SPX CEO Discusses Q3 2010 Results - Earnings Call Transcript

SPX Corporation (

SPW

)

Q3 2010 Earnings Call

November 3, 2010 8:30 a.m. ET

Executives

Ryan Taylor - Director of Investor Relations

Chris Kearney - Chairman, President and CEO

Patrick O'Leary - Chief Financial Officer

Analysts

Shannon O’Callaghan – Nomura

Stephen Tusa – JP Morgan

Bob Cornell – Barclays Capital

Nigel Coe - Deutsche Bank Securities

John Inch - BofA Merrill Lynch

Jeff Sprague – Vertical Research Finance

Deane Dray – Citi Investments

Presentation

Operator

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» SPX Corporation Q2 2010 Earnings Call Transcript
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» SPX Corporation Q3 2009 Earnings Call Transcript

Good day ladies and gentleman. And welcome to the third quarter 2010 SPX Earnings Conference Call. My name is Alicia and I will be your coordinator for today's call.

At this time all participants are in a listen-only mode. We will be conducting a question and answer session towards the end of the conference. (Operator Instructions)

I would now like to turn the presentation over to your host for today’s call, Mr. Ryan Taylor, Director of Investor Relations. Please proceed, sir.

Ryan Taylor

Thanks, Alicia. Good morning every one. We appreciate you joining us today. With me today on the call are Chris Kearney, our Chairman, President and CEO of SPX, and our Chief Financial Officer, Patrick O'Leary.

This morning's call is being webcast with a slide presentation which you can also access in the investor relations section of our website spx.com. This webcast will be available until November 17, and I encourage you to follow along with the webcast as we reference the detailed information on the slides.

Please note that the slide presentation also includes supplemental schedules, which provide reconciliations for all non-GAAP financial measures discussed today. Our earnings press release was issued this morning and can also be found on our website.

Before we continue, I would like to point out that portions of our presentation and comments are forward looking and subject to Safe Harbor Provisions. The updated 2010 EPS and free cash flow guidance that we discuss today is on an adjusted basis, and also from continuing operation. Please also note risk factors in our most recent SEC filings.

And with that, I will turn the call over to Chris.

Chris Kearney

Thanks Ryan, and good morning, everyone. Thanks for joining us on the call this morning. The third quarter results marked our strongest operating performance of the year so far. We reported overall organic revenue growth for the first time since Q4 2008, driven by strong demand in many of our early-cycle businesses, growth in emerging markets, and solid project execution.

Recovering, our TM markets is progressing largely in line with our expectations. In Q3, we were encouraged by a sustained momentum, in our early cycle businesses. We also saw some modest signs of increased demand in our late cycle tower and energy businesses.

From a strategic perspective, we completed the acquisition of Anhydro, which we believe is in excellent strategic fit with our flow technology segment. We also refinanced a significant portion of our outstanding debt during the quarter.

I’ll begin this morning with an overview of the consolidated results for the quarter as compared to the prior year. Reported revenue increased 10% to $1.3 billion. Organic revenue growth was 7%. All four segments reported organic growth, led by test and measurement at 24%.

Geographically, sales into Asia-Pacific increased by nearly 30%, highlighted by sales into China, which grew by more than 50%. Revenue also increased 11% in the Americas and 1% in EMEA. Sales in emerging markets accounted for 26% of total revenue in the period, consistent with the first half of this year.

Segment income increased to $158 million or 12.2% of revenue. This exceeded our targets primarily due to stronger than expected operating results in our Thermal and Test & Measurement segments. Excluding one-time charges related to our debt refinancing, third quarter earnings per share increased 13% year over year to $1.11 per share.

We ended the quarter with our backlog at about $3 billion, up 8% sequentially. The backlog increase was due primarily to favorable currency changes, particularly the strengthening of the South African Rand. And with the Anhydro acquisition complete, it’s order backlog of $76 million is now included in our consolidated total as of the end of Q3.

From organic perspective, the backlog was stable from quarter to quarter; an encouraging sign.

Total orders grew sequentially and on a year-over-year basis. Orders for flow components were quite strong and we also saw an increase in orders for our Power Energy businesses.

Our transformer backlog increased 14% from Q2 driven by an increase in volume. Pricing, which remained in low levels, was stable from quarter to quarter. In our Thermal segment, we saw a nice pickup and large power project awards.

In the United States, we won awards on five large contracts totally more than $100 million in value. Three of these are cooling system retrofit projects at aged coal-fired power plants. The other two are projects in California where our Thermal technology will be used to increase energy efficiency, improve environmental outcome, and increase renewable generation.

We’ve been selected to supply a dry cooling system for a combined cycle power plant in California where water conservation is an important consideration.

Also, in California, we have been chosen to supply the dry cooling systems and critical heat exchangers for what is expected to be the world’s largest solar power plant when it’s completed.

This plant is scheduled to be constructed in the Mojave Desert, were access to water is limited, making SPX dry cooling technology the ideal cooling solution. This is a unique project and our selection as a provider of cooling and Thermal components underscores the breadth of solution that SPX can provide to solar and other types of power plants.

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