Good day, ladies and gentlemen. Thank you for standing by, and welcome to the SPX Corporation Fourth Quarter and Full Year 2015 Earnings Conference Call. At this time, all participants are in a listen-only mode. Now, we'd like to turn the call to Mr. Paul Clegg, VP of Finance and Investor Relations. Please go ahead.

Thank you, Carmen, and good afternoon, everyone. Thanks for joining us. With me on the call today are Gene Lowe, our President and Chief Executive Officer; and Scott Sproule, our Chief Financial Officer. A press release containing our fourth quarter and full year 2015 results was issued just after market close. You can find the release and our earnings slide presentation, as well as a link to a live webcast of this call in the Investor Relations section of our website at spx.com. I encourage you to follow along with the slide presentation during our prepared remarks. A replay of the webcast will be available on our website until March 3. As a reminder, portions of our presentation and comments are forward-looking and subject to Safe Harbor provisions. Please also note the risk factors in our most recent SEC filings. Our comments today will largely focus on adjusted financial results. Specifically, we will focus on Core operating results which exclude the results of our South African projects, and we will separately provide an update on those projects. Other adjustments to our GAAP results this quarter include a goodwill impairment, a mark-to-market pension adjustment and some additional spin-related items that were booked in the fourth quarter. You can find reconciliations of all pro forma figures to their respective GAAP measures in the Appendix to today's presentation. Finally, we plan to be on the road meeting with investors during the first and third weeks of March. And with that, I'll turn the call over to Gene.

Thanks, Paul. Good afternoon, everyone. Thanks for joining us. Before I begin with comments about the business, I'd like to thank our employees for their continued hard work following the spinoff of SPX FLOW Incorporated. This is a transformative time for SPX. Not only are we focusing on building out our growth platforms to take the company through its newest chapter of evolution, we are also expending considerable effort to address our infrastructure and changing the fundamental way we are organized and operate as a company. While there's still a lot left to do, I'm very pleased with the accomplishments to date and the significant efforts and personal sacrifice being made throughout the organization. And I'm confident that we have the right team and the right plan in place to succeed in driving value across our platforms. I appreciate your continued focus and effort and we're excited about the future we're building together. Turning to the quarter. While the fourth quarter was not without its challenges, most of our businesses achieved strong results. Our HVAC and Detection & Measurement segments and our transformer business all continued to perform well and our cash flow generation was strong with our Core business generating more than $85 million of free cash flow. Our Power Generation business remained challenged, particularly in Europe, and experienced greater-than-expected pressures during the quarter which caused us to miss our full year Segment Income targets. We continue to reduce cost to better align with market demand and continue to implement process improvements. However, the fourth quarter results in Power Generation were unacceptable and we are committed to addressing the poor performance in this business. During the quarter, we had two announcements that we're very excited about and it helped move us further towards our long-term value creation goals, as…

Thanks, Gene. I'll start with our results for the quarter. As a reminder the spinoff of SPX FLOW occurred at the end of our third quarter in late September, making the fourth quarter our first full quarter as a standalone company. On an adjusted basis, Core earnings per share were $0.52. In order to properly reflect the ongoing earnings power of the post-spin SPX, we have made various adjustments to our GAAP results. In addition to the results of the South African projects, we've adjusted our GAAP EPS to exclude the effect of noncash goodwill impairment charge of $0.32 per share related to one of our European power-based generation businesses. In the fourth quarter, we also took a charge of $0.17 per share for changes in actuarial assumptions related to legacy benefit plans. In 2013, we adopted mark-to-market accounting for our pension and post-retirement benefit plans with adjustments generally recognized in the fourth quarter of the year. We also excluded some residual spin-related costs that were incurred during the quarter. As Gene noted, our Q4 results reflect generally strong performance from the key platforms we were counting on to deliver growth. However, this favorable performance was masked by weaker than expected results from our European Power Generation businesses. Core revenues declined 13% to $486 million in the fourth quarter compared with the prior-year period. This reflects an organic year-over-year decline of 10.1% and a 2.9% currency headwind. The key contributors of the revenue decline are lower sales of Power Generation and HVAC products. Core Segment Income margin was 10.4% compared with 11.3% in the prior-year period. Segment Income improved year-over-year in both HVAC and Detection & Measurement, but these improvements were more than offset by declines in our power segment. Now I'll walk you through the details of our results…

Thanks, Scott. We've had a lot of questions recently about the economic environment and how our company is likely to perform in a potential downturn. So I want to spend a few minutes talking about the company's sensitivities to some macro trends. Our businesses serve a variety of end markets with a breadth of products. When we look at the diversity of these products and end markets, as well as our geographic footprint, we believe these factors help limit the impact of some of the biggest macro concerns today. For example, about two-thirds of our revenues are replacement in nature, things that require maintenance, service, spare parts and upgrades. Low oil prices has been another major concern in the financial market. Post-spin, we have limited direct exposure to the petroleum industry. Having said that, in a portion of our businesses we do sell into economies that are oil-dependent and are monitoring those markets for weakness. Regarding the impact of a rising dollar, we would point out that a significant majority of our sales are in the U.S., more than 70% in 2015. There's also been a lot of discussion about slowing growth in China and what that means for industrial companies. Approximately 5% of our revenues are from China, excluding the Dry Cooling business. And we continue to see positive trends in the end markets we serve there. Our China exposure will decline at the sale of our Dry Cooling business, which does have direct exposure to the Chinese power market. Overall, we believe that SPX is well-positioned to endure tough economic conditions, if that is what occurs. We have strong liquidity, which we expect to be enhanced by the cash proceeds from the sale of our Dry Cooling business. We have modest debt service requirements and no refinancing requirements…

Thanks, Gene. Carmen, at this point, we are ready to open up the queue for questions and answers.

Thank you. And our first question is from the line of Julian Mitchell from Credit Suisse. Please go ahead. Ronnie Weiss - Credit Suisse Securities (USA) LLC (Broker): Hey, guys. This is Ronnie Weiss on for Julian.

Hi, Ronnie. Ronnie Weiss - Credit Suisse Securities (USA) LLC (Broker): Just want to touch into the HVAC segment there and what you guys are kind of looking at for 2016, the split out in the end markets there, kind of your outlook for residential and non-res construction?

So I'd say what we're seeing, as a reminder, a big portion of that is replacement revenue, which doesn't typically follow the newbuild commercial cycle. But we would anticipate to follow the Dodge Index, which we'd see low single-digits of growth in the commercial portion of that segment. Ronnie Weiss - Credit Suisse Securities (USA) LLC (Broker): Okay. And then also on HVAC kind of the pricing dynamics you guys saw in the quarter and then as you guys look to 2016 what those price cost dynamics look like?

Yeah, we really haven't seen any material pricing either positive or negative in the quarter and we're not anticipating any major changes in 2016 either. As Gene said, the order activity in the commercial side of the business really affecting mostly the cooling side of the products has been consistent. So we're seeing that – no risk there that we see as of now and then on the heating side, much of that is replacement business. Ronnie Weiss - Credit Suisse Securities (USA) LLC (Broker): Okay, great. And then I was just wondering if there's any more color you guys could give on the South African projects regarding kind of the 2016 outlook on the loss expected there? Any kind of quantification there?

Sure. I'll get into that. So, overall, there's no major changes on the project as we updated last quarter and for 2016 what we see is just a continuation of the efforts. We see ourselves completing the scope of work for the construction activities on the ACC project and continuing to move forward on the rest of our projects with our other customer. Based on the timeline of our customers and the end user, two more plants are scheduled to come online and producing power by the end of 2016, so progress remains. As I said in my comments, we do have excess capacities in the business. We would expect that somewhere around $3 million or so of losses on the projects on a quarterly basis until we're able to finish up the manufacturing scope of our work, which we anticipate being able to do in the end of the year and kind of get those capacities back in line with the overall business operations. Ronnie Weiss - Credit Suisse Securities (USA) LLC (Broker): Great. Thanks, guys.

Thanks.

And our next question is from David Rose from Wedbush Securities. Please go ahead.

Good afternoon. Thank you for taking my call. I was wondering if you could just discuss the dynamics of the margin impact on HVAC? What really drove the margin improvements despite the under-absorption of fixed costs?

I'll take that, Dave. I'd say we've seen some nice improvement in the HVAC business over the past couple of years. There's been a couple of items that have driven it. I think there's been some really nice work in product management bringing out good products, higher value products. There's been a lot of work on strategic sourcing, value engineering and really changing and making our products more competitive. I'd say with, I know this is something that's been improving over the past several years, as we did point out in our comments today, we're benefiting from a very large project in Q3, which does provide a little bit of a headwind into 2016. We do think our Core businesses there will have continued margin expansion, but we're overcoming that project in Q3, which I would say made our margins a little bit higher than they would have been on an organic basis. But there's been a number of initiatives there. I think the team, Randy Powell on the Cooling side and John Swann and his team have really, really drove some initiatives that have made our business stronger and driven high margins into the business and we'd expect that to continue.

And I would just add that a lot of these initiatives really started in 2014 or the earlier parts of 2015. So Q4 we're seeing the kind of a full year effect of those benefits as they relate to products and product quality, plant operational, as well as some levels of overhead cost reduction in the businesses that were taken on earlier in the year.

Just to be clear, there wasn't any part of that Q3 project that bled into Q4, though, correct?

That's correct.

Okay. And then if you could, what were the biggest intra-quarter changes within the Power segment that really changed for you vis-à-vis expectations?

As I have mentioned, we did see some push out of shorter cycle product orders and then we did have some project write downs in the quarter, mostly higher execution costs I referred to.

So, Scott, is it a function of forecasting that has to be improved on that front or what has to change as you move into Q1 and the rest of next year or this year?

A lot of the project that we had some of these adjustments to are older projects that we're taking kind of near the end of them and it's not uncommon when you have longer cycle projects that as you get towards the end of them and you're working through the final commissioning stage with your customer that you're going to have some overruns here. What has been different, though, is we've changed our order evaluation and acceptance processes. We're starting right at the front end of the business, as well as increase the level of, I guess, I'll say operational excellence around project management skills within the business. So, we don't have similar type of projects in our backlog entering 2016 as we had that created these issues in Q4.

So, your level of confidence is improved because you scrubbed the projects better or you have a better sense of the timing of when they'll be complete?

I would say our level of confidence is improved from both the scrubbing of the backlog and really understanding the margins in there, as well as the processes that we put in place to determine which projects we're going to take. We talked about project selectivity several times in the past. And so, we're not going to take on higher risk, lower return type of projects, as well as just the operational improvements around project management.

Okay. Thank you very much.

Yeah, Dave, just an additional comment there. I do think that there's been – while the Power Gen business performance is very disappointing in Q4, there have been a number of changes made with regards to the management of the project management and engineering, in particular, that we do believe give us much better visibility and control over the forward planning process.

Okay. That's helpful. Thanks, Gene.

And our next question is from the line of Robert Barry from Susquehanna. Please go ahead.

Hey, guys. Good evening.

Good evening, Robert.

Hey, Robert.

Just first a housekeeping item, the guidance. Does it include the Dry Cooling business or exclude it?

We've included it for the first half of the year.

Okay.

Anticipate it closing by the end of Q2.

Gotcha. So I assume when it goes out it's accretive to margins but that's already factored into the margin outlook?

That's correct.

Got you. On South Africa, I was wondering if you could give us some potential range in a best/worse-case scenario for what the cash flow impact could be related to the projects in 2016?

Sure. So just as a reminder, we've talked about overall projects and we took the charge in Q3 of $95 million. We said $25 million of that was related to working capital and the remainder $70 million was going to be cash over the lifecycle of the projects. And in the year, we have been investing cash into these projects to the tune of about $70 million in 2015. So as we go forward in 2016, we see that as being the highest year of cash flows over the next several years but probably roughly half the level of 2015. And then it'll abate from there given the completion of our construction work on the ACC and our ability to right size the manufacturing operations.

Got you. So I'm sorry. Just to clarify, in 2015 the cash outflow related to South Africa you said was about $70 million?

$70 million, correct.

So, something like $30 million to $40 million would be the outflow related to it in 2016?

That's right.

Got you. That's helpful. And regarding the hiring this advisor, just any way you can give us some rough dimension of what percent of the business is actually being contemplated for sale and what's the timing on that? Is that something that we should expect to be completed in the next quarter or two? Is it really kind of early stage?

I would say it's premature to get into the details around that. It is early stage, but we are moving aggressively. So we're working over the term of months not quarters. So we will provide updates as we have those.

Got you. Maybe just one more. The pressure you saw in HVAC related to the warm weather, is that continuing into first quarter? I know in New York at least it's been still pretty warm in the first quarter.

No, I think we have actually seen a nice uptick in Q1 so far. And I think there's a lot of third party secondary research analyses that look at the market. We feel good about our market share and how we're doing in those markets, but as you know and as most people know, when you do have a very warm winter, it does depress the overall market demand. But some of the cold snap that came in at the end of Q4 has provided an uptick for Q1.

Great. Thanks a lot.

Thanks.

And our next question is from the line of Brett Linzey from Vertical Research Partners. Please go ahead.

Hi. Good afternoon, guys.

Good afternoon.

Just wanted to come back on Power Gen. Could you just talk about the impact from project selectivity in the quarter? And as we go back to the Investor Day, you guys had talked about sort of a flat to down 3% CAGR for the total Power business. Given the market conditions, Power Gen continues to be pretty weak here. I guess, how have expectations changed over that three-year planning period and what's really the impact or update on profit degradation as you see it now?

Yeah. I would say for the overall planning period, the most significant difference in the revenue expectations is going to be the sale of the Dry business. And as Gene mentioned, that carried about $100 million of revenue in 2015. So, as I said earlier, we're kind of modeling it that about half of that will be there for 2016, and then in 2017 you'll see a full year effect of that impact. And then as far as on the margin aspect of it in Power Generation specifically, this is the area that we've been focusing most of our restructuring efforts. There are initiatives that have been implemented in the second half of 2015 including actions we took in Q4. So we are expecting to get some restructuring benefits there in 2016, as well as some of the charges that were taken in Q4 being more like one-time charges, will help improve the year-over-year profitability in the business. Now when you're looking at the segment as a total, the most significant aspect of that segment is Transformers. And we're very pleased with the performance of that business. As I said, we're actually ahead of our schedule on delivering our commitment to 10% margins by 2018. So that's the real driver of the profitability for the segment and our growth expectations.

Okay. And just a follow-up on the restructuring. So, I guess, how would you think about the 2016 benefits from 2015 actions? And then the $5 million of incremental restructuring costs modeled in 2016, what are the paybacks there? And do you think it's deep enough and the scope is wide enough given some of the pressures you see in Power?

Sure. So to start, from a full-year basis, we're expecting about $5 million of incremental restructuring benefit in 2016 versus 2015. As a reminder, most of these efforts are focused in areas of the world where it's more like a two year payback cycle. And then as far – I'm sorry, what was the other question?

Just the $5 million you are taking in 2016, do you think it's deep enough and the scope of those activities is enough to mitigate some of the challenges you see in Power?

Sure. Actually if you go back to our – when we gave our Q3 results, we actually had elevated even higher levels of restructuring. We pulled back from some of those plans for a couple of reasons. One, we had some greater levels of attrition than what we were planning for, which will additionally benefit us in 2016. But the other factor was our decision to hire an advisor to pursue a full gamut of strategic options for the business. So based on that we stopped moving on certain actions we were going to take in order to assess them more holistically.

Okay. If I could just get one more in. Given some of the macro cost currents, could you just give us an update on customer tone through January/February? How activity is tracking? And then, more specifically, as we think about the quarterly cadence through the front half, is there anything we should keep in mind in terms of project timing in D&M or HVAC? Anything to be aware of there?

Yeah. This is Gene. I'll try to give a little bit of commentary of what we're seeing in the first two months of the year. I'll start with HVAC. As we've talked about, I'd say we had muted demand levels in our heating portion of our HVAC business and we've seen an uptick to start in 2016. On the cooling side of the HVAC business, I'd say it's been steady and consistent. So we haven't seen any macro impacts there. If you look across our D&M platform, we've actually seen a pretty healthy frontlog there. And there's a couple of sub-drivers there, but we're not seeing any of the macro concerns. The one area I would say we're keeping our eyes on a little bit is our Communications Technology does fell into some oil-based economies, but we are seeing strength in some of our other product lines there. And then in our Power business, I would say we typically think of that in the two pieces. Our transformer business has had pretty steady demand levels. We feel good about what we're seeing there. And then on the Power Gen, this is where we've seen some pretty consistent weakness, but I would say stabilizing at a lower level. So where we are today, we don't see further deterioration, but we are at I'd say, at a low level of demand in the Power Gen business and that's really why we're focused on taking action to get those businesses healthy. That would be really where the focus of our restructuring in Q3 was focused on. That'd be really where our focus restructuring in Q4 was targeted and it's also where we're evaluating, as Scott had mentioned, alternative strategic options that we think would be in the best interest of shareholders.

I would just add for what Gene mentioned, is that in the Appendix of our presentation we did provide the last two years of kind of what the quarterly gating looks like of our Segment Income. And that's a fair representation of what we're expecting for 2016.

Okay. Great. Thanks, guys.

Thanks.

And ladies and gentlemen, this concludes our Q&A session. I will now turn the call back to management for final remarks.

Well, thank you very much for joining us for the call. We look forward to updating you throughout the year on our accomplishments. Thank you for your support. Have a good evening.

Thank you for participating in today's conference. This concludes the program, and you may all disconnect. Have a wonderful day, everyone.