23rd Annual Engineering & Construction CFO Roundtable and Tax Director Workshop
Opening Remarks
Erin Roberts, Americas Leader of Engineering & Construction
Las Vegas, NevadaSeptember 25-26, 2017
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Disclaimer
► Ernst & Young refers to the global organization of member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young LLP is a client-serving member firm of Ernst & Young Global Limited located in the US.
► The Ernst & Young organization is divided into five geographic areas and firms may be members of the following entities: Ernst & Young Americas LLC, Ernst & Young EMEIA Limited, Ernst & Young Far East Limited and Ernst & Young Oceania Limited. These entities do not provide services to clients.
► This presentation is ©2016 Ernst & Young LLP. All rights reserved. No part of this document may be reproduced, transmitted or otherwise distributed in any form or by any means, electronic or mechanical, including by photocopying, facsimile transmission, recording, rekeying or using any information storage and retrieval system, without written permission from Ernst & Young LLP. Any reproduction, transmission or distribution of this form or any of the material herein is prohibited and is in violation of US and international law. Ernst & Young LLP expressly disclaims any liability in connection with use of this presentation or its contents by any third party.
► Any US tax advice contained herein was not intended or written to be used, and cannot be used for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions.
► These slides are for educational purposes only and are not intended, and should not be relied upon, as accounting advice.
► The views expressed by speakers at this event are not necessarily those of Ernst & Young LLP.
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Welcome!
►Safety moment►Agenda for the day and logistics►Market Perspectives►Survey Results
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Safety Moment
►Alarms►Emergency exits►Assistance
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Agenda
► WIFI – EY2017► Conference website:
http://www.ey.com/us/en/home/2017-annual-cfo-roundtable-and-tax-director-workshop
► CPE – sign in sheet BOTH DAYS► CFO and Tax Directors together until 2:15pm today
► Focus on the market environment► Solutions Café
► Drill down into finance and tax topics in the afternoon► Dinner tonight – please confirm your attendance► Tuesday is a focus on Accounting and Regulatory topics► Formal session wraps at 11, and Revenue Recognition Summit will
begin at 11:30, and end by 1:30pm
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Perspective
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Disaster Strikes
► Harvey► 55 inches in under 5 days – heaviest
rainfall in US recorded history ► 20 trillion gallons – same as if
Niagara Falls spilled into Houston for 15 days
► 82 people lost their lives, 200,000 people lost their homes
► Irma ► Category 4 hurricane forces
mass evacuations► 65% of the houses in the Keys
sustained major damage► 6 million homes without power
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Disaster Strikes
► Hurricane Maria► Immediately following Irma through
the Caribbean► 3.4 million Puerto Ricans without
power for a month► 19 lives lost
► Mexico Earthquakes ► 3 separate strong quakes over
the past week► Significant damage sustained► 305 confirmed dead
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Rescue
► Coast Guard and Cajun Navy to the rescue!► Estimated 1,500 to 2,000 water rescues► Fluor employee from CP Chem project
saves 300
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Resilience
$37M
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Rebuild
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Rebuild
► Negative Impacts► Direct impacts – distraction, dislocation, remob = delay► Supply chain – wallboard, plywood, refining capacity► Labor availability, but muted due to current tight supply► Estimated 0.5% impact on Q3 GDP► Insurance not enough to rebuild
► Positive impacts► FEMA support► Short term - Utility and road repair► Long term – Storm hardening► Estimated nearly $400B in damage from Harvey and Irma
2017 Ernst & Young Engineering and Construction Survey
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Respondents
55%45%
Public or Private?
PrivatePublic
16%
55%
29%
Company Type
Design
GC, CM, EPC
Sub-contractor
32%
21%
5%
21%
21%
Industry Commercial building (mfg, warehouse, retail,office, hotel)Energy (including petroleum, power, utility)
Environmental, water, wastewater
Other
Transportation and other infrastructure
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Earnings trends
43%
46%
11%
How does Operating Income for 2017 compare to 2016?
Better than 2016, but less than 5% increase
Increase of more than 5% over 2016
Worse than 2016
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Earnings trends
74%
21%
5%
Backlog
Higher than at 12/31/16
Lower than at 12/31/16
Same as 12/31/16
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Earnings trends
21%
3%
51%
3%
22%
How do you expect average margins to change during the next 24 months?
Decrease 1% - 3%
Decrease by more than 3%
Increase 1% - 3%
Increase by more than 3%
No change
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Growth
52%
16%
3%
29%
How do you expect the company's geographic footprint to change over the next 24 months?
Expand into new marketsdomestically
Expand into new marketsinternationally
Leave current markets
No change
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Growth
42%
58%
Do you have plans to grow through acquisition over the next 24 months?
No
Yes
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Growth
18%
3%
8%
10%
8%
53%
Greatest opportunity for growth over the next 24 months: Commercial building (mfg,
retail, office)
Downstream Oil &Gas/Petrochemicals
Health care
Power generation,transmission and distribution
Public works
Transportation
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Growth
11%
55%
8%
26%
What is your greatest concern about the success of your business?
Availability of capital to supportyour business
Availability of skilled labor
Increasing regulation
Lack of GDP growth in the U.S.
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Trend in Contracting Risk
21%
24%55%
How has the percentage of fixed price work changed since the prior year?
DecreasedIncreasedStay about the same
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Trend in Contracting Risk
55%
8%
37%
Does the company expect to change its level of involvement with joint ventures in the next 24 months?
No change
Yes, decrease in use ofjoint venturesYes, increase in use ofjoint ventures
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Hope Springs Eternal
Hope springs eternal in the human breast;Man never is, but always to be blessed:
The soul, uneasy and confined from home,Rests and expatiates in a life to come.
– Alexander Pope, An Essay on Man
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