EX-99.1 2 a2224728zex-99_1.htm EX-99.1

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Exhibit 99.1

LOGO

[·], 2015

Dear SPX Corporation Shareholder:

        We are pleased to inform you that on [·], 2015, the board of directors of SPX Corporation ("SPX") approved the spin-off of SPX FLOW, Inc. ("Flowco"), a wholly-owned subsidiary of SPX. Upon completion of the spin-off, SPX shareholders will own 100% of Flowco outstanding common stock.

        We believe separating Flowco from SPX, allowing each company to operate as an independent, publicly-traded company, is in the best interests of both SPX and Flowco. We believe the spin-off will allow management of each company greater flexibility to focus on their respective businesses, to pursue opportunities in their respective operations, and to increase each company's access to capital, enabling them to create significant value for shareholders, customers and employees.

        Flowco will consist of SPX's current Flow Technology reportable segment, SPX's Hydraulic Technologies business, various related legal entities, and certain SPX corporate assets and liabilities. Flowco's broad component offerings will include a variety of centrifugal and reciprocating pumps, various control valves, filtration and dehydration equipment, mixers, heat exchangers and hydraulic technologies. It will also provide skidded and full-line systems, as well as aftermarket replacement components, parts and services. We believe that Flowco is well-positioned for future growth and operational improvement as a leading provider of highly engineered flow technologies, solutions and aftermarket parts and services for food and beverage, power and energy and industrial applications.

        SPX, the existing publicly-traded company, will continue to hold SPX's current Thermal Equipment and Services reportable segment and its power transformer, Radiodetection, Genfare and communications businesses. SPX's key product lines will include a wide variety of cooling technologies, power transformers, heat exchangers, pollution control filters, residential and commercial boilers, comfort heating products, underground locators, fare collection systems and communication technologies. We believe that SPX will be well-positioned after the spin-off for a global power market recovery and infrastructure investment with leading positions in power and HVAC markets and a diverse offering of highly engineered, specialty infrastructure products.

        The spin-off will be completed by way of a pro rata distribution of Flowco common stock to SPX's shareholders of record as of the close of business, Eastern time, on [·], 2015, the spin-off record date. Each SPX shareholder will receive, effective as of 11:59 p.m., Eastern time, on [·], 2015, one share of Flowco common stock for every [·] shares of SPX common stock held by such shareholder on the record date. The distribution of these shares will be made in book-entry form, which means that no physical share certificates will be issued. No fractional shares of Flowco common stock will be issued. Fractional shares of Flowco common stock to which SPX shareholders of record would otherwise be entitled will be aggregated and sold in the public market by the distribution agent. The aggregate net cash proceeds of the sales will be distributed ratably to those shareholders who would otherwise have received fractional shares of Flowco common stock.

        We intend that your receipt of shares of Flowco common stock in the distribution be tax-free for U.S. federal income tax purposes, except for cash received in lieu of fractional shares. You should consult your own tax advisor as to the particular tax consequences of the distribution to you, including potential tax consequences under state, local and non-U.S. tax laws.

        The distribution does not require shareholder approval, nor do you need to take any action to receive your shares of Flowco common stock. Immediately following the spin-off, shareholders of record will own common stock in both SPX and Flowco. SPX common stock will continue to be listed


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and traded on the New York Stock Exchange. In connection with the spin-off, we expect SPX stock to trade under a new symbol "SPXC." We expect that Flowco common stock will be listed and traded on the New York Stock Exchange under the symbol "FLOW." You will be able to trade in the common stock of each of the companies separately.

        The enclosed information statement, which we are mailing to all SPX shareholders, describes the spin-off in detail and contains important information about Flowco, including its historical combined financial statements. We urge you to read this information statement carefully.

        Thank you for your continued support of SPX. We look forward to your support of Flowco in the future.

    Yours sincerely,

 

 

Christopher J. Kearney
Chairman, President and Chief Executive Officer
SPX Corporation

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Information contained herein is subject to completion or amendment. A Registration Statement on Form 10 relating to these securities has been filed with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended.

SUBJECT TO COMPLETION, DATED MAY 14, 2015

INFORMATION STATEMENT

SPX FLOW, Inc.

Common Stock
(par value $0.01 per share)



        We are sending this information statement to you in connection with the separation of SPX FLOW, Inc. ("Flowco"), a newly-formed company, from SPX Corporation (collectively with its predecessors and consolidated subsidiaries, other than, for all periods following the distribution, Flowco and its combined subsidiaries, "SPX"), following which Flowco will be an independent, publicly-traded company. As part of the separation, SPX is undergoing an internal reorganization, after which it will contribute or otherwise transfer to Flowco its Flow Technology reportable segment, its Hydraulic Technologies business, various related legal entities, and certain of its corporate assets and liabilities, and complete the separation by distributing all shares of Flowco common stock on a pro rata basis to the holders of SPX common stock. We refer to this pro rata distribution as the "distribution," and we refer to the separation, including the internal reorganization and distribution, as the "spin-off." We intend that your receipt of shares of Flowco common stock in the distribution be tax-free for U.S. federal income tax purposes, except for cash received in lieu of fractional shares. Every [·] shares of SPX common stock outstanding as of the close of business, Eastern time, on [·], 2015, the record date for the distribution, will entitle the holder thereof to receive one share of Flowco common stock. The distribution of shares will be made in book-entry form. SPX will not distribute any fractional shares of Flowco common stock. Instead, the distribution agent will aggregate fractional shares into whole shares, sell the whole shares in the open market at prevailing market price and distribute the aggregate net cash proceeds from the sales pro rata to each holder who would otherwise have been entitled to receive a fractional share in the spin-off. The distribution will be effective as of 11:59 p.m., Eastern time, on [·], 2015. Immediately after the distribution becomes effective, Flowco will be an independent, publicly-traded company.

        No vote or further action of SPX shareholders is required in connection with the spin-off. We are not asking you for a proxy. SPX shareholders will not be required to pay any consideration for the shares of Flowco common stock they receive in the spin-off, and they will not be required to surrender or exchange shares of their SPX common stock or take any other action in connection with the spin-off.

        SPX currently owns all outstanding shares of Flowco common stock. Accordingly, there is no current trading market for Flowco common stock. We expect, however, that a limited trading market for Flowco common stock, commonly known as a "when-issued" trading market, will develop beginning on or shortly before the record date for the distribution, and we expect "regular-way" trading of Flowco common stock to begin the first trading day after the distribution date. We have applied for authorization to list Flowco common stock on the New York Stock Exchange under the ticker symbol "FLOW."

        In reviewing this information statement, you should carefully consider the matters described in "Risk Factors," beginning on page 19 of this information statement.

        Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved these securities or determined if this information statement is truthful or complete. Any representation to the contrary is a criminal offense.

        This information statement is not an offer to sell, or a solicitation of an offer to buy, any securities.

The date of this information statement is [·], 2015.

This information statement was first mailed to SPX shareholders
on or about [
·], 2015.


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  Page  

SUMMARY

    1  

RISK FACTORS

   
19
 

SPECIAL NOTE ABOUT FORWARD-LOOKING STATEMENTS

   
36
 

INDUSTRY DATA

   
37
 

THE SPIN-OFF

   
38
 

DIVIDEND POLICY

   
48
 

CAPITALIZATION

   
49
 

SELECTED HISTORICAL COMBINED FINANCIAL DATA

   
50
 

UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS

   
53
 

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

   
57
 

BUSINESS

   
76
 

MANAGEMENT

   
89
 

EXECUTIVE COMPENSATION

   
94
 

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

   
126
 

DESCRIPTION OF MATERIAL INDEBTEDNESS AND OTHER FINANCING ARRANGEMENTS

   
130
 

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

   
131
 

DESCRIPTION OF CAPITAL STOCK

   
132
 

WHERE YOU CAN FIND MORE INFORMATION

   
138
 

INDEX TO COMBINED FINANCIAL STATEMENTS

   
F-1
 

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SUMMARY

        This summary highlights information contained in this information statement and provides an overview of our company, our separation from SPX and the distribution of our common stock by SPX to its shareholders. For a more complete understanding of our business and the spin-off, you should read this entire information statement carefully, particularly the discussion set forth under "Risk Factors" beginning on page 19 of this information statement, and our audited and unaudited historical combined financial statements, our unaudited pro forma condensed combined financial statements and the respective notes to those statements appearing elsewhere in this information statement. Except as otherwise indicated or unless the context otherwise requires, "Flowco," "we," "us," and "our" refer to SPX FLOW, Inc., and its combined subsidiaries after giving effect to the internal reorganization and the distribution, and "SPX" refers to SPX Corporation, its predecessors and its consolidated subsidiaries, other than, for all periods following the distribution, SPX FLOW, Inc. and its combined subsidiaries.

        All dollar amounts below are in millions unless otherwise noted.

Our Company

        We are a leading global supplier of highly engineered flow components, process equipment and turn-key systems, along with the related aftermarket parts and services, into the food and beverage, power and energy, and industrial end markets. We have operations in over 35 countries and sales in over 150 countries around the world. Our innovative solutions play a critical role in helping meet rising global demand in the markets we serve. Our total revenue for 2014 was approximately $2.8 billion, with 71% from sales to destinations outside the United States, including 30% from sales into emerging markets.

        Our product portfolio of pumps, valves, mixers, filters, air dryers, hydraulic tools, homogenizers, separators and heat exchangers, along with the related aftermarket parts and services, supports global industries, including food and beverage, oil and gas, power generation (including nuclear and conventional), chemical processing, compressed air and mining. Our products feature uncompromising design and quality, while offering long service life, production efficiency and cost effective performance. In addition, our products help our customers increase productivity, control costs, reduce energy and waste, and meet stringent compliance regulations. Our product development and engineering experience enables us to work closely with customers to provide solutions configured to meet their specific application and business needs.

        We report our operating results under three segments: Food and Beverage, Power and Energy, and Industrial. From a segment perspective, 35% of our 2014 revenues were within Food and Beverage, 35% within Power and Energy, and 30% within Industrial.

        We initially established a presence in flow-related businesses when we acquired Lightnin Mixers as part of the 1998 General Signal merger. In 2001, we added three more flow-related businesses, Waukesha Cherry-Burrell pumps and valves, Bran+Luebbe metering and dosing pumps, and Dollinger filtration products, through the acquisition of United Dominion Industries. Subsequent smaller acquisitions of Copes Vulcan, M&J Valve, Hankison and Johnson Pumps broadened our product offerings and improved our organic growth profile. By the end of 2007, annual revenues associated with the flow businesses had grown to more than $1.0 billion.

        In 2007, the acquisition of APV significantly expanded our geographic presence and established a global platform in the dairy and food and beverage industries. Smaller acquisitions during 2010 and 2011 of Anhydro, Gerstenberg Schroeder, Murdoch and e&e broadened our processing capabilities into discrete product categories such as butters, fats and oils, powdered products, coffee and extracts. In 2011, the acquisition of ClydeUnion Pumps ("Clyde Union") further expanded our geographic presence and established a global platform in the power and energy industry.

 

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        At the end of 2013, we moved to a new operational leadership alignment focused on improving operating performance and strengthening our foundation for growth. This operational alignment was the next significant step in the development of our business and has improved our operating efficiency and enhanced our customer focus by more closely aligning our organizational resources with customers and end markets.

        We believe our current portfolio of products, highly skilled workforce, experienced leadership team, global presence and strategic initiatives, in combination with the growing demand within the end markets we serve, have us well-positioned for future growth.

        See the discussion under "Business—Company Overview" for further information.

Our Strengths

        Strong engineering expertise, highly skilled manufacturing operations and an intricate knowledge of the industries and applications in which our products are typically used are the foundations of our competitive strength. Our competitive strengths include the following:

Diversified product offering of highly engineered process technologies and flow control solutions and the ability to integrate products into automated modular and turn-key solutions:

        We believe the breadth and diversity of our product portfolio is unique to our business and provides a competitive advantage by allowing us to offer a variety of highly engineered solutions to customers, particularly on large capital investments that require multiple flow components within automated modular or full-line, turn-key systems.

Strong brands with leading market positions:

        We have a strong portfolio of brands, many of which have established leadership positions in their respective markets and product categories, with long-standing reputations for innovation and quality.

Diversified, loyal customer base, including long-standing and global customer relationships:

        We offer a unique platform with global sales, engineering, manufacturing, and design capabilities, and we leverage our deep understanding of product application, end markets and our customers to offer highly specialized and engineered solutions. We benefit from long-standing relationships with blue-chip, industry-leading companies in all of our reportable segments, as well as from low customer turnover.

Three global platforms serving attractive end markets with positive long-term growth characteristics and high barriers of entry:

        We believe we participate in highly attractive end markets with positive long-term growth characteristics. Trends positively impacting our key end markets include an increase in global demand for power and energy and processed foods and beverages, particularly in emerging markets driven by population growth, an expanding middle class, and environmental sustainability efforts. Our global scale and capabilities allow us to partner with other multi-national companies to provide products and services in many parts of the world. The complexity and highly engineered aspect of our product offering, safety and regulatory requirements and our customers' dependency on quality and reliability have created high barriers of entry for new competitors in our markets.

 

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Large installed base of original equipment that provides a steady annuity stream of aftermarket sales and a global service center footprint with highly skilled and experienced service technicians:

        Our track record of providing highly engineered and high quality products also gives us a competitive edge in the aftermarket. Our many years of success have led to a large installed base of original equipment, which we believe operates most effectively with our uniquely designed parts. Many of these products are integral to the core processes of our customers, who rely on our expertise to ensure uninterrupted operations. During 2014, approximately 25% of our total revenues were derived from aftermarket parts and services.

        Our installed base, at thousands of customers across more than 70 countries, offers a significant opportunity to expand our aftermarket service business. In recent years, we have added resources and increased our capabilities to service our installed base. We have also increased our focus on developing systems with higher levels of our factory content, which supports pull-through of aftermarket parts and services.

        We are also investing in new service centers, expanding existing service centers, and adding service technicians to better serve our customers. In 2014, we opened a service center in Aberdeen, Scotland dedicated to servicing the North Sea oil and gas industry where our ClydeUnion Pumps brand has a significant installed base. We also expanded our service capabilities in nine existing service centers across the world. In 2015, we have planned investments to add service centers in the Middle East and North America. We are also pursuing a strategic service partnership in the Middle East.

Regional distribution centers and strong distribution channels:

        We have a large distribution network that includes our own regional distribution centers as well as strong, long-standing relationships with key distributors and independent sales representatives. Our ability to supply products to customers in most parts of the world with competitive lead times is a strong advantage for us in the markets we serve.

Advanced engineering focused on new product development and innovation:

        We are focused on a balanced approach to new product development and innovation aimed at enhancing and expanding our current product offerings, as well as developing cutting-edge technology. A key part of our approach to innovation is identifying the needs of our customers and developing new solutions to address those needs. Our product development programs have created a broad technology offering, giving us access to a broad range of end markets. We own approximately 170 domestic and 110 foreign patents, including approximately 20 patents that were issued in the last three years, covering a variety of our products and manufacturing methods.

Operational expertise with global manufacturing capabilities and localized operations:

        We have operations in over 35 countries, including over 50 manufacturing and/or engineering facilities and over 25 service centers. Our global footprint, skilled workforce and ability to drive continuous improvement across all aspects of our organization enable us to deliver a high quality customer experience and also maintain a competitive cost structure.

Highly skilled workforce complemented by a strong, experienced management team:

        Our senior management team has extensive industry and leadership experience. Our nine executive officers average 30 years of experience in industrial businesses. They have a successful track record in winning new contracts, driving operating efficiency, and leading improvements in technologies and solutions. The management team is committed to creating shareholder value through continued

 

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operational improvement, profitable growth, strategic focus around our end markets, and disciplined execution of our capital allocation methodology.

Proven track record of delivering strong financial performance:

        We have a proven track record of driving strong growth and profitability through our highly engineered flow control systems and process equipment solutions, integrated low cost operating footprint and leading market positions. Over the last three years, we have focused on improving profitability through cost reduction efforts, a more disciplined, selective approach on large projects, improved project execution, and an expanded aftermarket presence. As part of this focus, we re-aligned our operational organization to focus more clearly on end markets.

Our Strategy

        We have developed a global, pure-play flow organization with a strong foundation on which to further grow our business. Our goal moving forward is to expand and strengthen our position as a global provider of flow control and process technology solutions. Our strategy is focused in two primary areas: driving sustainable, profitable growth and improving the efficiency of our global manufacturing operations and overall return profile of our business. The core initiatives supporting this strategy include the following:

Driving sustainable, profitable growth:

Increase our aftermarket capabilities and expand our global service center footprint:

        During 2014, approximately 25% of our total revenues were derived from aftermarket parts and services. Our aftermarket business provides a steady source of revenue and cash flows at higher margins than are typical in the sale of original equipment. We have focused initiatives across all three business segments to increase our aftermarket business.

        Our installed base at thousands of customers across the world offers a significant opportunity to expand our aftermarket service business. Today, we only service a small portion of our installed base. As we move forward, we have programs in place to secure the aftermarket business in new installations and we are also working to capture aftermarket business on our historical installations.

        In recent years, we have added resources and increased our capabilities to service our installed base. We have also increased our focus on developing systems with higher levels of our factory content, which supports pull-through of aftermarket parts and services.

        We plan to invest in new service centers, expand our capabilities at existing service centers, and add service technicians to better serve our customers. In 2015, we have planned investments to add service centers in the Middle East and North America. We are also pursuing a strategic service partnership in the Middle East.

Leverage combined technology offerings:

        Many of our products are used in similar applications and are complementary to each other. This includes providing integrated solutions for customers rather than individual components. A key part of this commercial initiative involves leveraging combined technology offerings into highly profitable market segments including oil pipelines, subsea oil exploration, nuclear power, dairy processing and chemical processing.

        As an example, we are leveraging our strong position as a valve supplier with key customer relationships in the North American oil pipeline industry to expand our sales of pipeline pump products.

 

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Further develop global customer relationships:

        As we look to grow our business, we plan to strengthen our current global customer relationships through key account management programs. By increasing our intimacy with customers and gaining a deeper understanding of their business needs and investment plans, we believe we can better position our business to partner and grow with many of our large, multi-national customers.

Expand sales and distribution channels, including e-business solutions:

        Sales and distribution channels are critically important to our business model. As we work to develop stronger relationships with our current channel partners, we are also seeking new and alternative methods to expand our sales channels. One of our key areas of focus is enhancing our e-business solutions to allow customers to purchase original equipment, spares and parts on-line.

        We are also seeking new distribution partners to expand our product offerings into adjacent markets.

Continue to develop new products to enhance our customers' production capabilities:

        We believe the breadth of our product offerings is a competitive advantage that allows us to offer more highly engineered content to customers, particularly on large capital investments that may require multiple components, skidded systems, or automated solutions. We invested approximately $20.0 in research and development during 2014 and are committed to continuing to invest in our product portfolio and expanding into adjacent and complementary technologies.

Expand into adjacent industries, product categories and geographies and selectively pursue acquisitions:

        We intend to leverage our existing end market platforms to not only increase current and new customer penetration, but also to expand into adjacent product categories.

        A disciplined approach to acquisitions is an important part of our growth strategy. We believe that we have created a strong base business and are well-positioned to take advantage of the high level of fragmentation in the flow control and adjacent markets. We have created a thoughtful and stringent framework for evaluating potential acquisitions, joint ventures and minority interest investment opportunities with a particular focus on opportunities that (a) strengthen our existing businesses, (b) expand our product offerings and technological know-how, and/or (c) provide access to new customers from the standpoint of end markets and/or geographies.

Improving Operating Efficiency:

Maintain a disciplined approach to project selection:

        Throughout our business, we have implemented a more disciplined approach to project selection that prioritizes strategic growth and aftermarket annuity streams and also better assesses project risk. We are focusing on new system and product opportunities in higher-growth end market applications. Through disciplined project selection, we have built a more strategic backlog, experienced improved operational execution and are gaining important aftermarket service opportunities.

Continuous operational improvement:

        We strive to continuously improve our operational performance to drive higher customer satisfaction and internal productivity. At the end of 2013, we established a centralized global manufacturing team responsible for driving continuous improvement across our business. As part of this effort, our global manufacturing operations team implemented a scorecard with a consistent set of operating metrics such as on-time delivery, quality, cycle times and safety. This enables us to quickly

 

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identify areas of opportunity to improve our operating efficiency. We also have a centralized team of experienced operational experts that we can deploy to help drive operational improvement.

        We believe there is significant potential to drive continuous improvement throughout our organization by focusing on lean principles and value engineering. We have also experienced success by sharing best practices throughout our broader organization.

        Additionally, we continue to work to rationalize our Enterprise Resource Planning ("ERP") systems in an effort to further standardize systems across the organization. We also plan to focus on improving working capital utilization, with a specific emphasis on accounts receivable and inventory turnover rates.

Expand our configured-to-order approach:

        In conjunction with our lean initiatives, we are driving our engineering and commercial teams to capture business that leverages existing engineering designs and manufacturing work flows. This involves pursuing orders that allow our business to reuse the high level of quality engineering involved in designing our products and systems. Our goal is to separate our design and manufacturing processes into modular, repeatable segments. This allows us to leverage the repeatability of common elements in the design and manufacturing process, while also allowing for the customization often required to meet our customers' needs across various stringent applications.

        By driving a configured-to-order approach, we intend to achieve higher efficiency in our engineering and manufacturing operations, more reliable production schedules, better predictability in our supply needs and shorter lead times on delivery to our customers.

Optimize our global footprint through localization and rationalization:

        We have significantly reduced our cost structure through previous restructuring actions. We believe there is significant potential to further optimize our global footprint. We are focused on expanding our global presence in higher growth regions of the world and utilizing lower-cost manufacturing and sourcing opportunities to further reduce our cost structure and remain competitive in the markets we serve.

        We continue to analyze our global footprint and believe there are opportunities to migrate our operations to lower cost regions where we already have successful operations. As part of this initiative, we have purchased land in Bydgoszcz, Poland on which we plan to construct a 300,000 square foot facility. Over the next few years, we intend to shift operations currently in several high cost regions into this new facility in Poland.

        In emerging regions where we see strong potential to sell our products and services, we are working to localize our operations, including our operations in South Korea, China and India.

Leverage global supplier relationships:

        Only approximately 30% of our total sourcing spend is concentrated in enterprise-wide programs. We believe there is a significant opportunity to leverage our global supplier relationships.

Corporate Information

        Our headquarters are located at 13320 Ballantyne Corporate Place, Charlotte, NC 28277. Our telephone number is [·]. Our website address is [·]. Information contained on, or connected to, our website or SPX's website does not and will not constitute part of this information statement or the registration statement on Form 10 of which this information statement is a part.

 

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The Spin-Off

Overview

        On October 29, 2014, SPX announced that its board of directors had unanimously approved a plan to spin-off its Flow Technology reportable segment, its Hydraulic Technologies business, various related legal entities, and certain of its corporate assets and liabilities, and on [·], 2015, the board of directors of SPX approved the spin-off of Flowco from SPX, following which Flowco will be an independent, publicly-traded company.

        Before our spin-off from SPX, we will enter into a Separation and Distribution Agreement and several other agreements with SPX related to the spin-off. These agreements will govern the relationship between us and SPX after completion of the spin-off and provide for the allocation between us and SPX of various assets, liabilities and obligations. See "Certain Relationships and Related Party Transactions—Agreements with SPX Related to the Spin-Off."

        We expect that, in connection with the spin-off, we will incur indebtedness of approximately $[·], including $600.0 aggregate principal amount of 6.875% Senior Notes due 2017 (the "2017 Notes"), which we will become obligated to repay. SPX's board of directors believes that following the spin-off we will be well capitalized with sufficient financial flexibility to pursue future growth opportunities.

        The distribution of Flowco common stock as described in this information statement is subject to the satisfaction or waiver of certain conditions. In addition, SPX has the right to abandon and not complete the spin-off at any time prior to the distribution. See "The Spin-Off—Conditions to the Spin-Off."

Questions and Answers about the Spin-Off

        The following provides only a summary of the terms of the spin-off. For a more detailed description of the matters described below, see "The Spin-Off."

Q:
What is the spin-off?

A:
The spin-off is the series of transactions by which Flowco will separate from SPX. To complete the spin-off, SPX will distribute to its shareholders all outstanding shares of Flowco common stock. We refer to this as the distribution. Following the distribution, Flowco will be a separate company from SPX, and SPX will not retain any ownership interest in Flowco. The number of shares of SPX common stock you own will not change as a result of the spin-off.

Q:
What is Flowco?

A:
Flowco is a wholly-owned direct subsidiary of SPX whose shares will be distributed to SPX shareholders upon completion of the spin-off. Flowco consists of SPX's Flow Technology reportable segment, SPX's Hydraulic Technologies business, various related legal entities, and certain SPX corporate assets and liabilities. After we complete the spin-off, Flowco will be an independent public company. Its broad component offerings will include a variety of centrifugal and reciprocating pumps, various control valves, filtration and dehydration equipment, mixers, plate heat exchangers and hydraulic technologies. It will also provide skidded and full-line systems, as well as aftermarket replacement components, parts and services. We believe that Flowco is well-positioned for future growth and operational improvement as a leading provider of highly engineered flow technologies, solutions and aftermarket parts and services for food and beverage, power and energy and industrial applications.

 

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Q:
What will I receive in the spin-off?

A:
As a holder of SPX common stock, you will retain your SPX shares and will receive one share of Flowco stock for every [·] shares of SPX common stock you own as of the record date. For a more detailed description, see "The Spin-Off."

Q:
Why is the separation of Flowco structured as a spin-off?

A:
On October 29, 2014, the board of directors of SPX approved a plan to spin off SPX's Flow Technology reportable segment, its Hydraulic Technologies business, various related legal entities, and certain of its corporate assets and liabilities, into a new company. SPX believes that a spin-off is the most efficient way to accomplish a separation of our business from SPX for several reasons including: (i) a spin-off offers a higher degree of certainty of completion in a timely manner than other separation transactions, lessening disruption to SPX's business operations; (ii) a spin-off provides greater assurance that decisions regarding SPX's and our capital structure support future financial stability; and (iii) SPX intends that a spin-off be a tax-free distribution of Flowco common stock to SPX shareholders. After evaluating the feasibility of other alternatives, including the possibility of selling one or more businesses of SPX, SPX believes that a spin-off will enhance the long-term value of both SPX and Flowco. See "The Spin-Off—Reasons for the Spin-Off."

Q:
When is the record date for the distribution?

A:
The record date will be the close of business, Eastern time, on [·], 2015.

Q:
When will the distribution occur?

A:
The distribution will be effective at 11:59 p.m., Eastern time, on [·], 2015. Flowco expects that it will take the distribution agent, acting on behalf of SPX, up to two weeks after the distribution date to fully distribute the shares of Flowco common stock to SPX shareholders. The ability to trade Flowco shares will not be affected during that time.

Q:
What are the reasons for and benefits of separating Flowco from SPX?

A:
SPX believes the spin-off will provide a number of benefits, including:

The creation of two strong, stand-alone companies with leading positions in the markets they serve.

Flowco will be a pure-play flow company, well-positioned as a leading provider of flow technologies across food and beverage, power and energy and industrial markets.

SPX will be well-positioned as a leading supplier of power, HVAC and highly engineered infrastructure products.

Allowing investors to gain a better understanding and distinctly value the unique attributes of each of the future separate companies.

Enhancing the ability of the management team of each company to pursue a more focused commercial and operational strategy aligned to the best interests of its business, customers, suppliers, other business partners and shareholders.

Providing the ability to more closely align incentive compensation with the nature of each business, as well as the ability to attract and retain key employees.

Allowing the opportunity for each company to implement a capital structure that best supports and reflects its respective business and financial profile, fiscal policy and capital allocation methodology.

 

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    Increasing the flexibility for both future companies to independently evaluate and pursue organic and inorganic growth opportunities without limitations inherent in the existing SPX entity.

    For a more detailed discussion of the reasons for the spin-off, see "The Spin-Off—Reasons for the Spin-Off."

Q:
What are the risks associated with the spin-off?

A:
An investment in Flowco common stock is subject to both general and specific risks relating to Flowco's business in general and the industries in which it operates, the spin-off, and ownership of Flowco common stock.

    Risks relating to our business in general and the industries in which we operate range from macroeconomic and competitive risk to the structure of our company, to litigation and other matters.

    Risks relating to the spin-off include that we may not achieve some or all of the expected benefits of the spin-off; the risk that we incur greater costs as an independent company than we did when we were a part of SPX; and the risk that we and/or SPX and the SPX shareholders become subject to significant tax liabilities because the distribution fails to qualify for its intended tax-free treatment.

    Risks relating to the ownership of Flowco common stock include the risk that an active trading market for our common stock may not develop or be sustained after the spin-off; the risk that the price of our common stock fluctuates significantly following the spin-off or substantial sales of our common stock occur in connection with the spin-off; and the risk that certain provisions in Flowco's amended and restated certificate of incorporation and bylaws, certain provisions of Delaware law and Flowco's agreements with SPX may prevent or delay an acquisition by Flowco or other strategic transactions.

    The above list of risk factors is not exhaustive. Please read the information in the section entitled "Risk Factors" starting on page 19 for a more thorough description of these and other risks.

Q:
Can SPX decide to cancel the spin-off even if all the conditions to the spin-off have been satisfied?

A:
SPX has the right to abandon and not complete the spin-off at any time prior to the distribution.

Q:
What is being distributed in the spin-off?

A:
Approximately [·] shares of Flowco common stock will be distributed in the spin-off, based on the number of shares of SPX common stock expected to be outstanding as of the record date. The actual number of shares of Flowco common stock to be distributed will be calculated on [·], 2015, the record date for the distribution. The shares of Flowco common stock to be distributed by SPX will constitute all issued and outstanding shares of Flowco common stock immediately prior to the distribution. For more information on the shares being distributed in the spin-off, see "Description of Capital Stock—Common Stock."

Q:
What do I have to do to participate in the spin-off?

A:
You do not need to take any action, although we urge you to read this entire document carefully. No shareholder approval of the distribution is required or sought. You are not being asked for a proxy. No action is required on your part to receive your shares of Flowco common stock. You will not be required to pay anything for the new shares or to surrender any shares of SPX common stock to participate in the spin-off.

 

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Q:
How will fractional shares be treated in the spin-off?

A:
Fractional shares of Flowco common stock will not be distributed. Fractional shares of Flowco common stock to which SPX shareholders of record would otherwise be entitled will be aggregated and sold in the public market by the distribution agent at prevailing market price. The distribution agent, in its sole discretion, will determine when, how and through which broker-dealers, those shares will be sold provided that such broker-dealers are not affiliates of SPX or Flowco, and at what prices to sell these shares. The aggregate net cash proceeds of the sales will be distributed ratably to those shareholders who would otherwise have received fractional shares of Flowco common stock. See "The Spin-Off—Treatment of Fractional Shares" for a more detailed explanation.

Q:
How will the spin-off affect equity awards held by SPX employees?

A:
SPX employees and directors with vested stock will be treated in the same manner as any other SPX shareholder.

    The treatment of stock options and unvested equity awards held by SPX employees and directors has not yet been determined.

    For more information on the treatment of equity awards, see "The Spin-Off—Treatment of Equity Awards."

Q:
What are the U.S. federal income tax consequences of the distribution to SPX shareholders?

A:
The distribution is conditioned upon, among other matters, SPX's receipt of an opinion of Fried, Frank, Harris, Shriver & Jacobson LLP ("Tax Counsel"), in form and substance satisfactory to SPX (in its sole discretion), regarding the qualification of the spin-off as a transaction that generally is tax-free to SPX and SPX's shareholders, for U.S. federal income tax purposes, under Sections 355 and 368(a)(1)(D) of the Internal Revenue Code of 1986, as amended ("Code"). Assuming that the spin-off so qualifies, SPX shareholders generally will not be required, for U.S. federal income tax purposes, to recognize any gain or loss (except with respect to any cash received in lieu of fractional shares) or to include any amount in their income upon their receipt of shares of Flowco common stock in the distribution.

    For more information regarding the material U.S. federal income tax consequences to you of the distribution, please refer to "The Spin-Off—Material U.S. Federal Income Tax Consequences of the Distribution." WE URGE YOU TO CONSULT YOUR OWN TAX ADVISOR AS TO THE PARTICULAR CONSEQUENCES OF THE DISTRIBUTION TO YOU, INCLUDING ANY CONSEQUENCES UNDER STATE, LOCAL OR NON-U.S. LAW.

Q:
How will I determine the tax basis I will have in the Flowco common stock I receive in the distribution?

A:
Generally, for U.S. federal income tax purposes, assuming your receipt of shares of Flowco common stock in the distribution is tax-free, the tax basis in the shares of SPX common stock that you hold immediately prior to the distribution will be allocated between such shares and the shares of Flowco common stock you receive in the distribution (including any fractional share interest in Flowco common stock for which cash is received) in proportion to the relative fair market values of such shares immediately following the distribution. You should consult your tax advisor about how this allocation will work in your situation (including if you have purchased SPX shares at different times or for different amounts) and regarding any particular consequences of the distribution to you, including under state, local or non-U.S. law. For more information regarding

 

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    the material U.S. federal income tax consequences to you of the distribution, please refer to "The Spin-Off—Material U.S. Federal Income Tax Consequences of the Distribution."

Q:
Will the Flowco common stock be listed on a stock exchange?

A:
Yes. Although there is no current public market for Flowco common stock, Flowco has applied for authorization to list its common stock on the NYSE under the symbol "FLOW." We anticipate that trading of Flowco common stock will commence on a "when-issued" basis beginning on or shortly before the record date. When-issued trading refers to a sale or purchase made conditionally because the security has been authorized but not yet issued. When-issued trades generally settle within four trading days after the distribution date. On the first trading day following the distribution date, any when-issued trading of Flowco common stock will end and "regular-way" trading will begin. "Regular-way" trading refers to trading after a security has been issued and typically involves a transaction that settles on the third full trading day following the date of the transaction. See "The Spin-Off—Trading Market for Our Common Stock" for more information.

Q:
Will my shares of SPX common stock continue to trade?

A:
Yes. SPX common stock will continue to be listed and trade on the NYSE. In connection with the spin-off, we expect SPX stock to trade under a new symbol "SPXC."

Q:
If I sell, on or before the distribution date, shares of SPX common stock that I held on the record date, am I still entitled to receive shares of Flowco common stock distributable with respect to the shares of SPX common stock I sold?

A:
Beginning on or shortly before the record date and continuing through the distribution date for the spin-off, SPX's common stock will begin to trade in two markets on the NYSE: a "regular-way" market and an "ex-distribution" market. If you are a holder of record of shares of SPX common stock as of the record date for the distribution and choose to sell those shares in the regular-way market after the record date for the distribution and before the distribution date, you also will be selling the right to receive shares of Flowco common stock in connection with the spin-off. However, if you are a holder of record of shares of SPX common stock as of the record date for the distribution and choose to sell those shares in the ex-distribution market after the record date for the distribution and before the distribution date, you will not be selling the right to receive shares of Flowco common stock in connection with the spin-off and you will still receive shares of Flowco common stock.

Q:
Will the spin-off affect the trading price of my SPX stock?

A:
Yes, we expect the trading price of shares of SPX common stock immediately following the distribution will be lower than the price of shares of SPX in the "regular-way" market immediately prior to the distribution because it will no longer reflect the value of SPX's existing Flow Technology reportable segment, its Hydraulic Technologies business, various related legal entities, and certain SPX corporate assets and liabilities. However, we cannot predict or provide you with any assurance as to the price at which the SPX shares will trade following the spin-off.

Q:
What are the financing plans for Flowco?

A:
We expect that, in connection with the spin-off, we will incur indebtedness of approximately $[·], including $600.0 aggregate principal amount of the 2017 Notes, which we will become obligated to repay.

 

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Q:
What will the relationship be between SPX and Flowco after the spin-off?

A:
Following the spin-off, Flowco will be an independent, publicly-traded company and SPX will have no continuing stock ownership interest in Flowco. In conjunction with the spin-off, Flowco will have entered into a Separation and Distribution Agreement and several other agreements with SPX for the purpose of allocating between Flowco and SPX various assets, liabilities and obligations. These agreements will also govern Flowco's relationship with SPX following the spin-off. These agreements will also include arrangements for transitional services. We describe these agreements in more detail under "Certain Relationships and Related Party Transactions."

Q:
What will Flowco's dividend policy be after the spin-off?

A:
Flowco's dividend policy will be established by the Flowco board of directors (the "Board") based on Flowco's financial condition, results of operations and capital requirements, as well as applicable law, regulatory constraints, industry practice and other business considerations that the Board considers relevant. In addition, the terms of the agreements governing our new debt or debt that we may incur in the future may limit or prohibit the payments of dividends. For more information, see "Dividend Policy."

Q:
Will Flowco have a stock repurchase program after the spin-off?

A:
We do not expect Flowco to have a stock repurchase program in place immediately following the spin-off.

Q:
Will I have appraisal rights in connection with the spin-off?

A:
As a holder of SPX's common stock, you will not have any appraisal rights in connection with the spin-off.

Q:
Who will be the transfer agent for Flowco common stock after the spin-off?

A:
After the distribution, the transfer agent for Flowco's common stock will be [·].

Q:
Who is the distribution agent for the spin-off?

A:
The distribution agent for the spin-off will be [·].

Q:
Where can I get more information?

A:
If you have any questions relating to the mechanics of the distribution, you should contact the distribution agent at:

[·]

Before the spin-off, if you have any questions relating to the spin-off, you should contact SPX at:

SPX Corporation
13320 Ballantyne Corporate Place
Charlotte, NC 28277
Attention: Investor Relations
Phone: (704) 752-4486
www.spx.com/en/investor-relations

After the spin-off, if you have any questions relating to Flowco, you should contact Flowco at:

SPX FLOW, Inc.
13320 Ballantyne Corporate Place
Charlotte, NC 28277
Attention: Investor Relations
Phone: [
·]
[
·]

 

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Summary of the Spin-Off

 
   

Distributing Company

  SPX Corporation, a Delaware corporation. After the distribution, SPX will own no shares of Flowco common stock.

Distributed Company

 

SPX FLOW, Inc., a newly-formed Delaware corporation and a wholly-owned direct subsidiary of SPX. After the spin-off, Flowco will be an independent, publicly-traded company.

Distributed Securities

 

All shares of Flowco common stock owned by SPX, which will be 100% of Flowco common stock issued and outstanding immediately prior to the distribution.

Record Date

 

The record date for the distribution is the close of business, Eastern time, on [·], 2015.

Distribution Date

 

The distribution will be effective at 11:59 p.m., Eastern time, on [·], 2015.

Internal Reorganization

 

As part of the spin-off, SPX is undergoing an internal reorganization that will, among other things, result in Flowco owning SPX's existing Flow Technology reportable segment, its Hydraulic Technologies business, various related legal entities, and certain of its corporate assets and liabilities. For more information, see the description of this internal reorganization in "The Spin-Off—Manner of Effecting the Spin-Off—Internal Reorganization."

Indebtedness and Other Financing Arrangements

 

We expect that, in connection with the spin-off, we will incur indebtedness of approximately $[·], including $600.0 aggregate principal amount of the 2017 Notes, which we will become obligated to repay.

Distribution Ratio

 

Each holder of SPX common stock will receive one share of Flowco common stock for every [·] shares of SPX common stock held on the record date.

 

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The Distribution

 

On the distribution date, SPX will release the shares of Flowco common stock to the distribution agent to distribute to SPX shareholders. The shares will be distributed in book-entry form, which means that no physical share certificates will be issued. We expect that it will take the distribution agent up to two weeks to electronically issue shares of Flowco common stock to you or to your bank or brokerage firm on your behalf by way of direct registration in book-entry form. You will receive written advice from the distribution agent as to the number of Flowco shares that have been issued to you, within [·] weeks following our public announcement that the distribution has taken place. Any delay in the electronic issuance of Flowco shares by the distribution agent will not affect trading in Flowco common stock. Following the distribution, shareholders who hold their shares in book-entry form may request that their shares be transferred to a brokerage or other account at any time. You will not be required to make any payment, to surrender or exchange your shares of SPX common stock or to take any other action to receive your shares of Flowco common stock.

Fractional Shares

 

The distribution agent will not distribute any fractional shares of Flowco common stock to SPX shareholders, but will instead aggregate all fractional shares of Flowco common stock to which SPX shareholders of record would otherwise be entitled and sell them in the public market. The distribution agent will then aggregate the net cash proceeds of the sales and distribute those proceeds ratably to those shareholders who would otherwise have received fractional shares.

Conditions to the Spin-Off

 

Completion of the spin-off is subject to the satisfaction or waiver by SPX of the following conditions:

 

Flowco's registration statement on Form 10, of which this information statement is a part, shall have become effective under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), with no stop order in effect with respect thereto, and this information statement shall have been mailed to the shareholders of SPX;

 

Flowco common stock shall have been approved for listing on the NYSE, subject to official notice of distribution;

 

SPX shall have received from Tax Counsel an opinion, in form and substance satisfactory to SPX in its sole discretion, regarding the qualification of the spin-off as a transaction that generally is tax-free to SPX and SPX's shareholders, for U.S. federal income tax purposes, under Sections 355 and 368(a)(1)(D) of the Code;

 

All permits, registrations and consents required under state and foreign securities or blue sky laws in connection with the distribution shall have been obtained and be in full force and effect;

 

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No order or other legal restraint preventing the distribution or any of the related transactions shall be in effect, and no other event shall have occurred or failed to occur that prevents the distribution or any of the related transactions;

 

All governmental approvals necessary to complete the distribution shall have been obtained and be in effect;

 

The financing arrangements contemplated to be entered into by SPX and Flowco in connection with the separation shall have been executed and delivered and the proceeds of those financing shall have been (or substantially concurrently will be) received by Flowco and SPX, as applicable;

 

The board of directors of SPX shall have received an opinion of Houlihan Lokey Financial Advisors, Inc. (or other solvency opinion provider of national standing) in form and substance satisfactory to the board of directors of SPX with respect to the solvency, capital adequacy and sufficiency of surplus of each of SPX and Flowco after giving effect to the separation and distribution; and

 

No events or developments shall have occurred or exist that, in the judgment of the board of directors of SPX, in its sole and absolute discretion, make it inadvisable to effect the distribution or the related transactions, or would result in the distribution or the related transactions not being in the best interest of SPX or its shareholders.

 

These conditions are for the sole benefit of SPX and do not give rise to or create any duty on the part of SPX or the board of directors of SPX to waive or not waive any such condition. SPX may, in its sole and absolute discretion, determine all terms of the distribution, including the form, structure and terms of any transactions to effect the distribution and the timing of and conditions to the consummation of the distribution. In addition, SPX may, at any time prior to the distribution, decide to abandon the distribution or modify or change the terms of the distribution.

 

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Trading Market and Symbol

 

We have applied for authorization to list Flowco common stock on the NYSE under the ticker symbol "FLOW." We anticipate that, beginning on or shortly before the record date, trading of shares of Flowco common stock will begin on a "when-issued" basis and will continue up to and including the distribution date, and we expect "regular-way" trading of Flowco common stock will begin the first trading day after the distribution date. We also anticipate that, beginning on or shortly before the record date, there will be two markets in SPX common stock: a regular-way market on which shares of SPX common stock will trade with an entitlement to shares of Flowco common stock to be distributed in the distribution, and an "ex-distribution" market on which shares of SPX common stock will trade without an entitlement to shares of Flowco common stock. For more information, see "The Spin-Off—Trading Market for Our Common Stock."

Material U.S. Federal Income Tax
Consequences

 

The distribution is conditioned upon, among other matters, SPX's receipt from Tax Counsel of an opinion, in form and substance satisfactory to SPX in its sole discretion, regarding the qualification of the spin-off as a transaction that generally is tax-free to SPX and SPX's shareholders, for U.S. federal income tax purposes, under Sections 355 and 368(a)(1)(D) of the Code. Assuming that the spin-off so qualifies, SPX shareholders generally will not be required, for U.S. federal income tax purposes, to recognize any gain or loss (except with respect to any cash received in lieu of fractional shares) or to include any amount in their income upon their receipt of shares of Flowco common stock in the distribution.

 

For more information regarding the material U.S. federal income tax consequences of the distribution, please refer to "The Spin-Off—Material U.S. Federal Income Tax Consequences of the Distribution."

 

SPX SHAREHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE PARTICULAR CONSEQUENCES TO THEM OF THE DISTRIBUTION, INCLUDING ANY CONSEQUENCES UNDER STATE, LOCAL OR NON-U.S. LAW.

 

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Relationship with SPX after the
Spin-Off

 

We will enter into a Separation and Distribution Agreement and other agreements with SPX prior to the spin-off. These agreements will govern our relationship with SPX after completion of the spin-off and provide for the allocation between us and SPX of various assets, liabilities, and obligations. In addition, we will enter into a Transition Services Agreement with SPX under which SPX will provide us with certain services, and we will provide SPX with certain services, on an interim basis following the distribution. We also will enter into an Employee Matters Agreement that will set forth our agreements with SPX concerning certain employee compensation and benefit matters. Further, we will enter into a Tax Matters Agreement with SPX that will, among other things, allocate responsibility for certain taxes, require us to indemnify SPX in certain instances for taxes resulting from the spin-off and contain certain restrictions (which generally relate to acquisitions of our stock and similar transactions) designed to preserve the intended tax-free treatment of the spin-off. We will also enter into a Trademark License Agreement, pursuant to which we will license rights to use described logos and other trademarks to SPX. We describe these arrangements in greater detail under "Certain Relationships and Related Party Transactions—Agreements with SPX Related to the Spin-Off," and describe some of the risks of these arrangements under "Risk Factors—Risks Relating to the Spin-Off."

Dividend Policy

 

Flowco's dividend policy will be established by the Board based on Flowco's financial condition, results of operations and capital requirements, as well as applicable law, regulatory constraints, industry practice and other business considerations that the Board considers relevant. In addition, the terms of the agreements governing our new debt will, and debt that we may incur in the future may, limit or prohibit the payments of dividends. For more information, see "Dividend Policy."

Distribution Agent

 

[·].

Risk Factors

 

We face both general and specific risks and uncertainties relating to our business, our relationship with SPX and our being an independent, publicly-traded company. We also are subject to risks relating to the spin-off. You should carefully read "Risk Factors" beginning on page 19 of this information statement.

 

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Summary Historical and Unaudited Pro Forma Combined Financial Data

        The table below presents summary historical and unaudited pro forma combined financial data for the periods indicated. We derived the summary historical combined financial data as of December 31, 2014 and 2013, and for each of the years in the three-year period ended December 31, 2014, from our audited combined financial statements included elsewhere in this information statement. We derived the summary historical combined financial data as of December 31, 2012 from our unaudited combined financial statements that are not included in this information statement.

        The unaudited pro forma combined financial statements are not necessarily indicative of our results of operations or financial condition had the distribution and our anticipated post-spin-off capital structure been completed on the dates assumed. Also, they may not reflect the results of operations or financial condition that would have resulted had we been operating as an independent, publicly traded company during such period. In addition, they are not necessarily indicative of our future results of operations or financial condition.

        You should read this summary financial data together with "Capitalization," "Unaudited Pro Forma Combined Financial Statements," "Selected Historical Combined Financial Data," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the combined financial statements and accompanying notes included in this information statement.

 
  As of and for the Year Ended December 31  
 
  Pro Forma
2014
  2014   2013   2012  

Revenues

      * $ 2,769.6   $ 2,804.8   $ 2,846.3  

Operating income

      *   254.6     231.2     188.9  

Net income attributable to Flowco

      *   134.5     131.0     126.9  

Total assets

      *   4,028.1     4,490.7     3,918.4  

Long-term debt (including capital lease obligations)

      *   976.6     965.1     762.9  

*
Unaudited pro forma amounts, when finalized, will be included in an amendment to this information statement.

 

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RISK FACTORS

        You should carefully consider each of the following risks and uncertainties, which we believe are the principal risks that we face and of which we are currently aware, and all of the other information in this information statement. Some of the risks and uncertainties described below relate to our business, while others relate to the spin-off. Other risks relate principally to the securities markets and ownership of our common stock.

        If any of the following events actually occur, our business, financial condition or financial results could be materially adversely affected, the trading price of our common stock could decline and you could lose all or part of your investment. Additional risks and uncertainties that we do not presently know about or currently believe are not material may also adversely affect our business and operations.

Risks Relating to Our Business

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

        We are an increasingly global company. In 2014, over 65% of our revenues were generated outside the United States. We have placed a particular emphasis on expanding our presence in emerging markets. As part of our strategy, we manage businesses with manufacturing facilities worldwide. Our reliance on non-U.S. revenues and non-U.S. manufacturing bases exposes us to a number of risks, including:

    Significant competition could come from local or long-term 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;

    Failure to comply with U.S. or non-U.S. laws regulating trade, such as the U.S. Foreign Corrupt Practices Act, and other anti-corruption laws, could result in adverse consequences, including fines, criminal sanctions, or loss of access to markets;

    Credit risk or financial condition of local customers and distributors could affect our ability to market our products or collect receivables;

    Regulatory or political systems or barriers may make it difficult or impossible to enter or remain in new markets. In addition, these barriers may impact our existing businesses, including making it more difficult for them to grow;

    Local political, economic and social conditions, including the possibility of hyperinflationary conditions, political instability, nationalization of private enterprises, or unexpected changes relating to currency could adversely impact our operations;

    Customs and tariffs may make it difficult or impossible for us to move our products or assets across borders in a cost-effective manner;

    Complications related to shipping, including delays due to weather, labor action, or customs, may impact our profit margins or lead to lost business;

    Government embargoes or foreign trade restrictions such as anti-dumping duties, as well as the imposition of trade sanctions by the United States or the European Union against a class of products imported from or sold and exported 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;

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    Environmental and other laws and regulations could increase our costs or limit our ability to run our business;

    Our ability to obtain supplies from foreign vendors and ship products internationally may be impaired during times of crisis or otherwise;

    Local, regional or worldwide hostilities could impact our operations; and

    Distance, language and cultural differences may make it more difficult to manage our business and employees and to effectively market our products and services.

        Any of the above factors or other factors affecting social and economic activity in emerging markets or affecting the movement of people and products into and from these countries to our major markets, including North America and Europe, could have a significant negative effect on our operations.

Many of the markets in which we operate are cyclical or are subject to industry events, and our results have been and could be affected as a result.

        Many of the markets in which we operate are subject to general economic cycles or industry events. In addition, certain of our businesses are subject to market-specific cycles, including, but not limited to the food and beverage markets and the oil and gas, chemical, mining, and petrochemical markets.

        Contract timing on large construction projects, including food and beverage systems and projects in the oil and gas industries, may cause significant fluctuations in revenues and profits from period to period.

        The businesses of many of our customers, particularly oil and gas companies, chemical companies and general industrial companies, are to varying degrees cyclical and have experienced, and may continue to experience, periodic downturns. Cyclical changes and specific industry events could also affect sales of products in our other businesses. Downturns in the business cycles of our different operations may occur at the same time, which could exacerbate any adverse effects on our business. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Results of Reportable Segments." In addition, certain of our businesses have seasonal fluctuations. Historically, some of our key businesses tend to be stronger in the second half of the year.

Our business depends on capital investment and maintenance expenditures by our customers.

        Demand for most of our products and services depends on the level of new capital investment and planned maintenance expenditures by our customers. The level of capital expenditures by our customers fluctuates based on planned expansions, new builds, and repairs, commodity prices, general economic conditions, availability of credit, and expectations of future market behavior. Any of these factors, individually or in the aggregate, could have a material adverse effect on our customers and, in turn, our business, financial condition, results of operations and cash flows.

Our customers could be impacted by commodity availability and price fluctuations.

        A number of factors outside our control, including fluctuating commodity prices, impact the demand for our products. Increased commodity prices may increase our customers' cost of doing business, thus causing them to delay or cancel large capital projects.

        On the other hand, declining commodity prices may cause mines, oil refineries, oil and gas extraction fields and other customers to delay or cancel projects relating to the production of such commodities. For example, recent declines in oil prices have led to reduced revenues in our oil and gas business. Reduced demand for our products and services could result in the delay or cancellation of

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existing orders or lead to excess manufacturing capacity, which unfavorably impacts our absorption of fixed manufacturing costs. This reduced demand may also erode average selling prices in the relevant market.

The price and availability of raw materials may adversely affect our business.

        We are exposed to a variety of risks relating to the price and availability of raw materials. In recent years, we have faced volatility in the prices of many of our key raw materials, including petroleum-based products, steel and copper. Increases in the prices of raw materials or shortages or allocations of 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. We are subject to long-term supplier contracts that may increase our exposure to pricing fluctuations.

Credit and counterparty risks could harm our business.

        The financial condition of our customers could affect our ability to market our products or collect receivables. In addition, financial difficulties faced by our customers may lead to cancellation or delay of orders.

        Our customers may suffer financial difficulties that make them unable to pay for a project when completed, or they may decide not to pay us, either as a matter of corporate decision-making or in response to changes in local laws and regulations. We cannot assure you that expenses or losses for uncollectible amounts will not have a material adverse effect on our revenues, earnings and cash flows.

Failure to protect or unauthorized use of our intellectual property may harm our business.

        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 or knowledge, particularly in foreign countries where the laws may not protect our proprietary rights to the same extent as in the United States. Costs incurred to defend 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 ("IT") networks and systems, including the Internet, to process, transmit and store electronic information. In particular, we depend on such IT infrastructure for electronic communications among our locations around the world and between our personnel and suppliers and customers, and we rely on the systems and services of a variety of vendors to meet our data processing and communication needs. Despite our implementation of security measures, cybersecurity threats, such as malicious software, phishing attacks, computer viruses and attempts to gain unauthorized access, cannot be completely mitigated. Security breaches of our, our customers' and our vendors' IT infrastructure can create system disruptions, shutdowns or unauthorized disclosure of confidential information, including our intellectual property, trade secrets, customer information or other confidential business information. If we are unable to prevent, detect or adequately respond to such breaches, our operations could be disrupted, our competitiveness could be adversely affected or we may suffer financial damage or loss because of lost or misappropriated information. Such incidents also could require significant management attention and resources and increased costs.

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Currency conversion risk could have a material impact on our reported results of business operations.

        Our operating results are translated into U.S. dollars for reporting purposes. The strengthening or weakening of the U.S. dollar against other currencies in which we conduct business could result in unfavorable translation effects as the results of transactions in foreign countries are translated into U.S. dollars. 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 related to 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 stemming from the cost of materials and products purchased overseas.

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 which are 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 are subject to domestic and international environmental protection laws and regulations with respect to our business operations and are operating in compliance with, or taking action aimed at ensuring compliance with, these laws and regulations. There can be no assurance that our compliance obligations with environmental protection laws and regulations, individually or in the aggregate, will not have a material adverse effect on our financial position, results of operations or cash flows.

        Numerous claims, complaints and proceedings arising in the ordinary course of business, including those relating to litigation matters (e.g., class actions, derivative lawsuits and contracts, intellectual property and competitive claims), environmental matters, and risk management matters (e.g., product and general liability, automobile, and workers' compensation claims), have been filed or are pending against us and certain of our subsidiaries. From time to time, we 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 (e.g., because of insurer insolvency) to protect us against potential loss exposures.

        We devote significant time and expense to defend 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 rights 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 "Management's Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Use of Estimates—Contingent Liabilities" and Note 13 to our combined financial statements for further discussion.

Governmental laws and regulations could negatively affect our business.

        Changes in laws and regulations to which we are or may become subject could have a significant negative impact on our business. In addition, we could face material costs and risks if it is determined that we have failed to comply with relevant law and regulation. Failure to comply with U.S. or non-U.S.

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laws regulating trade, such as the U.S. Foreign Corrupt Practices Act, and other anti-corruption laws, could result in adverse consequences, including fines, criminal sanctions, or loss of access to markets.

        In addition, costs associated with regulatory compliance can be difficult to predict. If we underestimate the time or costs required to comply with our legal and regulatory obligations, our actual costs may significantly exceed our projections, which could impact our results of operations.

Changes in tax laws and regulations or other factors could cause our income tax rate to increase, potentially reducing our net income and adversely affecting our cash flows.

        As a global manufacturing company, we are subject to taxation in various jurisdictions around the world. In preparing our financial statements, we calculate our effective income tax rate based on current tax laws and regulations and the estimated taxable income within each of these jurisdictions. Our effective income tax rate, however, may be higher due to numerous factors, including changes in tax laws or regulations. An effective income tax rate significantly higher than our expectations could have an adverse effect on our business, results of operations and liquidity.

        Officials in some of the jurisdictions in which we do business have proposed, or announced that they are reviewing, tax changes that could potentially increase taxes, and other revenue-raising laws and regulations, including those that may be enacted as a result of the OECD Base Erosion and Profit Shifting project. Any such changes in tax laws or regulations could impose new restrictions, costs or prohibitions on existing practices as well as reduce our net income and adversely affect our cash flows.

Cost overruns, inflation, delays and other risks could significantly impact our results, particularly with respect to long-term fixed-price contracts.

        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. In addition, contract delays may negatively impact these estimates and our revenues and earnings results for affected periods.

        To the extent that we underestimate the remaining cost or time to complete a project, we may overstate the revenues and profit in a particular period. Further, certain of these contracts provide for penalties or liquidated damages 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 record a loss on our projects.

The loss of key personnel and an 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 many locations 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.

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

        We sell our products in highly competitive markets, which could result in pressure on our profit margins and limit our ability to maintain or increase the market share of our products. We compete on a number of fronts, including on the basis of product offerings, technical capabilities, quality, service and pricing. We have a number of competitors 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 local governments, or both. In addition, new competitors may enter the markets in which we participate. Competitors may be able to offer lower prices, additional products or services or a more attractive mix of products or services, or services or 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. In addition, competitive environments in slow-growth markets, to which some of our businesses have exposure, have been inherently more influenced by pricing and domestic and global economic conditions. To remain competitive, we must invest in manufacturing, marketing, customer service and support and our distribution networks. No assurances can be made that we will have sufficient resources to continue to make the investment required to maintain or increase our market share or that our investments will be successful. If we do not compete successfully, our business, financial condition, results of operations and cash flows could be materially adversely affected.

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

        In areas where we depend on third-party suppliers and subcontractors for outsourced products, components or services, we are subject to the risk of customer dissatisfaction with the quality or performance of the products or services we sell due to supplier or subcontractor failure. In addition, business difficulties experienced by a third-party supplier or subcontractor can lead to the interruption of our ability to obtain outsourced products or services and ultimately our inability to supply products or services to our customers. Third-party supplier and subcontractor business interruptions can include, but are not limited to, work stoppages, union negotiations and other labor disputes. Current economic conditions could also impact the ability of suppliers and subcontractors to access credit and, thus, impair their ability to provide us quality products or services in a timely manner, or at all.

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, (ii) streamlining redundant administrative overhead and support activities, and (iii) restructuring and repositioning sales and marketing organizations to eliminate redundancies. Cost savings are inherently difficult to predict, 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, anticipated benefits could be delayed, differ significantly from our estimates and the other information contained in this report, or not be realized.

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 savings and other synergies. We may also be unable to raise additional funds necessary to consummate these acquisitions. In addition, decreases in our stock price may adversely affect our ability to consummate acquisitions. Competition

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for acquisitions in our business areas may be significant and result in higher prices for businesses, including businesses that we may target, which may also affect our acquisition rate or benefits achieved from our acquisitions.

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

        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 core business operations;

    Integration of technology, operations, personnel and financial and other systems;

    Increased expenses;

    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 compliant with 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 U.S. 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.

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

        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 customers or suppliers of the disposed businesses, potential disputes with the acquirers of the disposed 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.

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, 2014, we had goodwill and other intangible assets, net, of $1,740.3. 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.

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        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 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 reduction initiatives, capacity utilization, and assumptions for inflation and foreign currency changes. We monitor impairment indicators across all of our businesses. Significant changes in market conditions and estimates or judgments used to determine expected future cash flows that indicate a reduction in carrying value may give, and have given, rise to impairments in the period that the change becomes known.

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

        We have various collective labor arrangements covering certain U.S. and non-U.S. employee groups. We are subject to potential work stoppages and other potential labor disputes. Further, we may be subject to work stoppages, which are beyond our control, at our suppliers or customers.

We could experience operational difficulties and additional expense related to further implementations of Enterprise Resource Planning ("ERP") software.

        We are in the process of upgrading, and where necessary, implementing, a standard ERP software program across many of our business locations. Our expanded ERP software platform has involved, and will continue to involve, substantial expenditures on system hardware and software, as well as design, development and implementation activities. Operational disruptions during the course of these activities could materially impact our operations. For example, our ability to forecast sales demand, ship products, manage our product inventory, and record and report financial and management information on a timely and accurate basis could be impaired if there are significant problems implementing the expansion.

        Additionally, our cost estimates related to our new ERP system are based on assumptions which are subject to wide variability, require a great deal of judgment, and are inherently uncertain.

Our ordinary course and future restructuring activities could result in additional costs and operational difficulties.

        We face risks relating to our ongoing and future efforts to reduce global costs, including those designed to reduce headcount and consolidate our manufacturing and engineering footprint. We risk the loss of valuable employees, operational difficulties, product quality, restructuring costs, and difficulties arising from negotiations with work councils and other labor groups. We also risk disruption to our customer relationships if we are unable to meet our commitments to them. Further, these actions may take longer than anticipated, prove more costly than expected and distract management from other activities. Finally, we may not fully realize the expected benefits of these activities.

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

        We believe the development 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, in many cases in multiple jurisdictions around the world. The failure to do so could result in a significant competitive disadvantage.

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Cost reduction actions may affect our business.

        Cost reduction actions often result in charges against earnings. 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.

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, and from time to time have had, 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 any of 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.

Risks Relating to the Spin-Off

We face risks related to SPX's planned spin-off of its flow business.

        Unanticipated developments, including possible delays in obtaining required approvals, uncertainty of the financial markets, and challenges relating to the structure of the spin-off or resulting companies, could delay or prevent the planned spin-off, or cause it to occur on less favorable terms or conditions than projected. Even if the spin-off is completed as and on the timetable currently contemplated, we may not realize some or all projected benefits, or expenses relating to the planned spin-off may be significantly higher than projected.

        Additionally, the planned spin-off requires significant time and attention, which could distract management and other employee attention from the day-to-day operation of SPX's current Flow Technology reportable segment and its Hydraulic Technologies business.

The spin-off could result in substantial tax liabilities to SPX, Flowco and SPX's shareholders.

        Among the conditions to completing the spin-off will be SPX's receipt from Tax Counsel of an opinion, in form and substance satisfactory to SPX (in its sole discretion), regarding the qualification of the spin-off as a transaction that generally is tax-free to SPX and SPX's shareholders, for U.S. federal income tax purposes, under Sections 355 and 368(a)(1)(D) of the Code. However, if the factual assumptions or representations upon which this opinion is based are inaccurate or incomplete in any material respect, this opinion may be invalid and the conclusions reached therein could be jeopardized. Furthermore, this opinion will not be binding on the Internal Revenue Service ("IRS") or on any court. Accordingly, the IRS may challenge the conclusions set forth in the opinion and any such challenge could prevail. If, notwithstanding the opinion of Tax Counsel, the spin-off or a related transaction is determined to be taxable, SPX could be subject to substantial tax liabilities. In such case, each member of the SPX consolidated group immediately before the spin-off (including us and certain of our subsidiaries) would be jointly and severally liable, under U.S. Treasury Regulations, for the entire amount of the resulting U.S. federal income tax liabilities of SPX. In addition, if the spin-off is determined to be taxable, each holder of SPX common stock who receives Flowco shares in the distribution generally would be treated as receiving a taxable distribution of property in an amount equal to the fair market value of the Flowco shares received.

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        Even if the spin-off otherwise qualifies as a tax-free transaction, the distribution could be taxable to SPX and Flowco (but not to SPX's shareholders) in certain circumstances if one or more acquisitions of SPX's stock or Flowco's stock are deemed to be part of a plan or series of related transactions that includes the spin-off. In this event—which could occur for reasons outside of our control (such as actions taken by SPX)—we would be jointly and severally liable for the resulting U.S. federal income tax liabilities of SPX, which would be substantial. In connection with the spin-off, we intend to enter into a Tax Matters Agreement with SPX, under which we will agree (i) generally not to enter into certain transactions that could cause the spin-off to be taxable, and (ii) to indemnify SPX for any tax liabilities resulting from such a transaction. This obligation and potential tax liability may discourage, delay or prevent a change of control or acquisition of our common stock.

        For more information, please refer to "The Spin-Off—Material U.S. Federal Income Tax Consequences of the Distribution" and "Certain Relationships and Related Party Transactions—Agreements with SPX Related to the Spin-Off—Tax Matters Agreement."

The combined post-separation value of SPX and Flowco stock may not equal or exceed the pre-separation value of SPX common stock.

        As a result of the distribution, SPX expects the trading price of SPX common shares immediately following the distribution to be lower than the "regular-way" trading price of such shares immediately prior to the distribution because the trading price will no longer reflect the value of SPX's existing Flow Technology reportable segment businesses, its Hydraulic Technologies business, various related legal entities, and certain of its corporate assets and liabilities being transferred to Flowco. There can be no assurance that the aggregate market value of the SPX common stock and the Flowco common stock following the separation will be higher than or the same as the market value of SPX common stock if the separation did not occur.

We may not be able to engage in certain corporate transactions after the separation.

        To preserve the intended tax-free treatment of the spin-off, under the Tax Matters Agreement that we will enter into with SPX, for a period of two years following the distribution, we generally will be prohibited from taking certain actions that would prevent the spin-off from qualifying as a transaction that generally is tax-free to SPX and SPX's shareholders, for U.S. federal income tax purposes, under Sections 355 and 368(a)(1)(D) of the Code.

        These restrictions, which generally relate to acquisitions of our stock and similar transactions, may limit our ability to pursue certain strategic transactions or other transactions that we may otherwise believe to be in the best interests of our shareholders or that might increase the value of our business. For more information, please refer to "The Spin-Off—Material U.S. Federal Income Tax Consequences of the Distribution" and "Certain Relationships and Related Party Transactions—Agreements with SPX Related to the Spin-Off—Tax Matters Agreement."

Until the separation occurs, SPX has sole discretion to change the terms of the separation in ways which may be unfavorable to us.

        Until the separation occurs, we will be a wholly-owned subsidiary of SPX. Accordingly, SPX will effectively have the sole and absolute discretion to determine and change the terms of the separation, including the establishment of the record date for the distribution and the separation date. These changes could be unfavorable to us.

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We may be unable to make, on a timely basis, the changes necessary to operate as an independent, publicly-owned company.

        As a public entity, we will be subject to the reporting requirements of the Exchange Act and requirements of the Sarbanes-Oxley Act of 2002 (the "Sarbanes-Oxley Act"). These requirements may place a strain on our systems and resources. The Exchange Act requires that we file annual, quarterly and current reports about our business and financial condition. Under the Sarbanes-Oxley Act, we must maintain effective disclosure controls and procedures and internal control over financial reporting, which requires significant resources and management oversight. We will implement additional procedures and processes to address the standards and requirements applicable to public companies. To comply with these requirements, we may need to upgrade our systems; implement additional financial and management controls, reporting systems and procedures; and hire additional accounting and finance staff. We expect to incur additional annual expenses for the purpose of addressing these requirements, and those expenses may be significant. These activities may divert management's attention from other business concerns, which could have a material adverse effect on our financial position, results of operations or cash flows. If we cannot favorably assess the effectiveness of our internal control over financial reporting, or our independent registered public accounting firm cannot provide an unqualified attestation report on the effectiveness of our internal control over financial reporting, investor confidence and, in turn, the market price of our common stock could decline.

We do not have an operating history as an independent company and our historical and pro forma financial information may not be reliable indicators of our future results.

        The historical financial information we have included in this information statement has been derived from SPX's consolidated financial statements and accounting records and does not necessarily reflect what our financial position, results of operations and cash flows would have been had we been a separate, stand-alone entity during the periods presented. SPX did not account for us, and we were not operated, as a single stand-alone entity for the periods presented. Actual costs that may have been incurred if we had been a stand-alone company would depend on a number of factors, including the chosen organizational structure, what functions were outsourced or performed by employees and strategic decisions made in areas such as information technology and infrastructure. In addition, the historical information may not be indicative of what our results of operations, financial position and cash flows will be in the future. For example, following the spin-off, changes will occur in our cost structure, funding and operations, including changes in our tax structure and increased costs associated with becoming a public, stand-alone company.

        Additionally, in preparing our unaudited pro forma condensed financial information, we based the pro forma adjustments on available information and assumptions that we believe are reasonable and factually supportable; however, our assumptions may prove not to be accurate. Also, our unaudited pro forma condensed financial information may not give effect to various ongoing additional costs we may incur in connection with being an independent public company. Accordingly, our unaudited pro forma condensed financial information does not reflect what our financial condition and results of operations would have been as an independent public company and is not necessarily indicative of our future financial condition or future results of operations. Please refer to "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Unaudited Pro Forma Combined Financial Statements" and our historical audited combined financial statements and the notes to those statements included elsewhere in this information statement.

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In connection with our spin-off, SPX will indemnify us for certain liabilities and we will indemnify SPX for certain liabilities. If we are required to act on these indemnities to SPX, we may need to divert cash to meet those obligations and our financial results could be negatively impacted. The SPX indemnity may not be sufficient to insure us against the full amount of liabilities for which it will be allocated responsibility, and SPX may not be able to satisfy its indemnification obligations in the future.

        Pursuant to the Separation and Distribution Agreement, the Employee Matters Agreement and the Tax Matters Agreement between us and SPX, SPX will agree to indemnify us for certain liabilities, and we will agree to indemnify SPX for certain liabilities, in each case for uncapped amounts, as discussed further in "Certain Relationships and Related Transactions—Agreements with SPX Related to the Spin-Off." Such indemnities may be significant and could negatively impact our business, particularly our indemnity to SPX regarding the intended tax-free treatment of the distribution. Third parties could also seek to hold us responsible for any of the liabilities that SPX has agreed to retain. Further, the indemnity from SPX may not be sufficient to protect us against the full amount of such liabilities, and SPX may not be able to fully satisfy its indemnification obligations. Moreover, even if we ultimately succeed in recovering from SPX any amounts for which we are held liable, we may be temporarily required to bear these losses ourselves. Each of these risks could negatively affect our business, financial condition, results of operations and cash flows.

The spin-off may expose us to potential liabilities arising out of state and federal fraudulent conveyance laws and legal dividend requirements.

        The spin-off is subject to review under various state and federal fraudulent conveyance laws. Fraudulent conveyance laws generally provide that an entity engages in a constructive fraudulent conveyance when (1) the entity transfers assets and does not receive fair consideration or reasonably equivalent value in return, and (2) the entity (a) is insolvent at the time of the transfer or is rendered insolvent by the transfer, (b) has unreasonably small capital with which to carry on its business, or (c) intends to incur or believes it will incur debts beyond its ability to repay its debts as they mature. An unpaid creditor or an entity acting on behalf of a creditor (including, without limitation, a trustee or debtor-in-possession in a bankruptcy by us or SPX or any of our respective subsidiaries) may bring a lawsuit alleging that the spin-off or any of the related transactions constituted a constructive fraudulent conveyance. If a court accepts these allegations, it could impose a number of remedies, including, without limitation, voiding our claims against SPX, requiring our shareholders to return to SPX some or all of the shares of our common stock issued in the spin-off, or providing SPX with a claim for money damages against us in an amount equal to the difference between the consideration received by SPX and the fair market value of our company at the time of the spin-off.

        The measure of insolvency for purposes of the fraudulent conveyance laws will vary depending on which jurisdiction's law is applied. Generally, an entity would be considered insolvent if (1) the present fair saleable value of its assets is less than the amount of its liabilities (including contingent liabilities); (2) the present fair saleable value of its assets is less than its probable liabilities on its debts as such debts become absolute and matured; (3) it cannot pay its debts and other liabilities (including contingent liabilities and other commitments) as they mature; or (4) it has unreasonably small capital for the business in which it is engaged. We cannot assure you what standard a court would apply to determine insolvency or that a court would determine that we, SPX or any of our respective subsidiaries were solvent at the time of or after giving effect to the spin-off.

        The distribution of our common stock is also subject to review under state corporate distribution statutes. Under the General Corporation Law of the State of Delaware (the "DGCL"), a corporation may only pay dividends to its shareholders either (1) out of its surplus (net assets minus capital) or (2) if there is no such surplus, out of its net profits for the fiscal year in which the dividend is declared and/or the preceding fiscal year. Although SPX intends to make the distribution of our common stock

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entirely from surplus, we cannot assure you that a court will not later determine that some or all of the distribution to SPX shareholders was unlawful.

        The SPX board of directors believes that SPX and Flowco each will be solvent at the time of the spin-off (including immediately after the distribution of shares of Flowco common stock), will be able to repay its debts as they mature following the spin-off and will have sufficient capital to carry on its businesses and the spin-off, and that the distribution will be made entirely out of surplus in accordance with Section 170 of the DGCL. The expectations of the SPX board of directors in this regard are based on a number of assumptions, including its expectations as to the post-spin-off operating performance and cash flow of each of SPX and Flowco and its analysis of the post-spin-off assets and liabilities of each company. We cannot assure you, however, that a court would reach the same conclusions as SPX's board of directors in determining whether SPX or we were insolvent at the time of, or after giving effect to, the spin-off, or whether lawful funds were available for the separation and the distribution to SPX's shareholders.

A court could require that we assume responsibility for obligations allocated to SPX under the Separation and Distribution Agreement.

        Under the Separation and Distribution Agreement, from and after the spin-off, each of SPX and we will be responsible for the debts, liabilities and other obligations related to the business or businesses which it owns and operates following the consummation of the spin-off. Although we do not expect to be liable for any obligations that are not allocated to us under the Separation and Distribution Agreement, a court could disregard the allocation agreed to between the parties, and require that we assume responsibility for obligations allocated to SPX (including, for example, environmental liabilities), particularly if SPX were to refuse or were unable to pay or perform the allocated obligations. See "Certain Relationships and Related Party Transactions—Agreements with SPX Related to the Spin-Off—Separation and Distribution Agreement."

We will be subject to continuing contingent tax liabilities of SPX following the spin-off.

        Under the Code and U.S. Treasury Regulations, each corporation that was a member of the SPX consolidated group for U.S. federal income tax purposes during any taxable period (or portion thereof) ending on or before the effective time of the distribution is jointly and severally liable for the entire U.S. federal income tax liability of the SPX consolidated group for that taxable period. In connection with the spin-off, we intend to enter into a Tax Matters Agreement with SPX that generally will allocate economic responsibility for taxes of the SPX consolidated group to SPX. However, if SPX is unable to pay any such taxes, we could be liable for the entire amount of such taxes, which would include taxes arising out of the distribution if SPX were to take an action (over which we may have no control) that causes the spin-off to be taxable to SPX.

We might have been able to receive better terms from unaffiliated third parties than the terms we receive in our agreements with SPX.

        The agreements related to the spin-off, including the Separation and Distribution Agreement, the Employee Matters Agreement, the Tax Matters Agreement, the Transition Services Agreement, the Trademark License Agreement, the Lease Agreement and any other agreements, have been negotiated in the context of our separation from SPX while we are still part of SPX. Although these agreements are intended to be on an arm's-length basis, they may not reflect terms that would have resulted from arm's-length negotiations among unaffiliated third parties. The terms of the agreements being negotiated in the context of our separation concern, among other things, allocations of assets, liabilities, rights, indemnifications and other obligations among SPX and us. See "Certain Relationships and Related Party Transactions—Agreements with SPX Related to the Spin-Off" for more detail.

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After the spin-off, certain of our executive officers and directors may have actual or potential conflicts of interest because of their current or former positions in SPX or their ownership of SPX equity.

        Certain of the persons who will be our executive officers and directors will be former directors, officers or employees of SPX and thus have professional relationships with SPX's executive officers and directors. One of our directors, our Chairman, President and Chief Executive Officer, will continue to serve on the board of directors of SPX following the spin-off. In addition, all our executive officers and [·] of our directors have a financial interest in SPX as a result of their beneficial ownership of SPX equity. These relationships and financial interests may create, or may create the appearance of, conflicts of interest when these directors and officers face decisions that could have different implications for SPX than for us.

After the spin-off, SPX's insurers may deny coverage to us for losses associated with occurrences prior to the spin-off.

        In connection with the separation, we will enter into agreements with SPX to address several matters associated with the spin-off, including insurance coverage. See "Certain Relationships and Related Party Transactions—Agreements with SPX Related to the Spin-Off." After the spin-off, SPX's insurers may deny coverage to us for losses associated with occurrences prior to the spin-off. Accordingly, we may be required to temporarily or permanently bear the costs of such lost coverage.

The one-time and ongoing costs of the spin-off may be greater than we expected.

        There are risks and uncertainties relating to the execution of the spin-off, including the timing and certainty of the completion of the internal reorganization prior to the distribution and the timing and certainty of the satisfaction or waivers of the conditions to the distribution. In addition, we and SPX will incur costs in connection with the transition to being a stand-alone public company that relate primarily to accounting, tax, legal and other professional costs; financing costs in connection with refinancing SPX's outstanding indebtedness and obtaining our financing as a stand-alone company; compensation costs, such as modifications to certain incentive awards upon completion of the spin-off; recruiting and relocation costs associated with hiring our senior management personnel; and costs to separate information systems. These costs, whether incurred before or after the spin-off, may be greater than anticipated and could have a material adverse effect on our financial position, results of operations and cash flows.

Risks Relating to Our Common Stock

There is no existing market for our common stock and we cannot be certain that an active trading market will develop or be sustained after the spin-off. If the price of our common stock fluctuates significantly following the spin-off, shareholders could incur substantial losses of any investment in our common stock.

        There currently is no public market for our common stock. We cannot assure you that an active trading market for our common stock will develop as a result of the spin-off or be sustained in the future. The lack of an active market may make it more difficult for you to sell our common stock and could lead to the price of our common stock being depressed or more volatile. We cannot predict the prices at which our common stock may trade after the spin-off. The price of our common stock could fluctuate widely in response to a variety of matters, including those listed in our risk factors.

        In addition, the stock market has experienced extreme price and volume fluctuations in recent years that have significantly affected the quoted prices of the securities of many companies, including companies in our industry. The changes often appear to occur without regard to specific operating performance. The price of our common stock could fluctuate based upon factors that have little or nothing to do with us, and these fluctuations could materially reduce our stock price.

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Substantial sales of our common stock may occur in connection with the spin-off, which could cause the price of our common stock to decline.

        The shares of our common stock that SPX distributes to its shareholders may be sold immediately in the public market. SPX shareholders could sell our common stock received in the distribution if we do not fit their investment objectives or, in the case of index funds, if we are not part of the index in which they invest. Sales of significant amounts of our common stock or a perception in the market that such sales will occur may reduce the market price of our common stock.

We cannot assure you that we will pay dividends on our common stock, and our indebtedness could limit our ability to pay dividends on our common stock.

        Our dividend policy will be established by our Board based on our financial condition, results of operations and capital requirements, as well as applicable law, regulatory constraints, industry practice and other business considerations that our Board considers relevant. In addition, the terms of the agreements governing debt that we incur in connection with the spin-off or in the future may limit or prohibit the payments of dividends. For more information, see "Dividend Policy." We cannot assure you that we will pay dividends in the future or continue to pay any dividends if we do commence the payment of dividends.

Your percentage ownership in Flowco will be diluted in the future.

        Your percentage ownership in Flowco will be diluted because of additional equity awards that we expect will be granted to our directors, officers and employees pursuant to equity incentive plans. In addition, we may issue equity as all or part of the consideration paid for acquisitions and strategic investments we may make in the future.

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.

        Prior to the distribution date, our Board and SPX, as our sole shareholder, will approve and adopt amended and restated versions of our Certificate of Incorporation and By-laws, which will contain, and Delaware law contains, provisions that are intended to deter coercive takeover practices and inadequate takeover bids by making such practices or bids unacceptably expensive to the bidder and to encourage prospective acquirors to negotiate with our Board rather than to attempt a hostile takeover. 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 Board; advance notice requirements for shareholder proposals and nominations; limitations on shareholders' ability to amend, alter or repeal the By-laws; 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 DGCL, 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. See "Description of Capital Stock" for a more detailed description of these provisions.

        We believe these provisions will protect our shareholders from coercive or otherwise unfair takeover tactics by requiring potential acquirors to negotiate with our Board and by providing our Board with more time to assess any acquisition proposal. These provisions are not intended to make us immune from takeovers. However, these provisions will apply even if the offer may be considered

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beneficial by some shareholders and could delay or prevent an acquisition that our Board determines is not in the best interests of our company and our shareholders. These provisions may also prevent or discourage attempts to remove and replace incumbent directors.

        Provisions in our agreements with SPX may also delay or prevent a merger or acquisition that some shareholders may consider favorable. To preserve the intended tax-free treatment of the spin-off, under the Tax Matters Agreement that we will enter into with SPX, we generally will be prohibited, for a period of two years following the distribution, from taking certain actions that would prevent the spin-off from qualifying as a transaction that generally is tax-free to SPX and SPX's shareholders, for U.S. federal income tax purposes, under Sections 355 and 368(a)(1)(D) of the Code. These restrictions may limit our ability to pursue certain strategic transactions or other transactions that we may otherwise believe to be in the best interests of our shareholders or that might increase the value of our business. For more information, please refer to "The Spin-Off—Material U.S. Federal Income Tax Consequences of the Distribution" and "Certain Relationships and Related Party Transactions—Tax Matters Agreement."

Risks Relating to Our Indebtedness

We expect to incur new indebtedness in connection with the spin-off, and the degree to which we will be leveraged following completion of the spin-off may have a material adverse effect on our financial position, results of operations and cash flows and restrict our operating flexibility.

        We intend to enter into a credit agreement prior to or concurrently with the spin-off. We expect that the credit agreement will contain a number of significant covenants that, among other things, will restrict our ability to:

    create liens and encumbrances;

    incur additional indebtedness;

    merge, dissolve, liquidate or consolidate;

    make acquisitions, investments, advances or loans;

    dispose of or transfer assets;

    pay dividends or make other payments in respect of our capital stock;

    amend certain material governance or debt documents;

    redeem or repurchase capital stock or prepay, redeem or repurchase certain debt;

    engage in certain transactions with affiliates;

    enter into certain speculative hedging arrangements; and

    enter into certain restrictive agreements.

        Our ability to make scheduled payments of principal or pay interest on, or to refinance, our indebtedness and to satisfy other future debt obligations will depend upon our future operating performance, which may 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 an 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

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stock price. In addition, we cannot assure 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.

        In addition, the failure of one or more of our larger lenders, or several of our smaller lenders, could significantly reduce the availability of our credit, which could harm our liquidity.

The credit agreement that we plan to enter into in connection with the spin-off could impair our ability to finance our future operations and could cause our expected debt to be accelerated.

        The credit agreement that we plan to enter into in connection with the spin-off or future or revised instruments may contain various 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 will also be required to 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, under the credit agreement, we will be required to comply with additional affirmative and negative covenants. 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, we could default under the credit agreement, and the debt, together with accrued interest, could be declared due and payable. If our debt is accelerated, we may not be able to repay or refinance our debt. In addition, any default under our credit agreement could lead to an acceleration of debt under other debt instruments that we may enter into that contain cross-acceleration or cross-default provisions. Our ability to comply with the provisions governing our 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.

Our variable rate indebtedness may expose us to interest rate risk, which could cause our debt costs to increase significantly.

        Our indebtedness may include variable rates of interest, which will expose us to the risk of rising interest rates. We expect that as of the date of the spin-off, we will have approximately $[·] of aggregate debt outstanding, which may include floating-rate borrowings. If the LIBOR or other applicable base rates under instruments governing our new indebtedness increase in the future, then the interest expense on the floating-rate debt could increase materially.

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SPECIAL NOTE ABOUT FORWARD-LOOKING STATEMENTS

        We make forward-looking statements throughout this information statement, including in, among others, the sections entitled "Summary," "Risk Factors," "The Spin-Off," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Business," that reflect our current expectations and projections about our future results, performance and prospects. Forward-looking statements include all statements that are not historical in nature or are not current facts. We have tried to identify these forward-looking statements by using forward-looking words including "believe," "expect," "plan," "intend," "anticipate," "estimate," "predict," "potential," "continue," "may," "might," "should," "could," "will," or the negative of these terms or similar expressions.

        These forward-looking statements are subject to a number of risks, uncertainties, assumptions and other factors that could cause our actual results, performance and prospects to differ materially from those expressed in, or implied by, these forward-looking statements. These factors include the risks, uncertainties, assumptions and other factors discussed under "Risk Factors", including, but not limited to, the following risk factors:

    international economic, political, legal, accounting and business conditions;

    the cyclical nature of the markets in which we operate and the impact of industry events;

    capital investment and maintenance expenditures of our customers;

    the impact of commodity availability and price fluctuations on our customers

    the price and availability of raw materials;

    credit and other counterparty risks;

    our failure to protect or unauthorized use of our intellectual property;

    our failure to protect our information systems against data corruption, cyber-based attacks or network security breaches;

    the impact of currency conversion risk on our operations;

    laws and regulations and potential liability relating to claims, complaints and proceedings, including those relating to environmental and other matters;

    governmental laws and regulations;

    changes in tax laws and regulations or other factors that could cause our income tax rate to increase;

    cost overruns, inflation and delays;

    loss of key personnel and an inability to attract and retain qualified employees;

    our failure to compete effectively in our highly competitive industries;

    our strategy to outsource various elements of the products we sell subjecting us to the business risks of our suppliers and subcontractors;

    our failure to successfully complete or integrate acquisitions and to achieve the expected cost savings and other benefits of our acquisitions;

    our failure to successfully complete dispositions;

    potential material non-cash charges to our earnings 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;

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    potential work stoppages, labor disputes and other matters associated with our labor force;

    difficulties stemming from enterprise resource planning software;

    costs and operational concerns relating to restructuring;

    our failure to develop new technology products;

    cost reduction actions;

    defects or errors in our current and planned products which could harm our reputation;

    our inability to achieve some or all of the benefits of the spin-off;

    our inability to engage in certain corporate transactions following the spin-off; and

    risks associated with our debt obligations following the spin-off.


INDUSTRY DATA

        Industry data included in this information statement is estimated and is based on independent industry publications or other publicly available information. Although we believe that the information on which we have based these estimates of our market position and this market data are generally reliable, the accuracy and completeness of this information is not guaranteed and this information has not been independently verified.

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THE SPIN-OFF

Background

        On October 29, 2014, SPX announced that its board of directors had unanimously approved a plan for a spin-off of its Flow Technology reportable segment, its Hydraulic Technologies business, various related legal entities, and certain of its corporate assets and liabilities, and on [·], 2015, the board of directors of SPX approved the distribution of all the outstanding shares of Flowco to holders of shares of SPX as of the close of business on [·], 2015, the record date for the distribution. The distribution will be effective at 11:59 p.m., Eastern time, on [·], 2015, following which Flowco will be an independent, publicly-traded company. To complete the spin-off, SPX will, following an internal reorganization, distribute to its shareholders all outstanding shares of our common stock. The distribution will occur on the distribution date, [·], 2015. Each holder of SPX common stock will receive one share of our common stock for every [·] shares of SPX common stock held on [·], 2015, the record date.

        If they take no action, holders of SPX common stock will continue to hold their shares in SPX. We do not require and are not seeking a vote of SPX's shareholders in connection with the spin-off, and SPX's shareholders will not have any appraisal rights in connection with the spin-off or the internal reorganization.

        The distribution of our common stock as described in this information statement is subject to the satisfaction or waiver of certain conditions. In addition, SPX has the right not to complete the spin-off if, at any time prior to the distribution, its board of directors determines, in its sole discretion, that the spin-off is not in the best interests of SPX or its shareholders, or that it is not advisable for us to separate from SPX. For a more detailed description, see "—Conditions to the Spin-Off."

Reasons for the Spin-Off

        SPX has undergone a significant transformation over the last several years that has simplified and strengthened its business. As a continuation of that transformation, SPX's board of directors unanimously approved a plan for a spin-off of Flowco into a stand-alone, publicly traded company.

        The spin-off is expected to create two strong, stand-alone companies with leading positions in the markets they serve.

    Flowco will be a pure-play flow company, well positioned as a leading provider of flow technologies across food and beverage, power and energy and industrial markets.

    SPX will be well positioned as a leading supplier of power, HVAC and highly engineered infrastructure products.

        SPX is separating from Flowco because SPX's board and management team believe the spin-off will provide a number of benefits, including:

    Distinct investment identity.  The separation will allow investors to separately value each company based on its distinct investment identity. Flowco's businesses differ from SPX's businesses in several respects, such as the nature of the business, growth profile, end markets in which the businesses operate and business cycles to which the businesses are subject. The separation will enable investors to evaluate the merits, performance and future prospects of each company's respective businesses and to invest in each company separately based on these distinct characteristics. The separation may attract new investors that may not have clearly assessed the value of SPX's businesses as part of SPX's existing, consolidated structure, enhancing the likelihood that SPX and Flowco will, together, achieve an appropriate market valuation.

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    Enhanced strategic and management focus.  The separation will allow each company to more effectively pursue its distinct operating priorities and strategies and opportunities for long-term growth and profitability in their respective markets. Flowco's management will be able to focus exclusively on its flow business, while SPX's management will be able to focus exclusively on the retained businesses. Following the separation, management of each company should be able to implement goals and evaluate strategic opportunities in light of investor expectations within such company's markets.

    Alignment of incentive compensation with performance objectives.  The separation will allow each company to more directly tie incentive compensation arrangements for its employees to the performance of its business and the achievement of its strategic objectives, enhancing employee hiring and retention.

    More efficient allocation of capital.  The separation will permit each company to implement a capital structure appropriate to its strategy and business needs and to concentrate its financial resources solely on its own operations without having to compete with the other company's businesses for investment capital. This will provide each company with greater flexibility to invest capital in its businesses in a time and manner appropriate for its distinct strategy and business needs, facilitating a more efficient allocation of capital.

    Strategic flexibility.  The separation will provide each company increased strategic flexibility to make acquisitions and form partnerships and alliances in its target markets, unencumbered by consideration of the potential impact on or of the businesses of the other company, including by allowing each company to effect future acquisitions using its own stock for all or part of the consideration, the value of which will be more closely aligned with the performance of its businesses, and unaffected by the businesses of the other company.

Manner of Effecting the Spin-Off

        The general terms and conditions relating to the spin-off will be set forth in a Separation and Distribution Agreement between us and SPX.

    Internal Reorganization

        Prior to the distribution, as described under "—Distribution of Shares of Our Common Stock," SPX will complete an internal reorganization. Following the reorganization, Flowco will own SPX's current Flow Technology reportable segment, SPX's Hydraulic Technologies business, various related legal entities, and certain SPX corporate assets and liabilities.

    Distribution of Shares of Our Common Stock

        Under the Separation and Distribution Agreement, the distribution will be effective as of 11:59 p.m., Eastern time, on [·], 2015, the distribution date. As a result of the spin-off, on the distribution date, each holder of SPX common stock will receive one share of our common stock for every [·] shares of SPX common stock that the shareholder owns as of the record date. In order to receive shares of our common stock in the spin-off, a SPX shareholder must be a shareholder at the close of business, Eastern time, on [·], 2015, the record date.

        On the distribution date, SPX will release the shares of our common stock to our distribution agent to distribute to SPX shareholders as of the record date. Our distribution agent will establish book-entry accounts for record holders of SPX common stock and credit to such accounts the shares of our common stock distributed to such holders. Our distribution agent will send these shareholders, including any registered holder of shares of SPX common stock represented by physical share certificates on the record date, a statement reflecting their ownership of our common stock. Book-entry

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refers to a method of recording stock ownership in our records that does not use physical stock certificates. For shareholders who own SPX common stock through a broker or other nominee, their broker or nominee will credit their shares of our common stock to their accounts. We expect that it will take the distribution agent up to two weeks to electronically issue shares of our common stock to SPX shareholders or their bank or brokerage firm by way of direct registration in book-entry form. Any delay in the electronic issuance of Flowco shares by the distribution agent will not affect trading in Flowco common stock. As further discussed below, we will not issue fractional shares of our common stock in the distribution. Following the spin-off, shareholders who hold shares in book-entry form may request that their shares of our common stock be transferred to a brokerage or other account at any time.

        SPX shareholders will not be required to make any payment or surrender or exchange their shares of SPX common stock or take any other action to receive their shares of our common stock.

Treatment of Fractional Shares

        The distribution agent will not distribute any fractional shares of our common stock to SPX shareholders. Instead, as soon as practicable on or after the distribution date, the distribution agent will aggregate fractional shares of our common stock held by holders of record into whole shares, sell them in the open market at the prevailing market price and then distribute the aggregate sale proceeds ratably to SPX shareholders who would otherwise have received fractional shares of our common stock. The amount of this payment will depend on the prices at which the distribution agent sells the aggregated fractional shares of our common stock in the open market shortly after the distribution date. The distribution agent will, in its sole discretion, without any influence by SPX or us, determine when, how, through which broker-dealer and at what price to sell the whole shares. The distribution agent is not, and any broker-dealer used by the distribution agent will not be, an affiliate of either SPX or us. We will be responsible for payment of any brokerage fees, which we do not expect will be material to us. Your receipt of cash in lieu of fractional shares of our common stock generally will result in a taxable gain or loss for U.S. federal income tax purposes, as described in more detail under "—Material U.S. Federal Income Tax Consequences of the Distribution."

Material U.S. Federal Income Tax Consequences of the Distribution

        The following discusses the material U.S. federal income tax consequences of SPX's distribution of shares of our common stock to "U.S. Holders" (defined below). This discussion is based on the Code, the U.S. Treasury Regulations promulgated thereunder, rulings and other administrative pronouncements issued by the IRS, and judicial decisions, all as in effect on the date hereof, and all of which are subject to change, possibly with retroactive effect. No assurance can be given that the IRS would not assert, or that a court would not sustain, a position contrary to any of the tax consequences described below.

        For purposes of this discussion, a "U.S. Holder" is a beneficial owner of SPX common stock that is, for U.S. federal income tax purposes:

    an individual who is a citizen or resident of the United States;

    a corporation (or other entity taxable as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the United States, any state thereof or the District of Columbia;

    an estate the income of which is subject to U.S. federal income taxation regardless of its source; or

    a trust that (1) is subject to the primary supervision of a U.S. court and the control of one or more United States persons (within the meaning of Section 7701(a)(30) of the Code), or (2) has

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      a valid election in effect under applicable Treasury Regulations to be treated as a United States person.

        This discussion applies only to U.S. Holders that hold their shares of SPX common stock as a capital asset within the meaning of Section 1221 of the Code (generally, property held for investment). This discussion does not discuss all tax considerations that may be relevant in light of a U.S. Holder's particular circumstances, nor does it address the consequences to U.S. Holders subject to special treatment under the Code, such as:

    dealers or brokers in securities, commodities or currencies;

    tax-exempt organizations;

    banks, insurance companies or other financial institutions;

    mutual funds;

    regulated investment companies and real estate investment trusts;

    corporations that accumulate earnings to avoid U.S. federal income tax;

    U.S. Holders that hold individual retirement or other tax-deferred accounts;

    U.S. Holders that acquired shares of SPX common stock pursuant to the exercise of employee stock options or otherwise as compensation;

    U.S. Holders that actually or constructively own more than 5% of SPX common stock (by voting power or value);

    U.S. Holders that hold SPX common stock as part of a hedge, appreciated financial position, straddle, constructive sale, conversion transaction or other risk reduction transaction;

    traders in securities who elect to apply a mark-to-market method of accounting;

    U.S. Holders that have a functional currency other than the U.S. dollar;

    U.S. Holders that are subject to the alternative minimum tax; and

    partnerships or other pass-through entities or investors in such entities.

        If a partnership, including for this purpose any entity or arrangement that is treated as a partnership for U.S. federal income tax purposes, holds SPX common stock, the tax treatment of a partner in such partnership generally will depend upon the status of the partner and the activities of the partnership. A U.S. Holder that is a partnership and the partners in such partnership should consult their own tax advisors regarding the tax consequences of the distribution.

        This discussion also does not address any tax consequences arising under the unearned Medicare contribution tax pursuant to the Health Care and Education Reconciliation Act of 2010, nor does it address any tax considerations under state, local or non-U.S. law or under U.S. federal laws other than those pertaining to the U.S. federal income tax.

        THE FOLLOWING DISCUSSION IS A SUMMARY OF MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE DISTRIBUTION UNDER CURRENT LAW, IS FOR GENERAL INFORMATION ONLY, AND DOES NOT CONSTITUTE TAX ADVICE. SPX SHAREHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS CONCERNING THE U.S. FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF THE DISTRIBUTION TO THEM.

        SPX has not requested, and does not intend to request, a private letter ruling from the IRS regarding the qualification of the spin-off as a transaction that generally is tax-free to SPX and U.S. Holders of SPX common stock under Sections 355 and 368(a)(1)(D) of the Code, and there can be no

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assurance that the IRS will not assert that the distribution and/or certain related transactions are taxable. The distribution is conditioned upon, among other matters, SPX's receipt of an opinion of Tax Counsel regarding the qualification of the spin-off as a transaction that generally is tax-free to SPX and U.S. Holders of SPX common stock, for U.S. federal income tax purposes, under Sections 355 and 368(a)(1)(D) of the Code. The opinion will be based and rely on, among other things, certain facts and assumptions, as well as certain representations, statements and undertakings of SPX and us. If any of these representations, statements or undertakings are, or become, inaccurate or incomplete, or if SPX or Flowco breach any of their respective covenants in the separation documents, the opinion of Tax Counsel may be invalid and the conclusions reached therein could be jeopardized. An opinion of counsel is not binding on the IRS or any court.

        Notwithstanding the receipt by SPX of an opinion of Tax Counsel, the IRS could assert that the distribution and/or certain related transactions do not qualify for tax-free treatment for U.S. federal income tax purposes. If the IRS were successful in taking this position, SPX, Flowco and U.S. Holders could be subject to significant U.S. federal income tax liabilities. Please refer to "Material U.S. Federal Income Tax Consequences if the Distribution is Taxable" below.

        In connection with the spin-off, SPX and Flowco will enter into a Tax Matters Agreement. For a discussion of the Tax Matters Agreement, please refer to "Certain Relationships and Related Party Transactions—Agreements with SPX Relating to the Spin-Off—Tax Matters Agreement." Our indemnification obligations to SPX under the Tax Matters Agreement are not limited in amount or subject to any cap. If we are required to indemnify SPX under the Tax Matters Agreement, we may be subject to substantial liabilities.

        Material U.S. Federal Income Tax Consequences if the Spin-Off Qualifies as a Transaction That Generally is Tax-Free to SPX and U.S. Holders of SPX Common Stock Under Sections 355 and 368(a)(1)(D) of the Code.

        Assuming the spin-off qualifies as a transaction that generally is tax-free to SPX and U.S. Holders of SPX common stock, for U.S. federal income tax purposes, under Sections 355 and 368(a)(1)(D) of the Code, the U.S. federal income tax consequences of the distribution will be as follows:

    the distribution generally will not result in any taxable income, gain or loss to SPX, other than taxable income or gain possibly arising out of internal reorganizations and restructurings undertaken in connection with the distribution and with respect to items required to be taken into account under U.S. Treasury Regulations relating to consolidated federal income tax returns;

    no gain or loss generally will be recognized by (and no amount will be included in the income of) U.S. Holders of SPX common stock upon their receipt of Flowco common stock in the distribution, except with respect to any cash received in lieu of fractional shares of Flowco common stock (as described below);

    the tax basis in shares of SPX common stock that a U.S. Holder holds immediately prior to the distribution will be allocated between such shares and the shares of Flowco common stock such U.S. Holder receives in the distribution (including any fractional share interest in Flowco common stock for which the U.S. Holder receives cash) in proportion to the relative fair market values of such shares immediately following the distribution; and

    the holding period of the Flowco common stock received by each U.S. Holder of SPX common stock in the distribution (including any fractional share interest in Flowco common stock for which cash is received) generally will include the holding period at the time of the distribution for the SPX common stock with respect to which the distribution is made.

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        A U.S. Holder that receives cash in lieu of a fractional share of Flowco common stock in the distribution will be treated as having sold such fractional share for cash, and will recognize capital gain or loss in an amount equal to the difference between the amount of cash received and such U.S. Holder's adjusted tax basis in such fractional share. Such gain or loss will be long-term capital gain or loss if the U.S. Holder's holding period for its SPX common stock exceeds one year at the time of the distribution.

        U.S. Treasury Regulations provide that if a U.S. Holder holds different blocks of SPX common stock (i.e., shares of SPX common stock purchased or acquired at different times or for different amounts), the aggregate basis for each block of SPX common stock will be allocated, to the greatest extent possible, between such block of SPX common stock and the Flowco common stock received in the distribution in respect of such block of SPX common stock, in proportion to their respective fair market values, and the holding period of the Flowco common stock received in the distribution in respect of such block of SPX common stock generally will include the holding period of such block of SPX common stock. If a U.S. Holder is not able to identify which particular shares of Flowco common stock are received in the distribution with respect to a particular block of SPX common stock, the U.S. Holder may designate the shares of Flowco common stock to be treated as received in the distribution in respect of a particular block of SPX common stock, provided that such designation is consistent with the terms of the distribution. U.S. Holders are urged to consult their own tax advisors regarding the application of these rules to their particular circumstances.

    Material U.S. Federal Income Tax Consequences if the Spin-Off is Taxable.

        As discussed above, SPX has not requested, and does not intend to request, a private letter ruling from the IRS regarding the qualification of the spin-off as a transaction that generally is tax-free to SPX and U.S. Holders of SPX common stock under Sections 355 and 368(a)(1)(D) of the Code, and there can be no assurance that the IRS will not assert that the distribution and/or certain related transactions are taxable. If the IRS were successful in taking this position, notwithstanding the opinion of Tax Counsel, the consequences described above would not apply and SPX, Flowco, and U.S. Holders of SPX common stock could be subject to significant U.S. federal income tax liabilities. In addition, certain events that may or may not be within the control of SPX or Flowco could cause the spin-off to fail to qualify as a transaction that generally is tax-free to SPX and U.S. Holders of SPX common stock, for U.S. federal income tax purposes, under Sections 355 and 368(a)(1)(D) of the Code. Depending on the circumstances, Flowco may be required to indemnify SPX for taxes (and certain related losses) resulting from the distribution.

        If the distribution fails to qualify as a transaction that generally is tax-free to SPX and U.S. Holders of SPX common stock, for U.S. federal income tax purposes, in general:

    pursuant to a joint election of SPX and Flowco under Section 336(e) of the Code, the SPX consolidated group would recognize taxable gain as if Flowco had sold all of its assets in a taxable sale in exchange for an amount equal to the fair market value of the Flowco common stock and the assumption of all of Flowco's liabilities, and Flowco would obtain a stepped-up basis in its assets;

    each U.S. Holder that receives Flowco common stock in the distribution would be subject to tax as if the U.S. Holder had received a distribution from SPX in an amount equal to the fair market value of Flowco common stock that was distributed to the U.S. Holder, which generally would be, without duplication and in the following order, (A) taxed as a dividend to the extent of the U.S. Holder's pro rata share of SPX's current and accumulated earnings and profits (including earnings and profits resulting from the spin-off), (B) treated as a non-taxable return of capital to the extent of the U.S. Holder's basis in the SPX common stock, and (C) treated as capital gain from the sale or exchange of SPX common stock.

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        In addition, even if the spin-off were otherwise to qualify under Sections 355 and 368(a)(1)(D) of the Code, it may be taxable to SPX (but not to U.S. Holders) under Section 355(e) of the Code, if the distribution were determined to be part of a plan (or series of related transactions) pursuant to which one or more persons acquired, directly or indirectly, stock representing a 50% or greater interest in SPX or Flowco. For this purpose, any acquisitions of SPX common stock or of Flowco common stock within the period beginning two years before the distribution and ending two years after the distribution are presumed to be part of such a plan, although such presumption may be rebutted, including through the use of certain safe harbors contained in U.S. Treasury Regulations.

    Information Reporting and Backup Withholding

        U.S. Treasury Regulations require certain shareholders that receive stock in a distribution to attach to their U.S. federal income tax return for the year in which the distribution occurs a detailed statement setting forth certain information relating to the tax-free nature of the distribution.

        In addition, payments of cash to a U.S. Holder in lieu of fractional shares of Flowco common stock in the distribution may be subject to information reporting and backup withholding (currently at a rate of 28 percent), unless the shareholder provides proof of an applicable exemption or a correct taxpayer identification number and otherwise complies with the requirements of the backup withholding rules. Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules may be refunded or credited against a U.S. Holder's U.S. federal income tax liability provided that the required information is timely furnished to the IRS.

        THE FOREGOING DISCUSSION IS A SUMMARY OF THE MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE DISTRIBUTION UNDER CURRENT LAW, IS FOR GENERAL INFORMATION PURPOSES ONLY, AND DOES NOT CONSTITUTE TAX ADVICE. THE FOREGOING DOES NOT PURPORT TO ADDRESS ALL U.S. FEDERAL INCOME TAX CONSEQUENCES OR TAX CONSEQUENCES THAT MAY ARISE UNDER THE TAX LAWS OF OTHER JURISDICTIONS OR THAT MAY APPLY TO PARTICULAR CATEGORIES OF SHAREHOLDERS. EACH SPX SHAREHOLDER SHOULD CONSULT ITS OWN TAX ADVISOR AS TO THE PARTICULAR TAX CONSEQUENCES OF THE DISTRIBUTION TO SUCH SHAREHOLDER, INCLUDING THE APPLICATION OF U.S. FEDERAL, STATE, LOCAL AND FOREIGN TAX LAWS, AND THE EFFECT OF POSSIBLE CHANGES IN TAX LAWS THAT MAY AFFECT THE TAX CONSEQUENCES DESCRIBED ABOVE.

Results of the Spin-Off

        After the spin-off, we will be an independent, publicly-traded company. Immediately following the spin-off, we expect to have approximately [·] record holders of shares of our common stock and approximately [·] shares of our common stock outstanding, based on the number of shareholders of record and outstanding shares of SPX common stock on [·], 2015. The figures assume no exercise of outstanding options and exclude any shares of SPX common stock held directly or indirectly by SPX. The actual number of shares to be distributed will be determined on the record date and will reflect any exercise of SPX options and repurchase by SPX of SPX shares between the date the SPX board of directors declares the dividend for the distribution and the record date for the distribution.

        For information about options to purchase shares of our common stock that will be outstanding after the distribution, see "—Treatment of Equity Awards" and "Certain Relationships and Related Party Transactions—Agreements with SPX Related to the Spin-Off—Employee Matters Agreement."

        Before the spin-off, we will enter into several agreements with SPX to effect the spin-off and provide a framework for our relationship with SPX after the spin-off. These agreements will govern the relationship between us and SPX after completion of the spin-off and provide for the allocation between us and SPX of SPX's assets, liabilities and obligations, including indemnification obligations.

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For a more detailed description of these agreements, see "Certain Relationships and Related Party Transactions—Agreements with SPX Related to the Spin-Off."

Trading Market for Our Common Stock

        There is no public market for our common stock, and an active trading market may not develop or may not be sustained. We anticipate that trading of our common stock will commence on a "when-issued" basis beginning on or shortly before the record date and continuing through the distribution date. When-issued trading refers to a sale or purchase made conditionally because the security has been authorized but not yet issued. When-issued trades generally settle within four trading days after the distribution date. If you own shares of SPX common stock at the close of business on the record date, you will be entitled to receive shares of our common stock distributed in the spin-off. You may trade this entitlement to receive shares of our common stock, without the shares of SPX common stock you own, on the when-issued market. On the first trading day following the distribution date, any when-issued trading of our common stock will end and "regular-way" trading will begin. We have applied for authorization to list Flowco common stock on the NYSE under the ticker symbol "FLOW." A condition to the distribution is the listing of our common stock on the NYSE or another national securities exchange approved by SPX. We will announce our when-issued trading symbol when and if it becomes available.

        We also anticipate that, beginning on or shortly before the record date and continuing up to and including the distribution date, there will be two markets in SPX common stock: a "regular-way" market and an "ex-distribution" market. Shares of SPX common stock that trade on the regular-way market will trade with an entitlement to shares of our common stock distributed in the distribution. Shares that trade on the ex-distribution market will trade without an entitlement to shares of our common stock distributed in the distribution. Therefore, if you sell shares of SPX common stock in the regular-way market up to and including the distribution date, you will be selling your right to receive shares of our common stock in the distribution. However, if you own shares of SPX common stock at the close of business on the record date and sell those shares on the ex-distribution market up to and including the distribution date, you will not be selling the right to receive shares of our common stock in connection with the spin-off and you will still receive such shares of our common stock.

        We cannot predict the prices at which our common stock may trade before the spin-off on a "when-issued" basis or after the spin-off. Those prices will be determined by the marketplace. Prices at which trading in our common stock occurs may fluctuate significantly. Trading prices for our common stock may be influenced by many factors, including anticipated or actual fluctuations in our operating results or those of other companies in our industry, investor perception of our company, market fluctuations and general economic conditions. In addition, the stock market in general has experienced extreme price and volume fluctuations that have affected the performance of many stocks and that have often been unrelated or disproportionate to the operating performance of these companies. These are just some of the factors that may adversely affect the market price of our common stock. See "Risk Factors—Risks Relating to Our Common Stock" for further discussion of risks relating to the trading prices of our common stock.

Treatment of Equity Awards

        SPX employees and directors with vested stock will be treated in the same manner as any other SPX shareholder.

        The treatment of stock options and unvested equity awards held by SPX employees and directors has not yet been determined.

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Debt Incurrence

        We expect that, in connection with the spin-off, we will incur indebtedness of approximately $[·], including $600.0 aggregate principal amount of the 2017 Notes, which we will become obligated to repay. SPX's board of directors has determined that following the spin-off we will be well capitalized with sufficient financial flexibility to pursue future growth opportunities.

Conditions to the Spin-Off

        We expect that the spin-off will be effective as of 11:59 p.m., Eastern time, on [·], 2015, the distribution date, provided that the following conditions shall have been either satisfied or waived by SPX:

    Flowco's registration statement on Form 10, of which this information statement is a part, shall have become effective under the Exchange Act, with no stop order in effect with respect thereto, and this information statement shall have been mailed to the shareholders of SPX;

    Flowco common stock shall have been approved for listing on the NYSE, subject to official notice of distribution;

    SPX shall have received from Tax Counsel an opinion, in form and substance satisfactory to SPX (in its sole discretion), regarding the qualification of the spin-off as a transaction that generally is tax-free to SPX and SPX's shareholders, for U.S. federal income tax purposes, under Sections 355 and 368(a)(1)(D) of the Code;

    All permits, registrations and consents required under state and foreign securities or blue sky laws in connection with the distribution shall have been obtained and be in full force and effect;

    No order or other legal restraint preventing the distribution or any of the related transactions shall be in effect, and no other event shall have occurred or failed to occur that prevents the distribution or any of the related transactions;

    All governmental approvals necessary to complete the distribution shall have been obtained and be in effect;

    The financing arrangements contemplated to be entered into by SPX and Flowco in connection with the separation shall have been executed and delivered and the proceeds of those financing shall have been (or substantially concurrently will be) received by Flowco and SPX, as applicable;

    The board of directors of SPX shall have received an opinion of Houlihan Lokey Financial Advisors, Inc. (or other solvency opinion provider of national standing) in form and substance satisfactory to the board of directors of SPX with respect to the solvency, capital adequacy and sufficiency of surplus of each of SPX and Flowco after giving effect to the separation and distribution; and

    No events or developments shall have occurred or exist that, in the judgment of the board of directors of SPX, in its sole and absolute discretion, make it inadvisable to effect the distribution or the related transaction, or would result in the distribution or the related transactions not being in the best interest of SPX or its shareholders.

        The fulfillment of the foregoing conditions will not create any obligation on SPX's part to effect the spin-off. Except as described in the foregoing conditions, we are not aware of any material federal or state regulatory requirements that must be complied with or any material approvals that must be obtained. SPX has the right not to complete the spin-off if, at any time prior to the distribution, the board of directors of SPX determines, in its sole discretion, that the spin-off is not in the best interests of SPX or its shareholders or that it is not advisable for us to separate from SPX.

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Reason for Furnishing this Information Statement

        We are furnishing this information statement to you, as a SPX shareholder entitled to receive shares of our common stock in the spin-off, for the sole purpose of providing you with information about us. This information statement is not, and you should not consider it, an inducement or encouragement to buy, hold or sell any of our securities. We believe that the information in this information statement is accurate as of the date set forth on the cover. Changes may occur after that date and neither SPX nor we undertake any obligation to update the information except in the normal course of our respective public disclosure obligations.

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DIVIDEND POLICY

        Our Board will establish our dividend policy based on our financial condition, results of operations and capital requirements, as well as applicable law, regulatory constraints, industry practice and other business considerations that our Board considers relevant. We anticipate that the terms of the debt agreements that we expect to enter into in connection with the spin-off will contain restrictions on our ability to pay dividends. The terms of agreements governing debt that we may incur in the future may also limit or prohibit dividend payments. Accordingly, we cannot assure you that we will either pay dividends in the future or continue to pay any dividend that we may commence in the future.

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CAPITALIZATION

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

        The following table sets forth our cash and equivalents and our capitalization as of December 31, 2014 on a historical and pro forma basis to give effect to the spin-off and transactions related to the spin-off (the "Transactions"). The information below is not necessarily indicative of what Flowco's capitalization would have been had the Transactions been completed as of December 31, 2014. This table should be read together with "Selected Historical Combined Financial Data," "Unaudited Pro Forma Combined Financial Statements," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the audited historical combined financial statements and related notes thereto included elsewhere in this information statement.

 
  As of December 31, 2014  
 
  Historical   Pro Forma
(unaudited)
 

Cash and equivalents

  $ 216.6   $                *

Indebtedness:

             

Short-term debt:

             

Other indebtedness

    6.0                    *

Current maturities of capital lease obligations

    1.7                    *

Long-term debt:

             

[·]

                       *

Capital lease obligations

    10.3                    *

Total indebtedness

    18.0                    *

Equity:

             

Common stock, par value $0.01 per share, [·] shares authorized, issued and outstanding on a pro forma basis

                       *

Paid-in capital

                       *

Parent company investment

    2,144.6                    *

Accumulated other comprehensive loss

    (219.2 )                  *

Total parent company equity

    1,925.4                    *

Noncontrolling interests

    13.4                    *

Total equity

    1,938.8                    *

Total capitalization

  $ 1,956.8   $                *

*
The completed capitalization table and related notes thereto, when finalized, will be included in an amendment to this information statement.

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SELECTED HISTORICAL COMBINED FINANCIAL DATA

        The following table presents our selected historical combined financial data as of and for each of the years in the five-year period ended December 31, 2014. We derived the selected historical combined financial data as of December 31, 2014 and 2013, and for each of the years in the three-year period ended December 31, 2014, from our audited combined financial statements included elsewhere in this information statement. We derived the selected historical combined financial data as of December 31, 2012, and as of and for the years ended December 31, 2011 and 2010, from our unaudited combined financial statements that are not included in this information statement. In management's opinion, the unaudited combined financial statements have been prepared on the same basis as the audited combined financial statements and included all adjustments, consisting only of ordinary recurring adjustments, necessary for a fair presentation of the information for the periods presented.

        Our historical combined financial statements include certain expenses of SPX that have been charged to us for certain corporate centralized functions and programs, including information technology, payroll services, shared services for accounting, supply chain and manufacturing operations, and business and health insurance coverage. In addition, for purposes of preparing the combined financial statements, we have allocated a portion of SPX's total corporate costs to such financial statements, with the allocations related primarily to (i) the support provided by SPX's executive management, finance and accounting, legal, risk management, and human resource functions and (ii) costs associated with SPX's Charlotte, NC corporate headquarters and its Asia Pacific corporate center in Shanghai, China. These costs may not be representative of the future costs we will incur as an independent, publicly-traded company. In addition, our historical financial information does not reflect changes that we expect to experience in the future as a result of our spin-off from SPX, including changes in financing, operations, cost structure and personnel needs of our business. Our combined financial statements also do not reflect the allocation of certain assets and liabilities between SPX and us as reflected under "Unaudited Pro Forma Combined Financial Statements" included elsewhere in this information statement. Consequently, the financial information included here may not necessarily reflect our financial position, results of operations and cash flows in the future or what our financial condition, results of operations and cash flows would have been had we been an independent, publicly-traded company during the periods presented.

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        The selected historical combined financial data presented below should be read in conjunction with the combined financial statements and accompanying notes, "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the "Unaudited Pro Forma Combined Financial Statements" and accompanying notes included elsewhere in this information statement.

 
  As of and for the year ended December 31,  
 
  2014   2013   2012   2011   2010  

Summary of Operations

                               

Revenues(1)

  $ 2,769.6   $ 2,804.8   $ 2,846.3   $ 2,197.2   $ 1,788.4  

Operating income(2)(3)

    254.6     231.2     188.9     185.2     154.2  

Other income (expense), net(4)

    2.2     (5.2 )   (3.4 )   (36.8 )   (3.3 )

Interest expense, net(5)

    (23.4 )   (34.7 )   (56.0 )   (51.3 )   (32.3 )

Income before income taxes

    233.4     191.3     129.5     97.1     118.6  

Income tax provision(6)

    (97.5 )   (58.8 )   (0.6 )   (37.6 )   (30.2 )

Net income

    135.9     132.5     128.9     59.5     88.4  

Less: Net income attributable to noncontrolling interests

    1.4     1.5     2.0     1.2     1.4  

Net income attributable to Flowco

  $ 134.5   $ 131.0   $ 126.9   $ 58.3   $ 87.0  

Other financial data:

                               

Total assets(7)

  $ 4,028.1   $ 4,490.7   $ 3,918.4   $ 3,614.2   $ 2,384.2  

Total debt(8)

    1,021.1     1,006.4     805.8     819.1     724.8  

Other long-term obligations

    342.8     382.7     402.3     345.5     210.9  

Parent company equity

    1,925.4     2,238.9     1,832.9     1,621.6     896.3  

Noncontrolling interests

    13.4     11.6     9.0     7.4     7.6  

Capital expenditures

    40.7     23.4     26.3     22.6     29.2  

Depreciation and amortization

    65.8     69.9     67.3     45.0     39.8  

(1)
On December 22, 2011, we completed the acquisition of Clyde Union (Holdings) S.a.r.l. ("Clyde Union"). Revenues for Clyde Union for the period from January 1, 2011 to the date of acquisition and for 2010, neither of which are included above, totaled $434.2 and $403.4, respectively.

(2)
During 2014, 2013, 2012, 2011 and 2010, we recognized expense related to changes in the fair value of plan assets, actuarial gains/losses, and settlement gains/losses of $25.8, $2.0, $25.4, $0.5 and $2.0, respectively, associated with our and SPX's pension and postretirement benefit plans.

(3)
During 2014, we recorded impairment charges of $7.3 and $4.4 related to the trademarks of certain businesses within our Power and Energy and Industrial reportable segments, respectively.

During 2013, we recorded impairment charges of $3.4 and $1.3 related to the trademarks of certain businesses within our Power and Energy and Food and Beverage reportable segments, respectively.

During 2012, we recorded an impairment charge of $2.0 related to the trademarks of a business within our Power and Energy reportable segment.

See Note 8 to our combined financial statements for further discussion of impairment charges associated with intangible assets.

(4)
In 2011, we recorded a charge of $34.6 related to a foreign currency forward contract that was entered into to hedge the purchase price of the Clyde Union acquisition.

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(5)
During 2014, 2013, 2012, 2011 and 2010, we recognized interest expense, net, of $25.8, $36.3, $55.6, $52.4 and $32.3 on related party notes receivable and payable in which SPX, or its affiliates that are not part of the spin-off transaction, are the counterparties.

(6)
During 2014, the income tax provision was impacted by a charge of $18.7 related to increases in valuation allowances recorded against certain foreign deferred income tax assets.

During 2012, the income tax provision was impacted by income tax benefits of $18.3 associated with various audit closures and settlements, statute expirations, and other changes in the accrual for uncertain tax positions, with the most notable being the closure of the German tax examination for the years 2005 through 2009.

(7)
Included in total assets as of December 31, 2014, 2013, 2012, 2011 and 2010 are related party notes receivable of $707.1, $763.4, $5.6, $12.1 and $12.2, respectively.

(8)
Included in total debt as of December 31, 2014, 2013, 2012, 2011 and 2010 are related party notes payable of $1,003.1, $988.4, $775.8, $758.0 and $713.1, respectively.

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UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS

        The unaudited pro forma combined financial statements consist of an unaudited pro forma combined statement of operations for the year ended December 31, 2014 and an unaudited pro forma combined balance sheet as of December 31, 2014. The unaudited pro forma combined financial statements reported below should be read in conjunction with the information under "Selected Historical Combined Financial Data," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our audited historical combined financial statements and related notes thereto included elsewhere in this information statement. The unaudited pro forma combined statement of operations has been adjusted to give effect to the Pro Forma Transactions (as defined below) as if the Pro Forma Transactions had occurred or became effective as of January 1, 2014. The unaudited pro forma combined balance sheet has been adjusted to give effect to the Pro Forma Transactions as though the Pro Forma Transactions had occurred as of December 31, 2014.

        The unaudited pro forma combined financial statements included in this information statement have been derived from the audited historical combined financial statements included elsewhere in this information statement and do not purport to represent what our financial position and results of operations would have been had the distribution and related transactions summarized under "Certain Relationships and Related Party Transactions" occurred on the dates indicated or to project our financial performance for any future period. In addition, the unaudited pro forma combined financial statements are provided for illustrative and informational purposes only and are not necessarily indicative of our future results of operations or financial condition as a separate, stand-alone public company. The pro forma adjustments are based upon available information and certain assumptions that we believe are reasonable, but actual results may differ from the pro forma adjustments. These adjustments are subject to change based on the finalization of the distribution agreement with SPX and the other agreements described under "Certain Relationships and Related Party Transactions."

        SPX did not account for us as, and we were not operated as, a separate, stand-alone public company for the periods presented. Our unaudited pro forma combined financial statements have been prepared to reflect adjustments to our audited historical combined financial statements that are (1) directly attributable to the Pro Forma Transactions; (2) factually supportable; and (3) with respect to the unaudited pro forma combined statement of operations, expected to have a continuing impact on our results of operations. The unaudited pro forma combined financial statements have been adjusted to give effect to the following (the "Pro Forma Transactions"):

    the transfer of certain of our assets and liabilities that will be retained or forgiven by SPX,

    the distribution at a [·]-to-[·] ratio, by means of a tax-free distribution, to SPX shareholders and other adjustments resulting from the distribution,

    our anticipated capital structure, including debt anticipated to be incurred,

    the resulting elimination of SPX's net investment in us, and

    the impact of, and transactions contemplated by the Distribution Agreement, Transition Services Agreement, Tax Matters Agreement, Employee Matters Agreement, Trademark License Agreement, Lease Agreements and Manufacturing and Supply Agreements between us and SPX summarized under "Certain Relationships and Related Party Transactions."

Transition Services Agreement

        We expect to enter into a Transition Services Agreement with SPX prior to the distribution pursuant to which we and SPX and our and their respective affiliates will provide to each other for an agreed-upon charge, on an interim, transitional basis, certain services for a limited time. See "Certain Relationships and Related Party Transactions."

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Corporate Allocations and Stand-Alone Public Company Costs

        SPX currently provides certain corporate services to us, and costs associated with these functions have been allocated to us. These expense allocations include the cost of corporate functions and/or resources provided by SPX including, but not limited to, executive management, finance and accounting, legal and human resources support, and the cost of our Charlotte, NC corporate headquarters and our Asia Pacific center in Shanghai, China, and include the related benefit costs associated with such functions, such as pension and postretirement benefits and stock-based compensation. These costs were allocated to us based on direct usage when identifiable or, when not directly identifiable, on the basis of our proportional revenues to SPX's consolidated revenues from continuing operations. The total amount of these allocations from SPX was approximately $109.0 for the year ended December 31, 2014. These cost allocations are primarily included in selling, general and administrative expenses in the combined statements of operations as described in Note 1 to our audited historical combined financial statements. Management considers the basis on which the expenses have been allocated to reasonably reflect the utilization of services provided to or the benefit received by us during the periods presented. Following the spin-off, we expect SPX to continue to provide certain of these services related to these functions on a transitional basis for a fee pursuant to the Transition Services Agreements described above. See "Certain Relationships and Related Party Transactions."

        Upon the distribution, we will assume responsibility for all of our costs of operating as a stand-alone public company, including the costs of services currently provided by SPX. As a stand-alone public company, we do not expect our recurring costs to be materially different than the expenses historically allocated to us from SPX.

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FLOWCO

Unaudited Pro Forma Condensed Combined Statement of Operations

Year Ended December 31, 2014

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

 
  Historical   Pro Forma
Adjustments
  Pro Forma  

Revenues

  $ 2,769.6   $   * $   *

Costs and expenses:

                   

Cost of products sold

    1,833.1       *     *

Selling, general and administrative

    629.9       *     *

Intangible amortization

    26.1       *     *

Impairment of intangible assets

    11.7       *     *

Special charges, net

    14.2       *     *

Operating income

    254.6       *     *

Other income (expense), net

    2.2       *     *

Related party interest expense, net

    (25.8 )     *     *

Other interest income (expense), net

    2.4       *     *

Income before income taxes

    233.4       *     *

Income tax provision

    (97.5 )     *     *

Net income

    135.9       *     *

Less: Net income attributable to nonconcontrolling interests

    1.4       *     *

Net income attributable to Flowco

  $ 134.5   $   * $   *

Pro forma net income per share of common stock:

                   

Basic

              $   *

Diluted

                  *

Weighted average number of common shares outstanding:

                   

Basic

              $   *

Diluted

                  *

See accompanying notes to unaudited pro forma combined financial statements.*


*
When finalized, the unaudited pro forma combined financial statements, including the related notes thereto, will be included in an amendment to this information statement.

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FLOWCO

Unaudited Pro Forma Condensed Combined Balance Sheet

At December 31, 2014

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

 
  Historical   Pro Forma
Adjustments
  Pro Forma  

ASSETS:

                   

Current assets:

                   

Cash and equivalents

  $ 216.6   $   * $   *

Accounts receivable, net

    591.9       *     *

Related party accounts receivable

    16.6       *     *

Inventories, net

    330.0       *     *

Other current assets

    36.4       *     *

Deferred income taxes

    52.6       *     *

Total current assets

    1,244.1       *     *

Property, plant and equipment:

                   

Land

    30.8       *     *

Buildings and leasehold improvements

    158.6       *     *

Machinery and equipment

    350.0       *     *

    539.4       *     *

Accumulated depreciation

    (267.0 )     *     *

Property, plant and equipment, net

    272.4       *     *

Goodwill

    1,081.0       *     *

Intangibles, net

    659.3       *     *

Other assets

    64.2       *     *

Related party notes receivable

    707.1       *     *

TOTAL ASSETS

  $ 4,028.1   $   * $   *

LIABILITIES AND EQUITY:

                   

Current liabilities:

                   

Accounts payable

  $ 252.0   $   * $   *

Related party accounts payable

    11.9       *     *

Accrued expenses

    426.1       *     *

Income taxes payable

    35.4       *     *

Short-term debt

    6.0       *     *

Current maturities of long-term debt

    1.7       *     *

Current maturities of related party notes payable

    36.8       *     *

Total current liabilities

    769.9       *     *

Long-term debt

    10.3       *     *

Related party notes payable

    966.3       *     *

Deferred and other income taxes

    234.1       *     *

Other long-term liabilities

    108.7       *     *

Total long-term liabilities

    1,319.4       *     *

EQUITY:

                   

Common stock, par value $0.01 per share, [*] shares authorized, issued and outstanding on a pro forma basis

          *     *

Paid-in capital

          *     *

Parent company investment

    2,144.6       *     *

Accumulated other comprehensive loss

    (219.2 )     *     *

Total parent company equity

    1,925.4       *     *

Noncontrolling interests

    13.4       *     *

Total equity

    1,938.8       *     *

TOTAL LIABILITIES AND EQUITY

  $ 4,028.1   $   * $   *

See accompanying notes to unaudited pro forma combined financial statements.*


*
When finalized, the unaudited pro forma combined financial statements, including the related notes thereto, will be included in an amendment to this information statement.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

(All currency amounts are in millions)

        The following should be read in conjunction with the other sections of this information statement, including our audited combined financial statements and the related notes, "Business" and our "Unaudited Pro Forma Combined Financial Statements" and related notes. The following discussion contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results could differ materially from the results contemplated by these forward-looking statements due to a number of factors including, but not limited to, those discussed under headings "Risk Factors" and "Special Note About Forward-Looking Statements."

        Our combined financial statements, which we discuss below, reflect our historical financial condition, results of operations and cash flows. The financial information discussed below and included in this information statement, however, may not necessarily reflect what our financial condition, results of operations or cash flows would have been had we been operated as a separate, independent entity during the periods presented, or what our financial condition, results of operations and cash flows may be in the future.


Overview

    Spin-off Transaction

        On October 29, 2014, SPX announced that its Board of Directors had unanimously approved a plan to spin off its Flow business, comprised of its Flow Technology reportable segment, its Hydraulic Technologies business, various related legal entities, and certain of its corporate assets and liabilities, and separate into two distinct, publicly-traded companies. Under the plan, SPX would execute a spin-off of the business by way of a pro-rata distribution of common stock to SPX's shareholders of record as of the spin-off transaction record date.

    Our Business

        We are a global supplier of highly specialized, engineered solutions with operations in over 35 countries and sales in over 150 countries around the world. Our innovative solutions play a critical role in helping meet the rising global demand in the end markets we serve. Our total revenue in 2014 was $2.8 billion, with approximately 30% from sales into emerging markets.

        We serve the food and beverage, power and energy and industrial markets. Our product portfolio of pumps, valves, mixers, filters, air dryers, hydraulic tools, homogenizers, separators and heat exchangers, along with the related aftermarket parts and services, supports global industries, including food and beverage, oil and gas, power generation (including nuclear and conventional), chemical processing, compressed air and mining. From an end market perspective, in 2014, 35.0% of our revenues were from sales into the food and beverage end markets, 34.7% were from sales into the power and energy end markets, and 30.3% were from sales into the industrial end markets. Our core strengths include product breadth, global capabilities and the ability to create custom-engineered solutions for diverse flow processes. Over the past several years, we have strategically expanded our scale, relevance to customers, and global capabilities in these markets. We believe there are attractive organic and acquisition opportunities to continue to expand our business.

        We focus on a number of operating initiatives, including innovation and new product development, continuous improvement driven by lean methodologies, supply chain management, expansion in emerging markets, information technology infrastructure improvement, and organizational and talent development. These initiatives are designed to, among other things, capture synergies within our businesses to ultimately drive revenue, profit margin and cash flow growth. We believe our businesses

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are well-positioned for long-term growth based on our operating initiatives, the potential within the current markets served and the potential for expansion into additional markets.

        Our business is organized into three reportable segments—Food and Beverage, Power and Energy and Industrial. The following summary describes the products and services offered by each of our reportable segments:

    Food and Beverage:  The Food and Beverage reportable segment operates in a regulated, global industry with customers who demand highly engineered, turn-key solutions. Key demand drivers include dairy consumption, emerging market capacity expansion, sustainability and productivity initiatives, customer product innovation and food safety. Key products for the segment include mixing, drying, evaporation and separation systems and components, heat exchangers, and reciprocating and centrifugal pump technologies. Our core brands include Anhydro, APV, Bran+Luebbe, e&e, Gerstenberg Schroeder, LIGHTNIN, Seital and Waukesha Cherry-Burrell. The segment's primary competitors are Alfa Laval AB, Fristam Pumps, GEA Group AG, Krones AG, Südmo, Tetra Pak, and various regional companies.

    Power and Energy:  The Power and Energy reportable segment primarily serves customers in the oil and gas industry and, to a lesser extent, the nuclear and other conventional power industries. A large portion of the segment's revenues are concentrated on oil extraction, production and transportation at existing wells, and pipeline applications. The underlying drivers of this segment include increasing demand for power and energy driven by population growth and an expanding middle class. Key products for the segment include pumps, valves and the related accessories, while the core brands include APV, Bran+Luebbe, ClydeUnion Pumps, Copes-Vulcan, Dollinger Filtration, LIGHTNIN, M&J Valve, Plenty, and Vokes. The segment's primary competitors are Cameron International Corporation, Ebara Fluid Handling, Flowserve Corporation, ITT Goulds Pumps, KSB AG, and Sulzer Ltd.

    Industrial:  The Industrial reportable segment primarily serves customers in the chemical, air treatment, mining, pharmaceutical, marine, shipbuilding, infrastructure construction, automotive and water treatment industries. Key demand drivers of this segment are tied to macroeconomic conditions and growth in the respective end markets we serve. Key products for the segment are air dryers, filtration equipment, mixers, pumps, hydraulic technologies and heat exchangers. Core brands include Airpel, APV, Delair, Deltech, Hankison, Jemaco, Johnson Pump, LIGHTNIN, Power Team, and Stone. The segment's primary competitors are Alfa Laval AB, Chemineer Inc., EKATO, Actuant, Enerpac, IDEX Viking Pump, KSB AG, Parker Domnick Hunter and various regional companies.

    Summary of Operating Results

        The following summary is intended to provide a few highlights of the discussion and analysis that follows:

    Revenues

    In 2014, decreased 1.3% to $2,769.6 primarily as a result of lower sales of power and energy pumps, partially offset by increased sales of food and beverage systems.

    In 2013, decreased 1.5% to $2,804.8 primarily as a result of lower sales of power and energy pumps and industrial heat exchangers, partially offset by an increase in sales of valves, closures and other components into the oil and gas end market, as well as increased sales of systems and components into the food and beverage end market.

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    Income before Income Taxes

    In 2014, increased $42.1, or 22.0%, to $233.4 primarily as a result of the improvement in income for our reportable segments, partially offset by an increase in pension and postretirement expense.

    In 2013, increased $61.8, or 47.7%, to $191.3 primarily as a result of the improvement in income for our reportable segments, and a reduction in pension and postretirement expense.

    Cash Flows from Operations

    In 2014, increased to $302.6 (from $263.3 in 2013) primarily as a result of the improved profitability noted above.

    In 2013, increased to $263.3 (from $150.6 in 2012) primarily as a result of reductions in working capital at our Clyde Union business and, to a lesser extent, the improved profitability noted above.


Results of Operations

        Seasonality and Competition—The financial results of our businesses closely follow changes in the industries and end markets they serve. In addition, certain businesses have seasonal fluctuations. Demand in the oil and gas aftermarket is typically stronger in the second half of the year. Demand for food and beverage systems and related services is highly correlated to timing on large construction contracts, which may cause significant fluctuations in our financial performance from period to period. 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 service, product performance, technical innovation and price. These methods vary with the type of product sold. We believe we compete effectively on the basis of each of these factors. See "BusinessReportable 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. We believe 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"), should not be considered a substitute for net revenue growth (decline) as determined in accordance with GAAP and may not be comparable to similarly titled measures reported by other companies.

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        The following table provides selected financial information for the years ended December 31, 2014, 2013 and 2012, including the reconciliation of organic revenue decline to net revenue decline:

 
  Year ended December 31,    
   
 
 
  2014 vs.
2013%
  2013 vs.
2012%
 
 
  2014   2013   2012  

Revenues

  $ 2,769.6   $ 2,804.8   $ 2,846.3     (1.3 )   (1.5 )

Gross profit

    936.5     898.0     875.7     4.3     2.5  

% of revenues

    33.8 %   32.0 %   30.8 %            

Selling, general and administrative expense

    629.9     618.9     643.0     1.8     (3.7 )

% of revenues

    22.7 %   22.1 %   22.6 %            

Intangible amortization

    26.1     27.2     28.4     (4.0 )   (4.2 )

Impairment of intangible assets

    11.7     4.7     2.0     148.9     135.0  

Special charges, net

    14.2     16.0     13.4     (11.3 )   19.4  

Other income (expense), net

    2.2     (5.2 )   (3.4 )   *     52.9  

Interest expense, net

    (23.4 )   (34.7 )   (56.0 )   (32.6 )   (38.0 )

Income before income taxes

   
233.4
   
191.3
   
129.5
   
22.0
   
47.7
 

Income tax provision

   
(97.5

)
 
(58.8

)
 
(0.6

)
 
65.8
   
*
 

Net income

    135.9     132.5     128.9     2.6     2.8  

Components of combined revenue decline:

                               

Organic decline

                      (1.1 )   (1.4 )

Foreign currency

                      (0.2 )   (0.2 )

Acquisition

                          0.1  

Net revenue decline

                      (1.3 )   (1.5 )

        Revenues—For 2014, the decrease in revenues, compared to 2013, was due to a decline in organic revenue and, to a lesser extent, the strengthening of the U.S. dollar during the period against certain foreign currencies. The decline in organic revenue was due primarily to lower sales of power and energy pumps, partially offset by increased sales of food and beverage systems. See "—Results of Reportable Segments" for additional details.

        For 2013, the decrease in revenues, compared to 2012, was due primarily to a decline in organic revenue and, to a lesser extent, the strengthening of the U.S. dollar during the period against certain foreign currencies. The decline in organic revenue was due primarily to lower sales of power and energy pumps and industrial heat exchangers, partially offset by an increase in sales of valves, closures and other components into the oil and gas end market, as well as increased sales of systems and components into the food and beverage end market. See "—Results of Reportable Segments" for additional details.

        Gross Profit—The increase in gross profit and gross profit as a percentage of revenue during 2014, compared to 2013, was primarily attributable to our Power and Energy reportable segment and was the result of improved operational execution and favorable sales mix, as well as cost reductions associated with restructuring initiatives implemented during the latter half of 2013 and the first half of 2014.

        The increase in gross profit and gross profit as a percentage of revenue during 2013, compared to 2012, was primarily the result of improved operational execution and favorable sales mix, primarily within our Power and Energy and Industrial reportable segments. In addition, gross profit for 2012 included incremental costs of $8.1 associated with the impact of the excess fair value (over historical cost) of inventory acquired in the December 2011 acquisition of Clyde Union that was subsequently sold in the first half of 2012.

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        Selling, General and Administrative ("SG&A") Expense—SG&A expense includes allocations of general corporate expenses from SPX, including pension and postretirement expense and stock-based compensation. See Note 1 to our combined financial statements for further details on our methodology for allocating corporate-related costs. For 2014, the increase in SG&A expense, compared to 2013, was due primarily to an increase in pension and postretirement expense of $24.2, partially offset by cost reductions from restructuring actions completed in 2013 and 2014. The increase in pension and postretirement expense resulted primarily from our allocated share of the increase in actuarial losses recorded by SPX on its pension and postretirement plans during 2014. These actuarial losses were due primarily to reductions in discount rates and changes in mortality assumptions used to measure SPX's pension and postretirement obligations, as well as settlement losses associated with certain of SPX's plans.

        For 2013, the decrease in SG&A expense, compared to 2012, was due primarily to a decrease in pension and postretirement expense of $26.5. During 2013, actuarial losses on SPX's pension and postretirement plans declined, resulting in a decrease of our allocated share of such actuarial losses.

        Intangible Amortization—For 2014, the decrease in intangible amortization, compared to 2013, was due primarily to the impact of foreign currency translation.

        For 2013, the decrease in intangible amortization, compared to 2012, was due primarily to certain intangible assets becoming fully amortized during 2012.

        Impairment of Intangible Assets—During 2014, we recorded impairment charges of $7.3 and $4.4 related to the trademarks of certain businesses within our Power and Energy and Industrial reportable segments, respectively.

        During 2013, we recorded impairment charges of $3.4 and $1.3 related to the trademarks of certain businesses within our Power and Energy and Food and Beverage reportable segments, respectively.

        During 2012, we recorded an impairment charge of $2.0 related to the trademarks of a business within our Power and Energy reportable segment.

        See Note 8 to our combined financial statements for further discussion of impairment charges.

        Special Charges, Net—Special charges, net, related primarily to restructuring initiatives to consolidate manufacturing, distribution, sales and administrative facilities, reduce workforce, and rationalize certain product lines, as well as asset impairment charges. See Note 6 to our combined financial statements for the details of actions taken in 2014, 2013 and 2012. The components of special charges, net, were as follows:

 
  Year ended December 31,  
 
  2014   2013   2012  

Employee termination costs

  $ 11.6   $ 13.5   $ 15.2  

Facility consolidation costs

    0.6     1.0     1.8  

Other cash costs (recoveries), net

    0.5     (0.2 )   (4.5 )

Non-cash asset write-downs

    1.5     1.7     0.9  

Total

  $ 14.2   $ 16.0   $ 13.4  

        Other Income (Expense), Net—Other income, net, for 2014 was composed primarily of investment-related earnings of $6.0 and gains on foreign exchange ("FX") embedded derivatives of $2.6, partially offset by (i) foreign currency transaction losses of $2.8 and (ii) losses on FX forward contracts of $2.4. The $6.0 of investment-related earnings represented unrealized gains on our investment in equity securities. See Note 16 to our combined financial statements for additional details.

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        Other expense, net, for 2013 was composed primarily of foreign currency transaction losses of $6.6 and losses on FX embedded derivatives of $0.4, partially offset by gains on FX forward contracts of $1.2.

        Other expense, net, for 2012 was composed primarily of foreign currency transaction losses of $8.5, partially offset by gains on FX embedded derivatives of $1.1, gains on FX forward contracts of $0.9, and investment-related earnings of $0.8.

        Interest Expense, Net—Interest expense, net, comprised interest expense on (i) capital lease obligations, (ii) miscellaneous lines of credit, and (iii) related party notes payable, partially offset by interest income on (i) related party notes receivable and (ii) cash and equivalents. See Notes 11 and 17 to our combined financial statements for additional details on our third-party debt and related party notes, respectively.

        The decrease in interest expense, net, during 2014, compared to 2013, was due to an increase of $22.3 in interest income associated with related party notes receivable, partially offset by an increase of $11.8 in interest expense associated with related party notes payable.

        The decrease in interest expense, net, during 2013, compared to 2012, was due to an increase of $24.5 in interest income associated with related party notes receivable, partially offset by an increase of $5.2 in interest expense associated with related party notes payable.

        The above increases in interest income associated with related party notes receivable primarily were due to advances we made to SPX of $743.3 during the second and fourth quarters of 2013, as during the first quarter of 2013 and throughout 2012 related party notes receivable were relatively insignificant. The above increases in interest expense associated with related party notes payable were primarily due to net borrowings from SPX during 2013 of $142.3. During 2014, there were no borrowings from SPX under related party notes payable and net repayments of related party notes payable were only $6.7.

        Income Taxes—During 2014, we recorded an income tax provision of $97.5 on $233.4 of income before income taxes, resulting in an effective tax rate of 41.8%. The effective tax rate for 2014 was impacted by (i) an income tax charge of $18.7 related to increases in valuation allowances recorded against certain foreign deferred income tax assets and (ii) an income tax charge of $18.6 related to the repatriation of certain earnings of our non-U.S. subsidiaries, partially offset by $3.8 of income tax benefits related to various audit settlements and statute expirations.

        During 2013, we recorded an income tax provision of $58.8 on $191.3 of income before income taxes, resulting in an effective tax rate of 30.7%. The effective tax rate for 2013 was impacted by an income tax charge of $3.9 related to net increases in valuation allowances recorded against certain foreign deferred income tax assets, partially offset by $2.0 of income tax benefits related to various audit settlements and statute expirations and $0.7 of income tax benefits associated with the Research and Experimentation Credit generated in 2012.

        During 2012, we recorded an income tax provision of $0.6 on $129.5 of income before income taxes, resulting in an effective tax rate of 0.5%. The effective tax rate for 2012 was impacted by income tax benefits of $18.3 associated with various audit closures and settlements, statute expirations, and other changes in the accrual for uncertain tax positions, with the most notable being the closure of the German tax examination for the years 2005 through 2009.


Results of Reportable Segments

        The following information should be read in conjunction with our combined financial statements and related notes.

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

Food and Beverage

 
  Year ended December 31,    
   
 
 
  2014 vs.
2013%
  2013 vs.
2012%
 
 
  2014   2013   2012  

Revenues

  $ 968.9   $ 970.0   $ 946.5     (0.1 )   2.5  

Income

    99.3     90.4     91.7     9.8     (1.4 )

% of revenues

    10.2 %   9.3 %   9.7 %            

Components of revenue growth (decline):

                               

Organic growth

                      1.0     1.7  

Foreign currency

                      (1.1 )   0.4  

Acquisition

                          0.4  

Net revenue growth (decline)

                      (0.1 )   2.5  

        Revenues—For 2014, the decrease in revenues, compared to 2013, was due to a strengthening of the U.S. dollar during the period against various foreign currencies, generally offset by an increase in organic revenue. The increase in organic revenue was due primarily to higher sales of systems and components in Europe.

        For 2013, the increase in revenues, compared to 2012, was due primarily to an increase in organic revenue and, to a lesser extent, both a weakening U.S. dollar during the period against the Euro and the impact of the acquisition of Seital S.r.l. in March 2012. The increase in organic revenue was due primarily to higher sales of systems in Europe and South America.

        Income—For 2014, income and margin increased, compared to 2013, primarily as a result of cost reductions associated with restructuring initiatives at various locations in Europe and, to a lesser extent, improved operational execution and a more favorable sales mix within the segment's European operations.

        For 2013, income and margin decreased, compared to 2012, due to execution challenges on certain large system projects during 2013 and an increase in operating expenses during the year.

        Backlog—The segment had backlog of $485.1 and $549.1 as of December 31, 2014 and 2013, respectively. Approximately 88% of the segment's backlog as of December 31, 2014 is expected to be recognized as revenue during 2015.

Power and Energy

 
  Year ended December 31,    
   
 
 
  2014 vs.
2013%
  2013 vs.
2012%
 
 
  2014   2013   2012  

Revenues

  $ 961.6   $ 997.5   $ 1,011.4     (3.6 )   (1.4 )

Income

    168.7     127.4     96.7     32.4     31.7  

% of revenues

    17.5 %   12.8 %   9.6 %            

Components of revenue decline:

                               

Organic decline

                      (5.0 )   (1.0 )

Foreign currency

                      1.4     (0.4 )

Net revenue decline

                      (3.6 )   (1.4 )

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        Revenues—For 2014, the decrease in revenues, compared to 2013, was due to a decline in organic revenue, partially offset by the weakening of the U.S. dollar during the period against the British Pound ("GBP"). The decline in organic revenue was due primarily to lower sales of pumps, as the segment entered 2014 with a lower backlog (as compared to 2013) which we believe resulted from our more selective approach to large orders.

        For 2013, the decrease in revenues, compared to 2012, was due to an organic revenue decline and the strengthening of the U.S. dollar during the period against various foreign currencies. The decline in organic revenue was due primarily to lower sales of pumps, partially offset by an increase in sales of valves, closures and other components.

        Income—For 2014, income and margin increased, compared to 2013, primarily due to improved operational execution, favorable sales mix during the period which we attribute to our more selective approach to large orders, and cost reductions associated with restructuring initiatives implemented during the latter half of 2013 and the first half of 2014 at our Clyde Union business.

        For 2013, income and margin increased, compared to 2012, due to improved operational execution at a number of the businesses within the segment and cost reductions associated with restructuring initiatives implemented at Clyde Union. In addition, in 2012, income and margin were diluted by incremental costs of $8.1 associated with the excess fair value (over historical cost) of inventory acquired in the Clyde Union transaction and subsequently sold in the first half of 2012.

        Backlog—The segment had backlog of $475.5 and $629.5 as of December 31, 2014 and 2013, respectively. Approximately 85% of the segment's backlog as of December 31, 2014 is expected to be recognized as revenue during 2015.

Industrial

 
  Year ended December 31,    
   
 
 
  2014 vs.
2013%
  2013 vs.
2012%
 
 
  2014   2013   2012  

Revenues

  $ 839.1   $ 837.3   $ 888.4     0.2     (5.8 )

Income

    123.0     119.3     129.2     3.1     (7.7 )

% of revenues

    14.7 %   14.2 %   14.5 %            

Components of revenue growth (decline):

                               

Organic growth (decline)

                      1.4     (5.2 )

Foreign currency

                      (1.2 )   (0.6 )

Net revenue growth (decline)

                      0.2     (5.8 )

        Revenues—For 2014, the increase in revenues, compared to 2013, was due to an increase in organic revenue, partially offset by the strengthening of the U.S. dollar during the period against various foreign currencies. The increase in organic revenues was due primarily to higher sales of heat exchangers, dehydration equipment and pumps, partially offset by lower sales of mixers.

        For 2013, the decrease in revenues, compared to 2012, was due primarily to an organic revenue decline and, to a lesser extent, the strengthening of the U.S. dollar during the period against various foreign currencies. The decline in organic revenue was due to lower sales within the segment's Asia Pacific operations, as well as lower sales of heat exchangers and dehydration equipment. These decreases were offset partially by an increase in sales of mixers during 2013.

        Income—For 2014, income and margin increased, compared to 2013, primarily due to a more favorable sales mix during 2014.

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        For 2013, income and margin decreased, compared to 2012, due to the decline in organic revenue mentioned above and an increase in operating expenses during 2013. These unfavorable impacts on income and margin were offset partially by the effects of a more favorable sales mix in 2013.

        Backlog—The segment had backlog of $210.1 and $235.5 as of December 31, 2014 and 2013, respectively. Approximately 88% of the segment's backlog as of December 31, 2014 is expected to be recognized as revenue during 2015.


Corporate and Other Expense

 
  Year ended December 31,    
   
 
 
  2014 vs.
2013%
  2013 vs.
2012%
 
 
  2014   2013   2012  

Total combined revenue

  $ 2,769.6   $ 2,804.8   $ 2,846.3     (1.3 )   (1.5 )

Corporate expense

    58.3     59.8     58.0     (2.5 )   3.1  

% of revenues

    2.1 %   2.1 %   2.0 %            

Pension and postretirement expense

    32.2     8.0     34.5     302.5     (76.8 )

Stock-based compensation expense

    20.0     17.4     20.8     14.9     (16.3 )

        Corporate Expense—Corporate expense includes allocations of general corporate expenses from SPX that generally relate to the cost of corporate functions and/or resources provided by SPX. See Note 1 to our combined financial statements for further details on our methodology for allocating corporate-related costs.

        Corporate expense decreased during 2014, compared to 2013, due primarily to lower marketing expenses.

        Corporate expense increased during 2013, compared to 2012, due primarily to an increase in incentive compensation expense.

        Pension and Postretirement Expense—SPX sponsors a number of pension and postretirement plans. In addition, we also sponsor pension and postretirement plans. For all of these plans, changes in the fair value of plan assets and actuarial gains and losses are recognized to earnings in the fourth quarter of each year as a component of net periodic benefit expense, unless earlier remeasurement is required. The remaining components of pension and postretirement expense, primarily service and interest costs and expected return on plan assets, are recorded on a quarterly basis.

        Pension and postretirement expense, as presented herein, represents net periodic benefit expense associated with the plans we sponsor as well as an allocation of a portion of the net periodic benefit expense associated with the plans sponsored by SPX. See Note 1 to our combined financial statements for further details on our methodology for allocating corporate-related costs.

        During 2014, pension and postretirement expense increased, compared to 2013, primarily as a result of an increase in actuarial losses associated with both the plans sponsored by SPX and those that we sponsor.

        During 2013, pension and postretirement expense decreased, compared to 2012, primarily as a result of a decrease in actuarial losses associated with both the plans sponsored by SPX and those that we sponsor.

        See Note 9 to our combined financial statements for further details on SPX's and our pension and postretirement plans.

        Stock-based Compensation Expense—SPX sponsors a stock compensation plan that covers eligible employees, including certain of our employees. Stock-based compensation expense, as presented herein, represents the costs associated with our eligible employees, as well as an allocation of a portion of the

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costs associated with the eligible corporate employees of SPX. See Note 1 to our combined financial statements for further details on our methodology for allocating corporate-related costs.

        The increase in stock-based compensation expense for 2014, compared to 2013, was primarily the result of an increase in the fair value of the 2014 restricted stock share and restricted stock unit awards, as the weighted-average fair value of the 2014 awards was approximately 41% higher than the 2013 awards.

        The decrease in stock-based compensation expense for 2013, compared to 2012, was due primarily to a reduction in stock-based compensation associated with SPX's executive officer group, as well as an increase in forfeitures during 2013.

        See Note 14 to our combined financial statements for further details on SPX's stock-based compensation plans.


Liquidity and Financial Condition

        Listed below are the cash flows from (used in) operating, investing and financing activities, as well as the net change in cash and equivalents for the years ended December 31, 2014, 2013 and 2012.

 
  Year ended December 31,  
 
  2014   2013   2012  

Cash flows from operating activities

  $ 302.6   $ 263.3   $ 150.6  

Cash flows used in investing activities

    (34.0 )   (752.0 )   (45.3 )

Cash flows from (used in) financing activities

    (297.8 )   388.3     1.8  

Change in cash and equivalents due to changes in foreign currency exchange rates

    (12.0 )   (4.8 )   5.2  

Net change in cash and equivalents

  $ (41.2 ) $ (105.2 ) $ 112.3  

2014 Compared to 2013

        Operating Activities—During 2014, the increase in cash flows from operating activities, compared to 2013, was due primarily to improved profitability.

        Investing Activities—During 2014, cash flows used in investing activities were comprised primarily of capital expenditures of $40.7, partially offset by proceeds from asset sales and other of $7.3. Cash flows used in investing activities during 2013 were comprised primarily of loans to SPX of $743.3 and capital expenditures of $23.4, partially offset by proceeds from asset sales and other of $12.0.

        Financing Activities—During 2014, cash flows used in financing activities related primarily to net transfers to SPX of $291.6, while cash flows from financing activities in 2013 related primarily to net transfers from SPX of $261.3 and net borrowings from SPX (and certain of its affiliates that are not part of the spin-off transaction) of $142.3.

        Change in Cash and Equivalents due to Changes in Foreign Currency Exchange Rates—The decrease in cash and equivalents due to foreign currency exchange rates of $12.0 and $4.8 in 2014 and 2013, respectively, reflected primarily a reduction in U.S. dollar equivalent balances of Euro- and GBP-denominated cash and equivalents, as a result of the strengthening of the U.S. dollar against these currencies during the respective periods.

2013 Compared to 2012

        Operating Activities—During 2013, the increase in cash flows from operating activities, compared to 2012, was due primarily to a reduction in working capital at our Clyde Union business and, to a lesser

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extent, improved profitability. In 2012, our Clyde Union business experienced project delays and other operational execution issues, which contributed to a significant increase in working capital for the business (increase of approximately $140.0). During 2013, many of these issues were remediated, resulting in a significant decline in Clyde Union's working capital.

        Investing Activities—During 2013, cash flows used in investing activities were comprised primarily of loans to SPX of $743.3 and capital expenditures of $23.4, partially offset by proceeds from asset sales and other of $12.0. Cash flows used in investing activities during 2012 were comprised primarily of the acquisition of Seital S.r.l. of $28.0 and capital expenditures of $26.3, partially offset by repayments received on related party notes of $6.8 and proceeds from asset sales and other of $5.6.

        Financing Activities—During 2013, cash flows from financing activities related primarily to net transfers from SPX of $261.3 and net borrowings from SPX (and certain of its affiliates that are not part of the spin-off transaction) of $142.3, while cash flows from financing activities in 2012 related primarily to net transfers from SPX of $33.9, partially offset by net repayments of third-party debt of $34.3.

        Change in Cash and Equivalents due to Changes in Foreign Currency Exchange Rates—The decrease in cash and equivalents due to foreign currency exchange rates of $4.8 in 2013 reflected primarily a reduction in U.S. dollar equivalent balances of Euro- and GBP-denominated cash and equivalents, as a result of the strengthening of the U.S. dollar against these currencies during the year. The increase in cash and equivalents due to foreign currency exchange rates of $5.2 in 2012 reflects primarily an increase in U.S. dollar equivalent balances of Euro- and GBP-denominated cash and equivalents, as a result of a weakening of the U.S. dollar against these currencies during the year.


Financial Instruments

        We measure our financial assets and liabilities on a recurring basis, and nonfinancial assets and liabilities on a non-recurring basis, at fair value. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. We utilize market data or assumptions we believe market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable quoted prices in active markets for identical assets or liabilities (Level 1), significant other observable inputs (Level 2) or significant unobservable inputs (Level 3).

        Our derivative financial assets and liabilities include FX forward contracts and FX embedded derivatives measured at fair value using observable market inputs such as forward rates, interest rates, our own credit risk and our counterparties' credit risks. Based on these inputs, the derivative assets and liabilities are classified within Level 2 of the valuation hierarchy. Based on our continued ability to enter into forward contracts, we consider the markets for our fair value instruments active.

        As of December 31, 2014, there had been no significant impact to the fair value of our derivative liabilities due to our own credit risk as the related instruments were collateralized under SPX's senior credit facilities. Similarly, there had been no significant impact to the fair value of our derivative assets based on our evaluation of our counterparties' credit risks.

        We primarily use the income approach, which uses valuation techniques to convert future amounts to a single present amount. Assets and liabilities measured at fair value on a recurring basis are further discussed below.

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Currency Forward Contracts and Currency Forward Embedded Derivatives

        We manufacture and sell our products in a number of countries and, as a result, are exposed to movements in foreign currency exchange rates. Our objective is to preserve the economic value of non-functional currency-denominated cash flows and to minimize their impact. Our principal currency exposures relate to the Euro, Chinese Yuan and GBP.

        From time to time, we enter into foreign currency forward contracts ("FX forward contracts") to manage the exposure on contracts with forecasted transactions denominated in non-functional currencies and to manage the risk of transaction gains and losses associated with assets/liabilities denominated in currencies other than the functional currency of certain subsidiaries. In addition, some of our contracts contain currency forward embedded derivatives ("FX embedded derivatives"), because the currency of exchange is not "clearly and closely" related to the functional currency of either party to the transaction. Certain of our FX forward contracts are designated as cash flow hedges. To the extent these derivatives are effective in offsetting the variability of the hedged cash flows, changes in the derivatives' fair value are not included in current earnings, but are included in Accumulated Other Comprehensive Income ("AOCI"). These changes in fair value are reclassified into earnings as a component of revenues or cost of products sold, as applicable, when the forecasted transaction impacts earnings. In addition, if the forecasted transaction is no longer probable, the cumulative change in the derivatives' fair value is recorded as a component of "Other income (expense), net" in the period in which the transaction is no longer considered probably of occurring. To the extent a previously designated hedging transaction is no longer an effective hedge, any ineffectiveness measured in the hedging relationship is recorded in earnings in the period in which it occurs.

        We had FX forward contracts with an aggregate notional amount of $84.4 and $90.7 outstanding as of December 31, 2014 and 2013, respectively, with substantially all such contracts scheduled to mature in 2015. We also had FX embedded derivatives with an aggregate notional amount of $53.4 and $78.6 at December 31, 2014 and 2013, respectively, with scheduled maturities of $46.3, $5.9 and $1.2 in 2015, 2016 and years thereafter, respectively. The unrealized losses, net of taxes, recorded in AOCI related to FX forward contracts were less than $0.1 as of December 31, 2014, while there were no such amounts as of December 31, 2013. The net gain recorded in "Other income (expense), net" related to FX forward contracts and FX embedded derivatives totaled $0.2, $0.8 and $2.0 in 2014, 2013 and 2012, respectively.

        The net fair values of our FX forward contracts and FX embedded derivatives were $0.6 (liability) and $3.0 (liability) at December 31, 2014 and 2013, respectively.

Other Fair Value Financial Assets and Liabilities

        The carrying amounts of cash and equivalents and receivables (excluding related party notes receivable) reported in our combined balance sheets approximate fair value due to the short-term nature of those instruments. At December 31, 2014 and 2013, the aggregate estimated fair values of our related party notes receivable were approximately $758.0 and $682.0, respectively, compared to the respective carrying values of $707.1 and $763.4.

        The fair value of our debt instruments (excluding capital leases and related party notes payable) are considered to approximate carrying value due primarily to the short-term nature of these instruments. At December 31, 2014 and 2013, the aggregate estimated fair values of our related party notes payable were approximately $1,127.0 and $1,076.0, respectively, compared to the respective carrying values of $1,003.1 and $988.4.

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Concentrations of Credit Risk

        Financial instruments that potentially subject us to significant concentrations of credit risk consist of cash and equivalents, trade accounts receivable, and FX forward 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.

        We maintain cash levels in bank accounts that, at times, may exceed federally-insured limits. We have not experienced, and believe we are not exposed to significant risk of, loss in these accounts.

        We have credit loss exposure in the event of nonperformance by counterparties to the above financial instruments, but have no other off-balance-sheet credit risk of accounting loss. We anticipate that counterparties 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 counterparties.

        Concentrations of credit risk arising from trade accounts receivable are due to selling to customers in a particular industry. Credit risks are mitigated by performing ongoing credit evaluations of our customers' financial conditions and obtaining collateral, advance payments, or other security when appropriate. No one customer, or group of customers that to our knowledge are under common control, accounted for more than 10% of our revenues for any period presented.


Cash and Other Commitments

        We use operating leases to finance certain equipment, vehicles and properties. At December 31, 2014, we had $84.0 of future minimum rental payments under operating leases with remaining non-cancelable terms in excess of one year.

        Capital expenditures for 2014 totaled $40.7, compared to $23.4 and $26.3 in 2013 and 2012, respectively. Capital expenditures in 2014 related primarily to upgrades to manufacturing facilities, including replacement of equipment, and information technology. We expect 2015 capital expenditures to approximate $70.0, with a significant portion related to upgrades of manufacturing facilities and information technology. While the impact of continued market volatility cannot be predicted, we believe we have sufficient operating flexibility, cash reserves and funding sources to maintain adequate amounts of liquidity and to meet our future operating cash needs and internal growth opportunities.

        In 2014, we made contributions and direct benefit payments of $3.8 to our defined benefit pension and postretirement benefit plans. We expect to make $2.9 of minimum required funding contributions and direct benefit payments in 2015. Our pension plans have not experienced any liquidity difficulties or counterparty defaults due to the volatility in the credit markets. Our foreign pension funds experienced a positive return on assets of approximately 5.0% in 2014. See Note 9 to our combined financial statements for further disclosure of expected future contributions and benefit payments.

        On a net basis, we paid $11.4, $19.0, and $15.7 in income taxes in 2014, 2013 and 2012, respectively. The amount of income taxes 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, 2014, except as discussed in Note 13 to our combined financial statements and in the contractual obligations table below, we did not have any material guarantees, off-balance sheet arrangements or purchase commitments.

        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. See "Risk Factors," "Results of Reportable Segments" included in

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this "Management's Discussion and Analysis of Financial Condition and Results of Operations," and "Business" for an understanding of the risks, uncertainties and trends facing our businesses.


Contractual Obligations

        The following is a summary of our primary contractual obligations as of December 31, 2014:

 
  Total   Due
within
1 year
  Due in
1 - 3 years
  Due in
3 - 5 years
  Due after
5 years
 

Short-term debt obligations

  $ 6.0   $ 6.0   $   $   $  

Current maturities of related party notes payable

    36.8     36.8              

Long-term debt obligations

    12.0     1.7     1.4     5.4     3.5  

Related party notes payable

    966.3         558.0         408.3  

Pension and postretirement benefit plan contributions and direct benefit payments(1)

    67.0     2.9     6.4     7.5     50.2  

Purchase and other contractual obligations(2)

    209.4     191.4     18.0          

Future minimum operating lease payments(3)

    84.0     25.0     27.7     12.5     18.8  

Interest payments—capital lease obligations

    3.4     1.4     1.2     0.2     0.6  

Interest payments—related party notes payable

    609.0         152.1         456.9  

Total contractual cash obligations(4)

  $ 1,993.9   $ 265.2   $ 764.8   $ 25.6   $ 938.3  

(1)
Estimated minimum required pension contributions 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), rates of compensation increases, and health care cost trend rates. See Note 9 to our combined financial statements for additional information on expected future contributions and benefit payments.

(2)
Represents contractual commitments to purchase goods and services at specified dates.

(3)
Represents rental payments under operating leases with remaining non-cancelable terms in excess of one year.

(4)
Contingent obligations, such as environmental accruals and those relating to uncertain tax positions, generally do not have specific payment dates and accordingly have been excluded from the above table. Based on the outcome of certain examinations or as a result of the expiration of statutes of limitations for certain jurisdictions, we believe that within the next 12 months it is reasonably possible that our previously unrecognized tax benefits could decrease by $2.5 to $7.5. In addition, the above table does not include potential payments under our derivative financial instruments.

        We believe that our cash flows, together with cash on hand, provide us with the ability to fund our operations and make planned capital expenditures payments for at least the next twelve months. However, such cash flows are dependent upon our future operating performance which, in turn, is subject to prevailing economic conditions and to financial, business and other factors, including the conditions of our markets, some of which are beyond our control. If, in the future, we cannot generate sufficient cash from operations to meet any future debt service obligations, we would need to refinance such debt obligations, obtain additional financing or sell assets. We cannot assure you that our business will generate cash from operations, or that we will be able to obtain financing from other sources, sufficient to satisfy any such debt service or other requirements.

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Critical Accounting Policies and Use of Estimates

        The preparation of financial statements in accordance with GAAP requires us 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 our 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 combined financial statements, which include a detailed discussion of these and other accounting policies.

Long-Term Contract Accounting

        Certain of our businesses recognize revenues and profits from long-term construction/installation 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. We measure the percentage-of-completion principally by the contract costs incurred to date as a percentage of the estimated total costs for that contract at completion. In 2014, 2013 and 2012, we recognized $573.1, $612.8 and $693.1 of revenues under the percentage-of-completion method, respectively.

        We record any provision for estimated losses on uncompleted long-term contracts in the period in which the losses are determined. In the case of customer change orders for uncompleted long-term contracts, we include estimated recoveries for work performed in forecasting ultimate profitability on these 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 during the duration of a contract. These revisions to costs and income are recognized in the period in which the revisions are determined.

        Our estimation process for determining revenues and costs for contracts accounted for under the percentage-of-completion method is based upon (i) our historical experience, (ii) the professional judgment and knowledge of our engineers, project managers, and operations and financial professionals, and (iii) an assessment of the key underlying factors (see below) that impact the revenues and costs of our long-term contracts. Each long-term contract is unique, but typically similar enough to other contracts that we can effectively leverage our experience. As our long-term contracts generally range from nine to eighteen months in duration, we typically reassess the estimated revenues and costs of these contracts on a quarterly basis, but may reassess more often as situations warrant. We record changes in estimates of revenues and costs when identified using the cumulative catch-up method prescribed under the Revenue Recognition Topic of the Codification.

        We believe the underlying factors used to estimate our costs to complete and percentage-of-completion are sufficiently reliable to provide a reasonable estimate of revenue and profit; however, due to the length of time over which revenue streams are generated and costs are incurred, along with the judgment required in developing the underlying factors, the variability of revenue and cost can be significant. Factors that may affect revenue and costs relating to long-term contracts include, but are not limited to, the following:

    Sales Price Incentives and Sales Price Escalation Clauses—Sales price incentives and sales price escalations that are reasonably assured and reasonably estimable are recorded over the performance period of the contract. Otherwise, these amounts are recorded when awarded.

    Cost Recovery for Product Design Changes and Claims—On occasion, design specifications may change during the course of the contract. Any additional costs arising from these changes may be supported by change orders, or we may submit a claim to the customer. Change orders are accounted for as described above. See below for our accounting policies related to claims.

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    Material Availability and Costs—Our estimates of material costs generally are based on existing supplier relationships, adequate availability of materials, prevailing market prices for materials and, in some cases, long-term supplier contracts. Changes in our supplier relationships, delays in obtaining materials, or changes in material prices can have a significant impact on our cost and profitability estimates.

    Use of Sub-Contractors—Our arrangements with sub-contractors are generally based on fixed prices; however, our estimates of the cost and profitability can be impacted by sub-contractor delays, customer claims arising from sub-contractor performance issues, or a sub-contractor's inability to fulfill its obligations.

    Labor Costs and Anticipated Productivity Levels—Where applicable, we include the impact of labor improvements in our estimation of costs, such as in cases where we expect a favorable learning curve over the duration of the contract. In these cases, if the improvements do not materialize, costs and profitability could be adversely impacted. Additionally, to the extent we are more or less productive than originally anticipated, estimated costs and profitability may also be impacted.

    Effect of Foreign Currency Fluctuations—Fluctuations between currencies in which our long-term contracts are denominated and the currencies under which contract costs are incurred can have an impact on profitability. When the impact on profitability is potentially significant, we may (but generally do not) enter into FX forward contracts or prepay certain vendors for raw materials to manage the potential exposure. See Note 12 to our combined financial statements for additional details on our FX forward contracts.

        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.

        We periodically make claims against customers, suppliers and sub-contractors associated with alleged non-performance and other disputes over contractual terms. Claims related to long-term contracts are recognized as additional revenues or as a reduction of costs only after we have determined that collection is probable and the amount is reasonably estimable. Claims made by us may involve negotiation and, in certain cases, litigation or other dispute-resolution processes. In the event we incur litigation or other dispute-resolution costs in connection with claims, these costs are expensed as incurred, although we may seek to recover these costs. Claims against us are recognized when a loss is considered probable and amounts are reasonably estimable.

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. 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.

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        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 in conjunction with our annual financial planning process (or more frequently if impairment indicators arise), based primarily on events and circumstances existing as of the end of the third quarter. 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 our 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, when applicable, 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.

        We perform our annual trademarks impairment testing during the fourth quarter, or on a more frequent basis if there are indications of potential impairment. The fair values of our trademarks are determined by applying estimated royalty rates to projected revenues, with the resulting cash flows discounted at a rate of return that reflects current market conditions. During 2014 and 2013, we recorded impairment charges of $11.7 and $4.7, respectively, related to trademarks of certain of our businesses. Other changes in the gross values of trademarks and other identifiable intangible assets related primarily to foreign currency translation.

Employee Benefit Plans

        For both the plans we sponsor and the plans sponsored by SPX, changes in the fair value of plan assets and actuarial gains and losses are recognized to earnings in the fourth quarter of each year, unless earlier remeasurement is required. The remaining components of pension and postretirement expense, primarily service and interest costs and expected return on plan assets, are recorded on a quarterly basis.

        Neither our nor the pension plans sponsored by SPX have experienced any significant impact on liquidity or counterparty exposure due to the volatility in the credit markets.

        The costs and obligations associated with these plans are determined based on actuarial valuations. The critical assumptions used in determining these obligations and related expenses are discount rates and healthcare cost projections. These critical assumptions are calculated based on relevant data and appropriate market indicators, and are evaluated at least annually in consultation with outside actuaries. Other assumptions involving demographic factors such as retirement patterns, mortality, turnover and the rate of increase in compensation levels are evaluated periodically and are updated to reflect actual experience and expectations for the future. While we believe that the assumptions used are appropriate, actual results may differ.

        The discount rate enables the expected future cash flows to be stated 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. Including the effects of recognizing actuarial gains and losses into earnings as described above, a 50 basis point decrease in the discount rate on the above plans would have increased our 2014 pension expense by approximately $21.5, and a 50 basis point increase in the discount rate would have decreased 2014 pension expense by approximately $20.6.

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        The trend in healthcare costs is difficult to estimate, and it can significantly impact postretirement liabilities and costs. Including the effects of recognizing actuarial gains and losses into earnings as described above, a 100 basis point increase in the healthcare cost trend rate would have reduced our 2014 postretirement income by approximately $0.6, and a 100 basis point decrease in the healthcare cost trend rate would have increased our 2014 postretirement income by approximately $0.6.

        See Note 9 to our combined financial statements for further information on our accounting for pension and postretirement benefit plans.

Income Taxes

        For purposes of our combined financial statements, our income tax provision has been determined as if we filed income tax returns on a stand-alone basis. Our tax results as presented in the combined financial statements may not be reflective of the results that we will generate in the future. In jurisdictions where we have been included in the tax returns filed by SPX, any income taxes payable resulting from the related income tax provision have been reflected in our combined balance sheets within "Parent company investment."

        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 whether deferred tax assets will be realized and the adequacy of deferred tax liabilities, including the results of tax audits or estimates and judgments used.

        Realization of deferred tax assets involves estimates regarding (1) the timing and amount of the reversal of taxable temporary differences, (2) expected future taxable income, and (3) the impact of tax planning strategies. We believe that it is more likely than not that we may not realize the benefit of certain deferred tax assets and, accordingly, have established a valuation allowance against them. In assessing the need for a valuation allowance, we consider all available positive and negative evidence, including past operating results, projections of future taxable income and the feasibility of and potential changes to ongoing tax planning strategies. The projections of future taxable income include a number of estimates and assumptions regarding our volume, pricing and costs. Although realization is not assured for the remaining deferred tax assets, we believe it is more likely than not that the remaining 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 are significantly reduced or tax strategies are no longer viable.

        We review our income tax positions on a continuous basis and record a provision for potential uncertain tax positions when we determine that an uncertain position meets the criteria of the Income Taxes Topic of the Codification. As events change or resolutions occur, adjustments are made to amounts previously provided, 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, statute expirations, 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 10 to our combined financial statements for additional details regarding our uncertain tax positions.

Contingent Liabilities

        We are subject to litigation matters that arise in the normal course of business. We believe these matters are either without merit or of a kind that should not have a material effect, individually or in the aggregate, on our financial position, results of operations or cash flows.

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        We are subject to domestic and international environmental protection laws and regulations with respect to our business operations and are operating in compliance with, or taking action aimed at ensuring compliance with, these laws and regulations. None of our compliance obligations with environmental protection laws and regulations, individually or in the aggregate, is expected to have a material adverse effect on our financial position, results of operations or cash flows.


New Accounting Pronouncements

        See Note 3 to our combined financial statements for a discussion of recent accounting pronouncements.

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BUSINESS

Company Overview

        We are a leading global supplier of highly engineered flow components, process equipment and turn-key systems, along with the related aftermarket parts and services, into food and beverage, power and energy, and industrial markets. We engineer, design and manufacture a broad array of flow control systems integral to our customers' ability to process, blend, transport, meter, filter and dehydrate various types of fluids, gases, and powders across a diverse range of applications. Our innovative solutions play a critical role in helping meet rising global demand in the markets we serve. Our total revenue in 2014 was approximately $2.8 billion, with 71% from sales to destinations outside the United States, including 30% from sales into emerging markets.

History and Development

        We initially established a presence in flow-related businesses when we acquired Lightnin Mixers as part of the 1998 General Signal merger. In 2001, we added three more flow-related businesses, Waukesha Cherry-Burrell pumps and valves, Bran+Luebbe metering and dosing pumps, and Dollinger filtration products, through the acquisition of United Dominion Industries. The combination of these well-branded, highly engineered product lines created a solid foundation on which to build our flow business. Subsequent smaller acquisitions of Copes Vulcan, M&J Valve, Hankison and Johnson Pump broadened our product offerings and improved our organic growth profile. We consolidated these businesses under one management team, reduced our cost base and drove improved operational efficiencies through our lean philosophies. We also began selling complementary products as package solutions to expand our relevance to customers in three areas:

    Process equipment focused on food and beverage and sanitary applications;

    Flow control products focused on power and energy market applications; and

    Air treatment products and pumps focused on industrial applications.

        By the end of 2007, annual revenue for our flow business had grown to more than $1.0 billion. At that point, we began to focus on expanding our international presence in select, attractive end markets.

        In December 2007, we acquired APV, a leading global supplier of process automation technologies for the dairy, foods, beverages, pharmaceutical and healthcare industries. This acquisition significantly expanded our geographic presence and established a global platform in the food and beverage industry. Following a multi-year integration of APV into our flow business, several smaller acquisitions (Gerstenberg Schroeder, Anhydro, Seital, Murdoch and e&e) broadened our processing capabilities into discrete product categories such as butters, fats and oils, powdered products, coffee and extracts. Today, customers often look to us to design and construct a fully-integrated dairy factory.

        In December 2011, we acquired ClydeUnion Pumps ("Clyde Union") which further expanded our geographic presence and established a global platform in the power and energy industry, including a global footprint of aftermarket service centers. Clyde Union has over 140 years of experience in pumping technologies and has a rich heritage of product brands. Clyde Union was formed through the combination of Weir Pumps, a long-standing engineering company with roots dating back to 1871, and Union Pumps, owned previously by Textron. The joining of these companies brought together some of the most respected products, talent and brands in the pumping industry.

        Clyde Union's technologies are complementary to our legacy power and energy products. Today, our power and energy product offering includes a variety of critical pressure pumps, metering systems, dosing pumps, specialty valves and valve closures, chemical injection skids, filtration and air dehydration equipment.

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        At the end of 2013, we moved to a new operating alignment focused on managing our business strategy around three global end markets. This new operational alignment was the next significant step in the development of our flow business and has improved our operating efficiency and enhanced our customer focus by more closely aligning our organizational resources with our customers and end markets. It has also strengthened our foundation for future growth.

        In 2014, our segment income margins improved 210 points to 14.1 percent and in February 2015, we increased our long-term margin target to 14%-16%. We believe we are in a strong position to leverage operational excellence, cost reduction initiatives and commercial synergies across our operations, and to drive further growth and increased shareholder value.

Products

        Our product portfolio of pumps, valves, mixers, filters, air dryers, hydraulic tools, homogenizers, separators and heat exchangers, along with the related aftermarket parts and services, supports global industries, including food and beverage, oil and gas, power generation (including nuclear and conventional), chemical processing, compressed air and mining. The core strengths of our product portfolio and engineering capabilities include integrated dairy systems, high pressure pumps and control valves used in oil production and transportation, regulated safety technologies for nuclear power generation, and industrial components used in chemical processing.

        Our products feature uncompromising design and quality, while offering long service life, production efficiency and cost effective performance. In addition, our products help customers increase productivity, control costs, reduce energy and waste, and meet stringent compliance regulations. Through our vast engineering knowledge, product development and industry experience, we have the capability to work closely with customers to provide solutions configured to meet their specific application and business needs.

Brands and Marketing

        We market our products and services under one global brand, "SPX." This approach provides consistent recognition of our business across our global customer base. Following the spin-off, we will continue to have rights to the "SPX" brand. Ultimately, we plan to transition our global brand to "SPXFLOW." Our product brands, many of which we believe are technology leaders in their respective industries and regions, include: Airpel, Anhydro, APV, Bran+Luebbe, Bolting Systems, ClydeUnion Pumps, Copes-Vulcan, Delair, Deltech, Dollinger Filtration, e&e, GD Engineering, Gerstenberg Schroeder, Globe, Hankison, Hytec, Jemaco, Johnson Pump, LIGHTNIN, M&J Valve, Murdoch, OFM, Plenty, Pneumatic Products, Power Team, Rail Systems, Seital, Stone, Tigerholm, Vokes, and Waukesha Cherry-Burrell.

Customers and Markets Served

        We serve a global customer base ranging from large multi-nationals to regional and local companies. We sell our products and services to thousands of companies including some of the world's leading food and beverage consumer brands, engineering, procurement and construction firms ("EPCs"), original equipment manufacturers ("OEMs"), distributors and end users. No single customer represented 5% or more of our total revenues in 2014, 2013 or 2012.

        Our products and services are used across a variety of industries in many geographic regions of the world. In 2014, we estimate that the aggregate size of the global markets in which we participate was greater than $100 billion. We believe these markets offer attractive long-term growth characteristics and will benefit from global macro and demographic trends, including population growth, an expanding middle class, heightened regulatory and safety requirements, productivity improvements, and environmental conservation efforts. We also believe our end market and geographic diversity provides

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us with stability through economic cycles. In 2014, 2013, and 2012, the breakdown of our revenue by industry consisted of:

% Revenue by Industry
  2014   2013   2012  

Oil and Gas

    28.0 %   24.4 %   23.2 %

General Industrial(1)

    20.1 %   23.0 %   23.0 %

Foods, Beverages and Personal Care (non-dairy)

    18.5 %   17.9 %   17.5 %

Dairy and Dairy Derivatives

    14.1 %   15.3 %   16.0 %

Power Generation

    6.7 %   7.8 %   8.9 %

Compressed Air

    6.8 %   6.2 %   6.0 %

Chemical

    5.8 %   5.4 %   5.4 %

(1)
General Industrial includes marine and shipbuilding, mining, transportation infrastructure, HVAC, water and wastewater, and pulp and paper markets.

Global Capabilities

        Our global headquarters are located in Charlotte, North Carolina. We have operations in over 35 countries, including over 50 manufacturing and/or engineering facilities and over 25 service centers. We had sales in over 150 countries in 2014. The breakdown of sales by geographic destination in 2014, 2013 and 2012 consisted of:

Sales by Geographic Destination
  2014   2013   2012  

North America

    35.2 %   33.6 %   34.0 %

Europe

    30.0 %   29.0 %   26.7 %

Asia Pacific

    23.6 %   25.4 %   26.8 %

Middle East and Africa

    7.7 %   8.3 %   8.6 %

Latin America

    3.5 %   3.7 %   3.9 %

Properties

        The following is a summary of our principal properties including manufacturing and engineering facilities and service centers as of December 31, 2014:

 
   
  Number of
Facilities
  Owned   Leased  
 
   
   
  (~ square footage
in millions)

 

Food and Beverage

  4 U.S. states and 10 foreign countries     20     0.7     0.7  

Power and Energy

  5 U.S. states and 9 foreign countries     26     2.0     0.6  

Industrial

  6 U.S. states and 13 foreign countries     30     1.1     0.7  

Total

        76     3.8     2.0  

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        The following table lists the locations of our primary manufacturing and engineering facilities as of December 31, 2014:

Americas   EMEA   Asia Pacific
Burlington, Canada
Delavan, WI
Goldsboro, NC
Hanover Park, IL
Houston, TX
Newport, NC
Ocala, FL
Rochester, NY
Rockford, IL
Santiago, Chile
Sao Paulo, Brazil
  Annecy, France
Assen, Netherlands
Brixworth, UK
Budapest, Hungary
Bydgoszcz, Poland
Capetown, South Africa
De Leur, Netherlands
Ekero, Sweden
Erpe-Mere, Belgium
Etten-Leur, Netherlands
Glasgow, Scotland
Johannesburg, South Africa
Killarney, Ireland
Kolding, Denmark
Moers, Germany
Newbury, U.K.
Norderstedt, Germany
Orebro, Sweden
Penistone, Scotland
Santorso, Italy
Silkeborg, Denmark
Unna, Germany
  Ahmedabad, India
Auckland, New Zealand
Bangalore, India
Busan, South Korea
Jaipur, India
Melbourne, Australia
New Dehli, India
Pune, India
Singapore
Sydney, Australia
Tokyo, Japan
Xidu, China

Reportable Segments

        We report our operating results under three end market-focused segments: Food and Beverage, Power and Energy, and Industrial. The factors considered in determining our reportable segments include, among other things, the types of customers and the nature of products sold and services provided. The following table presents relative percentages of our total revenues attributable to each of our reportable segments for 2014, 2013 and 2012 (see Note 5 to our combined financial statements for additional details on our reportable segments):

% Revenue by Reportable Segment
  2014   2013   2012  

Food and Beverage

    35.0 %   34.6 %   33.3 %

Power and Energy

    34.7 %   35.5 %   35.5 %

Industrial

    30.3 %   29.9 %   31.2 %

Food and Beverage Overview

        We are one of the largest suppliers of process technologies for the global food and beverage industry. We engineer, design and manufacture a broad array of mechanical components and process technologies used in fully integrated, highly sophisticated production processes. Our mechanical component offering includes pumps, valves, mixers, homogenizers, separators, and heat exchangers. Our process technologies include a broad range of liquid processing, drying and evaporation technologies, and extraction and distillation solutions. Our key brands include Anhydro, APV, Bran+Luebbe, e&e, Gerstenberg Schroeder, LIGHTNIN, Seital and Waukesha Cherry-Burrell.

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        Our customers include multi-national, regional and local dairy, food and beverage producers. We also sell mechanical components to system integrators and end users through direct sales representatives and distributors. Our process technologies are used across a wide range of product applications. We have a particularly strong presence in dairy processing technologies. The following table lists the various applications in which our process technologies are used:

Dairy   Foods   Beverages   Personal Hygiene / Other
Fresh milk   Baby food   Soy drinks   Silica and industrial powders
Ultra high temperature milk   Margarines   Protein drinks   Extraction of organic substances
Extended shelf life milk   Ingredients and flavorings   Nutritional drinks   Cosmetics
Infant formula   Yeast extract   Tea   Healthcare
Yogurt and drinkable yogurt   Condiments   Coffee   Detergents
Whey powders   Confectionery   Fruit juices   Solvent recovery
Probiotics   Bakery   Flavored water   Biofuel
Recombined milk products   Proteins   Beer, wine and spirits   Glycerol
Butter, cheese and spreads            

        The food and beverage industry is highly regulated, with strict safety requirements. Our customers demand process solutions that meet the regulations within their industry. They also demand cost effective process engineering solutions for the production of high quality, innovative products. We believe this market provides stable, long-term growth opportunities driven by population growth, an expanding middle class, productivity initiatives, customer product innovation and food safety. In particular, we expect growing consumer demand for dairy and dairy product derivatives to be a key driver of new capacity investments by our customers. This is particularly true in China. Our global footprint is a key advantage that enables us to serve customers in nearly all parts of the world. We employ over 500 engineers and have full-line or modular system installations in over 70 countries.

        In the aftermarket, our service technicians work closely with customers to minimize downtime, while also ensuring the quality and integrity of our customers' production processes.

Power and Energy Overview

        We are a leading global supplier of a wide variety of heavy-duty process pumps, gate and control valves, valve closures, filters, mixers, air dryers, heat exchangers, chemical injection skids and modular systems. These products are used across the oil and gas and power generation industries to meet our customers' key business challenges, and the increasing global demand for energy and power.

        We have a strong presence in nuclear safety pumps and valves, oil pipeline valves, and high pressure pumps used in oil and gas exploration, production, transportation, processing, refining and storage. Our brands are well recognized for high quality engineering, strong process capabilities, and design excellence. They include APV, Bran+Luebbe, ClydeUnion Pumps, Copes-Vulcan, Dollinger

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Filtration, GD Engineering, LIGHTNIN, M&J Valve, OFM, Plenty, and Vokes. The table below illustrates the breadth of various types of technologies in our primary product categories:

Pump Technologies   Valve Technologies   Filters and Dryers   Modular Systems

Single-Stage Pumps

 

Control Valves

 

Compressed Air Treatment

 

Chemical Injection Skids

Multi-Stage Pumps

 

Gate Valves

 

Gas Treatment

 

Pigging Systems

Vertical Pumps

 

Expanding Gate Valves

 

Compressed Natural Gas Dryers

 

Surge Relief Control Skids

Hydraulic Submersible Pumps

 

Isolation Valves

 

Process Pipeline Filters

   

Reciprocating Pumps

 

Surge Relief Valves

 

Oil Mist Eliminators

   

Overhung Pumps

 

4-Way Diverter Valves

 

Air Intake Filtration

   

Boiler Feed Pumps

 

Nuclear Squib Valves

 

Gas Turbine Compressor Filters

   

Water Circulating Pumps

 

Nuclear Safety Valves

       

Auxiliary Pumps

 

Nuclear Butterfly Valves

       

Metering Pumps

 

Nuclear Ball Valves

       

Vane Pumps

 

Steam Turbine Bypass Valves

       

        In addition to our broad product portfolio, we offer a full range of aftermarket parts and services to ensure that our original equipment continues to operate at a high performance level. We also service and sell replacement parts for many of our competitors' products. We have over 25 service centers, strategically located throughout the world to provide a wide range of support 24 hours per day. Our service locations are the hub for component refurbishment and parts distribution. Our aftermarket parts and services include:

    Repair and exchange services;

    Equipment upgrade services;

    Installation and start-up support;

    Predictive and preventive maintenance;

    Remote diagnostics;

    Process and mechanical consulting;

    Asset management; and

    Training and on-site field support.

        We serve a global customer base ranging from large multi-nationals to regional and local companies. We sell our products and services to thousands of companies including some of the world's leading EPC's, power generators, oil producers, oil pipeline operators, distributors and end users.

        The global power and energy industry is highly regulated with strict safety requirements. Our customers demand highly engineered solutions that meet the stringent requirements of the mission critical applications with which they are associated. We believe this market provides stable, long-term growth opportunities driven by increasing demand for energy and power driven by population growth and an expanding middle class.

Industrial Overview

        We are a leading supplier of industrial flow components, with a high degree of engineering and application expertise. Our primary industrial products include air treatment equipment, mixers, hydraulic technologies, heat exchangers, and pumps. We have well-recognized brands, a large installed

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base and a growing aftermarket service presence. The table below illustrates the broad array of applications in which our primary products are used:

Air Treatment   Mixers   Hydraulic Technologies   Heat Exchangers   Pumps

Chemical Processing

 

Chemical Processing

 

Construction

 

Chemical Processing

 

Chemical Processing

Industrial Manufacturing

 

Industrial Manufacturing

 

Industrial Manufacturing

 

Industrial Manufacturing

 

Industrial Manufacturing

Mining and Minerals

 

Mining and Minerals

 

Mining and Minerals

 

Mining and Minerals

 

Mining and Minerals

Compressed Air

 

Slurry Pipelines and Storage

 

Oil and Gas

 

Oil and Gas

 

Horticulture

Metal Industries

 

Marine and Shipbuilding

 

Transportation

 

Marine and Shipbuilding

 

Marine and Shipbuilding

Petrochemical

 

Petrochemical

 

Rail line

 

Petrochemical

 

Petrochemical

Pulp and Paper

 

Pulp and Paper

 

Shipyards

 

HVAC

 

Pulp and Paper

Rubber and Plastics

 

Pharmaceutical

 

Power Generation

 

Pharmaceutical

 

Pharmaceutical

Electronics

 

Biotechnology

     

Food and Beverage

 

Food and Beverage

 

Water and Wastewater

     

Power Generation

 

Water and Wastewater

        Air Treatment:    We provide a wide variety of compressed air treatment and specialty gas solutions across a broad customer base serving diverse end market applications. Our engineers leverage technological advancements to deliver sustainable, energy efficient products, crafted from specialty metals and designed to handle the corrosive and harsh environments at many of our customers' facilities. Our key products include refrigerated, desiccant and membrane air dryers, compressed air filtration technologies, specialty dehydration technologies, breathing air purifiers, and condensate management and gas treatment systems. Product brands include Airpel, Delair, Deltech, Hankison, Jemaco, and Pneumatic Products.

        Mixers:    Our LIGHTNIN mixer business has over 90 years of experience in industrial mixing technology, process knowledge and technological innovation. We believe we have a strong reputation for durable, long-lasting mixers, agitators and aerators for fluid process systems. We offer a full spectrum of impeller designs for diverse applications. In addition, we offer a worldwide service network including mixer and gearbox repair, as well as the replacement of used parts.

        Hydraulic Technologies:    Our hydraulic technologies business provides a diverse product offering of hydraulic pumps, cylinders, valves, torque wrenches, torque and tensioning systems, bolting solutions, clamps cylinders, and rail switching systems. These high force hydraulic tools and equipment are used wherever strong, concentrated force is required including construction sites, power plants, rail lines, shipyards, oil pipelines, mining operations and other general industrial applications. Product brands include Bolting Systems, Globe, Hytec, Power Team, Rail Systems and Stone.

        Heat Exchangers:    Our APV business invented the plate heat exchanger in 1923 and continues today as a leading provider of heat transfer solutions for cooling, heating, condensing and evaporation of process fluids. Our heat exchanger products are designed to solve heat transfer process challenges in a vast array of industries. They are designed to meet demanding process conditions and our specialized global workforce is committed to providing efficient and durable heat transfer solutions to help customers optimize energy utilization and minimize downtime. Our heat transfer solutions are based on a range of heat exchanger technologies including gasketed, semi-welded, welded and hybrid plate heat exchangers, as well as tubular heat exchangers for hygienic applications. They range from high-capacity, high-duty units to small, compact designs and are available as standard solutions or customized units.

        Pumps:    For more than 75 years, our Johnson Pump business has developed, manufactured and marketed a variety of centrifugal and positive displacement pumps used for liquid transport in many different market applications including, among others, chemical processing, shipbuilding, marine, food

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and beverage, and water markets. We believe this experience and expertise, combined with our wide product range, makes us one of the most reliable pump producers.

Our Strengths

        Strong engineering expertise, highly skilled manufacturing operations and an intricate knowledge of the industries and applications in which our products are typically used are the foundations of our competitive strength. Our competitive strengths include the following:

Diversified product offering of highly engineered process technologies and flow control solutions and the ability to integrate products into automated modular and turn-key solutions:

        We believe the breadth and diversity of our product portfolio is unique to our business and provides a competitive advantage by allowing us to offer a variety of highly engineered solutions to customers, particularly on large capital investments that require multiple flow components within automated modular or full-line, turn-key systems.

Strong brands with leading market positions:

        We have a strong portfolio of brands, many of which have established leadership positions in their respective markets and product categories, with long-standing reputations for innovation and quality.

Diversified, loyal customer base, including long-standing and global customer relationships:

        We offer a unique platform with global sales, engineering, manufacturing, and design capabilities, and we leverage our deep understanding of product application, end markets and our customers to offer highly specialized and engineered solutions. We benefit from long-standing relationships with blue-chip, industry-leading companies in all of our reportable segments, as well as from low customer turnover.

Three global platforms serving attractive end markets with positive long-term growth characteristics and high barriers of entry:

        We believe we participate in highly attractive end markets with positive long-term growth characteristics. Trends positively impacting our key end markets include an increase in global demand for power and energy and processed foods and beverages, particularly in emerging markets driven by population growth, an expanding middle class, and environmental sustainability efforts. Our global scale and capabilities allow us to partner with other multi-national companies to provide products and services in many parts of the world. The complexity and highly engineered aspect of our product offering, safety and regulatory requirements and our customers' dependency on quality and reliability have created high barriers of entry for new competitors in our markets.

Large installed base of original equipment that provides a steady annuity stream of aftermarket sales and a global service center footprint with highly skilled and experienced service technicians:

        Our track record of providing highly engineered and high quality products also gives us a competitive edge in the aftermarket. Our many years of success have led to a large installed base of original equipment, which we believe operates most effectively with our uniquely designed parts. Many of these products are integral to the core processes of our customers, who rely on our expertise to ensure uninterrupted operations. During 2014, approximately 25% of our total revenues were derived from aftermarket parts and services.

        Our installed base, at thousands of customers across more than 70 countries, offers a significant opportunity to expand our aftermarket parts and services business. In recent years, we have added

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resources and increased our capabilities to service our installed base. We have also increased our focus on developing systems with higher levels of our factory content, which supports pull-through of aftermarket parts and services.

        We are also investing in new service centers, expanding existing service centers, and adding service technicians to better serve our customers. In 2014, we opened a service center in Aberdeen, Scotland dedicated to servicing the North Sea oil and gas industry where our Clyde Union brand has a significant installed base. We also expanded our service capabilities in nine existing service centers across the world. In 2015, we have planned investments to add service centers in the Middle East and North America. We are also pursuing a strategic service partnership in the Middle East.

Regional distribution centers and strong distribution channels:

        We have a large distribution network that includes our own regional distribution centers as well as strong, long-standing relationships with key distributors and independent sales representatives. Our ability to supply products to customers in most parts of the world with competitive lead times is a strong advantage for us in the markets we serve.

Advanced engineering focused on new product development and innovation:

        We are focused on a balanced approach to new product development and innovation aimed at enhancing and expanding our current product offerings, as well as developing cutting-edge technology. A key part of our approach to innovation is identifying the needs of our customers and developing new solutions to address those needs. Our product development programs have created a broad technology offering, giving us access to a broad range of end markets. We own approximately 170 domestic and 110 foreign patents, including approximately 20 patents that were issued in the last three years, covering a variety of our products and manufacturing methods.

Operational expertise with global manufacturing capabilities and localized operations:

        We have operations in over 35 countries, including over 50 manufacturing and/or engineering facilities and over 25 service centers. Our global footprint, skilled workforce and ability to drive continuous improvement across all aspects of our organization enable us to deliver a high quality customer experience and also maintain a competitive cost structure.

Highly skilled workforce complemented by a strong, experienced management team:

        Our senior management team has extensive industry and leadership experience. Our nine executive officers average 30 years of experience in industrial businesses. They have a successful track record in winning new contracts, driving operating efficiency, and leading improvements in technologies and solutions. The management team is committed to creating shareholder value through continued operational improvement, profitable growth, strategic focus around our end markets, and disciplined execution of our capital allocation methodology.

Proven track record of delivering strong financial performance:

        We have a proven track record of driving strong growth and profitability through our highly engineered flow control systems and process equipment solutions, integrated low cost operating footprint and leading market positions. Over the last three years, we have focused on improving profitability through cost reduction efforts, a more disciplined, selective approach on large projects, improved project execution, and an expanded aftermarket presence. As part of this focus, we re-aligned our operational organization to focus more clearly on end markets.

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Our Strategy

        We have developed a global, pure-play flow organization with a strong foundation on which to further grow our business. Our goal moving forward is to expand and strengthen our position as a global provider of flow control and process technology solutions. Our strategy is focused in two primary areas: driving sustainable, profitable growth and improving the efficiency of our global manufacturing operations and overall return profile of our business. The core initiatives supporting this strategy include the following:

Driving sustainable, profitable growth:

Increase our aftermarket capabilities and expand our global service center footprint:

        During 2014, approximately 25% of our total revenues were derived from aftermarket parts and services. Our aftermarket business provides a steady source of revenue and cash flows at higher margins than are typical in the sale of original equipment. We have focused initiatives across all three business segments to increase our aftermarket business.

        Our installed base at thousands of customers across the world offers a significant opportunity to expand our aftermarket service business. Today, we only service a small portion of our installed base. As we move forward, we have programs in place to secure the aftermarket business in new installations and we are also working to capture aftermarket business on our historical installations.

        In recent years, we have added resources and increased our capabilities to service our installed base. We have also increased our focus on developing systems with higher levels of our factory content, which supports pull-through of aftermarket parts and services.

        We plan to invest in new service centers, expand our capabilities at existing service centers, and add service technicians to better serve our customers. In 2015, we have planned investments to add service centers in the Middle East and North America. We are also pursuing a strategic service partnership in the Middle East.

Leverage combined technology offerings:

        Many of our products are used in similar applications and are complementary to each other. This includes providing integrated solutions for customers rather than individual components. A key part of this commercial initiative involves leveraging combined technology offerings into highly profitable market segments including oil pipelines, subsea oil exploration, nuclear power, dairy processing and chemical processing.

        As an example, we are leveraging our strong position as a valve supplier with key customer relationships in the North American oil pipeline industry to expand our sales of pipeline pump products.

Further develop global customer relationships:

        As we look to grow our business, we plan to strengthen our current global customer relationships through key account management programs. By increasing our intimacy with customers and gaining a deeper understanding of their business needs and investment plans, we believe we can better position our business to partner and grow with many of our large, multi-national customers.

Expand sales and distribution channels, including e-business solutions:

        Sales and distribution channels are critically important to our business model. As we work to develop stronger relationships with our current channel partners, we are also seeking new and

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alternative methods to expand our sales channels. One of our key areas of focus is enhancing our e-business solutions to allow customers to purchase original equipment, spares and parts on-line.

        We are also seeking new distribution partners to expand our product offerings into adjacent markets.

Continue to develop new products to enhance our customers' production capabilities:

        We believe the breadth of our product offerings is a competitive advantage that allows us to offer more highly engineered content to customers, particularly on large capital investments that may require multiple components, skidded systems, or automated solutions. We invested approximately $20.0 in research and development during 2014 and are committed to continuing to invest in our product portfolio and expanding into adjacent and complementary technologies.

Expand into adjacent industries, product categories and geographies and selectively pursue acquisitions:

        We intend to leverage our existing end market platforms to not only increase current and new customer penetration, but also to expand into adjacent product categories.

        A disciplined approach to acquisitions is an important part of our growth strategy. We believe that we have created a strong base business and are well-positioned to take advantage of the high level of fragmentation in the flow control and adjacent markets. We have created a thoughtful and stringent framework for evaluating potential acquisitions, joint ventures and minority interest investment opportunities with a particular focus on opportunities that (a) strengthen our existing businesses, (b) expand our product offerings and technological know-how, and/or (c) provide access to new customers from the standpoint of end markets and/or geographies.

Improving Operating Efficiency:

Maintain a disciplined approach to project selection:

        Throughout our business, we have implemented a more disciplined approach to project selection that prioritizes strategic growth and aftermarket annuity streams and also better assesses project risk. We are focusing on new system and product opportunities in higher-growth end market applications. Through disciplined project selection, we have built a more strategic backlog, experienced improved operational execution and are gaining important aftermarket service opportunities.

Continuous operational improvement:

        We strive to continuously improve our operational performance to drive higher customer satisfaction and internal productivity. At the end of 2013, we established a centralized global manufacturing team responsible for driving continuous improvement across our business. As part of this effort, our global manufacturing operations team implemented a scorecard with a consistent set of operating metrics such as on-time delivery, quality, cycle times and safety. This enables us to quickly identify areas of opportunity to improve our operating efficiency. We also have a centralized team of experienced operational experts that we can deploy to help drive operational improvement.

        We believe there is significant potential to drive continuous improvement throughout our organization by focusing on lean principles and value engineering. We have also experienced success by sharing best practices throughout our broader organization.

        Additionally, we continue to work to rationalize our ERP systems in effort to further standardize systems across the organization. We also plan to focus on improving working capital utilization, with a specific emphasis on accounts receivable and inventory turnover rates.

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Expand our configured-to-order approach:

        In conjunction with our lean initiatives, we are driving our engineering and commercial teams to capture business that leverages existing engineering designs and manufacturing work flows. This involves pursuing orders that allow our business to reuse the high level of quality engineering involved in designing our products and systems. Our goal is to separate our design and manufacturing processes into modular, repeatable segments. This allows us to leverage the repeatability of common elements in the design and manufacturing process, while also allowing for the customization often required to meet our customers' needs across various stringent applications.

        By driving a configured-to-order approach, we intend to achieve higher efficiency in our engineering and manufacturing operations, more reliable production schedules, better predictability in our supply needs and shorter lead times on delivery to our customers.

Optimize our global footprint through localization and rationalization:

        We have significantly reduced our cost structure through previous restructuring actions. We believe there is significant potential to further optimize our global footprint. We are focused on expanding our global presence in higher growth regions of the world and utilizing lower-cost manufacturing and sourcing opportunities to further reduce our cost structure and remain competitive in the markets we serve.

        We continue to analyze our global footprint and believe there are opportunities to migrate our operations to lower cost regions where we already have successful operations. As part of this initiative, we have purchased land in Bydgoszcz, Poland on which we plan to construct a 300,000 square foot facility. Over the next few years, we intend to shift operations currently in several high cost regions into this new facility in Poland.

        In emerging regions where we see strong potential to sell our products and services, we are working to localize our operations, including our operations in South Korea, China and India.

Leverage global supplier relationships:

        Only approximately 30% of our total sourcing spend is concentrated in enterprise-wide programs. We believe there is a significant opportunity to leverage our global supplier relationships.

Competition

        The markets we serve are highly competitive and fragmented throughout the world. Our competitors are diverse, ranging from large multi-nationals to regional and local companies. Our principal global competitors include Alfa Laval AB, Flowserve Corporation, GEA Group AG, IDEX Corporation, ITT Gould Pumps, Sulzer Ltd., and Tetra Pak International S.A. We do not have any one competitor with the same product offering, nor do we have any one competitor which serves the same end markets.

        Our ability to compete effectively depends on a variety of factors including breadth of product offering, product quality, engineering strength, brand reputation, lead-times, ability to deliver on-time, global capabilities, service capabilities, and cost position. As many of our products are sold through distributors and independent representatives, our success also depends on building and partnering with a strong channel network.

Raw Materials

        We purchase a wide variety of raw materials, including steel, titanium, copper, nickel and petroleum-based products. Where appropriate, we may enter into long-term supply arrangements or

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fixed-cost contracts to lower the overall cost of raw materials. In addition, due to our diverse product and service offering, as well as the wide geographic dispersion of our production facilities, we use numerous sources for the raw materials needed in our operations. However, we are not significantly dependent on any one supplier or a limited number of suppliers. Lastly, we continue to centralize certain aspects of supply chain management in an effort to ensure adequate materials are available for production at the lowest possible cost.

Intellectual Property

        We own approximately 170 domestic and 110 foreign patents 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.

Employees

        At December 31, 2014, we had approximately 8,000 employees. Less than 1% of our U.S. employees are covered under collective bargaining agreements, while certain of our non-U.S. employee groups are covered by various collective labor arrangements.

Environmental Matters

        We are subject to domestic and international environmental protection laws and regulations with respect to our business operations and are operating in compliance with, or taking action aimed at ensuring compliance with, these laws and regulations. We believe our compliance obligations with environmental protection laws and regulations should not have a material effect, individually or in the aggregate, on our financial position, results of operations or cash flows.

Legal Matters

        We are subject to litigation matters that arise in the normal course of business. We believe these matters are either without merit or of a kind that should not have a material effect individually or in the aggregate on our financial position, results of operations or cash flows.

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. We place particular emphasis on the development of new products that are compatible with, and build upon, our manufacturing and marketing capabilities. We expensed $19.8, $17.7 and $18.1 in 2014, 2013 and 2012, respectively, of research activities relating to the development and improvement of our products.

Seasonality

        Certain of our businesses have seasonal fluctuations. Demand in the oil and gas aftermarket is typically stronger in the second half of the year. Demand for food and beverage systems and related services are highly correlated to timing of large construction contracts, which may cause significant fluctuations in our financial performance from period to period. In aggregate, our businesses generally tend to be stronger in the second half of the year.

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MANAGEMENT

Our Executive Officers

        The following table sets forth information regarding individuals who are currently expected to serve as our executive officers, including their positions, after the spin-off.

Name
  Age   Position

Christopher J. Kearney

    60   Chairman, President and Chief Executive Officer

Jeremy W. Smeltser

    40   Vice President and Chief Financial Officer

Stephen A. Tsoris

    57   Vice President, Secretary, and General Counsel

Robert B. Foreman

    58   Executive Vice President

David A. Kowalski

    57   President, Global Manufacturing Operations

J. Michael Whitted

    43   Vice President, Corporate Development

Marc G. Michael

    51   President, Food and Beverage

Anthony A. Renzi

    66   President, Power and Energy

David J. Wilson

    46   President, Industrial

        Christopher J. Kearney will be Chairman, President, and Chief Executive Officer of Flowco. He is currently Chairman, President, and Chief Executive Officer of SPX. He was named President and Chief Executive Officer in December 2004, and added the title of chairman in May 2007. He joined SPX in February 1997 as Vice President, Secretary and General Counsel. Prior to joining SPX he was Senior Vice President and General Counsel of Grimes Aerospace Company, a leading manufacturer of aircraft lighting equipment, engine system components and electronic systems. His business experience also includes positions at Borg-Warner Chemicals as senior attorney and senior counsel at General Electric's global materials business. Mr. Kearney holds an undergraduate degree from the University of Notre Dame and a law degree from DePaul University Law School. Mr. Kearney is, and following the spin-off transaction expects to continue to be, a director of SPX. In addition, he serves on the Board of Directors of Nucor Corporation and Polypore International, Inc. Mr. Kearney is a member of the Advisory Council for University Libraries, University of Notre Dame, and serves on the Board of Directors of the Foundation for the Carolinas.

        Jeremy W. Smeltser will be Vice President and Chief Financial Officer of Flowco. He currently serves in these roles for SPX. Previously he served in various roles for SPX, most recently as Vice President and Chief Financial Officer, Flow Technology, and became an officer of SPX in April 2009. He joined SPX in 2002 from Ernst & Young LLP, where he was an audit manager in Tampa, Florida. Prior to that, he held various positions with Arthur Andersen LLP, in Tampa, Florida, and Chicago, Illinois, focused primarily on assurance services for global manufacturing clients.

        Stephen A. Tsoris will be Vice President, Secretary and General Counsel of Flowco. He has served in these roles for SPX since April 2015. Mr. Tsoris joined SPX in 2008 as the assistant general counsel, corporate development, where he played a major role in many significant acquisitions, divestitures and strategic ventures. Prior to joining SPX, he was a partner at Gardner Carton & Douglas LLP where in addition to working with a wide spectrum of clients across many industries, he supported SPX on over fifty M&A transactions. He holds a bachelor's degree in political science and economics from Marquette University, and earned his JD degree from Cornell Law School.

        Robert B. Foreman will be Executive Vice President of Flowco. He currently serves as Executive Vice President, Human Resources and Asia Pacific, a role to which he was appointed in December 2005 and Executive Vice President, Global Business Systems and Services, to which role he was appointed in June 2008. He joined SPX in April 1999 as Vice President, Human Resources and an officer of the company. Previously, he spent 14 years with PepsiCo, most recently serving as Vice President Human Resources for Frito Lay International.

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        David A. Kowalski will be President, Global Manufacturing Operations, of Flowco, a role in which he has served since August 2013. Since August 2011, he also has served as President of the SPX Industrial Products group of businesses. He joined SPX in 1999 as the Vice President and General Manager of Tools and Equipment at Service Solutions and was named President of Service Solutions in 2004. He became the segment President, Test and Measurement, and an officer of the company in August 2005. Before joining SPX, he held positions with American National Can Company, J.I. Case, Picker International and Warner Swasey.

        J. Michael Whitted will be Vice President, Corporate Development, for Flowco, a role in which he has served at SPX since joining the company. He currently serves as Vice President, Corporate Development, for SPX Corporation. He joined SPX Corporation in June 2001 and became an officer of the company in April 2009. Prior to joining SPX Corporation, Mr. Whitted was a Vice President at Bear Stearns and held a series of positions with investment banking firms, including CIBC World Markets and Bankers Trust.

        Marc G. Michael will be President, Food and Beverage of Flowco. He currently serves as President, Flow Technology—Food and Beverage of SPX, and was appointed an officer of the company in December 2014. He joined SPX Corporation in 2003 and prior to his current position, held various senior positions within the company, including President of the company's global evaporative and dry cooling businesses and President of Flow Technology's EMEA region. Prior to joining SPX Corporation, Mr. Michael held positions at General Electric and TDK Corporation.

        Anthony A. Renzi will be President, Power and Energy of Flowco. He currently serves as President, Flow Technology—Power and Energy of SPX, and was appointed an officer of the company in December 2014. He joined SPX Corporation in 2003 and prior to his current position, he held various senior positions within the company, including President, SPX Dehydration and Filtration; President, SPX Process Equipment; President, APV; Senior Vice President, Global Operations; and President, Flow Technology—Clyde Union and Americas region. Prior to joining SPX Corporation, Mr. Renzi held positions at James Burn International, Clopay, Breed Technologies, Sundstrand and General Electric.

        David J. Wilson will be President, Industrial of Flowco. He currently serves as President, Flow Technology—Industrial, of SPX and was appointed an officer of the company in December 2014. He joined SPX Corporation in 1998 and prior to his current position, he held various senior positions within the company, including President, Asia Pacific region for both Flow Technology and the company's Service Solutions business, and Vice President, Business Development for the Thermal Equipment and Services segment. Prior to joining SPX Corporation, Mr. Wilson held operating and engineering leadership positions at Polaroid Corporation.

Our Board of Directors

        Although we have not yet finalized the composition of our Board following the spin-off, we expect that Mr. Kearney will serve as the Chairman of the Board. We will select the remaining members of our Board prior to the spin-off and information concerning each member, such as biographies and the qualifications and experience each person would bring to our Board, will be included in an amendment to this information statement. As of the date of the distribution, our Board will consist of [·] members, of whom [·] will meet applicable regulatory and exchange listing independence requirements.

Structure of the Board of Directors

        We have not yet finalized the structure of our Board following the spin-off. A description of the structure of our Board will be included in an amendment to this information statement.

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Governance Principles

        Our Board expects to adopt governance principles that meet or exceed the rules of the NYSE. The full text of the governance principles will be posted on our website at [·].

Director Qualification Standards

        Our corporate governance guidelines will provide that the Nominating and Corporate Governance Committee is responsible for reviewing with our Board the appropriate skills and characteristics required of Board members in the context of the makeup of the Board and developing criteria for identifying and evaluating Board candidates.

        We will establish the limit on the number of public company board memberships for our directors at [·], including Flowco. We will also require Board candidates to disclose any outside compensation for serving as a director of Flowco, as well as any outside compensation received for serving as a director of any other public company.

Committees of Our Board

        Following the spin-off, the standing committees of our Board will include an Audit Committee, a Compensation Committee, and a Nominating and Corporate Governance Committee, each as further described below. Following our listing on the NYSE and in accordance with the transition provisions of the rules of the NYSE applicable to companies listing their securities in conjunction with a spin-off transaction, each of these committees will, by the date required by the rules of the NYSE, be composed exclusively of directors who are independent. Other committees may also be established by our Board from time to time.

        Audit Committee.    We expect our Board will select the directors who will serve as members of the Audit Committee, all of whom will be independent and at least one of whom will be a financial expert within the meaning of the NYSE rules. The Audit Committee's responsibilities will include, among other things:

    Appointing, retaining, overseeing, and determining the compensation and services of our independent auditors.

    Overseeing the quality and integrity of our financial statements and related disclosures.

    Overseeing our compliance with legal and regulatory requirements.

    Assessing our independent auditors' qualifications, independence and performance.

    Monitoring the performance of our internal audit and control functions.

        The responsibilities of our Audit Committee, which we anticipate will be substantially similar to the responsibilities of SPX's Audit Committee, will be more fully described in our Audit Committee charter. We will post the Audit Committee charter on our website at [·]. By the date required by the transition provisions of the rules of the NYSE, all members of the Audit Committee will be independent and financially literate. Further, at least one of the members of the Audit Committee will possess accounting or related financial management expertise within the meaning of the rules of the NYSE and qualify as an "audit committee financial expert" as defined under the applicable SEC rules.

        Compensation Committee.    We expect our Board will select the directors who will serve as members of the Compensation Committee, all of whom will be independent. The Compensation Committee's responsibilities will include, among other things:

    Providing recommendations to the Board regarding compensation matters.

    Overseeing our incentive and compensation plans.

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        The responsibilities of the Compensation Committee, which we anticipate will be substantially similar to the responsibilities of the SPX Compensation Committee, will be more fully described in our Compensation Committee charter. We will post the Compensation Committee charter on our website at [·]. Each member of the Compensation Committee will be a non-employee director, and given the relative size of our Board, there will be no prohibition against Compensation Committee interlocks involving any of the projected members of the Compensation Committee.

        Nominating and Corporate Governance Committee.    We expect our Board will select the directors who will serve as members of the Nominating and Corporate Governance Committee, all of whom will be independent. The Nominating and Corporate Governance Committee's responsibilities will include, among other things:

    Actively identifying individuals qualified to become Board members.

    Recommending to the Board the director nominees for election at the next Annual Meeting of Stockholders.

    Making recommendations with respect to corporate governance matters.

        We expect that directors will have to inform the Chairman of the Board and the Chair of the Nominating and Corporate Governance Committee in advance of accepting an invitation to serve on another public company board. In addition, we expect to provide that no director may sit on the Board, or beneficially own more than 1% of the outstanding equity securities, of any of our competitors in our principal lines of business.

        The responsibilities of the Nominating and Corporate Governance Committee, which we anticipate will be substantially similar to the responsibilities of SPX's Nominating and Corporate Governance Committee, will be more fully described in our Nominating and Corporate Governance Committee charter. We will post the Nominating and Corporate Governance Committee charter on our website at [·].

Director Independence

        We expect that a majority of our Board will meet the criteria for independence as defined by the rules of the NYSE.

        We expect that our Board will determine the independence of directors annually based on a review by the directors and the Nominating and Corporate Governance Committee. In determining whether a director is independent, we expect that the Board will determine whether each director meets the objective standards for independence set forth in the rules of the NYSE.

Meetings of Independent Directors

        We expect that the independent directors will have the opportunity to meet without management present at regularly scheduled meetings. A Lead Director will preside at the meetings of the independent directors.

Risk Oversight

        Our Board will take an active role in overseeing the risk management of Flowco with a focus on the most significant risks facing Flowco. The Board's oversight of risk management will be designed to support the achievement of our strategic objectives and increase shareholder value. A fundamental part of risk management for Flowco will be not only understanding the risks that are faced by Flowco and the steps necessary to manage those risks, but also understanding what level of risk is appropriate for Flowco. We expect that our Chairman, President and Chief Executive Officer, Chief Financial Officer and other members of senior management will regularly evaluate and report to the Board on significant

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risks facing Flowco. In addition, we expect that each Committee of the Board will also be responsible for assessing the risk exposure related to its specific area. We expect that the Committees will discuss matters of interest with our senior management, including matters related to our corporate governance and our code of conduct, and report to the full Board, as appropriate, including when a matter rises to the level of a material or enterprise level risk.

Codes of Business Conduct

        We expect that our Board will adopt a code of business conduct substantially similar to SPX's Code of Business Conduct that will apply to all our directors, officers and employees worldwide, including our principal executive officer, principal financial officer, controller, treasurer and all other employees performing a similar function. We will maintain a copy of our code of business conduct, including any amendments thereto and any waivers applicable to any of our directors and officers, on our website at [·].

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EXECUTIVE COMPENSATION

Compensation Discussion and Analysis

        Flowco is currently a wholly owned subsidiary of SPX. Additionally, Flowco's Compensation Committee has not yet been formed.

        The following pages describe SPX's executive compensation program and the compensation decisions made by the SPX Compensation Committee for the persons expected to be our named executive officers ("NEOs"), listed below.

NEO
  Title
Christopher J. Kearney   Chairman, President and Chief Executive Officer
Jeremy W. Smeltser   Vice President and Chief Financial Officer
Robert B. Foreman   Executive Vice President
J. Michael Whitted   Vice President, Corporate Development
David A. Kowalski   President, Global Manufacturing Operations

        Each of the NEOs was an officer, and each of Messrs. Kearney, Smeltser, Foreman, and Whitted were named executive officers, of SPX in 2014. This Compensation Discussion and Analysis describes the historical compensation practices of SPX and sets forth the anticipated executive compensation structure of Flowco following the spin-off. Flowco has discussed its anticipated compensation programs with the SPX Compensation Committee, but the Flowco Compensation Committee will have authority with respect to its compensation structure following the spin-off.

Executive Compensation Philosophy

        SPX follows, and we expect to follow, these guiding principles when designing and setting compensation for NEOs:

    Compensation should reward performance;

    Compensation should align the interests of our NEOs with those of our long-term stockholders;

    Compensation should support our business and human capital strategies; and

    Compensation should attract, motivate and retain quality NEOs.

Executive Compensation Practices

        The following list of practices followed and avoided is based on practices followed and avoided by SPX, and we intend to continue to employ them. See 2015 Compensation Changes, below, for a

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discussion of certain changes to 2015 compensation, which compensation we expect to differ from other years due to the spin-off.

Practices We Intend Follow

   

Pay for Performance

 

We expect to tie pay to performance. The significant majority of executive pay is not expected to be guaranteed. We expect that our bonuses will initially demand improvement in operating profit and/or margins and correspondingly strong cash performance. SPX equity awards to NEOs require the achievement of performance targets in order to vest and we expect that our equity awards to NEOs will provide similar incentives.

Reasonable Perquisites

 

We expect to have reasonable perquisites and pay no tax gross-ups related to perquisites.

Independent Compensation Advisor

 

We expect to retain an independent compensation advisor. This advisor will work directly for our Compensation Committee and the Nominating and Governance Committee, and will perform no other work for us except, at the direction of the relevant committee, work with management on executive officer and director compensation design.

Review Tally Sheets

 

We expect to review compensation tally sheets for our NEOs at least annually.

Mitigate Undue Risk

 

We expect to mitigate undue risk associated with compensation, by capping potential payments and employing multiple performance targets and robust Board and management processes to identify risk. We do not believe any of our pay programs will create risks that will be reasonably likely to have a material adverse impact on our company.

Stringent Share Ownership Guidelines

 

We expect to have a stringent share ownership policy, to which all NEOs will be subject.

Practices We Intend to Avoid

 

 

280G Excise Tax Gross-Ups

 

We do not plan to offer 280G excise tax gross-ups to any of our employees.

Hedging

 

We do not plan to permit our employees, including our NEOs, to hedge against fluctuations in our stock value or engage in short sales relating to our stock.

Other Practices We Intend to Avoid

 

Multi-year guarantees for salary increases;

Non-performance-based bonuses;

Excessive non-performance-based long-term incentive awards;

Inclusion of long-term equity awards in the pension calculation;

Bonus payouts without justifiable performance linkage or proper disclosure;

Discretionary bonuses; and

Performance goals that are too easily achievable or based on negative earnings.

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Compensation Practices Discussion

        Each of the below practices is followed by SPX. In each case we expect to follow similar practices.

        SPX does and we expect to tailor compensation to the business and competitive environment because for each of us success depends on our ability to attract and retain experienced and proven leaders and to motivate them to deliver superior results.

        As is the case with SPX, we expect the proportion of incentive-based pay to increase along with responsibility and authority. For our senior-level management, and in particular for our NEOs, we expect a significant majority of direct compensation (salary, bonus, and equity awards) to be incentive-based.

        At SPX, bonuses are based on operating performance, and we expect that will be the case at Flowco. Equity awards are and we expect will be designed to reward increased stock price and aid in retention. SPX does and we intend to design both cash bonuses and equity awards to align employee interests with those of stockholders, as well as to offer each NEO an appropriate level of perquisites and post-employment benefits.

        NEO performance at SPX is, and we expect at Flowco will be, judged primarily by reference to performance of the applicable company as a whole. Additional, subjective assessments will be made, including direct assessments of performance, formal talent assessment reviews, and assessments of adherence to our values. Our Compensation Committee also intends to review tally sheets setting forth total compensation and walk-away values at least annually, and to establish and approve all elements of compensation for our CEO based on input from and conversations with management and our Compensation Committee's independent compensation advisor, as well as its own assessments.

    Role of Management, the Independent Compensation Advisor and the Selection of a Peer Group

        The most significant aspects of management's role in the SPX compensation-setting process are, and we expect our management's role will be, as follows:

    The human resources, finance and legal departments prepare materials for the compensation committee, as will the independent compensation advisor.

    The CEO will provide his evaluation of the performance of each of the other NEOs and offers recommendations regarding their salary levels, bonus targets and equity awards. These recommendations are reviewed with the compensation committee's independent compensation advisor and then submitted to our compensation committee for review, discussion, and approval.

    Management will prepare and recommend business performance targets and objectives.

        The SPX Compensation Committee's independent compensation advisor is working with the SPX Compensation Committee to prepare a list of peer companies against which we will benchmark our executive officer and director compensation. We are building the peer group to comprise companies as a group similar to Flowco in size and other characteristics and companies that we typically compete against for talent. Factors considered in determining the peer group include revenues, market capitalization, total assets, and employee count. In addition, our peer group will include many companies with similar end-market characteristics. Our Compensation Committee will set our peer group after it is appointed.

        SPX does and we expect to consider competitive compensation of other companies for comparative purposes. We do not expect to target specific benchmark percentiles. The comparative analysis is just one of several tools we plan to use to set compensation. We may award compensation outside the target levels for reasons including market forces, company or individual performance,

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longevity of contribution to the company, existing contractual obligations, and differing levels of responsibility and value created by officers with the same or similar title.

2014 Compensation

        The below discussion relates to decisions made by the SPX Compensation Committee in connection with compensation of the NEOs.

Base Salary

        Base salary is designed to offer competitive base income. In setting base salary, SPX considers the salary and total compensation market data in the context of the NEO's role and responsibilities, experience and tenure, internal equity considerations, individual performance and contribution to SPX results.

        At the beginning of 2014, Messrs. Kearney, Foreman, Smeltser, Whitted and Kowalski received salary increases of, respectively, 2.6%, 2.7%, 4.2%, 4.3% and 3.7%, in recognition of each officer's agreement to reduce perquisites and benefits. Effective March 31, 2014, Messrs. Kearney, Foreman, Smeltser, Whitted and Kowalski received additional salary increases of, respectively, 2.9%, 2.9%, 9.6%, 2.9% and 2.9%, in line with SPX's view of increases at peer companies, and also in line with increases granted to its other employees.

Bonuses

    Targets

        SPX sets target bonus at a percentage of year-end salary. It increases this percentage as the employee's responsibilities and authority increase to help ensure that those most able to impact company performance have the greatest percentage of their total compensation tied to company performance.

        Target bonuses for NEOs were unchanged for 2014, with targets of 130% of salary for SPX's CEO, 100% for Mr. Foreman, and 80% for each of Messrs. Smeltser, Whitted and Kowalski.

    Bonus Awards

        NEO bonuses at SPX are paid by reference to the metrics under the SPX Executive Bonus Plan, the plan under which it pays bonuses to its other executives.

        The Executive Bonus Plan at SPX pays bonuses ranging from 0% to 200% of target bonus by reference to one or more metrics. The threshold for at least one metric must be met in order for any bonus to be paid. If only one metric threshold is met, total potential payout is limited to 50% of target bonus.

        The chart below shows the 2014 threshold, target, and stretch goals at SPX for each of the relevant metrics, actual results, and the resultant percentage of target bonus.

($ Millions)
Metric
  Threshold   Target   Stretch   Actual   Bonus %  

Corporate

                               

Bonus Operating Margin

    7.8 %   8.3 %   8.8 %   8.74 %   194 %

Bonus Free Cash Flow

  $ 188   $ 228   $ 268   $ 305        

Industrial

                               

Bonus Operating Income

  $ 153.6   $ 189.7   $ 226.0   $ 145.1     25.4 %

Bonus Free Cash Flow Conversion

    80 %   100 %   120 %   100.3 %      

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        The chart below details how SPX determined bonus amounts for each NEO.

 
  2014 Year-End
Salary
  Target Bonus, as
Percentage of
Salary
  Percentage of
Target Bonus
Payable Based on
2014 Performance
  Bonus
Amount
 

Christopher J. Kearney

  $ 1,224,800     130 %   194 % $ 3,088,946  

Jeremy W. Smeltser

  $ 571,200     80 %   194 % $ 886,502  

Robert B. Foreman

  $ 840,050     100 %   194 % $ 1,629,697  

J. Michael Whitted

  $ 525,900     80 %   194 % $ 816,197  

David A. Kowalski

  $ 613,450     80 %   109 % $ 538,364  

    Bonus Metrics

        SPX requires year-over-year improvement in operating performance and correspondingly strong cash flow performance for bonuses to be paid. SPX believes that setting targets to require improvement over the prior year's performance is appropriate and ties pay to performance.

        For Corporate employees at SPX, SPX uses Bonus Operating Margin and Bonus Free Cash Flow as the performance metrics. Combined, these metrics are designed to reward improving performance through effective management of profitability and expenses and appropriate focus on quality of earnings and the efficient use of capital. Further, these metrics align with SPX's public communications and internal business goals. SPX believes they are transparent, understandable and consistent with compensation plans at other industrial companies. In 2014, as it has every year since 2005, SPX required improvement over the prior year's operating margin performance to receive any bonus based on that metric, and an improvement of 50 basis points over the prior year's operating margin performance (as restated to reflect acquisitions or dispositions) to reach the target bonus.

        Items are excluded to eliminate factors beyond the control of SPX employees in the measurement year, to focus SPX employees, including NEOs, on controllable operating performance, and to eliminate possible disincentives to act in the best interest of stockholders. For example, the disposition of a non-core business may be expected to have long-term benefits, but the loss of profits and cash flow from the business may result in lower bonuses in the year in which the business was sold. Accordingly, these numbers are adjusted in the calculation of SPX bonuses.

        For 2014, Bonus Operating Margin represented adjusted operating income divided by net revenues, and adjusted operating income represented operating income excluding stock-based compensation expense, pension and post-retiree medical expense or income, non-cash asset impairments, certain profits or losses on acquisitions or dispositions and related activities, certain legal reserves and settlements, and other similar items, as approved by the SPX Compensation Committee.

        Bonus Free Cash Flow represented Bonus Operating Cash Flow less capital expenditures. Bonus Operating Cash Flow represented operating cash flow from continuing operations, plus or minus pension and post-retiree medical funding requirements in excess of or less than the related expense, minus deferred and amortized cash investments in our headquarters facility, certain operating cash activity associated with acquisitions or dispositions and related activities, and other similar items, as approved by the SPX Compensation Committee.

        The Industrial Products and Services businesses' operating results metric was Bonus Operating Income. The cash flow metric was Bonus Free Cash Flow Conversion for the Industrial Products and Services businesses. Combined, these metrics are designed to reward improving performance by managing profitability and expenses and encouraging focus on quality of earnings and the efficient use of capital. Further, these metrics align with our public communications and internal business goals. We believe they are transparent, understandable and consistent with compensation plans at other industrial companies.

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        Bonus Operating Income for the Industrial Products and Services businesses represented operating income, excluding minority interest (if applicable) and amounts accrued for bonuses. We do not generally exclude the effects of restructuring actions when calculating Bonus Operating Income, except that we do exclude any restructuring charges associated with the integration of newly acquired businesses. We also exclude costs associated with certain research and development activity from the calculation of Industrial Products and Services businesses' bonus. The elimination of costs associated with certain research and development activity is related to our corporate-led innovation initiative. Under this initiative, corporate-level management provided certain incentives to encourage the rapid development of what it deems to be the most promising research and development projects, representing a small portion of our total research and development projects and spending. These incentives included, for bonus calculation purposes, deferring development costs for selected innovation investments and amortizing development costs in a manner designed to track commercialization of the projects and other similar items, subject to SPX Compensation Committee approval.

        For the Industrial Products and Services businesses, Bonus Cash Flow Conversion represented Bonus Free Cash Flow divided by Bonus Operating Income. Bonus Free Cash Flow represented Bonus Operating Cash Flow less capital expenditures. The Bonus Operating Cash Flow metric was operating income, plus depreciation and amortization, plus or minus changes in working capital, but excluding the change in amounts accrued for bonuses, amounts related to adjustments of Bonus Operating Income, certain operating cash activity associated with acquisitions or dispositions, and other similar items, subject to SPX Compensation Committee approval.

Equity-Based Awards

        In 2014, two-thirds of the value of the restricted stock awards to SPX NEOs was in the form of external metric stock, and one-third was in the form of internal metric stock. Between 0% and 125% of the external performance metric award may vest based on the annualized three-year performance of SPX total shareholder return ("TSR") against the S&P 1500 Industrials TSR. The triggers for vesting are set forth in the below table.

Annualized Shareholder Return Performance During the Measurement Period
  Restricted Stock Vesting

Below Threshold:

   

More than 9% below S&P 1500 Industrials TSR

  0

Threshold:

   

9% below S&P 1500 Industrials TSR (approximates historical performance at 25th percentile)

  25% of target payout

Target:

   

Equal to S&P 1500 Industrials TSR

  Target payout

Maximum:

   

6% above S&P 1500 Industrials TSR (approximates historical performance at 65th percentile)

  125% of target payout

        Internal metric stock grants are subject to performance vesting designed to qualify the equity award for deductibility under Section 162(m) of the Internal Revenue Code ("Rule 162(m)"), and uses the same trigger applicable under the 162(m) Plan (as defined later). In each of 2013 and 2014, the target was met, qualifying each tranche of internal metric stock granted in that year for vesting, subject to the employee being employed at the vesting date.

        Annual grants of equity prior to 2013 had three tranches. The tranches vested in equal amounts over three years, but only if SPX total stockholder return exceeded the S&P 500 for the prior year or for the cumulative period since the grant date. Any tranche that did not vest within three years was forfeited.

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        One tranche granted prior to 2013 was eligible for vesting at the end of 2014—the third tranche of the 2012 awards. This tranche did not vest because SPX did not outperform the relevant index in either of 2014 or the three-year measurement period. Accordingly, NEOs forfeited this tranche, together with accrued dividends on the forfeited shares.

        In 2014, stock award values for SPX officers were increased in response to significant progress on key company strategic and capital initiatives, key examples of which are cited above. Mr. Kearney's award value was set at $6.65 million, Mr. Foreman's award value was set at $2.05 million, Mr. Whitted's award value was set at $1.43 million and the award for each of the other SPX NEOs was set at $1.55 million. The number of shares actually awarded is calculated based on the average stock price over the 30 days prior to the stock award and, accordingly, values reported in the Summary Compensation Table may vary from the above amounts.

        SPX designs equity awards to promote long-term stock ownership and expose senior-level management to the risks and rewards faced by long-term stockholders. Because the majority of equity awarded to NEOs vests over three years, and only if the TSR of SPX stock performs acceptably against a major stock index, it also has significant employee retention value and continues to tie the interests of NEOs to those of SPX stockholders even after it is awarded. Grants of performance-based restricted stock are the most significant component of SPX NEOs' direct compensation opportunity.

Equity Awards Practices

        We expect to conduct a full review of executive compensation, including equity awards, at least annually. In each of the last three years, SPX equity awards were reviewed and approved late in the prior year and granted on the first trading day of the award year.

        Dividends with respect to any shares of unvested SPX restricted stock are deposited in the SPX NEO's name in an escrow or similar account maintained by SPX for that purpose. The SPX NEO receives these dividends only if and when the related shares of equity vest. Dividends are forfeited if the equity on which those dividends were paid is forfeited.

        In the event of retirement, termination by SPX without "cause" or voluntary termination by the executive for "good reason" (each as defined in the applicable award or employment agreements), unvested restricted stock will remain subject to the original performance requirements and vesting schedule.

        The SPX Compensation Committee also has made special grants during the course of the year, primarily for new hires, for promotions, to retain valued employees or to reward exceptional performance. These special grants may be subject to performance or time vesting, and are issued on the date of grant or upon a date certain following the grant date, such as the date on which a new hire commences employment.

        SPX granted no stock options in 2014.

Other Benefits and Perquisites

        SPX provides perquisites to attract and retain executives in a competitive marketplace, at a level the SPX Compensation Committee believes is generally consistent with market practices of its peer group and other comparable public industrial manufacturing companies. See the Summary Compensation Table and accompanying footnotes for a full listing of benefits and perquisites. SPX does not provide tax gross-up payments for perquisites. It is expected that Flowco will also not provide tax gross-up payments for perquisites.

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        In connection with the relocation of its headquarters to Charlotte, North Carolina in 2002, all SPX's then-employees who relocated, including Mr. Foreman, were eligible to receive interest-free, 20-year relocation loans to finance the purchase of a principal residence. Mr. Foreman received a loan in the amount of $1.5 million. SPX has not made any relocation loans to officers since 2002.

        SPX's CEO may utilize its aircraft for personal travel for himself and his family. Other SPX NEOs may be permitted personal use of the aircraft for themselves and their families if approved by the SPX CEO. SPX believes this benefit enhances security for its officers and allows them to devote more time to SPX business. SPX reports the value of any NEO personal use of corporate aircraft as ordinary taxable income and as compensation in the Summary Compensation Table.

Retirement and Deferred Compensation Plans

        The SPX NEOs participate in the SPX Corporation Supplemental Retirement Plan for Top Management (the "TMP"). Some of the NEOs are also participants in the SPX US Pension Plan (formerly named the SPX Corporation Individual Account Retirement Plan) (the "IARP") and the SPX Corporation Supplemental Individual Account Retirement Plan (the "SIARP").

        Effective March 10, 2014, changes to the termination provisions of the TMP, SIARP, & SRSP (as defined below) were made to bring them in line with the benefits provided under the NEOs' change in control agreements.

        The SPX executive retirement program plays a key role in attracting and retaining executive talent. The TMP is the most significant element of this program and has been in place since October 22, 1985. Messrs. Kearney and Foreman have credited service in the TMP since 1997 and 1999, respectively. In each of 2005 and 2009, SPX reduced benefits provided by the TMP for new participants. Changes in 2005 included a reduced benefit, longer accrual period, higher early retirement age and reduction factor, and a 50% survivorship benefit. Changes in 2009 included a longer accrual period than required for earlier participants and required five years of service as an officer before vesting. The Summary Compensation Table and the Pension Benefits table, and their accompanying footnotes, provide further information concerning the annual increase in benefit value, accrued benefits and other terms of the TMP, IARP and SIARP. Retirement benefits payable upon an SPX NEO's termination of employment are quantified and described in "Potential Payments Upon Termination or Change-in-Control."

        SPX NEOs and other senior-level management are eligible to participate in the SPX Corporation Retirement Savings and Stock Ownership Plan (the "401(k) Plan") and the SPX Corporation Supplemental Retirement Savings Plan (the "SRSP"), a non-qualified deferred compensation plan that permits voluntary deferrals of base salary and annual bonuses. See the Nonqualified Deferred Compensation in 2014 table and accompanying narrative and footnotes for more information regarding these plans.

Termination and Change-in-Control Provisions

        SPX designs termination and change-in-control contractual provisions to be competitive at the time it enters into an agreement. As a result, its agreements have changed over time, with newer agreements generally offering reduced payments and increased vesting obligations.

        In December, 2013, each of SPX's executive officers including the NEOs voluntarily agreed to amend and restate his change of control agreement to, among other things:

    Eliminate the payment of excise tax gross-ups in the event of a change of control.

    Revise the definition of a "change of control" to increase the ownership threshold at which a change of control will be deemed to take place to 25%;

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    Require consummation of a business combination (rather than only shareholder approval) to trigger a change of control; and

    Eliminate the right of the executive officer to trigger change of control payments if he terminates his employment "for any reason" following a change of control.

        SPX's severance arrangements are designed to protect stockholder interests by stabilizing management during periods of uncertainty. Additionally, executives often assign significant value to severance agreements because they provide compensation for lost professional opportunities in the event of a change in control.

        Severance agreements also can be a powerful tool to discourage entrenchment of management, in that severance agreements can offset the risk of financial and professional loss that management may face when recommending a sale to or merger with another company. SPX's severance arrangements are structured to serve the above functions, which differ, and are perceived by recipients to differ, from pay for performance. Accordingly, decisions relating to other elements of compensation have minimal effect on decisions relating to existing severance agreements.

        In the case of a change in control, the NEOs become immediately vested in all previously granted unvested SPX restricted stock, including shares subject to performance vesting at the target level of vesting. This feature is designed to be equitable in the event of dismissal without cause or resignation for good reason, and SPX believes it is appropriate in the event of termination following a change in control.

        It is expected that we will assume the severance agreement of each of the NEOs.

        Termination and change-in-control agreements are further discussed and quantified in "Potential Payments Upon Termination or Change-in-Control."

2015 Compensation Changes

    Stock Options

        In January 2015, the SPX Compensation Committee granted stock options to its officers for the first time since 2004.

    Salary

        No officers other than Mr. Smeltser received salary increases for 2015. Mr. Smeltser received an increase in salary of 3%, in line with the U.S. merit increase budget for all employees.

    Bonus

        SPX expects 2015 to be a unique year from a compensation perspective, primarily due to the impact of the spin-off. If the spin-off is completed, historical measurements for bonus and equity vestings will no longer be workable. Additionally, SPX and we face retention concerns commonly seen in transactions of this type. As a result, SPX plans to significantly change its compensation programs for 2015 to address the spin-off should it occur.

        SPX has not finalized equity-related spin-off decisions, but the SPX Compensation Committee has effected bonus changes for 2015. In place of the metrics described above, if the spin-off is completed, the SPX Executive Bonus Plan will pay bonuses using two metrics; Bank EBITDA (Consolidated EBITDA, as defined in SPX's credit facilities) and revenue. The SPX Compensation Committee selected these metrics because it believes they are transparent and provide certainty of calculation. To address retention issues, the SPX Compensation Committee has set a floor payout under the Executive Bonus Plan of 85% of target bonus, the midpoint at 125% of target, and the maximum payout

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opportunity at 200%. These numbers compare to the current floor of 0%, target payout at 100%, and maximum payout opportunity of 200%. Target and Maximum Bank EBITDA would be, respectively, $185 million and $195 million. Target and Maximum revenue would be, respectively, $1,960 million and $1,992 million. As described above, the SPX Compensation Committee typically does and expects in this case to set bonuses for NEOs by reference to the Executive Bonus Plan.

Stock Ownership Guidelines

        SPX maintains, and we expect to maintain, stock ownership guidelines to emphasize the importance of substantive, long-term share ownership by senior executives to align their financial interests with those of stockholders. SPX's guidelines are:

Chief Executive Officer

  500% of salary

Chief Operating Officer

  400% of salary

Other Executive Officers

  300% of salary

Other designated executives

  100% - 200% of salary

        Shares held in family trusts and shares held in retirement plan accounts are deemed to be owned shares for purposes of these guidelines. Unvested performance-based equity awards (both those based on an internal and external metric) are excluded. Officers are asked to attain the desired level of stock ownership within five years of becoming an officer.

        Once an NEO attains the desired level of share ownership, he or she will continue to be compliant with these guidelines even if the NEO later falls below the guideline, provided that the NEO retains at least 50% of the net shares acquired upon exercise of stock options and at least 50% of the net shares acquired pursuant to vested restricted equity awards and vested restricted stock unit grants until he or she again meets or exceeds the guidelines.

Policy on Hedging

        No SPX employee may trade in derivative securities relating to SPX securities, such as put and call options or forward transactions. We expect to effect a similar policy.

Tax Matters

        SPX seeks to structure executive compensation in a tax efficient manner, and review compensation plans in light of applicable tax provisions, including Section 162(m) of the Internal Revenue Code. To maintain flexibility in structuring executive compensation to achieve its goals and compensation philosophy, the SPX Compensation Committee has not adopted a policy requiring all compensation to be tax deductible. SPX structures its executive officer bonuses to be tax deductible, and therefore a separate plan, the Executive Annual Bonus Plan (the "162(m) Plan"), determines whether each NEO qualifies for the payment of bonuses described above, and sets a cap on the amount of bonus that may be awarded and treated as tax-deductible. It is anticipated that Flowco will adopt a similar executive annual bonus plan.

        A portion of the stock awarded to SPX NEOs (the portion described as the "internal metric" stock) vests based on the same trigger as under the 162(m) Plan. In 2014, the 162(m) Plan performance goal was met.

        SPX eliminated Section 280G tax gross-ups effective March 10, 2014. It is expected that we will not have any Section 280G tax gross-up.

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Impact on Compensation from Misconduct—Clawbacks

        If the SPX Board of Directors were to determine that an SPX NEO had engaged in fraudulent or intentional misconduct, it would take action to remedy the misconduct and impose appropriate discipline. Discipline would vary based on the facts and circumstances, but may include termination of employment or other appropriate actions.

        SPX retroactively adjusts compensation in the event of a restatement of financial or other performance results to the extent required by the Sarbanes-Oxley Act of 2002. The 162(m) Plan provides for repayment or forfeiture of awards under specified circumstances if the company, as a result of misconduct, is required to prepare an accounting restatement due to material noncompliance with any financial reporting requirement under the securities laws. Any awards earned or accrued during the twelve-month period following the first public issuance or filing with the SEC (whichever first occurred) of the financial document that failed to materially comply with a financial reporting requirement must be paid back to SPX. To the extent that the affected award was deferred under a nonqualified deferred compensation plan maintained by SPX rather than paid to the executive officer, the deferred amount (and any earnings from it) must be forfeited. Beginning in 2013, SPX's equity award agreements provide that awards are subject to any compensation recovery policy adopted by SPX, as amended from time to time.

Notes

        The discussion of performance targets in Compensation Discussion and Analysis is exclusively in the context of executive compensation, and you should not use these targets for any other purpose, or regard them as an indication of management's expectations of future results.

        References to "bonuses" are to performance-based payments reflected as Non-Equity Incentive Plan Compensation in the Summary Compensation Table.

Historical Compensation of Executive Officers Prior to the Spin-off

        The Flowco executive officers listed above were employed by SPX prior to the separation; therefore, the information provided for the fiscal years below reflects compensation earned at SPX. Each of these executive officers is currently, and was as of December 31, 2014, an executive officer of SPX. All compensation decisions were made by the SPX Compensation Committee. Executive compensation decisions following the spin-off will be made by the Flowco Compensation Committee. All references to equity awards below are to SPX equity awards.

        The amounts and structure of compensation set forth below are not necessarily indicative of the compensation these executive officers will receive at Flowco.

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Summary Compensation Table for 2014

Name and Principal Position
  Year   Salary
($)(1)
  Stock
Awards
($)(2)
  Non-Equity
Incentive Plan
Compensation(3)
  Change in
Pension Value
and
Nonqualified
Deferred
Compensation
Earnings
($)(4)
  All Other
Compensation
($)(5)
  Total
($)
 

Christopher J. Kearney

    2014   $ 1,214,277   $ 6,941,749   $ 3,088,946   $ 3,585,158   $ 412,522 (6) $ 15,242,652  

Chairman, President

    2013   $ 1,147,615   $ 5,199,977   $ 1,824,680   $ 771,380   $ 261,011   $ 9,204,663  

and CEO

    2012   $ 1,105,250   $ 4,706,700   $ 444,597   $ 3,846,353   $ 466,800   $ 10,569,700  

Jeremy W. Smeltser

   
2014
 
$

556,923
 
$

1,613,698
 
$

886,502
 
$

326,309
 
$

104,098

(7)

$

3,487,530
 

Vice President & CFO

    2013   $ 486,538   $ 1,188,532   $ 484,000   $ 70,908   $ 57,651   $ 2,287,629  

    2012   $ 401,677   $ 1,135,523   $ 163,079