Fluor Corp (FLR) 2013 Q1 法說會逐字稿

Good afternoon, and welcome to Fluor Corporation's first-quarter 2013 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 at approximately 8.30 PM Eastern time today, accessible on Fluor's website at www.Fluor.com. The web replay will be available for 30 days. A telephone replay will also be available through 8.30 PM Eastern time on May 8, at the following telephone number, 888-203-1112. The passcode of 4490608 will be required. At this time for opening remarks, I would like to turn the call over to Ken Lockwood, Vice President of Investor Relations. Please go ahead, Mr. Lockwood.

Thanks very much, operator. Welcome, everyone, to Fluor's first-quarter 2013 conference call. With us today are David Seaton, Fluor's Chairman and Chief Executive Officer; and Biggs Porter, Fluor's Chief Financial Officer. Earnings announcement was released this afternoon after the market closed, and 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 the forward-looking statements, which we have summarized on slide 2. During today's call and slide presentation, we will be making forward-looking statements which reflect our current analysis of existing trends and information. There is inherent risk that actual results and experience could differ materially. You can find a discussion of our risk factors, which could potentially contribute such differences in the Company's Form 10-Q which was filed earlier today, and in the Company's 10-K.

During this call, we may discuss certain non-GAAP financial measures. Reconciliations of these amounts with the comparable GAAP measures are reflected in our earnings release, and are also posted in the investor relations section of our website at investor. Fluor.com. We've also updated and posted our factbook on our website, which includes a three year financial recast for the organizational realignment that went into effect with this quarter's reporting, and will be discussed somewhat on today's call. With that, I'll turn the call over to David Seaton, Fluor's Chairman and CEO. David?

Thanks, Ken. Good afternoon, and thank you to everyone for joining us today. Today, as Ken said, we're reviewing our first-quarter results and discussing the trends received for the remainder of 2013.

If you would turn to slide 3, I would like to begin by covering some of our highlights of the first quarter's financial performance. Net earnings attributable to Fluor for the quarter were $166 million, or $1.02 per diluted share, which is up from $155 million, or $0.91 per share in the first quarter 2012, which included the benefit of a lower tax rate. Consolidated segment profit for the quarter was $294 million, up 16% from $253 million a year ago. Segment profit results were driven by growth in Oil & Gas, industrial infrastructure and government segments. Oil & Gas segment profit was particularly strong, with first-quarter results of $105 million, which is a 42% increase over last year.

Consolidated revenue for the quarter was $7.2 billion, up 14% over last year, including a substantial increase in Oil & Gas. New awards for the quarter were strong, at $6.5 billion, including $3.1 billion in Oil & Gas, and $2.2 billion in Industrial & Infrastructure. Consolidated backlog was $37.5 billion, which is down from a year ago, primarily due to the downturn in the mining and metals market. More importantly, as we commented last quarter, we continue to see improving margins in our backlog, which is encouraging.

Our financial results are summarized on the table in slide 4, I'll continue my remarks on slide 5. Oil & Gas awards for the quarter included contracts for petrochemical facilities in the United States and China. Fluor was selected by Dow Chemical for the expansion of their existing petrochemical facility in the Gulf Coast, including an ethylene cracker and associated power utilities and infrastructure facility upgrades. Ending Oil & Gas backlog was $18.6 billion, which is an increase of 11% from a year ago, and a modest increase over last quarter. The Oil & Gas group continues to see strong demand for front-end engineering contracts, especially in petrochemical facilities, although we expect new awards for the remainder of 2013 to be fairly balanced across upstream, downstream and chemical markets.

Moving now to Industrial & Infrastructure, new awards for the quarter were $2.2 billion, including the Tappan Zee Bridge replacement in New York, and the Horseshoe Road project here in Dallas. Backlog declined to $16 billion, compared to $23 billion a year ago, as a result of continuing work off associated with large mining projects, combined with a lower new award count over the past year. There were a number of news reports recently pertaining to issues and delays on various existing mining projects, and new prospects which are creating some challenge for 2013. We are in close contact with these clients and continue to support their efforts. As a result of the organizational realignment that we noted in our earnings release, effective this quarter, financial results for Industrial & Infrastructure now include the operations and maintenance piece of the Global Services segment.

If you turn to slide 6, ending backlog for government segment was $964 million, which compares to $695 million a year ago. New awards in the first quarter were $756 million, driven primarily by the timing of LOGCAP IV task orders. 2013, we expect task order awards under LOGCAP IV to remain at or near existing levels. With regard to sequestration, we have seen some impact on our funding at Savannah River, and we don't believe the overall impact will be significant. We're also seeing some delays in the customer's decision-making timetable, on some of the services prospects that we are bidding on.

Moving to Global Services, the segment reported $28 million in segment profit, and $150 million in revenue. Results for the first quarter were lower than a year ago, due to the reduced contribution from AMECO, as a result of a shift from O&M to the industrial infrastructure segment, there are no new words or backlogs to the Global Services segment, since AMECO and TRS businesses are more transactional in nature. Power segment new awards for the first quarter were $448 million, including the extension of a long-term fossil power maintenance contract in Texas and an award of an engineering procurement construction contract for a facility in California.

Segment backlog was $1.9 billion. The group is currently working on a number of gas-fired and solar projects, in addition to maintaining Power facilities across the United States. The group continues to track opportunities for new gas-fired plants, alternative energy including solar, as well as plant betterment programs. On the nuclear front, last week we announced that a consortium with GE Hitachi nuclear energy, Fluor has been selected by Dominion Virginia Power to provide project development services for a proposed 1,475-megawatt nuclear unit at North Anna Power Station. Fluor will perform the engineering construction of the facility once Dominion Virginia Power receives federal permission to proceed, which is expected in 2015.

Please turn to slide 7. In order to better align our Company with our customers and markets we serve, as I previously mentioned, we have moved the operations of maintenance business line from the Global Services group segment to the industrial infrastructure segment. Within industrial infrastructure, we have aligned the O&M business with our manufacturing and life sciences group, which has a very similar customer base, with projects that are often smaller in nature and require a common skill set. Our Global Services group, which includes our TRS staffing business and our equipment business, AMECO, also have responsibility for the Company's strategically important construction, fabrication and supply chain solutions organizations.

I believe that expanding our capability in fabrication and modularization, increasing the amount of self-performed construction, and applying the best-in-class global supply chain solutions will allow us to leverage our knowledge and expertise and capitalize on the opportunities that we see ahead of us, particularly in Oil & Gas. With regard to fabrication, we have previously announced a joint venture company that we established with JG&P in the Philippines. This quarter we completed the purchase of an Australian-based Company that specializes in fabrication and pressure welding.

In addition, we just announced the formation of a partnership with Supreme Group, a modular fabricator in Canada. This relationship enhances our construction and modularization capacity in North America, and specifically in Canada. With that summary, I'll now turn it over to Biggs to review some of the details of our operating performance, and the corporate financial metrics for the quarter. Biggs?

Thanks, David, good afternoon, everyone. Please turn to slide 8 of the presentation. Is David indicated, consolidated backlog at quarter end was $37.5 billion. The percentage of fixed-price contracts in our overall backlog rose to 18% at quarter end, with the booking of two large infrastructure projects. About two-thirds of first-quarter awards were for US-based projects, which drove an increase in the backlog for projects located in the United States, to 32%.

Moving to corporate items on slide 9, G&A expense for the quarter was $33 million, which is an improvement from $38 million a year ago, primarily due to lower compensation expense. The effective tax rate for the first quarter was 30%. We expect the rate for the full year to be in the 32% to 34% range.

Shifting to the balance sheet, Fluor's financial condition remains strong, with cash plus current and non-current marketable securities totaling $2.5 billion. This compares with a balance of $2.6 billion last quarter. Cash flow during the first quarter was seasonally weak, with operating activities utilizing $22 million during the quarter. As we have said in the past, we take a number of factors into account when deciding whether or not to repurchase shares in any given quarter, including cash flow generation from operations. While we did not repurchase any shares during the quarter, we expect to continue our repurchase program in 2013, with repurchases biased towards the second half of the year.

I will conclude my remarks by commenting on our guidance for 2013, which is on slide 10. We are pleased with our financial results for the quarter, including $6.5 billion in new awards. We continue to experience headwinds and uncertainty in mining and metals, as David noted, which may put pressure on our ability to achieve or exceed the very high end of our range. However, we are very encouraged by the strength of our Oil & Gas business, and the substantial contributions from Industrial & Infrastructure. Considering the overall portfolio, we are maintaining our EPS guidance at the previously established range of $3.85 to $4.35 per share. With that, operator, we're ready to take questions.

(Operator Instructions)

Jamie Cook, Credit Suisse.

So, of course, I need to ask the question. I was pleasantly surprised by the margin performance in the quarter of the 3.8%. So, can you just tell me how that stood relative to your expectations and what were the drivers, and then what's the likelihood that we could actually hit a 4% margin in the quarter? I guess that's my first question. And then I have one more after that.

Well, I think we're right on plan with what we anticipated with that margin production. As I've said before, Jamie, we see a strengthening in the margin and backlog and we've seen the general improvement in the markets that we're serving. We're starting to see demand pick up, I think, pretty quickly. You've seen the new awards and particularly the change in the new award totals in the United States, primarily the back of the Dow announcement, but certainly others. So, I think we're on track with what we thought we would have relative to a build-up of margin within the specific businesses, but particularly, I think Oil & Gas improvement is something we anticipated and talked about, and clearly, right now, I think we're starting to see it. I don't know when we'll get to 4%, but I would say that I am very pleased with where we are, and particularly where we're headed with the programs that we're very active on, but have yet to book the EPC values of those programs.

And then, when we think about -- you mentioned in your slides about the high end not really being of likely, just given some of the things that you're seeing in mining. I guess, why not lower the high end at this point if -- that's out there or is there something that you think that could potentially better to offset that which is not making you take the high end down? And then I'll get back in the queue.

I think what we said, the headwinds, and I think that's a good way of describing it. I've never changed guidance or a number in my career in the first quarter, unless it was some significant event that would dictate that we do so. I think that we're in a very good position to perform at what our plan is. Even with the headwinds that we talked about and the upper end is not out of the question, it's just a hell of a lot harder with the headwinds from mining that we're seeing right now.

And then sorry, last, just a modeling question on the earnings from non-controlling interest it was much -- the number was bigger than I guess I would have expected. Can you just talk about what's driving behind that how we should think about that for the year? And I'll get back in queue.

It was higher for the quarter and higher for the quarter than we would expect in succeeding quarters. It's really just a mix of business. It depends upon the performance of each Joint Venture, relative to the performance of projects, which are wholly Fluor's in execution, and it really just comes in and out of the P&L. It's added into income before tax, tax is calculated, and then it's taken right back again to get to net income attributable to Fluor. So, it really has no net effect on the P&L, but it does have a somewhat, cosmetic effect on the tax rate, which you really just have to set aside.

Okay, thanks. I'll get back in the queue. Great quarter.

Andy Kaplowitz, Barclays.

It's actually [Mark Mahalo] on for Andy. First question I just was around the Oil & Gas business and your future outlook on that. You had a very good book to bill in the quarter, and I guess your conviction around that book-to-bill being at one times or better over the back half the year?

I think we're in the early stages of a pretty good growth curve, as we've stated before. We're in the very beginnings of, I think, several major programs in the United States. We're in the beginning stages of major Oil & Gas programs around the globe as well. I think, everybody wants to talk about shale gas in the Gulf Coast which is a great story, and I've said previously, we're in the early stages of $35 billion worth of EPC value, some of which went in during the quarter for Dow and some other things. So, I think we're all of the very early stages of a pretty good growth cycle, that I think has a pretty good length through that cycle. I'm expecting some really big things out of that group and am quite bullish on the market.

Thanks, David. Just to follow up on Pascua-Lama, how much work, if any, were you able to do on Pascua-Lama, and is it fair to say it's going to be a several cent hit to your income statement each quarter going forward?

I don't know about that. I think we're continuing to support Barrick on Pascua-Lama. The Argentinian side really didn't slow down, and that is the process side of that particular project, and we're continuing to obviously execute that. We did have a slowing on the Chilean side, because of the things that you've seen, we're supporting Barrick in the resubmission of their documents, to support the permits, and what they need to continue the project. Obviously, it's going to slow but I say its headwinds, it's not major hits. So, I'm not sure you're going to see it really impact us greatly.

Okay, thanks very much. I appreciate it.

Jerry Revich, Goldman Sachs.

Hi, this Ravi Gill on for Jerry. David, it's been about two decades since we have had a meaningful chemical CapEx cycle in the US. Can you help us frame what market share your franchise has historically garnered on the EPC side, in ethylene and propylene in the Middle East and Asia, and how we should think about that, relative to the United States?

I'm not sure we look at things in terms of market share. I think the way I would categorize it is, we spent a lot of time focusing on creating some relationships with some key clients that gave us a competitive advantage. The alliances that we have with Dow, with BASF, with Shell, the relationships we have with people like Sasol and others, I think, positions us to do the majority of the work in this cycle. And I think that's synonymous with the relationships that we've had with people like SABIC in Saudi Arabia and Aramcos and the like in the Middle East, in previous cycles. And we have those relationships as well, but I think what we're seeing specific to the United States is their need to get ahead of the curve because of cheap gas, and frankly, the resurging of manufacturing in the United States, which are both really good stories.

I think that our teams have done an outstanding job of positioning with these customers for these key projects. We feel comfortable with the capacities that we have, both in terms of management and engineering talent. Our supply chain capabilities, as well as the craft side. So, I think our customers are recognizing the value that they see, and our ability to deliver, both in terms of cost and schedule. So, I look at it is almost a perfect storm for us, because we've really spent the time to invest in what we needed in order to take advantage of these programs and projects, and win as much as we care to.

And then, given some of the developments over the past quarter, the Dow announcement this morning, a large ammonia project earlier in the month. Can you provide your updated assessment on when you believe the large greenfield projects and chemicals will get awarded? And which chemicals you see moving ahead first, ammonia, ethylene or propylene?

I think it depends how you define greenfield. Most of these facilities are built on existing production sites so when I think about greenfield I think about a true greenfield. Now, the Dow cracker is a greenfield cracker, but it is on an existing site as part of another, an overall program. But I do believe the ethylene business will be ahead, ethylene, propylene, polyethylene and that chain will be ahead of the other products that they're used for. I think GTL, and in some cases, LNG are next and Power usage will be last, and only last because of the delay in the CSAPR rules by the EPA, which doesn't give the generators good clarity on what they need to do relative to their generating base and balance. So it just delays that, but in all cases, it fits within our sweet spot of being able to execute for our customers so regardless of the sequence, we'll be very active in all accounts.

Okay, thank you very much.

Steven Fisher, UBS.

David, previously you had expressed some concerns about the permitting process on some of these US shale projects. What are your latest thoughts on that front, and do you have any other concerns about costs or end demand holding up any of the awards?

My comments on permitting were basically just the timing that's normally necessary, we don't necessarily see that being a major hold-up, but obviously it could be, based on backlog, because there's so many projects that are going to be vying for those permits at the same time. But there's really nothing that I see that stands in the way. I think the only pinch point is going to be in terms of craft labor, but if you look at our strategy around fabrication and the supply chain, we're able to take a fair amount of the construction off the site into a controlled environment to improve the quality. We are way out in front, relative to training centers and recruiting of the Fluor craft that we've always enjoyed in that area, so I think these first projects that we're doing, I don't see any significant issue standing in the way of them having a normal schedule trajectory.

Okay, and then just over to NuScale, can you just give us an update on your process there and your confidence that you'll be able to sell down a stake in that this year? A lot of discussions right now on potential investors.

We feel good about where we stand there, we've limited, as I said in the previous quarter, we've limited the expense by putting John Hopkins in there to manage that business in a much more forceful manner. I think we've done a very good job of controlling that. The second FOA is out, and we're accurately pursuing that.

Okay, thank you.

Andrew Wittmann, Baird.

Just to dig in a little bit more into some of the shale-driven infrastructure projects, I'm kind of curious as to, not specifically but maybe in generalities, if you could comment on what some of those terms look like? Are those -- are you able to get reimbursable-style contracts on those type projects, David? Or, as I mourn a fixed-price basis today? And do you see any change as we go deeper in?

Those are primarily reimbursable based contracts.

Okay. Is that something that your business model's afforded you to do, allowed you to win, whereas maybe your competition are trying to do it a different way, or is that just --

I think those decisions were based on that, the value proposition and the project people that we have to offer versus the others. I'd say that the clients are making value decisions. We've got the ability to do them under various Commercial approaches, reimbursable is fine, fixed-price is fine, regardless of whether it's in the Gulf Coast or whether it's someplace else. We really spent a lot of time and effort in improving that capability. But, I think primarily we've had a very strong position in gas, in gas market programs regardless of what the usage is, and I think that what you're seeing today is just that value proposition shining through.

Great. And then maybe up in the Oil Sands, David, given some of the discounts that we've seen up there, and some CapEx cuts, can you just talk about the project level activity that you're seeing out in the market today? Does that potentially continue to be a growth area as you look to the balance of the year, is that still flat at a high-level?

Well, I think it's a growth story, frankly. And I think the limitation and some of the discounts you're talking about in the gas side, I think are temporary. If you remember, we still don't have Keystone pipeline going. Or, any other infrastructure, so I think some people are hedging their bets on when will the infrastructure be there to support some of these developments. There's nothing standing in the way at the moment, but when you look towards some of the bigger users, the LNG plants and the like, we really need to have that infrastructure underway and ready when these plants start-up. That's really the only hampering point that I see in this equation. But, I think any pullback right now is temporary.

Okay, great. Thank you very much.

Tahira Afzal, KeyBanc.

Congratulations on a good quarter. My first question is really in regards to something, everyone's already asked about the petrochem side, so I'll let that one be, and when you're talking about the labor market in general, one of the projections I've seen is gross labor probably going up 35% or so between now and 2015, and some migration of labor maybe from the Midwest states down, to help out. So, I mean, it seems like some of the projects might get a little pushed out once it's canceled outright. Is that when you're actually doing your projections? Are you assuming that some projects are more cascaded versus everything getting done at the same time and a bit coming out more closer to 2016?

No, I really don't see things being pushed out, Tahira. I think, from a cost escalation point and a productivity perspective, those things are already part of the planning process. Everybody sees the same data you do in our customer base so, I think there's a good healthy debate on what those protection factors are, but those are not delaying any of the programs that are there. I think that a comprehensive immigration bill would be helpful to the circumstance. This country has been built on immigration, and I don't know why this next cycle would not enjoy the same support, because I think there's going to be plenty to go around.

I think that what we're going to see is a circumstance where the traveler will come back, I think over the last decade, or maybe two decades, in the United States, we've seen a lack of willingness on the craft part to travel more than one state away. I think you're going to see a change in that, and we're already seen people coming to us from three and four and five states away, hey, we're ready to come to the Gulf Coast and work. So, we're going to have to be careful about craft labor, but I don't see that being an Achilles heel to the schedules that people are thinking about, or canceling anyway the projects that we're focused on.

Great. And as a follow-up, you've obviously taken a great start to the petrochem cycle with the Dow announcement today, that was clearly an important win, and pretty bodes well for the cycle. When I look at Statoil, they obviously have a very large project prospect in play as well. And it seems they've already put in the lead procurement item order. So, if you look out over the next nine months or so, how many of these petrochem projects outside of Dow do you really see going forward, which are of fairly decent size?

I think most of what we're looking at have a better than average chance of going forward over the next probably four quarters, both in terms of the ethylene and petrochemical side, the gas and liquid side, and growing optimism on LNG in Canada and in the Gulf Coast. So I see a pretty good collection of projects that are going to be awarded and announced, basically on the schedule that we're anticipating.

Great, thank you very much for that.

Thanks, Tahira.

Alex Rygiel, FBR.

Two questions first. David, you mentioned that you're seeing some improved margins in backlog, what specifically is the catalyst to it? Is it just a shift in mix of what's in your backlog? Is it some improved pricing in certain end markets?

I think it's a collection of all of the above. I think we are seeing a shift back towards Oil & Gas business in an EPC form, which is always good. We are seeing some improvement in pricing, but I wouldn't suggest that it's overly so. I also think that we've spent a lot of time in improving our work processes to become more efficient, both in terms of reimbursable and fixed-price projects, which help add to that margin equation. And also, when you think about the leverage we get when we start to really burn hours on the engineering side, as it relates to overhead, space, computing, those fixed costs that we have, I think all of that adds to, I think, improved margin and backlog, and I think it'll continue to improve as we go to the next probably six quarters.

I would just add the shift in I&I from mining awards to infrastructure awards also increases the margin and backlog.

Right.

One last question, in the I&I category, when do you think we might get that equilibrium where new awards approximates revenue burn?

I don't know, that's something.

We hadn't really looked at it that way.

We hadn't really forecast, especially with awards always been lumpy as we say, it's kind of hard to do a forecast.

I guess maybe if I could ask that another way. How much further revenue burn in the mining sector is necessary to get back to a run rate back log in mining?

I think over the next, probably, three quarters, we're going to be burning significant revenue in the mining segment. It is the normal burn off, and as I mentioned in the prepared remarks, we're just not filling it up with as much new awards on the same basis, so I can't give you a time, but I think it's fair to say that we are moving in that direction with mining.

That's helpful, thank you. Nice quarter.

(Operator Instructions)

Michael Dudas, Sterne Agee.

David, to keep it on the infrastructure track, historically, Fluor's booked maybe one large infrastructure project a year. Obviously, you've got two nice awards of recent note. Could you update us on has more opportunities been accelerated over the past couple of months, and could we see some or positive activity on booking for Fluor as we move into 2014?

That a great question, Michael. I think I'd answer it a couple of different ways. One is, obviously, Horseshoe and Tappan Zee coming in one quarter is unusual. To your point, these are typically spread out. I will say that we've had an increase in the proposal activity over the last little while, and we have a fair amount of procurements that are in the early stages that will hopefully be awarded as we get towards maybe the end of this year, early next year, but we're really pleased with what we're getting. We have not been successful, and a couple that we bid in that brig tranche of bidding, but clearly we won the ones that were strategically important to us and fit our offering quite well.

I still see significant growth in infrastructure. I mean just the pent-up demand in the United States is there. One thing that Congress did very well was the reauthorization of the TIFIA program that helps support these programs, we're seeing a fair amount of the PPP market start to come back in a large way, and things like light rail, toll roads, and the like. So, to use the term we've always used, and Biggs just used, of lumpy, I still see growth in infrastructure. That's helpful and David, my follow-up would be, as you are looking at the mining customers, it seems like it's a little bit more of a pause given where capital spending trends and outlooks have been from some of the big, iron ore or hard rock mining customers, or is it still just the people just trying to figure out where the cycle's going to be? I think, to use your term, I think they've taken a deep breath. In every mining project that I've ever seen, there's always the issue of permitting and labor unrest that puts these projects into fits and takes, and they do slow down from time to time. I think this is more of a structural deep breath driven by the commodity markets, but also driven by the change in leadership. And, even when -- it was seamless when I took over from Alan but even at that, I took some time to think about where we were headed and the things that we needed to do, and what those priorities were, and my expectation is the folks at Rio and the folks at BHP and the like are doing the same thing. So I think that just adds to the deepness of the breath, so to speak. But, I don't, by any means, think that there's a long-term structural change in the market, nor a significant long-term delay in capital spending.

Certainly, maybe where the projects are going to be built might change because of nationalization, government and the likes?

Well, that's always been the case. And, I don't think that will change. I mean the one thing about it, for all the extractive industries, they have to go to some interesting places to gain access to those liquids and ores.

Excellent, thank you, David.

Robert Connors, Stifel Nicholas.

Just for housekeeping purposes, with the O&M business outside of Global Services, it was pretty good margin in the quarter. I mean, is this the run rate or were there some one-time things in there that won't be continuing going forward?

The run rate in I&I or --?

In the Global Services margin?

I think there's opportunities for improvement there. The reason we made that change is client preferences. Skill sets, coordination, and I think a fair amount of focus on the smaller projects, which fits within that group's capabilities, that drove that decision. And I think the margin, I think, should improve over time. But again, we're still waiting on, outside of Power, we're still waiting on that shut down turnaround market to return, and obviously that would be an impetus to improve margin.

Okay. And then, related to the supreme and EGP joint ventures, just wondering if Fluor is able to begin fabrication of the modular components for a lot of the Gulf Coast petchem facilities before the client receives their permit approval? And, if so, is that already occurring for some projects that we haven't heard, or that haven't been press released yet by Fluor?

Well, those two specifically and other actions that we're taking, I think, add to our ability to supply what's needed by our customers. The schedules, we're on schedule to be able to supply whatever is necessary on those schedules, those various projects. And, we feel good about those.

I'm less concerned about delays because of permits on these petrochemical facilities, and maybe some other use of gas. And the reason is that most of these new facilities are in existing facilities that already produce the same types of materials and products. And I think that the permitting process will not be encumbered by some of the new regulations that are out there. So, I feel pretty good about where we are on the timing of these programs, and I'm very comfortable with our ability to provide the fabricated modules for those projects, based on the schedules that we've produced for the customers.

Okay, thanks a lot.

John Rogers, D.A. Davidson.

I just wanted to follow-up on one thing. David, in the past, you have talked about investing more in modular fabrication and self-performing work and I know you've acquired some assets in Australia and partnership up in Canada. Is there more to do there, and particularly in the US?

Absolutely.

And will we see that soon or -- I mean is that something you'll acquire, build yourselves?

Well, I think we're in the process of making those decisions right now, and I really don't want to get into that. But, we're clearly going to do more in the Gulf Coast to support those programs and support the local labor capabilities in those regions.

Okay. Thank you.

Andrew Wittmann, Baird.

Great. So, just wanted to check in on the gas plant opportunity. David, earlier, you went through the cadence of how you thought some of the gas infrastructure things would play out. Lowest on this list sounded like gas Power generation, yet you noted in your prepared remarks that there's probably, I think you said, a handful, maybe six or something that you're looking at today. Can you just talk about the likelihood of those going, or maybe when you think those could make sense, and then just specifically, I think previously you commented that this year would be a $15 million to $20 million profit year for the Power business. Is that still the case? Thanks.

Well, I think it's delayed, frankly. We've done a lot of studies on gas plants and continue to do that. I think the delay in CSAPR is the reason for that. If you're a generator, and the regulators aren't giving you the answers you need to make your capital decisions on, you are going to have to push that out until you have that data, and I think the delay of CSAPR was not a good decision.

If you're a generator, you're sitting there with a coal fleet that they know they've got to fix, they're ready to fix, the CEO of Duke, I think it was last year, made the comment that they're ready to spend $20 billion on dealing with their coal fleet, if they just knew what the rules were, and in that. And I know I'm mixing things up, but gas is going to replace some of that coal fleet, and until they really know the capacity that they have to replace they don't know exactly which gas projects to sanction and move forward with, so I think the delay in those rules was not a positive step in the right direction. Particularly when it comes to fuel supply mix for the generators, or quite frankly job creation in United States.

Specifically on the profitability of that segment, does that change your previous comments there? Is this more of a breakeven year for the Power group then, do you think?

I think we're still looking at, now we're looking more at 2014 for the improvement in profitability for Power.

Got you. Just one more on the government business. There's been a change in opinion on the Y-12 Pantex Management contract. Your updated thoughts there, how you think you're positioned for the rebid there, as well as maybe some comments on Sandia, if any?

I think on Y-12, you've seen the reports that I've seen. We did not believe that decision was based on all the facts, and we're glad that the government has intervened, and will give a chance for all the facts to come out. We feel very good about the team that we were part of, and we look forward to re-competing that. On Sandia, I really wouldn't want to comment at this point, we'll just see how that comes out, but I think the government group has done a really good job of diversifying their offering. As we said in our prepared remarks, we don't see any significant change in the LOGCAP production performance over this year and into next year, and those guys are working really hard to find ways of filling that earnings stream up with other work with the US Federal Government and governments outside the United States.

Okay, great, thank you.

Will Gabrielski, Lazard.

Thank you. Very much sorry if my first question is a repeat, but did you give an updated specific on your NuScale, and whether that's been addressed with the FOA? In process?

No we didn't give a specific update on NuScale. But, I think it's consistent with what we have said before. We don't see any change with or without FOA in this year.

Our total guidance for the year is the same, we had said around $0.20 a share impact for the full year. The run rate in the first quarter maybe a little higher than that, because we were still leaving, coming out of last year at a little higher pace and bringing it down to some level of moderation. But no change to the full year expectation.

Over the past few months we have finally seen confirmation of what you have been talking about for the last few years in terms of the aggressive pricing in the Middle East, and two questions off of that. One, are you seeing anything changing on the competitive landscape right now, and two, is there any opportunity for you on jobs that are behind schedule or didn't have a program manager involved that are running over budget, to going to maybe pick up some work?

Well, we've already seen some of that, and we've been asked by certain customers to come in and support finishing some of these programs. I think it does provide the opportunity that I spoke of two years ago, when people said we couldn't compete against the Asian contractor. We've done it quite well, we continue to grow, and frankly speaking, when you fail in front of a customer, their memories aren't significantly longer, but they are longer, and they turn to people like us that have proven execution capabilities, have delivered for them over the longer term, and they go back to a value judgment. I think we've seen that probably for the last, I don't know, year and that's evidenced by the FEED work that we're doing. It's pretty global in nature in terms of mining and metals, specifically when you look at Ma'aden and our ability to win the phosphate project.

I think in terms of petrochemicals, both the United States and in the Middle East, we've also picked up some early work that would not go to some of those contractors, because of their lack of performance. So, I think we like to just tell it like we see it. As I said a long time ago, this is the third time I've seen this from the Asian contractors, and we will see it again. I think what we're trying to focus on is doing the right things to have good solid growth, to be able to perform, and finish these project for customers as they anticipate.

Because you've got to remember, all of our customers don't make a dime until we turn the switch to turn that thing on. And they're eager for that day. And those that historically can allow them to turn that switch on the date they anticipated, they're going to continue to come back to people like Fluor, because that's what we deliver.

Okay, extremely helpful. Thank you very much.

And that concludes our question-and-answer session. We'll now turn things back over to management for any additional or closing remarks.

Thank you, operator, and thank you everyone, for participating this afternoon. Based on our strong results for the first quarter, we think we're off to a good start, even with the challenging situation that we've seen in mining recently. As you gather on the call I'm particularly pleased where our Oil & Gas group is heading. I'm very pleased with where I&I is heading, given the challenges that they have and the way they been able to shift their resources to focus on projects and infrastructure and others, that will continue to help us grow this Company. I believe that our strategic focus on construction fabrication and supply chain Management further enhances our ability to provide an integrated solution to our customers, and enhances our overall market position. With that, I really appreciate your interest in Fluor, as well as your confidence in our great Company. Have a good day.

Once again, that concludes our call, thank you all for joining.