SPX Reports Third Quarter EPS of $1.94
24 October 2000
SPX Reports Third Quarter EPS of $1.94
MUSKEGON, Mich., Oct. 24 SPX Corporation today
announced third quarter 2000 financial results.
John B. Blystone, Chairman, President and Chief Executive Officer of SPX
said, "I am pleased to report the 19th consecutive quarter of meeting our
commitments. During the quarter we accomplished a great deal. We
demonstrated the value of our INRANGE business through a successful IPO and we
took additional actions to reduce the structure and cost base of our
industrial businesses. To remain profitable in tightening markets, we will
continue to properly size our businesses. We remain confident in the First
Call full year earnings per share estimate of $5.90 excluding unusual items."
Earnings Per Share -- Reported third quarter earnings of $1.94 per share
include a pretax gain of $98.0 million ($57.6 million after-tax) or $1.78 per
share and the previously announced pretax charges of $76.1 million ($44.9
million after-tax) or $1.39 per share. The third quarter 2000 earnings per
share without the impact of these unusual items is $1.55, a 10.7% improvement
over third quarter 1999 earnings per share of $1.40.
-- The $1.78 per share gain is associated with the company's initial
public offering of 8,855,000 shares of its INRANGE Technologies subsidiary's
Class B common stock. The company received net cash proceeds of $128.2
million as a result of the transaction. The gain is net of the company's
investment in INRANGE, fees, and other expenses related to the transaction.
-- The cash portion of the charges, for severance, termination benefits
and other restructuring expenses, totals approximately $21.7 million pretax
($12.8 million after-tax) or $0.40 per share.
-- Adjustments to property, plant and equipment, in-process research and
development expense and goodwill impairment equal $42.1 million pretax ($24.8
million after-tax) or $0.77 per share.
-- Cost of goods sold includes a $12.3 million pretax charge ($7.3 million
after-tax) or $0.22 per share primarily for discontinued products associated
with the restructuring and other product changes of the company's Service
Solutions business.
Revenues -- Revenues for the third quarter were $645.1 million compared
with third quarter 1999 revenues of $668.9 million. The third quarter 1999
revenues include the results of Best Power and one month of the results of
Acutex. Both businesses were sold in 1999.
Third Quarter 2000 First 9 Months 2000
Revenue Growth By Segment Reported Internal Reported Internal
Technical Products and Systems -16.8% 16.2% -21.7% 10.7%
Industrial Products and Services 17.3% 2.3% 15.4% 2.9%
Service Solutions -11.0% -11.0% 6.0% 6.0%
Vehicle Components -6.0% -3.4% -5.7% 3.4%
Consolidated -3.6% 0.9% -1.0% 5.6%
-- Technical Products and Systems: Internal growth in the segment was
driven by the introduction of INRANGE's FC/9000 fibre channel director,
international demand for fire detection and building life-safety products,
increased domestic demand from the renovation market for building life safety
system service, and sales of vending machines used by the US Postal Service.
-- Industrial Products and Services: Double-digit reported revenue growth
of 17.3% in the segment is primarily the result of the acquisitions of North
American Transformer in September 1999 and Fenner Fluid Power in March 2000.
Strong international sales of laboratory equipment and sales of medium-power
transformers provided internal growth. Softness in the pulp and paper and
other process industries continues to challenge this segment.
-- Service Solutions: Timing of several specialty tool programs,
including the Worldwide Diagnostic System (WDS) for Ford and emissions
programs, included in third quarter 1999 revenues explain the year over year
comparison.
-- Vehicle Components: In the vehicle components segment, a decline in
revenues from the forging business was partially offset by new orders for P-
2000 die-castings.
Operating Margins -- Third quarter operating margins excluding special and
other charges improved by 190 points to 15.9%, compared to 14.0% for the third
quarter 1999. All four segments reported year over year margin improvements
for the quarter.
Third Quarter First 9 Months
Operating Margin By Segment 2000 1999 2000 1999
Technical Products and Systems 20.8% 18.9% 18.3% 14.8%
Industrial Products and Services 20.5% 18.9% 18.3% 17.6%
Service Solutions 10.0% 8.2% 10.2% 8.6%
Vehicle Components 14.5% 13.4% 12.6% 13.9%
Consolidated 15.9% 14.0% 13.9% 12.7%
EVA -- EVA improvement was $5.5 million for the third quarter 2000 and
$35.9 million for the first nine months.
Cash Flow -- The company generated EBIT of $108.6 million and EBITDA of
$136.1 million for the third quarter 2000, compared to EBIT of $102.7 million
and EBITDA of $129.7 million for the third quarter 1999.
-- Third quarter 2000 EBITDA margins were 21.1% compared to 19.4% for
third quarter 1999.
-- During the quarter, the company purchased 70,000 shares of its stock in
the open market for a total consideration of $9.5 million. This brings the
total number of shares purchased during the first nine months of the year to
544,600 for a total consideration to $47.2 million.
-- Cash restructuring for the quarter was $11.0 million.
-- For the first nine months of the year, the company completed several
business investments and acquisitions for $211.1 million, $120.5 million
during the third quarter.
Inrange Technologies
On September 22, SPX filed an IPO of its INRANGE Technologies subsidiary.
While the company still owns 89.5% of the total outstanding shares of INRANGE
and consolidates its earnings into the Technical Products and Systems segment,
INRANGE will publicly report earnings today for the first time. INRANGE has
announced an earnings conference call for 10:00 a.m. EDT. Additional details
regarding the conference call are available at http://www.inrange.com .
Keeping with its historical practice, SPX will not comment specifically on
the results of any of its individual businesses, including INRANGE.
Consolidated earnings are announced on a segment by segment basis only.
Parties interested in the results of INRANGE are welcome to listen to the
INRANGE earnings conference call. Questions specific to INRANGE, now and in
the future, should be directed to the designated INRANGE investor relations
spokesperson.
SPX Corporation is a global provider of technical products and systems,
industrial products and services, service solutions and vehicle components.
The Internet address for SPX Corporation's home page is http://www.spx.com .
Certain statements in this press release are forward looking statements
within the meaning of Section 21E of the Securities Exchange Act of 1934, as
amended, and are subject to the safe harbor created thereby. Please refer to
the Company's Form 10-K for 1999 for discussion of certain important factors
that relate to forward looking statements contained in this press release.
Although the Company believes that the expectations reflected in any such
forward looking statements are reasonable, it can give no assurance that such
expectations will prove to be correct.
SPX CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
($ in millions, except per share data)
Three months ended Nine months ended
September 30, September 30,
2000 1999 2000 1999
Revenues $645.1 $668.9 $1,968.0 $1,987.2
Costs and expenses:
Cost of products sold 423.3 444.3 1,306.7 1,323.7
Selling, general and
administrative 121.5 120.7 369.9 378.8
Goodwill/intangible
amortization 10.3 10.4 29.4 31.4
Special charges 63.8 6.1 85.5 26.2
Operating income 26.2 87.4 176.5 227.1
Gain on issuance of
Inrange stock 98.0 - 98.0 -
Other (expense) income, net (1.7) 9.9 21.8 48.2
Equity in earnings of EGS 8.0 8.2 26.9 25.8
Interest expense, net (24.2) (28.7) (70.6) (90.8)
Income before
income taxes 106.3 76.8 252.6 210.3
Provision for income taxes (43.6) (32.7) (103.6) (93.7)
Income before loss on
early extinguishment of debt 62.7 44.1 149.0 116.6
Loss on early extinguishments
of debt, net of tax - - (8.8) -
Net income $62.7 $44.1 $140.2 $116.6
Basic income per share of common stock
Income before loss on
early extinguishments
of debt $2.03 $1.43 $4.82 $3.80
Loss on early
extinguishment of debt - - (0.28) -
Net income per share $2.03 $1.43 $4.54 $3.80
Weighted average number of
common shares outstanding 30.917 30.851 30.906 30.676
Diluted income per share of common stock
Income before loss on
early extinguishments
of debt $1.94 $1.40 $4.68 $3.75
Loss on early
extinguishment of debt - - (0.28) -
Net income per share $1.94 $1.40 $4.40 $3.75
Weighted average number of
common shares outstanding 32.254 31.398 31.894 31.063
SPX CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
($ in millions)
September 30, December 31,
2000 1999
ASSETS (Unaudited)
Current assets:
Cash and equivalents $46.6 $78.8
Accounts receivable 515.4 473.7
Inventories 301.5 274.0
Prepaid and other current assets 56.8 39.2
Deferred income taxes and refunds 116.0 110.8
Total current assets 1,036.3 976.5
Property, plant and equipment 869.0 799.8
Accumulated depreciation (400.4) (355.1)
Net property, plant and equipment 468.6 444.7
Goodwill and intangible assets, net 1,207.8 1,103.6
Investment in EGS 83.4 82.6
Other assets 287.1 238.6
Total assets $3,083.2 $2,846.0
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term borrowings and current
maturities of long-term debt $105.0 $97.7
Accounts payable 276.1 238.3
Accrued expenses 331.8 343.5
Income taxes payable 68.5 75.4
Total current liabilities 781.4 754.9
Long-term debt, less current
maturities 1,093.8 1,017.0
Deferred income taxes 326.9 322.4
Other long-term liabilities 203.1 199.4
Total long-term liabilities 1,623.8 1,538.8
Minority Interest 26.9 -
Shareholders' equity:
Common stock 357.6 354.9
Paid-in capital 494.9 489.7
Retained earnings (deficit) 128.5 (11.7)
Unearned compensation (11.7) (19.1)
Accumulated other comprehensive income (19.7) (13.0)
Common stock in treasury (298.5) (248.5)
Total shareholders' equity 651.1 552.3
Total liabilities and
shareholders' equity $3,083.2 $2,846.0
SPX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
(Unaudited)
($ in millions)
Nine months ended
September 30,
2000 1999
Cash flows from operating activities:
Net income $140.2 $116.6
Adjustments to reconcile net income to net
cash from operating activities -
Special charges 85.5 26.2
Earnings of EGS, net of distributions (0.8) (1.0)
Loss on early extinguishment of debt,
net of tax 8.8 -
Gain on Sale of Inrange stock (98.0) -
Gain on business divestitures - (31.7)
Deferred income taxes (0.7) 49.9
Depreciation 49.8 47.8
Amortization of goodwill and intangibles 33.7 31.4
Employee benefits (26.1) (14.1)
Other, net (6.7) 10.6
Changes in operating assets and liabilities,
net of effects from acquisitions and divestitures:
Accounts receivable (12.4) (45.6)
Inventories (5.0) (31.2)
Accounts payable 27.2 42.2
Accrued expenses (40.7) (68.8)
Other, net 6.6 32.6
Net cash from operating activities
before taxes on sale of Best Power 161.4 164.9
Taxes paid on the sale of Best Power (69.0) -
92.4 164.9
Cash flows from (used in) investing activities:
Business divestitures - 91.2
Business acquisitions and investments (211.1) (86.0)
Capital expenditures (91.0) (79.8)
Other, net - 15.7
Net cash (used in) investing activities (302.1) (58.9)
Cash flows from (used in) financing activities:
Net borrowings under revolving
credit agreement 20.0 55.0
Borrowings under other debt agreements 509.4 -
Payments under other debt agreements (445.3) (228.5)
Proceeds from Issuance of Inrange Stock 128.2 -
Treasury stock purchased (47.2) -
Common stock issued under stock
incentive programs 12.4 11.1
Treasury stock issued to defined
benefit plans - 28.5
Net cash from (used in) financing activities 177.5 (133.9)
Net (decrease) in cash and equivalents (32.2) (27.9)
Cash and equivalents, beginning of period 78.8 70.3
Cash and equivalents, end of period $46.6 $42.4
SPX CORPORATION
STATEMENTS OF OPERATING INCOME BY SEGMENT**
(Unaudited)
($ in millions)
Three months ended Nine months ended
September 30, September 30,
2000 1999 % 2000 1999 %
Technical Products and Systems
Revenues $168.3 $202.3 -16.8% $454.0 $580.0 -21.7%
Gross profit 77.2 84.1 199.7 232.9
Selling, general &
administrative 40.7 44.1 114.3 141.4
Goodwill/intangible
amortization 1.5 1.8 2.3 5.5
Operating income $35.0 $38.2 -8.4% $83.1 $86.0 -3.4%
as a percent of
revenues 20.8% 18.9% 18.3% 14.8%
Industrial Products and Services
Revenues $236.3 $201.5 17.3% $709.0 $614.6 15.4%
Gross profit 88.8 73.0 256.4 221.4
Selling, general &
administrative 38.0 32.9 119.3 106.8
Goodwill/intangible
amortization 2.3 2.1 7.6 6.3
Operating income $48.5 $38.0 27.6% $129.5 $108.3 19.6%
as a percent of revenues 20.5% 18.9% 18.3% 17.6%
Service Solutions
Revenues $155.8 $175.0 -11.0% $524.4 $494.9 6.0%
Gross profit 48.2 47.3 155.5 143.0
Selling, general &
administrative 28.5 28.9 89.7 88.2
Goodwill/intangible
amortization 4.1 4.1 12.3 12.3
Operating income $15.6 $14.3 9.1% $53.5 $42.5 25.9%
as a percent of revenues 10.0% 8.2% 10.2% 8.6%
Vehicle Components
Revenues $84.7 $90.1 -6.0% $280.6 $297.7 -5.7%
Gross profit 19.9 20.2 62.0 66.2
Selling, general &
administrative 5.2 5.7 19.4 17.6
Goodwill/intangible
amortization 2.4 2.4 7.2 7.3
Operating income $12.3 $12.1 1.7% $35.4 $41.3 -14.3%
as a percent of revenues 14.5% 13.4% 12.6% 13.9%
Corporate expenses $9.1 $9.1 $27.2 $24.8
** Operating Income for the three months ended September 30, 2000 and 1999
does not include Special and Other charges of $76.1 and $6.1, respectively.
Operating income for the nine months ended September 30, 2000 and 1999 does
not include charges of $97.8 and $26.2, respectively.
SPX CORPORATION
RECONCILIATION OF
RESULTS ON A COMPARABLE BASIS EXCLUDING UNUSUAL ITEMS
(Unaudited)
($ in millions, except per share amounts)
Three months ended Nine months ended
September 30, September 30,
2000 1999 2000 1999
Income before income taxes $106.3 $76.8 $252.6 $210.3
Special charges and gains:
Restructuring and other
special charges 76.1 6.1 97.8 26.2
Gain on settlement of
APC litigation - - (23.2) -
Gain on sale of businesses and
marketable securities - (8.9) - (45.5)
Gain on issuance of
Inrange stock (98.0) - (98.0) -
Pretax income excluding
unusual items 84.4 74.0 229.2 191.0
Income taxes (34.4) (30.0) (93.7) (77.4)
Net income from continuing
operations excluding
unusual items $50.0 $44.0 $135.5 $113.6
Diluted EPS from continuing
operations excluding
unusual items $1.55 $1.40 $4.25 $3.66
Shares Outstanding 32.254 31.398 31.894 31.063