Baird 45 th Annual Industrial Conference

Transcription

1 Baird 45 th Annual Industrial Conference Jeremy Smeltser, Vice President and CFO November 9, 2015

2 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 express or implied results. Although SPX FLOW 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 continuing operations, which are subject to change. Particular risks facing SPX FLOW include risks relating to 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 FLOW s SEC filings. 2015E as presented on October 28, Statements in this presentation are only as of the time made, and SPX FLOW 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 November 9,

3 Company Overview ~8,000 employees operations in over 35 countries including...38 manufacturing locations and over 25 service centers ~$2.4 billion in sales into more than 150 countries ~30% of sales into emerging markets Note: 2015E as of October 28, 2015 Delavan Rockford Hanover park Houston Burlington McKean Rochester Newport Goldsboro Ocala Glasgow Silkeborg Penistone Brixworth Kolding Orebro Etten-Leur Eygelshoven Killarney Assen Moers Newbury Annecy Unna Erpe-Mere Santorso Ekero Bydgoszcz Norderstedt Budapest Delhi Jaipur Ahmedabad Sao Paulo KEY MANUFACTURING LOCATIONS Busan Xidu Suzhou November 9,

4 Segment Revenue Breakdown Segment Revenue Breakdown FOOD & BEVERAGE 37% $2.4B 2015e revenue POWER & ENERGY 31% INDUSTRIAL 32% Note: 2015E as of October 28, 2015 November 9,

5 Capital Structure Q Cash and Debt Structure Debt Maturity Schedule $207m of cash on hand $1.1b of gross debt; $871m of net debt Gross leverage at 3.0x; net leverage at 2.5x $600m bonds at 6.875% Senior credit facilities: $400m Term Loan A $450m Revolver $500m Foreign Credit Instrument Facility Maturity to 2020 Securitization facility: $50m (annual renewal) $700 $600 $500 $400 $300 $200 $100 $0 $600 $340 $20 $20 $ Term Loan ~2% 6.875% Senior Notes Simple Debt Structure Without Significant Maturity Until Q November 9,

6 Capital Allocation Methodology Expected Outcome 1) Utilize strategic planning process to evaluate future revenue and earnings growth Quantify projected future cash flows and estimate total company valuation 2) Maintain target capital structure and fund regular dividend Gross Debt to EBITDA (1) target range: 1.5x to 2.5x Annual dividend policy to be reviewed by the Board 3) Invest available capital in highest, risk adjusted, return opportunities: EVA models continue to drive allocation decision-making Organic growth and improvement opportunities Dividend policy Share repurchases Strategic acquisitions (1) Gross Debt and EBITDA as defined in the company s credit facility Capital Allocation Discipline Focused on Highest Return Opportunities November 9,

7 Global Footprint Optimization 1. HOUSTON: 50k square foot expansion 1. HOUSTON 2. POLAND 3. MIDDLE EAST 6. INDIA 5. KOREA 4. CHINA new machine tools 2. POLAND: manufacturing expansion 3. MIDDLE EAST: commercial development, business partners and aftermarket capabilities EXPANDING where we see GROWTH opportunities and need critical mass 4. CHINA: localization of homogenizers & plate heat exchangers Food & Beverage innovation center 5. KOREA: leasing 100k square foot facility 6. INDIA: evaluating expanded presence November 9,

8 Bydgoszcz, Poland: Current State Leased facility aquired with APV in 2007; has since increased production capabilities and grown into current capacity Factory: 110,000 Sq.ft. Headcount: ~ revenue: ~$60m >90% on-time delivery F&B pumps Industrial pumps F&B valves F&B skids district heat exchangers F&B heat exchangers tubular heat exchangers Skilled Workforce with Strong Operational Performance and Solid Engineering Capabilities November 9,

9 Poland Manufacturing Expansion High quality, efficient workforce in Poland with industrial supply chain AUGUST 20, 2015 Building a 300k square foot facility in Bydgoszcz, Poland; expected to be operational in 2016 Intend to shift manufacturing into new facility over time: Facilities in Unna, Germany and Kolding, Denmark to be consolidated into Poland Evaluating other opportunities OCTOBER 7, 2015 Net investment: $60m to $65m: ~$20m net capital investments $40m to $45m restructuring costs (~$25m in 2015E) Up to $25m of tax incentives over time Expanding Manufacturing Presence in Poland to Reduce Global Manufacturing Overhead and Benefit from Economies of Scale November 9,

10 Key Investor Messages Current end market environment is challenging Long-term dynamics for food, energy and industrial production remain attractive Aggressively taking action to improve operating efficiency: 1. Optimizing global footprint 2. Streamlining business processes 3. Reducing SG&A Increased 3-year margin target 100 points to 15% to 17% Focused on What We Can Control and Committed to Improvement November 9,

11 Questions? November 9, 2015

12 Appendix November 9, 2015

13 Food & Beverage Overview DAIRY 60% FOOD 25% $885M 2015E Sales BEVERAGE 10% PERSONAL CARE 5% Note: 2015E as of October 28, 2015 November 9,

14 Food & Beverage Historical Revenue and Segment Income 2015E revenue down (8%) to (9%): (10%) currency impact 0 to +1% organic growth: $947 Revenue Segment Income $970 $969 (8%) to (9%) ($ millions) ~12% 2015E segment income up ~7%: ~12% operating profit margins 9.7% 9.3% 10.2% +180 points of margin expansion E Note: 2015E as of October 28, 2015 Targeting Flat to Modest Organic Growth in 2015E with ~180 Points of Margin Expansion November 9,

15 Power & Energy Overview AFTERMARKET 40% MIDSTREAM 25% $745M 2015E Sales CONVENTIONAL POWER 9% NUCLEAR POWER 10% UPSTREAM 12% DOWNSTREAM 4% Power & Energy Revenue Note: 2015E Profile as October Diverse 28, 2015 Across Oil and Power Applications November 9,

16 Power & Energy Historical Revenue and Segment Income 790 points of margin expansion from 2012 to E revenue down (22%) to (23%): (6%) currency impact (16%) to (17%) organic revenue decline due to the impact of lower oil prices on our customers spending behavior Revenue Segment Income $1,011 $998 $ % ($ millions) (22%) to (23%) 2015E Segment Income down ~42%: ~13% segment income margins (450) points of margin contraction primiarliy driven by lower revenue volume and to a lesser degree, lower pricing 12.8% ~13.0% 9.6% E Note: 2015E as of October 28, E Revenue and Income Reflect the Impact of Lower Oil Prices on Customer Spending November 9,

17 Industrial Overview MIXING SOLUTIONS 23% Chemical Processing Water / Wastewater Mining & Minerals DEHYDRATION EQUIPMENT 28% $770M 2015E Sales HYDRAULIC TECHNOLOGIES 19% Air Treatment General Industrial Marine / Shipbuilding HEAT EXCHANGERS 15% INDUSTRIAL PUMPS 15% Note: 2015E as of October 28, 2015 Diversified Industrial Process Equipment Provider Serving Attractive Global End-Markets November 9,

18 Industrial Historical Revenue and Segment Income 2015E revenue down (8%) to (9%): (7%) currency impact (1%) to (2%) organic revenue decline $888 Revenue Segment Income $837 $839 (8%) to (9%) ($ millions) 2015E segment income down ~(13%): ~14% segment income margins ~(70) points of margin contraction primarily due to decline in Hydraulic Technologies revenue and profit 14.5% 14.2% 14.7% ~14.0% E Note: 2015E as of October 28, 2015 Organic Revenue Expected to be Down (1%) to (2%) in 2015E with Margins Down ~70 Points November 9,

19 2015 Full Year Modeling Targets 2015 Financial Target SPX FLOW Food & Beverage Power & Energy Industrial Revenue Variance To Prior Year (13%) to (14%) (8%) to (9%) (22%) to (23%) (8%) to (9%) Currency Impact To Revenue ~(8%) ~ (9%) ~(6%) ~(7%) Organic Revenue Growth (5%) to (6%) 0% to +1% (16%) to (17%) (1%) to (2%) Segment Income % ~13% ~12% ~13% ~14% Adjusted EBITDA (1) $320m to $330m Special Charges (Restructuring) ~$45m Note: 2015E as of October 28, 2015 (1) See slide #21 for reconciliation to GAAP measure 2015 Modeling Targets Updated to Reflect Q3 Results and Revised Q4 Forecast November 9,

20 Restructuring Actions ($ millions) FY 2015E Expense FY 2015E Savings Annualized Savings Food & Beverage ~$25 ~$5 ~$20 Power & Energy ~$12 ~$3 ~$5 Industrial ~$7 ~$4 ~$10 SPX FLOW ~$45 ~$12 ~$35 Note: 2015E as of October 28, 2015 Expect ~$12m of Restructuring Savings in 2015E; Incremental $10m-$15m of Savings in 2016E; Expect Annualized Savings of ~$35m to be Fully Realized in 2017 November 9,

21 Adjusted EBITDA Reconciliation ($ millions) 2015E Segment Income $311 Corporate expense ($60) Special charges ($45) Stock based compensation ($24) Pension and post retirement healthcare ($3) Net other items $0 Adjustments: Depreciation $45 Amortization $23 Non-cash compensation expense $33 Extraordinary non-recurring cash charges $45 Adjusted EBITDA $325 Note: 2015E as of October 28, 2015 November 9,

22 Adjusted Debt Reconciliation ($ millions) 9/26/2015 Short-term debt $68 Current maturities of long-term debt $6 Long-term debt $1,005 Gross Debt $1,078 Less: Purchase card program and extended A/P programs -$9 Adjusted Gross Debt $1,069 Less: Cash in excess of $50 -$157 Adjusted Net Debt $912 Note: Adjusted debt as defined by the company s credit facilities November 9,

23 2016 Modeling Assumptions Special Charges $25m to $30m Free Cash Flow >100% of net income Corporate Expense ~$60m Capital Expenditures TBD Stock Compensation Expense TBD Depreciation ~$45m Pension Service Costs ~$3m Amortization ~$23m Effective Tax Rate 28% to 30% Diluted Shares Outstanding ~42m Plan to Issue 2016 Guidance in February 2016 During Q Earnings Webcast November 9,

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