Fluor Corporation (FLR)

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Fluor Corporation (FLR)

Q4 2009 Earnings Call Transcript

February 25, 2010 5:30 pm ET

Executives

Ken Lockwood – VP, IR

Alan Boeckmann – Chairman & CEO

David Seaton – COO

Mike Steuert – SVP & CFO

Analysts

Jamie Cook – Credit Suisse

Will Gabrielski – Broadpoint Amtech

Michael Dudas – Jefferies

Graham Mattison – Lazard Capital Markets

Scott Levine – JP Morgan

Andy Kaplowitz – Barclays Capital

Steven Fisher – UBS

Joe Ritchey – Goldman Sachs

Jeff Spittel – Pritchard Capital

Alex Rygiel – FBR Capital Markets

Barry Bannister – Stifel Nicolaus

John Rogers – D.A. Davidson

Presentation

Operator

Good afternoon and welcome to Fluor Corporation’s Fourth Quarter and Year End 2009 Conference Call. Today’s call is being recorded. At this time all participants are in a listen-only mode.

A question-and-answer session will follow management’s presentation. A replay of today’s conference call will be available at approximately 8.30 P.M. Eastern Time today, accessible on the Investor Relations section of Fluor’s Web site at www.fluor.com.

The web replay will be available for 30 days. A telephone reply will also be available through 8:30 P.M. Eastern Time on March 3rd at the following telephone number. 888-203-1112. A pass code of 4924283 will be required.

At this time for opening remarks I’d like to turn the call over to Ken Lockwood, Fluor’s Vice President of Investor Relations. Please go ahead Mr. Lockwood.

Ken Lockwood

Thank you, operator. Welcome everyone to Fluor’s Fourth Quarter and 2009 Year End Conference Call. And with us today are Alan Boeckmann, Fluor’s chairman and CEO, we also have David Seaton, Fluor’s Chief Operating Officer and Mike Steuert, Fluor’s Chief Financial Officer.

Our earnings announcement was released this afternoon after the market closed and we have posted a slide presentation on our Web site, which we will reference while making prepared remarks this afternoon.

Before getting started I would like to refer you to our Safe Harbor note regarding forward-looking statements, which is summarized on Slide #2 of the presentation

.

During today’s call and slide presentation, we will be making forward-looking statements which reflect our current analysis of existing trends and information, and there is an inherent risk that actual results and experience could differ materially. You can find a discussion of those risk factors in our 10K, which was also filed today, February 25, 2010.

With that I would like to turn the call over to Alan Boeckmann, Fluor’s Chairman and CEO. Alan?

Alan Boeckmann

Thank you, Ken. Good afternoon, everyone and I would like to thank you for joining us. Today, we will be reviewing our results for the fourth quarter and for the full year of 2009, providing an update for you on our current business outlook and then discussing our earnings prospects and guidance for 2010.

First, before we get into the specifics, let me just say that Fluor’s strong earnings in 2009 which included very good performance from oil, gas, power and government segments were surpassed only by our record results in 2008. And despite over $5 billion in cancellations and scope reductions during 2009, we finished the year with a $27 billion backlog. In an addition, our cash and our marketable securities balance grew to 2.6 billion.

I would like to take a look at some of the highlights of our financial performance in 2009 and I refer you to Slide #3.

Net earnings attributable to Fluor for 2009, declined 4% to $685 million, that’s $3.75 per diluted share. And that compares very favorably with the record $716 million or $3.89 per diluted share in 2008. You will recall then in 2008, we were bolstered by a $79 million pretax gain which was $0.27 per share, and that was related to the sale of our equity in the Greater Gabbard wind farm development.

Consolidated segment profit for the year was 1.25 billion, and that was down 3% from 1.29 billion a year ago. Full year results reflected very strong profit growth in the Government and Power segments. And Oil and Gas results which matched record levels achieved last year were offset by a decline in global services.

Consolidated revenue for the year totaled $22 billion that was effectively flat with $22.3 billion, a year ago. And the segment margins held up well at 5.7% that was down just a bit from 5.8% the previous year.

Move to Slide #4 if you would and there we see full year new awards for $18.5 billion, down from the record bookings of $25.1 billion a year ago. Mainly, that was due to a significant decline in Oil and Gas awards during 2009. As expected, our fourth quarter new awards were somewhat below recent trend lines at $3.3 billion. That included awards of $1.6 billion in industrial and infrastructure and $912 million in Oil and Gas. Backlog of $26.8 billion at year-end was down from $28 billion at the end of the Q3.

With that I would like to turn the call over to David Seaton, Fluor’s Chief Operating Officer to talk a little about the markets in each of our segments. David?

David Seaton

Thank you, Alan. If you don’t mind I’ll start with Oil and Gas and work my way through the segments. If you will turn to Slide #5, Oil and Gas had another tremendous year in 2009 from an earnings perspective, but the markets have clearly cooled off particularly to a downstream in refining perspective in the United States. While this was not at all unexpected it does leave a sizeable hole to fill.

We continue to see downstream prospects in the U.S., but they are smaller in size. The recent announcement of our selection by Pasadena Refining is a good example of this. We see the refining market continuing to move internationally, specifically, in Europe, the Middle East, and Asia and to some degree in Mexico.

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