AQUISITIONS AND DISCONTINUED OPERATIONS

6 Months Ended

Jul. 01, 2023

Acquisitions and Discontinued Operations [Abstract]

ACQUISITIONS AND DISCONTINUED OPERATIONS

Acquisition of ASPEQ

As indicated in Note 1, on June 2, 2023, we completed the acquisition of ASPEQ for $421.8, net of cash acquired of $0.9. We financed the acquisition with available cash and borrowings under our senior credit facilities. The assets acquired and liabilities assumed have been recorded at preliminary estimates of fair value as determined by management, based on information currently available and on current assumptions as to future operations and are subject to change upon completion of the acquisition method of accounting. Final determination of the fair values of certain assets and liabilities will be completed within the measurement period of up to one year from the acquisition date, as permitted under GAAP. The following is a summary of the recorded preliminary fair values of the assets acquired and liabilities assumed for ASPEQ as of June 2, 2023:


Assets acquired:
Current assets, including cash and equivalents of $0.9	$	41.7
Property, plant and equipment	10.6
Goodwill	169.3
Intangible assets	246.1
Other assets	1.3
Total assets acquired	469.0

Current liabilities assumed	11.3
Non-current liabilities assumed (1)	35.0

Net assets acquired	$	422.7

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(1)Includes net deferred income tax liabilities and other liabilities of $34.0 and $1.0, respectively.

The identifiable intangible assets acquired consist of customer relationships, trademarks, technology, and customer backlog of $142.3, $51.5, $47.8, and $4.5, respectively, with such amounts based on a preliminary assessment of the related fair values. We expect to amortize the customer relationships, technology, and customer backlog assets over 12.0, 16.0, and 1.0 years, respectively, with the trademarks acquired being indefinite lived.

We acquired gross receivables of $17.2, which had a fair value at the acquisition date of $17.1 based on our estimates of cash flows expected to be recovered.

The qualitative factors that comprise the recorded goodwill include expected market growth for ASPEQ’s existing operations, increased volumes achieved by selling ASPEQ’s products through existing SPX sales channels, procurement and operational savings and efficiencies, and various other factors. We expect none of the goodwill described above to be deductible for tax purposes.

Between the acquisition date and July 1, 2023, we recognized revenues and a net loss for ASPEQ of $8.6 and $0.5, respectively. The net loss included charges of $1.1 associated with the excess fair value (over historical cost) of inventory acquired which was subsequently sold during the period June 2, 2023 through July 1, 2023. During the three and six months ended July 1, 2023, we incurred acquisition-related costs for ASPEQ of $4.6 and $5.1, respectively, which have been recorded to “Selling, general and administrative” within our condensed consolidated statements of operations and “Corporate expense” within consolidated operating income in Note 6.

The following unaudited pro forma information presents our results of operations for the three and six months ended July 1, 2023 and July 2, 2022, respectively, as if the acquisition of ASPEQ had taken place on January 1, 2022. The unaudited pro forma financial information is not intended to represent or be indicative of our consolidated results of operations that would have been reported had the acquisition been completed as of the date presented, and should not be taken as representative of our future consolidated results of operations. The pro forma results include estimates and assumptions that management believes are reasonable; however, these results do not include any anticipated cost savings or expenses of the planned integration of ASPEQ. These pro forma results of operations have been prepared for comparative purposes only and include additional interest expense on the borrowings required to finance the acquisition, additional depreciation and amortization expense associated with fair value adjustments to the acquired property, plant and equipment and intangible assets, adjustments to reflect charges associated with acquisition-related costs and charges associated with the excess fair value (over historical cost) of inventory acquired and subsequently sold as if they were incurred during the first quarter of 2022, and the related income tax effects.


	Three months ended				Six months ended
	July 1, 2023		July 2, 2022		July 1, 2023		July 2, 2022
Revenues	$	442.0	$	380.4	$	870.3	$	711.8
Income from continuing operations	41.9		12.2		78.8		14.5
Net income	39.6		6.1		80.2		6.8

Income from continuing operations per share of common stock:
Basic	$	0.92	$	0.27	$	1.73	$	0.32
Diluted	$	0.90	$	0.26	$	1.69	$	0.31

Net income per share of common stock:
Basic	$	0.87	$	0.13	$	1.76	$	0.15
Diluted	$	0.85	$	0.13	$	1.72	$	0.15

Other Acquisitions

As indicated in Note 1, on March 31, 2022 and April 3, 2023, we completed the acquisitions of ITL and TAMCO, respectively. The pro forma effects of these acquisitions are not material to our condensed consolidated results of operations.

Sale of Transformer Solutions Business

On October 1, 2021, we completed the sale of SPX Transformer Solutions, Inc. During the first quarter of 2022, we agreed to the final adjustment of the purchase price which resulted in a payment to the buyer of $13.9 and an increase to the gain on sale of $0.2.

Wind-Down of DBT Business

We completed the wind-down of our DBT Technologies (PTY) LTD (“DBT”) business in the fourth quarter of 2021. As a result of completing the wind-down plan, we are reporting DBT as a discontinued operation for all periods presented.

The assets and liabilities of DBT have been included within “Assets of DBT and Heat Transfer” and “Liabilities of DBT and Heat Transfer,” respectively, on the condensed consolidated balance sheets as of July 1, 2023 and December 31, 2022. The major line items constituting DBT’s assets and liabilities as of July 1, 2023 and December 31, 2022 are shown below:


	July 1, 2023		December 31, 2022
ASSETS
Cash and equivalents	$	8.4	$	9.3
Accounts receivable, net	13.8		7.6
Other current assets	3.9		6.5
Property, plant and equipment:
Buildings and leasehold improvements	0.2		0.2
Machinery and equipment	0.6		0.7
	0.8		0.9
Accumulated depreciation	(0.7)		(0.8)
Property, plant and equipment, net	0.1		0.1
Other assets	17.5		19.1
Total assets of DBT	$	43.7	$	42.6
LIABILITIES
Accounts payable	$	1.2	$	1.4
Contract liabilities	3.2		3.6
Accrued expenses	18.8		22.0
Other long-term liabilities	4.2		4.6
Total liabilities of DBT	$	27.4	$	31.6

Wind-Down of the Heat Transfer Business

We completed the wind-down of our SPX Heat Transfer (“Heat Transfer”) business in the fourth quarter of 2020. As a result of completing the wind-down plan, we are reporting Heat Transfer as a discontinued operation for all periods presented.

The assets and liabilities of Heat Transfer have been included within “Assets of DBT and Heat Transfer” and “Liabilities of DBT and Heat Transfer,” respectively, on the condensed consolidated balance sheets as of July 1, 2023 and December 31, 2022. The major line items constituting Heat Transfer’s assets and liabilities as of July 1, 2023 and December 31, 2022 are shown below:


	July 1, 2023		December 31, 2022
ASSETS
Cash and equivalents	$	0.1	$	—

Other current assets	0.3		0.2
Other assets	0.1		0.1
Total assets of Heat Transfer	$	0.5	$	0.3
LIABILITIES
Accounts payable	$	0.2	$	0.1
Accrued expenses	0.1		0.1
Total liabilities of Heat Transfer	$	0.3	$	0.2

Changes in estimates associated with liabilities retained in connection with a business divestiture (e.g. income taxes) may occur. As a result, it is possible that the resulting gains/losses on these and other previous divestitures may be materially adjusted in subsequent periods.

For the three and six months ended July 1, 2023 and July 2, 2022, results of operations from our businesses reported as discontinued operations were as follows:


	Three months ended				Six months ended
	July 1, 2023		July 2, 2022		July 1, 2023		July 2, 2022





DBT
Income (loss) from discontinued operations (1)	$	(2.4)	$	(6.9)	$	0.6	$	(8.5)
Income tax benefit	0.2		1.1		0.9		1.5
Income (loss) from discontinued operations, net	(2.2)		(5.8)		1.5		(7.0)






All other
Loss from discontinued operations (2)	(0.1)		(0.4)		(0.1)		(0.9)
Income tax benefit	—		0.1		—		0.2
Loss from discontinued operations, net	(0.1)		(0.3)		(0.1)		(0.7)

Total
Income (loss) from discontinued operations	(2.5)		(7.3)		0.5		(9.4)
Income tax benefit	0.2		1.2		0.9		1.7
Income (loss) from discontinued operations, net	$	(2.3)	$	(6.1)	$	1.4	$	(7.7)

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(1)Income for the six months ended July 1, 2023 resulted primarily from income recorded in connection with dispute resolutions, partially offset by legal costs incurred in connection with various dispute resolution matters related to two large power projects. Loss for the three months ended July 1, 2023 and the three and six months ended July 2, 2022 resulted primarily from net legal costs incurred in connection with various dispute resolution matters related to two large power projects. Refer to Note 15 for additional details on these dispute resolution matters.

(2)Loss for the three and six months ended July 1, 2023 and July 2, 2022 resulted primarily from revisions to liabilities, including income tax liabilities, retained in connection with prior dispositions.