Fluor Corp (FLR) 2002 Q1 法說會逐字稿

This is Premier Conferencing. Please stand by, we're about to begin.

Good day, and welcome to Fluor Corporation's first quarter conference call. Today's call is being recorded by Fluor Corporation and is copyrighted material. It may not be recorded or rebroadcasted without Fluor Corporation's expressed permission. Your participation in our taping implies consent. Please disconnect if you do not agree with these terms.

There will be a replay of today's conference call at 10:00 a.m. Pacific Time today accessible on Fluor's web site at www.fluor.com. A telephone replay may also be available running through 5:00 p.m. Pacific Time on Tuesday May 7 at the following number: 888-203-1112. Again that number is 888-203-1112. The access code of 792182 will be required.

At this time for opening remarks I would like to turn the call over to Lila Churney, vice president of Investor Relations. Please go ahead, Ms. Churney.

Thank you.

Good morning, and welcome to Fluor's first quarter 2002 conference call. Our earnings' announcement was released yesterday after the market close.

Before getting started, I'd like to read our safe harbor statement.

In discussing certain subjects we will be making forward-looking statements regarding projected earnings, market outlook, new awards, margins and the effective strategic initiative. These forward-looking statements reflect our current analysis of existing trends and information and there is an inherent risk that actual results and experience could differ materially. These differences could arise from any number of factors. Information concerning factors that could cause actual results to differ materially from the information that we will give you is available in our Form 10-K filed March 21, 2002 which is available online or upon request.

The information in this conference call related to projections or other forward-looking statements may be relied upon subject to the previous safe harbor statement as of the date of this call and may continue to be used while this call remains in the active portion of the company's web site.

Now I'd like to turn it over to Alan Boeckmann, Fluor's chairman and chief executive officer.

Alan?

Thank you, Lila.

First of all, good morning to everybody, and thank you for joining us today.

This morning we will review results for our first quarter of 2002 which ended March 31, and also our current outlook for the future.

Earnings from continuing operations for the first quarter were $36.2 million or $0.45 per share. This compares with $32.7 million or $0.43 per share, excluding the after-tax impact of stock price-driven compensation expense of $16.2 million or $0.21 per share in the first quarter of last year. Revenues from continuing operations for the first quarter increased 31 percent to $2.5 billion compared with $1.9 billion in 2001. First-quarter performance was in line with our expectations and was consistent with the $0.40 to $0.45 per share guidance that we had provided.

New project awards in this first quarter were $2.6 billion which compared with $2.5 billion one year ago. Backlog grew 14 percent up to $11.6 billion compared to $10.2 billion in the first quarter of last year and sequentially was level with backlog at year-end 2001. This is the fifth quarter in a row where backlog has increased.

Importantly, backlog gross margin was 6.6 percent, up from 6.1 percent last year. This translates to a 24 percent increase in backlog gross margin to $770 million from the $621 million a year ago. We are particularly pleased with this strong advance in backlog gross margin that will benefit earnings in future periods.

Mike Steuert, Fluor's CFO, is going to provide business segment operating results and other financial information to you. However, let me first try to add some color for you beyond just the numbers; in fact, in terms of where we think Fluor is in this current business cycle.

Overall, we believe we are making good progress towards achieving our goal of sustainable long-term earnings growth. Our restructuring efforts over the past two years are now complete and our financial strength is excellent.

Our next generation management is now in place and is highly focused on executing our clear, strategic direction to capitalize on the growing opportunities within our core engineering, procurement, construction, and maintenance markets. Most importantly, we continue to see evidence that we are in the early stages of a long-term capital investment cycle, which is driven by a robust developing global market for oil, gas, and life sciences projects.

We are particularly encouraged by the number of potentially large, complex projects that are in geographically challenging locations. This is an area of traditional for Fluor and where few competitors can match our capabilities and experience. While we are absolutely convinced that these large project opportunities are real, they are also inherently lumpy in terms of when they will actually be released, and therefore contractually booked into backlog. Our conviction stems in part from the fact that we are already working on front-end for a number of these large-scale projects that we expect will transition into multi-year execution programs for Fluor.

The precise timing for these projects is difficult to project, but we expect they will begin to move forward over the next 12 to 24 months. As a consequence, we expect new awards to strengthen in the latter part of this year and continue strong throughout 2003. During that time frame, we also expect an economic recovery to begin that will strengthen activity in certain of our more economically-sensitive markets. In the near term, although power projects remained a strong contributor to first-quarter awards, the slowdown we've been talking about for the last few quarters in this area may result in some softness in the second quarter with new awards possibly below our recent quarter trend.

However, we view this as principally a timing issue, as the market rotates towards the larger international oil and gas projects. We are encouraged about our new award prospects for this year, however, quarterly performance may be uneven, with the second quarter likely to be the low point. Before asking Mike to review the individual segments, let me comment on the operating performance at the consolidated level.

Operating profit for the company in the first quarter was 86.6 million, a decline of 7 percent from 92.5 million of last year. This translates into an operating margin of 3.5 percent, compared to 4.8 percent in the first quarter of a year ago. This modest decline is not unexpected at this point in the cycle, as we move from higher-margin preliminary study work to full project implementation. In essence, margins are lower, but are on a much larger revenue base. Energy and chemical, and federal services, both boasted quarter-to-quarter earnings improvements.

The most significant decline was in the and infrastructure group, which includes our most economically sensitive markets, with modest declines in both global services and power. The decline in the operating profit and margin was primarily do to higher costs related to a few older legacy power projects nearing completion that were booked prior to 2001. This more than offset expected performance on more recent projects awarded under more favorable market conditions. Also contributing to the margin trend was a mixed shift to a larger volume of full engineering, procurement, and construction revenue in this quarter.

Let me make a few comments on our new segment disclosure. As most of you are aware, following completion of our strategic restructuring actions to exit non-core businesses and refocus on our core competencies, we increased our segment disclosure to five operating businesses that reflect our internal realignment.

With this new segmentation, we are now providing as much, if not more, financial disclosure than anyone else in our industry. We believe our increased segment disclosure will help you better understand our business, including the quarter-to-quarter vagaries that are part of a project-driven operation such as Fluor.

In evaluating our performance and projecting future trends, I would encourage you to focus on the consolidated results, recognizing that we employ a portfolio management strategy within the EPCM market to optimize growth, diversify risks, and minimize cyclicality. Our quarterly performance in individual segments is often uneven, is not reflective of the trends in the business because of the nature of revenue and profit recognition, including the timing of incentives on projects. Consequentially, we intend to do our best to provide overall guidance on the year and quarters, but we will not try to forecast individual segments on a quarterly basis.

So with that, let me now turn it over to Mike.

Thank you, Alan.

Starting with our largest segment, energy and chemicals reported operating profit of $32 million in the quarter, an 11 percent increase from $28.8 million a year ago. Revenues grew a strong 44 percent to $787 million from $546 million in the first quarter of 2001, reflecting the backlog growth that occurred over the past 12 months.

Margins declined modestly to the change in mix as revenue growth accelerated. This decline relates to a mixed changed that Alan mentioned earlier. We had a number of front-end studies and preliminary engineering work last year that tends to yield a particularly strong margin. A number of these projects are now moving into full EPC projects, which results in higher volume and higher operating profit, yet lower margins.

Backlog for the group was 5 percent to $3.5 billion from $3.3 billion a year ago, with energy and chemical new awards at $433 million for the quarter compared with $637 million last year. New awards in the quarter included two significant fire rebuilt projects and additional clean-fuel projects. We expect that the market rotation toward increasing activity in oil and gas sector will drive strong backlog growths for energy and chemical segments for the next several years.

Revenues for industrial infrastructure decreased 6 percent in the quarter to $487 million from $518 million a year ago. The segment posting operating profit of $15 million compared to $21.7 million in last year's first quarter. As expected, results were down for a more economically sensitive markets, including manufacturing, consumer and telecommunications. Additionally, earnings for the prior year period benefited from recognition of incentives related to completion of a large transportation project. New awards in the first quarter for the segment were $716 million, up a strong 33 percent from $541 million last year, due to continuing strength in life sciences and a strong quarter for mining.

We had some very good news after the first quarter closed with the selection of a Fluor-led consortium to negotiate a contract for the billion-dollar-plus state highway 130 project in Texas. Fluor holds a 45 percent interest in the consortium and we expect to book our proportionate share of this project in our third quarter. In addition, Fluor was selected by the Transportation Security Administration as one of three companies to design a plan for securing 429 of the nation's airports. This phase one plan development is funded at $9 million with significant potential for Fluor to be selected to help implement the rollout of this plan.

Industrial and infrastructure backlog increased 21 percent to $3.2 billion compared with $2.7 billion in the first quarter of last year. We expect this segment to benefit as we go through this year and beyond from an economic recovery that should help in the general manufacturing area, including microelectronics, as well as in telecommunications and additional strengthening in mining.

Moving to Fluor's power segment, operating profit totaled $13 million compared with $14.5 million in the first quarter of last year. Power revenues more than doubled in the quarter to $741 million from $313 million a year ago.

Profitability for the power segment was impacted by higher costs related to a few older projects nearing completion this year. This is counter to our normal trend of recognizing higher margins as projects near completion as risks are eliminated in a time.

While these few legacy projects reduced the operating margin in the quarter, we expect that increasing revenues and profits on newer projects will significantly improve margins throughout the next the next three quarters, and that our operating margin in power will be up year over year.

As expected, new power project awards declined from the very strong rate of $899 million experienced in the first quarter last year, although at 799 million, the power segment was still a strong contributor to the overall total for new project awards. Backlog for power increased 20 percent, to 2.3 billion from 2 billion a year ago. While new power awards for the year are expected to be down 50 percent compared to last year, our current power backlog continues to be quite firm, with no cancellations.

Moving to global services. Operating profit for the quarter was 21.4 million, down 6 percent from 22.8 million in the first quarter of 2001. On a 15 percent decline in revenues to 279 million compared with 330 million a year ago. The profit decline was principally due to a slowdown in Fluor's operating and maintenance activities following the terrorist attacks last September.

activity has been rebounding as expected, but is still below the level achieved a year ago in the first quarter. Despite this slowdown, which we believe is temporary, we continue to view the O and M market as a steady growth counter-cyclical business and expect it to be up year over year.

New awards increased a healthy 39 percent to 615 million, from 441 million in the first quarter of last year. First quarter new awards tend to benefit from contract renewals and this quarter is typical in that regard. Global services backlog increased 16 percent to 2.1 billion, from 1.8 billion a year ago.

Moving to our last segment, government services increased its operating profit by 12 percent to 5.3 million from 4.7 million the first quarter of last year. This was on a 7 percent increase in quarterly revenues with 213 million compared to 199 million a year ago. New awards as government services business vary significantly on a quarterly basis, typically concentrating in third quarter this year when our two major projects receive annual funding.

This was the case in the first quarter, with new awards of 15 million compared to 16 million in 2001. We are extremely pleased with the recent award to provide construction services for the US ground-based mid-course missile defense test bed facilities. The 3-year contract has the potential value of up to 325 million. We expect to book 160 million of this in the second quarter.

The contract for the US Army Corps of Engineers represents a significant success in achieving our strategic priority to broaden our participation in the federal services marketplace. Government services backlog was 436 million, level with last year.

Let me shift to the balance sheet and other aspects of our financial performance. Free cash flow for the quarter totaled approximately $120 million. Capital expenditures for the quarter were 23 million, including 2.4 million for at work with depreciation and amortization at 19 million.

The outlook for capital spending in 2002 is approximately $100 million with depreciation-amortization of 80 million expected for the year. Total debt decreased 15 million from year-end 2001 while cash and marketable securities increased by 101 million. As a result, the financial position, and capital structure of the company continues to be very strong with debt-to-total-capital at 4.4 percent.

Turning to the income statements, corporate for quarter was 33.5 million, compared to 62.8 million last year, which includes 25 million of thought-price-driven competition expense. Knowledge-at-work costs on the quarter 10.9 million, compared to 8.7 million a year ago. The company generated net interest income of $530,000 in the quarter compared with net interest expense of $7.4 million a year ago, primarily due to Fluor's strong position and minimal debt.

The tax rate for continuing earnings for the quarter was 32.5 percent, consistent with our outlook for the year. We continue to make good progress in exiting the businesses that we discontinued last year. During the quarter we completed the sale of our S&R equipment leasing business. We expect to complete all the remaining transactions by year-end and well within the parameters of the financial position that was established last fall.

Now I would like to turn it back to Alan to review our current earnings' outlook and for closing remarks.

First, let me address the outlook for operating results throughout 2002.

We remain convinced that we are particularly well positioned, as I said, for growing opportunities in strengthening oil, gas and life sciences markets. Importantly, though, this market does play to our strengths with significant investment being directed to large international projects where we have few competitors.

We are optimistic about our business prospects and we believe that this robust market outlook, along with the beginning of a recovery in certain economically sensitive markets, offers significant growth potential. Despite the potential for uneven quarterly performance, particularly in new awards, we are reconfronting our current earnings guidance for 2002 of approximately $2.10 per share which is consistent with the current analyst consensus estimate. Our outlook for second-quarter earnings is approximately $0.50 per share, also in line with consensus estimates.

Now let's move to the dialogue portion and open it up for your questions.

Thank you.

Today's question and answer session will be conducted electronically. If you would like to ask a question, please press star-1 on your telephone keypad. We'll take as many questions as time permits and we'll take them in the order that you signal us. We ask that each participant limits itself to one question and one follow-up question. Again, that is star-1 if you would like to ask a question.

We'll take our first question today from Donald Zwyer with Lehman Brothers.

Good morning, Alan, Mike, Lila. Don Zwyer at Lehman.

Good morning, Don.

The drop in operating margin was partly due to some of the energy and chemical projects that are now moving to the project execution phase. Does this trend continue in this segment? And is a similar thing happening going forward in other segments?

Don, I think that trend is probably more evident in the energy and chemical side, and I think there will be some slight continuation of that. But keep in mind, as these projects turn into real backlog, it'll be operating off of a higher revenue base. And so, we do expect earnings to continue to rise as a result.

And follow-up; is the operating and maintenance service business profitable in this last quarter?

Yes, absolutely.

Yes, definitely.

It was profitable, yes.

OK. Thank you.

Moving along with our next question from with Bear Stearns.

Good morning everyone.

Good morning, Mike.

Mike, could you talk about the difference between the core cash flow of the company in the quarter for the year-end, and some of the noncore stuff with acid sales and utilization of the cash on hand for power projects?

Sure.

As I said, cash flow for the quarter was about $120 million. Of that, approximately $40 million was due to the acid sales; the rest was core. We continue to feel that our core cash flow for the year will be between $100 and $150 million, and I would expect that we hopefully could double what we had in the first quarter in terms of total acid sales for the year, perhaps in the $80 million range.

Terrific. And my follow-up for Alan. Could you give a little bit more color on the few legacy projects that contributed to the lower margins that had been anticipated in the quarter? Were they different types of contracts? What environment led to those issues? How comfortable can we feel that those are being addressed by the operational joint venture level given, again, some of the issues we've seen in power over the last few years at Fluor?

Yes, Mike, let me address that.

Not quite two years ago we embarked on a rather strict regovernance of that joint venture; went in and did an audit of cross projects, changed the approval levels and instituted a quarterly review of all projects, including a higher selectivity bar, if you will, that had to be cleared before we would pursue projects. That has worked really well for us, these three projects that have, that I would call legacy projects, were ones that were signed prior to that time with not the same protections in contract and/or contingencies in our estimate.

So yes, I think to answer your question, although we don't like to have projects that cost us more than what they've been originally estimated, we have strong backlog and this pretty well cleans the slate. And in fact these were not material in any regard, so we do have a very positive cap forward in the power market for the remainder of the year, expecting that in fact we'll be up year-over-year in terms of the outlook for the power market.

And now would you-does mean that you had-that you were going to book for performance that didn't get booked, or is it just that you didn't take enough contingency on the margin.

These are projects that are coming to a close, Mike, and so there's more of a contingency issue and-you know, just general liabilities. So it-I think we've now got them behind us, we were profitable for the quarter, and I think we're looking for much stronger results now as we go through what is a much stronger and robust backlog for power.

Mike, Lila, thank you.

Next we'll hear from Merrill Lynch's

van carp: Good morning gentlemen. Let me follow up first on Mike's question, could you give us some idea, to whatever detail you want to say, the magnitude of the losses on these three jobs. I mean-it must have been-or losses or lack of profit, for three jobs to offset all the rest of the power work. Could you give us some idea of that?

Well, let's not use the word losses, Mike. I don't want to get into detail on individual projects. I think these had higher costs than the typical compliment of backlog in the rest of the projects. We have sixteen projects that are completing in this year, and there were three of them that had higher costs if you compare against the parameters of cost per megawatt than the ones that were going to be completed throughout the rest of the year.

van carp: So, I'm sorry, you have sixteen that are currently under construction.

Currently under construction, scheduled for commercial operation in this year.

van carp: Okay, and one other question on the distancing operations you sold S and R equipment. How much of-if you look at the portfolio of the dealerships, how much has been sold, how much, percent-wise, did S and R represent? How much is still there? Could you give us some color on that, please?

We have five dealerships, we've sold two of them so far. We're in the process of liquidating the third largest dealership and the other two are remaining for sale, which we expect to complete this year. In terms of proceeds, the combination of the two sales, plus the proceeds from liquidating the assets of our third dealership, represent the lion's share of what expect in proceeds from this transaction. That's why I indicated that perhaps between the four of the remaining dealerships and this temporary staffing business, that we could perhaps realize another 40 million in share perks.

van carp: Okay, and did you say that you expect to sell the temporary staffing business this year? That's included in the additional 40 million?

That's correct, yes.

van carp: Okay, thank you very much.

Next we'll hear from from Palmsmith Vine, Inc.

Yes, good morning. I was just curious with the violence, basically, in the Middle East. Has that caused any of your customers to delay, or maybe even cancel, any projects you have there?

No, it has not. First of all, we don't have any projects that are in-anywhere near where the conflict is occurring. Our projects are typically in the-Saudi Arabia, Kuwait, and the Arab Emirates in the mid-East. And those projects are continuing forward, albeit on a couple of them they're very large projects and so they're kind of-they're painstaking in terms of the negotiation and the deliberations before funding. But the momentum is still going forward on all of those programs.

Okay, great, thank you.

Thank you. Next we'll take a question from with .

Good morning. First of all, a compliment on the disclosure and the level of detail, and I admire your comment about looking at the total, but you know us. Just two questions on clarifications. One is, with regard to the power projects, you don't want to give the details, that's fine. But I guess-what I'm trying to understand, I think what we're all trying to understand, were the weaker than expected results of the power project expected? In other words, did you know a year ago that these things were going to be a problem or that this -- you know, that the concern is not on any project, the concern is, you know, the visibility that you guys had on it -- did you know that you were going to have a lower profitability here or was this a surprise?

The first quarter performance really wasn't a surprise for us. You know, we were pretty much right on plan. We knew, as we were going through last year and into the quarter, that these margins on these projects were below our typical margin for the segment. And certainly we expect typical margins for the segment to be much more comparable to what we had in the first quarter of last year or, perhaps, even a little higher.

Going forward?

Right. So this was really not a surprise for us.

And, John, I appreciate your comment there. But we do -- with this increased visibility and transparency, there are going to be, based on the nature of this business, quarter-to-quarter differences based on results either of timing of projects or award of incentives, release of contingencies. And we'll try to explain those as best we can. But it is going to be -- and I've used the word lumpy in the past, and I think that's going to continue to be the case.

No. I fully appreciate, understand that. And I was just trying to understand whether or not, A, you expected this and, B, it's over. If I understand what Mike said, A, you did expect it and, B, it is over, in terms of the impact of those three projects.

I would agree with both of those. And, in fact, we did get our earnings expectation for the quarter.

And then, my follow-up question is, again, can we just come back to the industrial and infrastructure, $15 million versus $21.7. There is an economic sensitivity, absolutely understand that perfectly. There was an incentive last year, in order of magnitude, are we talking about the incentive being $2 or $3 million or -- in other words, your earnings are down almost $7 million -- was the incentive last year $2 or $3 million or was it just a much smaller number and just something that you mentioned, but it was really, you know, the economic impact was greater? Just in order of magnitude.

There was a significant portion of a difference in profitability.

Over half of the difference in profitability?

Yes.

OK. Thank you very much.

from with DA Davidson.

Good morning. Couple of things. First of all, just on the balance sheet, can you give us a sense of what receivables look like, especially net of advanced bookings progress?

, hold on one second. Mike is turning to that page.

Our receivables are approximately $560 million at the end of the quarter. That is essentially unchanged from year end.

OK. And there are significant advance payments, change?

No, they're not.

OK.

Unlike the prior quarters, the cash flow this year was from kind of typical operations, as well as the asset sale. There is no significant increase in advances for . That was not the source of our cash flow this quarter, as it was a significant contribuytor last year.

OK. That's exactly what I was looking at. And then, secondly, Alan, you mentioned some of the large, especially oil and gas global sciences projects, that are out there, and I know you can't talk about specific projects. But could you give us a little bit more of a sense of the type of work that you're looking at, are these mega projects, new field development gas projects, pipelines, something...

Let me see if I can give you a sense of how that market is made up. It is very strongly tipped in favor of what I call upstream oil and gas development project's production. It's typically on-shore and offshore, good split between the two. They're large programs.

They're in the billions of dollars. We are joint ventured on some of them, but in every one of the cases, I'd say in about three-fourths of the cases we are involved on the front-end of htose efforts. And it's approximately good broad spectrum of geography.

It's centered in the Mideast in the former Soviet Union, offshore Western Africa and in China. So it's a pretty broad front: these projects are all what I call strategic. That is, that they are aimed at further development of reserves and into production.

They are heavily gas-driven as well as oil field, so it's a good broad mix and that's what gives me the optimism these are going forward, because they're not sensitive to today's oil prices. They're really focusing on three to seven years out.

Great, and you expect we may see the first as soon as the third or fourth quarter or so?

I would expect the first of these for Fluor to come towards the end of this year.

Great. Thank you.

And as a reminder, press *-1 on your touchtone telephone if you'd like to ask a question. We'll now take a follow up question from Donald Zwyer with Lehman Brothers.

Hello, it's Don Zwyer. The $673 million cash on the balance sheet -- how much of that roughly is progress payments that will be used over the next couple of years, and how much of that is really your permanent cash?

That's not an easy question to answer, Don. Our advances from our clients both for Fluor and Duke/Fluor total about a billion dollars. So you could say that all of that will be used for advances on those projects, but we will always have project advances at some significant level.

We expect that cash number to decline relative to Duke/Fluor Daniel advances as we work off our backlog this year. But we do expect to end at the year still with a very healthy cash balance. If you had to split it and say, well, normally what we're going to retain long-term of what we have right now, excluding what we're going to generate in the future, I would say it's probably 50/50 mix.

So over the long term, you'll always have a sizable cash balance although a big portion of it comes from advance payments.

Over the long term, we should always have a material level of advances from our clients although that will cycle. I would say right now it's pretty much at a peak, due to the fact that our backlog and power is pretty much at a peak. That will cycle down as power is worked off, but we expect always to be several hundred million of advances from clients on our projects.

Certainly perhaps not at the $1 billion level that we have right now, but perhaps half of that on a steady basis. That certainly should be complemented in the future by more core cash-flow generations we talked about.

Great. , Mike. Thank you.

And we'll take our next follow-up question from Chris Van Carp with Merrill Lynch.

van carp: Hi guys. I was going to ask about the projects, and that's already been answered but -- could you maybe just to follow up -- I will ask you if you can to mention some specific ones. I mean, in the past, you have mentioned some specific projects, and has that group of projects changed in terms of what you're looking as being the more near-term possibilities?

I mean, maybe the Saudi gas concessions are no longer on the sort of front end of that list, but maybe some different ones are. Could you give us some help with that, please?

Fritz, I'd love to be able to help you there. I would say that it pretty much stays the same. I do believe -- you mentioned the Saudi gas initiatives. Clearly, you can the press on the negotiations that are ongoing there. I think clearly there is a lot of negotiating room and posturing being done even through the press with respect to the parties there.

But there's a significant motive on both parts for that project to go forward, not withstanding the current differences. So I think it may have moved out a quarter in my expectations, but it's still in the mix.

van carp: OK. Well, maybe I'll ask you a question you can -- you're allowed to answer more. How do you -- on the power business, how do you feel about -- I mean, how much better are the margins on the new contracts, the ones that maybe we would start to see more of going forward? I mean, can you help us understand the order ?

Yes, they are much better. Not only the margins better. Our liability terms around those contracts are significantly better. As you know, we've been working on, over the last couple of years, our change control processes, and our overall governance. So I expect that our margins on the power to be up year-to-year, not withstanding our first quarter challenge.

van carp: OK. Thanks very much, guys.

One last comment, when you asked an earlier question about the number of projects. Alan talked about three of the 16 that impacted our margins in the first quarter, but those are only 16 we're completing this year. In total, we have approximately 30 projects we're working on.

That's a good point, Mike. The 16 I did quote, Fritz, were those we're completing in this year. We obviously have some projects that we're completing in both '03 and '04.

And we'll take our next question from with CS First Boston.

Yes, I just want to get a clarification of your guidance in terms of the second quarter. Your orders have been running about $2.5 billion or a little higher per quarter. was almost 800 million this quarter. If we take that out -- in other words, if power drops to zero, we're talking about a billion-eight. Obviously, it doesn't drop to zero; obviously, there's some offsets. But you're, obviously, signaling very strongly to lookout for a down quarter, and I guess -- can you give us an order of magnitude? Is it still going to start with a two or are we going to drop into the ones? What kind of a range are you signaling when we're saying it's going to be, you know, a much lower second quarter?

, this is a tough one to predict because these things can move across boundaries from one quarter to the next, as you know. I guess what I was trying to signal is that it will be -- of our four quarters, it will be the lightest quarter when we look at the timing of potential prospects and releases.

What it actually turns out to be is going to be hard to guess. But I would say it's going to be somewhere in the two range.

It could be border line...

Yes, it could be border line, too. That's what my expectations are. I think the actual total year booking will be equal or better than last year.

Equal or better than last year, even with the weaker second quarter.

Correct.

OK. And then, as a follow-up, let me try a different way -- and remember, you guys brought it up, not us -- one of the things that you talked about a couple of years ago, which I thought was an extremely meaningful data point, you talked about the dummy-ing up the front-end work of what you were doing, and then you kind of got away from that. But then one of the points, Alan, you made was about all of the front-end work that you are doing on these projects.

Right.

And I guess the question I would have is understanding -- put any kind of caveat you want on it -- but just to give us some idea of the order of magnitude of what you're looking at. In other words, can you give us some idea of where the dummied-up value of the front-end work that you're doing or the new front-end work that you're doing? I mean, just some order of magnitude to suggest, are we looking that in two years we should be looking at a two and a half, 2.6 billion quarterly rate or three and a half or four and a half billion quarterly order rate?

, as you know, I hesitate to give numbers on a quarterly basis simply because of the volatility quarter-to-quarter.

But that's why -- OK. Then you can take it anyway you want it, yes, but...

I think the projects that we are doing front-end on still are rather significant on their total installed cost. None of them have gone away. Some timing has changed in some of them slightly quarter-to-quarter, but we aren't looking at really a different market than what we've been talking about for the last year. And so, I would expect that if we look at this year, we'll probably be right around -- in a total backlog around 12 billion towards the end of this year, somewhere in that neighborhood.

Right.

And I think we could go up in succeeding years up into the $14 or $15 billion on just an organic basis, given what we're looking at for these projects.

OK. That's helpful. Thank you.

And at this time there appears to be no further questions on the queue. I would like to now turn the call over to Mr. Boeckmann. Please go ahead.

Thank you very much.

Well, first of all, thank you all for your interest and your questions today. As we close this conference, what I'd like to point out that we really have made significant progress in our diversification of our backlog with strong orders, both in the government and in the industrial side.

If you combine that with our company's strong financial position and the moves that we've made to shed our non-core assets and businesses, we're putting together what, I think, is a very positive trend on backlog contributing a positive outlook for the corporation. And we look forward to being able to share our progress with you quarter-to-quarter.

So thank you, again, for your attendance and your attention today and for the confidence that you've shown in our company.

And that concludes today's teleconference. We thank you for your participation.