SPX Corporation Reports Third Quarter EPS of $1.40 Per Share
26 October 1999
SPX Corporation Reports Third Quarter EPS of $1.40 Per Share; Operating Margins Nearly Doubled to 14%
MUSKEGON, Mich., Oct. 26 -- SPX Corporation today
announced third quarter 1999 earnings of $1.40 per share, a 175% improvement
over the comparable pro forma earnings in the third quarter 1998. The strong
results exceeded First Call's consensus estimate of $1.38 per share and
included 4.2% revenue growth and record operating margins.
HIGHLIGHTS*:
Earnings Per Share - Third quarter 1999 diluted earnings per share of
$1.40 represents a 175% improvement over pro forma third quarter 1998 earnings
per share of $0.51 before unusual items. Reported diluted earnings per share
includes after-tax unusual gains of $0.12 per share and after-tax unusual
charges of $0.12 per share as described below.
* In July 1999, the company sold marketable securities acquired in
connection with a technology acquisition, at a gain of $6.2 million pretax
($3.7 million after-tax), or $0.12 per share.
* Third quarter restructuring expenses related to actions announced in
the fourth quarter 1998 totaled $6.1 million pretax ($3.6 million after-tax),
or $0.12 per share.
Revenues - Revenues for the third quarter grew by 4.2% to $668.9 million,
compared to third quarter 1998 pro forma revenues of $641.8 million. Internal
growth for the quarter was 5.6%.
* Technical Products and Systems revenues for the third quarter 1999 were
$202.3 million, a 6.6% improvement over third quarter 1998 pro forma revenues
of $189.8 million. This 6.6% internal growth was driven by strong sales of
digital TV transmission systems, fire detection and life-safety systems, and a
new generation of transit fare collection systems.
* Industrial Products and Services revenues for the third quarter 1999
were $201.5 million, down slightly from third quarter 1998 pro forma revenues
of $209.2 million. Third quarter revenues were impacted by the closure of
unprofitable operations identified in the fourth quarter 1998 restructuring
plan and general softness in industrial process markets.
* Service Solutions revenues for the third quarter 1999 were $175.0
million, a 12.3% improvement over third quarter 1998 pro forma revenues of
$155.8 million. This internal double-digit growth was the result of several
new specialty tool programs.
* Vehicle Components revenues for the third quarter were $90.1 million, a
3.6% improvement over third quarter 1998 pro forma revenues of $87.0 million.
This increase in revenues was driven by new business and the impact of the GM
strike in 1998. Acutex, which was sold during the quarter, contributed $3.0
million of revenues and $9.0 million of revenues for the third quarter 1998.
Internal growth for the continuing businesses was 11.7%.
Operating Margins - Operating margins, before special charges, nearly
doubled to a record 14.0% for the third quarter 1999 compared to 7.4% for the
pro forma third quarter 1998. Operating margins improved in all four
segments.
Pro Forma Operating Third Quarter
Margin By Segment 1999 1998
Technical Products and Systems 18.9% 9.9%
Industrial Products and Services 18.9 13.4
Service Solutions 8.2 7.1
Vehicle Components 13.4 12.0
EVA - EVA improved by $22.0 million for the third quarter 1999, resulting
in year to date EVA improvement of $45.2 million.
* The company expects to be EVA positive early in 2000, two years ahead
of its original commitment of 2002.
* The company's success with EVA is directly attributable to high levels
of employee participation in EVA-based compensation. The company currently
has more than 60% of its work force on an EVA compensation plan and has
targeted a participation level of 80% by year-end 2000.
Cash Flow - The company generated EBIT of $102.7 million and EBITDA of
$129.7 million, before unusual items, for the third quarter 1999, compared to
EBIT of $58.2 million and EBITDA of $85.7 million for the pro forma third
quarter 1998.
* EBITDA margins, before unusual items, improved by 600 basis points to
19.4% for the third quarter 1999 compared to 13.4% for the pro forma third
quarter 1998.
* The company reduced net debt by $11.5 million after the $86.0 million
cash purchase of North American Transformer during the quarter. For the first
nine months of 1999, the company has reduced net debt by $145.6 million.
* Third quarter cash from operations was $79.7 million, capital spending
was $25.7 million, resulting in free cash flow of $54.0 million or 122% of
third quarter net income.
Commenting on the company's financial results, John B. Blystone, Chairman,
President and Chief Executive Officer said, "Our focus on EVA(R) and the SPX
Value Improvement Process(TM) continues to drive tremendous improvements in
operating results. Our businesses nearly doubled operating margins over the
last year. Cash flow was excellent, and we reduced debt even after the $86
million acquisition of North American Transformer. The third quarter results
represent the 15th consecutive quarter of exceeding our commitments, and we
are comfortable with analyst estimates for the fourth quarter."
SPX Corporation is a global provider of industrial products and services,
technical products and systems, service solutions and vehicle components. The
Internet address for SPX Corporation's home page is http://www.spx.com .
Certain statements in this press release are forward looking statements
within the meaning of Section 21E of the Securities Exchange Act of 1934, as
amended, and are subject to the safe harbor created thereby. Please refer to
the Company's Form 10-K for 1998 and the Company's 1999 Second Quarter Form
10-Q for discussion of certain important factors that relate to forward
looking statements contained in this press release. Although the Company
believes that the expectations reflected in any such forward looking
statements are reasonable, it can give no assurance that such expectations
will prove to be correct.
* On October 6, 1998, SPX Corporation merged with General Signal
Corporation in a reverse acquisition. As a result, the historical financial
results of General Signal became the accounting history of the combined
company through the third quarter of 1998. Accordingly, the comparison of the
historical financial results for the third quarter does not provide a basis
for meaningful analysis of the operations of the business. The following
discussion compares the third quarter 1999 to the third quarter 1998 pro forma
results.
SPX CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(Unaudited)
($ In Millions, Except Per Share Data)
Three months ended Nine months ended
September 30, September 30,
1999 1998 % 1999 1998 %
Revenues $668.9 $409.9 63.2% $1,987.2 $1,186.0 67.6%
Cost of sales 444.3 271.5 1,323.7 777.3
Selling, general &
administrative 120.7 102.4 378.8 290.0
Goodwill/Intangible
amortization 10.4 3.1 31.4 9.2
Special charges 6.1 - 26.2 -
Operating income 87.4 32.9 165.7% 227.1 109.5 107.4%
as a percent of
revenues 13.1% 8.0% 11.4% 9.2%
Other income, net 9.9 - 48.2 -
Equity in earnings
of EGS 8.2 10.4 25.8 30.4
Interest expense,
net (28.7) (4.2) (90.8) (12.8)
Income before income
taxes 76.8 39.1 210.3 127.1
Income taxes (32.7) (15.0) (93.7) (48.8)
Net income $44.1 $24.1 $116.6 $78.3
Diluted income
per share $1.40 $1.32 $3.75 $4.16
Weighted average number of
shares 31.398 18.321 31.063 18.828
Notes:
1. 1999 operating results include both SPX and former General Signal
businesses.
2. 1998 operating results reflect only the former General Signal
operations, as the Merger of SPX and General Signal in the fourth quarter
of 1998 was accounted for as a reverse acquisition.
SPX CORPORATION
PRO FORMA CONDENSED STATEMENT OF INCOME
(Unaudited)
($ In Millions, Except Per Share Data)
Three months ended Nine months ended
September 30, September 30,
1999 1998 % 1999 1998 %
Revenues $668.9 $641.8 4.2% $1,987.2 $1,880.0 5.7%
Cost of sales 444.3 438.4 1,323.7 1,277.9
Selling, general &
administrative 120.7 144.7 378.8 416.1
Goodwill/Intangible
amortization 10.4 10.9 31.4 31.6
Special charges
and gains 6.1 - 26.2 (7.1)
Operating income 87.4 47.8 82.8% 227.1 161.5 40.6%
as a percent of
revenues 13.1% 7.4% 11.4% 8.6%
Other income, net 9.9 - 48.2 1.5
Equity in earnings
of EGS 8.2 10.4 25.8 30.4
Interest expense, net (28.7) (32.1) (90.8) (89.9)
Income before
income taxes 76.8 26.1 210.3 103.5
Income taxes (32.7) (10.7) (93.7) (41.5)
Net income $44.1 $15.4 $116.6 $62.0
Diluted income
per share $1.40 $0.51 $3.75 $2.00
Weighted average
number of shares 31.398 30.284 31.063 31.043
Notes:
1. 1999 operating results represent actual operating results.
2. 1998 operating results are pro forma and reflect the Merger of SPX and
General Signal and related financings as if they had occurred as of
the beginning of 1998.
SPX CORPORATION
PRO FORMA STATEMENT OPERATING RESULTS BY SEGMENT
(Unaudited)
($ In Millions)
Three months ended Nine months ended
September 30, September 30,
1999 1998 % 1999 1998 %
Service Solutions
Revenues $175.0 $155.8 12.3% $494.9 $454.3 8.9%
Gross profit 47.3 44.9 143.0 130.8
Selling, general &
administrative 28.9 29.5 88.2 87.0
Goodwill/intangible
amortization 4.1 4.3 12.3 11.8
Operating income $14.3 $11.1 28.8% $42.5 $32.0 32.8%
as a percent of
revenues 8.2% 7.1% 8.6% 7.0%
Vehicle Components
Revenues $90.1 $87.0 3.6% $297.7 $280.0 6.3%
Gross profit 20.2 18.9 66.2 62.2
Selling, general &
administrative 5.7 6.0 17.6 17.5
Goodwill/intangible
amortization 2.4 2.5 7.3 7.6
Operating income $12.1 $10.4 16.3% $41.3 $37.1 11.3%
as a percent of
revenues 13.4% 12.0% 13.9% 13.3%
Industrial Products and Services
Revenues $201.5 $209.2 -3.7% $614.6 $615.7 -0.2%
Gross profit 73.0 70.5 221.4 214.2
Selling, general &
administrative 32.9 40.1 106.8 118.3
Goodwill/intangible
amortization 2.1 2.4 6.3 7.1
Operating income $38.0 $28.0 35.7% $108.3 $88.8 22.0%
as a percent of
revenues 18.9% 13.4% 17.6% 14.4%
Technical Products and Systems
Revenues $202.3 $189.8 6.6% $580.0 $530.0 9.4%
Gross profit 84.1 69.1 232.9 194.9
Selling, general &
administrative 44.1 48.7 141.4 144.0
Goodwill/intangible
amortization 1.8 1.7 5.5 5.1
Operating income $38.2 $18.7 104.3% $86.0 $45.8 87.8%
as a percent of
revenues 18.9% 9.9% 14.8% 8.6%
Notes:
1. 1999 operating results represent actual operating results.
2. The 1998 operating results are pro forma and reflect the Merger of SPX
and General Signal and related financings as if they had occurred as
of the beginning of 1998.