Revenues up 11%, Segment Income up 16%
Meets Target for Earnings Per Share and Exceeds Free Cash Flow Target
CHARLOTTE, N.C., Feb. 27 /PRNewswire-FirstCall/ -- SPX Corporation
(NYSE: SPW) today reported results for the fourth quarter and year ended
December 31, 2007:
Fourth Quarter Highlights:
-- Revenues increased 11.1% to $1.35 billion from $1.22 billion in the
year-ago quarter. Organic revenue growth* was 3.8%, while completed
acquisitions and the impact of currency fluctuations increased reported
revenues by 3.9% and 3.4%, respectively.
-- Segment income and margins were $197.0 million and 14.5%, compared with
$170.5 million and 14.0% in the year-ago quarter.
-- Diluted net income per share from continuing operations was $1.85,
compared with $1.47 in the year-ago quarter. Fourth quarter results
were impacted by a number of items, including:
- A 2007 effective tax rate of 21.9%, which represents a benefit of
$0.26 per share as compared to the expected 33.0% effective tax
rate.
- 2007 charges of $4.8 million, or $0.06 per share, related to legacy
legal matters recorded in corporate expense.
- 2007 non-cash charge of $4.0 million, or $0.05 per share, for
impairment of intangible assets.
-- Adjusted net income per share from continuing operations* was $1.70,
excluding the impact of the three items above, as compared to the
company's guidance of $1.60 to $1.70.
-- Net cash from continuing operations was $290.4 million, compared with
$83.7 million in 2006. The fourth quarter 2006 results included an
advance tax payment of $66.6 million, investments in working capital to
support organic growth and a tax payment of $23.4 million relating to
the retirement of the company's convertible debt in the first quarter
of 2006.
-- Free cash flow from continuing operations* during the quarter was
$247.0 million, compared with $68.8 million in the year-ago quarter.
The increase was due primarily to the items noted above, offset
partially by increased capital expenditures in 2007 to support
continued growth in the company.
Full Year 2007 Highlights:
-- Revenues increased 15.7% to $4.82 billion from $4.17 billion in 2006.
Organic revenue growth* was 9.8%, while completed acquisitions and the
impact of currency fluctuations increased reported revenues by 3.2% and
2.7%, respectively.
-- Segment income and margins were $622.4 million and 12.9%, compared with
$502.7 million and 12.1% in 2006.
-- Diluted net income per share from continuing operations was $5.33,
compared with $3.74 in 2006. The primary drivers of the increase were
the improvement in segment income, a reduced number of common shares
outstanding and a lower effective tax rate in 2007.
-- Adjusted net income per share from continuing operations* was $4.85 in
2007, as compared to the company's guidance of $4.70 to $4.80. This
figure is adjusted to exclude the following items:
- Miscellaneous tax benefits totaling $0.59 per share as compared to
the company's expected 32.0% tax rate.
- 2007 charges of $5.0 million, or $0.06 per share, related to legacy
legal matters recorded in corporate expense.
- 2007 non-cash charge of $4.0 million, or $0.05 per share, for
impairment of intangible assets.
-- Net cash from continuing operations was $404.2 million, compared with
$48.6 million in 2006. The primary drivers of the increase were
improved working capital performance and 2006 interest and tax payments
totaling $175.2 million relating to the retirement of the company's
convertible debt in the first quarter of 2006.
-- Free cash flow from continuing operations* was $313.3 million, compared
with a cash use of $7.1 million in 2006. The increase was due to the
items noted above, partially offset by increased capital expenditures
in 2007 to support continued growth of the company.
Chris Kearney, Chairman, President and CEO said, "In 2007, SPX
continued to grow and deliver strong financial results. Revenues for 2007
were $4.82 billion, an increase of 15.7% over 2006. Organic revenue growth
was almost 10%, driven by strong demand in our infrastructure and energy
markets.
"Our strategy of aligning the company around our three strategic growth
markets of global infrastructure, process equipment and diagnostic tools is
working. We have strong momentum and are well positioned for continued
growth in 2008," Kearney concluded.
FINANCIAL HIGHLIGHTS - CONTINUING OPERATIONS
Flow Technology
Revenues for the fourth quarter of 2007 were $323.1 million compared to
$244.1 million in the fourth quarter of 2006, an increase of $79.0 million,
or 32.4%. The increase was due primarily to organic revenue growth* of
18.0% and the acquisition of Johnson Pump. The organic revenue growth
related primarily to strong demand in the power, oil and gas, chemical,
sanitary and dehydration markets, as well as pricing improvements and new
product introductions. The impact of currency fluctuations increased
revenues by 3.1% from the year-ago quarter.
Segment income was $49.9 million, or 15.4% of revenues, in the fourth
quarter of 2007 compared to $37.1 million, or 15.2% of revenues, in the
fourth quarter of 2006. The increase in segment income and margins was due
primarily to the strong level of organic growth and manufacturing
efficiencies achieved from continuous improvement initiatives, offset
partially by the acquisition of Johnson Pump, which performed at lower
margins than the segment.
Test and Measurement
Revenues for the fourth quarter of 2007 were $340.8 million compared to
$317.5 million in the fourth quarter of 2006, an increase of $23.3 million,
or 7.3%. The increase was due primarily to acquisitions completed in the
second half of 2007. The impact of currency fluctuations increased reported
revenues by 3.3%, offset partially by organic revenue declines* of 2.0% due
primarily to reduced volumes in North American OEM tool programs.
Segment income was $43.0 million, or 12.6% of revenues, in the fourth
quarter of 2007 compared to $49.9 million, or 15.7% of revenues, in the
fourth quarter of 2006. The decline in segment income and margins was due
primarily to the organic revenue decline noted above, a less favorable
product mix and the acquisitions noted above, which performed at lower
margins than the segment.
Thermal Equipment and Services
Revenues for the fourth quarter of 2007 were $437.6 million compared to
$430.6 million in the fourth quarter of 2006, an increase of $7.0 million,
or 1.6%. The impact of currency fluctuations increased reported revenues by
5.0% from the year-ago quarter, offset partially by organic revenue
declines* of 3.4%. The organic revenue decline was primarily related to the
timing of cooling system revenues.
Segment income was $52.3 million, or 12.0% of revenues, in the fourth
quarter of 2007 compared to $50.2 million, or 11.7% of revenues, in the
fourth quarter of 2006. The increase in segment income and margins was due
primarily to improved operating performance in the thermal equipment and
heating product lines.
Industrial Products and Services
Revenues for the fourth quarter of 2007 were $253.1 million compared to
$227.4 million in the fourth quarter of 2006, an increase of $25.7 million,
or 11.3%. The increase was due primarily to organic revenue growth* of
10.4%, related largely to increased demand for domestic power transformers.
The impact of currency fluctuations increased revenues by 0.9% from the
year-ago quarter.
Segment income was $51.8 million, or 20.5% of revenues, in the fourth
quarter of 2007 compared to $33.3 million, or 14.6% of revenues, in the
fourth quarter of 2006. The increase in segment income and margins was
driven largely by the organic growth in power transformers from pricing and
volume, in addition to manufacturing efficiencies achieved from continuous
improvement initiatives across the segment.
OTHER ITEMS
Dividend: On February 21, 2008, the Board of Directors announced a
quarterly dividend of $0.25 per common share payable on April 1, 2008, to
shareholders of record on March 14, 2008. The fourth quarter 2007 dividend
of $0.25 per common share was paid on January 2, 2008.
Acquisition: On December 31, 2007, the company completed the
acquisition of APV for $524.2 million. APV, a global manufacturer of
process equipment and engineered solutions primarily for the sanitary
market, had revenues of approximately $876.0 million in the twelve months
prior to acquisition, and will be integrated into and reported in the Flow
Technology segment.
Discontinued Operations: During the fourth quarter of 2007, the company
completed the divestitures of two product lines formerly reported in its
Thermal Equipment and Services segment. These product lines were sold for
combined cash proceeds of $18.4 million, and resulted in the recording of a
combined gain on sale of $14.9 million, net of taxes. For the full year
2007, these product lines had revenues of approximately $100.0 million.
Form 10-K: The company expects to file its annual report on Form 10-K
for the year ended December 31, 2007 with the Securities and Exchange
Commission by February 29, 2008. 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 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 product portfolio, containing
many environmentally friendly products, 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
17,000 people worldwide in over 35 countries. Visit http://www.spx.com. (NYSE:
SPW)
* Non-GAAP number. See attached financial schedules for reconciliation
to most comparable GAAP number.
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 quarterly
report on Form 10-Q for the period ended September 30, 2007 and the
company's annual report on Form 10-K for the year ended December 31, 2007.
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
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited; in millions, except per share amounts)
Three months ended Twelve months ended
December 31, December 31,
2007 2006 2007 2006
Revenues $1,354.6 $1,219.6 $4,822.3 $4,167.6
Costs and expenses:
Cost of products sold 939.7 874.9 3,429.2 2,998.2
Selling, general and
administrative 263.2 219.3 937.5 830.5
Intangible amortization 5.1 4.0 18.4 14.1
Impairment of intangible assets 4.0 - 4.0 -
Special charges, net 3.5 (0.7) 7.6 3.9
Operating income 139.1 122.1 425.6 320.9
Other expense, net (1.7) (8.9) (4.6) (28.0)
Interest expense (24.3) (16.6) (76.9) (62.8)
Interest income 2.8 3.5 9.1 12.6
Loss on early extinguishment of debt - - (3.3) -
Equity earnings on joint ventures 10.8 12.5 39.9 40.8
Income from continuing
operations before income taxes 126.7 112.6 389.8 283.5
Income tax provision (27.8) (25.7) (89.5) (57.8)
Income from continuing
operations 98.9 86.9 300.3 225.7
Income (loss) from discontinued
operations, net of tax (1.8) (0.1) (2.6) 0.8
Gain (loss) on disposition of
discontinued operations, net of tax 11.1 - (3.5) (55.8)
Income (loss) from
discontinued operations 9.3 (0.1) (6.1) (55.0)
Net income $108.2 $86.8 $294.2 $170.7
Basic income per share of common
stock
Income from continuing operations $1.90 $1.51 $5.47 $3.87
Income (loss) from discontinued
operations 0.18 - (0.11) (0.94)
Net income per share $2.08 $1.51 $5.36 $2.93
Weighted average number of common
shares outstanding - basic 51.973 57.440 54.842 58.254
Income from continuing operations
for diluted income per share $98.9 $86.9 $300.3 $226.8
Net income for diluted income per
share $108.2 $86.8 $294.2 $171.8
Diluted income per share of common
stock
Income from continuing operations $1.85 $1.47 $5.33 $3.74
Income (loss) from discontinued
operations 0.17 - (0.11) (0.91)
Net income per share $2.02 $1.47 $5.22 $2.83
Weighted average number of common
shares outstanding - diluted 53.438 58.944 56.307 60.724
SPX CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited; in millions)
December 31, December 31,
2007 2006
ASSETS
Current assets:
Cash and equivalents $354.1 $476.9
Accounts receivable, net 1,299.9 1,103.1
Inventories, net 703.8 496.2
Other current assets 106.9 87.0
Deferred income taxes 60.0 55.4
Assets of discontinued operations 56.1 299.0
Total current assets 2,580.8 2,517.6
Property, plant and equipment
Land 43.0 29.4
Buildings and leasehold improvements 236.7 194.7
Machinery and equipment 628.5 518.3
908.2 742.4
Accumulated depreciation (416.0) (383.3)
Net property, plant and equipment 492.2 359.1
Goodwill 1,985.5 1,727.0
Intangibles, net 727.4 480.1
Other assets 407.5 353.3
TOTAL ASSETS $6,193.4 $5,437.1
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $733.8 $494.1
Accrued expenses 1,050.2 812.0
Income taxes payable 20.0 79.3
Short-term debt 255.4 168.0
Current maturities of long-term debt 79.0 42.3
Liabilities of discontinued operations 31.1 136.9
Total current liabilities 2,169.5 1,732.6
Long-term debt 1,240.7 753.5
Deferred and other income taxes 202.6 188.8
Other long-term liabilities 564.2 649.3
Total long-term liabilities 2,007.5 1,591.6
Minority interest 10.4 3.5
Shareholders' equity:
Common stock 963.5 937.4
Paid-in capital 1,296.0 1,134.5
Retained earnings 2,045.9 1,754.2
Accumulated other comprehensive
income (loss) 38.1 (86.6)
Common stock in treasury (2,337.5) (1,630.1)
Total shareholders' equity 2,006.0 2,109.4
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $6,193.4 $5,437.1
SPX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited; in millions)
Year ended
December 31,
2007 2006
Cash flows from (used in) operating activities:
Net income $294.2 $170.7
Less: Loss from discontinued
operations, net of tax (6.1) (55.0)
Income from continuing operations 300.3 225.7
Adjustments to reconcile income from continuing
operations to net cash from operating activities
Special charges, net 7.6 3.9
Impairment of intangible assets 4.0 -
Loss on early extinguishment of debt 3.3 -
Deferred and other income taxes 5.5 5.4
Depreciation and amortization 79.0 72.1
Accretion of LYONs - 1.7
Pension and other employee benefits 58.0 62.3
Stock-based compensation 41.4 37.6
Other, net 6.6 (8.0)
Changes in operating assets and liabilities, net
of effects from acquisitions and divestitures
Accounts receivable and other 15.9 (206.7)
Inventories (42.5) (42.1)
Accounts payable, accrued expenses and other (69.6) 81.0
Payments to terminate interest
rate swap agreements (0.4) -
Payments of LYONs tax recapture - (90.9)
Accreted interest paid on LYONs
repurchase (accreted since issuance date) - (84.3)
Cash spending on restructuring actions (4.9) (9.1)
Net cash from continuing operations 404.2 48.6
Net cash from discontinued operations 35.4 11.4
Net cash from operating activities 439.6 60.0
Cash flows from (used in) investing activities:
Proceeds from asset sales 3.3 19.4
Business acquisitions and
investments, net of cash acquired (567.2) (169.4)
Capital expenditures (90.9) (55.7)
Net cash used in continuing operations (654.8) (205.7)
Net cash from discontinued operations 126.1 101.4
Net cash used in investing activities (528.7) (104.3)
Cash flows from (used in) financing activities:
Borrowings under senior credit facilities 1,606.3 833.2
Repayments under senior credit facilities (1,560.6) (15.0)
Borrowings under senior notes 500.0 -
Repayment of LYONs principal - (576.0)
Borrowings under trade receivables agreement 586.0 199.0
Repayments under trade receivables agreement (517.0) (199.0)
Net repayments under other financing
arrangements (21.9) (4.4)
Purchases of common stock (715.9) (436.3)
Proceeds from the exercise of employee
stock options 153.7 196.8
Financing fees paid (15.1) (0.4)
Dividends paid (56.5) (59.9)
Net cash used in continuing operations (41.0) (62.0)
Net cash used in discontinued operations (5.8) (1.5)
Net cash used in financing activities (46.8) (63.5)
Change in cash and equivalents due to
changes in foreign currency exchange rates 12.8 4.8
Net change in cash and equivalents (123.1) (103.0)
Consolidated cash and equivalents,
beginning of period 477.2 580.2
Consolidated cash and equivalents,
end of period $354.1 $477.2
Cash and equivalents of continuing operations $354.1 $476.9
Cash and equivalents of discontinued operations $- $0.3
SPX CORPORATION AND SUBSIDIARIES
RESULTS OF OPERATIONS BY SEGMENT
(Unaudited; in millions)
Three months ended Year ended
December 31, December 31,
2007 2006 % 2007 2006 %
Flow Technology (1)
Revenues $323.1 $244.1 32.4% $1,121.3 $865.7 29.5%
Gross profit 107.9 78.6 385.8 287.9
Selling, general and
administrative expense 56.6 41.0 203.8 153.8
Intangible amortization
expense 1.4 0.5 4.8 0.9
Segment income $49.9 $37.1 34.5% $177.2 $133.2 33.0%
as a percent of
revenues 15.4% 15.2% 15.8% 15.4%
Test and Measurement
Revenues $340.8 $317.5 7.3% $1,174.1 $1,137.5 3.2%
Gross profit 107.4 104.2 357.9 375.6
Selling, general and
administrative expense 62.4 52.8 225.1 211.0
Intangible amortization
expense 2.0 1.5 6.4 5.5
Segment income $43.0 $49.9 -13.8% $126.4 $159.1 -20.6%
as a percent of
revenues 12.6% 15.7% 10.8% 14.0%
Thermal Equipment and
Services (1)
Revenues $437.6 $430.6 1.6% $1,560.5 $1,327.7 17.5%
Gross profit 117.6 104.3 376.5 309.1
Selling, general and
administrative expense 63.8 52.4 207.5 191.1
Intangible amortization
expense 1.5 1.7 6.3 6.6
Segment income $52.3 $50.2 4.2% $162.7 $111.4 46.1%
as a percent of
revenues 12.0% 11.7% 10.4% 8.4%
Industrial Products and
Services (1)
Revenues $253.1 $227.4 11.3% $966.4 $836.7 15.5%
Gross profit 85.9 61.5 288.7 213.2
Selling, general and
administrative expense 33.9 27.9 131.7 113.1
Intangible amortization
expense 0.2 0.3 0.9 1.1
Segment income $51.8 $33.3 55.6% $156.1 $99.0 57.7%
as a percent of
revenues 20.5% 14.6% 16.2% 11.8%
Total segment income $197.0 $170.5 $622.4 $502.7
Corporate expenses (30.4) (26.0) (100.3) (96.1)
Pension and
postretirement expense (11.0) (10.4) (43.5) (44.2)
Stock-based compensation
expense (9.0) (12.7) (41.4) (37.6)
Special charges, net (3.5) 0.7 (7.6) (3.9)
Impairment of intangible
assets (4.0) - (4.0) -
Consolidated Operating
Income (1) $139.1 $122.1 $425.6 $320.9
(1) Excludes results of discontinued operations.
SPX CORPORATION AND SUBSIDIARIES
ORGANIC REVENUE GROWTH RECONCILIATION
(Unaudited)
Three months ended December 31, 2007
Acquisitions Organic
Net Revenue and Foreign Revenue
Growth Divestitures Currency Growth
Flow Technology 32.4 % 11.3 % 3.1 % 18.0 %
Test and Measurement 7.3 % 6.0 % 3.3 % (2.0)%
Thermal Equipment and Services 1.6 % - % 5.0 % (3.4)%
Industrial Products and Services 11.3 % - % 0.9 % 10.4 %
Consolidated 11.1 % 3.9 % 3.4 % 3.8 %
Twelve months ended December 31, 2007
Acquisitions Organic
Net Revenue and Foreign Revenue
Growth Divestitures Currency Growth
Flow Technology 29.5 % 13.1 % 2.4 % 14.0 %
Test and Measurement 3.2 % 1.9 % 2.9 % (1.6)%
Thermal Equipment and Services 17.5 % - % 4.0 % 13.5 %
Industrial Products and Services 15.5 % - % 0.7 % 14.8 %
Consolidated 15.7 % 3.2 % 2.7 % 9.8 %
SPX CORPORATION AND SUBSIDIARIES
ADJUSTED FREE CASH FLOW RECONCILIATION
(Unaudited; in millions)
Three months Twelve months
ended ended
December 31, December 31,
2007 2006 2007 2006
Net cash from continuing operations $290.4 $83.7 $404.2 $48.6
Capital expenditures - continuing
operations (43.4) (14.9) (90.9) (55.7)
Free cash flow from (used in)
continuing operations $247.0 $68.8 $313.3 $(7.1)
SPX CORPORATION AND SUBSIDIARIES
CASH AND DEBT RECONCILIATION
(Unaudited; in millions)
Twelve months ended
December 31, 2007
Beginning cash $477.2
Operational cash flow 404.2
Business acquisitions and investments, net of cash acquired (567.2)
Capital expenditures (90.9)
Proceeds from asset sales 3.3
Borrowings under trade receivables agreement 586.0
Repayments under trade receivables agreement (517.0)
Borrowings under senior credit facilities 1,606.3
Repayments under senior credit facilities (1,560.6)
Borrowings under senior notes 500.0
Net repayments under other financing arrangements (21.9)
Purchases of common stock (715.9)
Proceeds from the exercise of employee stock options 153.7
Dividends paid (56.5)
Financing fees paid (15.1)
Cash from discontinued operations 155.7
Change in cash due to change in foreign currency exchange rates 12.8
Ending cash $354.1
Debt At Debt At
12/31/2006 Borrowings Repayments Other 12/31/2007
Term loan $735.0 $750.0 $(735.0) $- $750.0
Domestic revolving loan
facility - 757.0 (642.0) - 115.0
Global revolving loan
facility 82.8 99.3 (183.6) 1.5 -
7.625% senior notes - 500.0 - - 500.0
7.5% senior notes 28.2 - - - 28.2
6.25% senior notes 21.3 - - - 21.3
Trade receivables
financing agreement 1.0 586.0 (517.0) - 70.0
Other 95.5 - (21.9) 17.0 90.6
Totals $963.8 $2,692.3 $(2,099.5) $18.5 $1,575.1
SPX CORPORATION AND SUBSIDIARIES
ADJUSTED EARNINGS PER SHARE RECONCILIATION
(Unaudited; in millions, except per share)
Three Months Ended Year Ended
December 31, 2007 December 31, 2007
Diluted net income per share of
common stock from continuing
operations $1.85 $5.33
Third quarter tax benefits - (0.34)
Fourth quarter tax benefits, net (0.26) (0.25)
Legacy legal matters 0.06 0.06
Impairment charge on intangible assets 0.05 0.05
Adjusted diluted net income per share
of common stock from continuing
operations $1.70 $4.85
SOURCE SPX Corporation
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Related links:
http://www.spx.com
CONTACT:
Investors, Jeremy W. Smeltser,
+1-704-752-4478, investor@spx.com, Media, Jennifer H. Epstein,
+1-704-752-7403, jennifer.epstein@spx.com, both of SPX
Corporation
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