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Article by DailyStocks_admin    (03-05-13 12:12 AM)

Description

Filed with the SEC from Feb 21 to Feb 27:

SPX (SPW)
Relational Investors called shares "undervalued" due to a number of factors, saying, "despite [SPX's] attractive business mix, total shareholder returns and profitability have lagged peers' due primarily to excessive prices paid for acquisitions. This growth-at-any-cost strategy destroys shareholder value by overly emphasizing revenue growth over investment returns." Relational added that it believes "major improvements in a number of critical business processes will unlock significant intrinsic value for the company's shareholders." Relational also said that if SPX fails to achieve operating margins consistent with peers' and gain the confidence of investors, it should pursue strategic alternatives.

BUSINESS OVERVIEW

Forward-Looking Information

Some of the statements in this document and any documents incorporated by reference, including any statements as to operational and financial projection, constitute "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). These statements relate to future events or our future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our businesses' or our industries' actual results, levels of activity, performance or achievements to be materially different from those expressed or implied by any forward-looking statements. Such statements may address our plans, our strategies, our prospects, changes and trends in our business and the markets in which we operate under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations" ("MD&A") or in other sections of this document. In some cases, you can identify forward-looking statements by terminology such as "may," "could," "would," "should," "expect," "plan," "anticipate," "intend," "believe," "estimate," "predict," "project," "potential" or "continue" or the negative of those terms or other comparable terminology. Particular risks facing us include economic, business and other risks stemming from our internal operations, legal and regulatory risks, costs of raw materials, pricing pressures, pension funding requirements, integration of acquisitions and changes in the economy. These statements are only predictions. Actual events or results may differ materially because of market conditions in our industries or other factors, and forward-looking statements should not be relied upon as a prediction of actual results. In addition, management's estimates of future operating results are based on our current complement of businesses, which is subject to change. All the forward-looking statements are qualified in their entirety by reference to the factors discussed in this document under the heading "Risk Factors" and in any documents incorporated by reference that describe risks and factors that could cause results to differ materially from those projected in these forward-looking statements. We undertake no obligation to update or publicly revise these forward-looking statements to reflect events or circumstances that arise after the date of this document.

We caution you that these risk factors may not be exhaustive. We operate in a continually changing business environment and frequently enter into new businesses and product lines. We cannot predict these new risk factors, and we cannot assess the impact, if any, of these new risk factors on our businesses or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those projected in any forward-looking statements. Accordingly, you should not rely on forward-looking statements as a prediction of actual results. In addition, our estimates of future operating results are based on our current complement of businesses, which is subject to change as management selects strategic markets.


Business

We were incorporated in Muskegon, Michigan in 1912 as the Piston Ring Company and adopted our current name in 1988. Since 1968, we have been incorporated under the laws of Delaware, and we have been listed on the New York Stock Exchange since 1972.

We are a global supplier of highly specialized, engineered solutions with operations in over 35 countries and sales in over 150 countries around the world. Many of our products and solutions are playing a role in helping to meet rising global demand for power and energy and processed foods and beverages, particularly in emerging markets. In 2012, an estimated 30% of our revenues were from sales into emerging markets. Our key products include processing systems and equipment for the food and beverage industry, reciprocating pumps used in oil & gas processing, power transformers used by utility companies, and cooling systems for power plants.

From an end market perspective, in 2012, 43% of our revenues were from sales into power & energy markets, 19% were from sales into food & beverage markets and 17% were from sales into industrial flow markets. Our product and technology offerings are concentrated in flow technology and energy infrastructure.

Our Flow Technology reportable segment accounted for approximately 53% of our revenues in 2012 and serves the food & beverage, oil & gas, power generation and industrial flow markets. Within these markets, we are a leading provider of highly-engineered process equipment. Our core strengths include product breadth, global capabilities and the ability to create custom engineered solutions for diverse flow processes. Over the past several years, we have strategically expanded our scale, customer relevance and global capabilities. We believe there are attractive organic and acquisition opportunities to continue to expand our Flow Technology reportable segment.

In addition to flow technology, we also have leading market positions in power generation and U.S. power transmission and distribution markets. Our primary power generation offerings include cooling systems, large scale stationary and rotating heat exchangers and pollution control systems. We supply these technologies into many types of traditional and alternative power generation facilities. We are well-positioned to benefit from new or retrofit investments in natural gas, coal, nuclear, solar and geothermal power plants.

We are a leading supplier of medium power transformers for the U.S. market. Our medium power transformers range from a base rating of 10 Mega Volt Ampere ("MVA") to over 100 MVA and are uniquely designed to meet the requirements of each customer and substation. We have expanded our manufacturing capacity to increase our ability to produce large power transformers (greater than 100 MVA). This expansion was substantially completed in 2011 and we began shipping units from the expanded facility in 2012.

Throughout all our businesses, we focus on a number of operating initiatives, including innovation and new product development, continuous improvement driven by lean methodologies, supply chain management, expansion in emerging markets, information technology infrastructure improvement, and organizational and talent development. These initiatives are designed to, among other things, capture synergies within our businesses to ultimately drive revenues, profit margin and cash flow growth. We believe our businesses are well-positioned for long-term growth based on our operating initiatives, the potential within the current markets served and the potential for expansion into additional markets.

Our strategy is aimed at creating shareholder value through our continuous improvement initiatives, acquisitions in our core markets, as well as other actions. As a complement to this strategy, we also focus on environmental sustainability and conducting our business with a high level of ethics and integrity.


Reportable Segments and Other Operating Segments

We aggregate certain of our operating segments into our two reportable segments, Flow Technology and Thermal Equipment and Services, while our remaining operating segments, which do not meet the quantitative threshold criteria of the Segment Reporting Topic of the Financial Accounting Standards Board Codification ("Codification"), have been combined within our "All Other" category, which we refer to as Industrial Products and Services. This is not considered a reportable segment.

The factors considered in determining our reportable segments are the economic similarity of the businesses, the nature of products sold or services provided, production processes, types of customers and distribution methods. In determining our segments, we apply the threshold criteria of the Segment Reporting Topic of the Codification to operating income or loss of each segment before considering impairment and special charges, pensions and postretirement expense, stock-based compensation and other indirect corporate expenses. This is consistent with the way our chief operating decision maker evaluates the results of each segment. For more information on the results of our reportable and other operating segments, including revenues by geographic area, see Note 5 to our consolidated financial statements.

Flow Technology Reportable Segment

Our Flow Technology reportable segment had revenues of $2,682.2, $2,042.0 and $1,662.2 in 2012, 2011 and 2010, respectively. On December 22, 2011, our Flow Technology segment completed the acquisition of Clyde Union (Holdings) S.A.R.L. ("Clyde Union"), a global supplier of pump technologies utilized in oil and gas processing, power generation and other industrial applications. The segment's revenues for 2012 and 2011 included $571.2 and $13.6, respectively, of revenues related to Clyde Union. The Flow Technology reportable segment designs, manufactures and markets products and solutions used to process, blend, filter, dry, meter and transport fluids with a focus on original equipment installation and turnkey projects as well as comprehensive aftermarket support services. Primary offerings include engineered pumps, valves, mixers, heat exchangers, and dehydration and filtration technologies. Global end markets, including food and beverage, power and energy and general industrial processing are served by core brands, such as SPX Flow Technology, APV, ClydeUnion, e&e, Seital, Lightnin, Waukesha Cherry-Burrell, Anhydro, Bran&Luebbe, Copes-Vulcan, Johnson Pump, M&J Valves, Plenty, Hankison, Gerstenberg Schröder, GD Engineering, Dollinger Filtration, Pneumatic Products, Delair, Deltech and Jemaco. Competitors in these diversified end markets include GEA Group AG, Flowserve, Alfa Laval AB, Sulzer and IDEX Corporation. Channels to market consist of stocking distributors, manufacturers' representatives and direct sales. The segment continues to focus on innovation and new product development, optimizing its global footprint while taking advantage of cross-product integration opportunities and increasing its competitive position in global end markets. Flow Technology's solutions focus on key business drivers, such as product flexibility, process optimization, sustainability and safety.

Thermal Equipment and Services Reportable Segment

Our Thermal Equipment and Services reportable segment had revenues of $1,490.9, $1,636.4, and $1,593.2 in 2012, 2011 and 2010, respectively. This segment engineers, manufactures and services thermal heat transfer products. Primary offerings include dry, evaporative and hybrid cooling systems, rotating and stationary heat exchangers and pollution control systems for the power generation, HVAC and industrial markets, as well as boilers and heating and ventilation products for the commercial and residential markets. The primary distribution channels for the Thermal Equipment and Services reportable segment are direct to customers, independent manufacturing representatives, third-party distributors and retailers. The segment has a balanced presence geographically, with a strong presence in North America, Europe and South Africa.

Approximately 57% of the segment's 2012 revenues were from sales to the power generation market. The segment's primary power products and services are sold under the brand names of SPX Cooling Systems, Marley, Balcke-Duerr, Ceramic, Yuba, Ecolaire and Recold, among others, with the major competitors to these product and service lines being GEA Group AG, Thermal Engineering International, Hamon & Cie, Baltimore Aircoil Company, Evapco, Inc., Harbin Air Conditioning Co., Siemens AG and Alstom SA.

Declining demand from the power generation market and increased competition in and from China had a negative impact on the segment's revenues and profits during 2012 and 2011. Due to this decline, coupled with an expectation that a significant market recovery was not likely in the near-term, we determined that the goodwill and certain other long-term assets of the segment's Cooling Equipment and Services ("Cooling") reporting unit were impaired and, thus, recorded impairment charges in 2012 of $281.4 (see Note 8 to the consolidated financial statements for additional details).

On December 30, 2011, we and Shanghai Electric Group Co., Ltd. ("Shanghai Electric") established the Shanghai Electric JV, a joint venture supplying dry cooling and moisture separator reheater products and services to the power sector in China and other selected regions of the world. We contributed and sold certain assets of our dry cooling products business in China to the joint venture in consideration for a 45% ownership interest in the joint venture and cash payments of RMB 96.7, with RMB 51.5 received in January 2012, RMB 25.8 received in December 2012, and the remaining payment contingent upon the joint venture achieving defined sales order volumes. In addition, we are licensing our dry cooling and moisture separator reheater technologies to the joint venture for a royalty. We also are continuing to manufacture dry cooling components in our China factories and have entered into an exclusive supply agreement with the joint venture for these products. We believe this arrangement increases our ability to compete in China, leveraging Shanghai Electric's well-established presence in the region (see Note 4 to our consolidated financial statements for additional details).

The segment's boiler products include a complete line of gas and oil fired boilers for heating in residential and commercial applications, as well as ancillary equipment. The segment's primary boiler products competitors are Burnham Holdings, Inc. and Buderus.

The segment's heating and ventilation product line includes (i) baseboard, wall unit and portable heaters, (ii) commercial cabinet and infrared heaters, (iii) thermostats and controls, (iv) air curtains and (v) circulating fans. The segment sells heating and ventilation products under the Berko, Qmark, Farenheat and Leading Edge brand names, with the principal competitors being TPI Corporation, Ouellet, King Electric, Systemair Mfg. LLC, Cadet Manufacturing Company and Dimplex North America Ltd. for heating products and TPI Corporation, Broan-NuTone LLC and Airmaster Fan Company for ventilation products.

The segment's South African subsidiary has a Black Economic Empowerment shareholder, which holds a noncontrolling 25.1% interest.

Industrial Products and Services

Industrial Products and Services had revenues of $927.1, $858.5 and $843.4 in 2012, 2011 and 2010, respectively. Approximately 33% of Industrial Products and Services 2012 revenues were from the sale of power transformers into the U.S. transmission and distribution market. We are a leading provider of medium sized transformers (10 - 100 MVA) in the United States. We sell transformers under the Waukesha brand name. Typical customers for this product line are public and privately held utilities. Our key competitors in this market include ABB Ltd. (Kuhlman Electric Corporation), GE-Prolec and Hyundai. During 2011, we expanded our Waukesha, WI facility in order to increase our ability to manufacture large power transformers (100 - 1,200 MVA) and began shipping large power transformers during 2012.

Additionally, Industrial Products and Services comprises operating segments that design and manufacture industrial tools and hydraulic units, precision machine components for the aerospace industry, broadcast antenna systems, communications and signal monitoring systems, fare collection systems, portable cable and pipe locators, and precision controlled industrial

ovens and chambers. The primary distribution channels for the Industrial Products and Services operating segments are direct to customers, independent manufacturing representatives and third-party distributors.


Acquisitions

We regularly review and negotiate potential acquisitions in the ordinary course of business, some of which are or may be material. We will continue to pursue acquisitions and we may consider acquisitions of businesses with more than $1,000.0 in annual revenues.

On March 21, 2012, our Flow Technology reportable segment completed the acquisition of Seital S.r.l. ("Seital"), a supplier of disk centrifuges (separators and clarifiers) to the global food and beverage, biotechnology, pharmaceutical and chemical industries, for a purchase price of $28.8, net of cash acquired of $2.5 and including debt assumed of $0.8. Seital had revenues of approximately $14.0 in the twelve months prior to the date of acquisition.

Joint Ventures

We have a joint venture, EGS Electrical Group, LLC and Subsidiaries ("EGS"), with Emerson Electric Co., in which we hold a 44.5% interest. Emerson Electric Co. controls and operates the joint venture. EGS operates primarily in the United States, Brazil, Canada and France, and is engaged in the manufacture of electrical fittings, hazardous location lighting and power conditioning products. We account for our investment under the equity method of accounting, on a three-month lag basis. We typically receive our share of this joint venture's earnings in cash dividends paid quarterly. See Note 9 to our consolidated financial statements for more information on EGS.

As previously noted, on December 30, 2011, we completed the formation of a joint venture with Shanghai Electric, in which we hold a 45% interest. Shanghai Electric controls and operates the joint venture. We account for this investment under the equity method of accounting. See Note 4 to our consolidated financial statements for additional details.

International Operations

We are a multinational corporation with operations in over 35 countries. Sales outside the United States were $2,663.8, $2,299.2, and $2,074.7 in 2012, 2011 and 2010, respectively.

See Note 5 to our consolidated financial statements for more information on our international operations.


Research and Development

We are actively engaged in research and development programs designed to improve existing products and manufacturing methods and to develop new products to better serve our current and future customers. These efforts encompass all our products with divisional engineering teams coordinating their resources. We place particular emphasis on the development of new products that are compatible with, and build upon, our manufacturing and marketing capabilities.

We expensed $53.4, $52.7 and $47.2 in 2012, 2011 and 2010, respectively, of research activities relating to the development and improvement of our products.


Patents/Trademarks

We own over 400 domestic patents and 200 foreign patents, including approximately 25 patents that were issued in 2012, covering a variety of our products and manufacturing methods. We also own a number of registered trademarks. Although in the aggregate our patents and trademarks are of considerable importance in the operation of our business, we do not consider any single patent or trademark to be of such importance that its absence would adversely affect our ability to conduct business as presently constituted. We are both a licensor and licensee of patents. For more information, please refer to "Risk Factors."


Outsourcing and Raw Materials

We manufacture many of the components used in our products; however, our strategy includes outsourcing components and sub-assemblies to other companies where strategically and economically beneficial. In instances where we depend on third-party suppliers for outsourced products or components, we are subject to the risk of customer dissatisfaction with the quality or performance of the products we sell due to supplier failure. In addition, business difficulties experienced by a third-party supplier can lead to the interruption of our ability to obtain the outsourced product and ultimately to our inability to supply products to our customers. We believe that we generally will be able to continue to obtain adequate supplies of key products or appropriate substitutes at reasonable costs.

We are subject to increases in the prices of many of our key raw materials, including petroleum-based products, steel and copper. In recent years, we have generally been able to offset increases in raw material costs. Occasionally, we are subject to long-term supplier contracts, which may increase our exposure to pricing fluctuations.

Because of our diverse products and services, as well as the wide geographic dispersion of our production facilities, we use numerous sources for the raw materials needed in our operations. We are not significantly dependent on any one or a limited number of suppliers, and we have been able to obtain suitable quantities of raw materials at competitive prices.


Competition

Our competitive position cannot be determined accurately in the aggregate or by reportable or operating segment since we and our competitors do not offer all the same product lines or serve all the same markets. In addition, specific reliable comparative figures are not available for many of our competitors. In most product groups, competition comes from numerous concerns, both large and small. The principal methods of competition are service, product performance, technical innovation and price. These methods vary with the type of product sold. We believe we compete effectively on the basis of each of these factors as they apply to the various products and services offered. See "Reportable Segments and Other Operating Segments" above for a discussion of our competitors.


Environmental Matters

See "MD&A — Critical Accounting Policies and Use of Estimates — Contingent Liabilities," "Risk Factors" and Note 14 to our consolidated financial statements for information regarding environmental matters.


CEO BACKGROUND

ELECTION OF DIRECTORS

Seven directors currently serve on our Board of Directors. The directors are divided into three classes. There are currently two directors in the first class, three directors in the second class, and two directors in the third class. At this Annual Meeting, you will be asked to elect three directors for the second class and one director in the first class. Three directors will continue to serve on the Board of Directors as described below.

Our Board of Directors waived the requirement of our Corporate Governance Guidelines that non-management directors retire from the Board of Directors at the conclusion of their term following their 70 th birthday as it applied to Mr. Campbell, and asked Mr. Campbell to serve one additional term. Mr. Campbell has agreed and will stand for re-election at this annual meeting.

Each of Mr. Campbell, Mr. Fullwood, Mr. Mancuso, and Mr. Lisenby are current SPX directors. Mr. Campbell, Mr. Fullwood, and Mr. Mancuso, if elected, will each serve for a term of three years, until a qualified successor director has been elected, or until he resigns, retires or is removed by the stockholders for cause. Mr. Lisenby was appointed, effective January 10, 2011, to the position vacated by Dr. Fitzpatrick upon his resignation, effective January 7, 2011, and is standing for election pursuant to the requirement of our by-laws that any director elected by the other directors to fill any vacancies shall stand for election by stockholders at the next annual meeting of stockholders. Mr. Lisenby currently serves as a member of the first director class and, if elected at this Annual Meeting, will serve for a term of two years.

Each nominee has agreed to tender, promptly following his election or re-election, an irrevocable resignation effective upon his failure to receive the required vote for re-election at the next meeting at which he would face re-election and the acceptance of such resignation by the Board of Directors, in accordance with our Corporate Governance Guidelines.

Your shares will be voted as you specify on the enclosed proxy card. If you do not specify how you want your shares voted, we will vote them FOR the election of each of Mr. Campbell, Mr. Fullwood, Mr. Mancuso, and Mr. Lisenby. If unforeseen circumstances (such as death or disability) make it necessary for the Board of Directors to substitute another person for any of the nominees, your shares will be voted FOR that other person. The Board of Directors does not

anticipate that any of the nominees will be unable to serve. The nominees and continuing directors have provided the following information about themselves.

Nominees to Serve Until 2014 Annual Meeting

GRAPHIC

J. Kermit Campbell , 72, is the former Chairman, President and Chief Executive Officer of Herman Miller, Inc., a designer and manufacturer of office furniture. Since leaving Herman Miller, Inc. in 1995, Mr. Campbell has invested in a number of ventures, including United Power Line Contractors, Bering Truck Corporation, Black Star Farms, Advanced Information Systems, United Shield International, PassAlong Networks and CORE Energy Co. Mr. Campbell is a director of Traverse City State Bank, an honorary Trustee and past Chairman of the Board of Hope College, a Trustee of the Northwestern Michigan College Foundation, a Trustee of Eagle Village and a Charitable Trustee and President of Traverse Symphony Orchestra. Mr. Campbell has also been Chairman of Bering Truck Corporation and a director of Irwin Union Bank, Tennessee Pacific, and PassAlong Networks. Mr. Campbell has been a director of SPX since 1993.



Mr. Campbell is our longest-serving Board member. Since 1993, Mr. Campbell has consistently applied the operational, financial, and strategic experience garnered from his career, as well as involvement in a number of other business interests. In addition to the qualifications, attributes and skills Mr. Campbell initially brought to our Board, he now offers the perspective, institutional knowledge, and deep understanding of our business accumulated over his more than 15 years on our Board.

GRAPHIC

Emerson U. Fullwood , 63, is the retired Corporate Vice President of Xerox Corporation, a position to which he was named in 1996. In 2004, he assumed the role and responsibilities of Executive Chief of Staff and Marketing Officer for Xerox North America. Previous positions held by Mr. Fullwood at Xerox were President of the Xerox Worldwide Channels Group, President of Latin America, Executive Chief Staff Officer of Developing Markets and President of Worldwide Customer Services. Previously, Mr. Fullwood held several executive and general management leadership positions with Xerox. Mr. Fullwood serves as a director of Vanguard Group, Vanguard Funds and Amerigroup Corporation, as well as of the University of Rochester Medical Center, North Carolina A&T State University, the United Way of Rochester, the Rochester Boy Scouts of America, Monroe Community College Foundation, the Urban League and Colgate Rochester Crozier Divinity School. Mr. Fullwood has been a director of SPX since 1998 and was a director of General Signal Corporation prior to our acquisition of that company in 1998.



Mr. Fullwood is our second-longest-serving Board member and offers the perspective and deep understanding of our business accumulated over years of service on our Board. Mr. Fullwood has extensive and varied experience, gained in senior positions held over his many years of service with Xerox Corporation. Of particular value is his experience and perspective in marketing, including experience gained as Executive Chief of Staff and Marketing Officer for Xerox North America.




Michael J. Mancuso , 68, has been Vice President and Chief Financial Officer of Computer Sciences Corporation, a provider of information technology and business process outsourcing and information technology and professional services, since December 2008. He was previously Senior Vice President and Chief Financial Officer of General Dynamics Corporation, until June 2006. He joined General Dynamics in 1993 as Vice President and Chief Financial Officer for General Dynamics Land Systems, Inc., and was promoted to Vice President and Chief Financial Officer in 1994. Before joining General Dynamics, Mr. Mancuso spent seven years with United Technologies. His background also includes 21 years with General Electric. Mr. Mancuso is a director of the Shaw Group Inc. Within the past five years, Mr. Mancuso has also been a director of Agere Systems, Inc., CACI International, Inc., and LSI Logic Corporation. Mr. Mancuso has been a director of SPX since 2005.



Mr. Mancuso contributes a strong understanding of finance and accounting to our Board. In addition, Mr. Mancuso provides insights on managing a rapidly growing company, garnered from his years at General Dynamics, and brings a broad business and operations perspective, gained in part during his 21 years with General Electric and from his operations management responsibility for General Dynamics' Resources group in aggregates and coal. Finally, Mr. Mancuso's knowledge stemming from his corporate-wide responsibilities for IT systems at General Dynamics, as well as his experience as CFO of CSC, is valuable when considering IT issues and initiatives.

Nominee to Serve Until 2013 Annual Meeting

Terry S. Lisenby , 60, is the retired Chief Financial Officer, Treasurer and Executive Vice President of Nucor Corporation, a steel manufacturing company, a position he held from 2000 until the end of 2009. He previously served as a Vice President and Corporate Controller of Nucor from 1991 to 1999. Mr. Lisenby began his career with Nucor as Corporate Controller in 1985.
Mr. Lisenby contributes a strong understanding of finance and accounting to our Board. In addition, Mr. Lisenby brings a strong manufacturing and operations background, with expertise in supply chain management, among other things. Mr. Lisenby also has extensive experience in mergers and acquisitions and integration of new aquisitions.

YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE
FOR EACH OF THE DIRECTOR NOMINEES

Albert A. Koch , 68, is Vice Chairman and Managing Director with AlixPartners, LLP, an international corporate turnaround and financial advisory firm. Mr. Koch joined AlixPartners in 1995 as Managing Principal. In connection with his work at AlixPartners, he also serves as President and CEO of Motors Liquidation Company (formerly General Motors Corporation) and as President and CEO of Handleman Company. Other AlixPartners assignments include Mr. Koch serving as Chairman of Polar Corporation, a privately owned company, since 2004, and also as its CEO from 2004 until 2007. In 2004 and 2005, Mr. Koch was the Chairman, interim President and CEO at Champion Enterprises, Inc., and in 2002 and 2003, Mr. Koch served as interim CFO of the Kmart Corporation. Mr. Koch also was a partner with Ernst & Young for 14 years, including 7 years as Managing Partner of the firm's Detroit office. Mr. Koch is the Treasurer of the American College of Bankruptcy. Mr. Koch has also been a director of Tecumseh Products Company. Mr. Koch has been a director of SPX since 2007.



Mr. Koch was appointed Chief Restructuring Officer of General Motors Corporation two days prior to its filing under Chapter 11 of the U.S. Bankruptcy Code.



Mr. Koch contributes an extensive understanding of finance and accounting to our Board. Mr. Koch also brings a unique skill set of effectively managing and advising corporations facing crises, and the related perspective of understanding risks to which even healthy companies are exposed.


Directors Continuing Until 2012 Annual Meeting

Christopher J. Kearney , 55, is Chairman, President and Chief Executive Officer of SPX. He was named President and Chief Executive Officer in December 2004, and added the title of Chairman in May 2007. He joined the company in February 1997 as Vice President, Secretary and General Counsel and an officer of the company. Prior to joining SPX, he was Senior Vice President and General Counsel of Grimes Aerospace Company, a leading manufacturer of aircraft lighting equipment, engine system components and electronic systems. His business experience also includes positions at Borg-Warner Chemicals as Senior Attorney and Senior Counsel at General Electric's global materials business. Mr. Kearney holds an undergraduate degree from the University of Notre Dame and a law degree from DePaul University Law School. Mr. Kearney is a Member of the Advisory Council for University Libraries, University of Notre Dame, and serves on the Board of Directors of the Foundation for the Carolinas. Mr. Kearney is also a director of Nucor Corporation. Mr. Kearney has been a director of SPX since 2004.



Mr. Kearney brings valuable business and mergers and acquisitions experience and a strong legal perspective to our Board. Mr. Kearney, as the only member of SPX management to serve on the Board, also contributes a level of understanding of our company not easily attainable by an outside director.

GRAPHIC

Martha B. Wyrsch , 53, has been President of Vestas-Americas, an affiliate of Vestas Wind Systems NS since June 2009. From January 2007 until October 2008, Ms. Wyrsch was the President and Chief Executive Officer of Spectra Energy Transmission, LLC, Spectra Energy Corporation's natural gas transmission and storage business in the United States and Canada, as well as the gathering, processing and distribution businesses in Canada. She served on the board of directors for Spectra Energy Corporation and as chair of its two publicly traded partnerships, Spectra Energy Partners, L.P. and Spectra Energy Income Fund. Ms. Wyrsch joined Duke Energy Corporation in 1999, where she served in various legal positions. She was group vice president and general counsel, and was named president of Duke Energy Gas Transmission in 2005. Previously, Ms. Wyrsch was vice president, general counsel and secretary for KN Energy, Inc. Ms. Wyrsch is a member of the National Infrastructure Advisory Council and a director of the American Wind Energy Association. Within the past five years, Ms. Wyrsch has also served as Chairman of Westcoast Energy Inc. and Spectra Energy Partners GP, LLC, a General Partner of Spectra Energy Partners, LP, Chairman of Union Gas Ltd., and a director of Spectra Energy Facilities LP, Greater Houston Partnership, Union Gas Ltd., the National Petroleum Council, Spectra Energy Corp., and Spectra Energy Partners GP LLC. Ms. Wyrsch has been a director of SPX since 2009.



Ms. Wyrsch contributes to our Board the skills and experience gained from her years of serving in various senior legal and corporate governance capacities. Ms. Wyrsch also has a wide general business experience from serving in senior business roles at energy companies. Of particular value is Ms. Wyrsch's broad experience with energy infrastructure companies and her insight into global manufacturing.

MANAGEMENT DISCUSSION FROM LATEST 10K

Executive Overview

Overall, our operating results for 2012 were mixed as demand for products within our Flow Technology reportable segment was quite strong in the Americas and Asia Pacific and volumes for power transformers increased year-over-year. However, these favorable trends were offset partially by weak demand, generally across the globe, for cooling and thermal products within our Thermal Equipment and Services reporting segment. These trends, along with the impact of the December 2011 acquisition of Clyde Union, which contributed incremental revenues of $557.6 in 2012, resulted in an increase in revenues of 12.4% in 2012. Despite the increase in revenues, income associated with our reportable and other segments declined to $505.9 in 2012, compared to $520.6 in 2011, with the decline primarily the result of the revenue decreases noted above within our Thermal Equipment and Services reportable segment, particularly with regard to higher-margin dry cooling project revenues. Cash flows from continuing operations also declined on a year-over-year basis, from $252.5 in 2011 to $84.7 in 2012. Much of the decrease in cash flows from continuing operations was attributable to (i) investments in working capital at Clyde Union of approximately $140.0, (ii) the timing of milestone cash receipts for certain large projects within our Flow Technology and Thermal Equipment and Services reportable segments, (iii) an increase in pension and postretirement contributions and direct benefit payments of $37.2 and (iv) income tax payments, net of refunds, of $59.3 during 2012, compared to income tax payments, net of refunds, of $0 during 2011.

Significant Items that Impacted 2012 Financial Results


On January 23, 2012, we entered into an agreement to sell our Service Solutions business to Robert Bosch GmbH. We completed the sale in December 2012 for cash proceeds of $1,134.9 and recorded a gain, net of taxes, of $313.4 to "Gain on disposition of discontinued operations, net of tax" within our consolidated statement of operations for 2012.


On December 30, 2011, we and Shanghai Electric established the Shanghai Electric JV, a joint venture to supply dry cooling and moisture separator reheater products and services to the power sector in China and other selected regions of the world. We contributed and sold certain assets of our dry cooling products business in China to the Shanghai Electric joint venture in consideration for a 45% ownership interest in the joint venture and cash payments of RMB 96.7, with RMB 51.5 received January 2012, RMB 25.8 received in December 2012, and the remaining RMB payment contingent upon the joint venture achieving defined sales order volumes. Final approval for the transaction was received on January 13, 2012. In connection with the transaction, we recorded a pre-tax gain during the first quarter of 2012 of $20.5, with such gain included in "Other income (expense), net" in our consolidated statement of operations for 2012. See Note 4 to our consolidated financial statements for additional details on the transaction.


On February 16, 2012, we entered into a written trading plan under Rule 10b5-1 of the Securities and Exchange Act of 1934, as amended, to facilitate the repurchase of up to $350.0 of shares of our common stock on or before February 14, 2013, in accordance with a share repurchase program authorized by our Board of Directors. During the first half of 2012, 1.0 shares of our common stock were repurchased for $75.0, with the remainder scheduled to be repurchased following the consummation of the sale of the Service Solutions business. During December 2012, and following the completion of the sale of our Service Solutions business, we repurchased 2.6 shares of our common stock for $170.6, resulting in total repurchases of $245.6 during 2012. During January 2013, we completed the repurchases authorized under the trading plan.


On February 8, 2012, the lenders under our senior credit facilities agreed, with respect to the proceeds from the sale of our Service Solutions business, to waive the mandatory prepayments required by the senior credit facilities. The waiver required that a portion of the proceeds from the pending sale be used to repay $325.0 of the term loans under our senior credit facilities. Upon completion of the sale of Service Solutions in December 2012, we repaid $325.0 of the terms loans. In addition, we allocated $8.0 of interest expense associated with the $325.0 of term loan repayments to discontinued operations within our consolidated statement of operations for 2012.


During 2012, we recorded an impairment charge of $281.4 related to the goodwill ($270.4) and other long-term assets ($11.0) of our Cooling reporting unit. In addition, we recorded impairment charges of $4.5 related to trademarks for two other businesses within our Thermal Equipment and Services reportable segment. See Note 8 to our consolidated financial statements for further discussion.




During 2012, we recorded an income tax provision of $31.9 on a pre-tax loss from continuing operations of $46.5. The income tax provision for 2012 was impacted by the following:


An income tax benefit of $26.3 associated with the $281.4 impairment charge previously noted, as the majority of the goodwill for the Cooling reporting unit has no basis for income tax purposes;


Taxes provided of $15.4 on foreign dividends and undistributed earnings that are no longer considered to be indefinitely reinvested;


Incremental tax expense of $6.1 associated with the deconsolidation of our dry cooling business in China, as the goodwill allocated to the transaction is not deductible for income tax purposes; and


Valuation allowances that were recorded against deferred tax assets during the year of $5.4.

The above income tax charges were offset partially by income tax benefits of $23.7 associated with audit closures, settlements, statute expirations, and other changes in the accrual for uncertain tax positions, with the most notable being the closure of our German tax examination for the years 2005 through 2009.

Other Matters


On March 21, 2012, our Flow Technology reportable segment completed the acquisition of Seital S.r.l. ("Seital"), a leading supplier of disk centrifuges (separators and clarifiers) to the global food and beverage, biotechnology, pharmaceutical and chemical industries, for a purchase price of $28.8, net of cash acquired of $2.5 and including debt assumed of $0.8.


Inclusive of cash on hand and committed credit lines, our available liquidity was $1,564.0 at December 31, 2012.


There are no scheduled principal payments under our senior credit facilities until 2014.


Results of Continuing Operations

Seasonality and Competition — Many of our businesses closely follow changes in the industries and end markets they serve. In addition, certain businesses have seasonal fluctuations. Our heating and ventilation products businesses tend to be stronger during the third and fourth quarters, as customer buying habits are driven largely by seasonal weather patterns. Demand for cooling towers and related services is highly correlated to timing on large construction contracts, which may cause significant fluctuations from period to period. In aggregate, our businesses generally tend to be stronger in the second half of the year.

Although our businesses operate in highly competitive markets, our competitive position cannot be determined accurately in the aggregate or by reportable or operating segment since our competitors do not offer all the same product lines or serve all the same markets. In addition, specific reliable comparative figures are not available for many of our competitors. In most product groups, competition comes from numerous concerns, both large and small. The principal methods of competition are service, product performance, technical innovations and price. These methods vary with the type of product sold. We believe we can compete effectively on the basis of each of these factors as they apply to the various products and services we offer. See "Business — Reportable Segments and Other Operating Segments" for a discussion of our competitors.

Non-GAAP Measures — Organic revenue growth (decline) presented herein is defined as revenue growth (decline) excluding the effects of foreign currency fluctuations, acquisitions and divestitures. We believe this metric is a useful financial measure for investors in evaluating our operating performance for the periods presented, as, when read in conjunction with our revenues, it presents a useful tool to evaluate our ongoing operations and provides investors with a tool they can use to evaluate our management of assets held from period to period. In addition, organic revenue growth (decline) is one of the factors we use in internal evaluations of the overall performance of our business. This metric, however, is not a measure of financial performance under accounting principles generally accepted in the United States ("GAAP"), should not be considered a substitute for revenue growth (decline) as determined in accordance with GAAP and may not be comparable to similarly titled measures reported by other companies.


Revenues — For 2012, the increase in revenues, compared to 2011, was due to incremental revenues of $594.1 associated with the acquisitions of Seital in 2012 and Clyde Union and e&e Verfahrenstechnik GmbH ("e&e") in 2011 and, to a lesser extent, organic revenue growth. The organic revenue growth in 2012 was due primarily to (i) additional sales into our Flow Technology reportable segment's power and energy and industrial end-markets in the Americas and its food and beverage and industrial end-markets in Asia Pacific, (ii) an increase in sales volumes and, to a lesser extent, prices of power transformers, and (iii) an increase in sales of cooling products in South Africa associated with continued progression on the Kusile and Medupi projects. These increases in organic revenue were offset partially by a decline in sales of cooling and thermal products in the Americas, China, and Europe and the impact of a stronger U.S. dollar during 2012, when compared to 2011.

For 2011, the increase in revenues, compared to 2010, was due to organic revenue growth, the impact of the weaker U.S. dollar in 2011, and incremental revenues of $72.9 associated with the acquisitions of Clyde Union, e&e and Murdoch in 2011, and Anhydro, TTS, and Gerstenberg in 2010. The organic revenue growth was attributable primarily to additional sales into the food and beverage, power and energy, and general industrial end markets of our Flow Technology reportable segment, increases in evaporative cooling product revenues in the Americas within our Thermal Equipment and Services reportable segment, and greater demand for hydraulic tools and equipment within Industrial Products and Services. These increases in organic revenue were offset partially by volume declines of dry cooling products in China and at SPX Heat Transfer Inc.

Gross Profit — The increase in gross profit for 2012, compared to 2011, was due primarily to the revenue performance described above. Gross profit as a percentage of revenues declined during 2012, compared to 2011, primarily as a result of the following:

Matters related to Clyde Union's operating results during the period, including:


Charges related to the excess fair value (over historical cost) of inventory acquired and subsequently sold during the first half of 2012 of $8.1; and




The impact of loss contracts acquired and then converted to revenue during 2012 (such losses generally were recorded as part of Clyde Union's acquisition accounting adjustments).


The above increases in SG&A were offset partially by a decline in incentive compensation during 2011 of $12.2.

Intangible Amortization — For 2012, the increase in intangible amortization, compared to 2011, was due primarily to incremental amortization of $10.0 associated with intangible assets purchased in the Clyde Union acquisition.

For 2011, the increase in intangible amortization, when compared to 2010, was primarily due to incremental amortization associated with intangible assets purchased in the Clyde Union, e&e, Murdoch, Anhydro, TTS, and Gerstenberg acquisitions.

Impairment of Goodwill and Other Long-Term Assets — During 2012, we recorded impairment charges of $281.4 associated with the goodwill ($270.4) and other long-term assets ($11.0) of our Cooling reporting unit. In addition, we recorded impairment charges of $4.5 related to trademarks for two other businesses within our Thermal Equipment and Services reportable segment.

During 2011, we recorded impairment charges of $28.3 associated with the goodwill and indefinite-lived intangible assets of our SPX Heat Transfer Inc. reporting unit, with $20.8 of the charge related to goodwill and $7.5 to trademarks.

During 2010, we recorded an impairment charge of $1.7 related to trademarks of a business within our Thermal Equipment and Services reportable segment.

See Note 8 to our consolidated financial statements for further discussion of impairment charges.


Special Charges, Net — Special charges related primarily to restructuring initiatives to consolidate manufacturing, distribution, sales and administrative facilities, reduce workforce and rationalize certain product lines. See Note 6 to our consolidated financial statements for the details of actions taken in 2012, 2011 and 2010. The components of special charges, net, were as follows:


Other Income (Expense), Net — Other income, net for 2012 was composed primarily of a gain of $20.5 associated with the deconsolidation of our dry cooling products business in China, investment earnings of $9.9, and gains on FX forward contracts of $0.2, partially offset by foreign currency transaction losses of $12.2 and losses on FX embedded derivatives of $0.4.

For 2011, Other expense, net was composed primarily of charges associated with our FX forward contracts of $38.5 and foreign currency transaction losses of $4.4, partially offset by gains on FX embedded derivatives of $1.5 and insurance proceeds received of $3.2 related to death benefit and property insurance claims. The expense associated with the FX forward contracts included a charge of $34.6 related to our hedging a significant portion of the purchase price of the Clyde Union acquisition. In addition, and as discussed in Note 14 to our consolidated financial statements, we maintain insurance for certain risk management matters. During 2011, we recorded a charge of $18.2 to "Other income (expense), net" associated with amounts that are deemed uncollectible from an insolvent insurer for certain risk management matters. See Note 14 to our consolidated financial statements for further details.

For 2010, Other expense, net was composed primarily of charges associated with our FX forward contracts and FX embedded derivatives of $17.3 and foreign currency transaction losses of $10.2, partially offset by investment income of $9.5.

Interest Expense, Net — Interest expense, net, includes both interest expense and interest income. The increase in interest expense, net, during 2012, when compared to 2011, was primarily the result of interest incurred during 2012 on the $800.0 of term loans that were drawn down in December 2011 in order to fund the acquisition of Clyde Union. As discussed in Note 12 to the consolidated financial statements, interest expense associated with the term loans of approximately $8.0 was allocated to discontinued operations during 2012. In addition, in connection with the closing of the sale of our Service Solutions business in December 2012, we repaid $325.0 of the above term loans (see Notes 4 and 12 to our consolidated financial statements for further details).

For 2011, the increase in interest expense, net, when compared to 2010, was the result of replacing the term loan under our then-existing senior credit facilities (a loan that carried an interest rate, inclusive of the impact of the related interest rate protection agreements ("Swaps"), of approximately 5.0%) with the $600.0 of 6.875% senior notes in August 2010.

Loss on Early Extinguishment of Interest Rate Protection Agreements and Term Loan — During 2010, we incurred $25.6 of charges in connection with the August 2010 repayment of the term loan under our then-existing senior credit facilities (see Note 12 to our consolidated financial statements), with $24.3 associated with the early termination of the related Swaps and the remainder with the write-off of deferred financing costs and early termination fees.

Equity Earnings in Joint Ventures — Our equity earnings in joint ventures were attributable primarily to our investment in EGS, as earnings from this investment totaled $39.0, $28.7 and $28.8 in 2012, 2011 and 2010, respectively.

Income Taxes — During 2012, we recorded an income tax provision of $31.9 on a pre-tax loss from continuing operations of $46.5, resulting in an effective tax rate of (68.6)%. The effective tax rate for 2012 was impacted by (i) an income tax benefit of $26.3 associated with the $281.4 impairment charge recorded for Cooling reporting unit's goodwill and other long-term assets, as the majority of the goodwill for the Cooling reporting unit has no basis for income tax purposes, (ii) taxes provided of $15.4 on foreign dividends and undistributed earnings that are no longer considered to be indefinitely reinvested, (iii) incremental tax expense of $6.1 associated with the deconsolidation of our dry cooling business in China, as the goodwill allocated to the transaction is not deductible for income tax purposes, and (iv) valuation allowances that were recorded against deferred tax assets during the year of $5.4. These income tax charges were offset partially by income tax benefits of $23.7 associated with audit closures, settlements, statute expirations, and other changes in the accrual for uncertain tax positions, with the most notable being the closure of our German tax examination for the years 2005 through 2009.

During 2011, we recorded an income tax provision of $14.3 on $169.9 of pre-tax income from continuing operations, resulting in an effective tax rate of 8.4%. During 2011, we adopted an alternative method of allocating certain expenses between foreign and domestic sources for federal income tax purposes. As a result of this election, we determined that it is more likely than not that we will be able to utilize our existing foreign tax credits within the remaining carryforward period. Accordingly, during 2011, we released the valuation allowance on our foreign tax credit carryforwards, resulting in an income tax benefit of $27.8. In addition, during 2011 we recorded income tax benefits of $2.5 associated with the conclusion of a Canadian appeals process and $7.7 of tax credits related to the expansion of our power transformer facility in Waukesha, WI. These benefits were offset partially by $6.9 of federal income taxes that were incurred in connection with our plan to repatriate a portion of the earnings of a foreign subsidiary.

During 2010, we recorded an income tax provision of $45.6 on $223.6 of pre-tax income from continuing operations, resulting in an effective tax rate of 20.4%. The effective tax rate for 2010 was impacted favorably by a tax benefit of $18.2 that was recorded in connection with the completion of the field examinations of our 2006 and 2007 federal income tax returns and tax benefits of $16.0 related to the reduction in liabilities for uncertain tax positions associated with various foreign and domestic statute expirations and the settlement of state examinations. These benefits were offset partially by domestic charges of $6.2 associated with the taxation of prescription drug costs for retirees under Medicare Part D as a result of enactment of the PPAC Act during the year and $3.6 associated with the repatriation of foreign earnings.

Discontinued Operations

We report businesses or asset groups as discontinued operations when, among other things, we commit to a plan to divest the business or asset group, actively begin marketing the business or asset group, and when the sale of the business or asset group is deemed probable within the next 12 months. The following businesses, which have been sold, met these requirements and therefore have been reported as discontinued operations for the periods presented.



Tianyu — Sold for cash consideration of one RMB (exclusive of cash transferred with the business of $1.1), resulting in a loss, net of taxes, of $1.8 during 2012.

Weil McLain Shandong — Sold for cash consideration of $2.7 (exclusive of cash transferred with the business of $3.1), resulting in gain, net of taxes, of $2.2 during 2012.

Service Solutions — Sold to Robert Bosch GmbH for cash consideration of $1,134.9, resulting in a gain, net of taxes, of $313.4 during 2012.


MANAGEMENT DISCUSSION FOR LATEST QUARTER

EXECUTIVE OVERVIEW



Revenues for the three and nine months ended September 29, 2012 increased, when compared to the same periods in 2011, by 7.2% and 11.8%, respectively, primarily as a result of incremental revenue associated with the December 2011 acquisition of Clyde Union (Holdings) S.A.R.L. (“Clyde Union”) of $126.5 and $395.1, respectively. During the three months ended September 29, 2012, organic revenue declined 0.5%, when compared to the same period in 2011, while during the nine months ended September 29, 2012, organic revenue increased 2.9% when compared to the same period in 2011. Our Flow Technology reportable segment and Industrial Products and Services experienced organic revenue growth during the three and nine months ended September 29, 2012, while our Thermal Equipment and Services reportable segment experienced declines in organic revenue during these same 2012 periods. Income associated with our reportable and other operating segments declined to $134.2 and $332.7, respectively, during the three and nine months ended September 29, 2012 (compared to $138.0 and $359.6 in the respective 2011 periods). The decline in income associated with our reportable and other operating segments was attributable primarily to (i) the organic revenue declines and a lower proportion of high-margin project revenues within our Thermal Equipment & Services reportable segment and (ii) earnings dilution associated with the Clyde Union acquisition, including charges related to the excess fair value (over historical cost) of inventory acquired and subsequently sold during the first half of 2012 of $8.1. Cash flows from continuing operations also declined on a year-over-year basis from an inflow of $106.4 in the nine months ended October 1, 2011, to an outflow of $139.4 in the nine months ended September 29, 2012, primarily as a result of (i) investments in working capital at Clyde Union of approximately $100.0, (ii) the timing of milestone cash receipts for certain large projects within our Flow Technology and Thermal Equipment and Services reportable segments, (iii) an increase in pension contributions and direct benefit payments of $28.6 and (iv) income tax payments, net of refunds, of $32.0 during the nine months ended September 29, 2012, compared to income tax refunds, net of payments, of $13.0 during the nine months ended October 1, 2011.



Other items of note that impacted our financial results for the first nine months of 2012 are as follows:



• On December 30, 2011, we contributed and sold certain assets of our dry cooling products business in China to the Shanghai Electric joint venture in consideration for (i) a 45% ownership interest in the joint venture and (ii) cash payments of RMB 96.7, with RMB 51.5 received on January 18, 2012, RMB 25.8 to be received no later than December 31, 2012, and the remaining RMB payment contingent upon the joint venture achieving defined sales order volumes. Final approval for the transaction was received on January 13, 2012. In connection with the transaction, we recorded a pre-tax gain during the first quarter of 2012 of $20.5, with such gain included in “Other income (expense), net” in our condensed consolidated statement of operations. See Note 3 to our condensed consolidated financial statements for additional details on the transaction.



• On January 23, 2012, we entered into an agreement to sell our Service Solutions business to Robert Bosch GmbH for cash proceeds of $1,150.0. We expect the sale to close in December 2012, resulting in an estimated net gain of $450.0. We have reported our Service Solutions business as a discontinued operation within our condensed consolidated financial statements. Our Service Solutions business previously was reported within our Test and Measurement reportable segment. As a result of classifying our Service Solutions business as a discontinued operation, we changed our segment reporting structure. The remaining two businesses that had been included within the Test and Measurement reportable segment, along with our remaining operating segments, which do not meet the quantitative threshold criteria of the Segment Reporting Topic of the Codification, have been combined within our “All Other” category, which we refer to as Industrial Products and Services. This is not considered a reportable segment. See Notes 3 and 4 to our condensed consolidated financial statements for further details.



• On February 16, 2012, we entered into a written trading plan under Rule 10b5-1 of the Securities and Exchange Act of 1934, as amended, to facilitate the repurchase of up to $350.0 of shares of our common stock on or before February 14, 2013, in accordance with a share repurchase program authorized by our Board of Directors. During the first half of 2012, 0.992 shares of our common stock were repurchased for cash consideration of $75.0, with the remainder scheduled to be repurchased following the consummation of the sale of the Service Solutions business, in accordance with the share repurchase program. There were no common stock repurchases during the nine months ended October 1, 2011.

• On March 21, 2012, in our Flow Technology reportable segment, we completed the acquisition of Seital S.r.l. (“Seital”), a leading supplier of disk centrifuges (separators and clarifiers) to the global food and beverage, biotechnology, pharmaceutical and chemical industries, for a purchase price of $28.8, net of cash acquired of $2.5 and including debt assumed of $0.8.



RESULTS OF CONTINUING OPERATIONS



The unaudited information included in this Quarterly Report on Form 10-Q should be read in conjunction with the consolidated financial statements contained in our 2011 Annual Report on Form 10-K, as amended (“2011 Annual Report on Form 10-K/A”). Interim results are not necessarily indicative of results for a full year. We establish actual interim closing dates using a “fiscal” calendar, which requires our businesses to close their books on the Saturday closest to the end of the calendar quarter for the first quarter, with the second and third quarters being 91 days in length. Our fourth quarter ends on December 31. The interim closing dates for the first, second and third quarters of 2012 are March 31, June 30 and September 29, compared to the respective April 2, July 2 and October 1, 2011 dates. We had one fewer day in the first quarter of 2012 and will have two more days in the fourth quarter of 2012 than in the respective 2011 periods.



Seasonality and Competition — Many of our businesses closely follow changes in the industries and end markets that they serve. In addition, certain businesses have seasonal fluctuations. Our heating and ventilation products businesses tend to be stronger during the third and fourth quarters, as customer buying habits are driven largely by seasonal weather patterns. Demand for cooling towers and related services is highly correlated to timing on large construction contracts, which may cause significant fluctuations from period to period. In aggregate, our businesses generally tend to be stronger in the second half of the year.



Although our businesses operate in highly competitive markets, our competitive position cannot be determined accurately in the aggregate or by reportable or operating segment since our competitors do not offer all the same product lines or serve all the same markets. In addition, specific reliable comparative figures are not available for many of our competitors. In most product groups, competition comes from numerous concerns, both large and small. The principal methods of competition are service, product performance, technical innovations and price. These methods vary with the type of product sold. We believe we can compete effectively on the basis of each of these factors as they apply to the various products and services we offer.



Non-GAAP Measures — Organic revenue growth (decline) presented herein is defined as revenue growth (decline) excluding the effects of foreign currency fluctuations, acquisitions and the impact of contributing a business to a joint venture. We believe that this metric is a useful financial measure for investors in evaluating our operating performance for the periods presented, as, when read in conjunction with our revenues, it presents a useful tool to evaluate our ongoing operations and provides investors with a tool they can use to evaluate our management of assets held from period to period. In addition, organic revenue growth (decline) is one of the factors we use in internal evaluations of the overall performance of our business. This metric, however, is not a measure of financial performance under accounting principles generally accepted in the United States (“GAAP”), should not be considered a substitute for revenue growth (decline) as determined in accordance with GAAP and may not be comparable to similarly titled measures reported by other companies.

Revenues — For the three and nine months ended September 29, 2012, the increase in revenues, compared to the same 2011 periods, was due to incremental revenues of $139.3 and $427.6, respectively, associated with the acquisitions of Seital in the first quarter of 2012 and Clyde Union and e&e Verfahrenstechnik GmbH (“e&e”) in the fourth quarter of 2011. During the three months ended September 29, 2012, organic revenue declined, as compared to the same period in 2011, primarily as a result of a decrease in sales of cooling and thermal products in the Americas and Europe. Such decrease in organic revenue was offset partially by an increase in sales volumes and, to a lesser extent, prices of power transformers. During the nine months ended September 29, 2012, organic revenue increased, as compared to the same period in 2011, primarily as a result of (i) additional sales into our Flow Technology reportable segment’s power and energy and industrial end-markets in the Americas and its food and beverage and industrial end-markets in Asia Pacific and (ii) an increase in sales volumes and, to a lesser extent, prices of power transformers. These increases in organic revenue were offset partially by a decline in sales of cooling and thermal products in the Americas and Europe. A stronger U.S. dollar negatively impacted revenues during the three and nine months ended September 29, 2012, when compared to the same periods in 2011.



Gross Profit — For the three and nine months ended September 29, 2012, the increase in gross profit, compared to the respective 2011 periods, was due primarily to the revenue performance described above. Gross profit as a percentage of revenues declined during the three and nine months ended September 29, 2012, compared to the respective 2011 periods, primarily as a result of the following:

• Matters related to Clyde Union’s operating results during the period, including:



• Charges related to the excess fair value (over historical cost) of inventory acquired and subsequently sold during the first half of 2012 of $8.1; and



• The impact of low-margin projects acquired and then converted to revenue during each of the first three quarters of 2012.



• A decline in high-margin sales within our Thermal Equipment and Services reportable segment during the three and nine months ended September 29, 2012;



• A significant increase during the three and nine months ended September 29, 2012 of sales of food and beverage systems within our Flow Technology reportable segment, as such sales typically have lower profit margins than the segment’s food and beverage component revenues; and



• An insurance recovery of $6.3 during the first quarter of 2011 related to a product liability matter within Industrial Products and Services.



The above decreases in gross profit as a percentage of revenues were offset partially by improved cost absorption associated with the increase in sales of power transformers during 2012.



Selling, General and Administrative (“SG&A”) expenses — For the three and nine months ended September 29, 2012, the increase in SG&A expense, compared to the respective periods in 2011, was due primarily to incremental SG&A of $23.3 and $77.5, respectively, associated with the acquisition of Clyde Union. The increases in SG&A were offset partially by decreases of $6.7 and $18.8, respectively, during the three and nine months ended September 29, 2012 associated with a stronger U.S. dollar during these periods when compared to the same periods in 2011.



Intangible Amortization — For the three and nine months ended September 29, 2012, the increase in intangible amortization, compared to the respective periods in 2011, was due primarily to incremental amortization of $3.3 and $9.5, respectively, associated with intangible assets purchased in the Clyde Union acquisition.



Impairment of Goodwill and Other Intangible Assets — For the nine months ended October 1, 2011, we recorded an impairment charge of $24.7 associated with the goodwill and indefinite-lived intangible assets of our SPX Heat Transfer Inc. reporting unit, with $17.2 of the charge related to goodwill and $7.5 to tradenames. See Note 7 to the condensed consolidated financial statements for further discussion.



Special Charges, net — Special charges, net relate primarily to restructuring initiatives to consolidate manufacturing, distribution, and administrative facilities and functions. See Note 5 to the condensed consolidated financial statements for the details of actions taken in 2012 and 2011.



Other Income (Expense), net — Other expense, net, for the three months ended September 29, 2012 was composed primarily of foreign currency transaction losses of $3.0 and losses on currency forward embedded derivatives (“FX embedded derivatives”) of $1.8, as well as investment earnings of $3.3 and gains on foreign currency protection agreements (“FX forward contracts”) of $1.6. Other expense, net, for the three months ended October 1, 2011 was composed primarily of charges associated with our FX forward contracts of $35.2, partially offset by gains on our FX embedded derivatives of $3.8 and foreign currency transaction gains of $0.5. The expense associated with the FX forward contracts included a non-cash charge of $30.6 related to our hedging a significant portion of the purchase price of the Clyde Union acquisition, which was paid at closing in GBP. From the inception of these FX forward contracts through October 1, 2011, the U.S. dollar strengthened against the GBP by approximately 5.0%.



Other income, net, for the nine months ended September 29, 2012 was composed primarily of a gain of $20.5 associated with the deconsolidation of our dry cooling business in China, investment earnings of $8.7, and gains on FX forward contracts of $1.7, partially offset by foreign currency transaction losses of $8.9, losses on FX embedded derivatives of $3.1, and a loss of $1.0 associated with a fire at our power transformer manufacturing facility in Waukesha, WI. Other expense, net, for the nine months ended October 1, 2011 was composed primarily of a charge of $33.8 associated with our FX forward contracts and foreign currency transaction losses of $3.8, partially offset by gains on FX embedded derivatives of $1.0 and insurance settlements of $2.8 related to death benefits received and a property insurance claim. The expense associated with the FX forward contracts included a non-cash charge incurred during the third quarter of 2011 of $30.6 related to our hedging a significant portion of the purchase price of the Clyde Union acquisition. See Note 3 to our condensed consolidated financial statements for further discussion on the deconsolidation of the dry cooling business in China.



Interest Expense, net — Interest expense, net, includes both interest expense and interest income. The increase in interest expense, net, during the three and nine months ended September 29, 2012, when compared to the same periods in 2011, was primarily the result of interest incurred during the first three quarters of 2012 on the $800.0 of term loans that were drawn down in December 2011 in order to fund the acquisition of Clyde Union. As discussed in Note 10 to the condensed consolidated financial statements, interest expense associated with the term loans of approximately $2.0 and $7.0, respectively, was allocated to discontinued operations for the three and nine months ended September 29, 2012. Refer to the discussion of Liquidity and Financial Condition in our 2011 Annual Report on Form 10-K/A for details pertaining to our 2011 debt activity.



Equity Earnings in Joint Ventures — Our equity earnings in joint ventures were attributable primarily to our investment in EGS Electrical Group, LLC and Subsidiaries (“EGS”), as earnings from this investment totaled $8.6 and $6.7 during the three months ended September 29, 2012 and October 1, 2011, respectively, and $25.1 and $20.0 for the nine months ended September 29, 2012 and October 1, 2011, respectively. Our equity earnings from the Shanghai Electric JV were not material for the three and nine months ended September 29, 2012.



Income Tax Provision — For the three months ended September 29, 2012, we recorded an income tax provision of $12.5 on $67.4 of pre-tax income from continuing operations, resulting in an effective tax rate of 18.5%. This compares to an income tax benefit for the three months ended October 1, 2011 of $11.5 on $39.3 of pre-tax income from continuing operations, resulting in an effective tax rate of (29.3)%. The effective income tax rate for the three months ended September 29, 2012 was impacted favorably by tax benefits of $4.2 recorded in connection with various audit settlements and statute expirations during the period and a benefit of $2.8 associated with a reduction in deferred tax liabilities resulting from newly enacted corporate tax rates in the United Kingdom. The effective income tax rate for the three months ended October 1, 2011 was impacted favorably by an income tax benefit of $27.8 related to the release of a valuation allowance that had been recorded against our foreign tax credit carryforwards, partially offset by $6.9 of federal income taxes recorded in connection with our plan to repatriate a portion of the earnings of a foreign subsidiary.



For the nine months ended September 29, 2012, we recorded an income tax provision of $34.8 on $136.1 of pre-tax income from continuing operations, resulting in an effective tax rate of 25.6%. This compares to an income tax provision for the nine months ended October 1, 2011 of $4.0 on $100.5 of pre-tax income from continuing operations, resulting in an effective tax rate of 4.0%. The effective income tax rate for the nine months ended September 29, 2012 was impacted favorably by the tax benefits noted above for the three months ended September 29, 2012 and tax benefits of $2.5 recorded in the second quarter of 2012 in connection with various audit settlements and statute expirations. These benefits were offset partially by an incremental income tax charge of $6.1 associated with the deconsolidation of the dry cooling business in China, as the goodwill allocated to the transaction is not deductible for income tax purposes. The effective income tax rate for the nine months ended October 1, 2011 was impacted favorably by the net income tax benefits of $20.9 noted above that were recorded during the three months ended October 1, 2011, along with the tax benefits of $2.5 recorded during the first half of 2011 associated with the conclusion of the Canadian appeals process and $4.5 related to the expansion of our power transformer facility in Waukesha, WI.

CONF CALL

Scott R. Davis - Barclays Capital, Research Division

Okay, great. Thank you, all, for your patience. So we transitioned from 3M to GE to SPX. I think 3 of probably the most, well, what should I say, debated stories in industrial. It's funny yesterday, there wasn't a lot of questions, there wasn't a lot of debate. There wasn't a lot of -- I think the audience response to some questions were pretty consistent with the general bullish view that people had on a lot of companies that were presenting yesterday. And today, we have companies that have stirred up more emotion of late. And I think SPX, you guys have had an interesting few months, I'm sure, with the rumored GDI transaction and stock price has been up-and-down, yo-yoing a bit. And then of course, your very late, very late cycle. And given that your late cycle, a lot of other folks have had full recoveries in their businesses and are now talking about the next steps in their journey to drive up margins now that growth has slowed for them. But for you folks, growth is arguably going to be accelerating in the next 12, 24 months.

So I think SPX is an interesting company to have here. I think most of you know Chris Kearney, who is the Chairman and CEO -- President and CEO, I should say -- Chairman, President and CEO, excuse me. I don't want to gyp you out of your 3 fancy titles. Do you put those on your business cards, all 3, or you just say, I'm the king, I'm the guy...
Christopher J. Kearney - Chairman, Chief Executive Officer and President

[indiscernible] card.
Scott R. Davis - Barclays Capital, Research Division

It's like -- I introduced my wife once to Dave Cote. And he said, "Hi, I'm Dave. I run Honeywell." It's funny, I like that.

And then we've got Jeremy Smeltser, who is the relatively new CFO. I think it's been, what, 1 year, 1.5 years?
Jeremy W. Smeltser - Chief Financial Officer and Vice President

About a year.
Scott R. Davis - Barclays Capital, Research Division

About a year. And Ryan Taylor, who heads up the Investor Relations effort. I think Ryan does one of the best jobs of any other guys out there in Investor Relations. I think most of you who have dealt with him agree that his knowledge base is about as deep and helpful as it gets.

So look, I think there's a lot of things we could talk about in this presentation because you have some businesses like transformers, for example, that haven't -- they've turned up, but haven't really shown us the signs of life that people are expecting this quarter. It wasn't really that bad, but you had a cooling tower business, I think, that was, that's been struggling. So I think there's going to be a fair amount of questions on when that stabilizes and when that can turn up again. And then you start to anniversary some of the challenges at ClydeUnion, but that's getting a little bit better from here. And Flow, we can talk a bit about, maybe how you see the recovery in Flow, as well.

So lots of different questions. I think that what people have been paying me on the most just to get -- just to hit up front, and I know you don't -- you're not going to comment on GDI. But what is the SPX plan? Where do you see yourselves in 3 years? What's the focus going to be? And has that, in fact, changed at all? Let's address that upfront. And we can move into the businesses more explicitly.
Christopher J. Kearney - Chairman, Chief Executive Officer and President

Do you want me to start?
Scott R. Davis - Barclays Capital, Research Division

Sure, take it.
Christopher J. Kearney - Chairman, Chief Executive Officer and President

Sure. Well, first of all, thanks for having us, and thanks for letting us join your family on vacation again this year, I really appreciate that. So for those of you who aren't familiar with the SPX story and many of you who are, the past 16 years has really been a transformation story. We have significantly transformed the portfolio of businesses into higher growth, higher return profile businesses, built really around our Flow Technology segment. And so Flow Technology now accounts for more than half the company's total revenue.

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