SPX Reports Fourth Quarter 2011 Results

CHARLOTTE, N.C., Feb. 16, 2012 /PRNewswire/ -- SPX Corporation (NYSE: SPW) today reported results for the fourth quarter and year ended December 31, 2011:

Fourth Quarter Highlights:

• Revenues increased 12.6% to $1.49 billion from $1.33 billion in the year-ago quarter.  Organic revenues* increased 11.2%, while completed acquisitions and currency fluctuations impacted revenues by 2.2% and (0.8)%, respectively.
• Segment income and margins were $177.0 million and 11.9%, compared with $160.4 million and 12.1% in the year-ago quarter.
• Diluted net income per share from continuing operations was $1.25, compared with $1.30 in the year-ago quarter.  
• The fourth quarter of 2011 results included the following items:
  • Net charges of $16.4 million, or $0.27 per share, associated with strategic actions;
  • Charges of $18.2 million, or $0.22 per share, associated with amounts deemed uncollectible from an insolvent insurer for certain risk management matters; and
  • Non-cash impairment charges of $3.6 million, or $0.04 per share, associated with the impairment of goodwill of SPX Heat Transfer Inc.
• Adjusted net income per share from continuing operations*, which excluded the impact of the items noted above, was $1.78.
• Net cash from continuing operations was $202.4 million, compared with $213.0 million in the year-ago quarter.
• Adjusted free cash flow from continuing operations*, which excluded $92.8 million of net cash outflows related to the ClydeUnion acquisition relating primarily to the settlement of foreign exchange currency contracts and the purchase of the Glasgow, Scotland manufacturing facility, was $219.0 million, compared with free cash flow* of $173.0 million.  The 2010 results included a $100 million voluntary pension contribution.

Full Year 2011 Highlights:

• Revenues increased 11.8% to $5.46 billion from $4.89 billion in 2010.  Organic revenues increased 7.1%, while completed acquisitions and currency fluctuations impacted reported revenues by 2.3% and 2.4%, respectively.
• Segment income and margins were $580.2 million and 10.6%, compared with $560.3 million and 11.5% in 2010.
• Diluted net income per share from continuing operations was $3.54, compared with $3.86 in 2010.  The full year 2011 results included the following items:
  • Net charges of $49.7 million, or $0.70 per share, associated with strategic actions;
  • Net one-time tax benefits of $20.9 million, or $0.41 per share, primarily associated with tax planning strategies;
  • The previously noted charges relating to an insolvent insurer; and
  • Non-cash impairment charges of $28.3 million, or $0.33 per share, for the previously noted item.
• Adjusted net income per share from continuing operations*, which excluded the impact of the items noted above, was $4.38.
• Net cash from continuing operations was $326.4 million, compared with $256.7 million in 2010.  The increase in cash flow was due primarily to lower pension contributions in 2011, partially offset by operating cash outflows associated with the ClydeUnion acquisition.
• Adjusted free cash flow from continuing operations for 2011, which excluded $92.8 million of net cash outflows related to the ClydeUnion acquisition, was $265.1 million.  Adjusted free cash flow from continuing operations for 2010 of $205.5 million excluded $24.5 million paid in connection with early debt termination.  The increase in free cash flow was due primarily to the items noted above, partially offset by higher capital expenditures in 2011.

"The fourth quarter of 2011 was a period of strong operational performance for SPX, with organic revenue growth of 11 percent and adjusted earnings per share up 58 percent over last year.  We were particularly pleased with the performance of our Flow Technology segment, which reported 13 percent organic revenue growth and segment income margins over 15 percent," said Christopher J. Kearney, Chairman, President and Chief Executive Officer of SPX.

"Flow Technology is the foundation of our company and the focus of our long-term strategy.  The acquisition of ClydeUnion and the pending divestiture of Service Solutions are significant developments that further narrow our strategic focus and enhance our ability to continue building our Flow segment.

"We expect 2012 to be a transitional year for our company as we focus on successfully integrating ClydeUnion, executing the start-up of our large power transformer facility, completing the sale of Service Solutions and executing our previously announced debt reduction and share repurchase actions.  As part of this, we intend to begin repurchasing shares as early as next week.

"We expect to be in a very strong financial position with significant liquidity in 2012, and will evaluate additional strategic acquisitions and share repurchases consistent with our capital allocation methodology," Kearney added.

FINANCIAL HIGHLIGHTS – CONTINUING OPERATIONS

Flow Technology

Revenues for the fourth quarter of 2011 were $565.4 million compared to $486.2 million in the fourth quarter of 2010, an increase of $79.2 million, or 16.3%.  Organic revenues increased 12.8% and acquisitions increased reported revenue by 3.9%, including $13.6 million from the completed acquisition of ClydeUnion.  The impact of currency fluctuations decreased revenues by 0.4% from the year-ago quarter.

Segment income was $85.3 million, or 15.1% of revenues, in the fourth quarter of 2011 compared to $70.9 million, or 14.6% of revenues, in the fourth quarter of 2010.  The increase in segment income and margins was due primarily to the impact of the organic revenue increase noted above, including the benefit of the related operating leverage.  Segment margins in the quarter were diluted by 30 basis points from the ClydeUnion acquisition, due primarily to purchase accounting charges.  

Test and Measurement

Revenues for the fourth quarter of 2011 were $275.2 million compared to $252.1 million in the fourth quarter of 2010, an increase of $23.1 million, or 9.2%.  Organic revenues increased 5.0%, driven primarily by increased sales of diagnostic and service tools to vehicle manufacturers and their dealer service networks.  The 2011 acquisition of Teradyne Inc.'s Diagnostic Solutions business increased reported revenues by 4.2%.

Segment income was $32.7 million, or 11.9% of revenues, in the fourth quarter of 2011 compared to $21.7 million, or 8.6% of revenues, in the fourth quarter of 2010.  The increase in segment income and margins was due primarily to the impact of the organic and acquisition revenue increases noted above.

Thermal Equipment and Services

Revenues for the fourth quarter of 2011 were $453.1 million compared to $418.8 million in the fourth quarter of 2010, an increase of $34.3 million, or 8.2%.  Organic revenues increased 10.4% in the quarter, driven primarily by increases in evaporative cooling projects in the Americas and sales of heat exchangers and pollution control systems. The impact of currency fluctuations decreased reported revenues by 2.2% from the year-ago quarter.

Segment income was $44.0 million, or 9.7% of revenues, in the fourth quarter of 2011 compared to $52.8 million, or 12.6% of revenues, in the fourth quarter of 2010.  The decline in segment income and margin was due primarily to a $13.7 million charge associated with increases in estimated costs for certain contracts in South Africa.  

Industrial Products and Services

Revenues for the fourth quarter of 2011 were $198.0 million compared to $167.9 million in the fourth quarter of 2010, an increase of $30.1 million, or 17.9%.  Organic revenues increased 17.8% in the quarter, driven primarily by higher volume of power transformer sales.  Currency fluctuations increased reported revenues by 0.1%, from the year-ago quarter.

Segment income was $15.0 million, or 7.6% of revenues, in the fourth quarter of 2011 compared to $15.0 million, or 8.9% of revenues, in the fourth quarter of 2010.  The fourth quarter 2011 segment income included start-up costs of $4.4 million associated with our transformer plant expansion.

OTHER ITEMS

Dividend:   On November 23, 2011, the company announced that its Board of Directors had declared a quarterly dividend of $0.25 per common share to shareholders of record on December 14, 2011, which was paid on January 4, 2012.

Acquisition:  On December 22, 2011, the company completed the acquisition of ClydeUnion Pumps, a global supplier of pump technologies utilized in oil and gas processing, power generation and other industrial applications. The company's fourth quarter results include the following items related to the ClydeUnion acquisition:

• Revenue of $13.6 million and operating income of $0.3 million, which included $2.5 million of purchase accounting charges.
• A $4.0 million charge recorded in other expense for the forward exchange currency contracts noted below.
• Transaction costs of $2.4 million recorded in corporate expense.
• Interest expense of $1.3 related to borrowings to finance the acquisition.
• Net cash flow used in operations of $52.0 million, including the settlement of forward exchange currency contracts to hedge a significant portion of the purchase price and other related transaction costs and working capital investments.
• Capital expenditures of $40.8 million related to the purchase of ClydeUnion's manufacturing facility in Glasgow, Scotland.

Disposition:  On January 23, 2012, the company entered into a definitive agreement with Robert Bosch GmbH to sell its Service Solutions business for $1.15 billion in cash.  The sale is subject to normal closing conditions, regulatory and other approvals and is expected to be completed in the first half of 2012.  The company incurred costs of $2.1 million associated with this transaction in the fourth quarter, recorded in corporate expense.  Upon completion of the sale, the company expects to record an after-tax gain of approximately $450 million dollars or $8.65 per share.  Beginning in the first quarter of 2012 the Service Solutions business will be reported as a discontinued operation and the company will no longer report the Test and Measurement segment.  The other businesses previously reported in the Test and Measurement segment will be reported in the Industrial Products and Services segment.

Share Repurchases:  The company announced that it intends to enter into a written trading plan under Rule 10b5-1 of the Securities Exchange Act of 1934, as amended, to facilitate the repurchase of up to $350 million in value of shares of its common stock on or before February 14, 2013, in accordance with a share repurchase program authorized by its Board of Directors. Trading under this plan is scheduled to begin no sooner than February 24, 2012.  Of the amount under the plan, $75 million may be repurchased prior to the completion of the above-referenced sale of Service Solutions, with the remainder scheduled to be repurchased following the consummation of the Service Solutions sale.

Form 10-K:  The company expects to file its annual report on Form 10-K for the year ended December 31, 2011 with the Securities and Exchange Commission by February 29, 2012.  This press 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.

About SPX:  Based in Charlotte, North Carolina, SPX Corporation (NYSE: SPW) is a global Fortune 500 multi-industry manufacturing leader with over $5 billion in annual revenue, operations in more than 35 countries and over 18,000 employees. The company's highly-specialized, engineered products and technologies are concentrated in three areas: Flow Technology, infrastructure, and vehicle service solutions.  Many of SPX's innovative solutions are playing a role in helping to meet rising global demand for electricity, processed foods and beverages and vehicle services, particularly in emerging markets. The company's products include food processing systems for the food and beverage industry, power transformers for utility companies, cooling systems for power plants; and diagnostic tools and equipment for the automotive industry. This description of SPX does not contemplate the pending sale of the Service Solutions business. For more information, please visit www.spx.com.

* 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 annual reports on Form 10-K and quarterly reports on Form 10-Q.  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. Statements in this press release speak only as of the date of this press release, and SPX disclaims any responsibility to update or revise such statements.

SOURCE SPX Corporation