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, 1994
( ) 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 29, 1994 -- 13,944,106
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
SPX CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(000s omitted)
(Unaudited)
March 31 December 31
1994 1993
ASSETS
Current Assets:
Cash and temporary cash investments $ 14,899 $ 117,843
Receivables 148,440 123,081
Lease finance receivables-current portion 32,839 33,834
Inventories 161,066 159,223
Deferred income tax asset and refunds 54,489 54,489
Prepaid expenses and other current assets 27,451 29,726
Total Current Assets $ 439,184 $ 518,196
Investments 13,945 13,446
Property, plant and equipment (at cost) $ 374,644 $ 367,832
Less: Accumulated depreciation (176,203) (169,687)
$ 198,441 $ 198,145
Lease finance receivables - long term 50,079 51,013
Costs in excess of net assets of businesses
acquired 202,835 204,149
Other assets 43,420 39,452
$ 947,904 $1,024,401
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Notes payable and current maturities of
long-term debt $ 44,208 $ 93,975
Accounts payable 80,141 62,968
Accrued liabilities 179,144 229,998
Income taxes payable 12,596 11,864
Total Current Liabilities $ 316,089 $ 398,805
Long-term liabilities 123,953 123,235
Deferred income taxes 21,338 20,787
Long-term debt 338,513 336,187
Shareholders' Equity:
Common stock $ 155,772 $ 155,558
Paid in capital 58,624 58,926
Retained earnings 22,112 20,282
$ 236,508 $ 234,766
Less: Common stock held in treasury 50,000 50,000
Unearned compensation - ESOP 35,046 35,900
Minority interest 1,320 1,080
Cumulative translation adjustments 2,131 2,399
Total Shareholders' Equity $ 148,011 $ 145,387
$ 947,904 $1,024,401
SPX CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(In thousands of dollars except per share amounts)
(Unaudited)
Three Months Ended
March 31
1994 1993
REVENUES $277,451 $179,164
COSTS & EXPENSES
Cost of products sold 207,357 121,776
Selling, general &
administrative expenses 54,160 50,762
Other expense (income), net 606 1,519
SPT equity losses - 565
OPERATING INCOME $ 15,328 $ 4,542
Interest expense, net 10,228 3,907
INCOME BEFORE INCOME TAXES $ 5,100 $ 635
PROVISION FOR INCOME TAXES 2,000 278
INCOME BEFORE CUMULATIVE EFFECT
OF CHANGE IN ACCOUNTING METHODS $ 3,100 $ 357
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING
METHODS, NET OF INCOME TAXES - (31,800)
NET INCOME (LOSS) $ 3,100 $(31,443)
INCOME (LOSS) PER SHARE:
Before cumulative effect of change
in accounting methods $ .24 $ .02
Cumulative effect of change in
accounting methods - (2.52)
Net income (loss) $ .24 $ (2.50)
Dividends per share $ .10 $ .10
Weighted average number of
common shares outstanding 12,707,000 12,557,000
SPX CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(000s omitted)
(Unaudited)
Three Months Ended
March 31
1994 1993
Cash flows from operating activities:
Net income (loss) from operating activities $ 3,100 $ (31,443)
Adjustments to reconcile net income (loss)
to net cash from operating activities -
Cumulative effect of change in accounting
methods - 31,800
Depreciation and amortization 9,791 6,424
Increase in deferred income taxes 551 2,527
Increase in accounts receivable (25,359) (17,539)
Increase in inventories (1,843) (899)
Decrease in prepaid assets 2,275 867
Increase (decrease) in accounts payable 17,173 (1,264)
Increase (decrease) in accrued liabilities (5,891) 6,685
Increase (decrease) in income taxes payable 732 (6,652)
Decrease in lease finance receivables 1,929 -
Increase in long-term liabilities 718 508
Other, net 2,019 ( 600)
Net cash from operating activities $ 5,195 $ (9,586)
Cash flows used by investing activities:
Capital expenditures $ (10,318) $ (3,935)
Advance to SP Europe - (5,206)
Net cash used by investing activities $ (10,318) $ (9,141)
Cash flows provided (used) by financing activities:
Net borrowings (payments) under debt
agreements $ (47,567) $ 17,950
Payment of debt extinguishment costs (5,963) -
Payment of debt acquisition costs (4,147) -
Payment for interest in SPT (39,000) -
Dividends paid (1,144) (1,260)
Net cash provided (used) by financing
activities $ (97,821) $ 16,690
Net decrease in cash and temporary
cash investments $(102,944) $ (2,037)
Cash and temporary cash investments,
beg. of period 117,843 9,729
Cash and temporary cash investments,
end of period $ 14,899 $ 7,692
SPX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
MARCH 31, 1994 (Unaudited)
1. The interim financial statements reflect all adjustments which
are, in the opinion of management, necessary to a fair state-
ment of the results of the interim periods presented. All
adjustments are of a normal recurring nature. Amounts in the
1993 consolidated financial statements have been restated to
reflect the company's previous 49% share of Sealed Power Tech-
nologies Limited Partnership ("SPT") income or loss and the
effect of amortizing the difference between its investment
balance and its share of SPT's initial partnership capital
deficit and to reflect new accounting for the company's ESOP.
2. Information regarding the company's segments was as follows:
Three months ended March 31,
1994 1993
Revenues: (in thousands)
Specialty Service Tools....... $ 139.7 $ 111.4
SPX Credit Corporation........ 3.4 0.5
Original Equipment Components. 134.4 6.1
Businesses sold in 1993....... - 61.2
Total........................ $ 277.5 $ 179.2
Operating income (loss):
Specialty Service Tools....... $ 6.3 $ 4.2
SPX Credit Corporation........ 2.2 0.1
Original Equipment Components. 11.7 (0.5)
Businesses sold in 1993....... - 4.6
General corporate expenses.... (4.9) (3.9)
Total........................ $ 15.3 $ 4.5
Capital Expenditures:
Specialty Service Tools....... $ 2.8 $ 1.2
SPX Credit Corporation........ - -
Original Equipment Components. 6.0 0.1
Businesses sold in 1993....... - 2.6
General corporate............. 1.5 0.0
Total........................ $ 10.3 $ 3.9
Depreciation and amortization:
Specialty Service Tools....... $ 4.0 $ 3.6
SPX Credit Corporation........ - -
Original Equipment Components. 5.7 0.5
Businesses sold in 1993....... - 2.2
General corporate............. 0.1 0.1
Total........................ $ 9.8 $ 6.4
March 31, December 31
1994 1993
Identifiable assets:
Specialty Service Tools....... $ 422.4 $ 383.3
SPX Credit Corporation........ 84.6 85.2
Original Equipment Components. 356.7 343.8
General corporate............. 84.2 212.1
Total........................ $ 947.9 $ 1,024.4
3.In March of 1994, the first portion of the Refinancing was com-
pleted when the company closed a $250 million revolving credit
facility with First National Bank of Chicago, as agent for a
syndicate of banks. This revolving credit facility bears
interest at LIBOR plus 1.0% or the prime rate (at the company's
option) and expires in 1999. Upon completion of the senior
subordinated note offering, this revolving credit facility is
to be reduced to $225 million of maximum availability. Pro-
ceeds from this revolving credit facility will be used to
extinguish SPX debt as follows: Senior Notes aggregating $75
million, the $19.7 million note to the Allen Group, the com-
pany's ESOP trust's note of $42.1 million and $68 million of
miscellaneous debt, much of which was technically in default
of covenant provisions. Also, $15.2 million of letters of
credit securing the Industrial Revenue Bonds were renegotiated.
At March 31, 1994, approximately $80 million of this indebted-
ness had been paid using the revolving credit facility and
existing cash.
By June 30, 1994, the company expects to have completed its
$260 million offering of senior subordinated notes. These
notes are anticipated to bear interest at a rate of approxi-
mately 11% and will be due in or after the year 2002. At that
time, the proceeds will be used to retire existing SPT borrow-
ings, including the $100 million of 14.5% senior subordinated
debentures, the Term Bank Loan, and the Revolving Credit Loans.
Excess proceeds will be used to pay down the company's new
revolving credit facility at that time.
Item 2.Management's Discussion and Analysis of Results of Opera-
tions and Financial Condition
First Quarter 1994 vs. First Quarter 1993
The accompanying first quarter 1993 consolidated statement of
income does not include the results of Allen Testproducts and Allen
Group Leasing as they were acquired June 10, 1993, but does include
the results of the Sealed Power Replacement division which was sold
October 22, 1993, the results of the Truth division which was sold
November 5, 1993, the company's 49% share of the earnings or losses
of Sealed Power Technologies Limited Partnership ("SPT"), the equity
losses of Sealed Power Technologies Limited Partnership Europe ("SP
Europe"). The first quarter 1994 consolidated statement of income
reflects the results of SPT and SP Europe in their entirety. For
purposes of comparison, certain selected unaudited pro forma 1993
information is presented in the following discussion to enhance
understanding. The pro forma first quarter 1993 information re-
flects the acquisition of Allen Testproducts and Allen Group Leasing
and related restructuring, the divestiture of the Sealed Power
Replacement and Truth divisions, the acquisition of 51% of SPT, and
the consolidation of SP Europe as if they had occurred as of
January 1, 1993.
Revenues
The following were revenues by business segment:
Three months ended March 31
Historical Pro Forma
1994 1993 1993
(dollars in millions)
Specialty Service Tools...... $139.7 $111.4 $126.4
SPX Credit Corporation....... 3.4 0.5 4.2
Original Equipment Components 134.4 6.1 119.6
Businesses sold in 1993...... - 61.2 -
Total...................... $277.5 $179.2 $250.2
Total revenues for the first quarter of 1994 were up signifi-
cantly over the first quarter of 1993 due to the inclusion of SPT
and SP Europe revenues in 1994 (SPT and SP Europe were consolidated
as of December 31, 1993). Also effecting first quarter 1994 reve-
nues was the inclusion of the revenues of Allen Testproducts and SPX
Credit Corporation (formerly Allen Group Leasing), whereas in 1993,
the revenues of Allen Testproducts and Allen Group Leasing were not
included until the June 10, 1993 acquisition. Offsetting these in-
creases in revenues was the loss of revenues of the Sealed Power Re-
placement and Truth divisions, which were sold in the fourth quarter
of 1993.
Revenues of Specialty Service Tools for the first quarter of
1994 include Allen Testproducts. If Allen Testproducts revenues are
included in the first quarter of 1993, pro forma first quarter 1993
revenues would have been $126.4 million. The remaining increase in
1994 revenues over pro forma 1993 revenues, approximately $13
million, was attributable to improved general aftermarket tool
sales, strong hand held diagnostic equipment sales, improved high
pressure hydraulic sales and higher automotive related refrigerant
recovery and recycling equipment sales.
As stated above, first quarter 1994 revenues of Original Equip-
ment Components were up significantly due to the inclusion of SPT.
Pro forma first quarter 1993 revenues including SPT and SP Europe
would have been $119.6 million. The remaining increase in 1994 over
pro forma 1993 revenues, approximately $15 million, was attributable
to strong increases in all product line sales to OEMs as production
of new vehicles was up from last year. The segment's aftermarket
revenues also increased.
Revenues of SPX Credit Corporation, which was formed in June
1993, were down from pro forma 1993. SPX Credit Corporation's
revenues and lease portfolio were comparable to levels of the last
half of 1993 after SPX Credit Corporation merged its existing
leasing activities with Allen Group Leasing.
Gross Profit
Gross profit was $70.1 million, or 25.3% of revenues, in the
first quarter of 1994 compared to $57.4 million, or 32.0% of reve-
nues, in the first quarter of 1993. Due to the significant acquisi-
tion and divestiture activity in 1993, these figures are not compa-
rable. Pro forma first quarter 1993 gross profit would have been
$64.5 million, or 25.8% of revenues.
Selling, General and Administrative Expense ("SG&A")
SG&A was $54.2 million, or 19.5% of revenues, in the first
quarter of 1994 compared to $50.8 million, or 28.3% of revenues, in
the first quarter of 1993. Due to the significant acquisition and
divestiture activity in 1993, these figures are not comparable. Pro
forma first quarter 1993 SG&A would have been $54.5 million, or
21.8% of revenues.
Operating income (loss)
The following was operating income loss by business segment:
Three months ended March 31
Historical Pro forma
1994 1993 1993
(dollars in millions)
Specialty Service Tools...... $ 6.3 $ 4.2 $ 6.6
SPX Credit Corporation....... 2.2 0.1 2.5
Original Equipment Components 11.7 (0.5) 5.1
Businesses sold in 1993...... - 4.6 -
General corporate expenses... (4.9) (3.9) (4.5)
Total...................... $ 15.3 $ 4.5 $ 9.7
Total operating income for the first quarter of 1994 was up
significantly over the first quarter of 1993 due to the inclusion
of SPT in 1994 (SPT and SP Europe were consolidated as of
December 31, 1993). Also affecting first quarter 1994 operating
income was the inclusion of the operating income of Allen Testprod-
ucts and SPX Credit Corporation, whereas in 1993, operating income
was not included until the June 1993 acquisition. Offsetting these
increases in operating income was the loss of operating income of
the Sealed Power Replacement and Truth divisions, which were sold
in the fourth quarter of 1993.
First quarter 1994 operating income of Specialty Service Tools
segment includes the results of Allen Testproducts which are now in-
cluded in the results of the Automotive Diagnostics division. Pro
forma first quarter 1993 operating income would have been $6.6
million had it included Allen Testproducts and had certain cost
reductions been realized through the combination with the Bear Auto-
motive division. While comparative first quarter revenues are up
in Specialty Service Tools, the small reduction in comparative
operating income reflects the continued operating loss at the Auto-
motive Diagnostics division. Also contributing to the reduced
operating income were lower margins on the refrigerant recovery and
recycling systems.
Operating income of Original Equipment Components was up signif-
icantly due to the inclusion of SPT. The increase in 1994 first
quarter operating income over 1993 pro forma was attributable to
continued increases in customer demand as a result of the effect of
increased U.S. domestic light vehicle production, combined with an
increase in demand for parts in the automotive aftermarket.
Operating income of SPX Credit Corporation was down from pro
forma 1993. SPX Credit Corporation's operating income was compar-
able with levels achieved in the last half of 1993 after SPX Credit
Corporation merged its existing leasing activities with Allen Group
Leasing.
Interest Expense, net
First quarter 1994 interest expense, net was $10.2 million
compared to $3.9 million in the first quarter of 1993. The increase
was attributable to higher debt levels associated with the purchase
of SPT and Allen Testproducts which were partially offset by pro-
ceeds from the divestitures of the Sealed Power Replacement and
Truth divisions. Additionally, the debt existing during the first
quarter of 1994 was at relatively higher interest rates which
contributed to the increase in interest expense.
Provision for Income Taxes
The first quarter 1994 effective income tax rate was approxi-
mately 39% which reflects the company's current estimated rate for
the year.
Cumulative Effect of Change in Accounting Methods, net of Tax
In the first quarter of 1993, the company adopted new accounting
for its Employee Stock Ownership Plan and adopted SFAS No. 106 -
"Employers' Accounting for Postretirement Benefits Other Than Pen-
sions" for its then existing 49% share of SPT, resulting in a $31.8
million aftertax charge.
Liquidity and Financial Condition
As a result of the company's acquisition activity in 1993, the
company is more leveraged than in the past. This financial leverage
requires the company to focus on cash flows to meet higher interest
costs and to maintain dividends. Management believes that opera-
tions and the credit arrangements established in the first quarter
will be sufficient to supply the future funding needed by the com-
pany.
Cash Flow
Quarter ended March 31,
1994 1993
(in millions)
Cash flows from:
Operating activities...... $ 5.2 $ (9.6)
Investing activities...... (10.3) (9.1)
Financing activities...... (97.8) 16.7
Net Cash flow........... $(102.9) $ (2.0)
Cash flows from operating activities was a $5.2 million inflow
in first quarter of 1994 compared to a $9.6 million outflow in the
first quarter of 1993. The first quarter tends to increase working
capital significantly as higher revenue levels are experienced in
the first quarter when compared to the fourth quarter. In the first
quarter of both years, accounts receivable increased substantially
reflecting the higher revenue levels. In the first quarter of 1994,
a significant increase in accounts payable was achieved which
mitigated the negative cash flow effect of the increase in accounts
receivable. The first quarter of 1994 cash flows from operating
activities was also effected by the reduction of accrued liabili-
ties, much of which was continued utilization of the Automotive
Diagnostic's restructuring reserve. At March 31, 1994, the restruc-
turing reserve of $8.9 million is principally required for remaining
work force reductions and facility closing costs.
Cash flows from investing activities was an outflow of $10.3
million in 1994 compared to an outflow of $9.1 million in 1993.
While capital expenditures in 1994 were significantly higher than
in 1993, the company advanced $5.2 million to SP Europe in the first
quarter of 1993, which was consolidated by the company at
December 31, 1993.
Cash flows from financing activities in first quarter of 1993
consisted primarily of debt borrowings to fund operational require-
ments and capital expenditures in 1993. The first quarter of 1994
includes the $39 million payment to Riken Corporation to acquire the
additional 49% of SPT, payment of approximately $6 million of debt
extinguishment costs related to the partial payment of the ESOP
trust's note, payment of $4.1 million of debt acquisition costs
related to the new revolving credit facility and to pay down $47.6
million on SPX debt.
During the second quarter of 1994, the company expects signifi-
cant cash expenditures to complete its refinancing, including early
extinguishment costs on remaining SPX debt and SPT debt. Also,
early in the second quarter, approximately $8 million of payments
were made to finalize the dispute with the Internal Revenue Service
regarding the company's tax deferred income tax treatment of the
1989 transaction in which several operating units were contributed
to SPT and to finalize certain other tax matters related to the 1989
tax year.
Capitalization
March 31 Dec. 31
1994 1993
(in millions)
Notes payable and current
maturities of long-term debt $ 44.2 $ 94.0
Long-term debt.............. 338.5 336.2
Total debt................ $ 382.7 $ 430.2
Shareholders' equity........ 148.0 145.4
Total capitalization........ $ 530.7 $ 575.6
Total debt to capitalization
Ratio..................... 72.1% 74.7%
At March 31, 1994, the company's total debt was composed of SPX
debt of $174.8 million and of SPT debt of $207.9 million. As of
March 31, 1994, the company has used existing cash balances and
proceeds from its new $250 million revolving credit facility to pay
Riken Corporation for the additional 49% of SPT, extinguish a
majority of the company's ESOP trust's note of $42.1 million and to
pay off $50 of bank loans. In April, the company completed the
extinguishment of the ESOP note, the senior notes of $75 million,
the $19.7 million note to the Allen Group and $18 million of other
debt utilizing the new revolving credit.
The company continues with its plan to issue $260 million of
senior subordinated notes before the end of the second quarter of
1994. At that time, the outstanding SPT debt will be extinguished
using the proceeds from this offering. The March 31, 1994 unaudited
pro forma total debt would have been approximately $409 million
assuming that the remaining SPX debt was extinguished as well as
having the issuance of the senior subordinated notes and the SPT
debt extinguishment completed.
After the completion of the refinancing, the company's total
debt availability will consist of the new revolving credit of $225
million (adjusted), the senior subordinated notes of $260 million
and Industrial Revenue Bonds of $15.2 million. Management believes
that the additional availability from these facilities is sufficient
to meet operational cash requirements, working capital requirements
and capital expenditures planned for 1994 and thereafter.
If the notes are not issued, the revolving credit facility would
remain at $250 million and be secured by the company's assets (ex-
cluding SPT) and the SPT debt would remain outstanding. The combi-
nation of the unused SPX revolver availability and the unused SPT
credit availability would be sufficient to cover the company's
planned operational cash requirements, working capital requirements
and capital expenditures for 1994 and thereafter.
Capital Expenditures
Capital expenditures for the first quarter of 1994 were $10.3
million compared to $3.9 million in the first quarter of 1993. Full
year 1994 planned expenditures are estimated to exceed $40 million
and the first quarter reflects the annual pace. 1993 capital expen-
ditures do not include SPT.
Other Matters
Accounting Pronouncements - As of the beginning of 1994, the
company adopted Statement of Financial Accounting Standards, No. 112
- - "Employers' Accounting for Postemployment Benefits." This stan-
dard requires that the cost of benefits provided to former or
inactive employees be recognized on the accrual basis of accounting.
The company's analysis is that the provisions of this statement are
not material to its financial position or results of operations.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(2) None.
(4) None.
(11) None.
(15) None.
(18) None.
(19) None.
(20) None.
(23) None.
(24) None.
(25) None.
(28) None.
(b) Reports on Form 8-K
None.
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, 1994 By
Dale A. Johnson
Chairman and
Chief Executive Officer
Date: May 9, 1994 By
R. Budd Werner
Vice President, Finance and
Chief Financial Officer
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, 1994 By s/s Dale A. Johnson
Dale A. Johnson
Chairman and
Chief Executive Officer
Date: May 9, 1994 By s/s R. Budd Werner
R. Budd Werner
Vice President, Finance and
Chief Financial Officer
