Fluor Corporation (FLR)

Q2 2010 Earnings Call

July 26, 2010 5:30 PM ET


Ken Lockwood – Vice President, Investor Relations

Alan Boeckmann – Chairman and CEO

David Seaton – Chief Operating Officer

Mike Steuert – Chief Financial Officer


Steven Fisher – UBS

Michael Dudas – Jefferies

Graham Mattison – Lazard Capital Markets

Andrew Kaplowitz – Barclays Capital

John Rogers – D.A. Davidson

Scott Levine – JP Morgan

Will Gabrielski – Gleacher

Brian Uhlmer – Pritchard Capital

Joe Ritchie – Goldman Sachs

Peter Chang – Credit Suisse

Barry Bannister – Stifel Nicolaus

Chase Jacobson – Sterne, Agee



Please standby. Good afternoon. And welcome to the Fluor Corporation’s Second Quarter 2010 Conference Call. Today’s call is being recorded. At this time, all participants are in a listen-only mode. The 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 August 1st at the following telephone number, 888-203-1112. The passcode of 6080434 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.

Ken Lockwood

Thank you, Operator. And welcome everyone to Fluor’s second quarter 2010 conference call. With us today in the room with me are Alan Boeckmann, Fluor’s Chairman and CEO; David Seaton, Fluor’s Chief Operating Officer; and Mike Steuert, Fluor’s Chief Financial Officer.

Our earnings announcement was released this afternoon after the market closed. Our 10-Q will be available tomorrow, July 27th. We have posted a slide presentation on our website, which we will reference while making 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 two of the presentation. During today’s call and slide presentation, we will be making forward-looking statements, which reflect our current analysis of existing trends and information, and there is inherent risk that actual results and experience could differ materially. You can find a discussion of those risk factors in our 10-K, which was filed on February 25, 2010.

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 will turn the call over to Alan Boeckmann, our Chairman and CEO.

Alan Boeckmann

Thank you, Ken. Good afternoon, everybody, and I’d like to thank you for joining us today. We’re going to be reviewing our results for the second quarter and providing an update on our outlook for 2010. I’d like to start by looking at some of our second quarter financial highlights and I’m going to refer you to slide three.

Net earnings attributable to Fluor for the second quarter were $157 million or $0.87 per diluted share. Now these results reflect solid profitability across our portfolio, but it’s noteworthy that year-over-year increases in the Industrial & Infrastructure, Power and Global Service segments did -- were offset by a continuing decline in revenue and earnings for Oil & Gas.

Moving to slide four, second quarter new awards were a record $9.3 billion and it’s important to note that this surpassed our previous corporate record of $8.8 billion, which was achieved in the third quarter of 2008, and it’s certainly well above the recent quarterly run rate of approximately $3 billion.

The majority of these awards received during the quarter were from our Mining business line in the Industrial & Infrastructure segment and as we anticipated, our backlog increased in the quarter, rising to $30.2 billion, which is a $4.5 billion increase over the last quarter.

I’d like to take this time to point out what I think is an important facts that drives Fluor Corporation and that is our diversity. I think our large Mining awards this quarter are yet another reminder that this strategy of diversity continues to set us apart from all others in the engineering and construction peer group. Whether you look at our business from an industry or a geographic perspective, we are the leader in a number of important markets.

We’ve obviously had broad success in Oil & Gas for many years but now we’ve ramped up our Mining business to unprecedented levels and we’ve done also very well in growing our Government and Infrastructure businesses. And while power is slow right now, yet we believe it will absolutely cycle up again at some point.

We know that many investors are solely focused on energy markets but Fluor is much more diversified than that. Our backlog at the end of this quarter is now 72% outside the United States and this speaks volumes about our global reach. When you add the strength of our balance sheet and our strong double-digit returns, we believe that we offer best-in-class industry performance.

I’d now like to turn the phone over to David Seaton, Fluor’s Chief Operating Officer, who will provide a brief update on the markets in each of our segments. David?

David Seaton

Thanks, Alan, and good afternoon. If you turn to slide five, I’ll start with Oil & Gas. Our Oil & Gas group continues to make progress in upstream, with small incremental awards on a multi-billion oil sands program and an award for project management services on the Shah Gas program in Abu Dhabi.

During the quarter, we also announced that we were selected by Santos for the Gladstone LNG project in Australia and booked the early works portion of that project in the quarter, with full EPC expected later in this year or early into next year.

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