SPX Technologies, Inc. (SPXC) Q3 2014 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to the Third Quarter 2014 SPX Corporation Earnings Conference call. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes. I'd now like to turn the conference over to your host for today. To Ryan Taylor, Director of Investor Relations, you may begin.

Thank you, Frances, and good morning, everyone. Thank you for joining us. With me on the call this morning are Chris Kearney, our Chairman, President and CEO of SPX; and Jeremy Smeltser, our Chief Financial Officer. Our Q3 earnings press release was issued this morning and can be found on our website at spx.com, along with a separate press release regarding our announced plan to spin off our Flow business, which will result in 2 independent, stand-alone companies. This call is being webcast with 2 separate slide presentations, one for our Q3 earnings and also one for the spin announcement. These presentations are located in the Investor Relations section of our website, and I highly encourage you to follow along with the slides during our webcast. A replay of this webcast will be available on our website for the balance of this year. The financial information presented today is on a continuing-operations basis. And as a reminder, our 2014 earnings per share guidance is on an adjusted basis to exclude the following: the net gain on the sale of our EGS joint venture interest; early extinguishment of debt charges; non-service cost pension items, including the expected mark-to-market adjustment in Q4; and also costs associated with the planned spin transaction that we announced today. Our 2014 free cash flow guidance is also on an adjusted basis to exclude the tax payments related to the asset sale gains. In the appendix, we have provided reconciliations for all non-GAAP and pro forma financial measures included in today's presentation. Portions of our presentation and comments are forward-looking and subject to safe harbor provisions. Please also note the risk factors in our most recent SEC filings. And with that, I'll turn the call over to Chris.

Thanks, Ryan, and good morning, everyone. Thanks for joining us on this very significant and positive day for SPX. Along with our Q3 earnings release this morning, we also announced that our Board of Directors has unanimously approved a plan for a tax-free spin of our Flow business, which will accelerate our strategy to create a pure-play flow company. The remainder of SPX will be a stand-alone infrastructure company, with leading positions in power, HVAC and specialty infrastructure markets. We're very excited about this strategic decision and believe it will provide the Future Flow Company and the Future Infrastructure Company greater flexibility to pursue their respective strategies. We also believe this action will create significant value for our shareholders, customers and employees. We'll discuss the planned spin-off in detail after we review our third quarter results. I'll begin with an overview of Q3 and trends in our key end markets. We remain focused on improving operational performance and continuing -- excuse me, returning capital to shareholders, and I'm pleased to report continued success on these commitments. During the quarter, we repurchased $140 million of additional shares. As of yesterday, we've now repurchased approximately $485 million or 97% of the $500 million plan we entered into in Q4 2013. We expect this plan to complete trading in early November. On the operational front, through the first 9 months, our segment income increased 11%, and margins expanded 110 points over the prior year period. Our improved profitability reflects benefits driven by the new operational alignment, disciplined commercial initiatives and a lower structural cost base as a result of the restructuring executed over the past several quarters. It also reflects the dedication and commitment of our employees across the organization in supporting our continuous improvement efforts. Looking specifically at Q3. Adjusted EPS was $1.62, up 14% year-over-year and $0.22 above the high end of our guidance range. Organic revenue grew 1.5%, driven by our Thermal and Industrial segments. However, our Q3 revenue was lighter than anticipated due to currency impacts and shipping delays, many of which were customer driven. Jeremy will provide more details on this topic later in the call. In contrast to revenues, segment margins were better than expected at 12.1%, 80 points better than the prior year. This marks our sixth consecutive quarter with year-over-year margin improvement. The increase was led by Flow, where operating income grew 17% to $98 million, and margins expanded 250 points to 15.3%, above our long-term target range. Flow's margin expansion was largely driven by the power and energy business and underscores the significant progress Tony Renzi and his team have made improving the overall performance of their business. I'm especially pleased with our team at ClydeUnion, where operational performance continues to improve. For the last 12-month period, ClydeUnion's operating margin was above 12%. Overall, we're pleased with the improved performance across all 3 Flow end markets, and going forward, we believe there are additional opportunities to increase our market presence and drive even higher margin performance over time. We think the spin of Flow will enable us to accelerate our progress towards these goals and create even greater value for our shareholders. Looking at the trends in our key markets, beginning with Flow. In North America and EMEA, demand in our short-cycle businesses remained very healthy across all 3 end markets, and we continue to see steady incremental growth in aftermarket sales. In contrast, order activity in Asia Pacific, particularly for Flow's short-cycle component offerings, has been weaker than we anticipated coming into the year. For Q3, Flow's Asia-Pacific orders were down both sequentially and versus last year. For large capital projects, our quoting activity continues to be very solid, as it has been throughout the year. However, during the quarter, we continued to see the timing of large order placement delayed for various reasons. Broadly speaking, we're seeing customers increase their diligence and extend their evaluation of large capital investments, as a result of uncertainty in the macro and political environment. That said, we are in various stages of bidding on a number of food and beverage system opportunities and continue to work with our customers on preengineering requests. As part of that activity, we're in the latter stages of negotiations on a handful of large projects that we believe will materialize as firm orders in the near term. In power and energy, order placement for large projects was very light in Q3, and several orders we anticipated booking were delayed. During October, however, we've seen a sharp uptick in Flow's power and energy bookings, which is an encouraging sign, particularly on the OE side of the business. Here, we highlight one of the larger projects we've been tracking this year. It is an FPSO currently under development and scheduled to begin production in 2017. Early in the year, we bid on several technology packages for this project, and in October, won approximately $40 million of awards to supply multiple products. This is a very significant win for SPX and a direct result of our acquisition strategy and commercial initiative to combine technology offerings and increase our relevance to customers. This win marks our first multiproduct award on an FPSO and gives us a very strong reference for future projects of this kind. The content we have secured so far in this project includes water injection pumps, positive displacement pumps, process filters and plate heat exchangers. These 4 product lines represent different sub-brands sold as a One SPX solution. In addition to the content we've already been awarded, we have bids pending that could further increase our scope on this project. We've also seen an uptick in other power and energy order activity in October. We were awarded multiple orders for our filtration technology that will go into refineries in Saudi Arabia. We won a large nuclear power order in China for boiler feed water pumps. And in North America, we won yet another large valve order related to the continued build-out of oil pipelines. To put all of this in perspective, we anticipate Flow's power and energy orders in October will be 50% higher than the average monthly orders throughout the first 9 months of this year. In addition, even with oil prices near $80 a barrel, we expect our global aftermarket and North American pipeline business to hold up reasonably well. And we have focused growth initiatives underway aimed specifically at expanding our presence in those markets. For example, in the aftermarket, we have several projects underway focused on expanding the capabilities of our existing service center footprint and to repair and replace multiple SPX products. Our first significant aftermarket expansion was establishing a new facility in Aberdeen, Scotland, which I'm pleased to report is now operational. The facility increases our service capabilities in the North Sea, where ClydeUnion has a large installed base of pumps in subsea applications. In Houston, we're in the process of expanding our valve plant and expect to complete the second phase of our plan in the fourth quarter, and also expect to initiate phase 3 by year end. This will significantly increase our capacity going into next year and also reduce our lead times so we can better support our customers as they continue to build out North American oil pipelines. Given the growing activity in the shale production and natural gas, we're also working expeditiously to establish a presence and expand our value -- our valve business into adjacent gas markets. This represents yet another example of our strategy to leverage technology offerings into highly profitable market segments. Moving on to power -- our power and infrastructure businesses. In Q3, we saw a sharp increase in year-over-year bookings for both power transformers and cooling systems. In our power transformer business, we continue to see a high level of investment by utilities, as they focus on replacement of the aged installed base. We've also benefited from initiatives to expand into adjacent markets, such as oil and gas and data centers. In total, our Q3 transformer orders were up 30% year-over-year, driven primarily by a very strong bookings -- very strong bookings for medium-power transformers. In the medium-power market, although pricing remains challenging, lead times have increased modestly, an encouraging sign as we head into next year. In our comfort heating businesses, we saw a second consecutive quarter of strong bookings. We believe this is partly due to distributors stocking up in advance of what has been forecasted as yet another very cold winter. We also introduced several new heating products this year and expanded our distribution network, with a particular emphasis on establishing new reps in the Northeast region. In our cooling business, we're seeing sustained success from the commercial initiatives focused on adjacent market expansion, channel partner development and new product offerings. During Q3, we won an order valued at approximately $50 million to provide our ClearSky cooling towers for a coal-to-liquid facility to be built in China. Our ClearSky technology substantially eliminates the steam plume that is highly visible on a traditional wet cooling system. This is a significant win and reference that further validates our reputation as a global leader in cooling tower innovation. We also won a $37 million order to supply the dry cooling system for a coal plant to be built in Algeria. The benefits from the commercial initiatives Gene and his team have implemented are underscored by the growth in Thermal's core backlog, which has increased steadily over the past year and is now up 16% on a year-over-year basis. So that concludes my opening remarks, and at this point, I'll turn the call over to Jeremy to review our Q3 results in more detail before we discuss the spin transaction.

Thanks, Chris. I'll begin with earnings per share. For the third quarter, we reported diluted earnings per share from continuing operations of $1.52, up 7% over the prior year and $0.12 above our guidance range. This included a $0.10 charge related to incremental taxes on the gain from the sale of our interest in the EGS joint venture. This gain was recorded in the first quarter this year, and as Ryan mentioned, is not included in our EPS guidance. Excluding this item, adjusted EPS was $1.62 per share, up 14% year-over-year and $0.22 above our guidance range. Compared to our midpoint guidance, segment income was $0.04 better than expected. Within the segments, Flow and Thermal reported income higher than anticipated, with Industrial's profit coming in lower than expected. Currency fluctuations were a $0.04 headwind to segment income due to the strengthening of the dollar during the period. Looking at special charges. We recorded $4 million of restructuring expense in the quarter or about half of the targeted amount. This is simply a shift in the timing of a few actions that are now planned in the fourth quarter. As a result, we moved $0.07 of restructuring expense from Q3 to Q4 in our earnings model. And net other items were a $0.10 benefit versus our guidance. This included a handful of benefits, such as reduced corporate overhead and a lower effective tax rate as well as a small asset gain recorded in other income. Total revenue in the quarter was $1.16 billion, up 1% versus the prior year. Organic revenue increased 1.5%, offset partially by currency. As expected, revenue in the large power projects in South Africa declined $13 million. Excluding the impact from that decline, organic growth across the rest of SPX was just under 3%. Overall, revenue was lighter than anticipated, due primarily to shipping delays and currency fluctuations. The shipping delays were concentrated in our Flow and Industrial segments, and currency caused an $18 million variance as compared to our target. Despite these revenue headwinds, segment income was $140 million, in line with our guidance and up 8% over the prior year. Segment margins were better than expected at 12.1%, up 80 points over the prior year period. The segment income and margin growth was driven by Flow. Looking at Flow's Q3 results. Revenue was $639 million, down 2% versus the prior year. This decline was due to lower sales of power and energy pumps, which reflects the order delays we experienced in the OE part of the business over the past few quarters as well as our discipline on large project awards. We also had approximately $20 million of revenue in our power and energy business delayed due to timing of customer acceptance and, in some cases, supplier constraints. Sales in the food and beverage and industrial markets were flat year-over-year. Segment income increased $14 million or 17% to $98 million, and margins expanded 250 points to 15.3%. This income and margin improvement was driven by Flow's power and energy business, where profitability increased sharply, driven by improved operational performance, a favorable sales mix and cost reductions associated with restructuring actions. For the last 12-month period, Flow's segment income margin was 13.5%, firmly within our longer-term target margin range. We are very pleased with the improved performance across all 3 end markets. Tony Renzi, Marc Michael and David Wilson have all had a positive impact on their respective businesses since we moved to the new alignment 1 year ago. And we are particularly pleased with the significant turnaround at ClydeUnion, where the trailing 12-month operating margin was above 12%, as Chris mentioned. Flow's ending Q3 backlog was approximately $1.2 billion, down $161 million or 12% sequentially. Nearly 1/3 of this decline, about $45 million, was attributable to currency rate fluctuations. On an organic basis, a slowdown in Asia-Pacific orders and the timing of large capital decisions by our customers in energy and food markets were the primary causes of the backlog decline. To illustrate how the timing of large projects can influence the backlog trend, in Q3 2013, we booked 3 orders that totaled over $100 million. In contrast, the largest order booked in Q3 this year was $10 million. We are encouraged with the strong uptick in Flow's power and energy orders in October, and we're also closing in on a couple of large food and beverage projects. As a reminder, we continue to be selective on large orders. While this has likely contributed to the slower pace of large order development, we believe it has improved the overall quality of our backlog and our ability to meet customer commitments. The benefits from this project selectivity are a contributing factor in Flow's margin improvement. Over the past 12 months, our project management and on-time delivery has improved. Simultaneously, we are building an installed base with higher aftermarket potential. Moving on to Thermal. This segment continues to benefit from its growth and improvement initiatives. Thermal's Q3 revenue increased 4.5% year-over-year to $339 million. Organic revenue increased 6.2%, partially offset by currency fluctuations, which decreased revenue by 1.7%. The organic growth was driven by increased sales of cooling equipment and personal comfort heating products in North America. In South Africa, revenue associated with the large power projects declined $13 million organically. Excluding this expected ramp-down in South Africa, organic revenue for the core Thermal segment grew 11% or $28 million. Segment income was up 7% to $23 million, and margins improved modestly to 6.8%. The increased profitability was driven by the organic revenue growth in the core business as well as cost reductions associated with restructuring actions. This improvement was partially offset by lower income and margins in South Africa. We continue to see steady positive development in Thermal's backlog. At the end of Q3, Thermal's core backlog increased to $588 million and is now up 16% or $81 million over the past 12 months. This is net of a $13 million decline from currency. The core backlog development underscores the success of our commercial initiatives across this segment. In South Africa, the backlog continues to decline, as our work on the large power projects winds down. As Gene described at our Investor Meeting in September, there are 4 phases to these projects: manufacturing, construction, commissioning and the warranty period. At this point, we are approximately 85% through the manufacturing phase and expect to fully complete this phase in 2015. Most of the work going forward involves constructing the filters and cooling towers. Over the balance of these projects, we estimate approximately $180 million of additional revenue as we complete our contractual commitments, with the majority expected to be recognized by the end of 2015. Commissioning is an important milestone, particularly for the first plant, which Eskom plans to commission by the end of this year. We are pleased to say that the commissioning process is now underway. Earlier this month, Eskom reported that the Medupi location successfully fired up a portion of the boiler at 1 of its 6 power plants. This is a significant step in the commissioning process, and we are encouraged by this successful outcome. Moving on to Industrial. Revenue in the period was $181 million, up 6% over the prior year, driven by organic growth. Currency was a modest benefit. The most notable revenue growth was in our power transformer business, where revenue increased by more than 20% year-over-year, primarily driven by a higher volume of medium-power shipments. Coming into the quarter, we anticipated even stronger revenue growth in the transformer business. However, we experienced some production challenges that led to fewer shipments in the period as compared to our expectations. As we continue to ramp up volume at the Wisconsin plant, we are generally pleased with the level of productivity at the facility, which is running better than historical comparisons. The growth in transformer revenue was largely offset by a sharp decline in sales of fare collection systems due primarily to project delays, which we believe are due to the availability and processing of government funding. This had a significant impact on profitability in the quarter, as segment income decreased $6 million over the prior year to $19 million. Margins declined to 10.5%. The decline in fare collection sales was the main driver of the reduced profitability. However, margins were also impacted by the increased mix of lower-margin transformer sales. The ending Q3 backlog for Industrial was up 9% sequentially and 11% or $37 million over the prior year period. The backlog growth was driven by strong Q3 order volume for power transformers and communication technologies. We're encouraged with the strong demand and extended lead times in the medium-power transformer market. This gives us very good visibility to 2015 revenue, and we continue to focus on optimizing productivity and driving operational improvements in our transformer business. In the medium to long term, we believe the U.S. power transformer market is very attractive. This assessment is supported by several encouraging data points, including the positive economic outlook in the U.S., new home starts and a continued commitment by utilities to upgrade the aged infrastructure in the grid. At our Genfare business, the customers are primarily U.S. cities who rely heavily on federal funding to the U.S. highway bill. As this year has progressed, we've seen several cities delay fare collection orders into next year. As a result, quoting activity and order placement in 2014 have been much lower than the market anticipated. We believe the delays in order placement have been impacted by the timing and availability of government funding, and in some cases, the application process for federal funding has taken longer than anticipated. Although these delays have impacted 2014, they have also increased the pipeline of opportunities for 2015 and '16. Additionally, the revitalization of urban centers and an influx of young professional riders has created a need to upgrade traditional fare collection systems with electronic solutions. In anticipation of this trend, Genfare ramped up its innovation efforts over 1 year ago and is now offering a full suite of integrated e-solutions, including mobile ticketing, cloud-based hosting and point-of-sale delivery systems. We featured this next-generation technology at the recent Transportation Expo and received very positive feedback from the customer base. As a result of the order delays and our innovation efforts, we believe Genfare is very well positioned for growth over the next few years, as customer investment resumes. Moving on now to our fourth quarter and full year expectations. Beginning with revenue, based on the recent currency rates, we are modeling a 2% or $30 million revenue headwind due to currency translation. Organic revenue is expected to grow in the low to mid-single-digits. Segment income is targeted between $173 million and $185 million. This includes a currency headwind of about $3 million to $4 million year-over-year. Margins are expected to improve about 30 points over the prior year, driven again by our Flow segment. Margins at our Industrial segment are expected to decline modestly. We are targeting approximately $7 million of restructuring expense, as we continue to focus on cost-reduction initiatives. The tax rate is estimated to be between 25% and 26%, and we are modeling approximately 41.5 million shares outstanding. Based on these assumptions, our Q4 adjusted EPS guidance range is $2.05 to $2.30 per share. Looking at our updated targets for the full year, beginning with revenue. Compared to our prior targets, currency rate fluctuations decreased our full year revenue target by approximately $60 million or a little more than 1%. Based on recent currency rates, the Q3 revenue and backlog development, we are now targeting revenue to be flat to up 1% across each segment and in total. We have increased our margin target for Flow to about 13.6% or 190 points better than last year. Thermal's margin target is unchanged at just under 6%. And at Industrial, we now expect margins to decline about 150 points to approximately 13.6%. On a consolidated basis, we held our margin target at approximately 11.5%, up 80 points year-over-year. Our updated adjusted EPS guidance is $5.25 to $5.50 per share. This slide shows the midpoint EPS model, which includes our full year estimates for corporate-related items. Note that this model assumes just over 43 million shares outstanding and a 25% tax rate. The tax rate is lower than our previous expectations, due primarily to a shift in the geographic mix of earnings. Specifically, we now expect lower U.S. income as a result of the revised assumptions in our Industrial segment. Moving to the next slide. We also thought it would be helpful to provide a bridge to our prior EPS midpoint guidance to highlight the most significant changes. Beginning with the organic changes to segment income, Flow is now expected to contribute an additional $0.14 to the full year. This is based on the continued improvement in operational performance and favorable sales mix. We expect $0.19 less contribution from the Industrial segment, due primarily to the delayed project timing at the Genfare business. There were also 2 nonorganic items that impacted segment income. Changes to currency rates reduced our segment income target by $0.13 or $8 million. And as a result of the strategic action announced today, we will reclassify our Flash Technologies business as a continuing operation beginning in Q4 2014. With this change, we won't have any businesses left in discontinued operations. Flash is a leading provider of specialty LED tower lighting for aviation safety. It will be reported in the Industrial segment going forward. Note that Flash was not included in the results from continuing operations for the third quarter. For the full year, Flash is targeting just over $40 million in sales and will contribute approximately $0.13 of earnings per share, nearly all of which was earned in the first 9 months. Lastly, the net impact of the lower corporate-driven items, primarily the reduced tax rate, contributed $0.18 to our updated EPS model. As a result of our updated expectations, we have raised the midpoint of our adjusted EPS guidance by $0.13 to $5.38 per share. Our financial position remains healthy and flexible. In the third quarter, we paid an incremental $63 million of taxes related to gains on asset sales and also completed $140 million of share repurchases. From an operational perspective, we generated $78 million of adjusted free cash flow. We ended the quarter with over $500 million of cash on hand and $1.45 billion of total debt. Our gross leverage ratio was approximately 2.5x, and our net leverage was 1.7. In the fourth quarter, we are targeting $155 million to $205 million of adjusted free cash flow, consistent with our segment income target and our historical seasonality. We expect our $500 million share repurchase plan to complete trading in early November. That would put our Q4 share repurchases at about $75 million. And we also plan to pay the remaining taxes on asset sale gains during the quarter, which we estimate to be about $60 million. In summary, the work we've done over the past 12 to 18 months to reduce our debt and pension obligations has put us in a very good financial position to execute the spin transaction. On that note, I'll turn the call back over to Chris to discuss the spin announcement in more detail.

Thanks, Jeremy. We've made significant progress over the last several years, and particularly over the last 12 to 18 months, to simplify and strengthen SPX. And as we announced this morning, after a thorough review of strategic options, the SPX Board of Directors unanimously approved a plan for a tax-free spin of our Flow business into a new stand-alone publicly traded company. The action accelerates our goal of creating a pure-play flow company that will be well positioned as a leading provider of flow technologies across 3 broad end markets. The remainder of SPX, the Future Infrastructure Company, will also be well positioned as a global infrastructure platform with market-leading positions. We believe the spin will provide both companies greater flexibility to focus on and pursue their respective growth strategies, enabling them to create significant value for shareholders, customers and employees. We also believe the execution of this plan will allow investors to distinctly value the unique attributes of each company. This is a significant decision fully supported by our board and management team. We're aligned and ready to move forward with the process and expect to complete this transaction within the next 12 months. SPX has a long history of creating value for its shareholders. As our longtime followers can attest, SPX has undergone a significant transformation over the past 10 to 15 years. We diversified away from our legacy automotive roots and expanded globally into diversified infrastructure markets. Most recently, we've concentrated on expanding our Flow business in attractive end markets and realigned our resources to better serve our global customer base. The SPX transformation continues today with a plan to separate into 2 companies. We believe this move will accelerate our strategic transformation and create value for our shareholders, customers and employees. Over the past decade, we've narrowed the focus of our company and better positioned our business in higher-growth, higher-return markets. Since the end of 2004, we've divested over 20 businesses for gross proceeds of approximately $5 billion at an average EBITDA multiple of over 12x. This has unlocked significant value for our shareholders. Simultaneously, we focused our innovation, product development and acquisition investments on serving market sectors that require highly engineered system solutions, components and aftermarket services. As a result of our transformation, Flow represents about 60% of our revenue and is concentrated in power and energy, food and beverage and industrial flow markets. And our Infrastructure business represents about 40% of our revenue and is concentrated in power, HVAC and specialty infrastructure markets. We believe increased investment in all these secular end markets will be driven by population growth, the expanding middle class and environmental and sustainability efforts benefiting both future companies. Taking a closer look at the profiles for both future companies. The new flow company will include our current Flow segment and the Hydraulic Technologies business currently reported in our Industrial segment. We estimate the 2014 revenue for the new flow company to be just under $3 billion and balanced across the 3 broad end markets. Consistent with the 2014 guidance we presented today and assuming stand-alone costs, we estimate the pro forma EBITDA for the new flow company to be approximately $365 million. Upon completion of the spin, I will serve as the Chairman, President and CEO of the flow company. The Future Infrastructure Company will include our current Thermal segment and the power transformer, Radiodetection, Genfare and communications businesses. The 2014 revenue for the Future Infrastructure Company is expected to be approximately $2 billion, with half of the revenue concentrated in power-related markets and half in HVAC and other infrastructure markets. The pro forma EBITDA for the infrastructure company is estimated at $130 million in 2014. Again, this includes projected stand-alone costs. Mike Mancuso has agreed to serve as the Chairman of the Board. Mike has been a valuable board member of the SPX board since 2005. He has a strong industrial background, having worked at GE for over 20 years and then serving as the CFO at General Dynamics for 13 years before retiring in 2006. Gene Lowe, who currently serves as the President of our Thermal segment, will be the President and CEO of the infrastructure company. He joined SPX in 2008 as Vice President of Business Development for Thermal and was promoted to Global President of Evaporative Cooling in 2010. In Q1 2013, I promoted Gene to President of the Thermal segment, where he has done a remarkable job growing and improving that business, and I'm very confident in his ability to lead the Future Infrastructure Company. Looking more closely at the strength of each future company. The Future Flow Company will be a pure-play flow business that is well positioned in attractive secular growth markets, with a diverse global customer base. It will have a very broad offering of highly engineered components and integrated solutions with well-recognized brands. Flow has a large installed base, which provides a significant opportunity for us to grow our aftermarket presence. One of our top initiatives in Flow's strategy is to increase our customer service capabilities and expand our global service center footprint. Our Flow business has a long history of strong organic and acquisition growth, and as we've integrated the large acquisitions, the team at Flow has done a nice job of significantly improving margins and returns as we built the platform. Going forward, we believe that future Flow margins can expand beyond the 300 points of improvement accomplished over the past 2 years. Flow has a broad offering of highly engineered components and system solutions, many of which can be applied or adapted across all 3 end markets. The breadth of Flow's offering is a competitive advantage that allows us to offer more highly engineered content to customers, particularly on large capital investments that require multiple components, skidded systems or automated solutions. Continuing to increase our relevance with key global customers is a key part of our strategy. Going forward, we intend to further expand our product offering through innovation, new product development and focused acquisitions that add adjacent technologies or fill gaps in our current portfolio. Looking now at the key end-market drivers. We believe future investment across all 3 of these secular markets will be driven by population growth, the expanding middle class and environmental and sustainability efforts. We view food and beverage as the steadiest growth market and have found it to be less cyclical than the energy and industrial markets. Within food and beverage, we have a very strong offering of dairy process technologies and are helping our customers to meet the rising demand for dairy products in Asia Pacific. In power and energy, we participate through the entire oil production cycle and in both conventional and nuclear power. We have relatively strong positions in subsea oil exploration, the North American oil pipeline and nuclear power safety applications. Our growth strategy in power and energy includes building on these strong positions and expanding into attractive adjacent growth markets. Within industrial, the chemical processing market currently represents the largest opportunity for our products, and we're very well positioned for recovery in the mining industry. We also have a strong distribution network in the U.S. where we are well positioned to leverage multiple product lines and benefit from GDP growth. We have a number of strategic initiatives already underway at Flow. Among these initiatives, expanding our aftermarket presence is perhaps the most attractive, lowest-risk opportunity. We're also in the beginning stages of a multiyear initiative to optimize Flow's global footprint, and this includes localizing capabilities in high-growth regions, shifting manufacturing to lower-cost Eastern European locations and building out our aftermarket service center footprint. In addition, we believe there are attractive acquisition opportunities in the Flow industry that complement our strategic initiatives. So in summary, as a stand-alone company, we believe the Future Flow Company will be better positioned to execute its long-term strategy. And now I'll turn the call back over to Jeremy to cover the Future Infrastructure Company and provide more details on the proposed transaction.

Thanks, Chris. The Future Infrastructure Company will be positioned as the leading provider of highly engineered products and solutions into power and infrastructure markets. The majority of the businesses to be included within this company are the technology leaders in their respective markets, and they continue to innovate to maintain that edge. Over the past year, several of these businesses have demonstrated the ability to outgrow market demand and gain share. Future revenue potential for this company will be highly correlated to global power generation investment and U.S. electricity demand and infrastructure spending. Perhaps the most compelling investment factor is the potential for cyclical price recovery in the U.S. power transformer market in the medium term. The Future Infrastructure Company is expected to have just over $2 billion of revenue in 2014, with margins in the high single digits. From an end-market perspective, about 50% of the revenue is power-related, 25% is tied to HVAC and 25% is from sales of specialty infrastructure products. About 60% of the revenue comes from sales in North America, with about 20% in EMEA and 10% in Asia Pacific. The primary products and key brands for the Future Infrastructure Company are shown here by end market. These brands have long, distinguished track records and are well recognized as leaders in their respective markets for innovation, quality and reliability. Looking at the 2014 estimated revenue breakdown by product. It is a diversified mix of highly engineered products, with cooling towers and power transformers accounting for a little more than half the revenue. The offering has a nice balance of long-cycle and short-cycle products. And most of the shorter-cycle products tend to carry higher profit margins, as is often the case in our markets. The core backlog for the Future Infrastructure Company has grown steadily this year, up $144 million or 18% since the end of 2013. This was primarily driven by the commercial initiatives Gene and his team implemented at Thermal, along with strong order volume this year for medium power transformers. About 2/3 of the backlog is scheduled for revenue conversion in 2015, so there is solid revenue visibility in this business. The Future Infrastructure Company is well balanced across a diverse mix of end-market exposures. In power generation, it has leading technologies in thermal heat transfer that are used across a variety of power sources, including combined cycle, coal, nuclear, solar and geothermal. It is very well positioned for recovery of power investments in North America and Europe, where it has a large customer base that values the high quality of our engineering and project management capabilities. In Asia, we have joint ventures with Shanghai Electric in China and Thermax in India to position our technology strategically with well-established local EPCs that are focused on growth in emerging markets. In North America, we're a leading provider of power transformers. As you've seen today, the backlog for this business has grown steadily for several quarters now. Although the current investment cycle has developed slower than past cycles, based on current GDP forecast for ongoing growth in the U.S. economy in the near term, we believe the demand for transformers will continue to grow over the next 3 to 5 years. In the HVAC and specialty markets, we are well positioned with highly engineered product offerings, strong distributor networks and long-term customer relationships. While these businesses are generally niche suppliers concentrated in North America and Europe today, we believe they represent intriguing platforms for strategic and geographic expansion in the future. To echo Chris's comments, we are confident in Gene's ability to drive growth and value for shareholders in the Future Infrastructure Company. His strategic vision, commercial savvy, leadership skills and sense of urgency are just a few of the qualities that we believe will benefit him in his future role as President and CEO of the infrastructure company. Prior to joining SPX, Gene was the Director of Strategic Planning and Corporate Development at Milliken, and before that, he was a strategy consultant at Bain and Lazard. Gene's career background and success with the Thermal group at SPX will translate well into his future role. We think the initiatives he implemented to drive growth and margin improvement in the Thermal business over the past year will also be very effective at the industrial businesses. Through ongoing innovation efforts, continued focus on operational excellence and strategic initiatives, we believe the Future Infrastructure Company will be well positioned to serve its global power and infrastructure customers. Moving on now to the technical details of the planned transaction. We intend to execute the spin by distributing all of the shares of the Future Flow Company to SPX shareholders in the form of a tax-free transaction. The new independent Flow company will be publicly traded and initially owned 100% by SPX shareholders. This transaction will not require shareholder approval. However, it is subject to the effectiveness of the customary SEC Form 10 filing and final approval by the SPX Board of Directors. We expect to complete the transaction in 9 to 12 months. Onetime separation costs are expected to be in the range of $60 million to $80 million. In addition, we are focused on minimizing incremental stand-alone costs. We've done some preliminary analysis on the base tax rate for both companies that we think is directionally helpful for modeling purposes. And based on our initial estimates, we expect both companies to maintain a tax rate consistent with SPX today, in the mid- to high 20% range. Regarding capital structure, we intend for both companies to be well capitalized, with sufficient financial flexibility to pursue future growth opportunities. We expect the leverage ratios and credit ratings of both companies to be relatively consistent with SPX's current financial position. To accomplish this, we plan to refinancing -- or refinance our existing credit facilities. In addition, we will seek a clarifying consent from our current bondholders for the Future Flow Company to assume SPX's bond debt. We intend to maintain the current dividend policy through the effective date of the transaction. Following the spin, we expect both companies to maintain a disciplined approach to capital allocation, focused on the highest return opportunities and consistent with their respective growth strategies. As we move through the process, we'll share more information with you as details are finalized. With that, I'll turn the call back to Chris for closing remarks.

Thanks, Jeremy. So the actions taken over the past 2 years have simplified our organization, they've improved our operational performance and aligned our businesses more closely to our customers. The spin of Flow is a logical next step in the transformation of SPX. We expect it to create value for our shareholders, customers and employees. We firmly believe that both future companies will be well positioned with strong leadership to have success as independent, stand-alone companies. I want to thank our employees across the entire organization for their hard work and dedication to SPX. Your focus on our growth and continuous improvement initiatives have put us in a position to take this important strategic step and continue to pursue sustainable value creation going forward. So with that, we'll open the call for questions.

[Operator Instructions] Our first question will come from the line of Nigel Coe from Morgan Stanley.

Yes. So just a quick question. So just to confirm the pro forma EBITDA numbers for the 2 companies, that includes your best estimate of stand-alone corporate costs for both companies.

That's exactly right, Nigel. We've made an estimate and a division of corporate and stock compensation and pension-based costs that are embedded in those numbers. So they are net of all fully loaded costs.

Okay. Now that's really helpful. And then how do we think about further -- any disposal activities or capital allocation, share repos as you're going through this process?

I think our focus right now, Nigel, obviously, is doing the heavy task at hand to complete all the actions that need to be completed to get the transaction finalized. The large gating issue there, obviously, is going to be the 10 form filing -- the Form 10 filing and the associated audited financials that have to be prepared in connection with that. So we anticipate that, that would be done late Q1, early Q2. So along with that, obviously, a lot of other administrative work to be done in connection with completing the transaction. So our focus between now, the day of announcement, and the effective date of the transaction is doing everything we need to do, first of all, to continue to run our business and meet our commitments, which is a strong message to our team here, but to do all the things we need to do at corporate and with the teams -- the respective team help to get everything done to complete the transaction.

And to clarify, Nigel, that late Q1, early Q2 would be a targeted date for our initial Form 10 filing. And subsequent to that, would go through the SEC review process before effectiveness.

Okay, great. And one quick one before I hand it over. I think your 4Q guide for Flow margins is about 1 point lower than 3Q, and I don't think I've ever seen a 4Q Flow margin lower than 3Q before. So just wondering what's your thinking in terms of mix and what's driving that assumption.

I think the math might be a little off, Nigel. You might want to get with Ryan afterward, but I think it's more consistent with what we saw in Q3, at around the high end of our long-term target range.

Your next question will come from the line of John Baliotti from Janney Capital Markets.

Yes. As you pointed out, Chris, quite an interesting transformation of the company since you took over as CEO. It's gone quite -- gotten very big, and now it's gotten very focused, so it's very interesting. I was -- with regard to Flow, I know you pointed out some of the headwinds with regard to contract sizes and wins, which I think you guys talked about in Milwaukee. But I think one of the positives you pointed out there was that it's a steadier business as a result of that. You've got the better aftermarket. You've got more reach into these. And if you look at this quarter, obviously, the revenues came in a little bit lighter than expected, but the margins were a lot stronger. So all that combined, is there a way to think about, with this new portfolio of Flow, where the profitability -- because obviously, the business gets steadier, the margins seem to have a better tailwind to them.

Yes, sure. And I'll try to speak to that as comprehensively as I can, John. I think what we've said consistently as we built this Flow platform, and particularly, post-APV and post-ClydeUnion, is that the nature of the products and systems that we offer is considerably more complex than it was many years ago, when we were a small niche component player in the Flow industry. And so you could see that -- you've seen that develop in the food and beverage platform over the past several years, where the engineering complexity around these projects has affected the timing of those awards. And as we grew that business real quickly, we then, under Marc's leadership, have kind of -- have taken a more thoughtful approach to the opportunities that we target, much like we have done under Tony's leadership with respect to the oil and gas platform, the power and energy platform and specifically, at ClydeUnion. So there's a couple of things going on. The complexity of the projects that are being awarded are significant, and the engineering time takes a little bit longer. But what's really interesting about that for us -- and the FPSO example that I spoke to in my opening comments is a perfect example of that. It's allowed us to really offer broad product offerings to provide system solutions to customers that we believe, and have always believed as we built this platform, would give us a better competitive advantage, and it has. And that particular project that I've talked about today should be underscored because I think it's a very significant validation of the strategy and I think an indication of what we can expect going forward. With respect to the steadier performance, it's integrating these businesses and then addressing the more complex and broader offering that is interesting, but the careful approach that these teams are taking to those projects is resulting in a higher-quality backlog. And so what we would expect to see going forward is a more evenness, as you described it, in terms of how the business performs, more predictability, with higher-quality opportunities that result in better margin for the company, all of that, obviously, combined with the significant restructuring and organization changes that we've gone through over the last several years. So it's been a lot of heavy lifting. It is still a work in process, and I think, as I said this morning, it will continue to improve. But what we're really excited about with respect to the Flow business is how well it's positioned right now in those broad -- those 3 broad end markets to grow and develop higher-quality business going forward.

Yes. I mean, it seems like the utilization of the entire platform is going to be better because you're selling a little bit of everything. And '15 -- 2015 is set up well because you now -- you've got this sort of headwind of 2013 order size versus '14 behind you.

That's right.

Your next question will come from the line of Mike Halloran from Robert W. Baird. Michael Halloran - Robert W. Baird & Co. Incorporated, Research Division: So first, maybe you could just take a step back and walk us through the thought process behind why you chose this one. What were some of the other options you guys were considering under the strategic review? And then maybe a few reasons why you guys ultimately got rid of some of the other pieces and what was it about this that was so much better than some of the other options.

Sure. It's been a pretty steady march, as you know, Mike, in terms of getting to this point for us. The dispositions that we've successfully effected along the way have been quite significant in terms of putting us in a position to take this step now. So particularly, I mean, if you think of the recent significant dispositions, Service Solutions, our interest in EGS, selling that back to Emerson, all of that resulting in a company that got more and more focused but with a very, very healthy balance sheet. The strategic process is something that is a dynamic process and that we review regularly with our board and have, for as long as I've been in this job, on a very regular basis. And so it's comprehensive in terms of all the opportunities and the strategic choices that we can make, and I think it's a pretty thoughtful process. The point that we got to right now is, I think, a result of all of the businesses being in a very healthy place in terms of the positive momentum and the traction that they're getting and the new management teams coming together in the Flow business, the strength of the company's balance sheet and the ability, at this point, to separate those 2 businesses, very distinct businesses that have distinct growth strategies and opportunities and allow them to pursue those strategies independently. So it was the right point in time, given all those dynamics that I just described, and obviously, the result of a lot of thoughtful discussion on the part of the board and the management team, with great support from our Board of Directors. But we approach this enthusiastically because we thought we had arrived at a point, and believe we have, where it makes really good sense for our shareholders to do this, and we're, frankly, excited about the opportunity. Michael Halloran - Robert W. Baird & Co. Incorporated, Research Division: That makes sense there. And then on the core operations, when you think about the order trajectory on the Flow segment, obviously, for the end markets you guys deal with, having things shift from month to month is not a surprise and seeing the stronger orders in October after a more challenging 3Q is a good thing. But maybe some color on how your energy customers are looking at the world today. Obviously, they're willing to do some fulfillment, and you're seeing some traction with some of your internal initiatives. But what's the messaging you're getting from them relative to the environment and their willingness to go forward with some of these projects and how that pipeline looks?

Yes, you bet. I think it's probably helpful if I can just take some time to try and talk about the various -- and try and stratify the various levels of opportunity within our Flow Power & Energy business because it's quite different. And with the fluctuation and the downward pressure on oil prices, I think there's a lot of concern out there about, well, how does that affect companies like ours. And if I could, I'd like to take you through just what that means for us and how we see it affecting our power and energy business. So getting back again to the FPSO opportunity that I mentioned this morning, there are additional opportunities out there for projects just like that. And we believe those are likely to move forward since many of those deep-sea wells have already been dug, the capital investment has already been made, and those wells need to be productive. With respect to investment in upstream offshore drilling, that likely will be delayed until the market settles and we see where oil prices go. New investment in heavy oil production, as in the Canadian tar sands, that likely will slow as well. Activity in U.S. shale oil, that likely will continue due to the lower operating costs that those producers have. On the midstream pipeline construction opportunities, those could be delayed, but if you think about those permits already having been issued and how difficult it is to get those, there may be good reason and good incentive for those to continue to move forward. And then I think that sustained lower oil prices could actually be an incentive for downstream investment. So if you're thinking about refineries and lower prices stimulating consumer buying, gas prices, lower gas prices and petroleum-based products, that part could actually be stimulated. And then finally, Mike, I would say with respect to the aftermarket activity across all parts of our P&E business, we think that actually should increase because customers are going to be needing to maintain and service existing energy infrastructure. So kind of a mixed bag, but inside that, some pretty significant opportunity yet going forward. And importantly, we think it bodes pretty well for our aftermarket. Michael Halloran - Robert W. Baird & Co. Incorporated, Research Division: That's very helpful. And then last one my side, the fare collection piece. What's the visibility as it stands today? Obviously, these projects keep getting stretched out a little bit. You're now moving them into '15. It's a good business, certainly nice margins for you guys. There's confidence that those are going to be coming back. What's the visibility on timing? And then secondarily, I suspect you think the margins will come back pretty quickly in the Industrial segment as that comes back, but just looking for validation there.

Yes. I mean, the visibility on the front log is great because oftentimes, these projects can take a couple of years to come to fruition from the very beginning communication to final order. The challenge for us, in particular in forecasting, lies with the actual final order and revenue recognition, which, when that final order is placed, actually, we're shipping fairly quickly after that. And that's the challenge in predicting 90-day revenues for us. So as we said in the prepared remarks, what's happened here in Q3 and in Q4, frankly, because we had a similar, albeit less material conversation on our Q2 results -- or after our Q2 results, is challenging for this year. Fortunately, we've been able to hold our earnings for the year due to Flow's margins and a lower tax rate. But it is, as we said, building the pipeline for the coming couple of years. So we'll continue to communicate on it, do our best to forecast when those things are going to be hit -- or going to hit revenue. But it is lumpy for us, and it does move the needle pretty quickly on Flow margins, to your point.

Your next question will come from the line of Julian Mitchell from Credit Suisse. Julian Mitchell - Crédit Suisse AG, Research Division: Firstly, I just wanted to follow up on the orders and backlog trends overall. I think in Q2, the orders were up about 4% year-on-year overall. I just wanted to check what those were year-on-year in Q3 and how you're thinking about Q4 based on the comments about a strong October.

I don't have the exact percentage Q3 year-over-year in front of me in total. Obviously, the Flow orders that we talked about for power and energy in October bode well for a good start for Q4. And the, what we call, fairly imminent food and beverage large orders, those move the needle much more than the short-cycle businesses do because they've been so steady. But as it relates to Thermal and Industrial, with the exception of the Genfare business that we just covered, we see continued steady order trends, which have been pretty positive year-over-year each quarter. Julian Mitchell - Crédit Suisse AG, Research Division: And then you talked about one reason, timing-wise, behind this announcement today is because of the good momentum across the businesses. But if I look at the Future Infrastructure Company, the operating margins this year are about 8%. Last year, they were 9%. Three years ago, they were 10%. So I just wondered if you expect that trend to correct anytime soon.

Yes. We expect it to improve, certainly. And a couple of things that I would point out with respect to infrastructure co. and the businesses that will be in that company. We're in the wind-down phase of South Africa, which, as you know, Julian, has had a pretty negative impact on margins in Thermal. We're about 85% through the manufacturing phase there, encouraged by the first step towards commissioning the first power plant there, which we think is a really important momentum driver to move that. If you look organically at the rest of Thermal, the improvement in the business is, unfortunately, I think, being masked by the South Africa impact. But the restructuring that we've done there, the improvement that Gene has gotten across that business in package -- starting with package cooling and the restructuring improvement that we've done in Balcke-Dürr, the movement to One Cooling are all positive things. We've also had sort of an anomaly year with respect to Genfare, which, as you know, is a higher-margin business, with those projects moving out of 2014, which, we believe, again, bodes very well for 2015 and 2016. They're not going away. They're there. They've just shifted, and those are higher margin. And then we've had this long, extended recovery process in transformers, where we've seen, over the last couple of years, some improvement in pricing, but it's really flatlined and has stayed consistent at lower levels. What we see happening there is, as I mentioned -- or as we mentioned in our remarks this morning, what we see is lead times beginning to extend slightly in the open market, which we view as a positive sign. The order trends in transformers have been quite healthy over the last 2 years, so we think over the medium term, that outlook is good, and we think that business will get better. And any other points that you have there?

Yes. I mean, I'd say, Julian, the other 2 things I'd add, remember, in Q2, we took a pretty large cumulative charge for South Africa related to a cost adjustment, which is driving those margins. That's half the margin decline year-over-year for the Future Infrastructure Company from '13 to '14, which was kind of a onetime catch-up charge. And then we have the $7 million restructuring forecast for Q4. That should be a reminder to everybody that we're continuing to focus on cost and improving margins, and a good chunk of that Q4 restructuring is aimed towards the Thermal group to continue to move margins forward. So definitely get the point, but I think there's actually a lot of momentum to reverse that trend. Julian Mitchell - Crédit Suisse AG, Research Division: And then just a very quick question on Flash Technologies, the reclassification into continuing ops from disc ops. Is that related just to the formalities of the announcement today and ahead of the Form 10? Or is it to do more with potential interest from acquirers?

Essentially, Julian, with the board's decision to move forward with the spin transaction here at the end of October, we've made the decision to pull that business off the market and to hold it to this point. And to Chris's point on an earlier question, we don't intend for additional disposals during the period between this announcement and the effective date. So as a result of the trigger happening this week with board approval of moving forward with the spin, we'll pull that business in the 10-K for 2014 back into continuing operations to the year, which really won't have an impact on Q4 profitability because, as I mentioned, the business really made the vast, vast majority of its profit in the first 9 months of the year. As you can imagine, in the winter period here in Q4, not a lot of people are climbing those towers to change lighting systems.

Your next question will come from the line of Jeff Sprague from Vertical Research.

It's been a long, interesting road. So curious on one point on the spin. Often, you'd kind of expect the smaller asset to be spun, right, and the bigger asset to stay the remain co., and you're doing the opposite here. Is there some strategic or balance sheet reason for that, perhaps, related to contingent liabilities or other factors? Just what's the logic on actually spin being the Flow -- Flow co. being the spin?

Yes. We just -- we looked at, obviously, various approaches. What it came down to, Jeff, is that spinning the Flow business was the most efficient -- most tax-efficient, certainly, way to effect the separation of the 2 companies, and we were able to do it fairly naturally. But it was the -- it was actually the most efficient way to get there.

So there would have been some issue with infrastructure not being tax-efficient to spin that off? I don't quite understand.

Yes. Less as it relates to the actual spin, but more as it relates to how our legal entity structure is around the world. So if you look at our contractual obligations and our legal entity structures, imagine, obviously, to your point, a long and winding road. Flow has really been the last portion of it that's been built. The other pieces that are staying with the infrastructure company, those have been embedded in the legal entity structure globally for a longer period of time and were just more challenging and, frankly, much more costly to unwind out of SPX Corp. So this is the most efficient way. And so, said differently and simply, when I say that the onetime costs are in the $60 million to $80 million range, they would have been significantly higher if we were doing the opposite, as you say, you typically see in the market.

I see. And just on the question on cash, I get it that no more divestitures and probably no M&A either, but you could and should have pretty decent cash flow rolling into next year. Should we expect that just builds up or you'd do some repo along the way? What's the plan there?

At this point in time, I would expect us to focus internally on the capital structure. To my earlier comment, you can only imagine how complex the legal entity structure is and how the cash embedded around the world is there. So what we'll do as we generate cash is probably be conservative with the balance sheet, most likely hold on to that cash and focus on setting both companies free with the best possible balance sheet we can come effective date, sometime in the middle to later part of next year.

Okay, great. And then just one transformer question, and I'll move on. Just getting a little concerned on transformers that we're actually into kind of an extended period of very strong orders and volumes that are probably kind of at or near peak levels without getting price. I mean, what -- I mean, I understand your comments about lead times trying to stretch out a little bit, but how would you actually gauge the likelihood of getting some meaningful price and, therefore, driving some meaningful margin upside in this business as you look forward the next year or 2?

Well, a couple of things with respect to transformers and margins and expectations going forward, Jeff. So some of the challenges that we've had at transformers were, as you might expect, related to the complexity as we ramp up the EHV part of transformer solutions. And that has required some retest and, basically, bottlenecks they create as a result of that, in the factory, which manifests itself in lower revenue as fewer units are able to get out when they're expected to, and then the additional costs associated with the rework and the retest that comes with that. But as we look forward, as you appreciate, it's a long-cycle business. And because the order activity has been so robust, we're booked fairly well into next year, with prices kind of staying at these levels. We're actually in a position where I think we can be more selective and thoughtful about what we do to fill the factories for the balance of 2015. The plants are actually operating pretty efficiently as a result of all the work that Dave Kowalski and his team have done to improve that. And then the engineering redesign work, I think, also has helped us in terms of improving our cost position on the products that we offer. I think going forward, as the business continues to improve and becomes more successful, that's going to be contingent on, in part, on being more successful in terms of getting that new product out there. So there's a lot of good things underway. We're, again, encouraged by what we're seeing recently in terms of lead times in the open market. We think that bodes well. But at the end of the day, all of those things will require us to execute and to operate more efficiently. And we believe that we can and we will and hopefully can use what we're seeing in the open market as momentum to try and turn margins in a more positive direction.

Your next question will come from the line of Nathan Jones from Stifel. Nathan Jones - Stifel, Nicolaus & Company, Incorporated, Research Division: My first question's on the proposed capital structures of the 2 new companies being similar. I wonder if you could discuss your thought processes around that. I would have thought maybe Flow would come out with more of the cash, and infrastructure would come out with more of the debt, given the M&A opportunities in the market.

Well, I think given where the balance sheet is at today, obviously, at third quarter, we're a bit of a peak leverage for the year. With our strong fourth quarter cash flow, it'll come down into the lower 2s, like it was at the end of Q2. I think it makes sense to set both companies up very well. I mean, I don't think we should preclude infrastructure company in the future from the M&A markets. I mean, I think we said in our prepared remarks that there are a number of interesting businesses and niche products in there that we can and likely will build out going forward that really haven't been an M&A or strategic focus like that for us over the last few years, as we've been focused on Flow. And I think going back to that September investor pitch, you can go through those industrial slides that Dave presented and really see some of those stories. And the significant organic growth that's come out of those businesses, I think we can accelerate that there. So from my perspective, that, combined with -- the Thermal business still has requirements, a fairly large bank guarantee requirement, which is something that we need to think about from a rating agency and debt market capacity perspective. It really makes sense to set them out fairly similarly, and I don't think either company will be restrained taking that approach. Nathan Jones - Stifel, Nicolaus & Company, Incorporated, Research Division: Just speaking of that, when do those bank guarantees roll off or the need for them?

Well, it's part of -- it's a natural part of doing business, definitely in Thermal, but also in some of our projects in Flow, the larger projects. It's a rolling process. So you're issuing as you take orders and they roll off -- each quarter, we have some rolling off and some coming in. So it's not something that ever ends. It's just a natural part of those end markets. Nathan Jones - Stifel, Nicolaus & Company, Incorporated, Research Division: I guess I meant specifically around the South Africa projects.

Well, that will depend on commissioning -- when the full plans are finally commissioned, which should happen in the later part of this decade. Nathan Jones - Stifel, Nicolaus & Company, Incorporated, Research Division: Okay. And one follow-up. You talked about some imminent food and beverage project awards. What's the pipeline look like behind those?

Pipeline remains strong, as it has been the last couple of years. There's a lot happening right in our sweet spot around dairy and, more specifically, infant formula, as we talked about in great detail last month in Waukesha, particularly demand out of Asia-Pacific, which is driving investment by our customers, in Asia-Pac, in China, Australia, New Zealand, also in Europe for export of infant formula out into the Asia-Pacific growth markets. So we feel good about it. We think it's going to be a good market for some time. Though obviously, given the size of some of those project awards, $50 million apiece at times, it could skew the backlog in a given quarter fairly dramatically, like it did here in Q3.

Your next question will come from the line of Steve Tusa from JPMorgan. Charles Stephen Tusa - JP Morgan Chase & Co, Research Division: Are there any restrictions on the tax-free status of the spin with regards to potential takeout?

I'm not sure I specifically follow the question. Charles Stephen Tusa - JP Morgan Chase & Co, Research Division: Well, sometimes limitations on the tax-free nature of the spin is hurt by an acquisition within a certain period of time if somebody wanted to come in and buy the stand-alone Flow company.

We don't see any hurdles to closing the tax-free spin, as we've announced today. With regards to anything that might happen in the future, that would have to be analyzed as it was in front of us. Charles Stephen Tusa - JP Morgan Chase & Co, Research Division: Okay. And then most importantly, which company is Ryan going with?

I appreciate that, Steve.

All management to be determined other than the ones we've announced today.

We're bumping up on our time limit here, so we have to conclude the call, and I apologize. We still have several analysts in the queue. As typical, I'll be around all day and make myself available as I can to answer any and all questions. So we appreciate your time. Great day for SPX, very positive day for the company. And with that, we'll end this call. Thank you so much for joining us.