Annual Report

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-K

(Mark One)
ý	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the fiscal year ended December 31, 2007, or
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from to .

Commission file number: 1-6948

SPX Corporation
(Exact Name of Registrant as Specified in Its Charter)

Delaware
(State or Other Jurisdiction of
Incorporation or Organization)

38-1016240
(I.R.S. Employer Identification No.)

13515 Ballantyne Corporate Place
Charlotte, NC 28277
(Address of Principal Executive Offices) (Zip Code)

Registrant's telephone number, including area code: 704-752-4400

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class		Name of Each Exchange on Which Registered
Common Stock, Par Value $10.00		New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:

None
(Title of Class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ý No o

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No ý

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirement for the past 90 days. Yes ý No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of "large accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ý

Accelerated filer o

Non-accelerated filer o
(Do not check if a smaller reporting company)

Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No ý

The aggregate market value of the voting stock held by non-affiliates of the registrant as of June 30, 2007 was $4,823,454,493. The determination of affiliate status for purposes of the foregoing calculation is not necessarily a conclusive determination for other purposes.

The number of shares outstanding of each of the registrant's classes of common stock, as of February 22, 2008, was 53,320,057.

Documents incorporated by reference: Portions of the Registrant's Proxy Statement for its Annual Meeting to be held on May 1, 2008 are incorporated by reference into Part III of this Annual Report on Form 10-K.

P A R T I

ITEM 1. Business

(All dollar and share amounts are in millions, except per share data)

Forward-Looking Information

Some of the statements in this document and any documents incorporated by reference constitute "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). These statements relate to future events or our future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our businesses' or our industries' actual results, levels of activity, performance or achievements to be materially different from those expressed or implied by any forward-looking statements. Such statements include statements about our plans, strategies, prospects, changes and trends in our business and the markets in which we operate under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations" ("MD&A"). In some cases, you can identify forward-looking statements by terminology such as "may," "could," "would," "should," "expect," "plan," "anticipate," "intend," "believe," "estimate," "predict," "potential" or "continue" or the negative of those terms or other comparable terminology. These statements are only predictions. Actual events or results may differ materially because of market conditions in our industries or other factors, and forward-looking statements should not be relied upon as a prediction of actual results. In addition, management's estimates of future operating results are based on our current complement of businesses, which is subject to change. All the forward-looking statements are qualified in their entirety by reference to the factors discussed in this document under the heading "Risk Factors" and in any documents incorporated by reference that describe risks and factors that could cause results to differ materially from those projected in these forward-looking statements. We undertake no obligation to update or publicly revise these forward-looking statements to reflect events or circumstances that arise after the date of this document.

Business

We were incorporated in Muskegon, Michigan in 1912 as the Piston Ring Company and adopted our current name in 1988. Since 1968, we have been incorporated under the laws of Delaware and we have been listed on the New York Stock Exchange since 1972.

We are a global multi-industry manufacturing company with operations in over 35 countries and sales in over 150 countries around the world. The majority of our revenues, approximately 59% in 2007, are driven by global infrastructure development. Our infrastructure-related products and services include wet and dry cooling systems, thermal service and repair work, heat exchangers and power transformers into the global power market. We also provide pumps, metering systems and valves into the global oil and gas, chemical and petrochemical exploration, refinement and distribution markets. Our infrastructure-related products also include packaged cooling towers, boilers, heating and ventilation equipment and filters. We continue to focus on developing and acquiring products and services to serve global infrastructure development, as we believe that future investments in these end markets in both emerging and developed economies around the world provide significant opportunities for growth.

The other major component of our revenues in 2007 was test and measurement products and services, representing 24.3% of our 2007 revenues. In this area, we provide, among other things, electronic diagnostic systems, specialty service tools, service equipment and technical information services with a primary focus on the global transportation market. Our strategy includes partnering with manufacturers of automobiles, agricultural and construction equipment and recreational vehicles, among others, to provide solutions for maintaining and servicing these vehicles after sale. With the expanding global population and demand for vehicles, we believe there are significant future growth opportunities in this market.

Our operating strategy is focused on an integrated leadership process that aligns performance measurement, decision support, compensation and communication. This process includes:

•: a demanding set of leadership standards to drive achievement of results with integrity;
•: expanding our technological leadership and service offerings with a market focus on providing innovative, critical solutions to our customers;
•: growing through internal development and strategic, financially compelling acquisitions;
•: increased globalization with a focus on emerging economies and markets;

•: right-sizing our businesses to market and economic conditions to protect against economic downturns and take advantage of strong economic cycles;
•: focusing on continuous improvements to drive results and create shareholder value; and
•: strategically analyzing our businesses to determine their long-term fit.

Unless otherwise indicated, amounts provided throughout this Annual Report on Form 10-K relate to continuing operations only.

Segments

Our strategy is to have a centralized approach to continuous improvement, including lean manufacturing, supply chain management, organizational development and global expansion, with the intent of capturing synergies that exist within our businesses and, ultimately, on driving revenue, profit margin and cash flow growth. We believe that our businesses are well positioned for growth in these metrics based on our current continuous improvement initiatives, the potential within the current markets they serve and the potential for expansion into additional markets.

We aggregate our operating segments into four reportable segments in accordance with the criteria defined in Statements of Financial Accounting Standards ("SFAS") No. 131, "Disclosures about Segments of an Enterprise and Related Information". The segments are Flow Technology, Test and Measurement, Thermal Equipment and Services and Industrial Products and Services. The factors considered in determining our aggregated segments are the economic similarity of the businesses, the nature of products sold or services provided, production processes, types of customers and distribution methods. In determining our segments, we apply the threshold criteria of SFAS No. 131 to operating income or loss of each segment before considering impairment and special charges, pensions and postretirement expense, stock-based compensation and other indirect corporate expense. This is consistent with the way our chief operating decision maker evaluates the results of each segment. For more information on the results of our segments, including revenues by geographic area, see Note 5 to our consolidated financial statements.

Flow Technology

Our Flow Technology segment had revenues of $1,121.3, $865.7 and $775.8 in 2007, 2006 and 2005, respectively. APV, a global manufacturer of process equipment and engineering solutions primarily for the sanitary market, had revenues of approximately $876.0, $753.0 and $700.0 in 2007, 2006 and 2005, respectively, which have not been included in our results of operations as we acquired APV on December 31, 2007. The Flow Technology segment designs, manufactures and markets products and solutions that are used to process or transport fluids, as well as solutions and products that are used in heat transfer applications. Our focus is on innovative, highly-engineered new product introductions and expansion from products to systems and services in order to create total customer solutions. Our primary products include high-integrity pumps, valves, heat exchangers, fluid mixers, agitators, metering systems, filters and dehydration equipment. Our primary global end markets, in order of size, are sanitary food, beverage and pharmaceutical processing, general industrial, chemical processing, oil and gas processing, power generation and mining. We sell to these end markets under the brand names of Waukesha Cherry-Burrell, DeZurik, Lightnin, Copes-Vulcan, M&J Valves, Bran & Luebbe, APV, APV Gaulin and APV Rannie. Competitors in these fragmented markets include Alfa Laval, GEA, Fisher, Haywood, Chemineer, EKATO, Lewa, Fristam and Sudmo. The segment continues to focus on initiatives such as a global enterprise resource planning ("ERP") system implementation and lean manufacturing improvements. The primary distribution channels for the Flow Technology segment are independent manufacturing representatives and direct to customers.

Test and Measurement

Our Test and Measurement segment had revenues of $1,174.1, $1,137.5 and $1,059.6 in 2007, 2006 and 2005, respectively. This segment engineers and manufactures branded, technologically advanced test and measurement products used on a global basis across the transportation, defense, telecommunications and utility industries. Our technology supports the introduction of new systems, expanded services and sophisticated testing and validation. Products for the segment include specialty diagnostic service tools, fare-collection systems, portable cable and pipe locators and vibration testing equipment. Our diagnostic service tools product line includes diagnostic systems and service equipment as well as specialty tools. We sell diagnostic systems and service equipment to the franchised vehicle dealers of original equipment manufacturers ("OEM"s), aftermarket national accounts and independent repair facilities. We sell diagnostic systems under the OTC, Actron, AutoXray, Tecnotest and Robinair brand names. These products compete with brands such as Snap-on and ESP. We intend to grow this business by developing new service capabilities, strengthening alliances in diagnostic platforms and through acquisitions. We

sell our specialty tools to franchised vehicle dealers, aftermarket national accounts and independent repair facilities. We are a primary global provider of specialty tools for motor vehicle manufacturers' dealership networks to General Motors, Ford, Chrysler, BMW, Harley Davidson and John Deere, and a primary domestic provider to Toyota and Nissan. Sales of specialty service tools essential to dealerships tend to vary with changes in vehicle systems design and the number of dealerships and are not directly correlated with the volume of vehicles produced by the motor vehicle manufacturers. The segment sells automated fare-collection systems to municipal bus and rail transit systems, as well as postal vending systems, primarily within the North American market. Our portable cable and pipe locator line is composed of electronic testing, monitoring and inspection equipment for locating and identifying metallic sheathed fiber optic cable, horizontal boring guidance systems and inspection cameras. The segment sells this product line to a wide customer base, including utility and construction companies, municipalities and telecommunication companies. We sell our vibration testing equipment primarily to the aerospace, automotive and electronics industries, with our main competitors being IMV and Upholtz Dickie. The segment continues to focus on initiatives such as lean manufacturing and expanding its commercialization of the European and Chinese markets. The primary distribution channels for the Test and Measurement segment are direct to OEMs and OEM dealers, aftermarket tool and equipment providers and retailers.

Thermal Equipment and Services

Our Thermal Equipment and Services segment had revenues of $1,560.5, $1,327.7 and $1,178.4 in 2007, 2006 and 2005, respectively. This segment engineers, manufactures and services cooling, heating and ventilation products for markets throughout the world. Products for the segment include dry, wet and hybrid cooling systems for the power generation, refrigeration, HVAC and industrial markets, as well as hydronic and heating and ventilation products for the commercial and residential markets. This segment also provides thermal components for power and steam generation plants and engineered services to maintain, refurbish, upgrade and modernize power stations. We sell our cooling products and services under the brand names of Marley, Balcke-Duerr, Ceramic and Hamon Dry Cooling, with the major competitors to these product and service lines being Baltimore Aircoil, Evapco and GEA. Our hydronic products include a complete line of gas and oil fired cast iron boilers for space heating in residential and commercial applications, as well as ancillary equipment. The segment's hydronic products compete mainly with Burnham and Buderus. Our heating and ventilation product line includes i) baseboard, wall unit and portable heaters, ii) commercial cabinet and infrared heaters, iii) thermostats and controls, iv) air curtains and v) circulating fans. The segment sells heating and ventilation products under the Berko, Qmark, Farenheat, Aztec, Patton and Leading Edge brand names, with the principal competitors being TPI, Quellet, King, Cadet and Dimplex for heating products and Lenexa, TPI, Broan-NuTone and Air Master for ventilation products. The segment continues to focus on expanding its global reach, including expanding its dry cooling, heating and manufacturing capacity in China, as well as increasing thermal components and service offerings, particularly in China, Europe and South Africa. The primary distribution channels for the Thermal Equipment and Services segment are direct to customers, independent manufacturing representatives, third party distributors and retailers.

Industrial Products and Services

Our Industrial Products and Services segment had revenues of $966.4, $836.7 and $716.0 in 2007, 2006 and 2005, respectively. Of the segment's 2007 revenue, approximately 44% was from the sale of power transformers into the US transmission and distribution market. We are a leading provider of medium sized transformers (MVA between 10 and 60 mega-watts) in the United States. Our transformers are sold under the Waukesha Electric brand name. This brand is recognized for quality and reliability by our customers. Typical customers for this product line are public and privately held utilities. Our key competitors in this market include ABB, Kuhlman and GE Prolec.

Additionally, this segment includes operating units that design and manufacture industrial tools and hydraulic units, precision machine components for the aerospace industry, crystal growing machines for the solar power market, automatic transmission filters and television and radio broadcast antenna systems. The primary distribution channels for the Industrial Products and Services segment are direct to customers, independent manufacturing representatives and third party distributors.

Acquisitions

We regularly review and negotiate potential acquisitions in the ordinary course of business, some of which are or may be material. We will continue to pursue acquisitions and we may consider acquisitions of businesses with more than $1,000.0 in annual revenues.

In August 2007, we completed the acquisition of the European diagnostics division of Johnson Controls ("JCD") within our Test and Measurement segment for a purchase price of $40.3. The acquired business had revenues of approximately $93.0 in the twelve months prior to acquisition.

In October 2007, we completed the acquisition of Matra-Werke GmbH ("Matra") within our Test and Measurement segment for a purchase price of $36.6. The acquired business had revenues of approximately $26.0 in the twelve months prior to acquisition.

In December 2007, we completed the acquisition of APV within our Flow Technology segment for a purchase price of $524.2. The acquired business had revenues of approximately $876.0 in the twelve months prior to acquisition.

Divestitures

As part of our operating strategy, we regularly review and negotiate potential divestitures in the ordinary course of business, some of which are or may be material. As a result of this continuous review, we determined that certain of our businesses would be better strategic fits with other companies or investors. In accordance with SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," we report businesses or asset groups as discontinued operations when the operations and cash flows of the business or asset group have been or are expected to be eliminated, when we do not expect to have any continuing involvement with the business or asset group after the disposal transaction, and when we have met these additional six criteria:

•: management has approved a plan to sell the business or asset group;
•: the business or asset group is available for immediate sale;
•: an active program to sell the business or asset group has been initiated;
•: the sale of the business or asset group is probable within one year;
•: the marketed sales value of the business or asset group is reasonable in relation to its current fair value; and
•: it is unlikely that the plan to divest the business or asset group will be significantly altered or withdrawn.

The following businesses, which have been sold, met the above requirements and therefore have been reported as discontinued operations for all periods presented:

Business	Quarter Discontinued	Actual Closing Date of Sale
Balcke-Duerr Austria GmbH ("BD Austria")	Q4 2007	Q4 2007
Nema AirFin GmbH ("Nema")	Q4 2007	Q4 2007
Contech ("Contech")	Q3 2006	Q2 2007
Dock Products ("Dock")	Q2 2006	Q4 2006
Dielectric Tower ("Tower")	Q4 2005	Q1 2006
Security and protection business ("Vance")	Q3 2005	Q1 2006
Mueller Steam, Febco and Polyjet product lines	Q3 2005	Q4 2005
Aftermarket automotive products business ("Carfel")	Q1 2005	Q3 2005
Lab and life science business ("Kendro")	Q4 2004	Q2 2005
Brookstone telecommunication services business	Q1 2005	Q1 2005
Fire detection and building life-safety systems business ("EST")	Q4 2004	Q1 2005
Specialty tool business	Q4 2004	Q1 2005
Compaction equipment business ("Bomag")	Q3 2004	Q1 2005

recorded a net charge of $11.0 during 2007 to "Gain (loss) on disposition of discontinued operations, net of tax" in order to reduce the carrying value of the net assets to be sold to their estimated net realizable value.

Joint Venture

We have one significant joint venture, EGS Electrical Group, LLC and Subsidiaries ("EGS"), with Emerson Electric Co., in which we hold a 44.5% interest. Emerson Electric Co. controls and operates the joint venture. EGS operates primarily in the United States, Canada and France and is engaged in the manufacture of electrical fittings, hazardous location lighting and power conditioning products. We account for our investment under the equity method of accounting, on a three-month lag basis. We typically receive our share of this joint venture's earnings in cash dividends.

See Note 9 to our consolidated financials statements for more information on EGS.

International Operations

We are a multinational corporation with operations in over 35 countries. Our international operations are subject to the risks of possible currency devaluation and blockage, nationalization or restrictive legislation regulating foreign investments, as well as other risks attendant to the countries in which they are located. Our export sales from the United States were $339.7 in 2007, $335.2 in 2006 and $290.2 in 2005.

See Note 5 to our consolidated financial statements for more information on our international operations.

Research and Development

We are actively engaged in research and development programs designed to improve existing products and manufacturing methods and to develop new products to better serve our current and future customers. These efforts encompass all our products with divisional engineering teams coordinating their resources. We place particular emphasis on the development of new products that are compatible with, and build upon, our manufacturing and marketing capabilities.

We spent $70.3 on research activities relating to the development and improvement of our products in 2007, $61.4 in 2006 and $56.3 in 2005. In addition, we expensed purchased in-process research and development of $0.9 related to the APV acquisition as technological feasibility had not been established for the related projects.

Patents/Trademarks

We own over 700 domestic patents and 200 foreign patents, including approximately 50 patents that were issued in 2007, covering a variety of our products and manufacturing methods. We also own a number of registered trademarks. Although in the aggregate our patents and trademarks are of considerable importance in the operation of our business, we do not consider any single patent or trademark to be of such importance that its absence would adversely affect our ability to conduct business as presently constituted to a significant extent. We are both a licensor and licensee of patents. For more information, please refer to "Risk Factors."

Outsourcing and Raw Materials

We manufacture many of the components used in our products; however, our strategy includes outsourcing some components and sub-assemblies to other companies where strategically and economically feasible. In instances where we depend on third-party suppliers for outsourced products or components, we are subject to the risk of customer dissatisfaction with the quality or performance of the products we sell due to supplier failure. In addition, business difficulties experienced by a third-party supplier can lead to the interruption of our ability to obtain the outsourced product and ultimately to our inability to supply products to our customers. We believe that we generally will be able to continue to obtain adequate supplies of major items or appropriate substitutes at reasonable costs.

In the last four years we have faced significant increases in the prices of many of our key raw materials, including petroleum-based products, steel and copper. Over the past three years we have been able to generally offset increases in raw material costs across our segments mainly through effective price increases.

Because of our diverse products and services, as well as the wide geographic dispersion of our production facilities, we use numerous sources for the raw materials needed in our operations. We are not significantly dependent on any one or a limited number of suppliers, and we have been able to obtain suitable quantities of necessary raw materials at competitive prices.

Competition

Although our businesses are in highly competitive markets, our competitive position cannot be determined accurately in the aggregate or by segment since our competitors do not offer all of the same product lines or serve all of the same markets as we do. In addition, specific reliable comparative figures are not available for many of our competitors. In most product groups, competition comes from numerous concerns, both large and small. The principal methods of competition are price, service, product performance and technical innovation. These methods vary with the type of product sold. We believe that we can compete effectively on the basis of each of these factors as they apply to the various products offered. See "Segments" above for a discussion of our competitors.

Environmental Matters

See "MD&A — Critical Accounting Policies and Use of Estimates — Contingent Liabilities," "Risk Factors" and Note 14 to our consolidated financial statements for information regarding environmental matters.

Employment

At December 31, 2007, we had approximately 17,800 employees associated with businesses that have been classified in our consolidated financial statements as continuing operations. Additionally, we had approximately 700 employees associated with a business that we intend to sell in 2008 and have classified in our consolidated financial statements as a discontinued operation. Twelve domestic collective bargaining agreements cover approximately 1,275 employees, none of which relate to the business classified in our consolidated financial statements as a discontinued operation. We also have various collective labor arrangements covering certain non-U.S. employee groups. While we generally have experienced satisfactory labor relations, we are subject to potential union campaigns, work stoppages, union negotiations and other potential labor disputes.

Executive Officers

See Part III, Item 10 of this report for information about our executive officers.

Other Matters

No customer or group of customers that, to our knowledge, are under common control, accounted for more than 10% of our consolidated revenues for all periods presented.

Our businesses maintain sufficient levels of working capital to support customer requirements, particularly inventory. We believe that our businesses' sales and payment terms are generally similar to those of our competitors.

Many of our businesses closely follow changes in the industries and end-markets that they serve. In addition, certain businesses have seasonal fluctuations. Revenues for our Test and Measurement segment primarily follow customer-specified program launch timing for diagnostic systems and service equipment. Demand for products in our Thermal Equipment and Services segment is correlated to contract timing on large construction contracts and is also driven by seasonal weather patterns, both of which may cause significant fluctuations from period to period. Historically, our businesses generally tend to be stronger in the second half of the year.

Our website address is www.spx.com. Information on our website is not incorporated by reference herein. We file reports with the Securities and Exchange Commission ("SEC"), including our annual report on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, and any amendments to those reports. Copies of these reports are available free of charge on our website as soon as reasonably practicable after we file the reports with the SEC. The SEC also maintains a website that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. The address of that website is http://www.sec.gov. Additionally, you may read and copy any materials that we file with the SEC at the SEC's Public Reference Room at 100 F Street, NE, Washington, DC 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.

ITEM 1A. Risk Factors

(All amounts are in millions, except per share data)

You should consider the risks described below and elsewhere in our documents filed with the SEC before investing in any of our securities. Though we undertake no obligation to do so, we may amend, supplement or add to the risk factors described below from time to time in future reports filed with the SEC.

Difficulties presented by international economic, political, legal, accounting and business factors could negatively affect our interests and business effort.

We are an increasingly global company, with a significant portion of our sales taking place outside the United States. In 2007, approximately 42% of our revenues were generated outside the United States ("U.S."), and we expect that over 50% of our revenues will be generated outside the U.S. in 2008. We have placed a particular emphasis on expanding our presence in emerging and developing markets.

As part of our strategy, we manage businesses with manufacturing facilities worldwide, many of which are located outside the United States.

Our reliance on non-U.S. revenues and non-U.S. manufacturing bases exposes us to a number of risks, including:

•: distance, language and cultural differences may make it more difficult to manage the business and employees, and to effectively market our products and services.
•: we may encounter significant competition from local or long-time participants in non-U.S. markets who may have significantly greater market knowledge and substantially greater resources than we do.
•: local customers may have a preference for locally-produced products. For example, we are facing increased competition from local suppliers in the Chinese cooling tower market.
•: regulatory or political systems or barriers may make it difficult or impossible to enter new markets. In addition, these barriers may impact our businesses, including making it more difficult for them to grow, once established.
•: domestic and foreign customs and tariffs may make it difficult or impossible for us to move our products across borders in a cost-effective manner.
•: adverse tax consequences, including imposition or increase of income and other taxes on remittances and earnings by subsidiaries may impact our net income.
•: transportation and shipping expenses add cost to our products, and may impact our profit margins or lead to lost business.
•: credit risk or financial condition of local customers and distributors.
•: nationalization of private enterprises.
•: government embargos or foreign trade restrictions such as anti-dumping duties. Also, the imposition of trade sanctions by the United States or the European Union against a class of products imported by us from, sold by us to, or the loss of "normal trade relations" status with, countries in which we conduct business could significantly increase our cost of products imported into the United States or Europe or reduce our sales and harm our business.
•: environmental and other laws and regulations.
•: our ability to obtain supplies from foreign vendors and ship products internationally may be impaired during times of crisis or otherwise.
•: difficulties in protecting intellectual property.
•: local, regional or worldwide hostilities.
•: potential imposition of restrictions on investments.
•: local political, economic and social conditions, including the possibility of hyperinflationary conditions and political instability.

As an increasing percentage of our products are manufactured in China, health conditions and other factors affecting social and economic activity in China and affecting the movement of people and products into and from China to our major markets, including North America and Europe, could have a significant negative effect on our operations. Because of the importance of our international sales and sourcing of manufacturing, the occurrence of any risk described above could have a material adverse effect on our financial position, results of operations or cash flows. In addition, our Thermal Equipment and Services segment recently obtained a multi-year contract in South Africa to supply filters, air preheaters and pressure parts for boilers within a power generation facility.

In addition, sales and purchases in currencies other than the U.S. dollar expose us to fluctuations in foreign currencies relative to the U.S. dollar. Increased strength of the U.S. dollar will increase the effective price of our products sold in U.S. dollars into other countries, which may have a material adverse effect on sales or require us to lower our prices, and also decrease our reported revenues or margins in respect of sales conducted in foreign currencies to the extent we are unable or determine not to increase local currency prices. Likewise, decreased strength of the U.S. dollar could have a material adverse effect on the cost of materials and products purchased overseas. In addition, our sales are translated into U.S. dollars for reporting purposes. In particular, a revaluation of the Chinese Yuan could result in an increase in the cost of producing products in China, or increases in labor costs. The strengthening or weakening of the U.S. dollar could result in unfavorable translation effects as the results of transactions in foreign countries are translated into U.S. dollars.

We are subject to laws, regulations and potential liability relating to claims, complaints and proceedings, including those relating to environmental and other matters.

We are subject to various laws, ordinances, regulations and other requirements of government authorities in the United States and other nations. With respect to acquisitions, divestitures and continuing operations, we may acquire or retain liabilities of which we are not aware, or of a different character or magnitude than expected. Additionally, changes in laws, ordinances, regulations or other governmental policies may significantly increase our expenses and liabilities.

We face environmental exposures including, for example, those relating to discharges from and materials handled as part of our operations, the remediation of soil and groundwater contaminated by petroleum products or hazardous substances or wastes, and the health and safety of our employees. We may be liable for the costs of investigation, removal or remediation of hazardous substances or petroleum products on, under, or in our current or formerly owned or leased property, or from a third-party disposal facility which we may have used, without regard to whether we knew of, or caused, the presence of the contaminants. The presence of, or failure to properly remediate, these substances may have adverse effects, including, for example, substantial investigative or remedial obligations and limitations on the ability to sell or rent affected property or to borrow funds using affected property as collateral. New or existing environmental matters or changes in environmental laws or policies could lead to material costs for environmental compliance or cleanup. There can be no assurance that these liabilities and costs will not have a material adverse effect on our financial position, results of operations or cash flows. See Note 14 to our consolidated financial statements for further discussion.

We face numerous claims, complaints and proceedings. Class actions, derivative lawsuits and contract, intellectual property, competitive, personal injury, product liability, workers' compensation and other claims have been filed or are pending against us and certain of our subsidiaries. In addition, we from time to time, face actions by governmental authorities, both in and outside the United States. Additionally, we may become subject to significant claims of which we are currently unaware or the claims of which we are aware may result in our incurring a significantly greater liability than we anticipate. Our insurance may be insufficient or unavailable to protect us against potential loss exposures. In addition, we have increased our self-insurance limits over the past several years, which has increased our uninsured exposure.

We devote significant time and expense to defense against the various claims, complaints and proceedings brought against us, and we cannot assure you that the expenses or distractions from operating our businesses arising from these defenses will not increase materially.

We cannot assure you that our accruals and right to indemnity and insurance will be sufficient, that recoveries from insurance or indemnification claims will be available or that any of our current or future claims or other matters will not have a material adverse effect on our financial position, results of operations or cash flows. See "MD&A — Critical Accounting Policies and Use of Estimates — Contingent Liabilities."

The price of raw materials may adversely affect our results.

We are exposed to a variety of market risks, including inflation in the prices of raw materials. In the recent years, we have faced significant increases in the prices of many of our key raw materials, including petroleum-based products, steel and copper. Increases in the prices of raw materials may have a material adverse effect on our financial position, results of operations or cash flows, as we may not be able to pass cost increases on to our customers, or our sales may be reduced.

Our failure to successfully integrate acquisitions could have a negative effect on our operations; our acquisitions could cause financial difficulties.

As part of our business strategy, we evaluate potential acquisitions in the ordinary course, some of which could be and have been material. Our acquisitions involve a number of risks and present financial, managerial and operational challenges, including:

•: adverse effects on our reported operating results due to charges to earnings, including impairment charges associated with goodwill and other intangibles;
•: diversion of management attention from running our businesses;
•: integration of technology, operations, personnel and financial and other systems;
•: increased expenses, including compensation expenses resulting from newly hired employees;
•: increased foreign operations, often with unique issues relating to corporate culture, compliance with legal and regulatory requirements and other challenges;
•: assumption of known and unknown liabilities and exposure to litigation;
•: increased levels of debt or dilution to existing shareholders; and
•: potential disputes with the sellers of acquired businesses, technology, services or products.

In addition, internal controls over financial reporting of acquired companies may not be up to required standards. Issues may exist that could rise to the level of significant deficiencies or, in some cases, material weaknesses, particularly with respect to foreign companies or non-public United States companies.

Our integration activities may place substantial demands on our management, operational resources and financial and internal control systems. Customer dissatisfaction or performance problems with an acquired business, technology, service or product could also have a material adverse effect on our reputation and business. In addition, any acquired business, technology, service or product could under-perform relative to our expectations.

We may not achieve the expected cost savings and other benefits of our acquisitions.

We strive for and expect to achieve cost savings in connection with our acquisitions, including: (i) manufacturing process and supply chain rationalization, including plant closings in some cases; (ii) streamlining redundant administrative overhead and support activities; and (iii) restructuring and repositioning sales and marketing organizations to eliminate redundancies. Cost savings expectations are inherently estimates that are difficult to predict and are necessarily speculative in nature, and we cannot assure you that we will achieve expected, or any, cost savings. In addition, we cannot assure you that unforeseen factors will not offset the estimated cost savings or other benefits from our acquisitions. As a result, our actual cost savings, if any, and other anticipated benefits could be delayed and could differ significantly from our estimates and the other information contained in this report.

Our indebtedness may affect our business and may restrict our operating flexibility.

At December 31, 2007, we had $1,575.1 in total indebtedness. On that same date, we had $363.4 of available borrowing capacity under our revolving credit facilities after giving effect to borrowings under our domestic revolving loan facility of $115.0 and to $121.6 reserved for outstanding letters of credit. In addition, we had $470.0 of available issuance capacity under our foreign trade facility after giving effect to $480.0 reserved for outstanding letters of credit. At December 31, 2007, our cash and equivalents balance was $354.1. See "Management's Discussion & Analysis" and Note 12 to our consolidated financial statements for further discussion. We may incur additional indebtedness in the future, including indebtedness incurred to finance, or which is assumed in connection with, acquisitions. We may in the future renegotiate or refinance our senior credit facilities, senior notes or other debt facilities, or enter into additional agreements that have different or more stringent terms. The level of our indebtedness could:

•: limit cash flow available for general corporate purposes, such as acquisitions and capital expenditures, due to the ongoing cash flow requirements for debt service;
•: limit our ability to obtain, or obtain on favorable terms, additional debt financing in the future for working capital, capital expenditures or acquisitions;
•: limit our flexibility in reacting to competitive and other changes in the industry and economic conditions;

•: expose us to a risk that a substantial decrease in net operating cash flows due to economic developments or adverse developments in our business could make it difficult to meet debt service requirements; and
•: expose us to risks inherent in interest rate fluctuations to the extent existing borrowings are, and any new borrowings may be at variable rates of interest, which could result in higher interest expense in the event of increases in interest rates.

Our ability to make scheduled payments of principal, to pay interest on, or to refinance, our indebtedness and to satisfy our other debt obligations will depend upon our future operating performance, which will be affected by general economic, financial, competitive, legislative, regulatory, business and other factors beyond our control. In addition, we cannot assure you that future borrowings or equity financing will be available for the payment or refinancing of our indebtedness. If we are unable to service our indebtedness, whether in the ordinary course of business or upon acceleration of such indebtedness, we may pursue one or more alternative strategies, such as restructuring or refinancing our indebtedness, selling assets, reducing or delaying capital expenditures, revising implementation of or delaying strategic plans or seeking additional equity capital. Any of these actions could have a material adverse effect on our business, financial condition, results of operations and stock price. In addition, we cannot assure you that we would be able to take any of these actions, that these actions would enable us to continue to satisfy our capital requirements, or that these actions would be permitted under the terms of our various debt agreements.

We operate in highly competitive industries. Our failure to compete effectively could harm our business.

We operate in a highly competitive environment, competing on the basis of product offerings, technical capabilities, quality, service and pricing. We have a number of competitors, some of which are large, with substantial technological and financial resources, brand recognition and established relationships with global service providers. Some of our competitors have low cost structures, support from governments in their home countries, or both. In addition, new competitors may enter the industry. We cannot assure you that we will be able to compete successfully against existing or future competitors. Competitors may be able to offer lower prices, additional products or services or a more attractive mix of products or services, or services or other incentives that we cannot or will not match. These competitors may be in a stronger position to respond quickly to new or emerging technologies and may be able to undertake more extensive marketing campaigns, and make more attractive offers to potential customers, employees and strategic partners than can we.

Our strategy to outsource various elements of the products we sell subjects us to the business risks of our suppliers, which could have a material adverse impact on our operations.

In areas where we depend on third-party suppliers for outsourced products or components, we are subject to the risk of customer dissatisfaction with the quality or performance of the products we sell due to supplier failure. In addition, business difficulties experienced by a third-party supplier can lead to the interruption of our ability to obtain the outsourced product and ultimately our inability to supply products to our customers. Third-party supplier business interruptions can include, but are not limited to, work stoppages, union negotiations and other labor disputes, as well as financial and credit difficulties.

A portion of our revenues is generated through long-term fixed-price contracts, which could expose us to various risks including the risks of cost overruns, inflation and credit and other counterparty risks.

A portion of our revenues and earnings is generated through long-term fixed-price contracts. We recognize revenues from certain of these contracts using the percentage-of-completion method of accounting whereby revenues and expenses, and thereby profit, in a given period are determined based on our estimates as to the project status and the costs remaining to complete a particular project. Estimates of total revenues and cost at completion are subject to many variables, including the length of time to complete a contract. To the extent that we under-estimate the remaining cost to complete a project, we may overstate the revenues and profit in a particular period. Further, certain of these contracts provide for penalties for failure to timely perform our obligations under the contract, or require that we, at our expense, correct and remedy to the satisfaction of the other party certain defects. Because some of our long-term contracts are at a fixed price, we face the risk that cost overruns or inflation may exceed, erode or eliminate our expected profit margin, or cause us to take a loss on our projects. Additionally, even though we perform credit checks and conduct other due diligence on those with whom we do business, customers of our long-term contracts may suffer financial difficulties that make them unable to pay for a project when completed or they may decide, either as a matter of corporate decision-making or in response to changes in local laws and regulations, not to pay us. We cannot assure you that expenses or losses for uncollectible billings relating to our long-term fixed-price contracts will not have a material adverse effect on our revenues and earnings.

Changes in both the funding of and accounting for pension and postretirement benefit plans may affect our results of operations and cash flows.

As of December 31, 2007, our defined benefit pension and postretirement plans, including both qualified and non-qualified plans, were underfunded by $309.6. Of this amount, $6.5 related to our domestic qualified defined benefit pension plans. During 2006, the United States government passed into law the Pension Protection Act of 2006 ("PPA"). Among other things, the PPA requires plan sponsors to fund toward 100% of the underfunded status of domestic qualified defined benefit pension plans (with contributions phased in through 2011) and increased the annual premiums we pay to the Pension Benefit Guaranty Corporation. Additionally, during 2006, the Financial Accounting Standards Board ("FASB") issued SFAS No. 158, "Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans — an amendment of FASB Statements No. 87, 88, 106 and 132(R)". This statement required us to recognize the underfunded status of our defined benefit pension and postretirement plans in our consolidated balance sheet as of December 31, 2006. SFAS No. 158 represents the culmination of phase one of the FASB's project to re-address the accounting for defined benefit pension and postretirement plans, with the second phase of the project focused on the recognition of expense in the financial statements. As the specific annual funding requirements resulting from the PPA are not yet known, and the FASB's project is ongoing, we are currently unable to accurately predict their impact on our future results of operations or cash flows. See "MD&A — Critical Accounting Policies and Use of Estimates" for the impact that changes in certain assumptions used in the calculation of our costs and obligations associated with these plans could have on our results of operations and financial position. Furthermore, future changes in the funding of or accounting for these plans, or other regulatory changes could have adverse impacts on our results of operations and cash flows.

Our failure to successfully complete acquisitions could negatively affect us.

We may not be able to consummate desired acquisitions, which could materially impact our growth rate, results of operations, future cash flows and stock price. Our ability to achieve our goals depends upon, among other things, our ability to identify and successfully acquire companies, businesses and product lines, to effectively integrate them and to achieve cost effectiveness. We may also be unable to raise any additional funds necessary to consummate these acquisitions. In addition, changes in our stock price may adversely affect our ability to consummate acquisitions. Competition for acquisitions in our business areas has been significant, and has in many cases resulted in higher prices for businesses, including businesses that we may target, which may also affect our acquisition rate or benefits achieved from our acquisitions.

Dispositions or our failure to successfully complete dispositions could negatively affect us.

We continually review each of our businesses in order to determine their long term strategic fit. As part of this strategy, we dispose of certain of our businesses in the ordinary course, some of which dispositions could be and have been material. Our dispositions involve a number of risks and present financial, managerial and operational challenges, including diversion of management attention from running our core businesses, increased expense associated with the dispositions, potential disputes with the acquirers of the disposed assets or businesses and a potential dilutive effect on our earnings per share. If dispositions are not completed in a timely manner there may be a negative effect on our cash flows and/or our ability to execute our strategy. See Item 1. Business and Note 4 to our consolidated financial statements for the status of our divestitures.

Increases in the number of shares of our outstanding common stock could adversely affect our common stock price or dilute our earnings per share.

Sales of a substantial number of shares of common stock into the public market, or the perception that these sales could occur, could have a material adverse effect on our stock price. As of December 31, 2007, approximately 2.4 shares of our common stock were issuable upon exercise of outstanding stock options by employees and non-employee directors and we had the ability to issue up to an additional 6.2 shares as restricted stock, restricted stock units, or stock options under our 2002 Stock Compensation Plan. Additionally, we may issue a significant number of additional shares, in connection with acquisitions or otherwise. We also have a shelf registration statement for 8.3 shares of common stock that may be issued in connection with acquisitions, and we have a shelf registration statement for a total of $1,000.0, which may be used in connection with an offering of debt securities, preferred securities and/or common stock for general corporate purposes. Additional shares issued will have a dilutive effect on our earnings per share.

We may not be able to finance future needs or adapt our business plan to react to changes in economic or business conditions because of restrictions placed on us by our senior credit facilities and any existing or future instruments governing our other indebtedness.

Our senior credit facilities and agreements governing our other indebtedness contain, or may contain, a number of restrictions and covenants that limit our ability to make distributions or other payments to our investors and creditors unless

certain financial tests or other criteria are satisfied. We also must comply with certain specified financial ratios and tests. Our subsidiaries may also be subject to restrictions on their ability to make distributions to us. In addition, our senior credit facilities and any other agreements contain or may contain additional affirmative and negative covenants. Existing restrictions are described more fully under "Management's Discussion & Analysis". Each of these restrictions could affect our ability to operate our business and may limit our ability to take advantage of potential business opportunities, such as acquisitions.

If we do not comply with the covenants and restrictions contained in our senior credit facilities and agreements governing our other indebtedness, we could be in default under those agreements, and the debt, together with accrued interest, could then be declared immediately due and payable. If we default under our senior credit facilities, the lenders could cause all our outstanding debt obligations under our senior credit facilities to become due and payable or require us to apply all of our cash to repay the indebtedness we owe. If our debt is accelerated, we may not be able to repay or refinance our debt. Even if we are able to obtain new financing, we may not be able to repay our debt or borrow sufficient funds to refinance it. In addition, any default under our senior credit facilities or agreements governing our other indebtedness could lead to an acceleration of debt under other debt instruments that contain cross-acceleration or cross-default provisions. If the indebtedness under our senior credit facilities is accelerated, we may not have sufficient assets to repay amounts due under our senior credit facilities, senior notes or other debt securities then outstanding. Our ability to comply with these provisions of our senior credit facilities and agreements governing our other indebtedness will be affected by changes in the economic or business conditions or other events beyond our control. Complying with our covenants may also cause us to take actions that are not favorable to us and may make it more difficult for us to successfully execute our business strategy and compete, including against companies that are not subject to such restrictions.

The loss of key personnel and any inability to attract and retain qualified employees could have a material adverse effect on our operations.

We are dependent on the continued services of our leadership team. The loss of these personnel without adequate replacement could have a material adverse effect on our operations. Additionally, we need qualified managers and skilled employees with technical and manufacturing industry experience in order to operate our business successfully. From time to time, there may be a shortage of skilled labor, which may make it more difficult and expensive for us to attract and retain qualified employees. If we were unable to attract and retain sufficient numbers of qualified individuals or our costs to do so were to increase significantly, our operations could be materially adversely affected.

Many of the industries in which we operate are cyclical, and our results will be and have been affected as a result.

Many of the business areas in which we operate are subject to specific industry and general economic cycles. Certain businesses are subject to industry cycles, including, but not limited to:

•: The electric power and infrastructure markets, which influence our Thermal Equipment and Services and Industrial Products and Services segments.
•: The U.S. auto manufacturers and franchise dealers are facing significant competitive and other challenges, and we face pressure on revenues and margins in our Test and Measurement segment as a result.
•: Demand for cooling systems and towers within our Thermal Equipment and Services segment is correlated to contract timing on large construction contracts, which have caused significant fluctuations in revenues and profits from period to period. Accordingly, any downturn or competitive pricing pressures in those or other markets in which we participate could adversely affect us.
•: The oil and gas, chemical and petrochemical markets, which influence our Flow Technology segment.

Cyclical changes could also affect sales of products in our other businesses. The downturns in the business cycles of our different operations may occur at the same time, which could exacerbate any material adverse effects to our business. See "Management's Discussion & Analysis — Segment Results of Operations." In addition, certain of our businesses have seasonal fluctuations. Historically, our businesses generally tend to be stronger in the second half of the year.

Our business is subject to changes in the economy.

Our businesses have been affected in various years by difficult economic conditions. There can be no assurance that the economy will not worsen or that we will be able to sustain existing cost structures or create additional cost reductions to offset economic conditions, or that the unpredictability and changes in the markets in which we participate will not adversely impact our results. Cost reduction actions often result in charges against earnings. We expect to take charges against earnings in 2008

in connection with implementing additional cost reduction actions at certain of our businesses. These charges can vary significantly from period to period and, as a result, we may experience fluctuations in our reported net income and earnings per share due to the timing of restructuring actions, which in turn can have a material adverse effect on our financial position, results of operations or cash flows.

If the fair value of any of our reporting units is insufficient to recover the carrying value of the goodwill and other intangibles of the respective reporting unit, a material non-cash charge to earnings could result.

At December 31, 2007, we had goodwill and other intangible assets, net of $2,706.5. We account for goodwill and indefinite-lived intangibles in accordance with SFAS No. 142, "Goodwill and Other Intangible Assets". SFAS No. 142 states that goodwill and indefinite-lived intangible assets are not amortized, but are instead reviewed for impairment annually (or more frequently if impairment indicators arise). We conduct annual impairment testing to determine if we will be able to recover all or a portion of the carrying value of goodwill and indefinite-lived intangibles. In addition, we review goodwill and indefinite-lived intangible assets for impairment more frequently if impairment indicators arise. If the fair value is insufficient to recover the carrying value of our goodwill and indefinite-lived intangibles, we may be required to record a material non-cash charge to earnings.

Consistent with the requirements of SFAS No. 142, the fair values of our reporting units generally are based on discounted cash flow projections that are believed to be reasonable under current and forecasted circumstances, the results of which form the basis for making judgments about carrying values of the reported net assets of our reporting units. Other considerations are also incorporated, including comparable industry price multiples. Many of our businesses closely follow changes in the industries and end-markets that they serve. Accordingly, we consider estimates and judgments that affect the future cash flow projections, including principal methods of competition such as volume, price, service, product performance and technical innovations and estimates associated with cost improvement initiatives, capacity utilization, and assumptions for inflation and foreign currency changes. We monitor impairment indicators across all of our businesses. Any significant change in market conditions and estimates or judgments used to determine expected future cash flows that indicate a reduction in carrying value may give rise to impairment in the period that the change becomes known.

We are subject to work stoppages, union negotiations, labor disputes and other matters associated with our labor force, which may adversely impact our operations and cause us to incur incremental costs.

At December 31, 2007, we had approximately 17,800 employees associated with businesses that have been classified in our consolidated financial statements as continuing operations. Additionally, we had approximately 700 employees associated with a business that we intend to sell in 2008 and have classified in our consolidated financial statements as a discontinued operation. Twelve domestic collective bargaining agreements cover approximately 1,275 employees, none of which relate to the business classified in our consolidated financial statements as a discontinued operation. We also have various collective labor arrangements covering certain non-U.S. employee groups. We are subject to potential union campaigns, work stoppages, union negotiations and other potential labor disputes. Further, we may be subject to work stoppages, which are beyond our control, at our suppliers or customers.

Our technology is important to our success, and failure to develop new products may result in a significant competitive disadvantage.

Because many of our products rely on proprietary technology, we believe that the development and protection of our intellectual property rights is critical to the success of our business. In order to maintain our market positions and margins, we need to continually develop and introduce high quality, technologically advanced and cost effective products on a timely basis. The failure to do so could result in a significant competitive disadvantage.

Additionally, despite our efforts to protect our proprietary rights, unauthorized parties or competitors may copy or otherwise obtain and use our products or technology. The steps we have taken may not prevent unauthorized use of our technology, particularly in foreign countries where the laws may not protect our proprietary rights as fully as in the United States. Expenses in connection with defending our rights may be material.

If we are unable to protect our information systems against data corruption, cyber-based attacks or network security breaches, our operations could be disrupted.

We are increasingly dependent on information technology networks and systems, including the Internet, to process, transmit and store electronic information. In particular, we depend on our information technology infrastructure for electronic communications among our locations around the world and between our personnel and suppliers and customers. Security

breaches of this infrastructure can create system disruptions, shutdowns or unauthorized disclosure of confidential information. If we are unable to prevent such breaches, our operations could be disrupted or we may suffer financial damage or loss because of lost or misappropriated information.

Our current and planned products may contain defects or errors that are detected only after delivery to customers. If that occurs, our reputation may be harmed and we may face additional costs.

We cannot assure you that our product development, manufacturing and integration testing will be adequate to detect all defects, errors, failures and quality issues that could impact customer satisfaction or result in claims against us with regard to our products. As a result, we may have to replace certain components and/or provide remediation in response to the discovery of defects in products that are shipped. The occurrence of any defects, errors, failures or quality issues could result in cancellation of orders, product returns, diversion of our resources, legal actions by our customers or our customers' end users and other losses to us or to our customers or end users, and could also result in the loss of or delay in market acceptance of our products and loss of sales, which would harm our business and adversely affect our revenues and profitability.

Provisions in our corporate documents and Delaware law may delay or prevent a change in control of our company, and, accordingly, we may not consummate a transaction that our shareholders consider favorable.

Provisions of our Certificate of Incorporation and By-laws may inhibit changes in control of our company not approved by our Board. These provisions include, for example: a staggered board of directors; a prohibition on shareholder action by written consent; a requirement that special shareholder meetings be called only by our Chairman, President or our Board; advance notice requirements for shareholder proposals and nominations; limitations on shareholders' ability to amend, alter or repeal the By-laws; enhanced voting requirements for certain business combinations involving substantial shareholders; the authority of our Board to issue, without shareholder approval, preferred stock with terms determined in its discretion; and limitations on shareholders ability to remove directors. In addition, we are afforded the protections of Section 203 of the Delaware General Corporation Law, which could have similar effects. In general, Section 203 prohibits us from engaging in a "business combination" with an "interested shareholder" (each as defined in Section 203) for at least three years after the time the person became an interested shareholder unless certain conditions are met. These protective provisions could result in our not consummating a transaction that our shareholders consider favorable or discourage entities from attempting to acquire us, potentially at a significant premium to our then-existing stock price.

ITEM 1B. Unresolved Staff Comments

Not applicable.

ITEM 2. Properties

The following is a summary of our principal properties, as of December 31, 2007, classified by segment:

			Approximate Square Footage
		No. of Facilities	Approximate Square Footage
	Location	No. of Facilities	Owned	Leased
			(in millions)
Flow Technology	8 states and 22 foreign countries	56	2.4	2.0
Test and Measurement	7 states and 8 foreign countries	32	0.6	1.3
Thermal Equipment and Services	9 states and 8 foreign countries	31	4.1	3.9
Industrial Products and Services	14 states and 5 foreign countries	25	1.3	0.5

Total		144	8.4	7.7

In addition to manufacturing plants, we lease our corporate office in Charlotte, NC, our information technology data center in Horsham, PA, our Asia-Pacific center in Shanghai, China, and various sales and service locations throughout the world. We consider these properties, as well as the related machinery and equipment, to be well maintained and suitable and adequate for their intended purposes.

ITEM 3. Legal Proceedings

(All amounts are in millions)

In October of 2004, one of our Italian subsidiaries, SPX Cooling Technologies Italia, S.p.A., formerly Balcke Marley Italia, S.p.A., was notified that it was the subject of an investigation by the Milan Public Prosecutor's Office. The investigation related to the business practices of several individuals and different companies in securing contracts from an Italian power generation company. On August 24, 2006, the Public Prosecutor served on SPX Cooling Technologies Italia, S.p.A., a Notice of End of the Preliminary Investigations. This Notice, which also identified numerous other individual and corporate defendants, sets forth an allegation that SPX Cooling Technologies Italia, S.p.A. is responsible under Italian Legislative Decree No. 231 for failing to adopt and effectively implement a proper organization and management model suitable for the prevention of alleged acts of bribery by the former general manager of Hamon-Research Cottrell Italia, S.p.A. and the former director of Marley Cooling Tower Europe, S.p.A. Our subsidiary has previously taken actions to address Italian Legislative Decree No. 231, including the appointment of a compliance program supervisor at the cooling equipment business, and is evaluating these charges and potential defenses in advance of a preliminary hearing. Following the assertion of preliminary defenses by SPX Cooling Technologies Italia S.p.A., the Public Prosecutor discharged our subsidiary from any responsibilities under such Italian Legislative Decree for several alleged acts of bribery. Such discharge by the Public Prosecutor is subject to challenge by third parties having a lawful interest therein within six months after the filing of the discharge. In addition, following discussions between our subsidiary and the Public Prosecutor regarding a potential plea-agreement with respect to the remaining alleged acts of bribery, our subsidiary submitted a request for a plea-agreement to which the Public Prosecutor consented. The Judge responsible for this matter conducted a hearing to consider the proposed plea-agreement on February 26, 2008 and has scheduled a further hearing to issue a decision on March 28, 2008. We do not believe that the outcome of these proceedings will have a material adverse effect on our financial condition, results of operations, or cash flows.

We are subject to other legal proceedings and claims that arise in the normal course of business. In our opinion, these matters are either without merit or of a kind that should not have a material adverse effect individually or in the aggregate on our financial position, results of operations, or cash flows. However, we cannot assure you that these proceedings or claims will not have a material adverse effect on our financial position, results of operations, or cash flows.

See "Contingent Liabilities," "Risk Factors" and Note 14 to our consolidated financial statements for further discussion of legal proceedings.

ITEM 4. Submission Of Matters To A Vote Of Security Holders

Not applicable.

ITEM 5. Market For Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Our common stock is traded on the New York Stock Exchange under the symbol "SPW."

Set forth below are the high and low sales prices for our common stock as reported on the New York Stock Exchange composite transaction reporting system for each quarterly period during the years 2007 and 2006, together with dividend information.

		High		Low		Dividends per Share
2007
	4 ^th Quarter	$	109.88	$	90.72	$	0.25
	3 ^rd Quarter		94.70		79.81		0.25
	2 ^nd Quarter		89.39		69.11		0.25
	1 ^st Quarter		71.86		60.98		0.25

		High		Low		Dividends per Share
2006
	4 ^th Quarter	$	62.37	$	54.08	$	0.25
	3 ^rd Quarter		56.25		50.58		0.25
	2 ^nd Quarter		57.16		51.23		0.25
	1 ^st Quarter		54.00		45.91		0.25

The actual amount of each quarterly dividend, as well as each declaration date, record date and payment date is subject to the discretion of the Board of Directors, and the target dividend level may be adjusted during the year at the discretion of the Board of Directors. The factors the Board of Directors consider in determining the actual amount of each quarterly dividend includes our financial performance and on-going capital needs, our ability to declare and pay dividends under the terms of our credit facilities and any other debt instruments, and other factors deemed relevant.

There were no repurchases of common stock during the three months ended December 31, 2007. The approximate number of shareholders of record of our common stock as of February 22, 2008 was 4,521.

Company Performance

This graph shows a five year comparison of cumulative total returns for SPX, the S&P Composite Index and the S&P Capital Goods Index. The graph assumes an initial investment of $100 on December 31, 2002 and the reinvestment of dividends.

ITEM 6. Selected Financial Data

		As of and for the year ended December 31,
		2007			2006			2005			2004			2003
		(In millions, except per share amounts)
Summary of Operations
Revenues ⁽¹⁾⁽²⁾		$	4,822.3		$	4,167.6		$	3,729.8		$	3,508.9		$	3,131.4
Operating income ⁽²⁾⁽³⁾			425.6			320.9			263.9			49.6			304.9
Other (expense) income, net ⁽⁴⁾			(4.6	)		(28.0	)		(17.2	)		(8.7	)		47.4
Interest expense, net ⁽⁵⁾⁽⁶⁾			(71.1	)		(50.2	)		(164.1	)		(154.1	)		(187.7	)
Equity earnings in joint ventures			39.9			40.8			23.5			25.9			34.3

Income (loss) from continuing operations before income taxes			389.8			283.5			106.1			(87.3	)		198.9
(Provision) benefit for income taxes ⁽⁷⁾			(89.5	)		(57.8	)		(71.4	)		26.5			(84.8	)

Income (loss) from continuing operations			300.3			225.7			34.7			(60.8	)		114.1
Income (loss) from discontinued operations, net of tax ⁽⁶⁾			(6.1	)		(55.0	)		1,055.3			43.7			121.9

Net income (loss)		$	294.2		$	170.7		$	1,090.0		$	(17.1	)	$	236.0

Basic earnings (loss) per share of common stock:
	Income (loss) from continuing operations	$	5.47		$	3.87		$	0.49		$	(0.82	)	$	1.48
	Income (loss) from discontinued operations		(0.11	)		(0.94	)		14.84			0.59			1.59

	Net income (loss) per share	$	5.36		$	2.93		$	15.33		$	(0.23	)	$	3.07

Diluted earnings (loss) per share of common stock:
	Income (loss) from continuing operations	$	5.33		$	3.74		$	0.48		$	(0.82	)	$	1.46
	Income (loss) from discontinued operations		(0.11	)		(0.91	)		14.62			0.59			1.38

	Net income (loss) per share	$	5.22		$	2.83		$	15.10		$	(0.23	)	$	2.84

	Dividends declared per share	$	1.00		$	1.00		$	1.00		$	1.00			—
Other financial data:
	Total assets	$	6,237.4		$	5,437.1		$	5,306.4		$	7,588.5		$	7,624.3
	Total debt		1,575.1			963.8			780.7			2,526.1			2,619.9
	Other long-term obligations		823.3			838.1			990.5			1,211.6			1,353.5
	Shareholders' equity		2,006.0			2,109.4			2,111.2			2,127.8			2,067.2
	Capital expenditures		90.9			55.7			41.3			31.8			25.4
	Depreciation and amortization		79.0			72.1			65.9			69.8			68.8

⁽¹⁾: During 2005, revenues for our Test and Measurement segment were reduced for program incentives and rebates earned by certain customers throughout the year. Prior to 2005, these incentives and rebates were classified as cost of products sold and selling, general and administrative expense. Had these amounts been classified as a reduction to revenues prior to 2005, revenues for 2004 and 2003 would have been lower by $14.6 and $13.3, respectively.
⁽²⁾: An internal audit of an operation in Japan uncovered employee misconduct and improper accounting entries. Correction of these matters resulted in a charge of $7.4 during the third quarter of 2007, with a reduction of $2.3 to revenues, $4.5 recorded to cost of products sold and $0.6 recorded to selling, general and administrative expense. See Note 1 to our consolidated financial statements for further information.
: During 2007, we recorded charges related to the settlement of a legacy product liability matter within our Industrial Products and Services segment of $8.5. We also recorded a benefit of $5.0 during 2007 within our Thermal Equipment and Services segment as a result of cost improvements associated with a state-approved environmental remediation plan at a site in California.
⁽³⁾: In 2007, 2006 and 2005, we incurred net special charges of $7.6, $3.9 and $8.6, respectively, associated with restructuring initiatives to consolidate manufacturing and other facilities, as well as asset impairments. In 2005, these charges were net of a credit of $7.9 relating to a gain on the sale of land in Milpitas, CA, resulting in the finalization of a previously initiated restructuring action. See Note 6 to our consolidated financial statements for further details.
: In 2007, we recorded charges of $5.0 within corporate expense related to legacy legal matters.
: In 2007, we recorded an impairment charge of $4.0 associated with other intangible assets held by a business within our Thermal Equipment and Services segment. See Note 8 to our consolidated financial statements for further discussion.

: In 2004, we recorded charges of $175.3 related to the impairment of goodwill and other intangible assets for our Fluid Power, Radiodetection and TPS businesses. In addition, we incurred net special charges of $37.8 related to other asset impairments and cash costs associated with work force reductions, initiatives to divest or consolidate manufacturing facilities, asset divestures and the exit of certain operations. Approximately $8.8 of these net special charges related to non-disposal asset impairments at our Fluid Power business that were recorded in accordance with the provisions of SFAS No. 144.
: In 2003, we recorded $34.3 of net special charges associated primarily with the restructuring initiatives to consolidate manufacturing facilities and rationalize certain product lines, along with any related asset impairments.
⁽⁴⁾: In 2006, we recorded a charge of $20.0 relating to the settlement of a lawsuit with VSI Holdings, Inc. ("VSI").
: In 2003, we recorded a $41.9 net gain on the favorable settlement of a patent infringement suit against Microsoft Corporation.
⁽⁵⁾: Interest expense, net included losses on early extinguishment of debt of $3.3 in 2007, $113.6 in 2005, $2.6 in 2004 and $2.2 in 2003 related to the write-off of unamortized deferred financing fees, premiums/fees paid to redeem senior notes and other costs associated with the extinguishment of the term loans and revolving credit loan.
⁽⁶⁾: Income from discontinued operations included an allocation of interest expense of $10.2 in each 2004 and 2003 associated with the provision under our credit agreement then in effect that required that the first $150.0 of proceeds from business dispositions be applied to outstanding balances under the credit agreement, including the term loans. No other corporate costs have been allocated to discontinued operations.
⁽⁷⁾: During 2007, in connection with the resolution of certain matters related to our Federal income tax returns for the years 1995 through 2002, we recorded an income tax benefit of $16.8. In addition, during 2007, we recorded an income tax benefit of $11.5 associated with a reduction in the statutory tax rates in Germany and the United Kingdom. Lastly, during 2007, we recorded an aggregate income tax benefit of $15.9 associated with the settlement of various state matters and certain matters in the United Kingdom, an expected refund in China related to an earnings reinvestment plan, and the reversal of income taxes that were provided prior to 2007.
: During 2006 we recorded an income tax benefit of $34.7 principally associated with the settlement of certain matters relating to our 1998 to 2002 Federal income tax returns.

ITEM 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations

(All dollar and share amounts are in millions)

The following should be read in conjunction with our consolidated financial statements and the related notes. All dollar and share amounts are in millions.

Executive Overview

Overall, 2007 was a successful year for SPX as we experienced our third consecutive year of improvement in revenues and operating income. Specifically, revenues and operating income for 2007 were higher than 2006 by 15.7% and 32.6%, respectively. In addition, net operating cash flows from continuing operations were $404.2 in 2007 compared to $48.6 in 2006. We also continued our progress on our six key operating initiatives (emerging markets, new product development, lean processes, supply chain management, information technology centralization and organizational development). A brief summary of our efforts to date on our operating initiatives is as follows:

•: Emerging Markets — Our primary emerging markets' efforts have been on China. During 2007, revenues from sales into China totaled approximately $344.0, including approximately $244.0 relating to our Thermal Equipment and Services segment, with the primary driver being cooling systems in support of power plant construction. The developing infrastructure in China also provides opportunities for a number of our other businesses. For example, the number of vehicles throughout China continues to increase, which we expect to drive demand for our Test and Measurement segment's electronic diagnostic equipment, specialty tools and dealer services. In addition, our Flow Technology segment is expanding its presence in China, as it was recently awarded two contracts valued at $13.0 to design and provide squib valves to various nuclear power plants in China and to provide training and technical expertise for these plants, and we expect additional orders in the near-term. As part of our expansion into China, we recently rolled out plans for a shared service center in Shanghai, which will initially focus on finance and will eventually service all of our businesses in Asia Pacific. Our Shanghai service center will likely serve as a blueprint for other shared service centers around the globe, with the next likely candidate being our businesses in Europe. The expected benefits from this shared service approach are (i) our ability to capitalize on scale and synergies, (ii) an intensified market and customer focus,

and (iii) an improved internal control environment. Our global expansion has not been limited to China, as other parts of the world, including Africa, the Middle East and Russia, are contributing to our organic revenue growth. In particular, our Thermal Equipment and Services segment recently obtained a $235.0 multi-year contract in South Africa to supply filters, air preheaters and pressure parts for boilers within a power generation facility. The acquisition of APV also expands our reach into emerging markets, as approximately 37% of APV's annual revenues are associated with sales into Asia Pacific, Africa and South America. In 2008, over 50% of our consolidated revenues are expected to be from sales outside of the U.S., with over 20% outside of North America and Western Europe.

•: New Product Development — We are committed to developing new, innovative solutions to meet our customers' needs and, in some cases, regulatory standards. Within our Test and Measurement segment, new product development is critical to keeping pace with increasing vehicle complexity and new model launches. During 2007, the segment launched a new air conditioner servicing unit that has received two awards from the U.S. Environmental Protection Agency for its ability to protect the climate and ozone. The segment also recently launched the DT-500, a diagnostic tool that operates in Mandarin and is currently being sold in the Chinese aftermarket. Within our Thermal Equipment and Services segment, we have over 250 patents relating to our cooling systems. The segment recently introduced a new hybrid cooling application called Air-2-Air. This technology can reduce water consumption within a power plant by up to 20%. As noted above, our Flow Technology segment has developed a new squib valve technology for use in nuclear power plants.
•: Lean Processes — Our businesses are implementing lean principles throughout all their functions, with an ultimate objective of achieving operational excellence. Our lean efforts focus on making each task more efficient through, among other things, the elimination of waste and bottlenecks. Businesses within our Flow Technology segment as well as our power transformer business have experienced significant improvements in their manufacturing processes as a result of implementing lean principles, resulting in increased capacity and through-put and ultimately in improved profitability. Many of our other businesses are beginning to experience similar progress with their lean efforts, which should have a favorable impact on future operating results.
•: Supply Chain Management — Our supply chain initiative is focused on driving cost reductions and working capital improvement, along with quality and on-time delivery through partnering with a strategic global supply base. Across all our businesses, we are effectively managing challenging material markets (e.g., steel and copper) by (i) making strategic material purchases, (ii) consolidating our vendor base, and (iii) implementing hedging strategies where market opportunities exist.
•: Information Technology ("IT") Centralization — We continue to invest in and make progress on the IT front, including the planned global expansion of SAP, with an initial focus in our Flow Technology and Thermal Equipment and Services segments. During 2007, 15 business locations implemented SAP and another 10 are scheduled for 2008. The success of many of our other key operating initiatives is highly dependent upon continued investment in a global IT structure.
•: Organizational Development — Our employees are the backbone of the company. We are providing leadership and managerial training to further develop the skills of our employees. We have development programs for engineering, finance and human resources that are focused on recruiting and developing high-talent individuals. In addition, we recently implemented a business leadership development program for a select group of high potential managers. The program focuses on further developing leadership and problem solving skills, with the problem solving activities generally focused on our own key operating initiatives.

During 2007, our focus on these initiatives contributed to improvement in revenues and operating income and margins as described in "Results of Continuing Operations" and "Segments Results of Operations." In 2008, we will continue to focus on and anticipate continued progress across all these key initiatives, which we expect will result in additional improvement in revenue and operating income and margins. In addition, during 2008 we also will be looking to expand our low-cost country engineering and manufacturing presence. APV, which we acquired on December 31, 2007, already maintains a 32,000 square foot manufacturing facility in Bydgoszcz, Poland and is constructing an additional 113,000 square foot facility at the same location. We will to look to leverage what is already in place for APV and will consider other alternatives where there is an available skilled workforce, possible tax incentives and a modernized infrastructure. We believe that expanding our low-cost country engineering and manufacturing presence can favorably impact our cost structure as well as our ability to expand our customer base.

Other Significant 2007 Items

There were a number of other significant items that impacted our 2007 operating results, including:

Capital Structure:

•: We entered into new senior credit facilities, with total capacity of $2,300.0, which replaced our then-existing senior credit facilities.
•: We issued, in a private placement, $500.0 aggregate principal amount of 7.625% senior unsecured notes due in 2014.

Acquisitions:

•: In August 2007, we completed the acquisition of JCD within our Test and Measurement segment for a purchase price of $40.3.
•: In October 2007, we completed the acquisition of Matra within our Test and Measurement segment for a purchase price of $36.6, including cash acquired of $2.9.
•: On December 31, 2007 we completed the acquisition of APV within our Flow Technology segment for a purchase price of $524.2, including cash acquired of $41.7.

Dispositions and Discontinued Operations:

•: In April 2007, we sold Contech, our automotive components business, for net cash proceeds of $134.3. We recorded a net loss on the sale of $13.6 to "Gain (loss) on disposition of discontinued operations, net of tax."
•: During the third quarter of 2007, we committed to a plan to divest our Air Filtration business within the Flow Technology segment. As a result of the planned divestiture, we recorded a net charge of $11.0 during 2007 to "Gain (loss) on disposition of discontinued operations, net of tax."
•: During the third quarter of 2007, we recognized an income tax benefit of $13.5 to "Gain (loss) on disposition of discontinued operations, net of tax" relating to the reversal of certain deferred tax liabilities associated with businesses previously disposed of and reported as discontinued operations, primarily in 2005.
•: In December 2007, we sold BD Austria for cash proceeds of $11.6, exclusive of cash balances assumed by the buyer of $30.0. We recorded a gain on sale of $17.2 to "Gain (loss) on disposition of discontinued operations, net of tax."
•: In December 2007, we sold Nema for cash proceeds of $6.8, net of cash assumed by the buyer of $0.4. We recorded a net loss on the sale of $2.3 to "Gain (loss) on disposition of discontinued operations, net of tax."

Common Stock Repurchases — We repurchased 9.0 shares of our common stock for total cash consideration of $715.9.

Income Taxes:

•: As a result of our adoption of FASB Interpretation No. 48, "Accounting for Uncertainty in Income Taxes, an Interpretation of FASB Statement No. 109" ("FIN 48"), we reduced our income tax liabilities for unrecognized tax benefits by $52.5, with a corresponding increase to retained earnings.
•: We reached an agreement with the Internal Revenue Service ("IRS") regarding certain matters related to our Federal income tax returns for the years 1995 through 2002 after the agreement was approved by the Joint Committee on Taxation of the U.S. Congress. In connection with the resolution of these matters, we reduced our income tax liabilities by $35.6, which resulted in a continuing operations tax benefit of $16.8 and a decrease in goodwill of $18.8.
•: We recorded an income tax benefit of $11.5 associated with a reduction in the statutory tax rates in Germany and the United Kingdom.
•: We recorded an aggregate income tax benefit of $15.9 associated with the settlement of various state matters and certain matters in the United Kingdom, an expected refund in China related to an earnings reinvestment plan, and the reversal of income taxes that were provided prior to 2007.

Other:

•: An internal audit of an operation in Japan uncovered employee misconduct and improper accounting entries. Correction of these matters resulted in a charge of $7.4 during the third quarter of 2007, which included $2.4 of inventory write-downs, $2.0 of accounts receivable write-offs and $3.0 of other adjustments. See Note 1 to our consolidated financial statements for further information.

•: We recorded a benefit of $5.0 within our Thermal Equipment and Services segment as a result of cost improvements associated with a state-approved environmental remediation plan at a site in California during the second quarter of 2007.
•: We recorded net charges of $8.5 related to the settlement of a legacy product liability matter within our Industrial Products and Services segment during the first, second and fourth quarters of 2007.
•: We recorded charges of $5.0 related to legacy legal matters, with $4.8 recorded during the fourth quarter of 2007.

Results of Continuing Operations

Seasonality and Competition — Many of our businesses follow changes in the industries and end markets that they serve. In addition, certain businesses have seasonal fluctuations. Our heating and ventilation products businesses tend to be stronger during the third and fourth quarters, as customer-buying habits are driven largely by seasonal weather patterns. Demand for cooling towers and related services is highly correlated to contract timing on large construction contracts, which may cause significant fluctuations from period to period. Revenues for our Service Solutions business typically follow program launch timing for diagnostic systems and service equipment. In aggregate, our businesses generally tend to be stronger in the second half of the year.

Although our businesses operate in highly competitive markets, our competitive position cannot be determined accurately in the aggregate or by segment since our competitors do not offer all the same product lines or serve all the same markets. In addition, specific reliable comparative figures are not available for many of our competitors. In most product groups, competition comes from numerous concerns, both large and small. The principal methods of competition are price, service, product performance and technical innovations. These methods vary with the type of product sold. We believe we can compete effectively on the basis of each of these factors as they apply to the various products we offer. See "Segments" for a discussion of our competitors.

Non-GAAP Measures — Organic revenue growth (decline) presented herein is defined as revenue growth (decline) excluding the effects of foreign currency fluctuations and acquisitions and divestitures. We believe that this metric is a useful financial measure for investors in evaluating our operating performance for the periods presented, as when read in conjunction with our revenues, it presents a useful tool to evaluate our ongoing operations and provides investors with a tool they can use to evaluate our management of assets held from period to period. In addition, organic revenue growth (decline) is one of the factors we use in internal evaluations of the overall performance of our business. This metric, however, is not a measure of financial performance under accounting principles generally accepted in the United States ("GAAP") and should not be considered a substitute for revenue growth (decline) as determined in accordance with GAAP and may not be comparable to similarly titled measures reported by other companies.

The following table provides selected financial information for the years ended December 31, 2007, 2006 and 2005, including the reconciliation of organic revenue growth to net revenue growth, as defined herein:

		2007			2006			2005			2007 vs. 2006%		2006 vs. 2005%
Revenues		$	4,822.3		$	4,167.6		$	3,729.8		15.7		11.7
Gross profit			1,393.1			1,169.4			1,027.6		19.1		13.8
	% of revenues		28.9	%		28.1	%		27.6	%
Selling, general and administrative expense			937.5			830.5			742.3		12.9		11.9
	% of revenues		19.4	%		19.9	%		19.9	%
Intangible amortization			18.4			14.1			12.8		30.5		10.2
Impairment of intangible assets			4.0			—			—		*		—
Special charges, net			7.6			3.9			8.6		94.9		(54.7	)
Other expense, net			(4.6	)		(28.0	)		(17.2	)	(83.6	)	62.8
Interest expense, net			(67.8	)		(50.2	)		(50.5	)	35.1		(0.6	)
Loss on early extinguishment of debt			(3.3	)		—			(113.6	)	*		*
Equity earnings in joint ventures			39.9			40.8			23.5		(2.2	)	73.6
Income from continuing operations before income taxes			389.8			283.5			106.1		37.5		167.2
Income tax provision			(89.5	)		(57.8	)		(71.4	)	54.8		(19.0	)
Income from continuing operations			300.3			225.7			34.7		33.1		550.4
Components of consolidated revenue growth:
	Organic growth										9.8		9.7
	Foreign currency										2.7		0.6
	Acquisitions, net										3.2		1.4

	Net revenue growth										15.7		11.7

* Not meaningful for comparison purposes.

Revenues — For 2007, the increase in revenues was driven primarily by organic revenue growth. We continued to experience strong demand in the power, chemical, mining, oil and gas, sanitary and dehydration markets serviced by businesses in our Flow Technology segment, as well as for cooling systems and products and thermal services within our Thermal Equipment and Services segment. Growth in our Industrial Products and Services segment has been led by strong demand for power transformers. Revenues for 2007 also benefited from the fourth quarter 2006 acquisition of Aktiebolaget Custos ("Custos") within our Flow Technology segment, the 2007 acquisitions of JCD and Matra within our Test and Measurement segment, and the favorable impact of foreign currencies (i.e., weakening of the U.S. dollar against most other currencies).

For 2006, the increase in revenues was driven primarily by organic revenue growth. We experienced strong demand for thermal services and repairs in Europe and dry cooling products in China within our Thermal Equipment and Services segment, as well as within the power, chemical, mining and oil and gas markets serviced by businesses in our Flow Technology segment. Growth in our Industrial Products and Services segment was led by strong demand for power transformers, crystal growing and laboratory equipment, machined components for aircrafts, and industrial and hydraulic tools. Revenues also benefited from the fourth quarter 2005 acquisition of CarTool GmbH ("CarTool") in our Test and Measurement segment.

Gross profit — The increase in gross profit in 2007 was due primarily to the revenue performance described above. The following items favorably impacted gross profit as a percentage of revenues in 2007 when compared to 2006:

•: Improved pricing, favorable product mix and productivity associated with the power transformer business within our Industrial Products and Services segment.
•: Improved pricing and lean manufacturing initiatives within the Flow Technology segment.
•: Improved execution and favorable project mix within our cooling systems and products business.

The following items partially offset the 2007 increases in gross profit described above:

•: A significant decline in OEM program launches due to difficult conditions within the domestic automotive market led to reduced revenues and margins in our Test and Measurement segment.
•: An internal audit of an operation in Japan uncovered employee misconduct and improper accounting entries. Correction of these matters resulted in a total charge of $7.4 during third quarter of 2007, with a reduction of $2.3 of revenues, $4.5 recorded to cost of products sold and $0.6 recorded to selling, general and administrative expense. See Note 1 to our consolidated financial statements for further information.
•: Charges of $8.5 within our Industrial Products and Services segment related to the settlement of a legacy product liability matter.

The increase in gross profit in 2006, when compared to 2005, was due primarily to the revenue performance described above. The following items favorably impacted gross profit as a percentage of revenues in 2006 when compared to 2005:

•: Improved pricing and lean manufacturing initiatives within the Flow Technology segment.
•: New product introductions, improved pricing and favorable product mix associated with the specialty tools and portable cable and pipe locator product lines of our Test and Measurement segment.
•: Improved pricing, favorable product mix and productivity associated with the power transformer and industrial and hydraulic tools businesses within our Industrial Products and Services segment.

The following items partially offset the 2006 increases in gross profit described above:

•: Higher pension and postretirement costs, relating primarily to our domestic pension plans.
•: Lower profit margins for our boiler products business within our Thermal Equipment and Services segment as a result of lower overall demand in the domestic heating markets, unfavorable product mix and higher manufacturing costs in 2006.

Selling, general and administrative ("SG&A") expense — For 2007, the increase in SG&A expense of $107.0 was due primarily to incremental costs associated with the acquisitions of Custos, JCD and Matra, as well as increases in headcount and associated costs to support the organic revenue growth within our segments. Additionally, 2007 SG&A expense was higher due to the following:

•: Higher salaries and incentive compensation relating to the impact of headcount increases in support of certain key operating initiatives.
•: Higher stock-based compensation expense of $3.8 primarily as a result of an increase in the fair value of our 2007 restricted stock and restricted stock unit awards due to an increase in the market value of our common stock.

In addition, SG&A for 2007 included charges of $5.0 relating to legacy legal matters and a benefit of $5.0 within our Thermal Equipment and Services segment as a result of cost improvements associated with a state approved environmental remediation plan at a site in California.

For 2006, the increase in SG&A expense of $88.2 was due primarily to increases in headcount and associated costs to support the organic revenue growth within our segments. Additionally, 2006 SG&A expense was higher due to the following:

•: Higher pension and postretirement costs, relating primarily to our domestic pension plans.
•: Higher stock-based compensation expense of $9.3, resulting primarily from 2006 being the third year of our restricted stock/restricted stock unit awards (i.e., three years of awards being amortized to earnings in 2006 compared to two years of awards in 2005).
•: Charges of $4.1 in 2006 relating to the agreement in principle to settle both the Securities Class Action and the tag-along ERISA action. See Note 14 to our consolidated financial statements for the details associated with this matter.
•: Net charges of $6.7 relating to legal matters.
•: Higher incentive compensation costs as a result of improved operating results in 2006.
•: Incremental costs associated with the CarTool and Custos acquisitions.

Intangible Amortization — The increase in intangible amortization in 2007, as compared to 2006, was due primarily to the impact of amortization of intangibles associated with the acquisitions of Custos, JCD and Matra. The increase in intangible amortization in 2006, as compared to 2005, was due primarily to the impact of amortization of intangibles associated with the acquisitions of CarTool and Custos.

Impairment of Intangible Assets — In connection with our annual impairment testing of indefinite-lived intangibles under SFAS 142, we determined that other intangible assets held by a business within our Thermal Equipment and Services segment were impaired. Accordingly, we recorded an impairment charge of $4.0 in the fourth quarter of 2007 related to this matter. See Note 8 to our consolidated financial statements for further discussion.

Special charges, net — Special charges related primarily to restructuring initiatives to consolidate manufacturing, sales and administrative facilities, reduce workforce and rationalize certain product lines. See Note 6 to our consolidated financial statements for the details of actions taken in 2007, 2006 and 2005. The components of special charges, net, follow:

	2007		2006			2005
Employee termination costs	$	5.0	$	1.3		$	5.9
Facility consolidation costs		0.3		1.1			7.7
Other cash costs		1.5		0.4			1.4
Non-cash asset write-downs		0.8		1.3			1.5
Gain on sale of assets		—		(0.2	)		(7.9	)

Total special charges, net	$	7.6	$	3.9		$	8.6

Other expense, net — For 2007, other expense, net, was composed primarily of foreign currency transaction losses of $3.0 and minority interest charges of $2.0, partially offset by $1.1 of life insurance death benefits that were received during 2007, while 2006 other expense, net, was composed primarily of $20.0 in costs to settle the litigation with VSI (see Note 14 to our consolidated financial statements) and $7.1 of foreign currency transaction losses.

For 2005, other expense, net, was composed primarily of foreign currency transaction losses of $15.6 and legal charges of $6.7, partially offset by a $2.8 gain associated with a reduction of liabilities related to an environmental remediation site and gains of $1.7 associated with the sale of assets.

Interest expense, net — The increase in interest expense, net during 2007, as compared to 2006, was the result of higher average debt balances during 2007 due to additional borrowings on our trade receivables financing arrangement and our domestic revolving loan facility to facilitate the repurchase of our common stock. In addition, in December 2007 we issued $500.0 of 7.625% senior notes.

During 2006, interest expense, net was impacted negatively by the fact that during the first half of 2006 we redeemed the Liquid Yield Option Notes ("LYONs"), which carried an interest rate of 2.75%, and simultaneously became a borrower under our delayed draw term facility, which carried a higher interest rate than the LYONs. In addition, interest income for 2006 was $4.5 lower as a result of lower average cash balances during the year. These increases to interest expense, net in 2006 were more than offset by the impact of the debt retirement activity in 2005. See "Liquidity and Financial Condition" and Note 12 to our consolidated financial statements for details pertaining to our 2005 debt retirement activity.

Loss on early extinguishment of debt — During 2007, we incurred $3.3 of costs in connection with the termination of our then-existing senior credit facilities (see Note 12 to our consolidated financial statements), including $2.3 for the write-off of deferred financing costs, $0.2 for an early termination fee and $0.8 for costs associated with the early termination of our then-existing interest rate protection agreements (see Note 13 to our consolidated financial statements).

During 2005, we incurred $85.4 of charges associated with the redemption of 93% of the outstanding 6.25% and 7.50% senior notes, with such charges related to premiums and fees paid to redeem the notes and the write-off of deferred financing costs related to the notes. In addition, we incurred charges of $28.2 associated with the repayment of $1,073.4 on the term loans of our then-existing senior credit facilities, with such charges related to the write-off of deferred financing costs and the termination of the remaining interest rate protection agreements related to the term loans.

Equity earnings in joint ventures — Our equity earnings in joint ventures are attributable primarily to our investment in EGS, as earnings from this investment totaled $39.3, $40.2 and $22.4 in 2007, 2006 and 2005, respectively. For 2006, the equity earnings associated with EGS included a benefit of $2.2 representing our portion of the income recorded by EGS in connection with the change in fair value of their commodity contracts. Additionally, in 2005, we recognized a charge of $7.5 representing our portion of the estimated costs of a legal settlement at EGS.

Income taxes — For 2007, we recorded an income tax provision of $89.5 on $389.8 of pre-tax income, resulting in an effective tax rate of 23.0%. The effective tax rate for 2007 was favorably impacted by: 1) a decrease in the interest charge associated with the liability for unrecognized tax benefits; 2) income tax benefits of $16.8 and 3.8, respectively, associated with the settlement of certain matters related to our a) 1995 to 2002 Federal income tax returns and b) various state income tax matters; 3) an income tax benefit of $11.5 associated with a reduction in the statutory tax rates in Germany and the United Kingdom; 4) a decrease in our state income tax provision due to a reduction in the valuation allowance for certain states resulting from current and projected taxable income for such states; 5) an income tax benefit of $3.5 associated with the settlement of certain matters relating to income tax returns in the United Kingdom; 6) an expected refund of $3.7 associated with an earnings reinvestment plan in China; and 7) an income tax benefit of $4.9 associated with the reversal of income taxes that were provided prior to 2007. The lower interest charge was the result of the reduction of our liability for unrecognized tax benefits associated with the adoption of FIN 48 in the amount of $52.5 and payments made against this liability of $66.6 and $37.5 in December 2006 and January 2007, respectively.

For 2006, we recorded an income tax provision of $57.8 on $283.5 of pre-tax income, resulting in an effective tax rate of 20.4%. The effective tax rate for 2006 was impacted favorably by income tax benefits of $34.7 and $8.3, associated principally with the settlement of certain matters relating to our 1998 to 2002 Federal income tax returns and various state income tax returns, respectively.

For 2005, we recorded an income tax provision of $71.4 on $106.1 of pre-tax income, resulting in an effective tax rate of 67.3%. The high effective tax rate in 2005 was primarily the result of approximately $44.5 in income taxes that had been provided for the repatriation of foreign earnings. This increase in the 2005 income tax provision was offset partially by the closure of certain domestic and international tax matters, resulting in a reduction to the 2005 tax provision of $15.1.

Results of Discontinued Operations

For 2007, 2006 and 2005, income (loss) from discontinued operations and the related income taxes are shown below:

		Year ended December 31,
		2007			2006			2005
Income (loss) from discontinued operations		$	(37.5	)	$	(105.0	)	$	1,512.8
Income tax (provision) benefit			31.4			50.0			(457.5	)

	Income (loss) from discontinued operations, net	$	(6.1	)	$	(55.0	)	$	1,055.3

For 2007, 2006 and 2005, results of operations from our businesses reported as discontinued operations were as follows:

	Year ended December 31,
	2007			2006		2005
Revenues	$	295.8		$	555.4	$	1,057.0
Pre-tax income (loss)		(0.9	)		4.3		(41.7	)

We report discontinued operations in accordance with the guidance of SFAS No. 144. Accordingly, we report businesses or asset groups as discontinued operations when, among other things, we commit to a plan to divest the business or asset group, actively begin marketing the business or asset group, and when the sale of the business or asset group is deemed

probable within the next 12 months. The following businesses, which have been sold, met these requirements and therefore have been reported as discontinued operations for the periods presented.

Business	Quarter Discontinued	Actual Closing Date of Sale
BD Austria	Q4 2007	Q4 2007
Nema	Q4 2007	Q4 2007
Contech	Q3 2006	Q2 2007
Dock	Q2 2006	Q4 2006
Tower	Q4 2005	Q1 2006
Vance	Q3 2005	Q1 2006
Mueller Steam, Febco and Polyjet product lines	Q3 2005	Q4 2005
Carfel	Q1 2005	Q3 2005
Kendro	Q4 2004	Q2 2005
Brookstone telecommunication services business	Q1 2005	Q1 2005
EST	Q4 2004	Q1 2005
Specialty tool business	Q4 2004	Q1 2005
Bomag	Q3 2004	Q1 2005

BD Austria — Sold for cash proceeds of $11.6, exclusive of cash balances assumed by the buyer of $30.0, resulting in a gain, net of taxes, of $17.2.

Nema — Sold for $6.8 in cash, net of cash balances assumed by the buyer of $0.4, for a loss, net of taxes, of $2.3.

Contech — Sold to Marathon Automotive Group, LLC. for net cash proceeds of $134.3. During 2007, we recorded a net loss on the sale of $13.6, including $7.0 of expenses that were contingent upon the consummation of the sale, which included $1.1 due to the modification of the vesting period of restricted stock units that had been issued to Contech employees (see Note 15 to our consolidated financial statements for further information), and a $6.6 charge, recorded during the first quarter of 2007, to reduce the carrying value of the net assets sold to the net proceeds received from the sale. In addition, in 2007, we settled a capital lease obligation for $5.3 relating to equipment that was transferred to the buyer of Contech. During 2006, we recorded a charge of $102.7 to "Gain (loss) on disposition of discontinued operations, net of tax" in order to reduce the carrying value of the net assets to be sold to their estimated net realizable value.

Dock — Sold for $43.5 in cash during 2006 resulting in a net gain on the sale of $29.0. This gain related primarily to a tax benefit of $33.2, partially offset by expenses that were contingent primarily upon the consummation of the sale, which included $0.3 due to the modification of the vesting period of restricted stock units that had been issued to Dock employees (see Note 15 to our consolidated financial statements for further information).

Tower — Sold for $6.9 in cash during 2006, including additional cash proceeds of $4.4 that related to the settlement of the working capital associated with the transaction. In 2005, we recorded a charge, net of taxes, of $11.3 in order to reduce the carrying value of the net assets to be sold to their estimated net realized value. During 2006, we reduced the net loss by $0.9 primarily as a result of the working capital settlement noted above.

Vance — Sold for $70.6 in cash during 2006. In 2005, we recorded a loss, net of taxes, of $26.8 in order to reduce the carrying value of the net assets to be sold to their estimated net realizable value. During 2006, we increased the net loss by $3.1, primarily for expenses that were contingent upon the consummation of the sale, which included $1.6 due to the modification of the vesting period of restricted stock units that had been issued to Vance employees (see Note 15 to our consolidated financial statements for further information).

Mueller Steam, Febco and Polyjet — Sold for $44.7 in cash during 2005, which resulted in a gain on the sale of $50.7, including a tax benefit of $71.8.

Carfel — Sold for $12.0 in cash during 2005, which resulted in a loss on the sale, net of taxes and transaction fees, of $21.9.

Kendro — Sold to Thermo Electron Corporation for $828.8 in cash during 2005, which resulted in a gain on the sale, net of taxes and transaction fees, of $326.5.

Brookstone telecommunication services business — Sold for $0.9 in cash during 2005, which resulted in a loss on the sale, net of taxes and transaction fees, of $12.1.

EST — Sold to General Electric Company ("GE") during 2005 for $1,393.2 in cash, net of cash balances assumed by GE of $1.5. In 2005, we recorded a gain on the sale, net of taxes and transaction fees, of $662.5.

Specialty Tool Business — Sold for $24.2 in cash during 2005, with $21.8 received at the closing and $2.4 deposited in an escrow account. In 2005, we recorded a loss on the sale, net of taxes, of $3.7. We received $1.7 of the escrow amount in 2006 and the remaining $0.7 in 2007.

Bomag — Sold to Fayat SA ("Fayat") for $447.3 in cash during 2005, net of cash balances assumed by Fayat of $2.7. In 2005, we recorded a gain on the sale, net of taxes and transaction fees, of $137.4.

During the third quarter of 2007, we committed to a plan to divest our Air Filtration business within our Flow Technology segment. We are actively pursuing the sale of this business and anticipate that the sale will be completed in the first half of 2008. Accordingly, we have reported, for all periods presented, the financial condition, results of operations and cash flows of this business as a discontinued operation in our consolidated financial statements. As a result of this planned divestiture, we recorded a net charge of $11.0 during 2007 to "Gain (loss) on disposition of discontinued operations, net of tax" in order to reduce the carrying value of the net assets to be sold to their estimated net realizable value. We believe that the carrying value of the net assets approximates fair value at December 31, 2007; however, such value is subject to adjustment based upon the future terms of a definitive agreement.

In addition to the gains/losses recorded in 2007 relating to the BD Austria, Nema, Contech and Air Filtration businesses discussed above, we recognized a net loss in 2007 of $7.3 resulting from adjustments to gains/losses on sales of businesses that were previously discontinued. Along with the gains/losses recorded in 2006 relating to the Dock, Tower, Vance and Contech businesses discussed above, we recognized a net gain in 2006 of $20.1 resulting from adjustments to the gains/losses on sales of businesses that were previously discontinued, with such adjustments related primarily to a reduction in income tax liabilities. Lastly, in 2005, we recorded an additional loss of $1.6 associated with the 2004 disposition of our Axial fan business, with the loss relating to the final purchase price settlement. In 2005, we also received $2.5 related to the final payment on the promissory note associated with the sale of the Axial fan business.

The final purchase price for certain of the divested businesses is subject to adjustment based on working capital existing at the respective closing dates. The working capital figures are subject to agreement with the buyers or if we cannot come to agreement with the buyers, an arbitration process. Final agreement of the working capital figures with the buyers for some of these transactions has yet to occur. In addition, changes in estimates associated with liabilities retained in connection with a business divestiture (e.g., income taxes) may occur. It is possible that the purchase price and resulting gains/(losses) on these and other previous divestitures may be materially adjusted in subsequent periods. Refer to Note 11 for the tax implications associated with our dispositions.

During the third quarter of 2007, we recognized an income tax benefit of $13.5 to "Gain (loss) on disposition of discontinued operations, net of tax" relating to the reversal of certain deferred tax liabilities associated with businesses previously disposed of and reported as discontinued operations, primarily in 2005. See Note 1 to our consolidated financial statements for further details.

Segment Results of Operations

The following information should be read in conjunction with our consolidated financial statements and related notes. The segment results exclude the operating results of discontinued operations for all periods presented. See Note 5 to our consolidated financial statements for a description of each of our reportable segments.

Non-GAAP Measures — Throughout the following discussion of segment results, we use "organic revenue" growth (decline) to facilitate explanation of the operating performance of our segments. Organic revenue growth is a non-GAAP financial measure, and is not a substitute for revenue growth (decline). Refer to the explanation of this measure and purpose of use by management under Results of Continuing Operations.

Flow Technology

		2007		2006		2005		2007 vs. 2006%	2006 vs. 2005%
Revenues		$	1,121.3	$	865.7	$	775.8	29.5	11.6
Segment income			177.2		133.2		102.2	33.0	30.3
	% of revenues		15.8		15.4		13.2
Components of segment revenue growth:
Organic growth								14.0	9.8
Foreign currency								2.4	0.9
Acquisitions, net								13.1	0.9

	Net segment revenue growth							29.5	11.6

Revenues — For 2007, the increase in revenues was due primarily to organic revenue growth resulting from strong demand within the power, chemical, mining, oil and gas, sanitary and dehydration markets. Additionally, revenues were favorably impacted by the fourth quarter 2006 acquisition of Custos, which contributed revenues of $119.0 during 2007, as well as the impact of foreign currencies.

For 2006, the increase in revenues was due primarily to organic revenue growth resulting from strong demand within the markets mentioned above, pricing improvements and new product introductions.

Segment Income — For 2007, segment income and margin were favorably impacted by the items noted above, as well as lean manufacturing and supply chain initiatives and lower operating expenses resulting from previous restructuring initiatives.

For 2006, segment income and margin were impacted favorably by improved operating leverage on organic revenue growth, lean manufacturing initiatives and a reduction in operating expenses in 2006 as a result of the favorable impact of 2005 restructuring initiatives. In addition, during 2005, charges of $4.0 were incurred in connection with operating inefficiencies at a Canadian operation.

Test and Measurement

		2007		2006		2005		2007 vs. 2006%		2006 vs. 2005%
Revenues		$	1,174.1	$	1,137.5	$	1,059.6	3.2		7.4
Segment income			126.4		159.1		129.9	(20.6	)	22.5
	% of revenues		10.8		14.0		12.3
Components of segment revenue growth:
Organic growth (decline)								(1.6	)	2.5
Foreign currency								2.9		0.5
Acquisitions, net								1.9		4.4

	Net segment revenue growth							3.2		7.4

Revenues — For 2007, the increase in revenues was due primarily to the impact of foreign currencies and the acquisitions of JCD in the third quarter of 2007 and Matra in the fourth quarter of 2007, which contributed $37.5 of combined revenues to the segment. These increases were partially offset by a decline in organic revenue resulting from lower domestic OEM and dealer equipment revenues associated with the difficult conditions within the domestic automotive market.

For 2006, the increase in revenues was due primarily to the impact of the fourth quarter 2005 acquisition of CarTool, as well as organic revenue growth associated with increased European OEM volumes.

Segment Income — For 2007, segment income and margin decreased primarily as the result of lower revenues and margins associated with difficult conditions within the domestic automotive market, lower absorption of fixed manufacturing costs resulting from the aforementioned decline in revenues, additional costs associated with investments in Asia Pacific and increased research and development costs in support of new products. In addition, during 2007, we recorded a charge of $7.4 at an operation in Japan relating to improper accounting entries, which included $2.4 of inventory write-downs, $2.0 of accounts receivable write-offs and $3.0 of other adjustments (see Note 1 to the consolidated financial statements for further information). These declines in segment income and margin were offset partially by improved profitability within the segment's portable cable and pipe locator product lines associated with new product introductions and operating profits associated with the acquisitions of JCD and Matra.

For 2006, segment income and margin increased due primarily to the organic revenue growth noted above, as well as the result of new product introductions, improved pricing, favorable product mix and lean manufacturing initiatives, primarily within the segment's portable cable and pipe locator product lines. Additionally, the acquisition of CarTool contributed to the increase in segment income. These increases were partially offset by a 2005 benefit of $2.6 relating to the reimbursement of excess charges by a freight company.

Thermal Equipment and Services

		2007			2006			2005			2007 vs. 2006%	2006 vs. 2005%
Revenues		$	1,560.5		$	1,327.7		$	1,178.4		17.5	12.7
Segment income			162.7			111.4			117.5		46.1	(5.2	)
	% of revenues		10.4	%		8.4	%		10.0	%
Components of segment revenue growth:
Organic growth											13.5	11.7
Foreign currency											4.0	1.0
Acquisitions, net											—	—

	Net segment revenue growth										17.5	12.7

Revenues — For 2007, the increase in revenues was due primarily to organic revenue growth associated with the strong global power market demand for cooling systems and products and thermal services and equipment, as well as the impact of foreign currencies.

For 2006, the increase in revenues was due primarily to organic revenue growth derived from the strong demand for thermal services and repairs in Europe and dry cooling products in China, offset partially by softness in the domestic heating market.

Segment Income — For 2007, segment income and margin increased as a result of the organic revenue growth noted above and improved execution within the cooling products and services business. In addition, segment income for 2007 included a benefit of $5.0 as a result of cost improvements associated with a state-approved environmental remediation plan at a site in California.

For 2006, segment income declined despite the increase in organic revenue. The favorable impact of organic revenue growth on segment income was more than offset by a decline in profitability at the segment's boiler products business due primarily to softness in the domestic heating market, unfavorable product mix and higher manufacturing costs. The following items also impacted comparability of segment income:

•: A $2.8 write-down of accounts receivable in 2006 relating to an ongoing customer issue.
•: Charges of $3.3 during 2005 associated with an operation in France.

Industrial Products and Services

		2007		2006		2005		2007 vs. 2006%	2006 vs. 2005%
Revenues		$	966.4	$	836.7	$	716.0	15.5	16.9
Segment income			156.1		99.0		67.5	57.7	46.7
	% of revenues		16.2		11.8		9.4
Components of segment revenue growth:
Organic growth								14.8	16.7
Foreign currency								0.7	0.2
Acquisitions, net								—	—

	Net segment revenue growth							15.5	16.9

Revenues — For 2007, the increase in revenues was due to organic revenue growth driven primarily by strong demand for power transformers.

For 2006, the increase in revenues was due to organic revenue growth driven by strong demand for power transformers, crystal growing and laboratory equipment, machined components for aircraft and industrial and hydraulic tools.

Segment Income — For 2007, the increase in segment income and margin was due to the organic revenue growth described above. In addition, segment income for 2007 included charges of $8.5 related to the settlement of a legacy product liability matter.

For 2006, the increase in segment income and margin was due primarily to the organic revenue growth described above and improved pricing and favorable mix associated with the power transformer and industrial and hydraulic tools businesses and efficiencies achieved from lean manufacturing initiatives.

Corporate Expense and Other Expense

		2007		2006		2005		2007 vs. 2006%		2006 vs. 2005%
Total consolidated revenues		$	4,822.3	$	4,167.6	$	3,729.8	15.7		11.7
Corporate expense			100.3		96.1		87.6	4.4		9.7
	% of revenues		2.1		2.3		2.3
Stock-based compensation expense			41.4		37.6		28.3	10.1		32.9
Pension and postretirement expense			43.5		44.2		28.7	(1.6	)	54.0

Corporate Expense — Corporate expense generally relates to the cost of our Charlotte, NC corporate headquarters, our Horsham, PA information technology data center, and our Asia-Pacific center in Shanghai, China. The increase in 2007 corporate expense was due primarily to higher salaries and incentive compensation relating to the impact of headcount increases in support of certain key operating initiatives, including expansion of our Asia-Pacific center. In addition, 2007 corporate expense included charges of $5.0 relating to legacy legal matters.

For 2006, the increase in corporate expense was due primarily to charges of $4.1 associated with the agreement in principle to settle both a Securities Class Action and the tag-along ERISA action, net charges of $6.7 relating to other legal matters, and additional incentive compensation resulting from higher consolidated operating profits in 2006. These increases were partially mitigated by one-time relocation and other costs in 2005 associated with moving certain corporate functions to our Charlotte, NC headquarters as well as higher professional fees in 2005 associated primarily with the continued implementation of the regulatory requirements of the Sarbanes-Oxley Act of 2002.

Stock-based Compensation Expense — The 2007 increase in stock-based compensation expense was due primarily to an increase in the fair value of our 2007 restricted stock and restricted stock unit awards. The grant date fair value of our stock-based compensation awards is directly correlated to changes in the market value of our common stock (see Note 15 to the consolidated financial statements for a discussion of our valuation technique). The weighted average fair value of our 2007 restricted stock and restricted stock unit awards was approximately 35% higher than the weighted average fair value of the comparable 2006 awards.

The 2006 increase in stock-based compensation expense was primarily the result of 2006 being the third year of our restricted stock/restricted stock unit awards (i.e., three years of awards being amortized to earnings in 2006 compared to two years in 2005), partially offset by the effect of adopting SFAS No. 123(R) in the first quarter of 2006. Had our stock-based compensation been calculated on the same basis as in 2005, our expense for 2006 would have been $14.2 higher (see Note 15 to our consolidated financial statements for details regarding our adoption of SFAS No. 123(R)).

Pension and Postretirement Expense — Pension and postretirement expense represents our consolidated expense, which we do not allocate for segment reporting purposes. The decrease in pension and postretirement expense for 2007 versus 2006 was due primarily to a reduction in the amortization of unrecognized losses associated primarily with lower interest rates.

The increase in pension and postretirement benefit expense for 2006 versus 2005 was due primarily to the amortization of deferred losses within our domestic pension plans associated with lower than projected returns on plan assets and lower interest rates.

Outlook

The following table highlights our segment expectations for 2008 based on information available at the time of this report. We define forecasted trends as follows: "Growth" — Future performance is expected to be above the prior year; "Flat" — Future performance is expected to be flat compared to the prior year; "Decline" — Future performance is expected to be below the prior year.

Segment	2008 Annual Forecasted Trend	Comments
Flow Technology	Growth	We are projecting strong revenue and profit growth as a result of the APV acquisition and continued organic growth that is expected within the end markets served by the segment. However, we are projecting lower operating margins in 2008 as APV historically has generated operating margins below those experienced by the rest of the segment's product lines. We expect significant, but gradual, improvements in APV's operating margins as a result of the synergies that should result from our integration efforts. The segment had backlog of approximately $730.7 (including $363.5 related to APV) and $314.7 as of December 31, 2007 and 2006, respectively.
Test and Measurement	Growth	We are projecting moderate revenue and profit growth for 2008, with most of the revenue and profit growth associated with the JCD and Matra acquisitions, as these businesses are not impacted by the difficult trends within the North American OEM tool market. Backlog for the segment is not material as the related businesses are short-cycle in nature.
Thermal Equipment and Services	Growth	We are projecting revenue and profit growth for the segment in 2008, as the global energy and power markets continue to be quite strong. However, we expect the pace of revenue growth to be less than the double-digit growth that has been experienced by the segment over the past two years, due in part to a significantly higher revenue base. We had a backlog of approximately $1,254.2 and $1,080.2 as of December 31, 2007 and 2006, respectively, across the segment, with the majority in our cooling systems and products business.
Industrial Products and Services	Growth	We expect organic revenue and profit growth across the majority of the segment's businesses, with the most notable growth in our power transformer business. Backlog for the segment totaled approximately $640.3 and $538.4 as of December 31, 2007 and 2006, respectively.

Liquidity and Financial Condition

Listed below are the cash flows from (used in) operating, investing and financing activities, and discontinued operations, and the net change in cash and equivalents for the years ended December 31, 2007, 2006 and 2005.

			2007			2006			2005
Continuing operations:
	Cash flows from operating activities		$	404.2		$	48.6		$	268.3
	Cash flows used in investing activities			(654.8	)		(205.7	)		(50.3	)
	Cash flows used in financing activities			(41.0	)		(62.0	)		(2,500.5	)
Cash flows from discontinued operations				155.7			111.3			2,300.2
Increase (decrease) in cash and equivalents due to changes in foreign currency exchange rates				12.8			4.8			(23.9	)

		Net change in cash and equivalents	$	(123.1	)	$	(103.0	)	$	(6.2	)

2007 Compared to 2006:

Operating Activities — The primary factors contributing to the increase in cash flows from operating activities during 2007 as compared to 2006 were as follows:

•: Accreted interest (since issuance) of $84.3 paid in connection with the 2006 LYONs redemption. Unlike the zero coupon LYONs, our current long term debt arrangements have interest paid quarterly or semi-annually.

•: Income tax payments of $90.9 during 2006 resulting from the tax recapture associated with the 2006 LYONs redemption and payments to the IRS of $66.6 relating to adjustments resulting from audits of our 1995 to 2002 Federal tax returns. See Note 11 to our consolidated financial statements for additional details.
•: Higher operating earnings in 2007.
•: Payment of $20.0 during 2006 related to the settlement of a lawsuit with VSI.
•: An improvement in working capital during 2007 due primarily to increases in customer deposits, particularly for our power transformer business.

Investing Activities — The primary factors contributing to the increase in cash flows used in investing activities during 2007 as compared to 2006 were as follows:

•: An increase in business acquisitions and investments ($567.2 in 2007 compared to $169.4 in 2006), relating primarily to the acquisitions of APV, JCD and Matra.
•: A decrease in proceeds from asset sales ($3.3 in 2007 versus $19.4 in 2006).
•: An increase in capital expenditures relating primarily to the implementation of new ERP software systems in connection with our ERP rationalization initiative ($90.9 in 2007 compared to $55.7 in 2006).

Financing Activities — The primary factors contributing to the decrease in cash used in financing activities during 2007 as compared to 2006 were as follows:

•: Borrowings of $500.0 resulting from the issuance of our 7.625% senior notes.
•: An increase in borrowings of $69.0 under our trade receivables financing arrangement during 2007 compared to 2006.

The above increases were partially offset by the following:

•: Repurchases of our common stock totaling $715.9 during 2007 compared to $436.3 in 2006.
•: Decrease in net borrowings on the senior credit and other debt facilities of $214.0 in 2007.
•: Proceeds from the exercise of stock options totaling $153.7 in 2007 compared to $196.8 in 2006.

Discontinued Operations — The increase in cash flows from discontinued operations during 2007 as compared to 2006 was due primarily to an income tax refund of $45.4 associated with capital losses generated from the sale of discontinued operations.

2006 Compared to 2005:

Operating Activities — The primary factors contributing to the decrease in cash flows from operating activities during 2006 as compared to 2005 were as follows:

•: Accreted interest (since issuance) of $84.3 paid in connection with the 2006 LYONs redemption.
•: Income tax payments of $90.9 resulting from the tax recapture associated with the 2006 LYONs redemption and payments to the IRS of $66.6 relating to adjustments resulting from audits of our 1995 to 2002 Federal tax returns. See Note 11 to our consolidated financial statements for additional details.
•: Additional investments in accounts receivable and inventories associated with the organic revenue growth experienced in 2006.
•: Payment of $20.0 related to the settlement of a lawsuit with VSI.

The above decreases in operating cash flows were partially offset by the cash flow impact of higher operating earnings in 2006 and an increase in customer deposits, particularly for our power transformer business, during the year.

Investing Activities — The primary factors contributing to the increase in cash flows used in investing activities during 2006 as compared to 2005 were as follows:

•: An increase in business acquisitions and investments ($169.4 in 2006 compared to $50.4 in 2005).
•: A decrease in proceeds from asset sales ($19.4 in 2006 versus $41.4 in 2005).

•: An increase in capital expenditures relating primarily to the implementation of new ERP software systems across the company in connection with our ERP rationalization initiative ($55.7 in 2006 compared to $41.3 in 2005).

Financing Activities — The primary factors contributing to the decrease in cash used in financing activities during 2006 as compared to 2005 were as follows:

•: Repayments of $1,073.4 on our Tranche A and B term loans and repurchases of our senior notes, including premiums of $72.9, totaling $744.5 in 2005.
•: Borrowings of $750.0 under the delayed draw term loan of our senior credit facilities as a means of financing the redemption of the LYONs noted below in 2006.
•: Repurchases of our common stock totaling $436.3 during 2006 compared to $624.7 in 2005.
•: Borrowings of $83.2 under our global revolving loan facility as a means of financing a portion of the cash purchase price associated with acquisition of Custos in December 2006.
•: Proceeds from the exercise of stock options totaling $196.8 in 2006 compared to $38.3 in 2005.
•: Dividends paid totaling $59.9 during 2006 as compared to $73.3 in 2005 due to a decrease in the number of shares outstanding.

The above decreases were partially offset by the following:

•: Principal payments in 2006 of $576.0 in connection with the LYONs redemption.
•: Principal payments in 2006 of $15.0 on the delayed draw term loan.

Discontinued Operations — The decrease in cash flows from discontinued operations during 2006 as compared to 2005 was due primarily to lower proceeds from the sale of businesses ($123.0 in 2006 versus $2,751.2 in 2005), with the 2005 proceeds relating primarily to the sales of Bomag, EST and Kendro. This decrease was offset partially by the following:

•: Cash flows for 2005 included tax payments of $406.4 associated with the sales of Kendro, Bomag and EST.
•: Cash flows for 2005 included repayments by Bomag of $15.3 under its accounts payable financing program and fees paid in connection with the disposition of certain businesses during 2005 and 2004.

Borrowings

The following summarizes our outstanding debt and debt activity as of, and for the year ended, December 31, 2007. See Note 12 to our consolidated financial statements for the details regarding our 2007 debt activity.

		December 31, 2006		Borrowings		Repayments			Other ⁽⁴⁾		December 31, 2007
Term loan ⁽¹⁾		$	735.0	$	750.0	$	(735.0	)	$	—	$	750.0
Domestic revolving loan facility ⁽¹⁾			—		757.0		(642.0	)		—		115.0
Global revolving loan facility ⁽¹⁾			82.8		99.3		(183.6	)		1.5		—
7.625% senior notes			—		500.0		—			—		500.0
7.50% senior notes			28.2		—		—			—		28.2
6.25% senior notes			21.3		—		—			—		21.3
Trade receivables financing arrangement ⁽²⁾			1.0		586.0		(517.0	)		—		70.0
Other indebtedness ⁽³⁾			95.5		—		(21.9	)		17.0		90.6

	Total debt		963.8	$	2,692.3	$	(2,099.5	)	$	18.5		1,575.1

Less: short-term debt			168.0									255.4
Less: current maturities of long-term debt			42.3									79.0

	Total long-term debt	$	753.5								$	1,240.7

⁽¹⁾

The borrowings and repayments that occurred on September 21, 2007 as a result of our entering into new senior credit facilities and simultaneously terminating our then-existing senior credit facilities were as follows:

•: Term loan (borrowings — $750.0 and repayments — $716.2)
•: Domestic revolving loan facility (borrowings — $180.0 and repayments — $210.0)
•: Global revolving loan facility (borrowings — $99.3 and repayments — $49.0)

⁽²⁾: Under this arrangement, we can borrow, on a continuous basis, up to $130.0.
⁽³⁾: Includes aggregate balances under extended accounts payable programs and a purchase card program of $58.2 and $60.0 at December 31, 2007 and December 31, 2006, respectively.
⁽⁴⁾: "Other" includes debt assumed and foreign currency translation on any debt instruments denominated in currencies other than the U.S. dollar.

Credit Facilities

On September 21, 2007, we entered into new senior credit facilities with a syndicate of lenders that replaced our then-existing senior credit facilities, which were simultaneously terminated. The new senior credit facilities provide for committed senior secured financing of $2,300.0, consisting of the following:

•: A term loan facility in an aggregate principal amount of $750.0 with a final maturity of September 2012;
•: A domestic revolving credit facility, available for loans and letters of credit, in an aggregate principal amount of up to $400.0 with a final maturity of September 2012;
•: A global revolving credit facility, available for loans in Euros, British Pounds and other currencies in an aggregate principal amount up to the equivalent of $200.0 with a final maturity of September 2012; and
•: A foreign credit instrument facility, available for performance letters of credit and guarantees, in an aggregate principal amount in various currencies up to the equivalent of $950.0 with a final maturity of September 2012.

In connection with the termination of our then-existing senior credit facilities, we incurred $3.3 of costs, including $2.3 for the write-off of deferred financing costs, $0.2 for an early termination fee and $0.8 for costs associated with the early termination of our then-existing interest rate protection agreements (see Note 13 to our consolidated financial statements).

The weighted average interest rate of our outstanding borrowings under the new senior credit facilities was 6.3% at December 31, 2007.

We also may seek additional commitments for incremental term loan facilities or increases in commitments in respect of the domestic revolving credit facility, the global revolving credit facility and/or the foreign credit instrument facility by up to an aggregate principal amount of $400.0 without the need for consent from the existing lenders.

We are the borrower under the term and revolving loan facilities, and certain of our foreign subsidiaries are (and others may in the future become) borrowers under the global revolving credit facility and the foreign credit instrument facility.

All borrowings and other extensions of credit under our new senior credit facilities are subject to the satisfaction of customary conditions, including absence of defaults and accuracy in material respects of representations and warranties.

The letters of credit under the domestic revolving credit facility are stand-by letters of credit requested by any borrower on behalf of itself or any of its subsidiaries. The foreign credit instrument facility is used to issue foreign credit instruments, including bank undertakings to support our foreign operations.

The interest rates applicable to loans under our new senior credit facilities are, at our option, equal to either an alternate base rate (the higher of (a) the federal funds effective rate plus 0.5% and (b) the prime rate of Bank of America) or a reserve adjusted LIBOR rate for dollars (Eurodollar) plus, in each case, an applicable margin percentage, which varies based on our Consolidated Leverage Ratio (as defined in the credit agreement generally as the ratio of consolidated total debt (net of cash equivalents in excess of $50.0) at the date of determination to consolidated adjusted EBITDA for the four fiscal quarters ended on such date). We may elect interest periods of one, two, three or six months for Eurodollar borrowings. The fees charged and the interest rate margins applicable to Eurodollar and base rate loans are (all on a per annum basis) as follows:

Consolidated Leverage Ratio	Domestic Revolving Commitment Fee	Global Revolving Commitment Fee	Letter of Credit Fee	Foreign Credit Commitment Fee	Foreign Credit Instrument Fee	LIBOR Rate Loans	ABR Loans
Greater than or equal to 3.00 to 1.0	0.35%	0.35%	1.75%	0.35%	1.3125%	1.75%	0.75%
Between 2.00 to 1.0 and 3.00 to 1.0	0.30%	0.30%	1.50%	0.30%	1.125%	1.50%	0.50%
Between 1.50 to 1.0 and 2.00 to 1.0	0.25%	0.25%	1.25%	0.25%	0.9375%	1.25%	0.25%
Between 1.00 to 1.0 and 1.50 to 1.0	0.20%	0.20%	1.00%	0.20%	0.75%	1.00%	0.00%
Less than 1.00 to 1.0	0.175%	0.175%	0.875%	0.175%	0.65625%	0.875%	0.00%

The term loan is repayable in quarterly installments of $18.75 for each quarter ending March 31, 2008 through September 30, 2011, and $112.5 for the quarters ending December 31, 2011 through June 30, 2012, with the balance due in September 2012.

Our new senior credit facilities require mandatory prepayments in amounts equal to the net proceeds from the sale or other disposition of, including from any casualty to, or governmental taking of property in excess of specified values (other than in the ordinary course of business and subject to other exceptions) by us or our subsidiaries. Mandatory prepayments will be applied first to prepay the term loan and then to repay amounts (or cash collateralize letters of credit) outstanding under the global revolving credit facility or the domestic revolving credit facility (without reducing the commitments thereunder). No prepayment is required to the extent the net proceeds are reinvested in permitted acquisitions, permitted investments or assets to be used in our business within 360 days of the receipt of such proceeds.

We may voluntarily prepay loans under our new senior credit facilities, in whole or in part, without premium or penalty. Any voluntary prepayment of loans will be subject to reimbursement of the lenders' breakage costs in the case of a prepayment of Eurodollar rate borrowings other than on the last day of the relevant interest period.

Indebtedness under our new senior credit facilities is guaranteed by:

•: each existing and subsequently acquired or organized domestic material subsidiary with specified exceptions; and
•: us with respect to the obligations of our foreign borrower subsidiaries under the global revolving credit facility and the foreign credit instrument facility.

Indebtedness under our new senior credit facilities is secured by a first priority pledge and security interest in 100% of the capital stock of our domestic subsidiaries (with certain exceptions) and 65% of the capital stock of our material first tier foreign subsidiaries. If our corporate credit rating is "Ba2" or less by Moody's and "BB" or less by S&P, then we and our domestic subsidiary guarantors are required to grant security interests, mortgages and other liens on substantially all our and their assets.

Our new senior credit facilities require that we maintain:

•: a Consolidated Interest Coverage Ratio (as defined in the credit agreement generally as the ratio of consolidated adjusted EBITDA for the four fiscal quarters ended on such date to consolidated interest expense for such period) as of the last day of any fiscal quarter of at least 3.50 to 1.00, and
•: a Consolidated Leverage Ratio as of the last day of any fiscal quarter of not more than 3.25 to 1.00.

Our new senior credit facilities also contain covenants that, among other things, restrict our ability to incur additional indebtedness, grant liens, make investments, loans, guarantees or advances, make restricted junior payments, including dividends, redemptions of capital stock and voluntary prepayments or repurchase of certain other indebtedness, engage in mergers, acquisitions or sales of assets, enter into sale and leaseback transactions or engage in certain transactions with affiliates and otherwise restrict certain corporate activities. We do not expect these covenants to restrict our liquidity, financial condition or access to capital resources in the foreseeable future. Lastly, our senior credit facilities contain customary representations, warranties, affirmative covenants and events of default.

We are permitted under our senior credit facilities to repurchase our capital stock and pay cash dividends in an unlimited amount if our gross Consolidated Leverage Ratio is less than 2.50 to 1.00. If our gross Consolidated Leverage Ratio is greater than or equal to 2.50 to 1.00, the aggregate amount of such repurchases and dividend declarations cannot exceed (A) $100.0 in any fiscal year plus (B) an additional amount for all such repurchases and dividend declarations made after September 21, 2007 equal to the sum of (i) $300.0 and (ii) a positive amount equal to 50% of cumulative consolidated net income during the period from July 1, 2007 to the end of the most recent fiscal quarter for which financial information is available preceding the date of such repurchase or dividend declaration (or, in case such consolidated net income is a deficit, minus 100% of such deficit).

During 2005, in connection with the repayment of $1,073.4 on the term loans of our then-existing senior credit facilities, we recorded charges of $29.6 associated with the write-off of deferred financing costs and the termination of the remaining interest rate protection agreements related to the term loans, with $28.2 recorded to "Loss on early extinguishment of debt" and the remainder to "Income (loss) from discontinued operations."

At December 31, 2007, we were in compliance with all covenant provisions of our senior credit facilities, and the senior credit facilities did not impose any restrictions on our ability to repurchase shares or pay dividends, other than those inherent in the credit agreement.

Senior Notes

In December 2007, we issued in a private placement $500.0 aggregate principal amount of 7.625% senior unsecured notes that mature in 2014. We used the net proceeds from the offering for general corporate purposes including the financing of our acquisition of APV (see Note 4 to our consolidated financial statements). The interest payment dates for these notes are June 15 and December 15 of each year, commencing on June 15, 2008. The notes are redeemable, in whole, or in part, at any time prior to maturity at a price equal to 100% of the principal amount thereof plus a premium, plus accrued and unpaid interest. In addition, at any time prior to December 15, 2010 we may redeem up to 35% of the aggregate principal amount of the notes with the net cash proceeds of certain equity offerings at a redemption price of 107.625%, plus accrued and unpaid interest. If we experience certain types of change of control transactions, we must offer to repurchase the notes at 101% of the aggregate principal amount of the notes repurchased, plus accrued and unpaid interest. These notes are unsecured and rank equally with all our existing and future unsecured senior indebtedness. The indenture governing these notes contains covenants that, among other things, limit our ability to incur liens, enter into sale and leaseback transactions and consummate some mergers. At December 31, 2007, we were in compliance with all covenant provisions of these senior notes. We have agreed to conduct a registered exchange offer for the notes and will use commercially reasonable efforts to exchange the notes for a new issue of identical debt securities and file under certain circumstances a shelf registration statement to cover resales of the notes and to cause the registration statement to be declared effective by the SEC. If we fail to satisfy these obligations, within 150 days from February 28, 2009 we have agreed to pay additional interest to holders of the notes under certain circumstances.

In June 2003, we issued $300.0 of non-callable 6.25% senior notes that mature on June 15, 2011. The interest payment dates for these notes are June 15 and December 15 of each year. In December 2002, we issued $500.0 of callable 7.50% senior notes that mature on January 1, 2013. The interest payment dates for these notes are January 1 and July 1 of each year. Both of these note issuances are unsecured and rank equally with all of our existing and future unsecured senior indebtedness, but are effectively junior to our new senior credit facilities.

During the first quarter of 2005, we completed cash tender offers for $668.2, or 93%, of the then outstanding principal amount of our 7.50% and 6.25% senior notes due January 1, 2013 and June 15, 2011, respectively. The amount of the senior notes tendered exceeded the requisite consent thresholds for removing substantially all of the restrictive covenants and certain of the default provisions contained in the indenture governing the senior notes. Additionally, during the second and third quarter of 2005, we redeemed $3.4 of the senior notes. In connection with these redemptions, we recorded charges of $85.4 to "Loss on early extinguishment of debt" associated with premiums and fees paid to redeem the notes and the write-off of deferred financing costs related to the notes.

Other Borrowings and Financing Activities

In February 2006, all but $0.2 of the then remaining LYONs were put to us and settled in cash for $660.2, their accreted value on such date. We financed this redemption and the related tax recapture with amounts borrowed against our $750.0 delayed draw term loan under our then-existing senior credit facilities. In June 2006, we repurchased the remaining LYONs.

Some of our businesses participate in extended accounts payable programs through agreements with lending institutions. Under the arrangements, our businesses are provided extended payment terms. As of December 31, 2007 and December 31, 2006, the participating businesses had $12.8 and $14.2, respectively, outstanding under these arrangements. Additionally, certain of our businesses purchase goods and services under a purchasing card program allowing for payment beyond normal payment terms. As of December 31, 2007 and December 31, 2006, the participating businesses had $45.4 and $45.8, respectively, outstanding under this arrangement. As these arrangements extend the payment of our businesses' payables beyond their normal payment terms through third-party lending institutions, we have classified these amounts as short-term debt.

We are party to a trade receivables financing agreement, whereby we can borrow, on a continuous basis, up to $130.0. Availability of funds may fluctuate over time given changes in eligible receivable balances, but will not exceed the $130.0 program limit. The facility contains representations, warranties, covenants and indemnities customary for facilities of this type. The facility does not contain any covenants that we view as materially constraining to the activities of our business. We had $70.0 and $1.0 outstanding under this financing agreement at December 31, 2007 and 2006, respectively.

Availability

At December 31, 2007, we had $363.4 of available borrowing capacity under our revolving credit facilities after giving effect to borrowings under the domestic revolving loan facility of $115.0 and to $121.6 reserved for outstanding letters of credit. In addition, at December 31, 2007, we had $470.0 of available issuance capacity under our foreign credit instrument facility after

giving effect to $480.0 reserved for outstanding letters of credit. Lastly, at December 31, 2007, we had $21.0 of available borrowing capacity under our trade receivables financing agreement, after giving effect to borrowings of $70.0.

We believe that cash and equivalents, which totaled $354.1 at December 31, 2007, and our availability under our senior credit facilities and existing trade receivables financing agreement will be sufficient to fund working capital needs, planned capital expenditures, on-going equity repurchases, dividend payments, other operational cash requirements and required debt service.

Additionally, we have a shelf registration statement for 8.3 shares of common stock that may be issued for acquisitions. We also have a $1,000.0 shelf registration that may be used in connection with an offering of certain debt and/or equity securities for general corporate purposes or for the refinancing of existing debt. In addition, other financing instruments may be used from time to time, including, but not limited to, private placement instruments, operating leases, capital leases and securitizations. We expect that we will continue to access these markets as appropriate to maintain liquidity and to provide sources of funds for general corporate purposes or to refinance existing debt.

Cash and Other Commitments

Balances, if any, under the revolving credit and foreign credit instrument facilities of our senior credit facilities are payable in full in September 2012, the maturity date of the facilities. The term loan is repayable in quarterly installments of $18.75 for each quarter ending March 31, 2008 through September 30, 2011, and $112.5 for the quarters ending December 31, 2011 through June 30, 2012, with the balance due in September 2012.

We use operating leases to finance certain equipment and other purchases. At December 31, 2007, we had $163.7 of future minimum rental payments under operating leases with remaining non-cancelable terms in excess of one year.

In 2003, our Board of Directors approved the implementation of a quarterly dividend program. The actual amount of each quarterly dividend, as well as each declaration date, record date and payment date is subject to the discretion of the Board of Directors, and the target dividend level may be adjusted during the year at the discretion of the Board of Directors. The factors that the Board of Directors considers in determining the actual amount of each quarterly dividend include our financial performance and on-going capital needs, our ability to declare and pay dividends under the terms of our credit facilities and any other debt instruments, and other factors deemed relevant. During 2007, we declared and paid dividends of $55.0 and $56.5, respectively, while in 2006 we declared and paid dividends of $58.5 and $59.9, respectively.

Capital expenditures for 2007 totaled $90.9, compared to $55.7 and $41.3 in 2006 and 2005, respectively. Capital expenditures relate primarily to the implementation of new ERP software systems across our company in connection with our ERP rationalization initiative as well as upgrades of manufacturing facilities and replacement of equipment. We expect 2008 capital expenditures to be in the range of $140.0 to $150.0, with the increase relating primarily to investments to support 1) the growth and global expansion of certain of our businesses and 2) our key operating initiatives, including the continued implementation of ERP systems in efforts to consolidate the numerous IT platforms within our businesses.

In 2007, we made contributions and direct benefit payments of $43.1 to our defined benefit pension and postretirement benefit plans, and we expect to make $71.2 of contributions and direct benefit payments in 2008. See Note 10 to our consolidated financial statements for further disclosure of expected future contributions and benefit payments.

On a net basis, both from continuing and discontinued operations, we paid $80.5, $241.3 and $433.5 in cash taxes for 2007, 2006 and 2005, respectively. In 2007, we made payments of $139.6 associated with the actual and estimated tax liability for federal, state and foreign tax obligations and received refunds of $59.1. We made an advance payment to the IRS of $37.5 in January 2007 related to tax and interest assessed for the 1995 through 2002 Federal income tax returns (see Note 11 to our consolidated financial statements for additional details). The amount of income taxes that we pay annually is dependent on various factors, including the timing of certain deductions. Deductions and the amount of income taxes can and do vary from year to year.

As of December 31, 2007, except as discussed in Note 14 to our consolidated financial statements, we did not have any material guarantees, off-balance sheet arrangements or purchase commitments other than the following: (1) $121.6 of certain standby letters of credit outstanding, all of which reduce the available borrowing capacity on our revolving credit facility; and (2) approximately $224.3 of surety bonds. In addition, $72.8 of our standby letters of credit relate to self-insurance matters and originate from workers' compensation, auto, or general liability claims made against us. We account for each of these claims as part of our self-insurance accruals.

Our Certificate of Incorporation provides that we indemnify our officers and directors to the fullest extent permitted by the Delaware General Corporation Law for any personal liability in connection with their employment or service with us, subject to limited exceptions. While we maintain insurance for this type of liability, the liability could exceed the amount of the insurance coverage.

We continually review each of our businesses in order to determine their long-term strategic fit. These reviews could result in selected acquisitions to expand an existing business or result in the disposition of an existing business. Additionally, we have stated that we may consider a larger acquisition, more than $1,000.0 in revenues, if certain criteria were met. In addition, you should read "Item 1A. Risk Factors," "Segment Results of Operations" included in this MD&A, and "Item 1. Business" for an understanding of the risks, uncertainties and trends facing our businesses.

Credit Risk

Financial instruments that potentially subject us to significant concentrations of credit risk consist of cash and temporary investments, trade accounts receivable, interest rate swap agreements and foreign currency forward and forward commodity contracts. These financial instruments, other than trade accounts receivable, are placed with high-quality financial institutions throughout the world. We periodically evaluate the credit standing of these financial institutions.

Concentrations of credit risk arising from trade accounts receivable are due to selling to a large number of customers in a particular industry. We perform ongoing credit evaluations of our customers' financial conditions and obtain collateral or other security when appropriate. No customer or group of customers that, to our knowledge, are under common control accounted for more than 10% of our consolidated revenues for all periods presented.

We are exposed to credit losses in the event of nonperformance by counter parties to our interest rate swap agreements and foreign currency forward and forward commodity contracts, but have no other off-balance-sheet credit risk of accounting loss. We anticipate, however, that counter parties will be able to fully satisfy their obligations under the contracts. We do not obtain collateral or other security to support financial instruments subject to credit risk, but we do monitor the credit standing of counter parties.

Contractual Obligations:

The following is a summary of our primary contractual obligations:

	Total		Due within 1 year		Due in 1-3 years		Due in 3-5 years		Due after 5 years
Short-term debt obligations	$	255.4	$	255.4	$	—	$	—	$	—
Long-term debt obligations		1,319.7		79.0		157.5		552.3		530.9
Pension and postretirement benefit plan contributions and payments ⁽¹⁾		357.3		71.2		92.5		65.9		127.7
Purchase and other contractual obligations ⁽²⁾		420.1		390.2		28.0		0.7		1.2
Future minimum lease payments ⁽³⁾		163.7		41.2		49.4		36.4		36.7
Interest payments ⁽⁴⁾		452.2		98.6		157.6		119.6		76.4

Total contractual cash obligations ⁽⁵⁾	$	2,968.4	$	935.6	$	485.0	$	774.9	$	772.9

⁽¹⁾: Estimated minimum required pension funding and pension and postretirement benefit payments are based on actuarial estimates using current assumptions for, among other things, discount rates, expected long term rates of return on plan assets (where applicable), rate of compensation increases, and health care cost trend rates. The expected pension contributions in 2008 and later reflect the impact of the Pension Protection Act of 2006 that was signed into law on August 17, 2006. See Note 10 to our consolidated financial statements for additional information on expected future contributions and benefit payments. In addition, we are required to make a pension contribution in 2008 of approximately $31.0 associated with our former Chairman, Chief Executive Officer and President.
⁽²⁾: Represents contractual legally binding commitments to purchase goods and services at specified dates, and an amount payable in 2008 to our former Chairman, Chief Executive Officer and President of approximately $8.0.
⁽³⁾: Represents rental payments under operating leases with remaining non-cancelable terms in excess of one year, including future minimum lease payments for APV.
⁽⁴⁾: Includes interest payments at variable rates based on interest rates at December 31, 2007.
⁽⁵⁾: Contingent obligations, such as environmental accruals and those relating to uncertain tax positions (i.e., FIN 48 obligations), generally do not have specific payment dates and accordingly have been excluded from the above table. We believe that within the next 12 months it is reasonably possible that we could pay approximately $13.0 relating to uncertain tax positions, which includes an estimate for interest and penalties.

In addition, the above table does not include potential payments under our derivative financial instruments.

Critical Accounting Policies and Use of Estimates

The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and disclosure of contingent assets and liabilities. The accounting policies that we believe are most critical to the portrayal of our financial condition and results of operations, and that require management's most difficult, subjective or complex judgments in estimating the effect of inherent uncertainties are listed below. This section should be read in conjunction with Notes 1 and 2 to our consolidated financial statements, which include a detailed discussion of these and other accounting policies.

Long-Term Contract Accounting

Certain of our businesses, primarily within the Test and Measurement and Thermal Equipment and Services segments, recognize revenues and profits from long-term contracts under the percentage-of-completion method of accounting. The percentage-of-completion method requires estimates of future revenues and costs over the full term of product delivery. In 2007, 2006 and 2005, we recognized $1,071.5, $848.5 and $714.5 of revenues under the percentage-of-completion method, respectively.

Provisions for losses, if any, 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 reasonably possible that completion costs, including those arising from contract penalty provisions and final contract settlements, will 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 on uncompleted contracts 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 management has determined that collection is probable and the amount can be reliably estimated. Claims made by us may involve negotiation and, in certain cases, litigation. In the event we incur litigation costs in connection with claims, such litigation 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 determinable.

Impairment of Goodwill and Indefinite-Lived Intangible Assets

Goodwill and indefinite-lived intangible assets are not amortized, but instead are subject to annual impairment testing. We monitor the results of each of our reporting units as a means of identifying trends and/or matters that may impact their financial results and, thus, be an indicator of a potential impairment under SFAS No. 142. The trends and/or matters that we specifically monitor for each of our reporting units are as follows:

•: Significant variances in financial performance (e.g., revenues, earnings and cash flows) in relation to expectations and historical performance;
•: Significant changes in end markets or other economic factors;
•: Significant changes or planned changes in our use of a reporting unit's assets; and
•: Significant changes in customer relationships and competitive conditions.

The identification and measurement of goodwill impairment involves the estimation of the fair value of reporting units. We consider a number of factors, including the input of an independent appraisal firm, in conducting the impairment testing of our reporting units. We perform our impairment testing by comparing the estimated fair value of the reporting unit to the carrying value of the reported net assets, with such testing occurring during the fourth quarter of each year (or more frequently if impairment indicators arise). Fair value is generally based on the income approach using a calculation of discounted cash flows, based on the most recent financial projections for the reporting units. The revenue growth rates included in the financial projections are management's best estimates based on current and forecasted market conditions, and the profit margin assumptions are projected by each reporting unit based on current cost structure and anticipated net cost reductions.

The calculation of fair value for our reporting units incorporates many assumptions including future growth rates, profit margin and discount factors. Changes in economic and operating conditions impacting these assumptions could result in impairment charges in future periods.

Our annual goodwill impairment testing during the fourth quarter of 2007 identified three reporting units (Filtran, our automatic transmission business; LDS, our vibration testing equipment business; and Weil-McLain, our boiler products business) whose fair value exceeded their carrying value by less than 10%. The aggregate goodwill and indefinite-lived intangible asset balance for these three reporting units was $242.1 at December 31, 2007.

In connection with our annual impairment testing of indefinite-lived intangibles under SFAS 142, we determined that other intangible assets held by a business within our Thermal Equipment and Services segment were impaired. Accordingly, we recorded an impairment charge of $4.0 in the fourth quarter of 2007 related to this matter.

Employee Benefit Plans

We have defined benefit pension plans that cover a significant portion of our salaried and hourly paid employees, including certain employees in foreign countries. Additionally, we have domestic postretirement plans that provide health and life insurance benefits for certain retirees and their dependents. The costs and obligations associated with these plans are calculated based on actuarial valuations. The critical assumptions used in determining these obligations and related expenses are discount rates, the expected long-term rate of return on plan assets and healthcare cost projections. These critical assumptions are determined based on company data and appropriate market indicators, and are evaluated at least annually by management in consultation with outside actuaries and investment advisors. Other assumptions involving demographic factors such as retirement patterns, mortality, turnover and the rate of compensation increases are evaluated periodically and are updated to reflect our experience and expectations for the future. While management believes that the assumptions used are appropriate, actual results may differ.

To determine the expected long-term rate of return on pension plan assets, we consider the current and expected asset allocations, as well as historical and expected returns on various categories of plan assets. A lower expected rate of return on plan assets will increase pension expense. Our domestic plans account for approximately 80% of our total pension obligations at December 31, 2007. A 50 basis point change in the expected long-term rate of return for our domestic plans would impact our estimated 2008 pension expense by approximately $4.8.

The discount rate enables us to state expected future cash flows at a present value on the measurement date. This rate is the yield on high-quality fixed income investments at the measurement date. A lower discount rate increases the present value of benefit obligations and increases pension expense. A 50 basis point change in the discount rate for our domestic plans would impact our estimated 2008 pension expense by approximately $3.4.

The trend in healthcare costs is difficult to estimate, and it has an important effect on postretirement liabilities. The 2007 healthcare cost trend rate, which is the weighted-average annual projected rate of increase in the per capita cost of covered benefits, was 10%. This rate is assumed to decrease to 5% by 2014 and then remain at that level. A one-percentage point increase in the healthcare cost trend rate would increase postretirement expense by $0.6.

See Note 10 to our consolidated financial statements for further information on our pension and postretirement benefit plans.

Income Taxes

We record our income taxes based on the requirements of SFAS No. 109, "Accounting for Income Taxes," which includes an estimate 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 financial statements or tax returns.

Deferred tax assets and liabilities 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.

Realization of deferred tax assets associated with net operating loss and credit carryforwards is dependent upon generating sufficient taxable income prior to their expiration by tax jurisdiction. We believe that it is more likely than not that certain of these net operating loss and credit carryforwards may expire unused and, accordingly, have established a valuation allowance against them. Although realization is not assured for the remaining deferred tax assets, we believe it is more likely than not that the deferred tax assets will be realized through future taxable earnings or alternative tax strategies. However,

deferred tax assets could be reduced in the near term if our estimates of taxable income during the carryforward period are significantly reduced or alternative tax strategies are no longer viable.

The amount of income tax that we pay annually is dependent on various factors, including the timing of certain deductions and ongoing audits by federal, state and foreign tax authorities, which may result in proposed adjustments. We perform reviews of our income tax positions on a quarterly basis and accrue for potential contingencies in accordance with FIN 48. Accruals for these contingencies are recorded based on an expectation as to the timing of when the contingency will be resolved. As events change or resolution occurs, these accruals are adjusted, such as in the case of audit settlements with taxing authorities. We believe we have adequately provided for any reasonably foreseeable outcome related to these matters.

Our future results may include favorable or unfavorable adjustments to our estimated tax liabilities due to closure of income tax examinations, new regulatory or judicial pronouncements, changes in tax laws, changes in projected levels of taxable income, future tax planning strategies, or other relevant events. See Note 11 to our consolidated financial statements for additional details regarding our tax contingencies.

Product Warranty

In the normal course of business, we issue product warranties for specific product lines and provide for the estimated future warranty cost in the period in which the sale is recorded. We provide for the estimate of warranty cost based on contract terms and historical warranty loss experience. Because warranty estimates are forecasts that are based on the best available information, claims costs may differ from amounts provided. In addition, due to the seasonal fluctuations at certain of our businesses, the timing of warranty provisions and the usage of warranty accruals can vary period to period. We make adjustments to warranty liabilities as changes in the obligations become reasonably estimable.

Contingent Liabilities

Numerous claims, complaints and proceedings arising in the ordinary course of business, including but not limited to those relating to litigation matters (e.g., class actions, derivative lawsuits and contract, intellectual property, competitive claims, etc.), environmental matters, and risk management matters (e.g., product and general liability, automobile, workers' compensation, etc.) have been filed or are pending against us and certain of our subsidiaries. Additionally, we may become subject to significant claims of which we are unaware currently or the claims of which we are aware may result in our incurring a significantly greater liability than we anticipate. This may also be true in connection with past or future acquisitions. While we maintain property, cargo, auto, product, general liability, and directors' and officers' liability insurance and have acquired rights under similar policies in connection with our acquisitions that we believe cover a portion of these claims, this insurance may be insufficient or unavailable to protect us against potential loss exposures. In addition, we have increased our self-insurance limits over the past several years. While we believe we are entitled to indemnification from third parties for some of these claims, these rights may be insufficient or unavailable to protect us against potential loss exposures. However, we believe that our accruals related to these items are sufficient and that these items and our rights to available insurance and indemnity will be resolved without a material adverse effect, individually or in the aggregate, on our financial position, results of operations and cash flows. These accruals totaled $359.1 (including $268.8 for risk management matters) and $367.8 (including $260.3 for risk management matters) at December 31, 2007 and 2006, respectively.

It is our policy to comply fully with applicable environmental requirements. We are currently involved in various investigatory and remedial actions at our facilities and at third-party waste disposal sites. It is our policy to accrue for estimated losses from legal actions or claims when events exist that make the realization of the losses or expenses probable and they can be reasonably estimated. Our environmental accruals cover anticipated costs, including investigation, remediation, and operation and maintenance of clean-up sites. Accordingly, our estimates may change based on future developments, including new or changes in existing environmental laws or policies, differences in costs required to complete anticipated actions from estimates provided, future findings of investigation or remediation actions, or alteration to the expected remediation plans. We expense costs incurred to investigate and remediate environmental issues unless they extend the economic useful life of related assets. We record liabilities and report expenses when it is probable that an obligation has been incurred and the amounts can be reasonably estimated. Our estimates are based primarily on investigations and remediation plans established by independent consultants, regulatory agencies and potentially responsible third parties. It is our policy to realize a change in estimates once it becomes probable and can be reasonably estimated. In determining our accruals we do not discount environmental or other legal accruals and do not reduce them by anticipated insurance, litigation and other recoveries. We do take into account third-party indemnification from financially viable parties in determining our accruals where there is no dispute regarding the right to indemnification.

We are self-insured for certain of our workers' compensation, automobile, product and general liability, disability and health costs, and we believe that we maintain adequate accruals to cover our retained liability. Our accruals for self-insurance liabilities are determined by management, are based on claims filed and an estimate of claims incurred but not yet reported, and are not discounted. Management considers a number of factors, including third-party actuarial valuations, when making these determinations. We maintain third-party stop-loss insurance policies to cover certain liability costs in excess of predetermined retained amounts; however, this insurance may be insufficient or unavailable to protect us against potential loss exposures. The key assumptions considered in estimating the ultimate cost to settle reported claims and the estimated costs associated with incurred but not yet reported claims includes, among other things, our historical and industry claims experience, trends in health care and administrative costs, our current and future risk management programs, and historical lag studies with regard to the timing between when a claim is incurred versus when it is reported. We maintain third-party stop-loss insurance policies to cover certain liability costs in excess of predetermined amounts.

New Accounting Pronouncements

See Note 3 to our consolidated financial statements for a complete discussion of recent accounting pronouncements. The following summarizes only those pronouncements that could have a material impact on our financial condition or results of operations in future periods.

In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurement" which defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. SFAS No. 157 focuses on creating consistency and comparability in fair value measurements. With the exception of certain nonfinancial assets and liabilities, SFAS No. 157 is effective for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. In February 2008, the FASB issued FASB Staff Position ("FSP") FAS 157-2 to defer SFAS No. 157's effective date for all nonfinancial assets and liabilities, except those items recognized or disclosed at fair value on an annual or more frequently recurring basis, until years beginning after November 15, 2008. We do not expect the adoption of SFAS No. 157 to have a material impact on our consolidated financial statements; however, the prospective application of the provisions of SFAS No. 157 could materially impact our future consolidated financial statements.

In December 2007, the FASB issued SFAS No. 141 (revised 2007), "Business Combinations," ("SFAS No. 141(R)") which replaces SFAS No. 141. SFAS No. 141(R) requires an acquiring entity to recognize all the assets acquired and liabilities assumed in a transaction at the acquisition-date fair value with limited exceptions. In addition, SFAS No. 141(R) will require acquisition costs to be expensed as incurred, acquired contingent liabilities will be recorded at fair value at the acquisition date and subsequently measured at either the higher of such amount or the amount determined under existing guidance for non-acquired contingencies, in-process research and development will be recorded at fair value as an indefinite-lived intangible asset at the acquisition date, restructuring costs associated with a business combination will be generally expensed subsequent to the acquisition date and changes in deferred tax asset valuation allowances and income tax uncertainties after the acquisition date generally will affect income tax expense. SFAS No. 141(R) also includes a substantial number of new disclosure requirements. SFAS No. 141(R) is effective prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. We do not expect the adoption of SFAS No. 141(R) to have a material impact on our financial position or results of operations; however, the prospective application of the provisions of SFAS No. 141(R) could have a material impact on the fair values assigned to assets and liabilities of future acquisitions.

ITEM 7A. Quantitative and Qualitative Disclosures about Market Risk

(All dollar amounts are in millions)

We are exposed to market risk related to changes in interest rates, foreign currency exchange rates and commodity raw material prices, and we selectively use financial instruments to manage these risks. We do not enter into financial instruments for speculative or trading purposes; however, such instruments may become speculative if the future cash flows originally hedged are no longer probable of occurring as anticipated. We have interest rate protection agreements with financial institutions to limit exposure to interest rate volatility. Our currency exposures vary, but are primarily concentrated in the Euro, British Pound and Chinese Yuan. We generally do not hedge translation exposures. Our exposures for commodity raw materials vary, with the highest concentration relating to steel, copper and oil. See Note 13 to our consolidated financial statements for further details.

The following table provides information, as of December 31, 2007, about our primary outstanding debt obligations and presents principal cash flows by expected maturity dates, weighted average interest rates and fair values.

	Expected Maturity Date
	2008		2009		2010		2011		2012		After		Total			Fair Value
Long-term debt:
7.625% senior notes	$	—	$	—	$	—	$	—	$	—	$	500.0	$	500.0		$	511.3
Average interest rate														7.625	%
7.50% senior notes		—		—		—		—		—		28.2		28.2			28.8
Average interest rate														7.50	%
6.25% senior notes		—		—		—		21.3		—		—		21.3			20.8
Average interest rate														6.25	%
Term loan		75.0		75.0		75.0		168.8		356.2		—		750.0			750.0
Average interest rate														6.16	%
Domestic revolving loan facility		115.0		—		—		—		—		—		115.0			115.0
Average interest rate														7.25	%
Trade receivables financing arrangement		70.0		—		—		—		—		—		70.0			70.0
Average interest rate														5.08	%

We believe that current cash and equivalents, cash flows from operations, availability under revolving credit facilities and availability under our trade receivables financing agreement will be sufficient to fund working capital needs, planned capital expenditures, on-going equity repurchases, dividend payments, other operational cash requirements and required debt service obligations for the foreseeable future.

We had foreign currency forward contracts with an aggregate notional amount of $81.3 outstanding as of December 31, 2007, with scheduled maturities of $73.2, $7.5 and $0.6 in 2008, 2009 and 2010, respectively. The net fair value of our open contracts was $0.1, which was recorded as a current liability as of December 31, 2007. The fair value of the associated embedded derivatives was $0.8, which was recorded as a current liability as of December 31, 2007.

We also had interest rate protection agreements ("swaps") with a notional amount of $600.0 outstanding at December 31, 2007. These are amortizing swaps; therefore, the outstanding notional value is scheduled to decline commensurate with the maturities of our term loan. As of December 31, 2007, we recorded an unrealized loss, net of tax, of $9.1 to accumulated other comprehensive income (loss) and a long-term liability of $14.8 to recognize the fair value of our swaps.

ITEM 8. Financial Statements And Supplementary Data

SPX Corporation and Subsidiaries
Index To Consolidated Financial Statements

December 31, 2007

			Page
SPX Corporation and Subsidiaries
	Report of Independent Registered Public Accounting Firm — Deloitte & Touche LLP		44
	Consolidated Financial Statements:
		Consolidated Statements of Operations for the years ended December 31, 2007, 2006 and 2005	45
		Consolidated Balance Sheets as of December 31, 2007 and 2006	46
		Consolidated Statements of Shareholders' Equity and Comprehensive Income for the years ended December 31, 2007, 2006 and 2005	47
		Consolidated Statements of Cash Flows for the years ended December 31, 2007, 2006 and 2005	49
		Notes to Consolidated Financial Statements	50

All schedules are omitted because they are not applicable, not required or because the required information is included in our consolidated financial statements or notes thereto.

Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors of SPX Corporation:

We have audited the accompanying Consolidated Balance Sheets of SPX CORPORATION AND SUBSIDIARIES (the "Company") as of December 31, 2007 and 2006 and the related Consolidated Statements of Operations, Shareholders' Equity and Comprehensive Income, and Cash Flows for each of the three years in the period ended December 31, 2007. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We did not audit the financial statements of EGS Electrical Group, LLC and Subsidiaries ("EGS") for the years ended September 30, 2007, 2006 and 2005, the Company's investment in which is accounted for by use of the equity method (see Note 9 to the consolidated financial statements). The Company's equity in income of EGS for the years ended September 30, 2007, 2006 and 2005 was $39.3 million, $40.2 million and $22.4 million, respectively. The financial statements of EGS were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for such company, is based solely on the report of such auditors.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits and the report of the other auditors provide a reasonable basis for our opinion.

In our opinion, based on our audits and the report of the other auditors, such consolidated financial statements present fairly, in all material respects, the financial position of SPX CORPORATION AND SUBSIDIARIES at December 31, 2007 and 2006, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2007, in conformity with accounting principles generally accepted in the United States of America.

As discussed in Note 15 to the consolidated financial statements, in 2006, the Company changed its method of recognizing compensation expense for share-based awards. In addition, as discussed in Note 10 to the consolidated financial statements, the Company changed its method of accounting for pension and post retirement benefits as of December 31, 2006. Also, as discussed in Note 11, in 2007 the Company changed its method for measuring and recognizing tax benefits associated with uncertain tax positions.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company's internal control over financial reporting as of December 31, 2007, based on the criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 3, 2008 expressed an unqualified opinion on the Company's internal control over financial reporting.

/s/ Deloitte & Touche LLP

Charlotte, North Carolina
March 3, 2008

SPX Corporation and Subsidiaries
Consolidated Statements of Operations
($ and shares in millions, except per share amounts)

			Year ended December 31,
			2007			2006			2005
Revenues			$	4,822.3		$	4,167.6		$	3,729.8
Costs and expenses:
	Cost of products sold			3,429.2			2,998.2			2,702.2
	Selling, general and administrative			937.5			830.5			742.3
	Intangible amortization			18.4			14.1			12.8
	Impairment of intangible assets			4.0			—			—
	Special charges, net			7.6			3.9			8.6

		Operating income		425.6			320.9			263.9
Other expense, net				(4.6	)		(28.0	)		(17.2	)
Interest expense				(76.9	)		(62.8	)		(67.6	)
Interest income				9.1			12.6			17.1
Loss on early extinguishment of debt				(3.3	)		—			(113.6	)
Equity earnings in joint ventures				39.9			40.8			23.5

	Income from continuing operations before income taxes			389.8			283.5			106.1
Income tax provision				(89.5	)		(57.8	)		(71.4	)

	Income from continuing operations			300.3			225.7			34.7
Income (loss) from discontinued operations, net of tax				(2.6	)		0.8			(44.4	)
Gain (loss) on disposition of discontinued operations, net of tax				(3.5	)		(55.8	)		1,099.7

	Income (loss) from discontinued operations			(6.1	)		(55.0	)		1,055.3

Net income			$	294.2		$	170.7		$	1,090.0

Basic income per share of common stock
	Income from continuing operations		$	5.47		$	3.87		$	0.49
	Income (loss) from discontinued operations			(0.11	)		(0.94	)		14.84

		Net income per share	$	5.36		$	2.93		$	15.33

Weighted average number of common shares outstanding — basic				54.842			58.254			71.084
Income from continuing operations for diluted income per share			$	300.3		$	226.8		$	34.7
Net income for diluted income per share			$	294.2		$	171.8		$	1,090.0
Diluted income per share of common stock
	Income from continuing operations		$	5.33		$	3.74		$	0.48
	Income (loss) from discontinued operations			(0.11	)		(0.91	)		14.62

		Net income per share	$	5.22		$	2.83		$	15.10

Weighted average number of common shares outstanding — diluted				56.307			60.724			72.192

The accompanying notes are an integral part of these statements.

SPX Corporation and Subsidiaries
Consolidated Balance Sheets
($ in millions)

			December 31, 2007			December 31, 2006
ASSETS
Current assets:
	Cash and equivalents		$	354.1		$	476.9
	Accounts receivable, net			1,299.9			1,103.1
	Inventories, net			703.8			496.2
	Other current assets			117.6			87.0
	Deferred income taxes			97.9			55.4
	Assets of discontinued operations			56.1			299.0

		Total current assets		2,629.4			2,517.6
Property, plant and equipment:
	Land			43.0			29.4
	Buildings and leasehold improvements			236.7			194.7
	Machinery and equipment			628.5			518.3

				908.2			742.4
	Accumulated depreciation			(416.0	)		(383.3	)

				492.2			359.1
Goodwill				1,979.1			1,727.0
Intangibles, net				727.4			480.1
Other assets				409.3			353.3

TOTAL ASSETS			$	6,237.4		$	5,437.1

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
	Accounts payable		$	733.8		$	494.1
	Accrued expenses			1,050.2			812.0
	Income taxes payable			7.5			79.3
	Short-term debt			255.4			168.0
	Current maturities of long-term debt			79.0			42.3
	Liabilities of discontinued operations			31.1			136.9

		Total current liabilities		2,157.0			1,732.6
Long-term debt				1,240.7			753.5
Deferred and other income taxes				246.6			188.8
Other long-term liabilities				576.7			649.3

		Total long-term liabilities		2,064.0			1,591.6
Minority interest				10.4			3.5
Shareholders' equity:
	Common stock			963.5			937.4
	Paid-in capital			1,296.0			1,134.5
	Retained earnings			2,045.9			1,754.2
	Accumulated other comprehensive income (loss)			38.1			(86.6	)
	Common stock in treasury			(2,337.5	)		(1,630.1	)

		Total shareholders' equity		2,006.0			2,109.4

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY			$	6,237.4		$	5,437.1

The accompanying notes are an integral part of these statements.

SPX Corporation and Subsidiaries
Consolidated Statements of Shareholders' Equity and Comprehensive Income
($ in millions, except per share amounts)

		Common Stock		Paid-in Capital			Retained Earnings			Unearned Compensation			Accumulated Other Comprehensive Income (Loss)			Common Stock In Treasury			Total
Balance at December 31, 2004		$	888.8	$	969.1		$	622.6		$	(33.2	)	$	327.5		$	(647.0	)	$	2,127.8
	Net income		—		—			1,090.0			—			—			—			1,090.0
	Net unrealized gain on qualifying cash flow hedges, net of tax of $9.9		—		—			—			—			15.6			—			15.6
	Minimum pension liability adjustment, net of tax, of $141.1		—		—			—			—			(225.7	)		—			(225.7	)
	Foreign currency translation adjustments, including $221.2 of translation gains recognized upon sale of discontinued operations		—		—			—			—			(291.2	)		—			(291.2	)

	Total comprehensive income																			588.7
	Dividends declared ($1.00 per share)		—		—			(70.6	)		—			—			—			(70.6	)
	Exercise of stock options and other incentive plan activity, including related tax benefit of $12.5		12.6		50.0			—			—			—			6.2			68.8
	Restricted stock and restricted stock unit grants		4.4		55.7			—			(60.1	)		—			—			—
	Activity for cash awards provided in 2005 (see Note 15).		—		—			—			(3.1	)		—			—			(3.1	)
	Amortization of restricted stock and restricted stock unit grants (includes $1.8 recorded to discontinued operations)		—		—			—			30.1			—			—			30.1
	Restricted stock and restricted stock unit vesting, net of tax withholdings		1.8		(6.4	)		—			—			—			(1.2	)		(5.8	)
	Restricted stock and restricted stock unit forfeitures		—		(7.2	)		—			11.0			—			(3.8	)		—
	Treasury stock repurchased		—		—			—			—			—			(624.7	)		(624.7	)

Balance at December 31, 2005			907.6		1,061.2			1,642.0			(55.3	)		(173.8	)		(1,270.5	)		2,111.2
	Net income		—		—			170.7			—			—			—			170.7
	Net unrealized gain on qualifying cash flow hedges, net of tax of $1.2		—		—			—			—			1.9			—			1.9
	Minimum pension liability adjustment, net of tax of $135.7		—		—			—			—			224.5			—			224.5
	Foreign currency translation adjustments, including $1.6 of translation gains recognized upon sale of discontinued operations		—		—			—			—			70.2			—			70.2

SPX Corporation and Subsidiaries
Consolidated Statements of Shareholders' Equity and Comprehensive Income
($ in millions, except per share amounts) (Continued)

		Common Stock		Paid-in Capital			Retained Earnings			Unearned Compensation		Accumulated Other Comprehensive Income (Loss)			Common Stock In Treasury			Total
	Total comprehensive income																		467.3
	Dividends declared ($1.00 per share)		—		—			(58.5	)		—		—			—			(58.5	)
	Exercise of stock options and other incentive plan activity, including related tax benefit of $11.3		26.4		98.1			—			—		—			79.7			204.2
	Cumulative effect adjustment due to the adoption of SFAS 158, net of tax of $131.2		—		—			—			—		(209.4	)		—			(209.4	)
	Reclassification upon adoption of SFAS 123(R)		—		(52.4	)		—			55.3		—			—			2.9
	Amortization of restricted stock and restricted stock unit grants (includes $3.0 recorded to discontinued operations)		—		40.0			—			—		—			—			40.0
	Restricted stock and restricted stock unit vesting, net of tax withholdings		3.4		(12.4	)		—			—		—			(3.0	)		(12.0	)
	Treasury stock repurchased		—		—			—			—		—			(436.3	)		(436.3	)

Balance at December 31, 2006			937.4		1,134.5			1,754.2			—		(86.6	)		(1,630.1	)		2,109.4
	Net income							294.2											294.2
	Net unrealized loss on qualifying cash flow hedges, net of tax of $7.4		—		—			—			—		(11.9	)		—			(11.9	)
	Pension liability adjustment, net of tax of $35.5		—		—			—			—		46.1			—			46.1
	Foreign currency translation adjustments, including $0.1 of translation gains recognized upon sale of discontinued operations		—		—			—			—		90.5			—			90.5

	Total comprehensive income																		418.9
	Dividends declared ($1.00 per share)		—		—			(55.0	)		—		—			—			(55.0	)
	Cumulative effect adjustment due to the adoption of FIN 48		—		—			52.5			—		—			—			52.5
	Exercise of stock options and other incentive plan activity, including related tax benefit of $32.2		21.3		137.8			—			—		—			15.5			174.6
	Amortization of restricted stock and restricted stock unit grants (includes $2.2 recorded to discontinued operations)		—		42.3			—			—		—			—			42.3
	Restricted stock and restricted stock unit vesting, net of tax withholdings		4.8		(18.6	)		—			—		—			(7.0	)		(20.8	)
	Treasury stock repurchased		—		—			—			—		—			(715.9	)		(715.9	)

Balance at December 31, 2007		$	963.5	$	1,296.0		$	2,045.9		$	—	$	38.1		$	(2,337.5	)	$	2,006.0

The accompanying notes are an integral part of these statements.

SPX Corporation and Subsidiaries
Consolidated Statements of Cash Flows
($ in millions)

		Year Ended December 31,
		2007			2006			2005
Cash flows from (used in) operating activities:
Net income		$	294.2		$	170.7		$	1,090.0
Income (loss) from discontinued operations, net of tax			(6.1	)		(55.0	)		1,055.3

Income from continuing operations			300.3			225.7			34.7
Adjustments to reconcile income from continuing operations to net cash from (used in) operating activities
	Special charges, net		7.6			3.9			8.6
	Impairment on intangible assets		4.0			—			—
	Loss on early extinguishment of debt		3.3			—			113.6
	Deferred and other income taxes		(9.5	)		5.4			47.1
	Depreciation and amortization of intangibles and other assets		79.0			72.1			65.9
	Accretion of LYONs		—			1.7			18.0
	Pension and other employee benefits		58.0			62.3			53.6
	Stock-based compensation		41.4			37.6			28.3
	Other, net		6.6			(8.0	)		17.5
Changes in operating assets and liabilities, net of effects from acquisitions and divestitures
	Accounts receivable and other		15.9			(206.7	)		(89.2	)
	Inventories		(42.5	)		(42.1	)		1.4
	Accounts payable, accrued expenses and other		(54.6	)		81.0			57.7
	Taxes paid on repatriated foreign earnings		—			—			(47.5	)
	Payments to terminate interest rate swap agreements		(0.4	)		—			(13.3	)
	Payment of LYONs tax recapture		—			(90.9	)		—
	Accreted interest paid on LYONs repurchase (accreted since issuance date)		—			(84.3	)		(1.9	)
	Cash spending on restructuring actions		(4.9	)		(9.1	)		(26.2	)

Net cash from continuing operations			404.2			48.6			268.3
Net cash from (used in) discontinued operations			35.4			11.4			(401.8	)

Net cash from (used in) operating activities			439.6			60.0			(133.5	)
Cash flows from (used in) investing activities:
Proceeds from asset sales			3.3			19.4			41.4
Business acquisitions, net of cash acquired			(567.2	)		(169.4	)		(50.4	)
Capital expenditures			(90.9	)		(55.7	)		(41.3	)

Net cash used in continuing operations			(654.8	)		(205.7	)		(50.3	)
Net cash from discontinued operations (includes net cash proceeds from dispositions of $129.2, $123.0 and $2,751.2 in 2007, 2006 and 2005, respectively)			126.1			101.4			2,719.1

Net cash from (used in) investing activities			(528.7	)		(104.3	)		2,668.8
Cash flows from (used in) financing activities:
Borrowings under senior credit facilities			1,606.3			833.2			—
Repayments under senior credit facilities			(1,560.6	)		(15.0	)		—
Borrowings under senior notes			500.0			—			—
Repayments of debt borrowings			—			—			(1,073.4	)
Repurchase of senior notes (2005 includes premiums paid of $72.9)						—			(744.5	)
Repurchase of LYONs principal			—			(576.0	)		(16.0	)
Borrowing under trade receivables agreement			586.0			199.0			—
Repayments under trade receivables agreement			(517.0	)		(199.0	)		—
Net repayments under other financing arrangements			(21.9	)		(4.4	)		(1.8	)
Purchases of common stock			(715.9	)		(436.3	)		(624.7	)
Proceeds from the exercise of employee stock options			153.7			196.8			38.3
Dividends paid			(56.5	)		(59.9	)		(73.3	)
Financing fees paid			(15.1	)		(0.4	)		(5.1	)

Net cash used in continuing operations			(41.0	)		(62.0	)		(2,500.5	)
Net cash used in discontinued operations			(5.8	)		(1.5	)		(17.1	)

Net cash used in financing activities			(46.8	)		(63.5	)		(2,517.6	)

Increase (decrease) in cash and equivalents due to changes in foreign exchange rates			12.8			4.8			(23.9	)
Net change in cash and equivalents			(123.1	)		(103.0	)		(6.2	)
Consolidated cash and equivalents, beginning of period			477.2			580.2			586.4

Consolidated cash and equivalents, end of period		$	354.1		$	477.2		$	580.2

Cash and equivalents of continuing operations		$	354.1		$	476.9		$	576.2
Cash and equivalents of discontinued operations		$	—		$	0.3		$	4.0
Supplemental disclosure of cash flow information:
Interest paid		$	77.1		$	48.8		$	64.7
Income taxes paid, net of refunds of $59.1, $26.3 and $24.4 in 2007, 2006 and 2005 respectively		$	80.5		$	241.3		$	433.5
Non-cash investing and financing activity:
Debt assumed		$	4.7		$	23.2		$	9.9

The accompanying notes are an integral part of these statements.

Notes to Consolidated Financial Statements
December 31, 2007
(All dollar and share amounts in millions, except per share data)

(1) Summary of Significant Accounting Policies

Our significant accounting policies are described below as well as in other Notes that follow.

Basis of Presentation — The consolidated financial statements include SPX Corporation's ("our" or "we") accounts 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. Prior year amounts have been reclassified to conform to current-year presentation for our results of discontinued operations. In addition, we reclassified, within the investing section of our accompanying 2006 and 2005 consolidated statements of cash flows, proceeds from the sale of discontinued operations from net cash used in continuing operations to net cash from discontinued operations as we believe such presentation is more reflective of the concepts contained in Statement of Financial Accounting Standards ("SFAS") No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets". Unless otherwise indicated, amounts provided in these Notes pertain to continuing operations only (see Note 4 for more information on discontinued operations).

During 2007, we recognized an income tax benefit of $13.5 to "Gain (loss) on disposition of discontinued operations, net of tax" relating to the reversal of certain deferred tax liabilities associated with businesses previously disposed of and reported as discontinued operations, primarily during 2005. These additional gains should have been recorded in the period in which such businesses were disposed. In addition, an internal audit of a Japanese operation within our Test and Measurement segment uncovered employee misconduct and inappropriate accounting entries. Correction of this matter, substantially all of which relate to periods prior to 2007, resulted in a reduction of "Income from continuing operations before taxes" and "Net income" of $7.4 during 2007. These entries included $2.4 of inventory write-downs, $2.0 of accounts receivable write-offs and $3.0 in other adjustments. We have evaluated the effects of these corrections on prior periods' consolidated financial statements in accordance with the guidance provided by SEC Staff Accounting Bulletin No. 108, codified as SAB Topic 1.N, "Considering the Effects of Prior Year Misstatements in Current Year Financial Statements," and concluded that no prior period is materially misstated. In addition, we have considered the effects of these corrections on our interim and annual results of operations for the periods ended December 31, 2007 and concluded that the impact on these periods is not material.

Foreign Currency Translation — The financial statements of our foreign subsidiaries are translated into U.S. dollars in accordance with SFAS No. 52, "Foreign Currency Translation." Balance sheet accounts are translated at the current rate at the end of each period and income statement accounts are translated at the average rate. Gains and losses on foreign currency translations are reflected as a separate component of shareholders' equity and other comprehensive income. Foreign currency transaction gains and losses are included in other expense, net, with the related net losses totaling $3.0, $7.1 and $15.6 in 2007, 2006 and 2005, respectively.

Cash and Equivalents — We consider highly liquid money market investments with original maturities of three months or less at the date of purchase to be cash and equivalents.

Revenue Recognition — We recognize revenues from product sales upon shipment to the customer (f.o.b. shipping point) or upon receipt by the customer (f.o.b. destination), in accordance with the agreed upon customer terms. Revenues from service contracts and long-term maintenance arrangements are deferred and recognized on a straight-line basis over the agreement period. Revenues from certain construction/installation contracts are recognized using the percentage-of-completion method of accounting. Sales with f.o.b. destination terms are primarily to automotive industry customers. Sales to distributors with return rights are recognized upon shipment to the customer. Expected returns under these arrangements are estimated and accrued for at the time of sale. The accrual considers restocking charges for returns and in some cases the customer must issue a replacement order before the return is authorized. Actual return experience may vary from our estimates. Amounts billed for shipping and handling are included in revenue. Costs incurred for shipping and handling are recorded in cost of products sold.

Sales incentive programs offered to our customers relate primarily to volume rebates and promotional and advertising allowances and are only significant to two 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.

Certain of our businesses, primarily within the Test and Measurement and Thermal Equipment and Services segments, recognize revenues from long-term 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

Notes to Consolidated Financial Statements
December 31, 2007
(All dollar and share amounts in millions, except per share data)

estimated total costs for such contract at completion, in accordance with Statement of Position 81-1, "Accounting for the Performance of Construction — Type and Certain Production — Type Contracts."

Provisions for estimated losses, if any, 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 management has determined that collection is probable and the amount can be reliably estimated. Claims made by us involve negotiation and, in certain cases, litigation. In the event we incur litigation costs in connection with claims, such litigation 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 determinable.

We recognized $1,071.5, $848.5 and $714.5 in revenues under the percentage-of-completion method for the years ended December 31, 2007, 2006 and 2005, respectively. Costs and estimated earnings on uncompleted contracts, from their inception, and related amounts billed as of December 31, 2007 and 2006 were as follows:

	2007			2006
Costs incurred on uncompleted contracts	$	1,299.3		$	1,106.8
Estimated earnings to date		391.4			296.4

		1,690.7			1,403.2
Less: Billings to date		(1,693.8	)		(1,354.6	)

Net unbilled receivables	$	(3.1	)	$	48.6

These amounts are included in the accompanying consolidated balance sheets at December 31, 2007 and 2006 as shown below. Amounts for billed retainages and receivables to be collected in excess of one year are not significant for the periods presented.

	2007			2006
Costs and estimated earnings in excess of billings ⁽¹⁾	$	195.6		$	199.0
Billings in excess of costs and estimated earnings on uncompleted contracts ⁽²⁾		(198.7	)		(150.4	)

Net unbilled receivables	$	(3.1	)	$	48.6

⁽¹⁾: Reported as a component of "Accounts receivable, net" in the consolidated balance sheet.
⁽²⁾: Reported as a component of "Accrued expenses" in the consolidated balance sheet.

Amounts for costs and estimated earnings in excess of billings and billings in excess of costs and estimated earnings on uncompleted contracts for APV were $54.6 and $39.4, respectively, at December 31, 2007, which are not included in the table above.

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 costs are capitalized in accordance with SFAS No. 86, "Accounting for the Costs of Computer Software to be Sold, Leased or Otherwise Marketed" until the product is available for general release. These costs are amortized over the economic life of the related products and we 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

Notes to Consolidated Financial Statements
December 31, 2007
(All dollar and share amounts in millions, except per share data)

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. We expensed $70.3 of research activities relating to the development and improvement of our products in 2007, $61.4 in 2006 and $56.3 in 2005. In addition, we expensed purchased in-process research and development of $0.9 related to the APV acquisition as technological feasibility had not been established for the related projects.

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 was $58.7, $56.2 and $51.1 for the years ended December 31, 2007, 2006 and 2005, 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 construction or installation projects that are greater than $5.0 and one year in duration. There was no interest capitalized during 2007, 2006 and 2005.

Income Taxes — We account for our income taxes based on the requirements of SFAS No. 109, "Accounting for Income Taxes," 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 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. As further discussed in Notes 3 and 11, effective January 1, 2007, we began applying the provisions of the Financial Accounting Standards Board ("FASB") Interpretation No. 48, "Accounting for Uncertainty in Income Taxes, an Interpretation of FASB Statement No. 109" ("FIN 48") for measuring and recognizing tax benefits associated with uncertain tax positions.

Derivative Financial Instruments — We use interest rate swaps to manage our exposures to fluctuating interest rate risk on our variable rate debt, foreign currency forward contracts to manage our exposures to fluctuating currency exchange rates, and forward commodity contracts to manage our exposures to fluctuation in certain raw material costs. 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 other comprehensive income 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.

Fair value estimates are based on relevant market information. Changes in fair value are estimated by management quarterly based, in part, on quotes provided by third-party financial institutions.

(2) Use Of Estimates

The preparation of our consolidated financial statements in conformity with accounting principles generally accepted in the United States ("GAAP") requires us to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. We evaluate these estimates and judgments on an ongoing basis and base our estimates on experience, current and expected future conditions, third-party evaluations and various other assumptions that we believe are reasonable under the circumstances. The results of these estimates form the basis for making judgments about the carrying values of assets and liabilities as well as identifying and assessing the accounting treatment with respect to commitments and contingencies. Actual results may differ from the estimates and assumptions used in the financial statements and related notes.

Listed below are certain significant estimates and assumptions used in the preparation of our consolidated financial statements. Certain other estimates and assumptions are further explained in the related notes.

Notes to Consolidated Financial Statements
December 31, 2007
(All dollar and share amounts in millions, except per share data)

Accounts Receivable Allowances — We provide allowances for estimated losses on uncollectible accounts based on our historical experience and the evaluation of the likelihood of success in collecting specific customer receivables. In addition, we maintain allowances for customer returns, discounts and invoice pricing discrepancies, with such allowances primarily based on historical experience. Summarized below is the activity for these allowance accounts.

	2007			2006			2005
Balance at beginning of year	$	42.9		$	41.9		$	33.4
Acquisitions/divestitures, net		8.8			0.5			0.9
Allowances provided		22.6			18.4			25.6
Write-offs, net of recoveries and credits issued		(17.5	)		(17.9	)		(18.0	)

Balance at end of year	$	56.8		$	42.9		$	41.9

Inventory — We estimate losses for excess and/or obsolete inventory and the net realizable value of inventory based on the aging of the inventory and the evaluation of the likelihood of recovering the inventory costs based on anticipated demand and selling price.

Impairment of Long-Lived Assets and Intangibles Subject to Amortization — We continually review whether events and circumstances subsequent to the acquisition of any long-lived assets, or intangible assets subject to amortization, have occurred that indicate the remaining estimated useful lives of those assets may warrant revision or that the remaining balance of those assets may not be recoverable. If events and circumstances indicate that the long-lived assets should be reviewed for possible impairment, we use projections to assess whether future cash flows on an undiscounted basis related to the assets are likely to exceed the related carrying amount to determine if a write-down is appropriate. We will record an impairment charge to the extent that the carrying value of the assets exceed their fair values as determined by valuation techniques appropriate in the circumstances, which could include the use of similar projections on a discounted basis.

In determining the estimated useful lives of definite-lived intangibles, we consider the nature, competitive position, life cycle position, and historical and expected future operating cash flows of each acquired asset, as well as our commitment to support these assets through continued investment and legal infringement protection.

Goodwill and Indefinite-Lived Intangible Assets — We test goodwill and indefinite-lived intangible assets for impairment annually during the fourth quarter and continually review whether a triggering event has occurred to determine whether the carrying value exceeds the implied value. The fair value of reporting units is based generally on discounted projected cash flows, but we also consider factors such as comparable industry price multiples. We employ cash flow projections that we believe to be reasonable under current and forecasted circumstances, the results of which form the basis for making judgments about the carrying values of the reported net assets of our reporting units. Many of our businesses closely follow changes in the industries and end-markets that they serve. Accordingly, we consider estimates and judgments that affect the future cash flow projections, including principle methods of competition, such as volume, price, service, product performance and technical innovations, as well as estimates associated with cost improvement initiatives, capacity utilization and assumptions for inflation and foreign currency changes. Actual results may differ from these estimates under different assumptions or conditions. See Note 8 for more information, including discussion of an impairment charge recorded in 2007 related to other intangible assets held by a business within our Thermal Equipment and Services segment.

Notes to Consolidated Financial Statements
December 31, 2007
(All dollar and share amounts in millions, except per share data)

Accrued Expenses — We make estimates and judgments in establishing accruals as required under GAAP. Summarized in the table below are accrued expenses at December 31, 2007 and 2006.

	December 31,
	2007		2006
Employee benefits	$	240.4	$	208.4
Unearned revenue ⁽¹⁾		407.0		265.3
Warranty		44.1		44.4
Other ⁽²⁾		358.7		293.9

Total	$	1,050.2	$	812.0

⁽¹⁾: Unearned revenue includes billings in excess of costs and estimated earnings on uncompleted contracts accounted for under the percentage-of-completion method of revenue recognition, customer deposits and unearned amounts on service contracts.
⁽²⁾: Other consists of various items, including legal, interest, restructuring and dividends payable, none of which individually require separate disclosure.

Legal — It is our policy to accrue for estimated losses from legal actions or claims when events exist that make the realization of the losses, including the associated legal fees, probable and they can be reasonably estimated. We do not discount legal obligations or reduce them by anticipated insurance recoveries.

Environmental Remediation Costs — We expense costs incurred to investigate and remediate environmental issues unless they extend the economic useful life of related assets. We record liabilities and report expenses when it is probable that an obligation has been incurred and the amounts can be reasonably estimated. Our environmental accruals cover anticipated costs, including investigation, remediation and operation and maintenance of clean-up sites. Our estimates are based primarily on investigations and remediation plans established by independent consultants, regulatory agencies and potentially responsible third parties. We do not discount environmental obligations or reduce them by anticipated insurance recoveries.

Self-Insurance — We are self-insured for certain of our workers' compensation, automobile, product, general liability disability and health costs, and we believe that we maintain adequate accruals to cover our retained liabilities. Our accruals for self-insurance liabilities are determined by management, are based on claims filed and an estimate of claims incurred but not yet reported, and are generally not discounted. Management considers a number of factors, including third-party actuarial valuations, when making these determinations. We maintain third-party stop-loss insurance policies to cover certain liability costs in excess of predetermined retained amounts; however, this insurance may be insufficient or unavailable to protect us against potential loss exposures. The key assumptions considered in estimating the ultimate cost to settle reported claims and the estimated costs associated with incurred but not yet reported claims includes among other things, our historical and industry claims experience, trends in health care and administrative costs, our current and future risk management programs, and historical lag studies with regard to the timing between when a claim is incurred and reported. We maintain third-party stop-loss insurance policies to cover certain liability costs in excess of predetermined retained amounts.

Warranty — In the normal course of business, we issue product warranties for specific product lines and provide for the estimated future warranty cost in the period in which the sale is recorded. We provide for the estimate of warranty cost based on contract terms and historical warranty loss experience that is periodically adjusted for recent actual experience. Because warranty estimates are forecasts that are based on the best available information, claims costs may differ from amounts provided. In addition, due to the seasonal fluctuations at certain of our businesses, the timing of warranty provisions and the usage of warranty accruals can vary period to period. We make adjustments to initial obligations for warranties as changes in

Notes to Consolidated Financial Statements
December 31, 2007
(All dollar and share amounts in millions, except per share data)

the obligations become reasonably estimable. The following is an analysis of our product warranty accrual for the periods presented:

		For the year ended December 31,
		2007			2006			2005
Balance at beginning of year		$	54.4		$	50.1		$	54.6
Acquisitions/divestitures, net			4.8			0.1			0.3
Provisions			27.1			39.1			21.1
Usage			(24.9	)		(34.9	)		(25.9	)

	Balance at end of year		61.4			54.4			50.1
Less: Current portion of warranty			44.1			44.4			39.2

	Non-current portion of warranty	$	17.3		$	10.0		$	10.9

Income Taxes — We perform reviews of our income tax positions on a continuous basis and accrue for potential contingencies in accordance with FIN 48. Accruals for these contingencies are classified as "Income taxes payable" and "Deferred and other income taxes" in the accompanying consolidated balance sheets based on an expectation as to the timing of when the contingency will be resolved. As events change or resolution occurs, these accruals are adjusted, such as in the case of audit settlements with taxing authorities. These reviews also entail analyzing the realization of deferred tax assets associated with net operating loss and credit carryforwards. When we believe that it is more likely than not that a net operating loss or credit carryforward may expire unused, we establish a valuation allowance against them. For tax positions where it is more-likely-than-not that a tax benefit will be sustained, we have recorded the largest amount of tax benefit of tax benefit with a greater than 50% likelihood of being realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information.

Employee Benefit Plans — We have defined benefit plans that cover a significant portion of our salaried and hourly employees, including certain employees in foreign countries. We derive pension expense from an actuarial calculation based on the defined benefit plans' provisions and management's assumptions regarding discount rate, rate of increase in compensation levels and expected long-term rate of return on plan assets. Management determines the expected long-term rate of return on plan assets based upon historical actual asset returns and the expectations of asset returns over the expected period to fund participant benefits based on the current investment mix of our plans. Management determines the discount rate by matching the expected projected benefit obligation cash flows for each of the plans to a yield curve that is representative of long-term, high-quality (rated AA or higher) fixed income debt instruments as of the measurement date. The rate of increase in compensation levels is established based on management's expectations of current and foreseeable future increases in compensation. Management also consults with independent actuaries in determining these assumptions. See Note 10 for more information.

(3) New Accounting Pronouncements

The following is a summary of new accounting pronouncements that apply or may apply to our business.

In February 2006, the FASB issued SFAS No. 155, "Accounting for Certain Hybrid Financial Instruments," which amends SFAS No.'s 133 and 140, and improves the financial reporting of certain hybrid financial instruments by requiring more consistent accounting that eliminates exemptions and provides a means to simplify the accounting for these instruments. Specifically, SFAS No. 155 allows financial instruments that have embedded derivatives to be accounted for as a whole (eliminating the need to bifurcate the derivative from its host) if the holder elects to account for the whole instrument on a fair value basis. SFAS No. 155 is effective for all financial instruments acquired or issued after the beginning of an entity's first fiscal year that begins after September 15, 2006. We adopted SFAS No. 155 effective January 1, 2007, and it did not have an impact on our consolidated financial statements.

In June 2006, the Emerging Issues Task Force ("EITF") reached a consensus on EITF Issue No. 06-03, "How Taxes Collected from Customers and Remitted to Governmental Authorities Should Be Presented in the Income Statement (That Is, Gross versus Net Presentation)" ("EITF 06-03"). EITF 06-03 provides that the presentation of taxes assessed by a

Notes to Consolidated Financial Statements
December 31, 2007
(All dollar and share amounts in millions, except per share data)

governmental authority that are directly imposed on a revenue-producing transaction between a seller and a customer on either a gross basis (included in revenues and costs) or on a net basis (excluded from revenues) is an accounting policy decision that should be disclosed. EITF 06-03 is effective for interim and annual periods beginning after December 15, 2006. Our policy for all periods has been to present such taxes net in our consolidated statement of operations.

In June 2006, the FASB issued FIN 48, which seeks to reduce the diversity in practice associated with accounting for uncertainty in income taxes by prescribing a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken on a tax return. In addition, FIN 48 requires expanded disclosure with respect to the uncertainty in income taxes and is effective for fiscal years beginning after December 15, 2006. We adopted FIN 48 effective January 1, 2007, which resulted in an initial reduction of our income tax liability for unrecognized tax benefits of $50.4, with a corresponding increase to retained earnings. During the third quarter of 2007, we recorded a correcting adjustment of $2.1 to recognize an income tax receivable, with a corresponding increase to retained earnings. The impact of this correcting adjustment is not considered to be material to our consolidated financial position. See Note 11 for additional discussion regarding the impact of our adoption of FIN 48.

In September 2006, the FASB issued SFAS No. 158, "Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans — An Amendment of FASB Statements No. 87, 88, 106 and 132(R)". SFAS No. 158 requires balance sheet recognition of the funded status of pension and postretirement benefit plans. Under SFAS No. 158, actuarial gains and losses, prior service costs or credits, and any remaining transition assets or obligations that have not been recognized under previous accounting standards must be recognized as a component of shareholders' equity (in accumulated other comprehensive income (loss), net of tax effects) until they are amortized as a component of net periodic benefit expense. Additionally, the measurement date (the date at which plan assets and the benefit obligation are measured) is required to be the company's fiscal year end; which is consistent with our current practice. SFAS No. 158 is effective for financial statements issued for fiscal years ending after December 15, 2006. Based on the funded status of our plans as of December 31, 2006, the adoption of SFAS No. 158 decreased total assets by $127.9, increased total liabilities by $81.5 and reduced shareholders' equity by $209.4. The adoption of SFAS No. 158 did not affect our results of operations. Refer to Note 10 for additional details pertaining to the adoption of this standard.

In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities, Including an amendment of FASB Statement No. 115" which permits an entity to measure certain financial assets and financial liabilities at fair value. The objective of SFAS No. 159 is to improve financial reporting by allowing entities to reduce volatility in reported earnings, caused by the measurement of related assets and liabilities using different attributes, without having to apply complex hedge accounting rules. Under SFAS No. 159, entities that elect the fair value option will report unrealized gains and losses in earnings as of each subsequent reporting date. The fair value option may be elected on an instrument-by-instrument basis with a few exceptions, as long as it is applied to the instrument in its entirety. The fair value option election is irrevocable, unless a new election date occurs. SFAS No. 159 is effective as of the beginning of the first fiscal year that begins after November 15, 2007. We do not expect the adoption of SFAS No. 159 to have a material impact on our consolidated financial statements.

In March 2007, the EITF reached a consensus on EITF Issue No. 06-10, "Accounting for Collateral Assignment Split-Dollar Life Insurance Arrangements" ("EITF 06-10"). EITF 06-10 requires an employer to recognize a liability for the postretirement benefit obligation associated with a collateral assignment split- dollar life insurance arrangement in accordance with SFAS No. 106 (if deemed part of a postretirement plan) or Opinion 12 (if not part of a plan), if, on the basis of the substantive agreement with the employee, the employer has agreed to maintain a life insurance policy during the postretirement period or to provide a death benefit. EITF 06-10 also states that an employer should recognize and measure the associated asset on the

Notes to Consolidated Financial Statements
December 31, 2007
(All dollar and share amounts in millions, except per share data)

basis of the terms of the collateral assignment arrangement. EITF No. 06-10 is effective for fiscal years beginning after December 15, 2007, including interim periods within those fiscal years. We do not expect the adoption of EITF 06-10 to have a material impact on our financial position or results of operations.

In June 2007, the EITF reached a consensus on EITF Issue No. 06-11, "Accounting for Income Tax Benefits of Dividends on Share-Based Awards" ("EITF 06-11"). EITF 06-11 states that an entity should recognize a realized tax benefit associated with the dividends on affected securities charged to retained earnings as an increase in additional paid-in-capital ("APIC"), which should be included in the APIC pool. When an entity's estimate of forfeitures increases or actual forfeitures exceed its estimates, the amount of tax benefits previously recognized in APIC should be reclassified into the income statement; however, the amount reclassified is limited to the APIC pool balance on the reclassification date. EITF 06-11 is effective for income tax benefits declared on affected securities in fiscal years beginning after December 15, 2007, and interim periods within those fiscal years. We do not expect the adoption of EITF 06-11 to have a material impact on our financial position or results of operations.

In December 2007, the FASB issued SFAS No. 160, "Noncontrolling Interests in Consolidated Financial Statements — An Amendment of ARB No. 51". SFAS No. 160 establishes new accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. Specifically, SFAS No. 160 requires the recognition of a noncontrolling interest (minority interest) as equity in the consolidated financial statements and separate from the parent's equity. The amount of net income attributable to the noncontrolling interest will be included in consolidated net income on the face of the income statement. In addition, SFAS No. 160 requires that a parent recognize a gain or loss in net income when a subsidiary is deconsolidated. Such gain or loss will be measured using the fair value of the noncontrolling equity investment on the deconsolidation date. SFAS No. 160 also includes expanded disclosure requirements regarding the interests of the parent and its noncontrolling interest. SFAS No. 160 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. We do not expect the adoption of SFAS No. 160 to have a material impact on our financial position or results of operations.

In December 2007, the EITF reached a consensus on EITF Issue No. 07-01, "Accounting for Collaborative Arrangements" ("EITF 07-01"). EITF 07-01 defines a collaborative arrangement as a contractual arrangement in which the parties are (1) active participants to the arrangements and (2) exposed to significant risks and rewards that depend on the commercial success of the endeavor. EITF 07-01 requires costs incurred and revenues generated from transactions with third parties should be reported by the collaborators on the appropriate line item in their respective income statements. EITF 07-01 also states that the income statement characterization of payments between the participants to a collaborative arrangement should be based on other authoritative literature if the payments are within the scope of such literature. EITF 07-01 requires collaborators to disclose, in the footnotes to financial statements in the initial period of adoption and annually thereafter, (1) the income statement classification and amounts attributable to transactions arising from collaborative arrangements between participants for each period for which an income statement is presented and (2) information regarding the nature and purpose of the collaborative arrangement, the collaborators' rights and obligations under the arrangement, and any accounting policies for the collaborative arrangement. EITF 07-01 is effective for fiscal years beginning after December 15, 2008. We are currently

Notes to Consolidated Financial Statements
December 31, 2007
(All dollar and share amounts in millions, except per share data)

evaluating the impact of adoption that EITF 07-01 may have on our financial position or results of operations, specifically, as it relates to our consortium arrangements. See Note 14 for additional details of our consortium arrangements.

(4) Acquisitions and Discontinued Operations

We use acquisitions as a part of our strategy to gain access to customer relationships, new technology, expand our geographical reach, penetrate new markets and leverage our existing product, market, manufacturing and technical expertise. Acquisitions and divestitures for the years ended December 31, 2007, 2006 and 2005 are described below.

All business acquisitions have been accounted for in accordance with SFAS No. 141, "Business Combinations" and, accordingly, the consolidated statements of operations include the results of each acquired business since the date of acquisition. The assets acquired and liabilities assumed are recorded at estimates of fair values as determined by management based on information available. Management considers a number of factors, including third-party valuations or appraisals, when making these determinations. We finalize the allocation of purchase price to the fair value of the assets acquired and liabilities assumed when we obtain information sufficient to complete the allocation, but in any case, within one year after acquisition. Refer to Note 8 for additional disclosure on the purchase price allocation of the following acquisitions.

Acquisitions — 2007

In the Flow Technology segment, we completed the acquisition of APV, a global manufacturer of process equipment and engineering solutions on December 31, 2007, for a purchase price of $524.2, including cash acquired of $41.7. APV's primary products include pumps, valves, heat exchangers and homogenizers for the food, dairy, beverage and pharmaceutical industries. APV had revenues of approximately $876.0 for the twelve months ended December 31, 2007.

The assets acquired and liabilities assumed were recorded at preliminary estimates of fair values as determined by management, based on information currently available and on current assumptions as to future operations, and are subject to change upon the completion of acquisition accounting, including the finalization of asset valuations and working capital settlement.

The following is a summary of the recorded preliminary fair values of the assets acquired and liabilities assumed of APV as of December 31, 2007, the date of the acquisition:

Assets acquired:
	Current assets, including cash and equivalents of $41.7	$	390.4
	Property, plant and equipment		79.1
	Goodwill		190.4
	Intangible assets		204.9
	Other assets		3.2

Total assets acquired		$	868.0

Liabilities assumed:
	Current liabilities	$	297.6
	Other long-term liabilities		46.2

Total liabilities			343.8

Net assets acquired		$	524.2

The identifiable intangible assets acquired consist of trademarks, customer relationships and technology of $90.0, $69.0 and $45.9, respectively, with such amounts based on a preliminary assessment of the related fair values.

Purchased in-process research and development of $0.9 was expensed upon acquisition because technological feasibility had not been established for the related projects.

The following unaudited pro forma information presents our results of operations as if the acquisition of APV had taken place on January 1, 2006. 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 dates

Notes to Consolidated Financial Statements
December 31, 2007
(All dollar and share amounts in millions, except per share data)

presented, and should not be taken as representative of our future consolidated results of operations. The pro forma results include estimates and assumptions which management believes are reasonable. However, these results do not include any anticipated cost savings or expenses of the planned integration of APV. These pro forma results of operations have been prepared for comparative purposes only and include certain adjustments to actual financial results for the relevant periods, such as imputed financing costs, and estimated additional amortization and depreciation expense as a result of intangibles and fixed assets acquired.

		Year Ended December 31,
		2007		2006
Revenues		$	5,698.2	$	4,920.5
Income from continuing operations			256.3		198.8
Net income			250.2		143.8
Income from continuing operations:
	Basic	$	4.67	$	3.41
	Diluted	$	4.55	$	3.30
Net income:
	Basic	$	4.56	$	2.47
	Diluted	$	4.44	$	2.39

In the Test and Measurement segment, we completed the acquisition of the European diagnostics division of Johnson Controls ("JCD") in August 2007, for a purchase price of $40.3. The acquired business had revenues of approximately $93.0 in the twelve months prior to its acquisition. In addition, we completed the acquisition of Matra-Werke GmbH ("Matra") in October 2007, within our Test and Measurement segment for a purchase price of $36.6, including cash acquired of $2.9. The acquired business had revenues of approximately $26.0 in the twelve months prior to acquisition.

The pro forma effects of the acquisitions of JCD and Matra were not material individually or in the aggregate to our results of operations or financial position.

Acquisitions — 2006

In the Flow Technology segment, we completed the acquisition of Aktiebolaget Custos ("Custos") in December 2006, for a purchase price of $184.0 (related to approximately 97% of the outstanding shares of Custos), which was net of cash acquired of $4.4 and included debt assumed of $23.2. Custos had revenues of approximately $107.0 in the twelve months prior to the date of acquisition. The remaining shares of Custos were acquired in 2007 for $4.4.

The pro forma effects of the acquisition was not material to our results of operations or financial position.

Acquisitions — 2005

In the Test and Measurement segment, we completed the acquisition of CarTool GmbH ("CarTool") in November 2005, for a cash purchase price of $41.4, net of cash acquired of $22.6. CarTool had revenues of approximately $77.0 in the twelve months prior to the date of acquisition.

The pro forma effects of the acquisition was not material to our results of operations or financial position.

Discontinued Operations

Notes to Consolidated Financial Statements
December 31, 2007
(All dollar and share amounts in millions, except per share data)

probable within the next 12 months. The following businesses, which have been sold, met these requirements and therefore have been reported as discontinued operations for the periods presented.

Business	Quarter Discontinued	Actual Closing Date of Sale
Balcke-Duerr Austria GmbH ("BD Austria")	Q4 2007	Q4 2007
Nema AirFin GmbH ("Nema")	Q4 2007	Q4 2007
Contech	Q3 2006	Q2 2007
Dock Products ("Dock")	Q2 2006	Q4 2006
Dielectric Tower ("Tower")	Q4 2005	Q1 2006
Security and protection business ("Vance")	Q3 2005	Q1 2006
Mueller Steam, Febco and Polyjet product lines	Q3 2005	Q4 2005
Aftermarket automotive products business ("Carfel")	Q1 2005	Q3 2005
Lab and life science business ("Kendro")	Q4 2004	Q2 2005
Brookstone telecommunication services business	Q1 2005	Q1 2005
Fire detection and building life-safety systems business ("EST")	Q4 2004	Q1 2005
Specialty tool business	Q4 2004	Q1 2005
Compaction equipment business ("Bomag")	Q3 2004	Q1 2005

BD Austria — Sold for cash proceeds of $11.6, exclusive of cash balances assumed by the buyer of $30.0, resulting in a gain, net of taxes, of $17.2.

Nema — Sold for $6.8 in cash, net of cash balances assumed by the buyer of $0.4, for a loss, net of taxes, of $2.3.

Contech — Sold to Marathon Automotive Group, LLC. for net cash proceeds of $134.3. During 2007, we recorded a net loss on the sale of $13.6, including $7.0 of expenses that were contingent upon the consummation of the sale, which included $1.1 due to the modification of the vesting period of restricted stock units that had been issued to Contech employees (see Note 15 for further information), and a $6.6 charge, recorded during the first quarter of 2007, to reduce the carrying value of the net assets sold to the net proceeds received from the sale. In addition, in 2007, we settled a capital lease obligation for $5.3 relating to equipment that was transferred to the buyer of Contech. During 2006, we recorded a charge of $102.7 to "Gain (loss) on disposition of discontinued operations, net of tax" in order to reduce the carrying value of the net assets to be sold to their estimated net realizable value.

Dock — Sold for $43.5 in cash in 2006, resulting in a net gain on the sale of $29.0. This gain related primarily to a tax benefit of $33.2, partially offset by expenses that were contingent primarily upon the consummation of the sale, which included $0.3 due to the modification of the vesting period of restricted stock units that had been issued to Dock employees (see Note 15 for further information).

Tower — Sold for $6.9 in cash, including additional cash proceeds of $4.4 that related to the settlement of the working capital associated with the transaction. In 2005, we recorded a charge, net of taxes, of $11.3 in order to reduce the carrying value of the net assets to be sold to their estimated net realized value. During 2006, we reduced the net loss by $0.9 primarily as a result of the working capital settlement noted above.

Vance — Sold for $70.6 in cash. In 2005, we recorded a net charge of $26.8 in order to reduce the carrying value of the net assets to be sold to their estimated net realizable value. During 2006, we increased the net loss by $3.1, primarily for expenses that were contingent upon the consummation of the sale, which included $1.6 due to the modification of the vesting period of restricted stock units that had been issued to Vance employees (see Note 15 for further information).

Mueller Steam, Febco and Polyjet — Sold for $44.7 in cash. In 2005, we recorded a gain on the sale of $50.7, including a tax benefit of $71.8.

Carfel — Sold for $12.0 in cash. In 2005, we recorded a loss on the sale, net of taxes and transaction fees, of $21.9.

Kendro — Sold to Thermo Electron Corporation for $828.8 in cash. In 2005, we recorded a gain on the sale, net of taxes and transaction fees, of $326.5.

Brookstone telecommunication services business — Sold for $0.9 in cash. In 2005, we recorded a loss on the sale, net of taxes and transaction fees, of $12.1.

Notes to Consolidated Financial Statements
December 31, 2007
(All dollar and share amounts in millions, except per share data)

EST — Sold to General Electric Company ("GE") for $1,393.2 in cash, net of cash balances assumed by GE of $1.5. In 2005, we recorded a gain on the sale, net of taxes and transaction fees, of $662.5.

Specialty Tool Business — Sold for $24.2 in cash, with $21.8 received at the closing and $2.4 deposited in an escrow account. In 2005, we recorded a loss on the sale, net of taxes, of $3.7. We received $1.7 of the escrow amount in 2006 and the remaining $0.7 in 2007.

Bomag — Sold to Fayat SA ("Fayat") for $447.3 in cash, net of cash balances assumed by Fayat of $2.7. In 2005, we recorded a gain on the sale, net of taxes and transaction fees, of $137.4.

The final purchase price for certain of the divested businesses is subject to adjustment based on working capital existing at the respective closing dates. The working capital figures are subject to agreement with the buyers or if we cannot come to agreement with the buyers, an arbitration process. Final agreement of the working capital figures with the buyers for certain of these transactions has yet to occur. In addition, changes in estimates associated with liabilities retained in connection with a business divestiture (e.g., income taxes) may occur. It is possible that the purchase price and resulting gains/(losses) on these and other previous divestitures may be materially adjusted in subsequent periods. Refer to Note 11 for the tax implications associated with our dispositions.

For 2007, 2006 and 2005, income (loss) from discontinued operations and the related income taxes are shown below:

		Year ended December 31,
		2007			2006			2005
Income (loss) from discontinued operations		$	(37.5	)	$	(105.0	)	$	1,512.8
Income tax (provision) benefit			31.4			50.0			(457.5	)

	Income (loss) from discontinued operations, net	$	(6.1	)	$	(55.0	)	$	1,055.3

For 2007, 2006 and 2005, results of operations from our businesses reported as discontinued operations were as follows:

	Year ended December 31,
	2007			2006		2005
Revenues	$	295.8		$	555.4	$	1,057.0
Pre-tax income (loss)		(0.9	)		4.3		(41.7	)

Notes to Consolidated Financial Statements
December 31, 2007
(All dollar and share amounts in millions, except per share data)

The major classes of assets and liabilities, excluding intercompany balances, of the businesses reported as discontinued operations included in the accompanying consolidated balance sheets are shown below:

			December 31, 2007		December 31, 2006
Assets:
	Cash and equivalents		$	—	$	0.3
	Accounts receivable, net			17.7		63.7
	Inventories, net			12.6		30.7
	Other current assets			2.3		10.2
	Net property, plant and equipment			14.5		135.7
	Goodwill and intangibles, net			8.8		56.6
	Other assets			0.2		1.8

		Assets of discontinued operations	$	56.1	$	299.0

Liabilities:
	Accounts payable		$	9.2	$	57.7
	Accrued expenses and other			15.6		50.6
	Short-term debt			0.4		2.5
	Deferred and other income taxes			5.9		18.4
	Long term debt and other			—		7.7

		Liabilities of discontinued operations	$	31.1	$	136.9

(5) Business Segment Information

We are a global provider of flow technology, test and measurement products and services, thermal equipment and services and industrial products and services with operations in over 35 countries. We offer a diverse collection of products, which include, but are not limited to, valves, fluid handling equipment, metering and mixing solutions, specialty service tools, diagnostic systems, service equipment and technical information services, cooling, heating and ventilation products, power transformers, and TV and radio broadcast antennas. Our products are used by a broad array of customers in various industries, including, power generation, chemical processing, pharmaceuticals, infrastructure, mineral processing, petrochemical, automotive service, telecommunications and transportation.

We have aggregated our operating segments into four reportable segments in accordance with the criteria defined in SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information". The segments are Flow Technology, Test and Measurement, Thermal Equipment and Services and Industrial Products and Services. The factors considered in determining our aggregated segments are the economic similarity of the businesses, the nature of products sold or services provided, production processes, types of customers and distribution methods. In determining our segments, we apply the threshold criteria of SFAS No. 131 to operating income or loss of each segment before considering impairment and special charges, pensions and postretirement expenses, stock-based compensation and other indirect corporate expense. This is consistent with the way our chief operating decision maker evaluates the results of each segment.

Revenues by business segment represent sales to unaffiliated customers, and no one customer or group of customers that, to our knowledge are under common control accounted for more than 10% of our consolidated revenues for all periods presented. Intercompany revenues among segments are not significant. Identifiable assets by business segment are those used in our operations in each segment. General corporate assets are principally cash, pension assets, deferred tax assets, certain prepaid expenses, fixed assets and our 44.5% interest in the EGS Electrical Group, LLC and Subsidiaries ("EGS") joint venture. See Note 9 for financial information relating to EGS.

Flow Technology

Our Flow Technology segment designs, manufactures and markets solutions and products that are used to process or transport fluids, as well as solutions and products that are used in heat transfer applications. Our Flow Technology businesses

Notes to Consolidated Financial Statements
December 31, 2007
(All dollar and share amounts in millions, except per share data)

focus on innovative, highly engineered new product introductions and expansion from products to systems and services in order to create total customer solutions.

Test and Measurement

Our Test and Measurement segment engineers and manufactures branded, technologically advanced test and measurement products used across the transportation, defense, telecommunications and utility industries. Our technology supports the introduction of new systems, expanded services, and sophisticated testing and validation. Products for the segment include specialty automotive diagnostic service tools, fare-collection systems, portable cable and pipe locators, and vibration testing equipment. The segment continues to focus on initiatives such as lean manufacturing, expanding its commercialization of the European and Chinese markets and leveraging its outsourcing model.

Thermal Equipment and Services

Our Thermal Equipment and Services segment engineers, manufactures and services cooling, heating and ventilation products for markets throughout the world. Products for the segment include dry, wet and hybrid cooling systems for the power generation, refrigeration, HVAC and industrial markets, as well as hydronic and heating and ventilation products for the commercial and residential markets. This segment also provides thermal components for power and steam generation plants and engineered services to maintain, refurbish, upgrade and modernize power stations. The segment continues to focus on expanding its global reach, including expanding its dry cooling, heating and manufacturing capacity in China, as well as increasing thermal components and service offerings, particularly in China, Europe and South Africa.

Industrial Products and Services

Our Industrial Products and Services segment comprises businesses that design, manufacture and market power systems, industrial tools and hydraulic units, filters primarily for the automatic transmissions, precision machine components for the aerospace industry and television and radio broadcast antenna systems. This segment continues to focus on lean initiatives and global expansion opportunities.

Corporate Expense

Corporate expense generally relates to the cost of our Charlotte, NC corporate headquarters, our Horsham, PA information technology data center and our Asia-Pacific center in Shanghai, China.

Notes to Consolidated Financial Statements
December 31, 2007
(All dollar and share amounts in millions, except per share data)

Financial data for our business segments, including the results of acquisitions from the dates of the respective acquisitions, are as follows:

		2007		2006		2005
Revenues:
	Flow Technology	$	1,121.3	$	865.7	$	775.8
	Test and Measurement		1,174.1		1,137.5		1,059.6
	Thermal Equipment and Services		1,560.5		1,327.7		1,178.4
	Industrial Products and Services		966.4		836.7		716.0

	Total	$	4,822.3	$	4,167.6	$	3,729.8

Segment income:
	Flow Technology	$	177.2	$	133.2	$	102.2
	Test and Measurement		126.4		159.1		129.9
	Thermal Equipment and Services		162.7		111.4		117.5
	Industrial Products and Services		156.1		99.0		67.5

	Total segment income		622.4		502.7		417.1
	Corporate expense		100.3		96.1		87.6
	Pension and postretirement expense		43.5		44.2		28.7
	Stock-based compensation expense		41.4		37.6		28.3
	Special charges, net		7.6		3.9		8.6
	Impairment of intangible assets		4.0		—		—

	Consolidated operating income	$	425.6	$	320.9	$	263.9

Capital expenditures:
	Flow Technology	$	17.7	$	9.7	$	3.4
	Test and Measurement		11.9		9.7		7.5
	Thermal Equipment and Services		23.3		14.0		16.8
	Industrial Products and Services		24.4		21.1		11.8
	General corporate		13.6		1.2		1.8

	Total	$	90.9	$	55.7	$	41.3

Depreciation and amortization:
	Flow Technology	$	18.2	$	12.3	$	13.5
	Test and Measurement		20.2		20.4		17.4
	Thermal Equipment and Services		21.7		22.6		19.4
	Industrial Products and Services		14.2		13.4		11.5
	General corporate		4.7		3.4		4.1

	Total	$	79.0	$	72.1	$	65.9

Identifiable assets:
	Flow Technology	$	2,068.4	$	989.9	$	808.7
	Test and Measurement		1,346.5		1,183.8		1,151.8
	Thermal Equipment and Services		1,761.5		1,728.8		1,578.8
	Industrial Products and Services		697.4		703.5		665.7
	General corporate		307.5		532.1		536.1
	Discontinued operations		56.1		299.0		565.3

	Total	$	6,237.4	$	5,437.1	$	5,306.4

Notes to Consolidated Financial Statements
December 31, 2007
(All dollar and share amounts in millions, except per share data)

				2007		2006		2005
Revenues by Groups of Products:
	Flow Technology			$	1,121.3	$	865.7	$	775.8
	Test and Measurement				1,174.1		1,137.5		1,059.6
	Thermal Equipment and Services				1,560.5		1,327.7		1,178.4
	Industrial Products and Services:
		Power transformers and services			421.1		290.6		235.9
		Industrial tools and equipment			149.0		142.4		123.3
		Aerospace components			110.2		102.2		82.4
		Automatic transmission			101.7		95.8		92.5
		Broadcast antenna systems			93.3		116.7		112.1
		Laboratory equipment			91.1		89.0		69.8

			Total Industrial Products and Services		966.4		836.7		716.0

Total				$	4,822.3	$	4,167.6	$	3,729.8

Geographic Areas:		2007		2006		2005
Revenues: ⁽¹⁾
	United States	$	2,806.3	$	2,604.3	$	2,467.1
	Germany		710.3		580.6		450.6
	China		285.8		226.4		134.2
	United Kingdom		274.1		233.1		208.9
	Other		745.8		523.2		469.0

		$	4,822.3	$	4,167.6	$	3,729.8

Tangible Long Lived Assets:
	United States	$	589.2	$	555.6	$	469.3
	Other		312.3		156.8		212.0

Long lived assets of continuing operations			901.5		712.4		681.3
Long lived assets of discontinued operations			14.7		137.5		149.3