Q Stockholder Update Call

Transcription

1 Q Stockholder Update Call Jacque Hinman, Chairman and CEO Gary McArthur, Executive VP and CFO Natalie Eldredge, Director of Investor Relations January 20, 2017

2 Disclosures Forward Looking Statements This presentation contains forward-looking statements, as that term is defined in U.S. Federal and certain foreign securities regulations, including information related to our anticipated future operational and financial results, the amount and timing of charges and expenditures related to our restructuring activities, as well as the anticipated savings and operating efficiencies; business strategies; client market segment concerns; and growth opportunities. Although CH2M s management believes that its expectations are based on reasonable assumptions, these assumptions are subject to a wide range of economic, business, regulatory, technical, legal, and other unforeseen risks which may cause actual results to differ materially from those stated or implied by these forward-looking statements. Factors that could cause or contribute to such differences include, among others, our ability to manage the costs associated with our fixed-price contracts, our ability to maintain the liquidity necessary for our operations, difficulties or delays incurred in the execution of our contracts, difficulties or delays incurred in the implementation of our restructuring activities and changes in the level of activity in the hydrocarbon industry. We undertake no duty to update any forward-looking statement made herein. All forward-looking statements speak only as of the date of this stockholder call. This presentation should be read in conjunction with all the other information included in our most current Prospectus and European Prospectus, which are filed with the U.S. Securities and Exchange Commission (SEC) and the U.K. Financial Conduct Authority (FCA), respectively, and, for our stockholders outside of the U.S. and the European Union, similar documents filed with local securities regulators, where required. You should also read our Annual Report on Form 10-K, the related Amendment No. 1 on Form 10-K/A and quarterly reports on Form 10-Q, which include a more comprehensive list of factors that could cause actual operational and financial results to differ from those expected. All documents required to be filed with the SEC and other regulators are available via the investor relations website at ir.ch2m.com and on the SEC s website at 2 Third Quarter 2016 Results

3 Q3: Problem projects impact decent results Discussion agenda Revenue $ 1.28B Net Income $ 16M Revenue backlog $ 8.94B Revenue backlog year/year 15% Income per share $0.40 per diluted common share 1. Details on fixed-price, at risk construction projects, charges and steps taken 2. Review client-centric strategy performance and new operating model 3. Detailed review of Q3 results 4. Wins fueling backlog for future growth Q3 revenue declines six percent to $1.28 billion Charges on two fixed-price EPC projects drove operating loss of $108 million Non-recurring tax benefit of $46 million results in net income of $16 million Q3 revenue backlog healthy at nearly $9 billion; year/year decline reflects design-build projects winding down expected to be replaced in 2017 Fundamentally sound base business; transition to client-centric operating model 3 Third Quarter 2016 Results

4 Texas tollway fixed-price design-build project 11-mile tollway serving 180,000 vehicles per day Increased cost estimates to subcontract portions of remaining work, as well as for weather delays and schedule extensions increasing overall estimated costs for labor, materials, delivery and other expenses: Charge to operations: $66 M Seeking resolution of all outstanding change orders and claims via client negotiations and appeals to the Design Review Board for the contract CH2M forecasts exclude cost-recovery assumptions Central Texas Tollway Project Southwest United States 4 Third Quarter 2016 Results

5 Actions taken in the quarter and what to expect Actions Assigned a new executive sponsor Secured an independent, third-party review Appointed a new project oversight team Subcontract portions of the remaining work Expectations CH2M finishes work we are selfperforming very soon Subcontractors complete construction in the summer of Third Quarter 2016 Results

6 Australia fixed-price EPC Power project Last remaining project in business we re exiting; part of a JV to engineer, procure, construct and start combined-cycle power plant for liquefied natural gas facility in Darwin, Australia What happened: Schedule delays and increased cost estimates resulted in a charge this quarter: CCP-1 Lay Down Area CCP-1 Power Plant Consolidated JV charge: Our portion: $111 M 59 M Aggressively pursuing all change orders and claims CH2M forecasts exclude cost-recovery assumptions Combined-cycle plant Darwin, Australia 6 Third Quarter 2016 Results

7 Actions taken in the quarter and what to expect Actions Assigned a new executive sponsor Hired and appointed several new seasoned construction management and project leaders Conducted a thorough review with independent construction team Began implementing recommendations Expert specialized claims team prepared and submitted major claim Expectations Active discussions with client to obtain a clearer view of schedule Sharper edge in commercial approach 7 Third Quarter 2016 Results

8 New operating model Organizing around three client sectors national governments, state and local governments and private; providing a seamless face of CH2M Consolidating corporate groups and implementing common processes; reducing duplication New opportunities for our people; providing common career tracks for sales and delivery $ million savings annually Our new operating model is about aligning the company to our client-centric strategy, simplifying our organization and maximizing our potential to deliver innovative, unique and unexpected solutions without boundaries to positively affect our select clients, provide better development opportunities for employees and deliver higher levels of profitable growth. 8 Third Quarter 2016 Results

9 Q results New Gross Margin In Backlog 3% decline in Q3 contracted gross margin from new wins vs. a year ago; increase of 2% year-to-date $8.94 billion Revenue 6% decline to $1.28 billion vs. Q SG&A 17.6% of revenue vs. 16.1% in Q Q3 Net Income Earnings Per Diluted Share $16 million vs. $39 million from a year ago $0.40 vs. $1.22 in Q Third Quarter 2016 Results

10 Q business segments results Business segment Revenue Change y/y Operating income (loss) Environment & Nuclear $ 559 M 32% $ 29 M Water 298 M -13% 31 M Transportation 235 M - 6% (58 M) Energy & Industrial 211 M -27% (3 M) Power EPC (23 M) (107 M) Total $1,279 M - 6% ($108 M) 10 Third Quarter 2016 Results

11 Cash and liquidity $126M $423M $194M $130M Cash at September 30, 2016 Total debt outstanding up $121M, or 40% Unused available capacity under revolving credit facility Net cash used in operations for the first nine months of 2016, vs. $78M generated last year 11 Third Quarter 2016 Results

12 Stock price $46.83 Stock price per share for the February trade date 10% decrease from the price set in August Exclusions from Q3 stock valuation: Results of the Power EPC business Acquisition amortization Restructuring charges Material non-recurring tax benefit associated with the Halcrow pension plan redesign Eligible participants who wish to buy or sell common stock in their ownership accounts on this trade date will need to notify our broker, Neidiger, Tucker and Bruner, Inc. ( NTB ), no later than 5:00 p.m. MST February 1, Participants who wish to sell shares in their 401(K) account will need to notify Fidelity no later than 2:00 p.m. MST January 24, Third Quarter 2016 Results

13 CH2M Stock Price Compared with EFCG Peer Valuations Q EFCG Overall Range $0.9 to $1.9 Billion $900 $2,500 Public Market Comparables $900 $2,200 M&A Comparables $1,300 $1,900 CH2M Equity Value $1.53 Billion, $46.83 per share DCF Analysis $600 $800 $1,000 $1,200 $1,400 $1,600 $1,800 $2,000 $2,200 $2,400 $2,600 ($ in millions) 13 Third Quarter 2016 Results

14 Full-year 2016 and 2017 guidance 2016 Flat revenue Lower earnings than & 2017 Operating model change $90 $100M cost savings Healthy backlog Stronger year 14 Third Quarter 2016 Results

15 Environmental and nuclear wins Nuclear remediation follow-on work for a long-served national client Hanford River Corridor Closure continued environmental cleanup and site operations, including Environmental Restoration Disposal Facility 15 Third Quarter 2016 Results

16 Wins in water Thames Water Lee Tunnel named overall Global Project of the Year by trade publisher ENR Toronto, Canada; Fresno, California; Omaha, Nebraska; and City of Spokane, Washington Riverside Park Water Reclamation Facility next-level treatment supporting Integrated Plan focused on a Cleaner River Faster 16 Third Quarter 2016 Results

17 Wins providing transportation infrastructure Heathrow expansion has government greenlight to proceed Dubai 2020 World Expo rail extension: 14.5-kilometer metro transit line to the site of the Dubai 2020 World Expo Amtrak Gateway Program program management team delivering rail improvements to double passenger trains into Manhattan, New York City. Kuala Lumpur-to-Singapore High-Speed Rail technical advisor to MyHSR Corporation for 335-kilometer section 17 Third Quarter 2016 Results

18 Supporting the development of great cities National Western Center: City and County of Denver selected CH2M as program manager for redevelopment of the National Western Center, transforming 250 acres into a year-round destination and innovation hub for agriculture and agribusiness development. 18 Third Quarter 2016 Results

19 Energy and industrial technology wins Two large semiconductor manufacturing facility fit-up projects in Oregon from the same client that awarded last year s contract supporting development of the world s largest semiconductor plant in Asia Three-year contract renewal providing site-based engineering and design for another semiconductor industry leader s Idaho and Virginia sites Contract variation adding new gross margin for work serving a confidential energy client in the Middle East 19 Third Quarter 2016 Results

20 Closing remarks 20