SPX Corporation 3rd Quarter 2008 Results

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  • 1.2008 Third Quarter ResultsOctober 29, 2008

2. Forward-Looking Statements Certain statements contained in this presentation that are not historical facts, including anystatements as to future market conditions, results of operations and financial projections, areforward-looking statements and are thus prospective. These forward-looking statements aresubject to risks, uncertainties and other factors which could cause actual results to differ materiallyfrom future results expressed or implied by such forward-looking statements. Particular risks facing SPX include economic, business and other risks stemming from ourinternational operations, legal and regulatory risks, cost of raw materials, pricing pressures,pension funding requirements, integration of acquisitions and changes in the economy. Moreinformation regarding such risks can be found in SPXs SEC filings. Although SPX believes that the expectations reflected in its forward-looking statements arereasonable, it can give no assurance that such expectations will prove to be correct. In addition,estimates of future operating results are based on the companys current complement ofbusinesses, which is subject to change. Statements in this presentation are only as of the time made and SPX does not intend to updateany statements made in this presentation except as required by regulatory authorities. This presentation includes non-GAAP financial measures. A copy of this presentation, including areconciliation of the non-GAAP financial measures with the most comparable measures calculatedand presented in accordance with GAAP, is available on our website at www.spx.com.PAGE 2 3. Introduction PAGE 3 4. Changing Economic Environment% Value DeclineForeign exchange rates have changedvs. U.S. Dollardramatically, impacting SPXs 2008outlook and backlog:10% % decline from June through October:0% Euro: (18%)-10% British Pound: (18%) -20% Zar: (28%) -30%-40%Jun-08 Jul-08 Aug-08 Sep-08 Oct-08EURGBPZARBanking failures and consolidations have impacted credit availability formany companiesGlobal credit crisis has created an uncertain economic environmentas a result, capital budgets for 2009 are uncertain Recent Foreign Exchange Fluctuations Have Impacted SPXs 2008 Outlook;Too Early to Predict How Economic Changes Will Impact SPX Customers in 2009 PAGE 4 5. Q3 Financial Highlights($ millions, except per share data)Q3 2007 Q3 20082008 Comments GAAP Earnings Per Share$1.74$2.01+16%Adjusted Earnings Per Share (1)$1.39$1.66+19%Revenue $1,172$1,510 6.5% organic growthSegment Income Margin14.2%13.8% 120 points of marginexpansion excluding APVFree Cash Flow $30 $71 Improved operatingincome and working capital Q3 2007 EPS excludes $0.35 of tax benefits, Q3 2008 excludes $0.47 of tax benefits and a $0.11 legal charge(1)Note: Data from continuing operations; See appendix for non-GAAP reconciliations6.5% Organic Revenue Growth;19% Adjusted Earnings Growth PAGE 5 6. YTD Financial Highlights($ millions, except per share data) YTD 2007YTD 20082008 CommentsGAAP Earnings Per Share$3.43 $4.86+42% Adjusted Earnings Per Share (1) $3.10 $4.49+45%Revenue$3,361 $4,426 6% organic growthSegment Income Margin12.4% 13.1% 240 points of margin expansion excluding APVYTD 2007 EPS excludes $0.33 of tax benefits, YTD 2008 excludes $0.47 of tax benefits and a $0.11 legal charge(1)Note: Data from continuing operations; See appendix for non-GAAP reconciliations6% Organic Revenue Growth; 45% Adjusted Earnings Growth PAGE 6 7. SPX Global End MarketsPro Forma Revenue Q4 2008E Organic by End MarketGrowth Expectations Global Infrastructure53% HVAC, Telecom, OtherPower & Energy 20%Power & EnergyTools &33%Diagnostics 20%SanitaryGeneralSanitary Industrial 14% (Food, Beverage, Dairy, Pharma 13% and Personal Care Markets) General IndustrialPro Forma Revenue by Geography HVAC, Telecom, OtherNorth America49%Tools & Diagnostics Europe 32%Double Digit Mid-Single DigitSingle DigitROWAsia-PacificFlat4%Growth GrowthDecline 15%Note: 2007 data from continuing operations, pro forma for APV acquisition Targeting Q4 Organic Growth Between 8% and 10%;Tools & Diagnostics Declining PAGE 7 8. Backlog Development($ millions) Q3 ending backlog at $3.6b, Last 3 Quarters Ending Backlogdown $120m or 3% from Q2: Foreign currency fluctuations$2,002$763 $648 Q3 '08reduced the backlog value by$108m $2,077$796$648 Q3 '08* Industrial backlog down 10%:$2,003$782$721 Q2 '08 28% organic growth in Q3 Distribution transformer orders$1,401 $799 $696 Q1 '08slowing$0$1,000 $2,000$3,000~60% of annual revenue fromThermal FlowIndustrialshort-cycle businesses*Q3 2008 backlog excluding the impact of foreign currency fluctuationsNo major contract cancellations Backlog Decline Primarily Driven by Foreign Exchange Rate Changes;Total Backlog Down ~$120m or 3% During Q3 PAGE 8 9. Recent Strategic Actions Discontinued 2 non-core product lines: Flow product line: ~$50m in annual sales Test and Measurement product line: ~$20m in annual sales Signed definitive agreement to sell LDS, our vibration testing and dataacquisition equipment business, for ~$102m: Expect to complete the sale by the end of 2008 Acquired Autoboss: Chinese-based manufacturer of diagnostic tools and equipment ~$10m in annual sales APV integration progressing: Targeting headcount reduction of ~500 people Announced 10b5-1 share repurchase plan: Plan becomes active on November 3, 2008 and is designed to facilitate the repurchase of up to 3 million sharesContinue to Execute Long-Term Strategy;Consistent Approach to Capital Allocation PAGE 9 10. Financial Position ($ millions) Key Balance SheetDebt to CapitalAccounts at, 44.0% 12/31/079/27/0839.0%Cash $354 $466Other Current Assets 2,362 2,540Total Assets 6,237 6,523 Q4 2007Q3 2008Debt to EBITDA (1) 2.3x Total Debt $1,569 $1,5311.9xOther Current Liabilities1,837 1,8421.8x1.4x Shareholders' Equity 2,006 2,361Q4 2007 Q3 2008 Net LeverageGross Leverage Consolidated leverage ratios; Net and Gross Debt to EBITDA as defined in the credit facility (1) $466m of Cash on Hand at September 27th; PAGE 10 Gross Leverage Ratio Within Target Range of 1.5x to 2.0x EBITDA 11. Q3 2008 Consolidated Results PAGE 11 12. Q3 Earnings Per ShareQ3 Earnings Per Share Year-Over-Year Changes in From Continuing Operations Adjusted Earnings Per Share 16%16%Q3 2007 Adjusted EPS (1) $1.39 $2.01$1.74 Segment Income +$0.53 19%19% Tax Rate ($0.09)$1.66 $1.39Interest Expense ($0.06)Pension Expense($0.05)Other Items($0.05)Q3 2007 Q3 2008 Q3 2008 Adjusted EPS (1) $1.66(1)Adjusted EPS GAAP EPSQ3 2007 EPS excludes $0.35 of tax benefits, Q3 2008 excludes $0.47 of tax benefits and a $0.11 legal charge (1) Note: Data from continuing operations; See appendix for non-GAAP reconciliations 19% Adjusted Earnings GrowthDriven Primarily by Increased Segment Income PAGE 12 13. Q3 Financial Results ($ millions)Segment Income Revenue & Margin $1,510 29% 25%29% 25%$209 $167 $1,172 15.4%APV Dilution:160 pts 14.2% 13.8%Q3 2007Q3 2008 Q3 2007Q3 200825% increase in segment income20% acquisition growth 120 points of margin expansion6.5% organic growth excluding the dilutive impact of the APV acquisition3% benefit from foreign currency Note: Data from continuing operations; see appendix for non-GAAP reconciliations6.5% Organic Growth; 120 Points ofSegment Margin Expansion Excluding APV Dilution PAGE 13 14. Segment Analysis PAGE 14 15. Flow Technology: Q3 Financial Results & Q4 Targets ($ millions) Q3 Revenue and Q4E Revenue andSegment Income Margins Segment Income Margins 92% 92% +58%$493to 61% $311 $256 14.2% to 16.4% 14.5%17.2%11.3% Q3 2007Q3 2008 Q4 2007 Q4 2008E83% acquisition growth from APV: APV acquisition expected to drive top-line growth: APV margin dilution: 550 points Cost reduction actions expected to 8% organic growth: benefit margins Strong power, oil and gas andExpect mid-single digit organic growth dehydration salesNegative foreign currency impact Shipping delays caused by Hurricane Note: Data from continuing operations; see appendix for non-GAAP reconciliations 8% Organic Growth in Q3;APV Q3 Margin Dilution: 550 Points PAGE 15 16. Thermal Equipment and Services: Q3 Financial Results & Q4 Targets ($ millions)Q3 Revenue andQ4E Revenue andSegment Income MarginsSegment Income Margins +18%4%4%to 22%$437$422$43812.6% to13.4%13.1%12.0%12.0%Q4 2007Q4 2008E Q3 2007 Q3 2008 2% organic decline:Targeting double-digit organic growthUneven nature of infrastructure projectsNegative foreign currency impactLower China sales28% organic growth in Q3 2007Expect 60 to 110 points of margin 5% foreign exchange benefitexpansion Lower mix of higher margin dry cooling sales Note: Data from continuing operations; see appendix for non-GAAP reconciliations2 Percent Organic Revenue Decline in Q3;Targeting Double Digit Organic Revenue Growth in Q4 PAGE 16 17. Test and Measurement: Q3 Financial Results & Q4 Targets ($ millions)Q3 Revenue and Q4E Revenue andSegment Income Margins Segment Income Margins $3156%6%(13%) to (17%) $260$245 13.0% 11.7%10.2% to 10.5% 9.0% Q4 2007 Q4 2008E Q3 2007Q3 20087% acquisition growth: JCD & Matra Challenging US tools anddiagnostics market 3% organic decline: Weak U.S. market volume Reduced volume of OE programsin Q4 2008 vs. Q4 2007 270 points of margin expansion:Negative foreign currency impact $7m write-off in Q3 2007 Note: Data from continuing operations; see appendix for non-GAAP reconciliationsUS Tools and Diagnostics Market Remains Challenging; Expect Double-Digit Revenue Decline in Q4 PAGE 17 18. Industrial Products and Services: Q3 Financial Results & Q4 Targets ($ millions)Q3 Revenue and Q4E Revenue andSegment Income Margins Segment Income Margins $32029% 29% +13%to 17%$253 $249 22.0% 19.5% to 20.5%17.7% 19.7% Q3 2007 Q3 2008Q4 2007 Q4 2008E28% organic growth:Targeting double-digit organicgrowth in Q4Strong sales for transformers and crystalgrowers60% increase in segment income430 points of mar