SPX Technologies, Inc. — FY2023 Form 10-K
Reporting period: Year ended December 31, 2023; filed February 22, 2024. The supplied filing reports annual results, not a standalone 2023 fourth-quarter income statement. Amounts are in millions of dollars except per-share data.
Business context
SPX supplies engineered infrastructure equipment through two reportable segments: HVAC and Detection and Measurement. Its products include cooling, heating and ventilation equipment, utility locating and inspection systems, transportation and communication technologies, and aids to navigation. The company operates in 15 countries; approximately 84% of 2023 revenue was generated in the United States.
Financial performance and liquidity
| Metric | FY2023 | FY2022 | Change |
|---|---|---|---|
| Revenue | $1,741.2 | $1,460.9 | +19.2% |
| Gross profit / margin | $670.0 / 38.5% | $523.9 / 35.9% | Margin +2.6 pts |
| Operating income / margin | $221.9 / 12.7% | $51.0 / 3.5% | Improved |
| Income from continuing operations | $144.7 | $19.8 | +630.8% |
| Net income | $89.9 | $0.2 | — |
| Diluted EPS | $1.93 | Less than $0.01 (reported as $0.00) | — |
| Operating cash flow from continuing operations | $243.8 | $(115.2) | Turned positive |
Revenue growth comprised 12.2% organic growth, 6.9% from acquisitions and 0.1% from foreign currency. Segment revenue and income were: HVAC $1,122.3 and $234.4, versus $913.8 and $135.5 in 2022; Detection and Measurement $618.9 and $118.8, versus $547.1 and $114.1. HVAC margin increased to 20.9% from 14.8%; Detection and Measurement margin declined to 19.2% from 20.9%, primarily on less favorable mix.
At year-end, cash and equivalents were $99.4 on the balance sheet ($104.9 including cash held in discontinued-operation assets). Total debt was $558.3, compared with $246.8 a year earlier. Available capacity was $489.2 under revolving credit facilities and $44.0 under the receivables financing arrangement; the company reported compliance with credit agreement covenants. Continuing-operations capital expenditures were $23.9. Operating cash flow less capital expenditures was $219.9, a simple calculation rather than a company-reported free-cash-flow measure.
Material changes and unusual items
- Results benefited from higher organic sales, pricing, volume and improved manufacturing-cost absorption, alongside more stable supply and labor conditions.
- SPX acquired TAMCO for $125.5 and ASPEQ for $421.5 in 2023, adding to HVAC revenue and debt. The acquisitions contributed $547.0 of net cash use in investing activities. Intangible amortization rose to $43.9 from $28.5.
- 2022 operating income included a $73.9 loss on the asbestos portfolio sale; this did not recur in 2023. Conversely, 2023 included a $9.0 charge for a dispute with a former representative.
- Net income includes a $54.8 loss from discontinued operations, primarily reflecting a $54.2 after-tax charge for the 2023 settlement of DBT’s South African power-project claims. DBT also had a remaining $26.2 payment due to MHI in September 2024.
- Interest expense rose to $25.5 net from $7.6, reflecting higher average debt and borrowing rates. The effective tax rate was 22.3%, versus 26.9% in 2022.
Outlook, risks and contingencies
The filing does not provide a quantified 2024 revenue or earnings forecast. Management expects 2024 capital expenditures of approximately $35–$45 and expects about 98% of HVAC year-end backlog and 76% of Detection and Measurement backlog to convert to revenue during 2024. On February 7, 2024, SPX acquired Ingénia for $295.7, funded with revolving-credit borrowings.
Key risks include cyclical customer investment, project timing and fixed-price cost overruns, supply and labor disruptions, competitive pricing, variable-rate debt, foreign exchange, cybersecurity, regulation and climate-related requirements. Recorded liabilities for claims, primarily environmental matters, were $37.9 at year-end. A ULC seller’s lawsuit seeks $15.0 plus potential interest and fees; management said a loss was reasonably possible but not probable. Environmental and other claims may exceed recorded estimates or insurance coverage. The company’s asbestos liabilities were transferred in 2022 to subsidiaries that indemnify SPX without a cap or time limit; investors should assess the strength of that protection. ASPEQ goodwill and indefinite-lived intangibles totaled $242.6, and the auditor identified acquisition valuation of TAMCO and ASPEQ intangible assets as a critical audit matter. The auditor issued unqualified opinions on the financial statements and internal controls; the internal-control assessment excluded TAMCO and ASPEQ.
Important facts for investors to verify
- Reconcile continuing-operations earnings growth with the $54.8 discontinued-operations loss and one-time items.
- Assess post-acquisition performance, integration, debt reduction and the assumptions supporting ASPEQ and EAM goodwill and intangible-asset valuations.
- Confirm funding and repayment plans for the $26.2 DBT obligation due in September 2024 and the new Ingénia-related borrowing.
- Monitor conversion, timing and profitability of segment backlogs, particularly Detection and Measurement project mix.
- Review exposure to the ULC litigation, environmental matters, and the enforceability and financial capacity supporting asbestos-related indemnification.