Fluor Corporation

Good morning and welcome to Fluor's third quarter 2022 earnings conference call. Today's call is being recorded. At this time, all participants are in a little lonely mode. A question and answer session will follow management's presentation. A replay of today's conference call will be available at approximately 10.30 a.m. Eastern Time today, accessible on Fluor's website at investor.fluor.com. The web replay will be available for 30 days. A telephone replay will also be available for seven days through a registration link, also accessible at Floor's website at investor.floor.com. At this time, for opening remarks, I would like to turn it over to Jason Lenkamer, Head of Investor Relations. Please go ahead, Mr. Lenkamer.

Thank you, Julie. Welcome to Floor's 2022 Third Quarter Earnings Call. David Constable, Floor's Chairman and Chief Executive Officer, and Joe Brennan, Floor's Chief Financial Officer, are with us today. Floor issued its third quarter earnings release earlier this morning, and a slide presentation is posted on our website that 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 two. During today's presentation, we will be making forward-looking statements which reflect our current analysis of existing trends and information. There is an inherent risk that actual results and experience could differ materially. You can find a discussion of our risk factors, which could potentially contribute to such differences, in our 2021 Form 10-K and our Form 10-Q, which was filed earlier today. During this call, we will discuss certain non-GAAP financial measures. Reconciliations of these amounts to the comparable GAAP measures are reflected in our earnings release and posted in the investor relations section of our website at investor.floor.com. I'll now turn the call over to David Constable, FLUR's Chairman and Chief Executive Officer. David?

Thank you, Jason. Good morning, everyone. Thanks for joining us today. Please turn to slide four. Before we get started on operational results, I want to share insights from FLUR's Supply Chain Summit in Greenville, South Carolina, on September 14th. This high-energy event brought together senior leadership from FLUR, our clients, suppliers, and contractors across the globe. Ongoing industry trends, new business ideas, and solutions to current supply chain challenges were discussed, and this event gave everyone an opportunity to meet and interact with Fluor clients and senior Fluor business line and supply chain leadership. Fluor committed the proceeds from the event to nonprofit organizations, including the Carolinas Virginia Minority Supplier Development Council, the Houston Minority Supplier Development Council, the Greenville Chamber, and Fluor Cares. The councils and chamber will use the donation funds to impart training and certification to minority-owned businesses, helping them get ready for relationships with larger corporations. Please turn to slide five. I want to start by addressing the legacy infrastructure charges incurred in the quarter. Clearly, the impact of these projects weighed heavily on our otherwise great results in the quarter. The $107 million in charges include $64 million for additional rework and schedule delays on the I-635 LBJ East freeway project, $22 million for cost growth and delay mitigation costs on the Gordie Howe project, and $21 million for subcontractor cost escalation and productivity estimates on the LAX automated people mover project. Over the past 21 months, FLUR's leadership team has taken action to improve the progress and execution of our legacy projects. Specifically in infrastructure, we've completed six of the nine challenge projects in this timeframe. We continue to strengthen the leadership on the three remaining legacy infrastructure projects in support of our joint ventures. In the last three months, we have shifted resources from across our organization, including claims management, project estimators, procurement, and field execution personnel. This is to not only support our specific efforts, but to also reinforce the performance of our joint venture partners. Finally, we are actively engaged in formalizing our entitlement positions on these three legacy projects to seek relief for cost growth and schedule delays. This has taken some time to perfect due to the complex nature of the projects in question. We expect to validate these substantial positions in the next few months.