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EQUITY AND STOCK-BASED COMPENSATION | 3 Months Ended
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Mar. 30, 2013
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 earnings per share:
|  | Three months ended |
|  | March 30, |  | March 31, |
|  | 2013 |  | 2012 |
Weighted-average number of common shares used in basic earnings per share |  | 46.418 |  | 50.613 |
Dilutive securities — employee stock options, restricted stock shares and restricted stock units |  | 1.032 |  | 0.846 |
Weighted-average number of common shares and dilutive securities used in diluted earnings per share |  | 47.450 |  | 51.459 |
All stock options were included in the computation of diluted earnings per share for the three months ended March 30, 2013. The total number of stock options that were not included in the computation of diluted earnings per share because their exercise price was greater than the average market price of common shares was 0.005 for the three months ended March 31, 2012. The total number of unvested restricted stock shares and restricted stock units that were not included in the computation of diluted earnings per share because required market thresholds for vesting (as discussed below) were not met was 0.225 and 0.247 at March 30, 2013 and March 31, 2012, respectively. Stock-based Compensation Under the 2002 Stock Compensation Plan, as amended in 2006, 2011 and 2012, up to 3.123 shares of our common stock were available for grant at March 30, 2013. 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 three months ended March 30, 2013 and March 31, 2012, we classified excess tax benefits from stock-based compensation of $5.8 and $2.9, respectively, as financing cash flows and included such amounts in “Minimum withholdings paid on behalf of employees for net share settlements, net of proceeds from the exercise of employee stock options and other” 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 a period of time, generally one or three years. In some instances, such as death, disability, or retirement, stock may vest concurrently with or following an employee’s termination. A substantial portion of the restricted stock and restricted stock unit awards vest based on performance thresholds, while the remaining portion vest based on the passage of time since grant date. Each eligible employee received a target performance award in 2013 in which the employee can earn between 25% and 125% of the target award in the event the award meets the required vesting criteria. Vesting for the 2013 target performance awards is based on SPX shareholder return versus the S&P Composite 1500 Industrials Index over the three-year period ending December 31, 2015. Each eligible non-officer employee also received an award in 2013 that vests ratably over three years, subject only to the passage of time. Officers received awards that vest ratably over three years, subject to an internal performance metric. Vesting for the 2012 and 2011 performance awards is based on the 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 500 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. 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 0.017 shares of our common stock were available for grant at March 30, 2013. The 2012 and 2011 restricted stock grants to the non-employee directors 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 as the employee 2012 and 2011 awards described above. There were no grants under the Directors’ Plan in the three months ended March 30, 2013. Restricted stock and restricted stock units that do not vest within the three-year vesting period are 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 March 30, 2013. 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. There was no stock option expense for the three months ended March 30, 2013 or March 31, 2012. Compensation expense within income from continuing operations related to restricted stock and restricted stock units totaled $20.3 and $21.8 for the three months ended March 30, 2013 and March 31, 2012, respectively, with the related tax benefit being $7.3 and $8.2 for the periods ended March 30, 2013 and March 31, 2012, respectively. We use the Monte Carlo simulation model valuation technique to determine 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, 2013 and January 3, 2012:
|  |  |  |  |  |  |  | Correlation between total |
|  | Annual expected |  |  |  |  |  | shareholder return for SPX |
|  | stock price |  | Annual expected |  | Risk-free |  | and the applicable S&P |
|  | volatility |  | dividend yield |  | interest rate |  | Composite Index |
January 2, 2013: |  |  |  |  |  |  |  |  |
SPX Corporation |  | 36.3 | % | 1.40 | % | 0.37 | % | 0.7778 |
S&P Composite 1500 Industrials Index |  | 22.4 | % | n/a |  | 0.37 | % |  |
January 3, 2012: |  |  |  |  |  |  |  |  |
SPX Corporation |  | 44.3 | % | 1.60 | % | 0.44 | % | 0.7365 |
S&P 500 Composite Index |  | 23.1 | % | n/a |  | 0.44 | % |  |
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 three-year treasury yield curve rate as of the grant date. Restricted Stock and Restricted Stock Unit Awards The following table summarizes the restricted stock and restricted stock unit activity from December 31, 2012 through March 30, 2013:
|  |  |  | Weighted-Average |
|  | Unvested Restricted Stock |  | Grant-Date Fair |
|  | and Restricted Stock Units |  | Value Per Share |
Outstanding at December 31, 2012 |  | 1.935 |  | $ | 54.70 |
Granted |  | 0.560 |  | 60.20 |
Vested |  | (0.688 | ) | 53.87 |
Forfeited |  | (0.243 | ) | 50.19 |
Outstanding at March 30, 2013 |  | 1.564 |  | 57.73 |
As of March 30, 2013, there was $33.2 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 2.2 years. Stock Options The following table shows stock option activity from December 31, 2012 through March 30, 2013:
|  |  |  | Weighted- |
|  |  |  | Average Exercise |
|  | Shares |  | Price |
Options outstanding and exercisable at December 31, 2012 |  | 0.013 |  | $ | 62.45 |
Exercised |  | (0.001 | ) | 38.57 |
Terminated |  | (0.004 | ) | 85.36 |
Options outstanding and exercisable at March 30, 2013 |  | 0.008 |  | 52.00 |
The weighted-average remaining term, in years, of stock options outstanding and exercisable at March 30, 2013 was 0.9. All options exercisable on March 30, 2013 are in-the-money. 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 March 30, 2013, 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 March 30, 2013 was $0.2. The aggregate intrinsic value of options exercised during the first three months of 2013 was $0.02, while the related amount for the first three months of 2012 was $4.9. Accumulated Other Comprehensive Loss The changes in the components of accumulated other comprehensive loss, net of tax, for the three months ended March 30, 2013 were as follows:
|  | Foreign Currency Translation Adjustment |  | Net Unrealized Gains (Losses) on Qualifying Cash Flow Hedges (1) |  | Net Unrealized Losses on Available- for-Sale Securities |  | Pension and Postretirement Liability Adjustment and Other (2) |  | Total |
Balance at beginning of period |  | $ | 298.1 |  | $ | (3.3 | ) | $ | (3.1 | ) | $ | (520.6 | ) | $ | (228.9 | )
Other comprehensive income (loss) before reclassifications |  | (87.2 | ) | 3.6 |  | (0.5 | ) | 2.0 |  | (82.1 | )
Amounts reclassified from accumulated other comprehensive loss |  | — |  | 0.4 |  | — |  | 6.5 |  | 6.9 |
Current-period other comprehensive loss |  | (87.2 | ) | 4.0 |  | (0.5 | ) | 8.5 |  | (75.2 | )
Balance at end of period |  | $ | 210.9 |  | $ | 0.7 |  | $ | (3.6 | ) | $ | (512.1 | ) | $ | (304.1 | )
(1) Net of tax benefit of $2.5 as of December 31, 2012. (2) Net of tax benefit of $315.0 and $318.5 as of March 30, 2013 and December 31, 2012, respectively. Includes $5.0 and $3.8 related to our share of the pension liability adjustment for EGS as of March 30, 2013 and December 31, 2012, respectively. The following summarizes amounts reclassified from each component of accumulated comprehensive loss for the three months ended March 30, 2013:
|  | Amount Reclassified from AOCI |  | Affected Line Item in the Condensed Consolidated Statement of Operations |
Losses on qualifying cash flow hedges: |  |  |  |  |
FX forward contracts |  | $ | 0.6 |  | Cost of products sold |
Commodity contracts |  | — |  | Cost of products sold |
Pre-tax |  | 0.6 |  |  |
Income taxes |  | (0.2 | ) |  |
|  | $ | 0.4 |  |  |
Amortization of pension and postretirement items: |  |  |  |  |
Unrecognized losses and prior service credits |  | $ | 4.7 |  | Cost of products sold |
Unrecognized losses and prior service credits |  | 5.7 |  | Selling, general and administrative |
Pre-tax |  | 10.4 |  |  |
Income taxes |  | (3.9 | ) |  |
|  | $ | 6.5 |  |  |
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 2012, we repurchased 3.606 shares of our common stock for $245.6, including $43.2 of repurchases during the first quarter of 2012. During January of 2013, we repurchased 1.514 shares of our common stock for $104.4, which completed the repurchases authorized under the trading plan. During March of 2013, we repurchased 0.333 shares of our common stock on the open market for $27.0. During the three months ended March 30, 2013, “Common stock in treasury” was decreased by the settlement of restricted stock units issued from treasury stock of $13.6 and increased by $9.0 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 three months ended March 31, 2012, “Common stock in treasury” was decreased by the settlement of restricted stock units issued from treasury stock of $3.8 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. Dividends The dividends declared during the first quarters of 2013 and 2012 were $0.25 per share and totaled $11.4 and $12.8, respectively. First quarter dividends were paid on April 2, 2013 and April 3, 2012. Changes in Equity A summary of the changes in equity for the three months ended March 30, 2013 and March 31, 2012 is provided below:
|  | March 30, 2013 |  | March 31, 2012 |
|  | SPX |  |  |  |  |  | SPX |  |  |  |  |
|  | Corporation |  |  |  |  |  | Corporation |  |  |  |  |
|  | Shareholders’ |  | Noncontrolling |  | Total |  | Shareholders’ |  | Noncontrolling |  | Total |
|  | Equity |  | Interests |  | Equity |  | Equity |  | Interests |  | Equity |
Equity, beginning of period |  | $ | 2,268.7 |  | $ | 11.3 |  | $ | 2,280.0 |  | $ | 2,227.3 |  | $ | 10.0 |  | $ | 2,237.3 |
Net income (loss) |  | 2.3 |  | 1.3 |  | 3.6 |  | 13.5 |  | (0.7 | ) | 12.8 |
Net unrealized gains on qualifying cash flow hedges, net of tax provision of $2.5 and $0.5 for the three months ended March 30, 2013 and March 31, 2012, respectively |  | 4.0 |  | — |  | 4.0 |  | 0.6 |  | — |  | 0.6 |
Net unrealized gains (losses) on available-for-sale securities |  | (0.5 | ) | — |  | (0.5 | ) | 2.8 |  | — |  | 2.8 |
Pension liability adjustment, net of tax provision of $3.5 and $1.8 for the three months ended March 30, 2013 and March 31, 2012, respectively |  | 8.5 |  | — |  | 8.5 |  | 2.7 |  | — |  | 2.7 |
Foreign currency translation adjustments |  | (87.2 | ) | (0.6 | ) | (87.8 | ) | 58.8 |  | 0.3 |  | 59.1 |
Total comprehensive income (loss), net |  | (72.9 | ) | 0.7 |  | (72.2 | ) | 78.4 |  | (0.4 | ) | 78.0 |
Dividends declared |  | (11.4 | ) | — |  | (11.4 | ) | (12.8 | ) | — |  | (12.8 | )
Exercise of stock options and other incentive plan activity, including related tax benefit of $5.8 and $3.0 for the three months ended March 30, 2013 and March 31, 2012, respectively |  | 10.1 |  | — |  | 10.1 |  | 13.2 |  | — |  | 13.2 |
Amortization of restricted stock and restricted stock unit grants, including $0.5 relating to discontinued operations for the three months ended March 31, 2012 |  | 20.3 |  | — |  | 20.3 |  | 22.3 |  | — |  | 22.3 |
Restricted stock and restricted stock unit vesting, net of tax withholdings |  | (20.5 | ) | — |  | (20.5 | ) | (4.3 | ) | — |  | (4.3 | )
Common stock repurchases |  | (131.4 | ) | — |  | (131.4 | ) | (43.2 | ) | — |  | (43.2 | )
Other changes in noncontrolling interests |  | — |  | (0.2 | ) | (0.2 | ) | — |  | (0.1 | ) | (0.1 | )
Equity, end of period |  | $ | 2,062.9 |  | $ | 11.8 |  | $ | 2,074.7 |  | $ | 2,280.9 |  | $ | 9.5 |  | $ | 2,290.4 |

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