UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

Commission File Number 1-6948

SPX CORPORATION

(Exact Name of Registrant as Specified in its Charter)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  ý Yes  o No

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).  ý Yes  o No

Common shares outstanding July 28, 2005     73,163,613

Item 1. Financial Statements

SPX CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

($ in millions)

The accompanying notes are an integral part of these statements.

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SPX CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(in millions, except per share amounts)

The accompanying notes are an integral part of these statements.

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SPX CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

($ in millions)

The accompanying notes are an integral part of these statements.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2005

(Unaudited)

(Dollar and share amounts in millions, except per share and per LYON data)

(1)                                 BASIS OF PRESENTATION

In our opinion, the accompanying condensed consolidated balance sheets and related interim statements of condensed consolidated operations and cash flows include the adjustments (consisting of normal and recurring items) necessary for their fair presentation in conformity with United States generally accepted accounting principles (“GAAP”) and represent our accounts after the elimination of inter-company transactions. Investments in unconsolidated companies where we exercise significant influence, but do not have control are accounted for using the equity method. Preparing financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Actual results could differ from these estimates. The unaudited information included in this Form 10-Q should be read in conjunction with the Consolidated Financial Statements contained in our 2004 Annual Report on Form 10-K. Interim results are not necessarily indicative of results for a full year.

Certain prior period amounts have been reclassified to conform to current-period presentation, including the results of discontinued operations, equity earnings in joint ventures, which is now being presented below “income (loss) from continuing operations before income taxes”, and financial data for our reporting segments resulting from changes to our segment reporting structure that were implemented during the first quarter of 2005. Unless otherwise indicated, amounts provided in these Notes pertain to continuing operations (see Notes 4 and 5 for more information on discontinued operations and changes to our segment reporting structure).

We label our quarterly information using a calendar convention. Our first quarter is consistently labeled as ending on March 31, second quarter as ending on June 30, and third quarter as ending on September 30. It is our practice to 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 efficiency purposes. The interim closing dates for the first, second and third quarters of 2005 are April 2, July 2 and October 1, respectively, and April 3, July 3 and October 2 for 2004, respectively. The effects of this practice only impact the quarterly reporting periods and not the annual reporting period. We had two fewer days in the first quarter of 2005 and will have one additional day in the fourth quarter of 2005 when compared to the respective 2004 periods.

(2)                                 NEW ACCOUNTING PRONOUNCEMENTS

The following is a summary of new accounting pronouncements that apply or may apply to our business.

In May 2004, the FASB issued FSP SFAS No. 106-2 “Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003”. FSP SFAS No. 106-2 superceded FSP SFAS No. 106-1 and provides disclosure and accounting guidance for the federal subsidy that will be given to health care plan sponsors who provide specified levels of postretirement healthcare prescription benefits. In the third quarter of 2004, we adopted the provisions of FSP SFAS No. 106-2 and made the determination that our postretirement healthcare prescription benefits qualified for the federal subsidy, which has resulted, and will continue to result, in a reduction in our net periodic postretirement benefit cost. The resulting reduction to our net periodic postretirement cost for the three and six months ended June 30, 2005 was approximately $0.8 and $1.6, respectively.

In October 2004, the Emerging Issues Task Force (“EITF”) reached a consensus on EITF Issue No. 04-8, “The Effect of Contingently Convertible Instruments on Diluted Earnings Per Share.” Under the EITF’s conclusion, instruments that are convertible to common stock based on achieving a market price trigger are to be included in the calculation of diluted earnings per share regardless of whether the contingency has been met. At its November 2004 meeting, the EITF declared EITF No. 04-8 effective for all periods ending after December 15, 2004 and required retroactive adoption for all historical periods presented.  The impact of the inclusion of the contingent convertible common shares on both income (loss) from continuing operations and net income per share is shown below for all periods presented:

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(1) For the three and six months ended June 30, 2005, the impact of the inclusion of the LYONs is anti-dilutive.

In November 2004, the FASB issued SFAS No. 151, “Inventory Costs”. SFAS No. 151 amends the previous guidance in ARB No. 43 to clarify that abnormal amounts of idle facility expense, freight, handling costs, and wasted material (spoilage) should be recognized as current-period charges. In addition, SFAS No. 151 requires that the allocation of fixed production overhead to the costs of conversion be based on the normal capacity of the production facilities. The provisions of this statement are effective for inventory costs incurred during fiscal years beginning after June 15, 2005 and we are currently evaluating what impact, if any, this statement will have on our consolidated financial statements.

In December 2004, the FASB issued the revised SFAS No. 123, Share-Based Payment (“SFAS No. 123R”). SFAS No. 123R supercedes Accounting Principles Board (“APB”) Opinion No. 25 and requires the recognition of compensation expense over the vesting period for all share-based payments, including stock options, based on the fair value of the instrument at the grant date. In April 2005, the Securities and Exchange Commission amended the effective date of SFAS No. 123R and, accordingly, it is now effective starting with the first annual period beginning after June 15, 2005. We have not issued any stock options since our 2003 option grant and those will become fully vested in the first quarter of 2006. We intend to adopt the modified prospective application of expensing stock options in accordance with SFAS No. 123R in the first quarter of 2006 and, as a result of the timing of our options’ vesting, the impact of adopting SFAS No. 123R will result in total compensation expense of less than $1.0 for our unvested stock options in 2006. Compensation expense will continue to be recognized for both outstanding unvested restricted stock and restricted stock units in accordance with APB No. 25 and eventually SFAS No. 123R, upon its adoption in the first quarter of 2006.  We are currently evaluating the impact that SFAS No. 123R will have on our future grants of restricted stock and restricted stock units.  For the periods presented, we have provided the disclosures required by the provisions of SFAS No. 148, “Accounting for Stock-Based Compensation—Transition and Disclosure, an amendment of FASB Statement No. 123.” See Note 3 of our Consolidated Financial Statements for the disclosure information required under SFAS No. 148.

In March 2005, the FASB issued FASB Interpretation No. 47, “Accounting for Conditional Asset Retirement Obligations, an interpretation of FASB Statement No. 143” (“FIN 47”). This statement clarifies that an entity is required to recognize a liability for the fair value of a conditional asset retirement obligation when incurred, if the liability’s fair value can be reasonably estimated. FIN 47 is effective for fiscal years ending after December 15, 2005.

In May 2005, the FASB issued SFAS No. 154, “ Accounting Changes and Error Corrections”.  SFAS No 154 provides guidance on the accounting for and reporting of accounting changes and error corrections. It establishes, unless impracticable, retrospective application as the required method for reporting a change in accounting principle in the absence of explicit transition requirements specific to the newly adopted accounting principle. This Statement also provides guidance for determining whether retrospective application of a change in accounting principle is impracticable and for reporting a change when retrospective application is impracticable and also states that the correction of an error in previously issued financial statements is not an accounting change.  The standard is effective for fiscal years beginning after December 15, 2005.

(3)                                 STOCK-BASED COMPENSATION

We have a stock-based compensation plan, including stock options, restricted stock and restricted stock unit awards. We account for our stock-based compensation under APB Opinion No. 25, “Accounting for Stock Issued to Employees,” and, accordingly, except for awards of restricted stock and restricted stock units, we do not recognize any compensation expense. We have adopted the disclosure provisions of SFAS No. 148, “Accounting for Stock-Based Compensation—Transition and Disclosure, an amendment of FASB Statement No. 123” and the following table illustrates the pro forma effect on earnings per share for both net income and income (loss) from continuing operations for the three and six months ended June 30, 2005 and 2004 had the fair value recognition provisions of SFAS No. 123 been applied to employee grants of stock options from the date of grant:

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(1)                                  Reflects expense, net of tax, related to restricted stock and restricted stock unit awards.

(4)                                 ACQUISITIONS AND DISCONTINUED OPERATIONS

We use acquisitions as a part of our strategy to access new technologies, expand our geographic reach, penetrate new markets and leverage our existing product, market, manufacturing or technical expertise. We also look to sell businesses or asset groups that we determine would strategically fit better with another company. Business acquisitions and discontinued operations for the six months ended June 30, 2005 and 2004 are described below.

All business acquisitions have been accounted for using the purchase method of accounting and, accordingly, the statements of condensed consolidated operations include the results of each acquired business since the date of acquisition. The assets acquired and liabilities assumed are recorded at estimates of fair values as determined by management based on information available. We consider a number of factors, including third-party valuations or appraisals, when making these determinations. We finalize the allocation of purchase price to the fair value of the assets acquired and liabilities assumed when we obtain information sufficient to complete the allocation, but in any case, within one year after acquisition.

Acquisitions

There were no significant acquisitions during the first six months of 2005.

During the first quarter of 2004, we completed three acquisitions. In the Flow Technology segment, we completed the acquisition of McLeod Russel Holdings PLC (“McLeod Russel”) for a purchase price of $54.5, which included the assumption of $30.5 in debt. McLeod Russel had revenues of $118.6 in the twelve months prior to the date of acquisition. In the Test & Measurement segment, we completed one acquisition for a cash purchase price of $12.9. The acquired company had revenues of $6.7 in the twelve months prior to the date of acquisition. In the Industrial Products and Services segment, we completed one acquisition for a cash purchase price of $4.0. The acquired company had revenues of $16.6 in the twelve months prior to the date of acquisition.

During the second quarter of 2004, our Industrial Products and Services segment completed one acquisition for a cash purchase price of $14.6. The acquired company had revenues of $11.9 in the twelve months prior to the acquisition.  Additionally, during the second quarter of 2004, our Thermal Equipment and Services segment paid approximately $14.0 for a purchase price holdback relating to a 2002 acquisition.

These acquisitions are not material individually or in the aggregate.

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Discontinued Operations

We report discontinued operations in accordance with the guidance of SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” Accordingly, 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 met these requirements and therefore have been reported as discontinued operations for the periods presented.

In the fourth quarter of 2004, we completed the sale of the municipal water valve, inspection gauging system, and axial fan businesses for aggregate cash proceeds of $49.9. We recorded a combined loss, net of taxes and transaction fees, on the sales of these businesses of $23.6, with $13.1 and $10.5 recorded in the second and fourth quarters of 2004, respectively.  During the second quarter of 2005, we increased the loss on the sales of these businesses by $1.6 due primarily to working capital adjustments in connection with final purchase price settlements with the respective buyers.  As a result of these settlements, the aggregate cash proceeds were reduced by $0.3 in the second quarter of 2005.

In the first quarter of 2005, we completed the sale of Bomag to Fayat SA (“Fayat”) for $443.3 in cash, net of cash balances assumed by Fayat of $2.7. The purchase price is subject to adjustment based on working capital existing at the date of close. We recorded a gain on the sale, net of taxes and transaction fees, of $126.4 during the first quarter of 2005.  In the second quarter of 2005, we reduced the gain on the sale by $0.1 as a result primarily of additional professional fees associated with the transaction.

In the first quarter of 2005, we completed the sale of EST to General Electric Company  (“GE”) for $1,393.5 in cash, net of cash balances assumed by GE of $1.5. The purchase price is subject to adjustment based on working capital existing at the date of close. We recorded a gain on the sale, net of taxes and transaction fees, of $656.4 during the first quarter of 2005.  In the second quarter of 2005, we increased the gain on the sale by $7.1 as a result primarily of adjusting the estimated income tax liabilities associated with the transaction.

In the first quarter of 2005, we completed the sale of our specialty tool business for $24.2 in cash, with $21.8 received at the closing and $2.4 deposited in an escrow account. Our receipt of the escrow funds is to occur in the third quarter of 2006 and is contingent upon the buyer’s satisfaction with the clearance of certain standard indemnity matters, as defined in the related purchase agreement.  We recorded a loss on the sale, net of taxes and transaction fees, of $2.3 during the first quarter of 2005.  In the second quarter of 2005, we increased the loss on the sale by $0.4 as a result of additional costs associated with the transaction.

In the first quarter of 2005, we completed the sale of our Brookstone telecommunication services business for $0.9 in cash. We recorded a loss on the sale, net of taxes and transaction fees, of $10.6 during the first quarter of 2005.

On February 23, 2005, we committed to, and our board of directors approved, a plan of disposal for our Carfel aftermarket products business, a component of our Filtran reporting unit. In connection with the plan of disposal, we recorded a loss, net of taxes, in the first quarter of 2005 of approximately $29.0.

In the second quarter of 2005, we completed the sale of Kendro to Thermo Electron Corporation (“Thermo”) for $835.4 in cash.  The purchase price is subject to adjustment based on net assets existing at the date of close.  We recorded a gain on the sale, net of taxes and transaction fees, of $313.8 during the second quarter of 2005.

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As noted above, the final purchase price for the Bomag, EST and Kendro sales are subject to adjustment based on working capital or net assets existing at the respective closing dates.  The working capital figures are subject to agreement with the buyers and in the event we cannot come to agreement with each of the buyers, an arbitration process.  The arbitration process is currently underway for the Bomag transaction.  Finalization of the working capital or net asset figures for each of these transactions has yet to occur and, accordingly, it is possible that the purchase price and resulting gains on these transactions will be adjusted in subsequent periods.  However, subsequent adjustments, if any, are not expected to be material.

For the three and six months ended June 30, 2005 and 2004, income from discontinued operations and the related income taxes are shown below:

For the three and six months ended June 30, 2005 and 2004, total revenues and pre-tax income from discontinued operations, excluding the aforementioned gains, are shown below.

The major classes of assets and liabilities, excluding inter-company balances, of the businesses reported as discontinued operations included in the accompanying consolidated balance sheets as of June 30, 2005 and December 31, 2004, respectively, are shown below.

(5)                                 BUSINESS SEGMENT INFORMATION

We are a global provider of a diverse collection of products, which include, but are not limited to, cooling towers, heating and ventilation products, air filtration products, process equipment, pumps, valves, back-flow prevention and fluid handling equipment, metering and mixing solutions, specialty service tools, diagnostic systems, service equipment, technical information services, power transformers, high-tech die castings, dock products and systems, and TV and radio broadcast equipment and towers. Our products are used by a broad array of customers in various industries, including automotive, chemical processing, pharmaceuticals, infrastructure, mineral processing, petrochemical, telecommunications, transportation and power generation.

Since December of 2004, there have been a number of changes within our executive leadership team, including the appointment of a new President and Chief Executive Officer, the separate appointment of a Chairman of the Board of Directors, and the appointment of co-Chief Operating Officers. These leadership changes, coupled with the recent divestiture of some significant businesses, have resulted in a shift in strategy toward a more centralized approach to operational improvement, including lean manufacturing, supply chain management, organizational development, and global expansion, with the intent of capturing synergies that exist within our businesses and, ultimately, on driving revenue and profit margin growth. We believe that a number of our businesses are well positioned to capture synergies and for revenue and profit margin growth based on the potential within the current markets they serve as well as the potential for expansion into additional markets. These businesses have been aggregated into three segments identified as Thermal Equipment and Services, Flow Technology, and Test and Measurement. Each of the remaining businesses within our portfolio generally represent

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North American focused industrial operations that lack global scale and will not likely be the focus of acquisition growth. These businesses have been aggregated into a fourth segment identified as Industrial Products and Services.

We have aggregated certain operating segments in accordance with the criteria defined in SFAS No. 131, “Disclosures about Segments of an Enterprise and Related Information.” The primary aggregation factors considered in determining the segments were the nature of products sold, production processes and types of customers for these products. In determining our segments, we apply the threshold criteria of SFAS No. 131 to operating income or loss of each segment before considering special charges and other indirect corporate expenses. This is consistent with the way our chief operating decision maker evaluates the results of each segment.

Thermal Equipment and Services

Our Thermal Equipment and Services segment engineers, manufactures, and services cooling, heating, and ventilation products for markets throughout the world. Products for the segment include dry, wet, and hybrid cooling systems, cooling towers, and air-cooled condensers for the power generation, refrigeration, HVAC, and industrial markets, as well as boilers and heating and ventilation products for the commercial and residential markets. This segment also provides thermal components for power and steam generation plants and engineered services to maintain, refurbish, upgrade, and modernize power stations. The segment continues to focus on expanding its global reach, including expanding its dry cooling, heating, and ventilation manufacturing capacity in Asia, as well as increasing thermal components and service offerings, particularly in Asia and Europe.

Flow Technology

Our Flow Technology segment designs, manufactures, and markets solutions and products that are used to process or transport fluids, as well as solutions and products that are used in heat transfer applications and airflow treatment systems. Our Flow Technology businesses focus on innovative, highly engineered new product introductions and expansion from products to systems and services to create total customer solutions.

Test and Measurement

Our Test and Measurement segment engineers and manufactures branded, technologically advanced test and measurement products used across the automotive, transportation, defense, telecommunications and utility industries.  Our technology supports the introduction of new systems, expanded services, and sophisticated testing and validation.  Products for the segment include specialty automotive diagnostic service tools, fare collection boxes, portable cable and pipe locators, and vibration testing equipment.  The segment continues to focus on initiatives such as lean manufacturing, expanding its commercialization of the China market and leveraging its outsourcing model.

Industrial Products and Services

Our Industrial Products and Services segment is comprised of businesses that generally manufacture and market durable industrial goods to a variety of industries. This segment includes operating units that design, manufacture and market power systems, loading dock products, die castings and filters for the automotive industry, precision machine components for the aerospace industry, television broadcast antenna systems, and industrial tools and hydraulic units.

Financial data for our business segments, including the results of operations from the dates of the respective acquisitions, are as follows:

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(1)          In the second quarter of 2005, we recorded $3.3 of charges related to an operation in France.  These charges were offset by a credit of $4.7 related to a recent change in the warranty program for our boiler products business.

(2)          In the first quarter of 2005, we recorded a charge of $4.0 related to operating inefficiencies within our Valves Canadian operation.

(3)          In the second quarter of 2004, we recorded inventory write-downs of $7.5 associated with the discontinuance of certain utility and telecommunications product lines.

(6)                                 SPECIAL CHARGES

As part of our business strategy, we right-size and consolidate operations to drive results. Additionally, from time to time, we alter our business model to better serve customer demand, fix or discontinue lower-margin product lines and rationalize and consolidate manufacturing capacity. Our restructuring and integration decisions are based on discounted cash flows to achieve our goals of increased outsourcing, reduced structural footprint, and profitability in any economic environment. As a result of our strategic review process, we recorded net special charges of $10.2 and $11.9 in the first six months of 2005 and 2004, respectively. These net special charges relate primarily to restructuring initiatives to consolidate manufacturing, sales, and administrative facilities, reduce workforce, and rationalize certain product lines.

The purpose of our restructuring initiatives is to improve future profitability, streamline operations, reduce costs and improve efficiency. We anticipate that we will achieve operating cost reductions in 2005 and beyond through reduced employee and manufacturing costs and other facility overhead reductions.

The components of the net special charges have been computed based on actual cash payouts or receipts, our estimate of the realizable value of the affected tangible and intangible assets, and estimated exit costs, including severance and other employee benefits based on existing severance practices and local laws.

Special charges, net, for the three and six months ended June 30, 2005 and 2004 include the following:

At June 30, 2005, a total of $14.4 of restructuring liabilities remained on the condensed consolidated balance sheet as shown below. With the exception of certain multi-year operating lease obligations and other contractual obligations, we anticipate that the liabilities related to restructuring actions will be paid within one year from the period in which the action was initiated. The following table summarizes the restructuring accrual activity from December 31, 2003 through June 30, 2005:

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(1)                                  Excludes $2.9 of gains on asset sales recognized as a component of Special Charges, net.

Special Charges—2005

In the second quarter of 2005, we recorded special charges of $5.4 primarily related to employee benefit and facility closure costs. We recorded special charges of $2.2 in the Thermal Equipment and Services segment, $0.1 in the Flow Technology segment, $2.3 in the Test and Measurement segment, $1.1 in the Industrial Products and Services segment and a $0.3 credit at Corporate.

In the Thermal Equipment and Services segment, we recorded $4.6 of charges for the first six months of 2005 related primarily to workforce reductions associated with facility consolidations and closures. In the second quarter of 2004, we announced plans to close and relocate manufacturing activities at our Benton Harbor, MI facility and relocate certain manufacturing operations from our Michigan City, IN facility to our new Eden, NC facility. These restructuring actions will result in the ultimate termination of 179 hourly and 49 salaried domestic employees and resulted in $2.4 of employee termination and relocation costs during the first half of 2005.  Within our cooling businesses, we recognized $2.2 of special charges related primarily to employee termination costs associated with business integration efforts in Germany that were initiated in the fourth quarter of 2004 and employee termination, lease holding, and asset impairment charges associated with the scheduled closure of a facility in the United Kingdom.  The United Kingdom restructuring action will result in the termination of approximately 80 employees.

In the Flow Technology segment, we recorded $0.3 of special charges for the first six months of 2005 related primarily to employee benefit and facility consolidation costs for restructuring actions initiated in 2004.

In the Test and Measurement segment, we recorded special charges of $3.3 for the first six months of 2005 related primarily to employee termination and lease holding costs associated with the scheduled closure of a manufacturing facility in Miramar, FL that totaled $1.9 and an asset impairment charge of $0.9 relating to the planned divesture of a facility in the United Kingdom. The Miramar restructuring initiative will result in the termination of approximately 75 employees.

In the Industrial Products and Services segment, we recorded special charges of $1.1 for the first six months of 2005 related primarily to employee and lease termination costs associated with the scheduled closure of facilities in Tempe, AZ and Watertown, WI.  These restructuring actions will result in the termination of approximately 15 employees.

The Corporate special charges of $0.9 relate primarily to the lease holding costs of two administrative facilities that were closed during the first quarter of 2005.

Future costs associated with the above initiatives are not expected to be significant.

Special Charges—2004

In the second quarter of 2004, we recorded special charges of $10.0 related to employee benefit costs, facility closure costs, and asset impairments.  We

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recorded $4.8 in the Thermal Equipment and Services segment, $0.7 in the Flow Technology segment, $2.1 in the Test and Measurement segment, $1.8 in the Industrial Products and Services segment, and $0.6 at Corporate.

In the Thermal Equipment and Services segment, we recorded $5.4 of charges for the six months ended June 30, 2004 related primarily to asset write-downs associated with our boiler products business and a workforce reduction at our Overland Park, KS facility. In the second quarter of 2004, we announced plans to close and relocate manufacturing activities at our Benton Harbor, MI facility and relocate certain manufacturing operations from our Michigan City, IN facility.  As a result of this announcement, we recorded asset impairment charges of approximately $3.3.  These restructuring actions, which will result in the ultimate termination of 179 hourly and 49 domestic employees, began in the second half of 2004 and are expected to be completed in the second half of 2005.  We also recognized facility closure costs associated with previously initiated closures of two manufacturing and administrative facilities. These restructuring actions resulted in the termination of approximately 14 hourly and five salaried domestic employees.

In the Flow Technology segment, we recorded $0.2 of net special charges for the first six months ended June 30, 2004 related primarily to employee benefit costs, facility consolidation costs, and asset impairments, partially offset by a gain on the sale of a facility. Employee benefit and facility consolidation costs related to (a) workforce reductions in the United Kingdom and (b) the previously announced integration of existing facilities for our air treatment business into facilities of recently acquired businesses. In connection with the facility consolidation within our air treatment business, we sold a manufacturing facility in Ireland and recorded a corresponding gain of $1.3. These restructuring actions resulted in the termination of approximately three hourly and 12 salaried foreign employees.

In the Test and Measurement segment, we recorded special charges of $3.1 for the six months ended June 30, 2004 related primarily to workforce reductions and asset impairments. These restructuring actions resulted in the termination of approximately 55 hourly and ten salaried domestic and foreign employees at our Valley Forge, MI and Bristol, UK locations.

In the Industrial Products and Services segment, we recorded special charges of $2.2 for the six months ended June 30, 2004 related primarily to employee benefit costs, facility closure costs, and asset impairments, partially offset by a gain on the sale of a manufacturing facility. During the quarter, we recorded charges associated with the previously announced move of manufacturing operations from Milwaukee, WI to Reynosa, Mexico. In addition, we recorded facility closure costs of $0.9 offset by a $1.9 gain related to the closure and sale of a manufacturing facility in the United Kingdom.

The Corporate special charges of $1.0 related primarily to a workforce reduction and outsourcing of certain information technology support activities. These restructuring actions resulted in the termination of seven salaried domestic employees.

(7)                                 INVENTORY

Inventory consists of the following amounts:

Inventories include material, labor and factory overhead costs and are reduced, when necessary, to estimated realizable values. Progress payments, which are netted against work in process, were $25.7 and $22.8 at June 30, 2005 and December 31, 2004, respectively.

(8)                                 INVESTMENT IN JOINT VENTURE

We have a 44.5% joint venture investment in EGS Electrical Group LLC (“EGS”).  In the first quarter of 2005, we recorded an adjustment to reduce the carrying value of our EGS investment by approximately $4.6, while in the first quarter of 2004 equity earnings were impacted by a legal charge at EGS, with our portion of the charge totaling $3.8.  We recorded income from our investment in EGS of $7.5 and $11.7 during the three and six months ended June 30, 2005, respectively, and $6.7 and $12.4 for the three and six months ended June 30, 2004, respectively.  The carrying value of our investment in EGS totaled $64.9 and $70.7 at June 30, 2005 and December 31, 2004, respectively.

(9)                                 GOODWILL AND OTHER INTANGIBLE ASSETS

The following tables reflect goodwill and other intangible assets as of December 31, 2004 and the activity thereafter through June 30, 2005. The activity reflects purchase price adjustments for acquisitions completed not more than one year prior to the date of

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adjustment, currency translation adjustments, and amortization. This information is presented first on a consolidated basis and second on a segment basis.

Consolidated: