SPX Corp. (SPW) filed Quarterly Report for the period ended 2009-09-26.
SPX Corporation is a provider of technical products and systems industrial products and services service solutions and vehicle components. These products are primarily sold to customers throughout North America and Europe. As a global multi-industry company SPX is focused on profitably growing businesses that have scale and growth potential. These businesses are grouped into four different segments: Technical Products and Systems Industrial Products and Services Flow Technology and Service Solutions. Spx Corp. has a market cap of $2.98 billion; its shares were traded at around $60.7 with a P/E ratio of 11.3 and P/S ratio of 0.5. The dividend yield of Spx Corp. stocks is 1.7%. Spx Corp. had an annual average earning growth of 8.1% over the past 10 years.
Highlight of Business Operations:
Other Expense, net — Other expense, net, for the three months ended September 26, 2009 was composed primarily of foreign currency transaction losses of $6.6 and a net charge associated with the net decline in fair value of our foreign currency protection agreements (“FX forward contracts”) and currency forward embedded derivatives (“FX embedded derivatives”) of $0.4 (see Note 11 to our condensed consolidated financial statements). Other expense, net, for the three months ended September 27, 2008 was composed primarily of a charge of $9.5 relating to the settlement of a lawsuit arising out of a 1997 business disposition and foreign currency transaction losses of $2.5, partially offset by a net gain of $1.6 associated with the net appreciation in fair value of our FX forward contracts.
Other expense, net, for the nine months ended September 26, 2009 was composed primarily of foreign currency transaction losses of $11.7 and a net charge associated with the net decline in fair value of our FX forward contracts and FX embedded derivatives of $9.6 (see Note 11 to our condensed consolidated financial statements), partially offset by a $1.4 gain associated with the final settlement of a product line sale that occurred in 2006. Other expense, net, for the nine months ended September 27, 2008 was composed primarily of the charge of $9.5 mentioned above and a net charge of $1.7 associated with the net decline in fair value of our FX forward contracts, partially offset by foreign currency transaction gains of $2.1.
Income Tax Provision — For the three and nine months ended September 26, 2009, we recorded an income tax provision of $29.4 and $63.3 on $80.2 and $191.5 of pre-tax income from continuing operations, respectively, resulting in an effective tax rate of 36.7% and 33.1%, respectively. This compares to an income tax provision for the three and nine months ended September 27, 2008 of $17.8 and $97.2 on $128.9 and $362.9 of pre-tax income from continuing operations, respectively, resulting in an effective tax rate of 13.8% and 26.8%, respectively. The lower effective tax rate for the three and nine months ended September 27, 2008 was due primarily to a tax benefit of $25.6 that was recorded in connection with the finalization of the audits of our 2003 through 2005 federal income tax returns.
Dezurik — Sold for total consideration of $23.5, including $18.8 in cash and a promissory note of $4.7, resulting in a loss, net of taxes, of $1.0 during the first quarter of 2009. During the second and third quarters of 2009, we recorded net charges of $0.2 and $0.3, respectively, in connection with adjustments to certain liabilities that we retained. During the fourth quarter of 2008, we recorded a net charge of $6.0 to “Gain (loss) on disposition of discontinued operations, net of tax” in order to reduce the carrying value of the net assets to be sold to their estimated net realizable value.
Air Filtration — Sold for cash consideration of $35.7, resulting in a gain, net of taxes, of $2.4 during the third quarter of 2008. During the first quarter of 2008, we recorded a net charge of $3.1 to “Gain (loss) on disposition of discontinued operations, net of tax” to adjust the deferred tax assets of the Air Filtration business to their estimated realizable value. During 2007, we recorded a net charge of $11.0 to “Gain (loss) on disposition of discontinued operations, net of tax” in order to reduce the carrying value of the net assets to be sold to their estimated net realizable value.
During the fourth quarter of 2008, we committed to a plan to divest the automotive filtration solutions (“Filtran”) business within our Industrial Products and Services segment. The Filtran business includes a subsidiary with a minority interest shareholder. Our original plan for disposition contemplated the buyout of the minority interest shareholder in order to allow us to sell 100% of the Filtran business. As a result of this planned divestiture, and in consideration of the contemplated buyout of the minority interest shareholder, we recorded a total impairment charge of $23.0 during the fourth quarter of 2008 in order to reduce the carrying value of the Filtran net assets to be sold to their estimated net realizable value. Of the $23.0 charge, $16.5 related to the premium we were expecting to pay the minority interest shareholder, while the remaining of $6.5 represented the loss we were anticipating upon the sale of 100% of the Filtran business. The $23.0 charge was recorded to “Gain (loss) on disposition of discontinued operations, net of tax” within our 2008 consolidated statement of operations. During the first quarter of 2009, we recorded an additional impairment charge of $8.5 based on current indications of interest for the business, with all of the charge recorded to “Gain (loss) on disposition of discontinued operations, net of tax” within our first quarter 2009 condensed consolidated statement of operations.
SPW is in the portfolios of PRIMECAP Management.
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