Fluor Corporation (FLR) Q3 2013 Earnings Report, Transcript and Summary

Kenneth H. Lockwood - Vice President of Corporate Finance & Investor Relations David T. Seaton - Chairman, Chief Executive Officer and Chairman of Executive Committee Biggs C. Porter - Chief Financial Officer and Senior Vice President

Andrew Kaplowitz - Barclays Capital, Research Division Jerry Revich - Goldman Sachs Group Inc., Research Division Jamie L. Cook - Crédit Suisse AG, Research Division Vishal Shah - Deutsche Bank AG, Research Division Brian Konigsberg - Vertical Research Partners, LLC Tahira Afzal - KeyBanc Capital Markets Inc., Research Division Steven Fisher - UBS Investment Bank, Research Division Michael S. Dudas - Sterne Agee & Leach Inc., Research Division Andrew J. Wittmann - Robert W. Baird & Co. Incorporated, Research Division Alexander J. Rygiel - FBR Capital Markets & Co., Research Division John B. Rogers - D.A. Davidson & Co., Research Division George O'Leary - Tudor, Pickering, Holt & Co. Securities, Inc., Research Division Robert V. Connors - Stifel, Nicolaus & Co., Inc., Research Division

Good afternoon, and welcome to the Fluor Corporation's Third 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 November 6 at the following telephone number: (888) 203-1112. The passcode of 3521655 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 Third 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 market close and we have posted a slide presentation on our website, which we will reference while making our 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 2 of the presentation. During today's call and 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 our Form 10-K, which was filed on February 20. During this call, we may discuss certain non-GAAP financial measures and 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. So with that, I'd like to turn the call over to David Seaton, Fluor's Chairman and CEO. David?

Thanks, Ken. Good afternoon, everyone. Thank you for joining us on this Halloween. We'll try to be brief so that everyone can go trick-or-treat. Today, I'll be reviewing our results for the third quarter, our guidance for the balance of this year and we'll talk about the initial guidance for 2014. If you turn to Slide 3, I'd like to begin by covering some of the highlights of the third quarter performance. Net earnings attributable to Fluor for the quarter were $173 million or $1.05 per diluted share, which represents an increase of 20% and 22%, respectively, over last year. Consolidated segment profit for the quarter was $311 million, which increased from $278 million a year ago. Segment profit resulted -- results reflect a 24% increase in Oil & Gas, as well as improvement in our Power segment. Consolidated revenue for the quarter declined to $6.7 billion, with growth in Oil & Gas and Power segment, which was offset by lower revenues in Mining & Metals, as well as our business line -- our Government business line. New awards for the quarter were $5.6 billion, including $2.4 billion in Oil & Gas, $1.9 billion in Government, $846 million in Power. Consolidated backlog for the quarter was $36.5 billion. This compares with $37 billion last quarter. Importantly, margins in new award and backlog continued to track above levels we experienced a year ago. Our financial results were summarized in the table on Slide 4. And as you know, full detail by segment is included in the earnings release. Continuing my remarks on Slide 5. Oil & Gas awards for the quarter included our share of the engineering, procurement and construction award for the Chevron Phillips Chemical ethylene (sic) [ethane] cracker project in Texas and award to debottleneck an existing oil sands facility in Canada. The CPChem award to Dow Chemical cracker, which was awarded to Fluor earlier this year, and the FEED award for Sasol's proposed cracker were evidence that Fluor's strong market position in petrochemicals. I feel very good about our capture rate in this very important market. In addition to petrochemicals, we continued to be optimistic about prospects for a number of LNG projects, including the ongoing FEED for Anadarko's Mozambique project. As well as in North America, we expected to hear decisions in the next few quarters on our bids, both for the Kitimat project in Canada and the Cameron project in Louisiana. In downstream, we continue to track several key prospects, including refinery work in Mexico, Canada, as well as in Middle East. We hope to receive full notice to proceed on the North West Redwater upgrader project in Canada within the next 2 quarters. We continued to expect the demand for FEED work will translate into significant EPC awards over the next year, 1.5 years. Ending Oil & Gas backlog for the quarter was $18 billion, which is leveled with last quarter. Moving to Industrial & Infrastructure. New awards for the quarter were $472 million. Backlog stood at $13.8 billion, continuing its downward trend from $18 billion a year ago. While a number of the new awards during the quarter were modest, the group is pursuing a number of road and rail infrastructure projects in North America and several developing opportunities in Mining & Metals. I'm pleased to announced that the San Francisco-Oakland Bay Bridge was completed and opened for traffic during the third quarter, which was on time. I want to commend our project team for its outstanding performance in delivering this complex project to our customer. As you will know, our success on this bridge was key to our winning the Tappan Zee project in New York earlier this year. Now with regard to Barrick's announcement today on the Pascua-Lama project, that is not a surprise to us. It is evidence of more headwind that we have within our Mining & Metals group and, certainly, we've taken that into account in our guidance range for 2014. We fully expect to participate in this project and it's -- when it comes back in that phased approach that Barrick was speaking about. And because of that, our backlog will not change. We're very confident in our ability to return to that project once they make their decisions and once you see some of the commodity prices return. If you'll turn to Slide 6. New awards for the quarter for Government were $1.9 billion, including the annual funding of the multi-year Department of Energy contracts at Savannah River and Portsmouth and task orders on LOGCAP IV contract. Ending backlog for the Government segment was $1.8 billion. This compares with $1.6 billion a year ago. With regard to LOGCAP IV, we expect task order volume to continue to moderate downward as a number sites and personnel that we serve are reduced. 2014, we anticipate full year revenue of approximately $1 billion, down from $1.6 billion in 2013. I want to briefly address the government shutdown that occurred at the start of the fourth quarter. While some of our competitors reported workforce furloughs, fortunately, the impact of Fluor's programs were minimal, as most of our projects continued to be fully funded. Moving to Global Services. The segment reported $25 million in segment profit and $150 million of revenue for the quarter, which compares to $29 million in segment profit and $159 million in revenue a year ago. These modestly lower results were mainly driven by reduced contributions from the equipment business line in the quarter. This group continues to be very active in supporting Fluor projects, as well as external customers. In Power, new awards were $846 million, which included $800 million for the clean energy gas-fired power plant for Dominion Virginia Power. Backlog improved to $2.1 billion, up from $1.6 billion a year ago. And the Power group continues to track opportunities for new gas-fired plants, solar facilities, the plant betterment programs, as well as work on some new nuclear facilities. With that recap, I'll turn it over to Biggs, who will review some of the details of our operating performance and the EPS guidance. With that, Biggs?

Thanks, David. Good afternoon, everyone. Please turn to Slide 7 of the presentation. As David indicated, consolidated backlog at quarter end was $36.5 billion. The percentage of fixed-price contracts in our overall backlog was 19% at quarter end, up from 16% last quarter. Major new awards in Oil & Gas and Power drove our U.S. backlog percentage to 34%, up from 30% last quarter. Moving to corporate items on Slide 8. G&A expense for the quarter was $46 million, which compares with $41 million a year ago. Increased expenses in the quarter were primarily due to higher stock price-driven compensation costs. The effective tax rate for the third quarter was 29%, which was lower than our expectations, in large part due to an increase in earnings from noncontrolling interests, for which income taxes are not typically the responsibility of the company. Also, current quarter taxes benefited from research and development credits, while last year's third quarter was adversely affected by foreign tax charge. We expect the tax rate for the full year to be approximately 30%. Shifting to the balance sheet. Fluor had cash and marketable securities of $3 billion at the end of the third quarter, which is an increase of about $400 million from the previous quarter. Cash flow from operating activities was $470 million in the third quarter, driven mainly by earning sources and lower working capital, including accounts receivable collections. As we've discussed in the past, we look at our actual cash balance on a daily basis and cash moved up as we approach the end of the quarter. Despite some reductions in the balance since quarter-end, based on our current view of cash flows for the balance of the year, we plan to repurchase between $200 million and $400 million worth of shares over the next several months. These amounts fall within the 11.8 million share balance available under the existing board repurchase authorization. I will conclude my remarks by commenting on our guidance for 2013 and 2014, which is on Slide 7 -- Slide 9, excuse me. Based on strong year-to-date results, we are narrowing our guidance for 2013 to a range of $3.90 to $4.10 per share from our previous range of $3.85 to $4.20 per share. For 2014, we're establishing our initial EPS guidance at a range of $4.10 to $4.60 per share. This guidance reflects our expectation for double-digit profit growth in the Oil & Gas and Power segments, partially offset by the expected declines in the Mining & Metals business and the Industrial & Infrastructure segment and continued reductions in LOGCAP IV task order volume in the Government segment. During 2013, we benefited from a number of favorable project closeouts, particularly in Industrial & Infrastructure. Excluding those, we are seeing I&I's underlying quarterly earnings come down in line with revenue reductions. As a result, we expect our quarterly EPS in 2014 to start at a lower level and gradually recover throughout the year with stronger earnings in the second half than the first half. Overall, we anticipate flattish revenues in 2014 at a consolidated level but with an improving margin profile. Guidance for 2014 assumes that G&A expense will be in a range of $170 million to $180 million and effective tax rate of 32% to 33%. Guidance for 2014 also includes some benefit from our expected share repurchases that I mentioned earlier. With that, operator, we're ready to take questions.

[Operator Instructions] Our first question comes from Andrew Kaplowitz with Barclays.

David, so total backlog has been dropping over the last year plus, obviously, because of mining. Do you think that over the next year -- you talked about prospects over the next year, 1.5 years in Oil & Gas. Do you think that those prospects can get Fluor to reverse that trend and start rising again, total backlog? And then what's your conviction level that Oil & Gas backlog can rise and get close to its previous peak that you did in '08, low 20s, during this current cycle?

Well, I'll take those in reverse order. I've got great confidence that over the next year, 1.5 years, that Oil & Gas will return to that level or larger. The question gets to be is what's the headroom -- I mean, sort of the headwind that we've got from the shutdown of some of the mining projects in the near term. I've remarked that mining, like Mark Twain said, mining is not dead, regardless of what people say. So there's a lot of opportunity there. We're kind of retooling our offering there and I think we'll be greatly successful. But if you think about our revenue profile over the last, I don't know, probably 2 years, it's been heavily impacted by the mining burns. So we've burnt a lot more, so that curve's declining more quickly than the curve on E&C new awards picked up. So on balance, we're kind of expecting a little bit flattish, if not a little bit up, in '14. But I think what I'm more excited about is the improving margin in that backlog and our ability to drive more profitability to the bottom line. But I really am bullish about E&C. You've heard us use the word lumpy in the past. There's some really, really large projects that are going to be decided over the next little while. And we feel good about what we're going to be putting in the backlog, but it's going to take time because they're so much larger and they're having to go back to their boards one more quarter and have these decisions made. But I'm very bullish on where Oil & Gas is and I feel confident that they can eclipse the former high.

Okay. That's helpful, David. I'll let Jamie ask the question about [indiscernible]. I want to ask you about I&I margin. In the context of -- I know you said in your Q that there are progress on 2 infrastructure projects. Obviously, one of them is probably Bay Bridge. But when you look at the 5% margin you did in the quarter, maybe Biggs could quantify for us what the impact of these progress milestone payments were. And then as you look at the '14, do you think high 4s or 5% is achievable given the mix change that you're going to have?

Well, I think, Andy, you look at the third quarter, certainly, the margin rate was higher than it has run and it's higher than what we would expect going forward because of the significant pickup on a few projects. The run rate earlier in the year was the low 4%. Given the mix changes occurring, I think going forward, it's probably going to be closer to the prior run rate than it will be to that 5%. But a lot will depend quarter-to-quarter on the maturity of different projects. And when we hit milestones, as projects either hit those milestones or complete, it does enable a fair amount of profit recognition for performing well. But they're not always smooth across the quarters. And going into next year, we don't see quite the same frequency of opportunity in that regard that we saw this year and has particularly showed up in the third quarter.

Okay. So, Biggs, is it fair to say, though, that the underlying margin is still sort of in the low 4s, but that underlying margin could be rising a little bit as you go through the quarters in 2014 given the mix change? Is that how we should think about it?

I don't want to get too much specific than I already got by saying, yes, I think, going forward, it's going to be more like what we experienced the last few quarters, but it can move around. And so it's going to be tough to model on a quarter-to-quarter basis. And a lot will depend upon how projects progress next year.

We'll go next to Jerry Revich with Goldman Sachs.

David, can you flesh out the magnitude of the infrastructure projects that you're pursuing from here and just, if you don't mind, step us through the timing of final investment decisions on those?

They're mostly road. They're mostly in the United States. There are probably 3 to go to bid in early '14. And I'm not sure I want to get any more specific than that, but we do see a number of infrastructure-type programs. I think what you're seeing is the thirst for the PPP model, Public-Private Partnership model, I think, is only going to increase. And I think there's few people as well-positioned as we are to participate in those.

And within your Chemicals franchise and nice award this quarter, can you just update us on upcoming final investment decisions? How many do you think happened over the next 6 months for ethylene and propylene contracts? And then on the back-end, once you're done with the work, what's the opportunity set for follow-on work on derivative contracts once you have the main facilities built?

Well, I'm really pleased. Thank you for that question because I'm really excited about that. As many of you know, I spend a lot of my career in that part of our business. Obviously, we've got 2 underway, CPChem and Dow. Those were nearly early stages, obviously. And some of those downstream derivatives will be awarded later. We feel pretty good about our position on those projects. We're in the process of completing the FEED on Sasol. My expectation is there's a funding decision sometime early next year, at least by the second -- by the middle of the year. And that's the first, I think, piece of their investment there. Right behind it, you've got the gas-to-liquids programs that we're pursuing and have done some work on already. I think they're -- they, basically, have sequenced them such that you won't have the huge peak in the craft manpower requirement that we were worried about, frankly, a year ago. But there's Shell and there's Sasol and I think there's some other related projects. And then I mentioned the LNG projects. If you listened to my comments probably a year ago, I had those backwards. I thought that the gas-to-liquids would go before the LNG plants. And I'm pleased that I'm incorrect because those projects are pretty large and are pretty mature in their development. And as I said in the prepared remarks, we're in competition for those projects. But we feel pretty good about our position and our ability to deliver for those customers.

Our next question comes from Jamie Cook with Crédit Suisse. Jamie L. Cook - Crédit Suisse AG, Research Division: And because Andy set me up, David, you're not off the hook.

Oh come on now. Jamie L. Cook - Crédit Suisse AG, Research Division: I guess, Dave, look, we're sitting here again, it's a year later and your margins have been hovering in the high 3s. And I guess, in the context of you saying margin should improve next year, how do we think about Oil & Gas margins, in particular, as you're willing to take on some projects that have more fixed-price exposure, which, in my opinion, says you should be looking for a higher margin because of the risk associated with that? So, I guess, that's my first question. And then, I guess, my second question, I don't know if it's for you or for Biggs. Biggs, you mentioned earnings first half versus second half. It sounds like second half should be better. Can you give color on that? And I guess, at what point -- I think investors are sitting here saying, "You imply earnings growth at the midpoint, about 6%. Why aren't we growing double digit?" And, I mean, could we get to grow more meaningful growth in the back half of the year just with the dynamics of Mining rolling off and LOGCAP, et cetera?

Well, I'll start on the last one and then go to your first question, ask Biggs to give color on the other. As I said, we're in a declining curve on the Mining projects. At the same time, we've got an inclining curve on Oil & Gas and it's just not as mature enough to show the kind of percentage growth that, I think, that you're suggesting. But I believe it's clearly in front of us. With regard to your first question in the margin, I think you're going to continue to see margin in our Oil & Gas segment continue to rise every quarter over the next little while. But I'd caution you because a lot of those projects are fixed-price and they're going to have a different curve than the refining boom that we enjoyed in the last cycle where there was pretty steady growth quarter-over-quarter. It's going to look like a lot of the patterns of some of the Industrial & Infrastructure programs, where a lot of the profitability will fall out when we've mitigated the risk or passed that risk and have the ability to drop more profitability to the bottom line. Jamie L. Cook - Crédit Suisse AG, Research Division: But, David -- sorry. Go ahead.

But, clearly, we expect in that backlog to have significantly better backlog on those fixed-price projects than we saw in the refining boom a few years ago. Jamie L. Cook - Crédit Suisse AG, Research Division: So wait, you said better margin in backlog, so that would imply for sort of the first time you're thinking we could approach prior peak margins in Oil & Gas, or it's before you can play that down?

You said that, I didn't. Jamie L. Cook - Crédit Suisse AG, Research Division: Okay. So you said we can get the prior peak margins?

I think we have the ability over time -- and I'm talking about the back-end of next year and as we get into '15 and even into '16 -- that we will get back to those peak margins in Oil & Gas. Jamie L. Cook - Crédit Suisse AG, Research Division: Okay. That's great. And then, sorry, just, Biggs, just help me with the second half, first half earnings, just so we don't screw things up over here.

Okay. I guess, first of all, on the year-over-year, I think the midpoint of our guidance to '13, the midpoint of the guidance '14 is about 9% year-over-year. Maybe I've got the calculation wrong, but that's what I came up with. But in terms of the trend, just using the midpoint of our guidance for this year, it would suggest a little bit lower fourth quarter as a result of some of the strong performance in Infrastructure, not necessarily repeating itself in the fourth quarter, and the Government business declining a little bit more in the fourth quarter over the third. So that gives us a little bit lower run rate going into next year by itself. And then we expect it to pick up as we go through the year, as the Oil & Gas business continues to develop. And it's mix engineering and other content matters beyond just the one of what's the mix from, a fixed-price or reimbursable standpoint. So from a combination of effects, we expect it to grow over the course of next year as the I&Is and Government sort of moderate over the next couple of quarters and then Oil & Gas starts to develop. Jamie L. Cook - Crédit Suisse AG, Research Division: So declines in first half, growth in the second half? I'm sorry.

Yes. So our decline here in the fourth quarter... Jamie L. Cook - Crédit Suisse AG, Research Division: Yes. And then in the first half...

Turning over and then picking up from there. Turning over to the first quarter next year and then picking up from there, gradually. Jamie L. Cook - Crédit Suisse AG, Research Division: So each quarter should see better growth sequentially?

Probably, yes, slight growth, second over the first and then sharper to the second half. But a lot will depend upon the kind of things that we always talk about, of how projects progress, how they mature, how we are able to increase our booking rates based upon hitting milestones and those kinds of things. So pretty subjective to get too finite about it, but the general trend would be that we fall off a little bit in the fourth quarter, stay down in the first and then move up over time.

Jamie, I applaud you, you're the first one that's gotten guidance within the guidance.

Our next question comes from Vishal Shah with Deutsche Bank.

Just curious to get your thoughts on how we should think about LOGCAP and the decline of revenues in that investment next year.

Yes. I mean, LOGCAP, you read the papers just like I do. I mean, the U.S. military is pulling -- exercising the drawdown differently and more expediently than they did in Iraq. And as I said, we expect to go from $1.6 billion to probably $1 billion next year in revenue on LOGCAP. I will say that it's still strong and we think it will, quite frankly, extend beyond '14. But I would point you to the way the Government group -- I think it's been announced that we won the U.S. strategic petroleum reserve. So they've been really focused on growing their business and diversifying that business. And we feel pretty good about that being a pretty stable business, even though it will be down year-on-year because of how big LOGCAP is.

Okay. Great. And then just overall in terms of the GTL FEED activity. Can you talk a little bit about a timing of that and when you expect to start to see some of that activity?

I think the FEED activity will start to pick up as we get into next year, probably the second half. We've done some of the preliminary stuff on a couple of those projects. But I think kind of the truth, active FEED and then the EPC is back half, half of '14 and into '15.

We'll go next to Brian Konigsberg with Vertical Research.

Just going back to I&I and Pascua-Lama, the news that we heard today. I just want to make sure, are you assuming that there's no revenue contribution in 2014 and you're still keeping it in the backlog? Is that the way to think about it?

There will be some revenue on it. We've got to wind the project down effectively. I mean, there's only 2 months left in this project. We did the water management program for them to help them with their permitting situation. That is not complete. So there'll be some in early '14 as we take that project down, but clearly, it's a chunk of work that comes out of our earnings stream. But it's a suspension, not a cancellation. As I said, I feel confident that we'll be a participant in that phased approach when they start that project back up. Which they said probably won't be until maybe some of the planning work as we get into '14, but certainly '15. And that's when I expect the Mining business will pick up again in general, in early '15.

And secondly, on new scale, so we're still waiting for the DOE to make its -- to determine who the other participants are. Obviously, there's been some delays, I assume, within that decision-making progress. Maybe -- process. Can you give us an update on how you see that unfolding? And is there an assumption that there's some sell-down in the stake in '14?

There is an assumption to sell down in stake in '14. I mean, the government promised us that they were going to tell us in August. It was a successful FOA recipient, whether it's 1 or 2. All indications are based on our proposal and the questions that have been asked, that we're being seriously considered for one of those. And just like most things with government right now, we're just waiting and seeing, but it doesn't change much of our strategy. But clearly, we're turning down spending to match what's necessary to meet the NRC requirements in our proposal.

And so there's an assumption that your spending in '14 does decline based on your sell-down assumption? Can you provide that?

Yes, but I'm not going to quantify it.

We'll go next to Tahira Afzal with KeyBanc.

First question is really in regards to what you talked about, David, and as you put yourself on the spot by saying it's really near and dear to your heart, which is why the petrochem work. Clearly, you've done pretty much close to a clean sweep in all the EPCs and some of the FEEDs that have come out on the ethane cracker side. Could you talk a bit about, perhaps, your sort of third-generation modular technology and processes and how much of a role they've really played in winning some of this work as opposed to really slow going out and bidding aggressively?

We spend a lot of time and effort in improving our systems and tools and utilizing more of a modular design approach in this way than in past ways for 2 primary reasons. One, we think that we have improved our design process to the point where we're actually lowering the cost of facilities. The second is we had a -- obviously, a fear of an overheated craft market, and we wanted the ability to take part of that off of the job site into a more controlled environment, thus, improving schedule and quality. So we've been able to affect that. And I think it has had a positive effect on our competitive stance on those projects. There's 4 in North America. We won 3, and we're disappointed we didn't win the fourth. But I think that we've got a competitive advantage now in how we are implementing our design tools and how that results in a much more efficient supply chain opportunity but also more efficient construction approach.

And the second question is really in regards to some of your international opportunities. I know there's a lot of excitement around North America. But when I look at my database, I see you being on the forefront of a couple of fairly large upstream opportunities, even in the Middle East. I would love to get an idea of really looking outside of the U.S., what you think are really exciting opportunities for you from a backlog standpoint into next year.

Well, I think we'll start with the Middle East. There's a lot of projects coming, both upstream and downstream, that we're pursuing and feel pretty good about in refining market. Kuwait is an example. The clean fuels programs or the bids are under development as we speak. I'm not optimistic that the fourth refinery will actually be bid until late next year, if not into '15. But those programs have been on kind of a quiet phase for quite some time. But we're very active in the proposal steps on the clean fuels piece of that. We're very bullish on the upstream market, particularly with the ADMA-OPCO, Parvana, in the UAE. We continue to win front-end work with them relative to gas processing, and I think that we'll see some success there. So the Middle East, in general, I think, just 2 places, give us great optimism for growth outside the United States. Kazakhstan, the continuing on TCO, the next phase is there, we feel very good about, as well as some of the major pipeline programs that are there in Russia and Kazakhstan and the former Soviet Union. In China, there is a fair amount of refining work. And again, we've been able to participate in that. We are one of the few -- I think we're the only Western contractor that has our own design license and our own construction license. So that gives us competitive advantage in China. But we're also seeing opportunities in places like Singapore and other places in Southeast Asia in the refining sector that are quite optimistic. Australia continues to go. I'm not sure when this next phase of Santos will go, but we feel pretty good about finishing that -- the first phase of that project on time and feel good about the next phases. So ending in Canada, we're really excited about the gas in the States, but Canada, the refinery there continuing work in the oil sands, I think we've made some step change in our skill set and the people we have around SAGD. And some of those programs are in their early stages. So all that together, I mean, I'm really bullish about what Oil & Gas group can do over the next 3 to 5 years, frankly. And I think that with some of the improvements I mentioned in our tools and systems and how we go about projects and taking more of a direct hire and controlling some of the fabrication, I think it gives us a competitive advantage, and I see great headroom in that part of our business.

We'll go next to Steven Fisher with UBS.

David, you talked about those increasing fixed -- number of fixed-price projects. How much risk are you willing to put in the backlog at this point? And then has your perspective changed on that as things in the marketplace had been a bit slower than expected?

I wouldn't say it changed the slowness. I mean, we kind of anticipated it. Because these projects are getting so large, there's a little bit longer gestation period on them. So that's not a surprise. On the lump-sum piece, I'll answer 2 ways. One, we've been as high as 45%, 50% of our backlog in fixed-price, primarily in the days when we were doing a lot of the Power work. But because of that Power work and that experience, we've been able to transfer some of that knowledge over to our Oil & Gas business, that kind of is the underpinning of our confidence of being able to deliver more lump-sum in Oil & Gas, which is supported by the improvement in tools and systems that I spoke of in Tahira's question. So we're still, what, less than 20% fixed-price. There's great headroom in our comfort in moving that number north. But I'm much more confident in our execution capability today than I have been in some time, and it's because we have invested in those tools and systems and we have been successful in moving people around that have that expertise. So I feel pretty good about our position of being able to not only be competitive but to deliver the profitability that's expected.

Okay. And then for Biggs, what opportunities do you foresee in 2014 to repatriate any of your international cash? And then do you anticipate just generally generating more U.S. cash next year?

As far as the first question goes, we really can't repatriate today without too much tax consequence. The cash that we see as being really not readily available is the cash which is either tied up in joint ventures or for which it's in a form of a customer advance tied to a specific project. That's why we have a tendency to most carve out and say we really can't use that for operating purposes outside of specific projects to which they're tied and that we don't count on from the standpoint of having the kind of cushion we need to have for liquidity. So although there can be some inefficiency with international, we have taken into consideration that it's not the big driver of what we have available. The big driver is what was tied to projects, JVs and what's the amount of liquidity we just feel like we need to maintain. Do think that with the growth in domestic business and the increase in the backlog evidencing that, that we will see more cash generation domestically. However, as I said, that's not necessarily a big driver of our redeployment considerations, it's more a matter of do we have excess liquidity beyond $1 billion or $1.5 billion cushion that we feel like we need to have and are there any other better investment opportunities. If there aren't better investment opportunities and after we have continuously satisfied our dividend commitments or chosen increase, and then that's when we look to share repurchase.

We'll go next to Michael Dudas with Sterne Agee. Michael S. Dudas - Sterne Agee & Leach Inc., Research Division: David, 2 quick questions. First, on the LNG space in North America, a little bit bigger picture. You're quite involved now these days. How much room you think there are in North America, including Canada, even maybe a longer-term project that could happen in Alaska, I hear from one of your customers, do you foresee? And is Fluor positioned to take a lot more than we see right now or are you comfortable with your positioning?

I'm pretty comfortable with our positioning, and we want to make sure that we're focused on the ones that are going to happen the quickest. I think that there is a lot of growth for us. I mean, I'm very happy with our relationship with JGC. I work with JGC for at least since the early '90s on different programs. I have great respect for their capability. And the relationship that we've created there actually makes us part of that club and that's a part -- that's a club we haven't been -- haven't had access to. So I feel really good about where we are, I feel good about the competitive bids that we've put in on the 2 that the bids were actually active, including the fact that we're one of the FEED contractors on Mozambique. I think that there's a challenge on Mozambique from a timing standpoint, but notwithstanding that, I still feel good about our position to continue to participate in that program. I think when you think about the whole gas play, in my previous comments, I thought petrochemicals would go first, which it has. I thought LNG would be last, which is not. And I think the question gets to be is at what point does the supply -- the demand start to outstrip supply and what happens to gas prices. I don't think we're going to see dramatic rise. But LNG is a global commodity and I don't know why the U.S. would look at that any differently than the rest of the world. I think that the flows are going to change relative to who gets what flows around the world. But I feel pretty good about our position and we're going to take this one -- one project at a time and make sure that we can execute that project with excellence and deliver the profitability. I mean, they're big programs, big projects. We've got a partner that we're dealing with, that we're happy with. So I feel pretty good about where we are. Michael S. Dudas - Sterne Agee & Leach Inc., Research Division: And just a quick follow-up, David, on Power. A likelihood of 1 or 2 similar type bookings in 2014 than what we witnessed there in Virginia?

Well, I think we're continuing to work on the front-end to several gas-fired power plants. If the economy continues to improve in the United States, you're going to see an improving demand in electricity usage. At the same time, once we get the environmental regulations and rules exacted from the EPA and otherwise, I think there's going to be a demand. Whether it's -- when it is in '14 or whether it even moves in '15, I really -- I have no clue right now based on what's going to happen with the regs. But I feel good about our position and the fact Bear -- or the Dominion project is up and running -- I mean, up and off to a good start from an execution standpoint. So our ability to prove that we can execute is clear.

We'll go next to Andrew Wittmann with Baird. Andrew J. Wittmann - Robert W. Baird & Co. Incorporated, Research Division: David, I just want to kind of dig into the earnings cadence as we move into '14 a little bit more. How much of the bookings -- or how much visibility through bookings that are already on the books are in place today that gives you confidence with the earnings ramp as we go through '14? In other words, how much is there today versus what needs to be won to get that second half acceleration?

Well, 2 comments. I know I'm going to regret my comment about the Giants at some point in the near term. Secondly, the fact that Jamie got Biggs to give you guidance within a guidance gives you an answer that we feel pretty good about profile of EPS as it goes through the quarters next year. We feel pretty good and have great visibility into how we're going to get there. Andrew J. Wittmann - Robert W. Baird & Co. Incorporated, Research Division: Just in terms of the buyback coming out of the last quarter. It sounded like you're pretty confident that you wanted to kind of use the timing in the cash flow. The cash flows in the quarter were pretty good. Yet you didn't buy stock. Was there something that changed in the quarter about the way you viewed the capital allocation? Or can you just kind of take us through the process, why nothing happened in this quarter? In the near term, you're saying you'd come back and do this now. So I'm just wondering, kind of, was there a change in the thought process in the last 3, 6 months, how you're looking at buyback and cash flow?

There's really been no change in our philosophy. As I said in my comments, the cash built up towards the end of the quarter and we have a pretty good view towards just staying high or cash generation being good through the rest of this year. So it just was an ample trigger to go ahead and commit. So I think rather than spending a lot of time on what the -- all the circumstances were of the last quarter, last few quarters, I focused more about the fact that we've stepped out and made a commitment that we're going to spend $204 million over the next several months. Andrew J. Wittmann - Robert W. Baird & Co. Incorporated, Research Division: And then maybe the last question here is just talking about labor utilization, knowing that there is eventually going to be a substantial ramp. And David, you've been pretty outspoken about thoughts about constraints on labor. Can you just talk about where you are today on that and how much the floor model has in terms of leverage from underutilization, if could go to well-utilized labor in the next quarter or 2, and what that could mean to your margins? Can you just give us some context about where your people are being built today?

Well, I think in addition to my comments about the tools and systems, we also, I think, have perfected the dispersed execution models, where we have greater capacity because instead of taking Houston to 5,000 people, again, we can grow the entire portfolio and be effective in how we do design. And that's the designs side and the project management side. So we feel pretty good about our ability to scale this thing up quite a bit in the near term and over the long term to serve as the Oil & Gas boom. But also, it's kind of retooling our organization with some pretty talented folks. And I'm really pleased it's where we stand there. From the craft side, we've invested in training programs and in Texas and Louisiana so that we can get a head start on that craft. We do believe that we're an employer of choice in that marketplace. And early indications are, based on -- in our past and the fact that we are a direct-hire constructor, I think what we've seen in terms of interest in those training programs, interest in getting lined up for the projects that we already have going on, like Dow, Freeport and some other things, we feel pretty good about our ability to scale the craft resources as well. If you think about the petrochemical boom, we're the -- we've got the first 3 of the big programs in Louisiana and Texas. So we'll be the first one staffing those people and have that following that we're going to need to continue as we get into the bigger projects in LNG, gas-to-liquids and power and some of the other programs that are out there for us in the southeastern region of the United States. So I feel pretty good about our position and I feel pretty good about our ability to kind of turn the crank here and get the people we need to be successful.

I might just add. You asked about labor. But certainly, as you look at not just labor but nonlabor components of our overhead costs, as E&C ramps up, there will be benefits to their margins from increased leverage, I guess, overhead. So it will be a contributor. We have -- as David said, we have the labor capacity and ability to grow across the world, but from an overhead standpoint, there will be improved leverage as well contributing.

We'll go next to Alex Rygiel with FBR Capital Markets. Alexander J. Rygiel - FBR Capital Markets & Co., Research Division: Two quick questions. David or Biggs, maybe you can identify 1 or 2 sort of primary variables that could result in earnings of either $4.10 or $4.60. And then I have a follow-up.

Why don't we move to your follow-up? That would be guidance within the guidance. Alexander J. Rygiel - FBR Capital Markets & Co., Research Division: Well, if I could expand upon that a little bit, do you think it's the timing of certain projects or do you think it's sort of the margin profile of what's in backlog and how that comes through the P&L?

I think it's more timing, more than anything else. Clearly, things like Pascua-Lama and the headwind that, that presents is included in that range. But barring any more cancellations, I feel good about where we are in the visibility again and to how we're going to get there. But I think between the low and the highs, it's clearly a timing element. Alexander J. Rygiel - FBR Capital Markets & Co., Research Division: Okay. And secondly, if we were to exclude Pascua-Lama, because I think we all understand what's going on there, any other sizable projects that were canceled or delayed in the quarter?

No.

We'll go next to John Rogers with D.A. Davidson. John B. Rogers - D.A. Davidson & Co., Research Division: I just wanted to touch a little bit on plans for and uses of cash. I mean, I appreciate the plans to step up the repurchases, but when you generated a lot -- $470 million in the quarter, you're holding a lot of cash. David, any thoughts there on this cycle, some reasons that you have to hold more going into it or just waiting for the right opportunity?

Well, I mean, as Biggs said, I don't think our strategy or how we think of this has changed. I think when you look at the headwinds that were there around a government shutdown and all of the challenges that we've seen in front of us, I think it was prudent to kind of -- to wait and see. I think there's a lot of uncertainty out there. And I believe that having a healthy cash balance allows us to do what we need to do to prepare to grow. I don't think there's any magic in why it's a fourth quarter, first quarter buying bench, if you will. But I think that as we go through next year, you'll see a more normal buyback process because we do think that we're going to generate excess cash over what we think we need, which I appreciate is a different number than what you guys think we ought to have. John B. Rogers - D.A. Davidson & Co., Research Division: All right. And are you still of the mind that you're better off building capabilities than buying them?

Well, I think we've proven that we know how to grow organically pretty well and we have great control over that. I do believe that there are some weaknesses and maybe some holes in our current offering from a market perspective and from a geographic perspective. And we're going to look to see how we fill those holes. And I think that some acquisitive growth mentioned in its makeup is something that we've got to consider pretty directly as we get into '14.

We'll go next to George O'Leary with Tudor, Pickering. George O'Leary - Tudor, Pickering, Holt & Co. Securities, Inc., Research Division: Just a quick follow-up on that last question. Maybe some of the areas that you're considering or some of the holes that you're considering, what, I guess, segments would those fall into?

Well, I'd say across the board. I mean, we've got a good position in all the markets that we're in, but we can always get better. And I think that there's some room in our Oil & Gas offering and the upstream piece that would be helpful. Also, I think there's room in our government offering based on some of the changes that we're seeing. I think there's also opportunity when we think about infrastructure. But what that means and what shape that takes, I think that I'd caution you with our conservatism and the fact that we grow organically pretty well. And, again, because I believe we're an employer of choice, we got the ability to go get the critical people we need pretty readily and then build from there. George O'Leary - Tudor, Pickering, Holt & Co. Securities, Inc., Research Division: All right. And then last question for me. With Cameron and Kitimat both coming up, I think the expectations so that both of those projects kind of hit in the first half of next year and, potentially, Q1 of '14, I guess, first, are you kind of onboard with that timeline? And then, second, how do you feel you guys are in the running for the KBR project, given there's -- sorry, for the Kitimat project, given there's a couple of bidders there?

Thank you for that correction. That would be a new something I didn't know. I wouldn't -- I feel really good about our position. Basically, it's -- we're competing against one other consortium in both cases. I feel really good about where we stand on both of them. I'm not sure that I agree that both will hit in the first half of next year. I think one will and I think one will push out later in the year.

We'll take our final question from Robert Connors with Stifel, Nicolaus. Robert V. Connors - Stifel, Nicolaus & Co., Inc., Research Division: With the receivables coming down and the government mix dissipating, do you see the opportunity that -- I know you gave your EPS guidance range, but that the operating cash flow in 2014 could be a little bit higher than that range.

For the government, I mean, it's a very steady payer. But certainly, on the Government business, as revenues come down, there should be less tied up in working capital, that's true. Of course, on the E&C side, we've got growing activities and so that's going to take some working capital. I think all in all, the relationship between working capital and revenues should be largely the same 2014 as 2013. But I just have to caution everybody. When you have very large projects, there could be some very significant payments that come in, that could come in the day before the end of a quarter and the cash balance goes up; and they come in a day later when the cash balance goes down. So if while we look at it on a day-to-day basis and see what's happening and so you have some volatility quarter-to-quarter, but looking at it on sort of a normalized run rate basis, we'd expect a similar relationship between working capital and revenue next year, as this year, as I said. Robert V. Connors - Stifel, Nicolaus & Co., Inc., Research Division: I may have missed it, but where you think corporate G&A shakes out for 2013?

Right. I guided, I think, to $170 million to $180 million. Robert V. Connors - Stifel, Nicolaus & Co., Inc., Research Division: Okay. Or for 2013?

I'm sorry, I gave 2014. I didn't give a distinct number for 2013.

And gentlemen, that was our final question. So I'll turn it back to you for any closing remarks.

Thank you, operator. And thanks to everyone participating on the call this afternoon. I appreciate your interest in our company. As I think I've expressed, I feel pretty good about our financial performance so far this year, particularly given the short falloff that we've seen in the Mining & Metals market. Our Oil & Gas and Power and Infrastructure businesses have all performed well and are delivering, I think, strong growth in '13. Importantly, the Oil & Gas segment has been very successful, as we've said, in capturing the key awards during the year that we signaled in positioning ourselves quite well for substantial new awards and as we get to '14 and beyond. I want to reiterate that we think that we're in the early stages, early innings, if you will, of a substantial multi-year Oil & Gas investment cycle and our market position and prospects for growth are extremely strong. And I think our outlook is very positive. We greatly appreciate your interest in Fluor and your confidence in our company. And I wish everyone a safe Halloween and a good day.

Thank you. This does conclude today's program. You may disconnect at any time and have a great day.