Fluor Corporation (FLR) Q1 2013 Earnings Report, Transcript and Summary

Good afternoon, and welcome to Fluor Corporation's First 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 May 8 at the following telephone number: (888) 203-1112. The passcode of 4490608 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.

Thanks very much, operator. Welcome, everyone, to Fluor's First 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 the market closed, and we have posted a slide presentation on our website, which we will reference while making our prepared remarks. Before getting started, I'd like to refer you to our Safe Harbor note regarding the forward-looking statements, which we have summarized on Slide 2. During today's call and slide 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 the company's 10-K. 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 also posted in the Investor Relations section of our website at investor.fluor.com. We've also updated and posted our factbook on our website, which includes a 3-year financial recast for the organizational realignment that went in effect with this quarter's reporting and will be discussed somewhat on today's call. With that, I'll turn the call over to David Seaton, Fluor's Chairman and CEO. David?

Thanks, Ken. Good afternoon, and thank you to everyone for joining us today. Today, as Ken said, we'll be reviewing our first quarter results and discussing the trends we see through the remainder of 2013. If you would turn to Slide 3, I'd like to begin by covering some of our highlights of the first quarter's financial performance. Net earnings attributable to Fluor for the quarter were $166 million or $1.02 per diluted share, which is up from $155 million or $0.91 per share in the first quarter 2012, which included the benefit of a lower tax rate. Consolidated segment profit for the quarter was $294 million, up 16% and $253 million a year ago. Segment profit results were driven by growth in Oil & Gas, Industrial & Infrastructure and Government segments. Oil & Gas segment profit was particularly strong, with first quarter results of $105 million, which is a 42% increase over last year. Consolidated revenue for the quarter was $7.2 billion, up 14% over last year, including a substantial increase in Oil & Gas. New awards for the quarter was strong at $6.5 billion, including $3.1 billion in Oil & Gas and $2.2 billion in Industrial & Infrastructure. Consolidated backlog was $37.5 billion, which is down from a year ago, primarily due to the downturn in the Mining & Metals market. More importantly, as we commented last quarter, we continue to see improving margins on our backlog, which is encouraging. Our financial results are summarized on a table on Slide 4. I'll continue my remarks on Slide 5. Oil & Gas awards for the quarter included contracts for petrochemical facilities in the United States and China. Flour was selected by Dow Chemical for the expansion of their existing petrochemical facility in the Gulf Coast, including an ethylene cracker and associated power utilities and infrastructure facility upgrades. Ending Oil & Gas backlog was $18.6 billion, which is an increase of 11% from a year ago and a modest increase over last quarter. The Oil & Gas group continues to see strong demand for front-end engineering contracts, especially in petrochemical facilities, although expect new awards for the remainder of '13 to be fairly balanced across upstream, downstream and chemical markets. Moving now to Industrial & Infrastructure. New awards for the quarter were $2.2 billion, including the Tappan Zee Bridge replacement in New York and the Horseshoe road project here in Dallas. Backlog declined to $16 billion compared to $23 billion a year ago as a result of continuing work-off associated with large mining projects, combined with the newer -- lower new award count over the past year. Now there were a number of news reports recently pertaining to issues and delays on various existing mining projects and new prospects, which are creating some challenge for 2013. We are close -- in close contact with these clients and continue to support their efforts. As a result of the organizational realignment that we noted in our earnings release, effective this quarter, financial results for Industrial & Infrastructure now include the operations and maintenance piece of the Global Services segment. If you turn to Slide 6, ending backlog for Government segment was $964 million, which compares to $695 million a year ago. New awards in the first quarter were $756 million, driven primarily by the timing of LOGCAP IV task orders. 2013, we expect task order awards under LOGCAP IV to remain at or near existing levels. With regard to sequestration, we have seen some impact on our funding at Savannah River, and we don't believe the overall impact will be significant. We're also seeing some delays in the customers' decision-making timetable on some of the services prospects that we are bidding on. Moving to Global Services. The segment reported $28 million in segment profit and $150 million in revenue. Results for the first quarter were lower than a year ago due to the reduction -- excuse me, due to reduced contribution from AMECO. As a result of a shift from O&M to the Industrial & Infrastructure segment, there are no new awards or backlog for the Global Services segment since AMECO and TRS businesses are more transactional in nature. Power segment new awards for the first quarter were $448 million, including the extension of a long-term fossil power maintenance contract in Texas and award of an engineering procurement construction contract for a solar facility in California. Segment backlog was $1.9 billion. The group is currently working on a number of gas-fired and solar projects, in addition to maintaining power facilities across the United States. The group continues to track opportunities for new gas-fired plants, alternative energy, including solar, as well as plant betterment programs. On the nuclear front, last week we announced that a consortium with GE Hitachi Nuclear Energy, Fluor's been awarded -- has been selected by Dominion Virginia Power to provide project development services for a proposed 1,475-megawatt nuclear unit at North Anna Power Station. Fluor will perform the engineering construction of the facility once Dominion Virginia Power receives federal permission to proceed, which is expected in 2015. Please turn to Slide 7. In order to better align our company with our customers and markets we serve, as I previously mentioned, we have moved the operations and maintenance business line from the Global Services group segment to the Industrial & Infrastructure segment. In Industrial & Infrastructure, we have aligned the O&M business with our Manufacturing and Life Sciences group, which has a very similar customer base, with projects that are often smaller in nature and require a common skill set. Our Global Services group, which includes our TRS staffing business and our equipment business, AMECO, have also -- they have responsibility for the company's strategically important construction, fabrication and supply chain solutions organizations. I believe that expanding our capability in fabrication and modularization, increasing the amount of self-performed construction and applying the best-in-class global supply chain solutions will allow us to leverage our knowledge and expertise and capitalize on the opportunities that we see ahead of us, particularly in Oil & Gas. With regard to fabrication, we have previously announced a joint venture company that we established with AGP -- AG&P in the Philippines. This quarter, we completed the purchase of an Australian-based company that specializes in fabrication and pressure welding. In addition, we just announced the formation of a partnership with Supreme Group, a modular fabricator in Canada. This relationship enhances our construction and modularization capacity in North America and specifically in Canada. With that summary, I'll now turn it over to Biggs to review some of the details of our operating performance and the corporate financial metrics for the quarter. Biggs?

Thanks, David. Good afternoon, everyone. Please turn to Slide 8 of the presentation. As David indicated, consolidated backlog at quarter end was $37.5 billion. The percentage of fixed price contracts in our overall backlog rose to 18% at quarter end, with the booking of 2 large infrastructure projects. About 2/3 of first quarter awards were for U.S.-based projects, which drove an increase in the backlog for projects located in the United States to 32%. Moving to corporate items on Slide 9. G&A expense for the quarter was $33 million, which is an improvement from $38 million a year ago, primarily due to lower compensation expense. The effective tax rate for the first quarter was 30%. We expect the rate for the full year to be in the 32% to 34% range. Shifting to the balance sheet. Fluor's financial condition remains strong, with cash plus current and non-current marketable securities totaling $2.5 billion. This compares with a balance of $2.6 billion last quarter. Cash flow during the first quarter was seasonally weak, with operating activities utilizing $22 million during the quarter. As we have said in the past, we take a number of factors into account when deciding whether or not to repurchase shares in any given quarter, including cash flow generation from operations. While we did not repurchase any shares during the quarter, we expect to continue our repurchase program in 2013, with repurchases biased towards the second half of the year. I will conclude my remarks by commenting on our guidance for 2013, which is on Slide 10. We are pleased with our financial results for the quarter, including $6.5 billion in new awards. We continue to experience headwinds and uncertainty in Mining & Metals, as David noted, which may put pressure on our ability to achieve or exceed the very high end of our range. However, we are very encouraged by the strength of our Oil & Gas business and the substantial contributions from Industrial & Infrastructure. Considering the overall portfolio, we are maintaining our EPS guidance at the previously established range of $3.85 to $4.35 per share. With that, operator, we're ready to take questions.

[Operator Instructions] And we will go first to Jamie Cook of Crédit Suisse. Jamie L. Cook - Crédit Suisse AG, Research Division: So, of course, I need to ask the question. I was pleasantly surprised by the margin performance in the quarter of the 3.8%. So can you just tell me how that stood relative to sort of your expectations? And what were the drivers? And then what's the likelihood that we could actually hit a 4% margin in the quarter? I guess that's my first question. And then I have one more after that.

Well, I think we're right on plan with what we anticipated with that margin production. As I've said before, Jamie, we see a strengthening in the margin and backlog. We've seen a general improvement in the markets that we're serving. We're starting to see demand pick up, I think, pretty quickly. You've seen the new awards and particularly the change in the new award totals in the United States, primarily on the back of the Dow announcement but certainly others. So I think we're on track with what we thought we would have relative to a buildup of margin within the specific businesses. But particularly, I think Oil & Gas improvement is something we've anticipated and talked about, and clearly, right now, I think we're starting to see it. I don't know when we'll get to 4%, but I would say that I'm very pleased with where we are and particularly where we're headed with the programs that we're very active on but have yet to book the EPC values of those programs. Jamie L. Cook - Crédit Suisse AG, Research Division: And then when we think about sort of -- you mentioned in your slides about maybe the high end not really being as likely, just given some of the things that you're seeing in mining. I guess, why not lower the high end at this point if that's out there? Or is there something that you think could potentially better to offset that, which is not making you take the high end down?

I think what we said was the headwinds, and I think that's a good way of describing it. I've never changed a guidance or a number in my career in the first quarter unless it was some significant event that would dictate that we do so. I think that we're in a very good position to perform at what our plan is, even with the headwinds that we talked about. And the upper end is not out of the question. It's just a hell of a lot harder with the headwinds from mining that we're seeing right now. Jamie L. Cook - Crédit Suisse AG, Research Division: And then, sorry, last, just a modeling question. On the earnings from noncontrolling interest, it was much -- the number was bigger than I guess I would have expected. Can you just sort of talk about what's driving behind that and how we should think about that for the year?

It was higher for the quarter and higher for the quarter than we would expect in succeeding quarters. It's really just a mix of business. It depends upon the performance of each joint venture relative to the performance of projects which are wholly Fluor's in execution. And it really just comes in and out of the P&L. It's added into income before tax. Tax is calculated, and then it's taken right back again to get to net income attributable to Fluor. So it really has no net effect on the P&L, but it does have a somewhat, I don't know, cosmetic effect on the tax rate, which you really have to set aside.

We'll take our next question from Andy Kaplowitz of Barclays.

It's actually Mark Mihallo on for Andy. First question I just had was around, I guess, the Oil & Gas business and your future outlook on that. So you had a very good book-to-bill in the quarter. And I guess your conviction around that book-to-bill being out 1x are better over the back half of the year.

Well, I think we're in the early stages of a pretty good growth curve, as we stated before. We're in the very beginnings of, I think, several major programs in the United States. We're in the beginning stages of major oil and gas programs around the globe as well. I think everybody wants to talk about shale gas in the Gulf Coast, which is a great story. And I've said previously, we're in the early stages of $35 billion worth of EPC value, some of which went in during the quarter for Dow and some other things. So I think we're on the very early stages of a pretty good growth cycle that I think has a pretty good link through that cycle. I'm expecting some really big things out of that group and I'm quite bullish on the market.

Right. And just to follow up on Pascua-Lama. So how much work, if any, were you able to do on Pascua-Lama? And is it fair to say that it's going to be a several cent hit to your income statement each quarter going forward?

I don't know about that. I think we're continuing to support Barrick on Pascua-Lama. The Argentinian side really didn't slow down, and that is the process side of that particular project. And we're continuing to obviously execute that. We did have a slowing on the Chilean side because of the things that you've seen. But we're supporting Barrick in the resubmission of their documents to support the permits and what they need to continue the project. Obviously, it's going to slow, but I'll say it's headwinds, it's not major hits. So I'm not sure you're going to see it really impact us greatly.

And moving on to Jerry Revich of Goldman Sachs.

This is Ravi Gill on for Jerry. David, it's been about 2 decades since we've had a meaningful chemical CapEx cycle in the U.S. Can you help us frame what market share your franchise historically garnered on the EPC side in ethylene and propylene in the Middle East and Asia, and how we should think about that relative to the United States?

I'm not sure we look at things in terms of market share. I think the way I would categorize it is we spend a lot of time focusing on creating some relationships with some key clients that gave us a competitive advantage. The alliances that we have with Dow, with BASF, with Shell, the relationships we have with people like Sasol and others, I think, positions us to do the majority of the work in this cycle. And I think that's synonymous with the relationships that we've had with people like SABIC in Saudi Arabia and ARAMCOs and the like in the Middle East in previous cycles. Now we have those relationships as well, but I think what we're seeing specific to the United States is their need to get ahead of the curve because of cheap gas and, frankly, the resurging of manufacturing in the United States, which are both really good stories. I think that our teams have done an outstanding job of positioning with these customers for these key projects. We feel comfortable with the capacities that we have, both in terms of management and engineering talent, our supply chain capabilities, as well as the craft side. So I think our customers are recognizing the value that they see in our ability to deliver both in terms of cost and schedule. So I look at it as almost a perfect storm for us because we've really spent the time to invest in what we needed in order to take advantage of these programs and projects and win as much as we care to.

And then -- so given some of the developments over the past quarter, the Dow announcement this morning, the large ammonia project earlier in the month, can you just provide your updated assessment on when you believe the large greenfield projects in chemicals will get awarded? And which chemicals do you see moving ahead first, ammonia, ethylene or propylene?

Well, I think it depends on how you define greenfield. I mean, most of these facilities are built on existing production sites. So when I think about greenfield, I think about a true greenfield. Now the Dow cracker is a greenfield cracker, but it's on an existing site as part of another -- of an overall program. But I do believe the ethylene business will be ahead. Ethylene, propylene, polyethylene and that chain will be ahead of the other products that they're used for. I think GTL and, in some cases, LNG are next and power usage will be last and only last because of the delay in the Casper rules by the EPA, which doesn't give the generators good clarity on what they need to do relative to their generating base and balance. So I think it just delays that. But in all cases, it fits within our sweet spot of being able to execute for our customers. So regardless of the sequence, we'll be very active in all counts.

And next up from UBS, Steven Fisher.

David, previously, you had expressed some concerns about the permitting process in some of these U.S. shale projects. I guess, what are your latest thoughts on that front? And then do you have any other concerns about costs or end demand holding up any of the awards?

Well, my comments on permitting, I think, were basically just the timing that's normally necessary. We don't necessarily see that being a major holdup, but obviously it could be. based on backlog because there's so many projects that are going to be vying for those permits at the same time. But there's really nothing that I see that stands in the way. I think the only pinch point is going to be in terms of craft labor. But if you look at our strategy around fabrication and the supply chain, we're able to take a fair amount of the construction off the sites into a controlled environment to improve the quality. We are way out in front relative to training centers and recruiting of the Fluor craft that we've always enjoyed in that area. So I think these first projects that we're doing, I don't see any significant issues standing in the way of them having a normal schedule trajectory.

Okay. And then just over to NuScale. Can you just give us an update on your process there and your confidence that you'll be able to sell down a stake in that this year?

A lot of discussions right now on potential investors. We feel good about where we stand, there. We've limited -- as I've said in the previous quarter, we've limited the expense by putting John Hopkins in there to manage that business in a much more forceful manner. I think we've done a very good job of controlling that. The second FOA is out, and we're actively pursuing that.

And moving on to Andrew Wittmann with Baird. Andrew J. Wittmann - Robert W. Baird & Co. Incorporated, Research Division: Just to dig in a little bit more into some of the shale-driven infrastructure projects. I'm kind of curious as to -- not specifically but maybe in generalities, if you could comment on what some of those terms like -- look like. Are those -- are you able to get reimbursable style contracts on those type projects, David, or is that more on a fixed price basis today? And do you see change as we go deeper in...

Yes, those are primarily reimbursable, those contracts. Andrew J. Wittmann - Robert W. Baird & Co. Incorporated, Research Division: Okay. Is that something that your business model's afforded you to do, allowed you to win, whereas maybe your competition are trying to do it a different way? Or is that just kind of the standard one?

No, I think those decisions were based on the value proposition and the project people that we have to offer versus the others. I'd say that the clients were making value decisions. We've got the ability to do them under a various commercial approaches. Reimbursable is fine, fixed price is fine, regardless of whether it's in the Gulf Coast or whether it's some place else. We really spend a lot of time and effort in improving that capability, but I think primarily, we've had a very strong position in gas market programs regardless of what the usage is. And I think that what you're seeing today is just that value proposition shining through. Andrew J. Wittmann - Robert W. Baird & Co. Incorporated, Research Division: Great. And then maybe up in the oil sands, David. Given some of the discounts that we've seen up there and some CapEx cuts, can you just talk about the project level activity that you're seeing out in the market today? Is that potentially continuing to be a growth area as you look through the balance of the year? Is that still kind of flat at a high level?

Well, I think it's a growth story, frankly. And I think the limitation and some of the discounts you're talking about in the gas side, I think, are temporary. If you remember, we still don't have Keystone pipeline going or any other infrastructure. So I think some people are kind of hedging their bets on when will the infrastructure be there to support some of these developments. There's nothing standing in the way at the moment. But when you look towards some of the bigger users, the LNG plants and the like, we really need to have that infrastructure underway and ready when these plants start up. That's really the only hampering point that I see in this equation. But I think any pullback right now is temporary.

And we'll take our next question from Tahira Afzal of KeyBanc.

My first question is really in regards to something, I guess, everyone's already asking about the petrochem side so I'll let that one be. And when you're talking about the labor market in general, one of the projections I've seen is craft labor probably going up 35% or so between now and 2015 and some migration of labor maybe from the Midwest space down to help out. So, I mean, it seems like some of the projects might get a little pushed out versus canceled outright. Is that -- when you're actually doing your projections, are you assuming that some projects are more cascaded versus everything sort of getting done at the same time and a peak coming out more closer to 2016?

No, I really don't see things being pushed out, Tahira. And I think from a cost escalation point and a productivity perspective, those things are already part of the planning process. Everybody sees the same data you do in our customer base. So I think it's a good, healthy debate on what those protection factors are, but that's not delaying any of the programs that are there. I think that a comprehensive immigration bill would be helpful to the circumstance. This country's been built on immigration, and I don't know why this next cycle would not enjoy the same support because I think there's going to be plenty to go around. I think that what we're going to see is a circumstance where the traveler will come back. I think over the last decade or maybe 2 decades in the United States, we've seen a lack of willingness on the craft part to travel more than one state away. I think we're going to see a change in that. And we're already seeing people coming to us from 3 and 4 and 5 states away. They were ready to come to the Gulf Coast and work. So we're going to have to be careful about craft labor, but I don't see that being an Achilles' heel to the schedules that people are thinking about or cancel in any way the projects that we're focused on.

Okay, great. And as a follow-up, you've obviously taken a great start to the petrochem cycle with the Dow announcement today. That was clearly an important win and really bodes well for the cycle. When I look at Sasol, they obviously have a very large project prospect in play as well, and it seems they've already put in the lead procurement item orders. So if you look out over the next 9 months or so, how many of these petrochem projects outside of Dow do you really see going forward which are a fairly decent size?

I think most of what we're looking at have a better-than-average chance of going forward over the next probably 4 quarters, both in terms of the ethylene and petrochemical side, the gas and liquids side and a growing optimism on LNG in Canada and in the Gulf Coast. So I see a pretty good collection of projects that are going to be awarded and announced basically on the schedule that we're anticipating.

And we'll go to Alex Rygiel of FBR. Alexander J. Rygiel - FBR Capital Markets & Co., Research Division: Two questions. First, David, you mentioned that you're seeing some improved margins in backlog. What specifically is the catalyst to it? Is it just a shift in mix of what's in your backlog? Is it some improved pricing in certain end markets?

I think it's a collection of all of the above. I mean, I think we are seeing a shift back towards the Oil & Gas business in an EPC form, which is always good. We are seeing some improvement in pricing, but I wouldn't suggest that it's overly so. Also, I think that we spend a lot of time in improving our work processes to become more efficient both in terms of reimbursable and fixed price projects, which help add to that margin equation, and also when you think about the leverage we get when we start to really burn hours on the engineering side as it relates to overhead, space, computing, those fixed costs that we have. So I think all of that adds to, I think, improved margin and backlog, and I think it'll continue to improve as we go through the next probably 6 quarters.

I would just add, the shift in I&I from mining awards, infrastructure awards also increases margin and backlog.

Right. Alexander J. Rygiel - FBR Capital Markets & Co., Research Division: And one more question. Sort of in the I&I category, when do you think we might hit that equilibrium where new awards approximates revenue burn?

I don't know, that's something that...

We haven't really looked at it that way.

We forecast -- especially with awards always being lumpy, as we say, it's kind of hard to do a forecast. Alexander J. Rygiel - FBR Capital Markets & Co., Research Division: I guess maybe if I could ask that another way. How much further revenue burn in the mining sector is sort of necessary to get back to a, I don't know, sort of a run rate backlog in mining?

Well, I think over the next probably 3 quarters, we're going to be burning significant revenue in the mining segment. That's the normal burn-off. And as I mentioned in the prepared remarks, we're just not filling it up with as much new awards on the same basis. So I can't give you a time, but I think it's fair to say that we are moving in that direction with mining.

[Operator Instructions] And we'll go to Michael Dudas of Sterne Agee. Michael S. Dudas - Sterne Agee & Leach Inc., Research Division: David, keeping it on the infrastructure track. Historically, Fluor's booked maybe 1 large infrastructure project a year. Obviously, you've got 2 nice awards kind of, of recent note. Could you update us on -- has more opportunities been accelerated over the past couple of months? And could we see some more positive activity on booking for Fluor as we move into 2014?

That's a great question, Michael. I think I'd answer it in a couple of different ways. One is, obviously, Horseshoe and Tappan Zee coming in 1 quarter is unusual. To your point, it will typically spread out. I will say that we've had an increase in the proposal activity over the last little while. And we have a fair amount of procurements that are in the early stages that will hopefully be awarded as we get towards maybe the end of this year, early next year. But we're really pleased with what we're getting. We have not been successful in a couple that we bid in that big tranche of bidding, but clearly, we won the ones that were strategically important to us and fit our offering quite well. But I still see significant growth in Infrastructure. I mean, just the pent-up demand in the United States is there. One thing that the Congress did very well was the reauthorization of TIFIA program that helps support these programs. We're seeing a fair amount of the PPP market start to come back in a large way and things like light rail, toll roads and the like. So to use the term we've always used, and Biggs' just used of lumpy, I still see growth in Infrastructure. Michael S. Dudas - Sterne Agee & Leach Inc., Research Division: That's helpful. And David, just my follow-up would be, as you're looking at the mining customers, so it seems -- does it seem like it's a little bit more of a pause given where capital spending trends and outlooks have been from some of the big ore or these iron ore or hard rock mining customers? Or is this still just people just trying to figure out where the cycle is going to be?

I think to use your term, I think they're taking a deep breath. Some of these -- in every mining project that I've ever seen, there's always the issue of permitting and labor unrest that puts these projects into fits and takes. And they do slow down from time to time. I think this is more of a structural deep breath, driven by the commodity markets but also driven by the change in leadership. And even when I -- I mean, it was seamless when I took over from Alan, but even at that, I took some time to think about where we were headed and the things that we needed to do and what those priorities were. And my expectation is the folks at Rio and the folks at BHP and the like are doing the same thing. So I think that just adds to the deepness of the breath, so to speak. But I don't, by any means, think that there's a long-term structural change in the market nor a significant long-term delay in capital spending. Michael S. Dudas - Sterne Agee & Leach Inc., Research Division: Certainly maybe where the projects are going to be built might change it because of nationalization, government and the like...

That's always been the case, and I don't think that will change. I mean, one thing about it, both -- for all the extractive industries, they have to go to some interesting places to gain access to those liquids and ores.

And we'll go to Robert Connors of Stifel, Nicolaus. Robert V. Connors - Stifel, Nicolaus & Co., Inc., Research Division: Just for housekeeping purposes, with the O&M business outside of Global Services, it was pretty good margin in the quarter. I mean, is this sort of the run rate? Or were there some onetime things in there that won't be continuing going forward?

The run rate in I&I or in Global Services? Robert V. Connors - Stifel, Nicolaus & Co., Inc., Research Division: Yes, in the Global Services margin.

Well, I think there's opportunities for improvement there. The reason we made that change is client preferences, skill set coordination and I think a fair amount of focus on the smaller projects, which fits within that group's capabilities that drove that decision. And I think the margin, I think, should improve over time. But again, we're still waiting on -- outside of power, we're still waiting on that shutdown turnaround market to return, and obviously, that would be an impetus to improve margin. Robert V. Connors - Stifel, Nicolaus & Co., Inc., Research Division: Okay. And then related to the Supreme and AG&P joint ventures, just wondering if Fluor is able to begin fabrication of the modular components for a lot of the Gulf Coast petchem facilities before you guys or before -- excuse me, the client receives their permit approval. And if so, is that already occurring for some projects that we haven't heard or that haven't been press released yet by Fluor?

Well, those 2 specifically and other actions that we're taking, I think, add to our ability to supply what's needed by our customers. The schedules, we're on schedule to be able to supply whatever's necessary on those schedules, those various projects, and we feel good about those. I'm less concerned about delays because of permits on these petrochemical facilities than maybe some other use of gas. And the reason is, is that most of these new facilities are on existing facilities that already produce the same types of materials and products. And I think that the permitting process will not be encumbered by some of the new regulations that are out there. So I feel pretty good about where we are on the timing of these programs, and I'm very comfortable with our ability to provide the fabricated modules for those projects based on the schedules that we've produced for the customers.

And going next to John Rogers from D.A. Davidson. John B. Rogers - D.A. Davidson & Co., Research Division: I just wanted to follow up on one thing. David, in the past, you've talked about investing more in modular fabrications, self-performing work, and I know you've acquired some assets in Australia, and partnership up in Canada. Is there more to do there and particularly in the U.S.?

Absolutely. John B. Rogers - D.A. Davidson & Co., Research Division: And will we see that soon? Or, I mean, is that something you'll acquire or build yourselves?

Well, I think we're in the process of making those decisions right now, and I really don't want to get into that. But we're clearly going to do more in the Gulf Coast to support those programs and support the local labor capabilities in those regions.

And we'll take a question from Andrew Wittmann of Baird. Andrew J. Wittmann - Robert W. Baird & Co. Incorporated, Research Division: So I just wanted to check in on the gas plant opportunity. David, earlier, you kind of went through the cadence of how you thought some of the gas infrastructure things will play out, and lowest on that list sounded like gas power generation. Yet you noted in your prepared remarks that there's probably, I think you said a handful of maybe 6 or something that you're looking at today. Can you just talk about the likelihood of those going or maybe when you think those could make sense? And then just specifically, I think previously, you commented that this year would be a $15 million to $20 million kind of profit year for the Power business. Is that still the case?

Well, I think it's delayed, frankly. We've done a lot of studies on gas plants and continue to do that. I think the delay in Casper is the reason for that. If you're a generator and the regulators aren't giving you the answers you need to make your capital decisions on, you're going to have to push that out until you have that data. And I think the delay of Casper was not a good decision. If you're a generator, you're sitting there with a coal fleet that they know they've got to fix, they're ready to fix. The CEO of Duke, I think it was last year, made the comment that they're ready to spend $20 billion on dealing with their coal fleet if they just knew what the rules were. And in that, and I know I'm mixing things up, but gas is going to replace some of that coal fleet. And until they really know the capacity that they have to replace, they don't know exactly which gas projects to sanction and move forward with. So I think the delay in those rules was not a positive step in the right direction, particularly when it comes to fuel supply mix for the generators or, quite frankly, job creation in the United States. Andrew J. Wittmann - Robert W. Baird & Co. Incorporated, Research Division: Okay. And then -- but so specifically on the profitability of that segment, does that change your previous comments there? Is this more of a breakeven year for the Power group then, do you think?

Well, I think the earning -- I think we're still looking at -- now we're looking more at '14 for the improvement in profitability for Power. Andrew J. Wittmann - Robert W. Baird & Co. Incorporated, Research Division: Got you. And then just one more on the Government business. There's been a change in opinion on the Y-12/Pantex management contract. Just kind of your updated thoughts there, how you think you're positioned for, I guess, the rebid there and as well as maybe some comments on Sandia, if any.

Well, I think on Y-12, you've seen the reports that I've seen. We did not believe that, that decision was based on all the facts, and we're glad that the government has intervened and will give a chance for all the facts to come out. We feel very good about the team that we were part of, and we look forward to recompeting that. On Sandia, I really wouldn't want to comment at this point. We'll just see how that comes out. But I think the government group's done a really good job of diversifying their offering. As we said in our prepared remarks, we don't see any significant change in the LOGCAP production performance over this year and into next year. And those guys were working really hard to find ways of filling that earnings stream up with other work with the U.S. federal government and the governments outside the United States.

And we'll take our question from Will Gabrielski of Lazard.

Sorry if my first question is a repeat, but did you guys give an updated specific on your NuScale spend and whether that's being addressed with the FOA in process?

No, we didn't give a specific update on NuScale, but I think it's consistent with what we had said before. We don't see any change with or without FOA in this year.

See, our total guidance for the year is the same. We said around $0.20 a share impact for the full year. Run rate in the first quarter may be a little higher than that because we were still leaving -- coming out of last year at a little higher pace and bringing it down to some level of moderation. But no change to the full year expectation.

Okay. And over the past few months, we've finally seen confirmation of what you guys have been talking about for the last few years in terms of the aggressive pricing in the Middle East. And 2 questions off of that. One, are you seeing anything changing on the competitive landscape right now? And two, is there any opportunity for you on jobs that are behind schedule or didn't have a program manager involved that are running over budget to go in and maybe pick up some work?

Well, we've already seen some of that, where we've been asked by certain customers to come in and support finishing some of these programs. I think it does provide the opportunity that I spoke of 2 years ago when people said we couldn't compete against the Asian contractor. We've done quite well. We've continued to grow. And frankly speaking, when you fail in front of a customer, their memories aren't significantly longer but they are longer. And they turn to people like us that have proven execution capabilities, have delivered for them over the longer term and they go back to a value judgment. I think we've seen that probably for the last, I don't know, year. And that's evidenced by the FEED work that we're doing that's pretty global in nature in terms of Mining & Metals and specifically when you look at Ma'aden and our ability to win the phosphate project. I think in terms of petrochemicals both in the United States and in the Middle East, we've also picked up some early work that would not go to some of those contractors because of their lack of performance. So I think we like to just tell it like we see it. As I said a long time ago, this is the third time I've seen this from the Asian contractors, and we will see it again. But I think what we're trying to focus on is doing the right things to have good, solid growth, to be able to perform and finish these projects for our customers as they anticipate. Because you've got to remember, all of our customers don't make a dime until we turn the switch to turn that thing on, and they're eager for that day. And those that historically can allow them to turn that switch on the date that they anticipated, they're going to continue to come back to people like Fluor because that's what we deliver.

And that concludes our question-and-answer session. I'll now turn things back over to management for any additional or closing remarks.

Thank you, operator. And thank you, everyone, for participating this afternoon. Based on our strong results for the first quarter, we think we're off to a good start, even with the challenging situation that we've seen in mining recently. As you gathered on the call, I'm particularly pleased where Oil & Gas group is heading. I'm very pleased with where I&I is heading, given the challenges that they have and the way they've been able to shift their resources to focus on projects and infrastructure and others that will continue to help us grow this company. I believe that our strategic focus on construction, fabrication and supply chain management further enhances our ability to provide and integrate the solution to our customers and enhances our overall market position. With that, I really appreciate your interest in Fluor, as well as your confidence in our great company. Have a good day.

And once again, that concludes our call. Thank you all for joining.