Jeremy W. Smeltser - VP of Finance Christopher J.

Kearney - Chairman, President and CEO Patrick J. O’Leary - EVP and CFO

Shannon O'Callahan - Lehman Brothers Jeffrey Sprague - Citigroup John Inch - Merrill Lynch John Baliotti - FTN Midwest Securities Deane Dray - Goldman Sachs Nigel Coe - Deutsche Bank

Thanks Amber. Good morning, everyone.

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

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

You may wish to follow on with the webcast as we referenced 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. It can also be found on our website.

Before we continue, I would like to point out that portion of our presentation and comments are forward-looking and subject to Safe Harbor provisions. The 2008 guidance and targets we discuss today are on a GAAP basis from continuing operations.

I would also refer you to the risk factors on 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. We are pleased to present our fourth quarter and full-year 2007 results today.

I'll begin this morning with key highlights from the quarter and the year. Patrick will then take you though a detailed analysis of our 2007 financial results.

I'll conclude with a brief update of our current and market dynamics before we take your questions. 2007 was a year of significant revenue growth and earnings expansion for SPX and we finished with a strong fourth quarter.

Q4 earnings per share were $1.85. On an adjusted basis, EPS was $1.70, up 44% over the prior year.

Total revenue for the period increased 11% year-over-year to almost $1.4 billion. Organic growth was 4%.

Segment margin continue to improve hitting 14.5% for the quarter, up 50 points from Q4, 2006. Free cash flow with $247 million, up significantly year-over-year.

This was after $43 million of capital spending, the highest amount SPX has spend in any quarter since 2001. The elevated capital spending is funding our lean initiatives, capacity expansions, and IT improvement throughout our businesses.

We expect to continue investing in these areas throughout 2008. Looking at the full-year results for 2007, for the second consecutive year both revenue and earnings grew by double digits.

Adjusted earnings grew 58% to $4.85 per share. Total revenue grew 16% year-over-year to $4.8 billion.

For the second consecutive year, organic revenue growth was 10%. Operating leverage on the revenue growth, pricing strength, and continued focus on our operating initiatives were the key drivers of improved segment margins, which expanded 80 points to 12.9%.

Free cash flow for the year was $313 million. This represents a 104% conversion of net income.

We exceeded all of our operating targets for the year and we are pleased with the growth and improvement made throughout SPX in 2007. In addition to strong financial performance we also continue to make progress on our long-term strategy for SPX.

We acquired over $1 billion of revenue through the acquisitions of APV, Johnson Controls, European Diagnostics and Matra. These additions fit strategically within our flow and test and measurement segments and significantly expand our international presence.

In 2007, we also continued divesting in non-core businesses. In Q2, we completed the sale of Contech and in Q3 we discontinued the Air Filtration product line.

We expect this sale to be completed in the first half of 2008. Most recently, in Q4, we sold two product lines in our Thermal segment.

These were niche product lines that were not core to our Cooling Equipment and Service business. On an annual basis, these product lines had approximately $100 million of revenue.

Their historical profit contribution was not significant. The financial results of these businesses are classified as discontinued operations for all periods represented.

Since 2005, we've been consistent sellers of non-core assets. The proceeds from these sales have been used to fund debt reduction, share repurchases, and strategic acquisition.

You can expect that overtime we will continue to develop assets that are non-core to our long-term plans. Our financial position remains strong.

The balance sheet at December 31st reflects the acquisition of APV. We had a little more than $350 million of cash on hand at the end of 2007.

Net debt was $1.2 billion and our net leverage ratio was 1.8 times. Our growth leverage ratio was 2.2 times modestly above our target leverage range of 1.5 times to 2 times.

We expect 2008 capital allocation to be focused on debt reduction until we are back within the target range. We anticipate that this will occur sometime before the end of the year.

This year, we expect to continue the positive momentum for 2007. Today, we are reaffirming the guidance we issued on January 23rd.

Our EPS guidance for 2008 is $6 to $6.20 per share, an increase of about 26% over last year's adjusted earnings. And we expect free cash flow to be between $260 million and $300 million.

We expect our exposure to global infrastructure growth particularly Power and Energy will be the key… the key drivers to earnings growth in 2008. However, certain events could occur that may impact our guidance including asset or business disposals, changes in the order trends of our short cycle businesses, the speed and cost of integrating APV, changes in raw material cost and change in our effective tax rate.

Overall, we expect solid growth and improvement at SPX in 2008. And with that, I will turn the call over to Patrick.

Thanks Chris. Good morning everyone.

I am going to begin with a look at earnings per share. For the quarter, we reported earning from continuing operations of $1.85 per share.

On adjusted basis, EPS was $1.70. This excludes $0.26 tax benefit from a number of miscellaneous tax credits that lowered our effective rate below the 33% target.

A $0.06 charge related to legacy legal matters recorded in corporate expense and a $0.05 intangible assets write-down at one of our leading equipment product lines. For the year, we reported earnings from discontinued operations of $5.33 per share.

On an adjusted basis, full year EPS was $4.85 per share. This excludes the same Q4 adjustments and also in the tax benefits reported in Q3.

The tax benefits we are excluding from earnings per share as a result of a concentrated effort we have taken to improve our international tax process. During 2007, we engaged a third-party to assist in this project.

As a result of this analysis, we have recorded benefits to income taxes from the reduction of certain accruals related to historical tax matters. The reported EPS of $1.85 in the quarter was up 26% over the prior year quarter, adjusted EPS of $1.70 was up 44% as compared to adjusted EPS in Q4 2006.

Increased segment income contributed $0.27 to the improvement. Share repurchases reduced the Q4 share count by about 5 million shares and this benefited EPS $0.16.

Our reduction in the effective tax rate from 39% in Q4 2006 to 33% in Q4 2007 benefited EPS by $0.15. And all these increases offset higher net interest expense.

Our target range for Q4 earnings was $1.60 to $1.70 per share. We hit the top end of the range primarily due to the better-than-expected segment income.

2007 reported earnings increased 43% year-over-year to $5.33 per share. On an adjusted basis, 2007 EPS was 45… up 58% over 2006.

This improvement was driven by $1.20 from the increased segment income, $0.53 from the reduced tax rate and $0.22 from the reduction of shares outstanding partially offset by $0.18 of increased interest expense. Looking at fourth quarter operation on a consolidated basis, revenue was up 11% to nearly $1.4 billion.

Organic growth was 4%, driven primarily by demand for our Process Equipment and Power Transformers. Acquisition growth was 4% in the quarter and foreign exchange benefits primarily from the euro increased revenue by 3% year-over-year.

Q4 segment income increased $27 million or 16%. At $197 million we exceeded the high-end of our target segment income range by about $4 million.

Margins for the quarter were up 50 points to 14.5%. Leading on to the segments, we start with the results for Flow.

For the quarter Flow reported revenue of $323 million, that’s up 32% year-over-year, organic growth was 18%, driven by global demand for process equipment in oil and gas, chemical, power, sanitary, and dehydration markets. The Johnson Pump acquisition contributed 11% revenue growth in the period and foreign currency benefited revenue 3%.

Segment income was $50 million in the quarter, that’s up $13 million or 35% from Q4 2006. Operating margins increased 20 points to 15.4%.

We did report $2 million asset write-down in the period as a result of our year-end audit process. Excluding this charge, margins for the quarter would have been 16.1%.

For the year, the Flow segment reported total revenue of $1.1 billion, up $255 million or 30% over 2006. Organic growth was 14% driven by strong global demand for process equipment in all of our key end markets.

We successfully integrated Johnson Pump during 2007. The acquisition contributed 13% revenue growth to the year.

Segment income grew 33% year-over-year to $177 million and margins for the year were up 40 points to 15.8%. In 2008, we expect the legacy Flow margins to improve to over 16%.

Our reported margins will be obviously diluted by APV. Organic revenue growth for 2008 is targeted between 4% and 6%.

The APV acquisition is expected to add an additional $885 million to $900 million of revenue. We're targeting APV’s operating margins at about 5%, diluting Flows’ total 2008-targeted margins down to between 11.3% and 18....

and 11.8%. We have started integrating APV and expect revenue and cost synergies to begin improving margins during the second half of the year.

We have set the three-year margin target for this segment at 14% to 16%. Moving onto the Thermal segment, as expected, following two quarters of approximately 30% organic growth, Thermal reported modest revenue growth in Q4.

The organic revenue decline of 3% was offset by foreign exchange benefits of 5%. The decline was primarily due to contract timing of cooling system projects.

It should also be noted that this segment reported 23% organic growth in the fourth quarter of 2006. In Q1 2008, we are expecting a return to double-digit revenue growth in this segment.

Fourth-quarter operating margins were up 30 points to 12%. Improved operating performance in our Thermal equipment and heating product line was the primary driver.

For The full year, the Thermal segment reported significant revenue growth and margin expansion. 2007 reported revenue was nearly $1.6 billion, that’s up $233 million or 18% over 2006.

As Chris mentioned the financial results for both periods now exclude approximately $100 million of revenue from two product lines that were sold in Q4. Organic growth was 14% and foreign exchange increased revenue by 4% for the year.

Strong global demand for power infrastructure was the primary revenue driver. Segment income increased $51 million, up 46% over 2006.

Margin improvement was a high priority for this segment in 2007. Improved contract execution and lean initiatives drove 200 points of margin expansion to 10.4%.

This was well above our planned improvement and we're very pleased with this performance. In 2008, we're targeting revenue growth between 8% and 10% with operating margins of at least 10% to 10.5%.

On to Test and Measurement, the fourth quarter results for this segment was an improvement over the third quarter and better than our communicated targets. Our revenue was up 7% in the period; nearly all its growth, about 6% was from the European acquisitions completed in the second half of 2007.

Foreign currency benefit revenue is 3%; organic revenue declined 2% primarily due to a reduced volume of North American OEM tool programs. Margins for the quarter were 12.6%, down from 15.7% in the prior year period, however significantly improved from the 9% margins that we reported in Q3.

The difficulties in the North American market continue to impact margins. Dilution from the Q3 acquisitions and a less favorable product mix also contributed.

For the year, revenue increased to 3% to nearly $1.2 billion. 2% acquisition growth and 3% foreign currency benefit combined to offset a 2% organic decline.

2007 margins were 10.8%, down from a record high 14% in 2006. We took restructuring actions in the fourth quarter to reduce our North American cost base.

The benefits from this restructuring are expected to provide improvements in 2008. Additionally, we expect R&D investments made in 2007 to gain traction this year as we introduce new products.

We are targeting 6% to 8% revenue growth in 2008 with margins between 10.8% and 11.3%. As we discussed throughout 2007, we are focused on executing a long-term global expansion strategy for this segment.

Last but certainly not least, our Industrial segment, in Q4, we continue to execute on strong demand for replacement transformers in the U.S. transmission and distribution market.

Revenue grew 11% in the quarter, 10% was organic. Segment income increased $19 million or 56%.

Pricing strength and volume increases on sales to the domestic power market and lean improvements throughout the segment drove 590 points to margin expansion. For the period, the Industrial segment reported operating margins of 20.5%.

Full year growth in this segment was also significant. 2007 organic revenue growth was 15%, driven mostly by the increased demand in the U.S.

for power transformers. Segment income grew 58% from $99 million in 2006 to $156 million in 2007.

For the year, operating margins improved 440 points to 16.2%. As we said in our January guidance meeting, we expect the elevated demand for power transformers to continue in 2008.

This year, we're targeting 11% to 13% revenue growth with margins between 20% and 20.5%. We are obviously very pleased with the performance of the industrial segment.

Looking at revenue and segment income on a consolidated basis. 2007 revenue increased 16%.

Similar to 2006 we reported 10% organic growth, driven by our global infrastructure and power end markets. Acquisitions and foreign currency each contributed 3% revenue growth.

Our segment income for the year increased $120 million or 24% to $622 million leveraging the revenue growth. Segment margins improved 80 points to 12.9%.

Our improved operating performance was driven by operating leverage, improved pricing, and our continued focus on operational excellence. Moving on to cash flow.

The fourth quarter is historically our largest cash flow period. In Q4, we generated $247 million of free cash flow, that’s up from $100 million reported in the previous year's quarter.

It should be noted however that Q4 2006 free cash flow included a $67 million tax payment. On a comparable basis, Q4 2007 free cash flow increased 48% year-over-year despite the elevated capital expanding.

Working capital improvements were the largest driver of the increase. It came primarily from our Thermal segment.

The significant revenue growth in Thermal during Q2 and Q3 followed by a low growth fourth quarter naturally resulted in cash flows from accounts receivable and inventories during the period. Improved seasonal performance by our heating product lines also contributed to increased cash flow.

Capital expanding in the quarter was $43 million, almost 3 times the $15 million we spent in Q4 2006. For the year, we invested $91 million in CapEx, in line with expectations.

As Chris mentioned, the elevated capital investment is supporting lean improvements and capacity expansions throughout our factories as well as our IT initiatives. For the year free cash flow improved 72% to $313 million but slightly above the high-end of our guidance range.

This represents 104% conversion of net income from continuing operations. We have been disciplined in our use of our available capital.

In 2007 our largest use of capital was share repurchases. We spent over $716 million to repurchase 9 million shares of SPX stock at an average purchase price of just under $80 per share.

Our other large use of capital was for strategic acquisitions; the three acquisitions in 2007 had a combined purchase price of about $600 million, on average 0.6 times the required revenue. Total debt increased $593 million in 2007 primarily to fund the APV acquisition and also reflecting the share repurchases.

We continue to withdraw capital from the disposal of non-core assets totaling $244 million in the last two years and we currently pay an annual dividend of $1 per share just under $ 60 million in 2007. Our capital allocation methodology has not changed.

When our gross leverage is above two times we expect to focus on debt reduction. When we are levered below two times, we plan to focus on acquisitions and returning capital to our shareholders.

Gross leverage at the end of 2007 was 2.2 times reflecting APV and modestly above our target range of 1.5 times to 2 times. We're now allocating available capital to debt reduction.

Combined with projected EBITDA expansion, we expect growth leverage to be back below 2 times during 2008. As Chris mentioned we are reaffirming our 2008 guidance this morning.

Let me briefly review the targets with you. We have provided separate annual modeling targets for APV for the year.

As I mentioned we're targeting revenue between $885 million and $900 million. We expect to improve operating margins about 200 points to approximately 5%, interest expense from the debt issued to purchase APV is roughly $40 million in the 2008 model.

We expect cash restructuring to be between $30 million and $50 million with minimal income statement impact and capital spending for APV is targeted at around $15 million for 100% of depreciation. In the appendix of this presentation we have provided a full earnings model for the midpoint of our EPS guidance range.

Looking at our consolidated 2008 midpoint guidance, we're targeting total revenue growth of approximately 27% with segment margins of about 12.6%. Improvement at the segment level is the primary driver of EPS growth in 2008.

Our 2008 midpoint EPS guidance is $6.10 a share, an increase 26% from our 2007 adjusted EPS. We're targeting free cash flow between $260 million and $300 million.

This includes $30 million to $50 of cash restructuring I mentioned for APV this year and also capital spending of about $145 million supporting lean capacity expansions and IT. I'd like to finish with our estimates.

For Q1 2008 we are projecting a strong start for 2008. We expect consolidated revenue to grow between 35% and 38% in total.

Excluding APV target revenue growth is 11% to 13%. Segment income is targeted at $148 million to $152 million compared to $105 million a year ago that's up about 45%.

We expect margins to expand 40 points to 80 points to 10.4% to 10. 8%.

Our Q1 EPS range is $0.95 to $1 per share, that's up approximately 18% from last year. Chris, will now wrap up with a brief summary before we take questions.

Thanks Patrick. We are coming out two years of 10% organic growth.

The backlogs in our Flow, Industrial, and Thermal segments have increased over the past 12 months. Flow and Industrial grew 17% and 19% respectively.

Thermal has a record backlog of over $1.2 billion, up 16% from the end of 2006. Coding trends in all these segments continue to be strong.

We have good forward visibility in about one-third of the company primarily cooling systems and power transformers. The remainder of our businesses are primarily short cycles.

Currently, the older rates in these businesses are also generally strong. Our key global end-markets are highlighted on this chart.

This data is based of our 2007 revenue and is pro forma for APV. 53% of our revenue is from the sale of products and services supporting global infrastructure growth, our largest market.

Within infrastructure power and energy represents one-third of our total sales. For 2008, we are again expecting double-digit revenue growth in this market.

We expect our other infrastructure markets to grow in the mid-to-high single digits and mid-single-digit growth from our industrial and sanitary markets. We are targeting modest organic growth in our tools and diagnostic business as we expect the North American OEM tool market to remain challenging.

Apart from this market, we are expecting solid growth from sales into North America in 2008. Looking specifically at these North American end markets, you can see that just about one-third of its revenue is long cycle, meaning we have 9 to 12 months visibility in the future revenue.

Our largest North American market is power and energy. We are expecting double-digit growth from this market in 2008.

We also have positive indicators of revenue growth in our other key North American end markets this year. We are well positioned in growth end markets around the world and we continue to focus internally on improving our operating performance.

At the start of 2005, we established six key areas of operating focus to drive sustainable growth at SPX. Emerging markets and new product development initiatives are contributing to top line growth in our business.

Lean principles and supply chain management are driving improved operating margins in our financial results and we are enhancing our information systems and global talent base to the IT and organizational development initiatives. These six initiatives have been embraced by our employees and are changing the culture of SPX.

Looking forward, we have identified two particular areas of operational focus establishing shared services and expanding our low cost manufacturing presence with the focus in Eastern Europe. We are still in the process of developing our plan for these two initiatives but expect progress this year.

We anticipate establishing shared services will be a multi-year project and we are beginning with the focus on our financial systems and processes. We set forth these initiatives to establish a culture of steady continuous improvement throughout SPX.

The quarterly development of segment income demonstrates the consistent improvement path we have established. Over the past year, segment income increased on average by about 25% per quarter.

In Q1 2008, we are expecting approximately 40% more segment income than Q1 2007. On an annual basis, we have also achieved a steady continuous growth and improvement.

2007 marked our third consecutive year of organic revenue growth, margin expansion, and earnings growth. We are well positioned to continue building on this momentum.

Over 50% of our revenue, it's coming from sales outside North America and we have greater than 50% exposure to global infrastructure markets. We are targeting about 25% revenue and earnings growth in 2008.

In addition, we are working diligently to integrate APV as quickly as possible and we are encouraged by the synergies we expect the acquisition to yield over the next few years. Today, SPX is a healthy growing business, and we expect the initiatives we have in place to continue shaping SPX into a world-class organization.

We thank you for your time today and now we'll be happy to answer any of your questions. Question and Answer

Good morning guys.

Hi. Shannon.

Just a question I guess on the sort of pruning and non-core businesses. You did a little more in Thermal this quarter.

Can you give us a sense... looking out, do you expect these pieces to maybe become bigger or could you scope out within the portfolio, whether you think, bigger things might be coming and also kind of the margin structure, those bigger things?

I mean a lot of the... for example these things in Thermal obviously...

the profits aren't there. But I mean are there other things you're looking at, where there are profits and how you are thinking about that?

Obviously, we can't speak specifically to what might happen in the future Shannon. We have discussed the Air Filtration business and that is in process.

I think as a guide to the future, you can look to what we've done over the past three years, and what we've done is that we've taken a good hard strategic look at all of our business platforms, all of our product lines, and we have systematically continued to shape the company around these key end-market that are driving growth for SPX. I think you can expect that, that same philosophy that same discipline that same thorough analysis will happen going forward in the future and we expect to be successful at it as we have in the past.

And you feel good about sort of the market in terms of buyers for the assets here, you're considering?

We feel good about all of our businesses Shannon. I mean even businesses that we have made a determination are not core to the growth of SPX, they've all been good businesses, and I think under our ownership a lot of those businesses have become better businesses and I think in the sale process, that has been reflected in terms of the value that we've gotten for those businesses, and we would expect the same for all of it that we have in the portfolio...

that we might make that the termination on.

Okay. And then just a question...

couple of margin questions. Obviously industrial really strong margin, in the fourth quarter even ahead of what was already strong guidance there and then Thermal is going to get some benefit here from getting out of some of these non-core areas.

So the hurdles don't look too tough in '08 for those but are there any things that are keeping you cautious in terms of the margin outlook in those two businesses, are there any headwinds that you need to mention?

I think all the same things that we've been... that we've been cautions and diligent about...

and diligent about in the past. I think we keep our eye on managing our supply chain, managing our raw material cost, and intense focus on lean improvement.

But I think it is important to remember that while we talked about and worked hard on implementing lean initiatives across the business we really still are in early stages of that and we see big opportunities across the company, particularly in some of our major businesses to continue to improve efficiency, increased throughput, make those businesses more competitive by focusing on those initiatives. Then indeed we have taken a position where we are investing significantly to support those initiatives across the company.

So, I think it is important to remember that in all of our business we are in a competitive environment. Thermal is a very competitive environment as we bid for these big large contract projects around the world.

So it's important that we do everything we can from an operational standpoint to make ourselves more competitive than to improve margins as we are successful getting those contracts and that really applies across all of our businesses.

We’ve left the long-term margin targets for Thermal at 11% and 13%, we still feel good about that and the organisation is committed to it and with respect to the industrial segment, we are sort of now breaking through the magic 20% return on sales point and so we put sort of plus 20%. Obviously, we are expecting a strong first half of the year reflecting what happened last year but quite optimistic about what's happening in Industrial and very pleased with the progress that we made in Thermal in 2007.

Okay. And just the last one, in terms of this elevated CapEx can you just give a little more color on, I know you're talking about IT but I mean also in terms of some of the lean in capacity just specific target areas, and are you comfortable with the sort of the pace of that?

I mean does that put any sort of added stress on you, can you give a little feel for that?

Yes, I would say that it puts added stress, certainly was at a higher level when we’ve seen in some time in SPX but I think it was all well placed and all well directed. When you look at...

at going forward in 2008 and anticipated further CapEx investment in lean and in capacity, those two things go hand-in-hand. Obviously, by making the right investment in lean initiatives in certain businesses we have enabled ourselves to improve capacity.

That certainly has been true for instance in our Thermal businesses and certainly at Waukesha and so I think that we have identified a couple of areas of focus in 2008 namely shared services and low cost country manufacturing as part of that overall lean philosophy within the company. There is going to be fairly intense focus on doing that in 2008.

We think that will be key to our long-term success and we think it will be key to help contributing to better margins as we go forward. So it’s core to our culture as you know Shannon and we are putting our money where our mouth is in terms of investing CapEx in these initiatives and in finding capacity in the right parts of the world.

And we want to make sure that we are appropriately positioned so that we can efficiently serve those markets that are growing for us around the world. And so, we're seeing a fairly good CapEx budget, healthy CapEx budget for 2008.

And then we will see where we are as we go forward in time but I think over time we can expect that to normalize more into the range that we have targeted in terms of one-time depreciation.

We are coming off of year with three of our four segments growing organically in the mid-teens and Flow in particular for example I mean 30% three-year organic growth profile and we are not investing [inaudible] cross country, we are not investing in bricks and mortar, we are investing in productivity equipment. We are still committed to 50 points of margin improvement a year.

We are driving the organization with an incentive program that’s aligned with that along with delivering 100% conversion of cash flow. So we are looking out for appropriate long-term investment so that we can continue to move the margins forward.

Okay sounds good, thanks a lot guys.

Thanks Shannon.

Thank you. Good morning everyone.

Good morning Jeff.

I wonder, first if we could just jump into Thermal and we covered a little bit of this in New York last month but any change in kind of the complexion of demand where you are seeing it from? I'm sure the emerging markets are still strong, you got the big South African order but anything kind of changing and kind of the order outlook to bid and proposal activity, as you look into '08?

Well both the demand and the growth is still happening in the parts of the world Jeff where we anticipated it would and where we have enjoyed that growth over the last three years. And so that demand I think is the same, I think the competitive dynamics get stronger in certain places as time goes on, I think China is an example of that, China has become a more competitive market for us but still will be a growth market for global infrastructure and specifically power and energy.

South Africa as you mentioned is a market with potentially huge demand and we have benefited from some of that already with the order we got in 2007 and so that market will continue to develop. The Middle East is another intriguing market and the United States and Europe both from a replacement standpoint and from new capacity.

I mean there was a story in the journal today, there is another power outage failure in Florida. And so, I think, we are going to continue to see those things happen over time, the newer liability standards for instance are helping drive replacement business and the transformer business in addition to the grid is becoming saturated with demand.

So I think the short answer to your question is that demand will continue in the places that we talked about. I think that we have to continue to be competitive in those markets, and continue to be innovative with environmentally friendly solutions as we have and I think those things are going help drive sales for us in future.

And markets where we are optimistic about the medium-to-longer term, India and Russia will be good examples of that where demographically and in terms of theoretical demand it's clearly there. And so, further out, those might be areas where we will see engineering activity.

Right. And then if you could dial back to a little bit more detail on the short cycle, the Flow backlog is down sequentially, I mean you showed us that in January, it's not a new data point necessarily but can you kind of reconcile that with your thoughts on where short cycle demand is and your comment that order activity in general still looks pretty strong?

Yeah, the order activity that we're seeing in our key markets in Flow for instance, it really remains the same. We had a very strong growth quarter in Q4 with Flow at 18% and the outlook that we have got going forward continuous to be robust.

The markets that are driving that business, power and energy, oil and gas, the sanitary, food, beverage, pharma processing markets, we continue to be very confident and what we are seeing in that business up to this point refreshing our guidance, we are firming our guidance today hasn't changed our view at all.

I mean with respect to the immediate short cycle you can tell from what we’ve said about our expectations for Q1 that even excluding APV we expect topline to be double digit. And then, don't forget we are coming off these three years of pretty good topline growth in some of the segments very strong Flow, particularly very, very strong three-year trend.

So the base of revenue that we're working off is much higher and that even lower organic growth is actually more meaningful on an incremental basis.

Sure. And then just one last thing from me, Patrick if we could just zero in on the tax a little bit more, do some of these favorable settlements possibly portend a lower tax rate going forward?

Have you put something to rest that was an uncertainty and how does this factor into your thinking about cash taxes? Is there anything different going on there?

Good questions. There has been a lot going on in taxes in the last year.

First of all, we have been settling up legacy matters and closing prior year’s, right now in the domestic market we are closing up the audit of the 2003 to 2005 cycle and I'm hopeful that that cycle will end at some point this year. We've come off of a period of very significant disposals and acquisitions.

I mean going into this year, substantial changes were made to accounting for taxes with FIN 48 so a lot of different things happening. We've had as you gather from my comments our own internal process to improve our overall tax process.

The shift to 50% international has very dramatic changes on taxes and this last year we probably saw more international tax legislative change than we've seen in the last four or five years. Specifically lowering...significantly lowering tax rates in Germany and the United Kingdom and I will call it development of tax law in China and although the rates have been lower, the deductions have also been substantially changed.

So we have… tried to be as transparent as possible with the adjusted earnings per share. So, people can see what's going on with the core business.

And right now as you know from our January meeting, we are out looking 35% rate for 2008. I am very hopeful that over a reasonable period of time few years that rate will migrate down towards 32%.

Again, longer term I’ll also call it a target book tax rate certainly hope to come down below 30% on the five-year horizon subject to what kind of acquisitions we make, what kind of disposals we make and other legislative changes. And so, I think for the next period of time, we could have some more one-time gains and losses as we settle up more of the historical years.

As we restructured to face the new international profile of the company I expect the book rate to be coming down and to be a tailwind to the core earnings per share of the company and obviously potentially quite a significant tailwind. And overall this sort of cash tax rate around 30 is...

I don't see that changing significantly by still what I know now.

Great. Thank you very much

Thanks, Jeff.

Thank you. Good morning.

Good morning, John.

Good morning. So, the Flow strength, I guess if you add back the $2 million of asset write-down, you kind of came in at the 16.1% margins threshold.

Exactly.

In your guidance range, were there... Patrick were there any kind of...

or Chris any kind of production inefficiencies in the quarter that were tied to either perhaps mix or other things associated with the 18% organic revenue growth that might have made the margins otherwise higher?

No.

No. The margins...

the actual... the results of the operations were kind of exactly what we expected in terms of the margins other than the $2 million write-off that I drew attention to in the remarks.

Organic growth was a little above what we expected to be and frankly, pretty impressive given that they also had to deal with the APV activities that were going on, so if anything, I would have said with APV, I would have thought there might have been some eye off the ball pressure on the segment. But, really come in exactly operationally where we thought they would.

Yeah, Chris you talked about APV a little bit, I mean based on what you have seen thus far... are things in line with expectations in terms of your capacity to generate much higher margins overtime, are they a little bit better, I mean could you talk...

may be talk a little bit more about what you've at APV thus far?

Sure. I think Don Canterna would tell you that expectations are very much in line that we like what we see with the business and Don and his team are obviously, John, working very diligently to accelerate integration and take advantage of the cost and revenue synergies that we believe come with the transaction.

But no I think we got everything we expected with APV and that's a great business. I mean they have got a great brand name.

Those markets are very attractive to us in terms of how that business is trending there no negative surprises. I think we are getting exactly what we bargained for and so the key to us in terms of making this acquisition successful as it is with any acquisition is to be able to execute a swift and effective integration of the business and the faster we do that, the sooner the benefits will come.

And so, we're very much focused on that and Don and his team in particular. So I think they are thrilled with the acquisition.

And we're still thinking flat to $0.05 for this year and at least $0.25 improved earning per share contribution to the 2009 model. And what… we will obviously updated you quarterly in a detailed fashion early in the game.

Right. And then may be just one more from me.

Chris, you talked about the Florida blackout, I think it's a reminder of just how fragile the U.S. grid is and how much investments is going to have to go into it to bring it up to par.

I guess about the backlog trends at Waukesha, I mean what have you been seeing of late. I mean we obviously see the whole segment but maybe talk about business specifically and basically do you have enough capacity to meet what appears to be a very strong kind of multi-year trend of demand by utility customers?

I mean, how should we be thinking about that and is there any risk to potentially margins, given what's obviously been a very significant improvement lot of in the Industrial segment north of the 20%?

Yeah, we see, I mean a continuation of the trend that we're now seeing going back over the last two years in terms of the pace has picked up and orders extending out through the year. We have… we’ve done a very nice job, I think, with the leadership team at Waukesha lead by Tom Brockley, who has led the lean improvement initiative in his facility.

So we've gotten some good additional throughput and capacity that way. And what we said in the past John, I will reiterate today, we think that's a great business and a great market that we think we will continue to grow and demand will continue to be strong for some time as evidenced by the story you just referenced and that I referenced earlier.

I think that capacity need and the reliability standards are going to continue to drive that growth in the United States. What we have said in the past is that we are exploring strategic opportunities to expand the capacity one way or the other at Waukesha and extend that business and that's still where we are today.

And we certainly have enough capacity to meet our existing commitment to our key customers and to meet these financial targets that we've set forth, and obviously investment in the transformer business is part of the elevated CapEx.

Okay, but you have talked... I think you said power and energy was going to be up double digit, is that, I'm assuming that's not a unit number right, that's more all-in including pricing?

That's right. It’s a dollar number.

Okay. So that makes...

I am assuming that managing meeting capacity sort of that much more realizable, is that a fair statement. Is there anything… is there anything changing those two segments as you look at meeting demand '08 versus '07 that we should be…?

If you look at demand it is continuing at a steady level and the backlog is kind of rolling forward with kind of 9 to 12 months visibility. So the forward calendar is filling out at the same kind of rate.

So no change in the demand profile still predominantly replacement transformers and still predominantly distribution. But in perhaps the medium term a strategic expectation that there would be an increase in the demand for transmission transformers as well.

Great, thank you.

Thanks John.

Good morning.

Hey John, good morning.

How are you guys? I guess, it is obvious no surprise that you didn't change the revenue or segment targets given we just got them four weeks ago and obviously the duration of your cycles.

I just want to clarify one thing the… on the Thermal side, the base line that you are growing off of was sort of 9.6 to 9.8, and I guess given the divestitures we are looking at on an ongoing basis the fact that you didn't change the margin target, we are just looking at more apples-to-apples, the underlying businesses that were there in 2007, is that fair?

That's very fair. The comparison you see in these reported margins are true apple-to-apples.

Right, okay. And I guess given just regarding APV, I would imagine Chris, that Don feels pretty good given the strength, given the momentum in his base businesses coming out of 2007 on a revenue side, as well as the margin side.

I would imagine that bodes well for the sanitary… predominant sanitary side of APV?

We think it does John obviously. And I know Don does as well.

So, I think as I said in response to a previous question, I think Don and his team are intensely focused on getting the APV acquisition fully integrated. So, we can start seeing improvement in that business so that the margin in those similar type products and their sanitary business are commiserate with what we've seen and what we've done historically in our process equipment businesses.

So, I know Don is excited about APV and again we like the markets that they are in, we like the trends in those markets, we like where in the world they are serving those markets. So, it is I think everything we hope that it would be and again we are thrilled to have it as part of SPX.

Okay. Great.

All right thanks very much.

Okay, thanks John.

Thank you, good morning.

Good morning Deane.

Just come back to APV, Chris, you commented, you... it looks as though you accelerated some of the integration and put some numbers on this.

It's original plan was $60 million to $80 million of cash restructuring over three years and I think in your remarks you said $30 million to $50 million this year, is that the plan?

$30 million to $50 million this year.

Yes and we said all along that about half of it would take place in the first year.

Great, and how much of that is actually, will be flow through the P&L versus purchase accounting?

Very, very little. I would expect at this point that the vast majority of it would be treated as part of purchase accounting.

Okay. So you would not see that flow through on the results, that's included in your guidance.

Correct?

Exactly.

Okay. And then in terms of cash or in terms of the cost revenue synergies, is that still $40 million to $60 million and did you ever split out how much was cost and how much for revenue synergies?

We didn't disclosed that, and as I said earlier we will give... we are fairly early in the game here, will give more information as we go forward and we see $40 million to $60 million as our minimal earnings synergies.

Realistically this is a two- year to three-year project to get it up to the target revenues. And so we are expecting that the whole Flow segment will come back up to 14% to 16% with obviously APV being below the average for this segment at the end of three-years but still significant contributor to 2009 and 2010.

And then just a follow-up on Shannon's question earlier on the CapEx plans for '08, that is a sizable, at the mid… you take a mid-point, that’s 60% increase of CapEx.

Yes.

Are you... it's kind of a rare that management are willingly to dip below that threshold of 100% of cash conversion, by that level it would be 80 to 90, so just address how are you comfortable being below that level and how hard are you holding to that 40…140, 150 might you scale that back during the course of the year?

Well, first of all, I mean obviously APV in terms of the absolute number, APV is contributing about $15 million of that, we now... as you know from the operating initiatives, we have a number of simplification and it is just going on.

Lean is starting to gain traction and then... coming off of two years of double-digit growth with the kind of CapEx we've had, we've got decent line sight to the pay back.

We are still using the same economic return tool for the investment decision. So we're still using EBA project by project, we did not approve projects that will not give us the economic return and we are still committed to 50 points of margin improvement a year and then in absolute return we’re still very much conscious that we are in… the bottom half of above the industry absolute margins and so we're doing the things that we think are necessary to give the people in the field, the tools they need to deliver the margin improvement that were asking them to give us.

And if all goes according to plan on cash flow how soon would you hit that two times leverage and could we assume you’d go back to a buyback strategy once you have hit that threshold?

Well, it looks to be... at this point you can infer from what we're saying that sometime in the second half of the year it will obviously depend on a number of factors obviously including disposals and the timing of the EBITDA expansion that we are expecting.

When we are below two times, it really is in that period we are comparing the benefit of acquisitions to the benefit of share repurchases. And for both those decisions we look at the alternative views and say which is better for the shareholders.

The ones we are at that level, it is fair to say that share repurchases will be on the agenda again. But so potentially will additional strategic acquisitions.

Excellent [ph] thank you.

Amber, I think we have time for one more question before we hit our 9.30 cut off.

No. I'll say thank you.

Good morning. Thanks for squeezing me in then.

Chris, just want to pick up on the comment you made about the T&D issue options, I guess you got two options, expand into high capacity transformers or go international. Can you just talk about your thoughts there, I mean which you are leaning, perhaps, when you’ll be in position to finalize those plans and given some concerns on CapEx would this cause CapEx to step up a notch?

Well, I can't comment specifically. I think we’ve talked broadly Nigel, about all of the options and options include expanding facilities that you have, doing an offshore acquisition or partnership, or finding another acquisition along the way.

And all of those things, I think will be under consideration, and I think we will apply the same capital allocation discipline that we have in the past as we made that decision and… but we think that we are very bullish on the business; we are very bullish on the power and energy market and infrastructure more broadly. We think that the demand is going to be there for some time and we're going to do what we have to do to maintain our position and to improve it if we can.

So all of those things are in consideration right now. As those things crystallize and as they develop, certainly we'll disclose that.

Okay. And maybe two quick ones.

Obviously big swing on Thermal organic growth, you reflect that very well. I know, but how quickly that business swing back into double-digit kind of growth?

It looks like 1Q revenue guidance is obviously very strong.

In Q1 we are anticipating double-digit revenue growth in that business. And I think it's just important to understand that as many of you do, I know that the nature of that business is that it is around large contracts and tends therefore to be very choppy in terms of those growth numbers.

We've had a couple of years of very robust growth in that business and it looks like the trend is continuing in Q1. We think there is big opportunity around the world.

We think we're going to be a player for those... for those contract opportunities and we expect to be competitive but we'll see how the year develops.

Okay. Just want to confirm that and then finally on Test and Measurement, obviously not a great performance during the quarter but it doesn't appear to be any worse than it appear to be deteriorating, is that a fair comment?

That is a very fair comment. I think it is important to understand that the discount we experience in that business in Q2 and Q3, we acted on in terms of rightsizing our U.S.

operation and [inaudible] restructuring in Q4. We saw margins consecutively improve Q3 to Q4 and what is really important to understand about that business Nigel is that the global growth and the evolution of that business away from being U.S.

centric; it is a big global business now. The acquisitions that we've done over the last two years to support that have all been outside the United States.

We have developed great relationships with global OEMs around the world that will help support the growth of that business in Europe and in the Asian markets. So I'm confident that Dave and his team have taken the right steps to do what they need to do, to go with the market in that business and to maintain their position as the leading global supplier of essential tools and services to the OE dealers around the world.

And actually in Q4 they were above our expectations.

That's what I thought. So at this stage you wouldn't anticipate having to spend significant amounts on restructuring this business in 2008?

No.

No.

Right. Great.

Thanks a lot.

Okay, Thanks Nigel.

Thanks Amber, and thanks everybody for joining us. That concludes our session.

Ryan and I are both in the office and will be through all day to answer any further questions you have and we hope you have a great day.