URS's CEO Discusses Q2 2012 Results - Earnings Transcript

URS Corporation (URS)

Q2 2012 Earnings Call

August 07, 2012 5:00 p.m. ET

Executives

Martin Koffel, Chairman, Chief Executive Officer

Thomas Hicks – Chief Financial Officer

Analysts

Tahira Afzal – KeyBanc

Alex Rygiel – FBR

Andrew Biscotti – Credit Suisse

Michael Bivins – Sterne Agee

Richard Paget – Imperial Capital

Andy Kaplowitz – Barclays

John Rogers – DA Davidson

Steven Fisher – UBS

Andrew Wittmann – Robert W Baird

Presentation

Operator

Good afternoon, and welcome to the URS Corporation Earnings Conference Call for the second quarter of fiscal 2012.To begin I’ll turn the call over to Mr. Thomas Hicks, Chief Financial Officer of URS. Mr. Hicks, sir you may begin.

Tom Hicks

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, the Flynn acquisition, earnings and financial condition, foreign currency gains and losses, outstanding shares, 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 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 Form 10-Q for the quarterly period ending June 29, 2012, as well as in other SEC filings. And we assume no obligation to revise or update any forward-looking statements. A webcast of the call’s available on our Investor Relations portion of our website and will be archived in audio form on the website for a limited period.

With that, I’ll turn the call over to Martin Koffel our Chairman and Chief Executive Officer.

Martin Koffel

Good afternoon, and thank you for joining us. In addition to Tom Hicks the team with me here in San Francisco includes Gary Jandegian, President of Infrastructure and Environment; Randy Wortring, President of Federal Services; Bob Zaist, President of Energy and Construction; Martin Tanzer, Executive Vice President of Marketing; Reed Brimhall, Vice President and Chief Accounting Officer; and Sam Ramraj, Vice President of Investor Relations.

I should also like to welcome Bill Lingard, President of the Oil & Gas division, is joining our earnings call for the first time. Bill of course is the former President and Chief Executive Officer of Flint Energy Services. And we completed the acquisition of Flint in May. And we’re all delighted that Bill and his outstanding team are now a part of URS Corporation.

The response from customers to the acquisition overwhelmingly has been positive. Many of our multinational clients in the Oil & Gas sector already have inquired about utilizing our now expanded services. Our legacy URS clients want to learn about the new construction and maintenance capabilities that we gained through the acquisition of Flint. And clients of the former Flint Energy business are interested in URS’s engineering and our environmental services. Our expanded geographic reach is also very appealing to customers. With Flint we now offer full EPC capabilities in essentially all the major North American Oil & Gas regions. And already a joint team including our new Oil & Gas division is performing well-paid site assessment work in Pennsylvania for a major Oil & Gas customer.

Of course Flint has also added a substantial and growing book of business that provides for us an immediate basis of work. At Flint’s book of business, which was $1.8 billion when we closed the acquisition on May 14 already has grown to $1.9 billion at the end of our second quarter. This continued growth underscores the robust opportunity in the American Oil & Gas market, which is the reason we’re so excited to have an industry leading team in house at URS. And the integration of the new business is going very well indeed.

Those of you who have followed URS over the years know that integrating acquisitions is indeed one of our core strengths. And with regard to Flint, our assessment of the highly complementary nature of our operational capabilities, as well as the seamless cultural fit has only strengthened since we closed the acquisition.

Now before I discuss our results of the second quarter, I should like to point out that our reported results include only seven weeks of Flint’s operations. And the results also include acquisition related expenses. The results will be provided with and without these expenses so that you have a clear picture of our underlying operational performance, which continues to be strong.

Our revenues were solid at $2.7 billion. Now that’s a 14% increase from the second quarter of last year. These results include approximately $278 million in revenues from Flint for the seven-week period after the transaction was completed. Flint revenues contributed approximately 12% of the 14% revenue growth in the second quarter. On a GAAP basis net income for the quarter was $53.6 million and earnings per share was $0.72.

Now our GAAP net income includes $11.3 million in pre-tax expenses related to the acquisition of Flint. These expenses equate to $0.16 per share on an after tax basis. As a part of the financing of the Flint acquisition an intercompany loan between two euro subsidiaries, one was Canadian and one was U.S. based, was put in place to enhance the value of the transaction. In the future, we’ll be recording a noncash expense or income item each quarter to recognize U.S. Canadian currency exchange rate movements.

The second quarter income statement includes charges for foreign currency losses related to an intercompany loan and for foreign country contracts totaling $9.2 million or $0.12 per share. Excluding the transaction expenses and the charges for foreign currency losses relating to the intercompany loan and the foreign currency contracts, U.S.’s net income for the quarter would’ve been $74.7 million. That’s a 10% increase over the non-GAAP net income in the second quarter of 2011. And earnings per share, excluding these items would’ve been $1.00, which is a 15% gain over the same period last year on a non-GAAP basis. A reconciliation of net income and earnings per share with or without the acquisition related expenses and the foreign currency charges is provided in the reconciliation schedule on our website at www.urs.com, and in our earnings press release.

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