EnergySolutions, Inc Management Discusses Q2 2012 Results - Earnings Call Transcript

EnergySolutions, Inc (ES)

Q2 2012 Earnings Call

August 08, 2012 10:00 am ET


Richard Putnam

David J. Lockwood - Chief Executive Officer, President and Director

Gregory S. Wood - Chief Financial Officer and Executive Vice President


Scott J. Levine - JP Morgan Chase & Co, Research Division

Albert Leo Kaschalk - Wedbush Securities Inc., Research Division

Yilma Abebe - JP Morgan Chase & Co, Research Division

Robert Perry - Kingsland Capital Management, LLC

George Walsh

Gentry Klein

Nathaniel Kirk



Good day, everyone, and welcome to EnergySolutions' Second Quarter 2012 Earnings Conference Call. This call is being recorded. [Operator Instructions] At this time, I would like to turn the call over to Richard Putnam, EnergySolutions Vice President of Investor Relations. Mr. Putnam, please go ahead.

Richard Putnam

Thank you, Karen. Good morning, everyone. Welcome to EnergySolutions Second Quarter 2012 Conference Call. With me today are Chief Executive Officer, David Lockwood; and our Chief Financial Officer, Greg Wood. Before I turn the call over to David, I would like to remind listeners that during today's calls, management's remarks will contain forward-looking statements within the meaning of the federal securities laws. These remarks may include statements concerning plans, estimates, objectives, goals, strategies and projections of future events or performance, many of which are based upon certain assumptions. Forward-looking statements involve risks and uncertainties and although EnergySolutions believe its plans, intentions and expectations are based upon reasonable assumptions, we may not achieve those plans, intentions or expectations. There are important risks and uncertainties that could cause actual results to differ materially from those expressed in any forward-looking statements made in this conference call. Such risks and uncertainties are discussed in our annual report on Form 10-K for the year ended December 31, 2011 and our just announced earnings release included in our current report on Form 8-K filed with the Securities and Exchange Commission this morning.

Any projections as to the company's future financial performance represents management's estimates as of today, August 8, 2012. EnergySolutions assumes no obligation to update these projections in the future due to changing conditions, developments or otherwise. We've also prepared a number of tables that will be referenced in our discussion this morning. These tables are part of the earnings release that was put out earlier this morning and can be accessed on the Investor Relations tab at

To be respectful of your time, we will try to hold this call to 1 hour. We know that you will have a number of questions and we'll try to answer as many as possible in the hour. We'll be happy to follow up with you individually after the conference call if you have additional questions. With that, I'll now turn the call over to David Lockwood, CEO of EnergySolutions

David J. Lockwood

Good morning. It has been 58 days since Greg and I joined the management team at EnergySolutions. We have been extremely pleased with the performance of our management team and our dedicated employees. We are fortunate to work with the best people in the business, over 5,000 engineers, scientists and professionals who make a difference in the communities in which we work and live. Over the past 58 days we've spent time talking with our customers, our employees, regulators, competitors, consultants, others about our company and its various products and services. We've also had the opportunity to review the data concerning the prospects for the markets we serve. We've had the opportunity to evaluate where we're strong and where we could do better.

Based on our analysis, we have reached 4 conclusions about our company. First, our company requires more focus. We are in too many businesses in too many places. We'll be more successful if we focus on fewer opportunities. In particular, we should focus our management and deploy our capital on businesses in which we have gained strategic competitive advantages and enjoy higher margins.

Second, our company requires a lower cost structure. Today, we have a cost structure that is more appropriate for a substantially larger firm. We'll be more successful if we're able to deliver our products and services at a lower level of SG&A.

Third, our company requires a stronger balance sheet. We will be more successful if we're financially stronger, both in terms of winning customer contracts and funding and growing our businesses.

And finally, our company requires more investment to grow. We have not adequately funded our businesses, and as a result, while margins are improving, revenues have fallen. We can grow our business, both organically and inorganically, but only if we are willing and able to provide capital to invest in those businesses.

Based on these conclusions, we have developed 4 strategic initiatives. We plan to implement these initiatives by the end of this year. One, sell assets. In order to focus our company, we will consider asset sales. We made an announcement last month concerning discussions related to our U.K. business that owns the Magnox contract, and we are also considering other potential asset sales. Two, lower SG&A. We will lower the amount of expenses related to SG&A at our company. Three, reduce debt. We plan to use a significant portion of the proceeds from asset sales and cash flow from our businesses to decrease our expanding debt obligations. Four, grow our business. Through focusing on fewer businesses, selling assets, reducing our costs, and strengthening our balance sheet, we are planning to deploy our capital more aggressively in order to achieve significant revenue growth.

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