KBR's CEO Discusses Q1 2012 Results - Earnings Call Transcript

| About: KBR, Inc. (KBR)

KBR (NYSE:KBR)

Q1 2012 Earnings Call

April 26, 2012 9:00 am ET

Executives

Zachary A. Nagle - Vice President of Investor Relations and Communications

William P. Utt - Chairman, Chief Executive Officer and President

Susan K. Carter - Chief Financial Officer and Executive Vice President

Analysts

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

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

Steven Fisher - UBS Investment Bank, Research Division

Jamie L. Cook - Crédit Suisse AG, Research Division

Andy Kaplowitz - Barclays Capital, Research Division

Joseph Ritchie - Goldman Sachs Group Inc., Research Division

Chase Jacobson - William Blair & Company L.L.C., Research Division

George O'Leary - Tudor, Pickering, Holt & Co. Securities, Inc., Research Division

Martin W. Malloy - Johnson Rice & Company, L.L.C., Research Division

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

Matthew P. Tucker - KeyBanc Capital Markets Inc., Research Division

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

Operator

Good day, and welcome to KBR's First Quarter 2012 Earnings Conference Call hosted by KBR. This call is being recorded. [Operator Instructions] For opening remarks and introductions, I would like to turn the conference over to Mr. Zack Nagle, Vice President of Investor Relations and Communications.

Zachary A. Nagle

Good morning, and thank you for joining us for KBR's First Quarter 2012 Conference Call. Today's call is also being webcast and a replay will be available on KBR's website for 7 days at kbr.com. For any of you who missed our press release, you can also find it at kbr.com. Joining me today are: Bill Utt, Chairman, President and Chief Executive Officer; and Sue Carter, Executive Vice President and Chief Financial Officer. During today's call, Bill will provide an overview of KBR's first quarter operating results, highlighting a number of key areas. He will then take you through an update on our major prospects and provide his insight on KBR's market outlook. Sue will then provide an overview of the key financial takeaways for the quarter. Lastly, before turning the call to Q&A, Bill will provide closing comments. After our prepared remarks, we'll open the floor for questions.

This call will include forward-looking statements that involve risks and uncertainties that may cause KBR's results to differ materially from management's current expectations. We encourage you to review our Safe Harbor statement containing the earnings release published last night, as well as KBR's most recent SEC filings for more complete description.

Now I'll turn the call over to Bill. Bill?

William P. Utt

Thanks, Zach, and good morning, everyone. During today's call, I'd like to cover 3 main areas. First, I'll walk through the key takeaways relative to our first quarter performance. Second, I'll provide you with an update of our key prospect list so you can track some of the major opportunities we're pursuing. And third, I'll discuss in detail, some of the significant market trends and dynamics we're seeing at the present time.

KBR delivered $0.61 in the quarter. This overall operating performance was consistent with our expectations and our guidance, and we continue to believe we'll deliver progressively stronger performance in Q2 through Q4. There were a number of areas of strength in the quarter. Excluding all GAAP, revenues was up 5% year-over-year reflecting the underlying growth in our other businesses. At the consolidated level, job income margins and business group margins were both improved with particular strength in Gas Monetization and International Government, Defense and Support Services. Our Technology business continued to deliver strong performance with double-digit job income growth in the quarter.

We are very pleased with the ramp up of our Saudi JV KBR-AMCDE. KBR-AMCDE provides in-kingdom technical engineering and production capabilities through local utilization of KBR's world-class engineering tools and work processes. While not a large contributor to the first quarter, KBR-AMCDE booked 400,000 man-hours in Q1 and is on a flight path ahead of our initial expectations.

KBR's backlog also increased significantly with revenue backlog and job income backlog up 44% and 40% respectively, as the JKC joint venture Ichthys LNG project contract was booked in the backlog. For the quarter, KBR booked $5.6 billion for the Ichthys LNG project, about $100 million less than we indicated on our fourth quarter call, largely due to currency fluctuations.

The first quarter of 2012 saw 2 significant points of inflection in KBR's revenue backlog. First, Q1 was the first increase in KBR's revenue backlog since the fourth quarter of 2009. Second, this was KBR's first increase in revenue backlog to be worked off over the next 12 months since last year's first quarter. And we ended the quarter with a strong balance sheet with $837 million in cash and equivalents.

As you've noted from our press release, our Minerals business unit took first quarter charges that were primarily the result of further increases in cost estimates on one of the legacy Roberts & Schaefer projects. While we're clearly disappointed with the additional charges, we did enter performance testing for this project in Q1, and are therefore confident we have put this particular issue behind us. With respect to the other 2 minerals projects we discussed on the fourth quarter call, they are largely progressing as expected with no additional charges that were taken on either project in the first quarter. One of these projects is to be completed during the third quarter. We continue to believe we have strong risk management processes in place for this business and as a result, the ongoing and future projects will continue to receive the double regard in discipline necessary to drive strong operating performance.

One other notable area I wanted to touch on for the quarter is our effective tax rate, which came in highly favorable at about 9% versus our operating tax rate of 27%. Sue will address the tax rate further in her prepared remarks.

Now I'd like to provide an update on the major prospects we're pursuing. For the Kitimat LNG project, the open book EPC tendering process is continuing along with pre-FID site construction activities. We anticipate the open book tendering to be completed during the second quarter of 2012 with an FID following sometime in the second half of 2012. For the Browse LNG project, we are continuing with the EPC bidding process and plan to have our bids turned over to the customer in mid-2012. For the Gorgon LNG fourth train project, pre-FEED activities continue, and we expect a transition into FEED by the end of 2012. For the Anadarko LNG project in Mozambique, the FEED tendering process is underway. We anticipate FEED awards to be announced by mid-2012.

For the Pluto LNG project, the first train has safely reached startup and is progressing towards its first LNG cargo. KBR continues to perform various additional studies on the proposed expansion project.

Lastly, for the Lobito Refinery project, we are winding down our early-stage engineering work but continue to be active with on-site preparation work. KBR stands ready to support the customer once they have completed partner selection and are ready to move into FID. We continue to believe we are well-positioned on each of these major prospects.

I'd like to spend the balance of my prepared remarks discussing some of the key market dynamics we see unfolding over the next several quarters. Highlighting what we believe this is a great time to be invested in KBR. We may see some short-term fluctuations in the strength of one market versus another but in the long term, this is noise relative to the bigger picture. We firmly believe the long-term fundamentals of our end markets are strong and in place providing tremendous opportunities for KBR.

In the short term, there are a lot of moving parts that are driving the markets. Today's economic climate is challenged by all accounts and governments and companies alike are taking a hard look at their budgets and the economics of their investments. On the downside, we continue to see some projects moving to the right including some of the big elephants we thought were going to achieve FID during the second half of 2012. Ultimately, we strongly believe these projects will move forward as the economics are compelling. But they may not happen as soon as we originally anticipated, which is not uncommon with some of these large, very complex projects. However, whether the projects begin 6 months sooner or later, it doesn't demonstrably change their economics nor does it change KBR's value proposition as an investment.

At our Domestic and International Government Services businesses, we are on track profitability-wise and our proposal activity remains high. However, awards have been slower than anticipated. We believe this may be due to the ongoing debate over future activities in Afghanistan combined with tighter government budgets. We do however, believe that work should start being awarded in the coming months.

Albeit early in the year, growth at our U.S. Construction and our Industrial Services businesses has been slower than expected. While we still expect both businesses to be up year-over-year, the present near-term timing of awards for these businesses remains a bit cloudy.

In the Building Group, multifamily residential and manufacturing construction have come out of the gates strongly. But healthcare and higher education spending remains slow. On the upside, KBR continues to see an acceleration of activity in many North American markets, particularly in our Downstream, Technology, and Power businesses. These opportunities are driven by the market fundamentals of a favorable natural gas forward price curve that provides compelling economics for new ethylene, power and ammonia facilities. Accordingly, we believe that domestic natural gas-based industries will see significantly higher levels of capital investment over the coming years. Low-price natural gas coupled with air quality regulations is also driving a compelling value proposition for the construction of new, gas-fired combined cycle power plants as older coal-fired power plants are retired. Additionally, where the economics favor the construction of pollution control facilities, operators will spend significant capital to meet new emissions standards, which opens up additional opportunities for KBR.

Also in North America, we are seeing an increase in liquefaction in GTL opportunities. On the LNG front, in addition to the Kitimat LNG project, we're currently looking at 2 additional LNG prospects in Western Canada. One pre-FEED/FEED opportunity, on which we're already executing early study work, and another opportunity where we're in early but active dialogue with the customer. In the U.S. Gulf Coast area, we're looking at bidding a FEED for an LNG project where KBR is currently prequalified.

On the GTL side, we anticipate pursuing one or more FEEDs for projects in the United States this year. In the Gulf of Mexico, we are seeing a research and some deepwater drilling activity and we expect that this will provide offshore oil and gas opportunities for us starting in 2013 and beyond.

The Canadian marketplace is also showing far stronger levels of investment than originally anticipated. We're seeing more projects moving quickly from the engineering phase to the construction phase and we expect this trend to continue in the coming years. We have approximately $2 billion in tenders outstanding for projects that we expect to be awarded in 2012, including turnarounds, module fabrication, construction projects in the Alberta oil sands, gas processing projects in Western Canada and client camp support. Several of these tenders have already been awarded to KBR and we anticipate making announcements in the coming weeks.

We're also positioning ourselves for a stronger mining market in Canada, including mines producing gold, copper and potash. We see this market steadily ramping up and gaining momentum as 2012 progresses. And we expect to see KBR booking new awards starting in the second quarter.

Australia also remains a strong market for KBR. LNG and mining resources are abundant and significant infrastructure build out continues to drive tremendous opportunities for KBR where we are well-positioned on several major awards. We continue to work through the industry-wide labor challenges that we discussed previously, but the Australian labor environment will remain a challenge that we need to execute against for the foreseeable future.

In the Middle East, we're seeing significantly stronger activity than expected in downstream infrastructure and other industrial markets. In contrast to the last 2 years, we see projects continuing to move forward and we believe KBR's experience working in the region over the past several years positions us well there. On the Sadara project, most of the EPC packages have been awarded with a couple of these packages actually moving into construction. This week, KBR entered into a new contract amendment with our client to provide PMC services through the end of 2014. This contract amendment is approximately $300 million, which will be released via work orders through the end of 2014.

Additionally, as I discussed earlier, our Saudi JV, KBR-AMCDE, is exceeding our initial expectations bringing local content to the region and building up a solid backlog of work. In other markets such as China and India, KBR continues to make strong inroads, leading with our technology business, which has had significant success.

Now I'll turn the call over to Sue. After Sue's comments, I will provide a brief summary before turning the call over for questions. Sue?

Susan K. Carter

Thanks, Bill, and good morning, everyone. You've all seen our press release on Q1 earnings that we put out last night, so I won't go on into a lot of detail already covered in the press release. I do, however, want to spend a few minutes walking you through some of the more significant financial items in the quarter that we want you to take away from the call.

The first is on general and administrative expenses. First quarter G&A was $55 million, up $11 million from the first quarter of 2011. You'll recall that last year's first quarter had timing issues on several cost items for facilities, IT and incentive compensation programs that push those costs into the second quarter. The G&A expense for this quarter is a more normal amount and is within our expectations for our full-year 2012 corporate G&A expenses between $240 million and $250 million. The full-year 2012 corporate G&A expense guidance also includes an estimated $20 million to $25 million of costs related to the new ERP system.

The second item is related to our overall effective tax rate, which was 9% in the quarter. Within that 9% range, we had 2 large discrete tax items that drove the bulk of the delta versus the 27% operating tax rate. The first item resulted from our equity ownership at the FreightLink JV, where final tax returns identified operating losses for the final year of operations, which provided a tax benefit in Q1.

The second item is related to ongoing transfer pricing agreements. Reserves were adjusted for transfer pricing activity that occurred in Q1. We now expect KBR's full-year 2012 effective tax rate to be in the mid-20s.

The third item is related to KBR's backlog. Building on Bill's earlier comments, revenue and backlog as of March 31, 2012 was approximately $15.8 billion, up 44% from December 31, 2011. Overall, the backlog portfolio mix at the end of the first quarter was 62% cost reimbursable and 38% fixed price. A significant shift from the 75-25 split in the fourth quarter of 2011. This shift was primarily related to the Ichthys LNG project, a hybrid contract, which I discussed in detail on last quarter's call. We feel comfortable with the mix shift as the types of risks associated with the fixed price components of the increased backlog are once we have evaluated closely and have traditionally executed well against.

The fourth item is our cash use for operating activity, which totaled out at $107 million for the first 3 months of 2012, compared to cash provided by operating activities of $225 million in the first quarter of 2011. Q1 cash was negatively impacted by increases in unbilled receivables and decreases in advances in our Gas Monetization business. These are timing issues related to subcontractor claims and other nonoperating invoicing delays. The first quarter of 2011 benefited from collections expected in Q4 2010 totaling $140 million. These payments were received in the first 2 weeks of January 2011. We continue to expect to have strong cash flows from operations for the full year of 2012.

The fifth item is KBR's balance sheet, which at the end of March 2012, remains strong with cash and cash equivalents of $837 million. KBR's total cash was down $129 million from the previous quarter. Of this decline, approximately $50 million represents a reduction in cash from our consolidated JVs and another $38 million represents cash funding of share repurchases, dividends, pension contributions and CapEx, as outlined in our press release.

Lastly, I'd like to briefly touch on our guidance range of $2.45 to $2.80, which we've left unchanged from the original range we gave at the end of last year. Bill outlined the way we're thinking about the key markets with respect to KBR and some of the puts and takes to consider, so I'll take just a moment to provide some specifics you'll need for modeling purposes going forward. The only change to guidance is our effective tax rate, which as I said is expected to be in the mid-20s. Aside from that, all other guidance items remain unchanged and are as follows: full year G&A expenses between $240 million and $250 million, of which an estimated $20 million to $25 million is related to ERP; full year CapEx of approximately $100 million, of which we estimate $60 million to $65 million of CapEx related to the ERP project; full-year 2012 LogCAP project revenues between $300 million and $500 million; and a share count of approximately 148 million shares.

And now I'll turn the call back over to Bill for his final remarks.

William P. Utt

Thanks, Sue. In closing, I'll reiterate what I said last quarter as the conversation remains much the same. KBR believes there's a significant quantity of project opportunities, both in North America, as well as internationally, principally, in the Middle East and Australia. It is likely that some projects will be delayed but we should keep in mind that other unannounced projects are likely to go forward in their place. Ultimately, these projects will get built, only their schedule remains uncertain. KBR's near-term challenge is to continue to devote our resources to those projects that are moving forward and to build a solid pipeline of new awards to further fuel our future growth.

With respect to our guidance for 2012, given all the factors we've discussed, we believe the range of $2.45 to $2.80 per share remains appropriate. As I said earlier, there are a lot of moving parts. Some markets have started off a bit slower than we anticipated, while others are showing increased signs of strength. Net of all these factors, we expect Q2 net income before tax to be a bit stronger than Q1, and for Q3 and Q4 to be progressively stronger from there as these new awards move from backlog into the P&L. We have a strong backlog of projects that we'll ramp up as the year progresses, and we are working hard to capture the current and future prospects in the market, both of which will help drive progressively stronger performance over the balance of the year.

Now we'll take your questions.[Operator Instructions] Thank you.

Question-and-Answer Session

Operator

[Operator Instructions] We'll go first to Scott Levine with JPMorgan.

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

So a question regarding the markets, obviously, a lot of puts and takes in terms of which are getting better, which are getting worse. I mean, if you could summarize, maybe Bill, as a whole, are you feeling like the markets are recovering in line with your expectations, maybe if you could highlight 1 or 2 markets, which versus the last call or maybe 2 calls, which are getting progressively more visible, and maybe which are becoming a little bit cloudier?

William P. Utt

I think the markets that are getting more visible for us are clearly Canada and the Middle East. I just see that the amount of bids we have outstanding in Canada is as high as I can remember. The -- our positioning on those, I think, is very good. I also still believe that the last 2 years, the Middle East have been slow. Last year, there were a lot of political issues in the area but as we look at -- look out at our prospects list of projects that we're chasing in Middle East, it's as strong and as diverse as we've seen in some time. So I'm very much encouraged by the Middle East and Canada in terms of their relative improvements. I also think Australia remains a very good market for KBR. I wouldn't put that in the improvement category because it's always, for the last 18 months, has been a very strong market for us and I think continues to remain so for the near-term given some of the LNG minerals work and infrastructure work we're doing in Australia. North America is coming back. I think I talked a little bit about some of the delays we're seeing in awards coming out of our North American government business. We think, in part, because of the discussions on future activities in Afghanistan and the budget constraints, which also impact, a little bit, the International Government Defense business. But we do believe those awards are going to start trickling out or start coming out in the second quarter. So we think of that as more of a delay as opposed to a dramatic change from our expectations. Building Group is seeing some good markets in the residential, multifamily housing, as well as manufacturing. But some of the bigger projects that we've relied on over the last couple of years in healthcare and higher education, they still remain pretty slow. And I also made some comments regarding the U.S. Construction Industrial Services businesses are slow but the Power business and downstream and technology in North America that are all driven by the shale gas, I think those prospects look great. And I think I mentioned on one of the earlier calls that just as an example, we see 11 different ammonia plants being discussed for development in the United States, and for those of you who keep score on matters like that, we haven't built an ammonia plant in the U.S. in 35 years. So we're seeing a lot of announcements on the ethylene, the olefins, the ammonia projects, even the -- in some of the derivative place like the combined-cycle power plants that are going forward. All seeing great stimulus from what is now thought to be a much lower forward price curve for natural gas in the U.S. for the foreseeable future.

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

Got it. One follow-up if I may. On cash deployment plans in a bit negative, you referenced some of the working capital items in the quarter but you guys have had traditionally a pretty balanced approach. I wonder if you could provide an update with regard to thought process on investment M&A buyback what have you?

Susan K. Carter

Sure. As we look at it, we haven't really changed our stand, Scott, in terms of the items that are available to us, which is obviously, the return to shareholders with share repurchases and dividends, as well as investments, either organic or through M&A. As we've gone through the first quarter, obviously, as you can see, the share repurchases were about 205,000 shares. So not a great deal of purchasing. Again, we look at cash and what some of the opportunities were and we made our decisions along with that. M&A, obviously, is something that we still look at but it needs to be something that fits into the portfolio and that is at the right pricing. And so we'll just maintain our stance on what we're going to do with that and look at the individual opportunities and go after the ones that have the greatest return for us.

Operator

Moving next to John Rogers with D.A. Davidson.

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

I guess as a first thing is, Bill, you gave us some numbers on backlog and the job income in the backlog, and then you referenced the 12-month backlog, any comment on the job income in the 12-month backlog, is that also growing?

William P. Utt

We don't calculate that specifically. The comments related to the 12-month backlog come out of our Q where we talk about how much work will be executed over the next 12 months. I would postulate, I think postulate is the right word, that the job income backlog is following the increase both on a 12-month basis, as well as an absolute basis. We're seeing the -- on some of the lower-margin projects, Skikda is going to start up this year. We're going to be finished construction in Scravas [ph] by the end of the year. And so I think that would logically follow that the job income backlog should be increasing from the 12-month period, as well as in addition, to the overall backlog.

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

Okay. That's fine, I just want to confirm because you talked about some of these projects slipping out, I just wanted to understand how that flows because, I mean, it seems as if with your backlog is scheduled at -- and I know it's very early but it still seems that you should be growing into 2013 with what you have now, at least on the top line. Is that fair?

William P. Utt

Well, yes, a lot of it -- well, I think that's our expectation, John. I think -- we've got to make sure that some of these -- we're starting to see that with the Sadara award and some of these awards in Canada. We're expecting to announce in the near future that this is continuing to be manifested by accomplishments not rhetoric. We still got to get through what's happening in the -- in our government businesses, because I think they did come in a little bit lower than we had hoped, in terms of the award base. But if things go according to plan, in allowing the shifting mix of projects into and out of our near-term horizon, I think we should see a building of the earnings of the company as -- particularly later in the year as these projects move from new awards into the P&L and into 2013 as well.

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

Okay, great. And if I could, any update on collections from Mexico?

William P. Utt

The collections from Mexico are sitting with the initial judge who has been asked to consider what, if any impact, does an action of a Mexican court have on his initial ruling. And so we remain confident that based on our analysis, that it shouldn't have any impact and that when the judge gets around to issuing his opinion, that we think it will be another step forward to getting that issue resolved.

Operator

Moving on to Steve Fisher with UBS.

Steven Fisher - UBS Investment Bank, Research Division

Not sure if I missed it, but any way you can quantify what the mining charge was in the quarter and what happened between February and March and April on that project?

Susan K. Carter

Sure, Steve. As we put in, in some of the materials, the charges in the Minerals business unit were about $8 million in the quarter, with the majority of it being on one of the projects that we talked about in Q4. And so now that project is entering the commissioning phase. We think we've got it under control but what you saw in the first quarter was just revised cost estimates to get where they needed to be and the charges associated with that.

Steven Fisher - UBS Investment Bank, Research Division

Okay. I guess just shifting gears, on to the Downstream side of things. It was kind of light in the quarter but, Bill, you mentioned certainly some acceleration in that market, so I guess I'm wondering what kind of projects and activities I do have plans specifically for the second half of the year whether we could see a ramp up there sooner than later?

William P. Utt

Well, I think we have some good prospects that are in the Middle East area, not necessarily in the classic Middle East, on the Arabian Peninsula, but in and around that area that we think will go forward second or third quarter, some joint ventures we have with other players, as well as projects we're pursuing on our own. Back on the U.S. side, there are a number of olefins facilities that have been proposed, and we're having dialogue with those sponsors. They are mentioning phrases like, we want to be first to market to capture the advantages, et cetera. And so we're working towards them on those projects but we keep -- we're mindful of what it takes to put these projects together and I think we've got good proposals outstanding or good mature dialogue with the customers that will lead to proposals to see that business grow. I think what you've seen in Downstream is the -- we're probably about 17% through the engineering on the Lobito refinery project, which was ramping down in the first quarter. We've seen a ramp up in terms of the staffing we have at Yanbu, but that's lower-margin work than -- because it's field work, than what we do in the home office. Clearly, we're going to be ramping back up on Sadara, particularly in Kingdom with our PMC activities on that project. So there's a lot of things going on. And so I think the business will grow. The margins may be a little bit challenged compared to historical standards because the mix is moving more towards field-type activities as opposed to what were predominantly home office service PMC type of activities that we saw throughout a lot of 2011 and tailing off into the first quarter of '12.

Steven Fisher - UBS Investment Bank, Research Division

Okay. So it's more of a mix issue and so -- I mean, do you think that the margin there would deteriorate from here as the year goes on or kind of flat or could it even improve?

William P. Utt

I think the revenue will grow. It's unclear right now about the mix and I say this simply because we're adding a lot of folks in the field and as we bring in the engineering margins, that will be accretive to what we're doing but it's also something that may be diluted by the growth we're seeing of field revenues. I feel more comfortable talking about the advancement of revenues in Downstream and I really can't point you one way or the other on the margin side, just because of the increase in the field component of that revenue increase.

Operator

Moving on to Jamie Cook with Crédit Suisse.

Jamie L. Cook - Crédit Suisse AG, Research Division

Two questions, I understand, you said your first quarter was in line with your expectations and the street was probably off a little. But one question, is there any area within the first quarter that was better or worse than your expectations, even though you sort of netted to where you thought you would be? And then I guess as you think about -- as we now have one quarter under our belt, are you more or less confident with the higher end of the range given where the first quarter ended and just given as we talk about some of these pushouts and projects, I'm assuming that's probably more of a 2013 impact but I just want to be sure? And I'll get back in queue after that.

William P. Utt

First quarter expectations, I think we were pleased with the volumes we saw in hydrocarbons and that continues to be a business that's growing. I think it's a strong business for us. It's clearly the most demonstrable advantage business we have in the portfolio. The other businesses were okay, IGDSS continues to complete their fixed-price work in Afghanistan, nicely and that's helped their margins in the first quarter. We're disappointed with NAGL in the North American government business, from an award standpoint and it's obviously difficult transition, the conclusion of LogCAP III but we've been talking about that for 6 years now. That was going to wind down. But I think it was -- we're expecting it to be a little bit challenging from an earnings standpoint given the fall off in LogCAP. Kind of where services would've done a little bit better. We did okay on G&A. We did okay on labor cost absorption, hydrocarbons was pretty strong. As you look at the -- your question on the year guidance, we took a hard look at that and we think there are scenarios where we can get to the high end of the range and can even get beyond that but you have to look at the distribution of we could be higher, we could be lower, and Sue and I concluded that as we looked at our guidance, that we felt that the $2.45 to $2.80 was felt the best, and we didn't feel compelled to change the guidance at this point. I think what's going to be critical for us as we look at the second quarter is how much of these projects that we expect to be released in the North American government business, in Canada and some of the other markets, what kind of impact do they have into the backlog and how quickly do we believe they're going to get into the P&L during the second half of the year, because I think we've been consistent in talking about '12 as an upward sloping year for us. And I think we'll be able to give a pretty clear indication of where we think 2012 will be at our next quarter call because once you get through second quarter, anything beyond, that's only going to have a very small impact. And certainly, from our original budget planning, we had expected Kitimat to be third quarter and some of the other projects to be fourth quarter. So they weren't -- those larger projects weren't big contributors to the P&L, and certainly from our perspective, could be made up by some other projects that could come onto the horizon but we'll know by second quarter and certainly should be able to give a more precise and more narrow guidance regarding our performance. But as of today, we think the numbers we have out there are the best numbers that we could come up with and saw no reason to make a change at this point.

Jamie L. Cook - Crédit Suisse AG, Research Division

And just to be clear though, other projects that could come onto the horizon, is that -- I mean, you sound more bullish on Canada, is it that type of stuff in Middle East, I just want to be clear where the upside would come from?

William P. Utt

Well, we think the upside could come from Canada. It could come from some awards in NAGL, because we've got a big backlog there and some of the awards we're talking about would have a very quick book to burn. Some of the Canadian stuff that we're looking at signing wouldn't immediately go into earnings and one project would have a book to burn in 11 months. So we see those as being the real leverage points for us in 2012. They are the most obvious ones from our perspective.

Operator

And Andy Kaplowitz with Barclays has our next question.

Andy Kaplowitz - Barclays Capital, Research Division

Bill, in Services, I guess I just don't understand what's going on. I mean, the U.S. economy is doing a little bit better. Your backlog has been up over the last several quarters and your revenue has been going down. So I'm just kind of wondering what's going on in that segment?

William P. Utt

Well, within Services, we've got 3 large projects in Building Group: The Boeing construction in Charleston, South Carolina; Children's Hospital in Birmingham; and the Duke Cancer Center, which all went forward in 2009 that are coming to a close. And they've been just great anchor projects for our Building Group business. As they wind down, we're seeing a lot of projects in the $20 million to $50 million range. We've got a lot of verbal awards on those that will trickle into backlog during the year. But we don't see replacements for those big 3, which were all in the $200 million variety for us. Within the other parts of Services, Canada was particularly slow last year, we're seeing that. We're much more encouraged and very bullish of what we see in Canada for this year, that should help pick it up. The Industrial Services business, we continue to see our customers do what they can do to defer maintenance. It's a very competitive market out there for them and they are looking at ways of not cutting our staff but cutting the maintenance spend around these and I think that's maybe a consequence of us doing a really good job of maintaining the facilities and that the construction to replace stuff is a lot less with our involvement. And we're still trying to get better traction on U.S. Construction. We've got a lot of work that our construction teams are doing at Kemper County and other projects. But those construction activities are showing up in the business units because we book the construction component on EPCs within the business unit and the only thing we're booking in U.S. Construction is the construction-only projects that we're pursuing. But we've announced Devon [ph], we've got a couple others that we're looking at that we think we'll see that build. But I would say, over the last 12 months, most of our construction work has been as part of EPC projects and quite honestly, the field staff that we have, we made some comments where we have previously and this is what I recall having said, maybe 6x as many people in the field at the end of 2012 -- 2011 than we had at the beginning of 2011 but all those have been driven into EPC projects showing up on other business units.

Andy Kaplowitz - Barclays Capital, Research Division

That's very helpful, Bill. Just shifting gears. On LNG, I mean, you guys are a leader in LNG, obviously. The U.S. LNG opportunity has really come up I think, it's been out there for a while but people are believing in more, I think, over the last few months, and of course, there's lots of big Australian projects out there. How do you sort of weigh the 2 in terms of prospects now as you look at them. I mean, obviously, there's some monster Australian prospects out there. We often get questions now, about can both regions go forward, do you now see the U.S. or as you said, Western Canada being better prospects than some of these big ones in Australia, I mean, how do you kind of look at that and maybe throw in gas to liquids as well?

William P. Utt

Okay, well, that's -- some may take the next 1.5 hours talking about that answer but I'll try to be -- succinct on that. First of all, in the LNG markets, we think that there still will be demand growth in China and maybe a little bit lower growth rate than we see in the past. But the structural changes we see going into Japan movement from the nuclear fleet to the gas fleet, we think will continue to maintain a robust demand for new natural gas supplies going forward. Now in terms of where the supplies are coming from, we do worry about the labor market in Australia, and we can land ex-pats in Australia for about the cost of what we're hiring directly for construction workers. And you've got a very high cost situation in Australia. You get some wonderful resources and so there is some viability there in Australia, but we also want to hedge our bets. You did not mention Africa and we think some of the East Africa LNG reserves that are very prolific will have structural cost advantages for construction in East Africa compared to what we're doing in Australia today. So you've got to factor that in and that's why we're very active in East Africa, on Mozambique and some of the projects being proposed there. Within North America, we also are looking at how do we place our bets there. We obviously see and believe that British Columbia is a good place to be. It's going to be a good export market. Much closer to Asia than a U.S. Gulf Coast facility. But we are looking at how do we participate in certain U.S. Gulf Coast facilities that we believe the sponsors have the wherewithal, the market presence, the vertical integration in the U.S. markets to be an effective developer of an export facility in the U.S. Not necessarily relying on purchasing gas at NYMEX but having their own equity gas in the U.S. in the shale formations that can be used to fuel the LNG liquefaction. So net-net, Andy, we're spreading our bets, we're aware that Australia has perhaps some geographic advantages but some cost disadvantage regarding the construction of these facilities. East Africa, I think, is a new entrant in this market that could be -- could give some much lower cost options compared to Australia. And then we're trying to spread our bets here in North America to see how that market evolves, both in terms of shipping gas to Asia and in possibly shipping some further gas down to Latin America.

Operator

And our next question will come from Joe Ritchie with Goldman Sachs.

Joseph Ritchie - Goldman Sachs Group Inc., Research Division

So just following up on Andy's question there on LNG. Just specifically, it sounds like the opportunities in the U.S., North America could be large opportunities over the next few years. I guess my biggest question is really on Australia, we're not expecting any major financial investment decisions for any greenfields projects this year, but next year you've got Browse and Arrow. Have your conversations with your customers changed at all regarding the viability of those projects moving forward?

William P. Utt

Joe, I think it's mixed. In Australia, we're tracking 4 projects. You've got an addition to Browse and Pluto and Arrow, you've also got the 4 Train at Gorgon. And a lot of it gets back to just how prolific are the gas reserves and what is the marginal cost of building facilities. And when we've seen some discussion in the press and this is not any inside information to KBR as gathered, but there are questions being raised, of should the gas at Browse go to the Northwest shale where the assets are already constructed, which some people feel is running out of gas in the next couple of years, or should that gas go to a newly constructed LNG facility. So a lot of things moving around there in terms of what's the optimum way of monetizing gas resources and so that's one question around Browse. If you look at Pluto, very compelling economics given the foundation project and the investments that Woodside has made. Pluto 2 and 3 should be very attractive opportunities for them when they do find the gas and elect to move forward on that. Gorgon 4 the same way, a lot of installed infrastructure on the first 3 trains. On Arrow, obviously, Shell and their Chinese partner do have access to a market. And Shell's got a leading LNG position in the global LNG market. So there are a lot of dynamics going on that you can't really say, this one will go forward this won't but you can see with the discussion going on that there is a concern of how you best rationalize the resources of gas in Australia, particularly where the broader competitive environment against North America and East Africa gas to develop good projects.

Joseph Ritchie - Goldman Sachs Group Inc., Research Division

And do you see -- that's great color, Bill. Do you have any sense on timing on when this all shakes out and we have a better idea as to how those decisions will move forward?

William P. Utt

Well, the -- what we said is we're going to submit the EPC bids on Browse midyear. We're still doing work on Pluto. And I think Pluto, they've got to a very positive milestone of having first gas and are getting ready to ship their first cargo. The Gorgon FEED, it's pre-FEED activities are progressing on and we think they'll move into FEED at the -- by the end of this year. Arrow, the project -- that's a little bit disconnected from the others and that will have its own independent life cycle but we're going to continue to try to play as much of them and make sure that we have all the bases covered as KBR. So that as those projects move forward, we can prepare to move forward with the ones that have the best chance of moving forward and the highest probabilities of achieving FID.

Joseph Ritchie - Goldman Sachs Group Inc., Research Division

And I guess one follow-up question. As we think more near-term into the second quarter, you mentioned that some of the tenders in Canada have already been awarded. Is there any color that you can give us on the magnitude of what you've already booked in the backlog in the 2Q and how we should be thinking about whether backlog is going to grow in 2Q or not?

William P. Utt

I will tell you that Canadian backlog will definitely grow in Q2. The awards, to date, have not been booked in the backlog. We're thinking we could, as early as next week, see the contracts be signed. And that would be significant in terms of the overall book to bill. We're going to watch that closely. And the reason I say we're going to watch it closely is if you remember Sue's comments on the accounting for Ichthys, we booked our 30% share of that project of $5.6 billion into backlog this quarter. But as it goes into earnings, you're going to see the equity accounting take place on that. And so Ichthys will start winding down over time but we're optimistic that with the prospects we see in front of us for second quarter, that we really do believe we can get a book-to-bill greater than 1.0.

Operator

Moving on to Chase Jacobson with William Blair.

Chase Jacobson - William Blair & Company L.L.C., Research Division

Just a quick question on the Ichthys project, I think in the press release, you mentioned that the gas monetization job income was up partially because of the activity on that project. And from the way I thought you described it in the past, it didn't seem like that project was going to be a major contributor in 2012, or at least until later in the year. Is that moving faster for any specific reason than you thought?

William P. Utt

No. From our perspective, I don't see that as having been a big contributor to gas mons results. It was nice to have in the first quarter but not anything that really moved the needle in gas monetization at all. It's a big project and I think it's going to continue to ramp up according to the expectations we all discussed on our last call.

Chase Jacobson - William Blair & Company L.L.C., Research Division

Okay. So won't be more meaningful until later 2012, 2013 is how should we look at it?

William P. Utt

I'm sorry?

Chase Jacobson - William Blair & Company L.L.C., Research Division

It should be later 2012, 2013, we should see that pick up?

William P. Utt

We had a pick up -- we start out with a certain amount of earnings first quarter, it should increase second quarter and continue to increase over -- through the end of '13. And maybe beyond that depending on the S curve.

Susan K. Carter

Right. And Chase, I think one of the comments in terms of the contribution of Ichthys is as you look at it, Q1 of 2012 was the first quarter that it appeared. So on a year-over-year quarter-over-quarter basis, obviously, that contribution is good because it was its first quarter that we had it.

William P. Utt

We'll also offset some of the ramp down on Pearl and some of the other projects in the portfolio. So between Gorgon and the other projects that they're pursuing, it was a really good quarter gas month.

Chase Jacobson - William Blair & Company L.L.C., Research Division

Okay. And just a modeling question with the new breakout of Infrastructure and Minerals, from what we can see, there's obviously been a pretty wide range in the margin, in the job income margin in both those segments. Can you just -- can you give any color on how we should be thinking of it or looking at Infrastructure and Minerals -- I'm sorry, at Infrastructure, it looks about 35% to 20%, is that -- I mean, is 35% kind of a peak that we should be looking at or is it mid-20s? Any color there, I would be grateful?

William P. Utt

What are your units? What units are you referring to when you say 35 and 20?

Chase Jacobson - William Blair & Company L.L.C., Research Division

The job margin?

William P. Utt

Well, the job margin, Infrastructure was benefited by a gain share on a project in the first quarter of '11. And I believe it was we said $10 million. And that drove in an inordinately high margin. If you peel back the Infrastructure business, we're running primarily a consultancy in Australia, and that delivers 20%-plus job income margins. Now what you're going to -- what I expect to see going forward is that the job margins related to the consultancy business should stay about at that level and the volume of work should stay reasonably consistent. Where that business is growing is we're growing doing projects in the Middle East and doing some EPC work in the -- through joint ventures in Australia. And I expect that because of the way we account for those, we'll see the margins on that segment of work be less than the plus 20%. They may be in the low teens because you're dealing with a lot of pass or so. If you think about Infrastructures having a baseload of consultancy work, that ought to be in the 20% range and then a lot of the growth we ought to be seeing out of Infrastructure would be in the -- I'd say the 11% to 14% job income range where that marginal work would be the driver of the increased revenue backlog.

Operator

Moving on to George O'Leary with Tudor, Pickering.

George O'Leary - Tudor, Pickering, Holt & Co. Securities, Inc., Research Division

Maybe just looking for a little bit of incremental color on your U.S./North American market opportunities, if you could kind of rank those by segments, LNG and maybe even talk about Canadian versus U.S. versus the pet chem and ammonia build out and then Power, kind of where you think the most strength is and from a timing perspective, what hits more quickly?

William P. Utt

Well, obviously, the biggest opportunity we have is the Kitimat project of this year, which will be multibillion-dollar award that we'll be doing EPC. That is going to dominate any other individual project we see this year in North America. I am excited about what we're seeing in Canada. We've talked about the $2 billion in awards and we feel with the verbals we have in some of the other prospects, we could have a very good year in Canada, from a backlog growth standpoint. I do like our position in Power. We did win one pollution control project in the first quarter, we've got 3 fairly large bids we're pursuing right now in Power and we think our expectation and hope is that we'd get one of these 3. And so Power does have some opportunities. We're seeing some steady industrial work, we are also seeing some pollution control work start being talked about by our customers. So Power is pretty interesting for us. Downstream and Technology, I think you just packaged those up between the ammonia, ethylene and olefins facilities. We see a lot of stuff and we think those will be strong and I talked about the story around the ammonia market, so I think the Gas Mon, the Canadian operations, Power, Downstream and Technology should all have very good years in North America.

George O'Leary - Tudor, Pickering, Holt & Co. Securities, Inc., Research Division

Great. And then maybe just one quick follow-up. For a new ammonia plant, given that they haven't been built in the last 35 years, can you kind of quantify to what potential, maybe just on your average size, ammonia plant that would be built out?

William P. Utt

Not off the top of my head but if you want to go back and figure out the -- if you go back and look at our earlier reports on the EBIC ammonia plant, I think that was the 2008 annual report. I think we're pretty clear on how big that was. I just don't remember what the cost was on that, George. So forgive me for having a senior moment on that but the 2,000 ton a day ammonia plant is about where the state of the art is on ammonia plants. And so you can find that in some of our historical data pretty easily.

Operator

And our next question will come from Martin Malloy with Johnson Rice.

Martin W. Malloy - Johnson Rice & Company, L.L.C., Research Division

Could you maybe give us an update in terms of your initiative for providing more direct construction services to your customers and when that might impact margins?

William P. Utt

We're continuing to evolve discussions with some folks in Australia on that. We expect that we ought to be able to conclude a business plan and arrangement later this year. We wouldn't expect to see any tangible margins or work coming out of that venture and so probably the second half of '13 is my best guess right now. We're going to be -- and again, that's the greenfield path we're moving on now. If we were to elect with this venture, get to market earlier through an acquisition, well, that would change that statement but just in the way we're looking at it at present, building this thing brick by brick, it's probably second half of '13.

Martin W. Malloy - Johnson Rice & Company, L.L.C., Research Division

Okay. And then on the Kemper County plant in Mississippi, it looked like it got an important approval from the PSC in recent days. Could that be a meaningful impact to your backlog this year?

William P. Utt

I'm not aware of the approval. I knew there was a remanding back from a court in Mississippi to the Public Service Commission to document the details surrounding the permit for convenience and necessity. I believe that might be what you're referring to. We're expecting to see that. Kemper County was fully -- was pretty well-booked into our backlog last year. The engineering has been booked in the backlog. We did book a couple hundred million on the construction. We may see some scope growth on that. I'm not sure yet but any meaningful changes to our backlog related to Kemper County, we're not seeing. We'll probably seize the normal type of scope growth around that but nothing in terms of big lump sum changes in our awards.

Operator

Moving to Robert Norfleet with BB&T Capital.

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

Most of my questions have been answered but just one on the backlog as it exists today. I know you to talked that after booking, your thickest backlog. Terms of fixed price work is up to 38% versus 25%, largely due to that contract. But I guess I wanted to get your sense, as we start looking some of the Sahara works and Canadian works, some of the North American work, how do you see the fixed price/cost reimbursable dependent to backlog looking over the next 2 to 3 quarters? And indefinitely, do you see because of the higher fixed-price works, should that have a positive benefit on the gas monetization margins?

William P. Utt

Generally, as we look out at the future work that we're looking to book, the bids in NAGL, North American government defense -- and we expect the awards will be predominantly cost plus. We look at the Canadian work, that's also going to have either cost plus or unit rates. It gives a lot of deviations on scope. So I'm not expecting to see these near-term awards impacting the amount of fixed-price work in the backlog. What I do expect is that when we look at a project like Kitimat, we would have a significant portion of that being lump sum. And certainly, the areas that we're very comfortable doing, lump sum, the home office services, the construction management, the procurement which is we believe is largely back-to-back with bona fide suppliers to us can be good opportunities on the margin side without a lot of risk. And I'm not saying there is no risk but it's certainly manageable risk and risk that we've successfully managed many times over on prior projects. So I think we're kind of where we are now. I know on the IMPEX project we have, some of the scope is remeasured and what that means is today, it's cost plus and the fabrication yards but once we get the designs complete for the fabricated modules and we can give those to the fabricators, the fabricators now will be able to estimate their quantities, they already know their productivity so some of that work that's currently reimbursable will convert to a lump sum but in a very, we think, prudent and manageable risk format. So we still could see some movement in the next couple of years, on the amount of fixed-price work on INPEX, but I think it's thoughtfully put together in terms of at what point do we undertake the fixed-price risk and with respect to the fabrication we're doing so on what I believe are an appropriate level of known knowns such as quantities, weights and productivities that we think we're very capable of handling as KBR.

Operator

Moving on to Matt Tucker with KeyBanc Capital Markets.

Matthew P. Tucker - KeyBanc Capital Markets Inc., Research Division

My first question is a follow-up on how the first quarter results compare to your guidance. In the prepared comments, you indicated the results were consistent with the guidance although you also mentioned that you now expect the tax rate to be lower. So can you just clarify were you expecting the discrete benefits that you saw in the quarter when you gave your initial guidance? And just more importantly, excluding those benefits, how did the kind of operational results compared to your expectations?

Susan K. Carter

Let me try to take on some of that. So as you think about the full-year guidance and the tax rate, we gave an overall 2012 tax rate of 28%. That did not include any of the discrete items and by their very nature, a discrete item is not going to come through until an event happens, which is what happened in the Q1 items that brought down the effective tax rate. So as you look forward, again, you're not going to plan for those in how we're trying to give you guidance in terms of modeling the overall tax rate. So I think that helps you with that piece. In terms of how it plays in the guidance, I mean, guidance of $2.45 to $2.80 is going to take into a lot of different moving parts, the tax rate is one of them, obviously, performance in all of the businesses is going to be another, our forward looks. And when you meld all of those things together, you can kind of get back to where we're at. So while I would say that we didn't model those discretes into our guidance and we haven't changed our guidance, that there's lots of moving parts and there's -- and it's very early in the year. So sort of stay tuned from an overall perspective, the operating tax rate is -- was right around 27% for the quarter in Q1.

Matthew P. Tucker - KeyBanc Capital Markets Inc., Research Division

Then moving on to a couple of your large LNG projects, Kitimat and Browse. It sounds like on both of those, EPC tendering is going on and could potentially be completed well ahead of the FID on those projects. I was wondering if there's any potential that we could hear any announcements on the results of the EPC tendering ahead of the FID decisions or if we should kind of assume that we won't hear anything until the products reach FID?

William P. Utt

You probably won't hear anything from us until the ink is dry on the contract.

Matthew P. Tucker - KeyBanc Capital Markets Inc., Research Division

That makes sense. And then final question. You mentioned some GTL opportunities in the U.S., hoping you could just provide a little more color on kind of your expectations, when you see maybe final investment decisions on those projects occurring, how confident are you that we could see some GTL get built in the U.S.?

William P. Utt

I'm pretty confident we will see GTL getting built in the U.S. The cost of oil is $18 per million BTU. The cost of gas is $2 or $3 a million BTU, that's a pretty wide spread that should be able to support the construction of GTL. I think we'll see several projects move forward. I think you'll see FIDs -- I'm not anticipating the day FIDs in 2012, I think it'd be more like the second half of '13, but I do believe they will go forward and that there's a very compelling economic opportunity for those sponsors given the -- where I think the oil prices are going to continue to stay in the low gas price environment that we expect to have in the U.S. for the foreseeable future.

Operator

And our last question today will come from Robert Connors with Stifel, Nicolaus.

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

We're hearing sort of the same bullishness on Gulf of Mexico offshore CapEx from some of the service and equipment guys out there. Being that KBR and some of the other E&C agencies are much later cycled, do you believe that Gulf of Mexico work can have a meaningful impact on bookings, probably mostly in 2013, or do you see it mostly as a FEED work starting to kick up?

William P. Utt

Well, I see it as having impacts in '13. I think when we first had the Macondo instant, we said we're continuing to be strong with Jack/St. Malo and Big Foot and the work we're doing in the Gulf, but we also said that our impact to be 18 to 30 months later, and lo and behold, here we are 18 months later and we don't have a lot of volume in the Gulf. So we think as it resumes, there's a natural cycle of beneficiation from that, we think the oil service guys and the drillers will have it first. And then eventually, the food chain will get down to the E&C firms like KBR and we're expecting that we'll start seeing these awards come in 2013. We may see some earlier FEED work but yes, you're going to see the big impacts -- you're not going to see any big impacts on this Gulf of Mexico work at KBR in 2012. It will be 2013, it may be towards the second half.

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

Okay, that's helpful. And then, Sue, since you took over the CFO role, your corporate G&As and divisional overhead expense have remained at a pretty darn good control. And in addition, you're CapEx has pretty much been in line with D&A. So I guess my question is, as you look at the growth that's coming down the pipeline for this company, where will KBR need to invest, because this will really be sort of the first growth cycle for KBR where investors will see it as a stand-alone company?

Susan K. Carter

Absolutely. Well, thanks, by the way, for the commentary on G&A and overhead. So here's how we look at it. There's obviously some areas with growth that you have to win, invest in and to make sure that you've got the right people on the ground to do all of the things that you need to do from a customer standpoint, from a control standpoint and all of that. So obviously, we're going to do those things. However, we're also going to sit pretty hard on G&A and business unit overhead, outside of those areas and outside of proposals, because it's great operating leverage for the company and it's also a good opportunity to make sure that as we invest in this ERP system that we're talking about, that we take full advantage of what it's going to provide for us in terms of automation and being able to do some of the same things with less people. Therefore, you don't have to go out and add. So I think it provides an opportunity for us to do even more work on that part of the business.

William P. Utt

Yes. I think as we wrap up the call, I think that was a good call because we are focused on the scalability of the business. We saw that 2 years ago, when we started having discussions on ERP, our Board approved the program last year, we're off to implementation and I think as this rolls out, I think Sue is very correct that we will be able to grow the business significantly with very small changes in what the G&A line would be at KBR. And we remain committed to spend what we need to spend, not necessarily what we want to spend. So thank you all for joining us, I know we've gone a little bit over your time, we appreciate your questions and we look forward to talking to you at the end of next quarter. Thank you.

Operator

And this does conclude our conference call for today. We like to thank you for your participation.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!