SPX Technologies, Inc. (SPXC) Q3 2016 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to the Q3 2016 SPX Corporation’s Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. [Operator Instructions] As a reminder, this conference is being recorded. I would like now to turn the call over to your host Paul Clegg, VP of Finance and Investor Relations. Mr. Clegg, you may begin.

Thank you, Sherry. 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 third quarter 2016 results was issued today after market close. You can find the release in 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 review section of our website, at spx.com. I encourage you to review our disclosure and discussion of GAAP results in the press release and then fall along with the slide presentation during our prepared remarks. A replay of the webcast will be available on our website until November 10th. 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 10-K and other SEC filings. On our call today, we will discuss core operating results, which exclude the results of the South African projects, and we will separately provide an update on those projects. Other adjustments to our GAAP results this quarter include an adjustment to the gain from the sale of our Dry Cooling business, a pension adjustment and a charge associated with the write off of differed financing fees. You can find reconciliations of adjusted figures to their respective GAAP financial measures in the appendix to today’s presentation and in our press release. Finally, we plan to be on the road this month meeting with investors. And on December 1st, we will participate in the Credit Suisse Annual Industrials Conference in Palm Beach, Florida. And, with that, I will turn the call over to Gene.

Thanks, Paul. Good afternoon, everyone. Thank you for joining us. On the call today we'll give you a brief update on our overall results, segment performances, end market condition and guidance before going into Q&A. I'll start with some highlights from the quarter. Overall, I'm pleased with our performance in the face of headwinds and certain end markets. The operational initiatives we have been implementing across our company have helped drive improvements in the margin profile of our businesses and for the quarter our adjusted EPS is roughly in line with our internal forecast. And our Detection & Measurement segment specifically, two of our product lines have recently received their largest customer awards in years, helping to position the segment for future growth. Our Transformers business is continuing its strong performance and we're starting to see the benefits of restructuring actions in our Power Generation businesses. All of these factors leave us feeling good about our path forward. So, while we're making several changes to the components of our guidance today, we continue to be confident in our ability to achieve our full-year mid-point adjusted EPS guidance of a $10 as well as our leverage and our full-year targets for 2016. Turning to results. For the quarter, adjusted operating income was $10 million and 2.8% of sales, down from the prior year period primarily due to lower revenues and more origins in our HVAC segment. As a reminder, our year-over-year revenue comparisons in Q3 are affected by the sale of our Dry Cooling business which occurred in late Q1 as well as a large project in HVAC cooling completed in the prior year. During the quarter, most of our strategic platforms performed well. Our Transformer business experienced solid revenue and margin growth and is on track to exceed our full-year margin targets. Within our Detection & Measurements segment, our run rate businesses recorded steady, revenue performance and solid operation of gains. We also saw some less favourable market conditions during the quarter, including conservative order patterns in our HVAC heating businesses. However, the team did an excellent job maintaining share and delivering strong margins despite the challenging demand environment. In Detection & Measurement, while we are very pleased with our recent large wins that I mentioned, we are seeing timelines on certain projects stretching somewhat further than anticipated. In power generation, market conditions remain challenging. However, the efforts we've been applying here to reduce risk and mitigate losses are beginning to have a fair volume impact. Overall, for the year-to-date period, we remain largely on track with the internal profit and cash flow expectations we laid out at the beginning of the year. Turning to our value creation road map. Many of you are now accustomed seeing this slide which lays out our initiatives for driving double digit earnings growth from operational efficiencies expanding our strategic platforms and repositioning the company by focusing on our most attractive end markets. This quarter, the discussion of our accomplishments has a special significance for us, since at the end of September we celebrated the anniversary, the one year anniversary of the spend off. I'd like to briefly review some of our accomplishments over the last year that have helped us build a stronger company that has a significantly higher earnings power and growth potential and when we exited this spend. We're confident in our ability to build on this momentum in the coming months and years. In HVAC, the operational initiatives we have put in place have helped to drive solid year-to-date margin expansion. In addition, we have launched several products such as our new evaporative condenser line which takes us into the adjacent refrigeration market as well as two new high efficiency boilers that help expand our product rack in the growth portion of the hydronic heating market. Within HVAC cooling, we are particularly proud of our new NC Everest product which delivers 50% more capacity than any other factory assembled cooling tower, while offering up to 35% energy savings and as much as 30% lower installation cost. We think this product could have broader applications that will help to expand our market reach both in large commercial HVAC facilities as well as the factory assembled replacement for many field direct cooling applications in HVAC and industrial markets. We have seen healthy customer interests in this product and expect to start seeing this converting into orders in the coming months. In Detection & Measurement, we have been engaging in continuous product development to give our customers value creating technology solutions that drive efficiency in their businesses. For example, our GPS enabled locator within our cable and pipe locator business enhances functionality and allows reliable tracking of surveying and daily usage translating into greater customer efficiency and safety in the field. Within our communication technologies business, our new compact spectrum monitoring system provides increased flexibility to bring high quality spectrum analysis into difficult operating environments. We are in the process of securing orders for this product from North American and European customers and expects shipments to commence this quarter. And our Genfare link automated fare collection system continues to attract customer interest. We're also very pleased with the large customer awards that help further drive our confidence in growth and margin expansion in the segment. In our power segment, we have been actively reducing our risk profile while continuing to drive earnings and margin growth in our transformers business. The transformer scene continues to advance in its value engineering product initiatives and remains focussed on driving further operational improvements in strategic sourcing and productivity. And in South Africa, last December we announced an agreement with one of our customers at significantly reduces our future scope of work and our risk profile there. Another big initiative in our value creation roadmap is improving the financial return profile associate with our power segment. We believe that the performance drag associated with the underperforming portions of the power generation business mask the true earnings capacity of our company in ways on our valuation. To this end, we have taken several restructuring actions to better align our cost structure with market demand as well as other stuffs to reduce risk and exposure to this end market. In the first quarter of this year, we announced the completion of the sale of our dry cooling business for approximately $48 million. And in the second quarter, we took further steps by announcing the hiring of BNP Paribas to pursue the sale of the European based portion of our power generation business while simultaneously announcing an action to restructure part of our US power generation operations. The sale process is progressing and we are comfortable with where we are in the timeline as it is an active process, we can't give much additional detail today but we have a target to have a clear path forward by the end of the year. As we have previously disclosed, the elimination of the underperforming portions of the base power business would add more than $0.30 per share to our full-year 2016 adjusted EPS midpoint guidance of a $10. Turning to an update of our end markets. While the macroeconomic environment remains mixed, our diverse set of product lines and the effect of the operational initiatives we put in place positions us well to continue driving substantial earnings growth and shareholder value. In HVAC cooling, we continue to experience a healthy order pipeline and are pleased with the operational performance of the business. In HVAC heating, we saw the effect of last year's mild winter on first half bookings extend into the third quarter preheating season. However, we continue to maintain share and the operating initiatives or offsetting the margin impact of lower demand volumes. The performance of this business for the remainder of the year will be influenced by the winter weather particularly in the North East and the Mid-West. In Detection & Measurement, 2/3rds of our revenue was short take on nature and overall these product lines have continued to see steady demand. In the remaining 1/3rd which is more project oriented, despite timing shift, we have seen several projects enter the contracting phase over their last few months which gives us confidence of the quality of the front log. The market for transformers has displayed consistent year-over-year demand in medium power. Lead times for medium power transformers were roughly consistent with 30 to 40 weeks as we reported last quarter and the pricing environment remains stable. In large transformers demand is steady and based on customer feedback related to our existing quality and design, we would expect to be a more significant participant in this market over time. In the power generation end markets, demand for heat exchange products remains challenging and we continue to focus on repositioning these businesses. We expect benefits from the cost reduction actions to become more visible in the fourth quarter. And now, I'll turn the call over to Scott to go through the results in more detail.

Thanks, Gene. I'll start with our net results for the quarter. Our GAAP earnings per share was $0.06 on an adjusted basis earnings per share for the third quarter was $0.14. In addition to adjusting for the results of the South African projects, we continue to adjust for noncash pension cost that do not pay into the service time of our active employees. During the quarter, we also completed the true up of working capital transferred with the sale of our dry cooling business resulting in a final adjustment to gain on the sales on that transaction. Lastly, we reported a loss classified as the -- of debt on our income statement. This noncash charge reflects writing off a portion of previously differed financing cost. During the quarter we decided to reduce evaluable capacity associated with bank guarantee facilities that predominantly support our power generation businesses with the strategic actions we've been taking in those businesses, it was excess capacity that we are paining to maintain and this action reduces the facility to more properly reflect our ongoing needs. The result will be a reduction I cost of approximately $1 million on an annual basis. Moving on to core segment results of the quarter, which exclude the results of our South African project. We continue to execute well on the variables within our control and believe our year-to-date results reflect those accomplishments. As Gene had mentioned, we have experienced market headwinds during Q3 associated with HVAC heating orders. That effect was partially offset by continuing strong operating performance within HVAC. And our transformer business continues contributed another solid quarter of revenue in margin growth. In the Detection & Measurement segment, our run rate products experienced steady overall demand. However, revenue from projects which can vary from period to period were lower than the prior year, although in line with our expectations. I'll provide more colour in the various drivers of this as we walk you through our results by segment starting with HVAC. Revenues decreased 16.8% organically and 18.1% as the effect of currency. It is a lower demand for heating products and the effect of the high value cooling project completed during the prior year period that we previously mentioned. That project alone accounted for approximately 5% of the organic revenue decline. Remaining organic decline is largely attributable to softer than expected heating demand in the quarter in particular for boilers. So, let me take a step back for a moment and talk about the boiler market. Our boiler business is approximately 80% residential and for those products the primary demand drivers replacement and upgrades of existing boilers. Basically it's an aftermarket like business with larger steady demand and a level variability around it that's related to the weather. Given where boiler install base is construed in the North East and the Midwest and whether in those particular regions has the most influence. As we get into the colder months of Q4 and Q1, demand is driven more by end market pull through. And during warmer months here in Q2 and Q3, most of our demand comes from stocking orders and anticipation of the winter. During the moderate winter last year, total market shipment volumes for residential boilers in the fourth quarter were down 10%, yet overall market demand for residential boilers was flat in the first and second quarters of this year. In the third quarter, however, overall demand for boilers was down double digits following two quarters of relatively stable market demand, we do not anticipate this level of decline. Despite the lower market demand in the quarter, we are pleased with the performance across the segment. Our team has worked hard in this environment and overall we have been able to maintain our relative share position. Looking at the total HVAC segment, the operational initiatives implement over the last year helped moderate margin declined only 70 basis points when excluding the effect of the high value cooling project completed in the prior year period. In Detection & Measurement, revenues decreased 3.5% organically or 6.4% after the effect of currency due largely the timing of revenues associated with projects. Year-to-date revenues increased approximately 3% on an organic basis compared with the prior year period. Segment income margin remains similar to last year during the quarter but increased a 190 basis points from a year-to-date perspective. As Gene noted, we have seen delays associated with order placement for projects in this segment, slightly more than what we anticipated for the year. We have seen a recent uptick in customers moving these projects into the execution phase. In our power segment, excluding the results of the South African project, year-over-year comparability results remains effected by the sale of our dry cooling business in a large power project executed in 2015 for which we have no equivalent project in 2016. Excluding the effect of both of these items, segment revenues were up modestly, our margins was flat. With solid revenue growth and a strong operating performance in transformer business offset by low sales of power generation equipment's. Regarding the South African projects, there were no material changes in the operating environment and our quarterly results were in line with our expectations. You can refer to the appendix for more details. Turning now to our financial position in guidance. Our balance sheet remains solid. We ended the quarter with cash and equivalence of around $83 million. Free cash flow using continued operations in Q3 was $10.1 million during the quarter. This was in line with what we had anticipated and substantially all this free cash flow usage can be attributed to the South African projects. During the quarter we reduced debt by approximately $9 million. This conclude the first of our scheduled quarterly principle payments on our new term loan of $4.4 million when we'll have equal quarterly payments going forward. As we expected, our net leverage picked up sequentially to 2.6 times at the end of the quarter reflecting mostly seasonal variability in earnings and cash flows. Overall, we continue to feel good about our ability to maintain a strong balance sheet when meeting our obligations. As a reminder, the fourth quarter is historically our largest cash flow quarter and its uncommon than more a 100% of our full-year free cash flow is generated in the quarter. I remain confident that we are on track to return our year end goal of being around the midpoint of our target leverage range of 1.5 to 2.5 times, which will provide us with the cash to deploy capital for actions driving from our shareholder value. As Gene mentioned, we are making several adjustments to our 2016 guidance today by maintaining our midpoint for adjusted EPS of a $10. Before we go get into those details, I want to provide a little context of this year's performance going back to the original target we provided at the beginning of the year. In February, we laid out a view of 2016 and included year-over-year organic revenue growth and margin expansion in our strategic platforms as well as cost reductions in our power generation businesses to offset the weakness in that end market. What we're seeing today, we still expect to outperform our aggregate expectations for a strategic platforms with organic growth in Transformer, HVAC cooling and our -- segment. We are pleased with the operational improvements we've achieved throughout the company, in particular in our HVAC segment and Transformers business, where we have raised margin expectations during the year. However the most significant change to our guidance since February has been driven by the weakness in power generation markets which declined further than we anticipated. In response, we accelerated our strategic actions to address this situation as Gene detailed in going through our value creation real method. With that backdrop, let me take you through the changes in our guidance. We now expect core revenues for the year to be in a range of $1.5 billion to $1.6 billion in modest adjustment from our previous range of $1.5 billion to $1.7 billion. We are maintaining our segment income margin and adjusted operating income ranges in the midpoint of our guidance anticipates that we will likely come in towards the lower end of these ranges. For adjusted EPS, we are now in the range, lower end of these. For adjusted EPS we are now in the range to a $1 to a $20 and we continue to feel confident about executing around the midpoint of this range. Since this day and we have worked hard to continue optimising efficiencies across our company, further enhancing discipline of our cost structure and taking actions to reduce our exposure to low return businesses. Beyond the clear operational benefit these actions provide, they're also the effect of improving the jurisdictional mix of our earnings which improves our tax rate. In addition, we have successful result of potential impact of certain continuing tax matters that further benefits our rate. As a result of these changes, we are lowering our effective tax rate for the year to 30% to 35%. Based on continuing execution of our strategic plan, we'd expect this to be reflective of our ongoing rate. With respect to specific segment guidance, the effect of softer Q3 heating orders in HVAC leaves us targeting flattish organic revenues in the segment for the full-year with some variability around that forecast being driven by winter weather and to reflect any heating demand. Yes, we continue to expect full-year segment income margin with 13% to 16%. Our guidance assumes an average winter for our heating businesses with sensitivity around a warmer or colder winter having a potential effect of plus or minus of a 100 to a 150 basis points on the growth rate of the overall HVAC segment. For Detection & Measurement, the timing of projected related revenue will be a key driver growth for the year. Our long term target in this segment is for organic growth in the range of 2% to 6% and we expect growth this year to be between the mid and low end of this range. Segment income margins for the Detection & Measurement segment are now expected to be 20% to 21% compared with 20% in the prior year, this represents a slight decline from our previous expectations due to project timings that we discussed. With respect to power, the traction we are experiencing from the operational improvements in our transformer business continues to exceed our expectations. We still expect modest top line growth over our raising our year-over-year expectations for margin improvement to 200 basis points over the 7% margins realized in 2015. Previously we expected a 150 basis points of improvements. In power generation, we see no near term relief in the existing challenging market environment. However, as we have stated, we are firmly committing to eliminating the aggregate losses from these businesses. As we did last quarter, the appendix of today's presentation, we have included an update of our expectations for several below line items. We have also included details around our potential currency translation effect on our top line although we do not expect to have much of the impact on profitability. And before I turn the call back to Gene, I want to talk for a moment about the fourth quarter, which always our largest quarter of the year reflecting seasonality of our results. Overall, our fourth quarter guidance supported by a backlog coverage in consistent demand from our run rate businesses. Additionally, we expect sequential earnings improvement in base power. In part to Transformers it allows traction on the cost reduction actions we have been taking in power generation. And with that I turn the call back to Gene.

Thanks, Scott. Well, the third quarter reflected a strong operating performance in several businesses being offset by some market challenges, I'm confident that we have the right plan and the right team in place to continue executing on our blueprint to drive value for our shareholders. Before we move to the Q&A portion of the call, I want to say I'm very proud of the strong effort put forth by our employees since the spin-off of SPX flow more than one year ago today. There is still plenty of hard work in front of us, we've accomplished a lot in a short amount of time and we remain determined to create a more profitable growth company by continuing to build on our strategic platforms while executing on our plan to eliminate the losses from the underperforming portions of our power generation business. We are well underway on our plans to achieve these goals and I look forward to updating you on our progress going forward. I'll now turn the call back over to Paul.

Thanks, Gene. Sherry, I think we're ready to go to Q&A.

Thank you. [Operator Instructions] Our first question comes from Damien Horth of UBS.

Hey guys, good afternoon.

Hey, Damien.

Hey, Damien.

So, I appreciate the color on the boiler business and kind of what's going on there within HVAC. But I was wondering if you could just try to help us understand a little bit better, the typical seasonality that you see there in boilers. Now, is it normal that you kind of start seeing that business ramp September? I was just kind of trying to recognise last when it was a little bit warmer but just trying to understand if apart from that you would typically start seeing a seasonal ramp September?

Yes. I think, let me take a crack of that, Damien. I think as Scott mentioned, both the boiler business which is a portion of our heating business, is about 80% residential and that's really the portion that we're talking about here. Most of that goes into replacement and upgrades of existing boilers. And this is it's really an aftermarket business. And there is a fairly nice steady demand as you look at that year-over-year. Having said that weather does either increase the market or decrease the market on any given year. And it does effect the overall market demand that we see for that product line. The way that the demand typically works is you have a end market pull through in typically in Q4 and Q1 and that is when people are typically turning on their boilers and operating their boilers and the call for heat is initiating the process. And what we typically see in the offseason months of Q2 and Q3, most of our demand comes from our partners that are building up stocking orders in anticipation for the winter season. So, what will affect the demand profile for boilers overall in the residential side of the house is, one, how cold it is but also when the cold hits. The earlier the cold, the more the pull through demand will happen earlier in the season. So, we have talked about how last season was a low order volume that was not seen in Q1 and Q2 in terms of the demand profile for boilers. But we as we talked about, we did see a real decline in the market demand profile in Q3. Scott, do you have anything else on this topic?

The only thing I would add is if you look at just overall HVAC segment and you try to isolate what kind of impact heating could have on variability there. If you're looking that kind of an average view, you could see about plus or minus 2% to the organic revenue growth as a variability be whether it’s a very cold winter or very warm winter. So, we had already anticipated some impact of that because we obviously experienced a cold beginning tail end of the 2015, '16, winter. And what we've seen is some further delays and I think we're going to be towards the lower end of a season here.

Okay, that's really helpful. Now, I guess one more question on power. If you strip away the divesting impact, sort of the flat organic year-over-year result. Seems like a pretty good result relative to what you guys have been seeing there. You mentioned the Transformers is sort of continuing to see sort of steady demand there. So, I was just wondering if maybe you're starting to see in and some of the bleeding on the power generation side. If you can maybe just kind of provide a little additional colour on sort of the split between power gen transformers and what you saw there in the quarter. Thanks.

Yes. I don’t know if I'd go as far to say that we're seeing in end to the issues we're seeing in power generation on a full-year basis. We are seeing, we've been putting a fair amount of actions towards there. Structurally change in the business and as a result of the sale are drive business in the beginning of the year. We've done some restructuring directed at US operations, structurally get those businesses to least break even. We still are struggling in with the European businesses but we're seeing some benefits there and what we're alluding to is we're going to see some sequential improvement there from Q3 to Q$. And if you just look at Q3, we had less than 1% margins for the overall segment, but still had good margins in Transformers. You can get, if you back into those experiencing losses in those power gen business. So, I'm not saying that we've turned the corner around those but we've already going to see some benefit sequentially as we go to Q4. And it also, remember, Q4 usually are one of the larger quarters of the year. So, we're going to give a little bit of volume benefit there in Q4 as well.

Okay, thanks guys.

Thank you. Our next question comes from Ronny Weiss of Credit Suisse.

Hi, good afternoon, everyone.

Hi, Ron.

Hey runny. And Dissection & Measurement. Can you give some additional colour in to each of the business there kind of perform over the quarter. Is that flash business still see in a little bit of weakness and is all the live large project deferrals kind of related to Genfare or is it you got is all the live large project deferrals kind of related to Genfare or is it you got it business lines as well?

I'll take a crack at that Ronny. So, if I break down the Detection & Measurement. As we've talked about at the macro, that's about 2/3rds three quarters run rate businesses across our different product lines and we've seen very nice demand there, very steady demand there across the four product lines we have there. And then on the project businesses, I'd say there's two product lines that have more project oriented businesses and then knows I'd say one will be performing a little ahead, one we've been seeing some pushouts in particularly in the large capital decisions there. If I had to kind of run through those, our largest businesses, radio detection, that is really a run rate business and that's been steady for us. We're pleased with the demand profile we've seen there. The flash business which we brought up is really a largely a run rate business as well. That's been performing very well this year, I'd say ahead of our expectations as when we started the year. And if you look at Genfare, I would say on the demand side, the run rate portion of that business which is a good chunk of that business, has been healthy. And on the project side, we've had a pretty substantial backlog over the past two years, we were pleased that some of these were starting to convert. So, I think that we are seeing some kind of version of the backlog on that side. On the communication technologies business, this is a business that's very global and probably has the highest project orientation nature to it. We have a really robust front log there globally but this is where we have seen projects pushing our some of these capital projects pushing to the right, particularly I would say in some of the countries that are influenced by oil but in that when I look at kind of the demand profile across our Detection & Measurement businesses, I'd summarize by saying feeling good about the performance on the run rate. And then on the project, we're seeing a good front log. We're very pleased about these two awards that we got this quarter, which were the largest we've had in years. Those are two different businesses and two different product lines and we think that boards well for our past four --. Scott, do you have any other colour on the market?

Ronny, when you look at our updated guidance particularly for D&M, what you're seeing there is as we said we saw a little bit few more delays and so that means that we are expecting some of these projects to book in Q3 that we're going to be hold the revenue in Q4. We're seeing some of those fall out of the year. The positive is that we're actually seeing more traction in closing out, so moving from front log to closing out to contract phase, started here and late Q3 and into Q4. And we're not seeing a loss of prices or cancellation of projects, they feel like the -- is robust. It's our real project, projects are bit of a shift. So, it'll shift out at Q4 but it's not something that's shifting out of our expectations for award we'll be winning.

Very helpful. And then on the capital allocation side, you guys have talked about doing smaller deals. Deals in few areas in the past. The reason there has been no kind of activity there yet, the focus being mostly on the divestments right now, it is the valuation of some of the targets that you're going after is leverage still too high. Any kind of colour around there?

Yes. Ronny, I would say that we are actively in the market. I would say we've been involved with processes, we're being very disciplined on valuation. I would say one or two opportunities where the valuation that we're not comfortable with. But we actually think that there is a pretty reasonable front log for us. And again this would be opportunities that are both on, really right on top of our growth platforms or HVAC and our Detection & Measurement. As we've kind of laid out. And the $20 million to a $100 million revenue range is I would say the bulk of the opportunities that we see. So, I'd say that there is a lot of activity going on behind the scenes but we're going to be very disciplined and very careful. We think there is an opportunity to enhance the growth of our platforms but we want to do it in a smart way.

Got it. Congrats on the one year anniversary.

Thank you.

Thank you. Our next question comes from Brett Linzey at Vertical Research.

Thank you. Our next question comes from Brett Linzey at Vertical Research.

Hi, good afternoon all.

Hi, Brett.

I just want to come back to the full-year guide for HVAC. You're seeing flat for the year. And implicitly this is the Q4 that looks like it's something a little bit better than mid-single digits. And I understand and appreciate the colour on the heating side. What are the expectations on the cooling side? Do you have project deliverables invisibility there, there's -- like kind of help me get comfortable with the kind of mid-single digits plus growth profile?

Yes. And Brett, maybe I'll take a crack at it and Scott can also augment here. I think if you look at our cooling side, we're actually very pleased with what we're seeing. And as we've talked about dodge is really the best leading indicator there. And what the dodge index is saying, there several more years of growth, probably with the institutional taking on a little bit more of a lead role than commercial. But we're seeing a very healthy front log and we're very pleased with the conversion of that front log. This year, our cooling business is right now we're tracking organic at 5% to 6% for the full-year. And I think it's important to highlight that we had a really a one time job last year. That was POP go. If you take that into account, it's actually going to be much higher than that. What we've seen is very nice growth in the America, we've seen lower growth in Europe and higher growth in our Asia region. So, net net we think we're in the 5% to 6% range.

Okay, great. Now, that better helps. And then I know you can't say too much, but just around the European sale process in Power Gen. is it, is there a buyer than solidify and it's just more timing and working through the final negotiations. Just trying to understand the context of the clear password.

Yes. So, I mean, I've -- Brett, it's kind of hard for us to speak as we're right in the middle of the process and we don’t want to that limit what we can say. I think what we can say is we are targeting to have an answer here by the end of the year. This has been going on as we've highlighted over the past six months. So, it's been a process but with where we are today, there's rely a limit to what we can say about the active discussions.

Okay, great. And then just one last one on D&M. you talked about the two big awards you had. Could you maybe help us size those and then just say anything around timing, when we might see those convert?

I would say from a size wise individually 10 million. And for that segment over the large rewards. We don’t think kind of thinking anything in that segment or kind of over 5 million is probably a pretty large award. And as far as execution, there'll be, some of them have milestones they'll execute throughout 2017.

Okay, great. I appreciate you guys, thanks.

Thanks Brett. Speaker: Thank you. Our next question comes from Robert Barry of Susquehanna International Group.

Good afternoon, guys. This is Filippo on the call for Rob.

Hi, Filippo.

Hi, Filippo.

Hi. So, first question on the Detection & Measurement. What, so just to clarify, your guidance assumes kind of steady contribution from the run rate and not further delays on the project or what is your assumption for 4Q in Detection & Measurement.

Yes, that's correct. Steady run rate business in more and here for the fourth quarter really largely asking of the backlog.

Okay. And so you have visibility based on your current outlook on that.

That's correct.

Okay, cool. And if I look at your guidance, I mean, 4Q kind of implies a little stronger than you're a usual seasonality. Again what is the driver then? And also, on the EPS side, you also implies. Is this kind of almost more than 50% of earnings, your 4Q. Is there something below the line that makes the difference even larger at the EPS line? Is the tax rate or something else?

Yes, a couple of things one, just structurally how we are as a company in the type business we have, niche business or is always our largest quarter. And if you just look back at last year, when wed $0.52 of earnings on elevated restructuring, you'll see its similar level of earnings that we're expecting this quarter. Obviously visibilities are different but it's not an abnormal level. And as far as some of the things you're looking at, it's one of the reasons why I called out power because we're getting a greater level of contribution from the power segment in Q4. Certainly as you look at it sequentially from Q3 for the various matters I went through. And then as I updated, we are reducing our tax rate to 30% to 35%, we have been guiding over 35% plus, so that's benefitting us in the quarter, end of quarter.

Okay, great. And let me, finally if you can comment on Genfare and I know there's been a lot of talks about the highway deal and the potential benefit from here. When do you think those will come through and the project will come through and will have some contribution from those?

Yes. Filippo, this is Gene. I'll take a crack at that. I think we've had a pretty healthy pipeline there for a while since the transportation bill has come in. I would say that there's two things we've seen. There's a fairly big portion of that business, which is run rate and we've seen very healthy activity levels on the run rate business. But we've also seen some of the larger projects start to move towards the contracting phase. As a matter of fact, one of the projects that we referenced and our opening comment is a project in Genfare and that's currently under execution and we anticipate we'll be right in the end of the quarter and then 2017 timeframe. So, I would say that we believe we've already seeing some of the positive benefits of that and we think that's a very good market driver. As a reminder, that is a multiple year deal. And we think that's going to provide some tailwinds for the Genfare business.

Okay, great. Thanks, guys.

Thank you.

Thank you. I'm showing no further questions at this time. I would now like to turn the call back over to your host Mr. Paul Clegg.

Okay, thanks Sherry. And thank you everyone for joining the call. We look forward to updating you on our fourth quarter results in February. Have a good evening.

Ladies and gentlemen, this concludes today's conference. Thank you for your participation. You may all disconnect and have a wonderful day.