Q2 2011 Earnings Call
August 09, 2011 5:00 pm ET
Robert Zaist - President of Energy & Construction Business
Martin Koffel - Chairman of the Board, Chief Executive Officer and President
Randall Wotring - Vice President and President of the Federal Services Business
H. Hicks - Chief Financial Officer and Vice President
Martin Tanzer - Executive Vice President of Marketing
Gary Jandegian - Vice President and President of the Infrastructure & Environment Business
Scott Levine - JP Morgan Chase & Co
Alexander Rygiel - FBR Capital Markets & Co.
Tahira Afzal - KeyBanc Capital Markets Inc.
Richard Paget - WJB Capital Group, Inc.
John Rogers - D.A. Davidson & Co.
Andrew Wittmann - Robert W. Baird & Co. Incorporated
Andy Kaplowitz - Barclays Capital
Andrew Obin - BofA Merrill Lynch
Jamie Cook - Crédit Suisse AG
Will Gabrielski - Gleacher & Company, Inc.
Avram Fisher - BMO Capital Markets U.S.
Good afternoon and welcome to the URS Corp. Earnings Conference Call for the Second Quarter of Fiscal 2011. To begin, I'll turn the call over to Mr. Thomas Hicks, Chief Financial Officer for URS. Mr. Hicks, please go ahead.
Well thank you, and good afternoon, everyone. Before we get started, let me remind you that today's call will contain forward-looking statements, including statements about our revenues, business prospects, book of business, earnings and financial condition, outstanding shares, economic and industry conditions, and other statements that are not historic facts.
These statements represent our predictions and expectations as to future events, which we believe are reasonable or based on reasonable assumptions. However, numerous risks and uncertainties could cause actual results to differ materially from those expressed or implied in the forward-looking statements.
Information about some of these risks and uncertainties can be found in our earnings release and our Form 10-Q for the quarterly period ended July 1, 2011, as well as in other SEC filings. And we assume no obligation to revise or update any forward-looking statements.
A webcast of this call is available on the Investor Relations portion of our website, and will be archived in audio form on the website for a limited period. And with that, I'll turn the call over to Martin Koffel, our Chairman and Chief Executive Officer.
Good afternoon, and thank you for joining us. In addition to Tom, the team with me here in San Francisco this afternoon includes Gary Jandegian, President of Infrastructure and Environment; Randy Wotring, President of Federal Services; Martin Tanzer, Executive Vice President of Marketing; Reed Brimhall, Corporate Controller and Chief Accounting Officer; and Sam Ramraj, Vice President of Investor Relations.
I should also like to welcome Bob Zaist, our new President of Energy and Construction. Bob previously served as Senior Executive Vice President of the E&C division, and has more than 40 years of experience with the company. Many of you already know him from his participation in prior earnings calls, and through personal meetings at investor gatherings.
As usual, we'll begin with some prepared remarks and then open your call up for questions. Now I'll begin by reviewing the results for the quarter. Revenues were $2.36 billion, an increase of 5% from the second quarter of last year and net income was $66.8 million, up 8% from the second quarter of 2010, and earnings per share was $0.86, an increase of 13% from last year.
We generated $152 million in cash flow from operations. And at the end of the quarter, our net debt was approximately $324 million. So we are pleased with our second quarter results, which reflect the success of our strategy to build a balanced portfolio in 4 key market sectors.
At the end of the second quarter, our book of business remains strong at $28.7 billion. The Industrial and Commercial sector recovery continues to gain momentum. Second quarter revenues grew by 22% compared with last year. This follows a similar revenue increase in the first quarter this year.
Industrial and commercial backlog is up 19% from the end of 2010, reflecting favorable trends across this sector. As strong commodity prices are supporting mining expansions as well as increased capital expenditures in the oil and gas market.
Concurrent increases in manufacturing and process-related production in the U.S. and abroad have listing demand for our full life cycle, engineering, environmental, construction, and facilities management services.
Obviously, the economic and political turbulence in recent weeks is cause for concern. Nonetheless, the fundamentals on which our business is built remains strong, and these fundamentals will be the focus of our discussion with you today.
Firstly, trends in the federal market are positive with Congress moving forward on the 2012 DoD and DoE budgets, procurement activity by these agencies has begun to accelerate and we're bidding on an increasing number of new assignments. And whilst it will take time for agencies to complete the procurement process, we anticipate the pace of awards will increase later this year and early next year.
Honestly, there's been a great deal of discussion about the federal budget in recent weeks. However, much of our federal work involves the provision of essential services that are unlikely to face significant cuts. These include critical threat reduction programs, military preparedness initiatives and Nuclear Decommissioning and operations management programs.
In addition, our recent acquisition of Apptis provides us with access to the growing federal IT market. Apptis is a leader in complex IT services, including cloud computing, which federal agencies increasingly are utilizing to reduce their operating costs. And secondly, the state budget picture is now clearer. 47 states have now approved budgets in place for fiscal 2012.
State tax revenues grew about 10% in the first quarter of 2011 compared with last year. And preliminary figures for April and May showed that tax revenues have actually continued to increase. In addition, many states have made discretionary cuts to certain programs to balance their budgets. And after a long delay, Congress is now starting to address the reauthorization of SAFETEA-LU, the Federal Highway Bill. Once a new multiyear federal funding program is enacted, it should give state transportation agencies the confidence to move forward on large long-term infrastructure projects.
And finally, there have been several positive developments in the power market. Last month, the U.S. Environmental Protection Agency issued long-awaited changes to Federal Emissions Control Regulations. The implementation of these regulations should enhance growth in the emissions control market.
In the aftermath of the crisis at the Fukushima power plant in Japan, the Nuclear Regulatory Commission staff has proposed new regulations to improve safety at U.S. plants. The NRC's proposals should create both short- and long-term opportunities for URS to provide engineering, design and construction services, as plant retrofits are implemented.