SPX Corporation 4th Quarter and Full Year 2008 Results

COMPANY CONFIDENTIAL

global infrastructure x process equipment x diagnostic tools

February 25, 2009

2008 Q4 and Full Year Resultswhere a sound approach meets new challenges

1


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 changes in

the economy, our international operations, legal and regulatory risks, cost of raw materials, pricing

pressures, pension funding requirements, and integration of acquisitions. More information

regarding such risks can be found in SPX’s SEC filings.

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.



Introduction

February 2009

4

Q4 2008 Financial Results

($ millions, except per share data)

Adjusted Earnings Per Share

Revenue

Segment Income Margin

Free Cash Flow

$2.06 +21% (1)

$1,508 7% organic growth

15.0% +90 points excluding APV

$214 Capital spending: $40

7% Organic Revenue Growth;

21% Adjusted Earnings Per Share Growth

Q4 2008 Comments

(1) As compared to Q4 2007 adjusted EPS of $1.70

Note: Data from continuing operations; see appendix for non-GAAP reconciliations

5

2008 Financial Results



Revenue


Free Cash Flow

$6.53 +35% (1)

$5,856 6% organic growth

13.7% +200 points excluding APV

$288 Capital spending: $116



2008 Comments

(1) As compared to 2007 adjusted EPS of $4.85


6

2008 Strategic Highlights

Continued to Focus on Long-Term Strategy;

Disciplined Capital Allocation

APV integration on track

Continued progress on non-core disposals:

– Air Filtration, LDS, Scales and Dezurik sales completed (~$165m in proceeds)

– Discontinued product line in the Industrial segment in Q4 2008:

• ~$100m in annual revenue

Reduced debt by $223m:

- Gross Debt to EBITDA reduced from 2.3x to 1.6x (1)

Repurchased 3.6m shares in 2008:

– Additional 1.9m shares repurchased in 2009 YTD

Acquired AutoBoss

(1) Gross Debt to EBITDA as defined in the SPX credit facility

7

Capital Structure

Conservative Leverage Ratios;

Solid Financial Position and > $1b of Available Liquidity

Debt to EBITDA (1)

Equity

61%

Debt

39%

Cash: $476

Total Assets: $6,187

Total Debt: $1,345

Shareholders’ Equity: $2,261

2.3x

1.6x1.8x

1.1x

Dec-07 Dec-08

Net Leverage Gross Leverage

December 31, 2008

Capital Structure

Key December 31, 2008

Balance Sheet Figures

(1) Consolidated leverage ratios. Net and Gross Debt to EBITDA as defined in the credit facility

($ millions)

8

2009 Full Year Guidance

Earnings Guidance Range: $5.40 to $5.80 EPS from Continuing Operations

Certain Events Could Influence Earnings Per Share

Earnings Per Share:

$5.40 to $5.80

Note: Data from continuing operations; See appendix for non-GAAP reconciliations

Macro-economic factors:

– Stronger organic growth

– Foreign exchange fluctuations

– Raw material cost changes

Internal factors:

– Timing and execution of restructuring

– Additional share repurchases

– Acquisitions

– Lower tax rate

Upside Potentials

Macro-economic factors:

– Continued disruption in credit markets

– Lower organic growth

– Foreign exchange fluctuations

– Raw material cost changes

Internal factors

– Timing and execution of restructuring

– Disposals

Downside Potentials

Free Cash Flow:

$230m to $270m



Q4 and Full Year 2008

Financial Results

February 2009

10


Adjusted EPS Presented Consistent with 2008 EPS Guidance

Note: Data from continuing operations

Q4 2008 FY 2008

GAAP EPS from continuing operations ($0.20) $4.68

Q3 tax benefits (0.47)

Q3 legal matter 0.11

Q4 asset impairment 2.26 2.21

Adjusted EPS from continuing operations $2.06 $6.53

11

Q4 Adjusted Earnings Per Share

$1.70

$2.06

Q4 2007 Q4 2008


Driven by Increased Segment Income

Q4 Adjusted Earnings Per Share

From Continuing Operations

Q4 2007 Adjusted EPS $1.70

Segment Income +$0.41

Special Charges ($0.08)

Other items +$0.03

Q4 2008 Adjusted EPS $2.06

21%

Year-Over-Year Changes to

Earnings Per Share


12

Q4 Consolidated Results

$1,290

$1,508

Q4 2007 Q4 2008


90 Points of Segment Margin Expansion Excluding APV Dilution

Revenue($ millions)


Segment Income

$194

$227

Q4 2007 Q4 2008

15.0% 15.0%

7% organic growth:

– Driven by power and energy markets

15% acquisition growth:

– APV

(4%) foreign currency impact

17%17%

17% increase in segment income

90 points of margin expansion

excluding the dilutive impact of the

APV acquisition

13

Full Year Earnings Per Share

$5.23$4.68

$4.85

$6.53

2007 2008

Adjusted EPS GAAP EPS


Driven by Increased Segment Income

Full Year Earnings Per Share

From Continuing Operations


35%

Year-Over-Year Changes to


2007 Adjusted EPS $4.85

Segment Income +$2.35

Share Repurchases +$0.26

Interest Expense ($0.45)

Tax Rate ($0.23)

Special Charges ($0.15)

Other Items ($0.10)

2008 Adjusted EPS $6.53

14

2008 Consolidated Results


200 Points of Segment Margin Expansion Excluding APV Dilution


$4,575

$5,856

2007 2008

Revenue

($ millions)

28%

6% organic growth:

– Driven by power and energy markets

20% acquisition growth from APV

2% foreign exchange benefit

$606

$802

2007 2008

13.2%

13.7%


Segment income margins

expanded 50 points:

Up 200 points excluding APV

dilution

Segment Income & Margin



Segment Analysis

February 2009

16

Flow Q4 Financial Results

$311

$479

Q4 2007 Q4 2008


Core Margin Expansion Offset by APV Dilution

Q4 Revenue

($ millions)

54%

3% organic growth:

Strong demand in Oil & Gas and Power

markets offset softness in Dehydration

and Industrial end markets

59% acquisition growth from APV


$51

$71

Q4 2007 Q4 2008

16.4%

14.9%


220 points of margin expansion in

core business

APV operating margins in high

single digits

Q4 Segment Income & Margin


17

Flow 2008 Full Year Results

Targeting Low Single Digit Organic Growth in 2009;

2009 Targeted Margin Improvement Driven by APV Integration

2008 Quarterly Backlog

Q4 backlog decline: 15%

– 9% due to foreign exchange

fluctuations

87% revenue growth in 2008:

– 8% organic growth:

• Driven by sales into the oil & gas,

power and food & beverage markets

– 79% acquisition growth (APV)

– Foreign exchange neutral to full year

2008 segment margins:

– 550 points of margin dilution from

APV acquisition

– Core margins expanded 130 points

$799 $782 $763

$646

Q1 Q2 Q3 Q4

($ millions)

Revenue and Segment Income Margins

$1,070

$1,999$1,875 to

$1,975

+3% to

5%

2007 2008 2009E LT

12.2%

16.4% 13.7% to

14.7%

14% to

16%

2008 Drivers


18

Thermal Q4 Financial Results

$438

$497

Q4 2007 Q4 2008


210 Points of Operating Margin Expansion

Q4 Revenue

($ millions)

14%

17% organic growth:

Increased power generation sales,

particularly for heat exchangers and

cooling systems


$52

$70

Q4 2007 Q4 2008

12.0%

14.1%


210 points of margin expansion:

– Contract discipline

– Project execution

– Project mix



19

Thermal 2008 Full Year Results


$1,401

$2,003 $2,002 $2,084

Q1 Q2 Q3 Q4

($ millions)

Annual Revenue

$1,561

$1,690

$1,695 to

$1,775

5%+

2007 2008 2009E LT

2008 Drivers

Q4 backlog increase: 4%

– ~$125m order in South Africa

– 2 dry cooling contracts in China

– 6% decline due to foreign exchange

fluctuations

8% revenue growth in 2008:

- 5% organic growth;

Increased Power and Energy sales

- 3.5% foreign exchange benefits

170 points of margin expansion in

2008:

- Improved contract discipline and

project execution

- Favorable project mix in 2008

Targeting Mid Single Digit Organic Growth in 2009;

Margin Decline in 2009E Due Primarily to Lower Margin Project Mix

11% to

13%10.4% to

11.4%10.4%

12.1%


20

Test and Measurement Q4 Financial Results

Operating Declines Reflect Difficulties in

North American Aftermarket and Dealer Equipment Market

$315

$250

Q4 2007 Q4 2008

Q4 Revenue

($ millions)

(17%) organic decline:

Challenging U.S. aftermarket


1% acquisition growth

$41

$18

Q4 2007 Q4 2008

13.0%

7.2%

56% decrease in segment income

580 points of margin decline:

– Volume declines



(21%)

21

Test & Measurement 2008 Full Year Results

Expecting 2009E Organic Decline of ~10%;

Significant Restructuring Actions Planned

($ millions)

Annual Revenue

$1,080 $1,100$920 to

$980

+3% to

5%

2007 2008 2009E LT

2008 Drivers

8% acquisition growth

7% organic decline

End market analysis:

– Decline in US market:

• Decline in aftermarket sales

• No significant new model launches

• Dealership consolidation

• “Big 3” financial difficulties

– Europe and Asia steady

2007/2008 U.S. restructuring:

– Reduced footprint to one manufacturing

plant and one distribution center

– Reduced headcount by ~225

Integration of European and Asian

acquisitions

Annual Segment Margins

11.0%9.9% 8.3% to

9.3%

11% to

13%

2007 2008 2009E LT


22

Industrial Q4 Financial Results

Sales of Power Transformers and Crystal Growing Equipment

Drove 25% Organic Revenue Growth and 190 Points of Margin Expansion

$227

$281

Q4 2007 Q4 2008

Q4 Revenue

($ millions)

24%

25% organic growth:

Increased sales for power transformers

and crystal growers


$50

$67

Q4 2007 Q4 2008

22.0%

23.9%



– Leverage on organic growth

– Improved pricing



23

Industrial 2008 Full Year Results

Credit Crisis Significantly Impacting Industrial Segment;

Expecting Organic Decline in 2009 Greater than 20%


$686 $711$639

$550

Q1 Q2 Q3 Q4

($ millions)

Annual Revenue

$865

$1,067

$790 to

$850

3% to

5%

2007 2008 2009E LT

2008 Drivers

Q4 backlog decrease: 14%

–Transformer orders down 27%

–No new solar orders

23% organic revenue growth:

- Organic growth across all reporting

units in the segment:

Increased sales of power transformers,

crystal growers and broadcast antennas


- Improved pricing, particularly for

transformers

- Leverage on organic growth

- Lean and supply-chain improvements

~20%18.5% to

19.5%17.3%

23.0%


24

Equity Earnings

Equity Earnings Contributed ~9% of 2008 Pre-Tax Income

Q4 Equity Earnings

($ millions)

$11

$12

Q4 2007 Q4 2008

$40

$46

~$40

2007 2008 2009E

Full Year Equity Earnings



2008 Free Cash Flow

and Capital Allocation

February 2009

26

Free Cash Flow

$288m of Free Cash Flow Reported in 2008

Q4 Free Cash Flow($ millions)

Note: Data from continuing operations; See appendix for non-GAAP reconciliations

Full Year Free Cash Flow

$329$288

2007 2008

$245

$214

Q4 2007 Q4 2008

APV working capital investment ~$40

One-time pension payment $40

Increased capital spending $33

Increased cash restructuring $23

Negative foreign exchange impact

Working capital investment:

– Driven by increased A/R, primarily

in Cooling Technologies

Increased cash restructuring $13

Increased capital spending $4

27

Capital Allocation

Disciplined, Balanced Approach to Capital Allocation

Investments

($ millions)

Financing Activities


2007 2008

2-Year

Total

Cash Proceeds from Disposals $118 $131 $248

Acquisitions / Investments ($567) ($15) ($582)

Capital Expenditures (83) (116) ($199)

Net Change in Debt $593 ($223) $370

Stock Repurchases (716) (115) ($831)

Dividends Paid (57) (54) ($110)



2009 Financial Targets

February 2009

29

2009 Financial Targets

2009E EPS Guidance Range: $5.40 to $5.80

2009

Target Range

Revenue


Earnings Per Share

Free Cash Flow

Capital Spending


Comments

$5,280 to $5,580 Organic: flat to (5%)

FX: (~5%)

12.5% to 13.5%

$5.40 to $5.80 (11%) to (17%) (1)

$230 to $270 85% to 95% of NI

~$100


(1) As compared to 2008 adjusted EPS; see appendix for non-GAAP reconciliations

30

2009 Q1 Targets

Expect Decline in Q1 EPS of 25% to 35%


Q1 2009E

Revenue $1,350 ~(10%)

Segment Income $ $160 $126 to $131

Segment Income % 11.9% 10.3% to 10.7%

EPS $1.15 $0.75 - $0.85


Q1 2008

(18%) to (21%)

(120) to (160) bps

(25%) to (35%)



Executive Summary

February 2009

32

Backlog

21% of the Consolidated 2008 Year End Backlog is

Multi-Year Power Projects in South Africa

($ billions)

Year-End Backlog

Note: Data from continuing operations; Test and Measurement’s backlog is immaterial and not reported publicly

2005 2006 2007 2008

Thermal Flow Industrial

12/31/2008 Backlog

by Geography

Asia Pacific

9%

South Africa

21%

ROW

2%

Europe

30%Americas

38%

$1.3

$2.0

$2.6

$3.4

2010E &

Beyond

34%

2009E

66%

Backlog Aging

33

SPX Global End Markets

Current Economic Environment Impacting 2009 Expectations;

Long-Term Organic Growth Target is 4% to 6%

2009E

Power & Energy (3%) to +1% 5%+

Other Infrastructure (5%) to flat 3% to 5%

Tools & Diagnostics (12%) to (7%) 3% to 5%

Food & Beverage flat to +4% 3% to 5%

General Industrial (5%) to flat 3% to 5%

Total (5%) to flat 4% to 6%

Long-Term2008 Revenue by End Market

HVAC &

Other

15%

Tools &

Diagnostics

17%

Power &

Energy

41%

Food &

Beverage

13%

General

Industrial

14%

Infrastructure

56%

Organic Revenue


34

Current SPX Situation

2009 EPS Guidance: $5.40 to $5.80 per share

Solid financial position and liquidity:

– Additional 3m share repurchase plan active

– >$1b of available liquidity

– Significant flexibility in uncertain economic environment

APV integration and other restructuring actions aligning cost structure with

revenue stream and creating flexibility for the future

Continue to focus on executing long-term strategy:

– 3 core, global end markets

– Fundamental demand for SPX technologies unchanged

– Long-term organic growth target 4% to 6%

Carefully Monitoring Risks In Uncertain Economic Environment;

Continue to Drive Long-Term Strategy



Questions

February 2009



Appendix

February 2009

37

Full Year Mid-Point Target Financial Model


(1) Adjusted EPS, see appendix for reconciliation


Mid-Point EPS Guidance at $5.60

(1)

2008 Adjusted

Earnings

2009E

Guidance

Mid-Point

Revenue $5,856 $5,435

Segment Income Margin 13.7% 13.0%

Corporate overhead (108) (95)

Pension / PRHC (39) (36)

Stock-based compensation (42) (28)

Special charges (17) (65)

Operating Income $596 $482

% of revenues 10.2% 8.9%

Equity Earnings in J/V 46 40

Other Income/(Expense) 2 (7)

Interest Expense (105) (95)

Pre-Tax Income from Continuing Operations $539 $420

Tax Provision (186) (141)

Income from Continuing Operations $353 $279

Tax Rate 34% 34%

Weighted Average Dilutive Shares Outstanding 54 50

EPS Mid-Point from continuing operations 6.53$ 5.60$

EPS Guidance Range $5.40 to $5.80

EBITDA 803$ 725$

38

Re-Stated Quarterly Segment Data


2007 2008 2007 2008 2007 2008 2007 2008 2007 2008

Flow Technology

Revenue $237 $492 $266 $535 $256 $493 $311 $479 $1,070 $1,999

Segment Income $37 $47 $44 $70 $44 $56 $51 $71 $175 $243

Segment Margins 15.4% 9.5% 16.5% 13.1% 17.2% 11.3% 16.4% 14.9% 16.4% 12.2%

Test and Measurement

Revenue $236 $270 $284 $320 $245 $260 $315 $250 $1,080 $1,100

Segment Income $24 $24 $32 $37 $22 $30 $41 $18 $118 $109

Segment Margins 10.0% 8.9% 11.2% 11.4% 9.0% 11.7% 13.0% 7.2% 11.0% 9.9%

Thermal Equipment and Services

Revenue $313 $347 $388 $409 $422 $437 $438 $497 $1,561 $1,690

Segment Income $16 $36 $38 $46 $57 $52 $52 $70 $163 $204

Segment Margins 5.2% 10.5% 9.8% 11.1% 13.4% 12.0% 12.0% 14.1% 10.4% 12.1%

Industrial Products and Services

Revenue $187 $241 $228 $248 $224 $296 $227 $281 $865 $1,067

Segment Income $25 $53 $33 $55 $42 $69 $50 $67 $150 $245

Segment Margins 13.6% 22.2% 14.4% 22.1% 18.8% 23.5% 22.0% 23.9% 17.4% 23.0%

Full YearFirst Quarter Second Quarter Third Quarter Fourth Quarter

39

Pro Forma APV Calculation

Excluding

APV APV

Including

APV

SPX Consolidated Q4 2008

Revenue $1,325 $183 $1,508

Segment Income $211 $16 $227

Segment Margin 15.9% 9% 15.0%

Flow Technology Q4 2008

Revenue $296 $183 $479




40

Pro Forma APV Calculation

Excluding

APV APV

Including

APV

SPX Consolidated 2008

Revenue $5,017 $839 $5,856



Flow Technology 2008

Revenue $1,160 $839 $1,999






Non-GAAP Reconciliations

42

2008 Adjusted Earnings Per Share

Adjusted EPS Presented Consistent with 2008 EPS Guidance


Q4 2008 FY 2008

GAAP EPS from continuing operations ($0.20) $4.68

Q3 tax benefits (0.47)

Q3 legal matter 0.11

Q4 asset impairment 2.26 2.21


43

2007 Adjusted Earnings Per Share

Q4

2007 FY 2007

GAAP EPS from continuing operations $1.85 $5.23

Q3 Tax Benefits (0.34)

Q4 Tax Benefits (0.26) (0.25)

Q4 Asset Impairment 0.05 0.05

Q4 Legacy Legal Matters (Corporate Expense) 0.06 0.06


Businesses discontinued during 2008 0.00 0.10

Adusted EPS from continuing operations $1.70 $4.85


(as reported in 2007)

44

Q4 2008 Organic Revenue Growth Reconciliation

Net Revenue Acquisitions/ Organic

Growth Divestitures Growth

Flow 54.3% 59.3% -8.4% 3.4%

Test -20.5% 0.9% -4.3% -17.1%

Thermal 13.6% 0.0% -3.3% 16.9%

Industrial 24.2% 0.0% -0.8% 25.0%

Consolidated 16.9% 14.5% -4.3% 6.7%

Foreign

Currency

Quarter Ended December 31, 2008


45

2008 Organic Revenue Growth Reconciliation

Net Revenue Acquisitions/ Organic

Growth Divestitures Growth

Flow 86.8% 78.9% -0.1% 8.0%

Test 1.9% 7.7% 1.4% -7.2%

Thermal 8.3% 0.0% 3.5% 4.8%

Industrial 23.3% 0.0% 0.1% 23.2%

Consolidated 28.0% 20.3% 1.5% 6.2%

Foreign

Currency

Year Ended December 31, 2008


46

Free Cash Flow Reconciliation to GAAP Financial Measures

($ millions)Q4 2007 Q4 2008

Net cash from continuing operations 280$ 254$

Capital expenditures (36)$ (40)$

Free cash flow from continuing operations 245$ 214$

2007 2008




Free Cash Flow Reconciliation

(unaudited)

SPX Corporation and Subsidiaries

47

2009E Free Cash Flow Reconciliation

($ millions)




2009E Guidance Range

Free Cash Flow Reconciliation

(unaudited)

SPX Corporation and Subsidiaries

48

EBITDA Reconciliations

Note: EBITDA as defined in the credit facility; 2008E as of 10/29/2008

($ millions) 2008 2009E

Revenues $5,856 $5,435

Net Income $248 $279

Income tax provision (benefit) 153 141

Interest expense 116 103

Income before interest and taxes $517 $523

Depreciation and intangible amortization expense 105 105

EBITDA from continuing operations $621 $628

Adjustments:

Amortization or write-off of intangibles and organizational costs 127 0

Non-cash compensation expense 42 28

Extraordinary non-cash charges (22) 0

Extraordinary non-recurring cash charges 13 65

Excess of JV distributions over JV income 11 0

Loss (Gain) on disposition of assets 12 5

Pro Forma effect of acquisitions and divestitures (1) 0

Other 0 (1)

Adjusted LTM EBITDA from continuing operations $803 $725

49

Debt Reconciliations

($ millions) 12/31/2007 12/31/2008

Short-term debt 254$ 113$

Current maturities of long-term debt 79 76

Long-term debt 1,235 1,155

Gross Debt 1,568$ 1,345$

Less: Puchase card program and extended A/P programs (58)$ (48)$

Adjusted Gross Debt 1,510$ 1,297$

Less: Cash in excess of $50m (304)$ (426)$

Adjusted Net Debt 1,206$ 871$

Note: Debt as defined in the credit facility

SPX Corporation 4th Quarter and Full Year 2008 Results

Economy & Finance

Transcript of SPX Corporation 4th Quarter and Full Year 2008 Results