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URS (NYSE:URS)

Q4 2012 Earnings Call

February 25, 2013 5:00 pm ET

Executives

H. Thomas Hicks - Chief Financial Officer and Vice President

Martin M. Koffel - Chairman of the Board, Chief Executive Officer and President

William J. Lingard - President Oil & Gas Division

Randall A. Wotring - Vice President and President of the Federal Services Business

Robert W. Zaist - President of Energy & Construction Business

Gary V. Jandegian - Vice President and President of the Infrastructure & Environment Business

Analysts

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

Alexander J. Rygiel - FBR Capital Markets & Co., Research Division

Jamie L. Cook - Crédit Suisse AG, Research Division

Will Gabrielski - Lazard Capital Markets LLC, Research Division

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

Tahira Afzal - KeyBanc Capital Markets Inc., Research Division

Andrew J. Wittmann - Robert W. Baird & Co. Incorporated, Research Division

Steven Fisher - UBS Investment Bank, Research Division

John D. Ellison - BB&T Capital Markets, Research Division

Andy Kaplowitz - Barclays Capital, Research Division

Operator

Good afternoon, and welcome to URS Corporation Earnings Conference Call for the Fourth Quarter and Fiscal Year 2012. To begin, I'll turn the call over to Mr. Thomas Hicks, Chief Financial Officer of URS. Mr. Hicks, you may begin.

H. Thomas Hicks

Good afternoon, everyone. Before we get started, let me remind you that today's call will contain forward-looking statements, including statements about our future revenues, business prospects, book of business, earnings and financial conditions, debt paydown, federal budget cuts, economic conditions and other statements that are not historic facts. These statements represent our expectations as to future events, which we believe are based on reasonable assumptions. However, numerous risks and uncertainties could cause actual results to differ materially from those in the forward-looking statements, including those in our recently filed Form 10-K. We assume no obligation to revise or update any forward-looking statements.

A webcast of this call is available on the Investor Relations portion of our website and will be archived in audio form on the website for a limited period. With that, I'll turn the call over to Martin Koffel, our Chairman and Chief Executive Officer.

Martin M. Koffel

Good afternoon, and thank you for joining us. In addition to Tom Hicks, the team with me here in San Francisco today includes Gary Jandegian, President of Infrastructure & Environment; Bill Lingard, President of Oil & Gas; Randy Wotring, President of Federal Services; Bob Zaist, President of Energy & Construction; Martin Tanzer, Executive Vice President of Marketing; Reed Brimhall, Corporate Controller and Chief Accounting Officer; and Sam Ramraj, Vice President of Investor Relations.

Our 2012 results, which we announced today, are in line with the estimates that we updated for you 10 days ago. Overall, we had a strong year. And despite the sluggish economic recovery and the well-documented federal budget issues, our revenue was up 15% from 2011 and EPS increased by 18%. Now this comparison includes certain non-GAAP adjustments in 2011, and in addition, we generated $430 million in cash from operations.

A full reconciliation of net income and earnings per share reflecting the 2011 adjustments is provided in the Reconciliation Schedule on our website at urs.com and in our earnings press release.

Our 2012 results demonstrate our success in building a world-class, highly competitive engineering, construction and technical services company. Our scale, our market positions and diversified mix of businesses have enabled us to generate steady earnings growth and strong cash flow right throughout the economic cycle. And with the acquisition of Flint Energy last year, we took a really important step to ensure that we maintain a strategic balance for continued growth. The acquisition significantly increased our position in the rapidly expanding North American oil and gas market, which has been a long-standing strategic priority, and we've talked to you about that on several previous calls.

It also profoundly reshaped our overall business mix. In the fourth quarter, Oil & Gas revenues accounted for 29% of our total business, and that compares to just 8% in the fourth quarter of 2011. In 2012, revenues from the Oil & Gas sector increased dramatically, driven by the Flint acquisition which closed in May, and also by organic growth in our legacy engineering and construction businesses. With a $1.5 billion backlog of Oil & Gas and a strong pipeline of EPC opportunities, we expect robust growth in this sector in 2013.

Revenues from our power sector increased 16% in 2012, and this included 34% year-over-year growth in the fourth quarter. We expect continued growth this year as plans move forward with emissions control projects and modification work on nuclear facilities and transmission and distribution projects. Our power sector backlog of $1.4 billion gives us a strong base of work for both this year and beyond. It's important to note that our energy-related revenues, which now include revenues from the oil & gas and power sectors, accounted for 42% of our business in the fourth quarter. This compares with just 21% in the fourth quarter of 2011, and that demonstrates the extent to which we really have rebalanced URS.

The revenues from the industrial sector were down 8% in 2012, but we see positive trends in this business as well. A resurgence in manufacturing activity is leading to increased demand for our facilities management, O&M and EPC services. And additionally, we are benefiting from EPC mining projects in both the United States and Australia. These trends helped boost our backlog of industrial sector work by 28% over last year and support our positive outlook for 2013.

Infrastructure revenues were down 4% in 2012, reflecting a decline in the first half of the year, but that was followed by modest revenue increases in the third and fourth quarters. We expect the steady recovery to continue this year, as increased funding from federal programs from dedicated tax measures and bond initiatives all create new opportunities for highway, transit, airports and other public infrastructure projects. Infrastructure backlog has remained stable throughout the year at about $3 billion.

And finally, like many federal contractors, we felt the effects of the budget discord in Washington. Our federal sector revenues decreased by 4% in 2012, reflecting the continuing delay in procurement decisions and the reduction in anticipated spending against previously awarded contracts. Year-over-year comparisons were also affected by the successful completion of stimulus-funded projects for the Department of Energy in 2011.

We're, of course, mindful of the ongoing federal budget debate and the issues it creates for some of our public sector clients. But that said, we're confident in our long-term position in the federal market. Many of our programs involve the provision of essential services that are far less likely to face significant budget cuts. These include military preparedness initiatives, nuclear decommissioning and cleanup programs, cyber security measures and our support for the Department of Homeland Security, which includes the Federal Emergency Management Agency, or FEMA.

As I think about the total enterprise, URS as a whole, given the strength of our market positions and the balance of our business mix, we expect to deliver another year of revenue and EPS growth in 2013. We also expect to generate significant cash flow as we've always done in the past.

Our business now has the scale, the global reach and the market positions we have long targeted, and we're generating substantial organic growth opportunities. We intend to use future cash flow to support these organic growth opportunities, to repay debt and to return value to our stockholders through the dividends that we initiated in 2012, as well as our ongoing share repurchase program.

With that as background, I'll now give you some additional detail for each sector, starting with the Oil & Gas business. Our Oil & Gas sector revenues were $2.3 billion in 2012, a significant increase from 2011 revenues, which were $692 million. This includes $1.5 billion in revenues from Flint on top of 22% organic growth in our legacy Oil & Gas business. The fourth quarter Oil & Gas sector revenues were $855 million compared with just $200 million a year ago.

And during the year, we were active in every major oil and gas basin in both the United States and Canada, providing full life-cycle capabilities in the upstream, midstream and downstream segments. Increased capital spending is creating significant new opportunities that should support continued growth in 2013 and beyond. In the upstream market, we're seeing strong demand for facilities, construction and maintenance services as a result of increasing exploration budgets, particularly in the Canadian oil sands and shale oil and gas regions. In 2013, energy companies plan to deploy $22 billion in new oil sands construction projects. And investments in shale oil developments are rising, with an estimated $130 billion to be spent on new projects this year.

In the midstream market, we recently won a new contract with Alyeska Pipeline Company to provide EPCM services for the Trans-Alaska Pipeline. We also will begin work this year on a number of new pipeline and facility EPC projects, as a result of increased production and the need to transport these liquid-rich resources to refining facilities. And with an abundant and growing supply of unconventional oil and gas in North America, we believe that the industry's continued focus on upstream production and midstream pipeline development will lead to additional investments in downstream refining. And specifically, our clients are investing in new expansion and upgrade projects in their existing North American refineries.

In the downstream market, we continue to benefit from the successful expansion of our Master Service Agreements. And now, by combining Flint's construction and maintenance capabilities with URS's legacy engineering and environmental expertise, we're now able to broaden the services we provide. And in the past quarter, we were awarded $317 million of MSA oil and gas work, including more than $200 million to support Royal Dutch Shell around the world.

And as you can tell, we're very enthusiastic about the potential for our Oil & Gas business. I mean I couldn't be happier. And we said we'd do this, and now we're doing it. And behind this optimism is a $1.5 billion backlog of assignments, and that's a 9% increase over the third quarter, as well as a strong pipeline of EPC opportunities.

Our next key market is the power sector, which performed well in 2012. Revenues for the year were $1.3 billion and that's a 16% increase from 2011. Fourth quarter power sector revenues were $394 million. That's a 34% increase from the fourth quarter of 2011. We believe the underlying strength in the market will continue through 2013. There's a steady demand for emissions control services and we're currently working on 18 retrofit projects to help utilities meet federal emission standards and state consent decrees. And the EPA is continuing to evaluate new air quality regulations. If approved, these regulations should lead to additional air quality retrofit activity for both our utility and our industrial clients.

Opportunities for our advanced nuclear technology services also are increasing. This is driven by post-Fukushima safety requirements to improve on-site flood control, seismic reinforcements and, of course, backup power programs. Utilities also are continuing to invest in component replacement projects to expand generating capacity and efficiency at existing nuclear plants.

Finally, we expect to benefit from the new investments being made in transmission and distribution systems across the country. This is driven in part by the system vulnerabilities that were exhibited in the Northeast by Hurricane Sandy.

In addition, there's a continued focus on alternative energy generation, led by solar and wind power. And we'll be active on a number of projects this year, including work for Arizona Public Service Company to support the construction of a new 112-mile transmission line to Arizona.

Turning now to the industrial sector. 2012 revenues were $1.1 billion, an 8% decline compared with 2011. But notwithstanding the challenging market conditions in 2012, we're increasingly confident about the outlook for our industrial business, particularly given the continued recovery of the U.S. manufacturing industry. New orders for durable goods continue to rise, leading many clients to expand production at existing sites and to open additional facilities. This is creating a robust demand for our facilities management and for our O&M services.

Our positive outlook is supported by the growth in our back book -- backlog. We ended the year with an $895 million backlog of industrial sector work, and that's an increase of 28% for the year. Many of our industrial and manufacturing clients are planning capital investments to take advantage of the new low cost of gas-related feedstock and energy supply. As a result, we are seeing an increase in EPC opportunities. Currently, we're bidding on pre-see [ph] assignments in several industries.

Importantly, we continue to benefit from the expansion of our Master Service Agreements with multinational corporations. Through these long-term contracts, we provide an array of environmental and engineering services. And we just mobilized our new long-term assignments to support automotive, technology, pharmaceutical and industrial clients in the United States, Europe and in Asia Pacific.

URS's mining business in Australia also remains strong. In fact, one of our Australian mining clients recently announced a major capacity expansion of an iron ore project that we're supporting down there. At the same time, increasing commodity prices have led to a resurgence in our mining work here in the United States. We're performing EPC and other services at several mines in the southwest, including a new EPC assignment at Freeport-McMoRan's Morenci copper mine, which is in Arizona.

Turning now to the infrastructure sector. 2012 revenues were $1.8 billion. That's a 4% decrease compared to the previous year. Now after declining in the first half of 2012, infrastructure revenues increased modestly in the second half of the year. We expect the gradual recovery in this market to continue throughout 2013. Demand across the infrastructure market is strengthening, and that's reflected in the pace of new opportunities. In particular, federal funding through MAP-21 is enabling states to move forward with large-scale surface transportation projects. And I should note for you that the Federal Highway Trust Fund component of MAP-21, that's a big piece of MAP-21, will not be -- would not be affected by sequestration, if that should take place.

Alternative financing programs, such as bond and tax measures, continue to be a source of considerable opportunity for our infrastructure business. Last November, voters approved more than $27 billion to support a range of state and municipal projects. Furthermore, a number of states, including Pennsylvania and Virginia, are considering sizable new infrastructure programs that will be supported through sales and gas tax increases, through user fees and through other nontraditional funding mechanisms. In addition, the Sandy federal aid package includes $13 billion to repair roads and transit systems damaged by the storm. It also provides block grants of $1.7 billion to the state of New York, $1.8 billion to New York City and $1.8 billion to the state of New Jersey to support other reconstruction programs. New York state has initiated a $2 billion road repair and improvement program using both Sandy funding and the block grants. We already have been awarded approximately $83 million in task orders and expect that additional work will be released later this year. I should remind you that URS has a strong presence in the region, with over 3,000 professionals in the 2 states.

Another positive development is the increased use of design-build and public-private partnership contract vehicles to support critical infrastructure. Our full-service capabilities and a long history with these state agencies that are managing these programs have enabled us to win several new assignments. These include design work for the new Tappan Zee Bridge in New York and the design-build contract for the Atlanta Peachtree Streetcar line. And in the course of this year, we expect that our clients will make decisions on several significant design-build proposals.

Trends in our international infrastructure business also are quite positive. In the United Kingdom, government agencies are outsourcing more of their design and O&M work to reduce costs, creating a number of new opportunities for our business. And during the quarter, a URS-led joint venture won a major contract with Transport for London to provide design, construction and maintenance services for roads in 11 central London boroughs. The 8-year contract, which enables the boroughs to procure highway work from a pre-priced list of services, is the first of its kind in the U.K. and introduces a new way of providing infrastructure services. You'll recall that just 2 years ago, we substantially increased the size of our business in the United Kingdom with a strategic acquisition. The resulting reconfiguration and growth of URS's U.K. business, now as a Tier 1 contractor, is enabling us to win contracts of the type that I just described.

Moving from infrastructure to the federal sector. For 2012, revenues were $4.4 billion, down 4% from the previous year. Our results reflect budgetary uncertainty, which has caused our federal clients to delay procurement decisions and reduce spending on existing contracts. In addition, our year-over-year comparisons reflect that our 2011 revenues included several DOE assignments that were funded by the now depleted ARRA Stimulus Package.

As you well know, competing priorities prevail in Washington, and unless a budget agreement is reached by March 1, there will be automatic across-the-board budget cuts.

Regardless of how the current debate is resolved, either through sequestration or the legislative process, budgets are likely to be reduced. Of course, other budgetary events have a bearing on our federal business, including resolution of the national debt level, which is coming up, and the final determination of the continuing resolutions that, since 2011, have been used to fund important programs in lieu of an actual federal budget. Our federal clients are reevaluating their programs and spending priorities to account for the budget cuts that already have been made, as well as to prepare for potential additional reductions. And like all federal contractors, we'll be affected by the cutbacks.

But that said, we believe that the high-priority programs that we support, including programs that are vital to national security or are mandated under law, are less likely to see deep cuts. While the overall DoD budget could be reduced significantly, the agency's plans indicate that programs closely associated with the military's new defense strategy should be better protected. This includes much of our work to support unmanned aerial vehicles, electronic warfare, fed [ph] reduction and cyber security.

And we'll continue to benefit at URS from strategic investments in our federal business, such as our acquisition of Apptis. And this acquisition significantly expanded our expertise in cyber defense, cloud computing and other critically important federal IT programs. We've already won several sizable contracts and expect further opportunities later this year, following the establishment and the expansion of the DoD's Cyber Command.

As you know, we also provide essential services for the Department of Energy. This includes the cleanup of Cold War-era nuclear sites and other critical operations management services to meet required remediation deadlines. The DOE has indicated that it will try to achieve mandated budget reductions through furloughs and by cutting administrative costs before trimming the vital programs that we support.

The recently passed $50.5 billion Hurricane Sandy federal aid package is funding assessment, mitigation, repair and upgrade services concentrated in the tri-state area. URS has extensive resources in the areas I mentioned, and we're being mobilized on several contracts with FEMA, the Army Corps of Engineers and multiple state agencies.

Although our federal business is feeling the pressure of reduced federal funding, it always has been a profitable part of our company. It requires minimal capital expenditures and, of course, it generates significant cash flow. The services that we provide to the DoD, DOE and other federal agencies are of strategic importance to the country and will continue to be in high demand. And once federal funding levels are resolved, we are confident that our focus on supporting prioritized and mission-critical activities will enable us to emerge in an even stronger competitive position.

With that, Tom Hicks will now discuss our financial results in a bit more detail.

H. Thomas Hicks

Well, thanks, Martin. I'll focus on the full year 2012 results. Our fourth quarter results are available in the press release we issued this afternoon.

Fiscal 2012 revenues were $11 billion, and that's an increase of 15% over fiscal 2011. Net income was $310.6 million, and that's an increase of 14% from our adjusted 2011 net income. And fully diluted earnings per share were $4.17, and that's up 18% over our 2011 EPS. A reconciliation of net income and earnings per share reflecting the 2011 adjustments is provided in the Reconciliation Schedule on our website at urs.com and in our earnings release.

Interest expense for 2012 was $71 million. And our operating cash flow, a strength of the company, was $430 million. And we repaid $250 million of our bank debt during the second half of the year, resulting in a net debt of $1.7 billion at the end of 2012.

Our strong operational and financial performance will enable us to return additional value to our stockholders. First, we're increasing our quarterly cash dividend by 5% to $0.21 per share, beginning with the dividend that will be paid on April 5 to stockholders of record as of March 15. Second, we expect to continue to repurchase shares. We've repurchased 10 million shares over the past 3 years. And under our current stock repurchase program, we're authorized to repurchase up to an additional 5 million shares this year.

It's important to note that in addition to returning value to our stockholders, we expect to generate ample operating cash flow this year to support working capital and to continue to pay down our bank debt.

Our operating income margin continued to be strong in 2012 at 6.3%. And days sales outstanding, or DSOs, were 87 days at the end of the year, and that's compared to 89 days at the end of the third quarter and 79 days at the end of 2011. Our tax rate was 30.8%, and our diluted weighted average shares outstanding were 74.5 million.

CapEx, excluding the equipment we purchased through capital leases, was $125 million. And our 2012 results included a pretax expense of $101 million for amortization of intangible assets, and the amortization of intangible assets is expected to be approximately $110 million for 2013.

As you know, we report separate financial information for our 4 business segments: Infrastructure & Environment, Federal Services, Energy & Construction and Oil & Gas. For 2012, Infrastructure & Environment reported revenues of $3.8 billion and operating income of $221 million. Federal Services reported revenues of $2.7 billion and operating income of $249 million. Energy & Construction reported revenues of $3.1 billion and operating income of $254 million. And Oil & Gas reported revenues of $1.5 billion and operating income of $61 million.

Our press release contained a detailed description of our book of business, including backlog, option years and indefinite delivery contracts or IDCs. And we ended 2012 with a book of business of $24.9 billion compared to $27 billion at the end of 2011. Backlog was $13.3 billion at the end of the year compared with $14.3 billion at the end of 2011. But as a reminder, we discussed last quarter that we reduced federal sector backlog by $560 million during 2012 to reflect the Department of Energy's decision to remove the funding of certain pension obligations from the scope of one of our contracts, and these revenues would not have generated profit or net cash flow for URS.

The value of option years at the end of 2012 was $5 billion. That's up from $4.7 billion at the end of 2011. And for 2012, IDCs were $6.7 billion. That's down from $8.1 billion at the end of 2011.

With that, I'll turn the call back to Martin to discuss our guidance for 2013.

Martin M. Koffel

So turning to guidance. We've built a business focused on 5 key market sectors. Each sector has a distinct business cycle and is shaped by unique trends and market fundamentals, many of which we've discussed, of course, on today's call.

Our objective in building and managing the company is to deliver consistent growth and strong cash flow throughout the business and economic cycles, regardless of trends that may be affecting any one individual sector. While we're, of course, keenly focused on the execution of each of our businesses, that's our job, we manage URS as a single enterprise. Consequently, we think that consolidated results are the best way to judge how the company's performing.

To present our business as a total enterprise, rather than as component parts, we will not be providing specific revenue guidance for each sector. We will continue to provide guidance for annual consolidated revenues and, of course, earnings per share. In addition, each quarter, we'll continue to provide revenue results for each of our 5 market sectors and a general commentary on the performance and the outlook for each.

For 2013, we expect that consolidated revenues will be between $11.8 billion and $12.2 billion, and that diluted earnings per share will be between $4.25 and $4.75.

So to conclude, we performed well in 2012 and expect continued growth in 2013. In the near term, we expect growth to come primarily from our energy business, specifically the oil and gas and power sectors. Each of our other businesses, including the federal sector, remains an essential component of the company and we intend to be a major competitor in these markets for many years to come.

URS now has tremendous scale, skills and resources. We have leading positions in almost every sector of the E&C market, and we can execute the most complex projects virtually anywhere in the world. Our business is generating larger organic growth opportunities than ever before, and executing on these organic growth opportunities is now our primary focus. And we'll use excess cash to further delever our balance sheet and to return value to investors.

And thank you. With that, I will open the call up for your questions. Jessica?

Question-and-Answer Session

Operator

[Operator Instructions] Our first question comes from John Rogers.

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

I understand your decision, or your decision on guidance by sector, but maybe you could help me out a little bit in terms of you're guiding for revenue growth of roughly 9% next year. And it sounds like the strongest growth is in the sectors that, at least in the past year, had lower operating margins than the federal government side. And so I'm just trying to reconcile that. I mean are you looking at margin improvements in some of these other sectors or is it nonoperating items that change? Can you just walk through me your thoughts there a little bit?

H. Thomas Hicks

Well, your point's a good one. And the -- I would quibble with you on one issue. The energy sector includes oil and gas as well as power, and power has been a very fine performing business for us financially. Oil and gas suffers a bit from carrying the amortization of goodwill of the intangibles. So it's a little misleading in that respect. But we do expect -- what we presented to you, John, is our assessment of what the overall business can do. And of course, as you know from following us for many years, the businesses is very lumpy and it also -- each of these businesses has a little different cycle, a little different funding source. So from our perspective, we tried to weigh all those together, looked at the ranges that we could believe were reasonable for each of the business areas, and deliver a number to you that we feel confident we can generate for the year. So I don't know if that answers your question completely, but we continue to have good EBIT margins planned going forward, and of course, we had good margins last year.

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

And I guess, Tom, I mean is there -- your tax rate is back up to sort of historical range, mid-30%, or is it like what we had in 2012?

H. Thomas Hicks

Yes, well, the tax rate varies a lot depending on the source of income. And we have that large amount of noncontrolling interest that flows through our P&L, which has a big swing effect on that. As that changes over time, obviously it has a big impact on the tax rate. Also the profitability of our international operations, given the differential in tax rates, causes a big swing. So our tax rate is going to move around a bit. But my guess is, if you look at it on a basis that excludes the NCI impact, look at our real tax rate, if you will, it's roughly in the range it's been for the last few years.

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

Okay. One other quick thing. Just on the chemical demilitarization incentive payment, is -- that was collected in the first quarter?

H. Thomas Hicks

It was -- it's going to be recognized for the first quarter.

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

Or it will be?

H. Thomas Hicks

Yes, we've accomplished all the milestones and got approval from the client. So we plan to recognize it in Q1. It gets paid over time depending on other milestones related to the project. But we can recognize the earned income from that project in Q1.

Operator

And our next question comes from Alex Rygiel from FBR.

Alexander J. Rygiel - FBR Capital Markets & Co., Research Division

First, real quick. When we think about the quarterly earnings progression throughout the year, do you see any difference this year versus maybe some past years? Or is the seasonality trends going to be similar?

H. Thomas Hicks

You mean going into '13?

Alexander J. Rygiel - FBR Capital Markets & Co., Research Division

Yes.

H. Thomas Hicks

That's a good point. We were just talking about that the last couple of days. We traditionally have seen a lot of activity in late summer, or summer and late -- and early fall from the construction and engineering work we've done historically. And that's usually been our strongest periods of the year. It turns out that Flint Energy Services has exactly the opposite cycle. They're able to work and generate more revenue in the fourth and first quarters as opposed to our second and third quarter. So we think it might smooth out a bit. But I would caution you, Alex, that as you know, as I said earlier, there's a lumpiness to this business and things happen, like this incentive fee that we discussed in our pre-announcement. And that'll always be there in this business when you have large construction, large operations underway.

Martin M. Koffel

And, Alex, this is Martin. As we get the benefit of scale and as we work our divisions to present a single company, we're winning larger and larger projects. And those projects have an impact relative to the scale. So lumpiness is part of our future. It's a good thing because we're getting the projects and we're getting the revenue.

Alexander J. Rygiel - FBR Capital Markets & Co., Research Division

And maybe I'm thinking about this question a little bit too simplistically. But let's rewind 2 weeks ago, and if we were having this call 2 weeks ago, I suspect your guidance could have been more like $4.05 to $4.55. And in that scenario, or any scenario, is there any specific business line that, in your eyes, is substantially weaker than others?

Martin M. Koffel

Well, I actually don't think about relative weakness. I think about relative strength. I'm a manager, and obviously, that's my job. Clearly, we're seeing growth in the whole energy sector, as North America moves towards energy independence and then we start getting the benefits of the strategic position we took in acquiring Flint. And we see -- on the fourth quarter, we saw energy in total, oil and gas and power and distribution -- power generation accounting for 42% of revenue. I mean, in relative terms, that's where I think we'd see the growth rates. But all our businesses are profitable and strong cash generators. I'm -- I've always been, as you know, bullish on Infrastructure. I mean the growth rates are low-single-digit, but I think the states are taking quite independent views of things and are much less dependent on federal money than before. So I'm quietly optimistic about Infrastructure. It has to get fixed in the long run. So the -- I wouldn't say that Federal is weak. I never think of Federal as weak, because it's profitable and generates so much cash. It just has a lot of uncertainty. The work is there to do. National defense, security exists, but we have budget uncertainty coming out of the administrative and political process. When that uncertainty is gone, and I don't know when that will be, then I -- I think we'll see more predictable behavior for the Federal business.

Operator

Our next question comes from Jamie Cook of Crédit Suisse.

Jamie L. Cook - Crédit Suisse AG, Research Division

A couple of questions. One, just because, Tom, I don't -- the Q, what -- I don't think the Q is out yet, or I didn't see it. Was there anything unusual in the quarter? And then 2 questions as it relates to guidance for this year. Last year, you guys had a -- earnings were helped by incentive fees at the chemical demilitarization facilities, which is a positive thing, right? I mean should we look at 2012 as an unusually high year for that, understanding you made an adjustment for Q4 into Q1? But I'm just trying to get a sense of the puts and takes you're guiding to. Then my last question, is there any way you can help us with -- because the other benefit you get in 2013 is you're going to have 4 extra months of -- or 4.5 or whatever extra months of Flint in your numbers. Is there any way you can help us with how much you think that's helping your 2013? Or can I just look at historical trends for Flint and assume that's the amount that's historical seasonality and that's the amount that's helping your numbers for 2013?

H. Thomas Hicks

Okay, Jamie. You managed to ask about 10 questions, so I'll do my best here. First one was anything unusual in Q4? No. We have -- every quarter, we have lots of movement, moving parts, things moving around. But there was nothing -- no one material item that I would point out. We had our normal -- a normal kind of quarter as far as we were concerned. As far as the -- I answered the last question first. As far as Flint going forward, yes, we will get the benefit of a full year of Flint, and they're performing as we planned and expected. And I think their performance this year would be a good indication of how we expect them to perform next year. I'd point out and repeat what I said earlier, that they're carrying a big heavy load early on in this integration of amortization. It's more front-end loaded than typical. So we'll see a lot of good cash flow from there. But from a P&L standpoint, you'll see that they're not performing up to what they used to perform as an independent company, around 6% operating income, and that's because of the amortization. On the incentive fees, 2012 for chem demil was the peak, and I think we've been telling you that for quite some time. We expect that program to continue for the next 3 or 4 years, and we expect to receive significant fees in 2013 as well. Not as many as we got or as high as the numbers we got in 2012, but we still expect to see good fees coming out of that program.

Operator

And our next question comes from Will Gabrielski at Lazard.

Will Gabrielski - Lazard Capital Markets LLC, Research Division

Can you walk through the moving parts around the equity in unconsolidated affiliates and then the minority interest back out in Q4, and then also the tax rate in Q4, if that was related?

H. Thomas Hicks

Are you talking about the noncontrolling interest or...

Will Gabrielski - Lazard Capital Markets LLC, Research Division

Yes.

H. Thomas Hicks

Yes. Well, the noncontrolling interest was, I think for the full year, $120 million or so, is that right? $115 million. And as you know, you've followed us for a long time, that the way those work is there's no -- there's typically no tax on that. So when you're looking at the P&L, you've got to pull that out and apply the tax to the pre-NCI number to get the real tax rate. And that's the only thing that I would comment on as far as the fourth quarter goes. We didn't have anything -- to my knowledge, I'm looking at Reed right now, I don't think we had anything unusual in the quarter related to those, Will. I will tell you, that's going to move around going forward, and it's one that you have to -- I mean, we have to leave ourselves a lot of latitude as we plan because that has such an impact on us as a company. We're -- as you know, in the industry, we're one of the larger participants in that approach to the market, as a percentage of our revenue for sure and operating income. I don't know if I answered your question, but I'll take another swing at it if you got it more clear -- I mean, more [indiscernible] specific issue.

Will Gabrielski - Lazard Capital Markets LLC, Research Division

No, I'll just wait for the K. Sometimes, that's helpful. The margin guidance for 2013, if you look at the company on a blended basis, can you just give us your view of how the margin is trending versus 2012? And kind of -- obviously, there were a lot of puts and takes in 2012 and there's some in 2013 as well. But maybe just your sort of sense of what direction margins are trending excluding all that.

H. Thomas Hicks

We've run a little bit over 6% operating margins the last couple of years, and that -- we've been able to maintain those during some pretty tough market conditions. And I think we're all very confident we can keep them at that level. I don't -- we don't see any long-term trend there at the moment. The one issue will be, as I mentioned, I keep mentioning oil and gas is carrying that big amortization, which will have an impact on the whole company. But as that rolls off, we'll see a little bit of upward movement, if everything else stays the same over time.

Will Gabrielski - Lazard Capital Markets LLC, Research Division

Okay. And then last one, if you allow me, on cash flow in '13 in terms of the priorities for cash. You guys gave some good color on what your priorities are now. How much of what you expect to be cash from ops will go towards -- or free cash flow, will go towards debt repayments next year, as it stands right now in your forecast?

H. Thomas Hicks

Right. Well, we have been generating somewhere between $400 million and $500 million of, what I would call, discretionary cash flow that we could use for any number of things, including supporting working capital growth, doing acquisitions to the extent we are -- we've done them, pay down the debt and repurchased shares and now, of course, pay dividends. So priority-wise, we'll pay the dividends, obviously. We'll support working capital. And then we will balance the rest of our cash flow between repurchasing shares and paying down debt. And we have some ranges of debt paydown that we've discussed with our credit providers and with the rating agencies, which we intend to stay within. And then to the extent we're successful in generating cash beyond our nominal amounts, the rest will go towards repurchasing shares. We don't plan to do any major acquisitions this year.

Operator

And our next question comes from Michael Dudas with Sterne Agee.

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

With regard to energy, 2 things. First, I wasn't so surprised, Martin, about your comments about energy and the outlook. Maybe like, give a little more detail, possibly from Bill, on the growth within the traditional Canadian business and what the opportunities are of the combined side in the U.S. There's some pretty good numbers that you showed in the fourth quarter. And I'll wait for my follow-up.

Martin M. Koffel

Well, we only talk about that subject every day. So we're delighted to talk about it. Bill's right next to me, so I'll put Bill on and let him speak to it.

William J. Lingard

Yes, Michael, there's a few reasons why we are expecting growth in the Canadian side. And it's got a lot to do with synergies with URS. Already on current projects, we've deployed some folks from some of the traditional construction areas of URS, brought some Americans into Canada, and we're able to take on more projects than we did in the past. And in terms of a pipeline of pursuit, we had about $2.5 billion of projects in our pipeline prior to joining URS. And right now, I've got about $4.5 billion. And why? It's because I have that reachback in the synergy. Also in the Lower 48, both on pipeline engineering construction projects and facility engineering construction projects, Flint is working with the traditional URS groups that focused on some oil and gas. And we're already out working on projects together for a couple of major clients in the U.S., and we're also pursuing quite a few opportunities there. So I'm seeing quite a bit of organic growth coming from the synergies.

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

And the competition for the projects, now that you have a new combined strength of URS in certain areas, better than others, giving you the opportunity? As I'm sure you're quite aware, you read the same trade press articles, there's the expectations for construction growth over the next couple of years in the United States. How well do you think you're set up to take advantage of that from a manpower or engineering view [ph] ?

William J. Lingard

We're set up very well. There are some sectors -- so if you just look at the size of the U.S. market, it's somewhere around $150 billion a year gets spent on new projects in oil and gas every year. And we participate a lot in the upstream, midstream projects, not so much in any of the refining assets of our clients. So that is an opportunity for us to work and organically grow those capabilities within the company. We certainly have the construction know-how, the engineering know-how to design and build those projects, but we haven't done many. So we plan to organically build out that side of the business. So there's -- and as production goes up, both from oil sands and from unconventional shale oil, we expect that those refining customers will be doing debottlenecking, expansion, upgrades to their facilities and create quite a few opportunities for us. And we think we're well positioned there. In Canada, for the $22 billion that will get spent in oil sands projects this year, we're very well positioned. We have a great market share, great relationship with the clients. And all of those clients have now engaged with the engineering pieces. And we're even doing some engineering in Denver today for some of the clients in oil sands for future projects. So the synergies have already started.

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

And, Martin, my final question is as you look at the power segment, which just seems to be a little bit -- in my view, a little bit better performer than I would have thought. On a scale of 1 to 10, relative to certainty with your utility and power customers, can you compare maybe what you see in 2013, '14 versus what we witnessed in '11 and '12?

Martin M. Koffel

Well, there's a sentiment of assuredness about the power sector because at this point, so much of the work is mandated by either regulation or state consent decrees, and these emission standards have to be met. And a considerable part of our backlog in the immediate pipeline is work that is not discretionary. So I have a good sense of certainty about the growth in power in the year ahead. And we're also increasing our position in transmission, particularly with alternative energy, solar and wind coming on and it is a fact that everyone understands that the location of these alternative sources is a long way from the load or the market. And we don't have the transmission lines or the switching capacity to meet that. So there are a lot of forces behind this, many of which are regulatory, that I think good reason to be optimistic.

Operator

And our next question comes from Tahira Afzal from KeyBanc.

Tahira Afzal - KeyBanc Capital Markets Inc., Research Division

I guess my first question is around free cash flow. If I back into -- on a rough basis, maybe you do $400 million or so this year. Can you talk about the moving parts as you look forward? Directionally, how we should be thinking about free cash flow, x any acquisitions you might consider? And the second piece of that particular question is really in regards to your cash EPS. Tom, you talked a bit about the amortization backlog, amortization headwinds that you do have from Flint. Can you talk about progressively how that improves and really what your underlying cash EPS might be?

H. Thomas Hicks

Well, I -- we gave you some information, Tahira, about the amortization, that's included in our P&L, I think. And we expect next year that number to be over $100 million. And that's the -- typically, the major component of cash EPS that people are trying to come up with a non-GAAP indication of cash flow by share. To make a more macro statement about our cash flow, we've had a record, and you know from following the company for a while, of generating significant cash flow in the last few years, $500 million, $450 million, $420 million, I think sequentially over the last 3 years or so. And we actually believe that we can -- that there's some dials we can turn next year, including DSOs. We think we can get -- we can do a better job on DSOs next year. Although we always do a good job, we're still in the process of assimilating the Flint transaction from that perspective. And they've actually improved their DSOs over last few months, and we think the overall company can do better on working capital as well. So I don't see anything that would drive our free cash flow, our cash flow available for various discretionary uses, any negative impact on that over the next -- over the coming year. Our margins should be sustainable and the amount of cash we generate, as long as we manage our working capital, should be more than sufficient to do all the things I mentioned earlier. So we feel pretty good about, as always, about our cash flow discipline.

Martin M. Koffel

Tahira, you mentioned acquisitions. And I'm the first to admit that, for many years, that was the magic word at URS. But if you think back to the size we were when you first started to follow us, that was the imperative. It was the way forward. We didn't have the size, the spread of services, the geographic coverage to be a strong competitor. And our goal was to build a large platform, an international platform, as well as North America, to offer a full range of services, from the inception of the project right through to construction, even operation and demolition. We've built that framework. I mean we've got approaching 60,000 people, and we're talking about a revenue bracket, next year, midpoint of around $12 billion. And we've got the platform. And the really exciting thing is it's generating very large project opportunities for us, that we just couldn't have dreamt of before. And they're genuine organic growth opportunities. And the best use of any discretionary cash is build the business around those organic opportunities and keep going. So acquisitions, we're aware of it. We like to keep track of the industry. The industry is ever-changing, but that's not what's on our mind at this point. On our mind is building off organic growth and adding value for stockholders through the dividend program and the share buyback that Tom discussed earlier.

Tahira Afzal - KeyBanc Capital Markets Inc., Research Division

Got it. Okay, Martin. And I guess I had a follow-up on your commentary on acquisitions. Clearly, what's happening in North America is pretty interesting. And I remember you've led with that premise when you talked about Flint early on in 2012, when perhaps a lot of us hadn't really talked about it. But over last 6 months, the outlook for oil sands has probably changed slightly to the negative because of the spreads to [ph] WTI, while the shale side seems to be getting stronger in North America. So could you talk a bit, as William [ph] explained -- is that -- do you feel that being the right acquisition for you given there's been a slight change? Or is this a slight change that you thought could potentially happen and you felt Flint really has the flexibility to really maneuver and really grow on the shale side as well on the petrochem side?

Martin M. Koffel

Well, you've actually touched on the keyword, flexibility. Remember that the senior Flint management is as experienced in the United States as it is in Canada. Bill spent many years in the United States and his key people did. So they're quite at home in the important oil fields, gas fields in the U.S., as they are in Canada. I think Flint was the perfect acquisition for us. It had an absolute broad suite of skills, technical offerings that we needed, and had the franchise with the clients. Bill described how his ability to reach back into our construction and construction management capabilities and engineering has really empowered Flint with the clients they already had. So I think Flint was absolutely ideal for us. Do we wish Flint were even bigger in the U.S. than it is? Yes, of course. But the free cash flow and balance sheet is really sacrosanct for building stockholder value. And we're not going to rush out and try and augment too -- Flint too quickly.

Operator

And our next question comes from Andrew Wittman with Robert W. Baird.

Andrew J. Wittmann - Robert W. Baird & Co. Incorporated, Research Division

I just had 2 questions. One, to start out, first and just kind of get into the federal business. And as the federal government employees are drawing up contingency plans here for what may or may not happen this or next week, what can URS do to be proactive about this? Do you have the same furloughing ability that the federal government does? How quickly can you guys react to the -- to your cost structure?

Martin M. Koffel

Well, obviously, we're doing a lot of planning and we have a very flexible business model. But Randy Wotring, who's President of our Federal Services division, is right here.

Randall A. Wotring

Andrew, to answer your question immediately, yes, we have the same flexibility, and in fact, more flexibility about ramping up our workforce than the government does. So we still feel good about our position in the marketplace. It's going to be challenging. The uncertainty is affecting our customers. And frankly, it's affecting our employees too, as everybody wonders what's going to happen. So we're putting communications out. We're staying very close to our customer. Over the last number of years, URS has built a very large federal footprint. So we've diversified in terms of the services we provide and the agencies we provide those services to. We work for over 25 agencies. And more recently, over the last couple of years, we further diversified in those areas that are critical to the customer and are more enduring programs. So from that standpoint, we're as well positioned as we can. We're staying as close to our customers as we can stay and communicating with our employees. We expect to have to ramp up and ramp down. It will be a challenging year. But as Martin said, we expect to emerge from this much stronger than some of our competitors who do not have the footprint that URS enjoys today.

Andrew J. Wittmann - Robert W. Baird & Co. Incorporated, Research Division

Just a quick follow-up on that before I go to my second one. Is it possible that you guys will continue to do work and kind of book revenue, income on projects that maybe aren't funded and just kind of maybe build up your DSOs? In other words, the government will use your credit and leverage your balance sheet for a little bit before they figure out what they're going to do? Is it possible that, that could be an outcome here?

Randall A. Wotring

Well, I mean if you're asking if URS could go ahead and work on risk without contract coverage, the answer is yes, we could make a decision to do that. But in some cases, the customer will not allow that to happen. And in fact, from a URS standpoint, we will not -- that's not a good business model for us to start down. Over the years, it's not unusual for us to go on risk for a very short period of time with customers we've worked with for a number of years. But in this market with the uncertainty around budgets that exist, that's probably not a business model that any federal contract will continue to use.

H. Thomas Hicks

Yes, let me make another -- this is Tom Hicks. Let me make another comment. There are certain -- the government procures items under the federal acquisition regulations, and there are certain parts of that, that indicate the government's responsibility to pay and to pay on a timely basis. And we certainly would expect the government to pay us if we're doing work for them under a contract, if you're worried about them extending out on DSOs. Would there be -- could there be some slowdown? There could be some, but this is not something where they would ask us to wait 3 months or 6 months to get paid. That would not happen, in my experience.

Andrew J. Wittmann - Robert W. Baird & Co. Incorporated, Research Division

Great, that's helpful. And then just kind of one final question really on Sellafield and Hanford. I believe both of those contracts come up for renewal this year. I -- first, I wanted to confirm that. And then just specific to Sellafield, can you just give us your thoughts on your positioning there? Obviously, a very, very complicated project. But just wanted some color on that, just recognizing that you guys have dropped out of the bidding on another NDA project over at Magnox. Some color on that would be helpful.

Martin M. Koffel

Well, Sellafield is indeed a complex project. We felt we were uniquely equipped in the world, because of our background with DOE and other work in the United States, to do that. And we've done very well. It was a pretty bad legacy there, the legacy ponds and so on, which hadn't been categorized, and the general conditions were not good. We've make great operational progress. Of course, it's a very visible project, and I'm sure you've seen some of the press in the United Kingdom on it. We work for the -- an agency called the NDA, the Nuclear Decommissioning Authority. It has 16 sites in the United Kingdom, and Sellafield is one of them. Sellafield is perhaps -- it has the specter of nuclear safety, and not that there's ever been a problem, but it has that kind of thing around it. And we've -- as I said, we've made great progress. The contract comes up for extension a year from now, and there are some discussions going on between us and the NDA about that. I'm sure you understand that there's a negotiation going on. I wouldn't want to comment beyond that. As far as Magnox is concerned, Sellafield is so large and so commanding, and we're right at the sweet spot where we're starting to show some real progress. And we made a decision to keep our good and experienced people on Sellafield, really deliver for the NDA and not divert them to the pursuit of Magnox. So it was a business decision. We're in the service business, and sometimes you just have to think about the client and the long-term future or franchise with that client, and that's what we did in the case of Sellafield. Just -- before we move on, you asked a question, but you mentioned Hanford, but I didn't quite catch the question on Hanford. Keep moving.

Operator

Our next question comes from Steven Fisher with UBS.

Steven Fisher - UBS Investment Bank, Research Division

Just can you talk about how you have factored in the potential sequestration into the guidance? Is that the key difference between sort of the low end and the high end at this point?

H. Thomas Hicks

It's one of the major factors. It's -- it clearly is -- if you do some back of the envelope kind of math for us, if you looked at our total federal -- the federal spend, and you apply the 10% sequestration to it and then apply a 6% operating margin to that, you can get an idea what the pretax number might look like and apply a reasonable tax rate to it. You can get what the range of impact might be. It won't happen instantly. It will happen -- no matter what they say, it will happen over a period of a quarter or 2. So it won't all hit in Day 1, number one. Number two, it will affect different -- I mean, it is across the board. But depending on where our concentration of work is, some of our lower margin federal business may get hit more proportionately than the higher margin. So it's hard to predict exactly what the total impact might be. But to answer your question very specifically, it's included in the range we gave you. It's one of the reasons we have a relatively wide range this year.

Steven Fisher - UBS Investment Bank, Research Division

Okay, that's helpful. And then in terms of the construction business, can you just maybe rank how you see the biggest sources of new projects over the next year or so?

Martin M. Koffel

We'll have Bob Zaist speak to that. Bob's the President of what we call our E&C, Energy & Construction division.

Robert W. Zaist

Steven, certainly, we expect to see a continued variety of large power projects, largely driven by the AQCS business, but also a number of T&D type projects in the power sector. On the industrial side, we are seeing good signs of projects, particularly in the automotive and large equipment manufacturing facility expansion, the petrochemical facility expansion, particularly driven by low-price gas and gas derivative feedstocks. Our mining-related projects continue to provide a good complement in our pipeline, particularly several large iron ore programs in Australia, coupled with the projects that Martin mentioned in Southwest United States. And on the infrastructure side, we have a good pipeline of programs that are in various stages of development. Certainly in pursuit of light rail programs in Southern California, in Canada, in the Southeast. And we have several highway and bridge programs that would round out the complement of infrastructure programs, coupling that with the programs that Bill referred to earlier, where we are taking advantage of a cross-section of talent in the company pipelines, pipeline-related programs, compressor stations and the like.

Operator

And our next question comes from John Ellison with BB&T Capital Management.

John D. Ellison - BB&T Capital Markets, Research Division

I remember hearing that your Flint business, after you acquired them, hired roughly 2,000 people. And I wanted to know if you're still seeing that kind of growth in that market, and if that warrants any further notable increases in your workforce? And in relation to that, we've been recently hearing a lot about constraints in the labor market, especially in North America, and I wanted to know what kind of impact that might be having on URS.

Martin M. Koffel

All right. I'll let Bill speak to it. But let me mention something interesting. When we last spoke, we had added 2,000 people to the 10,000 Flint people who joined URS at the time of the acquisition. It's now up to 3,000. So Flint has 13,000, 3,000 have joined since last May. Bill?

William J. Lingard

Yes, when we look at the current projects we're executing on for clients and the work we have in backlog, going forward this year in '13, we're up to about 13,000 employees now. We expect to add about another 2,000. We think that we will peak at somewhere around 15,000 employees this year in oil and gas, and a lot of that's because of the big projects. In terms of supply of skilled people, it is a challenge, particularly in the remote areas like Fort McMurray area. Because of the reachback, we're able to get good project controls, construction management-type folks out of various divisions. We're pulling them from Federal Services if we can find people, obviously, E&C and I&E. It's a good supply of the skills that can be crossed over into Oil & Gas. On the craft labor side, we hire from the U.S., from every province in Canada, and we still have another program we call TFW, temporary foreign workers. And at any given time, we might have 400 or 500 temporary foreign workers in Canada. And we'll hire them from the Philippines, India, Europe. Poland has been a good source lately. So anywhere we can find the right skills to meet the needs of our clients on our projects, and they come in on temporary work visas. Some of them end up immigrating, and -- but we do have a very good recruitment machine in terms of being able to ramp up, and it is one of our core strengths. It's one of the things that clients really like about us.

Martin M. Koffel

Just to comment to Tahira. Tahira, you asked how we felt about Flint. And I told you we're very happy. But there's some real evidence of why we're happy.

Steven Fisher - UBS Investment Bank, Research Division

And one more to follow up, also in regards to oil and gas, particularly in the oil sands work that you're doing. I remember hearing that you've been operating at or near capacity recently. I wanted to know if you'd seen some capacity open up. And relating to this, I wanted to know if the bidding environment in oil and gas has started to show some increases in project margins and increased pricing due to capacity constraints?

William J. Lingard

So in terms of operating near capacity, we have multiple types of services we do for our clients. And with some dip in the gas drilling, certainly the upstream services, the things like fluid services and rig-moving services, they would be operating slightly below capacity. So we have some capacity left. And should some gas drilling come back, obviously you'd see us grow our revenues and profits, and that's the early cycle piece of our business. In the construction side and a lot of the big projects, we had been definitely operating at or near capacity, and we continue to be pretty close to our capacity. Although as I said, the reachback is allowing us, and the more internal folks that move across to oil and gas, the more pipelines of folks are coming across, we're certainly seeing the ability to grow much faster than we could in the past. So -- but we also look at our competitors, and in terms of fabrication capacity for mechanical, electrical and instrumentation, a lot of our competitors are near capacity as well. The margins have definitely been improving. And when we look at all of the bids we've put in, in 2012, we were bidding -- for example, we had a record year for pipeline construction. And we were putting in bids in 2012 that were -- we thought they were high because we didn't have much capacity left. And we thought well, we'll bid this one high and we won't get it. And we were still winning those at very high margins. So we've got a lot of quality backlog right now that we'll burn off in 2013. A lot of our projects that we landed last year at high margins, and we're still bidding at pretty high margins. So we expect to see some improvements in our margins as we move forward.

Operator

And our next question comes from John Rogers of D.A. Davidson.

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

I just wanted to follow up. In the power sector, was there anything unusual that boosted the margins in the quarter?

H. Thomas Hicks

Yes. I'll let Bob Zaist respond to you on that. It's -- as you know, it's a big incentive fee and target price environment. But I think Bob will give you details.

Robert W. Zaist

Yes, John. As it relates to the fourth quarter, we had 2 major steam generator programs that were active in the fourth quarter. We had a -- one for Entergy down in the New Orleans area and one for TVA. Both those programs went well and helped us in the fourth quarter. And we also, as Tom noted, had a program that was wrapping up, where we squared up some of the incentives for delivering that program successfully to the customer and success fees that went along with it.

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

And do you have steam generator replacements scheduled for 2013?

Robert W. Zaist

We do not. We have some residual closeout of the 2 projects that I mentioned, that carry over into this year of '13, but no additional programs that are currently scheduled.

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

Okay. And I guess for Bill Lingard, what's your split between the U.S. and Canada right now?

Martin M. Koffel

On revenue?

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

Yes.

William J. Lingard

Yes, that's -- I mean, that's a great question. Right now, we're doing about 80% of our business in Canada, about $2 billion out of about $2.5 billion. So about $500 million out of the U.S. This is the old Flint, those portions of Oil & Gas. Now, a lot of the work that I&E and E&C are doing is in the U.S. So obviously when you look at total oil and gas revenues, you would have to look at that. But we believe that even though we can grow our business in Canada, there's a lot bigger opportunity to grow the business in the U.S. and I certainly have a personal desire to grow our U.S. business bigger than our Canadian business. If we're going to get as big as we think we can in oil and gas, a lot of that growth is going to be in the U.S.

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

And are you doing pipeline work now in the U.S.?

William J. Lingard

Absolutely, yes. We've been very busy on pipeline work in the U.S., quite a bit up in the Marcellus, quite a bit up in the Bakken, a lot in the Eagle Ford. So in the areas where the clients need extra capacity, we've been very successful at winning projects.

Martin M. Koffel

Jessica, I think, out of respect to everyone's time, I think we've been very generous, I think we can take one more question and then I think we should let people go home.

Operator

Our last question comes from Andy Kaplowitz with Barclays.

Andy Kaplowitz - Barclays Capital, Research Division

Martin, if I can ask you about the Infrastructure business, the revenue was a little light versus your forecast for the year in 4Q. Is that just continued sort of slow backlog burn? And you can't help but notice that the state and local governments are starting to get healthier here, so maybe that should be sort of the end of that slow burn, and things should get better here. And then maybe if you could talk about the international Infrastructure business that you have, has that contributed to the weakness and if that should also get better over time.

Martin M. Koffel

I'll make some introductory comments, and then Gary Jandegian, who's President of the division that does most of that work, is here. First of all, you're right in saying that some of the states are starting to get it together. The goings-on in Washington, I think, have pushed the states to a much more independent and self-sufficient look at things. And we're just seeing a plethora of bond initiatives and sales tax initiatives and so on in the states, so they can get on with their programs. Two states, in fact, have announced they're going to start their own trust funds for infrastructure work. And overall tax revenues are up. Tax revenues, total receipts, California, up 3.8%; Arizona, 2.8%; New York, over 11%; Texas, 11%. And so the issue isn't a lack of tax revenue, it's what the money is spent on. And the entitlements, obviously, they're taking a major share of the available funds. And then the bond funding has been very successful. In the 20 states that dominate our business, there were $32 billion of ballot money on the November 2012 ballot, and $27 billion, 83% of it actually passed. And muni bond issuances, across a whole range of purposes, transportation, electric power, environmental, and so on, was back up -- or it wasn't quite at $400 billion. It was something like $375 billion, up from $287 billion in 2011. So we've seen the muni bond issuances by the top 10 states back to the traditional levels. That's the general picture, and I'll have Gary answer directly your questions.

Gary V. Jandegian

Good afternoon, Andy. You're right in that, the last couple of years, infrastructure spending has been mixed. But we are seeing a lot of improvement. Part of that is driven by the MAP-21 funding finally coming out, but also the TIFIA funding of $17 billion is now available to states. On top of that, we've got the Hurricanes Sandy funding, another $50 billion. And we've already been awarded, as we've mentioned in our prepared remarks, over $80 million of Hurricane Sandy work related to infrastructure. We also have a growing number of design builds and triple Ps [ph] that have been coming out, additional trust fund announcements by the city of Chicago and others, and more and more states moving toward more dedicated gasoline taxes to fund infrastructure. So overall, we expect to see revenue growth. Now, the revenue flatness that you've seen is really a result, in 2011, of us completing a very large levy project. And in 2012, we didn't replace that work. We're now starting to see more and more opportunities replacing that work. So the market looks good overall for us.

Martin M. Koffel

Bob Zaist mentioned the types of large construction projects, which are infrastructure related, that we are looking at. And the other question you asked was about international. We're building our Infrastructure business in a number of countries, and we've been quite successful in the United Kingdom. We bought Scott Wilson a bit over 2 years ago, and it's very strong in highways, bridges, rail and high-speed rail. And the stimulus activity in the U.K. is directly in transportation. And that acquisition absolutely hit the sweet spot of what is going on in infrastructure building in the U.K. And we're building a large business there that's profitable and very productive, and we're actually a net hirer of people to work on infrastructure projects in the United Kingdom. So again, we should stop there, I think.

Andy Kaplowitz - Barclays Capital, Research Division

Yes, that's fine. I mean I know we're running over. I've just one very quick question, Martin, on sort of pricing in federal. I mean is it fair to say that there's pressure there as well given the market, or is pricing kind of hanging in there?

Martin M. Koffel

Here's Randy again.

Randall A. Wotring

No, we are seeing significant pricing pressure. But we've also seen the government change it's procurement methods to go towards more of a fixed price. And in the federal world and services business, that means more fixed-price level of our per [ph] unit rate. And in fact, we've been able to perform better than at bid prices, so we haven't seen any drop-off in our margins because of that pricing pressure, but it is real.

Martin M. Koffel

Let me assure everyone, management was in no hurry get off the call. We love your questions. It gives us a chance to talk about the business. I'm sure you can sense we love what we've built. I mean, we've just got the range of services, we now have the international coverage that we'd long coveted. We got this wonderful position in oil and gas and energy. So I think we've just got a very exciting period ahead, and it's just wonderful for this team to have built such a terrific company. So thanks for joining us, and we'll report to you soon. Goodbye.

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