Good day everyone and welcome to the SPX Corporation Third Quarter 2008 Results Conference Call. This call is being recorded. At this time, I would like to turn the call over to the Vice President of Finance, Mr. Jeremy Smeltser. Please go ahead, sir.

Thank you, Shauna. Good morning everyone. Thanks for joining us. With me on the call this morning, as always, are Chris Kearney, Chairman, President and CEO of SPX; and Patrick O'Leary, our Chief Financial Officer. This morning's call is being webcast with a slide presentation which can be accessed on our website at www.spx.com in the Investor Relations section. This webcast will be available until November 12. You may wish to follow along with the webcast as we reference the detailed information on the slides. Please note that this slide presentation also includes supplemental schedules, which provide reconciliations for all non-GAAP financial measures referenced today. Our earnings press release was issued earlier this morning and can also be found on our website. Before we continue, I would like to point out that portions of our presentation and comments are forward-looking and subject to Safe Harbor provisions. I would also refer you to the risk factors in our most recent SEC filings. With that, I'll turn the call over to Chris.

Thanks, Jeremy and good morning everyone. Thanks for joining us as we report our third quarter earnings. As you know there have been a lot of changes in the global economy since we reported Q2. I'll address these changes and what we currently know about their impact on Spx. I will also update you on our key end market developments and recent strategic actions. Patrick will take you through a detailed analysis of the third quarter results, our expectations for Q4 and our revised full year guidance. He will also review our balance sheet and liquidity. I'll close with a brief summary before we take your questions. Recently there have been many changes in global economic landscape. The value of the euro, British pound and South African rand have each declined significantly versus the US dollar. In this call we will discuss how these foreign currency fluctuations impacted our Q3 results, Q4 outlook and reported backlog. Additionally, the banking failures and consolidations have stirred an unprecedented global credit crisis. Availability of capital is uncertain for many companies and it is unclear at this time how that impacts our customer's capital budgets as we move into 2009. We do expect that customers will generally be more cautious over the coming months. We also recognize that in today's global economic climate there are increased risks of potential changes in the behavior of our customers. We are carefully monitoring those risks and stand prepared to take additional restructuring or other actions if they become necessary. Most importantly we remained confident that our long term strategy and solid balance sheet have us well positioned to manage through the world's evolving economic changes. Looking specifically at Q3, let me highlight our key financial metrics for the quarter. Q3 earnings per share were just over $2…

Thanks, Chris. Good morning everyone. Beginning with EPS, we reported earnings per share for the quarter of $2.01. During the quarter we recorded a $0.47 tax benefit as a result of a favorable outcome of IRS tax audits for the years 2003 through 2005, details are not closed [ph]. Additionally we recorded $0.11 charge related to the settlement of a lawsuit associated with the business disposition that took place in 1997. This charge was recorded on the other expense line of our income statement in Q3. Excluding these two items, Q3 EPS was a $1.66, that's up 19% over the last year's adjusted EPS and $0.01 above the top end of the guidance range we gave you on July 30. Increased segment income contributed $0.53 of improvement; this more than offset headwinds from interest, pension expense and a higher effective tax rate. The effective tax rate on the adjusted earnings for the quarter was 34.3%, that's up from 30% in Q3 last year. Looking at our consolidated operating results for the quarter, the year-over-year performance was solid. However, compared to the targets we communicated on July 30, reported revenue was less than we anticipated, though the margin performance was much stronger than we expected. Reported revenue for the quarter was $1.5 billion, up 29% year-over-year. Acquisitions contributed 20% growth with APV reporting $211 million of revenue. Organic growth was 6.5%, highlighted by 28% from Industrial and 8% from Flow. We had expected modest organic growth at Thermal and Test and Measurement. However, these two segments reported organic declines for the quarter. Thermal had a tough comparison to last year due to project timing delays and lower sales into China. And Test and Measurement as a result of increasing softness in the U.S market. Foreign currency fluctuations increased revenues $30 million…

Thanks Patrick. In 2005 we communicated a plan to investors focused on repositioning SPX for the long term. Over the past four years, we successfully recapitalized our balance sheet and strategically reshaped SPX around three global end markets. We defined a disciplined approach to capital allocation and we've shown consistency in balance with our investment decisions. And we focused growth and improvement around core operating initiatives that have been embraced by our employees, and are driving a culture of continuous improvement at SPX. We believe these actions will have SPX well positioned to manage through an uncertain economic environment. And we are pleased to report Q3 earnings per share above our guidance range, and we are targeting double-digit revenue and earnings growth for the fourth quarter. Our financial position is strong, and we believe that we have ample liquidity to remain flexible in our investment decisions for acquisitions and share repurchases. The integration of APV is progressing, and we expect the cost reduction actions we are taking to benefit earnings in 2009. And we expect to begin executing our most recent share repurchase program next week. We are carefully evaluating our plan for next year, and expect to present our 2009 guidance in January. As I said in my opening remarks, we are seeing some changing trends in certain end markets and we recognize that in today's global economic climate, there are increased risks or further changes in the behavior of our customers. We are carefully monitoring those risks, and we stand prepared to take additional restructuring or other actions if they become necessary. We are confident in our long-term strategy, and we remain committed to executing it. Thanks again for joining us for the call. And at this time we are happy to take your questions. Question And Answer

Thank you. [Operator Instructions] And we will take our first question from Shannon O'Callahan with Barclays Capital.

Good morning, guys.

Hey, Shannon, good morning

Just, I guess first question on thermal, I mean, you're talking about the project timing lumpiness there. I mean, that's been an ongoing thing forever with that business, but just given the environment, your 4Q guidance would seem to imply that that's just normal course of business lumpiness, is that the case or are you seeing any unusual things related to the economic conditions.

No, I think you stated it correctly, Shannon. I think what we've seen in Q4 is normal and consistent with what we've seen and what we've talked about over past quarters. The important think to remember is that we have ... we focused on contract construction, better project execution in this base business. And have been focused on consistent margin improvement, which you've seen pretty consistently going back, probably to the middle of last year. And, pleased and consistent with what we've seen in the past I think would be my takeaway.

Shannon and ... I mean it's going to continue to be lumpy. We do take profit payments on these large contracts. Typically, the upfront tax payments are in the 5% to 15% range, and we obviously take progress payment through them. So, the projects that we put in backlog typically are committed and funded, and customers obviously ... how they are going to produce the cash flow, and as I mentioned, we take the upfront cash deposits.

Okay, great. And then on the transformers, can you just push that out a little bit in terms of the softening orders, what were they like year-over-year? What were they like sequentially? And how ... maybe also a little bit on just how you see that business tracking in environment where we have been, your reliability standards out there?

Yes, sure, Shannon. First of all, the transformer orders for the quarter what were up slightly versus Q3 last year. However, they were down about 15% from Q2. As I said in my comments, and Patrick, if you went through segment, the settlement underlined the recent behavior by our U.S. based power transformer customers that appears to be driven in the short term by some uncertainty regarding availability of capital in the current economic environment. And you can see that in terms of how investment grade utilities out there are pricing paper to finance this project. And we were seeing investment created utility paying at or near double-digit rate. And so I think that has had some slowing effect on the short-term on that business. I think as the U.S. recovery act gets into place, as the concerted bank activity for getting liquidity in the market begins to take hold and we may have seen some signs of that beginning this week. I think time will tell. I think the next several months are going to be important in terms of seeing how that settles out. It's important to understand that the underlying demand and the drivers that have been driving growth in this market and in power and energy generally around the world really haven't changed. I mean the demand and the need is there and so I think we'll certainly be watching closely as the financing situation changes, hopefully stabilizes and unfolds over the next couple of months.

Okay, thanks. Just one last one for Patrick. Patrick, we are hearing from a lot of companies that given the environment that is sort of more focused on liquidity in that reduction despite some significant pullbacks in these stocks and you have the three million shares repurchase program. How are you thinking about the structure related to debt target is it an environment where your sort of pulling in a little bit or given the pull back in the stock I mean are you comfortable with going above that leverage range if you had to? How are you thinking about it?

Well, first of all as I said in the comment we are very comfortable with the position we have. I mean on gross liquidity basis we're approaching $1 billion, with an equity market cap of around $2 billion, so we actually have a very flexible structure. We are very fortunate in the timing of our refinancing last year. So with respect to the next 24 months, there really is not much draw on our capital. Obviously we will be cautious about capital spending as we go through the planning process for 2009 until we see how this unfolds. We are not changing our financial strategy and we are not changing our business strategy. As you know, our target leverage range is 1.5 to 2 times EBITDA. While we are in that range which we obviously are now, we look at share repurchases and acquisitions and potential uses of that liquidity. And so the 3 million share repurchase about 6% of the company that plan starts next Monday. We'll see how that trades. We will go through our planning process and then we'll let you know in January when we give guidance how we feel about our likely capital allocation for 2009.

Okay thanks, I will leave it with that.

Thanks Shannon.

And we will take our next question from Nigel Coe with Deutsche Bank.

Thanks, good morning.

Hi, Nigel.

So the $2 billion in the backlog, have you done an office [ph] of how of that is fully funded and how much is to be financed. If you ever could may be just comment on what you're seeing in South Africa, right now?

Well the backlog represents contracts that we've accepted and taken deposits on, remember these are longer term contracts then we seeing in most of the in the rest of our business. And so in terms of where they are about you know a third of those contracts are in South Africa. About 10% or so in China, and the rest are in U.S. and Europe, in terms of where they are geographically just kind of give you an example. But typically the way those projects work is that we come at the later end of the construction cycle, in power plant construction and we will take initial deposit upfront, engineering work commences, upon the signing of the contract and acceptance of the deposit, then there are progress payments along the way

As you know our customers in South Africa are primarily Hitachi and Aston [ph] to this point. However the ultimate source of funding for these projects is from Ascom which is the wholly owned company by the South African government. Ascom has announced $44 billion capital expenditure plan over the next five years aimed at doubling the country's power generation capacity. From what we understand Ascom is expected to fund this plant from a combination of government loans and international borrowings. They've already raised electricity rates in the country substantially. We don't have anything more specific on their plans at this point but we are taking significant deposits on orders we've received from Hitachi and Aston [ph] and are managing our risk appropriately.

That's great color, Patrick thanks. And you mention I think China was down within Thermal. Can you just remind us how much of China as a proportion to Thermal sales and how much it is down by in the quarter?

You're speaking specifically of Thermal?

Thermal, exactly.

Yeah. Probably it's only 10% to 12% of total.

Okay. So it's not too much. And then, on the buybacks, obviously the plan is basically driven by an algorithm [ph] essentially. Given what the share price is right now, I mean, could you give us some color on your, how that algorithm will interpret current conditions, I mean, will this buyback be done by the end of the year or did you put it aside [ph]?

Well, obviously the algorithm is required to be confidential. So, commenting on it is troubling. I can't say, I mean based on our power consumption of the algorithm that the algorithm is related to the stock price. At the current level of the stock, I would expect the plan to trace fairly quickly.

Great. And then just finally, on the cash flow, you talked about $2 million of working capital requirements. Can you just discuss about that? I mean, I don't hope for that CapEx and restructuring. I mean, I don't expect guidance but just a little bit of color would do as well..

We've reduced to the $200 million as a while for, I'll call it a broad-based estimate of the working capital we need around the world to run the business. It actually fluctuates below that. With respect to CapEx, year-to-date we've spent about $80 million through nine months, as I mentioned on the call, somewhat elevated from last year, a number of significant projects including some IT ERP projects. So we've got little over $60 million margin for Q4, depreciation is sort of $80 to $90 million. We won't have good estimates for 2009 until we go through the planning process with each business, which will take place actually starting here shortly and going through December. And I'm sorry, I forget the third part of our question.

Yeah. Just be it, well, in that case, could you just talk about your maintenance CapEx, what you think maintenance CapEx is on a seamless below depreciation. And then, as actually just to comment on, what ... you please remind me what the restructuring spend is planned for 2009?

Right now, I would put an expectation for long-term capital spending around depreciation, which is $80 million to $85 million. Obviously, we had a nice organic growth for a number of years. We're going into a strong organic growth Q4. And we would be looking at what we need for productivity improvements, and/or other restructuring actions in 2009. With respect to restructuring, we started the year about at 10, and raised to 20, we are out looking or whatever looking about $16 million projects around restructuring. But mostly, the difference, the $4 million differences really might be timing.

I think Nigel as it related to 2009, it is a bit early. And I do think this Christmas we really want to see how rest of the year played out around the world. But I think one other things I remember id that APV, we've talked about over the three year 60 million to 80 million of cash restructuring and we are on 30 million to 50 million of that in 2008. So, we clearly have a tail on that, from a sending perspective, but I think it's important for everyone to have in their models for nest year, and in long-term.[ph]

Great. Thanks a lot.

Thanks, Nigel.

And we will take our next question from Jeff Sprague from City investment research.

Thank you. Good morning.

Good morning, Jeff.

Just a little more on South Africa, just trying to thing about other issues around costing and currency. I mean, obviously we now have started more manufacturing footprint there, but if the vast majority of your manufacturing costs denominated in rand also or are the others in ... other cost currency we should be thinking about?

Yes, it's a very good question, because of the governmental nature of these projects we are required to have the vast majority of our comp base in South Africa. And so are the components of these will actually be manufactured, the materials will be sold locally and the labor will be locally. So there is no significant downside to profitability other than the triangulation impact that we have discussed.

That's nice to hear. I speak here, On APV, you are clearly exiting the year quiet strongly. Again this gets a little bit into '09 forecasting what you are trying to avoid. But it is your [indiscernible], your though, may be put it this way, how dependent on revenue growth is your target for continued improvement in APV margins?

I think as I mentioned on the last call, we are more focused on profit improvement right now than we are revenue expansion with respect to APV. Chris talked about the significant restructuring actions that are underway, headcount reduction in the coming months of about 500 employees. There are works counsels, notice periods, there are communications that are necessary by law in each of these countries and so we need to go through, we need to go through that process. So with respect to the OP changes, they are highly co-related to the restructuring actions that we've been talked about and less co-related to revenue and revenue growth.

Is there something notably seasonal about Q4 or those we think about your exit rate of 9%?

No, I wouldn't say that at all. Jeff, I think what you are seeing in terms of the exit rate is just that the building impact of the restructuring that we have done so far. And clearly as I said in my comments, it will take a while to effect that, it as Patrick just underscored, there is a fair amount of complexity with respect to affecting that integration through multiple foreign jurisdictions and multiple locations. We are pleased with the progress that we are making. We always wanted to go faster but we went into this for the fairly detailed plan in terms of how that would be executed and we are working that plan. So the building OP margin that you are seeing in that is just really the effect of more than anything of what we have done so far and obviously we expect that to continue as we complete the integration process.

Couple of other the house keeping items, Patrick these favorable closures of IRS audits, does that set you up for a structurally lower tax rate in the future as you've kind of proven your case as it?

It modestly improves the rate by lower interest carry there at some... there some bigger factors I think going forward that will help us reduce the rates. So the changes that we've seen are more individual transaction oriented. The good news is that our contingent liabilities with respect to the historical years has been substantially reduced. We will have usual detailed disclosure about tax contingencies in the 10-Q when it comes out later in the week. But stepping back from a... as time passes I do expect to see the rate move down from the 34% level. So it's something that would be considered more normal for a global multi-industry.

Then finally, is there any directional or sensitivity color you can us as we think about pension for '08?

You know I mean with respect to pension at the end of 2007 we were essentially fully funded on an accounting basis in primary core five U.S. plants. As you would expect we have experienced negative returns on our assets year-to-date. Look frankly much less impact than the general equity market returns given our asset diversification. And while we expect to see some funding required in 2009 under the pension protection act, we don't expect it to be material to our overall cash flow at this time. Contribution to the foreign plants have been pretty consistently about $10 million per year and we still don't expect to see that change dramatically in the near term.

How about thinking about the P&L sensitivity to the differential between actual return and expected return?

I think, we need to get the year-end actuarial evaluation before we have a clearer point of view on how that will impact 2009.

Yes, I would say Jeff that we have... I would expect that to be headwind in relation to a main 5% expected greater return. But we also have some tailwinds going to 2009, that I expect will offset some or potentially all of that, but, obviously the next two months are very important for that calculation.

Great, Thanks a lot.

Thanks, Jeff.

And we will take our next question from John Inch with Merrill Lynch.

Thank you. Good morning.

Good morning, John.

Good morning, John.

So just to clarify the fourth quarter guidance within, but there is no incremental share repurchase, is that correct?

That is correct.

Okay, so based on your commentary Patrick, vis-à-vis the share price that's probably there is some cushion there?

I would say John, I think given that we are already 30 days into the quarter and our plan doesn't start trading potentially until next week, I'll pretty cautious about modeling an impact from the share repurchase so late in the quarter.

That's fair. Chris, the market seems to be batting there to your Thermal business and possibly some of the other is going to massively collapse. And I think based on your comments, and Patrick's comments vis-à-vis the progress payments so the way you parsed things out the orders, Thermal probably seems pretty solid, I would think for the next year. What about the Flow and Industrial segments, as you've looked at historical downturns, this cyclical contractions, what typically happens in those segments and how should we think about that?

I think here, first of all it's pretty difficult to compare or try and sympathize what's going on and compared to historical cyclical trends in the industry because we've have had an uncertain credit crisis impact on markets, which I think we see as more of an impact on things right now. And as we have said in our comments, we have seen some impact on short-term Flow and Industrial and we commented on the impact that we've seen in terms of... and from feedback we are getting from customers in terms of financing distribution transformer acquisitions. But, it's important to remember I think, John, when you look at our company, when you look at how the company is positioned in terms of the three growth platforms that we have, the long term drivers that are supporting and have supported growth in those businesses still exist. I mean you saw yesterday when we had yet another large contract announced in our Thermal business. Those times, we've not seen contract cancellations. We've taken deposits on these large contracts. We had commenced engineering and construction depending on where we are in the contract cycle. So I think as I've said in my opening comments and again in the close, we are confident with where we are positioned like a lot of other businesses, we are assessing the short-term impact of financing challenges that customers are having. And we haven't seen that materially affect our business. We are not seeing it material affect those longer cycle businesses like Thermal where the backlog continues to build. And we will take closer look over the next couple of months as we get into the planning process. But, I think that sentiment you are reflecting in terms of the drivers still being there is consistent with what we are seeing.

Chris, the other serious thing is your stock has traded down synchronously with the price of oil. Can you remind us again sort of the direct and indirect kind of mix impact, you believe is traveling [ph] within your businesses. And what's really target the price of oil and gas, I'm sorry, just oil and gas or energy markets generally?

Yeah. There is some connection, clearly to our Flow business, but overall in terms of total company impact, oil and gas just at about 5% of revenue. Excuse me, John.

5% total or of the Flow segment.

5% total.

Okay. And the just, a last, you talk, you sort of intimated you are going to be monitoring business conditions and prospectively takes some more actions if required, what would be the trigger point for some Patrick saying, all right, you know what, now it makes sense to take a big restructuring charge and begin to right size the businesses. How, what are we sort of ... what are we really looking for as part of you thinking in that process?

Well, first of all, it's important to remember that we have taken some significant restructuring action. If you look at just Flow, we've taken significant action in connection with the APV acquisition, John. But that really impacts our total Flow business as we looked to combine and consolidate locations and we do such around the world as we've announced, and as we talk about in the call today. And so the APV integration it does impact our legacy business and helps us to right size our total global footprint for that business. In Test, we have since last year consistently reduced our U.S. footprint to reflect the declining market in United States, so that by the end of this year we'll be down to actually one plant in United States. So we acted quickly there and I think that the quick actions that we have taken there have really helped us to stay in double digit margin performance in that segment in a pretty tough challenging market. We will stay close to how things change and develop during the balance of this year and if its necessary for us to take similar actions in other market to reduce our overhead and our footprint, we are flexible and we can do that and we are prepared to do that. But I think time will tell on that but I think the things that we have done so far have already helped position us as we move forward. And as I said in my remarks this morning if conditions sustain and if it looks like we need to do things in other parts of the world we will do that.

We are going right into our planning process and we are in a fortunate position, John that we've gone into a strong fourth quarter. So we had the luxury of completing our planning process and any actions that we take and announce in 2009 will be directed at specific businesses based on their individual plans, rather than some sort of broad brush approach.

Understood, thanks very much.

Thanks John.

Shacquana, we are having the opening. We have time for, I think for one more question.

And we will take our last question from John Baliotti with FTN Midwest Securities.

Hi good morning. Guys.

Hey, John.

Hey, Patrick if we just kind of look big picture about the changes through the rest of the year and knowing that you guide on continuing operating basis. If we put together some loss of earnings for the discontinued ops and then factor in some headwinds of currency, what do you think in sort of just ballpark, like $0.20 to $0.25 cumulatively?

The [indiscernible] were about $4 million for the year as I mentioned.

And I think John, don't forget seeing that we are taking the earnings of this class, including LDF out of our '08 model but we don't yet have the cash and have it redeployed. And so we always have to think about modeling that. When you get late in the year and you take the business out, you got to think about redeploying that capital for next year.

Sure, I just going to thinking about as you move to midpoint in a range down $0.05 but it looks like, you're actually factoring and that there is more headwinds in that that you have since the last time you gave guidance. So I was just to weigh that--

The realty is that John, we have offset that in a number of places, some operation we and then also Patrick mentioned the tax rate really moving to just below 34% for the year.

Yeah. The R&D credit was renewed in the recent governmental package and that did impact Q4 about $3.5 million.

And Chris, just quickly, in the past you said that we short cycle business has its worst visibility like four to six weeks and you commented earlier that what you did in the second quarter that right collectively its like a three months. So and with the wind yesterday in South Africa it seems that the not that much has changed yet on those... even on the short and a long cycle collectively

I think that is a fair assessment John.

Okay and then, all right and it seems that we are when you ask little questions the obviously you talked about the demand for transformers a lot of it is predicated on concerns about failure rates and the penalties associated so you would seen that if people are concerned about the credit that will be a... I would expect a quick snap back of those guys getting back in the queue given that they really don't want to run the risk of sitting around waiting for failures, is that fair?

The feedback that we are getting is that the credit issues are the final cards for facilitating that order rate down but those demands as you pointed out still are clearly there. We still have a liability standard, we still are under capacity, we still have demands, that is there. In terms of trying to engage or anticipate that recovery, I think it's really dependent on when the credit market settle, I think again as I said earlier, some of the things that we have seen happen with respect to that governments commercial paper program looking like its started to take affect are encouraging signs. But I think we have to wait and see how that plays out and you know I think again the next two months as we go to the end of the year are going to be important to see how that plays up.

Okay great thanks very much.

Okay thanks a lot John.

Thanks everybody I know there are more questions in queue. We are already running into the open. So we going to have to cut it off. Please don't hesitate to call Ryan and I are both in the office all for any further questions you have. And thanks again everybody for joining us. Have a great day.

Once again this does conclude today's conference. We thank you for your participation. And have a great day. .