UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 29, 2019

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from            to            

Commission File Number 1-6948

SPX CORPORATION

(Exact Name of registrant as specified in its charter)

Delaware	38-1016240
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

13320-A Ballantyne Corporate Place, Charlotte, North Carolina 28277

(Address of principal executive offices) (Zip Code)

(980) 474-3700

(Registrant’s telephone number, including area code)

NOT APPLICABLE

(Former name, former address, and former fiscal year, if changed since last report)

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

Title of each class	Trading Symbols(s)	Name of each exchange on which registered
Common Stock, par value $0.01	SPXC	New York Stock Exchange

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐

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

Common shares outstanding July 26, 2019, 44,033,914

SPX CORPORATION AND SUBSIDIARIES

FORM 10-Q INDEX

PART 1 – FINANCIAL INFORMATION
Item 1 – Financial Statements
Condensed Consolidated Statements of Operations and Comprehensive Income	3
Condensed Consolidated Balance Sheets	4
Condensed Consolidated Statements of Equity	5
Condensed Consolidated Statements of Cash Flows	6
Notes to Condensed Consolidated Financial Statements	7
Item 2 – Management's Discussion and Analysis of Financial Condition and Results of Operations	34
Item 3 – Quantitative and Qualitative Disclosures About Market Risk	43
Item 4 – Controls and Procedures	43
PART 2 – OTHER INFORMATION
Item 1 – Legal Proceedings	44
Item 1A – Risk Factors	44
Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds	44
Item 6 – Exhibits	44
SIGNATURES	45

PART I—FINANCIAL INFORMATION

ITEM 1. Financial Statements

SPX CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(Unaudited; in millions, except per share amounts)

	Three months ended						Six Months Ended
	June 29, 2019			June 30, 2018			June 29, 2019			June 30, 2018
Revenues	$	372.4		$	379.2		$	716.0		$	731.1
Costs and expenses:
Cost of products sold	264.2			281.5			524.6			543.3
Selling, general and administrative	78.2			72.6			154.9			141.2
Intangible amortization	2.4			0.8			4.0			1.0
Special charges, net	1.3			1.6			1.4			3.6
Other operating expenses	—			—			1.8			—
Operating income	26.3			22.7			29.3			42.0
Other income, net	1.9			2.2			9.1			3.2
Interest expense	(5.3		)	(5.1		)	(10.6		)	(9.4		)
Interest income	0.6			0.3			0.9			0.8
Income from continuing operations before income taxes	23.5			20.1			28.7			36.6
Income tax provision	(4.1		)	(0.4		)	(8.7		)	(4.5		)
Income from continuing operations	19.4			19.7			20.0			32.1
Income (loss) from discontinued operations, net of tax	—			—			—			—
Gain (loss) on disposition of discontinued operations, net of tax	(0.2		)	3.3			(1.6		)	3.3
Gain (loss) from discontinued operations, net of tax	(0.2		)	3.3			(1.6		)	3.3
Net income	$	19.2		$	23.0		$	18.4		$	35.4
Basic income per share of common stock:
Income from continuing operations	$	0.44		$	0.46		$	0.46		$	0.75
Income (loss) from discontinued operations	—			0.08			(0.04		)	0.08
Net income per share	$	0.44		$	0.54		$	0.42		$	0.83
Weighted-average number of common shares outstanding — basic	43.914			42.988			43.767			42.881
Diluted income per share of common stock:
Income from continuing operations	$	0.43		$	0.44		$	0.45		$	0.72
Income (loss) from discontinued operations	—			0.07			(0.04		)	0.07
Net income per share	$	0.43		$	0.51		$	0.41		$	0.79
Weighted-average number of common shares outstanding — diluted	44.892			44.723			44.750			44.545
Comprehensive income	$	15.3		$	20.0		$	16.2		$	36.8

The accompanying notes are an integral part of these statements.

3

SPX CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited; in millions, except share data)

	June 29, 2019			December 31, 2018
ASSETS
Current assets:
Cash and equivalents	$	34.6		$	68.8
Accounts receivable, net	251.5			269.1
Contract assets	62.5			91.2
Inventories, net	155.5			128.8
Other current assets (includes income taxes receivable of $18.1 and $18.9 at June 29, 2019 and December 31, 2018, respectively)	41.4			40.5
Total current assets	545.5			598.4
Property, plant and equipment:
Land	18.7			19.4
Buildings and leasehold improvements	119.1			125.2
Machinery and equipment	331.4			334.1
	469.2			478.7
Accumulated depreciation	(294.4		)	(294.5		)
Property, plant and equipment, net	174.8			184.2
Goodwill	431.4			394.4
Intangibles, net	229.2			198.4
Other assets	665.4			657.7
Deferred income taxes	21.0			24.4
TOTAL ASSETS	$	2,067.3		$	2,057.5
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	135.9		$	153.6
Contract liabilities	80.3			79.5
Accrued expenses	174.5			183.7
Income taxes payable	2.3			3.5
Short-term debt	59.5			31.9
Current maturities of long-term debt	14.1			18.0
Total current liabilities	466.6			470.2
Long-term debt	328.0			331.9
Deferred and other income taxes	31.5			23.2
Other long-term liabilities	804.5			817.3
Total long-term liabilities	1,164.0			1,172.4
Commitments and contingent liabilities (Note 15)
Equity:
Common stock (51,829,378 and 44,012,557 issued and outstanding at June 29, 2019, respectively, and 51,528,778 and 43,450,305 issued and outstanding at December 31, 2018, respectively)	0.5			0.5
Paid-in capital	1,285.3			1,295.4
Retained deficit	(631.7		)	(650.1		)
Accumulated other comprehensive income	242.7			244.9
Common stock in treasury (7,816,821 and 8,078,473 shares at June 29, 2019 and December 31, 2018, respectively)	(460.1		)	(475.8		)
Total equity	436.7			414.9
TOTAL LIABILITIES AND EQUITY	$	2,067.3		$	2,057.5

The accompanying notes are an integral part of these statements.

4

SPX CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(Unaudited; in millions)

	Three months ended June 29, 2019
	Common Stock		Paid-In Capital			Retained Deficit			Accum. Other Comprehensive Income			Common Stock In Treasury			SPX Corporation Shareholders’ Equity
Balance at March 30, 2019	$	0.5	$	1,279.9		$	(650.9	)	$	246.6		$	(460.8	)	$	415.3
Net income	—		—			19.2			—			—			19.2
Other comprehensive loss, net	—		—			—			(3.9		)	—			(3.9		)
Incentive plan activity	—		3.5			—			—			—			3.5
Long-term incentive compensation expense	—		2.7			—			—			—			2.7
Restricted stock and restricted stock unit vesting	—		(0.8		)	—			—			0.7			(0.1		)
Balance at June 29, 2019	$	0.5	$	1,285.3		$	(631.7	)	$	242.7		$	(460.1	)	$	436.7

	Six months ended June 29, 2019
	Common Stock		Paid-In Capital			Retained Deficit			Accum. Other Comprehensive Income			Common Stock In Treasury			SPX Corporation Shareholders’ Equity
Balance at December 31, 2018	$	0.5	$	1,295.4		$	(650.1	)	$	244.9		$	(475.8	)	$	414.9
Net income	—		—			18.4			—			—			18.4
Other comprehensive loss, net	—		—			—			(2.2		)	—			(2.2		)
Incentive plan activity	—		6.9			—			—			—			6.9
Long-term incentive compensation expense	—		5.3			—			—			—			5.3
Restricted stock and restricted stock unit vesting	—		(22.3		)	—			—			15.7			(6.6		)
Balance at June 29, 2019	$	0.5	$	1,285.3		$	(631.7	)	$	242.7		$	(460.1	)	$	436.7

	Three months ended June 30, 2018
	Common Stock		Paid-In Capital		Retained Deficit			Accum. Other Comprehensive Income			Common Stock In Treasury			SPX Corporation Shareholders’ Equity
Balance at March 31, 2018	$	0.5	$	1,300.4	$	(730.9	)	$	254.5		$	(491.3	)	$	333.2
Net income	—		—		23.0			—			—			23.0
Other comprehensive loss, net	—		—		—			(3.0		)	—			(3.0		)
Incentive plan activity	—		2.3		—			—			—			2.3
Long-term incentive compensation expense	—		3.1		—			—			—			3.1
Balance at June 30, 2018	$	0.5	$	1,305.8	$	(707.9	)	$	251.5		$	(491.3	)	$	358.6

	Six months ended June 30, 2018
	Common Stock		Paid-In Capital			Retained Deficit			Accum. Other Comprehensive Income		Common Stock In Treasury			SPX Corporation Shareholders’ Equity
Balance at December 31, 2017	$	0.5	$	1,309.8		$	(742.3	)	$	250.1	$	(503.4	)	$	314.7
Net income	—		—			35.4			—		—			35.4
Other comprehensive income, net	—		—			—			1.4		—			1.4
Incentive plan activity	—		5.3			—			—		—			5.3
Long-term incentive compensation expense	—		6.1			—			—		—			6.1
Restricted stock and restricted stock unit vesting	—		(15.4		)	—			—		12.1			(3.3		)
Impact of adoption of ASC 606 - See Note 2	—		—			4.0			—		—			4.0
Impact of adoption of ASU 2016-16 - See Note 2	—		—			(0.2		)	—		—			(0.2		)
Stranded income tax effects resulting from tax reform - See Note 2	—		—			(4.8		)	—		—			(4.8		)
Balance at June 30, 2018	$	0.5	$	1,305.8		$	(707.9	)	$	251.5	$	(491.3	)	$	358.6

5

SPX CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited; in millions)

	Six months ended
	June 29, 2019			June 30, 2018
Cash flows from operating activities:
Net income	$	18.4		$	35.4
Less: Gain (loss) from discontinued operations, net of tax	(1.6		)	3.3
Income from continuing operations	20.0			32.1
Adjustments to reconcile income from continuing operations to net cash from operating activities:
Special charges, net	1.4			3.6
Gain on change in fair value of equity security	(7.9		)	—
Deferred and other income taxes	4.4			6.1
Depreciation and amortization	16.6			13.4
Pension and other employee benefits	5.1			3.8
Long-term incentive compensation	6.8			8.1
Other, net	0.6			0.7
Changes in operating assets and liabilities, net of effects from acquisitions:
Accounts receivable and other assets	71.0			11.1
Inventories	(18.0		)	(4.8		)
Accounts payable, accrued expenses and other	(69.8		)	(67.4		)
Cash spending on restructuring actions	(2.2		)	(0.9		)
Net cash from continuing operations	28.0			5.8
Net cash used in discontinued operations	(1.5		)	(1.1		)
Net cash from operating activities	26.5			4.7
Cash flows used in investing activities:
Proceeds from company-owned life insurance policies, net	2.4			0.2
Business acquisitions, net of cash acquired	(77.2		)	(182.6		)
Net proceeds from sale of assets	5.5			10.1
Capital expenditures	(6.2		)	(5.4		)
Net cash used in continuing operations	(75.5		)	(177.7		)
Net cash from discontinued operations	—			2.4
Net cash used in investing activities	(75.5		)	(175.3		)
Cash flows from financing activities:
Borrowings under senior credit facilities	101.6			129.0
Repayments under senior credit facilities	(86.8		)	(33.0		)
Borrowings under trade receivables financing arrangement	45.0			32.0
Repayments under trade receivables financing arrangement	(44.0		)	(10.0		)
Net borrowings (repayments) under other financing arrangements	2.7			(1.1		)
Minimum withholdings paid on behalf of employees for net share settlements, net of proceeds from the exercise of employee stock options and other	(4.8		)	(3.0		)
Net cash from continuing operations	13.7			113.9
Net cash from (used in) discontinued operations	—			—
Net cash from financing activities	13.7			113.9
Change in cash and equivalents due to changes in foreign currency exchange rates	1.1			(0.9		)
Net change in cash and equivalents	(34.2		)	(57.6		)
Consolidated cash and equivalents, beginning of period	68.8			124.3
Consolidated cash and equivalents, end of period	$	34.6		$	66.7

The accompanying notes are an integral part of these statements.

6

SPX CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited; in millions, except per share data)

     (1)  BASIS OF PRESENTATION

Unless otherwise indicated, “we,” “us” and “our” mean SPX Corporation and its consolidated subsidiaries (“SPX”).

We prepared the condensed consolidated financial statements pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim reporting. As permitted under those rules and regulations, certain footnotes or other financial information normally required by accounting principles generally accepted in the United States (“GAAP”) can be condensed or omitted. The financial statements represent our accounts after the elimination of intercompany transactions and, in our opinion, include the adjustments (consisting only of normal and recurring items) necessary for their fair presentation.

We account for investments in unconsolidated companies where we exercise significant influence but do not have control using the equity method. In determining whether we are the primary beneficiary of a variable interest entity (“VIE”), we perform a qualitative analysis that considers the design of the VIE, the nature of our involvement and the variable interests held by other parties to determine which party has the power to direct the activities of the VIE that most significantly impact the entity’s economic performance, and which party has the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE. We have an interest in a VIE, in which we are not the primary beneficiary, as a result of the 2016 sale of Balcke Dürr. All other VIEs are considered immaterial, individually and in aggregate, to our condensed consolidated financial statements.

Sale of Balcke Dürr

On December 30, 2016, we completed the sale of Balcke Dürr to a subsidiary of mutares AG (the “Buyer”). On April 30, 2018, we reached a settlement with the Buyer on the amount of cash and working capital at the closing date, as well as on various other matters, for a net payment from the Buyer in the amount of Euro 3.0 (with Euro 2.0 received in May 2018 and Euro 1.0 in July 2018). The settlement resulted in a gain, net of tax, of $3.8, which was recorded to “Gain (loss) on disposition of discontinued operations, net of tax” during the second quarter of 2018. See Note 3 for information on discontinued operations.

Wind-Down of the SPX Heat Transfer Business (“Heat Transfer”)

Transactions of note associated with the wind-down of Heat Transfer were as follows:

• Second quarter of 2018:

◦ We recorded charges of $2.0, with $0.9 related to the write-down of inventories (included in “Cost of products sold”), $0.6 related to the impairment of machinery and equipment, and $0.5 related to severance costs (both included in “Special charges, net” - See Note 7).

◦ We sold certain intangible assets of the business for cash proceeds of $5.5, which resulted in a gain of less than $0.1.

• First quarter of 2019 - We sold the business’s manufacturing facility for cash proceeds of $5.5, which resulted in a gain of $0.3 (included in “Other income, net”).

We anticipate completing the wind-down by the end of 2019.

Change in Segment Reporting Structure

During the fourth quarter of 2018, due, in part, to the certain wind-down activities, and the related decline in volumes, at our South African subsidiary, DBT Technologies (PTY) LTD (“DBT”), and Heat Transfer, we concluded that these operating segments were no longer economically similar to the other operating segments within our Engineered Solutions reportable segment. As such, DBT and Heat Transfer are now being reported, for all periods presented, within an “All Other” category outside of our reportable segments. See Notes 4 and 6 for additional details.

Acquisition of Schonstedt

On March 1, 2018, we completed the acquisition of Schonstedt Instrument Company (“Schonstedt”), a manufacturer and distributor of magnetic locator products used for locating underground utilities and other buried objects, for a purchase price of $16.4, net of cash acquired of $0.3. The post-acquisition operating results of Schonstedt are reflected within our Detection and Measurement reportable segment.

7

Acquisition of Cues

On June 7, 2018, we completed the acquisition of Cues, Inc. (“Cues”), a manufacturer of pipeline inspection and rehabilitation equipment, which significantly increases our presence in the pipeline inspection market. The acquisition was completed through the purchase of all of the issued and outstanding shares of Cues’ parent company for a purchase price of $164.4, net of cash acquired of $20.6. The post-acquisition operating results of Cues are reflected within our Detection and Measurement reportable segment. See Note 3 for additional details on the Cues acquisition.

Acquisition of Sabik

On February 1, 2019, we completed the acquisition of Sabik Marine (“Sabik”), a manufacturer of obstruction lighting products, from Carmanah Technologies Corporation for a purchase price of $77.2, net of cash acquired of $0.6. The assets acquired and liabilities assumed have been recorded at estimates of fair value as determined by management, based on information available and on assumptions as to future operations and are subject to change upon completion of acquisition accounting. The post-acquisition operating results of Sabik are reflected within our Detection and Measurement reportable segment. See Notes 3 and 9 for additional details on the Sabik acquisition.

Other

Preparing financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Actual results could differ from these estimates. The unaudited information included in this Quarterly Report on Form 10-Q should be read in conjunction with the consolidated financial statements contained in our Annual Report on Form 10-K for the year ended December 31, 2018. Interim results are not necessarily indicative of full year results. We have reclassified certain prior year amounts to conform to the current year presentation, including amounts related to the change in the segment reporting structure previously discussed. Unless otherwise indicated, amounts provided in these Notes pertain to continuing operations only. See Note 3 for information on discontinued operations.

We establish actual interim closing dates using a fiscal calendar, which requires our businesses to close their books on the Saturday closest to the end of the first calendar quarter, with the second and third quarters being 91 days in length. Our fourth quarter ends on December 31. The interim closing dates for the first, second and third quarters of 2019 are March 30, June 29 and September 28, compared to the respective March 31, June 30 and September 29, 2018 dates. We had one less day in the first quarter of 2019 and will have one more day in the fourth quarter of 2019 than in the respective 2018 periods. We do not believe the one less day during the first quarter of 2019 had a material impact on our consolidated operating results for the first half of 2019, when compared to the consolidated operating results for the first half of 2018.

(2)                                NEW ACCOUNTING PRONOUNCEMENTS

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

ASC Topic 842

In February 2016, the Financial Accounting Standards Board (“FASB”) issued an amendment to existing guidance, Accounting Standards Codification (“ASC”) 842, that requires lessees to recognize assets and liabilities for the rights and obligations created by leases. Under the amendment, additional qualitative and quantitative disclosures are required to allow users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. Effective January 1, 2019, we adopted ASC 842 using the modified retrospective transition approach. The modified retrospective transition approach recognizes any changes as of the beginning of the year of initial application (i.e., as of January 1, 2019) through retained earnings, with no restatement of comparative periods.

The new standard provides a number of optional practical expedients upon transition. We elected the “package of practical expedients,” which allowed us to maintain our prior conclusions regarding lease identification, lease classification and initial direct costs. We did not elect the practical expedients for the use-of-hindsight or land easements; the latter not being applicable to us.

The impact of the initial adoption of the standard on our condensed consolidated balance sheet is summarized below, with the most significant impact being the recognition of right-of-use (“ROU”) assets and lease liabilities for operating leases. Our accounting for finance leases remains substantially unchanged.

8

	December 31, 2018		Impact of Adoption of ASC 842		January 1, 2019
Assets
Other assets	$	657.7	$	27.7	$	685.4
Liabilities
Accrued expenses	183.7		7.9		191.6
Other long-term liabilities	817.3		19.8		837.1

The adoption of ASC 842 had no impact on our retained deficit and no significant impact on the accompanying condensed consolidated statements of operations for the three and six months ended June 29, 2019 and condensed consolidated statement of cash flows for the six months ended June 29, 2019.

See Note 5 for further discussion of the post adoption impact of ASC 842.

Other Accounting Pronouncements

In May 2014, the FASB issued a new standard on revenue recognition (“ASC 606”) that outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. The only significant change in revenue recognition as a result of the adoption of ASC 606 related to our power transformer business. Under ASC 606, revenues for our power transformer business are being recognized over time, while under previous revenue recognition guidance (ASC 605), revenues for power transformers were recognized at a point in time. We adopted the standard as of January 1, 2018 under the modified retrospective transition approach, which resulted in a decrease of our retained deficit of $4.0.

In June 2016 the FASB issued an amendment on the measurement of credit losses. The FASB’s new guidance changes how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income, including trade receivables, based on historical experience, current conditions and reasonable and supportable forecasts. This amendment is effective for interim and annual reporting periods beginning after December 15, 2019. We are currently evaluating the impact this amendment may have on our consolidated financial statements.

In October 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-16, which removes the prohibition in ASC 740 against the immediate recognition of the current and deferred income tax effects of intra-entity transfers of assets other than inventory. ASU 2016-16 became effective for annual reporting periods beginning after December 15, 2017, including interim periods within those annual reporting periods. The requirements of ASU 2016-16 were to be applied on a modified retrospective basis, which entailed recognizing the initial effect of adoption in retained earnings. We adopted ASU 2016-16 as of January 1, 2018, which resulted in an increase of our retained deficit of $0.2.

In January 2017, the FASB issued an amendment to simplify the subsequent measurement of goodwill by removing the second step of the two-step impairment test. The amendment requires that an entity recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. This amendment is effective for annual reporting periods beginning after December 31, 2019, including interim periods within those annual reporting periods. Early adoption is permitted. The impact of this amendment on our consolidated financial statements will depend on the results of future goodwill impairment tests.

In August 2017, the FASB issued significant amendments to hedge accounting. The FASB’s new guidance will make more financial and nonfinancial hedging strategies eligible for hedge accounting. It also amends the presentation and disclosure requirements and changes how companies assess effectiveness. It is intended to more closely align hedge accounting with companies’ risk management strategies, simplify the application of hedge accounting, and increase transparency as to the scope and results of hedging programs. We adopted this guidance during the first quarter of 2019, with such adoption having no material impact to our condensed consolidated financial statements.

In February 2018, the FASB amended its guidance for reporting comprehensive income to reflect the potential impacts of the reduction in the corporate tax rate resulting from the Tax Cuts and Jobs Act (the “Act”). The amendment gives the option of reclassifying the stranded tax effects within accumulated other comprehensive income (“AOCI”) to retained earnings during the fiscal year or quarter in which the effect of the lower tax rate is recorded. We adopted this guidance as of January 1, 2018, which resulted in an increase of our retained deficit of $4.8.

9

     (3)  ACQUISITIONS AND DISCONTINUED OPERATIONS

Acquisition of Sabik

As indicated in Note 1, on February 1, 2019, we completed the acquisition of Sabik for $77.2, net of cash acquired of $0.6. The assets acquired and liabilities assumed have been recorded at estimates of fair value as determined by management, based on available information and on assumptions as to future operations and are subject to change upon completion of acquisition accounting. We financed the acquisition with available cash and borrowings under our senior credit and trade receivables financing arrangements. For the period February 1, 2019 to June 29, 2019, Sabik recognized revenues and a net income of $12.3 and $0.3, respectively, with the net income impacted by charges of $1.7 associated with the excess fair value (over historical cost) of inventory acquired which was subsequently sold during the period. During the six months ended June 29, 2019, we incurred acquisition related costs for Sabik of $0.2, which have been recorded to “Selling, general and administrative” within the accompanying condensed consolidated statement of operations. The pro forma effects of the Sabik acquisition are not material to our consolidated results of operations.

Acquisition of Cues

As indicated in Note 1, on June 7, 2018, we completed the acquisition of Cues for $164.4, net of cash acquired of $20.6. We financed the acquisition with available cash and borrowings under our senior credit and trade receivables financing arrangements. The following is a summary of the recorded fair values of the assets acquired and liabilities assumed for Cues as of June 7, 2018:

Assets acquired:
Current assets, including cash and equivalents of $20.6	$	70.4
Property, plant and equipment	7.4
Goodwill	47.8
Intangible assets	79.5
Other assets	2.3
Total assets acquired	207.4
Current liabilities assumed	7.8
Non-current liabilities assumed	14.6
Net assets acquired	$	185.0

The identifiable intangible assets acquired consist of a trademark, customer backlog, customer relationships, and technology of $27.6, $0.8, $42.6, and $8.5, respectively, with such amounts based on an assessment of the related fair values. We are amortizing the customer backlog, customer relationships, and technology assets over 0.5, 12.0, and 11.0 years, respectively.

We acquired gross receivables of $13.6, which had a fair value at the acquisition date of $13.2 based on our estimates of cash flows expected to be recovered.

The qualitative factors that comprise the recorded goodwill include expected synergies from combining our existing inspection equipment operations with those of Cues, expected market growth for Cues’ existing operations, and various other factors. We expect none of this goodwill or the intangible assets described above to be deductible for tax purposes.

The following unaudited pro forma information presents our results of operations for the three and six months ended June 30, 2018 as if the acquisition of Cues had taken place on January 1, 2018. The unaudited pro forma financial information is not intended to represent or be indicative of our consolidated results of operations that would have been reported had the acquisition been completed as of the date presented, and should not be taken as representative of our future consolidated results of operations. The pro forma results include estimates and assumptions that management believes are reasonable; however, these results do not include any anticipated cost savings or expenses of the planned integration of Cues. These pro forma results of operations have been prepared for comparative purposes only and include additional interest expense on the borrowings required to finance the acquisition, additional depreciation and amortization expense associated with fair value adjustments to the acquired property, plant and equipment and intangible assets, the removal of charges associated with excess fair value (over historical cost) of inventory

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acquired and subsequently sold, the removal of professional fees incurred in connection with the transaction, and the related income tax effects.

	Three months ended		Six months ended
	June 30, 2018		June 30, 2018
Revenues	$	395.9	$	765.2
Income from continuing operations	23.6		36.3
Net income	26.9		39.6
Income from continuing operations per share of common stock:
Basic	$	0.55	$	0.85
Diluted	$	0.53	$	0.81
Net income per share of common stock:
Basic	$	0.63	$	0.92
Diluted	$	0.60	$	0.89

Acquisition of Schonstedt

As indicated in Note 1, on March 1, 2018, we completed the acquisition of Schonstedt for $16.4, net of cash acquired of $0.3. The pro forma effects of the Schonstedt acquisition are not material to our consolidated results of operations.

Discontinued Operations

As indicated in Note 1, during the second quarter of 2018, we reached a settlement with the Buyer of Balcke Dürr on the working capital and cash at the closing date, as well as on various other matters. The settlement resulted in a gain, net of tax, of $3.8, which was recorded to “Gain (loss) on disposition of discontinued operations, net of tax” during the second quarter of 2018.

In addition to the adjustment to the net loss related to the Balcke Dürr sale, we recognized net losses of $0.2 and $1.6, respectively, during the three and six months ended June 29, 2019 and a net loss of $0.5 during the three and six months ended June 30, 2018 resulting primarily from revisions to liabilities retained from businesses discontinued prior to 2016.

Summarized below are the components of discontinued operations for the three and six months ended June 29, 2019 and June 30, 2018:

	Three months ended						Six months ended
	June 29, 2019			June 30, 2018			June 29, 2019			June 30, 2018
Balcke Dürr
Income from discontinued operations	$	—		$	6.3		$	—		$	6.3
Income tax provision	—			(2.5		)	—			(2.5		)
Income from discontinued operations, net	—			3.8			—			3.8
All other
Loss from discontinued operations	(0.2		)	(0.7		)	(0.2		)	(0.7		)
Income tax (provision) benefit	—