Fluor Corporation (FLR)

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Fluor (FLR)

Q4 2011 Earnings Call

February 22, 2012 5:30 pm ET

Executives

Kenneth H. Lockwood - Vice President of Corporate Finance and Investor Relations

David T. Seaton - Chairman and Chief Executive Officer

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

Analysts

Michael S. Dudas - Sterne Agee & Leach Inc., Research Division

Jamie L. Cook - Crédit Suisse AG, Research Division

Alan Fleming - Barclays Capital, Research Division

Tahira Afzal - KeyBanc Capital Markets Inc., Research Division

Steven Fisher - UBS Investment Bank, Research Division

Scott J. Levine - JP Morgan Chase & Co, Research Division

Joseph Ritchie - Goldman Sachs Group Inc., Research Division

Will Gabrielski - Lazard Capital Markets LLC, Research Division

Andrew Obin - BofA Merrill Lynch, Research Division

Robert F. Norfleet - BB&T Capital Markets, Research Division

Avram Fisher - BMO Capital Markets U.S.

Brian Konigsberg - Vertical Research Partners Inc.

John Rogers - D.A. Davidson & Co., Research Division

Min Tang-Varner - Morningstar Inc., Research Division

Robert Connors - Stifel, Nicolaus & Co., Inc., Research Division

Presentation

Operator

Good afternoon, and welcome to Fluor Corporation's Fourth Quarter and Year-end 2011 Conference Call. Today's call is being recorded. [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 February 28 at the following telephone number, (888) 203-1112. The passcode of 4586932 will be required.

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

Kenneth H. Lockwood

Thank you very much, operator. Welcome, everyone, to Fluor's Fourth Quarter and 2011 Year-end Conference Call. With us today are David Seaton, Fluor's Chairman and Chief Executive Officer; and Mike Steuert, Fluor's Chief Financial Officer.

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

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 earlier today.

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

With that, I'll turn the call over to David Seaton, Fluor's Chairman and CEO. David?

David T. Seaton

Thanks, Ken. Good afternoon to everyone, and I appreciate you joining us here today. Today, we'll be reviewing our results for the fourth quarter and the full year of 2011 and discussing our outlook for 2012.

If you'd turn -- now we'll turn to the financial results and ask you to turn to Slide 3. I want to start by covering some of the highlights for the performance for 2011. I'm pleased to report that Fluor had delivered -- has delivered another year of strong new awards, double-digit backlog growth and earnings per share at the top end of our expectation for 2011. Net earnings for 2011 were $594 million or $3.40 a diluted share, which compares to last year's $357 million or $1.98. Consolidated segment profit for the year was just over $1 billion, which compares with $621 million for 2010.

As you know, last year's segment profit was impacted by the significant pretax charges on 2 infrastructure projects, as well as the power project. Our results for 2011 reflect a substantial increase in the profit contribution from Industrial & Infrastructure segment, along with very solid performance from all the other 4 business segments.

Consolidated revenue for the year totaled a record $23.4 billion, which was up 12% over last year, mainly due to strong growth in the Mining & Metals business line. We also had another strong year for new awards at $26.9 billion, reflecting substantial Mining & Metals volume, as well as sizable orders within the Oil & Gas segment. Consolidated backlog rose to a new year ending high of $39.5 billion, which represents a 13% increase from a year ago.

Our full year cash flow generation from operations was significant, which enabled the company to return cash to our shareholders through the repurchase of over 10 million shares in Fluor. I'm also pleased to report that the board recently approved a 28% increase in our quarterly dividend to a new rate of $0.16 per share.

If you'll turn to Slide 4, I want to comment on the fourth quarter of 2011. Net earnings for the fourth quarter were $153 million or $0.90 per diluted share. This favorable result was mainly driven by a marked improvement in segment profit, which rose to $279 million in the quarter, again driven primarily by strong performance in our Industrial & Infrastructure segment. Net earnings for the quarter also benefited from a lower tax rate, which reflected the favorable resolution of various tax issues and audits. Revenue for the quarter was $6.3 billion, which was 19% higher than last year and again, mainly due to the Industrial & Infrastructure group.

Fourth quarter new awards were $4.3 billion, including awards of $2.5 billion in Oil & Gas, $947 million in Power and $504 million within the I&I segment. While our new award numbers for the quarter is somewhat below levels experienced over the last 6 quarters, I’d remind everyone of our regular commentary on the inherent lumpiness of quarterly new awards. We expect new awards in the first quarter of 2012 to strengthen.

If you turn to Slide 5, I'd like to take a moment and address the Greater Gabbard Wind Farm Project. Despite additional weather delays in the quarter, we continued to make good progress, and the project's now 97% complete. We've nearly done everything but the burial of some of the remaining inter-array cables and the completion of the installation of the second half of the third main export cable. At this point, all 140 monopiles, transition pieces, wind turbine generator sets are installed, and many of the units are generating power for the customer. We have just one set of wind turbine blades left to install, and we should complete that task within next week.

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