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EQUITY AND STOCK-BASED COMPENSATION | 9 Months Ended
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Sep. 29, 2012
EQUITY AND STOCK-BASED COMPENSATION |
EQUITY AND STOCK-BASED COMPENSATION |
(12) EQUITY AND STOCK-BASED COMPENSATION Earnings Per Share The following table sets forth the number of weighted-average shares outstanding used in the computation of basic and diluted income per share:
|  | Three months ended |  | Nine months ended |
|  | September 29, |  | October 1, |  | September 29, |  | October 1, |
|  | 2012 |  | 2011 |  | 2012 |  | 2011 |
Weighted-average shares outstanding used in basic income per share |  | 49.958 |  | 50.618 |  | 50.174 |  | 50.480 |
Dilutive securities — employee stock options and restricted stock units |  | 0.080 |  | 0.186 |  | 0.625 |  | 0.559 |
Weighted-average number of common and dilutive securities used for calculating diluted income per share |  | 50.038 |  | 50.804 |  | 50.799 |  | 51.039 |
The total number of stock options that were not included in the computation of diluted income per share because their exercise price was greater than the average market price of common shares was 0.003 for both the three and nine months ended September 29, 2012, respectively, and 0.128 and 0.093 for the three and nine months ended October 1, 2011, respectively. For the three and nine months ended September 29, 2012, 1.784 and 0.931 unvested restricted stock units, respectively, were excluded from the computation of diluted income per share, compared to 1.316 and 0.443 for the three and nine months ended October 1, 2011. Stock-based Compensation Under the 2002 Stock Compensation Plan, as amended in 2006, 2011 and 2012, up to 3.423 shares of our common stock were available for grant at September 29, 2012. The 2002 Stock Compensation Plan permits the issuance of new shares or shares from treasury upon the exercise of options, vesting of restricted stock units or granting of restricted stock. Each share of restricted stock and restricted stock unit granted reduces availability by two shares. During the nine months ended September 29, 2012 and October 1, 2011, we classified excess tax benefits from stock-based compensation of $3.4 and $6.5, respectively, as financing cash flows and included such amounts in “Proceeds from the exercise of employee stock options and other, net of minimum withholdings paid on behalf of employees for net share settlements” within our condensed consolidated statements of cash flows. Restricted stock or restricted stock units may be granted to certain eligible employees or non-employee directors in accordance with applicable equity compensation plan documents and agreements. Subject to participants’ continued employment and other plan terms and conditions, the restrictions lapse and awards generally vest over three years. Market (“company performance”) thresholds have been instituted for vesting of the significant majority of restricted stock and restricted stock unit awards. This vesting is based on SPX shareholder return versus the S&P 500 composite index. On each vesting date, we compare the SPX shareholder return to the performance of the S&P 500 composite index for the prior year and for the cumulative period since the date of the grant. If SPX outperforms the S&P 500 composite index for the prior year, the one-third portion of the grant associated with that year will vest. If SPX outperforms the S&P composite index for the cumulative period, any unvested portion of the grant that was subject to vesting on or prior to the vesting date will vest. Additionally, a portion of our restricted stock and restricted stock unit awards vest based on the passage of time since the grant date. Restricted stock and restricted stock units that do not vest within the three-year vesting period are forfeited. We grant restricted stock to non-employee directors under the 2006 Non-Employee Directors’ Stock Incentive Plan (the “Directors’ Plan”) and the 2002 Stock Compensation Plan. Under the Directors’ Plan, up to 0.013 shares of our common stock were available for grant at September 29, 2012. Restricted stock grants have a three-year vesting period based on SPX shareholder return versus the S&P 500 composite index and are subject to the same company performance thresholds for employee awards described in the preceding paragraph. Restricted stock that does not vest within the three-year vesting period in accordance with these performance requirements is forfeited. Stock options may be granted to key employees in the form of incentive stock options or nonqualified stock options. The option price per share may be no less than the fair market value of our common stock at the close of business on the day prior to the date of grant. Upon exercise, the employee has the option to surrender previously owned shares at current value in payment of the exercise price and/or for withholding tax obligations, and, subject to certain restrictions, may receive a reload option having an exercise price equal to the current market value for the number of shares so surrendered. The reload option expires at the same time that the exercised option would have expired. Any future issuances of options under the plan will not have a reload feature, pursuant to the terms of the plan. We have not granted options to any of our employees since 2004. All outstanding options are vested as of September 29, 2012. The recognition of compensation expense for share-based awards, including stock options, is based on their grant date fair values. The fair value of each award is amortized over the lesser of the award’s requisite or derived service period, which is generally up to three years. Compensation expense within income from continuing operations related to restricted stock and restricted stock units totaled $33.9 and $32.9 for the nine months ended September 29, 2012 and October 1, 2011, respectively, with the related tax benefit being $12.9 and $12.3 for the periods ended September 29, 2012 and October 1, 2011, respectively. We use the Monte Carlo simulation model valuation technique to determine the fair value of our restricted stock and restricted stock units that contain a “market condition.” The Monte Carlo simulation model utilizes multiple input variables that determine the probability of satisfying the market condition stipulated in the award and calculates the fair value of each restricted stock and restricted stock unit award. We used the following assumptions in determining the fair value of the awards granted on January 2, 2012 and March 1, 2011:
|  |  |  |  |  |  |  | Correlation |
|  |  |  |  |  |  |  | between total |
|  |  |  |  |  |  |  | shareholder |
|  | Annual expected |  |  |  |  |  | return for SPX |
|  | stock price |  | Annual expected |  |  |  | and S&P 500 |
|  | volatility |  | dividend yield |  | Risk-free interest rate |  | Composite Index |
January 2, 2012: |  |  |  |  |  |  |  |  |
SPX Corporation |  | 44.3 | % | 1.60 | % | 0.44 | % | 0.7365 |
S&P 500 Composite Index |  | 23.1 | % | n/a |  | 0.44 | % |  |
March 1, 2011: |  |  |  |  |  |  |  |  |
SPX Corporation |  | 61.0 | % | 1.27 | % | 1.03 | % | 0.7559 |
S&P 500 Composite Index |  | 30.3 | % | n/a |  | 1.03 | % |  |
Annual expected stock price volatility is based on the three-year historical volatility. The annual expected dividend yield is based on annual expected dividend payments and the stock price on the date of grant. The average risk-free interest rate is based on the one-year through three-year daily treasury yield curve rate as of the grant date. The following table summarizes the restricted stock and restricted stock unit activity from December 31, 2011 through September 29, 2012:
|  |  |  | Weighted-Average |
|  | Unvested Restricted Stock |  | Grant-Date Fair |
|  | and Restricted Stock Units |  | Value Per Share |
Outstanding at December 31, 2011 |  | 1.440 |  | $ | 54.38 |
Granted |  | 0.807 |  | 50.33 |
Vested |  | (0.204 | ) | 35.03 |
Forfeited |  | (0.044 | ) | 55.20 |
Outstanding at September 29, 2012 |  | 1.999 |  | 54.73 |
As of September 29, 2012, there was $22.3 of unrecognized compensation cost related to restricted stock and restricted stock unit compensation arrangements. We expect this cost to be recognized over a weighted-average period of 1.6 years. The following table shows stock option activity from December 31, 2011 through September 29, 2012:
|  |  |  | Weighted- |
|  |  |  | Average Exercise |
|  | Shares |  | Price |
Options outstanding and exercisable at December 31, 2011 |  | 0.364 |  | $ | 54.87 |
Exercised |  | (0.151 | ) | 39.73 |
Forfeited |  | (0.177 | ) | 69.42 |
Options outstanding and exercisable at September 29, 2012 |  | 0.036 |  | 46.93 |
The weighted-average remaining term, in years, of stock options outstanding and exercisable at September 29, 2012 was 0.5. The total number of in-the-money options exercisable on September 29, 2012 was 0.033. Aggregate intrinsic value (market value of stock less the option exercise price) represents the total pre-tax intrinsic value, based on our closing stock price on September 29, 2012, which would have been received by the option holders had all in-the-money option holders exercised their options as of that date. The aggregate intrinsic value of the options outstanding and exercisable at September 29, 2012 was $0.8. The aggregate intrinsic value of options exercised during the first nine months of 2012 was $5.3, while the related amount for the first nine months of 2011 was $2.5. Accumulated Other Comprehensive Loss The components of the balance sheet caption “Accumulated other comprehensive loss” were as follows:
|  | September 29, |  | December 31, |
|  | 2012 |  | 2011 |
Foreign currency translation adjustment |  | $ | 200.3 |  | $ | 199.7 |
Net unrealized losses on qualifying cash flow hedges, net of tax benefit of $2.3 and $2.9, respectively |  | (3.3 | ) | (4.4 | )
Net unrealized losses on available-for-sale securities |  | (3.0 | ) | (1.5 | )
Pension and postretirement liability adjustment and other, net of tax benefit of $266.7 and $274.3, respectively (1) |  | (427.1 | ) | (440.3 | )
Accumulated other comprehensive loss |  | $ | (233.1 | ) | $ | (246.5 | )
(1) | At both September 29, 2012 and December 31, 2011, includes $3.8 related to our share of the pension liability adjustment for EGS.
Common Stock in Treasury On February 16, 2012, we entered into a written trading plan under Rule 10b5-1 of the Securities and Exchange Act of 1934, as amended, to facilitate the repurchase of up to $350.0 of shares of our common stock on or before February 14, 2013, in accordance with a share repurchase program authorized by our Board of Directors. During the first half of 2012, 0.992 shares of our common stock were repurchased for cash consideration of $75.0, with the remainder scheduled to be repurchased following the consummation of the sale of the Service Solutions business, in accordance with the share repurchase program. There were no common stock repurchases during the nine months ended October 1, 2011. During the nine months ended September 29, 2012, “Common stock in treasury” was decreased by the settlement of restricted stock units issued from treasury stock of $3.9 and increased by $1.8 for common stock that was surrendered by recipients of restricted stock as a means of funding the related minimum income tax withholding requirements. During the nine months ended October 1, 2011, “Common stock in treasury” was decreased by the settlement of restricted stock units issued from treasury stock of $12.7 and increased by $7.0 for common stock that was surrendered by recipients of restricted stock as a means of funding the related minimum income tax withholding requirements. Dividends The dividends declared during each of the first three quarters of 2012 and 2011 were $0.25 per share and totaled $12.8, $12.7 and $12.7 during the first, second and third quarters of 2012, respectively, and $12.7, $12.8 and $12.7 during the first, second and third quarters of 2011, respectively. Third quarter dividends were paid on October 3, 2012 and October 4, 2011. Changes in Equity A summary of the changes in equity for the three months ended September 29, 2012 and October 1, 2011 is provided below:
|  | September 29, 2012 |  | October 1, 2011 |
|  | SPX |  |  |  |  |  | SPX |  |  |  |  |
|  | Corporation |  |  |  |  |  | Corporation |  |  |  |  |
|  | Shareholders’ |  | Noncontrolling |  | Total |  | Shareholders’ |  | Noncontrolling |  | Total |
|  | Equity |  | Interest |  | Equity |  | Equity |  | Interest |  | Equity |
Equity, beginning of period |  | $ | 2,165.2 |  | $ | 10.1 |  | $ | 2,175.3 |  | $ | 2,287.4 |  | $ | 6.3 |  | $ | 2,293.7 |
Net income |  | 57.8 |  | 2.4 |  | 60.2 |  | 60.7 |  | 1.6 |  | 62.3 |
Net unrealized gains (losses) on qualifying cash flow hedges, net of tax (provision) benefit of $(0.3) and $1.0 for the three months ended September 29, 2012 and October 1, 2011, respectively |  | 0.5 |  | — |  | 0.5 |  | (1.2 | ) | — |  | (1.2 | )
Net unrealized loss on available-for-sale securities |  | (2.9 | ) | — |  | (2.9 | ) | (2.5 | ) | — |  | (2.5 | )
Pension liability adjustment, net of tax provision of $2.5 and $3.2 for the three months ended September 29, 2012 and October 1, 2011, respectively |  | 3.7 |  | — |  | 3.7 |  | 4.1 |  | — |  | 4.1 |
Foreign currency translation adjustments |  | 77.8 |  | 0.3 |  | 78.1 |  | (92.1 | ) | (0.7 | ) | (92.8 | )
Total comprehensive income (loss) |  | 136.9 |  | 2.7 |  | 139.6 |  | (31.0 | ) | 0.9 |  | (30.1 | )
Dividends declared |  | (12.7 | ) | — |  | (12.7 | ) | (12.7 | ) | — |  | (12.7 | )
Exercise of stock options and other incentive plan activity, including tax benefit of $0.1 and $0.2 for the three months ended September 29, 2012 and October 1, 2011, respectively |  | 4.6 |  | — |  | 4.6 |  | 5.1 |  | — |  | 5.1 |
Amortization of restricted stock and stock unit grants, including $0.4 and $0.6 relating to discontinued operations for the three months ended September 29, 2012 and October 1, 2011 respectively |  | 6.0 |  | — |  | 6.0 |  | 7.8 |  | — |  | 7.8 |
Dividends attributable to noncontrolling interest |  |  |  | (0.7 | ) | (0.7 | ) | — |  | — |  | — |
Equity, end of period |  | $ | 2,300.0 |  | $ | 12.1 |  | $ | 2,312.1 |  | $ | 2,256.6 |  | $ | 7.2 |  | $ | 2,263.8 |
A summary of the changes in equity for the nine months ended September 29, 2012 and October 1, 2011 is provided below:
|  | September 29, 2012 |  | October 1, 2011 |
|  | SPX |  |  |  |  |  | SPX |  |  |  |  |
|  | Corporation |  |  |  |  |  | Corporation |  |  |  |  |
|  | Shareholders’ |  | Noncontrolling |  | Total |  | Shareholders’ |  | Noncontrolling |  | Total |
|  | Equity |  | Interest |  | Equity |  | Equity |  | Interest |  | Equity |
Equity, beginning of period |  | $ | 2,227.3 |  | $ | 10.0 |  | $ | 2,237.3 |  | $ | 2,097.7 |  | $ | 6.3 |  | $ | 2,104.0 |
Net income |  | 118.7 |  | 2.5 |  | 121.2 |  | 118.1 |  | 4.0 |  | 122.1 |
Net unrealized gains (losses) on qualifying cash flow hedges, net of tax (provision) benefit of $(0.6) and $1.0 for the nine months ended September 29, 2012 and October 1, 2011, respectively |  | 1.1 |  | — |  | 1.1 |  | (1.5 | ) | — |  | (1.5 | )
Net unrealized loss on available-for-sale securities |  | (1.5 | ) | — |  | (1.5 | ) | (7.7 | ) | — |  | (7.7 | )
Pension liability adjustment, net of tax provision of $7.6 and $7.8 for the nine months ended September 29, 2012 and October 1, 2011, respectively |  | 13.2 |  | — |  | 13.2 |  | 11.1 |  | — |  | 11.1 |
Foreign currency translation adjustments |  | 0.6 |  | 0.3 |  | 0.9 |  | 29.8 |  | (0.1 | ) | 29.7 |
Total comprehensive income |  | 132.1 |  | 2.8 |  | 134.9 |  | 149.8 |  | 3.9 |  | 153.7 |
Dividends declared |  | (38.2 | ) | — |  | (38.2 | ) | (38.2 | ) | — |  | (38.2 | )
Exercise of stock options and other incentive plan activity, including tax benefit of $3.6 and $5.9 for the nine months ended September 29, 2012 and October 1, 2011, respectively |  | 23.2 |  | — |  | 23.2 |  | 29.4 |  | — |  | 29.4 |
Amortization of restricted stock and stock unit grants, including $1.0 and $1.6 relating to discontinued operations for the nine months ended September 29, 2012 and October 1, 2011, respectively |  | 34.9 |  | — |  | 34.9 |  | 34.5 |  | — |  | 34.5 |
Restricted stock and restricted stock unit vesting, net of tax withholdings |  | (4.3 | ) | — |  | (4.3 | ) | (16.6 | ) | — |  | (16.6 | )
Common stock repurchases |  | (75.0 | ) | — |  | (75.0 | ) | — |  | — |  | — |
Dividends attributable to noncontrolling interest |  | — |  | (0.7 | ) | (0.7 | ) | — |  | (4.1 | ) | (4.1 | )
Other changes in noncontrolling interest |  | — |  | — |  | — |  | — |  | 1.1 |  | 1.1 |
Equity, end of period |  | $ | 2,300.0 |  | $ | 12.1 |  | $ | 2,312.1 |  | $ | 2,256.6 |  | $ | 7.2 |  | $ | 2,263.8 |

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- Definition The entire disclosure for accounts comprising shareholders' equity, comprised of portions attributable to the parent entity and noncontrolling interest, if any, including other comprehensive income (as applicable). Also includes disclosure of compensation-related costs for equity-based compensation which may include disclosure of policies, compensation plan details, allocation of equity compensation, incentive distributions, equity-based arrangements to obtain goods and services, deferred compensation arrangements, employee stock ownership plan details, and employee stock purchase plan details. + References No definition available. + Details
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