CHARLOTTE, N.C., Oct. 29 /PRNewswire-FirstCall/ -- SPX Corporation (NYSE:
SPW) today reported results for the third quarter ended September 27, 2008:
-- Revenues increased 28.8% to $1.51 billion from $1.17 billion in the
year-ago quarter. Organic revenue growth* was 6.5%, while completed
acquisitions and the impact of currency fluctuations increased reported
revenues by 19.7% and 2.6%, respectively.
-- Segment income and margins were $208.8 million and 13.8%, compared with
$166.7 million and 14.2% in the year-ago quarter. Excluding the dilutive
impact of the APV acquisition, segment margins improved 120 basis points.
-- Diluted net income per share from continuing operations was $2.01,
compared with $1.74 in the year-ago quarter. Both periods include benefits
from the settlement of certain tax matters.
-- Adjusted diluted net income per share from continuing operations was
$1.66, compared with $1.39 in the year-ago quarter. The 2008 adjusted earnings
exclude a benefit of $25.6 million ($0.47 per share) related to the settlement
of tax matters and a charge of $9.5 million ($0.11 per share, net of tax)
related to a legal settlement. Excluding these items, the company's effective
tax rate for the quarter was 34.3%.
The 2007 adjusted earnings exclude a benefit of $19.1 million ($0.35
per share) related to the settlement of certain tax matters and reductions in
certain foreign statutory tax rates.
-- Net cash from continuing operations was $103.8 million, compared with
$48.3 million in the year-ago quarter. The increase in cash flow was due
primarily to increased operating income.
-- Free cash flow from continuing operations* during the quarter was $71.2
million, compared with $29.6 million in the year-ago quarter. The increase
was due primarily to the items noted above, offset partially by increased
capital expenditures in 2008 to support continued growth in the company.
The company also announced fourth quarter earnings guidance in the range
of $1.90 to $2.00 per share, and narrowed its full year adjusted earnings
guidance to a range of $6.40 to $6.50 per share, from the previous range of
$6.40 to $6.60 per share. The guidance change is due primarily to fluctuations
in foreign currency, most notably the recent strengthening of the US dollar
against the Euro and British pound, and the impact those currency fluctuations
are expected to have on the company's fourth quarter reported results.
Chris Kearney, Chairman, President and CEO said, "SPX's third quarter
performance marked another period of solid revenue and earnings growth for our
company, despite facing the most challenging economic environment in recent
history. Our adjusted earnings per share of $1.66 represents a 19 percent
increase over the same period last year, and we had strong revenue growth of
29 percent during the quarter.
"At this time, we are narrowing our full year earnings guidance to a range
of $6.40 to $6.50 per share. This is necessary primarily from the impact the
recent rapid strengthening of the US dollar against many of the foreign
currencies in which we conduct business is expected to have on our fourth
quarter results. Although we're unable to predict what impact the current
global financial crisis will ultimately have on our customers, we are
confident in the strategic direction we embarked on four years ago and we
maintain our conservative approach to capital allocation. We believe we are
well positioned to remain competitive and resilient during these uncertain
times," Kearney added.
FINANCIAL HIGHLIGHTS - CONTINUING OPERATIONS
Flow Technology
Revenues for the third quarter of 2008 were $493.0 million compared to
$256.3 million in the third quarter of 2007, an increase of $236.7 million, or
92.4%. The increase was due primarily to the fourth quarter 2007 acquisition
of APV, which contributed $211.5 million of revenues during the quarter.
Additionally, organic revenue growth* was 8.3% in the quarter, driven
primarily by strong sales in the power, oil and gas, and dehydration markets.
The impact of currency fluctuations increased revenues by 1.0% from the year-
ago quarter.
Segment income was $55.8 million, or 11.3% of revenues, in the third
quarter of 2008 compared to $44.2 million, or 17.2% of revenues, in the third
quarter of 2007. Segment income was favorably impacted by organic growth and
operating profit from the APV acquisition. Segment margins declined primarily
due to the significantly lower margins at APV.
Test and Measurement
Revenues for the third quarter of 2008 were $260.0 million compared to
$245.0 million in the third quarter of 2007, an increase of $15.0 million, or
6.1%. The increase was due primarily to acquisitions completed in the second
half of 2007. The impact of currency fluctuations increased reported revenues
by 1.8%. These increases were offset partially by organic revenue declines* of
3.1% due primarily to reduced volumes in the North American automotive market.
Segment income was $30.3 million, or 11.7% of revenues, in the third
quarter of 2008 compared to $22.0 million, or 9.0% of revenues, in the third
quarter of 2007. The 2007 results included a one-time charge of $7.4 million.
In addition, segment income increased due to the acquisitions and benefit of
foreign currency fluctuations noted above, offset partially by declines
associated with difficult conditions in the domestic automotive market.
Thermal Equipment and Services
Revenues for the third quarter of 2008 were $436.8 million compared to
$422.1 million in the third quarter of 2007, an increase of $14.7 million, or
3.5%. The impact of currency fluctuations increased reported revenues by 5.3%
from the year-ago quarter, while organic revenue* declined 1.8%. The organic
revenue decline was primarily driven by timing and the uneven nature of large
project business in the segment.
Segment income was $52.4 million, or 12.0% of revenues, in the third
quarter of 2008 compared to $56.5 million, or 13.4% of revenues, in the third
quarter of 2007. The decrease in segment income and margins was due primarily
to the organic revenue decline noted above and unfavorable product mix as
compared to the year-ago quarter.
Industrial Products and Services
Revenues for the third quarter of 2008 were $319.8 million compared to
$248.6 million in the third quarter of 2007, an increase of $71.2 million, or
28.6%. The increase was due primarily to organic revenue growth* of 28.2%,
driven primarily by increased sales and pricing of power transformers and
solar and broadcast equipment. The impact of currency fluctuations increased
revenues by 0.4% from the year-ago quarter.
Segment income was $70.3 million, or 22.0% of revenues, in the third
quarter of 2008 compared to $44.0 million, or 17.7% of revenues, in the third
quarter of 2007. The increase in segment income and margins was driven
largely by the organic growth noted above, as well as manufacturing
efficiencies achieved from operating initiatives across the segment.
OTHER ITEMS
Share Repurchase Plan: On September 19, 2008, the company announced that
it had adopted a written trading plan under Rule 10b5-1 of the Securities
Exchange Act of 1934, as amended, to facilitate the repurchase of up to 3.0
million shares of its common stock on or before October 30, 2009, in
accordance with a share repurchase program authorized by its Board of
Directors. Trading under this plan is scheduled to begin no sooner than
November 3, 2008.
Acquisition: On September 2, 2008, the company announced that its Service
Solutions business unit had completed the acquisition of AUTOBOSS Tech, Inc.,
a Shenzhen, China-based manufacturer of diagnostic tools and equipment serving
China's vehicle maintenance and repair market.
Dividend: On August 28, 2008, the Board of Directors announced a
quarterly dividend of $0.25 per common share to shareholders of record on
September 15, 2008. The second quarter 2008 dividend of $0.25 per common
share was paid on October 2, 2008.
Discontinued Operations: During the third quarter of 2008, the company
committed to a plan to divest two product lines, one previously reported in
its Flow Technology segment and one previously reported in its Test and
Measurement segment. These sales are expected to be completed in within the
next twelve months.
During the first quarter of 2008, the company committed to a plan to
divest its vibration test equipment product line, which was previously
reported in the Test and Measurement segment. On October 1, the company
announced that it has entered into a definitive agreement to sell this
business for $102.0 million. This sale is expected to be completed during the
fourth quarter of 2008.
During the third quarter of 2007, the company committed to a plan to
divest its air filtration product line, which was previously reported in the
Flow Technology segment. This sale was completed on July 3, 2008.
The financial condition, results of operations, and cash flows of the
product lines discussed above have been reported as discontinued operations in
the attached condensed consolidated financial statements.
Form 10-Q: The company expects to file its quarterly report on Form 10-Q
for the quarter ended September 27, 2008 with the Securities and Exchange
Commission by November 6, 2008. This press release should be read in
conjunction with that filing, which will be available on the company's website
at www.spx.com, in the Investor Relations section.
SPX Corporation is a Fortune 500 multi-industry manufacturing leader. The
company offers highly-specialized engineered solutions to solve critical
problems for customers.
SPX is focused on providing solutions that support the expansion of global
infrastructure, with particular emphasis on the growing worldwide demand for
energy and power. Its innovative product portfolio, containing many energy
efficient products, includes cooling systems for power plants throughout the
world; custom engineered process equipment that assists a variety of flow
processes including food and beverage manufacturing, oil and gas exploration,
distribution and refinement and power generation; handheld diagnostic tools
that aid in vehicle maintenance and repair; and power transformers that
regulate voltage for electrical transmission and distribution by utility
companies.
SPX is headquartered in Charlotte, North Carolina and employs more than
17,000 people worldwide in over 35 countries. Visit www.spx.com. (NYSE: SPW)
* Non-GAAP number. See attached financial schedules for reconciliation to
most comparable GAAP number.
Certain statements in this press release are forward-looking statements
within the meaning of Section 21E of the Securities Exchange Act of 1934, as
amended, and are subject to the safe harbor created thereby. Please read
these results in conjunction with the company's documents filed with the
Securities and Exchange Commission, including the company's annual report on
Form 10-K for the year ended December 31, 2007. These filings identify
important risk factors and other uncertainties that could cause actual results
to differ from those contained in the forward-looking statements. Actual
results may differ materially from these statements. The words "believe,"
"expect," "anticipate," "estimate," "guidance," "target" and similar
expressions identify forward-looking statements. Although the company
believes that the expectations reflected in its forward-looking statements are
reasonable, it can give no assurance that such expectations will prove to be
correct. In addition, estimates of future operating results are based on the
company's current complement of businesses, which is subject to change.
Statements in this press release speak only as of the date of this press
release, and SPX disclaims any responsibility to update or revise such
statements.
SPX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited; in millions, except per share amounts)
Three months ended Nine months ended
Sept. 27, Sept. 29, Sept. 27 Sept. 29
2008 2007 2008 2007
Revenues $1,509.6 $1,172.0 $4,425.5 $3,360.6
Costs and expenses:
Cost of products sold 1,062.9 825.9 3,101.9 2,417.4
Selling, general and
administrative 280.0 218.3 869.5 647.9
Intangible amortization 6.4 4.3 19.7 13.0
Special charges, net 4.8 2.4 9.7 3.9
Operating income 155.5 121.1 424.7 278.4
Other expense, net (11.8) (1.2) (13.1) (2.7)
Interest expense (28.3) (23.5) (88.7) (55.8)
Interest income 3.4 2.3 7.6 6.4
Equity earnings in joint ventures 9.9 9.1 33.1 29.1
Income from continuing
operations before income taxes 128.7 107.8 363.6 255.4
Income tax provision (18.2) (12.9) (99.0) (59.0)
Income from continuing
operations 110.5 94.9 264.6 196.4
Income (loss) from discontinued
operations, net of tax 0.3 (1.5) 5.5 4.0
Gain (loss) on disposition of
discontinued operations, net of tax 6.2 (0.5) 3.1 (14.4)
Income (loss) from
discontinued operations 6.5 (2.0) 8.6 (10.4)
Net income $117.0 $92.9 $273.2 $186.0
Basic income per share of common
stock
Income from continuing
operations $2.06 $1.79 $4.98 $3.52
Income (loss) from discontinued
operations 0.12 (0.04) 0.16 (0.19)
Net income per share $2.18 $1.75 $5.14 $3.33
Weighted average number of common
shares outstanding - basic 53.694 53.045 53.124 55.809
Income from continuing
operations $2.01 $1.74 $4.86 $3.43
Income (loss) from discontinued
operations 0.12 (0.03) 0.16 (0.18)
Net income per share $2.13 $1.71 $5.02 $3.25
Weighted average number of common
shares outstanding - diluted 54.876 54.473 54.476 57.273
SPX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited; in millions)
September 27, December 31,
2008 2007
ASSETS
Current assets:
Cash and equivalents $466.4 $354.1
Accounts receivable, net 1,419.0 1,269.2
Inventories, net 721.3 667.0
Other current assets 165.5 115.5
Deferred income taxes 91.5 94.5
Assets of discontinued operations 149.4 215.9
Total current assets 3,013.1 2,716.2
Property, plant and equipment
Land 37.7 37.9
Buildings and leasehold improvements 245.6 233.1
Machinery and equipment 671.8 610.8
955.1 881.8
Accumulated depreciation (451.2) (403.1)
Net property, plant and equipment 503.9 478.7
Goodwill 1,921.1 1,930.1
Intangibles, net 682.7 707.7
Other assets 408.5 404.7
TOTAL ASSETS $6,529.3 $6,237.4
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $628.4 $714.6
Accrued expenses 1,148.3 1,035.4
Income taxes payable 25.0 7.5
Short-term debt 260.3 254.4
Current maturities of long-term debt 76.4 78.9
Liabilities of discontinued operations 40.3 80.6
Total current liabilities 2,178.7 2,171.4
Long-term debt 1,194.0 1,234.7
Deferred and other income taxes 211.2 240.5
Other long-term liabilities 570.5 574.4
Total long-term liabilities 1,975.7 2,049.6
Minority interest 14.2 10.4
Shareholders' equity:
Common stock 971.0 963.5
Paid-in capital 1,381.4 1,296.0
Retained earnings 2,278.7 2,045.9
Accumulated other comprehensive income 30.7 38.1
Common stock in treasury (2,301.1) (2,337.5)
Total shareholders' equity 2,360.7 2,006.0
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $6,529.3 $6,237.4
SPX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited; in millions)
Nine months ended
September 27, September 29,
2008 2007
Cash flows from (used in) operating
activities:
Net income $273.2 $186.0
Less: Income (loss) from discontinued
operations, net of tax 8.6 (10.4)
Income from continuing operations 264.6 196.4
Adjustments to reconcile income from
continuing operations to net cash from
operating activities
Special charges, net 9.7 3.9
Deferred and other income taxes (13.1) (4.3)
Depreciation and amortization 83.8 57.7
Pension and other employee benefits 41.0 44.5
Stock-based compensation 33.7 32.0
Other, net 21.5 19.9
Changes in operating assets and liabilities,
net of effects from acquisitions and
divestitures
Accounts receivable and other (181.9) (36.2)
Inventories (48.5) (68.6)
Accounts payable, accrued expenses and other (49.8) (107.2)
Cash spending on restructuring actions (13.9) (3.2)
Net cash from continuing operations 147.1 134.9
Net cash from discontinued operations 5.8 30.4
Net cash from operating activities 152.9 165.3
Cash flows from (used in) investing
activities:
Proceeds from asset sales and other 1.3 3.2
Business acquisitions and investments, net
of cash acquired (11.7) (42.0)
Capital expenditures (78.9) (46.9)
Net cash used in continuing operations (89.3) (85.7)
Net cash from discontinued operations 31.8 130.5
Net cash from (used in) investing activities (57.5) 44.8
Cash flows from (used in) financing activities:
Borrowing under revolving loan facilities 615.0 1,347.3
Repayments under revolving loan facilities (600.0) (1,137.8)
Borrowings under trade receivable agreement 261.0 405.0
Repayments under trade receivable agreement (261.0) (335.0)
Net repayments under other financing
arrangements (52.7) (21.3)
Purchases of common stock - (715.9)
Proceeds from the exercise of employee
stock options and other, net 80.1 99.3
Financing fees paid - (8.4)
Dividends paid (40.0) (43.5)
Net cash from (used in) continuing operations 2.4 (410.3)
Net cash used in discontinued operations (0.4) (5.1)
Net cash from (used in) financing activities 2.0 (415.4)
Change in cash and equivalents due to changes
in foreign exchange rates 14.9 10.9
Net change in cash and equivalents 112.3 (194.4)
Consolidated cash and equivalents, beginning
of period 354.1 477.2
Consolidated cash and equivalents, end of
period $466.4 $282.8
Cash and equivalents of continuing operations $466.4 $282.8
Cash and equivalents of discontinued
operations $- $-
SPX CORPORATION AND SUBSIDIARIES
RESULTS OF OPERATIONS BY SEGMENT
(Unaudited; in millions)
Three months ended
September 27, September 29,
2008 2007 %
Flow Technology
Revenues $493.0 $256.3 92.4%
Gross profit 148.1 94.5
Selling, general and administrative
expense 89.3 49.2
Intangible amortization expense 3.0 1.1
Segment income $55.8 $44.2 26.2%
as a percent of revenues 11.3% 17.2%
Test and Measurement
Revenues $260.0 $245.0 6.1%
Gross profit 80.0 68.0
Selling, general and administrative
expense 47.8 44.6
Intangible amortization expense 1.9 1.4
Segment income $30.3 $22.0 37.7%
as a percent of revenues 11.7% 9.0%
Thermal Equipment and Services
Revenues $436.8 $422.1 3.5%
Gross profit 111.6 109.7
Selling, general and administrative
expense 57.9 51.6
Intangible amortization expense 1.3 1.6
Segment income $52.4 $56.5 -7.3%
as a percent of revenues 12.0% 13.4%
Industrial Products and Services
Revenues $319.8 $248.6 28.6%
Gross profit 108.9 77.9
Selling, general and administrative
expense 38.4 33.7
Intangible amortization expense 0.2 0.2
Segment income $70.3 $44.0 59.8%
as a percent of revenues 22.0% 17.7%
Total segment income $208.8 $166.7
Corporate expenses 25.9 23.6
Pension and postretirement expense 14.8 11.1
Stock-based compensation expense 7.8 8.5
Special charges, net 4.8 2.4
Consolidated Operating Income $155.5 $121.1 28.4%
SPX CORPORATION AND SUBSIDIARIES
RESULTS OF OPERATIONS BY SEGMENT
(Unaudited; in millions)
Nine months ended
September 27, September 29,
2008 2007 %
Flow Technology
Revenues $1,519.6 $759.5 100.1%
Gross profit 469.7 270.3
Selling, general and administrative
expense 288.4 142.3
Intangible amortization expense 9.1 3.4
Segment income $172.2 $124.6 38.2%
as a percent of revenues 11.3% 16.4%
Test and Measurement
Revenues $850.0 $764.8 11.1%
Gross profit 259.3 223.1
Selling, general and administrative
expense 162.6 141.6
Intangible amortization expense 5.9 4.1
Segment income $90.8 $77.4 17.3%
as a percent of revenues 10.7% 10.1%
Thermal Equipment and Services
Revenues $1,193.0 $1,122.9 6.2%
Gross profit 306.9 258.8
Selling, general and administrative
expense 168.3 143.6
Intangible amortization expense 4.2 4.8
Segment income $134.4 $110.4 21.7%
as a percent of revenues 11.3% 9.8%
Industrial Products and Services
Revenues $862.9 $713.4 21.0%
Gross profit 294.5 202.8
Selling, general and administrative
expense 112.7 97.8
Intangible amortization expense 0.5 0.7
Segment income $181.3 $104.3 73.8%
as a percent of revenues 21.0% 14.6%
Total segment income $578.7 $416.7
Corporate expenses 80.8 69.9
Pension and postretirement expense 29.8 32.5
Stock-based compensation expense 33.7 32.0
Special charges, net 9.7 3.9
Consolidated Operating Income $424.7 $278.4 52.6%
SPX CORPORATION AND SUBSIDIARIES
ORGANIC REVENUE GROWTH RECONCILIATION
(Unaudited)
Three Months ended September 27, 2008
Organic
Net Revenue
Revenue Acquisi- Foreign Growth
Growth tions Currency (Decline)
Flow Technology 92.4 % 83.1 % 1.0 % 8.3 %
Test and Measurement 6.1 % 7.4 % 1.8 % (3.1)%
Thermal Equipment and Services 3.5 % - % 5.3 % (1.8)%
Industrial Products and Services 28.6 % - % 0.4 % 28.2 %
Consolidated 28.8 % 19.7 % 2.6 % 6.5 %
Nine months ended September 27, 2008
Organic
Net Revenue
Revenue Acquisi- Foreign Growth
Growth tions Currency (Decline)
Flow Technology 100.1 % 86.9 % 3.3 % 9.9 %
Test and Measurement 11.1 % 10.4 % 3.7 % (3.0)%
Thermal Equipment and Services 6.2 % - % 6.1 % 0.1 %
Industrial Products and Services 21.0 % - % 1.1 % 19.9 %
Consolidated 31.7 % 22.0 % 3.9 % 5.8 %
SPX CORPORATION AND SUBSIDIARIES
FREE CASH FLOW RECONCILIATION
(Unaudited; in millions)
Three months Nine months
ended ended
Sept. 27, Sept. 29 Sept. 27, Sept. 29
2008 2007 2008 2007
Net cash from continuing operations $103.8 $48.3 $147.1 $134.9
Capital expenditures - continuing
operations (32.6) (18.7) (78.9) (46.9)
Free cash flow from continuing
operations $71.2 $29.6 $68.2 $88.0
SPX CORPORATION AND SUBSIDIARIES
CASH AND DEBT RECONCILIATION
(Unaudited; in millions)
Nine months ended
September 27, 2008
Beginning cash $354.1
Operational cash flow 147.1
Business acquisitions and
investments, net of cash acquired (11.7)
Capital expenditures (78.9)
Proceeds from asset sales and
other 1.3
Borrowings under revolving
loan facilities 615.0
Repayments under revolving
loan facilities (600.0)
Net repayments under other
financing arrangements (52.7)
Proceeds from the exercise of
employee stock options and other 80.1
Dividends paid (40.0)
Cash from discontinued
operations 37.2
Change in cash due to
change in foreign
exchange rates 14.9
Ending cash $466.4
Debt at Borrow- Repay- Debt at
12/31/2007 ings ments Other 9/27/2008
Term loan $750.0 $- $(37.6) $- $712.4
Domestic revolving loan facility 115.0 515.0 (500.0) - 130.0
Global revolving loan facility - 100.0 (100.0) - -
7.625% senior notes 500.0 - - - 500.0
7.50% senior notes 28.2 - - - 28.2
6.25% senior notes 21.3 - - - 21.3
Trade receivables financing
arrangement 70.0 261.0 (261.0) - 70.0
Other indebtedness 83.5 - (15.1) 0.4 68.8
Totals $1,568.0 $876.0 $(913.7) $0.4 $1,530.7
SPX CORPORATION AND SUBSIDIARIES
ADJUSTED EARNINGS PER SHARE RECONCILIATION
(Unaudited; in millions, except per share)
Three months Nine months
ended ended
Sept. 27, Sept. 29, Sept. 27, Sept. 29,
2008 2007 2008 2007
Diluted net income per share of
common stock from continuing
operations $2.01 $1.74 $4.86 $3.43
Third quarter settlement of tax
matters (0.47) (0.20) (0.47) (0.19)
Reductions in foreign statutory
rates - (0.15) - (0.14)
Third quarter 2007 legal
settlement 0.11 - 0.11 -
Adjusted diluted net income per share
of common stock from continuing
operations $1.66 (1) $1.39 $4.49 (1) $3.10
(1) Adjusted diluted net income per share of common stock from continuing
operations may have differences due to rounding.
