News Release

CHARLOTTE, N.C., May 2, 2012 /PRNewswire/ -- SPX Corporation (NYSE: SPW) today reported results for the first quarter ended March 31, 2012:

First Quarter Highlights:

• Revenues increased 18.3% to $1.17 billion from $0.98 billion in the year-ago quarter. Organic revenues* increased 6.7%, while completed acquisitions and currency fluctuations impacted revenues by 13.2% and (1.6)%, respectively.
• Segment income and margins were $82.5 million and 7.1%, compared with $105.1 million and 10.7% in the year-ago quarter. First quarter of 2012 segment income and margins were negatively impacted by dilution from the 2011 acquisition of ClydeUnion, including $6.6 million of purchase accounting charges.
• Diluted net income per share was $0.26, compared with $0.45 in the year-ago quarter. The first quarter 2012 results included the following items:
  • Income from discontinued operations of $4.9 million (after tax), or $0.09 per share, primarily related to our Service Solutions business unit;
  • Charges of $14.0 million, or $0.19 per share, associated with ClydeUnion. This includes the purchase accounting charges noted above, financing costs, and transaction costs;
  • Costs of $3.6 million, or $0.05 per share, associated with the start-up of our expanded power transformer facility in Waukesha, WI; and
  • A one-time gain of $20.5 million, or $0.18 per share, associated with completing the formation of a joint venture in our Thermal Equipment and Services segment during the quarter.
• Net cash used in continuing operations was $193.5 million, compared with $19.1 million in the year-ago quarter. The increase was due primarily to investments in working capital both to fund anticipated organic revenue growth, and $57.0 million to fund ClydeUnion's initial working capital requirements. A portion of the ClydeUnion working capital was funded by the seller at closing.  Higher income tax payments, pension contributions, and lower operating income also contributed to the increase.
• Free cash flow from continuing operations* during the quarter was a negative $215.1 million, compared with a negative $34.3 million in the year-ago quarter. The decline was due primarily to the items noted above, in addition to higher capital expenditures in 2012.

"We view 2012 as a transitional year for our company as we are focused on executing several significant strategic actions. These actions had a net dilutive impact on our Q1 financial results; however, we expect to see a positive benefit from these actions over the balance of 2012 and beyond. Additionally, we believe these actions will allow us to leverage the positive trends we are seeing in many of our key end markets. In particular, we are experiencing robust demand for Flow components across many applications and also for the replacement of power transformers in the U.S. market," said Christopher J. Kearney, Chairman, President and Chief Executive Officer of SPX.

"The integration of ClydeUnion is progressing and we have implemented several improvement initiatives that we expect to increase productivity and profitability in this business over the remainder of this year and beyond. We also expect to see increased production out of our expanded large power transformer facility as the year progresses and we are on track to ship the first unit out of this facility in the second quarter.

"From a capital allocation perspective, we completed the first phase of our share repurchase program and anticipate executing the remainder of the program over the balance of the year, after the sale of Service Solutions is completed.

"The strategic actions we are executing this year are directed at narrowing our focus, improving our earnings potential and strengthening our financial position. By the end of this year, we are projecting to have over $1.4 billion of liquidity that will provide us significant flexibility for additional acquisitions and share repurchases, consistent with our capital allocation methodology," added Kearney.

FINANCIAL HIGHLIGHTS – CONTINUING OPERATIONS

Flow Technology  

Revenues for the first quarter of 2012 were $628.1 million compared to $455.9 million in the first quarter of 2011, an increase of $172.2 million, or 37.8%.  Organic revenues increased 10.4%, reflecting strong demand across the majority of the segment's end markets. This was led by sales of components and large-scale systems for the food and beverage market and components for the power and energy and industrial markets. The 2011 acquisitions of ClydeUnion, e&e and Murdoch increased reported revenues by 29.2%, while the impact of currency fluctuations decreased reported revenues by 1.8%, from the year-ago quarter.

Segment income was $46.4 million, or 7.4% of revenues, in the first quarter of 2012 compared to $56.4 million, or 12.4% of revenues, in the first quarter of 2011. Segment income and margin decreased due primarily to operating losses of $8.6 million from ClydeUnion in the first quarter of 2012, inclusive of purchase accounting charges of $6.6 million. The operating losses of ClydeUnion diluted the first quarter segment margin by 350 basis points. Segment income and margin were further impacted by isolated operational challenges in Europe that more than offset strong performance in other regions.

Thermal Equipment and Services

Revenues for the first quarter of 2012 were $320.5 million compared to $325.3 million in the first quarter of 2011, a decrease of $4.8 million, or 1.5%. Organic revenues increased 1.7% in the quarter, driven primarily by revenue from cooling systems in South Africa partially offset by declines in the Americas and Europe and declines in revenue from heating businesses due to warm winter weather. The impact of currency fluctuations decreased reported revenues by 2.3% from the year-ago quarter and the transfer of business to the joint venture with Shanghai Electric further decreased revenue by 0.9%.

Segment income was $10.3 million, or 3.2% of revenues, in the first quarter of 2012 compared to $21.3 million, or 6.5% of revenues, in the first quarter of 2011. The decline in segment income and margins was due primarily to fewer higher margin retrofit projects during 2012 and the organic revenue decline in our heating businesses noted above.

Industrial Products and Services

Revenues for the first quarter of 2012 were $216.6 million compared to $203.7 million in the first quarter of 2011, an increase of $12.9 million, or 6.3%. Organic revenues increased 6.6% in the quarter, driven primarily by volume increases for power transformers partially offset by declines in sales of solar crystal growers. The impact of currency fluctuations decreased reported revenues by 0.3%, from the year-ago quarter.

Segment income was $25.8 million, or 11.9% of revenues, in the first quarter of 2012 compared to $27.4 million, or 13.5% of revenues, in the first quarter of 2011. The decrease in segment income and margins was due primarily to $3.6 million of start-up and unabsorbed costs associated with the expansion of our power transformer facility in Waukesha, WI. In addition, segment income and margins for the first quarter of 2011 benefited from a $6.3 million insurance recovery related to a product liability matter.

OTHER ITEMS

Dividend: On February 23, 2012, 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 14, 2012, which was paid on April 3, 2012.

Acquisitions: On March 21, 2012 the company announced it had completed the acquisition of Seital S.r.l, in the Flow Technology segment.  This business, based in Santorso, Italy, is a leading supplier of disk centrifuges (separators and clarifiers) to the global food and beverage, biotechnology, pharmaceutical and chemical industries. 

Formation of Joint Venture: On December 30, 2011, the company and Shanghai Electric Group Co., Ltd. established a joint venture that will supply dry cooling and moisture separator reheater products and services to the power sector in China as well as other selected regions of the world. The company contributed and sold certain assets of its dry cooling products business in China to the joint venture in consideration for (i) a 45% ownership interest in the joint venture and (ii) cash payments of RMB 96.7 million, with RMB 51.5 million received on January 18, 2012, RMB 25.8 million to be received no later than December 31, 2012, and the remaining RMB payment contingent upon the joint venture achieving defined sales order volumes. The company has accounted for the transaction under the deconsolidation criteria of ASC 810, "Consolidation," and, thus, recorded a pre-tax gain during the first quarter of 2012 of $20.5 million. 

Discontinued Operations:   During the first quarter of 2012, the company entered into an agreement to sell our Service Solutions business unit, which was previously reported in the Test and Measurement segment. It is anticipated that the sale will be completed in the second or third quarter of 2012.

The financial condition, results of operations, and cash flows of Service Solutions have been reported as discontinued operations in the attached condensed consolidated financial statements. 

Change in Segment Reporting:  With the pending sale of Service Solutions, the company no longer reports the two remaining businesses in the Test and Measurement segment as a separate reportable segment. Effective with the first quarter of 2012, these two businesses are combined within Industrial Products and Services.

Form 10-Q:  The company expects to file its quarterly report on Form 10-Q for the quarter ended March 31, 2012 with the Securities and Exchange Commission by May 10, 2012. 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.

About SPX:  Based in Charlotte, North Carolina, SPX Corporation (NYSE: SPW) is a global Fortune 500 multi-industry manufacturing leader with over $5 billion in annual revenue, operations in more than 35 countries and over 18,000 employees. The company's highly-specialized, engineered products and technologies are concentrated in three areas: Flow Technology, infrastructure, and vehicle service solutions. Many of SPX's innovative solutions are playing a role in helping to meet rising global demand for electricity, processed foods and beverages and vehicle services, particularly in emerging markets. The company's products include food processing systems for the food and beverage industry, power transformers for utility companies, cooling systems for power plants; and diagnostic tools and equipment for the automotive industry. This description of SPX does not reflect the pending sale of the Service Solutions business. For more information, please visit 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," "project" 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.

 

 

 

 

 

 

 

 

 

SOURCE SPX Corporation

Ryan Taylor (Investors)	Jennifer H. Epstein (Media)
704-752-4486	704-752-7403 / 704-576-5441
E-mail: investor@spx.com	E-mail: jennifer.epstein@spx.com