SPX Reports First Quarter 2010 Results
CHARLOTTE, N.C., May 5, 2010 /PRNewswire via COMTEX/ --SPX Corporation (NYSE: SPW) today reported results for the first quarter ended April 3, 2010:
First Quarter Highlights:
- Revenues decreased 6.4% to $1.09 billion from $1.16 billion in the year-ago quarter. Organic revenues* declined 11.6%, while completed acquisitions and the impact of currency fluctuations each increased reported revenues by 2.6%.
- Segment income and margins were $106.3 million and 9.8%, compared with $126.2 million and 10.9% in the year-ago quarter.
- Diluted net income per share from continuing operations was $0.37, compared with $0.77 in the year-ago quarter. The current-year quarter included a non-cash tax charge of $6.2 million, or $0.12 per share, related to changes in federal health care laws.
- Net cash used in continuing operations was $25.1 million, compared with $35.0 million in the year-ago quarter. The decrease in cash used in continuing operations was due primarily to changes in working capital and lower spending on restructuring, which more than offset the decline in operating income.
- Free cash flow from continuing operations* during the quarter was a negative $36.9 million, compared with a negative $50.3 million in the year-ago quarter. The improvement was due primarily to the items noted above, in addition to lower capital expenditures in 2010.
"We are encouraged by positive signs that the recovery of the global economy is underway, and we have seen various levels of improved performance in our early cycle businesses," said Christopher J. Kearney, Chairman, President and Chief Executive Officer of SPX. "Nevertheless, continued softness in our transformer business weighed on our first quarter results, which remain below 2009 levels, and we maintain the view that recovery in our mid-to-late cycle businesses will lag the broader economy.
"We remain confident in our long-term strategy, are committed to executing it and believe the steps we have taken to enhance our business during the global recession have us well positioned for growth when our markets recover. We are revising our EPS guidance range to $3.00 to $3.30 per share, resulting in an increase to our mid-point guidance of $0.05 compared to our previous range of $2.90 to $3.30 per share. We also have higher expectations for cash flow performance, and are increasing our guidance range to $180 million to $220 million from $160 million to $200 million," added Kearney.
FINANCIAL HIGHLIGHTS - CONTINUING OPERATIONS
Flow Technology
Revenues for the first quarter of 2010 were $354.0 million compared to $394.0 million in the first quarter of 2009, a decrease of $40.0 million, or 10.2%. Organic revenues declined 15.3%, driven primarily by softness in the oil and gas market and lower demand for large-scale systems in the food and beverage market. Completed acquisitions and the impact of currency fluctuations increased reported revenues by 0.6% and 4.5%, respectively, from the year-ago quarter.
Segment income was $41.3 million, or 11.7% of revenues, in the first quarter of 2010 compared to $50.1 million, or 12.7% of revenues, in the first quarter of 2009. Segment income and margin declined due primarily to the organic decline noted above, offset partially by the benefits from restructuring actions taken in 2009.
Test and Measurement
Revenues for the first quarter of 2010 were $204.4 million compared to $196.0 million in the first quarter of 2009, an increase of $8.4 million, or 4.3%. Organic revenues increased 2.2%, driven primarily by increased demand in the global automotive aftermarket and sales of portable pipe and cable locators in the U.S. and Europe. The impact of currency fluctuations increased revenues by 2.1% from the year-ago quarter.
Segment income was $13.4 million, or 6.6% of revenues, in the first quarter of 2010 compared to $5.8 million, or 3.0% of revenues, in the first quarter of 2009. The increase in segment income and margins was due primarily to the benefits realized from restructuring actions initiated in 2009 and the impact of the organic revenue increase noted above.
Thermal Equipment and Services
Revenues for the first quarter of 2010 were $353.4 million compared to $342.2 million in the first quarter of 2009, an increase of $11.2 million, or 3.3%. Organic revenues declined 7.4% in the quarter, driven primarily by project timing for cooling systems. Completed acquisitions and the impact of currency fluctuations increased reported revenues by 8.2% and 2.5%, respectively, from the year-ago quarter.
Segment income was $31.5 million, or 8.9% of revenues, in the first quarter of 2010 compared to $21.4 million, or 6.3% of revenues, in the first quarter of 2009. The increase in segment income and margins was due primarily to favorable project mix and incremental profits from SPX Heat Transfer Inc.
Industrial Products and Services
Revenues for the first quarter of 2010 were $173.8 million compared to $227.4 million in the first quarter of 2009, a decrease of $53.6 million, or 23.6%. Organic revenues declined 23.7% in the quarter, driven primarily by volume and pricing declines for power transformers as well as lower demand in our solar crystal growers and broadcast equipment product lines. The impact of currency fluctuations increased revenues by 0.1% from the year-ago quarter.
Segment income was $20.1 million, or 11.6% of revenues, in the first quarter of 2010 compared to $48.9 million, or 21.5% of revenues, in the first quarter of 2009. The decrease in segment income and margins was due primarily to the organic declines noted above.
OTHER ITEMS
Tax Impact of Health Care Legislation: The recent passage of The Patient Protection and Affordable Care Act and the Health Care Education and Reconciliation Bill of 2010, resulted in the elimination of a portion of the federal income tax deduction associated with prescription drug costs that are reimbursed under the Medicare Part D retiree subsidy program. In the first quarter of 2010 the company recorded a non-cash charge of $6.2 million, or $0.12 per share, as a result of this legislation.
Dividend:On February 19, 2010, the company announced that its Board of Directors had declared a quarterly dividend of $0.25 per common share to shareholders of record on March 15, 2010, which was paid on April 6, 2010. The fourth quarter 2009 dividend of $0.25 per common share was paid on January 5, 2010.
Discontinued Operations:During the second quarter of 2009, the company committed to a plan to divest the PSD business that was previously reported in the Industrial Products and Services segment. In the first quarter of 2010, the company completed the sale of this business.
The financial condition, results of operations, cash flows and realized gain from the sale of this business 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 April 3, 2010 with the Securities and Exchange Commission by May 13, 2010. This press release should be read in conjunction with that filing, which will be available on the company's website at http://www.spx.com/, in the Investor Relations section.
SPX Corporation (NYSE: SPW) is a Fortune 500 multi-industry manufacturing leader that provides its customers with highly-specialized, engineered solutions to solve critical business issues.
SPX products and technologies play an important role in the expansion of global infrastructure to help meet increased demand for power and energy and support many different sources of power generation, including coal and natural gas, nuclear, solar and geothermal. The company's innovative product portfolio, containing many energy efficient products, includes cooling systems for power plants throughout the world; highly advanced food processing components and turnkey, scalable systems serving the global food and beverage industry; process equipment that assists a variety of flow processes including oil and gas exploration, distribution and refinement and power generation; handheld diagnostic tools that aid in vehicle maintenance and repair; and power transformers that allow utility companies to regulate electric voltage, transmission and distribution.
With headquarters in Charlotte, North Carolina, SPX has approximately 15,000 employees in more than 35 countries worldwide. Visit http://www.spx.com/.
* 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 reports on Form 10-K and quarterly reports on Form 10-Q. 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
------------------
April 3, March 28,
2010 2009
--------- ----------
Revenues $1,085.6 $1,159.6
Costs and expenses:
Cost of products sold 772.1 827.6
Selling, general and administrative 248.8 242.0
Intangible amortization 6.2 5.2
Special charges, net 6.8 11.9
--- ----
Operating income 51.7 72.9
Other expense, net (12.1) (12.2)
Interest expense (20.5) (23.0)
Interest income 1.6 2.1
Equity earnings in joint ventures 8.7 10.8
--- ----
Income from continuing operations
before income taxes 29.4 50.6
Income tax provision (11.7) (12.3)
----- -----
Income from continuing operations 17.7 38.3
Loss from discontinued operations, net
of tax - (1.9)
Gain (loss) on disposition of
discontinued operations, net of tax 3.6 (12.1)
--- -----
Income (loss) from discontinued
operations 3.6 (14.0)
--- -----
Net income 21.3 24.3
Less: Net loss attributable to
noncontrolling interests (0.8) (0.1)
Net income attributable to SPX
Corporation common shareholders $22.1 $24.4
===== =====
Amounts attributable to SPX
Corporation common shareholders:
Income from continuing operations, net
of tax $18.5 $38.7
Income (loss) from discontinued
operations, net of tax 3.6 (14.3)
--- -----
Net income $22.1 $24.4
===== =====
Basic income per share of common stock
Income from continuing operations
attributable to SPX Corporation
common shareholders $0.37 $0.78
Income (loss) from discontinued
operations attributable to SPX
Corporation common shareholders 0.08 (0.29)
Net income per share attributable to
SPX Corporation common shareholders $0.45 $0.49
===== =====
Weighted average number of common
shares outstanding -basic 49.530 49.952
Diluted income per share of common
stock
Income from continuing operations
attributable to SPX Corporation
common shareholders $0.37 $0.77
Income (loss) from discontinued
operations attributable to SPX
Corporation common shareholders 0.07 (0.29)
Net income per share attributable to
SPX Corporation common shareholders $0.44 $0.48
===== =====
Weighted average number of common
shares outstanding -diluted 49.921 50.278
SPX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited; in millions)
April 3, December 31,
2010 2009
---- ----
ASSETS
Current assets:
Cash and equivalents $464.1 $522.9
Accounts receivable, net 1,047.8 1,046.3
Inventories 569.2 560.3
Other current assets 145.6 121.2
Deferred income taxes 56.1 56.1
Assets of discontinued
operations - 5.7
--- ---
Total current assets 2,282.8 2,312.5
Property, plant and equipment
Land 39.6 39.1
Buildings and leasehold
improvements 246.0 250.4
Machinery and equipment 711.7 712.2
----- -----
997.3 1,001.7
Accumulated depreciation (461.5) (455.3)
------ ------
Property, plant and equipment,
net 535.8 546.4
Goodwill 1,583.1 1,600.0
Intangibles, net 695.4 708.3
Deferred income taxes 117.6 114.7
Other assets 447.6 442.5
----- -----
TOTAL ASSETS $5,662.3 $5,724.4
======== ========
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable $457.6 $475.8
Accrued expenses 938.5 987.5
Income taxes payable 49.1 40.3
Short-term debt 101.9 74.4
Current maturities of long-term
debt 76.0 76.0
Liabilities of discontinued
operations - 5.3
--- ---
Total current liabilities 1,623.1 1,659.3
Long-term debt 1,135.1 1,128.6
Other income taxes 92.9 92.1
Other long-term liabilities 954.2 962.9
----- -----
Total long-term liabilities 2,182.2 2,183.6
Equity:
SPX Corporation shareholders'
equity:
Common stock 982.6 979.0
Paid-in capital 1,422.4 1,425.7
Retained earnings 2,212.6 2,203.0
Accumulated other comprehensive
loss (254.5) (213.6)
Common stock in treasury (2,516.4) (2,523.3)
-------- --------
Total SPX Corporation
shareholders' equity 1,846.7 1,870.8
Noncontrolling interests 10.3 10.7
---- ----
Total equity 1,857.0 1,881.5
TOTAL LIABILITIES AND EQUITY $5,662.3 $5,724.4
======== ========
SPX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited; in millions)
Three months ended
------------------
April 3, March 28,
2010 2009
--------- ----------
Cash flows used in operating
activities:
Net income $21.3 $24.3
Less: Income (loss) from discontinued
operations, net of tax 3.6 (14.0)
--- -----
Income from continuing operations 17.7 38.3
Adjustments to reconcile income from
continuing operations
to net cash used in operating
activities:
Special charges, net 6.8 11.9
Deferred income taxes 9.3 -
Depreciation and amortization 27.8 25.1
Pension and other employee benefits 17.4 13.9
Stock-based compensation 11.9 9.2
Other, net 10.9 18.9
Changes in operating assets and
liabilities, net of
effects from acquisitions and
divestitures:
Accounts receivable and other assets (48.6) 40.4
Inventories (1.7) 11.3
Accounts payable, accrued expenses and
other (65.9) (186.2)
Cash spending on restructuring actions (10.7) (17.8)
----- -----
Net cash used in continuing operations (25.1) (35.0)
Net cash used in discontinued
operations (1.6) (4.2)
---- ----
Net cash used in operating activities (26.7) (39.2)
Cash flows from (used in) investing
activities:
Proceeds from asset sales and other 0.3 -
(Increase) decrease in restricted cash (5.8) 7.8
Business acquisitions, net of cash
acquired (26.8) -
Capital expenditures (11.8) (15.3)
----- -----
Net cash used in continuing operations (44.1) (7.5)
Net cash from discontinued operations 6.7 18.6
--- ----
Net cash from (used in) investing
activities (37.4) 11.1
Cash flows from financing activities:
Borrowings under senior credit
facilities 102.0 297.0
Repayments under senior credit
facilities (78.3) (182.0)
Borrowings under trade receivables
agreement 10.0 75.0
Repayments under trade receivables
agreement (3.0) (42.0)
Net repayments under other financing
arrangements (0.1) (11.1)
Purchases of common stock - (113.2)
Minimum withholdings paid on behalf of
employees for net share
settlements, net of proceeds from
exercise of employee
stock options and other (8.0) (5.6)
Purchase of noncontrolling interest in
subsidiary - (3.2)
Financing fees paid (1.0) -
Dividends paid (12.4) (13.1)
----- -----
Net cash from continuing operations 9.2 1.8
Net cash from discontinued operations - 0.2
--- ---
Net cash from financing activities 9.2 2.0
Change in cash and equivalents due to
changes in foreign currency exchange
rates (3.9) (18.9)
Net change in cash and equivalents (58.8) (45.0)
Consolidated cash and equivalents,
beginning of period 522.9 475.9
Consolidated cash and equivalents, end
of period $464.1 $430.9
====== ======
SPX CORPORATION AND SUBSIDIARIES
RESULTS OF OPERATIONS BY SEGMENT
(Unaudited; in millions)
Three months ended
------------------
April 3, March 28,
2010 2009 %
--------- ---------- ---
Flow Technology
Revenues $354.0 $394.0 -10.2%
Gross profit 127.3 130.5
Selling, general and
administrative expense 83.0 77.6
Intangible amortization
expense 3.0 2.8
Segment income $41.3 $50.1 -17.6%
===== =====
as a percent of revenues 11.7% 12.7%
Test and Measurement
Revenues $204.4 $196.0 4.3%
Gross profit 59.4 53.0
Selling, general and
administrative expense 44.5 45.5
Intangible amortization
expense 1.5 1.7
Segment income $13.4 $5.8 131.0%
===== ====
as a percent of revenues 6.6% 3.0%
Thermal Equipment and
Services
Revenues $353.4 $342.2 3.3%
Gross profit 82.7 72.8
Selling, general and
administrative expense 49.6 50.8
Intangible amortization
expense 1.6 0.6
Segment income $31.5 $21.4 47.2%
===== =====
as a percent of revenues 8.9% 6.3%
Industrial Products and
Services
Revenues $173.8 $227.4 -23.6%
Gross profit 48.6 78.4
Selling, general and
administrative expense 28.4 29.4
Intangible amortization
expense 0.1 0.1
Segment income $20.1 $48.9 -58.9%
===== =====
as a percent of revenues 11.6% 21.5%
Total segment income $106.3 $126.2
Corporate expenses 22.7 23.3
Pension and postretirement
expense 13.2 8.9
Stock-based compensation
expense 11.9 9.2
Special charges, net 6.8 11.9
----
Consolidated Operating
Income $51.7 $72.9 -29.1%
===== =====
SPX CORPORATION AND SUBSIDIARIES
ORGANIC REVENUE RECONCILIATION
(Unaudited)
Three months ended April 3, 2010
--------------------------------
Organic
Net Revenue Foreign Revenue
Increase/ Increase/
(Decline) Acquisitions Currency (Decline)
---------- ------------ -------- ----------
Flow
Technology (10.2)% 0.6% 4.5% (15.3)%
Test and
Measurement 4.3% - % 2.1% 2.2%
Thermal
Equipment
and
Services 3.3% 8.2% 2.5% (7.4)%
Industrial
Products
and
Services (23.6)% - % 0.1% (23.7)%
Consolidated (6.4)% 2.6% 2.6% (11.6)%
SPX CORPORATION AND SUBSIDIARIES
FREE CASH FLOW RECONCILIATION
(Unaudited; in millions)
Three months ended
------------------
April 3, March 28,
2010 2009
--------- ----------
Net cash used in continuing
operations $(25.1) $(35.0)
Capital expenditures -
continuing operations (11.8) (15.3)
----- -----
Free cash flow used in
continuing operations $(36.9) $(50.3)
====== ======
SPX CORPORATION AND SUBSIDIARIES
CASH AND DEBT RECONCILIATION
(Unaudited; in millions)
Three months
ended
April 3, 2010
-------------
Beginning cash
and
equivalents $522.9
Operational
cash flow (25.1)
Business
acquisitions,
net of cash
acquired (26.8)
Capital
expenditures (11.8)
Increase in
restricted
cash (5.8)
Proceeds from
asset sales
and other 0.3
Borrowings
under senior
credit
facilities 102.0
Repayments
under senior
credit
facilities (78.3)
Net repayments
under other
financing
arrangements (0.1)
Net borrowing
under trade
receivable
agreement 7.0
Minimum tax
withholdings
paid on
behalf of
employees for
net share
settlements,
net of
proceeds from
the exercise
of employee
stock
options and
other (8.0)
Financing fees
paid (1.0)
Dividends paid (12.4)
Cash from
discontinued
operations 5.1
Change in cash
due to
changes in
foreign
exchange
rates (3.9)
----
Ending cash
and
equivalents $464.1
======
Debt at Debt at
12/31/2009 Borrowings Repayments Other 4/3/2010
---------- ---------- ---------- ----- --------
Term loan $600.0 $- $(18.8) $- $581.2
Domestic
revolving
loan facility 61.5 102.0 (59.5) - 104.0
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 22.0 10.0 (3.0) - 29.0
Other
indebtedness 46.0 9.1 (9.2) 3.4 49.3
---- --- ---- --- ----
Totals $1,279.0 $121.1 $(90.5) $3.4 $1,313.0
======== ====== ====== ==== ========
SPX CORPORATION AND SUBSIDIARIES
FREE CASH FLOW RECONCILIATION
(Unaudited; in millions)
2010E Current
Guidance Range
--------------
Net cash from continuing
operations $280.0 $310.0
Capital expenditures (100.0) (90.0)
------ -----
Free cash flow from continuing
operations $180.0 $220.0
====== ======
2010E Prior Guidance
Range
---------------------
Net cash from continuing
operations $260.0 $290.0
Capital expenditures (100.0) (90.0)
------ -----
Free cash flow from continuing
operations $160.0 $200.0
====== ======
SOURCE SPX Corporation