Fluor Corporation (FLR)

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Fluor (FLR)

Q3 2010 Earnings Call

November 04, 2010 5:30 pm ET


David Seaton - Chief Operating Officer and Member of Compliance & Ethics Committee

Alan Boeckmann - Executive Chairman, Chief Executive Officer and Chairman of Executive Committee

D. Steuert - Chief Financial Officer, Principal Accounting Officer and Senior Vice President

Kenneth Lockwood - Vice President of Corporate Finance and Investor Relations


Barry Bannister - Stifel, Nicolaus & Co., Inc.

Richard Roy - Citigroup Inc

Rodney Clayton - JP Morgan

John Rogers - D.A. Davidson & Co.

Michael Dudas - Jefferies & Company, Inc.

Andy Kaplowitz - Barclays Capital

Guy Baber - Simmons & Company

Justin Hauke

Joseph Ritchie - Goldman Sachs Group Inc.

Will Gabrielski - Gleacher & Company, Inc.

Jamie Cook - Crédit Suisse AG

Avram Fisher - BMO Capital Markets U.S.

Steven Fisher - UBS Investment Bank



Good afternoon, and welcome to Fluor Corporation Third Quarter 2010 Conference Call. [Operator Instructions] A replay of today's conference call will be available at approximately 8:30 p.m. Eastern time today, accessible on Fluor's website at www.fluor.com. The web replay will be available for 30 days. A telephone replay will also be available through 8:30 p.m. Eastern time on November 10 at the following telephone number: (888) 203-1112. The passcode is 3923484 will be required. At this time, for opening remarks, I would like to turn the call over to Ken Lockwood, Vice President of Investor Relations. Please go ahead, Mr. Lockwood.

Kenneth Lockwood

Thanks very much, operator. Welcome, everyone to Fluor's Third Quarter 2010 Conference Call. With us today are Alan Boeckmann, Fluor's Chairman and CEO; 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 website, which we will reference while making prepared remarks. Before getting started, I'd like to refer you to our Safe Harbor note regarding forward-looking statements, which is summarized on Slide 2.

During today's call and slide presentation, we will be making forward-looking statements, which reflect our current analysis of existing trends and information, 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 10-K, which was filed on February 25 of 2010.

During this call, we may discuss certain non-GAAP financial measures. Reconciliations of these amounts with the comparable GAAP measures are reflected in our earnings release and are posted in the Investor Relations section of our website at investor.fluor.com.

And with that, I'd like to turn the call over to Alan Boeckmann, Fluor's Chairman and CEO.

Alan Boeckmann

Thank you, Ken. Good afternoon, everybody, and thank you for joining us. Today, we'll be reviewing our financial results for the third quarter and updating our outlook for the balance of 2010. We'll also then discuss our initial EPS guidance for 2011.

But before I begin, I'd like to address another announcement that we issued this afternoon. And specifically the announcement naming David Seaton to succeed me as CEO effective February 3, 2011. I think you should know that I am extremely pleased that the Board of Directors confirmed this decision. I will stay on as a non-executive Chairman of the Board, and will certainly continue to dedicate myself to Fluor and David and the team in that role.

David, some of you know him, but you'll get to know him. He's an exceptional choice given his vast experience and this significant talents. He has the respect of the whole organization and I am absolutely confident that the company will be in great hands. On a personal note, I couldn't be happier that his appointment now becomes an integral part of my legacy to this company. So David, maybe it'd be appropriate if I turn it over to you for a remark or two.

David Seaton

Well, and thank you. I can't tell you on the phone how honored I am to be leading the Fluor team of professionals that make this company great. I think we've got a legacy of excellence and executing projects all over the globe, and it's that team and collection of talents that our company has that makes that possible.

We clearly understand the duty we have to our shareholders and the investment that they have in our company. Alan's leadership is apparent in the performance that we've enjoyed over the last decade, and we only hope to continue to build on that legacy, Alan, and continue that legacy of excellence. So I appreciate the confidence that you and the Board have in me, and I look forward to the next chapter in Fluor's history. Alan?

Alan Boeckmann

Thank you, David. I'd like to now turn and to put focus and some attention and give you some additional background on the charges that we preannounced.

First, let me talk about the Greater Gabbard Wind project. This is beginning on Slide 3. As we indicated, during the third quarter, the project experienced a variety of execution challenges. Those included material delivery issues and reduced productivity, which primarily related to the installation of wind turbine generators and subsea cabling. Following the evaluation of third quarter performance, the project developed a revised estimate to include substantial cost for additional marine vessels and other subcontractor costs that were associated with the material installation. There also are repairs and the estimated schedule impact, which has been exacerbated by weather-related delays.

On this project, there are five primarily associated activities, including fabrication and installation of the monopiles and transition pieces, installation of the wind turbine generators, installation of the inter-array cabling, installation of the ocean-based substations, and then installation and conductivity of that cabling to the onshore substation.

The first primary activity is effectively complete with all the 140 monopiles and transition pieces installed. While we're making progress on the wind turbine generator installations with 54 installed to date, a variety of factors have slowed progress and reduced expected productivity levels.

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