URS's CEO Discusses Q1 2012 Results - Earnings Call Transcript


Q1 2012 Earnings Call

May 08, 2012 5:00 pm ET


H. Thomas Hicks - Chief Financial Officer and Vice President

Martin M. Koffel - Chairman of the Board, Chief Executive Officer and President

Robert W. Zaist - President of Energy & Construction Business

Gary V. Jandegian - Vice President and President of the Infrastructure & Environment Business

Randall A. Wotring - Vice President and President of the Federal Services Business


Alexander J. Rygiel - FBR Capital Markets & Co., Research Division

Jamie L. Cook - Crédit Suisse AG, Research Division

Andy Kaplowitz - Barclays Capital, Research Division

John Rogers - D.A. Davidson & Co., Research Division

Richard Paget

Tahira Afzal - KeyBanc Capital Markets Inc., Research Division

Avram Fisher - BMO Capital Markets U.S.

Andrew J. Wittmann - Robert W. Baird & Co. Incorporated, Research Division

Scott J. Levine - JP Morgan Chase & Co, Research Division

Steven Fisher - UBS Investment Bank, Research Division



Good afternoon, and welcome to the URS Corporation Earnings Conference Call for the First Quarter of Fiscal 2012. To begin, I'll turn the call over to Mr. Thomas Hicks, Chief Financial Officer of URS. Mr. Hicks?

H. Thomas Hicks

Well good afternoon, everyone. Before we get started, let me remind you today's call will contain forward-looking statements, including statements about our revenues, business prospects, book of business, closing of the Flint acquisition, earnings and financial condition, dividends, tax rate, 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 and are 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 Form 10-Q for the quarterly period ended March 30, 2012, as well as in our 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 CEO.

Martin M. Koffel

Good afternoon, and thank you for joining us. In addition to Tom, I have with me in San Francisco, the team with whom most of you are familiar. Gary Jandegian, President of Infrastructure & Environment; Randy Wotring, President of Federal Services; Rob Zaist, President of Energy & Construction; Martin Tanzer, Executive Vice President of Marketing; Reed Brimhall, Corporate Controller and Chief Accounting Officer; and Sam Ramraj, Vice President of Investor Relations.

And before discussing our first quarter results, I'd like to update you on the Flint Energy acquisition that we announced in February. We're pleased that the acquisition was approved by Flint shareholders in April, and we expect to receive final regulatory approval and close the acquisition in the course of next week.

As discussed in February and with many of you subsequently, Flint, in our view, is the perfect fit for us, and given our long-held ambition, I discussed this with you on many calls, to expand our position in the oil and gas market. It's also wholly consistent as we explained at the time of the announcement with our strategy and track record of expanding into high-growth markets and further diversifying our revenue and backlog.

We are very enthusiastic indeed about the potential of the Canadian oil sands and the North American unconventional oil and gas segments. We're also confident about Flint's positive near- and long-term benefits to URS's earnings profile. As you may have seen, Flint reported strong first quarter results just last week, and this underscores our enthusiasm for the acquisition as we go forward.

And to remind you, on the closing, Flint will become a new division of URS, it will be led by Bill Lingard, Flint's President and Chief Executive Officer. And more than 20% of URS's revenues will then derive from the oil and gas sector. And given its increased importance, we have actually started to report our oil and gas business as a separate sector beginning this quarter, the first quarter of '12. In the past as you're aware, oil and gas was actually included in our Industrial & Commercial sector. So at the same time, we have simplified the name of our Industrial & Commercial sector simply to the Industrial sector.

With that, let me summarize our results for the quarter, which I trust you've seen in the release. And we're really pleased with the outcome. The year started out well indeed. Revenues were $2.36 billion, up 2% from the first quarter of 2011. Net income was $79.7 million, that's a 28% increase over last year. And EPS was $1.07, 35% higher than the prior-year period.

And net income and EPS results include $3.4 million in expenses net of tax related directly to the acquisition of Flint Energy. Excluding these costs, net income was $83 million, a 34% increase from the first quarter of 2011.

EPS excluding those acquisition expenses would have been $1.12, that's a 42% gain over the same period last year. Now a reconciliation of net income and earnings per share with and without the acquisition-related expenses that I explained is included in the reconciliation schedule that's on our website, www.URS.com, and enclosed in our earnings press release.

Our performance this quarter gives us added confidence in our outlook for the year. We continue to benefit from our diversified portfolio. Conditions in the private sector markets that we serve, which include power, oil and gas and what we now call, industrial, are improving as a result of the mild but steady economic recovery. The outlook for the Infrastructure and Federal sectors also remain favorable.

And to be specific, in the Federal sector, we continue to benefit from our sizable and stable base of work with a diverse set of clients, as well as our ability to successfully enter new high-growth markets. And you've seen us do that in the past 6 months.

In the Infrastructure sector, improving state revenues and the availability of alternative financing is leading to increased procurement activity and new project awards. We ended the quarter with a $3.2 billion backlog of infrastructure work. That's actually the highest in the company's history.

Activity in the oil and gas market remains robust as our clients increased capital expenditures in the Canadian oil sands and for unconventional gas projects. Our backlog of oil and gas work increased by 18% during the quarter. And of course, this backlog does not yet include Flint.

In the industrial sector, which now comprises our industrial, manufacturing and mining work, we continue to benefit from the resurgence in mining activity and the expansion of our facilities management services for multinational companies around the world. And this too is reflected in our backlog of industrial work, which increased by 42% during the first quarter.

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