Welcome to the SPX Corporation first quarter 2010 results conference call. Today's call is being recorded. At this time, I'd like to turn the call over to Mr. Ryan Taylor, Director of Investor Relations. Please go ahead, sir.

Thank you, and good morning, everyone. Thank you for joining us. With me on the call this morning 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 in the Investor Relations section of our website at spx.com. This webcast will be available until May 19, and I encourage you to view the webcast as we reference the detailed information on the slides. Please note that the slide presentation also includes supplemental schedules which will provide reconciliations for all non-GAAP financial measures we discuss today. Our earnings press release was issued 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 our comments are forward-looking and are subject to Safe Harbor provisions. The updated 2010 guidance and targets we discuss today are on a GAAP basis from continuing operations. Please also note the risk factors in our most recent SEC filings. With that, I will turn the call over to Chris.

Thanks, Ryan, and good morning, everyone. Thanks for joining us on the call. In the first quarter we saw positive signs that the recovery of the global economy is underway. To provide you with some context for what this means to SPX I will begin this morning with an overview of what we experienced during the quarter in our key end markets. We continue to see various stages of improved performance in our businesses that serve early cycle markets. Broadly speaking, orders in our General Industrial businesses increased globally quarter-to-quarter. In the U.S. the recovery of the auto industry is beginning to have a positive impact on our Test and Measurement segment. Our run rate in the U.S. after market increased sequentially and year-over-year in Q1. We are also seeing signs of improvement in orders for replacement tools at OEM dealerships. We have made good progress so far this year with the OEMs in Asia. To date in 2010 we have won awards for new OEM diagnostic platforms with Suzuki, Geely and Cherry. Additionally in our Flow segment component orders for the food and beverage market increased quarter-to-quarter driven by distributor restocking and customer driven maintenance and repairs. As you may recall, however, about 2/3 of our business is mid to late cycle and about 40% of our annual revenue is from sales into the power and energy markets. These markets continue to be impacted by the recession. Our backlog reflects these trends. At the end of Q1 our backlog was $2.9 billion, down 6% from year-end as declines in late cycle power orders offset increased orders in our early cycle businesses. Looking at the backlog by segment Thermal backlog declined 8% organically as industry orders for power generation equipment declined globally in Q1. As we have noted in the…

Thanks Chris. Good morning everyone. I will begin this morning with a review of the Q1 earnings per share. We reported Q1 EPS from continuing operations of $0.37, $0.07 better than the high end of our guidance range. However, down 52% from the prior year. This was primarily due to the year-over-year decline in power transformer volume and pricing that Chris has already mentioned. In total, segment income from our Industrial segment declined $0.43 per share, offsetting $0.13 of combined operating improvement in our other three segments. Our reported tax rate for the quarter was 40%. The elimination of a portion of the tax deduction associated with Medicare Part D resulted in a one-time non-cash charge of $0.12 per share. This was partially offset by some discrete tax benefits recorded in the period. Our other items netted to a $0.02 benefit for the quarter. It should also be noted we recorded a net non-cash charge of $0.12 related to currency losses on our South African contract. This charge was driven by the weakening of the Euro to the Rand and also variances in the timing of expected cash inflows and out flows which caused the discontinuance of hedge accounting we put in place last year. It was recorded in the other expense and non-controlling interest lines of our income statement. On a consolidated basis our reported revenue for the quarter was $1.1 billion, down 6% from the prior year. Organically revenue declined 12% offset partially by 3% growth from acquisitions and a 3% currency benefit. The organic decline was primarily driven by our industrial and flow segments. Segment income declined 16% to $106 million or 9.8% of revenue. This was largely due to the organic decline in our Industrial segment. Test and measurement and Thermal both reported year-over-year increases in…

Thanks Patrick. In summary we are encouraged by the improvement in the global economy. As anticipated there will be different inflection points for recovery in each of our businesses. We have seen various levels of improved performance in our early cycle businesses through the end of Q1. However, our mid to late cycle businesses are still being impacted by the recession. We raised our EPS and free cash flow guidance for the year based on the strength of our Q1 operating performance. We remain confident in the long-term strategy for our three core markets and we are committed to executing it. We believe the actions we have taken to enhance our business during the global recession have us well positioned for growth when our markets do recover. So with that we will be happy to take your questions.

(Operator Instructions) The first question comes from the line of Nigel Coe - Deutsche Bank.

The backlog trends in both Thermal and Industrial were a bit weaker than I expected. I am curious to know if they were more or less in line with your plan? I know you had one Q1 guidance conservative. I am just wondering were they in line with expectations? When will we see the backlog stabilize to get to your FY10 plans?

Let’s talk about Thermal first. As a reminder, I know we say this a lot because we mean it but the quarterly data for our Thermal segment generally whether it is revenue margins or backlog will fluctuate and sometimes materially just due to the large size of the projects and the timing associated with that. In that segment we don’t really view quarterly data as much of a meaningful indicator of trends in this segment just given the large project nature of the business. We did experience a decline in orders year-over-year in thermal in Q1 for cooling systems and thermal equipment and the backlog declined by 10%. We are currently involved though in bidding and quote activity in Asia Pacific, the Middle East, EMEA and Americas and there is more activity in Asia Pacific than other regions. So we continue to believe that the fundamental demand for replacement and new power infrastructure remains strong. It is just the timing of contracts as they are awarded get pushed out for various reasons. So you mentioned Industrial. In Industrial, the biggest impact there obviously is the recovery of the transformer business. Nothing is happening with respect to transformer that is really at all inconsistent with what we talked about in our guidance presentation and in our Q4 report. Pricing is still pretty challenging in that business. We continue to see recovery occurring sometime later in the year.

Sequentially Industrial was down about 9%. We did have a $30 million Thermal order in Q4 2009. So really in terms of how Industrial is developing it is very much in line with the expectations we had at the beginning of the year.

Given your guidance it seems given your guidance the backlog for Industrial should I guess be up in Q2 or at least stable?

It is still predominately a short cycle segment. So for most of the segment the orders are coming in and turning the same quarter. The effect on the backlog is still predominately related to the Transformer business. Logically that will level out as we get into the back half of the year.

The 19% decline in the transformer backlog in the quarter was that all volume?

It was predominately volume. We still expect that business to deliver about $250 million of revenue this year. Year-over-year that is down a little over 30% and it is still kind of half price and half volume. As we implied in the script we still saw a pretty competitive open market and I would say it is pretty much the same as the last time we spoke publically.

Just to clarify is that half price and half volume?

No it is predominately volume.

You have a fair bit of cash on the balance sheet. Patrick you mentioned in your prepared remarks the EPS volatility caused by the low share base. Where do you sit right now with share buyback? You have done a few deals. Is there an appetite to do more share buyback given how low your share base is?

Basically we look at acquisitions and share buyback in parallel. We are still using fundamental economic tools to make those decisions. As Chris mentioned in his prepared remarks we are seeing a very attractive acquisition environment right now in terms of pricing but our fundamental approach to capital allocation has not changed at all. We still look at what we think will be the best thing for our long-term economic model.

The FX charges came in below the line predominately Euro/Rand movements. Is there an offsetting positive within the Thermal segment income so you take a charge on the FX translation but you get a benefit because of the lower translation of costs within segment profits?

Over the long-term there should be some benefit in the operating income side. Really the largest part of that charge in Q1 was in fact reversal of deferred hedge accounting.

The next question comes from the line of Bob Cornell – Barclays Capital. Bob Cornell – Barclays Capital : One more question on the Transformer business. What are the margin levels you assumed in the 250 embedded in the guidance for Industrial?

We have said that the business would come down to single digit margins. Bob Cornell – Barclays Capital : How about a comment on the pricing and backlog overall? Is pricing holding up in [a] cross price mix?

I would describe the pricing dynamic across most of our businesses as being fairly competitive in Q1 and challenged in transformers. That is not really different than we have described it in the past. Transformer pricing is really the only place in the business we have seen a material impact on the company’s results. Bob Cornell – Barclays Capital : You talked about acquisitions and a very favorable environment. You have been very successful acquirers. What is the chance you do something on a larger size? APB size or even bigger going forward?

We have been pretty disciplined in terms of the process as you know over the past 5-6 years and I think we have been successful. What we look at first is strategically where these opportunities fit within our three core platforms. So as we have always said those come in all shapes and sizes and in different geographies. We look first at where they fit strategically and then whether they pass our two primary financial hurdles. Those can come in various sizes. We have a pretty active and dynamic [inaudible] and radar screen that is active with opportunities and when we find the right ones and they pass the financial hurdles I think we have flexibility to act. Bob Cornell – Barclays Capital : Could you give us some color around the thermal project slippage in China, South Africa? Is that a function of electricity growth being down? Financing issues? What is really going on there?

It is really more project timing than anything else. Bob Cornell – Barclays Capital : How does the EGS Balance sheet look? Do you and Emerson extract the cash from that business or is there a cash build up? What is going on there?

It looks splendid. It is actually an unlevered entity and so we have no debt. Basically what we have been doing for the last several years is distributing the vast majority of the earnings in cash. Both companies have a responsibility for the tax obligation of the joint venture and so you need to get cash distributions to at least cover the cash. We are in fact distributing substantially all of the cash flow in the joint venture to the two partners. Bob Cornell – Barclays Capital : Is there any discussion about levering that up with interest rates being what they are and giving a more substantial cash dividend to the partners?

I won’t comment on that. What I would say is we have an excellent relationship with Emerson. They are doing a fabulous job running this. We are in fact open to deploying more capital in that joint venture notwithstanding the fact we have only a 44.5% interest. That frankly reflects the operating discipline and success they have shown in the downturn they have been able to maintain a high teen’s operating margin, close to 20% EBITDA. They have just done a really good job. It is probably the longest standing joint venture in the S&P 500. It was formed, as you know in 1997 just prior to our acquisition of General Signal and we are really happy with the way it has been operating and the amount of cash we get. Our balance sheet basis is really low. It is less than $80 million. In a normalized environment we have been getting over $40 million of cash a year from it.

The next question comes from the line of John Inch - Merrill Lynch.

Firstly, the $0.10 of other expense in the bridge this year I am assuming this was all of the South African hedges. Can you confirm that all hit in the first quarter so that was part of the $0.37?

That is correct. It was net of that.

Traditionally the first half of the year is about 1/3 of your yearly earnings. Are you expecting any of your businesses based on the first quarter trend so you adjusted for seasonality to actually get worse in the second half or worse from here? It sounds like the businesses are improving to a degree or holding their own. Am I missing something or is anything getting worse?

Just the transformers that we have previously discussed. Other than that you are correct.

So if we were to add the $0.10 back to the $0.37, add the $0.12 for the healthcare charges, if you take the midpoint of the second quarter that is $1.29 or $1.30. If you annualize that it is closing in on $4. If you were to subtract the $0.12 for healthcare and the $0.10 you see where I am going with this. You are getting a midpoint that seems to be substantially above the $3.15. Is there some other adjustment factor we should be thinking about or is this just conservatism?

Right now in terms of the way the first half and the second half line up we have got kind of $1.07 in the first half and about $2.08 in the second half. We are still predominately short cycle. We have talked about that. There is a ramp up in the Flow income and Thermal income between the two halves. We have got the personal heating business in Thermal very skewed to the second half. Really for what we are assuming in industrial right now the first half and the second half look very similar to each other. Net we are showing flat. What is going on in Transformers is we are dealing with the pain through the first half and the truly short cycle businesses there are actually starting to show some significant improvement. Then there are significant movements below the line. When you go to the other expense it is creating about $0.17 difference between the first and second half. Right now if you look at where we are standing in terms of the guidance we only have 11-12% of the year delivered in Q1. We are taking an appropriately prudent position with respect to expectations for the rest of the year. Once we are through Q2 we will have decent visibility in the short cycle businesses through let’s say the end of Q3. I think we will be in a good position then to talk about the rest of the year.

Do you have any sort of a perspective the improvement you have seen in your short cycle businesses may be sort of somewhat more fleeting if you will? Perhaps inventory restock or something that may not be sustainable?

No I think the trends we are seeing in the short cycle business are typical with economic recovery. You are not going to have perfect monthly linear progression but when you look over the last 5 months I think you can certainly see a line where things are improving. Test and Measurement is extraordinarily short cycle. We talk about daily tool orders. So I would say we are optimistic there. If you look at the broad company we really are a mid to late cycle story. I think this is now more about 2011 than it is about 2010.

You mentioned Test and Measurement. The car companies have anticipations of launching all of these new vehicle models. Does that begin to hit you in 2010 at the end of the year or early 2011? How significant could that be?

We see some impact in the later part of 2010 as those new programs ramp up. But we see a larger impact in the years following in 2011 and 2012. We are seeing some of it. We are particularly pleased with the success we have had recently as I mentioned in my comments this morning in the Asia Pacific market with those new customers. I think the momentum will build going beyond 2010.

You took out a lot of capacity if I am not mistaken in that business. Do you have the capacity to meet the anticipated demand? Do you have to hire people back or how does that work?

What we did was a lot of consolidation particularly here in the United States going from 7 facilities actually down to 2 right now with our distribution center in Chicago. We have acquired businesses in Europe and in China. We are absolutely confident we have the capacity to meet the demand. It is also important to remember the nature of that business is shifting not only in terms of its geographic emphasis but in the nature of the products that they make that account for the lion’s share of revenue in that business moving more from a specialty tool business to a global diagnostic business. So the business is shifting geographies and customer focuses and it is also shifting somewhat in terms of its product base.

Could we get an update on Thermax? What kind of revenues are you anticipating from that business? Probably less this year and more next year. What is the trend line expectation? The Indian economy seems to be doing pretty well. How does this play into that?

First of all Thermax is a joint venture with a minority partner so what we get out of Thermax will be recognized in equity earnings. What we said about that venture when we announced it was it would take some time for that business to ramp up for us in India but that over time as that business normalizes and grows and I think we gave about a 3-year time horizon, we said revenues were going to be somewhere in the $100-150 million range.

You still think that?

I think that. It is probably still right.

The next question comes from the line of Steve Tusa – JPMorgan.

A question on transformers and maybe other power products. The utilities have seen a little more demand from their industrial customers. I guess their residential customers also kind of bottoming out here and they are a little more positive on demand trends. What does it take to get them off the sidelines and start to put a little more capital to work? Is it just a couple quarters of uptick in demand? Do we have to see more substantial increase? I am curious as to the conversations you are having with your utility customers.

I think volume in that business for us will follow steady increase in electricity demand. I think it is also important to be a little bit careful in terms of broad industry data that we look at for transformers generally. We play into a distinct part of that market and I think some of the data we look at sort of amalgamates data across small, medium, large and very large transformers and there are different I think demand and replacement cycles and different new capacity needs in those markets. I think from our perspective as the economy normalizes as we see it beginning to do we will start to see a positive impact in that business that will just lag the early cycle parts of our business. I think it will occur naturally as the economy recovers. I think in part because of increased demand but also in part because of the focus on the aged nature of the product out there and the reliability standards that support replacement.

So I am curious, have the conversation levels picked up with customers? Is there any kind of change whatsoever in the tone you are hearing from your guys on the ground on utilities? I am curious of the nuance there.

I think the next couple of quarters are going to be important for us to determine exactly what happens.

Second quarter guidance, what is the organic growth guidance for the second quarter or decline or whatever you are putting out there?

For Q2 our guidance assumes 1-5% total growth. That is mostly acquisitions. There is a slight FX benefit as well. It would imply a modestly lower organic growth versus last year.

Any change in the outlook on South Africa projects in Thermal?

No. We are proceeding along on those contracts as we are required to do and get the product out. I think the forward guidance we have with respect to that segment reflects significant currency headwinds and just the project timing nature of those big projects like the ones we have going on in South Africa and China. I think we have to be a little bit careful and conservative in terms of how we see that just because of what we have experienced in the past on construction timing of those projects but other than that nothing is really any different.

We have selected about $180 million of progress payments in conjunction with those projects and we are about 3-6% of the total project. So from our point of view so far I think things are progressing.

The next question comes from the line of Jeff Sprague - Vertical Research

One more on transformers for me. Trying to understand the mix underneath the surface. If we look, industrial revenues have been $170-180 million for three quarters but the margins have gone from 19.5% to basically 11.5%. Clearly that is kind of stuff planned through the backlog as it relates to transformers but give us some view of the sequential look on transformers into the second quarter and whether we are finding some stabilization of the margins there.

In terms of the margins they are kind of where we expected them to be going into the year with the decline you see in the overall segment. What is really happening is we are still through Q1 and Q2 working off of somewhat higher price backlog and that is working its way out through the income statement. That should level out. Typically at the bottom of the cycle for us, last time we were mid to low single digit margins. I think we will be slightly better than that this time. Really if you look at 2010 for us as I have tried to infer in the comments the cake is pretty much baked. We have three quarters of the year either done or in the backlog. Pricing going forward, delivered results is really going to be a mix of direct negotiated sales and open market sales. I think again it is really about 2011. Sequentially you can see we actually gave a transformer decline in the backlog 19% predominately volume. Nothing has really changed with respect to our views for the year. It is kind of going along as we expected with about $250 million, down about 30% year-over-year delivered and about half of that in volume and half in pricing.

Is the backlog kind of sequentially linear? In other words, the flip side of having a 75% baked is 25% is not baked. Does that imply Q2 and Q3 are in hand and you have a hole in Q4 or kind of the hole is kind of spread out?

The hole is concentrated in Q4. It really isn’t linear because we participate in the open market to fill the factory up. There is some periods of time when you see obviously our profitability is a function of running the two factories as full as we can run them in each quarter. So we have a period of time. It obviously shortens at this point in the cycle. It goes up as much as a year at the top of the cycle. As Chris mentioned, volume and resultant pricing between now and the end of the year is really going to be important for the forward look. I don’t currently expect anything different to happen for the 2010 results than we are currently outlooking.

On the cost side, I am sure that is a challenge but it is helping on price. I see AK Steel took electrical price up $300 a ton last week. Is that changing the price discussions with your clients?

Not significantly. The reality is that the transformer market has moved to price flexing predominately or customers not taking the risk. So we basically quote at current prices. We do have some limited hedging activity on copper. If you look at what is actually affecting the backlog and the reported results it is predominately the existence of lower volume demand and as important the fact this depressed demand has, as in past cycles, brought pricing down to this level.

Finally, on Thermal was actually an upside surprise relative to where I was at. You mentioned Yuba but it sounds like actually it was maybe more mix in the core. Can you elaborate on that? Or is there…

If we have more wet cooling in the prior year and we have more dry cooling this year and so it really was mix and execution.

Do you have some good stuff in the backlog you acquired or is that business inherently more profitable than kind of the aggregate thermal business?

Not it is kind of around the average margin for the segment. It will affect perhaps quarterly comparisons because there is quite a swing between the quarters in the segment but it really wasn’t significant.

The next question comes from the line of Scott Davis – Morgan Stanley. Scott Davis – Morgan Stanley : Excuse me if I didn’t hear this right but can you refresh my memory on this other expense, the $0.10 non-cash charge you talked about and what that actually is?

Basically a large amount of it is unwinding of previous hedge accounting with respect to the South African contracts. The requirements to maintain hedge accounting are quite onerous and so it really relates to that. $0.12 in the aggregate with some of it being allocated to the minority interest. Scott Davis – Morgan Stanley : I guess my question is to clarify the accounting. I am sorry I don’t understand this but if you are hedging you actually have a cash loss and that is fine because it is a hedge right. Why would it be a non-cash charge?

Because the accumulated hedge accounting we had through the end of the year which is effectively suspended in the balance sheet in other comprehensive income actually simply unwinds from an accounting point of view. So it was previously a debit on the balance sheet and now it is just expense. Scott Davis – Morgan Stanley : I should have paid attention in my college accounting classes. You didn’t spend a lot of time talking about Europe and it has been 20% or so of your total business and the rate of change over there over the last few weeks just looks pretty dismal. Is there anything your guys are telling you over there that could lead you to believe that some of these contracts can get pushed to the right or anything you might have in the hopper there for the rest of the year that is at risk?

Not especially. It is actually more than that. It is closer to 30% of our total revenue. It has generally been across all of our businesses fairly depressed over the last year and a half or two years. So nothing significant has changed. With respect to those risks we see in the market those are taken into consideration with respect to the guidance we put out.

That is our last question for today. I will be available in the office today if you have any follow-up questions. We thank you for joining us. This concludes our Q1 earnings call.

Ladies and gentlemen thank you for your participation in today’s conference. This concludes the program. You may now disconnect. Thank you and have a nice day.