Jeremy W. Smeltser - IR Christopher J.

Kearney - Chairman of the Board, President, CEO Patrick J. O'Leary - EVP, Treasurer and CFO

Shannon O'Callahan - Barclays Capital Nigel Coe - Deutsche Bank Jeff Sprague - City Investment Research John Inch - Merrill Lynch John Baliotti - FTN Midwest Securities Corp

Thank you, Shauna. Good morning everyone.

Thanks for joining us. With me on the call this morning, as always, are Chris Kearney, Chairman, President and CEO of SPX; and Patrick O'Leary, our Chief Financial Officer.

This morning's call is being webcast with a slide presentation which can be accessed on our website at www.spx.com in the Investor Relations section. This webcast will be available until November 12.

You may wish to follow along with the webcast as we reference the detailed information on the slides. Please note that this slide presentation also includes supplemental schedules, which provide reconciliations for all non-GAAP financial measures referenced today.

Our earnings press release was issued earlier this morning and can also be found on our website. Before we continue, I would like to point out that portions of our presentation and comments are forward-looking and subject to Safe Harbor provisions.

I would also refer you to the risk factors in our most recent SEC filings. With that, I'll turn the call over to Chris.

Thanks, Jeremy and good morning everyone. Thanks for joining us as we report our third quarter earnings.

As you know there have been a lot of changes in the global economy since we reported Q2. I'll address these changes and what we currently know about their impact on Spx.

I will also update you on our key end market developments and recent strategic actions. Patrick will take you through a detailed analysis of the third quarter results, our expectations for Q4 and our revised full year guidance.

He will also review our balance sheet and liquidity. I'll close with a brief summary before we take your questions.

Recently there have been many changes in global economic landscape. The value of the euro, British pound and South African rand have each declined significantly versus the US dollar.

In this call we will discuss how these foreign currency fluctuations impacted our Q3 results, Q4 outlook and reported backlog. Additionally, the banking failures and consolidations have stirred an unprecedented global credit crisis.

Availability of capital is uncertain for many companies and it is unclear at this time how that impacts our customer's capital budgets as we move into 2009. We do expect that customers will generally be more cautious over the coming months.

We also recognize that in today's global economic climate there are increased risks of potential changes in the behavior of our customers. We are carefully monitoring those risks and stand prepared to take additional restructuring or other actions if they become necessary.

Most importantly we remained confident that our long term strategy and solid balance sheet have us well positioned to manage through the world's evolving economic changes. Looking specifically at Q3, let me highlight our key financial metrics for the quarter.

Q3 earnings per share were just over $2 per share. On an adjusted basis, EPS for the quarter was a $1.66, up 19% year-over-year.

Adjusted EPS excludes a $0.47 tax benefit and a $0.11 legal charge both related to recent settlements, Patrick will provide more detail on these two items latter in the call. The topline grew 29% in the quarter driven largely by the APV acquisition.

Organic revenue was 6.5%, up from 4% in Q2. Segment income margin was 13.8%, down 40 points from Q3 last year due to the diluted impact of ATV but ahead of our expectations.

Excluding APV, third quarter segment margins were up 120 points over last year. Free cash flow in the quarter was $71 million much stronger than the prior year quarter.

We pleased by our financial results throughout the first nine months of the year. Our topline grew more than 30%, including 6% organic growth.

Improved operating execution and strong leverage on the organic growth increased segment income a $162 million or 39%. Segment margins expanded 70 points to 13.1%.

Excluding the dilution from the APV acquisition, margins in the base business improved 240 points year-to-date. The growth and improvement were reflected in the bottom line and adjusted earnings per share grew 45% in the first nine months.

Moving into Q4; we are targeting organic growth for the quarter to be between 8% and 10%. We have good visibility in our backlog, the power and energy equipment orders that we expect to deliver in the fourth quarter.

Outside of this end market our forward look is more limited. About 60% of our business is short cycle with visibility at around three months.

This is particularly true for tools and diagnostics which has a significant daily tools business. We experienced softness in U.S.

tools and diagnostics market through the first nine months of this year. In Q3, organic revenue into this market was less than we had anticipated and our outlook for Q4 has come down as well.

We are now expecting a double digit organic decline in Q4 in our Test and Measurement segment. We've also seen some reduced activity in parts of our Industrial segment.

But we are still targeting double digit organic growth in this segment for Q4. The other change of note on this chart is the sanitary market.

Our recent bookings and order rates have been steady but not growing at the same pace we were seeing through the second quarter. This is true primarily with shorter cycle sanitary orders in the U.S and Europe.

Asia and the large project backlog continued to grow. It's important to note we exclude the impact of foreign exchange fluctuations in our reported organic growth.

With more than 50% of our business generated from sales outside the United States, changes in FX rates can impact our reported revenue and operating profits significantly. The translation of the euro and British pound have the most impact on our financial results.

Each of these rates has declined nearly 20% since the end of June. These declines reduced reported revenue in Q3 by about $30 million as compared to the revenue target we gave on July 30 and also reduced our outlook for Q4.

We have updated our full year guidance range primarily as a result of these currency changes. Additionally, declines in the value of the euro, pound and also the South African rand have reduced the dollar value of our backlog.

At the end of Q3 our backlog was $3.6 billion, down $120 million from Q2. $108 million of that was decline was due to foreign currency fluctuations.

Order growth in our Thermal backlog for instance was offset by approximately $75 million of decline related to currency fluctuations. The order pipeline at thermal is strong.

Quoting and bidding activities for cooling systems and heat exchanges remained steady, particularly for large projects. Yesterday we announced that we have signed a $124 million contract with Hitachi, to provide key thermal equipment for the new Kusile power station in South Africa.

This power station was previously referred to as Project Bravo. This contract is not reflected in the backlog we just presented today, which are as of the end of September.

Our foreign backlog at the excuse me our Flow backlog at the end of Q3 was down $19 million. Foreign currency fluctuations reduced the backlog by $33 million, offset partially by growth from orders of $14 million.

Overall orders remain steady and the majority of our slow end markets. However we have experienced a few delays of larger sanitary projects from Q4 into the first half of 2009.

Backlog in our Industrial segment declined 10%, which was partially due to a 28% organic growth in the period. However orders have slowed to some of our industrial products including distribution transformers.

The settlement underlying this recent behavior by our U.S based transformer customers appears to be driven in the short term by uncertainty regarding the availability of capital in the current economic environment and uncertainty as to what affect the slowing economy could have on electricity demand in the near term. If the settlement persists it could have an impact on the transformer business in the next year.

Looking at our entire business at this point it's too early to judge what impact the changing economic conditions and various responses to those conditions will ultimately have on our customers and their actual behavior in 2009. To date we have not had any major contract cancellations.

Our planning process for next year is underway and we expect to issue 2009 guidance in January as we normally do. We're proceeding cautiously in the short term and are closely monitoring the potential impact on our business.

We're confident in our long-term strategy to focus growth around power and energy infrastructure, process equipments and diagnostic tools. The fundamental global driver of these end markets remain positive; including population growth, increasing demand for electricity and the advancement of developing countries.

And we continue to execute the strategy which includes divesting of non-core businesses and product lines and developing our core platforms. During the quarter, we committed to divest two non-core product lines with combined annual revenue of about $70 million.

The financial results for these businesses are now classified as discontinued operations. They were previously reported in our Flow and Test and Measurement segments.

Additionally, we signed a definitive agreement to sell our vibration test business for about a $100 million. We expect to complete this sale by the end of the year.

While this is an attractive niche business, we did not have the critical mass needed to grow the business and we believe we have found a more natural owner for it. We continue to focus on globalizing the Tools and Diagnostics platform with acquisitions to expand our geographic customer base and technology capabilities.

During the quarter, we acquired AUTOBOSS, an Asian manufacturer of aftermarket diagnostic tools. This business has annual revenues of about $10 million.

Although, this business is small, it gives us access to the core systems used in the electronics of most Chinese manufactured vehicles. This significantly increases our ability to serve the evolving Asian markets and also provide distribution opportunities to local customers.

AUTOBOSS is the first acquisition we've completed since acquiring APV at the end of last year. The integration of APV is well under way, and it's initially focused on rationalizing operations in high cost regions including Europe and the United States.

We are executing on several facility closures and consolidations that are expected to reduce headcount by approximately 500 employees. As a reminder, we expect that total cost of the integration to be between $60 million and $80 million.

We expect the entire integration to be completed sometime in 2010. Our projected annualized savings are between $40 million and $60 million after the integration is finalized.

Lastly in September we announced that we have entered into a new 10b5-1 plan to repurchase up to 3 million shares of SPX stock. This represents about 6% of the outstanding shares.

The plan becomes active on November 3rd. We expect the APV integration and the share repurchase program to benefit earnings per share in 2009.

Moving onto our financial position; as of the end of the third quarter our balance sheet continued to improve. At the end of the quarter we have $466 million of cash on hand.

Net debt was reduced to just over a $1 billion and net leverage was down to 1.4 times. Gross leverage was 1.9 times, within our target range of 1.5 to 2.0 times.

Patrick will give you more details on our debt structure and liquidity later in the call. So we believe our financial position is solid and it gives us significant flexibility in the current economic environment and with that I will turn the call over to Patrick.

Thanks, Chris. Good morning everyone.

Beginning with EPS, we reported earnings per share for the quarter of $2.01. During the quarter we recorded a $0.47 tax benefit as a result of a favorable outcome of IRS tax audits for the years 2003 through 2005, details are not closed [ph].

Additionally we recorded $0.11 charge related to the settlement of a lawsuit associated with the business disposition that took place in 1997. This charge was recorded on the other expense line of our income statement in Q3.

Excluding these two items, Q3 EPS was a $1.66, that's up 19% over the last year's adjusted EPS and $0.01 above the top end of the guidance range we gave you on July 30. Increased segment income contributed $0.53 of improvement; this more than offset headwinds from interest, pension expense and a higher effective tax rate.

The effective tax rate on the adjusted earnings for the quarter was 34.3%, that's up from 30% in Q3 last year. Looking at our consolidated operating results for the quarter, the year-over-year performance was solid.

However, compared to the targets we communicated on July 30, reported revenue was less than we anticipated, though the margin performance was much stronger than we expected. Reported revenue for the quarter was $1.5 billion, up 29% year-over-year.

Acquisitions contributed 20% growth with APV reporting $211 million of revenue. Organic growth was 6.5%, highlighted by 28% from Industrial and 8% from Flow.

We had expected modest organic growth at Thermal and Test and Measurement. However, these two segments reported organic declines for the quarter.

Thermal had a tough comparison to last year due to project timing delays and lower sales into China. And Test and Measurement as a result of increasing softness in the U.S market.

Foreign currency fluctuations increased revenues $30 million or 2.6%, and compared to our target model on July 30 foreign currency translation impact in the quarter resulted in about $30 million less revenue than we had anticipated. Additionally, the two product lines reported as discontinued operations in the quarter, reduced our reported revenue by about $16 million.

Obviously the reduced revenue from currency translation and discontinued operations also negatively impacted segment income. Despite these headwinds our operating execution was solid.

Segment income was $209 million, that's up 25% over Q3 last year and in line with our target. Segment margins were 15.8%, 70 points better than the high end of our target range.

Reported margins were down 40 points year-over-year in Q3 reflecting 160 points of dilution from the APV acquisition. Excluding APV our segment margins were up 120 points year-over-year.

Moving on to the segments; beginning with Flow. Please not the result of Flow now excludes the discontinued product lines for all periods presented.

For the quarter, Flow reported revenue of $493 million, up 92% from Q3 last year. As I mentioned APV reported revenue of $211 million accounting for 83% of the growth.

Organic growth was 8%, driven by strong sales of our Engineered products in power, oil and gas and dehydration markets. Segment margins were 11.3%, down from 17.2% in Q3 last year.

The APV acquisition accounted for the majority of the decline diluting margins 550 points. Margins were also impacted due to shipping delays of higher margin products at our Houston facility, caught by Hurricane Ike.

Excluding the dilution from APV and the hurricane impact, margins in the base business were essentially flat year-over-year. For Q4, we are targeting total revenue growth of about 60%, with organic growth in the mid single digits.

We expect Q4 cost reduction actions to improve Ape's margins into the high single digits by year-end. For the segment, we are targeting margins between 14.2 and 14.5%.

Our Thermal segment reported revenue of $437 million, up 3.5% over last year. Foreign currency fluctuations benefited revenues 5%, offsetting a 2% organic decline.

In Q3 last year, Thermal reported 28% organic growth making this quarter's comparison challenging just as it was in Q2. Additionally, some revenue on projects, we had anticipated booking in Q3, was delayed due to construction timing and are now expected to be booked in the fourth quarter.

Q3 margins were 12%, down from 13.4% in the prior year. The year-over-year margin decline was caused by a lower margin mix of project business.

The uneven nature of project timing in this segment is likely to continue to cause quarterly fluctuations in revenue growth and margin performance. In Q4, we are targeting total revenue growth of about 20% with strong organic growth.

Margins are expected to increase year-over-year approaching 13%. And for the year, we are now targeting margins to be just under 12% within the long-term margin target range for this segment.

2008 margins have benefited from the $100 million dry cooling project in Qatar that we expect to be near completion by the end of the year. Moving on to Test and Measurement, again please note, the results for this segment exclude the product line that was discontinued during the quarter.

Revenue for the quarter was up 6 to $260 million. The European businesses acquired in 2007 contributed 7% growth and foreign currency benefited revenue by 2%.

Organically revenues declined 3%, primarily due to continued softness in the U.S. market for Tools and Diagnostics.

Segment margins were 11.7% in the quarter, up from 9% last year. However it should be noted that there was a one time charge of $7 million recorded in this segment in Q3 last year.

On a comparable Q3, 2008 margins were modestly lower than last year. We anticipate Q4 to be another challenging quarter for this segment.

We have reported revenue roughly flat sequentially to Q3 but down significantly year-over-year. The total revenue decline is expected to be between 13% and 18%, including a double-digit organic decline driven by the weakness in the U.S.

markets and fewer OE programs globally. Foreign currency fluctuations are expected to decrease revenue about 5% as compared to Q4 last year.

Q4 margins are targeted between 10.2% and 10.5%. Our long term strategy for Test and Measurement is focused on partnering with global OEMs.

We recently took another important step in that strategy, partnering with Honda to develop Honda's third generation diagnostic system. This is another good example of our successful growth with non U.S.

OEMs. Lastly our industrial segment, which turned in another very strong quarter.

Our revenue in the period was $320 million, up 29% year-over-year. Organic revenue growth of 28% was driven by strong sales of power transformers into the U.S.

market and crystal growers supporting growth in the global solar power market. Organic revenue also benefited from transformer shipments that were delayed in Q2 due to the flux in the Midwest.

Those units were delivered to customers at the beginning of Q3. Segment income was $70 million, up 60% year-over-year and margins for the quarter were 22%, up 430 points from Q3 last year.

The margin improvement was driven primarily by leverage on the organic growth and improved pricing in power transformers. For Q4, we are targeting revenue growth in the mid-teens with margins just under 20%.

Looking at our Q4 target on a consolidated basis, we expect total revenue growth of about 20% with organic growth between 8% and 10%, and acquisition growth of about 15%. Foreign currency fluctuations are expected to reduce revenue year-over-year by 5% to 6% This represents a significant change in our outlook driven by the recent declines in foreign exchange rates.

Segment income is targeted at about $225 million or about 15% greater than Q4 last year. Segment margins are expected to be just over 14%.

Excluding APV, we are targeting margins to be flat versus last year and earnings per share are targeted to grow 14% to 20% and be between $1.90 and $2 per share. For the full year we have updated our segment revenue, growth and operating margin targets.

Most notably, we have reduced our revenue targets by about $120 million. We think the average segment margins for the year of about 13%, this equates to about $15 million of segment income.

In addition the product line discontinued in the third quarter, reduced revenue and segment income by about $70 million and $4 million respectively. From an organic point of view we have reduced both the revenue growth and the margin targets at Test and Measurement due the increasing challenges in the U.S.

Tools and Diagnostics markets. This decline has been partially offset by an increase in our expectations for Thermal's full year margin.

We raised the Thermal margin target about 80 points to 11.7% to 11.9%. This reflects the Q3 margin performance and represents an increase of about a 140 point over 2007.

Based on these and other smaller changes we have revised our EPS guidance range to $6.40 to $6.50 per share. This reduces the midpoint of our EPS guidance $0.05 to $6.45 per share.

A complete model for the EPS midpoint is provided in the appendix of the presentation. On a consolidated basis we are targeting full-year revenue growth of 28% to 29%.

Organic growth is expected to be between 7% and 8%, consistent with our July 30th model and segment margins are expected to be about 13.3%, up 20 points over the last year, this includes dilutive impact of APV. Excluding APV, the base business is expected to increase margins more than a 150 points.

Effective tax rate on our updated model is just under 34%. And free cash flow guidance remains at $300 million to $320 million.

The most significant fact is that we believe it could cause us to report 2008 EPS outside of our revised guidance range are additional foreign currency fluctuation, changes in the market for our short-cycle businesses, project timing on larger orders, execution of the APV integration and the change up or down in our effective tax rate. I'll finish with a brief update on our cash flow, financial position and liquidity before I turn in the call back to Chris.

Through nine months, we have generated $68 million of free cash flow. We have invested nearly $80 million of CapEx to support growth in the business.

This is more than $30 million greater than last year at the same time. Consistent with prior years, we expect to generate the majority of this year's free cash flow in the fourth quarter.

We are targeting Q4 free cash flow of about $240 million. Our full year free cash guidance of $300 million to $320 million represent between 85% and 90% conversion of net income.

As a reminder our free cash flow guidance includes $30 million to $50 million of cash restructurings for APV and capital spending of about $145 million. During 2007, we refinanced the majority of our capital structure to give us increased flexibility to grow the business.

We also issued Senior Notes in December last year to finance the APV acquisition. This has positioned us well given the current credit market.

At the end of the third quarter, we have $1.5 billion of debt outstanding and $400 million of available credit lines. With our current debt structure, we have minimal repayment requirements in the near term.

Over the next two years we are only required to pay $75 million annually on the term loan. In 2012, our credit facilities mature and in 2014, the Senior Notes become due.

Looking at our liquidity, at the end of September, we had $466 million of cash on hand plus the $400 million of available credit lines. In Q4 we are targeting free cash flow generation as I mentioned of about $240 million and we expect to complete the sale of LDF before the end of the year, which would add approximately $100 million of cash.

We require... Q4 uses of cash include $19 million of principle payments on our debt and our quarterly dividend payment of $15 million.

Reserving about $200 million for working capital needs that give us total projected liquidity of about $975 million by year-end. We have already announced the plan to repurchase up to $3 million of SPX stock, assuming yesterday's closing price, the total cost of repurchasing 3 million shares is approximately $130 million.

If we complete the share repurchases at that price we would still have projected liquidity of nearly $850 million. We believe this amount of liquidity gives us significant flexibility in making strategic capital allocation decisions in the future.

In summary we are very comfortable with our capital structure and liquidity going into 2009. With that I will turn the call back to Chris.

Thanks Patrick. In 2005 we communicated a plan to investors focused on repositioning SPX for the long term.

Over the past four years, we successfully recapitalized our balance sheet and strategically reshaped SPX around three global end markets. We defined a disciplined approach to capital allocation and we've shown consistency in balance with our investment decisions.

And we focused growth and improvement around core operating initiatives that have been embraced by our employees, and are driving a culture of continuous improvement at SPX. We believe these actions will have SPX well positioned to manage through an uncertain economic environment.

And we are pleased to report Q3 earnings per share above our guidance range, and we are targeting double-digit revenue and earnings growth for the fourth quarter. Our financial position is strong, and we believe that we have ample liquidity to remain flexible in our investment decisions for acquisitions and share repurchases.

The integration of APV is progressing, and we expect the cost reduction actions we are taking to benefit earnings in 2009. And we expect to begin executing our most recent share repurchase program next week.

We are carefully evaluating our plan for next year, and expect to present our 2009 guidance in January. As I said in my opening remarks, we are seeing some changing trends in certain end markets and we recognize that in today's global economic climate, there are increased risks or further changes in the behavior of our customers.

We are carefully monitoring those risks, and we stand prepared to take additional restructuring or other actions if they become necessary. We are confident in our long-term strategy, and we remain committed to executing it.

Thanks again for joining us for the call. And at this time we are happy to take your questions.

Question And Answer

Good morning, guys.

Hey, Shannon, good morning

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

No, I think you stated it correctly, Shannon. I think what we've seen in Q4 is normal and consistent with what we've seen and what we've talked about over past quarters.

The important think to remember is that we have ... we focused on contract construction, better project execution in this base business.

And have been focused on consistent margin improvement, which you've seen pretty consistently going back, probably to the middle of last year. And, pleased and consistent with what we've seen in the past I think would be my takeaway.

Shannon and ... I mean it's going to continue to be lumpy.

We do take profit payments on these large contracts. Typically, the upfront tax payments are in the 5% to 15% range, and we obviously take progress payment through them.

So, the projects that we put in backlog typically are committed and funded, and customers obviously ... how they are going to produce the cash flow, and as I mentioned, we take the upfront cash deposits.

Okay, great. And then on the transformers, can you just push that out a little bit in terms of the softening orders, what were they like year-over-year?

What were they like sequentially? And how ...

maybe also a little bit on just how you see that business tracking in environment where we have been, your reliability standards out there?

Yes, sure, Shannon. First of all, the transformer orders for the quarter what were up slightly versus Q3 last year.

However, they were down about 15% from Q2. As I said in my comments, and Patrick, if you went through segment, the settlement underlined the recent behavior by our U.S.

based power transformer customers that appears to be driven in the short term by some uncertainty regarding availability of capital in the current economic environment. And you can see that in terms of how investment grade utilities out there are pricing paper to finance this project.

And we were seeing investment created utility paying at or near double-digit rate. And so I think that has had some slowing effect on the short-term on that business.

I think as the U.S. recovery act gets into place, as the concerted bank activity for getting liquidity in the market begins to take hold and we may have seen some signs of that beginning this week.

I think time will tell. I think the next several months are going to be important in terms of seeing how that settles out.

It's important to understand that the underlying demand and the drivers that have been driving growth in this market and in power and energy generally around the world really haven't changed. I mean the demand and the need is there and so I think we'll certainly be watching closely as the financing situation changes, hopefully stabilizes and unfolds over the next couple of months.

Okay, thanks. Just one last one for Patrick.

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

How are you thinking about it?

Well, first of all as I said in the comment we are very comfortable with the position we have. I mean on gross liquidity basis we're approaching $1 billion, with an equity market cap of around $2 billion, so we actually have a very flexible structure.

We are very fortunate in the timing of our refinancing last year. So with respect to the next 24 months, there really is not much draw on our capital.

Obviously we will be cautious about capital spending as we go through the planning process for 2009 until we see how this unfolds. We are not changing our financial strategy and we are not changing our business strategy.

As you know, our target leverage range is 1.5 to 2 times EBITDA. While we are in that range which we obviously are now, we look at share repurchases and acquisitions and potential uses of that liquidity.

And so the 3 million share repurchase about 6% of the company that plan starts next Monday. We'll see how that trades.

We will go through our planning process and then we'll let you know in January when we give guidance how we feel about our likely capital allocation for 2009.

Okay thanks, I will leave it with that.

Thanks Shannon.

Thanks, good morning.

Hi, Nigel.

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

Well the backlog represents contracts that we've accepted and taken deposits on, remember these are longer term contracts then we seeing in most of the in the rest of our business. And so in terms of where they are about you know a third of those contracts are in South Africa.

About 10% or so in China, and the rest are in U.S. and Europe, in terms of where they are geographically just kind of give you an example.

But typically the way those projects work is that we come at the later end of the construction cycle, in power plant construction and we will take initial deposit upfront, engineering work commences, upon the signing of the contract and acceptance of the deposit, then there are progress payments along the way

As you know our customers in South Africa are primarily Hitachi and Aston [ph] to this point. However the ultimate source of funding for these projects is from Ascom which is the wholly owned company by the South African government.

Ascom has announced $44 billion capital expenditure plan over the next five years aimed at doubling the country's power generation capacity. From what we understand Ascom is expected to fund this plant from a combination of government loans and international borrowings.

They've already raised electricity rates in the country substantially. We don't have anything more specific on their plans at this point but we are taking significant deposits on orders we've received from Hitachi and Aston [ph] and are managing our risk appropriately.

That's great color, Patrick thanks. And you mention I think China was down within Thermal.

Can you just remind us how much of China as a proportion to Thermal sales and how much it is down by in the quarter?

You're speaking specifically of Thermal?

Thermal, exactly.

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

Okay. So it's not too much.

And then, on the buybacks, obviously the plan is basically driven by an algorithm [ph] essentially. Given what the share price is right now, I mean, could you give us some color on your, how that algorithm will interpret current conditions, I mean, will this buyback be done by the end of the year or did you put it aside [ph]?

Well, obviously the algorithm is required to be confidential. So, commenting on it is troubling.

I can't say, I mean based on our power consumption of the algorithm that the algorithm is related to the stock price. At the current level of the stock, I would expect the plan to trace fairly quickly.

Great. And then just finally, on the cash flow, you talked about $2 million of working capital requirements.

Can you just discuss about that? I mean, I don't hope for that CapEx and restructuring.

I mean, I don't expect guidance but just a little bit of color would do as well..

We've reduced to the $200 million as a while for, I'll call it a broad-based estimate of the working capital we need around the world to run the business. It actually fluctuates below that.

With respect to CapEx, year-to-date we've spent about $80 million through nine months, as I mentioned on the call, somewhat elevated from last year, a number of significant projects including some IT ERP projects. So we've got little over $60 million margin for Q4, depreciation is sort of $80 to $90 million.

We won't have good estimates for 2009 until we go through the planning process with each business, which will take place actually starting here shortly and going through December. And I'm sorry, I forget the third part of our question.

Yeah. Just be it, well, in that case, could you just talk about your maintenance CapEx, what you think maintenance CapEx is on a seamless below depreciation.

And then, as actually just to comment on, what ... you please remind me what the restructuring spend is planned for 2009?

Right now, I would put an expectation for long-term capital spending around depreciation, which is $80 million to $85 million. Obviously, we had a nice organic growth for a number of years.

We're going into a strong organic growth Q4. And we would be looking at what we need for productivity improvements, and/or other restructuring actions in 2009.

With respect to restructuring, we started the year about at 10, and raised to 20, we are out looking or whatever looking about $16 million projects around restructuring. But mostly, the difference, the $4 million differences really might be timing.

I think Nigel as it related to 2009, it is a bit early. And I do think this Christmas we really want to see how rest of the year played out around the world.

But I think one other things I remember id that APV, we've talked about over the three year 60 million to 80 million of cash restructuring and we are on 30 million to 50 million of that in 2008. So, we clearly have a tail on that, from a sending perspective, but I think it's important for everyone to have in their models for nest year, and in long-term.[ph]

Great. Thanks a lot.

Thanks, Nigel.

Thank you. Good morning.

Good morning, Jeff.

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

other cost currency we should be thinking about?

Yes, it's a very good question, because of the governmental nature of these projects we are required to have the vast majority of our comp base in South Africa. And so are the components of these will actually be manufactured, the materials will be sold locally and the labor will be locally.

So there is no significant downside to profitability other than the triangulation impact that we have discussed.

That's nice to hear. I speak here, On APV, you are clearly exiting the year quiet strongly.

Again this gets a little bit into '09 forecasting what you are trying to avoid. But it is your [indiscernible], your though, may be put it this way, how dependent on revenue growth is your target for continued improvement in APV margins?

I think as I mentioned on the last call, we are more focused on profit improvement right now than we are revenue expansion with respect to APV. Chris talked about the significant restructuring actions that are underway, headcount reduction in the coming months of about 500 employees.

There are works counsels, notice periods, there are communications that are necessary by law in each of these countries and so we need to go through, we need to go through that process. So with respect to the OP changes, they are highly co-related to the restructuring actions that we've been talked about and less co-related to revenue and revenue growth.

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

No, I wouldn't say that at all. Jeff, I think what you are seeing in terms of the exit rate is just that the building impact of the restructuring that we have done so far.

And clearly as I said in my comments, it will take a while to effect that, it as Patrick just underscored, there is a fair amount of complexity with respect to affecting that integration through multiple foreign jurisdictions and multiple locations. We are pleased with the progress that we are making.

We always wanted to go faster but we went into this for the fairly detailed plan in terms of how that would be executed and we are working that plan. So the building OP margin that you are seeing in that is just really the effect of more than anything of what we have done so far and obviously we expect that to continue as we complete the integration process.

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

It modestly improves the rate by lower interest carry there at some... there some bigger factors I think going forward that will help us reduce the rates.

So the changes that we've seen are more individual transaction oriented. The good news is that our contingent liabilities with respect to the historical years has been substantially reduced.

We will have usual detailed disclosure about tax contingencies in the 10-Q when it comes out later in the week. But stepping back from a...

as time passes I do expect to see the rate move down from the 34% level. So it's something that would be considered more normal for a global multi-industry.

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

You know I mean with respect to pension at the end of 2007 we were essentially fully funded on an accounting basis in primary core five U.S. plants.

As you would expect we have experienced negative returns on our assets year-to-date. Look frankly much less impact than the general equity market returns given our asset diversification.

And while we expect to see some funding required in 2009 under the pension protection act, we don't expect it to be material to our overall cash flow at this time. Contribution to the foreign plants have been pretty consistently about $10 million per year and we still don't expect to see that change dramatically in the near term.

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

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

Yes, I would say Jeff that we have... I would expect that to be headwind in relation to a main 5% expected greater return.

But we also have some tailwinds going to 2009, that I expect will offset some or potentially all of that, but, obviously the next two months are very important for that calculation.

Great, Thanks a lot.

Thanks, Jeff.

Thank you. Good morning.

Good morning, John.

Good morning, John.

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

That is correct.

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

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

That's fair. Chris, the market seems to be batting there to your Thermal business and possibly some of the other is going to massively collapse.

And I think based on your comments, and Patrick's comments vis-à-vis the progress payments so the way you parsed things out the orders, Thermal probably seems pretty solid, I would think for the next year. What about the Flow and Industrial segments, as you've looked at historical downturns, this cyclical contractions, what typically happens in those segments and how should we think about that?

I think here, first of all it's pretty difficult to compare or try and sympathize what's going on and compared to historical cyclical trends in the industry because we've have had an uncertain credit crisis impact on markets, which I think we see as more of an impact on things right now. And as we have said in our comments, we have seen some impact on short-term Flow and Industrial and we commented on the impact that we've seen in terms of...

and from feedback we are getting from customers in terms of financing distribution transformer acquisitions. But, it's important to remember I think, John, when you look at our company, when you look at how the company is positioned in terms of the three growth platforms that we have, the long term drivers that are supporting and have supported growth in those businesses still exist.

I mean you saw yesterday when we had yet another large contract announced in our Thermal business. Those times, we've not seen contract cancellations.

We've taken deposits on these large contracts. We had commenced engineering and construction depending on where we are in the contract cycle.

So I think as I've said in my opening comments and again in the close, we are confident with where we are positioned like a lot of other businesses, we are assessing the short-term impact of financing challenges that customers are having. And we haven't seen that materially affect our business.

We are not seeing it material affect those longer cycle businesses like Thermal where the backlog continues to build. And we will take closer look over the next couple of months as we get into the planning process.

But, I think that sentiment you are reflecting in terms of the drivers still being there is consistent with what we are seeing.

Chris, the other serious thing is your stock has traded down synchronously with the price of oil. Can you remind us again sort of the direct and indirect kind of mix impact, you believe is traveling [ph] within your businesses.

And what's really target the price of oil and gas, I'm sorry, just oil and gas or energy markets generally?

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

Excuse me, John.

5% total or of the Flow segment.

5% total.

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

How, what are we sort of ... what are we really looking for as part of you thinking in that process?

Well, first of all, it's important to remember that we have taken some significant restructuring action. If you look at just Flow, we've taken significant action in connection with the APV acquisition, John.

But that really impacts our total Flow business as we looked to combine and consolidate locations and we do such around the world as we've announced, and as we talk about in the call today. And so the APV integration it does impact our legacy business and helps us to right size our total global footprint for that business.

In Test, we have since last year consistently reduced our U.S. footprint to reflect the declining market in United States, so that by the end of this year we'll be down to actually one plant in United States.

So we acted quickly there and I think that the quick actions that we have taken there have really helped us to stay in double digit margin performance in that segment in a pretty tough challenging market. We will stay close to how things change and develop during the balance of this year and if its necessary for us to take similar actions in other market to reduce our overhead and our footprint, we are flexible and we can do that and we are prepared to do that.

But I think time will tell on that but I think the things that we have done so far have already helped position us as we move forward. And as I said in my remarks this morning if conditions sustain and if it looks like we need to do things in other parts of the world we will do that.

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

Understood, thanks very much.

Thanks John.

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

Hi good morning. Guys.

Hey, John.

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

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

And I think John, don't forget seeing that we are taking the earnings of this class, including LDF out of our '08 model but we don't yet have the cash and have it redeployed. And so we always have to think about modeling that.

When you get late in the year and you take the business out, you got to think about redeploying that capital for next year.

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

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

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

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

even on the short and a long cycle collectively

I think that is a fair assessment John.

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

The feedback that we are getting is that the credit issues are the final cards for facilitating that order rate down but those demands as you pointed out still are clearly there. We still have a liability standard, we still are under capacity, we still have demands, that is there.

In terms of trying to engage or anticipate that recovery, I think it's really dependent on when the credit market settle, I think again as I said earlier, some of the things that we have seen happen with respect to that governments commercial paper program looking like its started to take affect are encouraging signs. But I think we have to wait and see how that plays out and you know I think again the next two months as we go to the end of the year are going to be important to see how that plays up.

Okay great thanks very much.

Okay thanks a lot John.

Thanks everybody I know there are more questions in queue. We are already running into the open.

So we going to have to cut it off. Please don't hesitate to call Ryan and I are both in the office all for any further questions you have.

And thanks again everybody for joining us. Have a great day.