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

Good morning, and welcome to KBR's fourth quarter and annual 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 fourth quarter results is also available on KBR's website. Joining me today are Bill Utt, Chairman, President and Chief Executive Officer; and Brian Ferraioli, Executive Vice President and Chief Financial Officer. During today's call, Bill will provide an overview of KBR's fourth quarter and annual 2013 operating results, highlighting a number of key areas from each of our business groups. Brian will then provide more detail on the key financial takeaways for today's call. Lastly, before opening the call for Q&A, Bill is going to provide brief closing comments. After our prepared remarks, we will open the floor for questions. Before I turn 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 significantly from our forward-looking statements. These risks are discussed in KBR's fourth quarter and annual 2013 earnings press release issued last night, KBR's Form 10-K for the period ended December 31, 2013, and KBR's current reports on Form 8-K. You can find all of these documents at kbr.com. Now I'll turn the call over to Bill. Bill?

Thanks, Zach, and good morning, everyone. Q4 was a strong bookings quarter for KBR, both in aggregate, with a book-to-bill ratio of 1.1, and across our major business groups, with 3 of our 4 business groups having book-to-bill ratios greater than 1. KBR also delivered $209 million in operating cash flow during the quarter. Additionally, our Board of Directors has reviewed and approved our capital allocation strategy. Most notably, they have authorized maintaining our current dividend and have initiated a new $350 million share repurchase program, which terminates and replaces the buyback program previously announced in 2011. The Board of Directors' actions affirm our long-standing commitment to efficiently returning excess cash to shareholders. Brian will discuss the details of our capital allocation strategy further in his prepared remarks. Despite strong bookings and cash flow in the fourth quarter, our overall financial results were well below our expectations. For the fourth quarter of 2013, we delivered $1.7 billion of revenue, $27 million of net income attributable to KBR and $0.18 of earnings per fully diluted share. The earnings for the quarter were less than anticipated for a number of reasons. While provisional acceptance was achieved on a major LNG contract, negotiations related to the final closeout continue and have not yet concluded in a favorable settlement as we had anticipated. This was a significant headwind to our quarterly earnings. However, we remain optimistic about our chances to successfully close this project. Additionally, as part of our closeout activities on the project, we recorded a $17 million pretax noncash charge associated with foreign currency accounting, which occurred over the life of the project, and an additional $20 million pretax charge for increased costs due to delays in project commissioning, project taxes and other items. With provisional acceptance achieved, we remain optimistic about…

Thanks, Bill, and good morning, everyone. To begin, I'd like to discuss a few changes that we've made to our disclosure, and that's based on the feedback that I've received from my recent discussions with investors. First, we've changed some of the captions in our financial statements to more closely conform to industry standards. On the income statement, we added a gross profit line and moved equity in earnings of unconsolidated revenues out of total revenues. On the balance sheet, we changed descriptions on a number of captions and are now using industry terms such as cost in estimated earnings in excess of billings, the so-called CIE, instead of unbilled, and also using billings in excess of cost in estimated earnings, so-called the BIE, instead of advanced billings. We also added a new caption called claims and accounts receivable. This caption contains the items related to claims with customers that we believe are collectible but where the timing is uncertain and collection is likely to extend beyond 12 months. The key items included here are the PEMEX arbitration award and $226 million in claims receivable for costs incurred under various U.S. contracts, where there are either disputes or where the costs exceed the government's funded amount. We also added additional disclosure around our cash balance and where the cash actually resides. We trust these changes will make it easier for investors to better understand our financial statements, and as always, we appreciate any additional feedback you may have. Moving on to the details of our cash. As of 12/31, we had $1.1 billion in cash and cash equivalents. Of that amount, $69 million is held by consolidated joint ventures for future use by those entities. Of the remaining balance, $355 million is held by our domestic U.S. entities and $675…

Thank you, Brian. In the fourth quarter, we had a solid book-to-bill of 1.1 and strong cash flow of $209 million. We missed our expectations on a number of other fronts, which made for a very tough fourth quarter and a disappointing end to 2013. Looking to 2014, we continue to see KBR well positioned in key markets, particularly at gas monetization, where we're well positioned on a number of future prospects. We also believe we're well positioned to execute and win new work at hydrocarbons, downstream technology, oil and gas, at services with oil sands-related work and an IGP in both power, with combined cycle and pollution control, and in IGDSS, with a diversification strategy that's well underway. We're also pleased with the board's approval of our capital allocation plans, which we believe will enable us to continue to provide strong returns to shareholders over time. Finally, before turning the call over to questions, I'm advised that the search for my successor at KBR is in full swing. The search committee of the KBR Board of Directors, along with their search firm, are working diligently on this assignment, and any further comment or announcement will come at the appropriate time. Now we'll open the call for questions. [Operator Instructions] Thank you.

[Operator Instructions] And we'll take our first question from John Rogers of D.A. Davidson. John B. Rogers - D.A. Davidson & Co., Research Division: A couple of things. Maybe if you could just talk about especially on the Gas Monetization side. I mean, at this point, 2014 looks like it will just be running off your existing work in 2015. We're hopeful that we'll get some projects coming in. I guess I'm just a little surprised, one, how much that market has deteriorated for you, and I'm trying to get a gauge of when we might see a recovery there.

Well, I think, John, you have to look at the cycle of work that we go through, and we certainly had put a lot of effort into a gas-to-liquids project that did not go forward. That had been something we were working on and had targeted that with our teams to fill an award position in 2013. And certainly, we were very disappointed with the news on Kitimat. And so it's created a gap in our portfolio. Notwithstanding that gap, we're still pursuing the projects as they're developing in East Africa. We're still looking at the expansions at Tangguh. And there's still opportunities for us in the British Columbia arena. We're under discussion on some projects in the U.S. Gulf Coast, but we're very candidly taking a very objective approach that we're still not seeing a lot of LNG contracts being executed with the project sponsors. And this is just what we're being told by the project sponsors, and that has the underpinnings of the timing at which these projects are moving forward. And there's still a lot of, we think, a lot of prospects out there, but I still see the market being reset based on getting the gas sales agreement and offtake agreements completed before they jump into a secondary activity, which is building the plan. John B. Rogers - D.A. Davidson & Co., Research Division: But a lot of those projects, Bill, I mean, I assume, wouldn't -- even if you'd won them, wouldn't have had a big impact on '14. And yet it looks like the margins, and I don't know if it's just Gas Mon or what else, are just coming in a lot lower than what we were thinking a few quarters ago and relative to your original guidance for 2013.

Well, when we look at the gas monetization, we're looking now where -- fundamentally, the Escravos, where we had some negligible contributions, and Skikda, where we have had contributions over time, have wound their way out of the portfolio. But for the closeout activities we referenced in the comments, Gorgon, we think, will be fairly steady during 2014, along historical lines. And you will see how that project continues to evolve as the subcontractors perform and make their progress on the site. Ichthys continues to ramp up in terms of our activity. We've always said our roles were going to be a little bit back end-loaded in terms of the fabrication management and construction management. And we also believe that some of the headwinds we saw in the fourth quarter, they're going to work themselves out as the project scopes expands and the customer addresses some of the increasing costs that we're seeing and that are an inevitable -- turning out to be an inevitable factor on all the Australian-based projects. So for us, those are still going forward smartly. It's really what's the next wave. And as we had looked at our work and our teams and where we were spending our time, we had some pretty good expectations of work, both on the GTL project that is not going forward and the Kitimat project, which we were not successful in continuing our role as the project leader on the downstream phase of that project, made us change from Apache to Chevron. So it's kind of reloading the portfolio and taking the teams that we had designated for both of the 2 aforementioned projects and making them available for discussions with customers, which are projects which we see being, perhaps, later in terms of their financial impact into our 2014 earnings than we had hoped with the others we were looking at, even a quarter ago.

And John, this is Brian. Let me maybe help a little bit on the margin question as well. Just to make sure we're all thinking about this the same way, if you refer to the press release, the $17 million charge and the $20 million increase in costs, as well as the African Development Bank charge, they're all in the Gas Monetization segment. So if you just look at the raw numbers without factoring in those specific items, yes, the margins look a little bit lower than the underlying business really is.

And the Ichthys percent complete reversal, too. That also was against the Gas Mon segment.

That's correct.

And our next question comes from Jamie Cook with Crédit Suisse. Jamie L. Cook - Crédit Suisse AG, Research Division: Sorry, we just -- we've got to switch back to the guidance again. Brian or Bill, I mean, if you just look at what you guys disclosed in your 10-K, I mean, you have over $14 billion in backlog. You said you'll burn through about half of that, which implies at least $7 billion. I'm just trying to understand what's embedded in your guidance, Brian, because even if you just take that $7 billion, the implied margins for the business to get to your guidance are pretty subpar, in my opinion. So can you just help me understand? Do you assume just the $7 billion? Do we assume you're going to get incremental work? And why are the margins so low? Is it mix, or do you not like what you see within the backlog? And then also, Brian, if you could help on -- is it tax? And why is the first half going to be weaker than the second half?

Jamie, let me address the first part of your question. A lot of the issues we're seeing is mix issues. If you look at the Dyno Nobel work, that's a 4-year type contract. Profits are recognized on a percentage of completion basis. And so as we see projects like that ramping up, you're getting less near-term benefit out of them. The earnings will be there, and they'll be longer term. But it's certainly not delivering the impact that you would typically see when you're doing more engineering study work. We've also -- we look at the mix of work we have. We had a large award with DuPont on the maintenance business last year as a great win for us, great positioning. It's led to further EPC work with DuPont. But it's also -- that's lower-margin work too, in terms -- but the volumes are much higher. And so we're dealing with a little bit the transition of selling work. And as we're working it off, we're working off a lot of EPC work that just doesn't have the near-term margin. And that's really the explanation for the guidance as it relates to the burn-off of the backlog. And I'll let Brian make some comments on that as well in addition to the tax point.

Yes, I'd add, Jamie, that when you're looking at -- when you're thinking about volume, I would suggest you think about a volume increase, as Bill has been alluding to on this call, as well as in the prior third quarter call. So you'll see volumes pick up, but because of the nature of more EPC work, you may see a little bit of compression on the actual margin. Moving on to taxes, the tax rate was a little higher than normal in the fourth quarter. We would expect the tax rate for the year 2014 to be more in line with our historic levels, so a little bit down from the fourth quarter but in line with what you've seen in prior periods. Jamie L. Cook - Crédit Suisse AG, Research Division: And then you didn't address first half versus second half, so if you could address that. And then, I guess, in terms of potential, Brian, I understand your comment, and you want to put out probably a conservative guide. I get that. But just can you give me some clarification on whether you assume you'd do anything on the share repurchase? I'm assuming that's not in your numbers. And then the other part of it is the closeouts on the LNG projects, when you'll expect -- why did you -- why are you lowering your assumptions from 0 to $0.27 versus you thought you'd get $0.36, and then when we'll hear about timing on that?

Okay. Let me take it maybe in some reverse order. Why did we lower the guidance, or why did we lower our expectations on the closeouts? Well, as you work through the process and more information becomes available, we just updated the numbers. So we think the 0 to $0.27 on one particular project is unchanged. There really had been the potential upside on another project that we're not as confident of achieving, so we've dropped our thinking on the total value potential on these closeouts. In terms of the... Jamie L. Cook - Crédit Suisse AG, Research Division: But in there, is $0.27-ish 2 projects or 1? Sorry.

One. One project. But there were 2 projects in the mix -- or there are 2 projects in the mix for closeout. However, the second project, we are not as optimistic at achieving some incentives or some upside potential on that project.

More specifically, we had certain rights to a project, where we had taken some significant provisions to get back to a certain position. However, in the discussions with the customer on that, the customer cited very significant cost growth in the ultimate conclusion of that project. And for the sake of a broader customer relationship, we made the decision not to force that issue and instead just close out the project and certainly not get into a heated debate regarding the entitlement of that upside. So that was a decision that we made, and that's why that, over the fourth quarter, that discussion led to us not achieving that upside and why we don't believe that upside will be achieved by KBR.

And coming back to some of your other questions, Jamie, the first half versus the second half, I thought Bill tried to address that in his remarks in that you have the EPC projects ramping up, so you're going to get more toward the back end rather than the first half of the year. And regarding the share buyback program in the guidance, there is an assumption for some share buyback to be in the guidance, but we're still waiting to see how we roll out the share buyback, what vehicle we use for that. As you know, on the buyback, there are different ways to accomplish that: open market, some accelerated programs, tender offers, et cetera. So we haven't announced anything about how we're going to execute the share buyback. So I'll leave it at that there is some share buyback assumed in that guidance, but we'll give you more updates as we move along with the program.

Our next question comes from Jerry Revich of Goldman Sachs.

Brian, can you talk about the ERP spending outlook beyond 2014 as you take ownership of that process? And then also just talk about the opportunity to repatriate cash to the U.S. You mentioned in your prepared remarks some additional disclosures, and I'm wondering if you'd just flush out for us where you are in the process of considering how to get that cash back into the U.S. for buybacks.

Okay. Regarding the ERP, this will be a heavy year for the ERP. 2015 will drop a bit from '14, and by then, we'll have rolled out the majority of the program. So you're really looking at '14 and '15 for ERP spend, with '14 being the higher of the 2. Regarding taxes, we're looking at a number of vehicles to bring back cash in a tax-efficient manner. We have several ideas, and I'm highly confident that we'll be able to fund the share buyback plan with existing cash, as well as the cash that we expect to generate over the next year or so or 18 months. When you take a step back, one of the things we're looking at, the cash tax impact varies by jurisdiction. So the majority of our cash tends to be in Australia, the U.K. and in Canada. And we will look to bring back cash in the most efficient manner that we can. Some we can do immediately. Some may take a little bit more time for tax planning purposes. But I don't think, at this point in time, we'll have any problems in funding the plans that we announced earlier today -- or yesterday, I should say.

Okay. And Brian, just a clarification on the ERP system relative to the spend in '14. What do you view as normalized, and how much lower do you expect '15 versus '14 just on the pure ERP spend?

I'm not sure I understand the question when you say normalized.

You're rolling it out. So you mentioned you're rolling it out, so your costs are elevated in 2014. So once you've completed the rollout, what do you view as the long-term ERP spending?

The normal long-term spending should be less than what we've been doing on an ongoing basis. What we've been trying to do is carve out the unusual or the onetime spend that will go away once the ERP program is completed. So once we get through 2015, I think we'll have our normal spend that you've been seeing or less.

I think more specifically, Jerry, we're still running the business on the existing -- largely on the existing ERP system. And as Brian was saying, we've got a whole separate team that's developing and now implementing the ERP's team. And we expect to see that team go away and resume more towards historical run rates of our overhead.

Okay. And lastly, Bill, can you talk about the chemicals opportunities in the U.S.? It looks like one of your customers received board approval for a sizable ammonia plant. Can you just give us an update on your expectations for ammonia order cadence and ethylene projects that you're pursuing in the U.S.?

Yes. I think we're -- I'll just comment broadly about the Hydrocarbons business, of which technology and downstream are 2 of the 3 legs of that stool. We're very optimistic about that business continuing to grow. Our expectation is backlog in the Hydrocarbons space will increase during 2014. And we're -- don't want to comment on any specific project, but overall, we feel really good about what's in front of us in Hydrocarbons.

And the next question comes from Steven Fisher of UBS.

I think investors are trying to assess whether 2014 is really a trough year. And I know it's hard to say at this point, but just wondering what things you can do this year to support earnings growth as you look out into 2015. I know you said just now that ERP is going to be down a little bit, but what can you do this year to support earnings growth, and are there any other tailwinds that you already know of?

Well, I think there's a lot of optimism around the shop here. If you look at the -- in our oil and gas business, yes, there was some mention about KBR related to BP's Mad Dog Phase 2 project. We're seeing a number of FLNG prospects on the horizon, including one where we're preparing the final FEED bid and APC bid. We're pleased with the award from BP in the Caspian, but we're also told that if you look at the history of work we've done at Shah Deniz and ACG, that given what BP is hoping to do in the future, that we're probably not halfway through that whole program with them. And so oil and gas has got a really good prospect list ahead of them, beyond even the couple of opportunities I just cited. In downstream, we're seeing U.S. chemicals, ammonia, some international refineries that we're pursuing. They all look to be fairly promising, and I think our competitive position in these projects is very good. We're expecting technology to continue to grow, and they had a great sales year last year. We'll see some contribution this year, but we'll get largely inventorying some earnings for future years as these technologies come online and we're able to recognize all of the job income from those technology sales. We talked about Power. We believe we've got one in the bag on that major combined cycle project that will hit backlog in second quarter. That's continuing to have a good cadence of awards in pollution control and combined cycle projects for us. At IGDSS, we've got a number of things we're looking at, extensions of the Allenby & Connaught project, some MoD outsourcings that we expect to see in the middle of the year, some results from that where we have bids in. There's some public-private partnerships that we're very favorably positioned on and are working through the mechanisms there. Canada, we're expecting to see continued growth, largely in the oil sands, and a rebound in our U.S. construction business. And we've already talked extensively about the reloading of the prospects in Gas Mon. So I think there's a lot of good things going on here that will portend to see stronger earnings in 2015. And really, it's up to the teams here to be able to execute these prospects, but we do have a lot of optimism across the portfolio for what the business can do.

I guess I was wondering more within your control, also in terms of cost restructuring and things along those lines.

Well, Steve, I think you know me well enough that, that's always an area of focus for me. We've done some of that already since I've been here, and it was underway before I arrived. And it'll continue to be an area of focus as we move forward. We made comments about some of the charges we took, about adjusting the size of our workforce to max the workload, and those activities are normal in this business. So yes, that's certainly part of the mix as well.

Okay. And if I could just ask a quick question on Ichthys in terms of the trajectory there. What is -- is 2015 expected to be steady with 2014? And I guess on the scope of your own work, when does that occur? And I think you had some price -- fixed-price elements of that at risk. When do you get beyond that risk period?

Well, if you think about Ichthys, we're still ramping up, and we should see improvements if you just think about normal percentage completion taking place in the second half of '14 and into '15 and '16. We also will see a higher degree of Services revenue from the services we'll be performing in the fab yards, as well as the on-site construction management on that. That will also give increased momentum on Ichthys going forward. And as we look at the fixed-price elements, we have had significant discussion about that in prior calls, where while you've got, contractually, a large amount of fixed price in our backlog, that the open positions really are not that material for a company of our size. What we saw on the cost estimates, we think that the costs are going up on some of the bids we're getting back. We have a certain discipline we follow for accounting, that as costs get back and we go through our check estimate process, that it does affect the percentage of completion, which we're doing on a cost-to-cost basis. It hasn't cost us earnings over the life of the project. In fact, we probably will be able to get some additional margins through the negotiations of the change orders on the increased costs. And so as we look at things, we're not that worried about where we stand from the management of the fixed price exposure of the project, particularly given some of the fairly reasonable debt bands, where we're eating some costs if we are to exceed these budgets before -- after which, we pick up on a reimbursable-of-our-cost perspective. So nothing's changed from our perspective on the fixed price. The overall Ichthys news is probably more profitable for us over the life of the project, but we had to take the hit because of the cost-to-cost accounting in the fourth quarter.

And our next question comes from Andrew Kaplowitz of Barclays.

So Bill or Brian, can you give us some more color on the level of utilization in your business? Is your labor cost absorption in 2014 going to be similar or actually worse than '13? And I know, Brian, you said the $13 million that you took in sort of cost takeout, I know you mentioned that, but is there more you can do? I mean, clearly, the sort of outlook in your Gas Monetization business has changed here. So can you work on that more here over the next 2 years? But I'm really curious about that labor cost absorption number.

Well, just to maybe give you some color on the labor cost absorption, Andy, as the cost of resources we have in the pool -- and we're being very good and aggressive about the variable costs or the personnel-related costs in terms of trimming that. However, we are still working through, a little bit more slowly, the implications of real estate that's not being used. And so our ability to manage that doesn't turn on a dime. It turns much more slowly. And we're working to take the steps to minimize the unused real estate cost that we have in the portfolio, but that's going to take a little bit of time.

Yes. And to follow on, on Bill's comments, that's exactly the point. The utilization, to answer your question, is, in many places, quite high. But to Bill's point, if you have excess office space or other fixed-type costs, even though you have the workforce fully utilized, there isn't the volume to absorb all of that overhead. So when I was commenting on earlier about -- on the cost side to Steve's question, that's exactly what I was thinking. We do have opportunities on more of the fixed costs. We are looking at that. That is a goal for 2014. And to answer your specific question, we would believe the labor cost underabsorption will be better in '14 than it was in '13.

Yes. To answer the -- our chargeabilities have remained very good for the people we have in the company.

Got you. But I mean, just to pin you down a little more, Brian, just marginally better or a lot better? I mean, better is -- you did negative 60 or around that in '13. There's a big difference between negative 30 and negative 50. You know what I'm saying?

Andy, I'm not going to be more specific, but yes, yes is the answer. It'll be better.

Okay. Bill, maybe just to push you a little bit on sort of the future -- the forward outlook here. You've grown backlog over the last few quarters here without big Gas Monetization projects. So as you look at '14, I know you sound confident that you can grow Hydrocarbons backlog, but if you look at the whole company, how do you feel about backlog for the whole company? Is there a chance you could grow backlog, even though we know Gas Monetization's going to go down? Because that gets us more excited that '15 can be up and not down.

Yes. There's a lot of things. I think the aperture of how things could go is a pretty wide range as we've tried to pin down our folks. We certainly have been, I think, fairly transparent on where we see the impact on backlog and the work-off of the Gas Mon backlog over the year. Yes, I think it's a much more optimistic picture in the rest of the portfolio, is the growth opportunities we have. It could be pretty powerful. But as we look at things, we're trying to risk-adjust them. If we had a great string of luck, you could see a much better backlog position than what we're signaling right now. But we're trying to stay within the discipline of our rated go-gets on that, and it's going to be tough for us to see much backlog contribution coming out of Gas Mon this year, but the rest of the company looks pretty good from where we sit.

Can I ask you guys just one quick clarification on the Services business? I mean, you're guiding to weaker earnings in the first half of '14 than the second half. Services revenue was good, but then it was lower in 4Q than 3Q, even though the backlog was up 25%. So was there weather impact at all in that business or in the first half?

I think we've made some comments previously, Andy, about the -- our vessel -- maintenance vessels down in Mexico, we tripled them. And we've seen a higher percentage of the time on those vessels being out of contract, which does give us headwinds on the margins in Services, and we're working hard to get them back on contract. Clearly, there's a lot of change going on in Mexico and PEMEX, in particular. And some days, we feel like we're pushing a rope on it, but we remain optimistic that we can get those boats under contract and get a much better performance out of that business in the second half of the year, certainly compared to where we see the position of that business in the first half. And I think that's probably the bigger -- the biggest impact or the most visible impact here in terms of what's going on in Services.

And the next question comes from Tahira Afzal of KeyBanc.

My first question is in regards to the Technology, if you could be looking to pursue an acquisition. Are you looking for something on the mainstream side, on the ethylene, polyethylene side? Are you looking at second derivative products on the polypropylene side? Or are you going for something even more out of way there [ph], maybe coals to olefins and all? Anything you can provide there actually would be helpful.

Well, we have a -- our distribution network is established. And what we're trying to focus on is to fill in adjacencies to our existing technologies to be able to expand our offering to offer multiple technologies as opposed to singular technology. So that's our first avenue. If we have an opportunity to look at something that's not an adjacency, well, we certainly will consider it. And for us, as we look at the distribution cost of that technology, it's -- we believe, largely, the technologies that aren't adjacencies will still be sold to the same customer base that we're calling on right now. And so it's a pretty wide spectrum of what we're considering, but with a stated preference for us to look for adjacencies where we think there's some benefit of providing a broader value package than we would selling one-offs.

Got it. And not to belabor the point, but I think even Andy was probably asking the right question because there clearly is a slight lag of [indiscernible] in the near term. If you're looking at 2015, and this is -- you're at this point next year and your backlog is flat, will the progression of profit recognition, as you've described it, for some of your larger projects which doesn't really contribute that much this year and the potential of even better underabsorption levels this year, would that be sufficient for you to see a 2013 up year? Or will you need something much more than that?

Well, that's a pretty wide-ranging question. As Brian has commented, we do see a bit of roll-off on the ERP spend. We're continuing to attack costs. And yes, as we talked about, there is some time it takes to work through unused real estate cost. If we were sitting with backlog where it is at the same level today as we'd see a year from now, it depends on the mix and where it is and how we sell it. We think that the work that we're going to be able to bring into the portfolio in Hydrocarbons will be at consistent Hydrocarbon margins, which is good, but again, it's dependent upon the mix, whether it's EPC or if it's Services-based. We think that some of the strategies that we put in place several years ago about project delivery are driving that business into EPC, where we expect to see larger net job income on these projects. But it's going to be recognized over longer period of times. And I'll just use the -- and we contrast that with the margins we've done on topsides engineering design versus project delivery. You probably see multiples of the job income, but probably at a, just to be very imprecise in my number, half the job income margin. So it gets back to mix. We feel pretty good about where the prospects are teeing up, and we think that if we do execute as to what our plans are, that we'll continue to see KBR grow and get back to a growth platform that we've had. And I think we've pretty well exhausted out the shrinkage in the North American government business. We see -- expect to see a little bit more in IGDSS in Afghanistan. But those margins have come down on the rebid. So it's really too early for us to get in and look at 2015, but if we hit the awards, a lot of things could spin around, including the LCA, if we're able to fully absorb the real estate costs better than we're expecting to do in 2014.

And Tahira, I would add that we're looking to grow all of the businesses in 2014 in terms of backlog and revenues, with the exception of the Gas Monetization. As we said, it's so lumpy that if you don't get an EPC award in a given year, you're always going to burn off some of the backlog. So we shouldn't discount the opportunities that exist in the other businesses. And I'm not sure if that has been understood in your question.

And our next question comes from Vishal Shah of Deutsche Bank.

This is Susie Min for Vishal Shah. I know some of your competitors have been awarded some of these larger LNG projects, as well as ethylene projects, which I know you guys don't compete in. But how does that position you for maybe projects that customers may not have considered you guys for but may be concerned about these other PMC players to have the capacity to do it? Do you see any change, or does that position you better? And then I have a follow-up question.

Well, I think it honestly positions us better. We had A teams that we had put on both -- we had an A team that was working on the Kitimat project. That's now available. And we had a A team that was on the GTL project that is not going forward. So I would say, as we look at the next projects that are coming up, as customers are considering the project teams, which we think is one of the more important aspects of how you make contractor selections, that we're going to be offering really good teams, and we believe that those competitors of ours who have sold work will probably be consuming some of their better people on those projects that they've won. And we think that gives us, on a relative basis, a stronger offering than, we believe, our customers can make.

Okay, great. And then just within the Hydrocarbons margin profile. I know in the past, you guys have said Gas Monetization margin should probably trend closer to Hydrocarbons as some of your project work that's kind of higher single digit works off. So how can I think about, I guess, maybe both of those margin profiles? I know we don't really have anything new on Gas Mon until maybe 2015 timeframe. But to focus more on the Hydrocarbons business, between the mix of technology as well as the new ammonia projects you guys have booked, how should we think about that margin profile?

Well, I think to come back to Brian's points on -- he made earlier, I think it was to John, we took a lot of -- yes, had a lot of headwind in Gas Mon this quarter on Ichthys and Skikda and the other costs we had. And so the Gas Mon margin should, particularly with the roll-off of Escravos and Skikda over the year, should be pretty good for us as these lower-margin consolidated projects are no longer having as material an impact in our earnings as they have historically. In Hydrocarbons, if we're pursuing the same type of work, the margins should be there. But as we look at a project like Dyno Nobel, where, as we cost these things internally, with respect to our engineering, we're still making the same margin in engineering on -- intellectually on Dyno Nobel as an EPC project as we are on a traditional engineering-only project. But what happens is, is you make a far smaller margin on procurement, a lesser margin on construction labor. And so as you take the project and you average the margins across all of the different components and engineering is, let's say, 10% of that, you're coming up with an EPC award that is appropriately priced at a job income margin that's far less than you do on a Services basis. And so as we're looking at these and rolling these into the percentage of completion, you're seeing a lot of margin compression -- or we expect to see a continued margin compression on the Services business related -- the Hydrocarbons business related to the mix of work. But overall, as you look at the life of the project and over a multiyear period, it's going to be a much more robust period of earnings for us than we would have had, had we stayed in our Services-only model.

Our next question comes from Brian Konigsberg of Vertical Research.

Most of my questions have been asked, but I guess maybe just touch on the commentary with the DOJ and the complaints about kickbacks, and how material might that be? Any commentary you could provide around timing of discussions or potential litigation and potential maybe size of the risk?

I would just say that we have fully disclosed our positions on those in the K. I would say that as we talked about in the release, we didn't see anything from our side that was new within the lawsuit filed by the Department of Justice. There was a lot of rehashing of things that we already knew. It, perhaps, was as much a tactic by the Department of Justice to get something out to maybe, in their view, to pressure us. But yes, as you read our K and you've listened to us over the years, we've got a lot of stuff going on, and so we don't spook easily when they file a lawsuit. We feel that we've been a model citizen in terms of our conduct over there. We report stuff when we're aware of it. We terminate people when they get off the reservation. We make restitution where it's appropriate, and we remain very proud not only of the services that we've provided to the men and women who serve the Armed Forces, but we do so with the belief that we did it with the full intent and character required of any contractor performing services for the U.S. government. Now as we move to the closeout and the inevitable issues that arise, not only in this case but others, there'll be a debate. We've got a lot of things we're working on, and this just was one that came up. We were actually surprised it came up because we were very much in discussions with them. But the government chose to take that public, and so we've chosen to address it. But it really doesn't change our tenure -- our tenor or cadence or belief about where we stand regarding our positions on the closeout of LogCAP matters. We feel that we have a very robust discussion internally with our law department, with our accountants, with our auditors and other outside advisors regarding the provisions that we have on the balance sheet related to the risks. And we feel that we're appropriately provisioned for what we believe is the ultimate disposition of these matters. A long answer to say it was just another lawsuit from the DOJ.

And Brian, we also updated the disclosure that we have around all of these disputes, particularly the government ones in particular, that hopefully, it provides a little bit more clarity about both the cash exposure as well as the book exposure.

Yes. Actually, I just looked through that section of the K. There are always a lot of numbers that are thrown around in that section. Can you maybe just give us maybe a shortcut and quantify as far as what -- how much of the Form 1s are outstanding and what you're pursuing, where that stands right now? Because I know there's just a number of items in there. It's a little bit hard to put together.

Well, there's a lot of items in there, but I -- maybe trying to get by with the easiest answer is, with all the review we do with our advisors, with our management, with our board, we think we've taken the appropriate positions on our balance sheet regarding these risks. And where we don't see a provision that's -- or we call out the absence of a provision, we think we will ultimately prevail appropriately according to the accounting we do every quarter on that.

And Brian, I think you've got to go through them one by one because each one is a separate issue and stands on its own merit. So take a look at the disclosure, like I said, because I think we've added some clarity to this issue in this latest version of the K.

Okay. That would be helpful. And then just lastly, just on pricing, I know maybe it's hard to be precise and you might have to go market by market, but it does seem, just from your commentary, the large projects that you have been pursuing have been very competitive. Would you say that the kind of the, I guess, the as-sold or core margin on these projects have been declining? And maybe that is a reflection of your peers wanting to fill up capacity but also the project donor just being tighter on controls or cost controls. Maybe if you could provide us a little color on that, it'd be helpful.

I think you're seeing good, healthy competition on the projects, and I think you're seeing -- and it manifests itself not only in terms of margins but also the risks that contractors are being asked to take on. It's a slightly different risk environment than we saw a couple of years ago. And we continue to have very open, transparent and robust discussions regarding the appropriate risk allocations with our customers, particularly in a very dynamic and changing environment that we find ourselves in here in the U.S. Gulf Coast.

And at this time, I would like to turn the conference back over to Bill Utt for any additional or closing remarks.

I'd like to thank everybody for tuning in. We very much appreciate your questions on KBR. We hope we've had the good fortune to address your questions to the best extent that we could. And we look forward to following up with you over the coming days and weeks if you have any further questions regarding the 2013 10-K and annual results. Thanks, and have a great day. Bye-bye.

This does conclude today's conference. We appreciate everyone's participation today.