Good afternoon, and welcome to the Fluor Corporation Fourth Quarter and Year-end 2018 Earnings Conference. Today's conference is being recorded. [Operator Instructions]. A replay of today's conference call will be available 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. Additionally, a telephone replay will also be available through 7:30 p.m. Eastern Time on February 28, 2019, at the following telephone number, 888-203-1112, using a passcode of 9818033. And at this time, for opening remarks, I would like to turn the conference over to Jason Landkamer, Director of Investor Relations.

Thank you, and welcome to Fluor's Fourth Quarter 2018 Conference Call. With us today are David Seaton, Fluor's Chairman and Chief Executive Officer; and Bruce Stanski, Fluor's Chief Financial Officer. Earnings announcement was released this afternoon after market closed. We have posted a slide presentation on our website, which we will reference while making prepared remarks. 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 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-K filed earlier today. During this call, we may discuss certain non-GAAP financial measures. Reconciliations of these amounts to 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 I'll turn the call over to David Seaton, Fluor's Chairman and CEO. David?

Thanks, Jason. Good afternoon, everyone, and thank you for joining us today. I understand that most of you probably have a better view out your window than we have, so I hope you're enjoying South Florida. I'd like to start by discussing what we are seeing in the markets that we serve and what we expect to deliver to shareholders in 2019. If you'll turn to Slide 3, we can discuss a few milestones from 2018. We ended 2018 with a robust $40 billion backlog with new awards more than doubling to just under $28 billion. Fluor was able to capture the upturn in the commodities market with a number of significant mining and Energy & Chemical awards, including chemical and refining work in the United States, iron ore expansion in Australia and copper projects in Latin America. Our most significant award of 2018 and one of the largest in Fluor's history was the $8.4 billion LNG Canada project we booked in the fourth quarter. This award represents our largest project to fully utilize the investments in data analytics and our comprehensive integrated solutions model. We expect revenues contributions from this project to be relatively modest in 2019 as we begin engineering. Revenue will start to accelerate next year as we start to release the module designs to our fabrication yards. I had a review of that project yesterday in Calgary. Turning to Slide 4, our infrastructure group continues to focus on and win projects that align with our core expertise of large rail, bridge and highway programs. This includes the Gordie Howe International Bridge, the LA People Mover and the Boston Green Line Rail Extension project. We also successfully opened the Tappan Zee bridge replacement project to traffic late last year. 2018 was a banner year for our Government…

Thank you, David, and good afternoon, everyone. Let's begin with our full year 2018 results on Slide 6. Revenue for the year was $19.2 billion compared to $19.5 billion a year ago. With new awards just under $28 billion, our book-to-bill ratio is 1.4, is the highest we delivered since the early 1990s. Corporate G&A expense for 2018 was $148 million, down from $192 million a year ago. Expenses for the year were favorably impacted by foreign exchange gains and reduced compensation expenses. 2018 net earnings attributed to Fluor were $225 million or $1.59 per diluted share. This includes $79 million or $0.56 per diluted share for the establishment of a valuation allowance on deferred tax assets. Excluding this noncash item, adjusted earnings attributed to Fluor for 2018 were $304 million or $2.15 per diluted share. Consolidated segment profit for the year was $602 million. Now I'd like to ask you to turn to Slide 7, if you would, for fourth quarter results. Revenue for the fourth quarter was $4.8 billion, with new awards of $10.1 billion, our book-to-bill ratio was above 2 for the second consecutive quarter. Earnings for the fourth quarter were $50 million or $0.36 per diluted share. Excluding the $58 million or $0.41 per diluted share and noncash tax charges related to the valuation allowance, which I just mentioned, adjusted earnings attributed to Fluor were $108 million or $0.77 per diluted share. It's important to point out that our earnings for the fourth quarter also include a benefit of $0.36 related to favorable foreign exchange fluctuations and reduced compensation expenses, and a $0.40 charge related to a gas-fired power project and a downstream project, both now online, and an offshore project. Shifting to the balance sheet on Slide 8. Cash plus marketable securities for the quarter…

[Operator Instructions]. Moving first to Jamie Cook at Crédit Suisse.

So I guess, my question is, David, if you could provide color on the charges on the offshore project in terms of, is that the FCFO, percent complete? How big? When it is expected to be done? And I guess, my second question is with regards to the guidance. I think you said back half of the year, earnings should be 50% greater than the first half. Just what your assumptions on that, is it predicated on winning additional work? Is it just ramp of existing projects? And what's embedded in the '19 numbers in terms of rev rec?

Well, the quick answer to your second question is, we're not really expecting any new awards to drive that. It's, I mean, just a normal flow that we expect. There's no big project in there that does it. I mean, as Bruce said, I mean, we feel really good about where the backlog is and how good visibility and probably the next three years, frankly, in terms of what that growth story is. I'll let Bruce answer that. But let me get to the first question. Project's about halfway done. It's not a significant issue. We are in negotiations with the customer and I'd really leave -- rather leave it to that at the moment.

And Jamie, back to your question again relative to the profiling, and this is consistent with what we talked about at our Investor Day and how the revenue recognition standard is elongating the earning streams of program and flattening over the life of the program, generating much more earnings later on in its life cycle than early on, something we talked about before. Relative to rev rec, when we started with rev rec a year ago, we put $339 million in retained earnings. We burned off $103 million, that's in our K, you could see, in 2018. And we have $237 million more to go. The burn rate on that ramps down pretty significantly. So to burn off that $237 million, it's going to take over four years to do that, four plus years. So we are in a mode here as we predict earnings going forward is, rev rec is not considered in that for us because it's part of our normal recognition of revenue on projects now. So -- but that will give you an idea how to profile over that 4.5 years.

Moving next to Andy Kaplowitz at Citi.

David, so you mentioned that you're tracking two large LNG projects. Are you a candidate for both LNG projects in Mozambique? And then you said that there were -- at the Analyst Day late last year, you said there were $40 billion of prospects for '19. You mentioned the petchem award in Q1. Have you seen any slippage in any of those prospects? And if you don't win a big LNG project in 2019, can you still grow backlog?

The quick answer to the last piece of that is, yes, we can grow backlog without an LNG plant in the count. It's going to be difficult, I think, to get FID in '19 on one of them. Marginally more positive in terms of FID in '19. But again, those things are going to push significant earnings, just like LNG Canada is, into 2020 and '21 and '22. We don't finish LNG Canada until that kind of time frame. So we feel good about the base workload that we got in our backlog. And I do believe it's going to grow. And I think the real next big growth spurt is going to be 2020 because it's going to have several mining projects in there, and it's going to have hopefully at least one of the LNG plants in there. We are not in -- considered on both of the Mozambique projects. But we feel good about the one we're in. I'm looking at a list of projects that -- and I'll just talk about E&C quickly. And they kind of -- we kind of look at it in different groupings of leads, prospects, things that are in preparation and then proposals that are pending. Just in prospects which -- or things that we have decided to chase, preparation and the pending column, there's about 45 projects that we're pursuing that are significant in terms of fee that leads to EPC awards in the out-years. But there's also a pretty healthy number of them that are EPC or EPFC to be awarded during 2019. In mining, I mentioned in the prepared remarks, we're starting the FEED or the prefeasibility on 4 additional copper plants around the globe. So you guys know that business as well as anybody, and what that…

David, that's very helpful. Let me ask me you about MII&P in the context of the margin. I just -- I kind of don't understand the 2% guidance in the sense that, we know it excludes NuScale, but if I think about history, mining projects, I thought, were sort of 3% to 4% margin. Infrastructure maybe high single-digits. I know you mentioned CFM. Is the passive just higher in this cycle because, I guess, the concern is that the infrastructure project margins are lower for something this cycle? Maybe you could sort of reconcile that for us?

I'll start, and then Bruce can give more color. I think part of it is the timing of the mix, because on the -- on a lot of those infrastructure projects that I mentioned in the prepared remarks, those are all just starting, right? So you're not going to get the kind of profitability in those early stages than you will as the project matures. Bruce?

Yes, Andy. And if we take a look at just the fourth quarter here for MIIP, just the way that the project adjustment that we took, we're about 2.2% operating margin there. So kind of in line with our guidance going forward, but very much like in my prepared remarks, is that if we remove that CFM, all that material at the customer that goes through our books, the margins we get on our value-added services are very consistent with what we get in Energy & Chemicals. So it's just the nature of how we book and burn off that backlog with that customer furnished material.

We will go next to Tahira Afzal at KeyBanc.

So David, just wanted to get a sense. I know it's very early on LNG Canada, and you provided a great sort of framework of how we should watch and think about the project. But you said, you were just on site. Any updates that you came across would be helpful?

Well, I wasn't on site. I was actually in our office in Calgary. The team is progressing, the engineering. Early signs are positive in terms of long lead equipment that we're out in the market with. We believe given the labor market there, we are out ahead of that. We've got good relationships in the province with First Nations and otherwise. The way we're doing the project, there's sufficient labor there to do the pieces that will be done in Canada. Based on all the scrutiny, because of the size of this project and the involvement of everybody, including myself in that -- in those reviews, I think we're in a really good place to be very successful there and have a very happy client in delivering this particular LNG plant on time.

Got it. Okay, David. And then, David, in line with what you've been saying, the first flash of updates from major oil and gas companies on CapEx outlooks and really the FIDs we've even seen over the last month, 1.5 months have been very positive. When do you think we get to a point where you can really start to push that pricing, the competitive dynamic stuff to notably improve for yourself?

You always ask for that question, Tahira, or at least one of you do. I think, I'll answer it the way I have always answered it. This business is a dogfight every single day. There's somebody that don't win one project that decides that the next project is absolutely critical and strategic, whatever words you'd like to use to describe it, and people are still in the mode right now of some pretty predatory behaviors. And we've been very lucky in part of this because of our challenges in being more disciplined and making sure that we're making decisions that fit Fluor's needs. What I can tell you is relative to margin, is we are continuing to work on our cost structure, our supply chain and our project delivery in terms of efficiency. And I look for improvements in margin to come from there. But you're not going to see that until we get towards the end of some of these projects just because of the nature of how they burn and the risk associated with them. So I know that our credibility has been shaken a little bit, but I know we've made improvements, and I feel pretty good about where we're headed in being able to deliver what I just said. So I think -- and as I said, I think you start looking at 2020, 2021, 2022 because of just how long and how large a lot of these projects are. I think we're going to see significant improvement in terms of margin and in terms of what that EPS outlook is going to be for those out-years.

We'll go next to Andrew Wittmann at Baird.

I guess, maybe these questions are for Bruce. I just wanted to make sure that everyone understood the quarter as well as we could, and part of that, I think, would be to decoupling the $72 million of total project charges. I was looking at this on a pretax basis and these have been numbers I calculated for the charges in the quarter, and wanted to see if you could verify these? On the refinery, it looks like the refinery took about $20 million charge, $40 million charge on the offshore project and a $12 million pretax charge on the power plant if you finish that one up. Are those correct?

They're correct. The charges were $0.40 for the quarter.

Okay, yes. As we translate those to EPS, we should just use about, what, 25% tax rate or something like that to translate those to the $0.40?

Yes. You can use an average tax rate because we're adjusting for tax later on our roll forward here. Our tax rate for -- on the quarter was in the tune of about 62%, but 50% to 60% because of these unusual tax charges.

Right. The valuation allowances, makes sense.

25% is a good number to use.

Yes. Okay. And then just, I guess, maybe a similar question here to understand a little bit what was going on in the corporate segment. It looks like the FX was a pretty significant benefit to the quarter here, given that, I think, you'd already talked and probably baked in what your bonus pool was going to look like heading into this quarter? So can you just quantify what the FX tailwind was, maybe either on a pretax or an EPS basis specifically, not includes what's the compensation or the corporate cost?

Actually for about $40 million, we're about $40 million under our run rate, about half of that pretty equally was with our foreign exchange and the other half was the reduced incentive comp payments that we're making.

Got it, okay. Very helpful. And then, I guess, I just -- looking at, you always have in your 10-K the burn rates that you expect and this year you have about 40% of your total backlog is expected to burn in '19. I guess, the question here is, and posted in the guidance there's obviously always some level of in-year, for-the-year book and burn. I guess, I wanted to understand how you guys are thinking about that amount that you need this year in a historical context just given that that's a component of your overall revenue growth that you're expecting this year.

I guess, burn rates, you're looking at the 10-K for 2018. As we look forward, these larger programs that we have, particularly like LNG Canada, have a much longer tail on them. So the duration of the projects, instead of 4, 5 years are 8 years or longer. So the burn rate will slow down as we go into '18 because of the nature of these large, large awards. So we're not guiding right now on exactly what burn rate is going to be. But I think that will help a lot, which is kind of -- if you kind of increase the time duration by 2 or 3 years, that should help you.

We'll go next to Michael Dudas at Vertical Research.

David, really following up on Tahira and Andy's questions relative to current year 2019 booking levels and expectations, it sounds like, you obviously are coming in with a record backlog. Do you feel comfortable that you can be more selective relative to what you're choosing and what -- maybe share a little bit about the difference in win rates you're seeing because of that selectivity and relative to what you're providing to the client relative to your integrated solutions and the changes you've made from that standpoint? And do we need to see a big backlog pickup this year? It sounds like 2020 could be the real big delta for Fluor's future earnings power going forward.

Yes. I think I'll answer the last part first. I think it's really 2020 and the first part of '21 when we see another significant jump. The '19 -- I mean, 2019, I'm not going to give you the number, but it's pretty robust in terms of our average year intake. I mean, clearly LNG Canada was a significant number. But even without that, we are -- we still started with -- the number still started with a two, and I wouldn't expect anything less as we go through '19. Now relative to selectivity, I think as I've talked in previous quarters and I can guarantee there's nobody more happy than I that 2018 is behind us. But there's learnings that come from the last two years. And I think those learnings have already been applied, as we booked work in '18 and even going back into '17 because I would remind you that the issues we had were booked 3 and 4 years ago. So we have become more selective. And in that process, given I think the integrated solutions approach, we've been able to go to some of these customers and help them shape the opportunity to derisk the opportunity for both sides of the equation there in some of the projects that we're winning. So yes, we've become more selective. I wouldn't say that win rate has -- it hasn't dropped or increased during this period of time, but I think what we've been able to do is really get back into the mode of being that consultant -- or the consultative sale with a customer and coming up with a right answer as opposed to maybe what the three bids and a cloud of dust would suggest. But I also go back and say, I've never seen the market allow us to raise prices. I would rather come up with a better mousetrap, a more efficient execution, a more sure delivery in terms of cost and schedule, and take that money to my bottom line from sticking to my netting as opposed to really looking for the customer for more. I believe that when you look at the size of the projects that these customers are doing and it doesn't matter the industry, they're looking for somebody that can deliver the asset and that is becoming a pretty small subset of competitors. And I do believe we're one of that subset that can deliver these assets. Over time, we will be the go-to company, and that's where we're headed. And that's when I think we continue to improve our efficiency and competitiveness, and at the same time drop more money to the bottom line.

To take that one step further, as you're setting up for this pretty big ramp in activity and project opportunities and earnings power, the future of Fluor, how do you feel today relative to your asset utilization, your people, your tools? Is there appetite or requirements for acquisitions? And how you're thinking through that in the landscape where we've seen a lot of other companies shakeout in different levels?

I think one of -- and we showed you some of this in the Investor Day. I feel really good about the investments that we've made in terms of tools and systems, and the discipline and governance around how we bid projects, how we start projects, how we go to the various phases and what those requirements are going to be. So I feel really, really good about that. I also feel really good about the talent that's coming up. I've spent a lot of time over the last, I don't know, probably 12 months all over the world with our people. There is an excited young, capable group of folks that we're going to be relying on that they're really talented folks, but they've also got a mix of scars on their backs, which I think differentiates us from maybe the competition because we're actually putting these people in the field and they're seeing what they're designing. And those next designs are much more efficient and effective in terms of how we execute those projects. From a people standpoint, we look at attrition rates, we look at new hires, we look at college programs. And all of those indicators are in the green, so to speak. So I think our ability to attract the best talent in the industry and apply those talent, grow that next wave of talent, still is pretty robust. I feel really confident that we can continue to grow the organization organically from a resource standpoint, but notwithstanding that, there's going to be tangential things that we're doing in new markets where we may require a shot in the arm in terms of some of the specialty resources and we'll look at that when those things arise. But I think the depth and breadth of the organization, frankly, is as healthy as I've ever seen it.

We'll go next to Chad Dillard at Deutsche Bank.

So if you back out the LNG Canada award in the E&C, the resulting book-to-bill suggests like a pretty big slowdown around like a 0.2x book-to-bill, which is understandable just given the fears of slowing global growth at the end of the fourth quarter. I was just curious whether you've started to see customers come back to the market since then. And do you think you can get your book-to-bill above 1x in early '19 for that segment?

Well, the second half of the year is going to be where we see the book-to-bill start increasing. Chad, I appreciate your question, especially taking out the Canada LNG. Canada LNG consumed a lot of resources and it was a target prospect for us. And so we could have used those resources to chase 5 or 6 or 8 other jobs, instead we're using to chase this job because it matched our integrated solutions strategy well and it was a significant award and we were very successful at it. So we don't back that out to say what's our book-to-bill because we spent the energy, resources to win that job. Same thing going forward into this year, into 2019. While there might not be any jobs quite that size, we do have a lot of large prospects on the books. And David talked about the mining prospects that will come -- we expect to come to fruition in 2020, but those efforts will be spent on those large jobs as well as the refining, the commodities jobs, the infrastructure jobs that we're chasing going on. So long answer to your simple question, but we'll see that book-to-bill in the second half of 2019 up to where you're asking, over 1.0.

That's helpful. And then just switching over to Diversified Services. I think, David, in your prepared remarks, you talked about planning to expand the footprint beyond just Energy and Chemicals. What sorts of new markets are you targeting? How big of an investment in personnel capabilities will be needed to actually get there?

Well, I think you've got to kind of start with the fact that when -- after we bought it is when the markets kind of dropped, and it gave us an opportunity to optimize what we already had in terms of the markets that we served. And it wasn't just oil and gas, but that's the one that probably hurt us the most in terms of growth. But when you look at the future, clearly the industrial piece of our business is key from owners like Procter & Gamble and Novo Nordisk, and those types of industries are certainly targets. Further into the fine chemicals market, if you look at where Stork and most of our oil and gas projects in that segment were, they were kind of refining to gas processing, the pipeline maintenance, offshore fabric kinds of things. But going further down into the petrochemical side is a key market. It's going to be regional, just like you would expect. I mean, the Gulf Coast is going to be a big place. Some places in South America are going to be a big place. Europe is still a big -- huge market for us. But then finally, we've only dabbled in years gone by in the mining business. Well, who better to stay there and maintain those facilities that we're building right now than us. So big focus on how do we leverage those relationships and those -- basically, the folks that we have in those countries, why wouldn't we take advantage of that? So that's just a little color on kind of how we're looking at Diversified Services, because it's not just Stork. If you look at the mining business, our AMECO business has always been very successful when the mining guys were spending capital. Same thing for petrochemicals or refining around the direct-hire components of those projects that we're doing. And clearly, TRS, our temporary staffing business, allows us to kind of flatten the peaks, if you will. And when those big markets are blown and gone, like I see them coming, you'll see that business respond as well. So it's almost like when the EPC side of the business is improving, it raises the water level for those guys too. So I feel pretty good about their growth prospects, again, as we get towards finishing these projects. So it is a longer-term play than the typical EPC burn on a project, I guess.

And we'll go next to Goldman Sachs and Jerry Revich.

David, you mentioned growing financials in hybrid type structures and greater risk on the E&C contract. Can you just expand on that? So what sort of projects that have historically been cost-plus? Are you seeing customers opting for that type of approach? And as you look at your prospect opportunity list, hopefully, you get an LNG project in 2020, which will likely also be fixed price. And so what's your level of appetite to undertake more fixed-price work, considering the backlog is now 47% fixed price?

Yes, I mean, we said that we're comfortable in that kind of range and maybe a little bit more. What we're seeing is some change in behaviors of some of the key customers around the globe where they believe the market is needy, and they're taking advantage of that and trying to pass the risk on to the contracting community. This goes back to the question that was asked earlier about discipline in bidding. And so far so good. But you've got some traditional international oil companies that are moving more towards a fixed-price basis on some of the front-end stuff, whether it's FEED or the like. So I'm hearing some feedback. Was that a question?

No, please go ahead.

I was just hearing some feedback. I apologize. But we're just trying to make sure that we're sticking to our knitting and what we can provide, regardless of what the approach is. I also mentioned that we've been successful because of the relationships and because, frankly, they're interested in the new approaches that we've perfected. We're able to kind of move some of the procurement to where it's more of a hybrid than say an LSTK, which I think fits into our need. So some projects are fixed in terms of the services, engineering and procurement services. Some of them are EP. And because it's in a questionable place around labor, we're kind of taking the attack that, that's not fixed price. In some cases, we're fixing the unit, but not the number of units. So I think we're really looking more towards the hybrid based on our ability to help the clients see what the best implementation strategy is as opposed to just, as I said earlier, three bids and a cloud of dust. So it's going to be a mixed bag. But as I said earlier, I'm really confident that the changes that we've made over the last few years in terms of governance and tools and systems is going to provide a more sure outcome for Fluor and limit, I can't say eliminate, but limit the issues that we've experienced over the last few years.

And in terms of the projects that you folks are actively monitoring at the executive office that are close to over budget or shown red flags, can you just talk about -- just help us build comfort with what that list looks like as we think about the 6% E&C margin estimate for 2019? Just help us build comfort around they not being additional charges? Maybe within that context, can you just remind us the size of the offshore project, just so we can get our arms around what's the -- how sizeable...

I'm going to answer it in a different way. We do about 1,000 to 1,200 projects a year. 89% of those are operating at as-sold margin or better. There's only 3% of those projects, and this is dollar-wise, are performing below profit. So I think the vast majority of our projects, I would argue, in easier term are greenlighted. There's maybe 5% or 6% in the yellow. And the rest are red. And we've already talked about the red ones.

Okay. And in terms of the size of the offshore project and the completion date -- start -- completion date, can you comment on that?

As I said, we're about halfway done, but I'm not going to get any further into the project than that, sorry.

We'll move next to Anna Kaminskaya at Bank of America.

Maybe I can start with a bigger picture question. If I look at the commentary from you or other EPC companies, flow names and everybody sounds pretty upbeat about backlog growth for the next year. But then if you look at the outlook from just energy companies for 2019, they are much more conservative and we do not see much growth in their outlook. So I guess, from your perspective, what's the disconnect? Are companies just being conservative and guiding for 2019 outlook? Is it just specific initiatives of the market where you play? I mean, how do we get comfort that your positive upbeat outlook for 2019 connects with the outlook from the energy companies?

That's a great question. The first piece of that is part of our bullishness comes from the fact that we are more diverse than most in our industry. So we're not just relying on the energy companies to provide us with growth opportunities. That would be point number one. Point number two, I think that the energy companies are a little bit gun-shy in terms of announcing projects simply because of what's gone on in the last little while and the volatility that you see in the markets. In my conversations with those energy guys or at least on the oil and gas side, they haven't changed their outlook in terms of what oil price will be in the long term. So that really is not going to change their decision-making process, in terms of whether the project is a high-value project are not. I think how it fits into their portfolio and in what cadence or sequence that it goes in is really why you're seeing some of them being a little bit circumspect in terms of that outlook. But I point to the growth we've seen in our infrastructure business. I look at the growth that we've seen again in the manufacturing sector, which includes the customers that I mentioned on Diversified Services in terms of people like Procter & Gamble and Novo Nordisk and a lot of other -- of the "industrial" companies. So we just look a little bit different in the marketplace and the diversity provides maybe a little bit more of a positive on the way we look at things, because we're not beholding to one industry to drive the boat. Now I don't want you to think that oil and gas isn't important to us and mining is not important to us. It clearly is. But being able to say that we've got $6 billion to $8 billion worth of backlog in infrastructure is a big statement in terms of that overall Fluor look. And I'm very pleased with how the company has responded to that diversity piece of our strategy.

That's helpful. And maybe next question is more for Bruce. How should we think about free cash flow for 2019? I kind of look at your previous cycles, your free cash flow conversion is somewhere between 125% to like close to 200% because you were getting some of the working capital coming in? Can we get to those levels for the next year? What can your balance sheet and free cash flow look like next year, with especially Canada LNG kicking in?

And that's a good question, and I'm glad you asked because obviously we -- when we look at free cash flow, we generally look at net earnings minus dividends and then any kind of capital expenditures that we have, other expenses. As we look into 2019, we are starting up on a number of large projects and investing in joint ventures that are running those projects as well. So we will see cash. And if you look at our capital priorities, our first is supporting our business. We'll be using a fair amount of our free cash to start up those programs as we go forward in the first half of 2019. So as far as exactly what -- where we're going to be on cash, we'll see as the year progresses. But I expect to be a little less than the numbers you're quoting for the very reasons I stated. We need it for these projects for starting. And that's been our objective the whole time. Then once the projects start generating revenue and we're in the field with it, the cash spinoff of those will be very, very large.

But should we think that at least 100% conversion and you can go north of that? Or just given how, I guess, disappointing 2018 was with some of the project charges, so just trying to get a baseline for the free cash flow next year.

I think if you're talking about 1.0, I think that's reasonable, but maybe even a little less. Again, it's more important for us to use that cash to start up those large jobs that are really going to generate cash in 2020 and beyond.

And that does conclude the question-and-answer session. Mr. Seaton, I'll turn things back over to you for any additional remarks.

Thank you very much, and thank you for participating in the call today. 2019 is going to be an exciting year for us. And as our businesses grow and we, I think, at least message an optimism that we can capitalize on the investments that we've made in our business as well as the future profitability. We do believe we have the best people in the industry, and I think that's going to prove itself. I'm really, as I said in the Q&A, excited about the people we have leading these big programs and the future group of people coming up. And that gives me a lot of confidence as we start into this cycle and look at not only '19, but '20, '21, '22 and beyond. So we really appreciate your support of Fluor and look forward to seeing all of you soon.

Ladies and gentlemen, once again, that does conclude today's conference. And again, I'd like to thank everyone for joining us today.