Fluor Corp (FLR) 2013 Q3 法說會逐字稿

Good afternoon, and welcome to Fluor Corporation's third-quarter 2013 conference call. Today's call is being recorded.

(Operator Instructions)

A replay of today's conference call will be available at approximately 8.30 p.m. 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 p.m. Eastern time on November 6 at the following telephone number, (888)203-1112. The passcode of 3521655 will be required.

At this time for opening remarks, O 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 third-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.

Our earnings announcement was released this afternoon after market close, and we have posted a slide presentation on our website which we will reference while making our prepared remarks today. Before getting started, I'd like to refer you to our Safe Harbor note regarding forward-looking statements, which is summarized on Slide 2 of the presentation. During today's call and presentation, we will be making forward-looking statements which reflect our current analysis of existing trends and information. There is an inherent risk that actual results and experience could differ materially. You can find a discussion of our risk factors which could potentially contribute to such differences in the Company's form 10-Q which was filed earlier today and in our form 10-K which was filed on February 20.

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 posted in the Investor Relations section of our website at investor.fluor.com.

With that, I'd like to turn the call over to David Seaton, Fluor's Chairman and CEO. David?

Thanks, Ken. Good afternoon, everyone. Thank you for joining us on this Halloween. We will try to be brief so that everyone can go trick-or-treat. Today I will be reviewing our results for the third quarter, our guidance for the balance of this year, and we will talk about the initial guidance for 2014. If you turn to Slide 3, I'd like to begin by covering some of the highlights of the third-quarter performance.

Net earnings attributable to Fluor for the quarter were $173 million, or $1.05 per diluted share, which represents an increase of 20% and 22% respectively over last year. Consolidated segment profit for the quarter was $311 million, which increase from $278 million a year ago. Segment profit resulted -- results reflect a 24% increase in Oil and Gas, as well as improvement in our Power segment. Consolidated revenue for the quarter declined to $6.7 billion, with growth in Oil and Gas and the Power segment, which was offset by lower revenues in mining and metals, as well as our business line -- our government business line.

New awards for the quarter were $5.6 billion, including $2.4 billion in Oil and Gas, $1.9 billion in Government, and $846 million in Power. Consolidated backlog for the quarter was $36.5 billion, which compares with $37 billion last quarter. Importantly, margins in new order and backlog continue to track above levels we experienced a year ago. Our financial results are summarized in the table on Slide 4, and as you know, full detail by segment is included in the earnings release.

Continuing my remarks on Slide 5, Oil and Gas awards for the quarter included our share of the engineering, procurement, and construction award for the Chevron Phillips ethane cracker project in Texas and award to debottlenecking existing oil sands facility in Canada. The CPChem award, the Dow Chemical cracker, which was awarded to Fluor earlier this year and the feed award for Sasol's proposed cracker are evidence that Fluor's strong market position in petrochemical's. I feel very good about our capture rate in this very important market.

In addition to petrochemical's, we continue to be optimistic about prospects for a number of LNG projects, including the ongoing feed for Anadarko's Mozambique project, as well as in North America we expect to hear decisions in the next few quarters on our bids, both for the Kitimat project in Canada and the Cameron project in Louisiana. In downstream, we continue to track several key prospects, including refinery work in Mexico, Canada, as well as the Middle East. We hope to receive full notice to proceed on the Northwest Redwater upgrade project in Canada within the next two quarters. We continued to expect that the demand for FEED work will translate into significant EPC awards over the next year, 1.5 years. Ending Oil and Gas backlog for the quarter was $18 billion, which is level with last quarter.

Moving to Industrial and Infrastructure, new awards for the quarter were $472 million, and backlog stood at $13.8 billion, continuing its downward trend from $18 billion a year ago. While a number of the new awards during the quarter were modest, the group is pursuing a number of road and rail infrastructure projects in North America, and has several developing opportunities in mining and metals.

I'm pleased to announce that the San Francisco-Oakland Bay bridge was completed and opened for traffic during the third quarter, which was on time. I want to commend our project team for its outstanding performance in delivering this complex project to our customer. As you will know, our success on this bridge was key to our winning the Tappan Zee project in New York earlier this year.

Now, with regard to Barrick's announcement today on the Pascua-Lama Loma project, that is not a surprise to us. It is evidence of more headwind that we have within our mining and metals group, and certainly we've taken that into account in our guidance range for 2014. We fully expect to participate in this project, and when it comes back in that phased approach that Barrick was speaking about, and because of that, our backlog will not change. We are very confident in our ability to return to that project once they make their decisions and once you see some of the commodity prices return.

If you will turn to Slide 6, new awards for the quarter for Government were $1.9 billion, including the annual funding of the multi-year Department of Energy contracts to Savannah River and Portsmouth, and task orders on LOGCAP IV contract. Ending backlog for the Government segment was $1.8 billion, which compares with $1.6 billion a year ago. With regard to LOGCAP IV we expect task order volume to continue to moderate downward as the number of sites and personnel that we serve are reduced. For 2014, we anticipate full-year revenue of approximately $1 billion, down from $1.6 billion in 2013.

I want to briefly address the government shutdown that occurred at the start of the fourth quarter. While some of our competitors reported workforce furloughs, fortunately the impact to Fluor's programs were minimal, as most of our projects continue to be fully funded.

Moving to Global Services, the segment reported $25 million in segment profit and $150 million in revenues for the quarter, which compares to $29 million in segment profit and $159 million in revenue a year ago. These modestly lower results were mainly driven by reduced contributions from the equipment business line in the quarter. This group continues to be very active supporting Fluor projects, as well as external customers.

In Power, new awards were $846 million, which include $800 million for the clean energy gas-fired power plant for Dominion Virginia Power. Backlog improved to $2.1 billion, up from $1.6 billion a year ago. The Power group continues to track opportunities for new gas-fired plants, solar facilities, and plant betterment programs, as well as work on some new nuclear facilities.

With that recap, I will turn it over to Biggs who review some of the details of our operating performance and EPS guidance. With that, Biggs?

Thanks, David. Good afternoon, everyone.

Please turn to Slide 7 of the presentation. As David indicated, consolidated backlog at quarter end was $36.5 billion. The percentage of fixed-price contracts in our overall backlog was 19% at quarter end, up from 16% last quarter. Major new awards in Oil and Gas and Power drove our US backlog percentage to 34%, up from 30% last quarter.

Moving to corporate items on Slide 8, G&A expense for the quarter was $46 million, which compares with $41 million a year ago. Increased expenses in the quarter were primarily due to higher stock price driven compensation costs. The effective tax rate for the third quarter was 29%, which is lower than our expectations, in large part due to an increase in earnings from non-controlling interest, for which income taxes are not typically the responsibility of the Company. Also, current quarter taxes benefited from research and development credits, while last year's third quarter was adversely affected by a foreign tax charge. We expect the tax rate for the full year to be approximately 30%.

Shifting to the balance sheet, Fluor had cash and marketable securities of $3 billion at the end of the third quarter, which is an increase of about $400 million from the previous quarter. Cash flow from operating activities was $470 million in the third quarter, driven mainly by earning sources and lower working capital, including accounts receivable collections. As we've discussed in the past, we look at our actual cash balance on a daily basis, and cash moved up as we approach the end of the quarter. Despite some reduction of the balance this quarter end, based on our current view of cash flows for the balance of the year, we plan to repurchase between $200 million and $400 million worth of shares over the next several months. These amounts fall within the 11.8 share balance that's available under the existing Board repurchase authorization.

I will conclude my remarks by commenting on our guidance for 2013 and 2014, which is on Slide 7 -- Slide 9, excuse me. Based on strong year-to-date results, we are narrowing our guidance for 2013 to a range of $3.90 to $4.10 per share from our previous range of $3.85 to $4.20 per share. For 2014, we are establishing our initial EPS guidance at a range of $4.10 to $4.60 per share. This guidance reflects our expectation for double-digit profit growth in the Oil and Gas and Power segments, partially offset by the expected declines in the mining and metals business and the Industrial and Infrastructure segment, and continued reductions in LOGCAP IV task quarter volume in the Government segment.

During 2013, we benefited from a number of federal project closeout's, particularly in Industrial and Infrastructure. Excluding those, we are seeing I&I's underlying quarterly earnings come down in line with revenue reductions. As a result, we expect our quarterly EPS in 2014 to start at a lower level and gradually recover throughout the year with stronger earnings in the second half than the first half. Overall, we anticipate flattish revenues in 2014 at a consolidated level, but with an improving margin profile. Guidance for 2014 assumes the G&A expense will be in the range of $170 million to $180 million, and an effective tax rate of 32% to 33%. Guidance for 2014 also includes some benefit from our expected share repurchases that I mentioned earlier.

With that, operator, we are ready to take questions.

(Operator Instructions)

Andrew Kaplowitz with Barclays.

Happy Halloween.

Same to you.

David, total backlog has been dropping over the last year-plus, obviously because of mining. Do you think that over the next year, you talked about process over the next year, 1.5 years in Oil and Gas. Do think that those prospects can get Fluor to reverse that trend and start rising again, total backlog? What's your conviction level that Oil and Gas backlog can rise and get close to its previous peak that you did in 2008, low $20s billion during this current cycle?

Well, I will take those in reverse order. I've got great confidence that over the next year, 1.5 years that Oil and Gas will return to that level or larger. The question gets to be, is what's the head room -- sorry, the headwind that we've got from the shutdown on some of the mining projects in the near term. I'd remarked that mining is like Mark Twain said, mining is not dead, regardless of what people say. So there's a lot of opportunity there. We are kind of retooling our offering there, and I think we will be greatly successful.

But if you think about our revenue profile over the last, I don't know, probably two years, it's been heavily impacted by the mining burn. So we've burned a lot more. So that curve is declining more quickly than the curve on E&C new awards has picked up. So on balance we're kind of expecting a little bit flattish, if not a little bit up in 2014, but I think what I'm more excited about is the improving margin in that backlog and our ability to drive more profitability to the bottom line.

But, I really am bullish about E&C. You've heard us use the word lumpy in the past. There's some really, really large projects that are going to be decided over the next little while. We feel good about what we are going to be putting in the backlog, but it's going to take time because they're so much larger and they are having to go back to their boards one more quarter and have these decisions made. I am very bullish on where Oil and Gas is, and I feel confident that they can eclipse the former high.

Okay. That's helpful, David. I will let Jamie ask the question about oil. I wanted to ask you about I&I margin in the context of -- I know you said in your Q that their progress on two infrastructure projects. Obviously, one of them is probably Bay bridge. When you look at the 5% margin you did in the quarter, maybe Biggs David could quantify for us what the impact of these progress milestone payments were. As you look at the 2014, do you think high 4%s or 5% is achievable, given the mix change that you are going to have?

I think, Andy, you look at the third quarter. Certainly the margin rate was higher than it has run and it's higher than what we would expect going forward because of the significant pick-up on a few projects. The run rate earlier in the year was the low 4%. Given the mix change that's occurring, I think going forward it is probably going to be closer to the prior run rate than it will be to that 5%. But a lot will depend quarter to quarter on the maturity of different projects, and when we hit milestones, as projects either hit those milestones or complete, it does enable a fair amount of profit recognition for performing well. But they are not always smooth across the quarters. And going into next year, we don't see quite the same frequency of opportunity in that regard that we saw this year, and it's particularly showed up in the third quarter.

Okay. So, Biggs, is that fair to say, though, that the underlying margin is still sort of in the low 4%s, but that underlying margin could be rising a little bit as you go through the quarters in 2014, given the mix changes? That's how we should think about it?

I don't want to get too much more specific than I already got by saying yes. I think going forward, it's going to be more like what we experienced the last few quarters. It can move around. So, it's going to be tough to model on a quarter-to-quarter basis, and a lot will depend upon how projects progress next year.

Okay. Thank you, guys.

Jerry Revich with Goldman Sachs.

David, can you flesh out the magnitude of the infrastructure projects that you are pursuing from here? And just, if you don't mind, step us through the timing of final investment decisions on those?

There are mostly road, they're mostly in the United States. There are probably three that go to bid in early 2014. I'm not sure I want to get any more specific than that, but we do see a number of infrastructure-type programs. I think what you are seeing is the thirst for the PPP model, public-private partnership model, I think is only going to increase. I think there is few people as well positioned as we are to participate in those.

Within your chemicals franchise (inaudible) award this quarter, can you just update us on upcoming final investment decisions? How many do you think happened over the next six months for ethylene and propylene contracts? On the back end, once you are done with the work, what's the opportunity set for follow-on work on derivative contracts, once you have the main facilities built?

I'm really pleased. Thank you for that question. I'm really excited about that, as many of you know. I spent a lot of my career on that part of our business. Obviously, we've got two under way. CPChem and Dow. Those are in the early stages, obviously, and some of those downstream derivatives will be awarded later. We feel pretty good about our position on those projects. We are in the process of completing the FEED on Sasol. My expectation is there is a funding decision sometime early next year, at least by the middle of the year. That's the first, I think, piece of their investment there.

Right behind it you've got the gas-to-liquids programs that we are pursuing and have done some work on already. I think they are basically have sequenced them such that you won't have the huge peak in the craft manpower requirement that we were worried about, frankly, a year ago. But there's Shell and there's Sasol, and I think there's some other related projects, and then I mentioned the LNG projects. If you listened to my comments probably a year ago, I had those backwards. I thought that the gas-to-liquids would go before the LNG plants, and I'm pleased that I'm incorrect because those projects are pretty large and are pretty mature in their development. As I said in the prepared remarks, we are in competition for those projects, but we feel pretty good about our position and our ability to deliver for those customers.

Thank you very much.

Jamie Cook with Credit Suisse.

Because Andy set me up, David, you are not off the hook.

Come on now.

I guess, Dave, look, we are sitting here again. It's a year later and your margins have been hovering in the high 3%s. I guess in the context of you saying margins should improve next year, how do we think about Oil and Gas margins, in particular, as you are willing to take on some projects that have more fixed price exposure, which in my opinion says you should be looking for a higher margin because of the risk associated with that? So, I guess that's my first question.

Then I guess my second question, I don't know if it's for you or Biggs. Biggs, you mentioned earnings first half versus second half. It sounds like second half should be better. Can you give color on that? I guess, at what point, I think investors are sitting here saying, you implied earnings growth at the midpoint's about 6% percent. Why aren't we growing double-digit? Could we get to more meaningful growth in the back half of the year? Just with the dynamics of mining rolling off and LOGCAP, et cetera?

I will start on the last one and then go to your first question, ask Biggs to give the color on the other. As I said, we are in a declining curve on the mining projects. At the same time, we've got an inclining curve on oil and gas. It's just not as mature enough to show the kind of percentage growth that I think that you are suggesting. But, I believe it's clearly in front of us.

With regard to your first question in the margin, I think you are going to continue to see margin in our Oil and Gas segments continue to rise every quarter over the next little while. But I'd caution you because, a lot of those projects are fixed price, and they are going to have a different curve than the refining boom that we enjoyed in the last cycle where there was pretty steady growth quarter over quarter. It's going to look like a lot of the patterns of some of the Industrial and Infrastructure programs where a lot of the profitability will fall out when we've mitigated the risk, or passed that risk, and have the ability to drop more profitability to the bottom line.

But David (multiple speakers) sorry, go ahead.

Clearly, we expect in that backlog to have significantly better backlog on those fixed price projects than we saw in the refining boom a few years ago.

So what you said better margins in backlog? That would imply for the first time you are thinking we could approach prior peak margins in Oil and Gas versus before you've been playing that down?

You said that, I didn't.

You said we can get to (multiple speakers) margins?

I think we have the ability over time, and I'm talking about the back end of next year and into -- as we get into 2015 and even into 2016, that we will get back to those peak margin in Oil and Gas.

Okay. That's great. Sorry, just Biggs, just help me with the second half/first half earnings. Just so we don't screw things up over here.

Fair enough. I guess first of all on the year over year, I think the midpoint of our guidance in 2013, the midpoint of the guidance 2014 is about 9% year over year. Maybe I've got the calculation wrong, but (inaudible) came up with. But in terms of the trend, just using the midpoint of our guidance for this year, it would suggest a little bit lower fourth quarter as a result of some of the strong performance in infrastructure not necessarily repeating itself with the fourth quarter, and the Government business declining a little bit more in the fourth quarter over the third. So that gives us a little bit lower run rate going into next year by itself. Then we expect it to pick up as we go through the year as the Oil and Gas business continues to develop and its mix, engineering and other content matters beyond just the one of what's a mix from a fixed price or reimbursable standpoint. From a combination of effects, we expect it to grow over the course of next year as the I&Is and Government sort of moderate over the next couple quarters and then Oil and Gas starts to develop.

So declines in first half, grows in the second half? I'm sorry.

A decline here in the fourth quarter.

Yes, and then in the first (multiple speakers).

Carrying over and then picking up from there. Carrying over the first quarter next year and then picking up from there gradually.

So each quarter should see better growth sequentially?

Probably, yes. Slight growth second over the first, and then sharper to the second half. A lot will depend upon the kind of things that we always talk about of how projects progress, how they mature, how we are able to increase our booking rates based upon any milestones and those kinds of things. So pretty subjective to get too finite about it. The general trend would be that we fall off a little bit in the fourth quarter, stay down the first, and then move up over time.

Jamie, I applaud you. You are the first one that's gotten guidance within the guidance.

I've got to try. All right. I appreciate it. Thanks.

Vishal Shah with Deutsche Bank.

Thanks for taking my question. I'm just curious to get your thoughts on how we should think about LOGCAP and the decline of revenues in that business next year?

LOGCAP, you read the papers just like I do. The US military is pulling -- exercising the draw-down differently and more expediently than they did in Iraq. As I said, we expect to go from $1.6 billion to probably $1 billion next year in revenue on LOGCAP. I will say that it's still strong, and we think it will, quite frankly, extend beyond 2014. But I would point you to the way the Government group, I think it's been announced that we won the US Strategic Petroleum Reserve. So they've been really focused on growing their business and diversifying that business, and we feel pretty good about that being a pretty stable business, even though it will be down year on year because of how big LOGCAP is.

Okay. Great. Then just overall in terms of the GTL FEED activity, can you talk a little bit about timing of that and when you expect to start seeing some of that activity? Thank you.

I think the FEED activity will start to pick up as we get into next year, probably the second half. We've done some of the preliminary stuff on a couple of those projects, but I think kind of the truth, active FEED and then the EPC is back half of 2014 and into 2015.

Thank you.

Brian Konigsberg with Vertical Research.

Just going back to I&I and Pascua-Lama, the news that we heard today. I just want to make sure, are you assuming that there's no revenue contribution in 2014, and you are still keeping it in the backlog? Is that the way to think about it?

There will be some revenue on it. We've got to wind the project down effectively. I mean, there's only two months left in this project. We did the water management program for them to help them with their permitting situation. That is not complete. There will be some in early 2014 as we take that project down.

Clearly, it's a chunk of work that comes out of our earnings stream. It's a suspension, not a cancellation. As I said, I feel confident that we will be a participant in that phased approach when they start that project back up, which they said probably won't be until, maybe some of the planning work as we get into 2014, but certainly 2015. That's when I expect the mining business will pick up again, in general, in early 2015.

Thanks for that. Secondly on [Newscale]. So we are still waiting for the DOE to make it's -- to determine who the other participants are. Obviously there's been some delays, I assume, within that decision-making progress -- process. Can you give us an update on how you see that unfolding, and is there is an assumption that there is some sell-down in the stake in 2014?

There is an assumption of sell-down in stake in 2014. The government promised us they were going to tell us in August who was the successful FOA recipient, whether it's one or two. All indications are based on our proposal and the questions that have been asked, is that we are being seriously considered for one of those. Just like most things with government right now, we are just waiting and seeing. But it doesn't change much of our strategy. Clearly, we are turning down spending to match what's necessary to meet the NRC requirements in our proposal.

So there's an assumption that you are spending in 2014 does decline, based on your sell-down assumption? Can you quantify that?

Yes. But I'm not going to quantify it.

Thank you.

Tahira Afzal with KeyBanc.

Congrats. Nice quarter.

Thank you, Tahira. Nice to hear from you.

First question is really in regards to what you talked about, David, and f you put yourself in a spot by saying it's really near and dear to your heart, which is really petrochem work. Clearly, you've done pretty much close to a clean sweep in all the EPCs and some of the FEEDs that have come out on the (inaudible) cracker side. Could you talk a bit about perhaps your sort of third-generation, modular technology and processes, and how much of a role they've really played in your winning some of this work as opposed to really [slow] going out and bidding aggressively?

We've spent a lot of time and effort in improving our systems and tools and utilizing more of a modular design approach in this wave than in past waves for two primary reasons. One, we think that we have improved our design process to the point where we are actually lowing the cost of the facilities. The second is we had, obviously, a fear of an overheated craft market, and we wanted the ability to take part of that off of the job site and into a more controlled environment, thus improving schedule and quality. So we've been able to effect that, and I think it has had a positive effect on our competitive stance on those projects. There is four in North America, and we won three and we are disappointed we didn't win the fourth. But I think that we've got a competitive advantage now in how we are implementing our design tools and how that results in a much more efficient supply chain opportunity, but also more efficient construction approach.

All right. Thank you, David. The second question is really in regards to some of your international opportunities. I know there's a lot of excitement around North America. When I look at my database, I see you being on the forefront of a couple of fairly large upstream opportunities, even in the Middle East. So would love to get an idea of really looking outside of the US, what you think are really exciting opportunities for you from a backlog standpoint into next year.

Well, I think we will start with the Middle East. There's a lot of projects coming both upstream and downstream that we are pursuing and feel pretty good about, and the refining market in Kuwait is an example. The clean fields programs are -- the bids are under developments as we speak. I'm not optimistic that the fourth refinery will actually be bid until late next year, if not into 2015. Those programs have been on kind of a quiet phase for quite some time. We are very active in the proposal steps on the clean fuels piece of that.

We are very bullish on the upstream market, particularly with the ADMA-OPCO part of ADNOC in the UAE. We continue to win front-end work with them relative to gas processing, and I think that we will see some success there. So the Middle East in general, I think just those two places give us great optimism for growth outside the United States. Kazakhstan, the continuing on TCO and the next phases there, we feel very good about, as well as some of the major pipeline programs that are there in Russia and Kazakhstan and the former Soviet Union.

In China, there is a fair amount of refining work, and again we've been able to participate in that. We are one of the few, I think we are the only Western contractor that has our own design license and our own construction license. So that gives us a competitive advantage in China. But we are also seeing opportunities in places like Singapore and other places in Southeast Asia in the refining sector that are quite optimistic.

Australia continues to go. I'm not sure when this next phase of Santos will go, but we feel pretty good about finishing the first phase of that project on time, and feel good about the next phases. So ending in Canada, we've been excited about the gas in the States. But Canada, the refinery there, continuing work in the oil sands. I think we've made some step change in our skill set and the people we have around a SAGD and some of those programs are in the early stages. So, and all that together, I'm really bullish about what our Oil and Gas group can do over the next three to five years, frankly. I think that with some of the improvements I mentioned in our tools and systems and how we go about project, and taking more of a direct hire and controlling some of the fabrication, I think it is gives a competitive advantage. And I see great head room in that part of our business.

Thanks a lot, David. That was very helpful.

Steven Fisher with UBS.

David, you talked about those increasing fixed -- number of fixed-price projects. How much risk are you willing to put in the backlog at this point? Then has your perspective changed on that as things in the marketplace have been a bit slower than expected?

I wouldn't say it changed, the slowness. We kind of anticipated it because these projects are getting so large that there's a little bit longer gestation period on them. So that's not a surprise. On the lump sum piece, I will answer it two ways. One, we've been as high as 45%, 50% of our backlog in fixed-price, primarily in the days when we were doing a lot of the Power work. But because of that Power work and that experience, we've been able to transfer some of that knowledge over to our Oil and Gas business that kind of is the underpinning of our confidence of being able to deliver more lump sum in Oil and Gas, which is supported by the improvement of tools and systems that I spoke of in Tahira's question. We are still, what, less than 20% fixed price.

There's great head room in our comfort in moving that number north. But I much more confident in our execution capability today then I have been in some time. It's because we have invested in those tools and systems, and we have been successful in moving people around that have that expertise. So I feel pretty good about our position of being able to not only be competitive, but to deliver the profitability that's expected.

For Biggs, what opportunities do you foresee in 2014 to repatriate any of your international cash? Do you anticipate just generally generating more US cash next year?

As far as the first question goes, we really can repatriate today without too much tax consequence. The cash that we see as being really not readily available is the cash which is either tied up in joint ventures or for which it's in the form of a customer advance tied to a specific project. That's when we have a tendency to most carve out and say we really can't use that for operating purposes outside of specific projects to which they are tied and that we don't count on from the standpoint of having the kind of cushion we need to have for liquidity. So although there can be some inefficiency with international, we have to take into consideration that it's not the big driver of what we have available. What the big driver is, what's tied to projects, JVs, and what's the amount of liquidity we feel like we need to maintain.

Do think that with the growth in domestic business, an increase in the backlog evidencing that, we will see more cash generation domestically. However, as I said, that's not necessarily a big driver of our redeployment considerations. It's more a matter of do we have excess liquidity beyond the $1 billion or $1.5 cushion that we feel like we need to have, and are there any other better investment opportunities? If there aren't other better investment opportunities, then after we have continuously satisfied our dividend commitments, or chosen to increase them, then that's when we look to share repurchase.

Okay. Thank you.

Michael Dudas with Sterne Agee.

David, two quick questions. First on the LNG space in North America. A little bit bigger picture. You are quite involved now these days. How much do we think there are in North America, including Canada, and even maybe a longer-term project that can happen in Alaska, I hear from (inaudible) of your customers, do you foresee? Is Fluor positioned to take a lot more than we see right now, or are you comfortable with your positioning?

I'm pretty comfortable with our positioning. We want to make sure that we are focused on the ones that are going to happen the quickest. I think that there is a lot of growth for us. I'm very happy with our relationship with JGC. I worked with JGC for at least since the early 1990s on different programs, and have great respect for the capability and the relationship that we've created there, actually makes us part of that club, and that's a club we haven't been -- haven't had access to. So I feel really good about where we are. Feel good about the competitive bids that we've put in on the two that the bids are actually active, including the fact that we are one of the FEED contractors on Mozambique. I think that there's a challenge on Mozambique from a timing standpoint, but notwithstanding that, I still feel good about our position to continue to participate in that program. I think when you think about the whole gas play, in my previous comments I thought petrochemicals would go first, which it has. I thought LNG would be last, which it's not.

I think the question gets to be is at what point does the supply -- the demand start to outstrip the supply, and what happens to gas prices? I don't think we are going to see dramatic rise, but LNG is a global commodity, and I don't know why the US would look at that any differently than the rest of the world. I think that the flows are going to change relative to who gets what flows around the world. I feel pretty good about our position, and we are going to take this one project at a time and make sure that we can execute that project with excellence and deliver the profitability. Their big programs, big projects. We've got a partner that we're dealing with that we are happy with. So I feel pretty good about where we are.

Just a quick follow-up, David, on Power. The likelihood of one or two similar type bookings in 2014 that what we witnessed there in Virginia?

Well, I think we are continue to work on the front-end of several gas-power power plants. If the economy continues to improve in the United States, you are going to see an improving demand in electricity usage. At the same time, once we get the environmental regulations and rules exacted from the EPA and otherwise, I think there is going to be a demand. When it is in 2014 and whether it even moves to 2015, I really, I have no clue right now based on what's going to happen with the regs. I feel good about our position and the fact that the Dominion project is up and running -- up and off to a good start from an execution standpoint. Our ability to prove that we can execute is clear.

Thank you, David, everyone.

Andrew Wittman with Baird.

David, just wanted to dig into the earnings cadence as we move into 2014 a little bit more. How much of the bookings -- how much visibility through bookings that are already on the books are in place today that gives you confidence with the earnings ramp as we go through 2014? In other words, how much is there today versus what needs to be won to get that second-half acceleration?

Well, two comments. I know I'm going to regret my comment about the Giants at some point in the near term. Secondly, the fact that Jamie got Biggs to give you guidance within the guidance gives you an answer that we feel pretty good about the profile of EPS as it goes through the quarters next year. We feel pretty good and have visibility into how we are going to get there.

In terms of the buyback coming out of last quarter, it sounded like you're pretty confident that you wanted to kind of use the timing of the cash flow. The cash flows in the quarter were pretty good. Yet you didn't buy stock. Was this something that changed in the quarter about the way you viewed the capital allocation, or can you just kind of take us to the process, why nothing happened in this quarter with it? And now in the near term you are saying you are coming back and do this now. I'm just wondering, was there a change in the thought process in the last three, six months, how you're looking at buyback and cash flow?

There's really been no change in our philosophy. As I said in my comments, the cash built up towards the end of the quarter, and we have a pretty good view towards it staying high, our cash generation being good through the rest of this year. So it just was ample trigger to go ahead and commit. So I think rather than spend a lot of time on what -- all the circumstances were of the last quarter, last few quarters, I'd focused more about the fact that we've stepped out and made a commitment that we are going to spend $204 million over the next several months.

Fair question, Maybe the last question here is just talking about labor utilization, knowing that there is eventually going to be a substantial ramp. David, you been pretty outspoken about thoughts about constraints on labor. Can you just talk about where you are today on that and how much the Fluor model has in terms of leverage from underutilization that could go to well-utilized labor the next quarter or two, and what that could mean to your margins? Can you just give us some context about where your people are being billed today?

I think in addition to my comments about the tools and systems, also we perfected the dispersed execution model to where we have greater capacity, because instead of taking Houston to 5000 people again, we can grow the entire portfolio and be effective in how we do design. That's the design side and the project management side. So we feel pretty good about our ability to scale this thing up quite a bit in the near term and over the long term to service as the oil and gas boom. But also, it's kind of retooling our organization with some pretty talented folks, and I'm really pleased with where we stand there.

On the craft side, we've invested in training programs in Texas and Louisiana so that we can get a head start on that craft. We do believe that we are an employer of choice in that marketplace, and early indications are based on our past and the fact that we are a direct-hire constructor, I think what we've seen in terms of interest in this training programs, interest in getting lined up for the projects that we already have going on, like Dow Freeport and some other things, we feel pretty good about our ability to scale the craft resources as well. If you think about the petrochemical boom, we've got the first three of the big programs in Louisiana and Texas. So we will be the first one staffing those people and have that following that we are going to need to continue as we get into the bigger projects in LNG, and gas-to-liquids and power, and some of the other programs that are out there for us in that southeastern region of the United States. So I feel pretty good about our position. And I feel pretty good about our ability to turn the crank here and get the people we need to be successful.

I might just add, you asked about labor, but certainly as -- if you look at not just labor, but non-labor components of our overhead cost, as E&C ramps up, there will be benefit to their margins from increased leverage against overhead. So, it will be a contributor. We have, as David said, we have the labor capacity and ability to grow across the world, but from an overhead standpoint, there will be improved leverage as well contributing.

Thank you very much.

Alex Rygiel with FBR Capital Markets.

Two quick questions. David or Biggs, maybe you could identify one or two sort of primary variables that could result in earnings of either $4.10 or $4.60? Then I have a follow-up.

Why don't we move to your follow-up? That would be guidance within the guidance.

If I could expand upon that a little bit, do you think is the timing of certain projects? Or do think it's sort of the margin profile of what's in backlog and how that comes through the P&L?

I think it's more timing, more than anything else. Clearly, things like Pascua-Lama, the headwind that that presents is included in that range. But barring any more cancellations, I feel good about where we are and the visibility, again, into how we are going to get there. I think between the low and the high is clearly a timing element.

Okay. Secondly, if we were to exclude Pascua-Lama, because I think we all understand what's going on there, any other sizable projects that were canceled or delayed in the quarter?

No.

No, very helpful. Thank you very much.

John Rogers with D.A. Davidson.

I just wanted to touch a little bit on plans for and uses of cash. I appreciate the plans to step up the repurchases, but when you generated a lot -- $470 million in the quarter, you are holding a lot of cash. David, any thoughts there on this cycle? Some reason that you have to hold more going into it, or just waiting for the right opportunity?

As Biggs said, I don't think our strategy or how we think of this has changed. I think when you look at the headwinds that were there around a government shutdown and all of the challenges that we've seen in front of us, I think it was prudent to wait and see. I think there's a lot of uncertainty out there, and I believe that having a healthy cash balance allows us to do what we need to do to prepare to grow. I don't think there's any magic in why it's a fourth quarter/first quarter buying binge, if you will. But I think that as we go through next year, you will see a more normal buyback process, because we do think that we are going to generate excess cash over what we think we need, which I appreciate is a different number than what you guys think we ought to have.

All right. Are you still of the mind that you are better off building capabilities than buying them?

Well, I think we've proven that we know how to grow organically pretty well. We have great control over that. I do believe that there are some weaknesses and maybe some holes in our current offering from a market perspective and from a geographic perspective, and we are going to look to see how we fill those holes. I think that some acquisitive growth mentioned in its makeup is something that we've got to consider pretty directly, as we go into 2014.

Okay. I appreciate the color. Thanks.

George O'Leary with Tudor Pickering.

Just a quick follow-up on that last question. Maybe some of the areas that you are considering, or some of the holes that you are considering. What, I guess, segments would those fall into?

I would say across the board. We've got a good position in all the markets that we are in, but we can always get better.

Sure.

I think that there's some room in our Oil and Gas offering that -- in the upstream piece that would be helpful. I also think there's room in our Government offering, based on some of the changes that we are seeing. I think there's also opportunity when we think about Infrastructure. But what that means and what shape that takes, I think that I would caution you with our conservatism. And the fact that we grow organically pretty well, and again because I believe we are an employer of choice, we got the ability to go get the critical people we need pretty readily and then build from there.

All right, thanks for that. Last question from me. With Canada and Kitimat both coming up, I think the expectations are that both of those projects kind of hit in the first half of next year, and potentially Q1 of 2014, I guess. First, are you kind of onboard with that timeline? Second, how do you feel you guys are in the running for the KBR project, given -- sorry, for the Kitimat project, given there's a couple of bidders there?

Thank you for that correction. (Laughter) I wouldn't -- I feel really good about our position. Basically, we are competing against one other consortium in both cases. I feel really good about where we stand on both of them. I'm not sure that I agree that both will hit in the first half of next year. I think one will, and I think one will push out later in the year.

All right. Thanks very much, guys.

Our final question from Robert Connors with Stifel Nicolaus.

With the receivables coming down and the Government mix dissipating, do you see the opportunity that, I know you gave your EPS guidance range, but that the operating cash flow in 2014 could be a little bit higher than that range?

Well, the government is a very steady payer. But certainly on the Government business, as revenues come down, there should be less tied up in working capital. That's true. Of course on the E&C side, we've got growing activities and so that's going to take some working capital. I think all in all, the relationship between working capital and revenues should be largely the same 2014 as 2013. But I just have to caution everybody. When you have very large projects, there could be some very significant payments that come in, and they could come in the day before the end of the quarter and the cash balance goes up, and they can come in a day later and the cash balance goes down. So that's why we look at it on a day-to-day basis to see what's happening. So you have some volatility quarter to quarter. Looking at it on a normalized run rate basis, we would expect a similar relationship between working capital and revenue next year as this year, as I said.

I may have missed it. But where do you think corporate G&A shakes out for 2013?

I guided, I think, to $170 million to $180 million.

Okay, or for 2013?

I'm sorry. I give (inaudible) 2014. I didn't give a distinct number for 2013.

Okay. All right. Thank you.

Thank you. And gentlemen, that was our final question. I will turn it back to you for any closing remarks.

Thank you operator, and thanks to everyone participating on the call this afternoon. I appreciate your interest in our Company.

As I think I've expressed, I feel pretty good about our financial performance so far this year, particularly given the sharp falloff that we've seen in the mining and metals market. Our Oil and Gas and Power and Infrastructure businesses have all performed well, and are delivering, I think, strong growth in 2013. Importantly, the Oil and Gas segment has been very successful, as we've said, in capturing the key awards during the year that we signaled, and positioning ourselves quite well for substantial new awards as we go to 2014 and beyond. I want to reiterate that we think that we are in the early stages, early innings if you will, of a substantial multi-year oil and gas investment cycle, and our market position and prospects for growth are extremely strong. And I think our outlook is very positive. We greatly appreciate your interest in Fluor and your confidence in our Company. I wish everyone a safe Halloween and good day.

Thank you. This does conclude today's program. You may disconnect at any time, and have a great day.