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Fair Value
 12 Months Ended
Dec. 31, 2011
Fair Value  
Fair Value

(16)   Fair Value

        Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In the absence of active markets for the identical assets or liabilities, such measurements involve developing assumptions based on market observable data and, in the absence of such data, internal information that is consistent with what market participants would use in a hypothetical transaction that occurs at the measurement date. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect our market assumptions. Preference is given to observable inputs. These two types of inputs create the following fair value hierarchy:

  • •
    Level 1 — Quoted prices for identical instruments in active markets.

    •
    Level 2 — Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.

    •
    Level 3 — Significant inputs to the valuation model are unobservable.

        The following section describes the valuation methodologies we use to measure different financial instruments at fair value on a recurring basis.

Derivative Financial Instruments

        Our financial derivative assets and liabilities include FX forward contracts, FX embedded derivatives and commodity contracts, which are valued using valuation models that measure fair value using observable market inputs such as forward rates, interest rates, our own credit risk and our counterparties' credit risks. Based on these inputs, the derivative assets and liabilities are classified within Level 2 of the valuation hierarchy. We have not made any adjustments to the inputs obtained from the independent sources. Based on our continued ability to enter into forward contracts, we consider the markets for our fair value instruments to be active. We primarily use the income approach, which uses valuation techniques to convert future amounts to a single present amount.

        As of December 31, 2011, there had been no significant impact to the fair value of our derivative liabilities due to our own credit risk as the related instruments are collateralized under our senior credit facilities. Similarly, there had been no significant impact to the fair value of our derivative assets based on our evaluation of our counterparties' credit risk.

Investments in Equity Securities

        Our available-for-sale securities include equity investments that are traded in active international markets. They are measured at fair value using closing stock prices from active markets and are classified within Level 1 of the valuation hierarchy. These assets had a fair market value of $5.2 and $12.8 at December 31, 2011 and December 31, 2010, respectively, and were recorded in "Assets of discontinued operations" within our consolidated balance sheets.

        Certain of our investments in equity securities that are not readily marketable are accounted for under the fair value option, with such values determined by multidimensional pricing models. These models consider market activity based on modeling of securities with similar credit quality, duration, yield and structure. A variety of inputs are used, including benchmark yields, reported trades, non-binding broker/dealer quotes, issuer spread and reference data including market research publications. Market indicators, industry and economic events are also considered. We have not made any adjustments to the inputs obtained from the independent sources. At December 31, 2011 and December 31, 2010, these assets had a fair value of $7.8 and $8.5, respectively, which are estimated using various valuation models, including the Monte-Carlo simulation model, and were recorded in "Assets of discontinued operations" within our consolidated balance sheets.

        Assets and liabilities measured at fair value on a recurring basis include the following as of December 31, 2011:

 
   Fair Value Measurements Using  
 
   Level 1   Level 2   Level 3  

Current assets — FX embedded derivatives and FX forward contracts

   $ —   $ 1.2   $ —  

Current assets — Investment in equity securities and available-for-sale securities

     5.2     —     7.8  

Current liabilities — FX forward contracts, FX embedded derivatives, and commodity contracts

     —     1.9     —  

Long-term liabilities — FX embedded derivatives

     —     14.8     —  

        Assets and liabilities measured at fair value on a recurring basis include the following as of December 31, 2010:

 
   Fair Value Measurements Using  
 
   Level 1   Level 2   Level 3  

Current assets — FX embedded derivatives, FX forward contracts and commodity contracts

   $ —   $ 4.1   $ —  

Current assets — Investment in equity securities and available-for-sale securities

     12.8     —     8.5  

Current liabilities — FX forward contracts and FX embedded derivatives

     —     6.1     —  

Long-term liabilities — FX embedded derivatives

     —     33.2     —  

        The table below presents a reconciliation of our investment in equity securities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the years ended December 31, 2011 and 2010, including net unrealized losses included in earnings.

 
   Reconciliation of
Equity Securities
using Significant
Unobservable Inputs
(Level 3) 		 

Balance at December 31, 2009

   $ —  

Purchases

     9.8  

Losses included in income from discontinued operations

     (1.3 )
       

Balance at December 31, 2010

     8.5  

Losses included in income from discontinued operations

     (0.7 )
       

Balance at December 31, 2011

   $ 7.8  
       

        During 2011, we recorded impairment charges of $6.5 to "Special charges, net" associated with our decision to postpone the construction of a manufacturing facility in Shanghai, China, with the charge related to all the costs that had been previously capitalized.

        During the second and fourth quarters of 2011, we determined that the fair value of our SPX Heat Transfer Inc. reporting unit was less than the carrying value of its net assets (see Note 8). The fair value of SPX Heat Transfer Inc. was based upon weighting the income and market approaches, utilizing estimated cash flows and a terminal value discounted at a rate of return that reflects the relative risk of the cash flows, as well as valuation multiples derived from comparable publicly-traded companies that are applied to the historical and projected operating results of SPX Heat Transfer Inc. (unobservable inputs — Level 3). We estimated the implied fair value of SPX Heat Transfer Inc.'s goodwill, which resulted in an aggregate impairment charge related to such goodwill of $20.8 during 2011. In addition, we recorded an impairment charge in the second quarter of 2011 of $7.5 related to the indefinite-lived intangible assets of SPX Heat Transfer Inc., with the fair value of these intangible assets of $22.6 determined based on a projection of cash flows for the assets discounted at a rate of return that reflected the relative risk of the cash flows (unobservable inputs — Level 3).

        During 2010, we recorded impairment charges of $6.8, to "Special charges, net" related to assets to be disposed of in connection with certain restructuring initiatives (see Note 6). The fair values of these assets ($4.7) were based on the estimated selling prices. We determined the estimated selling prices by obtaining information in the specific markets being evaluated, including comparable sales of similar assets and assumptions about demand in the market for these assets (unobservable inputs — Level 3).

        In connection with our annual goodwill impairment testing during the fourth quarter of 2009, we determined that the fair value of our Service Solutions reporting unit was less than the carrying value of its net assets. The fair value of the reporting unit was based upon weighting of the income and market approaches, utilizing estimated cash flows and a terminal value discounted at a rate of return that reflects the relative risk of the cash flows, as well as valuation multiples derived from comparable publicly traded companies that are applied to the historical and projected operating results of the reporting unit (unobservable inputs — Level 3). We estimated the implied fair value of Service Solutions' goodwill, which resulted in an impairment charge related to such goodwill of $187.7. In addition, in 2009 we recorded an impairment charge of $1.0 related to other intangible assets of Service Solutions. The fair value of these intangible assets was determined based on a projection of cash flows for the assets discounted at a rate of return that reflected the relative risk of the cash flows (unobservable input — Level 3). The aggregate impairment charge of $188.7 was recorded to "Income (loss) from discontinued operations, net of tax" in the accompanying consolidated statement of operations for the year ended December 31, 2009.

        In connection with our annual impairment testing of indefinite-lived intangible assets during the fourth quarter of 2009, we determined that trademarks held by a business within our Thermal Equipment and Services reportable segment were impaired and, thus, we recorded an impairment charge of $6.1 during 2009. The fair value was determined by applying an estimated royalty rate to projected revenues, with the resulting cash flows discounted at a rate of return that reflected current market conditions (unobservable inputs — Level 3).

        We recorded pre-tax impairment charges of $20.8 during 2009 (to "Gain (loss) on disposition of discontinued operations, net of tax") in order to reduce the carrying value of the net assets of Filtran and PSD (see Note 4) to their estimated fair values. The fair value of the Filtran business was based primarily on the sales price received in October 2009 (i.e., an observable quoted price in an active market, as adjusted for certain other observable inputs — Level 2), while the fair value for PSD was based on indications of interest (unobservable inputs — Level 3). In addition, we recorded impairment charges of $11.1 during 2009 to "Special charges, net" related to assets to be disposed in connection with certain restructuring initiatives. The fair values of $8.9 for these assets was based on the estimated selling prices. We determined the estimated selling prices by obtaining information in the specific markets being evaluated, including comparable sales of similar assets and assumptions about demand in the market for these assets (unobservable inputs — Level 3).

        The carrying amount of cash and equivalents and receivables reported in our consolidated balance sheets approximates fair value because of the short maturity of those instruments.

        The fair value of our debt instruments, based on borrowing rates available to us at December 31, 2011 for similar debt, was $2,099.1 at December 31, 2011, compared to our carrying value of $2,001.1.