SPX Technologies, Inc. — 2022 Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2022. SPX Technologies is the successor registrant to SPX Corporation following a holding-company reorganization completed August 15, 2022; the filing presents the predecessor’s results as continuous. The company supplies infrastructure equipment through its HVAC and Detection and Measurement segments.
Financial performance
| Metric | 2022 | 2021 | Change / context |
|---|---|---|---|
| Revenue | $1,460.9 million | $1,219.5 million | Up 19.8%; organic growth was 11.8 percentage points, with acquisitions contributing 9.7 points and currency reducing growth by 1.7 points. |
| Gross profit / margin | $523.9 million / 35.9% | $431.8 million / 35.4% | Margin improved 0.5 percentage points. |
| Operating income / margin | $51.0 million / 3.5% | $73.7 million / 6.0% | Lower principally because of the $73.9 million asbestos portfolio sale loss. |
| Income from continuing operations | $19.8 million | $59.0 million | Diluted continuing-operations EPS was $0.43 versus $1.27. |
| Net income | $0.2 million | $425.4 million | 2021 included a $382.2 million gain on the Transformer Solutions sale; 2022 included a $19.6 million net loss from discontinued operations. |
| Operating cash flow, continuing operations | $(115.2) million | $131.2 million | Cash use reflected the asbestos transaction contribution, taxes, higher inventory, project timing and other payments. |
Segment revenue and income increased in both businesses. HVAC revenue was $913.8 million and segment income was $135.5 million (14.8% of revenue), versus $752.1 million and $107.7 million in 2021. Detection and Measurement revenue was $547.1 million and segment income was $114.1 million (20.9%), versus $467.4 million and $92.9 million. Segment income is a company-defined measure, not GAAP operating income.
Cash, debt and liquidity
- Year-end total debt was $246.8 million, including $244.3 million on the term loan; year-end cash and equivalents were $147.8 million on the continuing-operations balance sheet, or $157.1 million including discontinued operations.
- The company reported $489.0 million of available revolving-credit capacity after letters of credit, plus $45.7 million available under its trade-receivables financing facility and $10.2 million of available foreign credit-instrument issuance capacity. It was in compliance with credit-agreement covenants at year-end.
- In August 2022, SPX refinanced and extended its senior credit facilities to August 2027, with total commitments of $770 million. The year-end weighted-average borrowing rate was approximately 5.8%.
- Capital expenditures were $15.9 million in 2022. Management expected 2023 capital expenditures of approximately $20–30 million and minimum pension funding contributions and direct benefit payments of $10.3 million.
Material changes, outlook and notable items
- Revenue growth reflected organic growth in both segments and acquisitions, including ITL in 2022 and Sealite, ECS and Cincinnati Fan in 2021. Higher prices contributed to HVAC growth; Detection and Measurement benefited from short-cycle demand and execution of larger projects.
- Supply-chain disruption, labor shortages and cost inflation weighed on first-half results, particularly in the first quarter. Management said these pressures eased in the second half as productivity improved and pricing actions took effect. The Russia/Ukraine conflict had no significant adverse operating impact in 2022, and management did not expect a significant impact at the time of filing.
- Year-end backlog was $243.1 million in HVAC and $251.0 million in Detection and Measurement. Management expected approximately 98% and 80%, respectively, to be recognized as revenue during 2023. Remaining performance obligations subject to disclosure were $158.5 million; about 72% was expected to be recognized within 12 months.
- The November asbestos portfolio divestiture transferred asbestos-related liabilities and certain assets to divested subsidiaries. SPX contributed $138.8 million and recorded a $73.9 million loss. The subsidiaries agreed to indemnify SPX for the transferred asbestos liabilities without a cap or time limit; the filing notes independent solvency opinions but investors should assess the practical strength of that protection.
- SPX recorded $13.4 million of goodwill and intangible-asset impairment charges in 2022, including $12.9 million related to ULC. Cincinnati Fan’s estimated fair value exceeded carrying value by less than 10%, leaving impairment sensitivity if forecasts are missed.
- Discontinued-operation matters remain, including DBT’s South African project disputes and SPX parent guarantees. A former ULC seller also sued, seeking $15.0 million of contingent consideration; management said it had defenses and did not consider a loss probable.
- Other risks include cyclical customer capital spending, fixed-price project cost overruns, material and labor availability, competition, currency and interest-rate exposure, environmental and product claims, acquisitions and integration, cybersecurity, and pension assumptions. The filing provides no formal revenue or earnings guidance.
Most important facts for investors to verify
- Whether organic demand, pricing and backlog conversion support continued growth, and whether project mix sustains segment margins.
- Whether operating cash flow recovers after the significant 2022 cash use and inventory investment.
- The terms, covenant headroom and interest-rate effects of the 2027-maturity credit facilities, including the impact of variable rates after existing swaps expire in November 2024.
- The enforceability and financial capacity of the asbestos-divested subsidiaries to honor their uncapped indemnities, and any remaining exposure for SPX.
- Developments in DBT disputes and guarantees, the ULC contingent-consideration lawsuit, and any further goodwill or intangible impairment indicators.
- The 2023 capital-spending outlook and expected backlog and remaining-performance-obligation conversion.
Deloitte issued unqualified opinions on the financial statements and internal control over financial reporting. Management and the auditor excluded ITL’s controls from the 2022 assessment because it was recently acquired; those controls represented less than 1% of consolidated assets and revenue.