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SHAREHOLDERS' EQUITY AND STOCK-BASED COMPENSATION | 6 Months Ended
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Jun. 27, 2015
SHAREHOLDERS' EQUITY AND STOCK-BASED COMPENSATION |
SHAREHOLDERS' EQUITY AND STOCK-BASED COMPENSATION | (12)SHAREHOLDERS’ EQUITY AND STOCK-BASED COMPENSATION Income 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 |  | Six months ended |
|  | June 27, |  | June 28, |  | June 27, |  | June 28, |
|  | 2015 |  | 2014 |  | 2015 |  | 2014 |
Weighted-average number of common shares used in basic income per share |  | 40.602 |  | 43.068 |  | 40.553 |  | 43.649 |
Dilutive securities — Restricted stock shares and restricted stock units |  | 0.315 |  | 0.832 |  | 0.301 |  | 0.838 |
Weighted-average number of common shares and dilutive securities used in diluted income per share |  | 40.917 |  | 43.900 |  | 40.854 |  | 44.487 |
For the three and six months ended June 27, 2015, 0.538 and 0.544 of unvested restricted stock shares/units, respectively, were not included in the computation of diluted income per share because required market thresholds for vesting (as discussed in our 2014 Annual Report on Form 10-K) were not met. For the three and six months ended June 27, 2015, 0.323 of stock options 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. All unvested restricted stock shares and restricted stock units were included in the computation of diluted income per share for the three and six months ended June 28, 2014 because required market thresholds for vesting were met. There were no stock options outstanding during the three and six months ended June 28, 2014. Stock-based Compensation Stock-based compensation awards may be granted to certain eligible employees or non-employee directors under the 2002 Stock Compensation Plan, as amended, or to non-employee directors under the 2006 Non-Employee Directors’ Stock Incentive Plan. A detailed description of the awards granted under these plans is included in our 2014 Annual Report on Form 10-K. 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 shares, restricted stock units, and stock options totaled $5.5 and $4.6 for the three months ended June 27, 2015 and June 28, 2014, respectively, and $29.1 and $29.3 for the six months ended June 27, 2015 and June 28, 2014, respectively. The related tax benefit was $2.1 and $1.7 for the three months ended June 27, 2015 and June 28, 2014, respectively, and $10.9 and $10.6 for the six months ended June 27, 2015 and June 28, 2014, respectively. Accumulated Other Comprehensive Income (Loss) The changes in the components of accumulated other comprehensive loss, net of tax, for the three months ended June 27, 2015 were as follows:
|  | Foreign Currency Translation Adjustment |  | Net Unrealized Losses on Qualifying Cash Flow Hedges (1) |  | Pension and Postretirement Liability Adjustment (2) |  | Total |
Balance at beginning of period |  | $ | (72.1 | ) | $ | (0.6 | ) | $ | 4.7 |  | $ | (68.0 | )
Other comprehensive income before reclassifications |  | 41.7 |  | — |  | — |  | 41.7 |
Amounts reclassified from accumulated other comprehensive loss |  | — |  | (0.8 | ) | (0.1 | ) | (0.9 | )
Current-period other comprehensive income (loss) |  | 41.7 |  | (0.8 | ) | (0.1 | ) | 40.8 |
Balance at end of period |  | $ | (30.4 | ) | $ | (1.4 | ) | $ | 4.6 |  | $ | (27.2 | )
| (1) |  | Net of tax benefit of $0.4 and $0.5 as of June 27, 2015 and March 28, 2015, respectively.
| (2) |  | Net of tax provision of $2.9 and $3.0 as of June 27, 2015 and March 28, 2015, respectively. The balances as of June 27, 2015 and March 28, 2015 include net unamortized prior service credits.
The changes in the components of accumulated other comprehensive income (loss), net of tax, for the six months ended June 27, 2015 were as follows:
|  | Foreign Currency Translation Adjustment |  | Net Unrealized Gains (Losses) on Qualifying Cash Flow Hedges (1) |  | Pension and Postretirement Liability Adjustment (2) |  | Total |
Balance at beginning of year |  | $ | 59.0 |  | $ | (1.3 | ) | $ | 4.9 |  | $ | 62.6 |
Other comprehensive income (loss) before reclassifications |  | (89.4 | ) | 0.1 |  | — |  | (89.3 | )
Amounts reclassified from accumulated other comprehensive income |  | — |  | (0.2 | ) | (0.3 | ) | (0.5 | )
Current-period other comprehensive loss |  | (89.4 | ) | (0.1 | ) | (0.3 | ) | (89.8 | )
Balance at end of period |  | $ | (30.4 | ) | $ | (1.4 | ) | $ | 4.6 |  | $ | (27.2 | )
| (1) |  | Net of tax benefit of $0.4 and $1.1 as of June 27, 2015 and December 31, 2014, respectively.
| (2) |  | Net of tax provision of $2.9 and $3.0 as of June 27, 2015 and December 31, 2014, respectively. The balances as of June 27, 2015 and December 31, 2014 include net unamortized prior service credits.
The changes in the components of accumulated other comprehensive income, net of tax, for the three months ended June 28, 2014 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 (2) |  | Total |
Balance at beginning of period |  | $ | 294.8 |  | $ | (1.5 | ) | $ | (0.2 | ) | $ | 0.4 |  | $ | 293.5 |
Other comprehensive income (loss) before reclassifications |  | (9.5 | ) | 0.5 |  | (0.2 | ) | — |  | (9.2 | )
Amounts reclassified from accumulated other comprehensive income |  | — |  | 0.1 |  | 0.4 |  | (0.1 | ) | 0.4 |
Current-period other comprehensive income (loss) |  | (9.5 | ) | 0.6 |  | 0.2 |  | (0.1 | ) | (8.8 | )
Balance at end of period |  | $ | 285.3 |  | $ | (0.9 | ) | $ | — |  | $ | 0.3 |  | $ | 284.7 |
| (1) |  | Net of tax benefit of $0.9 and $1.2 as of June 28, 2014 and March 29, 2014, respectively.
| (2) |  | Net of tax provision of $0.1 as of June 28, 2014 and March 29, 2014.
The changes in the components of accumulated other comprehensive income, net of tax, for the six months ended June 28, 2014 were as follows:
|  | Foreign Currency Translation Adjustment |  | Net Unrealized Losses on Qualifying Cash Flow Hedges (1) |  | Net Unrealized Gains (Losses) on Available- for-Sale Securities |  | Pension and Postretirement Liability Adjustment (2) |  | Total |
Balance at beginning of year |  | $ | 296.8 |  | $ | (0.8 | ) | $ | (3.7 | ) | $ | (4.8 | ) | $ | 287.5 |
Other comprehensive income (loss) before reclassifications |  | (11.5 | ) | (0.3 | ) | 3.6 |  | 0.2 |  | (8.0 | )
Amounts reclassified from accumulated other comprehensive income |  | — |  | 0.2 |  | 0.1 |  | 4.9 |  | 5.2 |
Current-period other comprehensive income (loss) |  | (11.5 | ) | (0.1 | ) | 3.7 |  | 5.1 |  | (2.8 | )
Balance at end of period |  | $ | 285.3 |  | $ | (0.9 | ) | $ | — |  | $ | 0.3 |  | $ | 284.7 |
| (1) |  | Net of tax benefit of $0.9 and $1.0 as of June 28, 2014 and December 31, 2013, respectively.
| (2) |  | Net of tax (provision) benefit of $(0.1) and $2.2 as of June 28, 2014 and December 31, 2013, respectively. The balance as of December 31, 2013 primarily included $(5.0), net of tax, related to our share of the pension liability adjustment for EGS as of December 31, 2013. In connection with the sale of our interest in EGS during the first quarter of 2014, as described in Note 1, we recognized our share of the pension liability adjustment for EGS as a component of the gain on sale of our investment interest.
The following summarizes amounts reclassified from each component of accumulated comprehensive income (loss) for the three months ended June 27, 2015 and June 28, 2014:
|  | Amount Reclassified from AOCI |  |  |
|  | Three months ended |  | Affected Line Item in the Condensed |
|  | June 27, 2015 |  | June 28, 2014 |  | Consolidated Statements of Operations |
(Gains) losses on qualifying cash flow hedges: |  |  |  |  |  |  |
FX forward contracts |  | $ | (1.1 | ) | $ | — |  | Revenues |
Commodity contracts |  | 0.5 |  | 0.1 |  | Cost of products sold |
Pre-tax |  | (0.6 | ) | 0.1 |  |  |
Income taxes |  | (0.2 | ) | — |  |  |
|  | $ | (0.8 | ) | $ | 0.1 |  |  |
Loss on available-for-sale securities |  | $ | — |  | $ | 0.4 |  | Other income (expense), net |
Gains on pension and postretirement items: |  |  |  |  |  |  |
Amortization of unrecognized prior service credits |  | $ | (0.2 | ) | $ | (0.1 | ) | Selling, general and administrative |
Pre-tax |  | (0.2 | ) | (0.1 | ) |  |
Income taxes |  | 0.1 |  | — |  |  |
|  | $ | (0.1 | ) | $ | (0.1 | ) |  |
The following summarizes amounts reclassified from each component of accumulated comprehensive income (loss) for the six months ended June 27, 2015 and June 28, 2014:
|  | Amount Reclassified from AOCI |  |  |
|  | Six months ended |  | Affected Line Item in the Condensed |
|  | June 27, 2015 |  | June 28, 2014 |  | Consolidated Statements of Operations |
(Gains) losses on qualifying cash flow hedges: |  |  |  |  |  |  |
FX forward contracts |  | $ | (1.1 | ) | $ | — |  | Revenues |
Commodity contracts |  | 1.2 |  | 0.2 |  | Cost of products sold |
Pre-tax |  | 0.1 |  | 0.2 |  |  |
Income taxes |  | (0.3 | ) | — |  |  |
|  | $ | (0.2 | ) | $ | 0.2 |  |  |
Loss on available-for-sale securities |  | $ | — |  | $ | 0.1 |  | Other income (expense), net |
(Gains) losses on pension and postretirement items: |  |  |  |  |  |  |
Recognition of our share of the pension liability adjustment for EGS |  | $ | — |  | $ | 7.4 |  | Other income (expense), net |
Amortization of unrecognized prior service credits |  | (0.4 | ) | (0.1 | ) | Selling, general and administrative |
Pre-tax |  | (0.4 | ) | 7.3 |  |  |
Income taxes |  | 0.1 |  | (2.4 | ) |  |
|  | $ | (0.3 | ) | $ | 4.9 |  |  |
Common Stock in Treasury On December 18, 2013, we entered into a written trading plan under Rule 10b5-1 of the Securities Exchange Act of 1934 to facilitate the repurchase of up to $500.0 of shares of our common stock on or before December 31, 2014, in accordance with a share repurchase program authorized by our Board of Directors. We repurchased 0.115 shares of our common stock for $11.2 under this trading plan during December 2013. During the first half of 2014, we repurchased 2.684 shares of our common stock for $274.4 under this trading plan. During the remainder of 2014, we repurchased 2.168 shares of our common stock for $214.4, which completed the repurchases authorized under this trading plan. There were no common stock repurchases during the first half of 2015. During the six months ended June 27, 2015 and June 28, 2014, “Common stock in treasury” was decreased by the settlement of restricted stock units issued from treasury stock of $5.7 and $12.8, respectively, and increased by $1.2 and $7.9, respectively, 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 totaled $15.4 and $15.5 during the first and second quarters of 2015, respectively, and $16.3 and $16.1 during the first and second quarters of 2014, respectively. We paid second quarter dividends on July 1, 2015 and July 2, 2014. In anticipation of the pending spin-off (see Note 1), the second quarter dividend payment for 2015 is expected to be our final cash dividend payment for the foreseeable future. Changes in Equity A summary of the changes in equity for the three months ended June 27, 2015 and June 28, 2014 is provided below:
|  | June 27, 2015 |  | June 28, 2014 |
|  | SPX |  |  |  |  |  | SPX |  |  |  |  |
|  | Corporation |  |  |  |  |  | Corporation |  |  |  |  |
|  | Shareholders’ |  | Noncontrolling |  | Total |  | Shareholders’ |  | Noncontrolling |  | Total |
|  | Equity |  | Interests |  | Equity |  | Equity |  | Interests |  | Equity |
Equity, beginning of period |  | $ | 1,687.8 |  | $ | (0.1 | ) | $ | 1,687.7 |  | $ | 2,349.6 |  | $ | 13.5 |  | $ | 2,363.1 |
Net income (loss) |  | 38.9 |  | (2.5 | ) | 36.4 |  | 51.2 |  | (1.2 | ) | 50.0 |
Net unrealized gains (losses) on qualifying cash flow hedges, net of tax provision of $0.1 and $0.3 for the three months ended June 27, 2015 and June 28, 2014, respectively |  | (0.8 | ) | — |  | (0.8 | ) | 0.6 |  | — |  | 0.6 |
Net unrealized gains on available-for-sale securities |  | — |  | — |  | — |  | 0.2 |  | — |  | 0.2 |
Pension and postretirement liability adjustment, net of tax benefit of $0.1 for the three months ended June 27, 2015 |  | (0.1 | ) | — |  | (0.1 | ) | (0.1 | ) | — |  | (0.1 | )
Foreign currency translation adjustments |  | 41.7 |  | 0.1 |  | 41.8 |  | (9.5 | ) | 0.7 |  | (8.8 | )
Total comprehensive income (loss), net |  | 79.7 |  | (2.4 | ) | 77.3 |  | 42.4 |  | (0.5 | ) | 41.9 |
Dividends declared |  | (15.5 | ) | — |  | (15.5 | ) | (16.1 | ) | — |  | (16.1 | )
Incentive plan activity |  | 4.1 |  | — |  | 4.1 |  | 4.1 |  | — |  | 4.1 |
Stock-based compensation expense |  | 5.5 |  | — |  | 5.5 |  | 4.6 |  | — |  | 4.6 |
Restricted stock and restricted stock unit vesting, net of tax withholdings, and related tax (provision) benefit of $(0.1) and $0.4 for the three months ended June 27, 2015 and June 28, 2014, respectively |  | (0.3 | ) | — |  | (0.3 | ) | (0.7 | ) | — |  | (0.7 | )
Common stock repurchases |  | — |  | — |  | — |  | (140.1 | ) | — |  | (140.1 | )
Dividends attributable to noncontrolling interests |  | — |  | 0.3 |  | 0.3 |  | — |  | — |  | — |
Other changes in noncontrolling interests |  | — |  | — |  | — |  | — |  | (0.4 | ) | (0.4 | )
Equity, end of period |  | $ | 1,761.3 |  | $ | (2.2 | ) | $ | 1,759.1 |  | $ | 2,243.8 |  | $ | 12.6 |  | $ | 2,256.4 |
A summary of the changes in equity for the six months ended June 27, 2015 and June 28, 2014 is provided below:
|  | June 27, 2015 |  | June 28, 2014 |
|  | SPX |  |  |  |  |  | SPX |  |  |  |  |
|  | Corporation |  |  |  |  |  | Corporation |  |  |  |  |
|  | Shareholders’ |  | Noncontrolling |  | Total |  | Shareholders’ |  | Noncontrolling |  | Total |
|  | Equity |  | Interests |  | Equity |  | Equity |  | Interests |  | Equity |
Equity, beginning of year |  | $ | 1,817.9 |  | $ | 3.2 |  | $ | 1,821.1 |  | $ | 2,158.0 |  | $ | 14.0 |  | $ | 2,172.0 |
Net income (loss) |  | 31.8 |  | (5.4 | ) | 26.4 |  | 369.4 |  | (1.6 | ) | 367.8 |
Net unrealized losses on qualifying cash flow hedges, net of tax provision of $0.7 and $0.1 for the six months ended June 27, 2015 and June 28, 2014, respectively |  | (0.1 | ) | — |  | (0.1 | ) | (0.1 | ) | — |  | (0.1 | )
Net unrealized gains on available-for-sale securities |  | — |  | — |  | — |  | 3.7 |  | — |  | 3.7 |
Pension and postretirement liability adjustment, net of tax benefit (provision) of $0.1 and ($2.3) for the six months ended June 27, 2015 and June 28, 2014, respectively |  | (0.3 | ) | — |  | (0.3 | ) | 5.1 |  | — |  | 5.1 |
Foreign currency translation adjustments |  | (89.4 | ) | 0.2 |  | (89.2 | ) | (11.5 | ) | 0.6 |  | (10.9 | )
Total comprehensive income (loss), net |  | (58.0 | ) | (5.2 | ) | (63.2 | ) | 366.6 |  | (1.0 | ) | 365.6 |
Dividends declared |  | (30.9 | ) | — |  | (30.9 | ) | (32.4 | ) | — |  | (32.4 | )
Incentive plan activity |  | 9.0 |  | — |  | 9.0 |  | 8.9 |  | — |  | 8.9 |
Stock-based compensation expense |  | 29.1 |  | — |  | 29.1 |  | 29.3 |  | — |  | 29.3 |
Restricted stock and restricted stock unit vesting, net of tax withholdings, and related tax benefit of $0.3 and $9.2 for the six months ended June 27, 2015 and June 28, 2014, respectively |  | (5.8 | ) | — |  | (5.8 | ) | (12.2 | ) | — |  | (12.2 | )
Common stock repurchases |  | — |  | — |  | — |  | (274.4 | ) | — |  | (274.4 | )
Dividends attributable to noncontrolling interests |  | — |  | (0.2 | ) | (0.2 | ) | — |  | — |  | — |
Other changes in noncontrolling interests |  | — |  | — |  | — |  | — |  | (0.4 | ) | (0.4 | )
Equity, end of period |  | $ | 1,761.3 |  | $ | (2.2 | ) | $ | 1,759.1 |  | $ | 2,243.8 |  | $ | 12.6 |  | $ | 2,256.4 |

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