UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

Commission File Number 1-6948

SPX CORPORATION

(Exact name of registrant as specified in its charter)

(Former name, former address, and former fiscal year, if changed since last report)

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

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

Common shares outstanding October 28, 2005     65,810,432

PART I—FINANCIAL INFORMATION

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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SPX CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited; 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 consolidated operations and cash flows include all adjustments (consisting only 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 expected results for a full year.

Certain prior period amounts have been reclassified to conform to current-period presentation.  The reclassifications are related to the results of discontinued operations, equity earnings in joint ventures, which are 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. We also have reclassified, within our condensed consolidated statement of cash flows for the nine months ended September 30, 2005, $13.3 of payments to terminate interest rate swap contracts, which were made in the first quarter of 2005, from “Cash flows from (used in) in financing activities” to “Cash flows from (used in) operating activities.” 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).

Capital expenditures as presented in the condensed consolidated statements of cash flows for the nine months ended September 30, 2005 and 2004 exclude additions to property, plant, and equipment of $2.8 and $2.1, respectively, as such amounts had yet to be paid under their normal trade payment terms as of September 30, 2005 and 2004, respectively.

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 November 2004, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standard (“SFAS”) No. 151, “Inventory Costs” (“SFAS No. 151”). 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 SFAS No. 123 (revised 2004), “Share-Based Payment” (“SFAS No. 123(R)”). SFAS No. 123(R) replaces SFAS No. 123, “Accounting for Stock-Based Compensation,” (“SFAS No. 123”) and 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. 123(R) 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. 123(R) in the first quarter of 2006 and, as a result of the timing of our options’ vesting, the impact of adopting SFAS No. 123(R) will result in total compensation expense of less than $1.0 for our unvested stock options. 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. 123(R).  We are currently evaluating the impact the adoption of SFAS No. 123(R) will have on our future results of operations for 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” (“SFAS No. 148”).  See Note 3 of our condensed consolidated financial statements for the disclosure information required under SFAS No. 148.

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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 interpretation 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 and we are currently evaluating the impact, if any, that this interpretation will have on our consolidated financial statements.

In May 2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections” (“SFAS No. 154”).  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, 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 nine months ended September 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:

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

(4)                                 ACQUISITIONS AND DISCONTINUED OPERATIONS

Acquisitions

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

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During the first nine months of 2004, we completed five acquisitions as follows (none of which were deemed to be material by management):

(1)   Relates to the acquisition of McLeod Russel Holdings PLC during the first quarter of 2004.  The aggregate purchase price for the acquisition included the assumption of $30.5 of debt.

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, which have been sold, met these requirements and therefore have been reported as discontinued operations for the periods presented.

Carfel – Sold for $12.0 in cash.  The purchase price is subject to adjustment based on net assets existing at the date of close.  In the first quarter of 2005, we recorded a loss, net of taxes, of approximately $29.0 based on the estimated selling price of the business.  Upon the sale of the business, we reduced the loss, net of taxes, to $21.1. 

Kendro – Sold 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 $314.7 in 2005, including a third quarter increase in the gain of $0.9 relating primarily to adjustments to estimated income tax liabilities associated with the transaction.

EST – Sold 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 $667.4, including a third quarter of 2005 increase in the gain of $4.0 primarily as a result of the settlement of certain items relating to the working capital that existed at the date of close.

Bomag – Sold 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 have recorded a gain on the sale, net of taxes and transaction fees, of $133.3, including a third quarter of 2005 increase in the gain of $7.0, primarily as a result of the settlement of certain items relating to the working capital that existed at the date of close. 

Brookstone telecommunication services business – Sold for $0.9 in cash. We recorded a loss on the sale, net of taxes and transaction fees, of $10.6 during 2005.

Specialty tool business - - Sold 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 $2.7.

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Axial fan, inspection gauging system, and municipal water valve businesses - Sold for aggregate cash proceeds of $49.6. 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 noted above, the final purchase price for certain of the divested businesses is subject to adjustment based on working capital or net assets existing at the respective closing dates.  The working capital or net asset figures are subject to agreement with the buyers or if  we cannot come to agreement with each of the buyers, an arbitration process.  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 (losses) on these transactions may be materially adjusted in subsequent periods. 

In addition to the completed transactions described above, in the third quarter of 2005, we committed to a plan to divest two businesses in our Industrial Products and Services and Flow Technology segments. We are actively pursuing purchasers for these businesses and anticipate the sales to be completed by no later than  the first quarter of 2006. Accordingly, we have reported, for all periods presented, their financial condition, results of operations, and cash flows as discontinued operations in our condensed consolidated financial statements. As a result of these planned divestitures, we recorded a charge of $36.3 during the third quarter of 2005 in order to reduce the net assets to be sold to their estimated net realizable value.

For the three and nine months ended September 30, 2005 and 2004, income (loss) from all discontinued operations and the related income taxes are shown below:

For the three and nine months ended September 30, 2005 and 2004, total revenues and pre-tax income, excluding gains/losses on dispositions, from discontinued operations 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 are shown below:

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(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 creation of the Chief Operating Officer role. These leadership changes, coupled with the recent divestiture of some significant businesses, have resulted in a shift in strategy toward a somewhat 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 Flow Technology, Test and Measurement, and Thermal Equipment and Services,. Each of the remaining businesses within our portfolio generally represent 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 our operating segments in accordance with the criteria defined in SFAS No. 131, “Disclosures about Segments of an Enterprise and Related Information” (“SFAS No. 131”).  The aggregation factors considered in determining the segments were the economic similarity of the businesses, 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.

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 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.

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.

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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 primarily 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:

(1)             Under the percentage of completion method, we recognized revenues of $235.6 and $553.9 for the three and nine months ended September 30, 2005, respectively, and $193.0 and $488.6 for the three and nine months ended September 30, 2004, respectively.

(2)          In the first quarter of 2005, we recorded a charge of $4.0 related to operating inefficiencies within a valves operation in Canada.

(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.

(4)          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 change in the warranty program for our boiler products business.

(6)                                 SPECIAL CHARGES

Special charges, net, for the nine months ended September 30, 2005 include the following:

Flow Technology segment - - Charges for the first nine months of 2005 related primarily to facility consolidation costs for restructuring actions initiated in 2004.  Of these charges, $0.4 was recorded in the third quarter of 2005.

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Test and Measurement segment - - Charges for the first nine months of 2005 related primarily to employee termination and lease holding costs associated with the scheduled closures of manufacturing facilities in Miramar, FL and the United Kingdom that totaled $2.2 within our service solutions business and an asset impairment charge of $1.0 relating to the divesture of a facility in the United Kingdom. The Miramar, FL and United Kingdom facility closures will result in the termination of approximately 11 employees.  Of these charges, $0.7 was recorded in the third quarter of 2005.

Thermal Equipment and Services segment - - Charges for the first nine months of 2005 related primarily to workforce reductions associated with facility consolidations and closures. Within our boiler products business, we recorded employee benefit costs associated with our previously announced closure of manufacturing activities at our Benton Harbor, MI facility and relocation of certain manufacturing operations from our Michigan City, IN facility to our new Eden, NC facility. These restructuring actions resulted in $2.5 of employee termination and relocation costs during the first nine months of 2005.  Within our cooling businesses, we recognized $2.3 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.  Of these charges, $0.2 was recorded in the third quarter of 2005. 

Industrial Products and Services segment - - The net credit for the first nine months of 2005 related primarily to a third quarter gain of $7.9 relating to the sale of land in Milpitas, CA, resulting in the finalization of a previously initiated restructuring action.  This was partially offset by 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.  Of these charges, $0.1 was recorded in the third quarter of 2005.  

Corporate - Charges for the first nine months of 2005 relate primarily to the lease holding costs for two administrative facilities that were closed during the first quarter of 2005 and an asset impairment charge of $1.1 relating to the planned divestiture of a facility in Newtown, CT recorded in the third quarter of 2005.

We do not expect future costs associated with the above initiatives to be significant.  At September 30, 2005, a total of $8.3 of restructuring liabilities remained on the condensed consolidated balance sheet. With the exception of certain multi-year operating lease obligations and other contractual obligations, which were not material to our condensed consolidated financial statements, we anticipate that the liabilities related to restructuring actions will be paid within one year from the period in which the action was initiated.

Special charges, net, for the nine months ended September 30, 2004 include the following:

Flow Technology segment – Net charges for the nine months ended September 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 integration of existing facilities for our air filtration business into facilities of acquired businesses. In connection with the facility consolidation within our air filtration 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.  Of these charges, $0.6 was recorded in the third quarter of 2004. 

Test and Measurement segment - - Charges for the nine months ended September 30, 2004 related primarily to workforce reductions and asset impairments. These restructuring actions resulted in the termination of approximately 49 hourly and 30 salaried domestic and foreign employees at our Valley Forge, MI and Bristol, UK locations.  Of these charges, $0.5 was recorded in the third quarter of 2004. 

Thermal Equipment and Services segment - - Charges for the nine months ended September 30, 2004 related primarily to asset write-downs and employee severance costs associated with our boiler products and cooling businesses.  In 2004, we announced plans to close and relocate manufacturing activities at our Benton Harbor, MI facility and relocate certain manufacturing operations from

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our Michigan City, IN facility.  As a result of this announcement, we recorded asset impairment charges of approximately $3.3 and employee severance and other charges of $2.1.  Costs relating to the restructuring actions at the cooling business totaled $3.2 and included charges associated with previously initiated closures of two manufacturing facilities and an administrative facility.  These restructuring actions resulted in the termination of approximately 14 hourly and 31 salaried domestic employees.  Of these charges, $3.2 was recorded in the third quarter of 2004. 

Industrial Products and Services segment - - Net charges for the nine months ended September 30, 2004 related primarily to asset impairments, employee benefit costs and facility closure costs, partially offset by a gain on the sale of a manufacturing facility.

In our dock products business, we recorded $0.8 of employee severance and other charges associated with the previously announced move of manufacturing operations from Milwaukee, WI to Reynosa, Mexico. In addition, we recorded an impairment charge of $0.4 relating to the sale of land in Williamsport, PA, $0.3 of costs relating to workforce reductions at our Raymond, ME facility, and $0.9 of facility closure costs, offset by a $1.9 gain related to the closure and sale of a manufacturing facility in the United Kingdom within our fluid hydraulic power tools business.  Of these charges, $1.6 was recorded in the third quarter of 2004. 

Corporate - Charges for the first nine months of 2004 related primarily to a workforce reduction and outsourcing of certain information technology support activities and the exit of certain administrative offices.  These restructuring actions resulted in the termination of seven salaried domestic employees. Of these charges, $0.4 was recorded in the third quarter of 2004. 

(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 $34.0 and $22.8 at September 30, 2005 and December 31, 2004, respectively.

(8)                                 INVESTMENT IN JOINT VENTURE

We have a 44.5% joint venture in EGS Electrical Group LLC (“EGS”).  We recorded equity earnings from our investment in EGS of $0.5 and $12.1 for the three and nine months ended September 30, 2005, respectively, and $6.3 and $18.7 for the three and nine months ended September 30, 2004.  The following reduced our equity earnings:

•                     In the third quarter of 2005, EGS recorded a charge for the settlement of a legal matter.  Our portion of this charge totaled $7.5.

•                     In the first quarter of 2005, we recorded an adjustment to reduce the carrying value of our investment in EGS by approximately $4.6.

•                     In the first quarter of 2004, EGS recorded legal charges, with our portion totaling $3.8.

The carrying value of our investment in EGS was $63.8 and $70.7 at September 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 September 30, 2005. The activity reflects purchase price adjustments for acquisitions completed not more than one year prior to the date of adjustment, currency translation adjustments (“CTA”), and amortization of definite lived intangibles.

Goodwill