Good day, ladies and gentlemen, and welcome to the First Quarter SPX Corporation Earnings Conference Call. My name is Matthew and I will be your operator for today. At this time, all participants are in listen-only mode. We will conduct a question-and-answer session towards the end of this conference. [Operator Instructions]. As a reminder, this call is being recorded for replay purposes. And now I would like to turn the call over to Mr. Ryan Taylor, Director of Investor Relations. Please proceed, sir.

Thank you, Matthew, and good morning, everyone. Thank you for joining us. With me on the call this morning are Chris Kearney, Chairman, President and CEO of SPX; and Jeremy Smeltser, our Chief Financial Officer. Our Q1 earnings press release was issued this morning and can be found on our website at spx.com. This call is being webcast with a slide presentation located in the Investor Relations section of our website. I encourage you to follow along with the details on the slides during the webcast. A replay of this webcast will be available on our website until May 6. As a reminder, portions of our presentation and comments are forward-looking statements and subject to Safe Harbor provisions. Please also note the risk factors in our most recent SEC filings. The financial information presented today is on a continuing-operations basis. And in the appendix of today’s presentation we have provided reconciliations for the non-GAAP and pro forma measures presented today. As a reminder for 2015, we have provided financial modeling targets for revenue, segment income, EBITDA and other reasonably predictable items for SPX as currently reported and also for the two future companies. We do not believe it is useful to provide 2015 EPS guidance given our plan to complete the spin-off of our Flow business in the third quarter of this year as well as the uncertain timing of the related financial impacts. And with that, I’ll turn the call over to Chris.

Thanks, Ryan, and good morning, everyone. As expected, our Q1 financial results reflect the strengthening of the U.S. dollar, the impact of lower oil prices and the ongoing weakness in power generation markets. Broadly speaking, these factors have caused many of our customers to reevaluate their capital spending budgets leading to delayed order placement and project timing. As a result, Q1 orders across our Power & Energy businesses were down double-digits over the prior year and significantly lower than anticipated. These declines overshadowed a strong bookings quarter in our Food & Beverage business which also reported solid organic revenue growth and margin improvement in the quarter. Given the slower start to the year and the uncertain timing of capital investments in oil and oil related markets, we have implemented additional cost production initiatives and increased our plan restructuring actions for the year. Our revised full-year targets reflect these changes as well as the strengthening of the U.S. dollar. For 2015, we now expect organic revenue to be flat to down 4% with total revenue down 6% to 10% including a 6% currency headwind. Before reviewing the first quarter results, I’ll provide a brief update on the spin-off of our Flow business. We continue to identify candidates to serve on our board for both future companies. We recently appointed IBM executive Anne Altman, to our Board of Directors. Anne is a valuable addition to our board, and I’m confident we can leverage her experience and expertise to help advance our overall business strategy. From an organizational perspective, we’ve determined the tier 1 reporting structure for both companies including the direct reports for both Gene Lowe and myself, and we’re now the process of finalizing the broader corporate teams. We expect them to be fully established by the end of Q2. On…

Thanks, Chris, good morning everyone. I’ll begin with a brief look at earnings per share. For the fourth quarter, we reported a diluted loss per share from continuing operations of $0.78. As Ryan mentioned, this included some notable items not in our Q4 guidance, which I’ll discuss in more detail. For Q1, we reported a loss per share from continuing operations of $0.17, which included $0.22 of cost associated with the spin-off of our Flow business. The cost associated with the spin included $5 million of professional fees recorded in corporate expense and $5 million of tax expense related to legal entity reorganization. Excluding the spin related costs, EPS from continuing operations was $0.05 in the quarter. Moving to the segment results beginning with Flow, revenue declined 14% to $531 million. Currency was an 8% or $51 million impact to the year-over-year revenue decline. Organic revenues were down 6% due to a double-digit decline in Power & Energy sales, reflecting the impact of lower oil prices on our customers’ capital spending decisions. This decline was partially offset by a mid-single-digit increase in sales of Food & Beverage components and systems. Segment income was down $7 million versus the prior year, with currency translation driving $5 million of the decline. Excluding currency, lower income due to the organic revenue decline in Power & Energy was largely offset by improved profitability in our Food & Beverage business, as well as cost savings from last year’s restructuring actions. Flow’s margins increased 50 points to 11.2%, a good result given the macro-environment and top line challenges. The margin improvement was driven by our Food & Beverage business, where operating margins were up 360 points year-over-year reflecting the disciplined order selectivity and improved project execution that Marc and his team have been working on. Flow’s…

Thanks Jeremy. So, in summary, given the slower than expected start to the year and the impact of lower oil prices on our customers’ capital investments, we provide for full year targets to reflect the challenging environment in our energy, power and industrial markets. Given these challenges, we’re focused on items that are within our control including restructuring actions, cost reduction initiatives and working capital performance. We also continue to make progress towards the spin-off of our Flow business and expect to complete that transaction around the end of Q3. We believe the spin will provide both future companies greater flexibility to focus on and pursue the respective growth strategies enabling them to create significant value per shareholders, customers and employees. We also believe the execution of this plan will allow investors to distinctly value the unique attributes of each company. So that concludes our prepared remarks. And at this time, we’ll open the call for questions.

[Operator Instructions]. And the first question comes from the line of Shannon O’Callaghan. Please go ahead. Shannon O’Callaghan: Hi, Chris, maybe on South Africa to start, just can you provide some more detail on how the losses play out there and also the dynamics of what’s really taking place, how and when this all gets resolved? You mentioned the potential of reimbursement maybe just a little bit more color what we can expect as this goes forward?

Yes, sure, happy to Shannon. As you know, and as many know who have followed this, and followed the company for a while, this is - these are two very large and very complex projects in South Africa that have now been going on for some time. And there is a common imperative among all parties starting with Eskom and that is to get it done right. And Eskom particularly is highly motivated to get these power plants up and running as soon as possible, just given the rolling blackouts in South Africa and the severe need for additional power generation in that country. So, with that, I mean, Medupi has successfully achieved the oil fire on its first unit that’s unit 6, which is a significant milestone I believe we talked about that on the last call. I mean, it’s important to understand that in order to achieve first fire, the boiler and all the related systems, we’re in fact available and fully commissioned. So that is a very important milestone. That said, there remain challenges for everyone involved again just given the size, the complexity and working conditions in South Africa. So it’s created a complex set of contractual relationships. We have taken an aggressive position to keep this project moving forward as Jeremy mentioned in his remarks. And so, with the cost, we’ve recognized in this quarter and in the previous quarter those are obviously intended for us to take greater control and to keep the project moving forward. The amounts that are invested, some of those obviously will be the subject and are the subject of dispute which again as Jeremy mentioned in his remarks will be resolved at a later date. And our position is that we have claims relating to, much of the charge…

Sure Shannon. One thing I do want to point out on that slide, the kind of skews, the comparison to last year in particular that the $25 million charge in Q4 for Thermals included in that 29% figure in the middle of that section. So it isn’t actually quite as big from last year than it appears on the slide. But what I would say is, a lot of what we have and forecast isn’t the backlog, particularly Food & Beverage, and Power & Energy and Thermal and Waukesha, which is a good thing. We have visibility to the projects that we have left in the outlook as well as some of the shorter cycle businesses, but they’re not yet in backlog and so there certainly is some level of risk but we think we’ve been appropriately cautious for everything that we know now. And the restructuring action that should drive the savings that help us as well, those are underway some have already been executed additional ones in process for Q2 and early Q3. So, certainly always some risk of customers pushing projects out further into 2016 and such an uncertain macro time. But encouraged by certain other things, such as the aftermarket orders holding up and Flow Power & Energy, that’s a positive for us, actually increasing sequentially which is a big driver of underlying profit expectations in the second half for that business. Shannon O’Callaghan: Okay, great. Thanks, guys.

Thanks Shannon.

Thank you for your question. Your next question comes from the line of Mike Halloran. Please go ahead.

Good morning, guys.

Good morning Mike.

Good morning Mike.

Just sticking with that question, I’m just wondering. I doesn’t sound, I just want to make sure here that there’s any core fundamental underlying improvement embedded in the second half of the ramp with the exception of maybe on-boarding a little bit more of these shorter cycle type product categories. Is that a fair statement?

It is fair. We certainly, given where we’re at four months into the year, have to assume the conditions continue as they are right now.

Fair. And then, switching over to the Flow side, with the margin degradation you guys are expecting there, could you just try to bucket in wide buckets what those pressure points are in delineating between volumes, price cost side, mix, things like that? And related to that maybe just talk about how that price cost dynamic is working out? Obviously, some price pressure on the environment here, how that’s flowing through on a net basis.

Yes, I’m not going to get into specific numbers but I’ll describe kind of for each end market. I’ll start with Flow industry which I think is the simplest story, we’re pretty steady both on the revenue and margin front and our expectations. And I would tell you that orders in the first four months of the year, support that position so, we’re confident there. On Food & Beverage, we expected as we started the year, as we communicated externally that Food & Beverage would have a big margin improvement year, and we’re certainly off to a great start with that with 360-point margin improvement in the first quarter. And then it really comes down to Power & Energy which is offsetting the Food & Beverage margin improvement to get us to where we are which is basically flat in total for the year. And in P&E, I would tell you that the vast majority of it is volume. Although we are seeing some pricing pressure and we’re negotiating the marketplace actively on timing of delivery versus price, etcetera. And it’s not pervasive but it’s certainly is a challenge for us but it doesn’t represent more than 20% of our margin degradation in that business.

Great. I appreciate the color, guys.

Thanks Mike.

Thanks Mike.

Thank you for your question. Your next question comes from the line of Nigel Cole. Please proceed.

I just want to pick up on the last question, the offsets to the turn-up points of P&E margin pressure. And just really given the ramp up in the system’s backlog within Food & Beverage, how confident are you that that improvement in Food & Beverage margins can continue into the back half of the year?

Yes, I mean I would say, we have a lot of confidence in it, particularly with the good start that we had in the first quarter. The execution has been solid across the system business. As we mentioned, the short-cycle orders particularly in North America, on the Food & Beverage pump side, we’re a little lighter than we expected. And we were still able to deliver that level of margin improvement in Q1. And given that that we’ve seen a pick-up there more recently I would say, it gives us increased confidence in delivering that second half.

Yes, and I would tell you Nigel that the significant improvement we’re seeing in the Food & Beverage businesses, real credit to Marc and his team. And really the manifestation of a couple of years’ worth of really good work in terms of much better project selection, much better project execution, he’s put a really terrific team together and a pretty cohesive unit around the world. So, we have seen very steady improvement in that business particularly over the course of the second half of last year. And to Jeremy’s point, the start we’ve seen in Q1 does give us a lot of confidence in their ability to continue down that path. So, I can’t say enough good things about Marc and his team and what they’ve done and how pleased we are, starting with the book of business that we have in that group, but secondly with just the execution on the projects.

Okay. That’s good to hear. Obviously, good news on the aftermarket orders, but on the OE side, you saw a big step down in OE orders during 3Q, and that continued into 4Q, albeit, it was a bit lumpy. Has the rate of decline, sequential decline and the OE orders start to stabilized, or are we still seeing pretty big step-downs on the OE side?

I think it stabilized as the quarter progressed particularly challenging in January and February, March as better. And I think March is continued into April from an activity perspective. So it seems to have stabilized sequentially as it relates to the year-over-year decline in orders.

And is there a good reason why you would’ve seen that decline earlier than some of your peers?

Good question, hard for us to answer that at this point in time. I mean, we haven’t really seen a significant change in competitive behavior in the marketplace as of yet, perhaps with a couple of exceptions as it relates to price as we mentioned in the prepared remarks.

Okay, thanks Jeremy.

Thank you. Your next question comes from the line of Jeff Sprague. Please proceed.

Thank you. Good morning. Just back to South Africa for a moment, are you in fact getting paid, or have line of sight of getting paid on this additional scope that you’re taking on, in the name of getting this stuff done, or are you jamming through and finishing this stuff and kind of then stake your claim after the fact?

We’re getting paid for a portion of it. But the things that we’re taking to charge for what we’re doing is, assuming that we have to bear those costs and we’re not recording receivable, that’s why there is in that charge. That said, there are active settlement conversations ongoing as Chris mentioned which lead us to believe that as we said earlier, there will be some level of recovery of those costs.

Right, because you’ve got max leverage before this thing is done, right not after it’s done. I just wanted to shift gears then to the delays that you’re seeing in power. You mentioned EMEA and oil producing countries, and that makes sense. Would you draw the same conclusion on the U.S. delays that you’re seeing, that it’s someway second derivative related to energy pressures, or you would not conclude that?

I think that’s fundamentally fair Jeff in terms of projects that are directly or indirectly energy related. The distinction however I would make with respect to differences in the U.S. market is the, is frankly the dearth of reconstruction opportunities which were mostly U.S. based in the past. And in the past, had supported margin improvement, because as you know those tend to be higher margin and quicker term projects. But with the lack of investment in the existing power infrastructure in the United States, particularly in the older facilities, we’ve seen those projects in the U.S. slow down pretty dramatically.

And if I can just slip one more, and I’ll move on, Food & Beverage orders into the balance of the year, do you think there’s enough there in the pipeline to support a view into 2016, or have we just kind of seen a nice surge in orders that we’re now going to burn off over the next 12 months or so?

No, the project planning activity that’s going on out there around the world, that we participate in and are getting our share of wins with respect to those projects continues. And so, I think the front-log activity is healthy. And going back to my comments at the beginning of the call it’s being driven by the predictable markets, right. So, activity in China around powered milk, infant baby formula and other dairy products like yogurt and protein drinks and things like that, that activity remains strong in the age-specific world. But in Europe as well, and so, we’re certainly in a comfortable position with respect to how we have targeted the rest of the year for that business. But with respect to additional activity, it’s fairly active.

Thank you very much.

Thank you. Your next question comes from the line of Robert Barry. Please proceed.

Hi, guys. Good morning.

Good morning, Robert.

I’m sorry if I missed it, but did you update us on what the expectation is for oil and gas, the estimate that had been down 5% to 10%?

We did all and its mid-teens.

Okay. Concentrated, I guess, on the upstream?

That’s on an organic basis too.

Correct, yes.

Right, okay. And could you just maybe give us a little bit more color on how things progressed through the quarter because I had the impression that maybe after a very bad January, things got a little better in February, and then maybe did it deteriorate again?

No, I think what Jeremy was describing was the order process in terms of starting out pretty rough in January, improving as the quarter went on. And what we would describe Robert is stabilizing in March. And so, I think there is a fair amount of activity still going on out there in terms of quoting activity and projects that are out there. But I think the view that we’ve taken with respect to reduced expectations for the balance of the year is prudent and one that has to be taken just given how Q1 started.

Got you. And then just finally on Industrial, it sounds like the main change in the view there is Genfare because I guess maybe transformers sounding even a little better?

Yes, transformers is performing in a steady fashion. And we’ve seen performance stabilized, what we’re seeing in transformers is, we continue to see a robust order process as we’ve seen over the last two plus years. But what we’re experiencing right now in Waukesha, much like we’ve seen improvement in some of our other businesses is a more disciplined approach around order intake. But in terms of how we see improved performance in the transformer business, it really relates to operating efficiencies and transformer design improvements that we’ve made that we’ve really benefited from. Because the pricing environment while stable is still no-where near where it was at the last peak in the market. And we don’t expect that to change. With respect to Genfare, it’s really all about project timing right. And so, and that relates fundamentally to government funding, which relates back to the status of the Highway Transportation Bill as Jeremy mentioned in his remarks which is still unresolved. And so, one way or the other, we expect resolution although it could be just an extension of existing programs rather than a new funding proposal being adopted. But that is at the core of where the customer buying decisions are. And so, as we see those delayed, or as we see that process delayed, as we have in past years, it tends to delay decision-making projects, decision-making on these projects in cities across the country. And the nature of the Genfare business is that while that decision making process can be slow and can be pegged to funding challenges when the decisions are made, the projects actually turn pretty quickly. So, but we have just given the slow development again, I think we’ve taken a prudent approach to that business in terms of the targets that we’ve set now for the balance of the year. We have seen sort of a pent-up potential program backlog in that business because we saw this pattern really in last year and it has been completed resolved in 2015.

Okay, great. Thank you.

Sure.

Thank you. Your next question comes from the line of Julian Mitchell. Please go ahead.

Hi. Thank you.

Hi Julian.

Hi, I just wanted to follow-up on transformers, not so much on the margins but specifically on the top line. Because I think in Q4 and now into Q1 the commentary on the backlog is pretty good, but the revenues for transformers, I think, were down year-on-year in Q4, down also in Q1. So, is there something going on in terms of the conversion of backlog into sales, or it’s just timing of a few specific units that moves around?

It’s really timing Julian, more than anything. And it’s those cold winter quarters, Q4 and Q1. So, in Q1 we saw revenues decline $4 million, about $3 million of that related to a couple of very large units that were completed and shipped but could not be accepted because they were in very cold weather states. And pursuant to the terms of those contracts they have to be accepted, put on the pad and then you recognize the revenue it’s just as simple as that. So, that accounted for most of the revenue mix in Q1 and some OP that goes with it.

Thanks. And then within Flow, the Food & Beverage piece, the dairy outlook on the demand side I guess, looks very good. I just wondered how you felt about the balance of supply relative to that because you had a lot of supply added in markets like New Zealand for exporting into China. China’s also been building out a lot of its own domestic dairy processing capacity more recently. So, I guess, is there a risk that the demand stays good, but there’s so much supply coming on that that may damage or limit the orders going forwards?

Yes, I don’t really think so Julian because the demand particularly in China is just so great. And so, while we have seen new capacity contracted for in places like New Zealand, Australia, Europe for export into China and then obviously directly in China, the quoting activity for additional projects continues. And so, I don’t think by any stretch that there has been saturation on the supply side. I think the demand side is still quite significant. And there is additional need and we have the benefit of seeing that in terms of the front-log activity and the quoting opportunities that are out there.

And Julian, I think if you go back to some of the work that Ryan’s done and I think probably the slides from the September Day, you’ll see there are some studies that show that the CAGR over the next decade expected on Chinese consumers demand increases is double digits over the decade. So, I think some of the macro data kind of supports what we hear from our customers in the front-log.

Great. Thank you.

Sure.

Thank you for your question. Your next question comes from the line of Nathan Jones. Please proceed.

Good morning, everyone.

Good morning, Nathan.

Nathan, how you’re doing?

Good thanks. I’ll just follow up on Julian’s question there. If you have a double-digit CAGR of demand in China, how long do you think it takes the market to catch up with that demand, so that you do see supply and demand in balance?

Difficult to say and I think also the product diversification makes it even more difficult to analyze. So back to Chris’ remarks, I mean, it’s one thing to just assess the baby formula market demand. But when you start looking at the innovation into drinkable yogurts, we’re seeing orders around coconut milk, almond milk, soy milk, lot of protein drinks. I mean, just a variety of things that our customers are adding. Because in that business for them it’s all about innovation and new products and that’s really where the second part of their growth comes from on a global basis. So, difficult to say but everything that we’re hearing from our customers and even new customers that are developing who are really farms and co-ops who are starting to think about going straight to the market themselves, supports what we see and what we’ve read from a macro perspective.

And it’s also important to remember Nathan that, part of this business model of ours and one of the more attractive aspects of it is, as this installed base increases, the need for aftermarket service and repair, and then improvement in those existing facilities in terms of efficiency gains that we can provide to our engineered changes will continue. And frankly that’s the more attractive part of the model.

It sounds like it would be fair to say many years then.

I think that’s the short answer.

If I can just go back to the overall guidance, specifically on the top line, you have about 6% organic decline in revenue in the first quarter. The midpoint of guidance is at 5% organic decline for the second quarter. To get to minus 2% for the full year would imply that you need to do 1% or 2% organic growth in the back half. To get to flat for the year, you’d have to do mid-single digit organic growth in the second half. The comps actually get tougher as the year go on. I’m just wondering given the current climate with project deferrals and deferred capital spending, how you get comfortable with forecasting organic revenue growth in the second half of the year?

Yes, I mean for us that’s all backlog driven Nathan. So, the comps do get tougher from a dollar perspective but that’s really driven by our historical seasonality to the second half. So what I’d tell you is we have not made any assumptions on run rate or short-cycle order increases to support the second half forecast that we’ve put out, it’s all about what’s in the backlog and the timing of when that backlog is currently scheduled to be delivered.

So, you haven’t made any assumptions of the run rate business getting any tougher, just continuing the way it is at the moment?

Continuing with the current environment that we’re seeing yes.

Okay. Thanks a lot.

Thanks Nathan.

Thanks Nathan.

Thanks Nathan, this is Ryan Taylor. We’re at our hour time for the call. So we’re going to conclude it here. We still have some analysts in the queue. Per the normal, I’ll be around throughout the day to answer all questions. Please feel free to reach out to me directly. Thank you for joining us today. And we’ll see you next time.

Thank you for joining in today’s conference ladies and gentlemen. This concludes the presentation. You may now disconnect. Good day.