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Basis of Presentation and Summary of Significant Accounting Policies | 12 Months Ended
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Dec. 31, 2017
Accounting Policies [Abstract] |
Basis of Presentation and Summary of Significant Accounting Policies | Basis of Presentation and Summary of Significant Accounting Policies Our significant accounting policies are described below, as well as in other Notes that follow. Unless otherwise indicated, amounts provided in these Notes pertain to continuing operations only (see Note 4 for information on discontinued operations). Principles of Consolidation — The consolidated financial statements include SPX Corporation’s (“SPX”, “our”, or “we”) accounts prepared in conformity with accounting principles generally accepted in the United States (“GAAP”) after the elimination of intercompany transactions. Investments in unconsolidated companies where we exercise significant influence but do not have control are accounted for 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 of the entity that could potentially be significant to the VIE. We have an interest in a VIE, in which we are not the primary beneficiary, as a result of the sale of Balcke Dürr. See below and in Notes 2, 4 and 15 for further discussion of the Balcke Dürr sale. All other VIEs are considered immaterial, individually and in aggregate, to our consolidated financial statements. Spin-Off of FLOW Business — On September 26, 2015 (the “Distribution Date”), we completed the spin-off to our stockholders (the “Spin-Off”) of all the outstanding shares of SPX FLOW, Inc. (“SPX FLOW”), a wholly-owned subsidiary of SPX prior to the Spin-Off, which at the time of the Spin-Off held the businesses comprising our Flow Technology reportable segment, our Hydraulic Technologies business, and certain of our corporate subsidiaries (collectively, the “FLOW Business”). On the Distribution Date, each of our stockholders of record as of the close of business on September 16, 2015 (the “Record Date”) received one share of common stock of SPX FLOW for every share of SPX common stock held as of the Record Date. SPX FLOW is now an independent public company trading under the symbol “FLOW” on the New York Stock Exchange. Following the Spin-Off, SPX’s common stock continues to be listed on the New York Stock Exchange and trades under the ticker symbol, “SPXC”. The financial results of SPX FLOW for the year ended December 31, 2015 have been classified as discontinued operations within the accompanying consolidated financial statements. Shift Away from the Power Generation Markets — Prior to the Spin-Off, our businesses serving the power generation markets had a major impact on the consolidated financial results of SPX. In the recent years leading up to the Spin-Off, these businesses experienced significant declines in revenues and profitability associated with weak demand and increased competition within the global power generation markets. Based on a review of our post-spin portfolio and the belief that a recovery within the power generation markets was unlikely in the foreseeable future, we decided that our strategic focus would be on our (i) scalable growth businesses that serve the heating and ventilation (“HVAC”) and detection and measurement markets and (ii) power transformer and process cooling systems businesses. As a result, we have significantly reduced our exposure to the power generation markets as indicated by the disposals summarized below:
• | Sale of Dry Cooling Business - On March 30, 2016, we completed the sale of our dry cooling business, a business that provides dry cooling systems to the global power generation markets and was previously reported within our Engineered Solutions reportable segment, to Paharpur Cooling Towers Limited. See Note 4 for additional details.
• | Sale of Balcke Dürr Business - On December 30, 2016, we completed the sale of Balcke Dürr, a business that provides heat exchangers and other related components to the European and Asian power generation markets, to a subsidiary of mutares AG (the “Buyer”). Balcke Dürr historically had been the most significant of our power generation businesses and, in recent years, had experienced significant declines in its operating performance as evidenced by its net loss of $39.6 in 2015. With the sale, we eliminated the losses and liquidity needs of Balcke Dürr, which were expected to be significant in the foreseeable future. As we considered the disposition of Balcke Dürr to be the cornerstone of our strategic shift away from the power generation markets, and given the significance of Balcke Dürr’s financial results to our overall operations prior to its disposition, we have classified Balcke Dürr as a discontinued operation in the accompanying consolidated financial statements. See Note 4 for additional details.
New Income Tax Regulations in the United States — On December 22, 2017, the Tax Cuts and Jobs Act (the “Act”) was enacted which significantly changes United States (“U.S.”) income tax law for businesses and individuals. The Act introduces changes that impact U.S. corporate tax rates (e.g., a reduction in the top tax rate from 35% to 21%), business-related exclusions, and deductions and credits. In addition, the Act will have tax consequences for many entities that operate internationally, including the timing and the amount of tax to be paid on undistributed foreign earnings. Given the significance of the changes that will result from the Act, companies are likely to encounter a situation in which the accounting for certain income tax effects of the Act will be incomplete by the time their financial statements are issued for the reporting period that includes the enactment date of December 22, 2017. In recognition of this potential situation, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 118 (“SAB 118”). SAB 118 provides guidance on how companies should apply Accounting Standard Codification (“ASC”) Topic 740, Income Taxes, in accounting for the impact of the Act. Specifically, SAB 118 indicates that to the extent accounting for certain income tax effects of the Act is incomplete, but an entity can determine a reasonable estimate for those effects, such estimates should be included in an entity’s financial statements. The reasonable estimates are to be reported as provisional amounts during a measurement period. The measurement period begins with the reporting period that includes the Act’s enactment date and ends when an entity has finalized its analysis of the information that is needed in order to complete the accounting requirements of ASC 740, but in no circumstances would the measurement period extend beyond one year from the enactment date. In circumstances when a reasonable estimate cannot be determined, an entity would continue to apply ASC 740 (e.g., when recognizing and measuring current and deferred income taxes) based on the provisions of the tax law that were in effect prior to the Act being enacted. In addition, to the extent the accounting for certain income tax effects of the Act are complete, these completed amounts will not be provisional amounts. SAB 118 also indicates that an entity should provide various disclosures about the material financial reporting impacts of the Act for which accounting under ASC 740 is incomplete. See Note 10 for a discussion of the impact of the Act on our 2017 consolidated financial statements, including disclosure of any provisional amounts that have been recorded and circumstances where reasonable estimates could not be made. Retirement of Treasury Stock — In 2016, we retired 50.0 shares, or $2,948.1, of “Common stock in treasury.” Under the applicable state law, these shares represent authorized and unissued shares upon retirement. In accordance with our accounting policy, we allocate any excess of share repurchase over par value between “Paid-in capital” and “Retained earnings,” resulting in respective reductions of $1,285.4 and $1,662.2. Foreign Currency Translation and Transactions — The financial statements of our foreign subsidiaries are translated into U.S. dollars in accordance with the Foreign Currency Matters Topic of the Financial Accounting Standards Board Codification (“Codification”). Gains and losses on foreign currency translations are reflected as a separate component of equity and other comprehensive income. Foreign currency transaction gains and losses, as well as gains and losses related to foreign currency forward contracts and currency forward embedded derivatives, are included in “Other expense, net,” with the related net losses totaling $3.3, $2.4 and $8.6 in 2017, 2016 and 2015, respectively. Cash Equivalents — We consider highly liquid money market investments with original maturities of three months or less at the date of purchase to be cash equivalents. Revenue Recognition — We recognize revenues from product sales upon shipment to the customer (e.g., FOB shipping point) or upon receipt by the customer (e.g., FOB destination), in accordance with the agreed upon customer terms. Revenues from service contracts and long-term maintenance arrangements are recognized on a straight-line basis over the agreement period. Sales with FOB destination terms are primarily to power transformer customers. Sales to distributors with return rights are recognized upon shipment to the distributor with expected returns estimated and accrued at the time of sale. The accrual considers restocking charges for returns and in some cases the distributor must issue a replacement order before the return is authorized. Actual return experience may vary from our estimates. We recognize revenues separately for arrangements with multiple deliverables that meet the criteria for separate units of accounting as defined by the Revenue Recognition Topic of the Codification. The deliverables under these arrangements typically include hardware and software components, installation, maintenance, extended warranties and software upgrades. Amounts allocated to each element are based on its objectively determined fair value, such as the sales price of the product or service when it is sold separately, competitor prices for similar products or our best estimate. The hardware and software components are usually recognized as revenue contemporaneously, as both are required for essential functionality of the products, with the installation being recognized upon completion. Revenues related to maintenance, extended warranties and software upgrades are recognized on a pro-rata basis over the coverage period. We offer sales incentive programs primarily to effect volume rebates and promotional and advertising allowances. These programs are only significant to one of our business units. The liability for these programs, and the resulting reduction to reported revenues, is determined primarily through trend analysis, historical experience and expectations regarding customer participation. Amounts billed for shipping and handling are included in revenues. Costs incurred for shipping and handling are recorded in cost of products sold. Taxes assessed by governmental authorities that are directly imposed on a revenue-producing transaction between a seller and a customer are presented on a net basis (excluded from revenues) in our consolidated statements of operations. In addition, certain of our businesses, primarily within the Engineered Solutions reportable segment, also recognize revenues from long-term construction/installation contracts under the percentage-of-completion method of accounting. The percentage-of-completion is measured principally by the percentage of costs incurred to date for each contract to the estimated total costs for such contract at completion. We recognize revenues for similar short-term contracts using the completed-contract method of accounting. Provisions for any estimated losses on uncompleted long-term contracts are made in the period in which such losses are determined. In the case of customer change orders for uncompleted long-term contracts, estimated recoveries are included for work performed in forecasting ultimate profitability on certain contracts. Due to uncertainties inherent in the estimation process, it is possible that completion costs, including those arising from contract penalty provisions and final contract settlements, may be revised in the near-term. Such revisions to costs and income are recognized in the period in which the revisions are determined. Costs and estimated earnings in excess of billings arise when revenues have been recorded but the amounts have not been billed under the terms of the contracts. These amounts are recoverable from customers upon various measures of performance, including achievement of certain milestones, completion of specified units or completion of the contract. Claims related to long-term contracts are recognized as revenue only after we have determined that collection is probable and the amount can be reliably estimated. Claims made by us involve negotiation and, in certain cases, litigation or other dispute-resolution processes. In the event we incur litigation or other dispute-resolution costs in connection with claims, such costs are expensed as incurred, although we may seek to recover these costs. Claims against us are recognized when a loss is considered probable and amounts are reasonably estimable. We recognized $255.5, $336.1 and $361.8 in revenues under the percentage-of-completion method for the years ended December 31, 2017, 2016 and 2015, respectively. Costs and estimated earnings on uncompleted contracts, from their inception, and related amounts billed as of December 31, 2017 and 2016 were as follows:
| 2017 |  | 2016
Costs incurred on uncompleted contracts | $ | 1,261.3 |  |  | $ | 1,191.4 |
Estimated earnings (loss) to date | (59.9 | ) |  | 25.0 |
| 1,201.4 |  |  | 1,216.4 |
Less: Billings to date | (1,202.0 | ) |  | (1,235.8 | )
Billings in excess of costs and estimated earnings | $ | (0.6 | ) |  | $ | (19.4 | )
These amounts are included in the accompanying consolidated balance sheets at December 31, 2017 and 2016 as shown below. Amounts for billed retainages and receivables to be collected in excess of one year are not significant for the periods presented.
| 2017 |  | 2016
Costs and estimated earnings in excess of billings(1) | $ | 28.8 |  |  | $ | 33.9 |
Billings in excess of costs and estimated earnings on uncompleted contracts(2) | (29.4 | ) |  | (53.3 | )
Net billings in excess of costs and estimated earnings | $ | (0.6 | ) |  | $ | (19.4 | )
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(1) | Reported as a component of “Accounts receivable, net.”
(2) | Reported as a component of “Accrued expenses.”
Research and Development Costs — We expense research and development costs as incurred. We charge costs incurred in the research and development of new software included in products to expense until technological feasibility is established. After technological feasibility is established, additional eligible costs are capitalized until the product is available for general release. We amortize these costs over the economic lives of the related products and include the amortization in cost of products sold. We perform periodic reviews of the recoverability of these capitalized software costs. At the time we determine that capitalized amounts are not recoverable based on the estimated cash flows to be generated from the applicable software, we write off any unrecoverable capitalized amounts. Capitalized software, net of amortization, totaled $8.3 and $10.5 as of December 31, 2017 and 2016, respectively. Capitalized software amortization expense totaled $2.4, $1.2 and $0.2 for 2017, 2016 and 2015, respectively. We expensed research activities relating to the development and improvement of our products of $23.3, $29.1 and $28.6 in 2017, 2016 and 2015, respectively. Property, Plant and Equipment — Property, plant and equipment (“PP&E”) is stated at cost, less accumulated depreciation. We use the straight-line method for computing depreciation expense over the useful lives of PP&E, which do not exceed 40 years for buildings and range from 3 to 15 years for machinery and equipment. Depreciation expense, including amortization of capital leases, was $22.2, $22.5 and $31.8 for the years ended December 31, 2017, 2016 and 2015, respectively. Leasehold improvements are amortized over the life of the related asset or the life of the lease, whichever is shorter. Interest is capitalized on significant construction or installation projects. No interest was capitalized during 2017, 2016 or 2015. Pension and Postretirement — We recognize changes in the fair value of plan assets and actuarial gains and losses in earnings during the fourth quarter of each year, unless earlier remeasurement is required, as a component of net periodic benefit expense and, accordingly, recognize the effects of plan investment performance, interest rate changes, and changes in actuarial assumptions as a component of earnings in the year in which they occur. The remaining components of pension/postretirement expense, primarily service and interest costs and expected return on plan assets, are recorded on a quarterly basis. Income Taxes — We account for our income taxes based on the requirements of the Income Taxes Topic of the Codification, which includes an estimate of the amount of taxes payable or refundable for the current year and deferred tax liabilities and assets for the future tax consequences of events that have been recognized in our consolidated financial statements or tax returns. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. We periodically assess the realizability of deferred tax assets and the adequacy of deferred tax liabilities, including the results of local, state, federal or foreign statutory tax audits or estimates and judgments used. Derivative Financial Instruments — We use foreign currency forward contracts to manage our exposures to fluctuating currency exchange rates, forward contracts to manage the exposure on forecasted purchases of commodity raw materials (“commodity contracts”) and interest rate protection agreements to manage our exposures to fluctuating interest rate risk on variable rate debt. Derivatives are recorded on the balance sheet and measured at fair value. For derivatives designated as hedges of the fair value of assets or liabilities, the changes in fair values of both the derivatives and the hedged items are recorded in current earnings. For derivatives designated as cash flow hedges, the effective portion of the changes in fair value of the derivatives is recorded in accumulated other comprehensive income (“AOCI”) and subsequently recognized in earnings when the hedged items impact earnings. Changes in the fair value of derivatives not designated as hedges, and the ineffective portion of cash flow hedges, are recorded in current earnings. We do not enter into financial instruments for speculative or trading purposes. For those transactions that are designated as cash flow hedges, on the date the derivative contract is entered into, we document our hedge relationship, including identification of the hedging instruments and the hedged items, as well as our risk management objectives and strategies for undertaking the hedge transaction. We also assess, both at inception and quarterly thereafter, whether such derivatives are highly effective in offsetting changes in the fair value of the hedged item. See Notes 12 and 14 for further information. Cash flows from hedging activities are included in the same category as the items being hedged, which are primarily operating activities.

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