Good day, everyone, and welcome to the KBR Second Quarter 2013 Earnings Conference Call. This call is being recorded. [Operator Instructions] For our opening remarks and introductions, I would like to turn the conference over to Mr. Zac Nagle, Vice President of Investor Relations and Communications. Please go ahead, sir.

Good morning, and welcome to KBR's Second Quarter 2013 Earnings Conference Call. Today's call is also being webcast and a replay will be available on KBR's website for 7 days at kbr.com. The press release announcing second quarter results is also available on KBR's website. Joining me today are Bill Utt, Chairman, President and Chief Executive Officer; and Sue Carter, Executive Vice President and Chief Financial Officer. During today's call, Bill will provide an overview of KBR's second quarter operating results, highlighting a number of key areas from each of our business units. Sue will then provide an overview of the key financial takeaways for today's call. Lastly, before turning the call over to Q&A, Bill will provide brief closing comments. After our prepared remarks, we will open the floor for questions. Before turning the call over to Bill, I would like to remind our audience that today's comments may include forward-looking statements reflecting KBR's views about future events and their potential impact on performance. These matters involve risks and uncertainties that could impact operations and financial results and cause our actual results to differ from our forward-looking statements. These risks are discussed in KBR's second quarter press release issued last night, KBR's Form 10-Q for the period ended June 30, 2013, and KBR's current reports on Form 8-K. You can find all these documents at kbr.com. Now I'll turn the call over to Bill. Bill?

Thank you, Zac, and good morning, everyone. KBR delivered a solid second quarter with earnings per share of $0.61. Overall we had strong project execution across our businesses, which drove job income up 8% year-over-year, with job income margins up 153 basis points. The second quarter results were negatively impacted by nonrecurring charges in the amount of $11 million. These costs include office closure and severance costs in the amount of $7 million, as well as $4 million related to a true-up of lease expenses in Australia. Second quarter results were also favorably impacted by a 12% effective tax rate for the quarter. The second quarter was also a strong bookings quarter for KBR. Ignoring foreign exchange impacts across our backlog in the amount of $611 million, KBR's second quarter book-to-bill ratio was 1.1. Across the 5 problem projects we discussed on our fourth quarter call, our execution remained consistent with the project provisions we took in the fourth quarter, and we did not take any further charges in this portfolio of projects in excess of these provisions. At our U.S. construction business unit, 1 project experienced an increase in cost, which was offset by lower estimates complete on the other 2 projects. We continue to estimate that all of the projects will be completed by the end of 2013. For the KPC projects, KBR has completed its work on the available construction fronts. On the KPC 2 project, all construction activities have been completed; however, due to operational requirements, the customer has elected not to provide KBR the opportunity to shut down a portion of the plant, so as to allow KBR to complete punch list activities and conduct final performance testing. As a result, KBR has commenced demobilization on the KPC 2 project. On the KPC 1 project,…

Thanks, Bill, and good morning, everyone. Let me summarize our financial performance and then go deeper on some of the key areas. KBR had a solid quarter of execution with job income up 8% and job income margins improving 153 basis points versus the second quarter of 2012. Hydrocarbons business group job income margins were up 390 basis points, driven by strength in Gas Monetization, Downstream and Technology. The NAGL, IGDSS, Canada and Industrial Services business units also delivered job income margin improvement year-over-year. Operating leverage was reduced in the quarter by higher business unit overhead, driven primarily by higher proposal costs; higher SG&A expenses, including $11 million associated with implementation costs for our new ERP system; and higher labor cost absorption or LCA expenses driven by our resource centers' labor under absorption of $12 million; and $5 million related to an office closure. Over time, we expect to see these 3 areas return to historical norms, which will help drive bottom line growth. Second quarter revenue was down compared to the prior year's second quarter consistent with our expectations, primarily driven by lower revenues from the Escravos GTL and Skikda LNG projects, which are largely complete. We did, however, see solid revenue growth in 2 key areas for KBR: Downstream and Services, driven by strong bookings over the past several quarters. Downstream revenue was up 33% year-over-year and Services was up 46% led by outstanding growth in Canada operations up 153% and robust growth in Building Group and Industrial Services up 44% and 27%, respectively. I'd like to highlight the $11 million of nonrecurring expense that we incurred in the quarter. The first piece of this is the closure of an office, which cumulatively cost approximately $7 million. This cost were split between LCA, which was approximately $5 million,…

Thank you, Sue. At this stage of the year, our business is progressing satisfactorily with large awards slower than expected. We've had solid execution so far in 2013 and our win rate on new awards is improving. While our 2013 labor cost absorption expenses are higher than expected, these have been offset in part by lower tax expenses. We continue to see a robust series of new opportunities across our 14 market-facing business units. The potential opportunities set for KBR continues to expand, given our solid positioning and capabilities, and I am confident in our ability to successfully win and execute this work both in the second half of 2013 and beyond. We will now open the call for questions. [Operator Instructions]

[Operator Instructions] We'll take your first question from Vishal Shah from Deutsche Bank.

Bill, I just wanted to better understand how we should be thinking about LCA going forward. Do you need some of the big projects to drive your LCA improvement in the second half and also in 2014? And can you also talk about the cost increase that you saw in one of the U.S. projects? Should we expect any more increases going forward?

On the labor cost absorption, we're seeing that being a regional issue for us. We look at weakness in our Australian markets, which we're trying to take steps to correct. That involves mostly the civil infrastructure business in Australia, which is not megaproject-related. We're seeing weakness in our Singapore and Jakarta offices, which is more oil- and gas-centric in terms of their outlook, and we've worked to move some other work into those offices to minimize that impact. But those are really going to come back based on either the additional work we sell in oil and gas or possibly looking at some of the larger LNG projects going forward. We're also seeing some under absorption in our London offices that is -- part of it will get solved with the FID on Shah Deniz when that takes place, and we expect that to take place later this year. But there's also additional FEED work that will help mitigate that. And as we move into Gorgon train 4 FEED later this year, the first part of next year, that will improve the situation. We did see some mitigation of the LCA with the Petronas FEED, which is being executed in London. But to get the London situation fully recovered, that's going to take some of the larger projects to move forward. Now offsetting that is, we're doing very well in the U.S. We see very positive labor cost absorption numbers, and we're looking at ways to try to balance off the portfolio effect of LCA. But we're clearly focused on what we need to do in those regional markets and maintaining capacity for work that we do believe will come forward. Now with respect to the U.S. construction projects, the cost we saw really got back to productivity and wage rates at one project. There is some opportunity to recover some other expenses related to that project, but we do have the fundamental base productivity and the wage rates for the work under contract that we signed up for. But overall, we do feel that the portfolio's appropriately provisioned and that we do see across the 3 U.S. construction projects, prospectively, upside opportunities that could balance any future downside effects for further wage increases or productivity impacts.

We'll move next to Jerry Revich from Goldman Sachs.

Bill, can you give us an update on the number of U.S. nitrogen projects that you're bidding on currently? And would love your perspective on the delays we've seen for the urea and UAN projects recently, and where do you think the return structures stack up on the various derivative projects?

Well, we have a number of projects we are pursuing. Off the top, I think there are 4 of them that we're looking at, at various stages of development, that we are pursuing from an EPC perspective. We do think there are other ones out there that haven't gotten to the point where I would say we're actively pursuing them, but we have 4 of them that we're looking at right now. I think in terms of what we expect to see on the margins, we're not seeing any change from our previous comments. These look like more like power plants and less like LNG facilities from a margin standpoint, because they are more of a product than a design for the specific fuel type or the specific site. These are all burning pipeline gas, and so they look more like a combined cycle standpoint from our perspective, as far as the economic opportunity for us.

Okay. And in Canada with the various LNG projects at various stages moving forward, can you just talk about how you see that basin evolving and what are the implications for construction costs, depending on when projects move forward? It feels like a pretty concentrated area where the projects are being developed.

I think, obviously, Canada, a resource-rich country with a small population, it's just like Australia in many regards. The projects going forward are going to be heavily modularized and you're going to have to really focus on how you're able to get the residual on-site construction talent, either by partnering with folks or having subcontractors who are very strong in construction in those areas. We've got a pretty good construction business in Alberta, but we're also talking to -- or have other partners for some of the pursuits that are very strong contractors across Canada. We're also looking at the opportunity to bring in third-country nationals just to maintain capability to do all that work. I do think you're going to see these projects kind of spread out in time. There was originally talk of 4 of them moving forward. I think, you're starting to see a separation with that. You will have ultimately some challenges in Canada when you look at multiple projects being at various forms of construction concurrently. And we're going to have to manage that by tapping into as much, either offshore construction through modular fabrication, coupled with as much resourcing either within Canada, the Western U.S. or even third-country nationals to come in and help those projects move forward.

We'll hear next from Jamie Cook from Credit Suisse. Jamie L. Cook - Crédit Suisse AG, Research Division: Two follow-up questions. One going back to the higher LCA relative to what you originally expected. Is there any way that you can quantify that? I'm just trying to figure out when the raise in EPS -- I'm trying to figure out how much is tax versus the LCA headwind. And then, I guess, just my second question relates to the guidance. Obviously, job income ramped significantly, second half versus first half. How much of that is Ichthys? And I guess, if you could rank order sort of where the growth is coming from, and then how much is dependent on new project wins?

On our LCA, Jamie, I think our comments really is going to continue to improve. It's probably a slower progression than we had articulated in our original guidance. So it's a little bit slower going, but an improving situation for us. We've elected not to make a formal guide on LCA. With respect to our guidance for the year, Ichthys will continue to ramp-up like a traditional S-curve. We do expect to see contributions from the new works that we are selling. We had a good -- we sold $2.2 billion to $2.3 billion in the quarter, and we're very pleased with what we sold there. And we are going to get some additional volumes there. We're going to get some additional -- we believe recoveries as we work out the closing issues on the LNG and GTL projects are getting towards completion. And so I do think there are a number of areas that we have opportunity to deliver the guidance. And in part, these various areas have caused us not to narrow our guidance maybe as much as we would have in past years. But we do think there's some new work that we want to sell, particularly in our IGP business, to help improve their job incomes for the second half. But we think the opportunity set out there is pretty good for us to be within the guidance range we offered. Jamie L. Cook - Crédit Suisse AG, Research Division: I guess, Bill, one last question on EPC 1 or PEMEX. I guess the news flow over the quarter was a little bit disappointing from my perspective. Can you just provide how you're viewing the potential for you guys to get cash from PEMEX and sort of the timing of when we'll have final resolution?

Well, yes, the news was, for us, mixed at the quarter. We did have some progress in Luxembourg regarding the enforcement of the ICC arbitration. And we believe PEMEX continues to lose their protest in the Luxembourg system and we are working towards a seizure of assets to the extent we can find them in the Luxembourg banking system. And so we continue to have progress there, but that path takes time. We had a fairly -- in our view, a fairly good session in front of Judge Hellerstein in New York some time ago, at which he said he'd rule fairly promptly. We're still waiting for his ruling, but part of his initial ruling was that we were in good shape with respect to our claims on that award. The Appeals Court asked him to go back and consider, have available remedies, were they available to KBR in Mexico. And we went back at the Hellerstein's request, and have -- we believe proven to our satisfaction, what we believe will be the judge's satisfaction, that we did not have adequate relief in Mexico for this and expect that, that fact plus the drawing of our bonds by PEMEX, which the judge really encouraged PEMEX not to do, should help our situation in the New York court. So we're really -- we're pursuing very actively 2 opportunities to recover, and we're also in the early stages of a NAFTA filing to get that money. Net-net, what that means with respect to when cash will flow, we don't know. You could get a ruling from Hellerstein today that could have cash flowing based on his ruling, assuming the Appeals Court acts fairly quickly on his logic, because we believe PEMEX would appeal. We do believe you could see cash possibly as early as this year. But again, that would depend on Hellerstein ruling and the outcome from an Appeals Court, but more likely it's probably going drag into '14.

Up next is Steve Fisher from UBS.

Bill, where you're seeing cost running up in North America, to what extent are you seeing customers ending up granting better terms and conditions as opposed to just deferring projects or compared to just they're still trying to find some contractor to take lump sum terms?

Well, I think their first step is always to try to find a contractor to take lump sum terms. But I think there's a reality setting in where customers aren't generally going to be able to get lump sum construction, certainly in the U.S. Gulf Coast. We have seen in our contracts a pretty good risk sharing that's been developed between the contractor and the owner where things that we can manage, such as productivity, get allocated more towards us and where you have labor per diem and other financial matters, we're sharing those risks, to have some skin in the game related to the cost. So we do see the market changing. I can't comment on what will happen going forward, particularly as it relates to some of our peers. But from the KBR perspective, we do see an environment where there's a pretty good degree of risk sharing going on between the customer and the contractor related to those matters that -- particularly the wage rates and per diems that will drive impacts on productivities.

Okay. That's helpful. And then, Bill, are the singles and doubles you mentioned going to be enough to keep your backlog flat over the next few quarters, and does that include an assumption of Shah Deniz?

Well, I think we are operating under the presumption that Shah Deniz will achieve its FID in December, and we would call that a good solid double for KBR. From a backlog standpoint, I think we did a pretty good job this quarter of ignoring -- we had a lot of FX change in the month of June, where I think the Australian dollar went from about $1.02 to $0.94. And that took our backlogs down $600-plus million. I think we can get close on the singles and doubles. We have to have all of our business units contribute to get there. I don't think you're going to see it being a Downstream only event. You're going to have to see some pickup in the Services group. They were about 0.7 last quarter and we got up -- we continue to be optimistic. At Canada, we do see some pretty good opportunities in the rest of the businesses, Industrial Services and Building group, and we've got to continue to drive sales within the IGP business. And I've talked about some of the recoveries in infrastructure. I think Mining is going to be challenged. Power's got to step up. NAGL's got to step up. And hopefully, we'll see some progress on the diversification efforts at IGDSS. So if we execute, then I think you will be able to maintain backlog generally at its -- about where it is now.

Andy Kaplowitz from Barclays has your next question.

Bill, can you give us a little more color on the risk of KPC 1, KPC 2. It seems like you do have some significant disagreements with the customer. How confident you would be that the reserves you've already taken to these projects, so far, should hold as you negotiate with the customer going forward?

Well, we looked very closely at where we were on those reserves throughout the month of June and a lot of these activities took place in May. And then certainly when we set the provisions up, we had expected that this work would go on throughout 2013, and we had accrued the potential LD exposure we had for being late in meeting the obligations under our contracts. As we look at KPC 2, the customer was not going to give us any kind of window of opportunity to go in and do our punch list and do our performance test. And with respect to performance test, we had taken provisions that looked at things in the worst case. And there's a possibility we could have done better, but we have already provisioned the worst case. Now their operational constraints on KPC 2, really, are their business. And we just can't afford to keep a full construction team mobilized, including the vendor support reps, to -- on-site on standby for some chance they might, in the next month or 2 or 3, allow us to go on and complete the punch list. The plant is in operation, it's running and the customer doesn't want to turn it off. So we made the decision that our work is essentially complete and they've not allowed us by their affirmative actions to complete our work under the contract. And so we've deemed it complete. The customer would prefer that we stay around on-site to some point that's indefinitely defined in the future to do these activities. And we've elected to say, no, that's not consistent with the contract and we're going to demobilize. So there is some disagreement there. On KPC 1, we had bid that project to go across a pit. A pit…

Okay. That's helpful, Bill. Just shifting gears. I think we can understand the infrastructure relative weakness in Australia. What I'm having a little bit of a hard time with is on the Oil & Gas side. I mean, we all know about Shah Deniz and its ramp-up. But Oil & Gas itself, there's quite a few opportunities out there, yet slowly but surely your backlog's been coming down in that business and you talked about some incremental weakness. So where is it coming from? Are customers now taking more time to make decisions? Has it been that you bid on those Middle East projects and you didn't win those, that we heard about last quarter. What is it in Oil & Gas that's happening?

Well, I think, Andy, what we're seeing is twofold: One, we've been without a leader in that business for a while, and I think that's affected the business. We announced a new leader for our Oil & Gas business yesterday, and we expect that, that will be helpful in getting us more volume. But I think the broader issue is the types of projects that we have performed, which have -- and we've performed very successfully, which is design of topsides for oil and gas facilities. We haven't seen a lot of that work. And so we have seen KBR look for other opportunities, which led us to move more into project delivery with respect to the Middle East projects we bid last year, and we're continuing to look for a bigger play in delivery with respect to FLNG and the 2 projects I talked about in my comments. We would still look for those opportunities to do our traditional engineering and lump sum engineering on topsides, and we just haven't seen the volume of work to allow us to get our share on those in the last 18 to 24 months. One observation I will make is, when we had the Macondo issue in the Gulf of Mexico, we said that we would start feeling the impacts 18 to 30 months after it, because of the prohibition on drilling at that time. We are suffering through a very low level of activity in the Gulf of Mexico at present. We do see prospects on the horizon, because the drilling that has taken place, post the moratorium, that is 18 to 24 months ahead of where we get active, has resumed. So we do believe our business, certainly in the Gulf of Mexico, will pick up because of the resumption of drilling and the facilities related to development of oil and gas facilities in the Gulf of Mexico. And so help is on the way in that regard, but we have a number of things that have impacted us on Oil & Gas, ranging from the lack of leadership, the Macondo issues, just absence of what has traditionally been our business on topsides design, and the timetable to move into more project delivery opportunities.

Got you. So it sounds to me like maybe sort of a bottoming process now in that business and then as you ramp-up on Shah Deniz and you get the new leader in place, maybe next year it could be better?

Yes. The new leader was with us 18 years before leaving us a couple of years ago. So I expect his learning curve to be pretty fast, and we're looking forward to his impact being felt more quickly than normal because of his legacy knowledge of KBR.

We'll move next to John Rogers from D.A. Davidson. John B. Rogers - D.A. Davidson & Co., Research Division: Bill, when you've talked about the delays in some of these larger projects in -- especially getting to the FEED and final decisions on it. Is there a point in here -- I assume you don't want to talk too much about 2014, but -- where you have to really start shifting the targets that you're going after to fill in for work, if these bigger projects continue to get pushed out?

That's an easy question to ask and a harder question to answer. We do look at more projects and pursue more projects than we can execute, John. If we were to be able to get all of the projects that I alluded to on our call, we would over sell the physical capabilities for KBR to do that work. So there is an element of attrition that we're planning in our bidding. And so the first 1 or 2 that may get delayed, they might not have any impact on us. But however, if you see several getting delayed, it could have delays across the entire E&C space. As we look at Shah Deniz, which would be a very, very significant project for Oil & Gas, that's obviously caught up in a broader project related to the pipelines that will get the products to market. And so we're seeing the big projects being looked at from the entirety of the infrastructure. Shah Deniz could have gone forward to FID several months ago. But again, as an owner, you're looking at not just our project, but the full value chain to get your product to market, which has delayed us from achieving FID. And candidly, I agree with the owner that, that's the right thing that they need to be doing. On some of the LNG projects, we've got some of our customers who are waiting to achieve a certain level of heads of agreement on LNG sales before kicking projects off. And again, we have -- Kitimat could have gone to FID several months ago, but the owners are electing to fill out other areas of their value chain before dealing with what is the mainstream activity for an E&C firm. So I agree with what everybody's doing. They're doing the right things from a business perspective. But across their value chains, it's not just the lead time for doing a FEED before you get FID, but how does everything else evolve in their businesses to permit them to competently take an FID on our segment so that their business model is preserved and meeting their overall risk requirements. John B. Rogers - D.A. Davidson & Co., Research Division: But I guess -- and as you look at this, are there other -- not completely different markets, but other areas of emphasis or target that you can shift towards?

Well, I think -- we're looking at everything we can. We've -- obviously putting a lot of emphasis on the U.S. market, driven by our Downstream business, and we continue to believe that we can sell more work in that market. And we believe work may come faster in that market compared to our Gas Monetization business, for example. We've got some really big opportunities in the floating LNG space, as well as Shah Deniz that we're looking at in Oil & Gas. We do see some opportunities in Power that will be out there and bids that we have in place today that we want to drive very strongly towards. There's a lot of opportunity that IGDSS is looking at, but it's high risk in new markets. And for example, their efforts in Libya, lots of needs have been identified, but do they have the infrastructure to have budgets and cut projects for it? That's something to be seen. So I think we're taking the appropriate steps to sign up whatever we can that meets our risk-adjusted job income thresholds, and we have opportunities to fulfill the capacity that we're currently carrying, and we're making an investment in the future at KBR by carrying this LCA. And we also believe that we have an opportunity to grow our resource centers by -- growing them 25% would get us back to where we were 3 years ago. So we're not just sitting around waiting for the next LNG project to come in. We're very active in trying to get the business in the house to generate not only the job income, but reversing the LCA charges and getting that turned around to being a positive as it was a couple of years ago.

We'll hear next from Tahira Afzal from KeyBanc.

I guess first question is, Bill, at a recent conference, you highlighted around 15 FEEDs and preliminary FEEDs that you were tracking. And I just wanted to see if you have an update on them as a whole as we go into the second half of 2013 and into 2014?

I don't have anything substantive to say specifically to that. I will say that we're continuing to win some FEEDs, and some FEEDs are being completed. So we still see a pretty good FEED window that we hope will evidence future work when those FEEDs are complete. But really, we are not seeing any material change to those earlier comments.

Okay. And I guess the second question I have is for Sue, and that's really on free cash flow. If you can provide us any update and how the recent PEMEX drawn [ph] really plays into your cash allocation, objectives going forward? And a few quarters back, you talked about DSO improvement and some focus there. Any update on that will be helpful as well.

Sure. So as we look at the cash situation, I mean, obviously, as I said we're very focused on what's happening with working capital and all of the different elements. So we worked very hard and have been working very hard over the last year to make some improvements. And we have some headwinds with our government customer that's hard to move. And as I said in my prepared remarks, that didn't move very much during the quarter. The bond draw, obviously, was operating cash and took the operating cash down to a lower level. But I will also say that one of the things I didn't highlight is that, as we move through the end of the quarter, we did see that we had some timing, once again, with heavy receipts. In fact the receipts were $63 million in the first week of July. So I think the cash flow in the second quarter was better than what it appeared on paper and is encouraging from an outlook standpoint in terms of what we're trying to do with improving working capital and doing all of that. In terms of the cash deployment and the activities, obviously, it's not necessarily the cash balance, it's where the cash balances are located that impacts whether we continue to do our dividend, which of course we do, and have increased that and plan to continue with evaluating the dividend. We continue to invest in capital to grow the business, as we've said, and our pension obligations. But we didn't make any share repurchases in the second quarter. And again, that's a function of where we're at U.S. cash and a whole bunch of considerations. So I think our main focus in terms of cash and the deployment of cash is, one, to right the working capital situation, and that's what the focus is all about. And as that continues and some of our work continues to shift to more of a U.S. base, so for instance, the ammonia projects start to be more of a U.S. book, and hopefully, some of the other projects will go forward, then we'll continue to look at adding back the share repurchase to the deployment actions.

We'll move on to Robert Norfleet from BB&T Capital Markets. John D. Ellison - BB&T Capital Markets, Research Division: This is John Ellison on for Rob. In regards to your revenues for the second half of 2013, I wanted to know, can we expect to see any meaningful growth here? I know that all the work being booked in the backlog, especially relating to LNG and petrochemicals, is FEED-related. I want to know if we should expect to see a more muted level of top line growth in the near to immediate term before moving towards larger EPC-related work that we expect in 2014 and out years?

So John, as we think about where the revenue goes as we look at the second half, I think what we saw in the second quarter is fairly indicative of what happens in the remainder of 2013. Again, we do have some FEED activity coming on board, we do have other projects ramping up, but we also have the Escravos project and Skikda, really, not a piece of the overall revenue profile as they're in the commissioning stage. So I think where we're at is pretty indicative until we get more of the projects to ramp-up. And again, it never hurts to remind that the Ichthys project is an equity-based project, meaning that it doesn't have the same revenue profile as what, say, the Gorgon project, that's a consolidated project would, and that also has an impact. But again, I think, it looks about like where we're at in the second quarter. John D. Ellison - BB&T Capital Markets, Research Division: Okay. Got you. And with hydrocarbon's margins around 14 1/8% [ph], I wanted to know if we should assume, like for the remainder of 2013, if this margin trajectory should continue, especially as you mentioned with Skikda and Escravos winding down and Ichthys ramping up? And also to add on to that, also as we look into 2014, with these FEEDs moving to EPC work, while dollar profit will likely increase, should we expect a lower effective margin here?

Yes. I mean, I think your points are valid as we look at this. So what happens to margins over the last part of '13 and as we go into the later pieces where we're booking the EPC contracts, particularly in Gas Monetization? You've got the Ichthys project which, again, is going to continue to ramp over its 5-year period with sort of that bell-shaped curve. We're in about 1.5 years out of the 5 years. So that continues to grow and does have a good impact on margins. The roll off of Skikda and Escravos, which were lower-margin projects, albeit great projects, will continue to show a better margin profile for us going forward, again, because those are rolling off. And then to your point, on the FEED versus the EPC contracts, as you get into the EPC, those margins may be different than the FEED. But again, the business is performing well. We're operating well. You'll get a bit of lumpiness if, as we talked about in the prepared remarks, that we do get some close-out activities on the projects. But overall, we think they are performing very well and will continue to in Gas Monetization.

Moving on to Brian Konigsberg from Vertical Research.

Bill, maybe just starting with U.S. LNG. So it sounds like you're pursuing a couple of FEEDs here. It sounds like the fundamentals of the market may be getting a tad better. I was just curious, is your interest raising in the prospects for participating in the market. I know you wanted to do some select projects, but maybe just give us an updated thoughts on how aggressive you might be?

I think our criteria for pursuing LNG projects hasn't changed. It remains a global outlook for KBR, that we'll weigh an opportunity at Tangguh for example, the same way we would on the U.S. Gulf Coast and try to pursue projects that way. We do look to have a preference for working more with sponsors, as opposed to developers of projects. We are interested in finding projects that can provide the right risk and return balance for us. There's an awful lot of risk allocation that goes in the project, financing that, that does factor into our internal analyses when we looked at risk-adjusted rates of return. That being said, we are interested in pursuing that market, but want to pursue it in a way that represents a fair risk-adjusted job income for KBR, as well as represents the best and highest use of our people for the project. Given all things considered in terms of the risks, the timings, et cetera. So, we're still interested, we still want to be a player. We think that there's a lot of projects that will ultimately move forward in the U.S., and we would like to find a way to be a player consistent with how we'd like execute projects from a risk-adjusted job income perspective.

Maybe can you quantify how many you, at this point, intend on trying to participate in?

No. We don't comment on stuff we're interested in. I could say we look at everything, and then we make our calls on what we pursue, and then when we have something tangible to talk about, such as a FEED award, we'll let you know as quickly as we can.

Okay. And then just moving on to power markets. So it sounds like you're still looking for a combined cycle on some environmental work. Has the discussion changed at all with some of the policy discussions we've had over the last couple of months related to government? I mean, do you find that some of the utilities are maybe pulling back on their plans to potentially implement environmental retrofits and maybe more intend to kind of close down plants instead?

We haven't seen anything directly from those recent discussions on that. Now where that will manifest itself will be in what projects go out to bid and not, and that may have some impact on that. We can't tell yet. We did have a flurry of mostly industrial activity after the elections, when it became clear that the proposed Boiler MACT rules would get adopted, and we had a number of folks want to move forward on studies and some projects, and we've been executing those. But right now, it's a little early for us to see any impacts. And I'm sure a lot of the utilities that are planning some of the pollution control projects are still trying to digest what these proposed changes or actual changes in regulations mean to them.

Actually, if I could just slip in one more. Just a point of clarification. You mentioned the FX impact on backlog book-to-bill. It sounds like the FX, at $600 million, is an impact to the balance of your backlog. But I just don't know, where are you coming up with the 1.1x book-to-bill? Did it actually impact orders during the quarter, or was it purely a backlog impact?

It was a backlog impact. If you think about it from a mathematical standpoint, we started out the quarter with $14.2 billion of backlog based on the exchange rates at the beginning of the quarter. If you would have taken that beginning backlog and applied the exchange rates at the end of the quarter, that $14.2 billion would have been $13.6 billion. So when we look at $13.6 billion on the adjusted beginning backlog relative to the $13.8 billion that we had at the end, based on those same exchange rates, there's a $200 million difference. And so when we look at the $2 billion of revenues and we increase backlog adjusted for exchange rates by $200 million, that's where we get the 1.1x in our mathematics.

Up next is Will Gabrielski from Lazard.

Last quarter you guys called out 2 larger power EPC opportunities, I believe, in the U.S. Have those gone through the bidding phase and have you been notified yet on those?

We're still working on one. And one we are no longer working on.

Okay. Can you talk about the Downstream business margins going forward? Obviously, the margins have been very good, but it's been a very FEED-dominated end market for you or segment for you, and I'm wondering what that will look like going forward as you move through the EPC phases on your recent large wins?

I think the way we look at it, and I'm just going to stay really high level, is that we'll see dollars of income go up and go up pretty nicely, and we'll see margins come down to reflect the reality of the margins on EPC being less than what we see on FEEDs.

Okay. Can you sustain double-digit margins in that business?

I'd rather not give that forward-looking statement.

Okay. The costs your holding, the LCA costs, are those being held for open book tenders, or are those competitive bids? Where you're specifically holding capacity for anticipated awards?

We don't break it down that way. We just look out at our business where we think it will be and we make an assessment, an intuitive assessment. Are we better off letting all those folks go? And then when this business hits, so having to rehire and deal with all the training of people. And we've made the decision every quarter that the amount of work that we see on the horizon is better for us as KBR to carry these costs and these people, because it will be a better solution for us than trying to hire these folks that we may see this -- we expect to see the situation continue to improve. And therefore, the issue, we believe, will ultimately go away.

Okay. Then lastly, just to follow-up on the U.S.-specific LNG question that was asked earlier. Maybe a different way of asking that is, are you at any level on any project engaged in a contract, its feasibility, pre-feasibility or early engineering? Any type of actual work order you have on any of these larger export jobs in the U.S.?

My comment is still, when we have something tangible to share with you, we will.

Robert Connors from Stifel, Nicolaus, your line is open. Robert V. Connors - Stifel, Nicolaus & Co., Inc., Research Division: Outside of Kitimat, it looks like the majority of the Gas Mon projects are transitioning to the FEED phase. Just was wondering if these are the typical 18- to 24-month lead lag before you start to see EPC awards? And related to that, it was a few years ago before the Australian LNG, when we're all talking about that, that I believe KBR indicated the LNG capacity was about 5 projects at one time, that you were capable of executing. Is that still accurate or has that changed over the years?

Well, I'll just make a comment relative to what we've previously said, and that -- whatever that was, I don't recall at this moment. But the capacity we have to execute major projects, be they LNG, GTL, Downstream, chemical projects, what have you, remains the same level we commented on previously. Robert V. Connors - Stifel, Nicolaus & Co., Inc., Research Division: Okay. And then for the majority of those Gas Mon awards, it looks like, outside of Kitimat, they're just transitioning to FEED. Is there anything different where these projects will be sort of that typical 18- to 24-month lead lag before EPC?

I think you've got to -- I mean, I think we've been pretty clear on what we have disclosed our role is on these project. And we don't see anything that's out of the ordinary in terms of what the progression is. Now we have some of these things, like we talked about on Kitimat, where the customer wants to get a certain amount of gas under a heads of agreement, which could delay it. But the market hasn't changed in terms of really where the timing is once you start a FEED and how long you go until you have an FID. Robert V. Connors - Stifel, Nicolaus & Co., Inc., Research Division: Yes. Okay. And if I could squeeze in one more. Just sort of strategically, when KBR bought BE&K, if I recall correctly, BE&K was marginally a Southeastern U.S. contractor. So just wondering if their skill set is easily transferable to the U.S. Gulf Coast where much of the construction labor supply is nonunionized, and do they need to develop the direct hire capabilities -- or excuse me, direct hire relations in that region or is it easily transferable?

Well, BE&K was a nonunion contractor throughout the Southeast. One of their projects was a combined cycle project for the lower Colorado River Authority in Waco, Texas. So they fit in nicely to what residual capabilities we had at the Brown & Root construction business. And that's positioned us to be able to be a very -- to-date, a very successful EPC contractor for projects that have been driven by the shale advances. So there's nothing that we needed to do at BE&K to prepare for this market. They were already there in terms of capabilities, networks and then the integration with our Brown & Root construction.

We'll move to your final question and that will come from Michael Dudas from Sterne Agee. Michael S. Dudas - Sterne Agee & Leach Inc., Research Division: That's it. Everything has been asked and answered, Bill and Sue.

Well, thanks for bearing with us, Mike. Thanks, everybody, for joining us. I know we've gone a little bit over our time, and we appreciate your continued interest in KBR.

And that does conclude today's teleconference. We thank you all for your participation.