SPX Technologies, Inc. [SPXC] Filings

10-Q 1 spxc-20230701.htm 10-Q spxc-20230701

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended July 1, 2023


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 1-6948

SPX TECHNOLOGIES, INC.

(Exact Name of registrant as specified in its charter)


Delaware						88-3567996
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

6325 Ardrey Kell Road, Suite 400, Charlotte, North Carolina 28277

(Address of principal executive offices) (Zip Code)

(980) 474-3700

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbols(s)	Name of each exchange on which registered
Common Stock, par value $0.01	SPXC	New York Stock Exchange

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. ☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐

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

Common shares outstanding July 28, 2023, 45,590,461

SPX TECHNOLOGIES, INC. AND SUBSIDIARIES

FORM 10-Q INDEX



PART 1 – FINANCIAL INFORMATION

Item 1 – Financial Statements
Condensed Consolidated Statements of Operations and Comprehensive Income						3
Condensed Consolidated Balance Sheets						4
Condensed Consolidated Statements of Stockholders' Equity						5
Condensed Consolidated Statements of Cash Flows						6
Notes to Condensed Consolidated Financial Statements						7
Item 2 – Management's Discussion and Analysis of Financial Condition and Results of Operations						32
Item 3 – Quantitative and Qualitative Disclosures About Market Risk						43
Item 4 – Controls and Procedures						43

PART 2 – OTHER INFORMATION
Item 1 – Legal Proceedings						44
Item 1A – Risk Factors						44

Item 5 - Other Information						44
Item 6 – Exhibits						45

SIGNATURES						46

PART I—FINANCIAL INFORMATION

ITEM 1. Financial Statements

SPX TECHNOLOGIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(Unaudited; in millions, except per share amounts)


	Three months ended				Six months ended
	July 1, 2023		July 2, 2022		July 1, 2023		July 2, 2022
Revenues	$	423.3	$	354.0	$	823.1	$	661.1
Costs and expenses:
Cost of products sold	259.7		229.4		509.6		432.5
Selling, general and administrative	100.8		88.3		194.6		172.5
Intangible amortization	11.5		7.1		17.8		16.4
Special charges, net	—		0.1		—		0.1

Other operating expense, net	—		1.9		—		1.0
Operating income	51.3		27.2		101.1		38.6

Other income (expense), net	—		(1.7)		2.5		4.8
Interest expense	(5.4)		(2.3)		(7.8)		(4.7)
Interest income	0.2		0.3		0.7		0.4


Income from continuing operations before income taxes	46.1		23.5		96.5		39.1
Income tax provision	(7.8)		(4.4)		(19.1)		(7.0)
Income from continuing operations	38.3		19.1		77.4		32.1

Income (loss) from discontinued operations, net of tax	—		—		—		—
Gain (loss) on disposition of discontinued operations, net of tax	(2.3)		(6.1)		1.4		(7.7)
Income (loss) from discontinued operations, net of tax	(2.3)		(6.1)		1.4		(7.7)

Net income	$	36.0	$	13.0	$	78.8	$	24.4

Basic income per share of common stock:
Income from continuing operations	$	0.84	$	0.42	$	1.70	$	0.71
Income (loss) from discontinued operations, net of tax	(0.05)		(0.13)		0.03		(0.17)
Net income per share	$	0.79	$	0.29	$	1.73	$	0.54

Weighted-average number of common shares outstanding — basic	45.533		45.444		45.457		45.500

Diluted income per share of common stock:
Income from continuing operations	$	0.82	$	0.41	$	1.66	$	0.69
Income (loss) from discontinued operations, net of tax	(0.05)		(0.13)		0.03		(0.16)
Net income per share	$	0.77	$	0.28	$	1.69	$	0.53

Weighted-average number of common shares outstanding — diluted	46.627		46.289		46.500		46.370

Comprehensive income	$	39.2	$	0.1	$	83.8	$	14.5

The accompanying notes are an integral part of these statements.

SPX TECHNOLOGIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited; in millions, except share data)


	July 1, 2023		December 31, 2022
ASSETS
Current assets:
Cash and equivalents	$	87.1	$	147.8
Accounts receivable, net	281.5		263.5
Contract assets	36.5		23.9
Inventories, net	299.6		244.0
Other current assets	34.3		41.9



Total current assets	739.0		721.1
Property, plant and equipment:
Land	17.2		13.9
Buildings and leasehold improvements	73.3		63.7
Machinery and equipment	253.3		233.4
	343.8		311.0
Accumulated depreciation	(209.1)		(201.1)
Property, plant and equipment, net	134.7		109.9
Goodwill	679.9		455.3
Intangibles, net	705.6		401.6
Other assets	195.1		197.4
Deferred income taxes	3.1		2.7

Assets of DBT and Heat Transfer (includes cash and equivalents of $8.5 and $9.3 at July 1, 2023 and December 31, 2022, respectively) (Note 3)	44.2		42.9
TOTAL ASSETS	$	2,501.6	$	1,930.9

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	131.0	$	124.5
Contract liabilities	71.0		52.8
Accrued expenses	131.2		148.0
Income taxes payable	13.9		4.7
Short-term debt	132.0		1.8
Current maturities of long-term debt	10.5		2.0


Total current liabilities	489.6		333.8

Long-term debt	533.1		243.0
Deferred and other income taxes	75.7		34.8
Other long-term liabilities	202.9		208.3

Liabilities of DBT and Heat Transfer (Note 3)	27.7		31.8
Total long-term liabilities	839.4		517.9
Commitments and contingent liabilities (Note 15)
Stockholders' Equity:

Common stock (53,529,856 and 45,581,485 issued and outstanding at July 1, 2023, respectively, and 53,350,918 and 45,291,989 issued and outstanding at December 31, 2022, respectively)	0.5		0.5
Paid-in capital	1,341.5		1,338.3
Retained earnings (deficit)	27.2		(51.6)
Accumulated other comprehensive income	262.5		257.5
Common stock in treasury (7,948,371 and 8,058,929 shares at July 1, 2023 and December 31, 2022, respectively)	(459.1)		(465.5)


Total stockholders' equity	1,172.6		1,079.2
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	2,501.6	$	1,930.9

The accompanying notes are an integral part of these statements.

SPX TECHNOLOGIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(Unaudited; in millions)


	Three months ended July 1, 2023
	Common Stock		Paid-In Capital		Retained Earnings (Deficit)		Accum. Other Comprehensive Income		Common Stock In Treasury		Total Stockholders’ Equity
Balance at April 1, 2023	$	0.5	$	1,335.3	$	(8.8)	$	259.3	$	(460.2)	$	1,126.1
Net income	—		—		36.0		—		—		36.0
Other comprehensive income, net	—		—		—		3.2		—		3.2
Incentive plan activity	—		3.0		—		—		—		3.0
Long-term incentive compensation expense	—		3.5		—		—		—		3.5
Restricted stock unit vesting	—		(0.3)		—		—		1.1		0.8

Balance at July 1, 2023	$	0.5	$	1,341.5	$	27.2	$	262.5	$	(459.1)	$	1,172.6


	Six months ended July 1, 2023
	Common Stock		Paid-In Capital		Retained Earnings (Deficit)		Accum. Other Comprehensive Income		Common Stock In Treasury		Total Stockholders’ Equity
Balance at December 31, 2022	$	0.5	$	1,338.3	$	(51.6)	$	257.5	$	(465.5)	$	1,079.2
Net income	—		—		78.8		—		—		78.8
Other comprehensive income, net	—		—		—		5.0		—		5.0
Incentive plan activity	—		8.2		—		—		—		8.2
Long-term incentive compensation expense	—		6.6		—		—		—		6.6
Restricted stock unit vesting	—		(11.6)		—		—		6.4		(5.2)

Balance at July 1, 2023	$	0.5	$	1,341.5	$	27.2	$	262.5	$	(459.1)	$	1,172.6


	Three months ended July 2, 2022
	Common Stock		Paid-In Capital		Retained Deficit		Accum. Other Comprehensive Income		Common Stock In Treasury		Total Stockholders’ Equity
Balance at April 2, 2022	$	0.5	$	1,321.2	$	(40.4)	$	266.9	$	(432.4)	$	1,115.8
Net income	—		—		13.0		—		—		13.0
Other comprehensive loss, net	—		—		—		(12.9)		—		(12.9)
Incentive plan activity	—		4.0		—		—		—		4.0
Long-term incentive compensation expense	—		2.5		—		—		—		2.5
Restricted stock unit vesting	—		(0.4)		—		—		0.3		(0.1)
Common stock repurchases	—		—		—		—		(33.7)		(33.7)
Balance at July 2, 2022	$	0.5	$	1,327.3	$	(27.4)	$	254.0	$	(465.8)	$	1,088.6


	Six months ended July 2, 2022
	Common Stock		Paid-In Capital		Retained Deficit		Accum. Other Comprehensive Income		Common Stock In Treasury		Total Stockholders’ Equity
Balance at December 31, 2021	$	0.5	$	1,334.2	$	(51.8)	$	263.9	$	(443.9)	$	1,102.9
Net income	—		—		24.4		—		—		24.4
Other comprehensive loss, net	—		—		—		(9.9)		—		(9.9)
Incentive plan activity	—		6.5		—		—		—		6.5
Long-term incentive compensation expense	—		5.6		—		—		—		5.6
Restricted stock unit vesting	—		(19.0)		—		—		11.8		(7.2)
Common stock repurchases	—		—		—		—		(33.7)		(33.7)
Balance at July 2, 2022	$	0.5	$	1,327.3	$	(27.4)	$	254.0	$	(465.8)	$	1,088.6

The accompanying notes are an integral part of these statements.

SPX TECHNOLOGIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited; in millions)


	Six months ended
	July 1, 2023		July 2, 2022
Cash flows from (used in) operating activities:
Net income	$	78.8	$	24.4
Less: Gain (loss) from discontinued operations, net of tax	1.4		(7.7)
Income from continuing operations	77.4		32.1
Adjustments to reconcile income from continuing operations to net cash from (used in) operating activities:
Special charges, net	—		0.1
Gain on change in fair value of equity security	(3.6)		(4.4)


Deferred and other income taxes	(10.4)		(9.0)
Depreciation and amortization	26.7		25.6
Pension and other employee benefits	5.7		6.3
Long-term incentive compensation	6.6		5.6
Other, net	(3.0)		1.0
Changes in operating assets and liabilities, net of effects from acquisitions and divestitures:
Accounts receivable and other assets	4.9		(5.0)
Inventories	(27.0)		(44.9)
Accounts payable, accrued expenses and other	(2.7)		(90.6)
Cash spending on restructuring actions	—		(0.3)
Net cash from (used in) continuing operations	74.6		(83.5)
Net cash used in discontinued operations	(7.0)		(13.0)
Net cash from (used in) operating activities	67.6		(96.5)
Cash flows from (used in) investing activities:
Proceeds related to company-owned life insurance policies, net	1.0		1.6
Business acquisitions, net of cash acquired	(547.1)		(41.4)

Capital expenditures	(8.7)		(6.0)

Net cash used in continuing operations	(554.8)		(45.8)
Net cash used in discontinued operations	—		(13.9)
Net cash used in investing activities	(554.8)		(59.7)
Cash flows from (used in) financing activities:

Borrowings under senior credit facilities	820.0		—
Repayments under senior credit facilities	(420.0)		(6.3)
Borrowings under trade receivables arrangement	61.0		—
Repayments under trade receivables arrangement	(31.0)		—
Net repayments under other financing arrangements	(0.1)		(0.2)
Payment of contingent consideration	—		(1.3)
Minimum withholdings paid on behalf of employees for net share settlements, net of proceeds from the exercise of employee stock options	(2.4)		(5.2)
Financing Fees Paid	(1.3)		—
Repurchases of common stock	—		(33.7)



Net cash from (used in) continuing operations	426.2		(46.7)
Net cash from discontinued operations	—		0.3
Net cash from (used in) financing activities	426.2		(46.4)
Change in cash and equivalents due to changes in foreign currency exchange rates	(0.5)		1.8
Net change in cash and equivalents	(61.5)		(200.8)
Consolidated cash and equivalents, beginning of period	157.1		396.0
Consolidated cash and equivalents, end of period	$	95.6	$	195.2


	Six months ended
	July 1, 2023		July 2, 2022
Components of cash and equivalents:
Cash and equivalents	$	87.1	$	189.8
Cash and equivalents included in assets of DBT and Heat Transfer	8.5		5.4
Total cash and equivalents	$	95.6	$	195.2

The accompanying notes are an integral part of these statements.

SPX TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited; in millions, except per share data)

(1) BASIS OF PRESENTATION

Unless otherwise indicated, “we,” “us” and “our” mean SPX Technologies, Inc. and its consolidated subsidiaries (“SPX”).

We prepared the condensed consolidated financial statements pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim reporting. As permitted under those rules and regulations, certain footnotes or other financial information normally required by accounting principles generally accepted in the United States (“GAAP”) can be condensed or omitted. The financial statements represent our accounts after the elimination of intercompany transactions and, in our opinion, include the adjustments (consisting only of normal and recurring items) necessary for their presentation. Unless otherwise indicated, amounts provided in these Notes pertain to continuing operations only (see Note 3 for information on discontinued operations).

We account for investments in unconsolidated companies where we exercise significant influence but do not have control using the equity method. In determining whether we are the primary beneficiary of a variable interest entity (“VIE”), we perform a qualitative analysis that considers the design of the VIE, the nature of our involvement and the variable interests held by other parties to determine which party has the power to direct the activities of the VIE that most significantly impact the entity’s economic performance, and which party has the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE. All of our VIE’s are immaterial, individually and in aggregate, to our condensed consolidated financial statements.

Merger and Consummation of Holding Company Reorganization

As of August 15, 2022, SPX Technologies, Inc. (the “Company”) is the successor registrant pursuant to Rule 12g-3(a) under the Securities Exchange Act of 1934, as amended, to SPX Corporation (“Legacy SPX”) as a result of the completion on August 15, 2022 of a holding company reorganization (the “Holding Company Reorganization”) effected as a merger of Legacy SPX with and into SPX Merger, LLC, a subsidiary of the Company. Each share of Legacy SPX’s common stock, par value $0.01 per share, issued and outstanding immediately prior to the consummation of the Holding Company Reorganization was automatically converted into an equivalent corresponding share of the Company’s common stock having the same designations, rights, powers and preferences and the qualifications, limitations and restrictions as the corresponding share of Legacy SPX common stock being converted. Accordingly, upon consummation of the Holding Company Reorganization, Legacy SPX stockholders became stockholders of the Company. The terms “SPX,” “we” and “our” include Legacy SPX for periods prior to the consummation of the Holding Company Reorganization as the context requires.

Divestiture of Asbestos Liabilities and Certain Assets

On November 1, 2022, we divested three wholly-owned subsidiaries that hold asbestos liabilities and certain assets, including related insurance assets, to Canvas Holdco LLC (“Canvas”), an entity formed by a joint venture of Global Risk Capital LLC and an affiliate of Premia Holdings Ltd. In connection with the divestiture (the “Asbestos Portfolio Sale”), the divested subsidiaries have agreed to indemnify us and our affiliates for their asbestos-related liabilities, which encompassed all of our consolidated asbestos-related liabilities and contingent liabilities immediately prior to the divestiture. These indemnification obligations are not subject to any cap or time limitation. As a result of this transaction, the Company divested all obligations with respect to pending and future asbestos claims relating to these matters. The board of managers of the divested subsidiaries each received a solvency opinion from an independent advisory firm that the divested subsidiaries were solvent after giving effect to the Asbestos Portfolio Sale.

The agreement for the Asbestos Portfolio Sale contains customary representations and warranties with respect to the divested subsidiaries, the Company, and Canvas. Pursuant to the agreement, the Company and Canvas will each indemnify the other for breaches of representation and warranties or breaches of covenants, subject to certain limitations as set forth in the agreement. Refer to Note 15 for additional details.

Acquisition of Cincinnati Fan

On December 15, 2021, we completed the acquisition of Cincinnati Fan & Ventilator Co., Inc. (“Cincinnati Fan”), a leader in engineered air movement solutions, including blowers and critical exhaust systems. We purchased Cincinnati Fan for cash consideration of $145.2, net of (i) cash acquired of $2.5 and (ii) an adjustment to the purchase price received during the second quarter of 2022 related to acquired working capital of $0.4. The post-acquisition operating results of Cincinnati Fan are reflected within our HVAC reportable segment.

Acquisition of ITL

On March 31, 2022, we completed the acquisition of International Tower Lighting, LLC (“ITL”), a leader in the design and manufacture of highly-engineered Aids to Navigation systems, including obstruction lighting for telecommunications towers, wind turbines and numerous other terrestrial obstructions. We purchased ITL for cash consideration of $40.4, net of (i) cash acquired of $1.1 and (ii) an adjustment to the purchase price received during the third quarter of 2022 related to acquired working capital of $1.4. The post-acquisition operating results of ITL are reflected within our Detection and Measurement reportable segment.

Acquisition of TAMCO

On April 3, 2023, we completed the acquisition of T. A. Morrison & Co. Inc. (“TAMCO”), a market leader in motorized and non-motorized dampers that control airflow in large-scale specialty applications in commercial, industrial, and institutional markets. We purchased TAMCO for cash consideration of $125.3, net of cash acquired of $1.0. The purchase price is subject to adjustment based upon the final calculation of working capital and cash as of the date of acquisition. The post-acquisition operating results of TAMCO are reflected within our HVAC reportable segment.

Acquisition of ASPEQ

On June 2, 2023, we completed the acquisition of ASPEQ Heating Group (“ASPEQ”), a leading provider of electrical heating solutions to customers in industrial and commercial markets. We purchased ASPEQ for cash consideration of $421.8, net of cash acquired of $0.9. The purchase price is subject to adjustment based upon the final calculation of working capital and cash as of the date of acquisition. The post-acquisition operating results of ASPEQ are reflected within our HVAC reportable segment.

The assets acquired and liabilities assumed in the TAMCO and ASPEQ transactions have been recorded at estimates of fair value as determined by management, based on information available and assumptions as to future operations and are subject to change, primarily for the final assessment and valuation of certain income tax amounts and acquired intangible assets.

Other

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 Quarterly Report on Form 10-Q should be read in conjunction with the consolidated financial statements contained in our Annual Report on Form 10-K for the year ended December 31, 2022 (“our 2022 Annual Report on Form 10-K”). Interim results are not necessarily indicative of full year results.

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 first calendar 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 2023 are April 1, July 1, and September 30, compared to the respective April 2, July 2, and October 1, 2022 dates. We had one less day in the first quarter of 2023 and will have one more day in the fourth quarter of 2023 than in the respective 2022 periods. It is not practicable to estimate the impact of the one less day on our consolidated operating results for the six months ended July 1, 2023, when compared to the consolidated operating results for the respective 2022 period.

Correction of Prior-Year Classification and Disclosure

During the fourth quarter of 2022, we concluded that, although the assessment of our reportable segments was performed using the appropriate measures as defined by the Segment Reporting Topic of the Accounting Standards Codification (“Codification”), the disclosure of operating income for each of our reportable segments (“Segment Income”) was not consistent with the measure used by our Chief Operating Decision Maker (“CODM”) when evaluating the results of, or allocating resources to, our reportable segments. We previously disclosed that Segment Income was determined before considering impairments and special charges, long-term incentive compensation, certain other operating income/expense, and other indirect corporate expenses. Our CODM also excludes the impact of intangible asset amortization, inventory step-up charges, and certain other acquisition-related costs from Segment Income. Accordingly, Segment Income, as presented in Note 6, now excludes all of the items noted above. This change had no impact to the amounts previously presented in our condensed consolidated statements of operations for the three and six months ended July 2, 2022. Although the impact of this change to previously disclosed Segment Income is not material, we revised the prior-year presentation to be consistent with the current-year disclosure. The impact of this change on the Segment Income previously presented for the three and six months ended July 2, 2022 is summarized below:


	Three months ended July 2, 2022						Six months ended July 2, 2022
	As Previously Presented		Effect of Change		Current Presentation		As Previously Presented		Effect of Change		Current Presentation
Income:

HVAC reportable segment	$	25.6	$	2.7	$	28.3	$	40.8	$	8.1	$	48.9
Detection and Measurement reportable segment	22.5		5.3		27.8		37.5		9.3		46.8
Total income for segments	48.1		8.0		56.1		78.3		17.4		95.7

Corporate expense	16.4		—		16.4		33.0		—		33.0
Acquisition related costs (1)	—		0.9		0.9		—		1.0		1.0
Long-term incentive compensation expense	2.5		—		2.5		5.6		—		5.6
Amortization of intangible assets	—		7.1		7.1		—		16.4		16.4

Special charges, net	0.1		—		0.1		0.1		—		0.1
Other operating expense, net	1.9		—		1.9		1.0		—		1.0
Consolidated operating income	$	27.2	$	—	$	27.2	$	38.6	$	—	$	38.6

________________________________

(1)Represents additional “Cost of products sold” related to the step-up of inventory (to fair value) acquired in connection with the ITL acquisition of $0.9 and $1.0 during the three and six months ended July 2, 2022, respectively.

(2) NEW ACCOUNTING PRONOUNCEMENTS

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

The London Interbank Offered Rate (“LIBOR”) was discontinued on June 30, 2023. In an effort to address the various challenges created by such discontinuance, the Financial Accounting Standards Board (“FASB”) issued three amendments to existing guidance, Accounting Standards Update (“ASU”) No. 2020-04, No. 2021-01, and No. 2022-06, Reference Rate Reform. The amended guidance is designed to provide relief from the accounting analysis and impacts that may otherwise be required for modifications to agreements (e.g., loans, debt securities, derivatives, etc.) necessitated by the reference rate reform. It also provides optional expedients to enable companies to continue to apply hedge accounting to certain hedging relationships impacted by the reference rate reform. Application of the guidance in the amendments is optional, is only available in certain situations, and is only available for companies to apply until December 31, 2024. In conjunction with entering into an amended and restated credit agreement on August 12, 2022, we adopted this guidance with no material impact on our condensed consolidated financial statements.

(3) ACQUISITIONS AND DISCONTINUED OPERATIONS

Acquisition of ASPEQ

As indicated in Note 1, on June 2, 2023, we completed the acquisition of ASPEQ for $421.8, net of cash acquired of $0.9. We financed the acquisition with available cash and borrowings under our senior credit facilities. The assets acquired and liabilities assumed have been recorded at preliminary estimates of fair value as determined by management, based on information currently available and on current assumptions as to future operations and are subject to change upon completion of the acquisition method of accounting. Final determination of the fair values of certain assets and liabilities will be completed within the measurement period of up to one year from the acquisition date, as permitted under GAAP. The following is a summary of the recorded preliminary fair values of the assets acquired and liabilities assumed for ASPEQ as of June 2, 2023:


Assets acquired:
Current assets, including cash and equivalents of $0.9	$	41.7
Property, plant and equipment	10.6
Goodwill	169.3
Intangible assets	246.1
Other assets	1.3
Total assets acquired	469.0

Current liabilities assumed	11.3
Non-current liabilities assumed (1)	35.0

Net assets acquired	$	422.7

________________________________

(1)Includes net deferred income tax liabilities and other liabilities of $34.0 and $1.0, respectively.

The identifiable intangible assets acquired consist of customer relationships, trademarks, technology, and customer backlog of $142.3, $51.5, $47.8, and $4.5, respectively, with such amounts based on a preliminary assessment of the related fair values. We expect to amortize the customer relationships, technology, and customer backlog assets over 12.0, 16.0, and 1.0 years, respectively, with the trademarks acquired being indefinite lived.

We acquired gross receivables of $17.2, which had a fair value at the acquisition date of $17.1 based on our estimates of cash flows expected to be recovered.

The qualitative factors that comprise the recorded goodwill include expected market growth for ASPEQ’s existing operations, increased volumes achieved by selling ASPEQ’s products through existing SPX sales channels, procurement and operational savings and efficiencies, and various other factors. We expect none of the goodwill described above to be deductible for tax purposes.

Between the acquisition date and July 1, 2023, we recognized revenues and a net loss for ASPEQ of $8.6 and $0.5, respectively. The net loss included charges of $1.1 associated with the excess fair value (over historical cost) of inventory acquired which was subsequently sold during the period June 2, 2023 through July 1, 2023. During the three and six months ended July 1, 2023, we incurred acquisition-related costs for ASPEQ of $4.6 and $5.1, respectively, which have been recorded to “Selling, general and administrative” within our condensed consolidated statements of operations and “Corporate expense” within consolidated operating income in Note 6.

The following unaudited pro forma information presents our results of operations for the three and six months ended July 1, 2023 and July 2, 2022, respectively, as if the acquisition of ASPEQ had taken place on January 1, 2022. The unaudited pro forma financial information is not intended to represent or be indicative of our consolidated results of operations that would have been reported had the acquisition been completed as of the date presented, and should not be taken as representative of our future consolidated results of operations. The pro forma results include estimates and assumptions that management believes are reasonable; however, these results do not include any anticipated cost savings or expenses of the planned integration of ASPEQ. These pro forma results of operations have been prepared for comparative purposes only and include additional interest expense on the borrowings required to finance the acquisition, additional depreciation and amortization expense associated with fair value adjustments to the acquired property, plant and equipment and intangible assets, adjustments to reflect charges associated with acquisition-related costs and charges associated with the excess fair value (over historical cost) of inventory acquired and subsequently sold as if they were incurred during the first quarter of 2022, and the related income tax effects.


	Three months ended				Six months ended
	July 1, 2023		July 2, 2022		July 1, 2023		July 2, 2022
Revenues	$	442.0	$	380.4	$	870.3	$	711.8
Income from continuing operations	41.9		12.2		78.8		14.5
Net income	39.6		6.1		80.2		6.8

Income from continuing operations per share of common stock:
Basic	$	0.92	$	0.27	$	1.73	$	0.32
Diluted	$	0.90	$	0.26	$	1.69	$	0.31

Net income per share of common stock:
Basic	$	0.87	$	0.13	$	1.76	$	0.15
Diluted	$	0.85	$	0.13	$	1.72	$	0.15

Other Acquisitions

As indicated in Note 1, on March 31, 2022 and April 3, 2023, we completed the acquisitions of ITL and TAMCO, respectively. The pro forma effects of these acquisitions are not material to our condensed consolidated results of operations.

Sale of Transformer Solutions Business

On October 1, 2021, we completed the sale of SPX Transformer Solutions, Inc. During the first quarter of 2022, we agreed to the final adjustment of the purchase price which resulted in a payment to the buyer of $13.9 and an increase to the gain on sale of $0.2.

Wind-Down of DBT Business

We completed the wind-down of our DBT Technologies (PTY) LTD (“DBT”) business in the fourth quarter of 2021. As a result of completing the wind-down plan, we are reporting DBT as a discontinued operation for all periods presented.

The assets and liabilities of DBT have been included within “Assets of DBT and Heat Transfer” and “Liabilities of DBT and Heat Transfer,” respectively, on the condensed consolidated balance sheets as of July 1, 2023 and December 31, 2022. The major line items constituting DBT’s assets and liabilities as of July 1, 2023 and December 31, 2022 are shown below:


	July 1, 2023		December 31, 2022
ASSETS
Cash and equivalents	$	8.4	$	9.3
Accounts receivable, net	13.8		7.6
Other current assets	3.9		6.5
Property, plant and equipment:
Buildings and leasehold improvements	0.2		0.2
Machinery and equipment	0.6		0.7
	0.8		0.9
Accumulated depreciation	(0.7)		(0.8)
Property, plant and equipment, net	0.1		0.1
Other assets	17.5		19.1
Total assets of DBT	$	43.7	$	42.6
LIABILITIES
Accounts payable	$	1.2	$	1.4
Contract liabilities	3.2		3.6
Accrued expenses	18.8		22.0
Other long-term liabilities	4.2		4.6
Total liabilities of DBT	$	27.4	$	31.6

Wind-Down of the Heat Transfer Business

We completed the wind-down of our SPX Heat Transfer (“Heat Transfer”) business in the fourth quarter of 2020. As a result of completing the wind-down plan, we are reporting Heat Transfer as a discontinued operation for all periods presented.

The assets and liabilities of Heat Transfer have been included within “Assets of DBT and Heat Transfer” and “Liabilities of DBT and Heat Transfer,” respectively, on the condensed consolidated balance sheets as of July 1, 2023 and December 31, 2022. The major line items constituting Heat Transfer’s assets and liabilities as of July 1, 2023 and December 31, 2022 are shown below:


	July 1, 2023		December 31, 2022
ASSETS
Cash and equivalents	$	0.1	$	—

Other current assets	0.3		0.2
Other assets	0.1		0.1
Total assets of Heat Transfer	$	0.5	$	0.3
LIABILITIES
Accounts payable	$	0.2	$	0.1
Accrued expenses	0.1		0.1
Total liabilities of Heat Transfer	$	0.3	$	0.2

Changes in estimates associated with liabilities retained in connection with a business divestiture (e.g. income taxes) may occur. As a result, it is possible that the resulting gains/losses on these and other previous divestitures may be materially adjusted in subsequent periods.

For the three and six months ended July 1, 2023 and July 2, 2022, results of operations from our businesses reported as discontinued operations were as follows:


	Three months ended				Six months ended
	July 1, 2023		July 2, 2022		July 1, 2023		July 2, 2022





DBT
Income (loss) from discontinued operations (1)	$	(2.4)	$	(6.9)	$	0.6	$	(8.5)
Income tax benefit	0.2		1.1		0.9		1.5
Income (loss) from discontinued operations, net	(2.2)		(5.8)		1.5		(7.0)






All other
Loss from discontinued operations (2)	(0.1)		(0.4)		(0.1)		(0.9)
Income tax benefit	—		0.1		—		0.2
Loss from discontinued operations, net	(0.1)		(0.3)		(0.1)		(0.7)

Total
Income (loss) from discontinued operations	(2.5)		(7.3)		0.5		(9.4)
Income tax benefit	0.2		1.2		0.9		1.7
Income (loss) from discontinued operations, net	$	(2.3)	$	(6.1)	$	1.4	$	(7.7)

________________________________

(1)Income for the six months ended July 1, 2023 resulted primarily from income recorded in connection with dispute resolutions, partially offset by legal costs incurred in connection with various dispute resolution matters related to two large power projects. Loss for the three months ended July 1, 2023 and the three and six months ended July 2, 2022 resulted primarily from net legal costs incurred in connection with various dispute resolution matters related to two large power projects. Refer to Note 15 for additional details on these dispute resolution matters.

(2)Loss for the three and six months ended July 1, 2023 and July 2, 2022 resulted primarily from revisions to liabilities, including income tax liabilities, retained in connection with prior dispositions.

(4) REVENUES FROM CONTRACTS

Disaggregated Revenues

We disaggregate revenue from contracts with customers by major product line and based on the timing of recognition for each of our reportable segments, as we believe such disaggregation best depicts how the nature, amount, timing, and uncertainty of our revenues and cash flows are affected by economic factors, with such disaggregation presented below for the three and six months ended July 1, 2023 and July 2, 2022:


	Three months ended July 1, 2023
Reportable Segments	HVAC		Detection and Measurement		Total

Major product lines
Package and process cooling equipment and services, and engineered air movement solutions	$	173.3	$	—	$	173.3
Boilers, electrical heating, and ventilation	95.7		—		95.7
Underground locators, inspection and rehabilitation equipment, and robotic systems	—		67.2		67.2
Communication technologies, aids to navigation, and transportation systems	—		87.1		87.1

	$	269.0	$	154.3	$	423.3

Timing of Revenue Recognition
Revenues recognized at a point in time	$	248.0	$	127.3	$	375.3
Revenues recognized over time	21.0		27.0		48.0
	$	269.0	$	154.3	$	423.3


	Six months ended July 1, 2023
Reportable Segments	HVAC		Detection and Measurement		Total

Major product lines
Package and process cooling equipment and services, and engineered air movement solutions	$	331.6	$	—	$	331.6
Boilers, electrical heating, and ventilation	189.0		—		189.0
Underground locators, inspection and rehabilitation equipment, and robotic systems	—		133.1		133.1
Communication technologies, aids to navigation, and transportation systems	—		169.4		169.4

	$	520.6	$	302.5	$	823.1

Timing of Revenue Recognition
Revenues recognized at a point in time	$	476.3	$	255.5	$	731.8
Revenues recognized over time	44.3		47.0		91.3
	$	520.6	$	302.5	$	823.1


	Three months ended July 2, 2022
Reportable Segments	HVAC		Detection and Measurement		Total

Major product lines
Package and process cooling equipment and services, and engineered air movement solutions	$	130.5	$	—	$	130.5
Boilers, electrical heating, and ventilation	88.2		—		88.2
Underground locators, inspection and rehabilitation equipment, and robotic systems	—		65.4		65.4
Communication technologies, aids to navigation, and transportation systems	—		69.9		69.9
	$	218.7	$	135.3	$	354.0

Timing of Revenue Recognition
Revenues recognized at a point in time	$	202.8	$	110.9	$	313.7
Revenues recognized over time	15.9		24.4		40.3
	$	218.7	$	135.3	$	354.0


	Six months ended July 2, 2022
Reportable Segments	HVAC		Detection and Measurement		Total

Major product lines
Package and process cooling equipment and services, and engineered air movement solutions	$	247.3	$	—	$	247.3
Boilers, electrical heating, and ventilation	164.5		—		164.5
Underground locators, inspection and rehabilitation equipment, and robotic systems	—		132.6		132.6
Communication technologies, aids to navigation, and transportation systems	—		116.7		116.7
	$	411.8	$	249.3	$	661.1

Timing of Revenue Recognition
Revenues recognized at a point in time	$	375.9	$	214.1	$	590.0
Revenues recognized over time	35.9		35.2		71.1
	$	411.8	$	249.3	$	661.1

Contract Balances

Our customers are invoiced for products and services at the time of delivery or based on contractual milestones, resulting in outstanding receivables with payment terms from these customers (“Contract Accounts Receivable”). In some cases, the timing of revenue recognition, particularly for revenue recognized over time, differs from when such amounts are invoiced to customers, resulting in a contract asset (revenue recognition precedes the invoicing of the related revenue amount) or a contract liability (payment from the customer precedes recognition of the related revenue amount). Contract assets and liabilities are generally classified as current. On a contract-by-contract basis, the contract assets and contract liabilities are reported net within our condensed consolidated balance sheets. Our contract balances consisted of the following as of July 1, 2023 and December 31, 2022:


Contract Balances	July 1, 2023		December 31, 2022		Change
Contract Accounts Receivable(1)	$	279.1	$	259.9	$	19.2
Contract Assets	36.5		23.9		12.6
Contract Liabilities - current	(71.0)		(52.8)		(18.2)
Contract Liabilities - non-current(2)	(4.1)		(4.7)		0.6
Net contract balance	$	240.5	$	226.3	$	14.2

___________________________

(1) Included in “Accounts receivable, net” within the accompanying condensed consolidated balance sheets.

(2) Included in “Other long-term liabilities” within the accompanying condensed consolidated balance sheets.

The $14.2 increase in our net contract asset balance from December 31, 2022 to July 1, 2023 was due primarily to revenue recognized during the period, partially offset by cash payments received from customers during the period.

During the three and six months ended July 1, 2023, we recognized revenues of $4.8 and $30.6, respectively, related to our contract liabilities at December 31, 2022.

Performance Obligations

As of July 1, 2023, the aggregate amount allocated to remaining performance obligations was $211.2. We expect to recognize revenue on approximately 82% and 89% of remaining performance obligations over the next 12 and 24 months, respectively, with the remaining recognized thereafter.

(5) LEASES

There have been no material changes to our operating and finance leases during the three and six months ended July 1, 2023.

(6) INFORMATION ON REPORTABLE SEGMENTS

We are a global supplier of highly specialized, engineered solutions with operations in 15 countries and sales in over 100 countries around the world.

We have aggregated our operating segments into the following two reportable segments: HVAC and Detection and Measurement. The factors considered in determining our aggregated segments are the economic similarity of the businesses, the nature of products sold or services provided, production processes, types of customers, distribution methods, and regulatory environment. In determining our reportable segments, we apply the threshold criteria of the Segment Reporting Topic of the Codification. Segment Income is determined before considering, if applicable, impairment and special charges, long-term incentive compensation, certain other operating income/expense, other indirect corporate expenses, intangible asset amortization expense, inventory step-up charges, and certain other acquisition-related costs. This is consistent with the way our CODM evaluates the results of each segment.

HVAC Reportable Segment

Our HVAC reportable segment engineers, designs, manufactures, installs and services package and process cooling products and engineered air movement solutions for the HVAC industrial and power generation markets, as well as boilers and electrical heating and ventilation products for the residential and commercial markets. The primary distribution channels for the segment’s products are direct to customers, independent manufacturing representatives, third-party distributors, and retailers. The segment serves a customer base in North America, Europe, and Asia.

Detection and Measurement Reportable Segment

Our Detection and Measurement reportable segment engineers, designs, manufactures, services, and installs underground pipe and cable locators, inspection and rehabilitation equipment, robotic systems, transportation systems, communication technologies, and aids to navigation. The primary distribution channels for the segment’s products are direct to customers and third-party distributors. The segment serves a global customer base, with a strong presence in North America, Europe, Africa, and Asia.

Corporate Expense

Corporate expense generally relates to the cost of our Charlotte, North Carolina corporate headquarters.

Financial data for our reportable segments for the three and six months ended July 1, 2023 and July 2, 2022 are presented below:


	Three months ended				Six months ended
	July 1, 2023		July 2, 2022		July 1, 2023		July 2, 2022
Revenues:
HVAC reportable segment	$	269.0	$	218.7	$	520.6	$	411.8
Detection and Measurement reportable segment	154.3		135.3		302.5		249.3
Consolidated revenues	$	423.3	$	354.0	$	823.1	$	661.1

Income:
HVAC reportable segment	$	55.2	$	28.3	$	102.9	$	48.9
Detection and Measurement reportable segment	29.2		27.8		55.9		46.8
Total income for segments	84.4		56.1		158.8		95.7

Corporate expense	16.6		16.4		31.2		33.0
Acquisition-related and other costs (1)	1.5		0.9		2.1		1.0
Long-term incentive compensation expense	3.5		2.5		6.6		5.6
Amortization of intangible assets	11.5		7.1		17.8		16.4
Special charges, net	—		0.1		—		0.1
Other operating expense	—		1.9		—		1.0
Consolidated operating income	$	51.3	$	27.2	$	101.1	$	38.6

________________________________

(1)Represents certain acquisition-related costs incurred of $1.5 and $2.1 during the three and six months ended July 1, 2023, respectively, and $0.9 and $1.0 during the three and six months ended July 2, 2022, respectively, including additional “Cost of products sold” related to the step-up of inventory (to fair value) acquired in connection with the ASPEQ acquisition of $1.1 during the three and six months ended July 1, 2023 and the ITL acquisition of $0.9 and $1.0 during the three and six months ended July 2, 2022, respectively.

(7) SPECIAL CHARGES, NET

There were no special charges for the three and six months ended July 1, 2023. No significant future charges are expected to be incurred under actions approved as of July 1, 2023. Special charges, net, for the three and six months ended July 2, 2022 are described in more detail below:


	Three months ended		Six months ended
	July 2, 2022		July 2, 2022
HVAC reportable segment	$	0.1	$	0.1
Detection and Measurement reportable segment	—		—

Total	$	0.1	$	0.1

HVAC — Charges for the three and six months ended July 2, 2022 related to severance costs associated with a restructuring action at one of the segment’s cooling businesses.

The following is an analysis of our restructuring liabilities for the six months ended July 1, 2023 and July 2, 2022:


	Six months ended
	July 1, 2023		July 2, 2022
Balance at beginning of year	$	—	$	0.3
Special charges	—		0.1
Utilization — cash	—		(0.3)
Currency translation adjustment and other	—		0.1
Balance at end of period	$	—	$	0.2

(8) INVENTORIES, NET

Inventories are accounted for under the first-in, first-out method and are comprised of the following at July 1, 2023 and December 31, 2022:


	July 1, 2023		December 31, 2022
Finished goods	$	79.3	$	73.0
Work in process	31.8		25.7
Raw materials and purchased parts	188.5