Fluor Corp (FLR) 2009 Q2 法說會逐字稿

Good afternoon, ladies and gentlemen, and welcome to the Fluor Corporation second quarter 2009 conference call. Today's call is being recorded. At this time, all participants are in a listen-only mode. A question and answer session will follow management's presentation. A replay of today's conference call will be available approximately at 8:30 Eastern time today, accessible on Fleur's website at www.fleur.com. The Web replay will be available for 30 days. A telephone replay will also be available through 8:30 Eastern time on August 16th at the following telephone number. That number is 888-203-1112. Passcode of 2913140 will be required. At this time for opening remarks, I would like to turn the conference over to Mr. Ken Lockwood, Vice President of Investor Relations. Please go ahead, Mr. Lockwood.

Thank you, operator. Welcome everyone to Fleur's second quarter 2009 conference call. With us today are Alan Boeckmann, Fleur's Chairman and CEO; and Mike Steuert, Fleur's Chief Financial Officer. Our earnings announcement and 10-Q were released this afternoon after the market closed. We have posted a slide presentation on our website, which we will reference while making our prepared remarks.

Before getting started, I would like to refer you to our Safe Harbor note regarding forward-looking statements, which is summarized on slide two. During today's call and slide presentation, we will be making forward-looking statements which reflect our current analysis of existing trends and information, and there is an inherent risk that actual results and experience could differ materially. You could find a discussion of those risk factors in our 10-K which was filed on February 25th, 2009. During this call, we will discuss certain nonGAAP financial measures. Reconciliation of these amounts with the comparable GAAP measures are reflected in our earnings release and are posted on our website at investor.fluor.com.

With that, I'll turn our call over to Alan Boeckmann, Fleur's Chairman and CEO.

Thanks, Ken. Well, good afternoon, everybody, and I want to thank you for joining us. Today we'll be reviewing our results for the second quarter and providing an update on our current business outlook along with guidance for 2009.

I'm going to start off by covering the highlights of our financial performance for last quarter. You will see those on slide three. The second quarter was a very solid one for us. Net earnings attributable to Fluor for the second quarter were $169 million compared to $208 million during the same period last year, and that period included a pre tax gain of $79 million from the sale of our equity interest in the Greater Gabbard wind project. Earnings per diluted share were $0.93 for this quarter, and that compares with $1.12 for the year ago quarter, and as I said, that did include on an apples to apples basis a $0.27 per share gain on that wind farm transaction. Segment profit for this quarter was $309 million compared with $392 million in the second quarter of 2008. Both the oil and gas and government segments had good profit growth over last year. Segment profit margin overall rose to 5.8%, compared with 5.4% a year ago when you normalize 2008 to exclude the Greater Gabbard gain. Revenue declined 8% to $5.3 billion. That is down from $5.8 billion in the second quarter of 2008, driven by decreases in the oil and gas, global services, and power segments.

Now moving to slide four, Fluor's focus on near term prospects and its diversified end markets have once again allowed us to record substantial new bookings in a very challenging economic environment. Project awards for the second quarter were $6.8 billion compared with $6.4 billion in new awards a year ago. This quarter included $2.9 billion in oil and gas awards, $2.2 billion in industrial and infrastructure awards, and $866 million in government awards. After the end of the second quarter, our government group was notified that it had won the LOGCAP IV competition for northern Afghanistan. I have to say, this was a tremendous win for us, and the program has the potential to be a very significant one for Fluor, with a total contract value of potentially more than $7 billion over five years.

Consolidated backlog at the end of the second quarter was $30.9 billion. That's up $1.8 billion sequentially from $29.1 billion in the last quarter, but it was down 6% from a year ago, primarily due to cancellations and scope reductions in oil and gas projects during our first quarter. We had no material cancellations during the second quarter. With regard to our markets and prospects, it obviously varies by business line. But in general, our clients continue to express uncertainty about CapEx plans, and as a result, we do expect to see variability in the volume of new awards going forward.

Let's talk a little bit about the markets that are represented in each of our segments. I'll start with our largest market, oil and gas, and ask you to turn to slide five. This segment had a relatively strong quarter from an awards perspective. As expected, over 80% of the new awards were for international projects. But the largest award for upstream work on Imperial Oil's new oil sands development in Canada. In downstream, while the US market has slowed considerably as we expected, we do continue to target international opportunities, which we think are developing over time. In petrochemicals, there are a few large prospects in the Middle East and in Asia, and in this quarter we booked additional scope at the Saudi Kayan Petrochemical Facility. Finally, in upstream, we continue to see client budgets shift toward expansion of oil and gas production.

As most of you will know by now, we bid the Habshan 5 program, but in fact we lost to a competitor who bid a substantially lower price. We will continue to pursue large projects on a selected basis where we believe we have a competitive advantage and an effective strategy to win that includes adequate risk protection. Fluor recently won a nice feed contract for Santos for the preparation of an execution plan and a cost estimate for the engineering procurement and construction of the upstream facilities required to deliver coal seam gas from Santos-operated coal seam fields in central Queensland to a proposed liquefaction facility to be located at Gladstone. We have also announced the formation of a consortium with Global Industries to pursue offshore projects in the Middle East and North Africa. The combination of Global Industries with Fluor's offshore solutions business will allow us to offer a full service model to our offshore clients.

As I move on to power on slide six, this market remains relatively lackluster, given reduced demands and a lack of clear US policy. In natural gas, we booked a fire rebuild project to repair a gas fired plant in Italy, and we're tracking various gas prospects in the US and Europe. In nuclear, we continued our support Toshiba on NRG's South Texas project, which will be one of the first plants to receive a COL and to participate in DOE's loan guarantee program. New coal projects continue to be rare, but we did receive a limited notice to proceed for a 960 megawatt coal plant for the Tenaska Trailblazer project. This is an interesting project in that they plan to include carbon capture and sequestration in the plant design, and a key part of our scope is to select the technology to achieve this.

On the environmental betterment side, we were selected to conduct feed work for a nitrogen oxide reduction project at Fiddler's Ferry Power Station in England. Fleur is currently performing preliminary engineering and construction planning services for selective catalytic reduction of emissions at Scottish & Southern's four unit coal fired power plant, as well as providing client technical support and project cost estimation.

In industrial and infrastructure, our backlog grew again this quarter with the award of a large mining project. We also see additional mining opportunities that will close during 2009. This is certainly an area when our diversification is bearing tremendous fruit when other markets are pulling back. In infrastructure, we continue to focus on select road and rail opportunities in the US and Europe, mainly those that are conducive to a PPP model structure or a design built advantage that we have. As always, these prospects require long development periods and often require financing. The next big project in the Q is the I-95/395 interchange in Virginia, which appears to be moving out in 2010. We recently submitted a proposal on a midsize road project in Texas, and we expect to have the client make that decision in the third quarter of 2009.

Moving to the government segment on slide seven, this group is having a very strong year. During the quarter, the group recorded over $800 million in new [orders], including approximately $600 million at Savannah River from the American Recovery and Reinvestment Act, or ARRA. This is stimulus funding, and $160 million for LOGCAP task orders were also booked in the quarter. On the LOGCAP IV award in north Afghanistan, we are working with the Army to develop a transition plan which will likely span over the next 90 days and will give us more visibility into how work under this contract will roll out and on what schedule. New awards will be recognized as the specific task orders are incrementally approved and funded.

Our global services segment is unfortunately seeing some fairly significant weakness in the operations and maintenance portion of its business. Our customers are deferring scheduled maintenance and discretionary spending to a greater extent than we anticipated. While we believe that long term contracts will sustain this segment at its current levels, we do not expect results in the segment to pick up materially until the broader economy improves.

In summary, Fluor had a good solid quarter with strong EPS, a substantial $6.8 billion in new project awards, and maintained a significant backlog. So with that, let me turn the call over to Mike Steuert to review additional details on our operating performance and other financial information. Mike?

Thank you, Alan, and good afternoon. First, let me provide you with a brief recap of the results for each operating segment.

Please turn to slide eight of the presentation. Fluor Corporation's oil and gas segment reported second quarter revenue of $3 billion, which is down 9% from a year ago. Segment operating profit increased 7% over 2008 to $181 million. New awards in the second quarter were $2.9 billion, including the $1.3 billion award for the Kearl Oil Sands project in Canada and a sizable petrochemical award in the Middle East. This brought ending backlog to $15.8 billion.

Moving on to slide number nine, Fluor's industrial and infrastructure segment reported revenue of $998 million, which was 9% higher than a year ago. Segment profit was $34 million, down from the $121 million reported a year ago when we recorded the $79 million gain on the sale of our stake in the Greater Gabbard project. Segment performance for the quarter was impacted by lower margins on certain projects due to a higher content of construction activity. Segment new awards were $2.2 billion for the quarter compared with $2.4 billion a year ago. Backlog at the end of the quarter was $9.8 billion, a 38% increase from a year ago.

Revenue for the government segment was $479 million for the second quarter compared to $300 million a year ago. Segment profit was $34 million, up threefold from $11 million a year ago. Improved results in the quarter were primarily due to contributions from LOGCAP task orders, FEMA task orders, and the favorable outcome of the claim related to the completed project in Afghanistan. New awards for the quarter totaled $866 million and ending backlog rose to $974 million, a substantial increase on the backlog of $316 million a year ago.

Now moving on to slide number 10. The global services segment reported a 35% decline in revenue to $452 million. As Al indicated, this decline was a continuation of what we started to see late last year, with lower levels of small cap projects and delays in turnaround and shutdown activities. Segment profit for the quarter was $34 million compared to $66 million a year ago. New awards were $533 million for the quarter, with backlog declining modestly at $2.6 billion from $2.7 billion a year ago.

Fluor's power segment reported revenue of $335 million, a decline from $522 million second quarter 2008 as our large coal-fired projects in Texas progressed closer to completion. Segment profit was $27 million, up from $25 million a year ago. Segment profit and margin improved due to favorable achievement on milestones on certain projects and a greater mix of higher margin engineering on front end projects. New awards were $192 million and backlog for the segment was $1.8 billion compared with $1.9 billion a year ago. Again as Alan mentioned, Fluor's consolidated backlog at quarter end rose to $30.9 billion. About 76% of this total backlog value was cost reimbursable, with about 59% of the total backlog comprised of non US projects.

Now let me turn to corporate items on slide 11. G&A expense for the quarter declined to $42 million from $62 million in the second quarter in 2008. This improvement was primarily due to lower compensation expense and the impact of our cost reduction efforts. For the year, we continue to expect G&A to be in the range of $180 million to $200 million. We had net interest income of $3 million for the quarter, down significantly from $12 million in the second quarter of last year. This decline is mainly the result of lower rates of return on invested cash securities, as our focus remains on preservation of capital. Tax rate for the quarter was 37% as expected.

Shifting to the balance sheet, cash plus current and non current marketable securities totaled $2.3 billion at the end of June, which compares with $2.4 billion a year ago. We declared a normal quarterly dividend of $0.125 per share, which is payable on October 2nd, 2009. Our debt to total capital ratio was a modest 4%, down from 11% reported a year ago. Capital expenditures for the quarter were $121 million, down slightly from $127 million last year, with a majority of these expenditures attributable to our continued investment in our equipment services business.

Overall, Fluor Corporation's financial position remains extremely strong with minimal leverage, substantial liquidity, and good access to capital based on our solid A rating. On slide number 12, with regard to our outlook for this year, given the strength of our result to date, the company is maintaining its earlier 2009 earnings per share guidance as the range of $3.80 to $4.10 per share. With that, Alan and I will be happy to response to questions.

(Operator Instructions). We'll take our first question from Andrew Kaplowitz with Barclays Capital.

Good evening.

Good afternoon.

So one thing that is noticeable is that despite your revenues coming down over the last quarter, your margins really haven't. So I know that some of this is looking at backlog that was booked last year, but some of it isn't. You mentioned things like global services weakening a bit, but the margins are still pretty good. The question is as we go forward here, what kind of pricing pressure are you actually facing? Maybe it is a little less acute than you thought. And where do you go from here on margins?

You have to again look at the segments of our markets to answer that question. I think in general, everybody is seeing more pricing pressure. But where it really shows up is in the lump sum bids as evidenced by our recent experience on the Habshan 5 proposal. Where we're doing program management, where we're doing front end feed work, where we're doing an overall EPC on a reimbursable cost basis, we just haven't seen that much of a degradation in our margins. Global services still is maintaining good margins, just the revenue is down. So I think we're going to continue to stay at good healthy margin levels. We're going to be very careful about getting into the lump sum game. That was a pretty surprising result on the Habshan 5 bid.

Maybe I could ask it this way. Could you still book the oil and gas business the way you like it and maintain margins that are close to where we are now?

Again, it depends on the scope. Andy, if you have a lump sum bid for an EPC of a process unit, that scenario I think is where margins are definitely going to suffer. If you're on a sole source award from feed to EPC, I don't think we'll see that much of a degradation. There it's usually a preference for either technology experience or the project team or in more of an alliance setting with our clients.

So Alan, I feel like I ask you this every quarter. But I'm going to ask you again, you talk about the lumpiness of the backlog and you expect it to be more lumpy going forward. But can you -- the backlog obviously were good in the quarter, the new awards were very good in the quarter. Can we see backlog sustain itself at close these levels for the rest of the year?

I think we can. I am going to revert to my lumpiness comment, because we just don't know. We did have one project cross over into this quarter that we thought would be a third quarter award. I think three months ago we were signaling that we would actually have a down second quarter. So they do move. This happened to move in the right direction. I don't see any what I would call real elephant projects in the upcoming quarters, but I see a significant number of fair sized projects that will hold us in good stead.

Got you, so without Habshan, you could still come close to where we are in backlog, right?

Yes, I think we're going to be over $30 billion or in shouting distance of $30 billion by the end of the year in my estimation.

Great, thank you very much.

We'll go next to Jamie Cook with Credit Suisse.

Hi, good evening. It is actually Chase Becker in for Jamie. A quick question in terms of your recent announcements with Global Industries. I wonder if you can expand a little bit on your expectation for that and specifically how you're thinking about managing risks going forward?

Well, it is a good match-up between us and Global Industries. Our skills are very complementary. And this allows us to really do a much more thorough job of canvassing and converting the offshore oil and gas business, which has been a strategic intent of ours. Certainly risk projects will be handled in a manner that doesn't put us into a high-risk situation competing against a lot of companies on the same bid. It will target projects fairly specifically and try to go in and limit the competition so that we can have a clear field and be able to mitigate the risks. We won't be changing our selectivity process for this.

Okay, that is helpful. And just switching over to government very quickly, nice award on the Afghanistan side. But wonder what you're hearing in terms of some opportunities going forward in Iraq?

Well, the Iraq work will be recompeted. I think you have heard that from some of our other competitors' conference calls. The other Iraq contract currently there will be recompeted. Again, because of the way LOGCAP works, the three contractors -- ourselves, KBR, and DynCorp -- will be the three that are bidding for that. So we intend to be in the hunt for that. I think we have a great position on it. I think our track record for execution under LOGCAP that has really differentiated us there.

Okay, great. I'll get back in queue, thank you.

We'll go next to Graham Mattison with Lazard Capital.

Hi, good evening guys.

Good evening.

Just a follow-up question on the tie-up with Global Industries. Are you currently bidding on any projects together? Is there a potential to expand outside the region you've talked about so far?

The answer is yes, we're pursuing opportunities with them as we speak, and are hopeful that those will be successful. It is intended to be -- we're focusing now on certain projects and we want to get those right. But it would be our intent as it goes forward to maximize its exposure throughout the globe.

So look at this as a trial run for the tie up and expand it from there if it is successful?

I would call it more than a trial. We have great expectations for its success. But obviously when you're working with a partner like this and just starting off, obviously you want to get your combined processes down. And we're going after a couple of prospects right now and we'll expand those as we go forward.

Okay, great. And now just turning to the infrastructure side, are you seeing any benefits on the infrastructure side from the stimulus money? Or is that still yet to hit?

We have had a very nice award in the stimulus funding. It didn't really come from what I call the infrastructure side. It came from our government side. So to answer your question, I don't think anybody has really seen significant awards of any nature coming out of the stimulus funding. Most of it went into very small project and prospects in a lot of localities, and very few -- significant prospects or projects. We were lucky and I think fortunate to get one of those.

Okay, great. I will jump back in queue. Thank you very much.

We'll go next to Steven Fisher with UBS.

Good evening. Related to M&A, would you say that you're more optimistic or less optimistic now about getting some deals done than you were three months ago? Others that commenting that valuations are still becoming more attractive. But other than today, it seems like market multiples are still expanding again.

We still are pursuing an M&A strategy. We're not in shouting distance of closing one out at this point in time. But we do still maintain the strategic intent to go after acquisitions in our four major strategic areas.

Okay. And then on the power side of things, and you had a nice result on the margins there from the Texas power plants -- what quarter do you think you would expect to see the margins peak there as a result of that project?

It is hard to pinpoint a certain quarter because that project is in phases. So -- but I would say anywhere from fourth quarter on to end of the first -- second quarter of next year.

Okay, and do you think it ramps up from here to that point?

Again, it is hard to say. There are some unique events in there, so timing is going to be difficult to pinpoint.

Okay, and just lastly, can you just comment on how the structure is progressing on Greater Gabbard? I think it was supposed to move into the construction phase over the last few months.

It has moved into the construction phase. We have modules that have shipped out of China and our lay barges are in place. We're expecting a shipment within the next week that will be going into installation.

Great, thanks a lot.

We'll go to Michael Dudas with Jefferies.

Hi Mike, it is an interesting twist on your name.

Thank you very much, as long as I keep remembering me. My first question -- global services have been a real champ and a powerhouse as a contributor over the past few years. Do you anticipate this being just again -- general GDP related volume? And maybe give a little more color -- coming out of the other side in 2010 and 2011, is there an opportunity for global services to get back where it was? Maybe even gain some more revenue and share visibility, given the fact that your backlog and client last has been maintained pretty healthily over this time period of time?

Yes, Mike, that is exactly right. We are very bullish on global services long-term. Right now, and this is particularly our O&M business, is seeing a tremendous drop-off in what I call discretionary capital spending. Turnarounds, shutdown, nonpreventative maintenance, most companies are pulling back on their expenses, and it's affecting us across the board. I think you've heard that from some other competitors in this arena. We are actually maintaining our client base. There has not been any cancellations or losses in that arena. It is just strictly pulling back the throttle on spending on the local plants. So this is an area we're going to continue. We've made acquisitions in this area. We're going to continue to do so much. We regard this as a significant strategic thrust for us.

And Mike, we really think the reductions are for the most part deferrals. We think a lot of the spending will come back in the future.

Sounds that way, thank you. My follow-up is -- 12 months from now, do you think that contractor capacity will be starting to fill up again? Assuming the world gets back into a more reasonable growth mode and energy prices stay relatively stable?

I think a couple of things have to happen, Mike, for that to occur. I think we have to see more expansion in capital spending. And for that to happen we have to get a lot of the uncertainty out on commodity prices, on currency exchange, on legislation. I mean -- the US is not alone right now in terms of some of the legislation that it is considering that would have an significant impact on business. So I think a lot of the uncertainty has got to come out of the equation as well. I do think though you're going to start seeing in 2010 a recovery that does start to find its way into increased capital spending. And at that point in time, I think you will see contractors able to get back on a little more balanced equation.

I appreciate that. Thank you, gentlemen.

We'll go next to Mark Thomas with Simmons and Company.

Good afternoon, guys.

Good afternoon.

Alan, you mentioned that new awards are going to be lumpy going forward. And that is understandable. But can you just update us on current back log and what you are hearing from customers on the cancellation front and if any projects are being delayed at this point in backlog?

Well, we -- like I said in my prepared remarks, we didn't have any material cancellations in the second quarter. Right after the quarter closed, we did hear on our USEC project, the uranium enrichment project, that the DOE had turned down the loan guarantee, and so that project is being put on hold. That is being rethought. And there is a rehearing of that decision that will hopefully be decided in the next month or two. So we're hopeful that will come back, but that is the only thing out there right now that we've seen that has any impact.

And just touching back on the global industries front, the project and the timing -- are those -- 2010 events?

Yes, most of them would be 2010, before you would see any revenue coming into our books.

Okay, all right. Thank you very much.

Thank you.

(Operator Instructions). We'll go next to John Rogers with D.A. Davidson.

Hi, good afternoon.

Hi, John.

Hey, first of all Mike, you talked about the cash balance and given -- setting aside acquisitions for the moment, given the market conditions, how much cash do you want to carry?

That is a good question, John. The first thing you have to look at is our client advances. And they're a little over $1 billion. You take that outlook at our free cash. From an operating point of view, above that we would like to have $400 million to $500 million of operating cash on hand to feel comfortable, especially in these current liquidity situations. But our cash balance is obviously very healthy, and in part it has grown because of our client advances. A more normalized level is perhaps $500 million to $700 million.

I keep reminding Mike that a certain part of those [clients] assets are going to be ours when we finish the project anyway.

Hopefully a very large portion.

And then Alan, you have touched on this a little bit, but -- I know it is a short timeframe, especially from investors' point of view, but are you noticing any change in client attitude as we move into the current year? I mean are the clients more comfortable now with the economic environment that they're -- going ahead with some of the work? Or moving it ahead, relative to how we started the year?

Marginally so, John. I still see a tremendous amount of unease in our client base, specifically around what they can expect on commodity prices going forward.

Okay. And -- your sense is that is what they're keying on now?

Absolutely, each of them have a market and each market is a little different. But there has been a tremendous amount of capacity installed in quite a few of the markets around the globe. So that the ones that are out there investing today are the ones that have very healthy balance sheets and are very convinced of the strength of their future markets.

And just given your hook-up on the offshore project JV, it seems if you're still pushing pretty hard on the oil and gas side in terms of the opportunities over the next couple of years?

Yes, absolutely. We've stated for the last couple of years -- our strategic thrust is going to be in the offshore oil and gas, infrastructure, global services, and in what I'll call alternative energy, forms of power including nuclear.

Great, thank you, appreciate the color.

We'll go next to Will Gabrielski with Broadpoint.

Thank you guys. Great quarter. Question for you on your comment about lump sum and trying to avoid that market. Does that preclude any of the opportunities in Abu Dhabi that we may have been paying attention to? And is there a difference between lump sum turnkey on an EPC contract versus the program management contract with how you're viewing that?

I'm glad you asked that question, because that allows me to elaborate. We're not going to avoid lump sum. The lump sum we're going to avoid is going up against five bidders on a bid slate for a lump sum project. In that market today, that's just -- it's a crazy market out there with people buying market share. And the companies that we lost to -- in that recent bid were for the most part Asian companies that bid incredibly aggressively. So we're not going to go into that.

However, we'll continue to go after lump sum projects where we have a small competitor group where we know we have a competitive advantage and we know we can mitigate the risks. So that would be certainly in very selected sections of engineer -- of energy and chemicals where we've done the program management and are bidding lump sum on the off-sites, for example, or in the infrastructure business where we do a lot of the development work ourselves, or go after design build projects where we have a competitive advantage. So I wouldn't say we we're going to avoid it. If I said that, that was my mistake. But we are going to be very careful about competitive lump sum bidding.

Okay, thanks for the color on that. With Global relationship, I was just curious, I don't think there is a real fab capacity between the two of you for fabrication outside of what you do in Mexico. Have you guys given any thought to how that would be structured when you're bidding on a piece of work?

Well, they do have fabrication capability, and we have the Mexico capability. So that's -- I think we have the ability to handle projects we're currently bidding on. To the extent that we require more than that, we will bring other teaming partners or subcontractors into the mix.

Okay, clarification -- you have said limited notice to proceed on the Tenaska project. I was just curious, does that mean feed has been completed at this point? Or are you still in the feed phase on that?

Feed has been completed. We're still doing some upfront engineering to prepare for the submittal for permits.

One last housekeeping. The burn rate for I&I and these new awards -- I know that burn rate was lower in the quarter. Is that going to be the trend here on the projects, the way they're structured? Or is that just an anomaly in the quarter?

I think it is a little more of an anomaly in the quarter. It is going to continue to grow, but not dramatically.

Okay, thank you, guys.

We'll go next to Joe Ritchie, Goldman Sachs.

Thank you, good afternoon, everybody.

Hey, Joe.

Quick question on Habshan 5, is it possible for you to comment on how much of a discount there -- was actually seen on the winning bid for the gas processing plant?

We don't have exact numbers. We just know it was rather significant. It is hard to get color in each of the segments of it.

Okay, and I guess on future gas processing plants that could be bid over the next couple of quarters, do you expect then to see the same type of pressure you saw on Habshan?

I think we can expect it. We're currently taking under advisement the bidding of the next project in those stream of projects.

Okay, and I guess lastly in your government segment, obviously nice win on the LOGCAP order. Two questions -- do you have a sense for the timing of the first task order? I believe it is supposed to hit backlog in 3Q and be the size of the booking?

We're currently in discussions with the Department of Defense and the Army on the rollout of that. Keep in mind this is a battlefield zone. So the handover and transition and the detailed planning for that is very exacting. We're reviewing transition plans with the Army right now, and based on their assessment of our transition plan, they will be communicating the timing of that to us here fairly quickly.

It's still uncertain? Do you think it is going to happen sometime in next couple of weeks or -- ?

I just don't know. They reserve the right to set that schedule. I am pretty confident it will be during this year. I would like it to be in the next couple of weeks, obviously.

Okay, great, thanks so much.

(Operator Instructions). We'll go next to Barry Bannister with Stifel Nicholas.

Hi. If I look at the quarterly revenue as a percentage of the backlog as just a different way of handling the burn rate issue, the long term average since 2001 was about 20% or 21% of backlog. And for the last certain quarters it has been rising back towards the mean, but suddenly dropped this quarter and revenues were about $500 million below the Street. What lumpiness or trend direction can we derive from that?

I would hesitate to derive a trend direction, Barry. On one data point, it is hard to comment on that. I mean if you look at our last four quarters of new awards, they have been $8.8 billion, $4.2 billion, $5.5 billion, and $6.8 billion. So it is incredibly lumpy. Backlog tends to be a little more linear because of the way it rolls out. So drawing a comparison on one quarter's data would be very difficult.

On revenues.

On revenues.

And then I want to go back to that first week of March when the S&P and Fluor stock were making a bottom. And I noticed on the SEC filings that you, Alan, had sold about 72% of your shares. And Mike Stewart, about 50%. And I want to get into the psychology that existed then, because it is not my view that we backslide into that kind of an abyss in terms of the economic view. But did you just have an options expiration or was there something peculiar about that time that caused you to feel that the game may be up? Or the backlog growth for the engineering cycle and for capital spending -- what motivated that?

Give me the dates for that.

The dates are March 2nd to March 6th.

What year?

2009.

I don't recall selling shares at that time. What we do is we do get -- it shows insider trading on the reports because we all get restricted stock grants that are earned, and then they vest over a timeframe. And so every time they vest, a predetermined formula sells off shares to pay for the taxes, and the rest go into our account. And it shows off as insider selling when in fact it's just covering the tax burden of the shares. The last time I sold any shares was on a 10b51 program in 2008, and which was announced and had to do with capital gains more than anything else.

Okay. And then just lastly as a little bit of a clarity issue, I noticed last quarter that I&I bookings had surged and noted that the operating margin in I&I is historically half that of oil and gas. So the profit and backlog -- the profit booked was less. Would you say that the I&I higher construction content this quarter is going to result in the continuation of a somewhat lower margin because of the construction content?

Yes, typically that is probably a good way to describe it. We obviously get our upticks in earnings as we close out these projects or when we get a success fee on development. And there were no significant awards or completion in the quarter, so.

No, but I&I has a real mix of business, and has some of our lower margin businesses like mining and some of our highest margin businesses like infrastructure and transportation.

Okay, thanks a lot.

We have no further questions in the queue. For closing remarks, I would like to turn the conference over to Mr. Alan Boeckmann.

Thank you, operator, and I would like to thank you all for participating in our call this afternoon. As evidenced by our strong results to date, I truly believe that our strategy of industry and geographic diversification is working well. It also enables us to deliver considerable value to our shareholders. Consider this -- we just had the strongest new awards second quarter in the company's history. We have maintained earnings guidance, the mid-point of which beats our record 2008 performance for EPS. I think this performance makes us incredibly unique in our space. And as we go forward, we're going to move to continually drive our competitive advantage in this area on behalf of our shareholders. We greatly appreciate your interest in Fleur and your confidence in our company. Have a good evening.

Ladies and gentlemen, this concludes today's conference. You may disconnect.