UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
ý QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 2, 20161, 2017
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from            to        
    Commission file number 1-37393
SPX FLOW, INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware47-3110748
(State or Other Jurisdiction of Incorporation or
Organization)
(I.R.S. Employer Identification No.)
13320 Ballantyne Corporate Place
Charlotte, NC
28277
(Address of Principal Executive Offices)(Zip Code)
Registrant’s Telephone Number, Including Area Code (704) 752-4400
(Former Name, Former Address, and Former Fiscal Year, if Changed Since Last Report)
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  ý Yes o No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  ý Yes o No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company”company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):
Large Accelerated Filer ox
 
Accelerated Filer o
   
Non-Accelerated Filer xo
 
Smaller Reporting Company o
(Do not check if a smaller reporting company) 
Emerging Growth Company o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o Yes ý No
The aggregate market value of the voting stock held by non-affiliates of the registrant as of July 1, 2017 was approximately $1,510 million. The determination of affiliate status for purposes of the foregoing calculation is not necessarily a conclusive determination for other purposes.
Common shares outstanding as of July 29, 201628, 2017 were 41,803,770.42,344,001.



SPX FLOW, INC. AND SUBSIDIARIES
FORM 10-Q INDEX


 
 
  
 
  
  




PART I—FINANCIAL INFORMATION
ITEM 1. Condensed Consolidated and Combined Financial Statements
SPX FLOW, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED AND COMBINED STATEMENTS OF OPERATIONS
(Unaudited; in millions, except per share amounts)




Three months ended Six months endedThree months ended Six months ended
July 2, 2016 June 27, 2015 July 2, 2016 June 27, 2015July 1, 2017 July 2, 2016 July 1, 2017 July 2, 2016
Revenues$528.8
 $615.1
 $1,033.8
 $1,186.3
$498.0
 $528.8
 $931.2
 $1,033.8
Costs and expenses:              
Cost of products sold362.0
 403.9
 707.8
 786.8
345.0
 362.0
 639.1
 707.8
Selling, general and administrative118.0
 139.2
 252.4
 282.1
113.0
 117.4
 228.3
 251.3
Intangible amortization5.7
 5.9
 11.4
 11.9
4.3
 5.7
 8.9
 11.4
Impairment of goodwill and intangible assets426.4
 
 426.4
 

 426.4
 
 426.4
Special charges, net10.8
 3.3
 51.8
 7.1
Special charges6.7
 10.8
 15.3
 51.8
Operating income (loss)(394.1) 62.8
 (416.0) 98.4
29.0
 (393.5) 39.6
 (414.9)
              
Other income (expense), net(0.1) (1.8) (2.6) 4.3
Related party interest expense, net
 (2.3) 
 (9.6)
Other interest expense, net(14.3) (0.4) (28.7) (0.7)
Other expense, net(0.3) (0.7) (2.4) (3.7)
Interest expense, net(15.8) (14.3) (31.7) (28.7)
Income (loss) before income taxes(408.5) 58.3
 (447.3) 92.4
12.9
 (408.5) 5.5
 (447.3)
Income tax benefit (provision)56.2
 (11.6) 62.9
 (22.6)(2.7) 56.2
 (2.6) 62.9
Net income (loss)(352.3) 46.7
 (384.4) 69.8
10.2
 (352.3) 2.9
 (384.4)
Less: Net income (loss) attributable to noncontrolling interests0.5
 (0.4) (0.5) (0.7)(0.1) 0.5
 
 (0.5)
Net income (loss) attributable to SPX FLOW, Inc.$(352.8) $47.1
 $(383.9) $70.5
$10.3
 $(352.8) $2.9
 $(383.9)
              
Basic income (loss) per share of common stock$(8.52) $1.15
 $(9.30) $1.73
$0.25
 $(8.52) $0.07
 $(9.30)
Diluted income (loss) per share of common stock$(8.52) $1.15
 $(9.30) $1.72
$0.24
 $(8.52) $0.07
 $(9.30)
              
Weighted-average number of common shares outstanding — basic41.397
 40.809
 41.273
 40.809
Weighted-average number of common shares outstanding — diluted41.397
 40.932
 41.273
 40.932
Weighted average number of common shares outstanding - basic41.844
 41.397
 41.724
 41.273
Weighted average number of common shares outstanding - diluted42.221
 41.397
 42.058
 41.273
The accompanying notes are an integral part of these statements.

SPX FLOW, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED AND COMBINED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited; in millions)


Three months ended Six months endedThree months ended Six months ended
July 2, 2016 June 27, 2015 July 2, 2016 June 27, 2015July 1, 2017 July 2, 2016 July 1, 2017 July 2, 2016
Net income (loss)$(352.3) $46.7
 $(384.4) $69.8
$10.2
 $(352.3) $2.9
 $(384.4)
Other comprehensive income (loss), net:       
Net unrealized gains (losses) on qualifying cash flow hedges, net of tax benefit (provision) of ($0.1) and $0.0 for the three and six months ended June 27, 2015
 0.1
 
 (0.1)
Foreign currency translation adjustments(52.9) 28.3
 (40.7) (92.8)
Other comprehensive income (loss), net(52.9) 28.4
 (40.7) (92.9)
Other comprehensive income (loss), net - foreign currency translation adjustments47.4
 (52.9) 96.9
 (40.7)
Total comprehensive income (loss)(405.2) 75.1
 (425.1) (23.1)57.6
 (405.2) 99.8
 (425.1)
Less: Total comprehensive income (loss) attributable to noncontrolling interests0.4
 (0.5) (0.5) (1.6)0.2
 0.4
 1.1
 (0.5)
Total comprehensive income (loss) attributable to SPX FLOW, Inc.$(405.6) $75.6
 $(424.6) $(21.5)$57.4
 $(405.6) $98.7
 $(424.6)
The accompanying notes are an integral part of these statements.


SPX FLOW, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited; in millions, except share data)


July 2, 2016 December 31, 2015July 1, 2017 December 31, 2016
ASSETS      
Current assets:      
Cash and equivalents$229.0
 $295.9
$226.1
 $215.1
Accounts receivable, net495.8
 483.9
451.3
 446.9
Inventories, net308.4
 305.2
307.2
 272.4
Other current assets101.0
 72.4
55.5
 72.8
Total current assets1,134.2
 1,157.4
1,040.1
 1,007.2
Property, plant and equipment:      
Land37.5
 37.7
35.5
 36.1
Buildings and leasehold improvements243.4
 224.9
247.8
 242.4
Machinery and equipment422.0
 483.9
446.5
 420.8
702.9
 746.5
729.8
 699.3
Accumulated depreciation(315.9) (314.1)(355.8) (322.0)
Property, plant and equipment, net387.0
 432.4
374.0
 377.3
Goodwill762.5
 1,023.4
757.2
 722.5
Intangibles, net386.8
 579.4
350.8
 344.3
Other assets122.3
 111.6
144.6
 151.9
TOTAL ASSETS$2,792.8
 $3,304.2
$2,666.7
 $2,603.2
      
LIABILITIES AND EQUITY   
LIABILITIES, MEZZANINE EQUITY AND EQUITY   
Current liabilities:      
Accounts payable$206.6
 $227.1
$215.0
 $203.8
Accrued expenses456.5
 467.3
369.1
 329.9
Income taxes payable17.4
 31.7
12.8
 10.8
Short-term debt33.7
 28.0
24.2
 27.7
Current maturities of long-term debt20.4
 10.3
20.4
 20.2
Total current liabilities734.6
 764.4
641.5
 592.4
Long-term debt984.4
 993.8
964.5
 1,060.9
Deferred and other income taxes89.9
 142.0
65.3
 62.2
Other long-term liabilities131.0
 133.4
125.4
 125.5
Total long-term liabilities1,205.3
 1,269.2
1,155.2
 1,248.6
Commitments and contingent liabilities (Note 12)

 

   
Commitments and contingent liabilities (Note 11)

 

Mezzanine equity21.3
 20.1
Equity:      
SPX FLOW, Inc. shareholders’ equity:      
Preferred stock, no par value, 3,000,000 shares authorized, and no shares issued and outstanding
 

 
Common stock, par value $0.01 per share, 300,000,000 shares authorized, 41,923,603 issued and 41,780,043 outstanding at July 2, 2016, and 41,429,014 issued and 41,386,740 outstanding at December 31, 20150.4
 0.4
Common stock, par value $0.01 per share, 300,000,000 shares authorized, 42,601,094 issued and 42,330,817 outstanding at July 1, 2017, and 42,092,393 issued and 41,920,477 outstanding at December 31, 20160.4
 0.4
Paid-in capital1,633.0
 1,621.7
1,651.6
 1,640.4
Retained earnings (accumulated deficit)(362.8) 21.1
Accumulated deficit(371.0) (373.9)
Accumulated other comprehensive loss(423.4) (382.7)(425.6) (521.4)
Common stock in treasury (143,560 shares at July 2, 2016, and 42,274 shares at December 31, 2015)(4.1) (1.4)
Common stock in treasury (270,277 shares at July 1, 2017, and 171,916 shares at December 31, 2016)(8.2) (4.9)
Total SPX FLOW, Inc. shareholders' equity843.1
 1,259.1
847.2
 740.6
Noncontrolling interests9.8
 11.5
1.5
 1.5
Total equity852.9
 1,270.6
848.7
 742.1
TOTAL LIABILITIES AND EQUITY$2,792.8
 $3,304.2
TOTAL LIABILITIES, MEZZANINE EQUITY AND EQUITY$2,666.7
 $2,603.2
The accompanying notes are an integral part of these statements.

SPX FLOW, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED AND COMBINED STATEMENTS OF EQUITY
(Unaudited; in millions)


 Six months ended July 2, 2016
 Common Stock Paid-In Capital Retained Earnings (Accumulated Deficit) Accumulated Other Comprehensive Loss Common Stock in Treasury Total SPX FLOW, Inc. Shareholders' Equity Noncontrolling Interests Total Equity
 Shares Outstanding Par       
Balance at December 31, 201541.4
 $0.4
 $1,621.7
 $21.1
 $(382.7) $(1.4) $1,259.1
 $11.5
 $1,270.6
Net loss
 
 
 (383.9) 
 
 (383.9) (0.5) (384.4)
Other comprehensive loss, net
 
 
 
 (40.7) 
 (40.7) 
 (40.7)
Incentive plan activity0.2
 
 3.5
 
 
 
 3.5
 
 3.5
Stock-based compensation expense
 
 11.2
 
 
 
 11.2
 
 11.2
Restricted stock and restricted stock unit vesting, including related tax provision of $3.0 and net of tax withholdings0.2
 
 (3.4) 
 
 (2.7) (6.1) 
 (6.1)
Dividends attributable to noncontrolling interests
 
 
 
 
 
 
 (1.2) (1.2)
Balance at July 2, 201641.8
 $0.4
 $1,633.0
 $(362.8) $(423.4) $(4.1) $843.1
 $9.8
 $852.9
                  
 Six months ended July 1, 2017
 Common Stock Paid-In Capital Accumulated Deficit Accumulated Other Comprehensive Loss Common Stock in Treasury Total SPX FLOW, Inc. Shareholders' Equity Noncontrolling Interests Total Equity
 Shares Outstanding Par       
Balance at December 31, 201641.9
 $0.4
 $1,640.4
 $(373.9) $(521.4) $(4.9) $740.6
 $1.5
 $742.1
Net income
 
 
 2.9
 
 
 2.9
 
 2.9
Other comprehensive income, net
 
 
 
 95.8
 
 95.8
 1.1
 96.9
Incentive plan activity0.1
 
 3.0
 
 
 
 3.0
 
 3.0
Stock-based compensation expense
 
 7.9
 
 
 
 7.9
 
 7.9
Restricted stock and restricted stock unit vesting, net of tax withholdings0.3
 
 0.3
 
 
 (3.3) (3.0) 
 (3.0)
Dividends attributable to noncontrolling interests and other
 
 
 
 
 
 
 (1.1) (1.1)
Balance at July 1, 201742.3
 $0.4
 $1,651.6
 $(371.0) $(425.6) $(8.2) $847.2
 $1.5
 $848.7
                  

 Six months ended June 27, 2015
 Former Parent Company Investment Accumulated Other Comprehensive Loss Total SPX FLOW, Inc. Shareholders' Equity Noncontrolling Interests Total Equity
Balance at December 31, 2014$2,144.6
 $(219.2) $1,925.4
 $13.4
 $1,938.8
Net income (loss)70.5
 
 70.5
 (0.7) 69.8
Other comprehensive loss, net
 (92.0) (92.0) (0.9) (92.9)
Net transfers from former parent568.6
 
 568.6
 
 568.6
Dividends attributable to noncontrolling interests
 
 
 (0.2) (0.2)
Balance at June 27, 2015$2,783.7
 $(311.2) $2,472.5
 $11.6
 $2,484.1
          
 Six months ended July 2, 2016
 Common Stock Paid-In Capital Retained Earnings (Accumulated Deficit) Accumulated Other Comprehensive Loss Common Stock in Treasury Total SPX FLOW, Inc. Shareholders' Equity Noncontrolling Interests Total Equity
 Shares Outstanding Par       
Balance at December 31, 201541.4
 $0.4
 $1,621.7
 $21.1
 $(382.7) $(1.4) $1,259.1
 $11.5
 $1,270.6
Net loss
 
 
 (383.9) 
 
 (383.9) (0.5) (384.4)
Other comprehensive loss, net
 
 
 
 (40.7) 
 (40.7) 
 (40.7)
Incentive plan activity0.2
 
 3.5
 
 
 
 3.5
 
 3.5
Stock-based compensation expense
 
 11.2
 
 
 
 11.2
 
 11.2
Restricted stock and restricted stock unit vesting, including related tax provision of $3.0 and net of tax withholdings0.2
 
 (3.4) 
 
 (2.7) (6.1) 
 (6.1)
Dividends attributable to noncontrolling interests
 
 
 
 
 
 
 (1.2) (1.2)
Balance at July 2, 201641.8
 $0.4
 $1,633.0
 $(362.8) $(423.4) $(4.1) $843.1
 $9.8
 $852.9

The accompanying notes are an integral part of these statements.



SPX FLOW, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS
(Unaudited; in millions)


Six months endedSix months ended
July 2, 2016 June 27, 2015July 1, 2017 July 2, 2016
Cash flows from (used in) operating activities:      
Net income (loss)$(384.4) $69.8
$2.9
 $(384.4)
Adjustments to reconcile net income (loss) to net cash from (used in) operating activities:      
Special charges, net51.8
 7.1
Special charges15.3
 51.8
Impairment of goodwill and intangible assets426.4
 

 426.4
Deferred income taxes(64.3) (3.9)(3.9) (64.3)
Depreciation and amortization34.1
 29.5
30.7
 34.1
Stock-based compensation11.2
 
7.9
 11.2
Pension and other employee benefits5.6
 1.6
3.3
 5.6
Gain on asset sales and other, net(1.3) (1.2)(1.5) (1.3)
Changes in operating assets and liabilities:      
Accounts receivable and other assets(13.2) (68.1)27.2
 (13.2)
Inventories(3.7) (27.5)(18.4) (3.7)
Accounts payable, accrued expenses and other(67.9) 38.8
26.9
 (67.9)
Cash spending on restructuring actions(22.9) (5.1)(18.5) (22.9)
Net cash from (used in) operating activities(28.6) 41.0
71.9
 (28.6)
Cash flows used in investing activities:   
Cash flows from (used in) investing activities:   
Proceeds from asset sales and other, net2.1
 1.6
31.1
 2.1
Increase in restricted cash(0.2) (0.1)
 (0.2)
Capital expenditures(30.1) (22.6)(11.4) (30.1)
Net cash used in investing activities(28.2) (21.1)
Net cash from (used in) investing activities19.7
 (28.2)
Cash flows from (used in) financing activities:      
Borrowings under senior credit facilities24.0
 
125.5
 24.0
Repayments of senior credit facilities(22.0) 
(202.5) (22.0)
Borrowings under trade receivables financing arrangement33.0
 
77.1
 33.0
Repayments of trade receivables financing arrangement(22.0) 
(98.3) (22.0)
Repayments of related party notes payable
 (5.4)
Borrowings under other financing arrangements1.1
 1.0
5.8
 1.1
Repayments of other financing arrangements(8.8) (1.3)(9.6) (8.8)
Minimum withholdings paid on behalf of employees for net share settlements, net(3.1) 
(3.3) (3.1)
Dividends paid to noncontrolling interests in subsidiary(1.2) (0.2)(1.5) (1.2)
Change in former parent company investment
 (48.7)
Net cash from (used in) financing activities1.0
 (54.6)(106.8) 1.0
Change in cash and equivalents due to changes in foreign currency exchange rates(11.1) (6.8)26.2
 (11.1)
Net change in cash and equivalents(66.9) (41.5)11.0
 (66.9)
Consolidated and combined cash and equivalents, beginning of period295.9
 216.6
Consolidated and combined cash and equivalents, end of period$229.0
 $175.1
Consolidated cash and equivalents, beginning of period215.1
 295.9
Consolidated cash and equivalents, end of period$226.1
 $229.0
The accompanying notes are an integral part of these statements.

SPX FLOW, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
(Unaudited; in millions, except per share data)



(1)    BASIS OF PRESENTATION
SPX FLOW, Inc. and its consolidated subsidiaries (“SPX FLOW,” ‘‘the Company,’’ “we,” “us,” or “our”) operate in three business segments and were wholly-owned by SPX Corporation (the “former Parent”) until September 26, 2015, at which time the former Parent distributed 100% of our outstanding common stock to its shareholders through a tax-free spin-off transaction (the “Spin-Off”).
Basis of Presentationsegments.
We prepared the condensed consolidated and combined financial statements pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC"“SEC”) for interim reporting. As permitted under those rules and regulations, certain footnotes or other financial information normally required by accounting principles generally accepted in the United States (“GAAP”) can be condensed or omitted. InThe financial statements represent our accounts after the elimination of intercompany transactions and, in our opinion, these financial statements include the adjustments (consisting only of normal and recurring items) necessary for their fair presentation.
Our condensed consolidated balance sheets as of July 2, 2016 and December 31, 2015, and financial activity presented in the condensed consolidated statements of operations and comprehensive loss for the three and six months ended July 2, 2016 and of equity and cash flows for the six months ended July 2, 2016, consist of the consolidated balances of SPX FLOW as an independent, publicly traded company as of and during the periods then ended. The basis of presentation for periods prior to the Spin-Off is discussed below. These financial statements, including the periods presented prior to the Spin-Off, have been prepared in conformity with GAAP, and the unaudited information included herein should be read in conjunction with our consolidated and combined financial statements included in our 2015 Annual Report on Form 10-K.
As discussed further in Note 3, segment results and corporate expense for the three and six months ended June 27, 2015 have been recast to (i) reflect the reclassification of certain product line results in order to more precisely present our results by reportable segment, (ii) include stock-based compensation costs associated with segment employees in segment income, and (iii) include stock-based compensation costs associated with corporate employees in corporate expense.

Certain operating cash flow amounts in the accompanying condensed combined statement of cash flows for the six months ended June 27, 2015 have been reclassified to conform to the current year presentation.
Preparing financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Actual results could differ from these estimatesestimates. The unaudited information included in this Quarterly Report on Form 10-Q should be read in conjunction with the consolidated and interimcombined financial statements contained in our 2016 Annual Report on Form 10-K. Interim results are not necessarily indicative of full year results. Theresults and the condensed consolidated and combined financial statements may not be indicative of the Company’s future performance.
We establish actual interim closing dates using a fiscal calendar, which requires our businesses to close their books on the Saturday closest to the end of the first calendar quarter, with the second and third quarters being 91 days in length. Our fourth quarter ends on December 31. The interim closing dates for the first, second and third quarters of 20162017 are April 1, July 1, and September 30, compared to the respective April 2, July 2, and October 1, compared to the respective March 28, June 27, and September 26, 20152016 dates. We had six moretwo less days in the first quarter of 20162017 and will have five less daysone more day in the fourth quarter of 20162017 than in the respective 20152016 periods.
Basis of Presentation Prior to the Spin-Off
Our condensed combined statements of operations and comprehensive loss for the three and six months ended June 27, 2015 and of equity and cash flows for the six months ended June 27, 2015, were prepared on a “carve out” basis and were derived from the condensed consolidated financial statements and accounting records of the former Parent for the historical periods presented. These condensed combined statements do not necessarily reflect what the results of operations, financial position, and cash flows would have been had SPX FLOW operated as an independent company for the historical periods reported.
The condensed combined statements of operations for the three and six months ended June 27, 2015 included costs for certain centralized functions and programs provided and/or administered by the former Parent that were charged directly to the former Parent’s business units, including business units of SPX FLOW. These centralized functions and programs included, but were not limited to, information technology, payroll services, shared services for accounting, supply chain and manufacturing operations, and business and health insurance coverage. During the three and six months ended June 27, 2015, $27.0 and $53.0

SPX FLOW, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited; in millions, except per share data)

of such costs, respectively, were directly charged to the Company's business units and were included in selling, general and administrative expenses in the accompanying condensed combined statements of operations.
For purposes of preparing these condensed combined statements of operations and comprehensive income (loss) for the three and six months ended June 27, 2015 and of equity and cash flows for the six months ended June 27, 2015, a portion of the former Parent’s total corporate expenses were allocated to SPX FLOW. These expense allocations included the cost of corporate functions and/or resources provided by the former Parent which included, but were not limited to, executive management, finance and accounting, legal, and human resources support, and the cost of our Charlotte, NC corporate headquarters and our Asia Pacific center in Shanghai, China, as well as related benefit costs associated with such functions, such as pension and postretirement benefits and stock-based compensation. During the three and six months ended June 27, 2015, the Company was allocated $12.6 and $36.4 of such general corporate and related benefit costs, respectively, which were primarily included within selling, general and administrative expenses in the accompanying condensed combined statements of operations.
A detailed description of the methodology used to allocate corporate-related costs is included in our consolidated and combined financial statements included in our 2015 Annual Report on Form 10-K.
(2)    NEW ACCOUNTING PRONOUNCEMENTS
The following is a summary of new accounting pronouncements that apply or may apply to our business.
In May 2014, and as subsequently amended, in the first six months of 2016, the Financial Accounting Standards Board (the "FASB") issued a new standard on revenue recognition that outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. The core principle of the new standard is that a company should recognize revenue to depict the transfer of promised goods or services to customers in accordance with the transfer of control over those goods and services and in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The new standard also requires a number of disclosures intended to enable users of financial statements to understand the nature, amount, timing and uncertainty of revenue, and the related cash flows. The standard is effective for interim and annual reporting periods beginning after December 15, 2017. We are currently evaluatingplan to adopt the effect that this new revenue standard will have on our condensed consolidated financial statements.
In April 2015, the FASB issued a new standard that requires debt issuance costs related to a recognized debt liability to be reported in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. This standard was adopted in the first quarter of 20162018 using the modified retrospective adoption method and was applied retrospectively. Thecontinue to evaluate the potential impacts to our revenues related to our pending adoption of thisthe new revenue standard.
Amongst other impacts, the amended revenue recognition guidance has the potential to affect our current practice of accounting for certain contracts of specific product lines as revenue using the completed contract method under existing guidance. In certain instances, we engineer and manufacture goods that may have no alternative use (absent significant costs to re-engineer the goods) and we have an enforceable right to payment for our performance over the life of the project. For such contracts, we expect to recognize revenue over time under the new guidance as compared with our current practice of using the completed contract method. In addition, we are reviewing our accounting policies to determine whether any changes may be necessary in order to ensure proper recognition of such obligations that we consider perfunctory in nature and/or qualitatively and quantitatively immaterial under existing revenue guidance, but which may be considered significant within the context of the contract under the new revenue standard. Our preliminary assessments of the potential impacts of the new revenue recognition standard did not have a material impact on our condensed consolidated financial statements.are subject to change.
In January 2016, the FASB issued an amendment to existing guidance which revises entities’ accounting related to: (i) the classification and measurement of investments in equity securities, and (ii) the presentation of certain fair value changes for financial liabilities measured at fair value. The amendment also changes certain disclosure requirements associated with the fair value of financial instruments. The amended guidance is effective for interim and annual reporting periods beginning after December 15, 2017 and requires a modified retrospective approach to adoption. Early adoption is only permitted for a provision

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited; in millions, except per share data)

related to instrument-specific credit risk. We are currently evaluating the effect that this amendment will have on our condensed consolidated financial statements.
In February 2016, the FASB issued a new standard which requires a lessee to recognize on its balance sheet the assets and liabilities associated with the rights and obligations created by leases with terms that exceed twelve months. Leases will continue to be classified as either financing or operating, with classification affecting the recognition, measurement and presentation of costs and cash flows arising from a lease. The new guidance is effective for interim and annual reporting periods beginning after December 15, 2018 and requires a modified retrospective approach to adoption for lessees related to capital and operating leases existing at, or entered into after, the earliest comparative period presented in the financial statements, with certain practical expedients available. Early adoption is permitted. We are currently evaluating the effect that this new standard will have on our condensed consolidated financial statements.
In March 2016, the FASB issued an amendment to clarify that a change in the counterparty to a derivative instrument that has been designated as a hedging instrument does not, in and of itself, require de-designation of that hedging relationship provided that all other hedge accounting criteria continue to be met. The amendment is effective for interim and annual reporting periods beginning after December 15, 2016 and may be applied on either a prospective or modified retrospective basis. The impact of the prospective adoption of this amendment had no effect on our first quarter 2017 condensed consolidated financial statements will be based on any future events that impact our hedging relationships.

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(Unaudited; in millions, except per share data)

statements.
In March 2016, the FASB issued an amendment which simplifies several aspects of the accounting for employee share-based payment transactions, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, classification of awards as either equity or liabilities, as well as classification in the statement of cash flows. This amendment is effective for prospective interim and annual reporting periods beginning after December 15, 2016. We plan on adoptingadopted this amendment atduring the first quarter of 2017. We recognized a tax charge of $1.3 in our income tax provision during the six months ended July 1, 2017 related to the vesting of certain restricted stock shares and restricted stock units during the period which, under previous guidance, would have been recognized as a reduction of paid-in capital. Consistent with our previous policy, we have elected to continue to accrue share-based compensation cost based on the number of awards that timeare expected to vest (i.e., by assuming a forfeiture rate in our accrual of such cost). See Note 12 for additional information related to our adoption of this amendment.
In October 2016, the FASB issued an amendment that requires recognition of the income tax consequences of an intra-entity transfer of assets other than inventory. Under current authoritative guidance, the tax effects of intra-entity asset transfers (intercompany sales) are deferred until the transferred asset is sold to a third party or otherwise recovered through use. This amendment requires tax expense and deferred tax asset recognition from the intra-entity sale of the asset in the seller’s tax jurisdiction when the asset transfer occurs, even though the pre-tax effects of that transaction are eliminated in consolidation. This update is effective for interim and annual reporting periods beginning after December 15, 2017. Early adoption is permitted, but the guidance can only be adopted in the first interim period of the early-adopt fiscal year. We are currently evaluating the impact that this amended guidance will have on our consolidated financial statements.
In November 2016, the FASB issued an amendment to guidance for statement of cash flow presentation, which requires that entities explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents in the statement of cash flows. Entities will also be required to reconcile such total to amounts on the balance sheet and disclose the nature of the restrictions. This amendment is effective for interim and annual reporting periods beginning after December 15, 2017, with early adoption permitted, including retrospective application. We expect to adopt this amendment in the first quarter of 2018 and do not expect a material impact to our consolidated financial statements.
In January 2017, the FASB issued an amendment to post-acquisition accounting for goodwill which eliminates the requirement to perform a Step 2 impairment analysis to determine the implied fair value of goodwill. Rather, goodwill impairment charges will be calculated as the amount by which a reporting unit's carrying amount exceeds its effectfair value. This amendment is effective for any annual or interim goodwill impairment tests performed in fiscal years beginning after December 15, 2019, with early adoption permitted. We adopted this amendment in the first quarter of 2017 and will perform our annual goodwill impairment test in accordance with the amended guidance, as well as any interim impairment tests, should facts and circumstances necessitate such a test.
In March 2017, the FASB issued an amendment to guidance on the presentation of net periodic pension and other postretirement benefit costs. Under the new rules, entities that sponsor defined benefit plans will present service costs with

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(Unaudited; in millions, except per share data)

other employee compensation costs within operating income (or capitalize on the balance sheet, when applicable), while other components of net benefit cost will be presented separately (in one or more line items) outside of operating income and will not be eligible for capitalization. This update is effective for interim and annual reporting periods beginning after December 15, 2017, with early adoption permitted if adopted in the first interim period of the early-adopt fiscal year. We adopted this amendment in the first quarter of 2017 and have accordingly reclassified non-service pension and postretirement costs from “Selling, general and administrative” expense to “Other expense, net” in our condensed consolidated financial statements.statements of operations for the three and six months ended July 1, 2017 and July 2, 2016, respectively, as we believe this classification provides investors a more comparative presentation of our selling, general and administrative expense and operating results from period to period. As permitted by the amended guidance, we used amounts disclosed in our employee benefit plans footnote for the three and six months ended July 2, 2016 as the estimation basis for applying the restrospective presentation requirements. See Note 7 for additional information related to our adoption of the amendment.
In May 2017, the FASB issued an amendment to guidance to clarify when to account for a change to the terms or conditions of a share-based payment award as a modification. Under the amended guidance, modification accounting is required only if the fair value, the vesting conditions, or the classification of the award (as equity or liability) changes as a result of the change in terms or conditions. The guidance is effective prospectively for all companies for interim and annual reporting periods beginning after December 15, 2017, with early adoption permitted. We adopted this amendment in the second quarter of 2017 and will evaluate future changes in share-based awards in accordance with the amended guidance as facts and circumstances require.
(3)    INFORMATION ON REPORTABLE SEGMENTS, CORPORATE EXPENSE AND OTHER
We are a global supplier of highly specialized, engineered solutions with operations in over 3530 countries and sales in over 150 countries around the world.  Many of our solutions play a role in helping to meet global demand for processed foods and beverages and power and energy, particularly in emerging markets.
Beginning January 2016, we changed our internal reporting structure to more precisely present reportable segment revenue and income in certain countries where we conduct business across multiple end markets. As a result of these structural enhancements, certain product line results have been reclassified between reportable segments. Additionally, we changed our measurement of segment income to include stock-based compensation costs associated with segment employees, while stock-based compensation for corporate employees is now reported as a component of corporate expense. These changes in reportable segment revenue and income, as well as in our measurement of segment profitability, are consistent with how our chief operating decision maker ("CODM"), beginning in 2016, assesses operating performance and allocates resources.
Segment results and corporate expense have been recast for all historical periods presented to reflect these changes.
We have three reportable segments: Food and Beverage, Power and Energy, and Industrial. In determining our segments, we apply the threshold criteria of the Segment Reporting Topic of the Codification to operating income or loss of each segment before considering impairment and special charges, pension and postretirement expenseservice costs and other indirect corporate expenses (including corporate stock-based compensation). This is consistent with the way our CODMchief operating decision maker evaluates the results of each segment.
Food and Beverage
The Food and Beverage reportable segment operates in a regulated, global industry with customers who demand highly engineered, turn-key solutions. Key demand drivers include dairy consumption, emerging market capacity expansion, sustainability and productivity initiatives, customer product innovation and food safety. Key products for the segment include mixing, drying, evaporation and separation systems and components, heat exchangers, and reciprocating and centrifugal pump technologies. We also design and construct turn-key systems that integrate many of these products for our customers. Our core brands include Anhydro, APV, Bran+Luebbe, Gerstenberg Schroeder, LIGHTNIN, Seital, and Waukesha Cherry-Burrell.
Power and Energy
The Power and Energy reportable segment primarily serves customers in the oil and gas industry and, to a lesser extent, the nuclear and other conventional power industries. A large portion of the segment's revenues are concentrated in oil extraction, production and transportation at existing wells, and in pipeline applications. The underlying driver of this segment includes demand for power and energy. Key products for the segment include pumps, valves and related accessories, while the core brands include APV, Bran+Luebbe, ClydeUnion Pumps, Copes-Vulcan, Dollinger Filtration, LIGHTNIN, M&J Valve, Plenty, and Vokes.
Industrial
The Industrial reportable segment primarily serves customers in the chemical, air treatment, mining, pharmaceutical, marine, shipbuilding, infrastructure construction, general industrial and water treatment industries. Key demand drivers of this segment are tied to macroeconomic conditions and growth in the respective end markets we serve. Key products for the segment are air dryers, filtration equipment, mixers, pumps, hydraulic technologies and heat exchangers. Core brands include Airpel, APV, Bolting Systems, Delair, Deltech, Hankison, Jemaco, Johnson Pump, LIGHTNIN, Power Team, and Stone.

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(Unaudited; in millions, except per share data)

Corporate Expense
Corporate expense generally relates to the cost of our Charlotte, NC corporate headquarters and our Asia Pacific center in Shanghai, China for the period subsequent to the Spin-Off, and includes allocations of the cost of corporate functions and/or resources provided by the former Parent prior to the Spin-Off. A detailed description of the methodology used to allocate

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(Unaudited; in millions, except per share data)

corporate-related costs prior to the Spin-Off can be found in our consolidated and combined financial statements included in our 2015 Annual Report on Form 10-K.China.
Financial data for our reportable segments for the three and six months ended July 1, 2017 and July 2, 2016 and June 27, 2015 were as follows:
Three months ended Six months endedThree months ended Six months ended
July 2, 2016 June 27, 2015 July 2, 2016 June 27, 2015July 1, 2017 July 2, 2016 July 1, 2017 July 2, 2016
Revenues(1):
              
Food and Beverage$188.0
 $234.8
 $372.8
 $444.9
$176.5
 $188.0
 $342.4
 $372.8
Power and Energy155.8
 184.1
 305.5
 357.5
145.0
 155.8
 250.9
 305.5
Industrial185.0
 196.2
 355.5
 383.9
176.5
 185.0
 337.9
 355.5
Total revenues$528.8
 $615.1
 $1,033.8
 $1,186.3
$498.0
 $528.8
 $931.2
 $1,033.8
              
Income:              
Food and Beverage$19.9
 $28.6
 $37.3
 $51.0
$17.3
 $19.9
 $32.8
 $37.3
Power and Energy10.0
 23.0
 12.2
 39.0
10.0
 10.0
 8.5
 12.2
Industrial26.9
 27.9
 46.3
 53.7
20.8
 26.9
 41.9
 46.3
Total income for reportable segments56.8
 79.5
 95.8
 143.7
48.1
 56.8
 83.2
 95.8
              
Corporate expense12.6
 12.4
 31.5
 36.2
12.1
 12.6
 27.6
 31.5
Pension and postretirement expense1.1
 1.0
 2.1
 2.0
Pension and postretirement service costs0.3
 0.5
 0.7
 1.0
Impairment of goodwill and intangible assets426.4
 
 426.4
 

 426.4
 
 426.4
Special charges, net10.8
 3.3
 51.8
 7.1
Consolidated and combined operating income (loss)$(394.1) $62.8
 $(416.0) $98.4
Special charges6.7
 10.8
 15.3
 51.8
Consolidated operating income (loss)$29.0
 $(393.5) $39.6
 $(414.9)
(1)      We recognized revenues under the percentage-of-completion method of $87.3$47.9 and $123.8$87.3 in the three months ended July 1, 2017 and July 2, 2016, and June 27, 2015, respectively. For the six months ended July 1, 2017 and July 2, 2016, and June 27, 2015, revenues under the percentage-of-completion method were $186.3$108.3 and $237.8,$186.3 respectively. Costs and estimated earnings in excess of billings on contracts accounted for under the percentage-of-completion method were $108.4$70.2 and $87.4$66.1 as of July 2, 20161, 2017 and December 31, 2015,2016, respectively, and are reported as a component of ‘‘Accounts receivable, net’’ in the condensed consolidated balance sheets. Billings in excess of costs and estimated earnings on uncompleted contracts accounted for under the percentage-of-completion method were $62.7$57.0 and $52.9$57.2 as of July 2, 20161, 2017 and December 31, 2015,2016, respectively, and are reported as a component of ‘‘Accrued expenses’’ in the condensed consolidated balance sheets.
(4)     SPECIAL CHARGES NET
Special charges net, for the three and six months ended July 1, 2017 and July 2, 2016 and June 27, 2015 were as follows:
Three months ended Six months endedThree months ended Six months ended
July 2, 2016 June 27, 2015 July 2, 2016 June 27, 2015July 1, 2017 July 2, 2016 July 1, 2017 July 2, 2016
Food and Beverage$5.7
 $0.3
 $14.5
 $2.7
$3.5
 $5.7
 $5.0
 $14.5
Power and Energy1.6
 2.4
 12.3
 2.3
1.3
 1.6
 2.3
 12.3
Industrial2.5
 0.6
 7.0
 2.1
1.9
 2.5
 4.7
 7.0
Other1.0
 
 18.0
 

 1.0
 3.3
 18.0
Total$10.8
 $3.3
 $51.8
 $7.1
$6.7
 $10.8
 $15.3
 $51.8
Global Realignment Program
As disclosed in our 20152016 Annual Report on Form 10-K, we are currently executing a multi-year plan to transition our enterprise to an operating company. As part of this plan, we announced our intent to further optimize our global footprint,

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited; in millions, except per share data)

streamline business processes and reduce selling, general and administrative expense through a global realignment program. The realignment program is intended to reduce costs across operating sites and corporate and global functions, in part by making structural changes and process enhancements which allow us to operate more efficiently. Special charges for the three and six

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NOTES TO CONDENSED CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited; in millions, except per share data)

months ended July 1, 2017 and July 2, 2016 were substantially associated with this program and included costs associated primarily with employee termination and facility consolidation, as well as certain non-cash charges associated with fixed asset impairments.
Special Charges Net, By Reportable Segment
Unless otherwise noted below, charges for the three and six months ended July 1, 2017 and July 2, 2016 relate to our global realignment program.
Food and Beverage Charges for the three months ended July 1, 2017 related primarily to severance and other costs associated with the reorganization of certain commercial, operational and administrative functions across all regions in which the segment operates. Charges for the six months ended July 1, 2017 included these charges and, to a lesser extent, severance and other costs associated with (i) the consolidation and relocation of a manufacturing facility in Germany to an existing facility in Poland, and (ii) reorganization and consolidation of certain administrative functions primarily in Europe and the Asia Pacific region.
Charges for the three and six months ended July 2, 2016 related primarily to severance and other costs, associated with the global realignment program, including (i) the consolidation and relocation of a manufacturing facility in Germany to an existing facility in Poland and of other facilities in Europe, and (ii) various other restructuring initiatives in Europe, the U.S., China and Brazil.
Power and Energy Charges for the three and six months ended June 27, 2015July 1, 2017 related primarily to severance and other costs associated with (i) the consolidationreorganization of facilitiescertain commercial, operational and administrative functions primarily in Europe and North America, partially offset by revisions of estimates for severance and other costs which were previously recorded in the first quarter of 2017 and in 2016. Charges for the six months ended July 1, 2017 included these charges as well as severance and other costs associated with (i) various locations in North America, and (ii) a restructuring initiativethe reorganization and consolidation of certain administrative functions primarily in South America.the EMEA region.
Power and Energy Charges for the three months ended July 2, 2016 included primarily an asset impairment charge of $1.5 related to certain long-lived assets.assets (but unrelated to the global realignment program). Charges for the six months ended July 2, 2016 related primarily to severance and other costs associated with the global realignment program in the U.K., France, Germany and, to a lesser extent, North America, including actions taken to (i) reduce the cost base of the segment in response to oil price declines that began in the latter half of 2014 and continued into 2016, which has resulted in a reduction in capital spending by our customers in the oil and gas industries, and (ii) realign certain sites around core service markets. Charges for the six months ended July 2, 2016 also included the $1.5 asset impairment charge previously noted.
Industrial Charges for the three and six months ended June 27, 2015July 1, 2017 related primarily to severance and other costs associated with actions that were taken to reduce the cost base(i) consolidation and relocation of the segment’s Clyde Union business, alsomanufacturing operations of a facility in responsethe Netherlands to an existing facility in Poland and (ii) reorganization of certain commercial, operational and administrative functions primarily in Europe and North America, partially offset by revisions of estimates for severance and other costs related to the significant decline in oil prices that beganpreviously planned consolidation and relocation of a manufacturing facility in the latter halfU.S. Charges for the six months ended July 1, 2017 related primarily to severance and other costs associated with (i) the consolidation and relocation of 2014a manufacturing facility in Sweden to an existing facility in Poland and, to a lesser extent, (ii) the resultant impact on capital spending by our customersreorganization and consolidation of certain administrative functions in the oilU.S., EMEA and gas industries.Asia Pacific, in addition to the aforementioned charges for the three months ended July 1, 2017.
Industrial Charges for the three and six months ended July 2, 2016 related primarily to severance and other costs, associated with the global realignment program, including (i) the consolidation and relocation of a manufacturing facility in Denmark to an existing facility in Poland and of certain other North American facilities, and (ii) various other global restructuring initiatives including, during the six months ended July 2, 2016, charges related to the relocation of a facility in Asia Pacific.
Charges for the three and six months ended June 27, 2015 related primarily to severance and other costs associated with (i) the continued reorganization of the Johnson Pump management structure in Europe and (ii) a reorganization of the commercial and operational structure of our plate heat exchanger business in Europe.
Other Charges for the six months ended July 1, 2017 reflected primarily corporate asset impairment and other related charges of $3.6 in connection with the sale of certain corporate assets during the period.
Charges for the three months ended July 2, 2016 reflected primarily (i) asset impairment charges of $0.6 related to certain long-lived assets (but unrelated to the global realignment program) and (ii) revisions of estimates for severance and other costs associated with the global realignment program which were previously recorded in the first quarter of 2016. Charges for the six months ended July 2, 2016 related primarily

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited; in millions, except per share data)

to corporate asset impairment charges of $12.6 primarily associated with the global realignment program, as well as severance and other related costs associated with the global realignment program.costs. Asset impairment charges resulted primarily from management’smanagement's decision during the first quarter of 2016 to market certain corporate assets for sale. Thosesale (such corporate assets which have an estimated fair valuewere sold during the first quarter of approximately $27.0, were marketed for sale beginning in the second quarter and, accordingly, are considered held for sale and reported2017, as a component of "Other current assets" in the condensed consolidated balance sheet as of July 2, 2016.noted above).
Expected charges still to be incurred under actions approved as of July 2, 20161, 2017 were approximately $2.3.

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NOTES TO CONDENSED CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited; in millions, except per share data)

$2.6.
The following is an analysis of our restructuring liabilities for the six months ended July 1, 2017 and July 2, 2016 and June 27, 2015:2016:
Six months endedSix months ended
July 2, 2016 June 27, 2015July 1, 2017 July 2, 2016
Balance at beginning of year$32.9
 $9.2
$33.6
 $32.9
Special charges(1)
37.7
 6.9
11.7
 37.7
Utilization — cash(22.9) (5.1)(18.5) (22.9)
Currency translation adjustment and other0.1
 (0.5)1.0
 0.1
Balance at end of period$47.8
 $10.5
$27.8
 $47.8
(1)Amounts that impacted special charges but not the restructuring liabilities included $3.6 and $14.1 of asset impairment and other related charges during the six months ended July 1, 2017 and July 2, 2016, and $0.2 of non-cash charges during the six months ended June 27, 2015.respectively.
(5)    INVENTORIES, NET
Inventories at July 2, 20161, 2017 and December 31, 20152016 comprised the following:
July 2, 2016 December 31, 2015July 1, 2017 December 31, 2016
Finished goods$86.3
 $87.5
$97.4
 $86.2
Work in process92.9
 88.8
104.4
 74.6
Raw materials and purchased parts135.5
 135.2
111.4
 117.8
Total FIFO cost314.7
 311.5
313.2
 278.6
Excess of FIFO cost over LIFO inventory value(6.3) (6.3)(6.0) (6.2)
Total inventories$308.4
 $305.2
$307.2
 $272.4
Inventories include material, labor and factory overhead costs and are reduced, when necessary, to estimated net realizable values. Certain domestic inventories are valued using the last-in, first-out (“LIFO”) method. These inventories were approximately 7% and 5%6% of total inventory at July 2, 20161, 2017 and December 31, 2015.2016, respectively. Other inventories are valued using the first-in, first-out (“FIFO”) method.
(6)    GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill
The changes in the carrying amount of goodwill by reportable segment forduring the six months ended July 2, 20161, 2017 were as follows:
December 31, 2015 Goodwill Resulting from Business Combinations Impairments 
Foreign Currency Translation and Other(1)
 July 2, 2016December 31, 2016 Impairments Foreign Currency Translation and Other July 1, 2017
Food and Beverage$269.9
 $
 $
 $(0.3) $269.6
$250.3
 $
 $17.5
 $267.8
Power and Energy(2)(1)
538.9
 
 (252.8) (17.4) 268.7
256.0
 
 10.0
 266.0
Industrial(3)(2)
214.6
 
 
 9.6
 224.2
216.2
 
 7.2
 223.4
Total$1,023.4
 $
 $(252.8) $(8.1) $762.5
$722.5
 $
 $34.7
 $757.2
(1)In connection with our recasting of historical reportable segment results in January 2016, as discussed further in Note 3, we performed a re-allocation of reportable segment goodwill during the first quarter of 2016. This re-allocation resulted in the following changes in goodwill compared to amounts previously reported at December 31, 2015 by reportable segment: Food and Beverage goodwill reduction of $5.6, Power and Energy goodwill reduction of $4.0, and Industrial goodwill increase of $9.6.
(2)The carrying amount of goodwill included $252.8$250.5 and $0.0$241.1 of accumulated impairments as of July 2, 20161, 2017 and December 31, 2015,2016, respectively.
(3)(2)The carrying amount of goodwill included $67.7 of accumulated impairments as of July 2, 20161, 2017 and December 31, 2015.2016.

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NOTES TO CONDENSED CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited; in millions, except per share data)

As of the first day of our fiscal fourth quarter of 2015,2016, we performed our annual goodwill impairment test, which indicated the estimated fair value of our Power and Energy reporting unit exceeded its carrying value by approximately 4%. Our assumptions in our annual impairment test included, among others, that (i) 2017 revenues would decline between 10%. to 15% as a result of lower backlog and 2017 order rates would remain consistent with those experienced in the second half of 2016, (ii) 2017 targeted cost savings would be executed as planned with incremental cash savings expected in 2018 and beyond, (iii) a discount rate of 10.5%, (iv) expanded current and forward EBITDA multiples associated with recent oil and gas industry transactions, which suggested higher valuation multiples than historical averages for the industry, and (v) changes in working capital continuing to correlate with order and revenue trends. The estimated fair value of each of our other reporting units significantly exceeded its respective book value.
OverA change in any of the courseassumptions used in testing Power and Energy's goodwill for impairment (e.g., projected order, revenue and profit growth rates, discount rate, industry valuation multiples, expected control premium, etc.) could result in Power and Energy's estimated fair value being less than the carrying value of its net assets.  For example, a one-hundred basis point increase in the discount rate used in determining Power and Energy's discounted cash flows in our 2016 annual goodwill impairment test would have resulted in Power and Energy's fair value being approximately $27 lower than the carrying value of its net assets as of the date of that fourth quarter test.
As of July 1, 2017, there were no indicators necessitating an interim impairment test of any of our reporting units, based on management's review of operating performance.
We will perform our annual impairment testing of goodwill (and indefinite-lived intangible assets that are not amortized), during the fourth quarter of 2015, global oil prices continued to decline, resulting2017 in delayed customer order patterns.  Based on these slower order rates at the end of the fourth quarter,conjunction with our annual financial planning process. In performing that annual impairment testing, we lowered the 2016 forecasted revenue and profitability of our Power and Energy segment. The combination of adverse market conditions, lowerwill assess, among other items, order trends and resultant impactthe operating cash flow performance of our reporting units, including Power and Energy. Adverse changes to or a failure to achieve the business plans included in our 2016 forecast subsequent to our annual goodwill impairment test led management to conclude an interim impairment test of our Power and Energy reporting unit, was necessary as of December 31, 2015. 
The results of our interim goodwill impairment test conducted as of December 31, 2015 indicated the estimated fair value of the Power and Energy reporting unit exceeded its carrying value by approximately 3%, while the carrying value of the Power and Energy segment goodwill was $538.9 as of December 31, 2015. Our assumptions in the December 31, 2015 interim impairment test included, among others, that (i) first half 2016 orders trends would remain comparable to those obtained in the fourth quarter of 2015, (ii) targeted cost savings could be executed as planned and cost savings would, in part, be realized by the end of 2016, and (iii) current and forward EBITDA multiples would remain consistent with oil and gas industry transactions observed in the preceding twelve months.
During the second quarter of 2016, our Power and Energy reporting unit experienced sustained quarterly order rates below order intake levels in the fourth quarter of 2015 and operating results which were below our internal estimates. As a result of the lower order patterns and lower year-to-date earnings of the reporting unit, we revised our 2016 projections below the bottom end of the range utilized in our fourth quarter 2015 interim impairment test, leading us to conclude that an interim impairment test as of July 2, 2016 was necessary.
Using revised cash flow projections as of July 2, 2016, market participant discount rates, and EBITDA multiples observed of peer companies and in recent transactions in the oil and gas industry, we determined the “step one” fair value of our Power and Energy reporting unit was below the carrying value of its net assets. In “step two” of the goodwill impairment test, we estimated the implied fair value of Power and Energy’s goodwill as of July 2, 2016, which resulted in an impairment charge related to such goodwill of $252.8. After reflecting the impairment charge, goodwill for the Power and Energy reporting unit was $268.7 as of July 2, 2016.
Adverse changes todiscussed above, or a failure to achieve the updated cash flow projections, further deterioration of macroeconomic conditions including significant downward price pressure on global oil prices, lower customer capital spending estimates, and/or significant declines in industry multiples, could result in future impairments, which could be material.
During the second quarter of 2016, we recorded an interim goodwill impairment charge of $252.8 as a future impairment.
The non-recurring fair value measurement is a "Level 3" measurement under the fair value hierarchy as further defined in Note 14.
Management assessed the operating performanceresult of eachlower than expected order patterns and lower year-to-date earnings of our otherPower and Energy reporting units and concluded that an interim impairment test as of July 2, 2016 for the other reporting units was not necessary.unit.
Other Intangibles, Net
Identifiable intangible assets were as follows:
July 2, 2016 December 31, 2015July 1, 2017 December 31, 2016
Gross Carrying Value Accumulated Amortization Net Carrying Value Gross Carrying Value Accumulated Amortization Net Carrying ValueGross Carrying Value Accumulated Amortization Net Carrying Value Gross Carrying Value Accumulated Amortization Net Carrying Value
Intangible assets with determinable lives:                      
Customer relationships$221.0
 $(101.3) $119.7
 $344.0
 $(94.1) $249.9
$220.5
 $(113.2) $107.3
 $209.6
 $(101.6) $108.0
Technology95.7
 (41.1) 54.6
 122.1
 (38.0) 84.1
90.8
 (46.6) 44.2
 84.6
 (40.8) 43.8
Patents6.6
 (4.8) 1.8
 6.7
 (4.6) 2.1
6.6
 (4.9) 1.7
 6.5
 (5.1) 1.4
Other12.9
 (10.3) 2.6
 13.0
 (10.3) 2.7
13.2
 (10.4) 2.8
 12.3
 (9.6) 2.7
336.2
 (157.5) 178.7
 485.8
 (147.0) 338.8
331.1
 (175.1) 156.0
 313.0
 (157.1) 155.9
Trademarks with indefinite lives208.1
 
 208.1
 240.6
 
 240.6
194.8
 
 194.8
 188.4
 
 188.4
Total$544.3
 $(157.5) $386.8
 $726.4
 $(147.0) $579.4
$525.9
 $(175.1) $350.8
 $501.4
 $(157.1) $344.3

SPX FLOW, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited; in millions, except per share data)

AtAs of July 2, 2016,1, 2017, the net carrying value of intangible assets with determinable lives consisted of the following by reportable segment: $81.2$75.8 in Power and Energy, $62.5$54.8 in Food and Beverage, and $35.0$25.4 in Industrial. Trademarks with indefinite lives consisted of the following by reportable segment: $101.4$99.4 in Food and Beverage, $60.7$60.6 in Industrial, and $46.0$34.8 in Power and Energy.
No impairment charges were recorded during the six months ended July 1, 2017. Changes in the gross carrying values of trademarks and other identifiable intangible assets during the six months ended July 1, 2017 related primarily to foreign currency translation.

SPX FLOW, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited; in millions, except per share data)

During the second quarter of 2016, as described in the “Goodwill” section above, we observed sustained quarterly order rates for Power and Energy below order intake levels in the fourth quarter of 2015 and operating results below our expectations, and thus determined an interim test of recoverability was required for the definite and indefinite-lived intangibles of that reporting segment. Based on market conditions as of July 2, 2016 and backlog positions falling below prior periods, we reduced our estimates of the expected future revenues from recorded intangible assets in the Power and Energy reporting unit.
In accordance with relevant guidance, we estimated the undiscounted cash flows of our customer relationships by projecting revenues and margin driven by customer relationships, reduced by an estimated retention rate. We estimated the undiscounted cash flows of our technology assets by applying estimated royalty rates to revenues projected to result from each of such underlying assets. The undiscounted cash flows of customer relationships and technology assets were less than their respective carrying values. In “step two” of the impairment test, we discounted expected cash flows from the customer relationships and technology assets at a rate of return that reflects current market conditions. As a result, we recorded impairment charges of $115.9 related to customer relationships and $30.9 related to technology assets during the second quarter of 2016.
our Power and Energy segment. Also during the second quarter of 2016, and as a result of thean interim “step one” impairment test of our Power and Energy indefinite-lived trademarks, we recorded an impairment charge of $26.8 representing the difference between fair value and carrying value. The fair value of the reporting unit’s trademarks was estimated using assumed royalty rates applied to expected future cash flows of the respective product lines of the reporting unit, discounted at a rate of return reflecting current market conditions.
Other changes in the gross carrying values of trademarks and other identifiable intangible assets during the six months ended July 2, 2016 related primarily to foreign currency translation.such trademarks.
(7)    WARRANTY
The following is an analysis of our product warranty accrual for the periods presented:
 Six months ended
 July 2, 2016 June 27, 2015
Balance at beginning of year$14.8
 $18.4
Provisions3.7
 4.4
Usage(6.0) (6.1)
Currency translation adjustment(0.1) (0.8)
Balance at end of period12.4
 15.9
Less: Current portion of warranty11.8
 14.7
Non-current portion of warranty$0.6
 $1.2
(8)    EMPLOYEE BENEFIT PLANS
PensionSPX FLOW sponsors a number of defined benefit pension plans and a postretirement plan. For all of these plans, changes in the fair value of plan assets and actuarial gains and losses are recognized to earnings in the fourth quarter of each year, unless earlier remeasurement is required. The remaining components of pension and postretirement expense, includes net periodic benefit expense associated with defined benefit pensionprimarily service and postretirement plans we sponsorinterest costs and in 2015, an allocation ofexpected return on plan assets, are recorded on a portion of the net periodic benefit expense associated with defined benefit pension and postretirement plans sponsored by the former Parent.quarterly basis.
Components of Net Periodic Pension and Postretirement Benefit Expense
The net periodic pension benefit expense for the foreign pension plans we sponsor was $0.5 and $0.7 for the three months ended July 2, 2016 and June 27, 2015, respectively, and $1.0 and $1.4, respectively, for the six months then ended, and was comprised primarily of service and interest costs. The net periodic benefit expense for the domestic pension and postretirement

SPX FLOW, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited; in millions, except per share data)

plans we sponsor was $0.6 and $0.1 for the three months ended July 2, 2016 and June 27, 2015, respectively, and $1.1 and $0.2 respectively, for the six months then ended, and was comprised of service and interest costs. (Income)
Net periodic benefit cost allocated to the Company related to theexpense (income) for our foreign pension plans sponsored by the former Parent was $0.2 and $0.4our domestic pension and postretirement plans for the three and six months ended June 27, 2015, respectively.July 1, 2017 and July 2, 2016 included the following components:
 Foreign Pension Plans Domestic Pension and Postretirement Plans Total Statement of Operations Caption in Which Expense is Reported
 Three months ended 
 July 1, 2017 July 2, 2016 July 1, 2017 July 2, 2016 July 1, 2017 July 2, 2016 
Service cost$0.1
 0.2
 $0.2
 $0.3
 $0.3
 $0.5
 Selling, general and administrative
Interest cost0.3
 0.3
 0.1
 0.3
 0.4
 0.6
 Other expense, net
Total net periodic benefit expense$0.4
 $0.5
 $0.3
 $0.6
 $0.7
 $1.1
  
 Foreign Pension Plans Domestic Pension and Postretirement Plans Total Statement of Operations Caption in Which Expense (Income) is Reported
 Six months ended 
 July 1, 2017 July 2, 2016 July 1, 2017 July 2, 2016 July 1, 2017 July 2, 2016 
Service cost$0.3
 0.5
 $0.4
 $0.5
 $0.7
 $1.0
 Selling, general and administrative
Interest cost0.4
 0.5
 0.3
 0.6
 0.7
 1.1
 Other expense, net
Curtailment gain(1)
(1.1) 
 
 
 (1.1) 
 Other expense, net
Total net periodic benefit expense (income)$(0.4) $1.0
 $0.7
 $1.1
 $0.3
 $2.1
  
(1)Gain is related to the cessation of accrual of future benefits by participants in a defined benefit pension plan in the Netherlands effective March 31, 2017. The accumulated obligations for future pension payments to participants in this plan were also transferred to an insurance company at that time. Under the agreement, the insurance company irrevocably assumed the obligation to make future pension payments to the approximately 60 participants of the plan.
Employer Contributions
During the six months ended July 1, 2017 and July 2, 2016, contributions to the foreign and domestic pension plans we sponsor were less than $0.1.

SPX FLOW, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited; in millions, except per share data)

(9)(8)    INDEBTEDNESS
Debt at July 2, 20161, 2017 and December 31, 20152016 comprised the following:
July 2, 2016 December 31, 2015July 1, 2017 December 31, 2016
Domestic revolving loan facility$2.0
 $
$1.0
 $68.0
Term loan(1)
400.0
 400.0
380.0
 390.0
6.875% senior notes, due in August 2017600.0
 600.0
5.625% senior notes, due in August 2024300.0
 300.0
5.875% senior notes, due in August 2026300.0
 300.0
Trade receivables financing arrangement11.0
 

 21.2
Other indebtedness(2)
29.6
 37.3
39.9
 42.4
Less: deferred financing fees(3)
(4.1) (5.2)(11.8) (12.8)
Total debt1,038.5
 1,032.1
1,009.1
 1,108.8
Less: short-term debt33.7
 28.0
24.2
 27.7
Less: current maturities of long-term debt20.4
 10.3
20.4
 20.2
Total long-term debt$984.4
 $993.8
$964.5
 $1,060.9
(1)The term loan, which had an initial principal balance of $400.0, is repayable in quarterly installments of 5.0% annually beginningwhich began with our third quarter of 2016, with the remaining balance repayable in full on September 24, 2020.
(2)Primarily includes capital lease obligations of $8.9$15.7 and $9.3$14.7 and balances under a purchase card program of $19.5$22.2 and $23.6$17.9 as of July 2, 20161, 2017 and December 31, 2015,2016, respectively. The purchase card program allows for payment beyond the normalcustomary payment terms for goods and services acquired under the program. As this arrangement extends the payment of these purchases beyond their normal payment terms through third-party lending institutions, we have classified these amounts as short-term debt.
(3)Deferred financing fees were comprised of fees related to the term loan and senior notes.
A detailed description of our senior credit facilities and senior notes is included in our consolidated and combined financial statements included in our 20152016 Annual Report on Form 10-K.
The weighted-average interest rate of outstanding borrowings under our senior credit facilities was approximately 2.2%4.0% at July 2, 2016.1, 2017.
At July 2, 2016,1, 2017, we had $438.5$441.5 of available borrowing capacity under our revolving credit facilities after giving effect to borrowings of $2.0$1.0 under the domestic revolving loan facility and $9.5$7.5 reserved for outstanding letters of credit. At July 2, 2016,1, 2017, we also had $7.7$31.9 of available borrowing capacity under our trade receivables financing arrangement after giving effect to borrowings of $11.0.arrangement. Our trade receivables financing arrangement provides for a total commitment of $50.0 from associated lenders, depending upon our trade receivables balance and other factors. In addition, at July 2, 2016,1, 2017, we had $244.4$297.5 of available issuance capacity under our foreign credit instrument facilities after giving effect to $255.6$202.5 reserved for outstanding bank guarantees and standby letters of credit.
At July 2, 2016,1, 2017, in addition to the revolving lines of credit described above, we had approximately $6.2$5.5 of letters of credit outstanding under separate arrangements in China and India.
At July 2, 2016,1, 2017, we were in compliance with all covenants of our senior credit facilities and our senior notes.


(10)(9)    DERIVATIVE FINANCIAL INSTRUMENTS
We manufacture and sell our products in a number of countries and, as a result, are exposed to movements in foreign currency ("FX") exchange rates. Our objective is to preserve the economic value of non-functional currency-denominated cash flows and to minimize the impact of changes as a result of currency fluctuations. Our principal currency exposures relate to the Euro, Chinese Yuan and Great BritainBritish Pound.
We had FX forward contracts with an aggregate notional amount of $51.7$27.5 and $44.7$28.0 outstanding as of July 2, 20161, 2017 and December 31, 2015,2016, respectively, with all such contracts scheduled to mature within one year. We also had FX embedded derivatives with an aggregate notional amount of $32.3$19.6 and $31.6$21.4 at July 2, 20161, 2017 and December 31, 2015,2016, respectively, with scheduled maturities of $29.3, $2.8$19.5 and $0.2$0.1 within one two and threetwo years, respectively. TheThere were no unrealized gains or losses net of tax, recorded

SPX FLOW, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited; in millions, except per share data)

in accumulated other comprehensive loss related to FX forward contracts were less than $0.1 as of July 2, 20161, 2017 and December 31, 2015.2016, respectively. The net gains (losses) recorded in "Other income (expense),expense, net" related to FX gains (losses) totaled $0.2$(1.6) and $(2.9)$0.2 for the three months ended July 1, 2017 and July 2, 2016, and June 27, 2015, respectively, and $(3.0)$(3.4) and $0.2$(3.0) for the six months then ended.
We enter into arrangements designed to provide the right of setoff in the event of counterparty default or insolvency, and have elected to offset the fair values of our FX forward contracts in our condensed consolidated balance sheets. The gross fair values of our FX forward contracts and FX embedded derivatives, in aggregate, were $2.9$2.4 and $2.0$2.9 (gross assets) and $1.3$0.1 and $1.5$0.1 (gross liabilities) at July 2, 20161, 2017 and December 31, 2015,2016, respectively.
(11)(10)    EQUITY AND STOCK-BASED COMPENSATION
Income (Loss) Per Share
Prior to the Spin-Off, SPX FLOW had no common shares outstanding. On September 26, 2015, 41.322 SPX FLOW common shares were distributed to the former Parent's shareholders in conjunction with the Spin-Off. For comparative purposes, basic shares outstanding reflect this amount in all periods presented prior to the Spin-Off.  For purposes of computing dilutive shares, unvested SPX FLOW awards at the Spin-Off date were assumed to have been issued and outstanding from January 1, 2015.  The resulting number of weighted-average dilutive shares has been used for the three and six months ended June 27, 2015. The following table sets forth the number of weighted average shares outstanding used in the computation of basic and diluted income (loss) per share: 
Three months ended Six months endedThree months ended Six months ended
July 2, 2016 June 27, 2015 July 2, 2016 June 27, 2015July 1, 2017 July 2, 2016 July 1, 2017 July 2, 2016
Weighted-average shares outstanding, basic41.397
 40.809 41.273
 40.80941.844
 41.397
 41.724
 41.273
Dilutive effect of share-based awards
 0.123 
 0.1230.377
 
 0.334
 
Weighted-average shares outstanding, dilutive(1)
41.397
 40.932 41.273
 40.93242.221
 41.397
 42.058
 41.273
(1)For the three and six months ended July 1, 2017, 0.234 and 0.213, respectively, of unvested restricted stock shares and restricted stock units were not included in the computation of diluted income per share because required internal performance thresholds for vesting (as discussed in our consolidated and combined financial statements included in our 2016 Annual Report on Form 10-K) were not met. For the three and six months ended July 1, 2017, 0.360 and 0.364, respectively, of stock options outstanding were excluded from the computation of diluted income per share because their exercise price was greater than the average market price of common shares. For the three and six months ended July 2, 2016, an aggregate of 0.780 and 0.820, respectively, of unvested restricted stock shares, restricted stock units, and stock options outstanding were excluded from the computation of diluted loss per share as we incurred a net loss during the periods. For the three and six months ended July 2, 2016, the number of anti-dilutive unvested restricted stock shares and restricted stock units outstanding excluded from the computation of diluted loss per share was 0.171 and 0.375, respectively. For the three and six months ended June 27, 2015, 0.479 of unvested restricted stock shares/units were not included in the computation of diluted income per share because required market thresholds for vesting (as discussed in our consolidated and combined financial statements included in our 2015 Annual Report on Form 10-K) were not met. For the three and six months ended June 27, 2015, 0.396 of stock options were not included in the computation of diluted income per share because their exercise price was greater than the average market price of common shares.respectively .
Stock-Based Compensation
Prior to the Spin-Off,September 26, 2015, at which time SPX Corporation (the "former Parent") distributed 100% of our outstanding common stock to its shareholders through a tax-free spin-off transaction (the "Spin-Off"), eligible employees of the Company participated in theour former Parent’s share-based compensation plan pursuant to which they were granted share-based awards of the former Parent'sits stock. TheOur former Parent’s share-based compensation plan included awards for restricted stock shares, restricted stock units and stock options. Compensation expense for share-based awards recorded by the Company prior to the Spin-Off includes the expense associated with the employees historically attributable to the Company’s operations, as well as an allocation of stock-based compensation expense for the former Parent’s corporate employees who provided certain centralized support functions.

SPX FLOW, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited; in millions, except per share data)

In connection with the Spin-Off, outstanding equity-based awards granted to SPX FLOW employees under theour former Parent's plan were converted into awards of the Company using a formula designed to preserve the intrinsic value of the awards immediately prior to the Spin-Off. This conversion did not result in additional compensation expense. Additionally, certain restricted stock units granted to employees in 2013 and 2014, none of whom were named executive officers at the time, were modified at the Spin-Off date to provide a minimum vesting equivalent to 50% of the underlying units at the end of the applicable remaining service periods. Compensation expense of $0.3 and $0.6 related to the modification was recognized in the three and six months ended July 2, 2016, and the remainingcompensation expense of $0.6 related to the modification will bewas recognized overduring the remaining service periodsremainder of the related awards.2016.
Since the Spin-Off, SPX FLOW stock-based compensation awards may be granted to certain eligible employees or non-employee directors under the SPX FLOW Stock Compensation Plan (the “Stock Plan”).  Under the Stock Plan, up to 2.0821.327 unissued shares of our common stock were available for future grant as of July 2, 2016.1, 2017. The Stock Plan permits the issuance of authorized but unissued shares or shares from treasury upon the exercise of options, vesting of restricted stock units, or granting of restricted stock shares.shares or exercise of stock options. Each stock option, restricted stock share, and restricted stock unit and stock option granted reduces share availability under the Stock Plan by one share.
Restricted stock shares or restricted stock units may be granted to certain eligible employees or non-employee directors in accordance with the Stock Plan and applicable award agreements. Subject to participants' continued service and other award

SPX FLOW, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited; in millions, except per share data)

terms and conditions, the restrictions lapse and awards generally vest over a period of time, generally three years (or one year for awards to non-employee directors). In some instances, such as death, disability, or retirement, awards may vest concurrently with or following an employee's termination. Approximately half of thesuch restricted stock shares and restricted stock unit awards vest based on performance thresholds, while the remaining portion vest based on the passage of time since grant date.
Eligible employees, including officers, receivedwere granted 2017 target performance awards primarily during the three months ended April 2, 20161, 2017 in which the employee can earn between 50% and 150% of the target performance award in the event, and to the extent, the award meets the required performance vesting criteria. Such awards are generally subject to the employees’ continued employment during the three-year vesting period, and may be completely forfeited if the threshold performance criteria are not met. Vesting for the 20162017 target performance awards is based on SPX FLOW shareholder return versus the performance of a composite group of companies, as established under the awards (the "Composite Group"), over the three-year period from January 1, 20162017 through December 31, 2018.2019. In addition, certain eligible employees, including officers, were granted 2017 awards during the three months ended April 1, 2017 that vest subject to attainment of stated improvements in a three-year average annual return on invested capital (as defined) measured at the conclusion of the measurement period ending December 31, 2019 (including eligible employees’ continued employment during the measurement period). These target performance and internal performance metric awards were issued as restricted stock units to eligible non-officer employees and restricted stock shares to eligible officers.
Eligible non-officer employees also receivedwere granted 2017 restricted stock unit awards primarily during the three months ended April 2, 20161, 2017 that vest ratably over three years, subject to the passage of time and the employees’ continued employment during such period. In some instances, such as death, disability, or retirement, awards may vest concurrently with or following an employee's termination. Eligible officers receivedwere granted restricted stock share awards in the three months ended April 2, 20161, 2017 that vest subject to an internal performance metric during the first year of the award and thenthat also require the completion ofcontain a two-yearthree-year holding period afterfrom the first yeargrant of the award (including eligible officers’whereby the holding period is generally released ratably over the three years (subject to a participant's continued employment during that period), before issuance to the eligible officers..
Non-employee directors received restricted stock share awards in the three months ended July 2, 20161, 2017 that vest at the close of business on the day before the date of the Company's next regular annual meeting of shareholders held after the date of the grant, subject to the passage of time and the directors' continued service during such period.
Our restrictedRestricted stock share and unit awards granted to eligible employees primarily during the three months ended April 1, 2017 include early retirement provisions which permit recipients to be eligible for vesting generally upon reaching the age of 5560 and completing fiveten years of service.service (and, if applicable, subject to the attainment of performance measures).
Restricted stock shares and restricted stock units that do not vest within the applicable vesting period are forfeited.
Stock options may be granted to eligible employees in the form of incentive stock options or nonqualified stock options. The option price per share may be no less than the fair market value of our common stock at the close of business on the date of grant. Upon exercise, the employee has the option to surrender previously owned shares at current value in payment of the exercise price and/or for withholding tax obligations.

SPX FLOW, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited; in millions, except per share data)

The recognition of compensation expense for share-based awards is based on their grant-date fair values. The fair value of each award is amortized over the lesser of the award's requisite or derived service period, which is generally up to three years as noted above. For the three and six months ended July 1, 2017 and July 2, 2016, and June 27, 2015, we recognized compensation expense related to share-based programs in “Selling, general and administrative” expense in the accompanying condensed consolidated and combined statements of operations as follows:
Three months ended Six months endedThree months ended Six months ended
July 2, 2016 June 27, 2015 July 2, 2016 June 27, 2015July 1, 2017 
July 2, 2016 (1)
 July 1, 2017 
July 2, 2016 (1)
Expense associated with individuals attributable to SPX FLOW's operations$4.0
 $1.4
 $10.6
 $4.1
Allocation of expense historically associated with the former Parent's corporate employees(1)

 1.7
 
 11.4
Expense related to modification as of Spin-Off date0.3
 
 0.6
 
Stock-based compensation expense4.3
 3.1
 11.2
 15.5
$3.9
 $4.3
 7.9
 11.2
Income tax benefit(1.7) (1.1) (4.1) (5.8)(1.5) (1.7) (2.8) (4.1)
Stock-based compensation expense, net of income tax benefit$2.6
 $2.0
 $7.1
 $9.7
$2.4
 $2.6
 $5.1
 $7.1
(1)See Note 1 of our consolidated and combined financial statements included in our 2015 Annual Report on Form 10-K for a discussion of the methodology used to allocate corporate-related costs prior to the Spin-Off.
(1)     Stock-based compensation expense for the three and six months ended July 2, 2016 included $0.3 and $0.6 of expense, respectively, related to modifications effected as of the Spin-Off date.

SPX FLOW, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited; in millions, except per share data)

Restricted Stock Share and Restricted Stock Unit Awards
The Monte Carlo simulation model valuation technique was used to determine the fair value of our restricted stock shares and restricted stock units that contain a “market condition.” The Monte Carlo simulation model utilizes multiple input variables that determine the probability of satisfying the market condition stipulated in the award and calculates the fair value of each restricted stock share and restricted stock unit award.
The following table summarizes the unvested restricted stock share and restricted stock unit activity for the six months ended July 2, 2016, for the Company's employees:1, 2017:
Unvested Restricted Stock Shares and Restricted Stock Units Weighted-Average Grant-Date Fair Value Per ShareUnvested Restricted Stock Shares and Restricted Stock Units Weighted-Average Grant-Date Fair Value Per Share
Outstanding at December 31, 20151.128 $51.13
Outstanding at December 31, 20161.275 $37.89
Granted0.723 27.980.482 35.16
Vested(0.276) 56.27(0.317) 43.55
Forfeited and other(0.298) 40.39(0.244) 51.14
Outstanding at July 2, 20161.277 $39.50
Outstanding at July 1, 20171.196 $32.56
As of July 2, 2016,1, 2017, there was $22.7$23.0 of unrecognized compensation cost related to SPX FLOW's restricted stock share and restricted stock unit compensation arrangements, including the effect of the modification discussed above.arrangements. We expect this cost to be recognized over a weighted-average period of 1.91.8 years.
Stock Options
On January 2, 2015, eligible employeesThere were 0.355 and 0.371 of the Company were granted 0.034SPX FLOW stock options in the former Parent's stock, alloutstanding as of which were outstanding (but not exercisable) from that date upJuly 1, 2017 and December 31, 2016, respectively, after giving effect to the Spin-Off.forfeiture and expiration of 0.016 during the first six months of 2017. Of the 0.355 stock options outstanding, 0.322 were exercisable as of July 1, 2017. The weighted-average exercise price per share of these options was $85.87 and the maximum term of these options is 10 years.
The weighted-average grant-date fair value per share of the former Parent's stock options granted on January 2, 2015 was $27.06. The fair value of each former Parent's option grant was estimated using the Black-Scholes option-pricing model.
In connection with the Spin-Off, certain corporate employees of the former Parent became employees of the Company. The number of outstanding SPX FLOW stock options, after reflecting (i) the former Parent stock options that had been granted to such corporate employees of the former Parent on January 2, 2015, and (ii) the conversion of the former Parent stock options

SPX FLOW, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited; in millions, except per share data)

to SPX FLOW stock options, was 0.396. After reflecting 0.025 of forfeitures during the fourth quarter of 2015, there were 0.371 of SPX FLOW options outstanding as of July 2, 2016 and December 31, 2015, of which 0.285 were exercisable as of July 2, 2016.
As a result of the conversion of the stock options, the weighted-average exercise price per share of the SPX FLOW stock options is $61.29 and the weighted-average grant-date fair value per share of the SPX FLOW stock options is $19.33. Other termsThe term of the SPX FLOW stockthese options are the same as those discussed above.expires on January 2, 2025.
As of July 2, 2016,1, 2017, there was $0.7$0.2 of unrecognized compensation cost related to SPX FLOW stock options. We expect this cost to be recognized over a weighted-average period of 1.60.6 years.
Accumulated Other Comprehensive Loss
The sole component of accumulated other comprehensive loss as of July 1, 2017 and December 31, 2016, and in the changes thereof during the three and six months then ended, was foreign currency translation adjustment.
The primary component of accumulated other comprehensive loss as of July 2, 2016 and December 31, 2015, and in the changes thereof during the three and six months then ended, was foreign currency translation adjustment of $(52.8) and $(40.7), respectively. The unrealized losses, net of tax, recorded in accumulated other comprehensive loss related to FX forward contracts were less than $0.1 as of July 2, 2016 and December 31, 2015.
The changes in the components of accumulated other comprehensive loss, net of tax, for the three months ended June 27, 2015 were as follows:
 Foreign Currency Translation Adjustment 
Net Unrealized Losses on Qualifying Cash Flow Hedges(1)
 
Pension Liability Adjustment(2)
 Total
Balance at March 28, 2015$(339.6) $(0.2) $0.1
 $(339.7)
Other comprehensive income before reclassifications28.4
 0.1
 
 28.5
Amounts reclassified from accumulated other comprehensive loss
 
 
 
Current-period other comprehensive income28.4
 0.1
 
 28.5
Balance at June 27, 2015$(311.2) $(0.1) $0.1
 $(311.2)
(1)Net of tax benefit of $0.0 and $0.1 as of June 27, 2015 and March 28, 2015, respectively.
(2)Net of tax provision of $0.0 as of June 27, 2015 and March 28, 2015. The balances as of June 27, 2015 and March 28, 2015 include unamortized prior service credits.
The changes in the components of accumulated other comprehensive loss, net of tax, for the six months ended June 27, 2015 were as follows:
 Foreign Currency Translation Adjustment 
Net Unrealized Losses on Qualifying Cash Flow Hedges(1)
 
Pension Liability Adjustment(2)
 Total
Balance at December 31, 2014$(219.3) $
 $0.1
 $(219.2)
Other comprehensive loss before reclassifications(91.9) (0.1) 
 (92.0)
Amounts reclassified from accumulated other comprehensive loss
 
 
 
Current-period other comprehensive loss(91.9) (0.1) 
 (92.0)
Balance at June 27, 2015$(311.2) $(0.1) $0.1
 $(311.2)
(1)Net of tax benefit of $0.0 as of June 27, 2015.
(2)
Net of tax provision of $0.0 as of June 27, 2015 and December 31, 2014. The balances as of June 27, 2015 and December 31, 2014 included unamortized prior service credits.

SPX FLOW, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited; in millions, except per share data)

Common Stock in Treasury
During the three and six months ended July 1, 2017 and July 2, 2016, “Common stock in treasury” was increased by $0.1$3.3 and $2.7, respectively, for common stock that was surrendered by recipients of restricted stock as a means of funding the related minimum income tax withholding requirements.
(12)(11)    LITIGATION, AND CONTINGENT LIABILITIES AND OTHER MATTERS
We are subject to litigation matters that arise in the normal course of business. We believe these matters are either without merit or of a kind that should not have a material effect, individually or in the aggregate, on our financial position, results of operations or cash flows.
We are subject to domestic and international environmental protection laws and regulations with respect to our business operations and are operating in compliance with, or taking action aimed at ensuring compliance with, these laws and regulations.

SPX FLOW, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited; in millions, except per share data)

We believe our compliance obligations with environmental protection laws and regulations should not have a material effect, individually or in the aggregate, on our financial position, results of operations or cash flows.
Mezzanine Equity
Independent noncontrolling shareholders in certain foreign subsidiaries of the Company have put options under their respective joint venture operating agreements that allow them to sell their common stock to the controlling shareholders (wholly-owned subsidiaries of SPX FLOW) upon the satisfaction of certain conditions, including the passage of time. The respective carrying values presented in "Mezzanine equity" of our condensed consolidated balance sheets as of July 1, 2017 and December 31, 2016 are stated at the the current exercise value of the put options, irrespective of whether the options are currently exercisable. To the extent the noncontrolling interests' put option price is correlated with the estimated fair value of the subsidiary, we have used the market method to estimate such fair values. This represents a level 3 fair value measurement. None of the noncontrolling interest put options are exercisable at this time. If and when such options are exercised, we expect to settle the option value in cash.
(13)(12)    INCOME TAXES
Unrecognized Tax Benefits
As of July 2, 2016,1, 2017, we had gross unrecognized tax benefits of $21.6$6.6 (net unrecognized tax benefits of $9.2)$2.3), of which $9.2,$2.3, if recognized, would impact our effective tax rate.
We classify interest and penalties related to unrecognized tax benefits as a component of our income tax provision. As of July 2, 2016,1, 2017, gross accrued interest totaled $1.9$0.3 (net accrued interest of $1.8)$0.2), and there was no accrual for penalties included in our unrecognized tax benefits.
Based on the outcome of certain examinations or as a result of the expiration of statutes of limitations for certain jurisdictions, we believe that within the next 12 months it is reasonably possible that our previously unrecognized tax benefits could decrease by $3.0$0.0 to $5.0.$1.5. The previously unrecognized tax benefits relate to a variety of tax issues, including transfer pricing and non-U.S. income tax matters.
The unrecognized tax benefits described above represent amounts that were included in tax returns filed by the Company. Historically, a portion of the Company's operations were included in tax returns filed by the former Parent or its subsidiaries that were not part of the Spin-Off. As a result, some uncertain tax positions related to the Company's operations resulted in unrecognized tax benefits that are now potential obligations of the former Parent or its subsidiaries due tothat were part of the Spin-Off. Because activities that gave rise to these unrecognized tax benefits related to the Company's operations for the three and six months ended June 27, 2015, the impact of these items was recorded to "Income tax provision" within our condensed combined statements of operations, with the offset recorded to "Former parent company investment" within our condensed combined balance sheets prior to the Spin-Off date, which have been reclassified to "Paid-in capital" in our condensed consolidated balance sheet as of December 31, 2015.
In addition, some of the Company's tax returns previouslyhave included the operations of the former Parent's subsidiaries that were not part of the Spin-Off. In certain of these cases, thethese subsidiaries' activities gave rise to unrecognized tax benefits for which the Company could be potentially liable. When required under the Income Taxes Topic of the Codification, we have recorded a liability for these uncertain tax positions within our condensed consolidated balance sheets. However, since the potential obligations were the result of activities associated with operations that were not part of the Spin-Off, we have not reflected any related amounts within our "Income tax provision" for the three and six months ended June 27, 2015, but have instead recorded the amounts directly to "Former parent company investment" within our condensed combined balance sheets prior to the Spin-Off date, which have been reclassified to "Paid-in capital" in our condensed consolidated balance sheet as of December 31, 2015.
Other Tax Matters
During the three months ended July 1, 2017, we recorded an income tax provision of $2.7 on $12.9 of pre-tax income, resulting in an effective tax rate of 20.9%. This compares to an income tax benefit for the three months ended July 2, 2016 we recorded an income tax benefit of $56.2 on $408.5 of pre-tax loss, resulting in an effective tax rate of 13.8%. This compares toThe effective tax rate for the second quarter of 2017 was impacted by (i) an income tax provisionbenefit of $3.4 resulting from changes to unrecognized tax benefits due to expiration of the statute of limitations during the period and (ii) an income tax charge of $1.3 related to pre-tax losses generated in the period for the three months ended June 27, 2015

SPX FLOW, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited; in millions, except per share data)

of $11.6 on $58.3 of pre-tax income, resulting in an effectivewhich no tax rate of 19.9%.benefit can be recognized. The effective tax rate for the second quarter of 2016 was impacted by an income tax benefit of $68.0 resulting from the $426.4 goodwill and intangible assets impairment charge recorded by our Power and Energy reporting unit (an effective tax rate of 15.9%), as (i) the majority of the goodwill for the Power and Energy reporting unit hashad no basis for income tax purposes and (ii) the impairment charge resulted in the addition of a valuation allowance for certain deferred income tax assets. The effective tax rate for the second quarter of 2016 also reflectsreflected the magnified effect that the small amount of our annual forecasted pre-tax loss hashad on forecasted annual tax expense. The
During the six months ended July 1, 2017, we recorded an income tax provision of $2.6 on $5.5 of pre-tax income, resulting in an effective tax rate for the second quarter of 2015 was impacted by a47.3%. This compares to an income tax benefit of $2.0 related to FX losses recognized for income tax purposes with respect to a foreign branch.
During the six months ended July 2, 2016 we recorded an income tax benefit of $62.9 on $447.3 of pre-tax loss, resulting in an effective tax rate of 14.1%. This compares toThe effective tax rate for the first six months of 2017

SPX FLOW, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited; in millions, except per share data)

was impacted by (i) an income tax provisionbenefit of $3.4 resulting from changes to our unrecognized tax benefits due to expiration of the statute of limitations during the period, (ii) an income tax charge of $2.2 related to pre-tax losses generated in the period for which no tax benefit can be recognized, and (iii) an income tax charge of $1.3 related to the six months ended June 27, 2015vesting of $22.6 on $92.4 of pre-tax income, resulting in an effective tax rate of 24.5%.certain restricted stock shares and restricted stock units during the period. The effective tax rate for the first six months of 2016 (i) was impacted by an income tax benefit of $68.0 resulting from the $426.4 goodwill and intangible assets impairment charge recorded by our Power and Energy reporting unit (an effective tax rate of 15.9%), as (i) the majority of the goodwill for the Power and Energy reporting unit has no basis for income tax purposesreasons noted above, and (ii) the impairment charge resulted in the addition of a valuation allowance for certain deferred income tax assets. The effective tax rate for the first six months of 2016 also reflectsreflected the magnified effect that the small amount of our annual forecasted pre-tax loss hashad on forecasted annual tax expense. The effective tax rate for the first six months of 2015 was impacted by a tax benefit of $2.0 related to FX losses recognized for income tax purposes with respect to a foreign branch.
We review our income tax positions on a continuous basis and record a provisionunrecognized tax benefits for potential uncertain positions when we determine that an uncertain position meets the criteria of the Income Taxes Topic of the Codification. As events change and resolutions occur, adjustments are made to amounts previously provided, such as in the case of audit settlements with taxing authorities.
In connection with the Spin-Off, we and the former Parent entered into a Tax Matters Agreement which, among other matters, addresses the allocation of certain tax adjustments that might arise upon examination of the 2013, 2014 and the pre-Spin-Off portion of the 2015 federal income tax returns of the former Parent. None of those returns isare currently under examination, and we believe any contingencies have been adequately provided for.
State income tax returns generally are subject to examination for a period of three to five years after filing the respective tax returns. The impact on such tax returns of any federal changes remains subject to examination by various states for a period of up to one year after formal notification to the states. We have various state income tax returns in the process of examination or administrative appeal. We believe any uncertain tax positions related to these examinations have been adequately provided for.reflected as unrecognized tax benefits.
We have various non-U.S. income tax returns under examination. The most significant of these areis the examination in Germany for the 2010 through 20132014 tax years. We expect this examination will conclude in 2018. We believe that any uncertain tax positions related to these examinations have been adequately provided for. During the second quarter of 2016, we settled an examination in Denmark related to the 2006 and 2007reflected as unrecognized tax years. This settlement did not have an impact on our effective tax rate during our second quarter of 2016 or require the cash payment of any taxes, as net tax assets in this jurisdiction had a full valuation allowance recorded against them as of April 2, 2016.benefits.
An unfavorable resolution of one or more of the above matters could have a material adverse effect on our results of operations or cash flows in the quarter and year in which an adjustment is recorded or the tax is due or paid. As audits and examinations are still in process or we have not yet reached the final stages of the appeals process, the timing of the ultimate resolution and any payments that may be required for the above matters cannot be determined at this time.
(14)(13)     FAIR VALUE
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In the absence of active markets for the identical assets or liabilities, such measurements involve developing assumptions based on market observable data and, in the absence of such data, internal information consistent with what market participants would use in a hypothetical transaction that occurs at the measurement date. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect our market assumptions. Preference is given to observable inputs. These two types of inputs create the following fair value hierarchy:
Level 1 — Quoted prices for identical instruments in active markets.

SPX FLOW, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited; in millions, except per share data)

Level 2 — Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.
Level 3 — Significant inputs to the valuation model are unobservable.
There were no changes during the periods presented to the valuation techniques we use to measure asset and liability fair values on a recurring basis. There were no transfers between the three levels of the fair value hierarchy during the six months ended July 1, 2017 and July 2, 2016 and June 27, 2015.2016.
The following section describes the valuation methodologies we use to measure different financial instruments at fair value on a recurring basis.

SPX FLOW, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited; in millions, except per share data)

Derivative Financial Instruments
Our derivative financial assets and liabilities include FX forward contracts and FX embedded derivatives, valued using valuation models based on observable market inputs such as forward rates, interest rates, our own credit risk and the credit risk of our counterparties, which comprise investment-grade financial institutions. Based on these inputs, the derivative assets and liabilities are classified within Level 2 of the valuation hierarchy. We have not made any adjustments to the inputs obtained from the independent sources. Based on our continued ability to enter into forward contracts, we consider the markets for our fair value instruments active. We primarily use the income approach, which uses valuation techniques to convert future amounts to a single present amount.
As of July 2, 20161, 2017 and December 31, 2015,2016, the gross fair values of our derivative financial assets and liabilities, in aggregate, were $2.9$2.4 and $2.0$2.9 (gross assets) and $1.3$0.1 and $1.5$0.1 (gross liabilities), respectively. As of July 2, 2016,1, 2017, there had been no significant impact to the fair value of our derivative liabilities due to our own credit risk as the related instruments are collateralized under our senior credit facilities. Similarly, there had been no significant impact to the fair value of our derivative assets based on our evaluation of our counterparties’ credit risks.
InvestmentsEquity Security Investment
Until June 2017, we had an investment in Equity Securities
Certain of our investments inan equity securitiessecurity that are not readily marketable arewas accounted for under the fair value option, but not readily marketable, and aretherefore which was classified as a Level 3 assetsasset in the fair value hierarchy, with such values determined by multidimensional pricing models. These models consider market activityhierarchy. In April 2017, we entered into an agreement to sell our investment in the equity security to a third party, and the security’s value as of the end of the first quarter of 2017 reflected the sales price under this agreement. We received proceeds from the sale of the equity security during the second quarter of 2017. In prior periods, we based the security's fair value on modeling of securities with similar credit quality, duration, yield and structure. Aa variety of inputs, are used, including benchmark yields, reported trades, non-binding broker/dealer quotes, issuer spread and reference data including market research publications.historical trade prices of the same securities. Market indicators and industry and economic events arewere also considered. We have not made any adjustments to the inputs obtained from the independent sources. At July 2, 2016 and December 31, 2015, these assets2016, this asset had a fair value of $7.9 and $8.1, respectively.$7.6.
The table below presents a reconciliation of our investment in the equity securitiessecurity measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the six months ended July 1, 2017 and July 2, 2016, and June 27, 2015, including net unrealized gains (losses)losses recorded to “Other income (expense),expense, net."
Six months endedSix months ended
July 2, 2016 June 27, 2015July 1, 2017 July 2, 2016
Balance at beginning of year$8.1
 $7.4
$7.6
 $8.1
Unrealized gains (losses) recorded to earnings(0.2) 2.9
Unrealized losses recorded to earnings(1.4) (0.2)
Proceeds received from sale of investment(6.2) 
Balance at end of period$7.9
 $10.3
$
 $7.9
Mezzanine Equity
To the extent the noncontrolling interests' put option price is correlated with the estimated fair value of the subsidiary, we use the market method to estimate the fair values of noncontrolling interest put options reported in "Mezzanine equity" using unobservable inputs (Level 3) on a recurring basis. Changes to the noncontrolling interest put option values are reflected as adjustments to "Mezzanine equity" and "Accumulated deficit." Refer to Note 11 for further discussion.
Goodwill, Indefinite-Lived Intangible and Other Long-Lived Assets
Certain of our non-financial assets are subject to impairment analysis, including long-lived assets, indefinite-lived intangible assets and goodwill. We review the carrying amounts of such assets whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable or at least annually for indefinite-lived intangible assets and goodwill. Any resulting impairment would require that the asset be recorded at its fair value. At December 31, 2015,July 1, 2017, we did not have any significant non-financial assets or liabilities that were required to be measured at fair value on a recurring or non-recurring basis. Refer to Note 6 for further discussion pertaining to our annual and interim evaluation of goodwill and other intangible assets for impairment.

SPX FLOW, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited; in millions, except per share data)

for impairment, including the goodwill and intangible asset impairment charge recognized during the three and six months ended July 2, 2016.
Indebtedness and Other
The estimated fair values of other financial liabilities (excluding capital leases and deferred financing fees) not measured at fair value on a recurring basis as of July 2, 20161, 2017 and December 31, 20152016 were as follows:
July 2, 2016 December 31, 2015July 1, 2017 December 31, 2016
Carrying Amount Fair Value Carrying Amount Fair ValueCarrying Amount Fair Value Carrying Amount Fair Value
Domestic revolving loan facility$2.0
 $2.0
 $
 $
$1.0
 $1.0
 $68.0
 $68.0
Term loan(1)
400.0
 400.0
 400.0
 400.0
380.0
 380.0
 390.0
 390.0
Senior notes(1)
600.0
 625.5
 600.0
 637.5
5.625% Senior notes(1)
300.0
 309.0
 300.0
 300.0
5.875% Senior notes(1)
300.0
 309.0
 300.0
 296.3
Trade receivables financing arrangement11.0
 11.0
 
 

 
 21.2
 21.2
Other indebtedness20.7
 20.7
 28.0
 28.0
24.2
 24.2
 27.7
 27.7
(1)Carrying amount reflected herein excludes related deferred financing fees.
The following methods and assumptions were used in estimating the fair value of these financial instruments:
The fair values of the term loan and senior notes were determined using Level 2 inputs within the fair value hierarchy and were based on quoted market prices for the same or similar instruments or on current rates offered to us for debt with similar maturities, subordination and credit default expectations.
The fair values of amounts outstanding under our domestic revolving loan facility, term loan, and trade receivables financing arrangement approximated carrying value due primarily to the variable-rate nature and credit spreads of these instruments, when compared to other similar instruments.
The fair value of our other indebtedness approximated carrying value due primarily to the short-term nature of these instruments.
The carrying amounts of cash and equivalents and receivables reported in our condensed consolidated balance sheets as of July 2, 20161, 2017 and December 31, 20152016 approximate fair value due to the short-term nature of those instruments.
(15)    RELATED PARTY TRANSACTIONS
Allocation of General Corporate Expenses

The condensed combined statements of operations for the three and six months ended June 27, 2015 include expenses for certain centralized functions and other programs provided and/or administered by the former Parent charged directly to business units of the Company. In addition, for purposes of preparing these condensed combined financial statements for periods prior to the Spin-Off on a “carve-out” basis, a portion of the former Parent's total corporate expenses have been allocated to the Company. A detailed description of the methodology used to allocate corporate-related costs is included in our consolidated and combined financial statements included in our 2015 Annual Report on Form 10-K.
Related Party Interest
We recorded interest income of $8.4 and $18.8 for the three and six months ended June 27, 2015, respectively, associated with related party notes receivable of $670.0 outstanding as of June 27, 2015, with the former Parent serving as the counterparty. The related party notes receivable had a weighted-average interest rate of approximately 5.0% as of June 27, 2015.
We recorded interest expense of $10.7 and $28.4 for the three and six months ended June 27, 2015, respectively, associated with (i) related party notes payable of $391.3 outstanding as of June 27, 2015, with the former Parent (and certain other of its affiliates that were not part of the Spin-Off) serving as counterparties, and (ii) $600.5 of other related party notes payable that were extinguished by way of a capital contribution to the Company by the former Parent during the second quarter of 2015. The related party notes payable had a weighted-average interest rate of approximately 7.0% as of June 27, 2015.

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (in millions)
FORWARD-LOOKING STATEMENTS
Some of the statements in this document and any documents incorporated by reference, including any statements as to operational and financial projections, constitute “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These statements relate to future events or our future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our businesses’ or our industries’ actual results, levels of activity, performance or achievements to be materially different from those expressed or implied by any forward-looking statements. Such statements may address our plans, our strategies, our prospects, or changes and trends in our business and the markets in which we operate under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations” (“MD&A”) or in other sections of this document. In some cases, you can identify forward-looking statements by terminology such as “may,” “could,” “would,” “should,” “expect,” “plan,” “anticipate,” “intend,” “believe,” “estimate,” “predict,” “project,” “potential” or “continue” or the negative of those terms or similar expressions. Particular risks facing us include business, internal operations, legal and regulatory risks, costs of raw materials, pricing pressures pension funding requirements, integration of acquisitions and changes in the economy.  These statements are only predictions. Actual events or results may differ materially because of market conditions in our industries or other factors, and forward-looking statements should not be relied upon as a prediction of actual results. In addition, management’s estimates of future operating results are based on our current complement of businesses, which is subject to change as management selects strategic markets.
All the forward-looking statements in this document are qualified in their entirety by reference to the factors discussed under the heading “Risk Factors” in our 20152016 Annual Report on Form 10-K and in any documents incorporated by reference herein that describe risks and factors that could cause results to differ materially from those projected in these forward-looking statements. We caution you that these risk factors may not be exhaustive. We operate in a continually changing business environment and frequently enter into new businesses and product lines. We cannot predict these new risk factors, and we cannot assess the impact, if any, of these new risk factors on our businesses or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those projected in any forward-looking statements. Accordingly, you should not rely on forward-looking statements as a prediction of actual results. We undertake no obligation to update or publicly revise any forward-looking statements to reflect events or circumstances that arise after the date of this document.
EXECUTIVE OVERVIEW
Our Business
SPX FLOW, Inc. and its consolidated subsidiaries (“SPX FLOW,” ‘‘the Company,’’ “we,” “us,” or “our”) operate in three business segments and were wholly-owned by SPX Corporation (the “former Parent”) until September 26, 2015, at which time the former Parent distributed 100% of our outstanding common stock to its shareholders through a tax-free spin-off transaction (the “Spin-Off”).segments.
We are a global supplier of highly specialized, engineered solutions with operations in over 3530 countries and sales in over 150 countries around the world. OurMany of our solutions play a role in helping to meet the global demand in the end markets we serve. Our total revenue in 20152016 was $2.4$2.0 billion, with approximately 29%39%, 35%, and 26% from sales into emerging markets.the Americas, EMEA, and Asia Pacific regions, respectively.
We serve the food and beverage, power and energy and industrial markets. Our product portfolio of pumps, valves, mixers, filters, air dryers, hydraulic tools, homogenizers, separators and heat exchangers, along with the related aftermarket parts and services, supports global industries, including food and beverage, oil and gas, power generation (including nuclear and conventional), chemical processing, compressed air and mining. From an end market perspective, in 2015,2016, approximately 36%37% of our revenues were from sales into the food and beverage end markets, approximately 28% were from sales into the power and energy end markets, and approximately 36%35% were from sales into the industrial end markets. Our core strengths include product breadth, global capabilities and the ability to create custom-engineered solutions for diverse flow processes. Over the past several years, we have strategically expanded our scale, relevance to customers, and global capabilities. We believe there are attractive organic and acquisition opportunities to continue to expand our business.
We focus onare aggressively executing a numbermulti-year plan to transition our enterprise to an operating company. As part of this plan, we announced our intent to further optimize our global footprint, streamline business processes and reduce selling, general and administrative expense through a global realignment program. The realignment program is intended to reduce costs across operating initiatives, including innovationsites and new product development, continuous improvement drivencorporate and global functions, in part by lean methodologies, supply chain management,making structural changes and process efficiency, expansion in emerging markets,enhancements which allow

information technology infrastructure improvement, and organizational and talent development. These initiatives are designedus to among other things, capture synergies withinoperate more efficiently. We made significant progress reducing our businesses to ultimately drive revenue, profit margin and cash flow growth. We believe our businesses are well-positioned for long-term growth based on our operating initiatives, the potential within the current markets servedcost structure through 2016 and the potential for expansion into additional markets.first six months of 2017, realigning our footprint and streamlining our functional support globally.
We have aligned our segment teams to focus primarily on developing intimate customer relationships and expanding our relevance to customers within each end market. The key areas our end market teams are emphasizing include (i) product management, (ii) channel development, (iii) engineering customer solutions and (iv) project execution and delivery. We made substantial progress in certain of these areas during 2016 and the first six months of 2017, and have plans to further streamline our operations to simplify and reduce our cost structure. Our ultimate goal is to create a more customer-centric, service-oriented organization and deliver greater value to our customers, investors and employees.
Our business is organized into three reportable segments — Food and Beverage, Power and Energy, and Industrial. The following summary describes the products and services offered by each of our reportable segments:
Food and Beverage:  The Food and Beverage reportable segment operates in a regulated, global industry with customers who demand highly engineered, turn-key solutions. Key demand drivers include dairy consumption, emerging market capacity expansion, sustainability and productivity initiatives, customer product innovation and food safety. Key products for the segment include mixing, drying, evaporation and separation systems and components, heat exchangers, and reciprocating and centrifugal pump technologies. We also design and construct turn-key systems that integrate many of these products for our customers. Our core brands include Anhydro, APV, Bran+Luebbe, Gerstenberg Schroeder, LIGHTNIN, Seital, and Waukesha Cherry-Burrell. The segment's primary competitors are Alfa Laval AB, Fristam Pumps, GEA Group AG, Krones AG, Südmo, Tetra Pak International S.A., and various regional companies. 
Power and Energy:  The Power and Energy reportable segment primarily serves customers in the oil and gas industry and, to a lesser extent, the nuclear and other conventional power industries. A large portion of the segment's revenues are concentrated in oil extraction, production and transportation at existing wells, and in pipeline applications. The underlying driver of this segment includes demand for power and energy. Key products for the segment include pumps, valves and the related accessories, while the core brands include APV, Bran+Luebbe, ClydeUnion Pumps, Copes-Vulcan, Dollinger Filtration, LIGHTNIN, M&J Valve, Plenty, and Vokes. The segment's primary competitors are Cameron, International Corporation, Ebara Fluid Handling, Flowserve Corporation, ITT Goulds Pumps, KSB AG, and Sulzer Ltd. 
Industrial:  The Industrial reportable segment primarily serves customers in the chemical, air treatment, mining, pharmaceutical, marine, shipbuilding, infrastructure construction, general industrial and water treatment industries. Key demand drivers of this segment are tied to macroeconomic conditions and growth in the respective end markets we serve. Key products for the segment are air dryers, filtration equipment, mixers, pumps, hydraulic technologies and heat exchangers. Core brands include Airpel, APV, Bolting Systems, Delair, Deltech, Hankison, Jemaco, Johnson Pump, LIGHTNIN, Power Team, and Stone. The segment's primary competitors are Alfa Laval AB, Chemineer Inc., EKATO, Actuant, Enerpac, IDEX Viking Pump, KSB AG, Parker Domnick Hunter and various regional companies.
Summary of Operating Results
Non-GAAP Measures - Throughout the following segment discussion, we use organic revenue growth (decline) to facilitate explanation of the operating performance of our segments. Organic revenue growth (decline) is a non-GAAP financial measure, and is not a substitute for net revenue growth (decline). Refer to the explanation of this measure and purpose of use by management under “Results of Operations-Non-GAAP Measures.”
The financial information discussed below and included in this Quarterly Report on Form 10-Q may not necessarily reflect what our financial condition, results of operations or cash flows would have been had we been operated as a separate, independent entity during the periods presented prior to the Spin-Off, or what our financial condition, results of operations and cash flows may be in the future.
The following summary is intended to provide a few highlights of the discussion and analysis that follows (all comparisons are to the related periodsperiod in the prior year):
Revenues — For the three and six months ended July 2, 2016,1, 2017, revenues decreased 14.0%$30.8 (5.8%) and 12.9%$102.6 (9.9%), respectively,respectively. The decreases in revenues were due primarily as a result of the impacts of lowerto reduced customer capital investments, particularly in oil and dairy pricesrelated markets, and reflect the lower levels of backlog of each of our segments as of the beginning of 2017 when compared to the respective period of 2016, which were $784.1 and $905.0 on revenues.a consolidated basis, respectively.
Income (Loss) before Income Taxes Income before income taxes was $12.9 and $5.5 for the three and six months ended July 1, 2017, respectively. The loss before income taxes of $408.5 and $447.3 for the three and six months ended July 2,

2016, includesrespectively, included a charge of $426.4 related to the impairment of goodwill and intangible assets of our Power and Energy reportable segment (see Note 6 to our condensed consolidated and combined financial statements for further details related to this charge).segment. The reductionincrease in pre-tax income for the three and six month periods, compared to the respective 2015 period,2016 periods, primarily resulted from thisthere being no impairment charge in the 2017 periods and, to a lesser extent, declines in segment profitability, an increase in net interest expense, and an increasereductions in special charges related to our global realignment program during the period.


The loss before income taxes was $447.3 for the six months ended July 2, 2016. The reduction in pre-tax income, compared to the respective 2015 period, primarily resulted from the impairment charge referred to above and, to a lesser extent, declinesperiods, partially offset by reductions in segment profitability, an increase in special charges related to our global realignment program, and an increase in net interest expense during the period.profitability.
Cash Flows from (used in) Operations — For the six months ended July 2, 2016, decreased1, 2017, cash flows from operations increased to $(28.6)$71.9 from $41.0$(28.6) primarily as a result of (i) a declineimprovements in segment profitability,working capital driven by the timing of project execution and associated milestone payments, (ii) an interest payment of $20.6 related to our senior notes,reduced payments for incentive compensation and (iii) an increase in cash spending on restructuring actions, and (iv) pension benefit payments of $12.0 to certain former officers of the Company.Company during the first half of 2016 which did not recur during the corresponding period of 2017.
RESULTS OF OPERATIONS
The unaudited information included in this Quarterly Report on Form 10-Q should be read in conjunction with our annual consolidated and combined financial statements included in our 20152016 Annual Report on Form 10-K. Interim results are not necessarily indicative of results for a full year. We establish actual interim closing dates using a fiscal calendar, which requires our businesses to close their books on the Saturday closest to the end of the first calendar quarter, with the second and third quarters being 91 days in length. Our fourth quarter ends on December 31. The interim closing dates for the first, second and third quarters of 20162017 are April 1, July 1, and September 30, compared to the respective April 2, July 2, and October 1, compared to the respective March 28, June 27, and September 26, 20152016 dates. We had six moretwo less days in the first quarter of 20162017 and will have five less daysone more day in the fourth quarter of 20162017 than in the respective 20152016 periods.
Cyclicality of End Markets, Seasonality and Competition -The financial results of many of our businesses closely follow changes in the industries and end markets they serve. In addition, certain businesses have seasonal fluctuations. Also, capital spending on original equipment by our customers in the oil and gas industries is heavily influenced by current and expected oil and gas prices. The significant decline in oil prices from the latter half of 2014 and continuing throughout 2015, as well as the recent volatility in oil prices throughoutin 2016 through the first halfsecond quarter of 20162017, and the uncertainty in future oil prices, continue to impact both operational and capital spending by end customers in our Power and Energy reportable segment. Revenues from food and beverage systems and related services are highly correlated to timing on large construction contracts,projects, which may cause significant fluctuations in our financial performance from period to period. The reductionFluctuations in dairy commodity prices and increased production of dry powder dairy related products, particularly related tothose aimed at serving the China market, has resulted in delayed or deferredcan influence the timing of capital spending by many end customers in our Food and Beverage reportable segment.
Although our businesses operate in highly competitive markets, our competitive position cannot be determined accurately in the aggregate or by segment since our competitors do not offer all the same product lines or serve all the same markets. In addition, specific reliable comparative figures are not available for many of our competitors. In most product groups, competition comes from numerous concerns, both large and small. The principal methods of competition are service, product performance, technical innovation and price. These methods vary with the type of product sold. We believe we compete effectively on the basis of each of these factors. See "Our Business" for a discussion of our competitors.
Non-GAAP Measures - Organic revenue growth (decline) presented herein is defined as revenue growth (decline) excluding the effects of foreign currency fluctuations and acquisitions.fluctuations. We believe this metric is a useful financial measure for investors in evaluating our operating performance for the periods presented, as, when read in conjunction with our revenues, it presents a useful tool to evaluate our ongoing operations and provides investors with a metric they can use to evaluate our management of assets held from period to period. In addition, organic revenue growth (decline) is one of the factors we use in internal evaluations of the overall performance of our business. This metric, however, is not a measure of financial performance under accounting principles generally accepted in the United States (“GAAP”), should not be considered a substitute for net revenue growth (decline) as determined in accordance with GAAP and may not be comparable to similarly titled measures reported by other companies.


The following table provides selected financial information for the three and six months ended July 1, 2017 and July 2, 2016, and June 27, 2015, respectively, including the reconciliation of organic revenue decline to net revenue decline:
 Three months ended Six months ended
 July 2, 2016 June 27, 2015 % Change July 2, 2016 June 27, 2015 % Change
Revenues$528.8
 $615.1
 (14.0) $1,033.8
 $1,186.3
 (12.9)
Gross profit166.8
 211.2
 (21.0) 326.0
 399.5
 (18.4)
% of revenues31.5% 34.3%   31.5% 33.7%  
Selling, general and administrative118.0
 139.2
 (15.2) 252.4
 282.1
 (10.5)
% of revenues22.3% 22.6%   24.4% 23.8%  
Intangible amortization5.7
 5.9
 (3.4) 11.4
 11.9
 (4.2)
Impairment of goodwill and intangible assets426.4
 
 *
 426.4
 
 *
Special charges, net10.8
 3.3
 227.3
 51.8
 7.1
 *
Other income (expense), net(0.1) (1.8) (94.4) (2.6) 4.3
 (160.5)
Related party interest expense, net
 (2.3) (100.0) 
 (9.6) (100.0)
Other interest expense, net(14.3) (0.4) *
 (28.7) (0.7) *
Income (loss) before income taxes(408.5) 58.3
 *
 (447.3) 92.4
 *
Income tax benefit (provision)56.2
 (11.6) *
 62.9
 (22.6) *
Net income (loss)(352.3) 46.7
 *
 (384.4) 69.8
 *
Less: Net income (loss) attributable to noncontrolling interests0.5
 (0.4) (225.0) (0.5) (0.7) (28.6)
Net income (loss) attributable to SPX FLOW, Inc.$(352.8) $47.1
 *
 $(383.9) $70.5
 *
            
Components of consolidated and combined revenue decline:           
Organic decline    (11.9)     (10.7)
Foreign currency    (2.1)     (2.2)
Net revenue decline    (14.0)     (12.9)

*    Not meaningful for comparison purposes.
 Three months ended Six months ended
 July 1, 2017 July 2, 2016 % Change July 1, 2017 July 2, 2016 % Change
Revenues$498.0
 $528.8
 (5.8) $931.2
 $1,033.8
 (9.9)
Gross profit153.0
 166.8
 (8.3) 292.1
 326.0
 (10.4)
% of revenues30.7% 31.5%   31.4% 31.5%  
Selling, general and administrative113.0
 117.4
 (3.7) 228.3
 251.3
 (9.2)
% of revenues22.7% 22.2%   24.5% 24.3%  
Intangible amortization4.3
 5.7
 (24.6) 8.9
 11.4
 (21.9)
Impairment of goodwill and intangible assets
 426.4
 *
 
 426.4
 *
Special charges6.7
 10.8
 (38.0) 15.3
 51.8
 (70.5)
Other expense, net(0.3) (0.7) (57.1) (2.4) (3.7) (35.1)
Interest expense, net(15.8) (14.3) 10.5
 (31.7) (28.7) 10.5
Income (loss) before income taxes12.9
 (408.5) *
 5.5
 (447.3) *
Income tax benefit (provision)(2.7) 56.2
 *
 (2.6) 62.9
 *
Net income (loss)10.2
 (352.3) *
 2.9
 (384.4) *
Less: Net income (loss) attributable to noncontrolling interests(0.1) 0.5
 (120.0) 
 (0.5) *
Net income (loss) attributable to SPX FLOW, Inc.$10.3
 $(352.8) *
 $2.9
 $(383.9) *
            
Components of consolidated revenue decline:           
Organic decline    (4.7)     (8.3)
Foreign currency    (1.1)     (1.6)
Net revenue decline    (5.8)     (9.9)
*Not meaningful for comparison purposes           
Revenues - For the three and six months ended July 2, 2016,1, 2017, the decrease in revenues, compared to the respective 20152016 periods, was due primarily to a decrease in organic revenue and, to a lesser extent, a strengthening of the U.S. dollar against various foreign currencies. The decreasedecreases in organic revenue waswere due primarily to the impacts of lowerreduced customer capital investments, particularly in oil and dairy pricesrelated markets, and reflect the lower levels of backlog of each of our segments as of the beginning of 2017 when compared to the respective period of 2016, which were $784.1 and $905.0 on customer order patterns.a consolidated basis, respectively.
See "Results of Reportable Segments" for additional details.
Gross Profit - The decrease in gross profit and margin for the three and six months ended July 2, 2016,1, 2017, compared to the respective 20152016 periods, was attributable primarily to the revenue declines noted above. GrossThe reduction in gross margin decreased duringfor the three and six months ended July 2, 2016,1, 2017, compared to the respective 20152016 periods, was due alsoprimarily to competitive pricing pressures, a lower mix of higher margin products, and lower utilization rates at certain manufacturing facilities in our Power and Energy and Industrial segments and, particularly during the three months ended July 1, 2017, increased warranty costs in our Power and Energy segment, increased costs of shipments of heat exchangers in our manufacturing locations,Industrial segment, and an increase in incentive compensation based on the Company’s year-to-date performance relative to certain incentive targets in 2017 as compared to 2016. These reductions in gross profit and gross margin were partially offset by savings from restructuring actions. actions and other cost reduction initiatives during the respective periods and, particularly during the three months ended July 1, 2017, improved productivity in our Poland facility.
See "Results of Reportable Segments" for additional details.
Selling, General and Administrative (“SG&A”) Expense - For the three and six months ended June 27, 2015, SG&A expense included allocations of general corporate expenses from the former Parent, including pension and postretirement expense and stock-based compensation. See NoteJuly 1, to our consolidated and combined financial statements included in our 2015 Annual Report on Form 10-K for further details on our methodology for allocating corporate-related costs prior to the Spin-Off.
For the three months ended July 2, 2016,2017, the decrease in SG&A expense, compared to the respective 2015 period,2016 periods, was due primarily to (i) reduced incentive compensation expense, due to lower profitability in the three months ended July 2, 2016, compared to the respective period in 2015, (ii) savings from restructuring actions related to our global realignment program,


announced other cost reduction initiatives implemented during 2016 and the first quarterhalf of 2016,2017, and (iii) the effect of a stronger U.S. dollar against various foreign currencies during the period.periods, partially offset, particularly in the three
For the six

months ended July 2, 2016,1, 2017, by the decreaseeffects of an increase in SG&A expense,incentive compensation, based on the Company’s year-to-date performance relative to certain incentive targets in 2017 as compared to the respective 2015 period, was due to the items noted above, as well as reductions in stock-based compensation expense (see “Corporate and Other Expenses” for additional details).2016.
Intangible Amortization - For the three and six months ended July 2, 2016,1, 2017, the decrease in intangible amortization, compared to the respective periods in 2015,2016, was due primarily to the impacteffects of foreign currency translation.translation and a reduction in intangible assets subject to amortization that resulted from the impairment of certain such assets of our Power and Energy reportable segment during the second quarter of 2016.
Impairment of Goodwill and Intangible Assets - During the three and six months ended July 2, 2016, we performed an interim goodwill impairment test and determined that the fair value of our Power and Energy reporting unit was less than the carrying value of its net assets. As a result of this determination, we recorded an impairment charge of $252.8 to reduce the goodwill of the reporting unit to its implied fair value. We also recorded an additional impairment charge of $173.6 related to certain intangible assets of certain businesses within our Power and Energy reportable segment. See Note 6 to our condensed consolidated and combined financial statements for further discussion.
Special Charges net - Special charges net, for the three and six months ended July 1, 2017 and July 2, 2016, relate primarily to our global realignment program including restructuring initiatives to consolidate manufacturing, distribution, sales and administrative facilities, reduce workforce and for the six months ended July 2, 2016, an asset impairment chargeand other related charges associated with management's decision to market for sale certain corporate assets. See Note 4 to our condensed consolidated and combined financial statements for the details of actions taken during the three and six months ended July 1, 2017 and July 2, 2016, and June 27, 2015, respectively.
Other Income (Expense),Expense, net - Other expense, net, for the three months ended July 1, 2017 was composed primarily of foreign currency (“FX”) losses of $1.6 and non-service-related pension and postretirement costs of $0.4, partially offset by gains on asset sales of $1.5. See Note 7 to our condensed consolidated financial statements for additional details related to non-service-related pension and postretirement costs.
Other expense, net, for the three months ended July 2, 2016 was composed of non-service-related pension and postretirement costs of $0.6 and investment-related losses of $0.3, partially offset by foreign currency (“FX”)FX gains of $0.2. The $0.3 of investment-related losses represented unrealized losses on our investment in an equity security. See Note 13 to our condensed consolidated financial statements for additional details related to investment-related losses.
Other expense, net, for the threesix months ended June 27, 2015July 1, 2017 was composed primarily of FX losses of $2.9,$3.4 and investment-related losses of $1.4, partially offset by gains on asset sales of $1.2.$1.5, non-service-related pension and postretirement benefits of $0.4 and other items of $0.3.
Other expense, net, for the six months ended July 2, 2016 was composed of FX losses of $3.0, non-service-related pension and postretirement costs of $1.1, net settlement costs of $0.7 related to certain legal and tax-related claims, and investment-related losses of $0.2, partially offset by gains on asset sales of $1.3.
Other income, net, for the six months ended June 27, 2015 was composed of investment-related earnings of $2.9, gains on asset sales of $1.2 and FX gains of $0.2. The $2.9 of investment-related earnings represented unrealized gains on our investment in equity securities. See Note 14 to our condensed consolidated and combined financial statements for additional details.
Related Party Interest Expense, net - Related party interest expense, net, for the three months ended June 27, 2015 was comprised of interest on notes receivable and notes payable with the former Parent (and certain other of its affiliates that were not part of the Spin-Off) serving as the counterparties. Such amount was comprised of $10.7 of related party interest expense, partially offset by $8.4 of related party interest income. See Note 15 to our condensed consolidated and combined financial statements for additional details on our related party notes.
Related party interest expense, net, for the six months ended June 27, 2015 was comprised of $28.4 of interest expense, partially offset by $18.8 of interest income.
There were no related party notes receivable or payable outstanding during the six months ended July 2, 2016.
Other Interest Expense, net - Other interest expense, net, for the three and six months ended July 1, 2017 and July 2, 2016, was composed primarily of interest expense related to our senior notes and senior credit facility and, to a lesser extent, interest expense related to our trade receivables financing arrangement, capital lease obligations and miscellaneous lines of credit, partially offset by interest income on cash and equivalents. Other interest expense, net, for the three and six months ended June 27, 2015 (prior to the Spin-Off), was composed primarily of interest expense related to capital lease obligations and miscellaneous lines of credit, partially offset by interest income on cash and equivalents.
Other interestInterest expense, net, included interest expense of $15.2$17.1 and $0.9,$15.2, and interest income of $0.9$1.3 and $0.5,$0.9, respectively, during the three months ended July 1, 2017 and July 2, 2016, and June 27, 2015. Other interest expense, net, included interest expense of $30.4$34.0 and $1.7,$30.4, and interest income of $1.7$2.3 and $1.0,$1.7, respectively, during the six months ended July 1, 2017 and July 2, 2016 and June 27, 2015.2016. See Note 98 to our condensed consolidated and combined financial statements for additional details on our third-party debt.


The increase in interest expense, net, during the three and six months ended July 1, 2017, compared to the respective 2016 periods, was due to a higher level of average outstanding borrowings under our senior credit facilities and trade receivables financing arrangement, and an increase in our average effective borrowing rates under our debt facilities during the 2017 periods.
Income Tax Benefit (Provision) - During the three months ended July 2, 2016,1, 2017, we recorded an income tax provision of $2.7 on $12.9 of pre-tax income, resulting in an effective tax rate of 20.9%. This compares to an income tax benefit for the three months ended July 2, 2016 of $56.2 on $408.5 of pre-tax loss, resulting in an effective tax rate of 13.8%. This compares to an income tax provision for the three months ended June 27, 2015 of $11.6 on $58.3 of pre-tax income, resulting in an effective tax rate of 19.9%. The effective tax rate for the second quarter of 2017 was impacted by (i) an income tax benefit of $3.4 resulting from changes to our unrecognized tax benefits due to expiration of the statute of limitations during the period and (ii) an income tax charge of $1.3 related to pre-tax losses generated in the period for which no tax benefit can be recognized. The effective tax rate for the second quarter of


2016 was impacted by an income tax benefit of $68.0 resulting from the $426.4 goodwill and intangible assets impairment charge recorded by our Power and Energy reporting unit (an effective tax rate of 15.9%), as (i) the majority of the goodwill for the Power and Energy reporting unit hashad no basis for income tax purposes and (ii) the impairment charge resulted in the addition of a valuation allowance for certain deferred income tax assets. The effective tax rate rate for the second quarter of 2016 also reflectsreflected the magnified effect that the small amount of our annual forecasted pre-tax loss hashad on forecasted annual tax expense. The effective tax rate for the second quarter of 2015 was impacted by a tax benefit of $2.0 related to FX losses recognized for income tax purposes with respect to a foreign branch.
During the six months ended July 2, 2016,1, 2017, we recorded an income tax provision of $2.6 on $5.5 of pre-tax income, resulting in an effective tax rate of 47.3%. This compares to an income tax benefit for the six months ended July 2, 2016 of $62.9 on $447.3 of pre-tax loss, resulting in an effective tax rate of 14.1%. This compares toThe effective tax rate for the first six months of 2017 was impacted by (i) an income tax provisionbenefit of $3.4 resulting from changes to our unrecognized tax benefits due to expiration of the statute of limitations during the period, (ii) an income tax charge of $2.2 related to pre-tax losses generated in the period for which no tax benefit can be recognized, and (iii) an income tax charge of $1.3 related to the six months ended June 27, 2015vesting of $22.6 on $92.4 of pre-tax income, resulting in an effective tax rate of 24.5%.certain restricted stock shares and restricted stock units during the period. The effective tax rate for the first six months of 2016 (i) was impacted by an income tax benefit of $68.0 resulting from the $426.4 goodwill and intangible assets impairment charge recorded by our Power and Energy reporting unit (an effective tax rate of 15.9%), as (i) the majority of the goodwill for the Power and Energy reporting unit has no basis for income tax purposesreasons noted above, and (ii) the impairment charge resulted in the addition of a valuation allowance for certain deferred income tax assets. The effective tax rate for the first six months of 2016 also reflectsreflected the magnified effect that the small amount of our annual forecasted pre-tax loss hashad on forecasted annual tax expense. The
Our future effective tax rate formay vary, particularly during the first six monthsquarter of 2015 was impacted by aeach year, based on tax benefitcharges or benefits that could result from potential future vestings of $2.0 related to FX losses recognized for income tax purposes with respect to a foreign branch.restricted stock shares and restricted stock units.
RESULTS OF REPORTABLE SEGMENTS
In January 2016, we changed our internal reporting structure to more precisely present reportable segment revenue and income in certain countries where we conduct business across multiple end markets. As a result of these structural enhancements, certain product line results have been reclassified between reportable segments. Additionally, we changed our measurement of segment income to include stock-based compensation costs associated with segment employees, while stock-based compensation for corporate employees is now reported as a component of corporate expense. These changes in reportable segment revenue and income, as well as in our measurement of segment profitability, are consistent with how our chief operating decision maker, beginning in 2016, assesses operating performance and allocates resources.
Segment results and corporate expense have been recast for all historical periods presented to reflect these changes.
The following information should be read in conjunction with our condensed consolidated and combined financial statements and related notes.
Food and Beverage
Three months ended Six months endedThree months ended Six months ended
July 2, 2016 June 27, 2015 % Change July 2, 2016 June 27, 2015 % ChangeJuly 1, 2017 July 2, 2016 % Change July 1, 2017 July 2, 2016 % Change
Revenues$188.0
 $234.8
 (19.9) $372.8
 $444.9
 (16.2)$176.5
 $188.0
 (6.1) $342.4
 $372.8
 (8.2)
Income19.9
 28.6
 (30.4) 37.3
 51.0
 (26.9)17.3
 19.9
 (13.1) 32.8
 37.3
 (12.1)
% of revenues10.6% 12.2%   10.0% 11.5%  9.8% 10.6%   9.6% 10.0%  
Components of revenue decline:                      
Organic decline    (18.5)     (14.5)    (5.3)     (7.0)
Foreign currency    (1.4)     (1.7)    (0.8)     (1.2)
Net revenue decline    (19.9)     (16.2)    (6.1)     (8.2)
Revenues - For the three and six months ended July 2, 2016,1, 2017, the decrease in revenues, compared to the respective 20152016 periods, was due primarily to a decrease in organic revenue and, to a lesser extent, a strengthening of the U.S. dollar during the periods against various foreign currencies. The decrease in organic revenue was due primarily to lower revenues from large systems projects as a decline in dairy pricing, which began in 2015, delayed the placement of several large systems orders, particularly for milk powder projects.

Income - For the three and six months ended July 2, 2016, income and margin decreased, compared to the respective periods in 2015, primarily due to the revenue declines noted above. These declines in income and margin were partially offset by savings from restructuring actions and other cost reduction initiatives implemented during the periods.
Backlog - The segment had backlog of $345.8 and $427.7 as of July 2, 2016 and June 27, 2015, respectively. Of the $81.9 year-over-year decline in backlog, $75.8 was attributable to an organic decline and $6.1 was due to the impact of changes in various foreign currencies relative to the U.S. dollar as of July 2, 2016, as compared to June 27, 2015. The organic decline was due primarily to the impact of the decline in dairy pricing in 2015 mentioned above and its impact on large systems orders.
Power and Energy
 Three months ended Six months ended
 July 2, 2016 June 27, 2015 % Change July 2, 2016 June 27, 2015 % Change
Revenues$155.8
 $184.1
 (15.4) $305.5
 $357.5
 (14.5)
Income10.0
 23.0
 (56.5) 12.2
 39.0
 (68.7)
% of revenues6.4% 12.5%   4.0% 10.9%  
Components of revenue decline:           
Organic decline    (11.9)     (11.3)
Foreign currency    (3.5)     (3.2)
Net revenue decline    (15.4)     (14.5)
Revenues - For the three months ended July 2, 2016, the decrease in revenues, compared to the respective 2015 period, was due primarily to a decrease in organic revenue and, to a lesser extent, a strengthening of the U.S. dollar during the period against various foreign currencies. The decrease in organic revenue was due primarily to the impact of lower oil prices on customer order patterns, particularly for upstream and midstream original equipment. Additionally, organic revenue declined as a result of revenues realized from a large nuclear project during the three months ended June 27, 2015 which not recur in the three months ended July 2, 2016.
For the six months ended July 2, 2016, the decrease in revenues, compared to the respective 2015 period, was due primarily to a decrease in organic revenue and, to a lesser extent, a strengthening of the U.S. dollar during the period against various foreign currencies. The decrease in organic revenue was due primarily to the impact on revenues of a lower backlog as of the beginning of 2016,the 2017 periods, compared to the respective periodperiods of 2015,2016, due to lower oil prices,a decline in dairy pricing which began in 2015, as well as the impacts mentioned above.impact of such lower prices on the placement of large systems orders throughout 2016 and the second quarter of 2017.
Income - For the three and six months ended July 2, 2016,1, 2017, income and margin decreased, compared to the respective 20152016 periods, primarily due to the revenue declines noted above and, particularly in the three months ended July 1, 2017, due to the effects of an increase in incentive compensation based on the Company’s year-to-date performance relative to certain incentive targets in 2017 as compared to 2016. These declines in income and margin were partially mitigated by improved productivity in our Poland facility and savings from restructuring actions and other cost reduction initiatives.
Backlog - The segment had backlog of $320.3 and $345.8 as of July 1, 2017 and July 2, 2016, respectively. Of the $25.5 year-over-year decline in backlog, $24.7 was attributable to an organic decline and $0.8 was attributable to the impact of fluctuations in foreign currencies relative to the U.S. dollar. The organic decline was due primarily to the impact of the decline in dairy pricing mentioned above and its impact on large systems orders.

Power and Energy
 Three months ended Six months ended
 July 1, 2017 July 2, 2016 % Change July 1, 2017 July 2, 2016 % Change
Revenues$145.0
 $155.8
 (6.9) $250.9
 $305.5
 (17.9)
Income10.0
 10.0
 
 8.5
 12.2
 (30.3)
% of revenues6.9% 6.4%   3.4% 4.0%  
Components of revenue decline:           
Organic decline    (5.1)     (15.0)
Foreign currency    (1.8)     (2.9)
Net revenue decline    (6.9)     (17.9)
Revenues - For the three and six months ended July 1, 2017, the decrease in revenues, compared to the respective 2016 periods, was due to a decrease in organic revenue mentioned above.and, to a lesser extent, a strengthening of the U.S. dollar during the period primarily against the British Pound. The decline in organic revenue reflects the impact on revenues of a lower backlog as of the beginning of 2017, compared to the beginning of 2016, due primarily to reduced customer spending, particularly for original equipment used in upstream and midstream oil applications, as well as lower aftermarket revenues. These declines were partially offset by an increase in lower margin filtration product revenues.
Income - For the three months ended July 1, 2017, income was alsoflat and margin increased, compared to the respective 2016 period. Savings from restructuring actions and other cost reduction initiatives more than offset reductions in income and margin related primarily to the revenue decline noted above, as well as increased warranty costs and incentive compensation.
For the six months ended July 1, 2017, income and margin decreased, compared to the respective 2016 period, primarily due to competitive pricing pressures andthe revenue decline noted above, lower utilization rates at certain manufacturing facilities, and increased warranty costs and incentive compensation, the effects of our manufacturing locations,which were partially offset by savings from restructuring actions and other cost reduction initiatives implemented during the periods.initiatives.
Backlog - The segment had backlog of $364.1$403.5 and $512.2$364.1 as of July 1, 2017 and July 2, 2016, and June 27, 2015, respectively. Of the $148.1$39.4 year-over-year declinegrowth in backlog, $121.9$42.4 was attributable to an organic decline and $26.2 was attributablegrowth, partially offset by a decrease of $3.0 due to the impact of a stronger U.S. dollar as of July 2, 2016,1, 2017, as compared to June 27, 2015,July 2, 2016, primarily relative to the Great BritainBritish Pound. The organic declinegrowth was due primarily to the impact of lower oil prices mentioned above.certain orders received for U.K.-based nuclear safety pumps and original equipment of North American pipeline valves.

Industrial
Three months ended Six months endedThree months ended Six months ended
July 2, 2016 June 27, 2015 % Change July 2, 2016 June 27, 2015 % ChangeJuly 1, 2017 July 2, 2016 % Change July 1, 2017 July 2, 2016 % Change
Revenues$185.0
 $196.2
 (5.7) $355.5
 $383.9
 (7.4)$176.5
 $185.0
 (4.6) $337.9
 $355.5
 (5.0)
Income26.9
 27.9
 (3.6) 46.3
 53.7
 (13.8)20.8
 26.9
 (22.7) 41.9
 46.3
 (9.5)
% of revenues14.5% 14.2%   13.0% 14.0%  11.8% 14.5%   12.4% 13.0%  
Components of revenue decline:                      
Organic decline    (4.2)     (5.6)    (3.9)     (3.9)
Foreign currency    (1.5)     (1.8)    (0.7)     (1.1)
Net revenue decline    (5.7)     (7.4)    (4.6)     (5.0)
Revenues - For the three and six months ended July 2, 2016,1, 2017, the decrease in revenues, compared to the respective 2015 period,2016 periods, was due primarily to a decrease in organic revenue and, to a lesser extent, a strengthening of the U.S. dollar during the period against variouscertain foreign currencies. The decrease in organic revenue was due primarily to lower sales of hydraulic tools, heat exchangersmixers and dehydration equipment.industrial pumps.
For the six months ended July 2, 2016, the decrease in revenues, compared to the respective 2015 period, was due primarily to a decrease in organic revenue and, to a lesser extent, a strengthening of the U.S. dollar during the period against various foreign currencies. The decrease in organic revenue was due primarily to lower large capital project revenues and decreased sales of hydraulic technology equipment into the oil and gas market, as well as lower sales of heat exchangers and dehydration equipment.
Income - For the three and six months ended July 2, 2016,1, 2017, income and margin decreased, compared to the respective 20152016 period, primarily due to the revenue decline noted above. The segment’s margin increased, compared toabove and, particularly in the respective 2015 period,three months ended July 1, 2017, due to higher costs on shipments of heat exchangers and increased incentive compensation. These reductions in income and margin

were partially offset by savings from restructuring actions and other cost reduction initiatives implemented during the period.
Forperiods and, particularly during the sixthree months ended July 2, 2016, income and margin decreased, compared to the respective 2015 periods, primarily due to the revenue decline noted above. The decline1, 2017, improved productivity in margin was also due to a lower mix of higher margin products, partially offset by savings from restructuring actions and cost reduction initiatives implemented during the period.our Poland facility.
Backlog - The segment had backlog of $170.8$206.8 and $193.4$170.8 as of July 1, 2017 and July 2, 2016, and June 27, 2015, respectively. Of the $22.6$36.0 year-over-year declinegrowth in backlog, $18.2$34.5 was attributable to an organic declinegrowth and $4.4$1.5 was attributable to the impact of a strongerfluctuations in foreign currencies relative to the U.S. dollar as of July 2, 2016, as compared to June 27, 2015.dollar.
CORPORATE EXPENSE AND OTHER EXPENSESPENSION AND POSTRETIREMENT SERVICE COSTS
Three months ended Six months endedThree months ended Six months ended
July 2, 2016 June 27, 2015 % Change July 2, 2016 June 27, 2015 % ChangeJuly 1, 2017 July 2, 2016 % Change July 1, 2017 July 2, 2016 % Change
Total consolidated and combined revenues$528.8
 $615.1
 (14.0) $1,033.8
 $1,186.3
 (12.9)
Total consolidated revenues$498.0
 $528.8
 (5.8) $931.2
 $1,033.8
 (9.9)
Corporate expense12.6
 12.4
 1.6
 31.5
 36.2
 (13.0)12.1
 12.6
 (4.0) 27.6
 31.5
 (12.4)
% of revenues2.4% 2.0%   3.0% 3.1%  2.4% 2.4%   3.0% 3.0%  
Pension and postretirement expense1.1
 1.0
 10.0
 2.1
 2.0
 5.0
Pension and postretirement service costs0.3
 0.5
 (40.0) 0.7
 1.0
 (30.0)
Corporate Expense - Corporate expense generally relates to the cost of our Charlotte, NC corporate headquarters and our Asia Pacific center in Shanghai, China. Prior to the Spin-Off, corporate expense also included allocations of the cost of corporate functions and/or resources provided by the former Parent. A detailed description of the methodology used to allocate corporate-related costs can be found in our consolidated and combined financial statements included in our 2015 Annual Report on Form 10-K. Beginning in 2016, corporateCorporate expense also reflects stock-based compensation costs associated with corporate employees (2015 corporate expense has been recast to reflect this change in reporting, as further discussed in Note 3 to our condensed consolidated and combined financial statements).employees.

The increase in corporate expense for the three months ended July 2, 2016, compared to the respective 2015 period, was due to an increase in corporate stock-based compensation, partially offset by a reduction in incentive compensation expense. The decrease in corporate expense for the six months ended July 2, 2016, compared to the respective 2015 period, was due to reductions in corporate stock-based compensation and incentive compensation expense.
The changes in corporate stock-based compensation expense, compared to the respective periods in 2015, reflect primarily (i) changes in the composition of our management team on a year-over-year basis, as well as (ii) the benefit of forfeitures of certain awards during the first three months of 2016. In 2015, our corporate stock-based compensation expense included an allocation of expense related to certain former officers whose awards became fully vested during the first quarter of 2015, based on early retirement provisions contained within the applicable award agreements. In 2016, a greater portion of corporate stock-based compensation expense related to our current management team is being recognized ratably over the relevant performance or service period of the applicable awards.
The decrease in incentive compensation expense is due to lower profitability in the three and six months ended July 2, 2016,1, 2017, compared to the respective 2016 periods, in 2015.was due primarily to savings from restructuring actions undertaken during 2016 and other cost reduction initiatives, including the effects of restructuring actions on corporate stock-based compensation cost.
See Note 1110 to our condensed consolidated and combined financial statements for further details regarding our stock-based compensation awards.
Pension and Postretirement ExpenseService Costs - SPX FLOW sponsors a number of defined benefit pension plans and a postretirement plan. Prior to the Spin-Off, certain eligible employees associated with SPX FLOW were participants in defined benefit pension and postretirement plans sponsored by the former Parent. For all of these plans, changes in the fair value of plan assets and actuarial gains and losses are recognized to earnings in the fourth quarter of each year as a component of net periodic benefit expense, unless earlier remeasurement is required. The remaining components of pension and postretirement expense, primarily service and interest costs and expected return on plan assets, are recorded on a quarterly basis.
Pension Non-service-related pension and postretirement costs (benefits) are reported in “Other expense, as presented herein, represents net periodic benefit expense associated with the plans we sponsor and, in 2015, an allocation of a portion of the net periodic benefit expense associated with the plans sponsored by the former Parent prior to the Spin-Off. See Note 1 to our consolidated and combined financial statements included in our 2015 Annual Report on Form 10-K for further details on our methodology for allocating corporate-related costs prior to the Spin-Off.net”.
See Note 87 to our condensed consolidated and combined financial statements for further details onregarding our pension and postretirement plans, as well as our allocated portion of the plans sponsored by the former Parent prior to the Spin-Off.plans.
LIQUIDITY AND FINANCIAL CONDITION
Listed below are the cash flows from (used in) operating, investing, and financing activities, as well as the net change in cash and equivalents, for the six months ended July 1, 2017 and July 2, 2016 and June 27, 2015.2016.
Cash Flow
Six months endedSix months ended
July 2, 2016 June 27, 2015July 1, 2017 July 2, 2016
Cash flows from (used in) operating activities$(28.6) $41.0
$71.9
 $(28.6)
Cash flows used in investing activities(28.2) (21.1)
Cash flows from (used in) investing activities19.7
 (28.2)
Cash flows from (used in) financing activities1.0
 (54.6)(106.8) 1.0
Change in cash and equivalents due to changes in foreign currency exchange rates(11.1) (6.8)26.2
 (11.1)
Net change in cash and equivalents$(66.9) $(41.5)$11.0
 $(66.9)
Operating Activities - During the six months ended July 2, 2016,1, 2017, the decreaseincrease in cash flows from operating activities, compared to the same period in 2015,2016, was primarily attributable to (i) a declineimprovements in segment profitability,working capital driven by the timing of

project execution and associated milestone payments, (ii) an interest payment of $20.6 related to our senior notes,reduced payments for incentive compensation and (iii) an increase in cash spending on restructuring actions, and (iv) pension benefit payments of $12.0 to certain former officers of the Company.

Company during the first six months of 2016 which did not recur during the corresponding period of 2017.
Investing Activities - During the six months ended July 1, 2017 and July 2, 2016, cash flows used infrom (used in) investing activities were comprised primarily of proceeds from asset sales and other of $31.1 and $2.1, respectively, offset by capital expenditures of $11.4 and $30.1, respectively, associated generally with upgrades of manufacturing facilities and information technology, partially offset by proceedstechnology. Proceeds from asset sales and other of $2.1. Cash flows used in investing activities$31.1 during the comparable periodfirst six months of 2017 related primarily to the sale of certain corporate assets which were marketed for sale beginning in 2015 were comprised primarilythe first quarter of capital expenditures of $22.6 associated generally with upgrades of manufacturing2016, certain facilities in the Asia Pacific and information technology, partially offset by proceeds from asset salesEMEA regions, and other of $1.6.our former investment in an equity security. See Note 13 to our condensed consolidated financial statements for additional details regarding our former investment in the equity security.
Financing Activities - During the six months ended July 2, 2016,1, 2017, cash flows used in financing activities related primarily to net repayments of our revolving credit facilities of $77.0 and of our trade receivables financing arrangement of $21.2. Cash flows from financing activities during the comparable period in 2016 related primarily to net borrowings under our trade receivables financing arrangement of $11.0, partially offset by net repayments of other financing arrangements of $7.7. Cash flows used in financing activities during the comparable period in 2015 related primarily to net transfers to the former Parent of $48.7 and repayments of related party notes payable of $5.4.
Change in Cash and Equivalents due to Changes in Foreign Currency Exchange Rates - The increase in cash and equivalents due to foreign currency exchange rates of $26.2 in the six months ended July 1, 2017, reflected primarily an increase in U.S. dollar equivalent balances of foreign-denominated cash and equivalents as a result of the weakening of the U.S. dollar against the Euro and various other foreign currencies during the period.
The decrease in cash and equivalents due to foreign currency exchange rates of $11.1 in the six months ended July 2, 2016 reflected primarily a reduction in U.S. dollar equivalent balances of foreign-denominated cash and equivalents as a result of the strengthening of the U.S. dollar against the Great BritainBritish Pound and various other foreign currencies.currencies during the period.
The decrease in cash and equivalents due to foreign currency exchange rates of $6.8 in the six months ended June 27, 2015 reflected primarily a reduction in U.S. dollar equivalent balances of Euro-denominated cash and equivalents as a result of the strengthening of the U.S. dollar against the Euro in the first six months of 2015.
Borrowings and Availability
Borrowings —Debt at July 2, 20161, 2017 and December 31, 20152016 comprised the following:
July 2, 2016 December 31, 2015July 1, 2017 December 31, 2016
Domestic revolving loan facility$2.0
 $
$1.0
 $68.0
Term loan(1)
400.0
 400.0
380.0
 390.0
6.875% senior notes, due in August 2017600.0
 600.0
5.625% senior notes, due in August 2024300.0
 300.0
5.875% senior notes, due in August 2026300.0
 300.0
Trade receivables financing arrangement11.0
 

 21.2
Other indebtedness(2)
29.6
 37.3
39.9
 42.4
Less: deferred financing fees(3)
(4.1) (5.2)(11.8) (12.8)
Total debt1,038.5
 1,032.1
1,009.1
 1,108.8
Less: short-term debt33.7
 28.0
24.2
 27.7
Less: current maturities of long-term debt20.4
 10.3
20.4
 20.2
Total long-term debt$984.4
 $993.8
$964.5
 $1,060.9
(1)The term loan, which had an initial principal balance of $400.0, is repayable in quarterly installments of 5.0% annually beginningwhich began with our third quarter of 2016, with the remaining balance repayable in full on September 24, 2020.
(2)Primarily includes capital lease obligations of $8.9$15.7 and $9.3$14.7 and balances under a purchase card program of $19.5$22.2 and $23.6$17.9 as of July 2, 20161, 2017 and December 31, 2015,2016, respectively. The purchase card program allows for payment beyond the normalcustomary payment terms for goods and services acquired under the program. As this arrangement extends the payment of these purchases beyond their normal payment terms through third-party lending institutions, we have classified these amounts as short-term debt.
(3)Deferred financing fees were comprised of fees related to the term loan and senior notes.
At July 2, 2016,1, 2017, we were in compliance with all covenants of our senior credit facilities and our senior notes.
Availability — At July 2, 2016,1, 2017, we had $438.5$441.5 of available borrowing capacity under our revolving credit facilities after giving effect to borrowings of $2.0$1.0 under the domestic revolving loan facility and $9.5$7.5 reserved for outstanding letters of credit, and $7.7

$31.9 of available borrowing capacity under our trade receivables financing arrangement after giving effect to borrowings of $11.0.arrangement. In addition, at July 2, 2016,1, 2017, we had $244.4$297.5 of available issuance capacity under our foreign credit instrument facilities after giving effect to $255.6$202.5 reserved for outstanding bank guarantees and standby letters of credit.
At July 2, 2016,1, 2017, in addition to the revolving lines of credit described above, we had approximately $6.2$5.5 of letters of credit outstanding under separate arrangements in China and India.
Refer to Note 98 for further information on our borrowings as of July 2, 2016.

Amendment of Senior Credit Facilities— On July 11, 2016, the Company and certain of its subsidiaries entered into an amendment (the “First Amendment”) to the Company’s existing senior credit facilities, dated as of September 1, 2015 (the “Existing Senior Credit Facilities” and, as amended by the First Amendment, the “Senior Credit Facilities”), by and among the Company, the foreign subsidiary borrowers party thereto, the lenders party thereto, Deutsche Bank AG Deutschlandgeschäft Branch, as foreign trade facility agent, and Bank of America, N.A., as administrative agent (the “Administrative Agent”). The First Amendment amended the Existing Senior Credit Facilities to, among other things:
increase the maximum consolidated leverage ratio that must be maintained by the Company from 3.25:1.00 (or 3.50:1.00 for the four fiscal quarters after certain permitted acquisitions) to 4.00:1.00;
require that the Company and the domestic subsidiary guarantors grant to the Administrative Agent valid and perfected first priority security interests in substantially all personal property assets of the Company and the domestic subsidiary guarantors (subject to certain exceptions) and valid first priority mortgages on all domestic real property owned by the Company and the domestic subsidiary guarantors having a fair market value in excess of $10.0; and
amend the per annum fees charged and the interest rate margins applicable to Eurodollar and alternate base rate loans, to provide for amended fees and margins within various leverage tiers.
The Senior Credit Facilities continue to provide that, if the Company’s corporate credit rating is “Baa3” or better by Moody’s or “BBB-” or better by S&P and no defaults would exist, then all collateral hecurity will be released and the obligations under the Senior Credit Facilities will be unsecured.2017.
Financial Instruments
We measure our financial assets and liabilities on a recurring basis, and nonfinancial assets and liabilities on a non-recurring basis, at fair value. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. We utilize market data or assumptions that we believe market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable quoted prices in active markets for identical assets or liabilities (Level 1), significant other observable inputs (Level 2) or significant unobservable inputs (Level 3).
Our derivative financial assets and liabilities include FX forward contracts and FX embedded derivatives measured at fair value using observable market inputs such as forward rates, interest rates, our own credit risk and our counterparties' credit risks. Based on these inputs, the derivative assets and liabilities are classified within Level 2 of the valuation hierarchy. Based on our continued ability to enter into forward contracts, we consider the markets for our fair value instruments active.
As of July 2, 2016,1, 2017, there had been no significant impact to the fair value of our derivative liabilities due to our own credit risk as the related instruments were collateralized under our senior credit facilities. Similarly, there had been no significant impact to the fair value of our derivative assets based on our evaluation of our counterparties' credit risks.
We primarily use the income approach, whichmarket approach, or both approaches, as appropriate. The income approach uses valuation techniques to convert future amounts to a single present amount. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities (including the sale of a business). Assets and liabilities measured at fair value on a recurring basis are further discussed below.
Currency Forward Contracts and Currency Forward Embedded Derivatives
We manufacture and sell our products in a number of countries and, as a result, are exposed to movements in foreign currency exchange rates. Our objective is to preserve the economic value of non-functional currency-denominated cash flows and to minimize the impact of changes as a result of currency fluctuations (see Note 109 to our condensed consolidated and combined financial statements). Our principal currency exposures relate to the Euro, Chinese Yuan and Great BritainBritish Pound.
We had FX forward contracts with an aggregate notional amount of $51.7$27.5 and $44.7$28.0 outstanding as of July 2, 20161, 2017 and December 31, 2015,2016, respectively, with all such contracts scheduled to mature within one year. We also had FX embedded derivatives with an aggregate notional amount of $32.3$19.6 and $31.6$21.4 at July 2, 20161, 2017 and December 31, 2015,2016, respectively, with scheduled maturities of $29.3, $2.8$19.5 and $0.2$0.1 within one two and threetwo years, respectively. TheThere were no unrealized gains or losses net of tax, recorded in accumulated other comprehensive loss related to FX forward contracts were less than $0.1 as of July 2, 20161, 2017 and December 31, 2015.2016, respectively. The net gains (losses) recorded in "Other income (expense),expense, net" related to FX gains (losses) totaled $0.2$(1.6) and $(2.9)$0.2 for the three months ended July 1, 2017 and July 2, 2016, and June 27, 2015, respectively, and $(3.0)$(3.4) and $0.2$(3.0) for the six months then ended.

The net fair values of our FX forward contracts and FX embedded derivatives were $1.6$2.3 (asset) and $0.5$2.8 (asset) at July 2, 20161, 2017 and December 31, 2015,2016, respectively.
Other Fair Value Financial Assets and Liabilities
The carrying amounts of cash and equivalents and receivables reported in our condensed consolidated balance sheets approximate fair value due to the short-term nature of those instruments.
The fair value of our debt instruments (excluding capital leases and deferred financing fees), based on borrowing rates available to us at July 2, 20161, 2017 for similar debt, was $1,059.2,$1,023.2, compared to our carrying amountvalue of $1,033.7.$1,005.2.

Concentrations of Credit Risk
Financial instruments that potentially subject us to significant concentrations of credit risk consist of cash and equivalents, trade accounts receivable, and FX forward contracts. These financial instruments, other than trade accounts receivable, are placed with high-quality financial institutions throughout the world. We periodically evaluate the credit standing of these financial institutions.
We maintain cash levels in bank accounts that, at times, may exceed federally-insured limits. We have not experienced, and believe we are not exposed to significant risk of, loss in these accounts.
We have credit loss exposure in the event of nonperformance by counterparties to the above financial instruments, but have no other off-balance-sheet credit risk of accounting loss. We anticipate that counterparties will be able to fully satisfy their obligations under the contracts. We do not obtain collateral or other security to support financial instruments subject to credit risk, but we do monitor the credit standing of counterparties.
Concentrations of credit risk arising from trade accounts receivable are due to selling to customers in a particular industry. Credit risks are mitigated by performing ongoing credit evaluations of our customers' financial conditions and obtaining collateral, advance payments, or other security when appropriate. No one customer, or group of customers that, to our knowledge, are under common control, accounted for more than 10% of our revenues for any period presented.
Other Matters
Contractual Obligations - As of July 2, 2016,1, 2017, there were no material changes in the amounts of our contractual obligations from those disclosed in our 20152016 Annual Report on Form 10-K. See “Borrowings and Availability” within this MD&A for a discussion regarding the amendment of our senior credit facilities on July 11, 2016.
In addition, on July 8, 2016, we made direct benefit payments of $53.9 related to our domestic nonqualified pension plan to certain former officers of the Company. These payments were funded by borrowings under our senior credit facilities.
Our total net liabilities for unrecognized tax benefits including interest were $11.0$2.5 as of July 2, 2016.1, 2017. Of that amount, we believe that within the next 12 months it is reasonably possible that our previously unrecognized tax benefits (including interest) could decrease by $4.0$0.0 to $6.0.$1.5.
Contingencies and Other Matters - We are subject to litigation matters that arise in the normal course of business. We believe these matters are either without merit or of a kind that should not have a material effect, individually or in the aggregate, on our financial position, results of operations or cash flows.
We are subject to domestic and international environmental protection laws and regulations with respect to our business operations and are operating in compliance with, or taking action aimed at ensuring compliance with, these laws and regulations. None of our compliance obligations with environmental protection laws and regulations, individually or in the aggregate, is expected to have a material adverse effect on our financial position, results of operations or cash flows.
Refer to Note 11 for discussion regarding amounts reported in "Mezzanine equity" on the condensed consolidated balance sheets as of July 1, 2017 and December 31, 2016. Subsequent changes, if any, in amounts reported are not expected to have a material adverse effect on our financial position, results of operations or cash flows.
Global Realignment Program - As previously disclosed in our 20152016 Annual Report on Form 10-K, we are currently executing a multi-year plan to transition our enterprise to an operating company. As part of this plan, we announced our intent to further optimize our global footprint, streamline business processes and reduce selling, general and administrative expense through a global realignment program. The realignment program is intended to reduce costs across operating sites and corporate and global functions, in part by making structural changes and process enhancements which allow us to operate more efficiently. We plan to have approximately $125$50 in cash outflows in support of our realignment program in 2016.2017. Additionally, we expect to recognize pre-tax charges to earnings of approximately $120$30 to $40 in the aggregate over the course of 2016 and 2017 (we recognized approximately

$50 $78 related to the realignment program during 2016 and $15 during the six months ended July 2, 2016,1, 2017, as discussed in Note 4 to our condensed consolidated and combined financial statements). These realignment actions are expected to be substantially complete by the end of 2017.

Critical Accounting Policies and Use of Estimates
General - The preparation of financial statements in accordance with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and disclosure of contingent assets and liabilities. The accounting policies that we believe are most critical to the portrayal of our financial condition and results of operations and that require our most difficult, subjective or complex judgments in estimating the effect of inherent uncertainties are discussed in our consolidated and combined financial statements included in our 20152016 Annual Report on Form 10-K. We have effected no material change in either our critical accounting policies or use of estimates since the filing of our consolidated and combined financial statements in our 20152016 Annual Report on Form 10-K.


ITEM 3. Quantitative and Qualitative Disclosures about Market Risk
We are exposed to market risk related to changes in interest rates, foreign currency exchange rates and commodity raw material prices, and we selectively use financial instruments to manage certain of these risks. We do not enter into financial instruments for speculative or trading purposes; however, these instruments may be deemed speculative if the future cash flows originally hedged are no longer probable of occurring as anticipated. Our currency exposures vary, but are primarily concentrated in the Euro, Chinese Yuan and Great BritainBritish Pound. We generally do not hedge currency translation exposures. Our exposures for commodity raw materials vary, with the highest concentration relating to steel, copper and oil.steel. See Note 109 to our condensed consolidated and combined financial statements for further details.
The following table provides information, as of July 2, 2016,1, 2017, about our primary outstanding debt obligations and presents principal cash flows by expected maturity dates, weighted-average interest rates and fair values.
Due Within 1 Year Due Within 2 Years Due Within 3 Years Due Within 4 Years Due Within 5 Years Thereafter Total Fair ValueDue Within 1 Year Due Within 2 Years Due Within 3 Years Due Within 4 Years Due Within 5 Years Thereafter Total Fair Value
6.875% senior notes$
 $600.0
 $
 $
 $
 $
 $600.0
 $625.5
Domestic revolving loan facility$
 $
 $
 $1.0
 $
 $
 $1.0
 $1.0
Average interest rate            6.875%              6.000%  
Term loan20.0
 20.0
 20.0
 20.0
 320.0
 
 400.0
 400.0
20.0
 20.0
 20.0
 320.0
 
 
 380.0
 380.0
Average interest rate            2.210%              3.976%  
5.625% senior notes
 
 
 
 
 300.0
 300.0
 309.0
Average interest rate            5.625%  
5.875% senior notes
 
 
 
 
 300.0
 300.0
 309.0
Average interest rate            5.875%  
We believe that cash and equivalents, cash flows from operations, and availability under revolving credit facilities and our trade receivables financing arrangement will be sufficient to fund working capital needs, planned capital expenditures, dividend payments (if declared), other operational cash requirements and required debt service obligations for at least the next 12 months.
We had FX forward contracts with an aggregate notional amount of $51.7$27.5 outstanding as of July 2, 2016,1, 2017, with all such contracts scheduled to mature within one year. We also had FX embedded derivatives with an aggregate notional amount of $32.3$19.6 at July 2, 2016,1, 2017, with scheduled maturities of $29.3, $2.8$19.5 and $0.2$0.1 within one two and threetwo years, respectively. The gross fair values of our FX forward contracts and FX embedded derivatives, in aggregate, were $2.9$2.4 (gross assets) and $1.3$0.1 (gross liabilities) as of July 2, 2016.1, 2017.
ITEM 4. Controls and Procedures
SPX FLOW management, including the Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of disclosure controls and procedures, pursuant to Exchange Act Rule 13a-15(b),Rules 13a-15 and 15d-15, as of July 2, 2016.1, 2017. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of July 2, 2016.1, 2017.
In connection with the evaluation by SPX FLOW management, including the Chief Executive Officer and the Chief Financial Officer, of our internal control over financial reporting, pursuant to Exchange Act Rule 13a-15(d),Rules 13a-15 and 15d-15, no changes during the quarter ended July 2, 20161, 2017 were identified that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.


PART II—OTHER INFORMATION
ITEM 1. Legal Proceedings
The information required by this Item is incorporated by reference from the footnotes to the condensed consolidated and combined financial statements, specifically Note 12,11, “Litigation, and Contingent Liabilities and Other Matters,” included under Part I of this Form 10-Q.
ITEM 1A. Risk Factors
In addition to the other information set forth in this report, and as stated below, you should carefully consider the risk factors discussed in Part I, "Item 1A. Risk Factors" in our 20152016 Annual Report on Form 10-K, which could materially affect our business, financial condition, or future results.
Our global operations could be negatively impacted by the economic and political instability caused by the
United Kingdom ("UK") vote to leave the European Union ("EU").
The UK held a referendum on June 23, 2016 on its membership in the EU. A majority of UK voters voted to exit the EU (“Brexit”), and negotiations will commence to determine the future terms of the UK’s relationship with the EU, subject to a negotiation period that could last up to two years after the UK government formally initiates the withdraw process, including the terms of trade between the UK and the EU. Brexit has created instability and volatility in the global markets and could adversely affect Europeanresults or worldwide economic or market conditions. Although it is unknown what those terms will be, they may impair the ability of our operations in the EU to transact business in the future in the UK, and similarly the ability of our UK operations to transact business in the future in the EU. Specifically, it is possible that there will be greater restrictions on imports and exports between the UK and EU countries and increased regulatory complexities. These changes may adversely affect our operations and financial results. In addition, Brexit could lead to legal uncertainty and potentially divergent national laws and regulations as the UK determines which EU laws to replace or replicate. Further, among other things, Brexit could reduce capital spending in the UK and the EU, which could result in decreased demand for our products. Any of these effects of Brexit, and others we cannot anticipate, could adversely affect our business, business opportunities, results of operations, financial condition and cash flows.

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds
Issuer Purchases of Equity Securities
The following table summarizes the repurchases of common stock during the three months ended July 2, 2016:1, 2017:
Period 
Total Number of Shares Purchased(1)
 Average Price Per Share Total Number of Shares Purchased as Part of a Publicly Announced Plan or Program Maximum Approximate Dollar Value of Shares That May Yet be Purchased Under the Plan or Program 
Total Number of Shares Purchased(1)
 Average Price Per Share Total Number of Shares Purchased as Part of a Publicly Announced Plan or Program Maximum Approximate Dollar Value of Shares That May Yet be Purchased Under the Plan or Program
4/3/16 - 4/30/16 1,440 $24.59  
5/1/16 - 5/31/16 1,083 27.19  
6/1/16 - 7/2/16 1,547 30.08  
4/2/17 - 4/30/17 424
 $34.71
  
5/1/17 - 5/31/17 
 
  
6/1/17 - 7/1/17 
 
  
Total 4,070   424
    
     
(1) Reflects the surrender to us of shares of common stock to satisfy tax withholding obligations in connection with the vesting of restricted stock shares and restricted stock units.
ITEM 4. Mine Safety Disclosures
None.

ITEM 6. Exhibits
The exhibits to this Quarterly Report on Form 10-Q are listed in the accompanying Index to Exhibits.




SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
  SPX FLOW, Inc.
  (Registrant)
   
Date: August 3, 20162, 2017By/s/ Marcus G. Michael
  President and Chief Executive Officer
   
Date: August 3, 20162, 2017By/s/ Jeremy W. Smeltser
  Vice President and Chief Financial Officer


INDEX TO EXHIBITS
Item No. Description
11.1 Statement regarding computation of earnings per share. See condensed consolidated and combined statements of operations on page 1 of this Form 10-Q.
31.1 Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2 Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1 Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.1 
SPX FLOW, Inc. financial information from its Form 10-Q for the quarterly period ended July 2, 2016,1, 2017, formatted in XBRL, including: (i) Condensed Consolidated and Combined Statements of Operations for the three and six months ended July 1, 2017 and July 2, 2016 and June 27, 2015;2016; (ii) Condensed Consolidated and Combined Statements of Comprehensive Income (Loss) for the three and six months ended July 1, 2017 and July 2, 2016 and June 27, 2015;2016; (iii) Condensed Consolidated Balance Sheets atas of July 2, 20161, 2017 and December 31, 2015;2016; (iv) Condensed Consolidated and Combined Statements of Equity for the six months ended July 1, 2017 and July 2, 2016 and June 27, 2015;2016; (v) Condensed Consolidated and Combined Statements of Cash Flows for the six months ended July 1, 2017 and July 2, 2016 and June 27, 2015;2016; and (vi) Notes to Condensed Consolidated and Combined Financial Statements.




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