URS Management Discusses Q3 2012 Results - Earnings Call Transcript

Nov. 6.12 | About: URS Corporation (URS)

URS (NYSE:URS)

Q3 2012 Earnings Call

November 06, 2012 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

Robert W. Zaist - President of Energy & Construction Business

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

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

Analysts

John A. Allison - BB&T Corporation

Alan Fleming - Barclays Capital, Research Division

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

Andrew Buscaglia

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

Steven Fisher - UBS Investment Bank, Research Division

Tahira Afzal - KeyBanc Capital Markets Inc., Research Division

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

Will Gabrielski - Lazard Capital Markets LLC, Research Division

Sameer Rathod - Macquarie Research

Operator

Good afternoon, and welcome to the URS Corporation Earnings Conference Call for the Third Quarter of Fiscal 2012. To begin, I'll turn the call over to Mr. Thomas Hicks, Chief Financial Officer of URS. Mr. Hicks, please go ahead, sir.

H. Thomas Hicks

Thank you. Good afternoon, everyone. Before we get started, let me remind you that today's call will contain forward-looking statements, including statements about our revenues, business prospects, book of business, earnings and financial condition, debt paydown, outstanding shares, tax rate, economic and industry conditions and other statements that are not historic facts. These statements represent our predictions and expectations as to future events, which we believe are reasonable and are based on reasonable assumptions. However, numerous risks and uncertainties could cause actual results to differ materially from those expressed or implied in the forward-looking statements. Information about some of these risks and uncertainties can be found in our earnings release and Form 10-Q for the quarterly period ended September 28, 2012, as well as in other SEC filings. And 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

Well, good afternoon, and thank you for setting time aside on election day to join us. Many of you met the team who are with me here in San Francisco. In addition to Tom Hicks, we have Gary Jandegian, President of our Infrastructure & Environment division; Gary (sic) [Randall] Wotring, President of Federal Services; Bob Zaist, President of Energy & Construction; Bill Lingard, President of Oil & Gas; Martin Tanzer, Executive Vice President of Marketing; Reed Brimhall, Vice President and Chief Accounting Officer; and Sam Ramraj, Vice President of the Investor Relations.

As you all have seen from our press release, we had another strong quarter. Revenues were at $2.9 billion. That's 19% higher than the third quarter of 2011. Our revenue growth this quarter and the robust profit and cash flow figures that I'll discuss in a moment reflect strong results from our Oil & Gas business in particular.

We acquired Flint Energy Services in May, and this is the first time that a full quarter of Flint's operations have been included in the quarterly result. And we could not be more pleased with the performance of our newly expanded Oil & Gas business. As you know, the strategic motivation for the Flint acquisition was to enhance our presence in the North American oil and gas market. The benefits are clearly reflected in the third quarter results.

Our Oil & Gas business, which generated 28% of our revenues this quarter, further diversifies our mix of business. By way of example, in the third quarter of 2011, our federal sector revenues accounted for 51% of total revenues. With the growth of our Oil & Gas business, federal revenues in the third quarter represented 37% of revenue. The oil and gas market is now a significant contributor to our profitability and growth. With market conditions expected to remain buoyant, we're all confident in the future growth and the increasing contribution of this business to URS.

On a GAAP basis, URS's net income for the quarter was $107 million, and EPS was $1.43. Our results include an after-tax foreign currency gain as $10.3 million or $0.14 a share. Now you'll recall that our results for the third quarter of 2011 included a noncash, after-tax goodwill impairment charge of some $699 million or $9.03 a share. Now after adjusting for both these items, net income for the third quarter of 2012 increased over last year by $19.6 million or 26%, and earnings per share grew by $0.30 or 31%. A reconciliation of net income and earnings per share reflecting these adjustments is provided in the Reconciliation Schedule on our website at urs.com and in our earnings press release.

Our operating results this quarter also include an incentive award for the early completion of key milestones at a large chemical weapons demilitarization site. And previously, we'd anticipated that a portion of the incentives earned this year -- year-to-date would not have been recognized until 2013. We continue to generate strong cash flow, and we delivered $279 million in cash from operations during the quarter.

I think many of you know that URS has a strong track record of quickly deleveraging after completing acquisitions, and our third quarter was no exception. We paid down $171 million in debt during the quarter, and we expect to continue to reduce debt in the coming months.

Now that we're in the fourth quarter of 2012, we understand that many of you are interested in our outlook for 2013. So our comments today will be focused on the trends that are expected to drive our performance next year. As I noted, conditions in the oil and gas sector remain very favorable.

Capital expenditures in the North American market are at their highest level in many years. And with Flint, we can now provide the full range of engineering, construction and maintenance services that increasingly are necessary to support large-scale projects. With the tremendous oil and gas reserves in the United States and the Canadian oil sands, we expect this industry to lead North America's economic growth. And we continue to see positive developments in the power sector. Emissions control projects, new generation facilities and nuclear modification work are creating additional opportunities for our business.

In the industrial sector, we expect to benefit from increased mining activity and the expansion of our operations and maintenance and facilities management services for multinational corporations.

In the infrastructure sector, we're benefiting from the availability and diversification of state and local funding for new highway and transit programs. And many of these will receive additional support from the new federal transportation program, MAP-21.

In the federal sector, we're mindful of the budget uncertainties and the political process that is yet to be completed. But many of our programs involve the provision of essential services that are less likely to face significant budget cuts. These include military preparedness initiatives, nuclear decommissioning and cleanup programs, cybersecurity measures and our support for the Department of Homeland Security, including the Federal Emergency Management Agency. And I'll have a bit more to say about that in a moment.

Now with that background, I shall discuss each sector in detail starting with the Oil & Gas business. Our third quarter Oil & Gas sector revenues were $828 million. That's a 362% increase from the third quarter of last year because our performance reflects the Flint acquisition, our underlying robust market conditions and a 31% organic growth rate in our legacy Oil & Gas business. As you know, we had a relatively smaller Oil & Gas business in the -- in URS before we bought Flint. Our Oil & Gas capabilities include engineering, construction and technical services to the upstream, midstream and downstream segments of the industry. Activity levels remain robust in the midstream and downstream markets, and the upstream market is stable and is benefiting from the shift in production from gas-related to oil or liquid-rich activities.

In the midstream market, the increase in liquid-focused drilling is creating new demand for the pipeline infrastructure and storage facilities that URS constructs. We recently won several new pipeline construction projects for clients operating across North America.

Our facility construction group continues to benefit from the high level of investment in the Canadian oil sands. In 2013, we'll begin the construction phase for several large steam-assisted gravity drainage or SAGD projects that support the oil recovery efforts. The increased activity in the Canadian oil sands also is leading to new bidding opportunities for our maintenance services. And we believe that our client relationships will enable us to expand these programs when new work is awarded next year. Our outlook for this year and beyond reflects strong organic growth opportunities and significant top line synergies that we already have begun to capture.

Now by bringing together URS's legacy engineering and construction management capabilities with Flint's construction and maintenance experience, we have expanded opportunities for both businesses. Our ability to provide full-service project delivery is enabling us to compete for larger and more complex assignments, because that was our strategy in doing this. Neither company could have pursued these independently.

In summary, we believe that our expanded capabilities and our $1.3 billion backlog positions us for the future. For 2012, we now expect that our Oil & Gas revenues will be approximately $2.3 billion, better than previously expected. As we look to 2013, we believe that our Oil & Gas business will continue to benefit from favorable market conditions, a solid book of business and our enhanced ability to serve a larger portion of this growing market.

Our power sector continued to perform well in the third quarter and generated revenues of $291 million. This is a 5.7% increase from the third quarter of 2011. Power sector revenues for the first 9 months were $910 million, a 9.5% increase from the same period last year, and the pace of bidding activity and contract awards remained steady. And we ended the third quarter with a backlog of $1.5 billion. We expect demand for our air quality and emission control services to remain consistent for the next several years.

In the new generation market, utilities are accelerating investments in natural gas-fired power plants to meet future capacity needs and to replace coal-fired facilities that have been retired. Currently, we are providing front-end engineering and design services on several large gas-fired projects. We expect that our early-stage work on these programs will lead to expanded scope in the next several years. We also anticipate that our nuclear clients will continue to procure services to meet the Nuclear Regulatory Commission's Fukushima-related requirements. And this work includes seismic, flooding and back-up power modifications.

The NRC has established deadlines over the next several years that require nuclear licensees to address these potential vulnerabilities. URS has more than 60 years of continuous experience on approximately half of the existing U.S. nuclear operating fleet. And so this, obviously, positions us to provide full-service engineering and construction services to address new NRC requirements. And we now expect that our power sector revenues for 2012 will be approximately $1.2 billion.

And turning now to the industrial sector. Third quarter revenues were $264 million, down 16% from the third quarter of last year. For the first 9 months of the year, our industrial sector revenues were $856 million, a decrease of 7% compared to the same period last year. Due to the substantial increase in our industrial backlog, we remain optimistic about the longer-term prospects for this sector. In fact, after Oil & Gas, the industrial sector at URS has generated the highest growth in backlog year-to-date. We've been successful in capturing new work as clients allocate funding for future capacity expansions. Our industrial backlog was $888 million at the end of the quarter, and this is a 27% increase since the end of last year.

Despite the recent slowdowns in certain segments of the mining industry, the outlook for our mining business remains positive. In Australia, we successfully moved a major iron ore project into the construction phase. We also won a new EPC assignment in excess of $100 million for a copper mine in Arizona. We expect a high level of construction activity on both these projects next year.

In the industrial manufacturing market, we continue to benefit from our facilities management and O&M work with multinational corporations. We recently expanded our scope of work with Pfizer and with Pratt & Whitney in North America. So we continue to expect that our industrial sector revenues will be approximately $1.2 billion this year.

In the infrastructure sector, third quarter revenues were $464 million, a 4.7% increase from the same period last year. For the first 9 months of this year, infrastructure revenues were $1.3 billion, a 5.1% decline compared to the prior year period.

There are signs that the recovery in infrastructure is under way. And today, there are more than $4 billion of bond referendums or infrastructure programs on the ballots in 9 states, and that's up from $1.9 billion 2 years ago. There also are several billion dollars of finance measures on municipal and regional ballots.

At the same time, and I think this is important, our engineering and design services work is increasing, which is a good indication that construction work will follow. Our infrastructure backlog has increased $60 million since the beginning of the year and totaled $3.1 billion at the end of the quarter. And many states are using MAP-21 and TIFIA funds, these are the federal programs, to advance large-scale surface transportation projects, such as the Tappan Zee Bridge. There also is a high level of activity on mass transit and on rail projects. A number of states, including Texas, New York, Michigan, Ohio and Florida, expect to award major contracts early next year.

Opportunities for our international infrastructure business also are increasing as European governments turn to infrastructure spending to stimulate economic development. And one example is the United Kingdom. The government is moving forward with its GBP 50 billion infrastructure program to upgrade roadways, rail and transit programs and high-speed rail across the country. And URS is well aligned with these programs through our existing contractual relationships. And as you know, in 2010, we significantly expanded our U.K. presence with the acquisition of Scott Wilson. And we continue to expect that our 2012 infrastructure revenues will be approximately $1.9 billion. And as we look to 2013, we remain optimistic that we'll benefit from increased infrastructure opportunities.

Turning now to the federal sector. Third quarter revenues were $1.1 billion, a 13% decline from the third quarter of 2011. During the first 9 months of the year, federal sector revenues were $3.4 billion, down slightly from the comparable period in 2011. And these results are in line with our expectations. The federal government continues to operate under a series of short-term continuing resolutions. The budget uncertainties have resulted in a slowdown in funding obligation for some of our federal programs as well as a delay in the award of certain new contracts.

While there continues to be a great deal of discussion about the federal budget, the long-term outlook for our business is good. By successfully diversifying our federal business beyond the Department of Defense, we now have a large and stable base of work supporting essential long-term federal programs. Many of these programs are funded through relatively secure areas of the budget. These include unmanned aerial vehicles and cybersecurity programs, which are fundamental to national security. We're also supporting the remediation of Cold War-era nuclear sites, which is mandated by both state consent decrees and by international treaties. Bidding activity is actually at the highest level in several years. This includes a number of competitions that will open new opportunities with the Department of Energy in the U.S., the United Kingdom's Ministry of Defence and other agencies. The URS team was recently awarded a 3-year extension on the Idaho Cleanup Project, one of the Department of Energy's largest nuclear cleanup sites. As a consequence of all this activity, we continue to expect that our federal sector revenues for 2012 will be approximately $4.5 billion.

And finally, many of you have asked us about the impact of Hurricane Sandy. Although we deeply regret the circumstances, I should like to remind you that URS is a leading provider of emergency response and recovery services following natural disasters. And we've been doing this sort of work for decades. The URS currently has 10 federal contracts to support assessment, recovery and rebuilding efforts, including arrangements with FEMA and various elements of the Department of Defense. Following Hurricane Sandy, we will mobilize under most of these contracts.

We're also assisting a number of state agencies and municipal governments in New York and New Jersey. For example, over the past weekend, we completed an emergency inspection of the Queens Midtown tunnel. In addition, we are preparing to conduct substation assessments for regional utilities. We are one of the largest engineering firms in the New York, New Jersey metropolitan area. And we expect the scope and tempo of our work to increase.

And with that, I'll ask Tom Hicks to discuss the financial results in more detail.

H. Thomas Hicks

Thanks, Martin. To summarize our third quarter results, on a GAAP basis, revenues were $2.9 billion, net income was $107 million and fully diluted earnings per share was $1.43.

Our results for the quarter included an after-tax gain of $10.3 million or $0.14 per share related to the intercompany loan we put in place as part of the Flint transaction. We recorded an after-tax charge of $6.4 million or $0.08 per share in the second quarter of 2012 related to this loan. So therefore, on a year-to-date basis, we've recorded a net gain of $3.9 million or $0.06 per share for this noncash item. There's also a $600,000 after-tax acquisition-related adjustment recognized in the quarter. If you exclude these gains, net income for the quarter would have been $96 million, and earnings per share would have been $1.28. A reconciliation of net income and earnings per share reflecting these adjustments is provided in the Reconciliation Schedule on our website at urs.com and in our earnings press release.

Interest expense in the quarter was $20.5 million and operating cash flow was $279 million for the quarter. We repaid $171 million of debt, resulting in a net debt of $1.9 billion at the end of the quarter.

DSOs were 89 days at the end of the quarter compared to 84 days at the end of the second quarter and 79 days at the end of 2011.

In the third quarter, our tax rate was 34%, and diluted weighted average shares outstanding were 74.6 million. CapEx excluding the equipment purchased through capital leases was $53 million.

Our third quarter results include a pre-tax expense of $31 million for the amortization of intangible assets. The amortization of intangible assets is expected to be approximately $100 million in fiscal 2012 and approximately $110 million in 2013.

On October 5, we paid a quarterly cash dividend of $0.20 per common share to stockholders of record as of September 14. And our next quarterly dividend of $0.20 per share will be paid on January 4 to stockholders of record as of December 14, 2012.

With the addition of Flint, we now report separate financial information for our 4 business segments: Infrastructure & Environment, Federal Services, Energy & Construction and Oil & Gas. And for the third quarter of 2012, Infrastructure & Environment reported revenues of $921 million and operating income of $67 million. Federal Services reported revenues of $683 million and operating income of $65 million. Energy & Construction reported revenues of $782 million and operating income of $65 million. And Oil & Gas reported revenues of $592 million and operating income of $29 million.

Our operating income margins for the quarter and year-to-date reflect several unique events. As we've noted in our prior calls, our revenues and profits increasingly are based on project milestones and incentives. And as a consequence, our results have become more variable from quarter-to-quarter. Accordingly, the margins achieved in the third quarter and year-to-date exceed our historical average and should not necessarily be assumed in future projections.

Our press release contained a detailed description of our book of business, including backlog, option years and indefinite delivery contracts or IDCs. We ended the third quarter with a book of business of $26 billion as compared to $27 billion at the end of 2011. Backlog was $13.8 billion at the end of the third quarter. The value of option years was $5 billion. And finally, we ended the third quarter with IDCs of $7.2 billion. Our backlog and book of business has been affected by an atypical adjustment that occurred during this fiscal year. We reduced our backlog by $560 million to reflect the Department of Energy's decision to remove the funding of a certain pension obligations from the scope of our contracts. And this had no impact on our profit or cash flow for 2012.

With that, I'll turn the call back over to Martin.

Martin M. Koffel

We're pleased with our third quarter results, and we're confident about our performance for the remainder of the year. And let me comment specifically on 2012 guidance.

As I noted earlier, we now expect that revenues from the Oil & Gas sector will be approximately $2.3 billion. Revenues from the power sector will be approximately $1.2 billion. Revenues from the industrial sector will be approximately $1.2 billion. Revenues from the infrastructure sector will be approximately $1.9 billion. And revenues from the federal sector will be approximately $4.5 billion. And based on these assumptions, we continue to expect that consolidated revenues for 2012 will be approximately $11 billion.

We now expect that earnings per share will be between $4.20 and $4.30 per share on a fully diluted basis. And I should like to remind you that our net income and EPS guidance is on a GAAP basis. It includes all of the Flint acquisition-related expenses, the currency fluctuations we discussed, the foreign currency losses related to the foreign currency forward contracts and the additional amortization of intangible assets resulting from the Flint acquisition. We now expect that our tax rate will be approximately 34%, but the rate may fluctuate depending on the amount of non-controlling interests that will be included in our results. And we also expect that the number of weighted average shares outstanding used to calculate our EPS for 2012 will be approximately 75 million shares.

So to summarize, the strategic mix of our business is working well. And we're confident in the outlook for the remainder of 2012 and beyond. With the addition of Flint, we've created a powerful Oil & Gas business that already is supporting increased revenue and profit growth for URS. And we are encouraged by the favorable conditions in the oil and gas market and the improving outlook for the infrastructure and industrial markets. Meanwhile, we enjoy strong positions in the federal and power markets and expect both of these businesses to be steady producers of revenue and profit in the years ahead.

So with that, we'll open the call up for your questions. Operator?

Question-and-Answer Session

Operator

[Operator Instructions] Our first question will come from the line of Robert Norfleet with BB&T Capital Markets.

John A. Allison - BB&T Corporation

This is actually John Allison on for Rob. My first question relates to projects related to the hurricane. I wanted to know if any of that revenue would be included in your 2012 guidance?

Martin M. Koffel

Probably not. We'll start staging that work. There could be some of it, but I'm thinking that it's more next year. There will be some -- let me -- to the extent that we have labor hours and we bill it, there will some there. But here, we're talking on a -- we're talking about an $11 billion run rate for this year. And it wouldn't move that very much.

John A. Allison - BB&T Corporation

Okay. And also in Oil & Gas, I noticed that your margin was around 5%. Is this lower margin due to acquisition and non-recurring expenses? Or should we view this margin as a run rate going forward for the Oil & Gas segment?

H. Thomas Hicks

The margin you're observing is after amortization of the intangible assets that were acquired as part of the transaction. This business is a 6%-plus business. So the difference between that and what you're seeing reported is really the effect of the amortization.

John A. Allison - BB&T Corporation

Okay, and one more. Can -- could you give us an update on what you expect accretion for Flint to look like this year? Is it still in the $0.50 to $0.60 range?

H. Thomas Hicks

We don't have any update for you on that. The number that you're quoting was before amortization and acquisition costs, and that number is still the best number we have for the year.

Operator

Our next question will come from the line of Andy Kaplowitz with Barclays.

Alan Fleming - Barclays Capital, Research Division

This is Alan Fleming standing in for Andy this evening. My first question is -- it relates to the oil sands. Can you talk about the level of activity you're seeing there? We've heard some talk of slowing CapEx plans from some of the larger players such as Suncor. I was curious if that's having an impact on your facility construction business and whether or not you're seeing any delays or evidence of projects getting pushed out.

Martin M. Koffel

We have Bill Lingard here. And I guess you probably saw that Wall Street Journal article. But Bill certainly would like to comment.

William J. Lingard

So what we're seeing in oil sands activity is still today record levels of activity for projects that are either in the works or just starting to ramp up. And you're seeing 2012 as a big jump over 2011 in terms of the amount that gets spent. And still the projections for 2013 and 2014 are further increases in capital spending for oil sands. The delayed projects or the projects people are still studying are mainly around mining projects, which would need a higher oil price to have good returns for the clients. The SAGD projects are were the ones that we're working on. And even at about $65 oil, those things give good economic returns for our clients. So we're not seeing any slowdown. As a matter of fact, when I look at my business for next year and what we have in backlog and what we've got in the business development hopper, we expect to be growing our business again next year. We expect to be probably adding in the magnitude of another 2,000 people next year.

Alan Fleming - Barclays Capital, Research Division

Okay, that's helpful. And then as a follow-up, if I could switch gears a bit and ask you about your mining business. Martin, you still seem relatively positive on mining. And I was wondering if you could kind of help us reconcile your outlook and commentary versus maybe what we've been hearing as slightly more cautious from some of the larger mining producers. What's driving your optimism? And are you concerned about an impact from a slowdown in spending?

Martin M. Koffel

Yes. So what we've all been seeing, and you've obviously been seeing, is first of all, the decreased demand from China and the effect on capital expenditure plans by the 2 or 3 largest global mining companies. And that has certainly led to the cancellation or deferment. I come from the mining industry, and I have to tell you that there's no such thing as a canceled mining project. There's a deferred mining project, and cancellation just means it's more than a few years out. Mining people love to build mines and they like to buy equipment. And that's how they make a living. So some large projects, particularly in Australia, have been canceled. We were affected, I think, and strained [ph] by one project. We have others going forward. We have projects in the U.S. going forward. We're in both non-ferrous metals and iron ore, and we have quite buoyant projects in both. And it's a question of where you fit in. I mean, if you've got a project and it's canceled, then you're hurting. If the projects you have, which is a situation that we're facing, are going forward, then you enjoy economic benefits. Bob Zaist, who runs our EC division which includes mining, is here to make some more particular comments.

Robert W. Zaist

Yes. Alan, I would tell you the reason we have maybe a contrarian view of the market is the fact that programs that we are involved with for the most part are going forward. As Martin said, we had a single project in Australia that was deferred. But the other projects that we're working on continue to move forward based on the customers' business plan and needs and commitments that they have made. And here in the States, likewise, the programs that we're involved with around the copper and gold industry as well as the industrial phosphate minerals business continues to move forward. And as a consequence, our short- to intermediate-term outlook is positive.

Martin M. Koffel

So precious metals and phosphate has not been cut back. It's large-scale non-ferrous and iron ore, particularly in Australia.

Operator

Our next question will come from the line of John Rogers with D.A. Davidson.

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

One thing is -- and I haven't been able to go through the Q completely. But as we look at the remainder of 2011, the fourth quarter, it looks like margins are coming down fairly significantly. And I know there's the chemical demilitarization fee in there. There's some seasonality. But especially with Flint and some [ph] of those, could you talk about sort of the seasonal effects and maybe help us a little bit as we start thinking about 2013?

H. Thomas Hicks

Well, John, let me first comment on this year and the fourth quarter that -- which you brought up. In the third quarter, we had a couple of unusual things happen. Martin already mentioned that we captured some early incentives on the Chem Demil business which, really, a lot of that fell in the third quarter, which really, really increased the margins in the fed services group. When you look at that, you'll see it pretty obviously.

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

And, Tom, that was $13 million is what I saw.

H. Thomas Hicks

Yes, that was the difference between '12 -- '11 and '12. That's not much of a pickup we had there. Then in the -- in Engineering -- in -- I'm sorry, in the Energy & Construction division, we had the true-up of a couple of projects that had completed, and we were waiting final billing authority, et cetera. So we had some pickups there that hit in the quarter. And in the IE group, we had some employee benefit adjustments based on bringing actuals in line with accruals there. So all of those things happened in the quarter. I tried to make a comment that we had some things going on in the quarter. None of those will reoccur in the fourth quarter. So that's really what's going on and why the margins look like they're coming down. It's better to look at the margins, as you know, on a run-rate basis on a full year. And that's probably more indicative of what you can expect going forward.

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

Okay, that helps. And specifically on the Flint business, I guess in terms of the seasonality of that business now?

H. Thomas Hicks

Yes. I'll -- it's -- it turns out that their best productivity is in the winter when they can move equipment in and out. And Q4 and 1 are their strongest quarters of the year. And it looks like it's ramping up this year to be the same. I'm looking at Bill, and he's nodding his head yes as we talk.

Martin M. Koffel

John, the important thing I think is that the margins that we achieved in the third quarter are unique to the third quarter. And I saw some new shift in the margin rate for the corporation as a whole on a permanent basis. John, you have been following the company for many years. And the thing that will have struck you is we now have a much more complex mix. Each quarter is a different combination of businesses and different events. And you just have to look at each quarter standalone. And then as Tom said, look at the annualized rates as you start thinking ahead, then take the low of any one quarter or the high of any one quarter.

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

But -- sorry, and Martin, especially on the Federal Services business, given the change in the mix a little bit with your customers, should we see higher margins in that business? Is it less procurement?

H. Thomas Hicks

Yes. It's Tom, John. Yes, you're right. That business has gone from less field service-type work to more value-added work in the IT area and in the intel world, as you know. And I think that combined with the continuing incentive fees, the potential awards as we go forward will mean that the traditional 4% to 6% operating margins there maybe are 5% to 7% going forward. And that's kind of what we expect in the Federal Services business.

Martin M. Koffel

All of which is very deliberate. We've been talking about cybersecurity and hiring IT work and moving away from the field services-type work for quite a number of years. And we've been executing that with the emphasis on the kind of pursuits we're making with the acquisition of Apptis last year and so on. So we are changing that mix on a permanent basis.

Operator

Our next question will come from the line of Jamie Cook with Crédit Suisse.

Andrew Buscaglia

This is Andrew Buscaglia on behalf of Jamie Cook. My question is on the power side. With the opportunities on -- specifically with air quality control, can you talk a little bit more about your thoughts on timing around some of the drivers there? And looking out into '13 and potentially after today's election if you think the visibility there clears up a bit.

Martin M. Koffel

Bob Zaist, who runs EC division, has a [indiscernible] long power background. He'd be happy to expand on that.

Robert W. Zaist

Yes. Andrew, I mean one of the things that has the market paused a little bit was trying to get a handle on where the regulations were going to go. And as you know in August, the Cross-State Air Pollution Rule, or CSAPR, was reversed in favor of the interstate rule, which was left in place. That coupled with the mercury and toxin substance regulations, which are referred to as MATS, are the 2 elements of regulation that will drive the business. As a result of these adjustments in regulations, the one dynamic that did happen is a market stretched out a bit with the compliance dates being adjusted somewhat. From our perspective, that's a good thing. It will allow us the capacity to address a greater number of opportunities over that wider spread. And we're encouraged by the pipeline of opportunities that we have out in front of us that we've identified coupled with the backlog that we already have brought in or are close to bringing in, items that are in negotiation. So we see that as a continuing good market for us for the next several years.

Andrew Buscaglia

Okay. And just outside -- one other question, outside of the power, I'm just leading into Oil & Gas. Outside of the Canadian oil sands, obviously that's a great opportunity for you guys. Can you talk a little bit about the environment outside of that and how you guys are feeling about that now? Looking at it not just in '13 but just beyond that, what you guys are seeing there?

Martin M. Koffel

I'll have Bill Lingard to comment. Remember that -- we think of Flint as Canadian oil sands. But Flint came to us with a substantial business in the United States, which is an excellent platform for us to grow and invest in, in the future. Bill?

William J. Lingard

Yes. Typically, about 25% of our business has been in the U.S. And even in Canada, about 20 -- about half our business is oil sands business, and about half is other types of oil and gas activities. So the shale oil plays in the Bakken, the Eagle Ford, the wet shales there, shale gas, the Marcellus, they've all been driving our activity a lot. And we're quite busy in those areas. And as you see the resource getting built out in the U.S, and the reserves, of course, are bigger than ever, the reserves are there, the clients have to build quite a bit of infrastructure, pipelines, facilities, compressor stations, booster pumps, storage facilities. There's a whole gamut of different types of facilities needed to tap into that resource. And we're seeing right now lots of deal flow. And being part of URS is helping with that a lot, because they'd already done quite a bit of process engineering prior. So we're able to do the construction side of the same projects that they've been doing in the engineering. So we're seeing lots of synergies. And the capital spend in the U.S. is about 5x as big as the capital spend in Canada, so the market's much bigger. We're a very small market share player. We think that if you look out over the next 2, 3, 4 years, we should be able to grow our U.S. business, as Martin has said strategically before, bigger than our Canadian business. So we certainly have many plans in place in many oil and gas basins. And we're active in all of the active basins. So -- and near term, we're seeing lots of opportunities. And we're actually out working together on a couple of jobs with major key clients with URS legacy groups, with the Flint crews out doing the work. So we're seeing the synergies quickly. And to expand just a little bit more, in oil sands, we were at capacity, and we could only do about 2 big projects at any given time. We're reaching back into E&C and even reaching back in the Federal Services and I&E some, but primarily in E&C, getting the senior construction guys, the project management guys. We've injected about 30 people out of Bob Zaist's group into the oil sands groups. And we're able to bid on and do a lot more projects and work in oil sands. So we expect that side of our business to grow as well. So we're already recognizing the synergies. They're coming faster than I thought they would, which pleases me a lot.

Martin M. Koffel

Like any good acquisition, Flint brought a number of things. It obviously brought the franchise and the capability. It brought a phenomenal experience, technical management team, all of whom have joined us. In fact, Flint has added 2,000 people since we acquired it in May of this year. And you heard Bill say that he plans to add at least 2,000 next year. The other thing it brought was -- remember, Flint was a freestanding public company. And it brought with it its own ambitions and its own strategic plans, all of which are now our plans. So Flint is our fastest-growing business with the Oil & Gas business division is our fastest-growing business. And we're going to back those plans in due course.

Operator

And our next question will come from the line of Scott Levine with JPMorgan.

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

So the infrastructure, I want to dive into that a little bit. The backlog has kind of held steady. It's up a little bit from the beginning of the year. And it's kind of steady over the last 6 quarters and really started to move up in the first half of '11. We now have a new highway bill, but it's shorter duration than where we're used to. I'm wondering if that provides a little bit of a shot in the arm in terms of award flow in that business. And at what point, as you kind of move into next year, do you need to see momentum start to move towards maybe longer-term solution to drive maybe growth beyond what might be just a 1-year or 1- to 2-year type of lift in infrastructure based on recent policy developments?

Martin M. Koffel

Here, the federal matching concept is very important. But as a practical reality, they are less important than they used to be. Federal funding used to represent 70% or 80% of any interchange freeway or any other piece of important infrastructure. It simply doesn't represent that percentage anymore. And with the political uncertainty over the last 3 federal matching funds, I mean, all of them went through absolute fits to get passed and never quite came out with the amount of money or the time duration that people hoped. What we saw was a considerable diversification at the state and municipal level. And diversification meant reaching out to entirely innovative fund sources, public-private partnerships, which never quite got going in the U.S. to the extent that it did in Europe. But sales tax measures, special use measures, all of which have been vigorously supported by the voters, bonds at the state level and the local level. And bond revenue is a very important source of it. In my prepared remarks, I mentioned the dollar number of the bonds on today's ballot where year-to-date, municipal bond issuances mostly for infrastructure are already at $279 billion, and obviously a larger number by year end, and if a decent proportion of those on the ballot are approved today, we'll see a lot more bonding next year. And as the capital markets improve and the economy improves, I think -- we're anticipating, if it's the right word, a recovery, so more buoyancy next year. And we see the funding sources in place. With the enormous network of offices we have and presence in every major city and state and then big international presence now, I think we're very well positioned. And Gary Jandegian, who heads that business, will make a few more comments.

Gary V. Jandegian

Scott, let me address the front-end work, which largely is performed by the Infrastructure & Environment division, where we do the permitting, the planning and the engineering and some construction management. Then I'll let Bob Zaist answer for the construction portion of our business in Energy & Construction. But we did see an increase in our revenue in the third quarter in the front-end work, up about 5%, and it's up slightly for the year. There are -- there is a mix in the way states are spending on infrastructure, but we're seeing improvement in general. And in fact, our front-end Infrastructure & Environment backlog is up about $142 million from year end. And it currently stands at about $1.7 billion of backlog. The U.K. is also growing its infrastructure revenue and backlog, so positive signs since MAP-21 was enacted. We also have about $20 billion of TIFIA loan guarantee money that's come into play to bring a portion of that mix that Martin described in the funding mechanism. So we feel that the state's recovery and infrastructure is under way. And I'll let Bob Zaist talk to the construction side.

Robert W. Zaist

Scott, from our side of the business, we've got a number of large opportunities, particularly centered around the light rail part of the business, that is very active right now in various stages of either negotiation or procurement. We were recently awarded the Atlanta Streetcar program, which is about a $50 million program that we are just getting kicked off on. We've got several large highway-related programs that are also in the competition phase. So we're happy with the pipeline that we have out in front of us, that is on the visible horizon. And I think with the funding mechanisms that are in place and in the level of work that we're seeing on the front end with Gary's business that it will continue to replenish that pipeline on a go-forward basis.

Operator

Our next question will come from the line of Steven Fisher with UBS.

Steven Fisher - UBS Investment Bank, Research Division

Question for Tom or Bill. Can you just tell us what the organic year-over-year revenue growth of the Flint business was in the quarter? I'm wondering if you can say how the U.S. piece is performing year-over-year versus the Canadian pieces.

H. Thomas Hicks

Yes. I can't tell you that because of the way we've amalgamated things. But I can tell you it's grown. There's no question there's year-over-year growth in both parts of the business, both the U.S. part of Flint and the Canadian part. When we give you guidance for next year, you'll have some real -- at the end of the year, we'll have some real hard numbers for you about how things turned out. But in general, we're very, very pleased the revenue and performance of the Flint acquisitions is at or above what we expected when we bought the company.

Martin M. Koffel

I mean, a good proxy for giving you a number is just the fact that Bill's hiring people. As I said, he's hired 2,000 people net since we acquired Flint and is looking to hire more.

Steven Fisher - UBS Investment Bank, Research Division

Okay. And then the Oil & Gas backlog was down a bit sequentially. Can you just give us a little color on that?

H. Thomas Hicks

Yes, it's the same phenomena that we see in the E&C division that we have. It's the large projects that get booked, and then they get burned off. And in this case, this is just a phenomena of some things that were booked over the last few quarters that are starting to get burned off. And I think Bill will tell you, as he said earlier on the call, that there are multiple targets out there that are in place to replenish that backlog. So we don't -- we're not too concerned about it going forward, and Bill would like to comment on that directly.

William J. Lingard

Yes. The way the backlog comes in the facility construction for Oil & Gas is in large lumps. And you'll get contracts worth $400 million or $500 million at a time. So -- and we've got quite a few of those that we're negotiating on. So I'm not worried about the drop-off in backlog at all. It's a normal way for it to come back. And on the size of the quarter, just to comment a little further on that, what I can tell you is we're are as big when it comes to how many employees we have as we've ever been as Flint. And I would expect that 2013 would be a record year for us. So it looks very good, good growth.

Steven Fisher - UBS Investment Bank, Research Division

Okay. And then just wondering if you can comment on where you guys are in the life cycle of these chemical demilitarization fee opportunities. Just wondering how much is left.

H. Thomas Hicks

Yes. The -- as you know, those programs have been in place and been ongoing for many years. And I think we've told you before and we've reported before that '12 would be the peak year for incentives and awards. There's a good -- I think it's 3 solid years left, '13, '14 and '15. And then beyond that, there's opportunities to do more at those sites. But it will be coming down next year as compared to this year. It's a little early to be projecting that. We're working on the plans for next year right now. And a lot of it depends on the progress we make this year as to what's available for award next year. But it is coming down for next year.

Operator

Our next question will come from the line of Tahira Afzal with KeyBanc Capital Markets.

Tahira Afzal - KeyBanc Capital Markets Inc., Research Division

I guess my first question is, if I look at the operating income that your Oil & Gas segment contributed in the quarter, and let's assume that it's prorated for the full year, and you really look at the incentive fees you've gotten from the Chem Demil so far this year, it seems like they sort of offset each other. So as you look at 2013 outside of any outsized incentives and outside of Flint growth, should we be looking at a flat year?

H. Thomas Hicks

Well, that's -- it's a little early for us to tell. As I commented on the last question, we're putting our plans together now. And you're right, Flint will make up a lot of the difference from the downturn in the Chem Demil. Chem Demil is still generating a lot of profit for us, just not as much as it has in its banner year. But then Oil & Gas will have a full year, and we'll have a -- and the prospects look very good for next year for Oil & Gas. So it really depends on the rest of the business and how infrastructure and some of the other big construction projects and power do. But it's -- frankly, it's a little early for us to speculate on that for next year, but it will be a good solid year next year. We just -- I just don't know what level of growth we might have.

Martin M. Koffel

But as we said -- Tahira, as we said in the prepared remarks, there are some unique aspects to the third quarter which we wouldn't -- and some of those elements we would not expect to be repeated.

Tahira Afzal - KeyBanc Capital Markets Inc., Research Division

Got it, okay. And I guess my second question is if you rewind to when you gave us revenue guidance earlier on this year, you were very comfortable around the high ramp on the power side. And subsequently, you've had [indiscernible] down. Most of all -- the regulatory environment and macro visibility was, if anything, company-specific. But this is the second year we've seen some of the segment revenue targets being brought down. As we look into 2013, what is the lesson, I guess, in terms of setting those segment revenue guidances that will probably be factored in to be a little more comfortable with that macro visibility and regulatory trends that are factored in?

H. Thomas Hicks

Tahira, that's a good point you make. And I -- we probably do ourselves a disservice by being so specific about the guidance for each of our sectors. And we probably, to be fair to you and the other analysts that follow, should give you a little wider range for each. Because it's very difficult to get to the nearest hundred million dollars on a $2 billion or a $1.5 billion business because of the lumpiness of some of the issues we've talked about. We had in one of our businesses recently a customer deciding they were going to purchase an item rather than have us purchase it. And that didn't really affect our profitability on the project. It just moved that from a contractor-furnished to a customer-furnished item, which wiped out several hundred million dollars of revenue and -- but had no impact. So that's the kind of thing that goes on. I mentioned earlier that we had some backlog changes because DOE wanted to fund pension through a different contract vehicle than the one that we had. Once again, no impact on our financial performance, but really skews the revenue from period-to-period and year-to-year. So one thing we'll be sure of next year -- and Sam and I -- Sam Ramraj and I have been discussing this to give you a broader range on each of these areas, so that we can encompass the kinds of lumpiness and changes that we've encountered and not really mislead you or any of the other analysts that follow us.

Operator

Our next question will come from the line of Andrew Wittmann with Robert W. Baird.

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

I wanted to just dig in a little bit more into the guidance. And it was like the chemical demilitarization is coming a little bit sooner and the gain that was recognized in the quarter. When I look at that vis-à-vis the guidance, kind of feels like guidance maybe should have moved a little bit higher. Was that a third quarter to a fourth quarter timing? Or -- so would you explain the -- maybe the lack of a guidance raise and above what you did do?

H. Thomas Hicks

Well, we had -- as always, as we look at this, Andrew, we try to bring everything up to date as best as we can. And we had a bunch of moving parts. You hit on 2 of them, but you left out one, which I didn't emphasize in the call. But our tax rate actually has creeped up a bit. And it has offset some of the positive things that happened in the quarter. So that's -- we went from 33% to 34% as our expected rate, which doesn't sound like a big move. But when you're talking about taxable income of $400 million or $500 million, it's a big impact in one quarter. The other thing I would tell you is that on the currency fluctuation, we had a loss in the first -- in the second quarter. We had a gain in this quarter. And when we originally gave you our guidance, we assumed that it was going to be neutral. And so therefore, we expect still included in our guidance is an adjustment to soak up that gain for the rest of the year. So all that taken together, we've given you our best estimate of where we'll be at the end of the year for the $4.20 to $4.30 number.

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

Okay, great. And then just -- and this is just kind of an accounting thing. But in terms of that FX, the $10.8 million pre-tax, is that number not taxed? Because if you do tax them, we'll get a number of accretion more like $0.10 rather than the $0.14. Is that not -- you don't tax that when you look at the EPS impact?

H. Thomas Hicks

Yes, it's insidious. If we get a gain, it gets taxed at one rate. If we have a loss, we can't deduct it. So the tax rate -- it's not fully taxable, and therefore, you see a bigger tax impact than you would -- an after-tax impact than you would expect.

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

Okay, that is complicated. So then -- and just -- and the CapEx, it looks like CapEx kind of sequentially stepped up there. Is that kind of a -- -- is that a more normalized run rate now that Flint is in the -- part of the business? Or was there something that was unusual in terms of the CapEx level for the quarter? And I'll be done.

H. Thomas Hicks

Our CapEx will go up because Flint is more capitally intensive. But the run rate for the quarter is not an annualize-able number. We -- there's some catch-up to do in the acquisition. Some things were put off for a while. So we caught up some things that the Oil & Gas division needed to do. And then going forward, we will probably look more towards capital leases for some of that activity. So I wouldn't -- I'd wait for our guidance for next year. But it will be higher than this year, but it won't be as high as annualizing Q3.

William J. Lingard

Just as a clarification here. Flint is relatively more capital-intensive than, say, the consulting business, but it's not a capital-intensive business. For $1 of revenue or profit, it will take a little bit more capital. But URS emerges from the Flint acquisition actually not being capital-intensive. We'll have a lot of net free cash flow.

Operator

And our next question will come from the line of Will Gabrielski with Lazard Capital Markets.

Will Gabrielski - Lazard Capital Markets LLC, Research Division

Can you talk a little bit about the shorter-cycle businesses within Flint's fluid handling and rig moving? And I guess what the impact has been from the softer Canadian rig count? And then also how you're doing moving maybe more into the North American market, any progress you've seen to date, with specific emphasis on pricing and competition right now?

Martin M. Koffel

So here's Bill Lingard back.

William J. Lingard

So rig counts in the U.S. have not dropped much. They're still hanging up pretty close to 2,000 rigs. And our activity levels on that kind of early-cycle upstream business have been pretty robust in the U.S. Our fluid services business and our rig-moving business in the U.S. is quite strong. And we're in the right markets. In Canada, with only about 400 rigs working out of the 800 in the fleet, it is slower -- lower percentage utilization. And while we're making pretty good money, we could be making a lot more money in -- and particularly in Southern Alberta, where it's gassy areas in some of the foothill - foothills gas areas, where typically, we would have had strong revenues from that early-cycle business. We -- I mean, we're still doing fine there, but it could be a lot better. The margins could be better there, and activity levels could be better. So it's -- we've been feeling all year the effect of some slowdown in that early-cycle business. But the midstream business is still quite robust and quite strong because of all the oil-focused drilling.

Will Gabrielski - Lazard Capital Markets LLC, Research Division

Okay, that's helpful. And then if you can talk maybe on the Federal margin side. I just wanted to make sure I understood you guys clearly. But if we were to, like you said, look at the run rate margin this quarter, call it mid-7s, is that the way we should think about the business going forward? Or should we think about there still being a little bit of risk around that just given the uncertainty in Federal? Or does mix offset that enough so we can stay in that mid-7s range?

H. Thomas Hicks

Well, we traditionally have said that our Federal business is a 4% to 6% business. And we've actually -- as we said earlier, Randy's moved that business to a higher-margin business. On top of that, we've also benefited from these large incentive payments. So that's -- the message we're trying to send in the third quarter was you won't see margins at the level of third quarter going forward. You will see margins at the higher end of that range that we talked about, the 5% to 7% range. And I think when we get our plans finalized for 2013, we'll have a better view as to what those margins really can be. We have a lot of activity -- bidding activity under way and a lot of big programs that are ending and new stuff that's starting up. So we'll have a refresh on that whole margin outlook for Federal Services for '13 going forward. But the only thing maybe I'll tell you for sure is Q3 is a tough-to-repeat quarter given the margin that we enjoyed.

Martin M. Koffel

Yes. I mean, I think that message is don't reset your expectations of our Federal margins to the Q3 margin level.

Will Gabrielski - Lazard Capital Markets LLC, Research Division

No, understood, okay. And then correct me if I'm wrong, but I think beyond Chem Demil, it's been the vehicle maintenance and repair that's been a big driver within Federal. Maybe an update on how that's going, what your visibility is like there and if there's anything materially changing over the next 12 to 24 months.

H. Thomas Hicks

Randy Wotring is here. He'll answer your questions.

Randall A. Wotring

As Tom indicated, we still have a robust pipeline of opportunities in front of us. The operations and maintenance activities remain high. And with the wind-down of the war, we still do see that 2-year tail that we've talked about previously for -- to get the equipment ready again. Readiness activity that will be in place for, again, 2 years is what we expect. But other than that, we see robust pipelines across all of the markets. And particularly, with the acquisition of Apptis, we've been able to increase the -- our ability to address IT -- high-end type, IT-type of opportunities. We're very pleased with our bidding activity. And as soon as some of the budget uncertainties go away here, and I think the election today will take away some of it, and then when we finally get our budget in place and some of the continuing resolutions, it will really help our customers make decisions and move forward. So we think there's great opportunities across the board at Federal.

Will Gabrielski - Lazard Capital Markets LLC, Research Division

Okay. And then just one last question for Martin, and I guess with Flint, in adding essentially what I'll call self-performed construction exposure to the business mix. As you've gone through this process now over the past 7, 8 months, has it in any way maybe changed the way you view the industry and what you think about complementing self-performed construction in any of your other segments where you think you could see a similar synergy?

Martin M. Koffel

Bob Zaist will comment, and I'm going to comment after him.

Robert W. Zaist

Yes. Much of our part of the business is self-performed. We -- our power business is almost exclusively self-performed except for specialty contracts. Our industrial and our portion of the Oil & Gas business is self-performed, as is our work for the Department of Energy and the U.K. NDA. And about half of our heavy civil and infrastructure-related and mining business self-perform. So it's not a new dynamic for URS. It's merely an expanded dynamic with the addition of Flint.

Martin M. Koffel

The self-perform in itself isn't challenging. It's the commercial terms of the contract. And as you know, URS generally is averse to fixed price. It doesn't mean we don't do fixed price. We do fixed price where [indiscernible] it's called self-performing. But where we've done a lot of work for that kind of customer or that customer in the past and we know what we're doing. Flint has a very similar risk profile to URS, which is one of the attractions. Bill is highly averse to fixed-price work, which doesn't mean he doesn't occasionally do it, but he really does know what he's doing when he bids on it. So I'm not at all uncomfortable with the mix, and it was a natural evolution for us away from our origins as an engineering firm.

Operator

Our next question will come from the line of Sameer Rathod with Macquarie.

Sameer Rathod - Macquarie Research

Just a quick question, maybe longer term on the oil sands. How do we think about that market longer term with the growth of light oil production here in the U.S. and seemingly strong opposition against the Northern Gateway and other pipelines? Do we think structurally there'll be lower growth in the oil sands? Or are these just near-term concerns?

Martin M. Koffel

So here's Bill again.

William J. Lingard

So what I see is that even though we have a lot of wet oily plays in the U.S. and in North America, in Canada, the oil sands is the big part of the solution to North America's energy independence. And it is a safe, reliable source of energy. If you look at the consumption in the U.S., some 19 million barrels a day, and you look at the amount that's being produced, I think about 9 million a day, so there's a good 10 million a day or more being imported. So -- and to go from 1.2 million in oil sands to 3 million or 1.5 million to 3 million, we're going to be able to do that over the next few years. It will be a good part of that solution. And the opposition -- the pipelines, no matter what happens in the election today, it sounds like the opposition to Keystone will go away. And there's certainly other pipeline projects on the books and other ways to -- other than Keystone to get oil to the U.S. And TransCanada and Kinder Morgan and other are coming up with unique solutions. So I got to believe that, that is a big part of the solution in the future. And we certainly see that when it comes to capital spending, I think we're at about $16 billion last year, about $20 billion this year. Predictions for the next couple of years are up around $22 billion a year being spent, capital spending for oil sands. And there's a lot of projects by some big major oil companies that are very aggressive at going after this, because the reserves are so big. You got 175 billion barrels in place there, recoverable. So it's a big, big reserve.

Operator

That concludes today's Q&A portion of the call. I would now like to hand the conference back over to Mr. Martin Koffel for closing remarks.

Martin M. Koffel

Thanks for joining us. I can tell from your questions that you readily grasped that Flint has been a success, not just as an acquisition, but it really has positioned us strongly in the Oil & Gas business. 28% of the revenue mix to the quarter, that's indicative of where we'd like to be. It's a strong business, and it's growing well. And we have -- as you've heard, we've got very good management on it. We quite clearly had a very good quarter. I mean, Oil & Gas contributed, the special circumstances of the Federal business contributed. I can also tell from your questions that you understand that while there's a very solid underlying Federal business, there was a uniqueness to the Federal profit in this quarter. And that I'm sure you'll be careful not to reset your expectations too wildly based on the award fees that we had in the fourth quarter. But other than that, all the businesses are good. We love the portfolio we built, and we're having great fun running URS. And we'll report the fourth quarter at the very end of February or the very early days of March. And thank you for joining us.

Operator

Ladies and gentlemen, this does conclude today's conference call. You may now disconnect.

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