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Foster Wheeler AG (NASDAQ:FWLT)

Q3 2012 Results Earnings Call

November 9, 2012 10:00 AM ET

Executives

Scott Lamb - Investor Relations

Umberto della Sala - President and COO

J. Kent Masters - Chief Executive Officer

Franco Baseotto - EVP, CFO and Treasurer

Gary Nedelka - CEO, Global Power Group and President and CEO, Foster Wheeler

Analysts

Michael Dudas - Sterne Agee

Scott Levine - JPMorgan

Steven Fisher - UBS

Alan Fleming - Barclays Capital

Cindy - Credit Suisse

John Rogers - D. A. Davidson

Tahira Afzal - KeyBanc

Brian Konigsberg - Vertical Research

Rob Norfleet - BB&T Capital Markets

Will Gabrielski - Lazard Analyst

Robert Connors - Stifel Nicolaus

Operator

Good morning. My name is Christi and I will be your conference facilitator today. At this time, I'd like to welcome everyone to the Foster Wheeler Third Quarter 2012 Investor Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer period. (Operator Instructions)

Thank you. It is now my pleasure to turn the floor over to Scott Lamb, Vice President of Investor Relations.

Scott Lamb

Good day, everyone, and thank you for joining us. Our news release announcing financial results for the third quarter was issued this morning and has been posted to our website at fwc.com. The presentation we'll use has also been posted on the website.

Before turning to our discussion here, I need to remind you that any comments made today about future operating results or other future events are forward-looking statements under the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995.

Actual results may defer substantially from such forward-looking statements. A discussion of factors that could cause actual results to vary is contained in Foster Wheeler's annual and quarterly reports filed with the SEC. The company's Form 10-Q is being filed with the SEC later today.

We are hosting the call today from our office in Zug, joining me here are Kent Masters, our Chief Executive Officer; Umberto della Sala, our Chief Operating Officer and CEO of the Global E&C Group; Franco Baseotto, who is our Executive VP, CFO and Treasurer; and Gary Nedelka, CEO of our Global Power Group. After our prepared remarks, as always we'll have time to take your questions.

Now, I will turn the call over to Kent.

Kent Masters

Thanks, Scott, and good day, everyone. Thank you for joining us on the call. After my introductory comments, I'll ask Franco to summarize the consolidated business group financial results and the company's cash position. Umberto and Gary will talk about their respective businesses then I will comment on guidance.

So let's start with slide number two, where you can see the highlights for the quarter. Q3 was a very strong quarter for us compared to the average quarter of 2011. We had a 40% increase in our adjusted net income and 57% increased in our adjusted earnings per share. Perhaps the business headlines for the quarter is a record level of scope new orders in our Global E&C Group, which was due in part to the three big orders we booked and announced during the quarter. And EPCm contract for the El Palito Refinery Project in Venezuela, and a very large FEED contract for Petrobras for Gas petrochemical facility in Brazil.

As a result of the strong bookings our E&C Group backlog so the 31% sequential quarter increase to $1.7 billion. Continuing with the good news our Global Power Group reported an extremely strong margin for third quarter and Franco will tell you more about that in just few minutes.

As you can see here from the slide, who also active with our share buyback program during the quarter investing about $40 million, repurchase 1.9 million shares and an average price of $20.50.

In addition, FEED price in new and larger credit agreement, the new agreement gives us $750 million facility as compared to the previous $450 million agreement and we were able to reduce the net cost of the facility compared to what we'd previously pay, while giving our sales the additional flexibility that come to the larger facility.

And on that note, I'll turn the presentation over to Franco to cover the third quarter financials.

Franco Baseotto

Thank you, Kent. If you now turn to slide three, you will see the detail results for the quarter. Our adjusted net income for the quarter was $60.2 million or $0.56 per diluted share, as compared to $43.1 million or $0.36 per share in the average quarter of 2011.

The increase was due largely to a 41% increase in EBITDA in the Global Power Group combined with the lower effective tax. The effective tax rate for the quarter was 21.2% as compared to 24.9% for the average quarter of 2011. For the nine month period of 2012, our effective tax rate was 23.8% which is within the full year range of the mid to low 20s that we had previously provided.

Consolidated scope revenue during the quarter were like and below the average quarter of 2011 driven by lower volume of growth executed in both of our business groups.

One slide four, you'll see the summary of the financial results for our Global Engineering and Construction Group. EBITDA in the third quarter of 2012 was $52 million on scope revenues of $381 million.

EBITDA in the third quarter of 2012 was comparable to the average quarter of 2011 as increased profit on work executed was partially offset by an unfavorable utilization rate and higher sales pursuit costs. Two factors that we have - that has continue to be a headwind for us few year in the Engineering and Construction Group.

Scope revenues in the third quarter of 2012 were below the average quarter of 2011, due to delays and contact award that he had experienced during the first half of the year.

The EBITDA margin on scope revenue for the third quarter of 2012 was 13.7%, which is slightly above the average quarter of 2011 and which was aided by an increase in profit enhancement opportunities.

Going to slide five, you see that, our Global Power Group reported EBITDA of $65.1 million for the third quarter of 2012, a 41% increase from the average quarter of a year ago. A good portion of the increase was attributable to profit enhancement opportunities and royalty fees. Scope revenues in the Power Group in the third quarter of 2012 were below the average quarter of 2011 primarily as a result of the same factor I mentioned for the engineering construction business and there is delays in contract awards.

The EBITDA margin on scope revenues for the Power Group was 29.2% for the third quarter of 2012, which is well above the average quarter of 2011 and is in fact an all time quarterly record.

Again this is a reflection of good operating performance combined with profit enhancement and royalty fees. To a lesser extent the margin was also aided by the lower level of scope revenues.

If you turn to slide 6, you will see that our cash position remained quite strong at $788 million. Kent mentioned the share repurchase activity which you see summarized here, as of the end of September we had approximately $460 million remaining under our authorization.

And as we have said previously, we intend to be opportunistic in our share repurchases from quarter to quarter, taking into account a variety of factors such as share price and other potential uses of cash.

I will also listed here the new five years $750 million senior unsecured credit facility which as Kent already mentioned, as we improved terms and conditions and lower cost than the previous $450 million credit agreement.

And I will now turn the presentation over to Umberto to talk about the engineering and Construction Group.

Umberto della Sala

Okay. Thank you, Franco. Now turning to slide seven, you see here the track for new orders in regional construction group. Now I think many of you were expecting E&C to have a strong booking quarter, and I stress that we did not disappoint. We reported the scope new orders of $769 million which is a new quarterly record.

As Kent mentioned, too many large orders contributed to the strong booking performance for the third quarter. In previously press release the most of these contract awards, the El Palito Refinery in Venezuela and the Petrochemical facility in Brazil. So there is no need to repeat the other details. But I want to emphasize, that we'll continue to see a steady flow smaller and medium sized [contracts] and that is also key part to the big story for the third quarter.

Moving now to slide 8, we have listed here some of our more meaningful awards during the third quarter. The first two bullets are the large orders I just mentioned. And the third bullet you see here, we received a contract for incremental work on the Sadara Petrochemicals Complex in Saudi Arabia.

We will be taking sizable EPCm contract award but first renewal of the Sadara project. The first to build a [proper link] outside UAE, which was awarded in December 2011 and is currently being executed by our Thailand office.

The fourth bullet here is an EPCm contract for a rubber plant in Singapore, which is expected to be the largest plant of its kind in the world. For our client likes us, LANXESS is a German Chemicals firm that has been very active in Singapore and with whom we have built an excellent relationship over the past several years. The award that follows first year successful completion of the front end engineering design for this project earlier this year.

The next job is a contract for engineering and procurement for a grass root chemical plant in Asia, for a client with whom we have done a fair amount of work in the past.

Next job on the list is a very healthy win for us. This contract is with a major international oil company and this is a client with whom we have grown our downstream work in recent years, this is our largest win with this client and our first major upstream win with date.

Then you see two additional jobs that have not yet been press released. It's this is another EPCm contract for a chemical plant in Asia and a FEED contract for a large refinery upgrading project in Europe. Now, this European refinery project is one for which we believe, we will have a good opportunity for additional work once the FEED is completed.

Turning to slide 9. You see the scope backlog for the E&C Group. And since there are three important messages here, first we will derive model of scope backlog since the third quarter of 2009. Second as Kent mentioned in his opening remarks, scope backlog increased 31% on a sequential quarter basis.

Third, based on the pipeline of prospects that we have seen, we continue to believe that we will end the year with a very strong backlog level, certainly well above where we were at the end of 2011.

Moving now to slide 10, we summarized here our view of the market. These bullet points probably look very similar to what we told you on the second quarter investor quarter. The reason for that is that market conditions have not changed much following the course of the course of the past several months.

Clearly selective opportunities are emerging, and are gaining momentum across all of our [selling] markets and you see evidence in that strong bidding level for the third quarter. However, certain other prospects continue to slip and clients are still deferring decisions due to macroeconomic uncertainty. Anyway whether the [gross] moving forward are slipping the constant factor is the competitive environment which remains challenging. So the market environment is basically mixed, and that's reasons to be both optimistic and a little bit cautious.

We certainly have a very robust prospect list, and believe our fourth quarter bookings could improve some key projects, such the refinery project in the Middle East, and cogeneration project in Asia and strategy project in Canada, additional refining work in South America, additional chemical work in Asia and early work in related to North American gas mobilization project. And on that note I will turn it over to Gary to discuss the Power Group.

Gary Nedelka

Thanks, Umberto looking at slide 11, you can see that we reported a modest level of new orders for the third quarter of 2012, reflecting slippage of award dates for some of recommitted key prospects from 2012 into 2013.

Again is the remainder when we take committed key prospect this is a that has a very specific meaning, it means the client has given us an award letter, or some other exclusive indication that they will use our equipment or services as soon as they make a decision to proceed with the project.

On slide 12 you see the summary of the Q3 bookings the CFB boiler, a heat recovery steam generator and erection contract for the emissions reduction project in the United States.

Another notable part of the story is that we booked two design collaboration agreements for projects in Korea, of Doosan and BHI our licensees at Foster Wheeler. And this kinds of arrangements can enable us to participate in a wider array of projects, which may not otherwise participate.

Essentially, we are licensing specific technologies and providing related engineering design services. I would expect to see an increasing number on these kinds of contracts over time.

Turning to slide 13, you can see our backlog trend decline again reflecting slippage of award dates for committed key prospects. Our current expectation is that year end backlog is likely to be modestly below Q3 level.

On slide 14, I have summarized our view of the market. You've heard me say this in recent quarters, power generation markets globally remained relatively weak. We are now seeing the effects of the global slowdown of economic activity in Asia, even so that region remains and continues to offer the largest number of near-to intermediate term prospects for solid fuel generation.

The other bright spot for potential demand as I said previously is the Middle East which is showing real promise as the potential market for solid fuel power generation, specifically and opportunity to burn petroleum coke at some places coal. The market for emissions retrofitting of existing US power [clients] are going to unfavorably impacted by low natural as prices and election year uncertainties.

Now that the election is behind utility companies and regulatory agencies should have a better circle, how they may want to proceed within the projects in 2013 and beyond. Speaking of Natural gas I will state the obvious by noting, that it continuous to be the field of choice in the United States and Europe and elsewhere and that continues to be headwind for Foster whether if you expect our position as a provider of solid fuel boilers.

Even so due to low electricity demand growth, we have not yet seen a market expansion in natural gas power generation anywhere close to that experience during low gas price period ten years ago.

Even with these challenging conditions our standing as an unquestioned market leader in solid fuel flexibility continues to give us a competitive advantage in part for world a value a need this kind of power generation on that note I will turn back over to Kent.

Kent Masters

Thanks, Gary. We now turn to slide 15 this is our updated guidance for 2012. Let's start with global E&C Group where we are maintaining margin guidance, but lowering guidance from scope revenues specifically we expect the full year EBITDA margin on scope revenues to be in the range of 11%-13% no change there. As for scope revenues in E&C Group we now expect 2012 will be essentially flat as compared to 2011.

Our Global Power Group we are raising our guidance on margins for maintaining guidance on scope revenues the full year EBITDA margin on scope revenues in Power Group is now expected to within a range of 20%-22% and no change in our expectation for scope revenues in the Global Power Group we believe 2012 will be essentially flat as compared to 2011. We continue to expect that our earnings per share in 2012 would materially higher than they were in 2011.

Scott Lamb

All right. Thanks, Kent. Operator we're ready to go to Q&A

Question-and-Answer Session

Operator

(Operator instructions) Our first question comes from Michael Dudas, Sterne Agee.

Kent Masters

Hey, Mike.

Michael Dudas - Sterne Agee

Two things one, Franco utilization rates and bidding costs when do you expect to see maybe are fixed, maybe those improved to a better light. And secondly, could you talk about the economic activity from the boiler side China and on the engineering side in Australia? Thank you.

Kent Masters

Hello, Mike as we have said there continues to be a headwind in Engineering, Construction in the third quarter. Clearly the high booking level of activity in Q3 will have a positive impact in terms of volume, but I don't expect that to be material in Q4, so that's more of 2013.

Franco Baseotto

Then there is a question in engineering field in Australia. Now the situation in Australia, we have [contained] you know the final approach lead in for an computer and we are not falling with the cabinet prospects which I don't want give real ingredient to material base. But, so far nothing major going on. It's more a proposal year.

Kent Masters

Mike with respect to your question on China, we booked more projects in China this year, small PFP projects, but overall in China we have seen a slowdown in new boiler activity more for ourselves and for the Chinese domestic boiler makers as well. And that will be something that you would expect in following the huge build out that the Chinese did over the last few years and then looking forward at a slightly slower amount of growth in China.

Michael Dudas - Sterne Agee

Gary has already said that there is some activity potential in 2013, you know with the new government, with the monetary stimulus coming through in the country.

Gary Nedelka

Maybe some might, but I was yet to disclose a follow basic utility principals of building capacity to maintain a reserve margin and more of the stimulus that they have done as an engine to renewable projects, whether it would be wind, solar or infrastructure projects, as opposed to building it into traditional thermal power plants.

Michael Dudas - Sterne Agee

Thanks gentlemen.

Operator

Your next question comes from the line of Scott Levine with JPMorgan.

Scott Levine - JPMorgan

Hello.

Kent Masters

Hi Scott go ahead.

Scott Levine - JPMorgan

Okay, great. So, I think you just mentioned that some of the increased award flow in the E&C segment should result in improved work volumes in 2013. I was hoping you might be able to find a little bit more color in terms of the timing of the relationship. We talked in the first half of the year and your expectation seems to be that the markets are stable, you know improving here and there. Should we be seeing improved utilization with the margins in that business from the start of the year forward or take time to ramp up and reach what you'd expect to be more of kind of your peakish margin and utilization rates as 2013 progresses?

Franco Baseotto

I don't think at this point we're ready to provide guidance for 2013. So I think we'll have to stay with the qualitative comment that clearly we're seeing in E&C as Umberto mentioned the backlog there is going to increase compared to the level of backlog that we had for the current year and that is likely to that of course and increase volume. But with respect to what is the impact of the margin we'll have to wait for us to complete the full year plan and then we'll give you the margin guidance for 2013 and back on in time.

Scott Levine - JPMorgan

Okay, fair enough. Follow-up then I guess, you know and look at the award slate in both businesses obviously still very highly tilted towards overseas markets. I think you mentioned something about the emissions market in the US. So we might be able to elaborate a little bit further regarding your expectations for the US market. Broadly speaking and your thoughts on the energy and petrochemicals markets and some of these more shale gas driven energy markets and whether you expect them to come back meaningfully in '13 or whether your expectations will take a little bit longer?

Kent Masters

Okay, I'd like to speak a little bit to the US energy market, what we see there. Although we have got very attractive prices on natural gas in the United States, it still is not an overwhelming demand growth there. In fact if we look at electricity production and demand this year even over the summer, which is a very hot summer, it's basically at the same levels that it was four years ago or so. So there is nothing a huge demand for share requiring a lot of growth in even natural gas fired capacity.

With respect to the emissions, there were several court issued stays and overturns of EPA regulations last year and what we would look to see is over the course of this year that the EPA would recollect its stocks in the Zack activities and start to get the CSAPR regulations and the MATS regulations in place. I can't begin to predict whether that will be Q1, Q2, Q3 but I don't see a whole lot of activity moving until there is more clarity in those regulations.

Scott Levine - JPMorgan

Understood. One last one really quickly on the UK. I thought you had seen, recently you guys had opened up an offshore engineering office in that market. might be able to comment a little bit more on opportunities out of that office and also further thoughts on the growing the presence in upstream?

Kent Masters

Okay, so the thing about the .

Scott Levine - JPMorgan

Yes.

Kent Masters

Okay, well the biggest part of the development of our streak of abilities now, as you are totally aware we had ADR [Royal] Dutch group, you know we have upstream mainly onshore is ready, but we thought that we'll be able to recruit the large we have yet to set that ratio and that's basically working. That, certainly has been opened and we start mainly in the office, so we are in an active lease agreed during and this will support the business mainly in the EMEA regions.

Scott Levine - JPMorgan

Great, thank you.

Kent Masters

Okay.

Operator

Your next question comes from the line of Steven Fisher with UBS.

Kent Masters

Hi, Steven go ahead.

Steven Fisher - UBS

Just on the power side of things. Can you tell us on which projects you are experiencing those profit enhancements or when were they booked and to what extent do you have others coming to this point over the next year?

Kent Masters

I can to that. In general most of the process or the profit enhancements have come are jobs that were booked not in the recent past. Jobs that were booked when perhaps we looked at the supplier market and didn't think it will be as soft as it is right now. We have got to keep in mind that it's regionally a soft market for selling. So to the people who are selling to us and so for projects that we booked a year to 2.5 years ago. We are able to take advantage of those profit opportunities. On a go forward basis though right now it's a soft market for everybody selling so I don't see this being a continuing thing we're going to be able to [suck] these levels of contingences out of projects.

Steven Fisher - UBS

Okay, that's fair. Then I guess, over to Umberto on the competitive landscape. I know you said it's still challenging. I guess, I am wondering what changes you are seeing there. If any of you have seen any new Asian competitors expanding their presence in the marketplace and I guess there has been some debate over who is being more aggressive in bidding be it in the Asian companies or the western side. any view on that?

Umberto della Sala

Well, honestly I have not seen a really new players coming into the market. We have seen some of the usual very competitive, very aggressive operator in the Koreans and something like some of your kids, but as we go we don't compete with them. Sometimes we join forces with them as we have done for example in Venezuela, but no more of the changes in the market . If that is the question.

Steven Fisher - UBS

Okay, and I am not sure if I missed there is an answer to Mike's question, but the proposal cost is that going to be a headwind or tailwind over the next year?

Umberto della Sala

It's a big question. trading in the last few months we have quite a lot of money proposal to be able to make to book work. Now you should realize whenever you have we need to keep the people, we need to continue to work on the proposal so even that's spending more money in the proposal. Kind of this, the projects we have booked required the level of work to come up with the final agreement with the client. So, on a we have not yet developed our proposal budget for next year. So, maybe it's too early to say. But of course it is easy that we'd spend money, that would be related to bookwork. So…

Kent Masters

And it is a little bit, it is what it is, we are pursuing projects and I certainly continue to go after them, but there we'll have to spend a bit more money, but we don't give up and so it's difficult to predict if you don't the clients you are going to make decisions.

Steven Fisher - UBS

Okay, thank you.

Operator

So our next question comes from the line of Andy Kaplowitz with Barclays.

Kent Masters

Hi, Andy.

Alan Fleming - Barclays Capital

Fleming standing in for Andy this morning. How are you?

Kent Masters

Good.

Alan Fleming - Barclays Capital

Nice quarter. I wanted to start with the question on E&C awards. Can you maintain a more normalized run rate of E&C awards going forward or would that be more difficult to do after such a strong quarter of bookings. I don't want to use the term pull forward, but are you concerned that there could be a lull in the short-term and just how do we think about a more normalized run rate going forward?

Umberto della Sala

It's $1 million question. Now we have already given to you values on the fourth quarter, because you know where we are, we have been in this project with some into this issue. So overall I can tell you that we based on our prospect list we still have a robust prospect list and so going forward that for 2012 as you saw competition is tough. We still believe that we are well positioned to really project some of which would be in our [RSP] for a while, but I cannot tell you whether we are going to be at the same level for the whole of the next quarter, [so I know], but we see above the market.

Alan Fleming - Barclays Capital

Okay, thank you. You mentioned that some small and medium sized awards that could drive 4Q bookings. Can you talk about the mix of your prospect list in terms of small and medium versus kind of larger opportunities?

Umberto della Sala

You are talking about the fourth quarter.

Alan Fleming - Barclays Capital

…or just in general?

Umberto della Sala

You should that we typically book a lot as more of the medium sized projects and which of course - mainly which are not even press released and this represents the base of our bookings. So even in a low booking quarter, you still book small medium sized projects. Going forward we see major [bank], which leaves us with good deals going forward and then we see some large projects as well. But without, I don't believe we kind of leave all these with the major ones. We must have this pipeline to smoothly decide projects to be able to maintain the operational, [feed] the operation.

Alan Fleming - Barclays Capital

Then may be a question for Gary, what kind of conviction do you have Gary, that 2013 could be a better year for power bookings than 2012. I know you mentioned that backlog will be down modestly sequentially in 4Q. So are we getting close to the backlog bottoming here?

Gary Nedelka

Well, I think we have mentioned last quarter and mention again this quarter that we have a pretty large, pretty large list of prospective prospects that on a go get basis, if the project goes we get it. Whether those release in 2013 or earlier in the year, late in the year, I just, I wouldn't be able to give you the specifics in terms of exactly what the decision making process is in each one of these cases. Some of these are in Asia, which are possibly going to be affected by changes in governments in Asia. We have elections in Korea, there is a change in China, there is more in before. I am certainly optimistic that bookings will be better in 2013 than they are in 2012 and certainly we are maintaining the horsepower. I mean the horsepower to execute those if they come in, but exactly then I just don't know, but I am feeling pretty optimistic about 2013.

Alan Fleming - Barclays Capital

Okay, very good guys. I'll get back in line, thanks a lot.

Operator

Your next question comes from the line of Jamie Cook with Credit Suisse.

Kent Masters

Hi Jamie.

Cindy - Credit Suisse

Cindy on in for Jamie Cook. So, I guess could you guys just talk a little bit more on the E&C segment. I mean, when should we expect recent bookings to kind of kick in and then can we expect those bookings to have a little bit more help on margins?

Kent Masters

You have, in terms of the top line, you have our full year guidance of which we have in Q3 you have an idea of what we expect directionally for the next quarter. And as I said most of the impact in terms of volume from the new bookings is going to be in 2013, but once again we are not going to give any guidance on 2013 at this point in time. With respect to margin, the one thing I will say is that as we have said in previous calls we still don't see improvement in the absolute margins. So we have increased the volume of the bookings, but in terms of the booking margin we have not seen yet improved absolute margins and this is actually true for both of our business groups.

Cindy - Credit Suisse

Okay, and then on the power side then. Could you give a little bit more detail and then kind of quantify how much that profit and have some opportunities in those royalty fees that happened this quarter. How much did that help, and then how should we think about the margins that are currently in backlog?

Kent Masters

You have the information what we sort of changes in contract estimates in our appendix to the slide deck, but if you just did the math for the quarter it will impact the changes in comfort estimates in the quarter was 7% in terms of margin. That does not mean that you need to normalize it out of the margin, because of course we have those similar changes in comfort estimate.

In other quarter it was a bit heavier in Q3 than in prior period. We are not going to quantify the benefit in terms of marginal dollar of the royalty fees, you'll remember we did mention that that was one of the reason why the margin in Q2 was a bit lower than the average for the year and then those royalties were accrued in Q3. With respect to the full year you have our new margin guidance in the 20% - 22% range for the full year and that should probably in an indication of how strong the Q3 margin have been compared to what Q3 as a more sustainable run rate.

Cindy - Credit Suisse

Okay, all right. Thanks guys. I'll get back in the queue.

Operator

Your next question comes from the line of John Rogers with Davidson.

Franco Baseotto

Hi, John.

John Rogers - D. A. Davidson

I know you're not giving guidance and you don't want to comment too much on margins but the and you said the as sold pricing is the same, but how is the mix of work as you look at the you're bringing in. I'm not asking for specific guidance. But is it [book] what -- that you traditionally have done better on than what you've been executing over the last couple of years?

Franco Baseotto

Yeah. John. If you look at the changes in contract estimated , is an indication of our much leverage margin through execution have improved compare to DSO. So that's true.

Historically, we have done better in terms of execution than DSO margin because we have been able to convert some of the contingencies into profit, and we have been able - as Gary said, particularly in the Power Group to have some cost savings.

Now with respect to 2013, once again, it is likely still to be the case but in terms of quantifying the impact into margin guidance, you really need to have a bit more patient and that has completed the full planning cycle and provide you with a full guidance when we release the next quarter.

John Rogers - D. A. Davidson

Okay. I'll try and sit on my hands. As far as buyback, how many shares do you have out now if you've bought anything in the fourth quarter?

Franco Baseotto

Sorry, you ask the outstanding shares?

John Rogers - D. A. Davidson

Right. Downside. Okay. And have you bought anything in the fourth quarter?

Franco Baseotto

(Inaudible)

John Rogers - D. A. Davidson

I'm sorry.

Franco Baseotto

We've done - we will talk about the quarter that we are in.

John Rogers - D. A. Davidson

Okay. Okay. Fair enough. Thank you.

Operator

Your next question comes from the line of Tahira Afzal with KeyBanc.

Tahira Afzal - KeyBanc

Thank you very much. Congratulations on a great quarter. First question is just, I think the margin question has been beaten to death, so I'll parcel mine. And really move onto the second one. You talked about the power sector and your alliance says that some Korean companies such as Nissan. There have been several new paper articles including one recently Times talking about how Korean companies are leveraging and subsidizing loans to sell wins in international world and really offset the slowness now being seen in China and some of the Asian market.

So the question is really, even though you see a market, which has been very strong in China and that's probably moving down a bit now. Do you see some of your alliances pushing more aggressively on the power side in particular and could that help you offset and get more power award next year?

Kent Masters

Okay. Yeah. We are very active in Korea and work with the Korean EPC contractors. The two jobs that you saw that we refer to as license and design collaboration projects. Those are projects in the domestic Korean market and so our situation in certain domestic markets that make it difficult for cost to directly bid into and in those cases, we will license.

We also - I believe last quarter announced that we have a direct sale of a small CFV into Korea. So we operate domestically in Korea, both as a direct contractor to certain owners or there can be conversive conditions or requirement that are best serve by us dealing with a license. So that's for the domestic Korean market.

Moving outside of Korea, the Korean EPC contracts as you've said are very aggressive and the government very much supports them with financed packages, et cetera and encourages them to be very aggressive overseas. We are working with - we have worked and are working with Korean EPC contractors in Vietnam. We are bidding work in the Philippines with Korean EPC contractors. We've had work in Indonesia with the Koreans.

We are also looking at working South America with Korean EPC contractors. In those cases, the Korean EPC contractors' value technology, predominantly they are circulating and that becomes the driver for us to participate in those projects with them.

Tahira Afzal - KeyBanc

Okay. Great. And my second question is with regards to gas-to-liquids. When we read through and see the two opportunities in particular that have been announced by , it seems that Foster Wheeler might have an opportunity there. Would love to get an idea of how far you can take your scope if those projects do happen. When I look through a GTL component in terms of what's needed, they are very similar to projects that's probably done on the downstream in LNG side.

So, we'd love to get an idea of what might be different other than it's clearly been a very large and complex project being done in the U.S. and in North America?

Umberto della Sala

Okay. and should expect your question because your voice comes up and down. But in terms of gas-to-liquid, we have made sure that we expect to book some ordinary work on the gas-to-liquid project in North America.

We are not in a position to disclose the client, but we'll start seeing some activities and as we know we have done work, we have a relationship with but I don't think I can give more than that.

In terms of LNG, if you are referring particularly to North America, there is a number of project related to LNG project and waiting for final decisions that U.S. government total LNG net.

We are closely following the situation and we are working in one of them. But it's too early to tell you what's going to happen there. But certainly we are very actively following that market.

Tahira Afzal - KeyBanc

Okay. Thanks and just a follow-up on that. How would you say a GTL project is different? I know that some components of GTL are very similar to components on downstream and LNG projects. What do you see as something that could be different other than just the scale of the projects like that?

Franco Baseotto

Let me see whether I understood your question. You are asking me differently. Speaking on the project and the GTL project.

Tahira Afzal - KeyBanc

Yeah. In terms of components, is it highly complex? I'm trying to understand the risk level of doing a large gas-to-mix project in North America?

Gary Nedelka

But in terms of rich level, let's talk about the technology risk. Well, many times we don't have a technology risk unless it is our own technology. As an EPC contractor, typically we achieved clients an excellent technology. So we will see project designs strategies for alliances technologies. So we don't have a technology risk.

In terms of complexity, we are talking about complex projects . Some of the refinery units have been complex, certainly GTL and from a technology point of view, our complexities are , complex profit, large profit and you need to have technical capabilities and the knowledge of these type of units to be able to successfully perform in PCM. So that it's not - if your concern is the technology risk than it's not a technology risk. The risk is about institutional.

Tahira Afzal - KeyBanc

Thank you very much.

Operator

Your next question comes from the line of Brian Konigsberg with Vertical Research.

Franco Baseotto

Hi, Brian. Go ahead.

Brian Konigsberg - Vertical Research

Hey. Maybe just starting with - you talked about that as an area or region that where some projects are coming close to . There has been a lot of speculation in the press about you and another contract of winning EPC there. Maybe can you just give us you can, how active you are there, how close you might be to actually booking a contract and any color there would really be appreciated.

Franco Baseotto

Okay. Listen, there have been speculations in the market about this project. We are not in a position to really tell you much in that. What I can tell you that we are active in the entire area and certainly Kuwait is one of the countries in which we have an excellent track record. We have very successful projects. Our name is a big name, but I cannot give you more than that.

Brian Konigsberg - Vertical Research

I don't want to try. And secondly, I don't know sort of how much you can comment in this year but there has also some discussions that Foster might be dropped from the GES+ contract in Saudi Arabia, I guess because of your or the difficulty and establishing a local presence with I guess establishing in JV there, can you talk about where you are as far as solidifying a JV and any comments on your ability to remain within that program or not?

Gary Nedelka

Okay. I'm glad you ask the question because we had seen a number of big stabilization going in the market. Now the situation is lot worse. But as you know we are building to be GES+ contractor and under the GES+ contract you have the super period of time to reduce the company to get heavy duty license, without heavy duty license you can not perform GES+ services, okay.

So we started the process to the reduce company up to get the license these the process we one of the platform, we have two platform two local platforms. Because of those two agreements so you can not complete these process in time according to the require . What we have done drop to another platform we can not reach agreement and if perceivably this ratio of geometric company we growth the engineering license.

Now we are applying to I caught which that's why all competitors should believe -- to be eligible as a GES+ contract and we applying to in the meantime I would like to that we continue to we grow our relationship, very good relationship with we will also be growth will be 2011 and 2012 so that's the big issue the GES+.

Brian Konigsberg - Vertical Research

Got it. Thank you very much.

Gary Nedelka

You bet.

Operator

Your next question comes from the line of Rob Norfleet with BB&T Capital Markets.

Rob Norfleet - BB&T Capital Markets

Hey, how are you? Most of my questions have been answered, but just one in terms of capital allocation can you discuss a little bit obviously you increases the size and obviously getting buying back some stock can you discussed what you have been saying in terms of acquisitions are you still actively engaged and looking at transaction is there any somewhat feasible in your eyes in terms of protocol that make sense at this point.

Gary Nedelka

Okay. I will take that we are -- we continue to look for acquisitions and that number of different areas and we have been I think pretty concern about the areas that we are looking above, looking at on a continue look forward probably not closed anything significant at this point but we continue to look at that in FY into our capital allocation is part of that. I think that revolver the credit lines it's a bit opportunistic because the fees in the cost look there, we pick the opportunities we get a little bit for our largest facilities and lower cost at the same time. So, I don't think is anything match other than this is very opportunistic.

Rob Norfleet - BB&T Capital Markets

Okay. And just one other question during the past one market you all talked about hopefully growing it's mining and obviously we pulled up all the challenges that your competitors are saying on that landscape but once your process given the changes that we've seen over the last six to nine month demand in that sector that still a market that you also be growing or is that become more and more back part are now.

Gary Nedelka

Now, we feel like the space I mean it is -- all of that we play and we have prices are go up and down this is a cycle for the mining segment I better mean we lost interest mainly in the opportunity become more interesting form an acquisition standpoint but we continue the focus on that, we focus on growing that organic growth and looking at opportunities as you will but probably more prices to organically on the particularly mining space at the moment. But we haven't lost interest.

Rob Norfleet - BB&T Capital Markets

Great. Thanks for your time.

Operator

Your next question comes from the line of Will Gabrielski with Lazard.

Will Gabrielski - Lazard Analyst

Good afternoon can you talk about Dawso car and patchy frame agreements you haven't place in how those are progressing and what type of visibility you might have over the next few years on both front-end work but maybe being able to convert some EPC work as well? Thank you.

Gary Nedelka

Well, we have started to book work on the recent agreement this practically one of the this more medium size and more, what I mentioned before. We expect and by the way you have and our expectation is that they would be reduce in 2013 which specific elected to us the strong beginning.

Will Gabrielski - Lazard Analyst

Okay. Within U.S. refining one of your competitor talked about the potential uptake in activity I guess the change in crude shale coming from ?U. S. potentially that around of capital expenditures there sort of opposite what we saw few years in terms of always driving that spending can you talk about how your position for that in the U.S. specifically and whether or not you see that is a real opportunity over the next one to three years?

Gary Nedelka

Well, all those I mean seen real in the mid year refunding work in U.S. so far I believe that become you can see and improvement in the market that so far and that's too much. But growth that so far left do much.

Will Gabrielski - Lazard Analyst

No. I am never right, so and then lastly can you talk about how the feed for progressing on the LNG side and then from a timing standpoint when that completes and what your expectation would applying completion SD per PMC role or any other type of role.

Gary Nedelka

Between to them to allow these projects we will the timing of destroy that this is the one of the project they are looking for a expect. This relationts ane we work in late but you can have to produce the one we are going to BMC.

Will Gabrielski - Lazard Analyst

Okay. Thank you. Veryu god.

Operator

Your final question comes from the line of Robert Connors with Stifel Nicolaus.

Robert Connors - Stifel Nicolaus

Credit agreement at the time the significant cost savings so what is the impact on this new credit facility as it relates the cost savings?

Gary Nedelka

Yeah. Cost and then just there is follow-up to another question this current environment we are revolver is going to be primarily huge for the issue outside of the securities to support our core business and to our contracts rather than for capitalization and business flat we are able to introduce the issuance space for this bonds from the previous haven't had business plant to 75 basis point yearly cost saving and good terms and condition and famous going to be an lead in the of margin in 2013 but it's a nice, of course cost saving that we are going to add into the bottom line.

Robert Connors - Stifel Nicolaus

Okay. And then does being the feed contract on the petrobras, gas chem complex for heavy you from being EPCM from like it was with the premium refinery?

Gary Nedelka

I think enjoy feed contract that prevent according to the petrobras continue to EPCM, it is the fact I actually kind of petrobras management there are going to revision of the areas of the implemented projects and various chart we approach its these feedback refinery.

Robert Connors - Stifel Nicolaus

Okay. Okay. Its helpful.

Gary Nedelka

Thank you.

Robert Connors - Stifel Nicolaus

Thanks.

Operator

Your next question comes from the line George O'Leary.

Gary Nedelka

Hi, George go ahead.

Operator

My apologies, Mr. O'Leary disconnect, I handed call back over to management for any further comments or remarks.

Gary Nedelka

Okay. Thanks, operator so just to wrap up we feeling optimistic about the board momentum of the various projection in our E&C and power businesses and we please to deliver on our objective of the material increase in our earnings per share in 2012, all of you seeing many of you next week at New York in our investor conference. Thanks for joining the call. And have a good day.

Operator

That does conclude today's conference call you may now disconnect.

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