystal Growers for Solar Power
SPX Has Leading Technology with Global Reach;~$90m in Orders Received Within the Past Year
0
2
4
6
8
10
12
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Gig
aWat
ts
MonocrystallineDemand Projection SPX Crystal Growers
Source: ?
PAGE 20
South African Power Market
South Africa Represents a Significant Opportunity for SPX
Reserve margin below 10%
Economic growth driving increased electricity demand
Government committed to double generating capacity to 80gw over the next decade
Eskom targeting ~70% of South Africa’s new capacity
Electricity Demand vs.Installed Capacity
Current installed capacity is 38,000 MW
Peak demand expected to reach 55,000 MW by 2022
Source: www.eskom.com
PAGE 21
Previous SPX Projects in South Africa
SPX has Significant Demonstrated Experience in South Africa
Kendal Power Station (1993) Majuba Power Station (2000)
Size: 4,116 MW Size: 2,100 MW
PAGE 22
Eskom’s Coal-Fired Power Generation Expansion
Eskom’s Expected Investment in Energy Infrastructure Represents a Significant Long-Term Opportunity for SPX
Province: Limpopo
Size: 4,800 MW
Source: Coal
Medupi
Province: Mpumalanga
Size: 4,740 MW
Source: Coal
Project Bravo
Approved Capacity Expansions Project Pipeline
Project Delta: 2,200 MW
Project Echo: 1,000 MW
Project Charlie: 2,100 MW
Project Golf: 4,200 MW
Project Foxtrot: 4,200 MW
Coal Plants
Source: Eskom Presentation: Overview of Eskom Future Generation Options
PAGE 23
SPX Presence in South Africa
SPX is Committed to Providing Critical Components to Help South Africa Expand its Power Capacity
SPX Located inNigel, South Africa
X
SPX established in South Africa in 1970
Currently ~210k square feet of manufacturing capacity:
Planning additional capacity expansion of ~100k square feet
Employing local labor for manufacturing
25.1% BEE minority shareholder
PAGE 24
Process Equipment
PAGE 25
APV Impact on Process Equipment End Markets
APV Acquisition Increases SPX’sExposure to Global Sanitary Flow Market
Chemical17%
Compressed Air8%
Power & Energy35%
General Industrial
22%
Sanitary18%
Including APV
2007 Revenue by End Market
Note: Data from continuing operations.
Chemical10%
Compressed Air5%
Sanitary41% Power &
Energy25%
General Industrial
19%
Excluding APV
PAGE 26
SPX Sanitary Flow Overview
APV Acquisition Provides SPX Critical Mass Needed toCompete in Global Sanitary Flow Market
SPX Strengths
Note: Data from continuing operations; 2008E as of 4/30/2008.
$200
~$875
2007 2008E
Sanitary Flow Revenue
Custom engineered solutions
Brand leadership
Global presence
Cross channel leverage
New product development
PAGE 27
SPX Sanitary Flow Products
Full Line of Product Offerings
Positive Displacement Pumps Centrifugal Pumps
Mixers
Homogenizers
Valves
Process Regulating Butterfly
Heat Exchangers
PAGE 28
SPX Sanitary Flow Opportunities
SPX has Technologies that Serve Customers Across Many Global Sanitary Applications
Processed Food Beverage
Dairy
Brewing
Pharmaceutical Personal Care
PAGE 29
Global Food and Beverage Market
Investment in Food Processing Machinery Expected to be Higher in Developing Countries
2001 to 2010E Investmentfor Food Processing Machinery and
Equipment by Region
Source: Food Processing Machinery and Equipment Report, Global Industry Analysts, Inc. 2006
’01 – ’06CAGR
5.8%
3.3%
0.1%
4.0%
Region
Asia-Pac
Europe
US
Latin America
’07 – ’10ECAGR7.1%
3.3%
3.6%
5.6%
Regulated market
Stable
Accelerating growth
Developing market opportunities
Attractive End MarketCharacteristics
PAGE 30
APV Integration Update
Expect APV to be Neutral to Slightly Accretive in 2008;Targeting Greater than 25 Cents EPS Accretion in 2009
Gross margins on component sales >30%
Transitioning from “cost center” to “profit center”organization
Optimizing global footprint
Synergizing distribution channels
Operating Margin OpportunityAPV Margin Development
2.2%3.6%
~5.0%
16.0%
APV FY2007
APV Q12008*
APV FY2008E
SPX Avg.Process
EquipmentMargins
*Excludes $7.5m inventory charge related to purchase accounting
PAGE 31
Diagnostic Tools
PAGE 3232
Primary Diagnostic Tools and Service Offerings
32
VehicleRepair Manuals,Wiring Diagrams
Repair Labor Time Studies & Warranty Reduction Initiatives Technology Based
Applications for Content Creation Management & Delivery
Training Development& Delivery
Field Surveys, Investigations & Training Programs
Dealer Equipment and Services
Dealer Facility Design
OEM Essential Service Tool Programs
Aftermarket Electronic Diagnostic Tools
Aftermarket Specialty Tools & EquipmentOEM
Electronic Diagnostic Tools
Managed Program Provider to Support Customer Service Readiness
ToolsTechnical
Information
DES
Only Global Provider with a Full Line of Products and Services for the Transportation Industry
PAGE 33
Regional Market Trends
US Market Remains Challenging in the Near Term;International Markets are Growing
US remains challenging:No significant new model introductions expected until 2009
Soft aftermarket
Europe providing growth:SPX growing globally with European OE’s
2007 acquisitions performing well
Investing in Asia-Pacific:Future growth market
PAGE 34
Diagnostic Tools Evolving Global Presence
ROW1%
North America78%
Asia-Pacific6% Europe
15%
Expect Globalization to Continue
Note: Data from continuing operations
2005 Revenueby Geography
2007 Revenueby Geography
ROW1%
North America59%
Asia-Pacific8%
Europe32%
PAGE 35
SPX Diagnostic Tools Strategic Initiatives
Positioning for Global Growth;Strategic Plan on Track
Restructure US cost base:Closed facility in Owatonna, MN (2007-2008)
Announced intent to close facility in Cleveland, OH (2008)
Expand international operations:Increase global OE customer base: BMW, Volkswagen, Renault
European acquisitions: CarTool, JCID, Matra
Investment in China: Engineers, Sales, R&D
$0$2$4$6$8
$10$12$14$16$18$20
1995 2000 2005 2010 2015 2020 2025 2030
Overtake Japan Sales
Overtake US Sales
Source: WEO 2007 Copyright OECD/IEA, 2007; Figure 9.6, page 300, as modified by SPX Corporation
($ billions)
Projected New Car Sales in China
PAGE 36
Renault Case Study: As Renault Grows…
Renault Continues to Expand into New Markets
Renault focused on growing in emerging markets:
Brazil, India, Russia, Korea, Romania and Morocco
Targeting 37% of sales outside Europe by 2009 by:
Expanding product line
Designing new vehicles for specific markets
35% of RenaultSales Outside Europe
Globalization of Renault
PAGE 37
…SPX Grows With Renault
Roll out of diagnostic platform: SPX providing sales and service to 15,000 dealers globally
SPX’s Ability to Provide Sales, Distribution and Service in EmergingMarkets is Critical to Our Customers’ Global Success
PAGE 38
SPX Tools & Diagnostics New Products
New Product Launches Expected to Drive Future Growth
Next GenerationGlobal Diagnostic Tool
DT-500Chinese Scan Tool
Launched Q4 2007 Expected to Launch Summer of 2008
PAGE 39
SPX Well Positioned for Continued Growth
SPX Well Positioned for Future Growth in GlobalInfrastructure, Process Equipment and Tools & Diagnostics Markets
Global Infra
structu
re Process Equipment
Tools & Diagnostics
2005 2006 2007 2008E
…Driving Earnings Growth*
$2.62
$4.85
$3.07
$6.20 to $6.40
17%17% 58%58% ~30%~30%
Three Global Growth Markets…
*2005 – 2007 adjusted for certain items, see appendix for reconciliations; 2008E as of April 30, 2008
PAGE 40
Questions
PAGE 41
Appendix
PAGE 42
Q1 2008 Highlights
Q1 2008
Note: Data from continuing operations, see appendix for non-GAAP reconciliations
Comments($ millions, except per share data)
Earnings Per Share
Revenue
Organic Growth
Segment Income Margin
$1.14 +115%
$1,393 +37%
7% Power & Energy Market Strength
11.6% +140 points
Significant Earnings Growth in Q1
PAGE 43
2008 Q2 Targets
20% to 26% Earnings Growth Expected in Q2
($ millions, except per share data)Q2 2008E
Revenue $1,208 +28% to 30% +9% to 11%
Segment Income $ $149 $189 to $195
Segment Income % 12.4% 12.2% to 12.6% 13.8% to 14.0%+140 to 160 pts
EPS $1.25 $1.50 - $1.57
Note: Data from continuing operations; 2008E as of 4/30/2008
Q2 2007
+27% to 31%+27% to 31%
~ Flat~ Flat
+20% to 26%+20% to 26%
Excluding APV
PAGE 44
2008 Financial Targets
Targeting 27% to 32% Revenue Growth and 28% to 32% Earnings Growth
2008ETarget Range
Revenue
Segment Income Margin
Excluding APV
Earnings Per Share
Free Cash Flow
Capital Spending
Note: Data from continuing operations; see appendix for non-GAAP reconciliations; 2008E as of 4/30/2008
Comments+27% to 32% Organic: 5% to 7%
12.7% to 13.2% ~flat
13.8% to 14.3% +80 to 130 bps
$6.20 to $6.40 28% to 32% (1)
$260 to $300 75% to 85% of NI
$140 to $150 Capacity, Lean & IT Investments
($ millions, except per share data)
(1) As compared to 2007 adjusted EPS
PAGE 45
Full Year Financial Model($ millions, except per share data)
2008E Mid-Point EPS Guidance is $6.30 Per Share
(1)
2007
2008E Guidance Mid-Point
Revenue $4,822 $6,175Segment Income Margin 12.9% 12.9%
Corporate overhead (95) (102) Pension / PRHC (44) (39) Stock-based compensation (41) (46) Special charges (8) (15) Operating Income $435 $594 % of revenues 9.0% 9.6%
Equity Earnings in J/V 40 46 Other Income/(Expense) (5) (5) Interest Expense (71) (110) Pre-Tax Income from Continuing Operations $399 $526Tax Provision (126) (181) Income from Continuing Operations $273.1 $344
Tax Rate 32% 35%Weighted Average Dilutive Shares Outstanding 56 55
EPS from continuing operations 4.85$ 6.30$
Guidance Range $6.20 to $6.40
EBITDA 663$ 840$ Note: Data from continuing operations; see appendix for non-GAAP reconciliations; 2008E as of 4/30/2008
PAGE 46
Expected APV Impact
Revenue: ~3-5% revenue growth ($885m to $900m)
Operating margin: ~5%
Interest expense: ~$40m
Cash restructuring $30m to $50m
Capital spending: ~$15m
Depreciation expense: ~$15m
2008E APV Financial Modeling Targets
Expect APV Acquisition to Dilute Consolidated Margin Performance;Neutral to Slightly Accretive Impact to EPS
Note: Quarterly results may vary
PAGE 47
Pro Forma APV Calculation
Base Flow Segment APV
Purchase Accounting
Pro Forma Flow
SegmentQ1 2007
Revenue $251 $248 $499Segment Income $38 $9 $47Segment Margin 15.0% 3.5% 9.3%
Q1 2008Revenue $277 $227 $0 $504Segment Income $45 $8 ($8) $46Segment Margin 16.4% 3.6% na 9.1%
Note: Data from continuing operations
PAGE 48
Pro Forma Calculation
RevenueSegment Income
Segment Margin
2007SPX $4,747 $616 13.0%
APV $876 $19 2.2%
Pro Forma SPX $5,623 $635 11.3%
2008E
SPX $5,165 - $5,350 13.8% to 14.3%
APV $885 - $900 ~5%
Total SPX $6,050 - $6,250 12.7% to 13.2%
2008E
SPX Flow Technology 16.3% to 16.8%
APV ~5%
Total SPX Flow Technlogy 11.5% to 12.0%
Note: Data from continuing operations
PAGE 49
Re-Stated Quarterly Segment Data
Note: Data from continuing operations
2006 2007 2006 2007 2006 2007 2006 2007 2006 2007
Flow Technology Revenue $194 $251 $215 $278 $212 $269 $244 $323 $866 $1,121 Segment Income $28 $38 $34 $45 $34 $45 $37 $50 $133 $177 Segment Margins 14.3% 15.0% 15.9% 16.0% 16.2% 16.8% 15.2% 15.4% 15.4% 15.8%
Test and Measurement Revenue $242 $240 $270 $289 $260 $250 $296 $320 $1,067 $1,098 Segment Income $22 $24 $40 $33 $42 $23 $46 $41 $150 $120 Segment Margins 9.3% 9.9% 14.7% 11.3% 16.3% 9.2% 15.6% 12.7% 14.1% 10.9%
Thermal Equipment and Services Revenue $275 $313 $300 $388 $322 $422 $431 $438 $1,328 $1,561 Segment Income $12 $16 $15 $38 $34 $57 $50 $52 $111 $163 Segment Margins 4.4% 5.2% 4.9% 9.8% 10.7% 13.4% 11.7% 12.0% 8.4% 10.4%
Industrial Products and Services Revenue $196 $212 $207 $253 $206 $249 $227 $253 $837 $966 Segment Income $19 $26 $22 $34 $25 $44 $33 $52 $99 $156 Segment Margins 9.6% 12.3% 10.8% 13.5% 11.9% 17.7% 14.6% 20.5% 11.8% 16.2%
Full YearFirst Quarter Second Quarter Third Quarter Fourth Quarter
PAGE 50
Non-GAAP Reconciliations
PAGE 51
Organic Revenue Growth Reconciliation
Net Revenue Acquisitions Organic Growth/(Decline) and Other Growth/(Decline)
2005 6.2% 0.5% 0.0% 5.7%
2006 11.8% 1.4% 0.7% 9.7%
2007 15.7% 3.2% 2.7% 9.8%
2008E 27% - 32% 20% - 22% 2% - 3% 5% - 7%
Foreign Currency
Note: Data from continuing operations; 2008E as of 4/30/2008
PAGE 52
2007 Adjusted Earnings Per Share
Adjusted EPS Presented Consistent with 2007 EPS Guidance
Note: Data from continuing operations
FY 2007
GAAP EPS from continuing operations $5.33
Q3 Tax Benefits (0.34)
Q4 Tax Benefits (0.25)Q4 Asset Impairment 0.05
Q4 Legacy Legal Matters (Corporate Expense) 0.06
Adjusted EPS from continuing operations $4.85
PAGE 53
2006 Adjusted Earnings Per Share
FY 2006
GAAP EPS from continuing operations $3.65
Q2 Tax Accrual Reversal (0.57)
Q2 VSI Legal Settlement 0.20
Q4 Miscellaneous Tax Benefits (0.28)
Q4 Charges for Legacy Legal Matters 0.07
Adjusted EPS from continuing operations $3.07
PAGE 54
2005 Adjusted EPS Reconciliation
Note: The model above has been presented on the same basis as the annual earnings per share model presented in SPX’s March 3, 2005 investor presentation
GAAP net income per share $15.33
Income from discontinued operations (15.61)SFAS 142 asset impairment 0.96Loss on early extinguishment of debt 0.96Normalized tax rate (40%) 0.41Projected share count (64m) 0.26Normalized interest expense ($37m) 0.12Other (1) 0.19
Adjusted earnings per share $2.62
(1) Includes income from businesses discontinued in the second half of 2005, other expense relating to FX losses on the repatriation of cash, a one-time legal settlement at our EGS joint venture and a one-time gain on the sale of property.
Year ended, Dec 31, 2005