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SPX Management Discusses Q2 2012 Results - Earnings Call Transcript

The integration of ClydeUnion is a key focus for us this year. As we previously discussed, we have identified significant opportunities to improve ClydeUnion's operating performance. In the first quarter, we implemented several initiatives that have led to improved supply chain management and increased production at ClydeUnion key facilities. This had a positive impact on the Q2 financial performance as ClydeUnion's revenue increased 15% sequentially to $144 million with a 3% return on sales. We're pleased with the progress quarter-to-quarter and we expect to see continued improvement going forward.

As part of our improvement plan for ClydeUnion, we initiated restructuring actions during Q2 that include a 5% headcount reduction. We expect savings from these actions to benefit the second half of this year. On the commercial side, we continue to be very encouraged by the consumer reaction to this acquisition. We're now taking quotes that combine ClydeUnion Pumps with other Flow products most notably, control valves.

Moving on to our Transformer investment. We have now taken orders for 26 large power transformers and are pleased to report that in Q2, we delivered the first 3 units out of the expanded plant. We plan to ship an additional 12 units in the second half of the year and expect to increase production in 2013 as we grow into the new capacity. We're also pleased with the early developments in our joint venture with Shanghai Electric. In Q2, the joint venture booked 3 orders for dry cooling units with a combined value greater than $40 million.

The approval process for the sale of Service Solutions is progressing. In June, we received European regulatory approval and we're now in the latter stages of the U.S. approval process. We anticipate the final regulatory requirements will be satisfied over the next few months, and we expect this transaction to be completed shortly thereafter. The after-tax proceeds from this sale are estimated at approximately $1 billion. Once we have received the proceeds, we plan to pay down $350 million of debt and continue our share repurchase program. We completed the first phase of the share buyback program early in the second quarter. Phase 2 allows for repurchases up to $275 million. After these actions, we're projecting about $1.4 billion of liquidity that will provide us significant financial flexibility moving into 2013.

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