Exhibit 99.1
Contact: | Jeremy W. Smeltser (Investors) |
| 704-752-4478 |
| E-mail: investor@spx.com |
| |
| Tina Betlejewski (Media) |
| 704-752-4454 |
| E-mail: spx@spx.com |
SPX REPORTS SECOND QUARTER 2007 RESULTS
Revenues up 22%, Segment Margins Improve 100 Points
Earnings per Share from Continuing Operations of $1.26
CHARLOTTE, NC – August 1, 2007 – SPX Corporation (NYSE:SPW) today reported results for the second quarter ended June 30, 2007:
· Revenues increased 22.4% to $1.28 billion from $1.04 billion in the year-ago quarter. Organic revenue growth* was 17.9%, while completed acquisitions and the impact of currency fluctuations increased reported revenues by 2.2% and 2.3%, respectively.
· Segment income and margins were $150.4 million and 11.8%, compared with $112.1 million and 10.8% in the year-ago quarter. The increase in segment income and margins was driven primarily by increased demand for the company’s power and energy infrastructure products.
· Diluted net income per share from continuing operations (the basis of the company’s guidance) was $1.26, compared with $1.06 in the year-ago quarter. The effective tax rate for the quarter was 29.9%, a benefit of $0.06 per share when compared to the company’s previously expected effective tax rate.
· Net income was $63.9 million, or $1.12 per share, compared with $110.3 million, or $1.83 per share in the year-ago quarter. The year-ago quarter included a gain on the sale of discontinued operations of $43.8 million ($0.73 per share) and a benefit from the settlement of certain tax matters of $34.7 million ($0.58 per share).
· Net cash from continuing operations was $88.0 million, compared with a cash use of $28.2 million in the year-ago quarter. Free cash flow from continuing operations* was $69.0 million, compared with a negative $41.8 million in the year-ago quarter. The second quarter of 2006 included a payment of $20.0 million related to a legal settlement and tax payments of $45.0 million related to the redemption of convertible notes.
Chris Kearney, Chairman, President and CEO said, “Our second quarter results were strong, as we achieved or exceeded our operating targets for organic growth, margin improvement and earnings, building on the strong trends in the first quarter.”
Kearney continued, “We also delivered $69.0 million in free cash flow, a solid year-over-year improvement and a good indicator of high quality earnings.”
“Order trends in our primary global infrastructure end markets, particularly power and energy, remain strong, and our operating execution in these markets continues to improve. Based on these factors and our first half performance, we expect to achieve our updated full year earnings guidance range of $4.50 to $4.70 per share,” Kearney concluded.
SEGMENT HIGHLIGHTS
Flow Technology
Revenues in the second quarter of 2007 were $303.5 million compared to $239.0 million in the second quarter of 2006, an increase of $64.5 million, or 27.0%. The increase was due to organic revenue growth of 13.2%, growth from the fourth quarter 2006 Custos acquisition of 11.2% and currency fluctuations of 2.6%. The organic growth was related primarily to continued strong demand in the power, mining, oil and gas, and dehydration markets.
Segment income was $45.2 million, or 14.9% of revenues, in the second quarter of 2007 compared to $34.6 million, or 14.5% of revenues, in the second quarter of 2006. The increase in segment income and margins was due primarily to the organic growth noted above and efficiencies achieved from continuous improvement initiatives.
Test and Measurement
Revenues in the second quarter of 2007 were $307.2 million compared to $286.5 million in the second quarter of 2006, an increase of $20.7 million, or 7.2%. The increase was due primarily to organic growth of 6.1% associated with increased OEM diagnostic and distribution volumes in Europe and Asia and an increase in domestic aftermarket volumes. In addition, currency fluctuations increased reported revenue by 2.2%, offset partially by minor product line dispositions which reduced reported revenues by 1.1%.
Segment income was $33.5 million, or 10.9% of revenues, in the second quarter of 2007 compared to $41.5 million, or 14.5% of revenues, in the second quarter of 2006. The decrease in segment income and margins was due largely to a shifting mix towards higher aftermarket and distribution revenues coupled with slowness in sales to domestic automotive dealers as well as increased research and development costs in support of new products.
Thermal Equipment and Services
Revenues in the second quarter of 2007 were $412.6 million compared to $309.7 million in the second quarter of 2006, an increase of $102.9 million, or 33.2%. The increase was due primarily to organic revenue growth of 30.0%, related largely to the continued strong global power
market demand for cooling systems and products and thermal services and equipment. Currency fluctuations increased revenues by 3.2% from the year-ago quarter.
Segment income was $37.4 million, or 9.1% of revenues, in the second quarter of 2007 compared to $13.6 million, or 4.4% of revenues, in the second quarter of 2006. The increase in segment income and margins was due primarily to the organic growth and improved operating execution in cooling equipment. In addition, the second quarter of 2007 included a $5.0 million benefit from an environmental matter, offset partially by a $2.0 million charge related to a customer contract issue.
Industrial Products and Services
Revenues in the second quarter of 2007 were $253.2 million compared to $207.4 million in the second quarter of 2006, an increase of $45.8 million, or 22.1%. The increase was due primarily to organic revenue growth of 21.5%, driven most notably by increased demand for power transformers and aerospace components. Currency fluctuations increased revenues by 0.6% from the year-ago quarter.
Segment income was $34.3 million, or 13.5% of revenues, in the second quarter of 2007 compared to $22.4 million, or 10.8% of revenues, in the second quarter of 2006. The increase in segment income and margins was driven by the strong organic growth in the end markets noted above, and manufacturing efficiencies achieved from continuous improvement initiatives, partially offset by a $6.0 million charge related to the settlement of a legacy product liability matter.
OTHER ITEMS
Discontinued Operations: During the third quarter of 2006, the company committed to a plan to divest its Contech automotive components business, previously reported in its Industrial Products and Services segment. In April 2007, the company completed the sale of Contech for net proceeds of $139.2 million. The financial condition, results of operations, and cash flows of Contech have been reported as discontinued operations in the attached condensed consolidated financial statements.
Share Repurchases: During the second quarter of 2007, the company repurchased 3.9 million shares of its common stock for $317.2 million. Year-to-date through July 31, 2007, the company has repurchased 7.0 million shares of its common stock for $542.7 million. The company’s 10b5-1 trading plan announced in May 2007 has 2.0 million shares remaining to be purchased.
Class Action Settlements: On April 13, 2007, the U.S. District Court for the Western District of North Carolina entered an Order and Final Judgment in each of the securities class action and the tag-along ERISA class action, approving the settlement of each case and dismissing the settled claims with prejudice. The company’s second quarter results include a $5.1 million payment of the company’s previously-accrued net settlement contribution.
Dividend: On June 1, 2007, the Board of Directors announced a quarterly dividend of $0.25 per common share payable to shareholders of record on June 15, 2007. This second quarter 2007 dividend was paid on July 2, 2007.
Form 10-Q: The company expects to file its quarterly report on Form 10-Q for the quarter ended June 30, 2007 with the Securities and Exchange Commission by August 9, 2007. This news release should be read in conjunction with that filing, which will be available on the company’s website at 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 14,000 people worldwide in over 20 countries. Visit 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, including any statements as to future results of operations and financial projections, 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, 2006. 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. Particular risks facing the company include economic, business and other risks stemming from its international operations, legal and regulatory risks, costs of raw materials, pricing pressures, pension funding requirements, integration of acquisitions and changes in the economy. 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.
