UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 8-K

Current Report

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of report (Date of earliest event reported):  May 2, 2007

SPX CORPORATION

(Exact Name of Registrant as specified in Charter)

 

13515 Ballantyne Corporate Place

Charlotte, North Carolina 28277

(Address of Principal Executive Offices) (Zip Code)

Registrant’s telephone number, including area code  (704) 752-4400

NOT APPLICABLE

(Former Name or Former Address if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o    Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o    Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o    Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o    Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02.  Results of Operations and Financial Condition.

On May 2, 2007, SPX Corporation (the “Company”) issued the press release attached as Exhibit 99.1 hereto and incorporated herein by reference.

The press release incorporated by reference into this Item 2.02 contains disclosure regarding free cash flow from continuing operations.  Free cash flow from continuing operations is defined, for purposes of this press release, as cash flow from continuing operations less capital expenditures from continuing operations. The Company’s management believes that free cash flow from continuing operations is a useful financial measure for investors in evaluating the cash flow performance of multi-industrial companies, since it provides insight into the cash flow available to fund such things as equity repurchases, dividends, mandatory and discretionary debt reduction and acquisitions or other strategic investments. In addition, although the use of free cash flow from continuing operations is limited by the fact that the measure can exclude certain cash items that are within management’s discretion, free cash flow from continuing operations is a factor used by the Company’s management in internal evaluations of the overall performance of its business.  Free cash flow from continuing operations is not a measure of financial performance under accounting principles generally accepted in the United States (“GAAP”), should not be considered a substitute for cash flows from operating activities as determined in accordance with GAAP, should be used in combination with cash flows from operating activities as determined in accordance with GAAP, and may not be comparable to similarly titled measures reported by other companies.

The press release also contains disclosure regarding organic revenue growth (decline), which is defined, for purposes of this press release, as revenue growth (decline) excluding the effects of foreign currency fluctuations and acquisitions and divestitures.  The Company’s management believes that this metric is a useful financial measure for investors in evaluating our operating performance for the periods presented because excluding the effect of currency fluctuations and acquisitions and divestitures, when read in conjunction with the Company’s revenues, presents a useful tool to evaluate the Company’s ongoing operations and provides investors with a tool they can use to evaluate the Company’s management of assets held from period to period.  In addition, organic revenue growth (decline) is one of the factors the Company’s management uses in internal evaluations of the overall performance of its business. This metric, however, is not a measure of financial performance in accordance with GAAP and should not be considered a substitute for revenue growth (decline) as determined in accordance with GAAP and may not be comparable to similarly titled measures reported by other companies.

Refer to the tables included in the press release for the components of the Company’s free cash flow from continuing operations, and organic revenue growth and for the reconciliations to their respective comparable GAAP measures.

The information in this Report is being furnished and shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject

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to the liabilities of that Section. The information in this Report shall not be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing.

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Item 9.01.              Financial Statements and Exhibits.

Exhibit
Number		Description
99.1		Press Release issued May 2, 2007, furnished solely pursuant to Item 2.02 of Form 8-K.

 

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SIGNATURE

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 hereunto duly authorized.

	SPX CORPORATION
Date: May 2, 2007	By:	/s/	Patrick J. O’Leary
		Patrick J. O’Leary
		Executive Vice President Finance, Treasurer and
		Chief Financial Officer

 

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EXHIBIT INDEX

Exhibit
Number		Description
99.1		Press Release issued May 2, 2007, furnished solely pursuant to Item 2.02 of Form 8-K.

 

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Exhibit 99.1

Contact:	Jeremy W. Smeltser (Investors)
	704-752-4478
	E-mail: investor@spx.com
	Tina Betlejewski (Media)
	704-752-4454
	E-mail: spx@spx.com

 

SPX REPORTS FIRST QUARTER 2007 RESULTS

Revenues up 13%, Segment Margins Improve 110 Points to 9.8%, EPS up 45% to $0.55

Raises 2007 EPS Guidance Range to $4.45 to $4.65 from $3.85 to $3.95

CHARLOTTE, NC — May 2, 2007 — SPX Corporation (NYSE:SPW) today reported results for the first quarter ended March 31, 2007:

·                  Revenues increased 13.0% to $1.08 billion from $0.95 billion in the year-ago quarter.  Organic revenue growth* was 7.7%, while completed acquisitions and the impact of currency fluctuations increased reported revenues by 2.3% and 3.0%, respectively.

·                  Segment income and margins were $105.3 million and 9.8%, compared with $82.5 million and 8.7% in the year-ago quarter.  The increase in segment income and margins was driven by improvements across each of the company’s four business segments.

·                  Diluted net income per share from continuing operations (the basis of the company’s guidance) was $0.55, compared with $0.38 in the year-ago quarter.  The effective tax rate for the quarter was 34.3%, slightly below the company’s previous expectations of 35% to 36%. The company’s updated expectation for the 2007 effective tax rate is 33% to 34%.

·                  Net income was $29.2 million, or $0.49 per share, compared with $21.7 million, or $0.35 per share in the year-ago quarter.

·                  Net cash used in continuing operations was $15.1 million, compared with $114.2 million in the year-ago quarter. Free cash flow* from continuing operations was a negative $27.2 million, compared with a negative $124.4 million in the year-ago quarter. The first quarter of 2007 included an advanced tax payment of $37.5, while the first quarter of 2006 included a payment of $84.3 million related to accreted interest on the redemption of convertible notes.

* Non-GAAP number. See attached financial schedules for reconciliation to most comparable GAAP number.

Chris Kearney, President and CEO said, “SPX’s first quarter performance marked a strong start to 2007. We achieved or exceeded our operating targets for organic growth, margin improvement and earnings, highlighted by a 45% increase in earnings per share from continuing operations.”

Kearney continued, “We have also made progress from a strategic and capital allocation perspective, completing the sale of our Contech automotive components business and returning

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capital to our shareholders by repurchasing 3.0 million shares of our common stock for $210.6 million year to date.”

“In addition, we are raising our earnings per share guidance range to $4.45 to $4.65 from the previous range of $3.85 to $3.95. This 17% increase is driven by multiple positive factors: our continued robust order trends in global infrastructure, particularly power and energy markets, our ability to execute on this demand through a constant focus on our operating initiatives, our recent share repurchases, and a lower effective tax rate due to our expanding global presence,” Kearney concluded.

SEGMENT HIGHLIGHTS

Flow Technology

Revenues in the first quarter of 2007 were $274.4 million compared to $218.0 million in the first quarter of 2006, an increase of $56.4 million, or 25.9%.  The increase was due to organic revenue growth of 10.7%, growth from the fourth quarter 2006 Custos acquisition of 11.6% and currency fluctuations of 3.6%. The organic growth was related primarily to continued strong demand in the power, mining, oil and gas, and dehydration markets.

Segment income was $37.6 million, or 13.7% of revenues, in the first quarter of 2007 compared to $28.0 million, or 12.8% of revenues, in the first quarter of 2006.  The increase in segment income and margins was due primarily to the organic growth noted above and efficiencies achieved from continuous improvement initiatives.

Test and Measurement

Revenues in the first quarter of 2007 were $258.2 million compared to $256.8 million in the first quarter of 2006, an increase of $1.4 million, or 0.5%.  The increase was due to currency fluctuations which increased reported revenue by 3.3%, offset partially by an organic decline of 1.8% due to the timing of OEM program launches and minor product line dispositions which reduced reported revenues by 1.0%.

Segment income was $25.9 million, or 10.0% of revenues, in the first quarter of 2007 compared to $24.0 million, or 9.3% of revenues, in the first quarter of 2006.  The increase in segment income and margins was due largely to improved profitability in the portable cable and pipe locator product lines, driven by new product introductions, favorable product mix and efficiencies achieved from continuous improvement initiatives.

Thermal Equipment and Services

Revenues in the first quarter of 2007 were $333.7 million compared to $283.1 million in the first quarter of 2006, an increase of $50.6 million, or 17.9%.  The increase was due primarily to organic revenue growth of 14.0%, related largely to the continued strong global demand for cooling and power equipment and thermal service and repair work. Currency fluctuations increased revenues by 3.9% from the year-ago quarter.

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Segment income was $15.8 million, or 4.7% of revenues, in the first quarter of 2007 compared to $11.7 million, or 4.1% of revenues, in the first quarter of 2006.  Segment income and margins increased due primarily to the organic growth and improved operating execution in wet and dry cooling equipment product lines.

Industrial Products and Services

Revenues in the first quarter of 2007 were $211.6 million compared to $195.6 million in the first quarter of 2006, an increase of $16.0 million, or 8.2%.  The increase was due primarily to organic revenue growth of 7.7%, driven most notably by increased demand for power transformers and aerospace components.  Currency fluctuations increased revenues by 0.5% from the year-ago quarter.

Segment income was $26.0 million, or 12.3% of revenues, in the first quarter of 2007 compared to $18.8 million, or 9.6% of revenues, in the first quarter of 2006.  The increase in segment income and margins was driven by the strong organic growth in the end markets noted above, and manufacturing efficiencies achieved from continuous improvement initiatives, partially offset by a $3.6 million charge related to a legacy legal matter.

OTHER ITEMS

Discontinued Operations:  During the third quarter of 2006, the company committed to a plan to divest its Contech automotive components business, previously reported in its Industrial Products and Services segment. In April 2007, the company completed the sale of Contech for net proceeds of $139.4 million. The financial condition, results of operations, and cash flows of Contech have been reported as discontinued operations in the attached condensed consolidated financial statements.

Share Repurchases:  During the first quarter of 2007, the company repurchased 2.3 million shares of its common stock for $164.7 million.  Year-to-date through May 2, 2007, the company has repurchased 3.0 million shares of its common stock for $210.6 million.  The company’s 10b5-1 trading plan that was announced in March 2007 has been completed.

Class Action Settlements: On April 13, 2007, the U.S. District Court for the Western District of North Carolina entered an Order and Final Judgment in each of the securities class action and the tag-along ERISA class action, approving the settlement of each case and dismissing the settled claims with prejudice. The company expects to make the previously accrued net settlement payment of $5.1 million to the settlement fund in the second quarter of 2007.

Dividend:   On February 22, 2007, the Board of Directors announced a quarterly dividend of $0.25 per common share payable to shareholders of record on March 15, 2007.  This first quarter 2007 dividend was paid on April 2, 2007.

Form 10-Q:  The company expects to file its quarterly report on Form 10-Q for the quarter ended March 31, 2007 with the Securities and Exchange Commission by May 4, 2007.  This news release

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should be read in conjunction with that filing, which will be available on the company’s website at www.spx.com, in the Investor Relations section.

SPX Corporation is a Fortune 500 multi-industry manufacturing leader. The company offers highly-specialized engineered solutions to solve critical problems for customers.

SPX is focused on providing solutions that support the expansion of global infrastructure, with particular emphasis on the growing worldwide demand for energy and power. Its innovative and environmentally friendly product portfolio includes cooling systems for all types of power plants throughout the world; custom engineered pumps, valves and mixers that assist a variety of flow processes including oil and gas exploration, distribution and refinement; handheld diagnostic tools that aid in vehicle maintenance and repair, and power transformers that regulate voltage for electrical transmission and distribution by utility companies.

SPX is headquartered in Charlotte, North Carolina and employs over 14,000 people worldwide in over 20 countries. Visit www.spx.com. (NYSE: SPW)

Certain statements in this press release, including any statements as to future results of operations and financial projections, are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and are subject to the safe harbor created thereby.  Please read these results in conjunction with the company’s documents filed with the Securities and Exchange Commission, including the company’s annual report on Form 10-K for the year ended December 31, 2006.  These filings identify important risk factors and other uncertainties that could cause actual results to differ from those contained in the forward-looking statements.  Actual results may differ materially from these statements.  The words “believe,” “expect,” “anticipate,” “estimate,” “guidance,” “target” and similar expressions identify forward-looking statements.  Particular risks facing the company include economic, business and other risks stemming from its international operations, legal and regulatory risks, costs of raw materials, pricing pressures, pension funding requirements, integration of acquisitions and changes in the economy. Although the company believes that the expectations reflected in its forward-looking statements are reasonable, it can give no assurance that such expectations will prove to be correct.  In addition, estimates of future operating results are based on the company’s current complement of businesses, which is subject to change.

SPX CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited; in millions, except per share amounts)

		Three months ended
		March 31,
		2007			2006
Revenues		$	1,077.9		$	953.5
Costs and expenses:
Cost of products sold		783.1			701.0
Selling, general and administrative		235.4			207.6
Intangible amortization		4.3			3.8
Special charges, net		0.5			0.4
Operating income		54.6			40.7
Other expense, net		(0.9		)	(0.7		)
Interest expense		(16.8		)	(13.8		)
Interest income		3.4			3.2
Equity earnings in joint ventures		10.1			9.8
Income from continuing operations before income taxes		50.4			39.2
Income tax provision		(17.3		)	(15.7		)
Income from continuing operations		33.1			23.5
Income from discontinued operations, net of tax		2.5			3.1
Loss on disposition of discontinued operations, net of tax		(6.4		)	(4.9		)
Loss from discontinued operations		(3.9		)	(1.8		)
Net income		$	29.2		$	21.7
Net income for diluted income per share		$	29.2		$	22.8
Diluted income (loss) per share of common stock
Income from continuing operations		$	0.55		$	0.38
Loss from discontinued operations		(0.06		)	(0.03		)
Net income per share		$	0.49		$	0.35
Weighted average number of common shares outstanding - diluted		60.123			65.363

 

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SPX CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited; in millions)

		March 31,			December 31,
		2007			2006
ASSETS
Current assets:
Cash and equivalents		$	286.5		$	477.2
Accounts receivable, net		1,086.9			1,127.0
Inventories, net		576.4			514.3
Other current assets		82.4			89.4
Deferred income taxes		53.4			60.5
Assets of discontinued operations		191.3			190.1
Total current assets		2,276.9			2,458.5
Property, plant and equipment
Land		35.5			30.3
Buildings and leasehold improvements		204.4			199.9
Machinery and equipment		549.8			536.0
		789.7			766.2
Accumulated depreciation		(403.2		)	(391.6		)
Net property, plant and equipment		386.5			374.6
Goodwill		1,762.7			1,762.2
Intangibles, net		485.8			488.0
Other assets		337.0			353.8
TOTAL ASSETS		$	5,248.9		$	5,437.1
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable		$	527.3		$	521.1
Accrued expenses		811.3			849.1
Income taxes payable		17.0			81.0
Short-term debt		125.3			168.7
Current maturities of long-term debt		48.1			42.3
Liabilities of discontinued operations		61.6			50.5
Total current liabilities		1,590.6			1,712.7
Long-term debt		741.5			753.6
Deferred and other income taxes		156.8			207.2
Other long-term liabilities		649.0			650.7
Total long-term liabilities		1,547.3			1,611.5
Minority interest		6.8			3.5
Shareholders’ equity:
Common stock		947.7			937.4
Paid-in capital		1,176.1			1,134.5
Retained earnings		1,818.9			1,754.2
Accumulated other comprehensive loss		(72.6		)	(86.6		)
Common stock in treasury		(1,765.9		)	(1,630.1		)
Total shareholders’ equity		2,104.2			2,109.4
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY		$	5,248.9		$	5,437.1

 

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SPX CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited; in millions)

		Three months ended
		March 31,
		2007			2006
Cash flows from (used in) operating activities:
Net income		$	29.2		$	21.7
Less: Loss from discontinued operations, net of tax		(3.9		)	(1.8		)
Income from continuing operations		33.1			23.5
Adjustments to reconcile income from continuing operations to net cash used in operating activities
Special charges, net		0.5			0.4
Deferred and other income taxes		(19.5		)	8.4
Depreciation and amortization		19.1			19.0
Accretion of LYONs		—			1.7
Pension and other employee benefits		16.7			16.9
Stock-based compensation		14.1			9.4
Other, net		10.6			3.0
Changes in operating assets and liabilities, net of effects from acquisitions and divestitures
Accounts receivable and other		61.4			(27.3		)
Inventories		(60.2		)	(32.7		)
Accounts payable, accrued expenses and other		(89.6		)	(49.1		)
Accreted interest paid on LYONs repurchase (accreted since isuance date)		—			(84.3		)
Cash spending on restructuring actions		(1.3		)	(3.1		)
Net cash used in continuing operations		(15.1		)	(114.2		)
Net cash used in discontinued operations		(5.6		)	(19.6		)
Net cash used in operating activities		(20.7		)	(133.8		)
Cash flows from (used in) investing activities:
Proceeds from sales of discontinued operations, net of cash sold		—			73.5
Proceeds from other asset sales		1.1			2.3
Increase in restricted cash		—			(89.8		)
Business acquisitions and investments, net of cash acquired		(1.7		)	(13.1		)
Capital expenditures		(12.1		)	(10.2		)
Net cash used in continuing operations		(12.7		)	(37.3		)
Net cash used in discontinued operations		(1.4		)	(7.0		)
Net cash used in investing activities		(14.1		)	(44.3		)
Cash flows from (used in) financing activities:
Borrowing under senior credit facilities		—			750.0
Repayments of senior credit facilities		(45.1		)	—
Repurchase of LYONs principal		—			(575.9		)
Borrowings under trade receivable agreement		60.0			—
Repayments under trade receivable agreement		(45.0		)	—
Net repayments under other financing arrangements		(24.5		)	(13.9		)
Purchases of common stock		(140.6		)	(248.5		)
Proceeds from the exercise of employee stock options and other		49.4			66.5
Financing fees paid		—			(0.4		)
Dividends paid		(14.8		)	(16.3		)
Net cash used in continuing operations		(160.6		)	(38.5		)
Net cash used in discontinued operations		(0.3		)	(0.2		)
Net cash used in financing activities		(160.9		)	(38.7		)
Change in cash and equivalents due to changes in foreign exchange rates		5.0			0.7
Net change in cash and equivalents		(190.7		)	(216.1		)
Consolidated cash and equivalents, beginning of period		477.2			580.2
Consolidated cash and equivalents, end of period		$	286.5		$	364.1
Cash and equivalents of continuing operations		$	286.5		$	364.1

 

SPX CORPORATION AND SUBSIDIARIES

RESULTS OF OPERATIONS BY SEGMENT

(Unaudited; in millions)

		Three months ended
		March 31,
		2007			2006			%
Flow Technology
Revenues		$	274.4		$	218.0		25.9	%
Gross profit		94.2			72.8
Selling, general and administrative expense		55.6			44.6
Intangible amortization expense		1.0			0.2
Segment income		$	37.6		$	28.0		34.3	%
as a percent of revenues		13.7		%	12.8		%
Test and Measurement
Revenues		$	258.2		$	256.8		0.5	%
Gross profit		82.5			77.3
Selling, general and administrative expense		55.2			51.6
Intangible amortization expense		1.4			1.7
Segment income		$	25.9		$	24.0		7.9	%
as a percent of revenues		10.0		%	9.3		%
Thermal Equipment and Services
Revenues		$	333.7		$	283.1		17.9	%
Gross profit		65.0			60.3
Selling, general and administrative expense		47.6			47.0
Intangible amortization expense		1.6			1.6
Segment income		$	15.8		$	11.7		35.0	%
as a percent of revenues		4.7		%	4.1		%
Industrial Products and Services (1)
Revenues		$	211.6		$	195.6		8.2	%
Gross profit		57.1			46.5
Selling, general and administrative expense		30.8			27.4
Intangible amortization expense		0.3			0.3
Segment income		$	26.0		$	18.8		38.3	%
as a percent of revenues		12.3		%	9.6		%
Total segment income		$	105.3		$	82.5
Corporate expenses		(25.4		)	(20.1		)
Pension and postretirement expense		(10.7		)	(11.9		)
Stock-based compensation expense		(14.1		)	(9.4		)
Special charges, net		(0.5		)	(0.4		)
Consolidated Operating Income (1)		$	54.6		$	40.7

(1)             Excludes results of discontinued operations.

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SPX CORPORATION AND SUBSIDIARIES

ORGANIC REVENUE GROWTH RECONCILIATION

(Unaudited)

		Three Months ended March 31, 2007
		Net Revenue		Acquisitions,		Foreign		Organic Revenue
		Growth		Divestitures and Other		Currency		Growth (Decline)
Flow Technology		25.9	%	11.6	%	3.6	%	10.7	%
Test and Measurement		0.5	%	(1.0	)%	3.3	%	(1.8	)%
Thermal Equipment and Services		17.9	%	—	%	3.9	%	14.0	%
Industrial Products and Services		8.2	%	—	%	0.5	%	7.7	%
Consolidated		13.0	%	2.3	%	3.0	%	7.7	%

 

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SPX CORPORATION AND SUBSIDIARIES

FREE CASH FLOW  RECONCILIATION

(Unaudited; in millions)

		Three months ended
		March 31,
		2007			2006
Net cash used in continuing operations		$	(15.1	)	$	(114.2	)
Capital expenditures - continuing operations		(12.1		)	(10.2		)
Free cash flow used in continuing operations		$	(27.2	)	$	(124.4	)

 

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SPX CORPORATION AND SUBSIDIARIES

CASH AND DEBT RECONCILIATION

(Unaudited; in millions)

		Three months ended
		March 31, 2007
Beginning cash		$	477.2
Operational cash flow		(15.1		)
Business acquisitions and investments, net of cash acquired		(1.7		)
Capital expenditures		(12.1		)
Proceeds from asset sales		1.1
Repayments of senior credit facilities		(45.1		)
Net repayments under other financing arrangements		(24.5		)
Net borrowings under trade receivable agreement		15.0
Purchases of common stock		(140.6		)
Proceeds from the exercise of employee stock options and other		49.4
Dividends paid		(14.8		)
Cash used in discontinued operations		(7.3		)
Change in cash due to change in foreign exchange rates		5.0
Ending cash		$	286.5

 

		Debt at												Debt at
		12/31/2006			Borrowings			Repayments			Other			3/31/2007
Delayed draw term loan		$	735.0		$	—		$	(9.4	)	$	—		$	725.6
Global revolving loan facility		82.8			—			(35.7		)	(1.5		)	45.6
7.50% senior notes		28.2			—			—			—			28.2
6.25% senior notes		21.3			—			—			—			21.3
Other indebtedness		97.3			60.0			(69.5		)	6.4			94.2
Totals		$	964.6		$	60.0		$	(114.6	)	$	4.9		$	914.9