SPX Corporation Restructures: Estimates $0.15 Per Share Savings in 1998 And an Additional $0.35 Per Share Savings in 1999
19 December 1997
SPX Corporation Restructures: Estimates $0.15 Per Share Savings in 1998 And an Additional $0.35 Per Share Savings in 1999
MUSKEGON, Mich., Dec. 19 -- SPX Corporation
today announced it will record up to a $110 million pre-tax, $70 million
after-tax, restructuring charge in the fourth quarter of 1997. The
restructuring charge is the result of the company's actions to strategically
position its Service Solutions business in response to changing market
dynamics. These actions will be implemented over the next year and management
estimates the savings will be $0.15 per share in 1998 and an additional $0.35
in 1999. Details of the restructuring charge follow:
1. SPX is dramatically reorganizing to leap ahead of the changing market
dynamics in the vehicle service market.
* Vehicle service locations are consolidating, franchised dealers and
national accounts are increasing their share of the service market,
and the line between OEM dealers and the aftermarket is blurring.
* The electronic content of vehicles is increasing, data is
proliferating, use of the Internet is expanding and customers are
demanding systems with open architecture.
* The trend is moving from dedicated PC hardware toward smaller,
universal, handheld products that fully-integrate into the vehicle
service process.
2. Management is taking the actions necessary to profitably meet the
changing needs of customers.
* To take advantage of synergies in manufacturing, distribution and
engineering, the company is combining its OE Tool and Equipment and
Aftermarket Tool and Equipment groups into a single Service
Solutions business.
* SPX has reorganized its Service Solutions field sales and service
organization to better align with customers in a changing
marketplace. The company will increase its focus on franchised
dealers, national accounts and emissions programs while continuing
to service the current installed base.
* Engineering efforts will continue to be concentrated on development
of products that integrate the vehicle service process. SPX is
working closely with the other founding members of the Enterprise
Alliance to develop a comprehensive set of technical standards for
the seamless integration of computer-based, repair shop products.
3. The result of these actions is a $70 million after-tax restructuring
charge. The total charge is split almost equally between cash and non-
cash items.
* The cash portion of the restructuring charge is related to actions
taken to combine the OE and Aftermarket Tool and Equipment groups.
The charge includes closing several facilities and sales offices on
a global basis with a commensurate reduction in workforce.
* These strategic actions will also result in a reduced carrying value
of certain inventory and associated working and fixed capital.
These actions support the company's efforts to introduce new product
technology and accelerate the movement to smaller, lower-priced,
upgradeable equipment.
4. The company's restructuring actions will drive operational savings and
EVA improvement.
* The company estimates the actions associated with the restructuring
charge will improve earnings per share by $0.15 in 1998 and an
additional $0.35 in 1999, for a total of $0.50 per share annualized
savings.
* Under SPX's EVA or Economic Value Added plan, the restructuring
charge will be treated as an investment and will remain a permanent
part of the company's invested capital. The company is confident
that the restructuring charge will provide a return greater than its
cost of capital and therefore will be EVA positive.
* The company has obtained the necessary support from its lenders.
John B. Blystone, Chairman, President and Chief Executive Officer of SPX
Corporation said, "We're having another great year and we expect a solid
fourth quarter driven by program tool shipments and strong emissions program
sales. We remain confident with the earnings estimate of $2.96 per share for
1997. For 1998 and beyond, our decision to combine the OE Tool and Equipment
and Aftermarket Tool and Equipment businesses will strategically position SPX
ahead of the changes taking place in the vehicle service market."
Mr. Blystone added, "By taking advantage of the synergies within our
current set of businesses we will be a more profitable, responsive business,
aligned with our customers and the market. While the transition to handheld
and PASSPORT compatible products will result in a short-term reduction in
revenues, we remain confident in our 10% revenue growth commitment for 1998."
SPX Corporation is a global provider of Vehicle Service Solutions to
franchised dealers and independent service locations, Service Support to
Vehicle Manufacturers, and Vehicle Components to the worldwide motor vehicle
industry. The Internet address for SPX Corporation's home page is
http://www.spx.com.
Statements in this press announcement that are not strictly historical are
"forward-looking" statements within the meaning of the Safe Harbor provisions
of the federal securities laws. Investors are cautioned that such statements
are solely predictions and speak only as of the date of this release. Actual
results may differ materially due to risks and uncertainties that are
described in the company's Form 10-K for 1996, the 1996 Annual Report to
shareholders, and Form 10-Q for the first, second, and third quarters of 1997.
SOURCE SPX Corporation