SPX Investor Meeting


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SPX Investor Meeting

  1. 1. 2009 guidance presentation where a sound approach meets new challenges h d h t h ll global infrastructure x process equipment x diagnostic tools 1 January 21, 2009 1
  2. 2. Introductions Chris Kearney Chairman, President and Chief Executive Officer Patrick O’Leary O Leary EVP and Chief Financial Officer Jeremy S lt J Smeltser VP of Finance f Fi Ryan Taylor Manager of Investor Relations 2
  3. 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 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. Except as specifically noted otherwise, the fiscal year 2008 financial data are the estimates presented by SPX on October 29, 2008, and are presented here only for comparison purposes. SPX’s inclusion of earlier estimates in the presentation is not an update, confirmation, affirmation, or disavowal of the estimates. In keeping with its past practice, SPX will only disclose actual fiscal year 2008 and fourth quarter numbers in its fourth quarter earnings release, expected to be issued on February 25, 2009. 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, 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, GAAP is available on our website at www spx com www.spx.com. 3
  4. 4. Agenda 1) SPX Overview and 2009 Guidance 2) Update on Key End Markets 3) Update on Financial Reporting Segments 4) 2009 Full Year and Q1 Financial Targets 5) Capital Structure and Liquidity 6) Summary and Questions 4
  5. 5. SPX Overview global infrastructure x process equipment x diagnostic tools COMPANY CONFIDENTIAL
  6. 6. Strategic Transformation 9 Pl tf Platforms i 2004… in 2004 Fluid Systems Fundamental Long-Term Service Specialty Solutions Engineered Market Drivers Products Growing world population Power Systems Cooling Broadcast Advancement of developing Ad t fd li Lab d Lif L b and Life Compaction Security Sciences countries and emerging middle class …3 Core, Global End Markets in 2008E Infrastructure Aging Western world power 56% HVAC / and energy infrastructure Other 16% Power & Energy Tools & 41% Increased electricity demand Diagnostics 17% Increased demand for Food & General p processed dairy, food and y, Beverage Industrial 13% % 14% beverages Note: 2004 data as reported and includes the discontinued revenue of EST, Kendro and Bomag Note: Data from continuing operations; 2008E estimated as of 1/21/2009 SPX Has Undergone a Significant Transformation; 6 Long-Term Strategy is Focused on 3 Core, Global End Markets
  7. 7. Business Disposals ($ millions) ~Annual ~Gross # of Disposals Revenue* Proceeds From 2005 through today: 2005 7 $1,440 $2,751 – 16 total disposals – $2.3b of revenue sold 3 $300 $123 2006 – $3.1b of gross proceeds 2 disposals in process: 3 $350 $129 2007 – Flow product line discontinued in Q3 2008 – Industrial product line 2008 2 $160 $125 discontinued in Q4 2008 2009 1 $20 $16 *At the time of disposal Consistent Seller of Non-Core Assets; 7 Increased Focus on 3 Core, Global End Markets
  8. 8. Capital Structure September 29, 2008 Capital Structure Reduced outstanding debt by g y $1.7b in 2005 Debt Simplified debt structure in 2007: 39% Equity Re-financed global credit facility in 61% September 2007 Issued bonds in December 2007 to finance the APV acquisition Gross Debt to EBITDA $1.3b of total debt outstanding at $ f 12/31/2008E 2.6x 2.2x 1.8x Required debt payments of $75m in 1.6x 1.6x 2009 and 2010 2009E available liquidity: > $1b 2004 2006 2008E* *2008E based on EBITDA as of October 29, 2008 and December Balance Sheet Solid Financial Position and > $1b of Available Liquidity 8
  9. 9. Disciplined Capital Allocation Gross Debt to EBITDA Excess Capital Usage > 2.0x Debt reduction < 2.0x 2 0x Strategic acquisitions Share repurchases Target Gross Debt to EBITDA of 1.5x to 2.0x 9
  10. 10. Share Repurchases Cumulative Dilutive Common Share Repurchases Shares Outstanding Total cumulative cost: $1.9b 74m 35m 32m 50m 23m 15m 2005 2005 - 2006 2005 - 2007 2005 - 2008* 12/31/2004 2009E 2005 2006 2007 2008 *As of December 18th, 2008 Repurchased ~35m Shares or 45% of the Ending 2004 Share Count; 10 Additional 3m Share Repurchase Plan Announced December 18, 2008
  11. 11. Acquisitions Primary ~Annual End Market Revenue* Allocated ~$800m towards $800m acquisitions f i iti from 2005 t 2008 to Food & Beverage ~$1.1b of revenue acquired $100m Acquisition criteria: Johnson Controls $80m European Diagnostics Strategic to three core end markets $50m Accretive to earnings within the Tools & Diagnostics first 12 months $25m Generate returns above SPX’s cost of capital within a short time frame $10m *At the time of acquisition Disciplined Acquisitions Strategic to Core End Markets 11
  12. 12. Globalization 2004 SPX Revenue 2008E SPX by Geography Revenue by Geography North America North America 70% 48% Europe 28% Africa ROW 2% South 3% Asia Pacific Europe Middle Asia America 14% 20% East 7% 3% 5% Note: Data from continuing operations; 2008E estimated as of January 21, 2009 Increased Global Revenue Base; 12 Greater Than 50% of Sales Outside North America
  13. 13. Backlog 12/31/2008* Backlog Year-End Backlog by Geography $3.4 ($ billions) Europe $2.6 30% Americas 38% $ $2.0 $1.3 Asia Pacific 9% ROW South Africa 2% 21% 2005 2006 2007 2008* Thermal Flow Industrial Note: D t f N t Data from continuing operations; Test and Measurement’s backlog is immaterial and not reported publicly ti i ti T t dM t’ b kl i i t il d t t d bli l *12/31/2008 backlog estimated as of January 21, 2009 21% of the Consolidated 2008 Year End Backlog is 13 Multi-Year Power Projects in South Africa
  14. 14. Backlog Year-End Backlog Backlog Aging $3.4 ($ billions) $2.6 2009E 66% $ $2.0 $1.3 2010E & Beyond 34% 2005 2006 2007 2008* Thermal Flow Industrial Note: D t f N t Data from continuing operations; Test and Measurement’s backlog is immaterial and not reported publicly ti i ti T t dM t’ b kl i i t il d t t d bli l *12/31/2008 backlog estimated as of January 21, 2009 Starting 2009 with a Total Backlog of $3.4b; 14 Approximately 66% Expected to be Delivered in 2009
  15. 15. Operating Initiatives and Financial Results Revenue & Segment Income Margins Organic ~7-8% 6% 10% 10% Operating Initiatives: growth ~$6.0 Emerging and developing markets ($ billions) $4.8 New product d N d t development l t $4.1 13.0% to $3.7 13.2% 12.9% Continuous Lean improvements 12.1% Efficient supply-chain management 11.1% IT infrastructure improvement 2005 2006 2007 2008E Organizational and talent development Revenue – Segment Income Margin Note: 2005 – 2007 data as restated in 2007 10-K; 2008E as of October 29, 2008 Strategic Transformation and Operating Initiatives 15 Have Contributed to Revenue Growth and Margin Improvement
  16. 16. SPX Today Adjusted EPS Global, multi-industrial provider of $6.40 to $6 40 t engineered solutions to three core, $6.50 global end markets $4.85 Annual Revenue: ~$6b $6b Solid financial position $3.07 $2.62 Disciplined capital allocation Continuous improvement culture 2005 2006 2007 2008E $3.4b backlog Note: As reported and adjusted for certain items; see appendix for reconciliations; 2008E as of October 29, 2008 Strategic Transformation Has SPX Well-Positioned to 16 Manage Through an Uncertain Economic Environment
  17. 17. Uncertain Economic Environment Banking failures and consolidations have impacted credit availability for 2008E Revenue Split many companies Long Cycle 40% Global credit crisis has created an uncertain economic environment… …as a result, capital spending for many companies for 2009 is uncertain Short Cycle Volatile foreign V l til f i exchange rates h t 60% Volatile commodity pricing 60% of SPX’s Revenue is Short Cycle; 17 Slowing Global Economy Impacting SPX’s Outlook for 2009
  18. 18. SPX Global End Markets Organic Revenue 2008E Revenue by End Market 2009E Long-Term Power & Energy (3%) to +1% 5%+ Infrastructure If t t 56% HVAC & Other Infrastructure (5%) to flat 3% to 5% Other Power & 15% Energy Energ Tools & 41% Diagnostics Tools & Diagnostics (12%) to (7%) 3% to 5% 17% Food & Food & Beverage flat to +4% 3% to 5% Beverage General 13% Industrial 14% General Industrial (5%) to flat 3% to 5% Total (5%) to flat 4% to 6% Note: Data from continuing operations; 2008E estimated as of 1/21/2009 Current Economic Environment Impacting 2009 Expectations; 18 Long-Term Organic Growth Target is 4% to 6%
  19. 19. Focused Restructuring in 2009 Reporting Segment Restructuring Expectations Flow Technology Fl Thl APV i t integration ti Cost controls in response to slower revenue growth Thermal Equipment & Services Rationalization of package cooling business in China Continued headcount reduction and outsourcing at Guangzhou, China facility Guangzhou Concentration of resources in centers of excellence in Germany, U.S., Belgium and Hungary Targeting $65m of Restructuring Actions in 2009; 19 2008 & 2009 Actions Expected to Reduce Global Workforce by ~10%
  20. 20. Focused Restructuring in 2009 Reporting Segment Restructuring Expectations Test M T t & Measurement t U.S. U S market rationalization k t ti li ti European acquisition integration Rationalization of Chinese operations p p post Autoboss acquisition Industrial Products & Services Business by business measured response to changing environment Targeting $65m of Restructuring Actions in 2009; 20 2008 & 2009 Actions Expected to Reduce Global Workforce by ~10%
  21. 21. 2009 Guidance 2009 Macro-Economic 2009 Guidance Assumptions Global economic recession: – 1% global GDP growth Earnings Per Share: Transformer shipments decline $5.40 to $5.80 in 2H of 2009 Continued order decline in U.S. U S for vehicle repair tools Free Cash Flow: and diagnostics $230m to $270m Mid-January exchange rates Raw material costs remain stable with existing estimates Note: Data f N t D t from continuing operations; see appendix f non-GAAP reconciliations ti i ti di for GAAP ili ti Prudent Management Through Difficult Economic Environment; 21 Maintaining Commitment to Long-Term Strategy
  22. 22. Global Power & Energy Market global infrastructure x process equipment x diagnostic tools 22 January 21, 2009 22
  23. 23. SPX Power & Energy Technology Examples 2008E Power & Energy 2008E Power & Energy Revenue by Market Revenue by Product Pumps & Valves Transmission & Cooling g 22% Distribution Systems 21% 32% (US market only) Power Generation 54% Heat Coal Exchangers & Solar Crystal Oil & Gas Natural Gas Filters Growers 19% 22% Nuclear 3% Geothermal Mining Transformers 6% Solar 21% Moisture Separator Reheater Heat Exchangers Cooling Systems Pumps and Valves Note: Data from continuing operations; 2008E estimated as of 1/21/2009 Diverse Technology Offerings Provide Efficient Solutions for Customers 23 and Responds to Many Environmental Challenges
  24. 24. Global Energy Infrastructure Investment Cumulative Expected Investment in Energy Infrastructure, 2007 - 2030 Coal 3% Gas Power 21% Generation Power $5.5 $5 5 50% 52% $13.6 trillion trillion $6.8 trillion $6.3 trillion $6.8 Oil trillion 24% Transmission/ Distribution 50% Source: WEO 2008 Copyright OECD/IEA, 2008; Figure 2.6, page 89 , as modified by SPX Corporation $26 Trillion Estimated to be Spent on 24 Energy Infrastructure From 2007 Through 2030
  25. 25. Investment in Power Infrastructure by Region Cumulative Energy-Supply Infrastructure Investment by Region, 2007 - 2030 Key Market Drivers ($ billions) Advancement of developing economies in Asia and South North America Africa China Europe E. Europe / Eurasia Aging US and Western Middle East European infrastructure Africa Developing Countries: Latin America 63% of world total Demand for higher efficiency India Developed Countries: products Rest of Asia 37% of world total Developed Pacific $0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 $3,500 $4,000 $4,500 $5,000 Stricter St i t regulatory environment lt i t Increasing project size Source: WEO 2008 Copyright OECD/IEA, 2008; Table 2.4, page 88, as modified by SPX Corporation Global Demand Fueled by Aging US and European Infrastructure 25 And New Power Capacity Expansion in Developing Regions
  26. 26. Installed Power Capacity by Region Asia (852 GW) EMEA (746 GW) Middle East Australia 6% 4% Africa India 8% W. W Europe 10% 45% China 55% E. Europe 19% Other Asia 31% Russia 22% Americas (676 GW) S. America 5% N. America 95% Source: Platt's Global Power Database January 2008; Limited to SPX addressable markets Asia, EMEA and the Americas Have Significant 26 Installed Bases of Power Generation Infrastructure
  27. 27. Aging of Power Fleet Percent of Installed Capacity (GW) Reaching 40 Years of Age by Year 50% 45% 2007 2011 2015 40% 35% 30% 25% 20% 15% 10% 5% 0% Americas Russia Rest of India China EMEA Source: Platt's Global Power Database January 2008; Limited to SPX addressable markets The Aging of Existing Infrastructure Provides an 27 Attractive Opportunity for Retrofit and Rebuild
  28. 28. Installed Power Capacity by Major Fuel Asia (852 GW) EMEA (746 GW) Nuclear 10% Nuclear Coal 25% 43% Gas 13% Coal 77% Gas 32% Americas (676 GW) Nuclear 18% Coal 53% Gas 29% Source: Platt's Global Power Database January 2008; Limited to SPX addressable markets The Majority of Existing Capacity is Coal Based 28
  29. 29. Overview of Coal-Fired Installed Base United States Western Europe Coal Plants 1,580 1 580 1,190 1 190 Average Size (MW) 225 MW 185 MW Average Age (y g g (years) ) 34 29 Average Efficiency 35% 36% Note: efficiency = electricity produced energy input Source: IEA, Platts and Alliance Bernstein New Power Plants Operate in the 40% to 48% Efficiency Range; 29 Significant Opportunity to Improve Efficiency in the Installed Base
  30. 30. Typical Coal-Fired Power Plant Thermal Segment Flow Segment Industrial Segment 30
  31. 31. New Power Plant Opportunities 1,000 1 000 MW 800 MW Nuclear Plant Coal Plant ($ millions) ~$150m $160 SPX Potential Revenue Pumps & Valves $140 ~$100m Filters $120 ~$80m $100 Heat Exchangers $80 Cooling Systems $60 $40 $20 $0 Coal Coal Nuclear (w / wet cooling) (w / dry cooling) (wet cooling only) Source: SPX management estimates. Actual results may vary based on project specifications, raw material prices and competitive dynamics Attractive Revenue Opportunities for New Power Plant Projects 31
  32. 32. Power Projects in China SPX began selling dry cooling systems in China in 2002 X 2 d cooling manufacturing plants: dry li fti lt X – Zhangjiakou – Tianjin X Awarded 8 contracts in 2008 Awarded 2 contracts YTD 2009 SPX cooling system in Zenglan, China In total, awarded 47 total projects from 2002 to today: – 32 completed – 7 under construction – 8 i engineering/design in i i /d i Steady Orders for Dry Cooling Systems in Competitive Chinese Market; 32 Average Dry Cooling Contract Size is $15m to $25m
  33. 33. Power Projects in South Africa Current Projects SPX awarded contracts to supply critical components on two 4.8GW coal-fired mega-projects: – Medupi – Kusile Turbine Island Boiler Island Multi-year construction projects Total l T t l value of contracts in SPX’s f t t i SPX’ December backlog: ~$725m Collected cash deposits between Air cooled condenser Jet fabric filters 5% and 15% on each contract d h tt (dry cooling)* Air preheaters Feedwater heaters Boiler pressure parts 2009E revenue: $50m to $60m *Kusile contract only South African Contracts Expected to Contribute to 33 Revenue and Earnings from 2009 through 2012
  34. 34. Kendall Power Station Kendall Power Station The Kendall power station’s installed capacity is 4 116 GW 4,116 Construction by Eskom was started in 1982 and completed in 1993, no major plants have been added since Cooled by SPX’s dry cooling y y g technology which uses significantly less water in the cooling process than wet cooled p power stations Six of SPX’s natural draft, dry cooling towers are used to cool the Kendall Power station The Kendall Power Station was the Last Major Project in South Africa 34
  35. 35. Presence in South Africa Kusile Power Station Established in South Africa Medupi Power Station in 1970 as DB Thermal Currently ~300k square feet 300k of manufacturing capacity in Nigel, South Africa Employing local labor for manufacturing 25.1% Black Economic Empowerment minority shareholder SPX is Committed to Providing Critical Components to 35 Help South Africa Expand its Power Capacity
  36. 36. Power Project in Iceland SPX was awarded a $100m contract in June 2008 to provide a cold end solution Geothermal plants require a on 5 power plants for Orkuveita condenser and a cooling t d d li tower Reykajavikur Integration of condenser and wet cooling tower (cold end) offers unique value proposition Iceland’s Svartsengi p g power pplant with SPX’s cold end solution Geothermal Power is an Attractive Niche Market Opportunity 36
  37. 37. Financing for South Africa & Iceland South Africa Customer deposits received Eskom has increased electricity rates 27% to fund its capital spending program Customer commitments remain intact The World Bank has indicated a commitment to loan Eskom $5b Progress has been made on financing fi i Iceland Governmental backing Reykjavik received a 170m Euro loan appears firm from a European investment bank Financing Appears to be Secure at this Point; 37 We Will Continue to Monitor Each Situation as Projects Progress
  38. 38. Solar Opportunity SPX designs crystal growing technology used by solar panel suppliers Solar concentrator plants require stationary heat exchangers and cooling towers Emerging market opportunity Nevada S l O i cooled b N d Solar One is l d by SPX cooling technologies Solar is Another Attractive Niche Market Opportunity 38
  39. 39. Power Transformers: US Market Customer Landscape Power Transformer Investor Owned Utilities: – 200 Accounts Public Power: – 3,000 Accounts Independent Power Producers (IPPs) Industrial / Commercial: – Automotive, Petroleum & Refining, Chemical, Pulp & Paper, Etc. SPX Custom-Engineers Power Transformers for the 39 Transmission and Distribution of Electricity in the United States
  40. 40. Power Transformers: US Market Power Transformer Revenue Q4 2008 orders down 27% from Q3 f ($ millions) ~$500 Customer sentiment (20%) to underlying this change: yg g $420 (25%) – Uncertainty regarding the availability of capital in the $290 current economic environment – The cost of long-term capital needed to fund capital projects – Uncertainty as to what effect a slowing economy could have 2006 2007 2008E 2009E on electricity demand in the near-term Note: 2008E as of 10/29/2008 Transformer Orders Slowed During the Latter Part of 2008 40 Due to Customer Concerns Over the Cost and Availability of Capital
  41. 41. Aging US Transformers Demand Drivers 200 180 160 Transformer GVA Installed 140 Increased Electricity Demand (1): 120 A 100 – Demand for electricity expected to 80 increase on average 1% per year 60 40 from 2006 through 2030 20 0 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 Year Heightened Regulatory Standards: 100% – Energy Policy Act of 2005 90% 80% – Electric Reliability Organization Hazard Function 70% 60% 50% 40% 30% Aging Infrastructure: Ai If t t 20% 10% – Average transformer age is 25 years 0% 2 8 14 20 26 32 38 44 50 56 62 68 74 or greater Age Source: Hartford Steam Boiler (1) WEO 2008 Copyright OECD/IEA, 2008; Table 6.1, page 88, as modified by SPX Corporation Fundamental Long-Term Demand Drivers Have Not Changed; 41 Need for Infrastructure Replacement is Still Significant
  42. 42. Regulatory Influences on Investment Federal regulation has increased since the last investment interruption Current regulatory factors may limit the length of time that investment is deferred: –M d Mandatory reliability standards: li bili dd • Potential fines up to $1m per day – FERC incentives: • Capacity margins, transmission constraints – State requirements and regulation – Homeland security Investment Decisions May be Influenced by Regulatory Standards 42
  43. 43. Global Tools & Diagnostics global infrastructure x process equipment x diagnostic tools January 21, 2009 43 COMPANY CONFIDENTIAL
  44. 44. Primary Tools And Diagnostics Offerings Aftermarket Specialty Tools & Equipment Repair Labor Time OEM Studies & Warranty Electronic Reduction Diagnostic Initiatives I iti ti Tools Tl Tools Aftermarket Technology Based Technical Electronic Applications for Diagnostic Content Creation Information Tools Management & Vehicle Delivery Repair Manuals, OEM Essential E ti l Wiring Service Tool Diagrams Training Programs Development & Delivery Dealer Equipment and Services Managed Program Provider to Field Surveys, Support Customer Service Readiness DES Investigations & Training Programs P Dealer Facility Design Only Global Provider with a Full Line of 44 Products and Services for the Transportation Industry
  45. 45. Tools & Diagnostics Market Drivers 2008E R Revenue b P d t by Product Electronic Diagnostics Key Market Drivers: 42% Hard Tools 33% New model introductions Increasing electronic Information & Services complexity of vehicles 25% 2008E Revenue by Market Environmental regulations Aftermarket OEM outsourcing initiatives 32% OEM 68% Note: Data from continuing operations; 2008E estimated as of January 21, 2009 New Model Introductions and Increased Vehicle Complexity Drive 45 Growth Opportunities for Diagnostic Platforms and Service Offerings
  46. 46. Strategic Transformation 2005: 2005 US BBased B i d Business w/ European Presence North 2008E revenue: ~$1b America 78% Globalized business model: Increased presence in – Europe and Asia Asia Pacific Europe 4% Restructured U.S. footprint 18% – 2008E: Global Business w/ Regional Infrastructure Expanded relationships with North America European customers: 54% Less dependent on U.S. big – three ROW 2% Investing for growth in Asian Asia Pacific 5% markets Europe 39% Note: Data from continuing operations; 2008E estimated as of January 21, 2009 Strategically Globalized Tools & Diagnostics Business 46
  47. 47. International Acquisitions Annual Key Customer Year Revenue* Relationships Acquired Location ~$70m BMW, Volkwagen 2005 Germany Johnson Controls ~$80m Renault, Peugeot 2007 France European Diagnostics ~$25m Volkswagen 2007 Germany ~$10m A leading Chinese 2008 Shenzhen, diagnostic supplier China * At the time acquired International Acquisitions have Increased Technical Capabilities 47 and Expanded Global Presence by Region or OEM
  48. 48. Customer Evolution 2005 Revenue 2008E Revenue GM, Chrysler, Aftermarket Ford GM, Chrysler, Aftermarket 41% 23% Ford 32% 29% BMW, VW, , , Renault- Nissan 16% Other OEMs Other OEMs 30% 29% Note: Data for Service Solutions business unit; 2008E estimated as of January 21, 2009 Increased Presence with Leading European OEMs; 48 Decreased Dependence on US OEMs
  49. 49. Evolving Footprint Service Solutions Plant Locations 2007 & 2008 restructuring g focused on reducing U.S. 8 cost base: Reduced footprint to one – manufacturing plant and fti ltd one distribution center 3 3 Headcount reduced by ~225 – 2 1 0 2009 restructuring focus: U.S. market rationalization 2003 2008 Integrating European and North American locations Asian acquisitions European locations Asian locations Continuing to Shift Resources to Overseas 49
  50. 50. Chinese Vehicle Market Projected New Car Sales in China China car parc lags well $20 behind Europe and the ($ billions) $18 Americas $16 $14 Significant increase in new $12 Overtake US Sales car sales expected $10 $8 Dealer count expected to $6 expand significantly $4 Overtake Japan Sales $2 ~7% growth in the near term g – $0 1995 2000 2005 2010 2015 2020 2025 2030 Source: WEO 2007 Copyright OECD/IEA, 2007; Figure 9.6, page 300, as modified by SPX Corporation China is Expected to be a Significant Growth Opportunity 50
  51. 51. Asia-Pacific Expansion Asia-Pacific Revenue* Investing in R&D: ~85 engineers – $65 Expanding OEM customer base: $59 30 global OEM customers – $58 29 independent Chinese OEMs – $48 Acquired Autoboss in 2008 Honda order: Selected to design and deliver H d ’ 3rd generation Honda’s ti diagnostics system 2005 2006 2007 2008E *Includes Asia, the Middle East and Australia , Technology and Expertise Driving Asia-Pacific Expansion 51
  52. 52. New Product Development Next Generation Global Diagnostic Tool Launched in Q4 2008 Wireless vehicle connection ti Speed scroll control Audio A di & video id Information at the fender 1980 to 2007 vehicle coverage Internet connectivity It t ti it Touch screen selection High speed scope Continue to Focus on New Product Development to 52 Serve a Global Customer Base
  53. 53. Global Food & Beverage Market global infrastructure x process equipment x diagnostic tools January 21, 2009 53 COMPANY CONFIDENTIAL
  54. 54. Key Food & Beverage Market Drivers Enhanced hygienic standards and regulatory controls Economic expansion in developing regions Process optimization Energy efficiency and waste gy y reduction Production of higher quality products Demand for new plants SPX Serves the Global Food & Beverage Market 54
  55. 55. Food Processing Market Characteristics Food Processing Machinery and Attractive End Market Equipment Global Forecast Characteristics ($ billions) $45.4 6% CAGR Regulated market $43.0 $40.7 $40 7 Stable, less cyclical $38.6 Consistent gro th growth Developing market opportunities 2008E 2009E 2010E 2011E Source: Global Industry Analysts’ Food Processing Machinery and Equipment Report, 2007 Global Food Processing Market is Steady 55 and Less Cyclical than Most Markets
  56. 56. Expected Growth by Region 2007 to 2010E Investment for Food Processing Machinery and 2007 Global FPME Spend by Region Equipment by Region ’07 – ’10E EMEA Region CAGR 30% 7.1% 7 1% Asia-Pac Ai P Asia-Pacific A i P ifi 35% Latin America 5.6% 3.6% 3 6% US 3.3% Europe North America Latin America 18% ROW 10% 7% Source: Global Industry Analysts’ Food Processing Machinery and Equipment Report, 2007 Investment in Food Processing Machinery 56 Expected to be Higher in Developing Countries
  57. 57. Typical Food & Beverage Customers Power Global Customer Base Including Many 57 Leading Food and Beverage Manufacturers
  58. 58. Food & Beverage Components Positive Displacement Pumps: Pump viscous products such as tomato paste, chocolate Centrifugal Pumps: Pump thin fluids for beverage or clean in place systems Heat Exchangers: Temperature control for mechanically separated meats, margarines, icings, fondants Valves: Process flow diversion & shut off Mixers: Dispersion & solid suspension Diverse Product Portfolio of Custom Engineered Solutions 58
  59. 59. Food & Beverage Product Offerings 2008E Revenue by Type ~70% engineered components for niche end markets: – Built to order Engineered Components ~30% full-line and skidded 70% process systems: – Engineered, designed and installed Process Systems 30% Note: Data from continuing operations; 2008E estimated as of January 21, 2009 SPX Offers Customers Engineered Components, 59 Skidded Sub-Systems and Full-Line Systems
  60. 60. Food & Beverage Presence Before APV Strong Presence Growing Presence Global Expansion of Manufacturing, Sales and Distribution 60 Presence Underway Prior to APV Acquisition…
  61. 61. Food & Beverage Presence Including APV Strong Presence Growing Presence Key APV Additions APV has increased SPX’s presence in developing growth markets: – China – Eastern Europe – S th A South America i – Middle East – Russia – South Africa …Addition of APV’s Global Platform is Expected to 61 Accelerate SPX Flow Technology’s Global Expansion
  62. 62. APV Integration Update Streamline combined global presence: Targeting headcount reduction of ~500 people – Leverage SPX operating initiatives: Implementation of “Lean” p – Leverage global supply base – IT consolidation – Increased localization of manufacturing Leverage respective distribution markets globally – Product “pull-through” from combined distribution channels Expect Integration to be Completed in 2010 62 Projected Annualized Savings of $60m to $80m
  63. 63. Update on Reporting Segments global infrastructure x process equipment x diagnostic tools January 21, 2009 64 COMPANY CONFIDENTIAL
  64. 64. Financial Reporting Segments Thermal Equipment Th lE i t Industrial Products & Flow Technology Test & Measurement Services & Services End Markets Served Food & beverage Power generation Vehicle tools & Power transmission diagnostics di ti & di t ib ti distribution Power generation HVAC Telecom Solar power General industrial General industrial generation Transportation Chemical General industrial Oil & gas Aerospace Air dehydration Broadcast Automotive Financial Results Reported in Four Segments 64
  65. 65. Financial Reporting Segment 2008E Revenue by Segment Thermal Equipment & Flow Services Technology 29% 34% Test & Industrial Measurement easu e e t Products and 19% Services 18% Note: Data from continuing operations; 2008E as of 10/29/2008 Flow Technology Contributed 34% of Consolidated Revenue in 2008E 65
  66. 66. Flow Technology Product Overview 2008E Revenue by Product Engineered g Components 85% Pumps Valves Homogenizers Mixers Skidded and Full-Line Systems 15% Dryers Heat Exchangers Note: Data from continuing operations; 2008E estimated as of January 21, 2009 Diverse Offering of Branded, Custom-Engineered Processing Solutions 66
  67. 67. Flow Technology Revenue Breakdown 2008E Revenue 2008E Revenue by Geography by End Market 27% Power & Energy Europe Oil & Gas 35% North America Power 12% Food & 26% Generation Beverage 8% 36% Mining 7% Africa General 3% Asia-Pacific Industrial South 22% 20% America Middle East Air Dehydration Chemical 7% 8% 7% 9% Note: Data from continuing operations; 2008E estimated as of January 21, 2009 Significant Global Presence; 67 Food & Beverage is Primary End Market
  68. 68. Flow Technology Backlog and Revenue ($ millions) 2008 Quarterly Backlog $799 $782 $763 $646 Q4 b kl d li backlog decline: 15% 9% due to foreign exchange – fluctuations Q1 Q2 Q3 Q4* 2009 Drivers FX translation impact: (~7%) Annual Revenue Limited d Li it d order visibility past Q1 i ibilit t +3% to $1,875 to 5% ~$2,000 End market trends: $1,975 Oil & gas and power markets steady – $1,070 Food & beverage markets steady – General industrial, chemical and – dehydration markets softening due to economic slowdown 2007 2008E 2009E LT Note: Data from continuing operations; 2008E as of 10/29/2008 *12/31/2008 backlog estimated as of January 21, 2009 Targeting Low Single Digit Organic Growth in 2009 68
  69. 69. Flow Technology Segment Margins Annual Segment Margins 2009 Drivers APV Integration: 14% to 16.4% 16% Facility consolidations – 13.7% to 14.7% 14 7% Headcount reduction of ~500 Hd t d ti f 500 – 12.0% to 12.2% End market trends: Prepared for cost reductions if – orders decline as the year progresses 2007 2008E 2009E LT Note: Data from continuing operations; 2008E as of 10/29/2008 2009E Margin Improvement Driven by APV Integration 69
  70. 70. Flow Technology Strategic Focus APV integration Globalizing sales channels to leverage niche products Increasing presence in developing economies New product development in food & beverage and power markets Potential acquisitions Focus on Continued Globalization and Expansion in Key End Markets 70