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, 1996
( ) 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 April 19, 1996 -- 14,450,668
2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
SPX CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands)
(Unaudited)
March 31 December 31
1996 1995
ASSETS
Current assets:
Cash and temporary investments $ 27,079 $ 17,069
Receivables 152,559 130,171
Inventories 148,439 150,851
Deferred income tax asset and refunds 47,246 47,246
Prepaid and other current assets 21,686 18,191
Total current assets $ 397,009 $ 363,528
Investments 18,558 18,885
Property, plant and equipment, at cost 428,824 425,636
Accumulated depreciation (219,819) (212,672)
Net property, plant and equipment $ 209,005 $ 212,964
Costs in excess of net assets of
businesses acquired 190,710 192,334
Other assets 39,337 43,647
Total assets $ 854,619 $ 831,358
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable and current maturities
of long-term debt $ 640 $ 893
Accounts payable 88,492 71,379
Accrued liabilities 145,195 135,387
Income taxes payable 4,678 3,352
Total current liabilities $ 239,005 $ 211,011
Long-term liabilities 113,655 113,737
Deferred income taxes 25,717 25,489
Long-term debt 311,141 318,894
Shareholders' equity:
Common stock $ 160,310 $ 159,474
Paid in capital 57,029 57,668
Retained earnings 20,411 18,997
$ 237,750 $ 236,139
Common stock held in treasury (50,000) (50,000)
Unearned compensation (24,724) (26,888)
Cumulative translation adjustments 2,075 2,976
Total shareholders' equity $ 165,101 $ 162,227
Total liabilities and shareholders' $ 854,619 $ 831,358
equity
3
SPX CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(in thousands, except per share amounts)
(Unaudited)
Three months ended
March 31
1996 1995
Revenues $ 292,308 $ 275,769
Costs and expenses
Cost of products sold 228,733 217,213
Selling, general and administrative 47,942 50,857
Goodwill/Intangible amortization 1,877 2,238
Minority interest (income) - (766)
Earnings from equity interests (893) (1,234)
Restructuring charge 1,124 -
Operating income $ 13,525 $ 7,461
Other expense (income), net 105 (2,103)
Interest expense, net 8,814 9,230
Income before income taxes $ 4,606 $ 334
Provision for income taxes 1,842 133
Income from continuing operations $ 2,764 $ 201
Discontinued Operation:
Income from discontinued
operation, net of tax - 121
Income before extraordinary loss $ 2,764 $ 322
Extraordinary loss, net of tax - (72)
Net income $ 2,764 $ 250
Income (loss) per share:
Continuing operations $ 0.20 $ 0.01
Discontinued operation - 0.01
Extraordinary loss, net of taxes - -
Net income $ 0.20 $ 0.02
Dividends per share $ 0.10 $ 0.10
Weighted average number of
common shares outstanding 13,530 13,039
4
SPX CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
Three Months Ended
March 31
1996 1995
Cash flows from operating activities:
Net income (loss) from operating activities $ 2,764 $ 250
Adjustments to reconcile net income (loss) to
net cash from operating activities -
Extraordinary loss - 72
Depreciation and amortization 10,845 11,096
(Earnings) loss from equity interests (893) (1,234)
Income applicable to minority interest - (766)
Decrease in net deferred income tax assets,
refunds and liabilities 228 10,028
Increase in receivables (22,388) (12,999)
(Increase) decrease in inventories 2,412 (16,325)
(Increase) decrease in prepaid and other
current assets (3,495) (721)
Decrease in net assets of discontinued operation - 1,225
Increase in accounts payable 17,113 15,285
Increase (decrease) in accrued liabilities 8,684 6,027
Increase in income taxes payable 1,326 1,365
(Increase) decrease in other assets 3,753 (385)
Restructuring charge 1,124 -
Increase (decrease) in long-term liabilities (82) (510)
Compensation recognized under employee stock plan 1,136 797
Other, net 214 4,266
Net cash provided by (used by) operating
activities $ 22,741 $ 17,471
Cash flows used by investing activities:
Capital expenditures $ (4,500) $ (13,974)
Net cash used by investing activities $ (4,500) $ (13,974)
Cash flows provided by financing activities:
Net borrowings (payments) under debt agreements $ (8,006) $ 1,401
Payment of fees related to debt restructuring - (118)
Net shares sold under stock option plan 1,125 901
Dividends paid (1,350) (1,310)
Net cash provided by (used by) financing
activities $ (8,231) $ 874
Net increase (decrease) in cash and temporary
investments $ 10,010 $ 4,371
Cash and temporary investments, beg. of period 17,069 9,859
Cash and temporary investments, end of period $ 27,079 $ 14,230
5
SPX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
MARCH 31, 1996 (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.
The preparation of the company's consolidated condensed
financial statements in conformity with generally accepted
accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and
liabilities at the date of the consolidated condensed
financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results
could differ from those estimates.
2. Information regarding the company's segments was as follows:
Three months ended
March 31
1996 1995
(in millions)
Revenues:
Specialty Service Tools $ 156.6 $ 135.8
Original Equipment Components 135.7 140.0
Total $ 292.3 $ 275.8
Operating income (loss):
Specialty Service Tools $ 7.0 $ 3.1
Original Equipment Components 11.5 9.0
General Corporate (5.0) (4.6)
Total $ 13.5 $ 7.5
Capital Expenditures:
Specialty Service Tools $ 0.5 $ 3.0
Original Equipment Components 3.8 10.8
General Corporate 0.2 0.2
Total $ 4.5 $ 14.0
Depreciation and Amortization:
Specialty Service Tools $ 3.5 $ 3.8
Original Equipment Components 6.9 6.7
General Corporate 0.4 0.6
Total $ 10.8 $ 11.1
March 31 December 31
1996 1995
Identifiable Assets:
Specialty Service Tools $ 397.6 $ 390.3
Original Equipment Components 367.5 361.8
General Corporate 89.5 79.3
Total $ 854.6 $ 831.4
6
SPX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
MARCH 31, 1996 (Unaudited)
3. Restructuring
During the fourth quarter of 1995, the company initiated two
significant restructurings. The first combines five Specialty
Service Tool divisions into two divisions and the second closes a
foundry at SP Europe.
Specialty Service Tool Restructuring
As of March 31, 1996, the restructuring was progressing as
planned. The closing of the manufacturing facilities should
occur in the second quarter for one plant and by yearend for the
other. The closing of the distribution facility is currently
scheduled by yearend. Approximately 60 positions of the net 310
employee positions identified for elimination have been completed
as of March 31, 1996. At March 31, 1996, approximately $5.3
million of accruals recorded in the fourth quarter of 1995 are
available.
As previously disclosed, the company estimates that
approximately $11 million of incremental costs associated with
this restructuring will be incurred in 1996. These incremental
costs did not qualify for accrual in 1995. During the first
quarter of 1996, approximately $2.4 million of these incremental
costs were expensed. Of this amount, $1.1 million was recorded
to reflect the incremental cost of an early retirement program
that was accepted by approximately 60 people that were identified
for termination in the fourth quarter of 1995. The balance of
this amount, $1.3 million, includes inventory and equipment
relocation costs, underabsorbed manufacturing costs, costs to
revise information systems, costs to retain employees and other
miscellaneous costs.
SP Europe Restructuring - German Plant
The closing of the German foundry is progressing on schedule
and the foundry is planned to be closed by mid-1996. As of March
31, 1996, approximately 40 of the 200 employee positions planned
to be eliminated have been completed. Approximately $3.4 million
of accruals recorded during the fourth quarter of 1995 remain at
March 31, 1996.
Anticipated Additional Restructurings
During the second quarter of 1996, the company expects to
record additional restructuring charges related to the Specialty
Service Tool international operations and an early retirement
program at the piston ring and cylinder liner operation. The
total cost of these actions is currently estimated at $10
million, most of which will be expensed during the second quarter
of 1996. However, the estimates are preliminary and could change
subject to finalization of the restructuring plans.
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.
Update on Restructuring
During the fourth quarter of 1995, the company initiated two
significant restructurings. The first combines five Specialty
Service Tool divisions into two divisions and the second closes a
foundry at SP Europe.
Specialty Service Tool Restructuring
As of March 31, 1996, the restructuring was progressing as
planned. The closing of the manufacturing facilities should
occur in the second quarter for one plant and by yearend for the
other. The closing of the distribution facility is currently
scheduled by yearend. Approximately 60 positions of the net 310
employee positions identified for elimination have been completed
as of March 31, 1996. At March 31, 1996, approximately $5.3
million of accruals recorded in the fourth quarter of 1995 are
available.
As previously disclosed, the company estimates that
approximately $11 million of incremental costs associated with
this restructuring will be incurred in 1996. These incremental
costs did not qualify for accrual in 1995. During the first
quarter of 1996, approximately $2.4 million of these incremental
costs were expensed. Of this amount, $1.1 million was recorded
to reflect the incremental cost of an early retirement program
that was accepted by approximately 60 people that were identified
for termination in the fourth quarter of 1995. The balance of
this amount, $1.3 million, includes inventory and equipment
relocation costs, underabsorbed manufacturing costs, costs to
revise information systems, costs to retain employees and other
miscellaneous costs.
SP Europe Restructuring - German Plant
The closing of the German foundry is progressing on schedule
and the foundry is planned to be closed by mid-1996. As of March
31, 1996, approximately 40 of the 200 employee positions planned
to be eliminated have been completed. Approximately $3.4 million
of accruals recorded during the fourth quarter of 1995 remain at
March 31, 1996.
Anticipated Additional Restructurings
During the second quarter of 1996, the company expects to
record additional restructuring charges related to the Specialty
Service Tool international operations and an early retirement
program at the piston ring and cylinder liner operation. The
total cost of these actions is currently estimated at $10
million, most of which will be expensed during the second quarter
of 1996. However, the estimates are preliminary and could change
subject to finalization of the restructuring plans.
8
Results of Operations - First Quarter 1995 vs. First Quarter 1994
Consolidated:
Three months ended
March 31,
1996 1995
(in millions)
Revenues:
Specialty Service Tools............$ 156.6 $ 135.8
Original Equipment Components...... 135.7 140.0
Total............................$ 292.3 $ 275.8
Operating income (loss):
Specialty Service Tools............$ 7.0 $ 3.1
Original Equipment Components...... 11.5 9.0
General corporate expense.......... (5.0) (4.6)
Total............................$ 13.5 $ 7.5
Other expense (income), net..........$ .1 $ (2.1)
Interest expense, net................ 8.8 9.3
Income before income taxes...........$ 4.6 $ 0.3
Provision for income taxes........... 1.8 .1
Income from continuing operations....$ 2.8 $ .2
Income from discontinued operation... - .1
Income before extraordinary loss.....$ 2.8 $ .3
Extraordinary loss, net of taxes..... - (.1)
Net income...........................$ 2.8 $ .2
Capital expenditures.................$ 4.5 $ 14.0
Depreciation and amortization........ 10.8 11.1
Identifiable assets.................. 854.6 831.4
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. The
first quarter of 1996 expense was greater than the first quarter
of 1995 principally due to higher incentive compensation expense.
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.
Interest Expense, net
During the first quarter of 1995, a portion of interest
expense was allocated to the discontinued operation, SPX Credit
Corporation. First quarter 1996 interest expense was less than
the first quarter 1995 interest expense due to lower debt levels.
Provision for Income Taxes
The first quarter 1995 effective income tax rate was
approximately 40%, which reflects the company's current estimated
rate for the year.
9
Income from Discontinued Operation
The first quarter of 1995 reflects the results of SPX Credit
Corporation, net of allocated interest and income taxes, as a
discontinued operation. SPX Credit Corporation was sold at the
end of the third quarter of 1995.
Extraordinary Loss, net of taxes
During the first quarter of 1995, the company purchased $3.5
million of its 11_ senior subordinated notes. These were
repurchased in the market at a market premium of $72,000, net of
income taxes.
Specialty Service Tools:
Three months ended
March 31,
1996 1995
(in millions)
Revenues.............................$ 156.6 $ 135.8
Gross Profit......................... 44.6 42.8
% of revenues...................... 8.5% 31.6%
Selling, general & administrative.... 35.3 38.5
% of revenues...................... 22.5% 28.4%
Goodwill/intangible amortization..... 1.1 1.3
(Earnings) from equity interests..... 0.1 (0.1)
Restructuring charge................. 1.1 -
Operating income.....................$ 7.0 $ 3.1
Capital expenditures.................$ 0.5 $ 3.0
Depreciation and amortization........ 3.5 3.8
March 31, December 31,
1996 1995
(in millions)
Identifiable assets..................$ 397.6 $ 390.3
Revenues
First quarter 1996 revenues increased $20.8 million, or
15.3%, over the first quarter of 1995. The most significant
explanation for the increased revenues was an increase of
approximately $20 million in dealer equipment sales. These sales
were principally to one customer and represent a large domestic
equipment program during the quarter. The balance of specialty
service tool sales were comparable to the first quarter of 1995.
Gross Profit
First quarter 1996 gross profit as a percentage of revenues
("gross margin") of 28.5% was lower than the 31.6% gross margin
in 1995. The decrease in the gross margin was a direct result of
the significant increase in dealer equipment sales in 1996.
Dealer equipment sales have a relatively low (less than 15%)
gross margin. Also affecting the first quarter of 1996 gross
margin was approximately $.3 million of incremental costs
incurred as part of the restructuring of five divisions into two
divisions. These incremental costs included inventory and
equipment relocation costs and underabsorbed manufacturing costs
in a plant being closed.
Selling, General and Administrative ("SG&A")
First quarter 1996 SG&A expense was $35.3 million, or 22.5%
of revenues, compared to $38.5 million, or 28.4% of revenues, in
1995. The reduction in first quarter SG&A reflects a $1.7
million decrease in research and development costs which were
high in 1995 due to the development of gas emissions testing and
hand-held diagnostic products and reflects a $1.1 million
decrease for severance costs associated with approximately 140
10
people in 1995. However, the first quarter of 1996 SG&A included
approximately $1.0 million of costs associated the ongoing
restructuring. These costs include costs to revise information
systems, costs to retain employees during the restructuring
period and other miscellaneous costs.
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. The first quarter of 1996 reflects
costs associated with an inventory reduction and rationalization
plan being implemented at JATEK.
Restructuring Charge
As part of the restructuring that began in the fourth
quarter of 1995, approximately 60 employees elected to
participate in an early retirement program. In the first quarter
of 1996, the company recorded a $1.1 million restructuring charge
to reflect the incremental cost of the early retirement program
based upon these employees acceptances in the first quarter.
Operating Income
1996 first quarter operating income of $7.0 million compares
to first quarter 1995 operating income of $3.1 million. The
increase was primarily attributable to higher revenues and cost
reductions in 1996. First quarter 1996 was impacted by $2.4
million of incremental costs due to the restructuring and the
first quarter 1995 was impacted by the higher R&D level and the
severance charge for 140 people.
Capital Expenditures
First quarter 1996 capital expenditures were $.5 million
compared to first quarter of 1995 capital expenditures of $3.0
million. The company continues to invest in manufacturing
capability and systems to better support customers. Full year
1996 capital expenditures are expected to approximate $10 million
which will include approximately $2 million of incremental
spending to support the restructuring.
Identifiable Assets
First quarter 1996 identifiable assets increased
approximately $7 million from year-end 1995. The increase was
predominately accounts receivable and inventories. The increase
in accounts receivable was a result of higher revenues in
February and March of 1996 compared to November and December of
1995. Days sales outstanding in accounts receivable are
approximately 65 to 70 days for the segment. The increase in
inventories was a result of the normal seasonal buildup of
inventory to support higher second quarter business activity.
11
Original Equipment Components:
Three months ended
March 31,
1996 1995
(in millions)
Revenues...........................$ 135.7 $ 140.0
Gross Profit....................... 19.0 15.7
% of revenues.................... 14.0% 11.2%
Selling, general & administrative.. 7.7 7.7
% of revenues.................... 5.7% 5.5%
Goodwill/intangible amortization... 0.8 0.9
Minority interest (income)......... - (0.8)
(Earnings) from equity interests... (1.0) (1.1)
Operating income...................$ 11.5 $ 9.0
Capital expenditures...............$ 3.8 $ 10.8
Depreciation and amortization...... 6.9 6.7
March 31, December 31,
1996 1995
(in millions)
Identifiable assets..................$ 367.5 $ 361.8
Revenues
First quarter 1996 revenues were down $4.3 million, or 3.1%,
over first quarter 1995 revenues. A significant portion of the
decrease was attributable to lower March shipments to General
Motors resulting from a strike experienced by that customer. The
decrease in revenues was mitigated somewhat by strong demand for
cylinder liners. Also, first quarter 1995 revenues were affected
by continuing weak valve train sales and the effect of higher die-
casting metal prices that increased sales.
The General Motors strike was resolved at the end of March
and the company expects shipments to General Motors to return to
pre-strike levels.
Gross Profit
First quarter 1996 gross margin of 14.0% compares favorably
to the first quarter 1995 gross margin of 11.2%. Several factors
that contributed to relatively low gross margin in 1995 are (1)
the previously mentioned die-casting metal pricing pass through
to customers reduced gross margins as the increase in revenues
equals the increase in costs, (2) during the first quarter of
1995, the company purchased approximately $6 million of inventory
from an aftermarket customer, began to package this inventory for
the customer and recorded a $1.2 million charge state this
inventory at the company's standard inventory cost, (3) SP Europe
recorded approximately $.8 million in severance charges and
incurred additional costs associated with the ongoing process to
achieve profitability, and (4) a die-casting facility incurred
incremental costs associated with product change over.
Selling, General and Administrative ("SG&A")
SG&A was $7.7 million, or 5.7% of revenues, in the first
quarter of 1996 compared to $7.7 million, or 5.5% of revenues, in
1995. 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.
12
Minority interest (income)
The first quarter of 1995 reflects the 30% partner's
minority interest in the results of SP Europe. During the fourth
quarter of 1995, the 30% partner limited its participation by not
fully funding its share of SP Europe. Starting in the fourth
quarter of 1995, the company recorded 100% of SP Europe's income
or loss due to this limited participation.
(Earnings) from equity interests
Earnings from equity interests include the company's share
of earnings or losses in Promec, IBS Filtran and Allied Ring
Corporation ("ARC").
Operating Income
First quarter 1996 operating income was $11.5 million
compared to $9.0 million in the first quarter of 1995. The $2.5
million increase reflects that the first quarter of 1995 included
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.
Capital Expenditures
Capital expenditures in the first quarter of 1996 were $3.8
million and $10.8 million in the first quarter of 1995.
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 cylinder liners. Capital expenditures for 1996
are expected to approximate $20 million and will be focused upon
cost reductions and maintenance of the operations.
Identifiable Assets
Identifiable assets increased approximately $6 million from
year-end 1995. The increase was attributable to higher accounts
receivable ($13.6 million). The higher accounts receivable are
due to higher revenue activity in the first quarter compared to
the fourth quarter of 1995. As the normal cycle of business
activity subsides later in the year, the accounts receivable
should decrease. Offsetting the effect of the accounts
receivable, inventories decreased by $5.2 million.
Factors That May Affect Future Results
Impact of the Clean Air Act and Other Environmental Regulations -
During 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 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.
Strategic Review of Operations - The company is currently
performing a strategic review of each of its operations. This
review may result in the divestiture of one or more of these
operations. Additionally, the review may identify strategic
acquisitions. At this time, no divestitures or acquisitions have
been made.
13
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.
The company is highly levered with indebtedness. This
financial leverage requires management to focus on cash flows to
meet interest costs and to maintain dividends. Management
believes that operations and the credit arrangements will be
sufficient to supply funds needed by the company in 1996.
Cash Flow
Three months ended March 31,
1996 1995
(in millions)
Cash flow from:
Operating activities...... $ 22.7 $ 17.5
Investing activities...... (4.5) (14.0)
Financing activities...... (8.2) 0.9
Net Cash Flow............ $ 10.0 $ 4.4
Cash flow from operating activities in the first quarter of
1996, $22.7 million, compares favorably with the first quarter of
1995, $17.5 million. The first quarter 1996 cash flow from
operating activities reflects the seasonal increase in working
capital. 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 1996 and 1995 represent capital expenditures of $4.5 million
and $14.0 million, respectively. Capital expenditures for 1996
should approximate $30 million for the year.
Cash flow from financing activities during the first quarter
of 1996 reflects the company's quarterly dividend payment and an
$8.0 million reduction in borrowings. During the first quarter
of 1995, cash flow from financing activities included the
company's quarterly dividend payments and modest borrowings.
Capitalization
March 31, December 31,
1996 1995
(in millions)
Notes payable and current maturities
of long-term debt.................... $ 0.6 $ 0.9
Long-term debt......................... 311.2 318.9
Total debt........................... $ 311.8 $ 319.8
Shareholders' equity................... 165.1 162.2
Total capitalization................... $ 476.9 $ 482.0
Total debt to capitalization ratio..... 65.4% 66.3%
At March 31, 1996, the following summarizes the debt
outstanding and unused credit availability:
Total Amount Unused Credit
Commitment Outstanding Availability
(in millions)
Revolving credit............ $ 175.0 $ 55.0 $ 104.8(a)
Swingline loan facility..... 5.0 - 5.0
Senior subordinated notes... 228.3 228.3 -
Industrial revenues bonds... 15.1 15.1 -
Other....................... 16.5 13.4 3.1
Total debt................ $ 439.9 $ 311.8 $ 112.9
(a) Decreased by $15.2 million of facility letters of credit
outstanding at March 31, 1996 which reduce the unused credit
availability.
14
The company is required to maintain compliance with
restrictive covenants contained in the revolving credit
agreement, as amended, 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 75% or less. The
leverage ratio at March 31, 1996 was 68%.
Maintain an interest expense coverage ratio, as defined, of
1.75:1 or greater. The interest expense coverage ratio at
March 31, 1996 was 2.29:1.
Maintain a fixed charge coverage ratio, as defined, of
1.50:1 or greater. The company's fixed charge coverage ratio
at March 31, 1996 was 1.83:1.
Limit dividends paid during the preceding twelve months to
10% of operating income plus depreciation and amortization
(EBITDA) for the twelve month period. Dividends paid for the
twelve month period ended March 31, 1996 were $5.3 million
and 10% of EBITDA for the period was $8.1 million.
Covenants also limit capital expenditures, investments and
transactions with affiliates. Late in the first quarter of 1996,
the company obtained an amendment to the revolving credit
agreement to allow the company to purchase up to $50 million of
its senior subordinated notes. Additionally, this amendment
included the reduction of the revolving credit facility's
commitment from $225 million to $175 million.
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 1996. Aggregate future maturities of total debt
are not material for 1996 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.
The foregoing discussion in "Management's Discussion and
Analysis of Financial Condition and Results of Operations"
contains forward-looking statements which reflect management's
current views with respect to future events and financial
performance. These forward-looking statements are subject to
certain risks and uncertainties, including but not limited to
those matters discussed under the caption "Factors That may
Affect Future Results" above. Due to such uncertainties and
risks, readers are cautioned not to place undue reliance on such
forward-looking statements, which speak only as of the date
hereof.
15
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(2) None.
(4) Waiver and Amendment No. 5 to
Credit Agreement between SPX Corporation and The
First National Bank of Chicago, as agent for the
banks named therein, dated as of March 24, 1996.
(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.
16
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 1, 1996 By /s/ John B. Blystone
Chairman, President and
Chief Executive Officer
Date: May 1, 1996 By /s/ William L. Trubeck
Senior Vice President,
Finance, and Chief
Financial and Accounting
Officer
AMENDMENT NO. 5 TO CREDIT AGREEMENT
This Amendment No. 5 to Credit Agreement ("Amendment No. 4")
dated as of March 4, 1996 is made by and among SPX Corporation,
a Delaware corporation (the "Borrower"), each 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 (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. 5 in order to amend Section 6.32 of the Credit
Agreement in certain respects and to permanently reduce the
Aggregate Revolving Credit Commitment as hereinafter provided.
NOW, THEREFORE, in consideration of the mutual
execution hereof and other good and valuable consideration, the
Agent, the Required Lenders and the Borrower agree as follows:
1. 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, on or after March 5, 1996,
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 in an
aggregate amount exceeding $50,000,000."
2. Permanent Reduction of the Aggregate Revolving
Credit Commitment. The Borrower and the Lenders hereby agree
that the Aggregate Revolving Credit Commitment is hereby
permanently reduced, ratably among the Lenders, from $225,000,000
to $175,000,000 effective on the date that this Amendment No. 5
becomes effective pursuant to paragraph 4 hereof.
3. Representations and Warranties. The Borrower
represents and warrants that: (a) this Amendment No. 5 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. 5
no Default or Unmatured Default has occurred and is continuing.
4. Effective Date. The amendments contained in this
Amendment No. 5 shall become effective only upon receipt by the
Agent (with sufficient copies for the Lenders) of written
agreement thereto by the Agent, the Required Lenders and the
Borrower.
5. Effect of Amendment. Upon execution of this
Amendment No. 5, 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. 5 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. 5 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. 5 to be executed by their duly authorized
representatives as of the date first written above.
SPX CORPORATION
By: William L. Trubeck
Title: Senior Vice President, Finance
and Chief Financial and
Accounting Officer
THE FIRST NATIONAL BANK OF
CHICAGO, individually as a Lender
and as Agent
By: Patricia H. Besser
Title: Vice President
THE BANK OF NEW YORK, as Lender
By: John M. Lokay, Jr.
Title: Vice President
NBD BANK, N.A., as Lender
By: William C. Goodhue
Title: Vice President
THE BANK OF NOVA SCOTIA, as Lender
By: F.C.H. Ashby
Title: Senior Manager Loan Operations
MICHIGAN NATIONAL BANK, as Lender
By: Joseph M. Redoutey
Title: Vice President
SUMITOMO BANK, as Lender
By: James W. Semonchik
Title: Senior Vice President
THE YASUDA TRUST & BANKING
CO., LTD., as Lender
By: K. Inoue
Title: Joint Regional Manager
MITSUBISHI TRUST & BANKING
CORPORATION, as Lender
By: Masaaki Yamagishi
Title: Chief Manager
COMERICA BANK, as Lender
By: James R. Grossett
Title: Vice President
OLD KENT BANK & TRUST
COMPANY, as Lender
By: Richard K. Russo
Title: Vice President
BANK OF TOKYO TRUST, as Lender
By: Friedrich N. Wilms
Title: Vice President
5
3-MOS
DEC-31-1996
MAR-31-1996
27,079
0
161,576
(9,017)
148,439
397,009
428,824
(219,819)
854,619
239,005
228,310
160,310
0
0
4,791
854,619
292,308
292,308
228,733
278,783
105
0
8,814
4,606
1,842
2,764
0
0
0
2,764
.20
.20
