Citigroup's Energy 2020 Conference
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Transcript of Citigroup's Energy 2020 Conference
ENERGY 2020June 11, 2008
PAGE 2
Introductions
Chris Kearney Chairman, President and Chief Executive Officer
Patrick O’Leary EVP and Chief Financial Officer
Jeremy Smeltser VP of Finance
Ryan Taylor Manager of Investor Relations
PAGE 3
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 4
Industrial Products &
Services
Test & Measurement
Flow Technology
Thermal Equipment &
Services
SPX Overview
$6b Global, Multi-Industrial Company; ~1/3 of SPX Revenue isFrom Sales into the Global Power and Energy Market
35% 28%
19%18%
2008E Revenueby Segment
Note: Data from continuing operations, 2008E as of 4/30/2008
Global, multi-industrial manufacturer of engineered products
2008E revenue: $6.2b
Operations in over 20 countries
Over 17,000 global employees
PAGE 5
SPX Earnings 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 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 ~$58 per share
($ millions)
PAGE 8
Globalization of SPX Continues
ROW3%
North America70%
Asia-Pacific7%
Europe20%
Continued International Expansion;50% of 2007 Revenue Outside North America
Note: Data from continuing operations, 2007 pro forma for APV acquisition
2004 SPX Revenueby Geography
2007 Pro Forma SPX Revenue by Geography
ROW4%
North America49%
Asia-Pacific15%
Europe32%
PAGE 9
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 10
SPX Global End Markets
53% of SPX Revenue Serves the Global Infrastructure Market;Significant Exposure to Global Power and Energy Markets
2007 Pro Forma Revenue by End Market
Note: Data from continuing operations, 2007 pro forma for APV acquisition; 2008E as of 4/30/2008
General Industrial
13%
Global Infrastructure
53%
Sanitary14%
Tools & Diagnostics
20%
Power & Energy
33%
HVAC, Telecom,
Other20%
2008E Market Trends
• Power & Energy
• Sanitary
• General Industrial
• HVAC, Telecom, Other
• Tools & Diagnostics
Double-Digit Growth
Mid/High-Single DigitGrowth
Low-Single DigitGrowth
PAGE 11
$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 12
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 13
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 14
Fuel Source Debate
Positive and Negative Factors About Each Power Source
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
Coal
Oil
Natural Gas
Nuclear
Alternative Sources
PAGE 15
World Primary Energy Demand
Global Primary Energy Demand
Coal, Gas and Oil Expected to be the Primary Sources for Energy;Alternative Sources Gaining Momentum
0
2
4
6
8
10
12
14
16
18
1980 1990 2000 2010E 2020E 2030E
Coal Oil Gas Nuclear Hydro/Other
Source: WEO 2007 Copyright OECD/IEA, 2007; Figure 1.1, page 76, as modified by SPX Corporation
0.7%7.0%
2005 – 2030CAGR
2.1%
1.3%
2.2%Bill
ion
tonn
esof
oil
equi
vale
nt
PAGE 16
SPX Power and Energy Contract Examples
SPX Power and Energy Technologies Providing SolutionsAcross a Diverse, Global Landscape of Customer Needs
South AfricaCoal$235mQ4 2007
IcelandGeothermal$100mQ2 2008
United KingdomCoal$70mQ3 2006
NorwaySolar$40mQ3 2007
ChinaNuclear$13mQ3 2007
ChinaCoal40 plants2002 - present
QatarPetrochemical$100mQ1 2007
United StatesCoal$50mQ4 2007
PAGE 17
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 18
Cooling Solutions
SPX Offers Broad Cooling System Technology That Serves Customers Across Many Types of Power Generation Facilities
Air Cooled Condensers (Dry Technology)
Mechanical Draft Evaporative Cooling
(Wet Technology)
Natural Draft Towers(Wet or Dry Technology)
Air2Air(Hybrid Technology)
PAGE 19
Thermal Equipment
SPX Provides Critical Components for Power Generation Facilities
Heat Exchangers
FeedwaterHeaters
Deaerators
Electrostatic Precipitators
PAGE 20
Flow Technology
SPX Engineered Flow Products Assist in Power Generation and Oil and Gas Exploration and Refinement
Flue Gas Desulfurization Mixers
Process Pumps & Systems
Steam, Control, Gate, Squib ValvesDryers Filters: Liquid & Air
PAGE 21
Typical Coal-Fired Power Plant
TEXT
Thermal SegmentFlow SegmentIndustrial Segment
PAGE 22
Nuclear Example
SPX 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 23
Solar Example
SPX Has Leading Crystal Growing Technology with Global Reach;~$90m in Orders for Crystal Growers 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
Source: BCC Research
Global reach:Large installed base of crystal growersSales into over 20 countries for solar
Reputation for reliability and quality:KX120PV a gold standard for solar market
High productivity equipment with sophisticated automatic operation
Focused on new product development
SPX Key Market Attributes
PAGE 24
Geothermal Example
SPX Helping Iceland Expand Its Energy Infrastructure
$100m project in Iceland
SPX chosen to engineer, design, manufacture and install complete cold end solution
5 geothermal plants at the base of the Hengill volcano
Total generating capacity of 225 MW
Iceland’s Svartsengi Power Plant
PAGE 25
Transmission and Distribution
PAGE 26
Power Transformers
SPX Custom Engineers Power Transformers for the Transmission and Distribution of Electricity in the US
Power Transformer
$235
$290
$420
10% to 15%
2005 2006 2007 2008E
Power Transformer Revenue
($ millions)
Note: 2008E as of April 30, 2008
PAGE 27
US Transmission and Distribution Market Drivers
Increased Electricity Demand, Regulatory Standards and Aging Infrastructure Driving Investment in US T&D Market
> Investment in medium power transformers (10-60 mva) has driven Waukesha’s organic growth and backlog growth
> Investment in large power transformers (>60 mva) is expected to increase in the near-term
> Three primary drivers of this investment in transformers:Increased Electricity Demand (1):
2007 demand was 83% of net capacity resources
Demand for electricity expected to increase 135,000 MW or 18% over the next decade
Heightened Regulatory Standards:Energy Policy Act of 2005
Electric Reliability Organization
Aging Infrastructure(1) US Department of Energy
PAGE 28
Installation History of US Transformers
Significant Capital Spending for NewUS Transformers Occurred ~30 Years Ago
Base Giga-Voltage Ampere (GVA) per Year Additions
0
20
40
60
80
100
120
140
160
180
200
1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996
Year
Tran
sfor
mer
GVA
Inst
alle
d
Source: Hartford Steam Boiler
PAGE 29
Aging US Transformers
0%10%20%
30%40%50%60%70%
80%90%
100%
2 8 14 20 26 32 38 44 50 56 62 68 74
Age
Haz
ard
Func
tion
Risk of Transformer Failure and Need for Replacement Begins Significant Increase at 30 Years of Age
Source: Hartford Steam Boiler
Transformer Age
PAGE 30
Expected Rate of Failure
Failure Rate Forecast
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
1964
1968
1971
1974
1977
1980
1983
1986
1989
1992
1995
1998
2001
2004
2007
2010
2013
Source: Hartford Steam Boiler
Rate of Failure Expected to Increase Over the Next 5 Years
Tran
sfor
mer
GVA
PAGE 31
Regulatory Influences on T&D Investment
Mandatory reliability standards
FERC incentives:Capacity margins, transmission constraints
State requirements and regulation
Homeland security
Customer Behavior Altered by Heightened Regulatory Standards;Driving Investment in Transmission and Distribution
ViolationRisk Factor Low Medium High Severe
Low $1 - $3 $2 -$8 $3 - $15 $5 - $25
Medium $2 - $30 $4 - $100 $6 - $200 $10 - $335
High $4 - $125 $8 - $300 $12 - $625 $20 - $1,000
NERC’s Base Penalty Amount Table
Source: NERC
PAGE 32
Summary
PAGE 33
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
2006 2007
Power & Energy Revenue SPX Focus
~$1,950
~$1,500
PAGE 34
Financial Results
The Transformation of SPX is Clearly Reflected in Our Improving Financial Performance
*Excludes dilutive impact of APV
Segment Income Margins
11.1%
12.1%
13.5% to 14.0%*
13.0%
6% 10% ~5-7%10%
Revenue GrowthOrganic growth
($ millions)
2005 2006 2007 2008E
$3,658$4,097
$4,747
$6,175
2005 2006 2007 2008E
12.4% to 12.9%
Including APV
Note: Data from continuing operations; 2008E as of 4/30/2008; See appendix for non-GAAP reconciliations
PAGE 35
Questions
PAGE 36
Q1 2008 Highlights
Q1 2008
Note: Data from continuing operations, see appendix for non-GAAP reconciliations
Comments($ 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 37
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 38
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 39
Flow Technology
Chemical10%
Compressed Air5%
Sanitary41% Power &
Energy25%
General Industrial
19%
Providing Process Solutions to Global, Diverse Markets
2007 Pro Forma Revenue by End Market
Note: Data from continuing operations; pro forma for APV acquisition
2007 Pro Forma Revenueby Geography
ROW8%
North America33%
Asia-Pacific21%
Europe38%
PAGE 40
Flow Technology: Full Year Analysis
$1,121
2007 2008E
Targeting 5% to 7% Organic Growth in 2008
Full Year Revenue &Segment Margin
($ millions)
15.8%
Excluding APV Including APV
11.5% to 12.0%
88% to 92%
16.3% to 16.8%
APV Revenue:$885 to $900m
APV Dilution:~480 points
Note: Data from continuing operations; see appendix for non-GAAP reconciliations; 2008E as of 4/30/2008
Key 2008 Drivers:
APV Integration
Global energy infrastructure development:
Power, oil & gas, and mining
Leverage on organic growth
11.3%
PAGE 41
Thermal Equipment and Services
Power & Energy61%
HVAC31%Industrial
8%
Global Provider of Thermal Equipment and Services;Power and Energy Infrastructure is Largest End Market
2007 Revenueby End Market
Note: Data from continuing operations
2007 Revenueby Geography
ROW2%
North America
42%
Asia-Pacific19%
Europe37%
PAGE 42
Thermal Equipment and Services: Full Year Analysis
$1,561
2007 2008E
Expect 9% to 11% Total Revenue Growth;Expect Margins Between 10.3% and 10.8%
Full Year Revenue &Segment Margin
($ millions)
10.4% 10.3% to 10.8%
+9 to 11%
Key 2008 Drivers:
Global demand for power plant refurbishments and capacity additions
Qatar contract ($100m):Dry cooling system for Lindepetrochemical plant
Majority of work expected to be completed in 2008
Discipline on project bids:Competitive China market
Contract execution
Lean manufacturing initiativesNote: Data from continuing operations; see appendix for non-GAAP reconciliations; 2008E as of 4/30/2008
PAGE 43
Test & Measurement
Other7%
Vehicle Tools &
Diagnostics81%
Utilities8%
Trans-portation
4%
Leading Global Provider of Essential Tools and Diagnostic Systems for New Vehicle Platforms
2007 Revenueby End Market
Note: Data from continuing operations
2007 Revenueby Geography
ROW1%
North America
59%
Asia-Pacific8%
Europe32%
PAGE 44
Test and Measurement: Full Year Analysis
$1,098
2007 2008E
Challenging N.A. OEM Markets Impacted Financial Performance;Focused on Long-Term Strategy for Global Expansion
Full Year Revenue &Segment Margin
($ millions)
10.9%10.8% to
11.3%
+9 to 11%
Key 2008 Drivers:
Integration of Johnson Controls European Diagnostics and Matra
North American market remains challenging
Focus on long-term strategy:
Global expansion into Europe and Asia
Restructure US business model
Invest in R&D
Note: Data from continuing operations; see appendix for non-GAAP reconciliations; 2008E as of 4/30/2008
PAGE 45
Industrial Products and Services
Broadcast10%
Other Industrial
19%
Power & Energy44%
Hydraulic Tools15%
Aerospace12%
44% of Revenue Serves the Domestic Transmission and Distribution Market
2007 Revenue by End Market
Note: Data from continuing operations
2007 Revenueby Geography
North America
81%
Asia-Pacific7% Europe
12%
PAGE 46
Industrial Products and Services: Full Year Analysis
$966
2007 2008E
Demand for T&D Equipment Driving Margin Expansion and Double-Digit Organic Growth
Full Year Revenue &Segment Margin
($ millions)
16.2%
20.2% to 20.7%
+14% to16%
Key 2008 Drivers:
U.S. investment in transmission and distribution of electricity
Strong backlog
Positive growth in other key end markets
Pricing strength
Lean process improvements and capacity expansion
Note: Data from continuing operations; see appendix for non-GAAP reconciliations; 2008E as of 4/30/2008
PAGE 47
EGS Electrical Group Joint Venture
Nearly 50% of Sales From Infrastructure Equipment;Solid Earnings and Cash Contributor
Equity Earnings
($ millions)
$39 $39
$46
2006 2007 2008E
Aerospace2%
Auto7%
Agriculture3% Chemical
6%
Infrastructure47% General
Industrial26%
Sanitary9%
EGS 2007 Revenueby End Market
Note: Data from continuing operations; 2008E as of April 30, 2008
PAGE 48
Balance Sheet
($ millions) 12/31/07 3/31/08 Change
Cash $354 $385 $31
Other Current Assets 2,342 2,512 169
Goodwill 1,944 2,005 61
Other Assets 1,597 1,636 39
Total Assets $6,237 $6,537 $300
Other Current Liabilities $1,838 $1,905 $67
Total Debt 1,569 1,624 55
Long-Term Liabilities 825 829 4
Shareholders' Equity 2,006 2,180 174Total Liabilities and Shareholders' Equity
$6,237 $6,537 $300
Debt / Capital Ratio 44% 43%LTM EBITDA (1) $663 $712Net Debt / EBITDA (1) 1.83x 1.73xGross Debt / EBITDA (1) 2.29x 2.20x
(1) Consolidated leverage ratios; Gross Debt to EBITDA as defined in the credit facility
PAGE 49
Capital Allocation Methodology
3/31/2008 Gross Debt to EBITDA at 2.2x;Expect to be In Target Leverage Range During 2008
Gross Debt to EBITDA (1) Excess Capital Usage
> 2.0x
< 2.0x
Debt reduction
Strategic acquisitions
Share repurchases
Target Leverage Range: 1.5x to 2.0x Gross Debt to EBITDA (1)
(1) Consolidated leverage ratios; Gross Debt to EBITDA as defined in the credit facility
PAGE 50
Debt Maturity Schedule
Minimal Debt Repayment Requirements for the Next 3 Years
$75 $75 $75
$195
$556
$30
$500
2008 2009 2010 2011 2012 2013 2014
PAGE 51
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 52
Non-GAAP Reconciliations
PAGE 53
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 54
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 - $6,250 12.7% to 13.2%
2008E
SPX Flow Technology 16.3% to 16.8%
APV ~5%
Total SPX Flow Technlogy 11.5% to 12.0%
Note: Data from continuing operations
PAGE 55
Organic Revenue Growth Reconciliation
Net Revenue Acquisitions Organic Growth/(Decline) and Other Growth/(Decline)
2005 6.2% 0.5% 0.0% 5.7%
2006 11.8% 1.4% 0.7% 9.7%
2007 15.7% 3.2% 2.7% 9.8%
2008E 27% - 32% 20% - 22% 2% - 3% 5% - 7%
Foreign Currency
Note: Data from continuing operations; 2008E as of 4/30/2008
PAGE 56
Q1 2008 Organic Revenue Growth Reconciliation
Net Revenue Acquisitions/ Organic Growth Divestitures Growth
Flow 101.0% 91.1% 5.2% 4.7%
Test 14.4% 13.0% 4.6% -3.2%
Thermal 10.9% 0.0% 6.1% 4.8%
Industrial 26.2% 0.0% 1.3% 24.8%
Consolidated 37.2% 25.5% 4.6% 7.1%
Foreign Currency
Quarter Ended March 31, 2008
Note: Data from continuing operations
PAGE 57
Q1 Free Cash Flow Reconciliation to GAAP Financial Measures
($ millions) Q1 2006 Q1 2007 Q1 2008
Net cash from continuing operations (114)$ (6)$ (28)$ Capital expenditures (10)$ (11)$ (21)$
Free cash flow from continuing operations (124)$ (17)$ (48)$ Taxes paid on LYONs tax recapture 84$
Adjusted free cash flow from continuing operations (40)$
Free Cash Flow Reconciliation(unaudited)
SPX Corporation and Subsidiaries
PAGE 58
2008E Free Cash Flow Reconciliation to GAAP Financial Measures
Net cash from continuing operations 400$ 450$ Capital expenditures (140)$ (150)$
Free cash flow from continuing operations 260$ 300$
2008 Guidance Range
SPX Corporation and SubsidiariesFree Cash Flow Reconciliation
(unaudited)
($ millions)
Note: Data from continuing operations; 2008E as of 4/30/2008
PAGE 59
EBITDA Reconciliations
Note: EBITDA as defined in the credit facility; 2008E as of 4/30/2008
($ millions) 2006 2007 2008E
Revenues $4,313 $4,822 $6,175
Net Income $171 $294 $344Income tax provision (benefit) 56 90 181Interest expense 50 77 110Income before interest and taxes $277 $461 $635
Depreciation and intangible amortization expense 90 83 122EBITDA from continuing operations $367 $544 $756
Adjustments:Non-cash compensation expense 38 41 46Extraordinary non-cash charges 41 14 0Extraordinary non-recurring cash charges 27 7 18Excess of JV distributions over JV income (12) 2 13Loss (Gain) on disposition or assets 56 4 0Pro Forma effect of acquisitions and divestitures 53 5Other 8 0 2
Adjusted LTM EBITDA from continuing operations $525 $663 $840
PAGE 60
Debt Reconciliations
($ millions) 12/31/2007 3/31/2008
Short-term debt 255$ 313$ Current maturities of long-term debt 79 79 Long-term debt 1,235 1,231
Gross Debt 1,569$ 1,624$
Less: Puchase card program and extended A/P programs (58)$ (53)$
Adjusted Gross Debt 1,511$ 1,570$
Less: Cash in excess of $50m (304)$ (335)$
Adjusted Net Debt 1,207$ 1,236$
Note: Debt as defined in the credit facility
PAGE 61
2007 Adjusted Earnings Per Share
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 62
2006 Adjusted Earnings Per Share
Note: Data from continuing operations
FY 2006
GAAP EPS from continuing operations $3.74
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
Loss from operations discontinued in 2007 (0.08)
Adjusted EPS from continuing operations $3.07
PAGE 63
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
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