Q2 2004 Fluor Corporation Earnings Conference Call - Final.

Original Source: FD (FAIR DISCLOSURE) WIRE

OPERATOR: Good day everyone and welcome to Fluor Corporation second-quarter 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. There will be a replay of today's conference call at 9 AM Pacific Time today accessible on Fluor's Website at www.fluor.com. A telephone reply will also be available running through 5 PM Pacific Time on Thursday August 5, at the following telephone numbers; 1-888-203-1112 and the access code of 185466 will be required.

Now at this time for opening remarks, I would like to turn the call over to Lila Churney, Vice President of Investor Relations.

LILA CHURNEY, VP OF IR, FLUOR CORPORATION: Welcome to Fluor's second-quarter conference call. Our earnings announcement was released yesterday after the market closed. Let me mention that our Board meeting this quarter was out at our offices in Shanghai, China and is where our speakers, CEO Alan Boeckmann and CFO Mike Steuert are calling from today. While it is morning for most of us it is approximately 9 PM in Shanghai.

Before getting started I would like to read our cautionary note regarding forward-looking statements. In discussing certain subjects we will be making forward-looking statements regarding projected earnings, market outlook, new awards, margins, the effective strategic initiatives and other statements regarding the intent, belief or expectations of Fluor and its management. These forward-looking statements reflect our current analysis of existing trends and information and there is an inherent risk that actual results and experience could differ materially. These differences could arise from any number of factors. Information concerning factors that could cause actual results to differ materially from the information that we will give you is available in our Form 10-K filed March 15, 2004 which is available on line or upon request.

The information in this conference call related to projections and other forward-looking statements may be relied upon subject to this cautionary note as of the date of this call. The Company undertakes no obligation to update publicly any forward-looking statements whether as a result of new information, future events or for any other reason.

Now I would like to turn the call over to Alan to get started.

ALAN BOECKMANN, CHAIRMAN & CEO, FLUOR CORPORATION: Good morning everybody and thank you for joining us today. As Lila pointed out, Mike Stewart and I are calling from China where we have just held our second-quarter board meeting earlier today. Given the growing level of Fluor's current activities and the significant future potential of this market we felt that it was important to give our Board a first-hand view of what is occurring here in China as it is rapidly becoming a regional and global economic powerhouse.

During the past 25 years Fluor has completed more than 140 projects worth over $8 billion in the mining, oil and gas, chemicals, manufacturing, life sciences and power sectors for China's state owned enterprises and for multinational companies. During this tenure in China we have formed significant relationships and gained valuable experience working with Chinese design institutes and construction companies. We are currently executing more than 5 billion dollars in project investment value and have diversified our business mix to encompass multiple industry sectors.

Among our current activities in China, Fluor is managing a 2.5 billion dollar Petrol chemical project in Nan Chang (ph). We are also the managing contractor for a $1 billion chemical plant in Shanghai and are designing nonshore oil production processing facilities for a $2 billion program in Bohai Bay. We are exceptionally proud of our legacy in China and we are excited about the prospects that this market represents for Fluor.

Now let me move on to our second-quarter results and our current business outlook. We continue to benefit from our broad market diversity which is continuing to allow us to manage through the individual market cycles and to deliver more consistent earnings performance. Our second-quarter results were in line with our expectations with all 5 segments contributing to a solid quarter.

Net earnings as well as earnings from continuing operations for the second quarter were $44.8 million or 54 cents per share. This compares with earnings from continuing operations in the second quarter last year of $43 million or 54 cents per share and net earnings or 45.0 million or 56 cents per share, which included the net earnings of $2 million or 2 cents per share from discontinued operations.

Revenues for this past quarter were 2.2 billion dollars level with one year ago but up 7 percent sequentially.

Consolidated operating profit in this quarter was $99.6 million compared with 97.1 million last year while the operating margin increased to 4.5 percent up from 4.3 percent in that second quarter of a year ago.

I am very pleased to report that we had another very strong quarter for new awards which increased 46 percent to $3.3 billion. This was even better than our first quarter total of $3.1 billion which in fact in and of itself was our highest quarterly totaled in 7 years. Also worth noting was the broad based mix of new awards that reflected activity across a number of our diverse markets.

Fluor's broad industry and geographic diversity has positioned the Company extremely well to capitalize on the strengthening trend in capital spending globally.

Second-quarter awards including several sizable projects such as a significant oil sands project in Canada, a major mining project in Chile and a large manufacturing facility in Taiwan. As a result of the strong quarterly awards, consolidated backlog grew 23 percent to 12.9 billion up from 10.5 billion a year ago and up nearly $1 billion from the 11.9 billion at the end of the first quarter.

The continuing strength and diversity of our quarterly new awards is particularly encouraging and it provides the support for the positive market outlook that we have been talking about. As we look forward 2004 continues to be a year of transition from an earnings perspective with an evolving mix of businesses contributing to current results. We are obviously very encouraged by the trend for new project awards throughout the first half of this year.

We continue to expect further backlog expansion which is driven by increasing momentum in the global oil and gas market, by strengthening spending in certain economically sensitive industrial markets and the continuing growth in our government business. Growing backlog along with continued improvement in the global economic environment should build the basis for excellent earnings growth over the next 5 years.

The confidence that we have expressed in a major capital spending cycle in the global oil and gas market is now being evidenced by the …