Revenues up 9%, Segment Income up 19% CHARLOTTE, N.C., May 3
/PRNewswire-FirstCall/ -- SPX Corporation (NYSE: SPW) today
reported results for the first quarter ended March 31, 2006: --
Revenues increased 8.8% to $1.06 billion from $977.6 million in the
year-ago quarter. Organic revenue growth (revenue growth over the
year-ago quarter excluding the effects of foreign currency
fluctuations and acquisitions and divestitures) was 9.8%, while
completed acquisitions and the impact of currency fluctuations
combined to reduce reported revenues by 1.0%. -- Segment income and
margins were $87.6 million and 8.2%, compared with $73.9 million
and 7.6% in the year-ago quarter. -- Diluted net income per share
from continuing operations was $0.42, compared with a loss of $0.78
in the year-ago quarter. First quarter 2005 results were reduced by
costs related to the early extinguishment of debt of $103.5
million, or $0.83 per share. -- Diluted net income per share,
including discontinued operations, was $0.35, compared with $9.17
in the year-ago quarter. The first quarter of 2006 included a loss
on the disposition of discontinued operations, net of tax, of $4.9
million, or $0.07 per share, while the first quarter of 2005
included a gain on the disposition of discontinued operations, net
of tax, of $740.9 million, or $9.94 per share. -- Adjusted free
cash flow from continuing operations during the quarter was a
negative $48.2 million, compared with a negative $53.2 million of
free cash flow in the year-ago quarter. This performance is
consistent with the company's historical seasonal patterns of free
cash flow. For the year, the company's guidance for adjusted free
cash flow remains at $190 million to $210 million. Chris Kearney,
President and CEO said, "The first quarter marked our second
straight quarter of organic revenue growth of approximately 10.0%,
and included double-digit organic growth in three of our four
segments. Segment margins expanded 60 points to 8.2%, positioning
us well to meet our full year target improvement. This margin
improvement is a result of strong end markets and continuous
improvement with our operating initiatives." Mr. Kearney continued,
"Our first quarter earnings per share were $0.42, well above our
previous expectations of $0.27 to $0.30 per share. While a portion
of this was due to timing, we are very pleased to announce a $0.10
per share increase in our full year earnings per share guidance
range. We are now expecting earnings from continuing operations of
$2.85 to $2.95 per share." "SPX is off to a great start in 2006,
building on the momentum we established in 2005, and supporting our
increased 2006 financial commitments," Mr. Kearney concluded.
FINANCIAL HIGHLIGHTS - CONTINUING OPERATIONS Flow Technology
Revenues in the first quarter of 2006 were $218.0 million compared
to $202.0 million in the first quarter of 2005, an increase of
$16.0 million, or 7.9%. The increase was due to organic revenue
growth of 10.8%, related primarily to strong demand in the power,
mining, oil and gas, and dehydration markets. The impact of
currency fluctuations decreased revenues by 2.9% from the year-ago
quarter. Segment income was $28.0 million, or 12.8% of revenues, in
the first quarter of 2006 compared to $18.4 million, or 9.1% of
revenues, in the first quarter of 2005. The increase in segment
income and margins was due to the strong level of organic growth,
improved pricing, and lean manufacturing initiatives. In addition,
the first quarter of 2005 included charges of $4.0 million in
connection with operating inefficiencies at a Canadian operation.
Test and Measurement Revenues in the first quarter of 2006 were
$256.8 million compared to $246.3 million in the first quarter of
2005, an increase of $10.5 million, or 4.3%. The increase was due
primarily to the acquisition of CarTool in the fourth quarter of
2005 and organic growth across the segment, partially offset by the
impact of currency fluctuations. Segment income was $24.0 million,
or 9.3% of revenues, in the first quarter of 2006 compared to $19.2
million, or 7.8% of revenues, in the first quarter of 2005. The
increase in segment income and margins was due primarily to
improved profitability across the segment, most notably in portable
cable and pipe locator product lines, and the acquisition of
CarTool. Thermal Equipment and Services Revenues in the first
quarter of 2006 were $283.1 million compared to $253.9 million in
the first quarter of 2005, an increase of $29.2 million, or 11.5%.
The increase was due to organic revenue growth of 14.1%, related
largely to the strong demand for thermal service and repair work in
Europe and dry cooling products in Asia. The impact of currency
fluctuations decreased revenues by 2.6% from the year-ago quarter.
Segment income was $11.7 million, or 4.1% of revenues, in the first
quarter of 2006 compared to $17.6 million, or 6.9% of revenues, in
the first quarter of 2005. The decrease in segment income and
margins was due primarily to additional selling, general and
administrative costs to support the segment's expansion in Asia and
Europe, higher manufacturing costs in the boiler and heating and
ventilation businesses, and a decline in income from thermal
services and repairs associated with unexpected delays for certain
large contracts resulting in under-absorption of fixed costs.
Industrial Products and Services Revenues in the first quarter of
2006 were $306.1 million compared to $275.4 million in the first
quarter of 2005, an increase of $30.7 million, or 11.1%. The
increase was due to organic revenue growth of 11.4%, driven by
increases across the segment, with the exception of declines in the
domestic automotive market. The most notable organic growth related
largely to increased demand for power transformers and industrial
and hydraulic tools. The impact of currency fluctuations decreased
revenues by 0.3% from the year- ago quarter. Segment income was
$23.9 million, or 7.8% of revenues, in the first quarter of 2006
compared to $18.7 million, or 6.8% of revenues, in the first
quarter of 2005. The increase in segment income and margins was
driven by improvements across the segment and can be attributed to
strong organic growth from pricing and end market strength, and
manufacturing efficiencies achieved from continuous improvement
initiatives, partially offset by the declines in the domestic
automotive market. OTHER ITEMS Share Repurchases: During the first
quarter of 2006, the company repurchased 4.2 million shares of its
common stock for $204.3 million. Year- to-date, the company has
repurchased 4.6 million shares of its common stock for $226.6
million. This activity marks the completion of the company's
previously announced 10b5-1 trading plan. Since beginning its share
repurchase strategy in the second quarter of 2005, the company has
repurchased 19.4 million shares for $902.0 million. Debt
Refinancing: During the first quarter of 2006, the company borrowed
$750.0 million under its delayed draw term loan facility within its
senior credit facility. The majority of the proceeds from this
borrowing were used to settle $660.2 million of Liquid Yield Option
Notes ("LYONs"), which were put to the company during the quarter.
The remaining proceeds will be used to fund tax recapture payments
related to the LYONs settlement. In connection with the new $750.0
million term loan facility, the company entered into interest rate
swap agreements to hedge the potential impact of increases in
interest rates on that facility. These swaps are accounted for as
cash flow hedges and effectively convert $550.0 million of the
borrowing to fixed rates. Discontinued Operations: During the third
quarter of 2005, the company committed to a plan to divest Vance,
its former global investigation and security firm. During the first
quarter of 2006, this disposition was completed and the company
received $70.6 million in proceeds. Primarily as a result of this
divestiture, the company recorded a loss on the disposition of
discontinued operations of $4.9 million, net of tax, during the
first quarter of 2006. Dividend: On February 22, 2006, the Board of
Directors announced a quarterly dividend of $0.25 per common share
payable on April 1, 2006, to shareholders of record on March 15,
2006. This first quarter 2006 dividend was paid on April 3, 2006.
Form 10-Q: The company expects to file its quarterly report on Form
10-Q for the quarter ended March 31, 2006 with the Securities and
Exchange Commission by May 10, 2006. This press release should be
read in conjunction with that filing, which will be available on
the company's website at http://www.spx.com/, in the Investor
Relations section. SPX Corporation is a leading global provider of
flow technology, test and measurement solutions, thermal equipment
and services and industrial products and services. For more
information visit the company's website at http://www.spx.com/.
Certain statements in this press release are forward-looking
statements within the meaning of Section 21E of the Securities
Exchange Act of 1934, as amended, and are subject to the safe
harbor created thereby. Please read these results in conjunction
with the company's documents filed with the Securities and Exchange
Commission, including the company's annual report on Form 10-K for
the year ended December 31, 2005. These filings identify important
risk factors and other uncertainties that could cause actual
results to differ from those contained in the forward-looking
statements. Actual results may differ materially from these
statements. The words "believe," "expect," "anticipate,"
"estimate," "guidance," "target" and similar expressions identify
forward-looking statements. Although the company believes that the
expectations reflected in its forward-looking statements are
reasonable, it can give no assurance that such expectations will
prove to be correct. In addition, estimates of future operating
results are based on the company's current complement of
businesses, which is subject to change. SPX CORPORATION AND
SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS ($ in millions)
March 31, December 31, 2006 2005 (Unaudited) ASSETS Current assets:
Cash and equivalents $453.9 $576.3 Accounts receivable, net 1,001.4
961.8 Inventories, net 499.9 463.4 Other current assets 79.8 78.3
Deferred income taxes 138.3 46.4 Assets of discontinued operations
- 102.1 Total current assets 2,173.3 2,228.3 Property, plant and
equipment Land 29.2 28.9 Buildings and leasehold improvements 245.8
240.8 Machinery and equipment 693.9 686.2 968.9 955.9 Accumulated
depreciation (492.8) (481.7) Net property, plant and equipment
476.1 474.2 Goodwill 1,824.4 1,812.2 Intangibles, net 436.2 437.4
Other assets 359.1 354.3 TOTAL ASSETS $5,269.1 $5,306.4 LIABILITIES
AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable
$499.2 $535.0 Accrued expenses 689.8 683.2 Income taxes payable
244.2 158.9 Short-term debt 50.9 64.9 Current maturities of
long-term debt 27.0 2.6 Liabilities of discontinued operations -
26.1 Total current liabilities 1,511.1 1,470.7 Long-term debt 788.1
720.9 Deferred and other income taxes 343.7 345.1 Other long-term
liabilities 664.3 656.6 Total long-term liabilities 1,796.1 1,722.6
Minority interest 2.3 1.9 Shareholders' equity: Common stock 939.9
920.8 Paid-in capital 1,090.1 1,084.8 Retained earnings 1,648.7
1,642.0 Unearned compensation - (55.3) Accumulated other
comprehensive loss (161.1) (173.8) Common stock in treasury
(1,558.0) (1,307.3) Total shareholders' equity 1,959.6 2,111.2
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $5,269.1 $5,306.4 SPX
CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS (Unaudited) (in millions, except per share amounts)
Three months ended March 31, 2006 2005 Revenues $1,064.0 $977.6
Costs and expenses: Cost of products sold 795.5 731.2 Selling,
general and administrative 218.5 201.4 Intangible amortization 4.0
4.4 Special charges, net 0.4 4.8 Operating income 45.6 35.8 Other
expense, net (0.7) (3.2) Interest expense (13.8) (32.3) Interest
income 3.2 1.5 Loss on early extinguishment of debt - (103.5)
Income (loss) from continuing operations before income taxes 34.3
(101.7) Income tax (provision) benefit (17.6) 38.9 Equity earnings
in joint ventures 9.8 4.3 Income (loss) from continuing operations
26.5 (58.5) Income from discontinued operations, net of tax 0.1 1.0
Gain (loss) on disposition of discontinued operations, net of tax
(4.9) 740.9 Income (loss) from discontinued operations (4.8) 741.9
Net income $21.7 $683.4 Basic income (loss) per share of common
stock Income (loss) from continuing operations $0.44 $(0.78) Income
(loss) from discontinued operations (0.08) 9.95 Net income per
share $0.36 $9.17 Weighted average number of common shares
outstanding - basic 59.971 74.556 Income (loss) from continuing
operations for diluted income (loss) per share $27.6 $(58.5) Net
income for diluted income per share $22.8 $683.4 Diluted income
(loss) per share of common stock (1) Income (loss) from continuing
operations 0.42 $(0.78) Income (loss) from discontinued operations
(0.07) 9.95 Net income per share $0.35 $9.17 Weighted average
number of common shares outstanding - dilutive 65.363 74.556 (1)
Diluted loss per share for the quarter ended March 31, 2005 is
anti-dilutive and therefore has been adjusted to reflect basic loss
per share. SPX CORPORATION AND SUBSIDIARIES RESULTS OF OPERATIONS
BY SEGMENT (Unaudited) ($ in millions) Three months ended March 31,
2006 2005 % Flow Technology (1) Revenues $218.0 $202.0 7.9% Gross
profit 72.8 62.1 Selling, general and administrative expense 44.6
42.6 Intangible amortization expense 0.2 1.1 Segment income $28.0
$18.4 52.2% as a percent of revenues 12.8% 9.1% Test and
Measurement (1) Revenues $256.8 $246.3 4.3% Gross profit 77.3 72.8
Selling, general and administrative expense 51.6 52.7 Intangible
amortization expense 1.7 0.9 Segment income $24.0 $19.2 25.0% as a
percent of revenues 9.3% 7.8% Thermal Equipment and Services (1)
Revenues $283.1 $253.9 11.5% Gross profit 60.3 59.3 Selling,
general and administrative expense 47.0 40.0 Intangible
amortization expense 1.6 1.7 Segment income $11.7 $17.6 -33.5% as a
percent of revenues 4.1% 6.9% Industrial Products and Services (1)
Revenues $306.1 $275.4 11.1% Gross profit 62.6 54.9 Selling,
general and administrative expense 38.2 35.5 Intangible
amortization expense 0.5 0.7 Segment income $23.9 $18.7 27.8% as a
percent of revenues 7.8% 6.8% Total segment income 87.6 73.9
Corporate expenses (20.1) (20.3) Pension and postretirement expense
(12.1) (7.7) Stock-based compensation expense (9.4) (5.3) Special
charges, net (0.4) (4.8) Consolidated Operating Income (1) $45.6
$35.8 (1) Excludes results of discontinued operations. SPX
CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS (Unaudited) ($ in millions) Three months ended March 31,
2006 2005 Cash flows from (used in) operating activities: Net
income $21.7 $683.4 Less: Income (loss) from discontinued
operations, net of tax (4.8) 741.9 Income (loss) from continuing
operations 26.5 (58.5) Adjustments to reconcile income (loss) from
continuing operations to net cash from (used in) operating
activities Special charges, net 0.4 4.8 Loss on early
extinguishment of debt - 103.5 Deferred and other income taxes 8.4
(38.0) Depreciation 18.9 18.7 Amortization of intangibles and other
assets 4.2 4.5 Accretion of LYONs 1.7 4.5 Pension and other
employee benefits 16.9 13.3 Stock-based compensation 9.4 5.3
Dividends from joint ventures in excess of equity earnings 2.6 6.6
Other, net 0.4 11.5 Changes in operating assets and liabilities,
net of effects from acquisitions and divestitures Accounts
receivable and other (44.3) 73.8 Inventories (34.4) (26.1) Accounts
payable, accrued expenses and other (37.7) (137.1) Payments to
terminate interest rate swap agreements - (13.3) Interest on LYONs
repayment (84.3) - Cash spending on restructuring actions (3.1)
(6.5) Net cash used in continuing operations (114.4) (33.0) Net
cash used in discontinued operations (13.6) (18.1) Net cash used in
operating activities (128.0) (51.1) Cash flows from (used in)
investing activities: Proceeds from sales of discontinued
operations, net of cash sold 73.5 1,859.9 Proceeds from other asset
sales 2.3 3.0 Business acquisitions and investments, net of cash
acquired (13.1) (2.8) Capital expenditures (18.1) (20.2) Net cash
from continuing operations 44.6 1,839.9 Net cash from (used in)
discontinued operations 0.9 (2.3) Net cash from investing
activities 45.5 1,837.6 Cash flows from (used in) financing
activities: Repayments of Tranche A and B term loans - (405.6)
Repurchase of senior notes (includes premiums paid of $72.9) -
(741.1) Borrowings under delayed draw term loan 750.0 - Repayment
of LYONs principal (575.9) - Net repayments under other financing
arrangements (14.1) (22.9) Purchases of common stock (248.5) -
Proceeds from the exercise of employee stock options 60.7 7.7
Financing fees paid (0.4) - Dividends paid (16.3) (18.5) Net cash
used in continuing operations (44.5) (1,180.4) Net cash used in
discontinued operations - (17.7) Net cash used in financing
activities (44.5) (1,198.1) Change in cash and equivalents due to
changes in foreign currency exchange rates 0.7 (12.1) Net change in
cash and equivalents (126.3) 576.3 Consolidated cash and
equivalents, beginning of period 580.2 586.4 Consolidated cash and
equivalents, end of period $453.9 $1,162.7 Cash and equivalents of
continuing operations $453.9 $1,154.9 Cash and equivalents of
discontinued operations $- $7.8 SPX CORPORATION AND SUBSIDIARIES
CASH AND DEBT RECONCILIATION (Unaudited) ($ in millions) Three
months ended 3/31/2006 Beginning cash (1) $580.2 Operational cash
flow (2) (114.4) Business acquisitions and investments, net of cash
acquired (13.1) Capital expenditures (18.1) Proceeds from sales of
discontinued operations, net of cash sold 73.5 Proceeds from other
asset sales 2.3 Borrowings under delayed draw term loan 750.0
Repayment of LYONs principal (575.9) Net repayments under other
financing arrangements (14.1) Purchases of common stock (248.5)
Proceeds from the exercise of employee stock options 60.7 Dividends
paid (16.3) Financing fees paid (0.4) Cash used in discontinued
operations (12.7) Change in cash due to change in foreign currency
exchange rates 0.7 Ending cash (1) $453.9 Accretion Debt At and
Debt Debt At 12/31/2005 Assumption Borrowings Repayments 3/31/2006
LYONs, net of unamortized discount (2) 658.6 1.7 - (660.2) 0.1 7.5%
Senior Notes 28.2 - - - 28.2 6.25% Senior Notes 21.3 - - - 21.3
Delayed draw term loan - - 750.0 - 750.0 Other 80.3 0.2 - (14.1)
66.4 Totals $788.4 $1.9 $750.0 $(674.3) $866.0 (1) Includes cash of
discontinued operations of $3.9 as of December 31, 2005. (2) LYONs
repayments include $84.3 of accreted interest that is a component
of operational cash flow. SPX CORPORATION AND SUBSIDIARIES ADJUSTED
FREE CASH FLOW RECONCILIATION (Unaudited) ($ in millions) Three
months ended March 31, 2006 2005 Cash used in continuing operations
$(114.4) $(33.0) Capital expenditures - continuing operations
(18.1) (20.2) Free cash flow used in continuing operations $(132.5)
$(53.2) Interest on LYONs repayment 84.3 - Adjusted free cash flow
used in continuing operations $(48.2) $(53.2) SPX CORPORATION AND
SUBSIDIARIES ORGANIC REVENUE GROWTH RECONCILIATION (Unaudited)
Quarter ended March 31, 2006 Net Revenue Acquisitions and Foreign
Organic Revenue Growth Other, Net Currency Growth Flow Technology
7.9 % - % (2.9)% 10.8 % Test and Measurement 4.3 % 3.5 % (2.0)% 2.8
% Thermal Equipment and Services 11.5 % - % (2.6)% 14.1 %
Industrial Products and Services 11.1 % - % (0.3)% 11.4 %
Consolidated 8.8 % 0.9 % (1.9)% 9.8 % DATASOURCE: SPX Corporation
CONTACT: Jeremy W. Smeltser, Investors, +1-704-752-4478, ; or Tina
Betlejewski, Media, +1-704-752-4454, , both of SPX Corporation Web
site: http://www.spx.com/
Copyright