Fluor Corporation

Good morning. Welcome to Fluor's fourth quarter 2022 earnings 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 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 on Fluor's website at investor.fluor.com. At this time for opening remarks, I'd like to turn the call over to Jason Landkammer, Head of Investor Relations. Please go ahead, Mr. Landkammer.

Thanks, Chris. Welcome to Fluor's 2022 Fourth Quarter Earnings Call. David Constable, Fluor's Chairman and Chief Executive Officer, and Joe Brennan, Fluor's Chief Financial Officer, are with us today. Floor issued its fourth quarter earnings release earlier this morning, and a slide presentation is posted on our website that we'll 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'll 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 2022 Form 10-K, 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. With that, I'll now turn the call over to David Constable, Floor's Chairman and Chief Executive Officer.

David? Thank you, Jason. Good morning, everyone, and thank you for joining us today. And please turn to slide three. Before we get started on operational results, as safety is one of our core values, it is always a top priority. Our total case incident rate for 2022 was 0.31, better than Fluor's corporate goal of 0.38, and well under the industry benchmark of 0.90. One example of our commitment to safety is our Silver Medallion Award. which was established to recognize employees who embody our vital commitment to protect one another. During 2022, 26 employees received a silver medallion for life-saving actions. In one particular incident, an employee was camping with his family and encountered a child face down in a nearby lake. Two weeks prior to this incident, the employee had taken a company onsite first aid course. With the training fresh in his mind, The employee, Rick and Bob Saar, took charge of the situation by pulling the child out of the water and successfully performing CPR while waiting for emergency assistance to arrive. Now let's turn to slide four. It has been just over two years since the launch of our new Building a Better Future strategy and long-term financial targets. I'm incredibly proud of the progress the company has made in reaching and in many instances surpassing our strategic goals. I'll discuss our updated strategic targets in just a moment. Our new awards in 2022 doubled to just under $20 billion with a full year book to burn ratio of 1.5 times. Through our disciplined pursuit of contracts, 87% of new awards were reimbursable and our total backlog is now 63% reimbursable. This compares to 45% reimbursable two years ago. I'm encouraged by the market's response to our priority of seeking fair and balanced terms in our contracts. Clients continue to recognize the value Fluor provides in the industry. Our optimism is further supported by a robust prospect pipeline. We are currently working on, or have recently completed, feed and study packages that represent an estimated $147 billion installed cost of high-quality new award prospects. We are also tracking front-end design prospects in the next 18 months that represent more than $230 billion in capital expenditures. Of that amount, 20% is related to energy transition opportunities. This continues to be a key element of our strategy and represents significant opportunity for Fluor. Moving to our business segments, please turn to slide six. Beginning with Urban Solutions, segment profit for the year was $3 million, down from $38 million in 2021. Results reflected infrastructure cost growth on three legacy projects in the first three quarters. Results for the year include a non-cash charge of $16 million for a ruling on a Denver commuter rail project that was completed back in 2019. since this decision was not issued until february 10th floor along with his joint venture partners are currently reviewing the decision 2022 was an excellent year for new awards and urban solutions with a total of 6.8 billion dollars in high quality contracts a significant increase from 2.7 billion last year with these new awards backlog for urban solutions is currently 55 percent reimbursable compared to 32 percent in 2021. Turning now to slide seven, new awards for the fourth quarter in mining and metals included a $2.4 billion metals project in the United States and a $600 million mining project in Greece for Hellas Gold. Although some mining awards have been delayed due to geopolitical and inflation concerns, we are reassured as clients continue to move into the execution phase. With the ongoing demand for copper, gold, and lithium, we are presently working on $2 billion of limited notice to proceed work. In one of the LNTP awards, the client is awaiting environmental approval and has been offered a $700 million loan commitment from the DOE. In addition, we are well positioned to book a copper concentrator expansion project for a repeat customer in South America. This is a clear indication of capital deployment taking off in our mining business. Now please turn to slide eight. Our advanced technologies and life sciences business continues to support our strategic priority of driving growth across the portfolio. We were awarded $100 million in front-end study work for semiconductors and biopharmaceuticals in Q4. These front-end work packages are gateways to larger opportunities, including $4 billion in two life sciences projects. In addition to this front-end work, we have another $3 billion opportunity on the horizon to significantly expand capacity for a pharmaceuticals company. The value we add with full project execution capability and speed to market is a differentiator with this client. In the semiconductor space, although the market has shown unprecedented growth in the United States, Europe, and Asia, A widespread shortage in recent years has exposed the reliance on these specialized components in our modern technology economy. We plan to leverage our expertise for a number of clients, including a $4.5 billion U.S. facility currently in the bidding phase. Turning to slide nine, in infrastructure, we entered into a contract in January to perform design, construction, and maintenance services for the A27 motorway project in the Netherlands. Floor's $220 million share was booked in the first quarter of 2023. We have completed multiple projects with our Dutch joint venture partner and have executed a number of projects in the region. For this project, we are reducing the risk typically associated with fixed price work by using a two-phase contracting approach. Here, design work packages and negotiations with subcontractors and vendors are complete before the second phase is undertaken. This commercial pattern could become popular for future infrastructure projects. During the fourth quarter, we made progress on claims and schedule relief on all three legacy projects. Joe will provide more details on this progress in a moment. Moving on to slide 10, Mission Solutions reported a segment profit of $136 million for the year. compared to $155 million a year ago. These comparative results reflect the successful conclusion of a few large projects in 2021. New awards in 2022 included the $4.5 billion extension with the U.S. Department of Energy for the floor-led Savannah River Nuclear Solutions LLC management and operations contract near Aiken, South Carolina. Our performance on jobs within Mission Solutions has been outstanding, and as a result, provided us an opportunity to bid on several contracts for the intelligence community. This increased pipeline could bolster segment revenue in 2023 and into 2024. Looking ahead, we see some great prospects, including a recompete of the existing Portsmouth decontamination and decommissioning contract, and a continuation of our services to NuScale and UAMPS. among other nuclear engineering opportunities. We are also exploring multi-billion dollar opportunities with the U.S. Air Force for the management and operations of their facilities and the Hanford Integrated Tank Disposition Contract with the DOE. Consistent with our strategic priority to pursue contracts with fair and balanced terms, all prospects here are aligned with our reimbursable pursuit criteria. Moving to energy solutions, please turn to slide 11. We finished the year strong with 2022 segment profit of $301 million, a 20% increase over 2021. New awards for the year were $6.5 billion, nearly double the previous year's new awards. Our opportunity in the LNG market continues to grow and includes an award in the fourth quarter for the full notice to proceed on a third New Fortress Energy FAST LNG project. We also received another package for the BASF Integrated Chemicals project in China, and were awarded EPC services for the Brascom Ethane Storage Terminal in Mexico under our ECA Fluor joint venture. Turning to slide 12. At the LNG Canada project, our joint venture scope of work is approaching 80% complete. By the end of December, 169 modules have been shipped with 149 delivered. All 215 modules are expected to be on site by mid 2023. And we continue to have productive conversations with the client regarding the resolution of COVID related impacts across the primary job site and fabrication yards. Together with LNG becoming a growing business line in energy solutions, we have significant prospects supporting our chemicals clients as well. had a positive start to 2023 with the award of initial engineering procurement and construction management work from dow for the world's first net zero ethylene and derivatives chemical complex for this reimbursable contract we will be taking an initial feed award in q1 and anticipate a full epcm award release in mid to late 2023 we were also awarded a pre-feed study for a major middle eastern client for a significant liquid to chemicals complex that is expected to convert more than 400,000 barrels of oil per day into chemical derivatives. Now moving to energy transition on slide 13. We continue to be upbeat with the direction and growth Fluor is making in the energy transition space. We have increased opportunities across all of our business segments. Just one of many examples to highlight is Fluor's recently completed engineering procurement and construction management services contract for SoCalGas's hydrogen home. This is a first-of-a-kind US project aimed to show how a carbon-free gas from renewable electricity can be used in pure form or in a blend to power a clean energy system. Overall, energy transition projects were 22% of new awards in 2022, or approximately $4.3 billion, an increase from 13% in 2021. With that, let me turn the call over to Joe for the financial update.