Please stand by, we're about to begin. Good afternoon, and welcome to the Fluor Corporation's Third Quarter 2017 Conference Call. Today's call is being recorded. At this time, all participants are in a listen-only mode. A question-and-answer session will follow management's presentation. 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 investor.fluor.com. The web replay will be available for 30 days. A telephone replay will also be available through 7:30 P.M. Eastern Time on November 9th at the following telephone number, 888-203-1112 and the pass code of 4869593 will be required. At this time, for opening remarks, I'd like to turn the call over to Mr. Geoff Telfer, Senior Vice President of Investor Relations. Please go ahead, sir.

Thank you, Deedee, and welcome to Fluor's third quarter 2017 conference call. With us today are David Seaton, Fluor's Chairman and Chief Executive Officer; and Bruce Stanski, Fluor's Chief Financial Officer. Our earnings announcement was released this afternoon after market close, and we've posted a slide presentation on our website which we'll reference while making prepared remarks. But before getting started, I'd like to refer you to our Safe Harbor note regarding forward-looking statements, which is summarized on slide 2. During today's call and slide presentation, we'll be making forward-looking statements, which reflect our current analysis of the existing trends and information. However, there is an inherent risk that actual results 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 filed earlier today and our Form 10-K filed on February 17. During today's call, we may also discuss certain non-GAAP financial measures. Reconciliations of these amounts with the comparable GAAP measures are reflected in our earnings release and posted in the Investor Relations section of our website at investor.fluor.com. Now, let me turn the call over to David Seaton, Fluor's Chairman and CEO. David?

Thanks, Jeff. Good afternoon, everyone, and I appreciate everybody joining us today. On the call, we'll review our results for the third quarter and discuss our views of the market. If you turn to slide 3, let's look at the results for the third quarter. Net earnings attributable to Fluor were $94 million or $0.67 per diluted share. Our consolidated segment profit for the third quarter was $203 million, and segment profit margin was 4.1%. Revenue for the quarter was $4.9 billion, compared to $4.8 million a year ago. New awards for the quarter were $3.8 billion. And ending backlog stood at $32.9 billion, with both of the nuclear projects having been removed from that backlog number. If you'll turn to slide 4, the Energy, Chemicals & Mining segment booked $2.6 billion in new awards for the quarter, including a number of petrochemical projects, mostly in Malaysia, the Philippines and the United States. Ending backlog for Energy Chemicals & Mining segment was $18.5 billion. We continue to see a ramp up in mining, with the award of BHP Spence copper project in Chile. Based on what our clients are asking from us in terms of feasibility studies and FEED work, we believe that we're at the start of the next commodity cycle. This includes commodities such as copper, gold, as well as replacement mines for iron ore. Our oil and gas customers continue to focus on projects that are advantaged; meaning, they have a clear and distinct economic profile in the current commodity pricing environment. As we look at Q4 and into 2018, we see clients pursuing final investment decisions on chemical facilities and pipeline projects in the United States, LNG projects in North America, as well as refining and chemical projects in the Middle East and Asia. As we…

Thanks, David, and good afternoon, everyone. Please turn to slide 6 of your presentation. I'll start by providing some additional comments on our third quarter performance, and then I'll move on to the balance sheet. As David just said, revenue for the quarter was $4.9 billion, up slightly from $4.7 billion last quarter and $4.8 billion a year ago. Revenue improvements in the Energy, Chemicals & Mining segment are being driven by the mining and metals business line as we start to execute on recent awards. Corporate G&A expense for the third quarter was $46 million, compared to $47 million last quarter. Shifting to the balance sheet where cash plus current and non-current marketable securities for the quarter was $2.1 billion, flat with last quarter and a year ago. Cash provided by operating activities was $123 million for the quarter and $551 million year-to-date. During the quarter, we paid $29 million in dividends. Moving on to slide 7. Fluor's consolidated backlog at quarter-end was $32.9 billion. The percentage of fixed price contracts in our overall backlog was 36%, compared to 29% a year-ago, when we had two large reimbursable nuclear projects in our backlog. A quarter-end, the mix by geography was 40%, U.S. and 60% non-U.S. I'll conclude my remarks today by commenting on our guidance for 2017, which is on slide 8. We're revising and tightening our earnings guidance range to $1.50 to $1.60 per diluted share. And, finally, I want to mention one housekeeping item as we look ahead to 2018. Some people have asked me about the change in accounting for construction based contracts. Starting January 1st, Fluor will be required to report under the new revenue recognition standard. Under existing guidance, the company's segments revenue and margin recognition between the engineering and construction phases of our contracts. Upon adoption of the new standard, the company expects that the entire engineering and construction contract will be a single performance obligation, which will result in less volatility and recognition of revenue and margin over the term of the contract. We won't know the full effect of this new standard until we know what our mix of business will be at the end of the year. As such, we're delaying 2018 guidance until we report full year 2017 results. While we won't know the full impact until the year is concluded, the economic drivers of the business remain unchanged. For fourth quarter 2017 and going into 2018, we expect our tax rate to be in the range of 34% to 36%, and G&A expense to be approximately $50 million a quarter depending on currency fluctuation and share price. NuScale expenses are expected to be approximately $75 million in 2018. With that, operator, we're ready to take questions.

Thank you. And we'll go to our first question from Andrew Kaplowitz with Citi.

Hi, good evening, guys. It's Alan calling on for Andy.

Okay. How are you?

Good. David, outside of your award for TCO, this is the best aggregate bookings result we've seen in ECM since I think the second half of 2015 and you did it with fairly broad-based strength in mining and oil and gas. So I think the tendency to think that has made market potential turn here and customers moving forward with larger project decisions. I mean do you think that's a fair way to kind of look at it? And does this give you more confidence and backlog starting to turn higher for good here?

That's a great question. And I'm cautiously optimistic. I mean I've been bitten over the last five quarters on certain things continuing to be shifted right on the schedule. But this does kind of give us some optimism that the trough is the trough and we're starting to come out of it. I think the quality of the projects that are coming up are really intriguing to us in terms of mining, as well as some of the projects that the oil and gas guys are finally taking to FID. So I guess the short answer is, I'm cautiously optimistic that we're in the beginning of the recovery.

Okay. I appreciate that. And maybe, David, you can talk about how we should think about ECM margin going forward. I think over the last several quarters you pointed to the lack of engineering utilization, as you said, as being a drag on margin performance. But you did book some sizable engineering awards this quarter and CPChem is rolling off. So do you think we should start to see maybe a more significant inflection in margin heading into 2018, and maybe talk about how mining plays into that?

I'm really not going to give any guidance. I would just say that, you're correct in that there's more of an engineering component at least coming in right now. But I would remind you what Bruce said around the new rev rec model. So I think what you're going to see is, two things: we still are seeing improved margin in terms of backlog, but I think what you're going to see is a more smooth take-up in terms of that margin over the longer term with the new regs.

Okay. Thank you. I'll hand it over.

Thanks.

Thank you. And our next question comes from Tahira Afzal with KeyBanc.

Hi, David and team. Congrats on being back on track.

Thank you.

So listening to your customer calls, it does seem cautiously optimistic, make sense. I know in the past you've been more positive on petrochem, seems like you're getting more positive on mining. How about LNG, any change in thoughts over there?

Well, there's some big projects out there that we're pursuing. We'll see how quickly they move forward. I think there's one or two that'll probably be – will reach FID in 2018. And then, we'll see what goes from there. But I think you're correct. I mean, we're continue to see strength in petrochemicals globally, as well as refining. And again, as I said in the prepared remarks, it's pretty diverse in terms of geography in that regard. So, again, cautiously optimistic. I've been wrong before, but I listen to the same things you do and talk to those same customers. And there seems to be a little bit more optimism there as well.

Okay. And, David, if you look at the recently advertised Saudi 2030 Vision plan, it seems like probably the most notable plan for infrastructure we've seen in a while. And I was just wondering, is there a way you can leverage your relationships that you've built on the oil and gas side so successfully? Can you leverage them to get a bigger piece of that pie, if you're interested, that is?

Well, we've always had an infrastructure play there. We're currently managing the heavy-haul rail program for the Saudis and have a fairly sizable project management organization there to do that. We were doing the, before it was canceled, the Doha Crossing project Sharq, which was called Sharq.

Right.

We've managed the mass-transit program in the UAE. So I think not only can we leverage the relationships we got, but we also have a pretty good resume to use. I would say that the plans are quite aggressive, but really intriguing to us because they fit within the types of programs that we're interested in. And I had mentioned that there was a power seminar or conference, or whatever you want to call it, this past week there and there was great interest in the presentations that were made on NuScale.

Right.

And I think that that bodes well for where we're going with NuScale. Clearly, if we can get the Saudis to sign the 123 Agreement, that kind of opens the door. The DOE was there and was very complimentary of our progress in terms of the DCA submittal. And we're on track. So I think, to me, those were very positive statements that were made in the Middle East that fit a lot of the things that we're looking at doing.

Got it. Okay. Thank you very much, David.

Thanks, Tahira.

Thank you. Our next question is from Jamie Cook with Credit Suisse. Jamie L. Cook - Credit Suisse Securities (USA) LLC: Good evening.

Good evening. Jamie L. Cook - Credit Suisse Securities (USA) LLC: And it's nice to see a back-to-normal Fluor quarter. Couple questions. One, David, obviously it was nice to see that we didn't have any charges in the quarter. I think you did talk about last quarter trying to decide strategically whether the gas-fired power business made sense for you longer term. So an update there. My second question, obviously, when I think about sort of green shoots on mining versus your traditional oil and gas business over the next 12 months, which end market has a bigger pipeline in the next 12 months? Is it mining versus energy if you handicap really what you think will go forward? And then, will mining be a lower-margin business like last cycle if we adjust out the accounting? And then, I have a third question for Bruce.

No. You can't have it, two – you can only have two. Jamie L. Cook - Credit Suisse Securities (USA) LLC: Oh, come on. I'm complimenting you on the quarter.

Well, you think one compliment gets you three questions, really? Jamie L. Cook - Credit Suisse Securities (USA) LLC: Yeah. Come on, it's been a while.

Okay. I'm in a good mood. What's the third one? Jamie L. Cook - Credit Suisse Securities (USA) LLC: The third one is, I know you don't want to talk about 2018 guidance, which I'm fine with because we can make our own assumptions on the markets. But of the things we do know, is it fair to just assume as we think about the base for 2017 and we can make whatever assumption we want on the end market or backlog trajectory, is it fair to just adjust out the problem projects? And then, obviously, we have to minus the new projects which come out, which I think is about $0.40. I just want to make sure I have that math right.

I'll let Bruce answer the math questions. But – let him get under fire a little bit here, this thing is his first official call. You've said basically that mining wasn't our traditional market; I know you didn't mean it that way... Jamie L. Cook - Credit Suisse Securities (USA) LLC: No. I didn't say that. I said over the next 12 months.

No, I get it. Jamie L. Cook - Credit Suisse Securities (USA) LLC: Which is a bigger opportunity.

You basically said that only gas was our main market. I would argue that we're very diverse; and mining is just as much a main market as oil and gas. But clearly when you look at where mining was in terms of backlog, say, a year ago versus where it is now, it's growing. But clearly the oil and gas market is going to be a bigger market in the medium-term, more long-term. So I would argue that oil and gas is still going to kind of drive the ship, but I think that's going to be the back half of that 12-month period that you stated. Jamie L. Cook - Credit Suisse Securities (USA) LLC: Okay.

I think we're going to see some more mining things in the near-term. We're kind of at the trough, like I said, in terms of new awards. And as I mentioned in the last call, I'm not seeing the markets this low for this long in my career. And I do think that there is going to be a bit of a feeding frenzy with some of these projects that need to go forward if these companies are going to make the kind of numbers that they're suggesting. So I used the term cautiously optimistic just because I've been burnt before, but I do think that both oil and gas and mining are picking up. But oil and gas is going to be a bigger piece of the pie. And the first question was? Jamie L. Cook - Credit Suisse Securities (USA) LLC: Government – sorry, not government, gas. You said last quarter you were trying to figure out whether it makes sense to stay in it while you make a final division.

We still haven't made a decision. In fact, there are certain projects in that gas market that we're continuing to pursue. But it's not for bids and a cloud of dust and the one that makes the most mistakes wins, which has been that market for some time. Projects that we're looking at are projects that we're helping these owners develop and have an ability to negotiate what the right cost should be. So we really haven't made our decision. We're still looking at some gas, but it's on a completely different basis than the four projects that we made mistakes on. But we're kind of sticking to our knitting, if you will, in terms of how we're executing and executing against that plan that we used. Just like I think we've done this very well in the past and maybe we've had a couple of hiccups, but selectivity is still the word of choice regardless of market. And I'd say, we've kind of sharpened our, as a management team, sharpened our focus on selectivity. And now, the margin question.

Yeah, Jamie. Thanks. When I look at the math as it be, I want to take out the impact of our problem projects here for the year, I get more like $0.89 instead of $0.40. Jamie L. Cook - Credit Suisse Securities (USA) LLC: Well, no, the $0.89 is the problem projects, the $0.40 is the – we're taking the new projects, like how much does the absence of the new projects hurt 2018. So you would add back to $0.90 or $0.89 and then subtract out to $0.40 because you're going to lose that. Does that make sense, the Westinghouse project?

That does make sense. And I would say it's directionally correct. Jamie L. Cook - Credit Suisse Securities (USA) LLC: Okay. All right. Thank you. I appreciate it.

You can get back in the queue and ask a fourth question, if you like. Jamie L. Cook - Credit Suisse Securities (USA) LLC: Don't tempt me.

Thank you. And next, we'll hear from Steven Fisher with UBS.

Thanks. Good afternoon.

Good afternoon.

And since you're in a good mood, I've got six questions for you. Just kidding.

I should have know that. I thought we X'd him off the queue.

So starting last quarter, David, you commented that the market environment was the worst in 30 years. That was a pretty strong statement. Now, you're cautiously optimistic. What's kind of changed over the last three months?

Well, basically, I was talking about the previous time. And I think what I said was that we're starting to see companies move these projects forward, but that it was going to be a back end of 2018 kind of timeframe. I think some of the projects that we were counting on have come through in terms of the schedule. LyondellBasell is probably a great example of where it moved around quarter-to-quarter. And that one actually received funding, and we're moving forward on that one. There's a couple others that are – it appears they're going to stop moving and decisions are going to be made. And in most of those cases are projects we're already working on. So I think it's just a timing element. And I think, like I said, I'm not seeing a whole big slog of things happening in the next two quarters. But I think as we go through 2018, we'll end up with a better new award performance in 2018, than we'll have in 2017.

Okay. That's helpful. And then, just a couple of backlog clarifications. What was the roughly $1 billion downward adjustment to the EC&M backlog in the quarter. I didn't see it in the Q, but maybe I missed it. And then, do you have any preliminary expectations for how the new revenue recognition standard is going to affect backlog?

Steve, I'll take that one, if you don't mind.

Sure.

The $1 billion in our EC&M segment was – we had to remove CFM, Customer Furnished Materials, from refinery project and a pipeline project. So there were no cancellations in that segment. As far as rev rec from the backlog and the revenue and earnings side, that's what we're evaluating. Again, we'll have a much better understanding as we close out 2017, what the impacts will be on 2018.

Okay. And sorry, Bruce, why did you take those things out of your scope?

We no longer had the responsibility for the Client Furnished Material on those two projects. So the risk profile of those contracts diminished. And those two projects, we're still doing the engineering and project management, we're not responsible for the material. So it doesn't flow through our books.

Okay. Fair enough. Thanks.

Thank you. And next, we'll hear from Jerry Revich with Goldman Sachs. Jerry Revich - Goldman Sachs & Co. LLC: Hi. Good afternoon and good evening. David, you folks often have the best early look at mining opportunities. Can you just flesh out what commodities or regions you're most optimistic about translating into bookings for you folks over the next 12 months? Obviously, mining spans a lot of commodities and markets. If you could just give us any context there, that'd be helpful.

Well, I think certainly copper. You've seen the prices rise on copper and there's a fair amount of work. Some of the stuff we've just been awarded is in that commodity. What we're seeing is capacity replacement programs in iron ore. They've shipped as much as they can ship and now they got to figure out how to refill the ability to perform. We're also seeing some opportunities in bauxite still in Western Africa. And then, we're starting to see some aluminum projects come back on the fabrication side. So it's mostly aluminum, copper and iron ore that we're seeing move. Jerry Revich - Goldman Sachs & Co. LLC: Okay. Thank you. And then, can you talk about the opportunities you're pursing in Government and Diversified Services there? How are you thinking about the opportunities to grow backlog over the next 12 months? anything meaningful on the radar that we need to keep in mind?

Well, I think the – Bruce is in as good a position to answer this question as I am having come from that. But I think when you think about government work, there's no new work. You got to take it away from someone. And there's a fair amount of bids that are coming up in the next, say, three to four quarters. But I think the biggest thing that's going to be in the near-term is just how much do we need to do to help Puerto Rico. If you look at, what, 2005, 2006, after Katrina, I would argue that Puerto Rico's damage rivals Katrina. And I think this first contract will grow. I mean it's out in the contracting space. There's an additional $600 million available. That's just the way they're using the process. So there's going to be growth there. And I think that you see the strife around the globe. And I think our LOGCAP contracts certainly won't be shrinking over the near-term, and there's probably some additional opportunities there. Jerry Revich - Goldman Sachs & Co. LLC: Okay. Thank you. And lastly, David, earlier you mentioned you see pretty good opportunities in oil and gas within the I think six to 12-month timeframe. Can you just flesh out what part of the oil and gas food chain you see moving forward first? I guess what are the most positive end markets within that area?

Petrochemicals and refining, I'd say that's one and two. There will be one or two LNG projects that go very little upstream offshore, although we're starting to see some studies around new production, which I think is probably 2019 kind of a timeframe, 2019, 2020 before it starts to come back. But there are significant opportunities in petrochemicals and refining. Jerry Revich - Goldman Sachs & Co. LLC: Okay. Thank you.

And Thank you. And next question comes from Michael Dudas with Vertical Research.

Good evening, everybody.

Mike, I can't hear you.

Can you hear me now? Can you hear me now?

Yeah.

Okay. Thanks. Sorry, David. Two thoughts. First, good news about the Purple Line getting going. So that could be very helpful for the next couple years on the infrastructure side. Can you refresh us on your strategy still of those $200 million to $300 million, $400 million projects and that you're pursuing, how we might see some of that flush through? And are there any big larger type projects given that you're seeing a lot more state and local funding coming through the door that Fluor could be helpful on that front or even some P3 things down the road?

I think in the near-term what you're going to see is, is the $200 million to $400 million project. There's, I don't know, a half a dozen or so that we think we'll be successful on as we go into 2018. There's a big bid slate that we're working on, on various projects and in various in infrastructure kinds of markets that probably won't be awarded until 2019. So we kind of went through a low. We had a couple of big ones with like Purple Line into backlog, we've been successful on the smaller projects. And then, it's going to be a little bit of a low before those big projects come back. But we're working on the procurement on and bid development on several large ones.

I hope we can find another bridge to use the Left Coast Lifter?

That's right. That's right.

And I drive over that bridge twice a day, so they're all doing and working real hard and doing a great job there.

That's good.

So one commuter appreciates it.

You'd be surprised how many commuters I get e-mails from.

Good or bad?

They'll only let me see the good ones.

So second question is, I know it just got announced this morning, but with the U.S. tax reform, I don't know if there's any early indication on how that might impact things looking into 2018 if things goes from the corporate side. But do you get a sense from the people you talked to in the commissions that you're on such that there could be a lot more activity in the U.S. economically going forward. And can Fluor generate benefits from some of that if we continue to see this momentum we're seeing in the U.S. economy?

Well, if we can get everybody to make it law, that'd be great. We still got that process to go through and I'm sure there'll be some reconciliations that takes place. But from a vantage point on the National Association of Manufacturers, we're already seeing significant reinvestment in the United States in manufacturing. And we're well-positioned in that market in a lot of the things we're doing. There's a fair amount of direct investment in the United States from outside as well. So I think it's going to have a positive impact once it becomes law. And the simplicity of what they've put forth, I think, is really good for everybody. So I think there will be a good uptick in terms of investment and kind of regenerating that manufacturing, Mike, of the U.S. I'm pretty excited about that and for a lot of the reasons, not withstanding that we'll hopefully build our fair share of that. So I'm pretty optimistic that the new tax law will be a good catalyst for growth.

Excellent, David. Thank you very much.

Thanks.

And thank you. And lastly from Baird, we have Justin Hauke. Justin P. Hauke - Robert W. Baird & Co., Inc. (Broker): Thanks. So I've got kind of two quick ones here. First, I just wanted to clarify maybe the contribution from the nukes and try to understand if there's any nuke residual revenue in the fourth quarter, or if we should think that the $0.57 to $0.67 that's implied there is basically a clean number versus maybe some contribution you had in the second quarter and the third quarter?

Well, we're still working on both sides. So, I mean, it's little onesies and twosie kind of thing. I think we still got about 140 people on the SCANA site helping them shut that project down. So there'll be some, but it won't be material. Justin P. Hauke - Robert W. Baird & Co., Inc. (Broker): Okay. Great. And then, I guess the second question is just more capital allocation. It's been I guess about two years since you've done any buybacks. It sounds like you're saying that you feel pretty good that you're at a bottom here. Previously, you were buying the stock in the mid-40s, balance sheet's in a good position, you mostly – I guess you don't really have much on the fab yard left to invest in. Is buyback back on the table or what are you thinking about what you want to do with the balance sheet here?

I'll let Bruce answer that.

Justin, that's a good question. Obviously, our cash and securities balance remains at over $2 billion, and that's very consistent with where we've been. But relative to our capital strategy, it really remains unchanged. So, as you know, we have a priority for our capital allocations. The first, of course, is to fund current operations. The second is to service our shareholders by paying our dividends. Third, looking at very select niche M&A opportunities. And lastly, share repurchase when we have excess cash and capital that we think – I don't think we're in that position where we have worked our way down that list effectively right now. So for the near-term, we don't see share repurchases is the best place to put our capital right now. Justin P. Hauke - Robert W. Baird & Co., Inc. (Broker): Great. Thank you.

And, gentlemen, we have no further questions in the queue. I'll turn the call back over to you for finally remarks.

Well, this is a record in terms of time and we really appreciate that actually. I wondered is it because of people breaking the rules and asking three and six questions that got us here. I was really disappointed that Michael didn't say anything about my cowboys, but we'll save that for later. But I would like to thank everyone for participating in the call. I believe that our results this quarter are stepped in the right direction. And it's clear that we're focusing on execution and positioning ourselves to win advantaged projects across all of the end markets that we serve. We greatly appreciate your support, and thank you for your time today.

And that concludes today's conference call, and we thank you for joining.