1
F O R M 1 0 - Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1995
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to _________
Commission File Number 1-6948
SPX CORPORATION
(Exact Name of Registrant as Specified in its Charter)
Delaware 38-1016240
(State of Incorporation) (I.R.S. Employer Identification No.)
700 Terrace Point Drive, Muskegon, Michigan 49443
(Address of Principal Executive Office)
Registrant's Telephone Number including Area Code (616) 724-5000
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes (X) No ( )
Common shares outstanding May 5, 1995 -- 14,147,440
2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
SPX CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(000s omitted)
(Unaudited)
March 31 December 31
1995 1994
ASSETS
Current assets:
Cash and temporary investments $ 14,230 $ 9,859
Receivables 141,621 128,544
Lease finance receivables - current 35,848 35,026
portion
Inventories 168,146 151,821
Deferred income tax asset and refunds 46,094 55,843
Prepaid and other current assets 25,909 25,188
Total current assets $ 431,848 $ 406,281
Investments 17,317 16,363
Property, plant and equipment, at cost 423,150 408,365
Accumulated depreciation (202,081) (193,512)
Net property, plant and equipment $ 221,069 $ 214,853
Lease finance receivables - long-term 44,783 47,042
Costs in excess of net assets of
businesses acquired 197,526 199,145
Other assets 47,671 47,979
Total assets $ 960,214 $ 931,663
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable and current maturities
of long-term debt $ 1,386 $ 1,133
Accounts payable 98,369 83,278
Accrued liabilities 140,438 134,361
Income taxes payable 4,465 3,100
Total current liabilities $ 244,658 $ 221,872
Long-term liabilities 120,131 120,641
Deferred income taxes 16,655 16,376
Long-term debt 415,230 414,082
Shareholders' equity:
Common stock $ 157,801 $ 156,478
Paid in capital 58,196 58,072
Retained earnings 28,351 29,411
$ 244,348 $ 243,961
Common stock held in treasury (50,000) (50,000)
Unearned compensation (29,730) (31,073)
Minority interest (4,044) (3,278)
Cumulative translation adjustments 2,966 (918)
Total shareholders' equity $ 163,540 $ 158,692
Total liabilities and shareholders' $ 960,214 $ 931,663
equity
3
SPX CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(In thousands of dollars except per share amounts)
(Unaudited)
Three months ended
March 31
1995 1994
Revenues $ 278,833 $ 277,451
Costs and expenses
Cost of products sold 217,213 209,335
Selling, general and 52,295 52,182
administrative
Goodwill/Intangible 2,238 1,626
amortization
Minority interest (income) (766) (240)
Earnings from equity interests (1,234) (538)
Operating income $ 9,087 $ 15,086
Other expense (income), net (1,985) (242)
Interest expense, net 10,657 10,228
Income before income taxes $ 415 $ 5,100
Provision for income taxes 165 2,000
Net income $ 250 $ 3,100
Net income per share $0.02 $ 0.24
Dividends per share $0.10 $ 0.10
Weighted average number of
common shares outstanding 13,039 12,707
4
SPX CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(000s omitted)
(Unaudited)
Three Months Ended
March 31
1995 1994
Cash flows from operating activities:
Net income (loss) from operating activities $ 250 $ 3,100
Adjustments to reconcile net income (loss) to
net cash from operating activities -
Depreciation and amortization 11,096 9,791
(Earnings) loss from equity interests (1,234) (538)
Decrease in net deferred income tax assets,
refunds and liabilities 10,028 551
Increase in receivables (13,077) (25,359)
Increase in inventories (16,325) (1,843)
(Increase) decrease in prepaid and other
current assets (721) 2,275
Increase in accounts payable 15,091 17,173
Increase (decrease) in accrued liabilities 6,077 (5,891)
Increase in income taxes payable 1,365 732
Decrease in lease finance receivables 1,437 1,929
Increase (decrease) in long-term liabilities (510) 718
Other, net 4,777 2,557
Net cash provided by (used by) operating $ 18,254 $ 5,195
activities
Cash flows used by investing activities:
Capital expenditures $ (13,974) $ (10,318)
Payments for purchase of business - (39,000)
Net cash used by investing activities $ (13,974) $ (49,318)
Cash flows provided by financing activities:
Net borrowings (payments) under debt agreements $ 1,401 $ (47,567)
Payment of fees related to debt restructuring - (10,110)
Dividends paid (1,310) (1,144)
Net cash provided by (used by) financing
activities $ 91 $ (58,821)
Net increase (decrease) in cash and temporary
investments $ 4,371 $(102,944)
Cash and temporary investments, beg. of period 9,859 117,843
Cash and temporary investments, end of period $ 14,230 $ 14,899
5
SPX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
MARCH 31, 1995 (Unaudited)
1. The interim financial statements reflect all adjustments
which are, in the opinion of management, necessary to a fair
statement of the results of the interim periods presented.
All adjustments are of a normal recurring nature.
Certain amounts in the 1994 consolidated financial
statements have been reclassified to conform with the 1995
presentation. This reclassification had no effect on net
income for any period.
2. Information regarding the company's segments was as follows:
Three months
ended March 31
1995 1994
(in millions)
Revenues:
Specialty Service Tools $ 135.7 $ 139.7
SPX Credit Corporation 3.1 3.4
Original Equipment Components 140.0 134.4
Total $ 278.8 $ 277.5
Operating income (loss):
Specialty Service Tools $ 3.3 $ 5.9
SPX Credit Corporation 1.4 2.2
Original Equipment Components 9.0 11.6
General Corporate (4.6) (4.6)
Total $ 9.1 $ 15.1
Capital Expenditures:
Specialty Service Tools $ 3.0 $ 2.8
SPX Credit Corporation 0.0 0.0
Original Equipment Components 10.8 6.0
General Corporate 0.2 1.5
Total $ 14.0 $ 10.3
Depreciation and Amortization:
Specialty Service Tools $ 3.8 $ 4.0
SPX Credit Corporation 0.0 0.0
Original Equipment Components 6.7 5.7
General Corporate 0.6 0.1
Total $ 11.1 $ 9.8
March 31 December 31
1995 1994
Identifiable Assets:
Specialty Service Tools $ 413.1 $ 397.9
SPX Credit Corporation 81.8 84.1
Original Equipment Components 387.8 367.9
General Corporate 77.5 81.8
Total $ 960.2 $ 931.7
6
SPX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
MARCH 31, 1995 (Unaudited)
3. At March 31, 1995, the company was not in compliance with
the interest expense coverage ratio covenant of the
revolving credit agreement. The company has obtained a
waiver for this condition and other minor technical defaults
from the syndicate of banks which provide the revolving
credit facility. Additionally, the company obtained an
amendment to the revolving credit agreement to adjust the
interest expense coverage ratio covenant from 2.5:1 to
2.25:1 at June 30, 1995 and September 30, 1995. With the
exception of the above, the company was in compliance with
all covenants contained in the revolving credit agreement
and the senior subordinated note indenture at March 31,
1995.
The company has also obtained amendments to the revolving
credit agreement which; (a) allow use of the proceeds from
an equity offering to reduce senior subordinated notes in
excess of the original limitation of $25 million, and,
(b) allow the company to reduce senior subordinated notes by
an additional $25 million. A further amendment to the revolving
credit agreement to allow use of the proceeds from the sale of
SPX Credit Corporation to reduce the senior subordinated notes
requires approval of 100% of the participating banks is pending.
Resolution of this matter is expected in the second quarter.
4. In April, the company announced its intention to sell SPX
Credit Corporation. This sale is anticipated to occur
before year-end 1995. Currently, the company is negotiating
with potential buyers and does not know with certainty the
selling price of this business. Preliminary assessment of
market conditions indicate that the sales price should be at
least the company's carrying value of this business.
7
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition
The following unaudited information should be read in
conjunction with the company's unaudited consolidated financial
statements and the related footnotes.
Results of Operations - First Quarter 1995 vs. First Quarter 1994
Consolidated:
Three months ended
March 31,
1995 1994
(in millions)
Revenues:
Specialty Service Tools....... $ 135.7 $ 139.7
Original Equipment Components. 140.0 134.4
SPX Credit Corporation........ 3.1 3.4
Total....................... $ 278.8 $ 277.5
Operating income (loss):
Specialty Service Tools....... $ 3.3 $ 5.9
Original Equipment Components. 9.0 11.6
SPX Credit Corporation........ 1.4 2.2
General corporate expense..... (4.6) (4.6)
Total....................... $ 9.1 $ 15.1
Other expense (income), net.... (2.0) (0.2)
Interest expense, net.......... 10.7 10.2
Income before income taxes..... $ 0.4 $ 5.1
Provision (benefit) for income
taxes......................... 0.2 2.0
Net income..................... $ 0.2 $ 3.1
Capital expenditures........... $ 14.0 $ 10.3
Depreciation and amortization.. 11.1 9.8
On the following pages, revenues, operating income and
related items are discussed by segment. The following provides
explanation of general corporate expenses and other consolidated
items that are not allocated to the segments.
General Corporate expense
These expenses represent general unallocated expenses and
are consistent and comparable between years.
Other expense (income), net
Represents expenses not included in the determination of
operating results, including gains or losses on currency
exchange, translation gains or losses due to translation of
financial statements in highly inflationary countries, the fees
incurred on the sale of accounts receivable under the company's
accounts receivable securitization program, gains or losses on
the sale of fixed assets and unusual non-operational gains or
losses. In the first quarter of 1995, a $1.5 million gain was
recorded on the sale of the company's aftermarket distribution
business. 1994 annual revenues of this business were
approximately $14 million. Prospectively, the company will sell
the products previously sold through this business to the buyer
rather than directly to the aftermarket.
8
Interest Expense, net
The first quarter 1995 interest expense, net reflects the
debt structure in place after the 1994 refinancing. The level of
interest expense, $10.7 million, was comparable with interest
expense of the third and fourth quarters of 1994. The
refinancing was completed during the second quarter of 1994 and
included obtaining the $225 revolving credit facility and
issuance of $260 million of senior subordinated notes.
Provision for Income Taxes
The first quarter 1995 effective income tax rate was
approximately 39%, which reflects the company's current estimated
rate for the year.
Specialty Service Tools:
Three months ended
March 31,
1995 1994
(in millions)
Revenues........................... $ 135.7 $ 139.7
Gross Profit....................... 42.8 45.9
% of revenues.................... 31.6% 32.8%
Selling, general & administrative.. 38.3 38.7
% of revenues..................... 28.2% 27.7%
Goodwill/intangible amortization... 1.3 1.2
(Earnings) from equity interests... (0.1) 0.1
Operating income................... $ 3.3 $ 5.9
Capital expenditures............... $ 3.0 $ 2.8
Depreciation and amortization...... 3.8 4.0
March 31, 1995 December 31, 1994
(in millions)
Identifiable assets................ $ 413.1 $ 397.9
Revenues
First quarter 1995 revenues decreased $4.0 million, or 2.9%,
from the first quarter of 1994. The primary reasons for the
decrease are lower European revenues, particularly gas emission
equipment in Germany, and lower revenues from refrigerant
recycling and recovery equipment. In the first quarter of 1994,
the company had implemented certain sales incentives which pulled
some additional refrigerant recycling and recovery equipment
sales into the quarter. Sales of refrigerant recycling and
recovery equipment should be stronger in the second quarter.
Also negatively impacting sales of engine diagnostic equipment in
the first quarter of 1995 was the effect of market uncertainties
associated with delays in state emission testing programs. Sales
of engine diagnostic and gas emission testing equipment are
closely related.
The above reasons for the decreased revenue levels were
mitigated by continued strength in the base specialty service
tool sales including electronic and mechanical program tools and
dealer equipment. Additionally, sales of hydraulic tools
continue to be strong and are up significantly over last year.
General economic and market conditions continue to be
favorable and the company expects revenues to be strong for the
balance of the year.
9
Gross Profit
First quarter 1995 gross profit as a percentage of revenues
("gross margin") of 31.6% was lower than the 32.8% gross margin
in 1994. The decrease in the gross margin was primarily a result
of product mix. First quarter 1995 sales of electronic service
tools consisted of a greater percentage of purchased product
which carry a lower gross margins than manufactured product. In
addition, refrigerant recycling and recovery equipment sales,
which have higher gross margins, were lower in the first quarter
of 1995.
Selling, General and Administrative ("SG&A")
First quarter 1995 SG&A expense was $38.3 million, or 28.2%
of revenues, compared to $38.7 million, or 27.7% of revenues, in
1994. 1995 SG&A compares favorably to 1994 after noting that
1995 research and development costs in 1995 exceeded 1994 by $1.3
million and that 1995 SG&A included a $1.1 million charge for
downsizing severance costs at the Automotive Diagnostics
division. The additional $1.3 million in R&D spending was
attributable to development of the newer gas emissions testing
products and hand-held diagnostic equipment which are planned to
be sold over the balance of the year. The downsizing at
Automotive Diagnostics involving approximately 140 people,
addresses delays in the state vehicle emissions testing programs
as well as additional cost reductions to improve future
profitability at the unit.
Goodwill/Intangible Amortization
Noncash goodwill and intangible amortization results
primarily from excess purchase price over fair value of assets in
acquisitions.
(Earnings) from equity interests
Represents the equity (earnings) or losses of JATEK, a 50%
owned joint venture in Japan. JATEK's business was very slow in
the first half of 1994 reflecting economic conditions in Japan.
The first quarter reflects the continued improvement in results
that began in the last half of 1994.
Operating Income
1995 first quarter operating income of $3.3 million was
lower than first quarter 1994 operating income of $5.9 million.
Before the effect of the increased research and development
spending and the Automotive Diagnostics' severance charge charge
($2.4 million combined), the reduced revenue levels and
associated lower gross margins were virtually offset by reduced
SG&A expenses.
Capital Expenditures
First quarter 1995 capital expenditures were comparable to
the first quarter of 1994 capital expenditures. The company
continues to invest in manufacturing capability and systems to
better support customers. Full year 1995 capital expenditures
are expected to approximate $8 million.
Identifiable Assets
First quarter 1995 identifiable assets increased
approximately $15 million from year-end 1994. The increase was
predominately accounts receivable and inventories. The increase
in accounts receivable was a result of higher revenues in
February and March of 1995 compared to November and December of
1994. Days sales outstanding in accounts receivable are
approximately 65 to 70 days for the segment. The increase in
inventories was a result of delays in state emissions testing
programs and the normal buildup of inventory to support higher
second quarter business activity.
10
Original Equipment Components:
Three months ended
March 31,
1995 1994
(in millions)
Revenues........................... $ 140.0 $ 134.4
Gross Profit....................... 15.7 18.9
% of revenues.................... 11.2% 14.0%
Selling, general & administrative.. 7.7 7.8
% of revenues.................... 5.5% 5.8%
Goodwill/intangible amortization... .9 0.3
Minority interest (income)......... (0.8) (0.2)
(Earnings) from equity interests... (1.1) (0.6)
Operating income................... $ 9.0 $ 11.6
Capital expenditures............... $ 10.8 $ 6.0
Depreciation and amortization...... 6.7 5.7
March 31, 1995 December 31, 1994
(in millions)
Identifiable assets................ $ 387.8 $ 367.9
Revenues
First quarter 1995 revenues were up $5.6 million, or 4.2%,
over first quarter 1994 revenues. The increase was attributable
to continued increases in solenoid valve sales, higher European
revenues principally resulting from the translation effect of the
weaker U.S. dollar, and increased die-casting metal costs passed
on to customers. The increased die-casting metal prices are tied
to the market prices for the metal and do not effect
profitability as the company's cost rises by the same amount.
The first quarter revenues were reduced by the temporary loss of
hydraulic valve train business with a major customer and the by
loss of sales associated with the January sale of the company's
export aftermarket distribution business.
The domestic original equipment automotive and light truck
market and the automotive aftermarket continued to be strong,
which contributed to the continuing strong overall revenue level.
Europe's automotive industry continues to improve. The company
expects overall revenues to continue at relatively high levels
for the balance of 1995.
Gross Profit
First quarter 1995 gross margin of 11.2% compares to the
first quarter 1994 gross margin of 14.0%. Several factors
contributed to this decrease as follows:
The previously mentioned metal cost and pricing pass through
to customers reduced gross margins as the increase in revenues
equals the increase in costs.
During the quarter, the company purchased approximately $6
million of inventory from an aftermarket customer and began to
package this inventory for the customer. The inventory is
anticipated to be resold over the next twelve months at normal
margins. A $1.2 million charge was taken to record this
inventory at the company's standard inventory cost.
SP Europe recorded approximately $.8 million in severance
charges and incurred additional costs associated with the ongoing
process to achieve profitability.
11
The die-casting facilities incurred incremental costs
associated with product change over at one its manufacturing
facilities.
Selling, General and Administrative ("SG&A")
SG&A as a percentage of revenues decreased to $7.7 million,
or 5.5% of revenues, in the first quarter of 1995 compared to
$7.8 million, or 5.8% of revenues, in 1994. This reflects the
segment's continuing cost containment efforts as the dollar
amounts of SG&A in the comparative quarters are essentially the
same.
Goodwill/Intangible Amortization
Goodwill and intangible amortization was a result of the
excess purchase price over the fair value of assets recorded upon
the acquisition of 51% of SPT at the end of 1993. First quarter
1994 goodwill and intangible amortization is lower than the first
quarter of 1995 as the company was recording income related to
negative goodwill associated with SP Europe. This reversal of
negative goodwill was completed at the end of the second quarter
of 1994. The first quarter 1995 expense was comparable with the
third and fourth quarters of 1994.
Minority interest (income)
This reflects the 30% partner's minority interest in the
results of SP Europe. SP Europe continued to incur significant
losses in the first quarter of 1995. The company continues to
reconfigure SP Europe's operations in order to achieve
profitability. The first quarter of 1995 results of SP Europe
includes a $.8 million severance charge and additional costs
necessary to change processes to accomplish profitability.
(Earnings) from equity interests
Earnings from equity interests include the company's share
of earnings or losses in RSV, Promec, IBS Filtran and Allied Ring
Corporation ("ARC"). The increase in first quarter 1995 earnings
from equity interests over the first quarter of 1994 was due to
continued profitability at Promec and improved profitability at
IBS Filtran and ARC. RSV's losses also decreased from the first
quarter of 1994 as this unit continues through its development
phase.
Operating Income
First quarter 1995 operating income was $9.0 million
compared to $11.6 million in the first quarter of 1994. The $2.6
million decrease includes the $1.2 million charge associated with
the inventory purchase from the aftermarket customer and the $.8
million of severance costs recorded at SP Europe. The balance of
the reduction in operating profit was attributable to the die-
casting product changeovers and incremental process costs
incurred at SP Europe.
Capital Expenditures
Capital expenditures in the first quarter of 1995 were $10.8
million and $6.0 million in the first quarter of 1994.
Significant capital improvements were in process during late 1994
and carried over into the first quarter of 1995. These projects
include an additional solenoid valve assembly line, additional
die-casting capacity for high strength heat treated aluminum die-
castings for air bag steering columns and additional automated
cylinder sleeve casting and machining capacity to meet the demand
for aluminum block engine liners. Capital expenditures for 1995
are expected to approximate $22 million, and as such, will be
significantly lower in each of the remaining quarters of the
year.
12
Identifiable Assets
Identifiable assets increased approximately $20 million from
year-end 1994. The increase was attributable to higher inventory
($7.2 million), higher accounts receivable ($7.3 million), and
the significant capital expenditures for the quarter. The higher
inventory was attributable to anticipated second quarter demand
as well as the purchase of inventory from an aftermarket customer
for packaging to be performed by the company in the future. The
higher accounts receivable are due to higher revenue activity in
the first quarter compared to the fourth quarter of 1994. As the
normal cycle of business activity subsides later in the year, the
accounts receivable and inventory levels should decrease.
SPX Credit Corporation:
Three months ended
March 31,
1995 1994
(in millions)
Revenues........................... $ 3.1 $ 3.4
Operating income................... 1.4 2.2
March 31, 1995 December 31, 1994
Identifiable assets................ $ 81.8 $ 84.1
SPX Credit Corporation provides leasing alternatives to
customers purchasing higher dollar electronic diagnostic, gas
emissions and wheel service equipment. Revenues, which
represents lease financing income, are down from the first
quarter 1994 principally as the size of the lease portfolio has
decreased. Operating income, which does not include any interest
expense, decreased from the first quarter of 1994 due to higher
costs associated with repossessed leases in 1995 than in 1994.
Factors That May Affect Future Results
Impact of the Clean Air Act and Other Environmental Regulations -
During the first quarter of 1995, many delays by states in
implementing Federally mandated emissions testing programs
occurred. These delays or modifications in the state programs
reduced the company's expected revenues from gas emissions
equipment in the first quarter of 1995. While uncertainties
still exist as to when the states will proceed with these
emissions testing programs, the company believes that the states
will begin implementation within the next few quarters. At that
time, the company should share in a significant portion of this
substantial market.
Equity Offering - During April of 1995, the company announced its
intention to file a Shelf Registration Statement with the U.S.
Securities and Exchange Commission to offer additional equity
when the company believes that market conditions are appropriate.
Should the equity offering occur, it is intended that the
proceeds from the offering would be used to reduce the company's
debt. At this time, no date, number of shares or targeted share
price has been established for such action.
13
Sale of SPX Credit Corporation - In April, the company announced
its intention to sell SPX Credit Corporation. This sale is
anticipated to occur before year-end 1995. Currently, the
company is negotiating with potential buyers and does not know
with certainty the selling price of this business. Preliminary
assessment of market conditions indicate that the sales price
should be at least the company's carrying value of this business.
Proceeds from the sale will be used to reduce the company's debt.
SP Europe - The company's 30% partner in SP Europe is currently
studying its future participation in the business and has
informed the company that its extent of participation will be
decided by the third quarter of 1995. Should the partner choose
to limit its participation, the company could be required to
recognize a portion of losses previously attributed to the
partner. These losses are currently included as "Minority
Interest" in the equity section of the consolidated balance
sheets.
Liquidity and Financial Condition
The company's liquidity needs arise primarily from capital
investment in new equipment, funding working capital requirements
and to meet interest costs.
As a result of the company's acquisition activity in 1993,
the company is highly leveraged. This financial leverage
requires management to focus on cash flows to meet higher
interest costs and to maintain dividends. Management believes
that operations and the borrowing arrangements established in
1994 will be sufficient to supply the 1995 funds needed by the
company.
Cash Flow
Three months ended March 31,
1995 1994
(in millions)
Cash flow from:
Operating activities..... $ 18.3 $ 5.2
Investing activities..... (14.0) (49.3)
Financing activities..... 0.1 (58.8)
Net Cash Flow........... $ 4.4 $ (102.9)
Cash flow from operating activities in the first quarter of
1995, $18.3 million compares favorably with the first quarter of
1994, $5.2 million. The first quarter 1995 cash flow from
operating activities reflects the seasonal increase in working
capital, offset by a $9.7 million tax refund received. The
increases in accounts receivable and inventory tend to be high
during the first quarter due to increased business activity.
Cash flow from investing activities during the first quarter
of 1995 represents the significant capital expenditures, $14
million, to expand production capacity, particularly within the
Original Equipment Components segment. Capital expenditures will
be lower during the remaining quarters of 1995 and should
approximate $30 million for the year. During the first quarter
of 1994, the company paid Riken Corporation $39 million for the
1993 acquisition of 49% of SPT.
Cash flow from financing activities during the first quarter
of 1995 reflects the company's quarterly dividend payment and
modest borrowings. During the first quarter of 1994, cash flow
from financing activities included the payment of approximately
$10 million of fees related to the debt refinancing and, with
available cash, debt was paid down approximately $48 million.
14
Capitalization
March 31, December 31,
1995 1994
(in millions)
Notes payable and current maturities
of long-term debt................... $ 1.4 $ 1.1
Long-term debt....................... 415.2 414.4
Total debt......................... $ 416.6 $ 415.2
Shareholders' equity................. 163.5 158.7
Total capitalization................. $ 580.1 $ 573.9
Total debt to capitalization ratio... 71.8% 72.3%
At March 31, 1995, the following summarizes the debt
outstanding and unused credit availability:
Total Amount Unused Credit
Commitment Outstanding Availability
(in millions)
Revolving credit.......... $ 225.0 $ 130.0 $ 78.6(a)
Swingline loan facility... 5.0 - 5.0
Senior subordinated notes. 256.5 256.5 -
Industrial revenues bonds. 15.1 15.1 -
Other..................... 16.8 15.0 1.8
Total debt.............. $ 518.4 $ 416.6 $ 85.4
(a) Decreased by $16.4 million of facility letters of credit
outstanding at March 31, 1995 which reduce the unused credit
availability.
The company is required to maintain compliance with
restrictive covenants contained in the revolving credit agreement
and the senior subordinated note indenture. Under the most
restrictive of these covenants, the company is required to:
Maintain a leverage ratio, as defined, of 78% or less. The
leverage ratio at March 31, 1995 was 74%.
Maintain an interest expense coverage ratio, as defined, of
2.5:1 or greater. The interest expense coverage ratio at March
31, 1995 was 2.4:1 (see below).
Maintain a fixed charge coverage ratio, as defined, of
1.75:1 or greater. The company's fixed charge coverage ratio at
March 31, 1995 was 1.83:1.
Limit dividends to $8 million for the five quarters starting
with the first quarter of 1994, and 10% of operating income plus
depreciation and amortization (EBITDA) thereafter. Dividends for
the five quarters ending March 31, 1995 were $6.4 million.
At March 31, 1995, the company was not in compliance with
the interest expense coverage ratio covenant of the revolving
credit agreement. The company has obtained a waiver for this
condition and other minor technical defaults from the syndicate
of banks which provide the revolving credit facility.
Additionally, the company obtained an amendment to the revolving
credit agreement to adjust the interest expense coverage ratio
covenant from 2.5:1 to 2.25:1 at June 30, 1995 and September 30,
1995. With the exception of the above, the company was in
compliance with all covenants contained in the revolving credit
agreement and the senior subordinated note indenture at March 31,
1995.
15
The company has also obtained amendments to the revolving
credit agreement which; (a) allow use of the proceeds from an equity
offering to reduce senior subordinated notes in excess of the original
limitation of $25 million, and, (b) allow the company to reduce senior
subordinated notes by an additional $25 million. A further amendment
to the revolving credit agreement to allow use of the proceeds from the
sale of SPX Credit Corporation to reduce the senior subordinated notes
requires approval of 100% of the participating banks is pending.
Resolution of this matter is expected in the second quarter.
Management believes that the unused credit availability on
the revolving credit facility is sufficient to meet operational
cash requirements, working capital requirements and capital
expenditures for 1995. Aggregate future maturities of total debt
are not material for 1995 through 1998. In 1999, the revolving
credit agreement expires and borrowings on the revolver would
become due, however, management believes that the revolving
credit agreement would likely be extended or that alternate
financing will be available to the company.
16
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(2) None.
(4) (i) Waiver and Amendment No. 1 to
Credit Agreement between SPX Corporation and The
First National Bank of Chicago, as agent for the
banks named therein, dated as of June 3, 1994.
(ii) Waiver and Amendment No. 2 to
Credit Agreement between SPX Corporation and The
First National Bank of Chicago, as agent for the
banks named therein, dated as of April 20, 1995.
(10) None.
(11) Statement regarding computation of earnings per share.
See Consolidated Condensed Statements of Income.
(15) None.
(18) None.
(19) None.
(20) None.
(22) None.
(23) None.
(24) None.
(27) Financial data schedule.
(99) None.
(b) Reports on Form 8-K
None.
17
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
SPX CORPORATION
(Registrant)
Date: May 9, 1995 By /s/ Dale A. Johnson
Chairman and Chief Executive Officer
Date: May 9, 1995 By /s/ William L. Trubeck
Senior Vice President, Finance
and Chief Financial and Accounting
Officer
5
3-MOS
DEC-31-1995
MAR-31-1995
14,230
0
149,777
(8,156)
168,146
431,848
423,150
(202,081)
960,214
244,658
256,500
157,801
0
0
5,739
960,214
275,769
278,833
217,213
269,746
(1,985)
11,072
10,657
415
165
250
0
0
0
250
.02
.02
EXHIBIT (4)(i)
WAIVER AND AMENDMENT NO. 1 TO CREDIT AGREEMENT
This Waiver and Amendment No. 1 to Credit Agreement
("Amendment No. 1") is dated as of June 3, 1994 and is made by
and of the undersigned Lenders and The First National Bank of
Chicago, individually and as agent for the Lenders.
R E C I T A L S
A. The parties hereto are party to a certain Credit
Agreement dated as of March 24, 1994 (the "Credit Agreement").
Each capitalized term used but not otherwise defined herein shall
have the meaning ascribed to such term in the Credit Agreement.
B. The parties hereto desire to enter into this
Amendment No. 1 in order to (a) evidence the waiver of any and
all Defaults or Unmatured Defaults which have occurred and are
continuing as a result of the failure of the Company to repay
certain Indebtedness described on Schedule 6.2 to the Credit
Agreement on or prior to the repayment date set forth on such
Schedule with respect to such Indebtedness, and (b) to amend the
Credit Agreement to make certain changes with respect to the
provisions regarding the application of the proceeds of the
Subordinated Notes.
NOW, THEREFORE, in consideration of the mutual
execution hereof and other good and valuable consideration, the
Agent, the Lenders signatory hereto and the Company agree as
follows:
1. Amendments.
1.1 Amendment of Schedule 2.21(b)(iii). From and
after the Effective Date (as defined below), the Credit Agreement
shall be amended by deleting Schedule 2.21(b)(iii) thereto in its
entirety and inserting Schedule 2.21(b)(iii) attached hereto in
substitution therefor.
1.2 Amendment of Schedule 2.21(c)(ii). From and after
the Effective Date (as defined below), the Credit Agreement shall
be amended by deleting Schedule 2.21(c)(ii) thereto in its
entirety and inserting Schedule 2.21(c)(ii) attached hereto in
substitution therefor.
2. Waiver. The Lenders hereby waive all Defaults and
Unmatured Defaults arising under the Credit Agreement, including,
without limitation, subsection 6.2 thereof, as the result of the
failure of the Company, on or prior to April 23, 1994, to repay
that certain Indebtedness in an aggregate principal amount of
$3,845,000 described as "Foreign Debt" on Schedule 6.2 to the
Credit Agreement (the "Foreign Debt"), provided, however, that
(a) the foregoing waiver is subject to the condition subsequent
that such Foreign Debt be repaid on or prior to August 3, 1994
and, in the event such Foreign Debt is not so repaid on or prior
to such date, such failure shall constitute, as of such date, a
Default under the Credit Agreement, and (b) this waiver shall not
be construed as a continuing waiver of compliance with the terms
of subsection 6.2 or any other applicable provisions of the
Credit Agreement and nothing contained herein shall be deemed to
constitute a waiver of any other term or condition contained in
the Credit Agreement.
3. Representations and Warranties. The Company
represents and warrants that: (a) this Amendment No. 1 is a
legal, valid and binding obligation of the Company enforceable
against it in accordance with its terms, except as the
enforcement thereof may be subject to (i) the effect of any
applicable bankruptcy, insolvency, reorganization, moratorium or
similar law affecting creditors' rights generally, and (ii)
general principles of equity (regardless of whether such enforce
ment is sought in a proceeding in equity or at law); and (b)
after giving effect to the execution of Amendment No. 1, no
Default or Unmatured Default has occurred and is continuing.
4. Effective Date. This Amendment No. 1 shall become
effective only upon receipt by the Agent (with sufficient copies
for the Lenders) of this Amendment No. 1 executed by the Agent,
the Required Lenders and the Company. The date upon which the
above condition has been satisfied is the "Effective Date." Upon
the occurrence of the Effective Date, this Amendment No. 1 shall
be deemed to have become effective as of the date first written
above.
5. Effect of Amendment. Upon execution of this
Amendment No. 1 and the occurrence of the Effective Date, each
reference in the Credit Agreement to "this Agreement,"
"hereunder," "hereof," "herein," or words of like import, and
each reference to the Credit Agreement in any of the other Loan
Documents shall mean and be a reference to the Credit Agreement
as amended hereby. Except as specifically set forth above, the
Credit Agreement, the Exhibits and Schedules thereto and the
Notes shall remain unaltered and in full force and effect and the
respective terms, conditions or covenants thereof are hereby in
all respects ratified and confirmed.
6. Counterparts. This Amendment No. 1 may be
executed in any number of counterparts and by different parties
hereto in separate counterparts, each of which when so executed
and delivered shall be deemed to be an original and all of which
taken together shall constitute one instrument.
7. Governing Law. This Amendment No. 1 shall be
governed by and construed in accordance with the internal laws
(and not the law of conflicts) of the State of Illinois, but
giving effect to federal laws applicable to national banks.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment No. 1 to be executed by their duly authorized
representatives as of the date first written above.
SPX CORPORATION
By: /s/ Robert C.Huff
Title: Treasurer
THE FIRST NATIONAL BANK OF CHICAGO,
Individually and as Agent
By: /s/ Patricia H. Besser
Title: Vice President
THE BANK OF NEW YORK,
as Lender
By: /s/ C. L. Flaton
Title: Assistant Vice President
NBD BANK, N.A.,
as Lender
By: /s/ Susanna P. Nichols
Title: Assistant Vice President
THE BANK OF NOVA SCOTIA,
as Lender
By:
Title:
MICHIGAN NATIONAL BANK,
as Lender
By:
Title:
THE SUMITOMO BANK, LIMITED,
as Lender
By:
Title:
SPX CORPORATION SCHEDULE 2.21(b)(iii)
CREDIT AGREEMENT
INDEBTEDNESS OF SPT TO BE REPAID
FROM SUBORDINATED NOTE PROCEEDS
Amount
Outstanding at
December 31,
1993
14.50% senior subordinated $100,000
debentures due May 15, 1999
Term bank loan 78,863
Revolving credit loan 30,000
Total SPT debt $208,863
SCHEDULE 2.21(c)(ii)
I. A new Section 5.25 is added as follows:
5.25. Subordinated Notes. the Borrower has all
requisite power and authority (corporate and otherwise)
and legal right to issue the Subordinated Notes and to
incur the Indebtedness evidenced by the Subordinated Debt
Documents. The subordination provisions of the
Subordinated Notes will be enforceable against the holders
of the Subordinated Notes by the holder of any Notes which
has not effectively waived the benefits thereof. All
Obligations, including the Obligations to pay principal of
and interest on the Notes, constitute senior Indebtedness
entitled to the benefits of the subordination created by
the Subordinated Debt Documents. The Borrower
acknowledges that the Agent and each Lender are extending
the Facility Termination Date pursuant to Section 2.21(b)
and are continuing to extend the Aggregate Revolving
Credit Commitment in reliance upon the subordination
provisions contained in the Subordinated Debt Documents
and this Section 5.25.
II. A new Section 6.32 is added as follows:
6.32. Subordinated Debt Documents. The Borrower will
not make any amendment or modification of any Subordinated
Debt Documents, nor shall the Borrower directly or
indirectly voluntarily prepay, defease or in substance
defease, purchase, redeem, retire or otherwise acquire any
of the Indebtedness evidenced by the Subordinated Notes.
III. A new Section 6.33 is added as follows:
6.33 Repayment of SPT Mortgage. The Borrower shall,
on or prior to September 1, 1994, repay in full, or cause
SPT to repay in full, that certain mortgage Indebtedness
of SPT in an aggregate principal amount of $1,343,000 as
of December 31, 1993.
IV. Section 7.3 is deleted in its entirety and the following
is added in substitution therefor:
7.3 The breach by the Borrower of any of the terms
or provisions of Section 6.2, Sections 6.10 through 6.24
or Sections 6.26 through 6.33.
EXHIBIT (4)(ii)
WAIVER AND AMENDMENT NO. 2 TO CREDIT AGREEMENT
This Waiver and Amendment No. 2 to Credit Agreement ("Amendment No. 2")
dated as of April 20, 1995 is made by and among SPX Corporation, a Delaware
corporation (the "Borrower"), each of the Lenders and The First National Bank of
Chicago, individually and as agent for the Lenders.
R E C I T A L S
A. The parties hereto are party to a certain Credit Agreement dated as of
March 24, 1994 (as heretofore amended, the "Credit Agreement"). Each capitalized
term used but not otherwise defined herein shall have the meaning ascribed to
such term in the Credit Agreement.
B. The parties hereto desire to enter into this Amendment No. 2 in order
to (a) amend Section 6.13 of the Credit Agreement to permit the Borrower to
divest its subsidiary corporation, SPX Credit Corporation; (b) amend Section
6.24 of the Credit Agreement to increase the maximum all-in fixed rate required
for interest rate protection; (c) amend Section 2.7 and Section 6.32 of the
Credit Agreement to make certain changes with respect to permitted repurchases
of Subordinated Notes; (d) amend Section 6.29.2 of the Credit Agreement as more
fully described hereinafter and (e) waive currently existing Defaults under the
Credit Agreement more fully described hereinafter.
NOW, THEREFORE, in consideration of the mutual execution hereof and other
good and valuable consideration, the Agent, the Lenders and the Borrower agree
as follows:
1. Amendments.
1.1 Amendment of Section 2.7. Section 2.7 of the Credit Agreement
shall be amended by:
(i) Inserting the word "and" after the semicolon at the end of clause
(c)(i) .
(ii) Deleting clause (c)(ii) in its entirety and inserting the following in
lieu thereof:
"(ii) in an amount equal to 100% of the aggregate Net Available
Proceeds in excess of $1,000,000 realized upon all Asset Dispositions
in any fiscal year of the Borrower (other than any sale or disposition
of SPX Credit), such reduction to be effective concurrently with the
receipt thereof by the Borrower or any Subsidiary."
(iii)Deleting clause (c)(iii) in its entirety.
1.2 Amendment of Section 6.13. Section 6.13 of the Credit Agreement shall
be amended by inserting the following additional sentence at the end of Section
6.13:
"The sale or other disposition of all or substantially all of the stock or
assets of SPX Credit shall not be deemed to be a sale or disposition subject to
or prohibited by the terms of this Section 6.13 provided that the Borrower shall
receive cash consideration in connection with disposition of not less than the
greater of (i) $65,000,000 or (ii) 90% of the book value of Credit as of the
time of such sale or disposition."
1.3 Amendment of Section 6.24.Section 6.24 of the Credit Agreement shall
be amended by deleting the percentage "eight percent (8.0%)" where it appears
therein and inserting the percentage "ten percent (10.0%)" in lieu therefor.
1.4 Amendment of Section 6.29.2. Section 6.29.2(b) of the Credit
Agreement is deleted in its entirety and the following is added in substitution
therefor:
"(b) During the Alternate Permanent Facility Term, maintain an Interest
Expense Coverage Ratio of not less than the following for the following
respective periods:
Period Ratio
As of the end of each the second and
third fiscal quarters in fiscal year 1995,
for the trailing four fiscal quarter period
then ended 2.25 to 1.0
As of the end of the fourth
fiscal quarter in fiscal year 1995,
for the trailing four fiscal quarter period
then ended 2.5 to 1.0
As of the end of each fiscal quarter in
fiscal years 1996 and 1997, for the
trailing four fiscal quarter period
then ended 3.0 to 1.0
As of the end of each fiscal quarter in
fiscal year 1998 and each fiscal year
thereafter, for the trailing four fiscal quarter
period then ended 3.5 to 1.0"
1.5 Amendment of Section 6.32. Section 6.32 of the Credit Agreement
is deleted in its entirety and the following is added in substitution therefor:
" 6.32. Subordinated Debt Documents. The Borrower will not make any
amendment or modification of any Subordinated Debt Documents, nor shall the
Borrower directly or indirectly voluntarily prepay, defease, or in substance
defease, purchase, redeem, retire, or otherwise acquire any of the Indebtedness
evidenced by the Subordinated Notes provided that the Borrower may purchase,
redeem, retire or otherwise acquire any of the indebtedness evidenced by the
Subordinated Notes in an aggregate amount not exceeding the sum of
(a) $25,000,000, (b) the Net Available Proceeds from the sale or disposition
of SPX Credit, and (c) the aggregate Net Available Proceeds received by the
Borrower in connection with the issuance of its common stock on and after
April 20, 1995."
2. Waivers.
2.1 By its signature below each of the undersigned Lenders hereby
specifically waives any objection that it may have and any Default or Unmatured
Default caused by the violation of Section 6.24 of the Credit Agreement with
respect to the maximum permitted all-in fixed rate required for interest rate
protection provided the rate does not exceed ten percent (10%) per annum. This
specific waiver applies only to the above-specified violation.
2.2 By its signature below each of the undersigned Lenders hereby
specifically waives any objection that it may have and any Default or Unmatured
Default caused by the violation of Section 6.29.2 (b) of the Credit Agreement
for the fiscal quarter beginning March 31, 1995 provided the Borrower shall have
maintained an Interest Expense Coverage Ratio of not less than 2.4 to 1.0 for
the trailing four fiscal quarter period then ended. This specific waiver
applies only to the above-specified violation.
2.3 By its signature below each of the undersigned Lenders hereby
specifically waives any objection that it may have and any Default or Unmatured
Default caused by the violation of Section 6.32 of the Credit Agreement caused
by the Borrower's repurchase of Subordinated Notes prior to the date hereof
provided that all such purchases shall be in compliance with Section 6.32 as
herein above amended. This specific waiver applies only to the above-specified
violation.
3. Representations and Warranties. The Borrower represents and
warrants that: (a) this Amendment No. 2 is a legal, valid and binding
obligation of the Borrower enforceable against it in accordance with its terms,
except as the enforcement thereof may be subject to (i) the effect of any
applicable bankruptcy, insolvency, reorganization, moratorium or similar law
affecting creditors' rights generally, and (ii) general principals of equity
(regardless of whether such enforcement is sought in a proceeding in equity or
at law); and (b) after giving effect to the execution of this Amendment No. 2,
no Default or Unmatured Default has occurred and is continuing.
4. Effective Date. This Amendment No. 2 shall become effective only
upon receipt by the Agent (with sufficient copies for the Lenders) of this
Amendment No. 2 executed by the Agent, the Lenders and the Borrower. The date
upon which the above condition has been satisfied is the "Effective Date." Upon
the occurrence of the Effective Date, this Amendment No. 2 shall be deemed
to have become effective as of the date first written above.
5. Effect of Amendment. Upon execution of this Amendment No. 2 and
the occurrence of the Effective Date, each reference in the Credit Agreement to
"this Agreement," "hereunder," "hereof," "herein," or words like import, and
each reference to the Credit Agreement in any of the other Loan Documents shall
mean and be a reference to the Credit Agreement as amended hereby. Except as
specifically set forth above, the Credit Agreement, the Exhibits and Schedules
thereto and the Notes shall remain unaltered and in full force and effect and
the respective terms, conditions or covenants thereof are hereby in all respects
ratified and confirmed.
6. Counterparts. This Amendment No. 2 may be executed in any number
of counterparts and by different parties hereto in separate counterparts, each
of which when so executed and delivered shall be deemed to be an original and
all of which taken together shall constitute one instrument.
7. Governing Law. This Amendment No. 2 shall be governed by and
construed in accordance with the internal laws (and not the law of conflicts) of
the State of Illinois, but giving effect to federal laws applicable to national
banks.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment
No. 2 to be executed by their duly authorized representatives as of the date
first written above.
SPX CORPORATION
By: /s/ Robert C. Huff
Title: Treasurer
THE FIRST NATIONAL BANK OF
CHICAGO, individually as a Lender and
as Agent
By: /s/ Patricia H. Besser
Title: Vice President/Sr. Banker
THE BANK OF NEW YORK, as Lender
By: /s/ John M. Lokay
Title: Vice President
NBD BANK, N.A., as Lender
By: /s/ William C. Goodhoe
Title: Vice President
THE BANK OF NOVA SCOTIA,
as Lender
By: /s/ F.C.H. Ashby
Title: Senior Manager Loan Operations
MICHIGAN NATIONAL BANK,
as Lender
By: /s/ Joseph M. Redoutey
Title: Second Vice President
SUMITOMO BANK, as Lender
By: /s/ Katsuyasu Iwasawa
Title: Joint General Manager
THE YASUDA TRUST & BANKING
CO., LTD., as Lender
By: /s/ Joseph C. Meek
Title: Vice President & Manager
MITSUBISHI TRUST & BANKING
CORPORATION, as Lender
By: /s/ Masaaki Yamagishi
Title: Chief Manager
COMERICA BANK, as Lender
By: /s/ Robert M. Porterfield
Title: Vice President
OLD KENT BANK & TRUST
COMPANY, as Lender
By: /s/ Richard K. Russo
Title: Vice President
BANK OF AMERICA ILLINOIS, as
Lender
By:
Title:
