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TABLE OF CONTENTS
TABLE OF CONTENTS2
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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For the fiscal year ended December 31, 2011 |
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or |
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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For the transition period from to |
Commission file number: 1-16129
FLUOR CORPORATION
(Exact name of registrant as specified in its charter)
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Delaware
(State or other jurisdiction of incorporation or organization) |
33-0927079
(I.R.S. Employer Identification No.) |
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6700 Las Colinas Boulevard Irving, Texas (Address of principal executive offices) |
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75039 (Zip Code) |
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469-398-7000 (Registrant's telephone number, including area code) |
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Securities registered pursuant to Section 12(b) of the Act:
| Title of Each Class | Name of Each Exchange on Which Registered | |
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| Common Stock, $.01 par value per share | New York Stock Exchange |
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes þ No o
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes o No þ
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
| Large accelerated filer þ | Accelerated filer o | Non-accelerated filer o | Smaller reporting company o |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ
As of June 30, 2011, the aggregate market value of the registrant's common stock held by non-affiliates of the registrant was approximately $11.2 billion based on the closing sale price as reported on the New York Stock Exchange.
Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date.
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Class
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Outstanding at February 16, 2012
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| Common Stock, $.01 par value per share | 169,003,400 shares | |
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DOCUMENTS INCORPORATED BY REFERENCE |
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Document |
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Parts Into Which Incorporated |
| Portions of the Proxy Statement for the Annual Meeting of Stockholders to be held on May 3, 2012 (Proxy Statement) | Part III | |
FLUOR CORPORATION
INDEX TO ANNUAL REPORT ON FORM 10-K
For the Fiscal Year Ended December 31, 2011
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Forward-Looking Information
From time to time, Fluor® Corporation makes certain comments and disclosures in reports and statements, including this annual report on Form 10-K, or statements are made by its officers or directors, that, while based on reasonable assumptions, may be forward-looking in nature. Under the Private Securities Litigation Reform Act of 1995, a "safe harbor" may be provided to us for certain of these forward-looking statements. We wish to caution readers that forward-looking statements, including disclosures which use words such as the company "believes," "anticipates," "expects," "estimates" and similar statements are subject to various risks and uncertainties which could cause actual results of operations to differ materially from expectations.
Any forward-looking statements that we may make are based on our current expectations and beliefs concerning future developments and their potential effects on us. There can be no assurance that future developments affecting us will be those anticipated by us. Any forward-looking statements are subject to the risks, uncertainties and other factors that could cause actual results of operations, financial condition, cost reductions, acquisitions, dispositions, financing transactions, operations, expansion, consolidation and other events to differ materially from those expressed or implied in such forward-looking statements.
Due to known and unknown risks, our actual results may differ materially from our expectations or projections. While most risks affect only future cost or revenue anticipated by us, some risks may relate to accruals that have already been reflected in earnings. Our failure to receive payments of accrued amounts or incurrence of liabilities in excess of amounts previously recognized could result in a charge against future earnings. As a result, the reader is cautioned to recognize and consider the inherently uncertain nature of forward-looking statements and not to place undue reliance on them.
These factors include those referenced or described in this Annual Report on Form 10-K (including in "Item 1A. — Risk Factors"). We cannot control such risk factors and other uncertainties, and in many cases, we cannot predict the risks and uncertainties that could cause our actual results to differ materially from those indicated by the forward-looking statements. You should consider these risks and uncertainties when you are evaluating us and deciding whether to invest in our securities. Except as otherwise required by law, we undertake no obligation to publicly update or revise our forward-looking statements, whether as a result of new information, future events or otherwise.
Except as the context otherwise requires, the terms "Fluor" or the "Registrant" as used herein are references to Fluor Corporation and its predecessors and references to the "company," "we," "us," or "our" as used herein shall include Fluor Corporation, its consolidated subsidiaries and divisions.
Fluor Corporation was incorporated in Delaware on September 11, 2000 prior to a reverse spin-off transaction that separated us from our coal business which previously operated as Massey Energy Company prior to its acquisition by Alpha Natural Resources in June 2011. However, through our predecessors, we have been in business for 100 years and will celebrate our 100 th anniversary in April 2012. Our principal executive offices are located at 6700 Las Colinas Boulevard, Irving, Texas 75039, telephone number (469) 398-7000.
Our common stock currently trades on the New York Stock Exchange under the ticker symbol "FLR".
Fluor Corporation is a holding company that owns the stock of a number of subsidiaries. Acting through these subsidiaries, we are one of the largest professional services firms providing engineering, procurement, construction and maintenance as well as project management services on a global basis. We serve a diverse set of industries worldwide including oil and gas, chemicals and petrochemicals, transportation, mining and metals, power, life sciences and manufacturing. We are also a primary service provider to the U.S. federal government; and we perform operations and maintenance activities for major industrial clients.
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Our business is aligned into five principal segments. The five segments are Oil & Gas, Industrial & Infrastructure, Government, Global Services and Power. Fluor Constructors International, Inc., which is organized and operates separately from the rest of our business, provides unionized management and construction services in the United States and Canada, both independently and as a subcontractor on projects in each of our segments. Financial information on our segments, as defined under accounting principles generally accepted in the United States, is set forth on page F-44 of this annual report on Form 10-K under the caption "Operating Information by Segment," which is incorporated herein by reference.
Competitive Strengths
As an integrated world class provider of engineering, procurement, construction, maintenance and project management services, we believe that our business model allows us the opportunity to bring to our clients compelling business offerings that combine excellence in execution, safety, cost containment and experience. In that regard, we believe that our business strategies, which are based on certain of our core competencies, provide us with some significant competitive advantages:
Excellence in Execution Given our proven track record of project completion and client satisfaction, we believe that our ability to design, engineer, construct and manage complex projects often in geographically challenging locations gives us a distinct competitive advantage. We strive to complete our projects on schedule while meeting or exceeding all client specifications. In an increasingly competitive environment, we are also continually emphasizing cost controls so that our clients achieve not only their performance requirements but also their budgetary needs.
Financial Strength We believe that we are among the most financially sound companies in our sector. We strive to maintain a solid financial condition, placing an emphasis on having a strong balance sheet and an investment grade credit rating. Our financial strength provides us a valuable competitive advantage in terms of access to surety bonding capacity and letters of credit which are critical to our business. Our strong balance sheet also allows us to fund our strategic initiatives, pay dividends, repurchase stock, pursue opportunities for growth and better manage unanticipated cash flow variations.
Safety One of our core values and a fundamental business strategy is our constant pursuit of safety. Both for us and our clients, the maintenance of a safe workplace is a key business driver. In the areas in which we provide our services, we have delivered and continue to deliver excellent safety performance, with our safety record being better than the industry average. In our estimation, a safe job site decreases risks on a project site, assures a proper environment for our employees and enhances their morale, reduces project cost and exposure and generally improves client relations. We believe that our safety record is one of our most distinguishing features.
Global Execution Platform As the largest U.S.-based, publicly-traded engineering, procurement, construction and maintenance company, we have a global footprint with employees situated throughout the world. Our global presence allows us to build local relationships that permit us to capitalize better on opportunities near these locations. It also provides comfort to our larger internationally-based clients that we know and understand the markets where they may elect to use our services and allows us to mobilize quickly to those locations where projects arise.
Market Diversity The company serves multiple markets across a broad spectrum of industries. We feel that our market diversity is a key strength of our company that helps to mitigate the impact of the cyclicality in the markets we serve. Just as important, our concentrated attention on market diversification allows us to achieve more consistent growth and deliver solid returns. We believe that our continued strategy of maintaining a good mixture within our entire business portfolio permits us to both focus on our more stable business markets and to capitalize on developing our cyclical markets when the timing is appropriate. This strategy also allows us to better weather any downturns in a specific market by emphasizing markets that are strong.
Long-Term Client Relationships While we aggressively work towards pursuing and serving new clients, we also believe that the long-term relationships we have built with our major clients, often after decades of
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work with many of them, allow us to better understand and be more responsive to their requirements. These types of relationships also facilitate a better understanding of many of the risks that we might face with a project or a client, thereby allowing us to better anticipate risks, solve problems and manage our risk. We have worked towards an alliance-like relationship with many of these clients and, in doing so, we better understand their business needs.
Risk Management We believe that our ability to assess, understand and gauge project risk, especially in difficult locations or circumstances or in a lump-sum contracting environment, gives us the ability to selectively enter into markets or accept projects where we feel we can best perform. We have an experienced management team, particularly in risk management and project execution, which helps us to better anticipate and understand potential risks and, therefore, how to manage them. Our risk management capabilities allow us to better control costs and ensure timely performance, which in turn leads to clients who are satisfied with the delivered product.
General Operations
Our services fall into five broad categories: engineering, procurement, construction, maintenance and project management. We offer these services independently as well as on a fully integrated basis. Our services can range from basic consulting activities, often at the early stages of a project, to complete, total-responsibility, design-build contracts.
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overall program manager on large complex projects where various contractors and subcontractors are involved and multiple activities need to be integrated to ensure the success of the overall project. Project management services include logistics, development of project execution plans, detailed schedules, cost forecasts, progress tracking and reporting, and the integration of the engineering, procurement and construction efforts. Project management is accountable to the client to deliver the safety, functionality and financial performance requirements of the project.
We operate in five principal business segments, as described below.
Oil & Gas
Through our Oil & Gas segment, we have long served the global oil and gas production, processing, and the chemical and petro-chemical industries, as an integrated service provider offering a full range of design, engineering, procurement, construction and project management services to a broad spectrum of energy-related industries. We serve a number of specific industries including upstream oil and gas production, downstream refining, offshore production, chemicals and petrochemicals. While we perform projects that range greatly in size and scope, we believe that one of our distinguishing features is that we are one of the few companies that have the global strength and reach to perform extremely large projects in difficult locations. As the locations of large scale oil, gas and chemicals projects have become more challenging geographically, geopolitically or otherwise, we believe that clients will continue to look to us based upon our size, strength, global reach and experience. Moreover, as many of our clients continue to recognize that they need to invest and expend resources to meet oil, gas and chemicals demands, we believe that the company has been and will continue to be extremely well-positioned to capitalize on these opportunities.
As the global economy becomes increasingly more cost-competitive, clients are placing an increasing emphasis on lower cost project execution. We also are seeing that in many of the countries where we work, clients are requiring more local content in their projects through the use of in-country talent. As a result, we continue to emphasize a dispersed execution model that allows resources from multiple offices to work on projects; we are emphasizing local training programs; and we are increasing our use of global execution centers such as our offices in Manila, Delhi and Cebu where we can continue to provide superior services but on a more cost-efficient basis. Another way in which we are addressing local content requirements is our increasing use of strategic alliances with local partners, such as in Russia and China, where we can tie together our global expertise with an existing local presence.
With each specific project, our role can vary. We may be involved in providing front-end engineering, program management and final design services, construction management services, self-perform construction, or oversight of other contractors and we may also assume responsibility for the procurement of labor, materials, equipment and subcontractors. We have the capacity to design and construct new facilities, upgrade and revamp existing facilities, rebuild facilities following fires and explosions, and expand refineries, processing plants, (petro)chemical facilities and pipeline and offshore facility installations. We also provide consulting services ranging from feasibility studies to process assessment to project finance structuring and studies.
In the upstream sector, our clients need to develop additional and new sources of supply. Our typical projects in the upstream sector revolve around the production, processing and transporting of oil and gas resources, including the development of major new fields, as well as liquefied natural gas (LNG) projects. We are also involved in offshore production facilities and also see additional opportunities in the Canadian oil sands market.
In the downstream sector, we continue to pursue significant global opportunities relating to refined products. Our clients are modernizing and modifying existing refineries to increase capacity and satisfy environmental requirements. We continue to play a strong role in each of these markets. We also remain focused on markets such as clean fuels, both domestically and internationally, where an increasing number of countries are implementing stronger environmental policies. As heavier feedstocks become more viable to refine, we employ our strength in technologies to pursue opportunities that facilitate the removal of sulfur from this heavier crude.
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In the chemicals and petrochemicals market, we have been very active for several years with major projects involving the expansion of ethylene based derivatives as well as in the production of polysilicon. The most active markets have been in the Middle East, as well as in China where there is significant demand for chemical products. In addition, we have started to get involved in the front end activities of several chemical facilities in the United States, driven by the availability of low cost (shale) gas.
With our partner Grupo ICA, we maintain a joint venture known as ICA Fluor, through which we continue to participate in the Mexican and Central American oil, gas, power, chemical and other markets.
Industrial & Infrastructure
The Industrial & Infrastructure segment provides design, engineering, procurement and construction services to the transportation, wind power, mining and metals, life sciences, manufacturing, commercial and institutional, telecommunications, microelectronics and healthcare sectors. These projects often require state-of-the-art application of our clients' processes and intellectual knowledge. We focus on providing our clients with solutions to reduce and contain cost and to compress delivery schedules. By doing so, we are able to complete our clients' projects on a quicker, more cost efficient basis.
In transportation, as the global population continues to grow, especially in emerging countries, and existing infrastructure continues to age in developed countries, we have won and will continue to pursue transportation projects on a global basis, promoting our business model of pursuing large complex projects. We provide a broad range of services including consulting, design, planning, financial structuring, engineering and construction, domestically and internationally. Our service offerings include transportation infrastructure such as roads, highways, bridges and rail. Many of our projects involve the use of public/private partnerships, which allow us to develop and finance deals in concert with public entities for projects such as toll roads that would not have otherwise been commenced had only public funding been available. From time to time, we are also an equity investor in certain of the public/private partnerships, where appropriate.
Mining and metals continues to be one of our strengths, driven by a strong demand for commodities that is leading our mining clients to invest in order to increase their volume. In this group, we provide a full range of services to the iron ore, copper, diamond, gold, nickel, alumina, aluminum and other commodity-based industries. These services include feasibility studies through detailed engineering, design, procurement, construction, and commissioning and start-up support. We see many of these opportunities being developed in extreme altitudes, topographies and climates, such as the Andes Mountains, Mongolia, Western Australia and West Africa. We are one of the few companies with the size and experience to pursue large scale mining and metals projects in these difficult locations.
In life sciences, we provide design, engineering, procurement, construction and construction management services to the pharmaceutical and biotechnology industries. We also specialize in providing validation and commissioning services where we not only bring new facilities into production but we also keep existing facilities operating. The ability to complete projects on a large scale basis, especially in a business where time to market is critical, allows us to better serve our clients and is a key competitive advantage.
In manufacturing, we provide design, engineering, procurement, consulting, construction and construction management services to a wide variety of industries. We have recently seen opportunities for growth in the solar energy arena, including the production of solar panels for use in producing environmentally clean alternative energy. Similarly, there are opportunities for consumer electronics, chip fabrication and microelectronic facilities.
Government
Our Government segment is a provider of engineering, construction, logistics support, contingency response and management and operations services to the U.S. government. We are primarily focused on the Department of Energy, the Department of Defense and the Department of Homeland Security.
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Because the U.S. government is the single largest purchaser of outsourced services in the world, with a relatively stable year-to-year budget, it represents an attractive opportunity for the company.
For the Department of Energy, we provide site management, environmental remediation, decommissioning, engineering and construction services and have been very successful in addressing the myriad of environmental and regulatory challenges associated with these sites. Fluor performs significant activities as part of a joint venture that has responsibility for the Savannah River site near Aiken, South Carolina. There, our team is engaged in managing and operating this important site which encompasses over 300 square miles with total on site personnel of approximately 5,500 people. A Fluor-led team also has responsibility for the Department of Energy's Portsmouth Gaseous Diffusion Plant in Pike County, Ohio. We are leveraging our skills and experience to pursue additional domestic and international opportunities in the nuclear services and environmental remediation arenas.
The Government segment also provides engineering and construction services, as well as logistics and contingency operations support, to the Department of Defense. We support military logistical and infrastructure needs around the world. Our largest long-term contract is LOGCAP IV, under which we provide engineering, procurement, construction and logistical augmentation services to the U.S. military in various international locations, with a primary focus on the United States military-related activities in and around the Middle East and more specifically Afghanistan. In combination with our subsidiary, Del-Jen, Inc., we are a leading provider of outsourced services to the federal government. We provide operations and maintenance services at military bases and education and training services to the Department of Labor, particularly through Job Corps programs. Because of our strong network of global resources, we believe we are well-situated to efficiently and effectively mobilize the resources necessary for Department of Defense operations, even in the most remote and difficult locations.
The company is also providing significant support to the Department of Homeland Security. We are particularly involved in supporting the U.S. government's rapid response capabilities to address security issues and disaster relief, the latter primarily through our long-standing relationship with the Federal Emergency Management Agency.
Global Services
The Global Services segment integrates a variety of customized service capabilities that serve and assist industrial clients in improving the performance of their plants and facilities. Capabilities within Global Services include operations and maintenance activities, small capital project engineering and execution, site equipment and tool services, industrial fleet services, plant turnaround services, supply chain solutions and temporary staffing.
Continuing operations and sustaining small capital project services are frequently executed under multi-year alliance style agreements directly between Global Services and its clients. Clients demand these services to help achieve substantial operations improvements while they remain focused on their core business functions. Support services for large capital projects are provided to clients in concert with other Fluor segments or on a standalone basis. This segment often benefits from large projects that originate in another of our segments which can lead to long-term maintenance or operations opportunities. Alternatively, long-term maintenance contracts for Global Services can lead to larger capital projects for one of our other segments when that need arises.
Global Services' activities in the operations and maintenance markets include providing facility start-up and management, plant and facility maintenance, operations support and asset management services to the oil and gas, chemicals, life sciences, mining and metals, consumer products and manufacturing industries. We are a leading supplier of operations and maintenance services, providing our service offerings both domestically and internationally.
We also provide Site Services SM and Fleet Outsourcing SM through American Equipment Company, Inc., or AMECO®. AMECO provides integrated construction equipment, tool, and fleet service solutions on a global basis for construction projects and plant sites of both third party clients and clients of
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the company. AMECO supports large construction projects and plants at locations throughout North and South America, Africa and the Middle East.
Our supply chain solutions business line provides a full range of strategic sourcing solutions to help execute capital projects. Our material, equipment and subcontracted services specialists continually monitor and analyze supply market activity, allowing us to advise our clients on procurement strategies that can optimize cost and schedule to support increased return on investment.
Global Services serves the temporary staffing market through TRS Staffing Solutions, Inc. or TRS®. TRS is a global enterprise of staffing specialists that provides the company and third party clients with recruiting and permanent placement services and the placement of contract technical professionals.
Power
In the Power segment, we provide a full range of services to the gas fueled, solid fuels, environmental compliance, renewables, nuclear and power services markets. Our services include engineering, procurement, construction, program management, start-up and commissioning, operations and maintenance and technical services.
Through the gas fueled market, we offer a full range of services for simple and combined cycle reference plant designs, as well as Integrated Gasification Combined Cycle (IGCC) projects. In the United States, investment in gas fueled plants is continuing to show some resurgence, partly driven by coal-fired plant retirements. We are also expanding our international operations in this market.
Through the solid fueled and environmental compliance markets, we offer a full range of services for subcritical, supercritical, ultra-supercritical and circulating fluidized bed (CFB) technologies, as well as emissions reduction solutions including selective catalytic reduction (SCR), flue gas desulphurization (FGD), and particulate and mercury controls designs. We offer significant experience in designing and constructing coal-fired power generation facilities while delivering proven full scale technology for base load capacity that complies with stringent industry emission guidelines. As part of our environmental compliance service offering, we design, install and commission emissions reduction equipment in order to assist our clients with environmental guideline compliance which allows owners to comply with current emissions regulations. We also offer comprehensive solutions for post-combustion carbon capture and sequestration for solid fueled and gas fueled facilities on a global basis, offering our commercially demonstrated proprietary Econamine FG Plus SM CO 2 capture technology.
In the renewables market, we offer a wide range of technology choices for solar, wind, biomass and geothermal solutions on a global basis. For solar, we are strongly focused globally on thermal technologies such as Photovoltaic (PV) as well as Concentrating Solar Power (CSP) applications. In the biomass market, we bring proven expertise with small boiler and circulating fluidized bed technologies for projects using woody biomass and/or agricultural waste fuels.
In nuclear, we are strategically positioned to offer our extensive nuclear experience for new build plants, capital modifications, extended power uprate (EPU) projects and operations and maintenance services on a global basis. We bring a resume of nuclear experience that includes construction of ten nuclear units, design of three nuclear units and maintenance and capital modification services for units operating in the United States. We also recently purchased a majority interest in NuScale Power, LLC, an Oregon-based small modular nuclear reactor technology company. Power supplies engineering, procurement and construction services in support of this light water, passively safe design which we believe will provide us with significant future opportunities.
Through our power services business line, we offer a variety of services to owners including fossil, renewable and nuclear plant maintenance, facility management, operations support, asset performance improvement, capital modifications and improvements, operations readiness and start-up commissioning on a global basis. We have annual maintenance and modification contracts covering full generation fleets within the utility generation market. Additionally, we provide a solution to the transmission and distribution market through entities based in the United States and South Africa. In the U.S. market, the
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scope of services is focused on the design and construction of new transmission lines to connect new capacity from the current renewables market to existing distribution centers.
Other Matters
Backlog
Backlog in the engineering and construction industry is a measure of the total dollar value of work to be performed on contracts awarded and in progress. The following table sets forth the consolidated backlog of the Oil & Gas, Industrial & Infrastructure, Government, Global Services and Power segments at December 31, 2011 and 2010:
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December 31,
2010 |
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Oil & Gas |
$ | 15,068 | $ | 14,267 | |||
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Industrial & Infrastructure |
19,601 | 16,862 | |||||
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Government |
1,091 | 751 | |||||
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Global Services |
1,881 | 2,057 | |||||
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Power |
1,843 | 972 | |||||
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Total |
$ | 39,484 | $ | 34,909 | |||
The following table sets forth our consolidated backlog at December 31, 2011 and 2010 by region:
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December 31,
2011 |
December 31,
2010 |
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(in millions)
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United States |
$ | 8,572 | $ | 8,985 | |||
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Asia Pacific (including Australia) |
10,517 | 7,887 | |||||
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Europe, Africa and Middle East |
8,172 | 8,340 | |||||
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The Americas (excluding the United States) |
12,223 | 9,697 | |||||
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Total |
$ | 39,484 | $ | 34,909 | |||
For purposes of the preceding tables, backlog for the Global Services segment includes our operations and maintenance activities that have yet to be performed. The equipment, temporary staffing and supply chain solutions business lines do not report backlog due to the quick turnaround between the receipt of new awards and the recognition of revenue. With respect to backlog in our Government segment, if a contract covers multiple years, we generally only include the amounts for which Congressional funding has been approved and then only for that portion of the work to be completed in the next 12 months. For our contingency operations, we include only those amounts for which specific task orders have been received. For projects related to proportionately consolidated joint ventures, we include only our percentage ownership of each joint venture's backlog.
We expect to perform approximately 63 percent of our backlog at December 31, 2011 in 2012. Although backlog reflects business that is considered to be firm, cancellations or scope adjustments may occur. Backlog is adjusted to reflect any known project cancellations, revisions to project scope and cost, and deferrals, as appropriate. Due to additional factors outside of our control, such as changes in project schedules, we cannot predict the portion of our December 31, 2011 backlog estimated to be performed annually subsequent to 2012.
For additional information with respect to our backlog, please refer to "Item 7. — Management's Discussion and Analysis of Financial Condition and Results of Operations," below.
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Types of Contracts
While the basic terms and conditions of the contracts that we perform may vary considerably, generally we perform our work under two groups of contracts: cost reimbursable contracts, and fixed-price, lump-sum and guaranteed maximum contracts. In some markets, we are seeing "hybrid" contracts containing both fixed-price and cost reimbursable elements. As of December 31, 2011, the following table breaks down the percentage and amount of revenue associated with these types of contracts for our existing backlog:
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December 31, 2011 | ||||||
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(in millions)
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Percentage
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Cost Reimbursable |
$ | 33,555 | 85% | ||||
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Fixed-Price, Lump-Sum and Guaranteed Maximum |
$ | 5,929 | 15% | ||||
Under cost reimbursable contracts, the client reimburses our cost in performing a project and pays us a pre-determined fee or a fee based upon a percentage of the cost incurred in completing the project. Our profit may be in the form of a fee, a simple mark-up applied to labor cost incurred in performing the contract, or a combination of the two. The fee element may also vary. The fee may be an incentive fee based upon achieving certain performance factors, milestones or targets; it may be a fixed amount in the contract; or it may be based upon a percentage of the cost incurred.
Our Government segment, as a prime contractor or a major subcontractor for a number of U.S. government programs, generally performs its services under cost reimbursable contracts subject to applicable statutes and regulations. In many cases, these contracts include incentive fee arrangements. The programs in question often take many years to complete and may be implemented by the award of many different contracts. Some of our government contracts are known as Indefinite Delivery Indefinite Quantity (IDIQ) agreements. Under these arrangements, we work closely with the government to define the scope and amount of work required based upon an estimate of the maximum amount that the government desires to spend. While the scope is often not initially fully defined or does not require any specific amount of work, once the project scope is determined, additional work may be awarded to us without the need for further competitive bidding.
Fixed-price contracts include both negotiated fixed-price contracts and lump-sum contracts. Under negotiated fixed-price contracts, we are selected as contractor first, and then we negotiate price with the client. These types of contracts generally occur where we commence work before a final price is agreed upon. Under lump-sum contracts, we bid on a contract based upon specifications provided by the client against competitors, agreeing to develop a project at a fixed price. Another type of fixed-price contract is a unit price contract under which we are paid a set amount for every "unit" of work performed. If we perform well under these contracts, we can benefit from cost savings; however, if the project does not proceed as originally planned, we cannot recover cost overruns except in certain limited situations.
Guaranteed maximum price contracts are performed in a manner similar to cost reimbursable contracts except that the total fee plus the total cost cannot exceed an agreed upon guaranteed maximum price. We can be responsible for some or all of the total cost of the project if the cost exceeds the guaranteed maximum price. Where the total cost is less than the negotiated guaranteed maximum price, we may receive the benefit of the cost savings based upon a negotiated agreement with the client.
Competition
We are one of the world's largest providers of engineering, procurement and construction services. The markets served by our business are highly competitive and for the most part require substantial resources and highly skilled and experienced technical personnel. A large number of companies are competing in the markets served by our business, including U.S.-based companies such as Bechtel Group, Inc., CH2M Hill Companies Limited, Jacobs Engineering Group, Inc., KBR Inc., the Shaw Group and URS Corporation, and international-based companies such as AMEC plc, Balfour Beatty, Chicago Bridge and Iron Company N.V., Chiyoda Corporation, Foster Wheeler AG, Hyundai Engineering &
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Construction Company, JGC Corporation, McDermott International, Inc., Samsung Engineering, Technip and WorleyParsons Limited.
In the engineering and construction arena, our competition is primarily centered on performance and the ability to provide the design, engineering, planning, management and project execution skills required to complete complex projects in a safe, timely and cost-efficient manner. Our engineering, procurement and construction business derives its competitive strength from our diversity, reputation for quality, technology, cost-effectiveness, worldwide procurement capability, project management expertise, geographic coverage and ability to meet client requirements by performing construction on either a union or an open shop basis, ability to execute projects of varying sizes, strong safety record and lengthy experience with a wide range of services and technologies.
The various markets served by the Global Services segment, while having some similarities, tend also to have discrete issues impacting individual units. Each of the markets we serve has a large number of companies competing in its markets. The equipment sector, which operates in numerous markets, is highly fragmented and very competitive, with most competitors operating in specific geographic areas. The competition for larger capital project services is more narrow and limited to only those capable of providing comprehensive equipment, tool and management services. Temporary staffing is a highly fragmented market with over 1,000 companies competing globally. The key competitive factors in this business line are price, service, quality, breadth of service and the ability to identify and retain qualified personnel and geographical coverage. The barriers to entry in operations and maintenance are both financially and logistically low with the result that the industry is highly fragmented with no single company being dominant. Competition is generally driven by reputation, price and the capacity to perform.
Key competitive factors in our Government segment are primarily centered on performance and the ability to provide the design, engineering, planning, management and project execution skills required to complete complex projects in a safe, timely and cost-efficient manner.
Significant Clients
For 2011, revenue earned from agencies of the U.S. government and Exxon Mobil Corporation and its affiliates accounted for 14 percent and 13 percent, respectively, of our total revenue. We perform work for these clients under multiple contracts and sometimes through joint venture arrangements.
Raw Materials
The principal products we use in our business include structural steel, metal plate, concrete, cable and various electrical and mechanical components. These products and components are subject to raw material (aluminum, copper, nickel, iron ore, etc.) availability and commodity pricing fluctuations, which we monitor on a regular basis. We have access to numerous global supply sources and we do not foresee any unavailability of these items that would have a material adverse effect on our business in the near term. However, the availability of these products, components and raw materials may vary significantly from year to year due to various factors including client demand, producer capacity, market conditions and specific material shortages.
Research and Development
While we engage in research and development efforts for new products and services, during the past three fiscal years, we have not incurred cost for company-sponsored or client-sponsored research and development activities which would be material, special or unusual in any of our business segments.
Patents
We hold patents and licenses for certain items that we use in our operations. However, none is so essential that its loss would materially affect our business.
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Environmental, Safety and Health Matters
We believe, based upon present information available to us, that our accruals with respect to future environmental cost are adequate and any future cost will not have a material effect on our consolidated financial position, results of operations, liquidity capital expenditures or competitive position. Some factors, however, could result in additional expenditures or the provision of additional accruals in expectation of such expenditures. These include the imposition of more stringent requirements under environmental laws or regulations, new developments or changes regarding site cleanup cost or the allocation of such cost among potentially responsible parties, or a determination that we are potentially responsible for the release of hazardous substances at sites other than those currently identified.
Number of Employees
The following table sets forth the number of employees of Fluor and its subsidiaries engaged in our business segments as of December 31, 2011:
|
|
Number of
Employees |
|||
|---|---|---|---|---|
|
Salaried Employees: |
||||
|
Oil & Gas |
9,869 | |||
|
Industrial & Infrastructure |
4,776 | |||
|
Government |
11,328 | |||
|
Global Services |
3,445 | |||
|
Power |
816 | |||
|
Other |
3,018 | |||
|
Total Salaried |
33,252 | |||
|
Craft and Hourly Employees |
9,835 |
|||
|
Total |
43,087 | |||
The number of craft and hourly employees, who provide support throughout the various business segments, varies in relation to the number and size of projects we have in process at any particular time.
Available Information
Our website address is www.fluor.com . You may obtain free electronic copies of our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to those reports on the "Investor Relations" portion of our website, under the heading "SEC Filings" filed under "Financial Information." These reports are available on our website as soon as reasonably practicable after we electronically file them with the Securities and Exchange Commission. These reports, and any amendments to them, are also available at the Internet website of the Securities and Exchange Commission, http://www.sec.gov. The public may also read and copy any materials we file with the Securities and Exchange Commission at the SEC's Public Reference Room located at 100 F Street, N.E., Washington, D.C., 20549. In order to obtain information about the operation of the Public Reference Room, you may call 1-800-732-0330. We also maintain various documents related to our corporate governance including our Corporate Governance Guidelines, our Board Committee Charters and our Codes of Conduct on the "Sustainability" portion of our website under the heading "Corporate Governance Documents" filed under "Governance."
We may experience reduced profits or losses under contracts if costs increase above estimates.
We conduct our business under various types of contractual arrangements where costs are estimated in advance. In terms of dollar-value, the majority of our contracts allocate the risk of cost overruns to our
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clients by requiring our clients to reimburse us for our cost. Approximately 15 percent of the dollar-value of our backlog is currently guaranteed maximum price or fixed-price contracts, where we bear a significant portion of the risk for cost overruns. If we fail to accurately estimate the resources and time necessary for these type of contracts, or fail to complete these contracts within the timeframes and costs we have agreed upon, there could be a material impact on our financial results as well as our reputation. Risks under our contracts which could result in cost overruns, project delays or other problems can also include:
These risks tend to be exacerbated for longer-term contracts since there is increased risk that the circumstances under which we based our original bid could change with a resulting increase in costs. In many of these contracts, we may not be able to obtain compensation for additional work performed or expenses incurred, and if a project is not executed on schedule, we may be required to pay liquidated damages.
Intense competition in the engineering and construction industry could reduce our market share and profits.
We serve markets that are highly competitive and in which a large number of multinational companies compete. In particular, the engineering and construction markets are highly competitive and require substantial resources and investment in technology and skilled personnel. In addition, our success in the government market and certain international markets can be impacted by the presence or quality of a local partner. If we are unable to compete alone, or with a quality partner, our ability to win work and successfully complete our contracts may be impacted. Competition also places downward pressure on our contract prices and profit margins. Intense competition is expected to continue in these markets, presenting us with significant challenges in our ability to maintain strong growth rates and acceptable profit margins. If we are unable to meet these competitive challenges, we could lose market share to our competitors and experience an overall reduction in our profits.
Our revenue and earnings are largely dependent on the award of new contracts which we do not directly control.
A substantial portion of our revenue and earnings is generated from large-scale and increasingly international project awards. The timing of when project awards will be made is unpredictable and outside of our control. We operate in highly competitive markets where it is difficult to predict whether and when we will receive awards since these awards and projects often involve complex and lengthy negotiations and bidding processes. These processes can be impacted by a wide variety of factors including governmental approvals, financing contingencies, commodity prices, environmental conditions and overall market and economic conditions. In addition, we may not win contracts that we have bid upon due to price, a client's perception of our ability to perform and/or perceived technology advantages held by others. In these highly competitive times, many of our competitors may be more inclined to take greater or unusual risks or terms and conditions in a contract that we might not deem market or acceptable. Because a significant portion of our revenue is generated from large projects, our results of operations can fluctuate from quarter to quarter and year to year depending on whether and when project awards occur and the commencement
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and progress of work under awarded contracts. As a result, we are subject to the risk of losing new awards to competitors or the risk that revenue may not be derived from awarded projects as quickly as anticipated.
Current global economic conditions will likely affect a portion of our client base, partners, subcontractors and suppliers and could materially affect our backlog and profits.
Current global economic conditions have reduced and continue to negatively impact our client's willingness and ability to fund their projects. These conditions make it difficult for our clients to accurately forecast and plan future business trends and activities, thereby causing our clients to slow or even curb spending on our services, or seek contract terms more favorable to them. Our government clients may face budget deficits that prohibit them from funding proposed and existing projects or that cause them to exercise their right to terminate our contracts with little or no prior notice. Furthermore, any financial difficulties suffered by our partners, subcontractors or suppliers could increase our cost or adversely impact project schedules. These economic conditions continue to reduce the availability of liquidity and credit to fund or support the continuation and expansion of industrial business operations worldwide. Current financial market conditions and adverse credit market conditions could adversely affect our clients', our partners' or our own borrowing capacity, which support the continuation and expansion of projects worldwide, and could result in contract cancellations or suspensions, project delays, payment delays or defaults by our clients. Our ability to expand our business would be limited if, in the future, we are unable to access sufficient credit capacity, including capital market funding, bank credit, such as letters of credit, and surety bonding on favorable terms or at all. These disruptions could materially impact our backlog and profits. Finally, our business has traditionally lagged recoveries in the general economy, and therefore may not recover as quickly as the economy as a whole.
If we experience delays and/or defaults in client payments, we could suffer liquidity problems or we could be unable to recover all expenditures.
Because of the nature of our contracts, we sometimes commit resources to projects prior to receiving payments from the client in amounts sufficient to cover expenditures as they are incurred. In difficult economic times, some of our clients may find it increasingly difficult to pay invoices for our services timely, increasing the risk that our accounts receivable could become uncollectible and ultimately be written off. Delays in client payments may require us to make a working capital investment, which could impact our cash flows and liquidity. If a client fails to pay invoices on a timely basis or defaults in making its payments on a project in which we have devoted significant resources, there could be a material adverse effect on our results of operations or liquidity.
We are vulnerable to the cyclical nature of the markets we serve.
The demand for our services and products is dependent upon the existence of projects with engineering, procurement, construction and management needs. Although downturns can impact our entire business, our oil and gas, petrochemicals, power, and mining and metals lines exemplify businesses that are cyclical in nature and have historically been affected by a decrease in worldwide demand for these projects or the underlying commodities. For example, in our Oil & Gas segment, capital expenditures by our oil and gas clients may be influenced by factors such as prevailing prices and expectations about future prices, technological advances, the costs of exploration, production and delivery of product, domestic and international political, military, regulatory and economic conditions and other similar factors. In our Power segment, new order activity has slowed due to low demand for power. Industries such as these and many of the others we serve have historically been and will continue to be vulnerable to general downturns.
We have international operations that are subject to foreign economic and political uncertainties. Unexpected and adverse changes in the foreign countries in which we operate could result in project disruptions, increased cost and potential losses.
Our business is subject to fluctuations in demand and to changing international economic and political conditions which are beyond our control. As of December 31, 2011, approximately 78 percent of our
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backlog consisted of revenue to be derived from projects and services to be completed outside the United States. We expect that a significant portion of our revenue and profits will continue to come from international projects for the foreseeable future.
Operating in the international marketplace exposes us to a number of special risks including:
The lack of a well-developed legal system in some of these countries may make it difficult to enforce our contractual rights. We also face significant risks due to civil strife, acts of war, terrorism and insurrection. We operate in countries where there is a significant amount of political risk including Afghanistan, Indonesia, Iraq, Russia, China and Saudi Arabia. In addition, military action or continued unrest, especially in the Middle East, could impact the supply or pricing of oil, disrupt our operations in the region and elsewhere, and increase our security costs. Our level of exposure to these risks will vary with respect to each project, depending on the particular stage of each such project. For example, our risk exposure with respect to a project in an early development stage will generally be less than our risk exposure with respect to a project in the middle of construction. To the extent that our international business is affected by unexpected and adverse foreign economic and political conditions, we may experience project disruptions and losses. Project disruptions and losses could significantly reduce our overall revenue and profits.
If we guarantee the timely completion or performance standards of a project, we could incur additional cost to cover our guarantee obligations.
In some instances and in many of our fixed-price contracts, we guarantee a client that we will complete a project by a scheduled date. We sometimes commit that the project, when completed, will also achieve certain performance standards. From time to time, we may also assume a project's technical risk, which means that we may have to satisfy certain technical requirements of a project despite the fact that at the time of project award, we may not have previously produced the system or product in question. If we subsequently fail to complete the project as scheduled, or if the project subsequently fails to meet guaranteed performance standards, we may be held responsible for cost impacts to the client resulting from any delay or the cost to cause the project to achieve the performance standards, generally in the form of contractually agreed-upon liquidated damages. To the extent that these events occur, the total cost of the project could exceed our original estimates and we could experience reduced profits or, in some cases, a loss for that project.
We are involved in litigation proceedings, potential liability claims and contract disputes which may reduce our profits.
We may be subject to a variety of legal proceedings, liability claims or contract disputes in virtually every part of the world. We engage in engineering and construction activities for large facilities where design, construction or systems failures can result in substantial injury or damage to third parties. In addition, the nature of our business results in clients, subcontractors and vendors occasionally presenting
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claims against us for recovery of cost they incurred in excess of what they expected to incur, or for which they believe they are not contractually liable. We have been and may in the future be named as a defendant in legal proceedings where parties may make a claim for damages or other remedies with respect to our projects or other matters, including liabilities associated with divested businesses. These include potential liabilities arising from the operations of the divested lead business of St. Joe Minerals Corporation as described in "13. Contingencies and Commitments" in the Notes to Consolidated Financial Statements. For example, in the St. Joe Minerals matters, while we believe we will be ultimately successful, if we were unsuccessful in the defense of the claims arising in these matters or in the prosecution of and collection on our indemnity claims, we would have to recognize a substantial charge to our earnings. When it is determined that we have liability, we may not be covered by insurance or, if covered, the dollar amount of these liabilities may exceed our policy limits. With regard to insurance coverage, our professional liability coverage is on a "claims-made" basis covering only claims actually made during the policy period currently in effect. In addition, even where insurance is maintained for such exposure, the policies have deductibles resulting in our assuming exposure for a layer of coverage with respect to any such claims. Any liability not covered by our insurance, in excess of our insurance limits or, if covered by insurance but subject to a high deductible, could result in a significant loss for us, and reduce our cash available for operations. In other matters, we may be covered by indemnification agreements which may at times be difficult to enforce. Even if enforceable, it may be difficult to recover under these agreements if the indemnitor does not have the ability to financially support the indemnity. Litigation and regulatory proceedings are subject to inherent uncertainties, and unfavorable rulings could occur. If we were to receive an unfavorable ruling in a matter, our business and results of operations could be materially harmed.
Our failure to recover adequately on claims against project owners or subcontractors for payment or performance could have a material effect on our financial results.
We occasionally bring claims against project owners for additional costs exceeding the contract price or for amounts not included in the original contract price. Similarly, we present change orders and claims to our clients and subcontractors. If we fail to properly document the nature of claims or change orders, or are otherwise unsuccessful in negotiating a reasonable settlement, we could incur reduced profits, cost overruns and in some cases a loss on the project. These types of claims can often occur due to matters such as owner-caused delays or changes from the initial project scope, which result in additional cost, both direct and indirect. From time to time, these claims can be the subject of lengthy and costly arbitration or litigation proceedings, and it is often difficult to accurately predict when these claims will be fully resolved. When these types of events occur and unresolved claims are pending, we may invest significant working capital in projects to cover cost overruns pending the resolution of the relevant claims. A failure to promptly recover on these types of claims could have a material adverse impact on our liquidity and financial results.
We are dependent upon third parties to complete many of our contracts.
Much of the work performed under our contracts is actually performed by third-party subcontractors. We also rely on third-party suppliers to provide much of the equipment and materials used for projects. If we are unable to hire qualified subcontractors or find qualified suppliers, our ability to successfully complete a project could be impaired. For example, in our Greater Gabbard project, the bankruptcy of a key equipment supplier has been one of the reasons behind the increased cost to complete this project. If the amount we are required to pay for subcontractors or equipment and supplies exceeds what we have estimated, especially in a lump-sum or a fixed-price type contract, we may suffer losses on these contracts. If a supplier or subcontractor fails to provide supplies, equipment or services as required under a negotiated contract for any reason, or provides supplies, equipment or services that are not an acceptable quality, we may be required to source those supplies, equipment or services on a delayed basis or at a higher price than anticipated, which could impact contract profitability. In addition, faulty equipment or materials could impact the overall project, resulting in claims against us for failure to meet required project specifications. These risks may be intensified during the current economic downturn if these suppliers or subcontractors experience financial difficulties or find it difficult to obtain sufficient financing to fund their
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operations or access to bonding, and are not able to provide the services or supplies necessary for our business. In addition, in instances where Fluor relies on a single contracted supplier or subcontractor or a small number of subcontractors, there can be no assurance that the marketplace can provide these products or services in a timely basis, or at the costs we had anticipated. A failure by a third-party subcontractor or supplier to comply with applicable laws, rules or regulations could negatively impact our business and, in the case of government contracts, could result in fines, penalties, suspension or even debarment.
The success of our joint ventures depends on the satisfactory performance by our joint venture partners of their joint venture obligations. The failure of our joint venture partners to perform their joint venture obligations could impose on us additional financial and performance obligations that could result in reduced profits or, in some cases, significant losses for us with respect to the joint venture.
We enter into various joint ventures and teaming arrangements as part of our engineering, procurement and construction businesses, including ICA Fluor and project-specific joint ventures, where control may be shared with unaffiliated third parties. Differences in opinions or views between joint venture partners can result in delayed decision-making or failure to agree on material issues which could adversely affect the business and operations of the venture. At times, we also participate in joint ventures where we are not a controlling party. In such instances, we may have limited control over joint venture decisions and actions, including internal controls and financial reporting which may have an impact on our business.
From time to time in order to establish or preserve a relationship, or to better ensure venture success, we may accept risks or responsibilities for the joint venture which are not necessarily proportionate with the reward we expect to receive. The success of these and other joint ventures also depends, in large part, on the satisfactory performance by our joint venture partners of their joint venture obligations, including their obligation to commit working capital, equity or credit support as required by the joint venture and to support their indemnification and other contractual obligations. If our joint venture partners fail to satisfactorily perform their joint venture obligations as a result of financial or other difficulties, the joint venture may be unable to adequately perform or deliver its contracted services. Under these circumstances, we may be required to make additional investments and provide additional services to ensure the adequate performance and delivery of the contracted services. These additional obligations could result in reduced profits or, in some cases, increased liabilities or significant losses for us with respect to the joint venture. In addition, a failure by a joint venture partner to comply with applicable laws, rules or regulations could negatively impact our business and, in the case of government contracts, could result in fines, penalties, suspension or even debarment.
Our businesses could be materially and adversely affected by events outside of our control.
Extraordinary or force majeure events beyond our control, such as natural or man-made disasters, could negatively impact our ability to operate. As an example, from time to time we face unexpected severe weather conditions which may result in weather-related delays that are not always reimbursable under a fixed-price contract; evacuation of personnel and curtailment of services; increased labor and material costs in areas resulting from weather-related damage and subsequent increased demand for labor and materials for repairing and rebuilding; inability to deliver materials, equipment and personnel to jobsites in accordance with contract schedules and loss of productivity. We may remain obligated to perform our services after any such natural or man-made event, unless a force majeure clause or other contractual provision provides us with relief from our contractual obligations. If we are not able to react quickly to such events, our operations may be significantly affected, which could have a negative impact on our operations. In addition, if we cannot complete our contracts on time, we may be subject to potential liability claims by our clients which may reduce our profits.
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Our backlog is subject to unexpected adjustments and cancellations and, therefore, may not be a reliable indicator of our future revenue or earnings.
As of December 31, 2011, our backlog was approximately $39 billion. Our backlog generally consists of projects for which we have an executed contract or commitment with a client and reflects our expected revenue from the contract or commitment, which is often subject to revision over time. We cannot guarantee that the revenue projected in our backlog will be realized or profitable. Project cancellations, scope adjustments or deferrals may occur, from time to time, with respect to contracts reflected in our backlog and could reduce the dollar amount of our backlog and the revenue and profits that we actually earn. Many of our contracts have termination for convenience provisions in them. In addition, projects may remain in our backlog for an extended period of time. Finally, poor project or contract performance could also impact our backlog and profits. It is unclear what impact the current market conditions may have on our backlog. The ongoing global economic downturn may result in a diminished ability to replace backlog once projects are completed and/or may result in the cancellation, modification or deferral of projects currently in our backlog, as discussed below. Such developments could have a material adverse effect on our business and our profits.
Our government contracts and contracting rights may be terminated or otherwise adversely impacted at any time.
We enter into significant government contracts, from time to time, such as those that we have with the U.S. Department of Energy as part of teaming arrangements at Savannah River Nuclear Solutions LLC and at the Department of Energy site in Portsmouth, Ohio, or with the Department of Defense for the LOGCAP IV contract. Government contracts are subject to various uncertainties, restrictions and regulations, including oversight audits by government representatives and profit and cost controls, which could result in withholding or delay of payments to us. Government contracts are also exposed to uncertainties associated with Congressional funding. A significant portion of our business is derived as a result of federal government regulatory, military and infrastructure priorities. Changes in these priorities, which can occur due to policy changes or changes in the economy, are unpredictable and may impact our revenues. The government is under no obligation to maintain funding at any specific level and funds for a program may even be eliminated. Our government clients may terminate or decide not to renew our contracts with little or no prior notice.
In addition, government contracts are subject to specific regulations. For example, we must comply with the Federal Acquisition Regulation ("FAR"), the Truth in Negotiations Act, the Cost Accounting Standards ("CAS"), the Service Contract Act and Department of Defense security regulations. We must also comply with various other government regulations and requirements as well as various statutes related to employment practices, environmental protection, recordkeeping and accounting. These laws impact how we transact business with our governmental clients and, in some instances, impose significant costs on our business operations. If we fail to comply with any of these regulations, requirements or statutes, our existing government contracts could be terminated, and we could be temporarily suspended or even debarred from government contracting or subcontracting.
We also run the risk of the impact of government audits, investigations and proceedings, and so-called "qui tam" actions, where treble damages can be awarded, brought by individuals or the government under the Federal False Claims Act that, if an unfavorable result occurs, could impact our profits and financial condition, as well as our ability to obtain future government work. For example, government agencies such as the U.S. Defense Contract Audit Agency (the "DCAA") routinely review and audit government contractors with respect to the adequacy of and our compliance with our internal control systems and policies (including our labor, billing, accounting, purchasing, estimating, compensation and management information systems). Despite the fact that we take precautions to prevent and deter fraud, misconduct or other non-compliance, we face the risk that our employees, partners or subcontractors may engage in such activities. If any of these agencies determine that a rule or regulation has been violated, a variety of penalties can be imposed including criminal and civil penalties all of which would harm our reputation with the government or even debar us from future government activities. The DCAA has the ability to review how we have accounted for cost under the FAR and CAS, and if they believe that we have engaged in
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inappropriate accounting or other activities, they may present their findings to the Defense Contract Management Agency ("DCMA"). Should the DCMA determine that we have not complied with the terms of our contract and applicable statutes and regulations, payments to us may be disallowed or we could be required to refund previously collected payments. Furthermore, in this environment, if we have significant disagreements with our government clients concerning costs incurred, negative publicity could arise which could adversely effect our industry reputation and our ability to compete for new contracts.
Many of our federal government contracts require contractors to have security clearances. Depending upon the level of required clearances, security clearances can be difficult and time-consuming to obtain. If we or our employees are unable to obtain or retain necessary security clearances, we may not be able to win new business, and our existing clients could terminate their contracts with us or decide not to renew them. To the extent that we cannot obtain or maintain the required security clearance working on a particular contract, we may not derive the revenue anticipated from the contract which could adversely affect our revenues.
If one or more of our government contracts are terminated for any reason including for convenience, if we are suspended or debarred from government contract work, or if payment of our cost is disallowed, we could suffer a significant reduction in expected revenue and profits.
Fluctuations and changes in the U.S. government's spending priorities could adversely impact our business expectations.
The Government segment's revenue is generated largely from work we perform for the U.S. government, including a significant amount generated from contracts with the Department of Defense. Political instability, often driven by war, conflict or natural disasters, coupled with the U.S. government's fight against terrorism has resulted in increased spending from which we have benefitted, including in locations such as Afghanistan, where we perform significant work under the LOGCAP IV contract. Based on recent government pronouncements, the current level of Department of Defense overall spending will likely decrease. More specifically, government services being provided in the Middle East, including Afghanistan, will likely not continue at present levels indefinitely and we could see our current level of services decline over time. Future levels of expenditures, especially with regard to foreign military commitments, may decrease or may be shifted to other programs in which we are not a participant. As a result, a general decline in U.S. defense spending or a change in priorities could reduce our profits or revenue. Our ability to win or renew government contracts is conducted through a rigorous competitive process and may prove to be unsuccessful.
Most federal government contracts are awarded through a rigorous competitive process. The federal government has increasingly relied upon multiple-year contracts with pre-established terms and conditions that generally require those contractors that have been previously awarded the contract to engage in an additional competitive bidding process for each task order issued under the contract. Such processes require successful contractors to anticipate requirements and develop rapid-response bid and proposal teams as well as dedicated supplier relationships and delivery systems in place to react to these needs. We face rigorous competition and significant pricing pressures in order to win these task orders. If we are not successful in reducing costs or able to timely respond to government requests, we may not win additional awards. Moreover, even if we are qualified to work on a government contract, we may not be awarded the contract because of existing government policies designed to protect small businesses and under-represented minority contractors. Our inability to win or renew government contracts during the procurement processes could harm our operations.
We could suffer from a temporary liquidity crisis if the financial institutions who hold our cash and investments fail.
Our cash balances and short-term investments are maintained in accounts held by major banks and financial institutions located primarily in North America, Europe, and Asia. Some of our accounts hold deposits that exceed available insurance. Although none of the financial institutions in which we hold our cash and investments have gone into bankruptcy or forced receivership, there remains the risk that this
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could occur in the future. This concern is especially heightened in Europe where some of the European banks in which we deposit funds may be exposed to sovereign debt risk. If this were to occur, we could be at risk of not being able to access our cash which could result in a temporary liquidity crisis that could impede our ability to fund operations.
Our project execution activities may result in liability for faulty engineering services.
Because our projects are often large and complicated, our failure to make judgments and recommendations in accordance with applicable professional standards could result in large damages. Our engineering practice involves professional judgments regarding the planning, design, development, construction, operations and management of industrial facilities and public infrastructure projects. While we do not generally accept liability for consequential damages, and although we have adopted a range of insurance, risk management and risk avoidance programs designed to reduce potential liabilities, a catastrophic event at one of our project sites or completed projects resulting from the services we have performed could result in significant professional or product liability, warranty or other claims against us as well as reputational harm, especially if public safety is impacted. These liabilities could exceed our insurance limits or the fees we generate, or could impact our ability to obtain insurance in the future. In addition, clients or subcontractors who have agreed to indemnify us against any such liabilities or losses might refuse or be unable to pay us. An uninsured claim, either in part or in whole, if successful and of a material magnitude, could have a substantial impact on our operations.
Changes in our effective tax rate and tax positions may vary.
We are subject to income taxes in the United States and numerous foreign jurisdictions. A change in tax laws, treaties or regulations, or their interpretation, in any country in which we operate could result in a higher tax rate on our earnings, which could have a material impact on our earnings and cash flows from operations. In addition, significant judgment is required in determining our worldwide provision for income taxes. In the ordinary course of our business, there are many transactions and calculations where the ultimate tax determination is uncertain. We are regularly under audit by tax authorities. Although we believe that our tax estimates and tax positions are reasonable, they could be materially affected by many factors including the final outcome of tax audits and related litigation, the introduction of new tax accounting standards, legislation, regulations and related interpretations, our global mix of earnings, the realizability of deferred tax assets and changes in uncertain tax positions. A significant increase in our tax rate could have a material adverse effect on our profitability and liquidity.
We could be adversely affected by violations of the U.S. Foreign Corrupt Practices Act and similar worldwide anti-bribery laws.
The U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act of 2010 and similar anti-bribery laws in other jurisdictions generally prohibit companies and their intermediaries from making improper payments to officials or others for the purpose of obtaining or retaining business. Our policies mandate compliance with these anti-bribery laws. We operate in many parts of the world that have experienced governmental corruption to some degree and, in certain circumstances, strict compliance with anti-bribery laws may conflict with local customs and practices. We train our staff concerning anti-bribery laws and issues, and we also inform our partners, subcontractors, agents and others who work for us or on our behalf that they must comply with anti-bribery law requirements. We also have procedures and controls in place to monitor internal and external compliance. We cannot assure that our internal controls and procedures always will protect us from the reckless or criminal acts committed by our employees or agents. If we are found to be liable for anti-bribery law violations (either due to our own acts or our inadvertence, or due to the acts or inadvertence of others including our partners, agents or subcontractors), we could suffer from criminal or civil penalties or other sanctions which could have a material adverse effect on our business.
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Systems and information technology interruption and breaches in data security could adversely impact our ability to operate and our operating results.
As a global company, we are heavily reliant on computer, information and communications technology and related systems in order to properly operate. From time to time, we experience system interruptions and delays. If we are unable to continually add software and hardware, effectively upgrade our systems and network infrastructure and take other steps to improve the efficiency of and protect our systems, systems operation could be interrupted or delayed or our data security could be breached. In addition, our computer and communications systems and operations could be damaged or interrupted by natural disasters, power loss, telecommunications failures, acts of war or terrorism, acts of God, computer viruses, physical or electronic break-ins and similar events or disruptions. Any of these or other events could cause system interruption, delays and loss of critical data, could delay or prevent operations including the processing of transactions and reporting of financial results, could result in the unintentional disclosure of client or our information (including proprietary intellectual property) and could adversely affect our operating results. While management has taken steps to address these concerns by implementing sophisticated network security and internal control measures, there can be no assurance that a system failure or loss or data security breach will not materially adversely affect our financial condition and operating results.
Our business may be negatively impacted if we are unable to adequately protect intellectual property rights.
Our success is dependent, in part, on our ability to defend our intellectual property rights as to our technologies and know-how. This success includes the ability of companies in which we invest, such as NuScale Power, LLC, to protect their intellectual property rights. We rely principally on a combination of patents, trade secrets, confidentiality agreements and other contractual arrangements to protect our interests. However, these methods only provide a limited amount of protection and may not adequately protect our interests. This can be especially true in certain foreign countries. We also rely on unpatented technology and we cannot provide assurances that we can meaningfully protect our interests or that others will not independently develop substantially similar technology or otherwise gain access to our unpatented technology. We also hold licenses from third parties which may be utilized in our business operations, the loss of which could impact our business operations.
We may need to raise additional capital in the future for working capital, capital expenditures and/or acquisitions, and we may not be able to do so on favorable terms or at all, which would impair our ability to operate our business or achieve our growth objectives.
Our ongoing ability to generate cash is important for the funding of our continuing operations and the servicing of our indebtedness. To the extent that existing cash balances and cash flow from operations, together with borrowing capacity under our credit facilities, are insufficient to make future investments, make acquisitions or provide needed working capital, we may require additional financing from other sources. Our ability to obtain such additional financing in the future will depend in part upon prevailing capital market conditions, as well as conditions in our business and our operating results; and those factors may affect our efforts to arrange additional financing on terms that are acceptable to us. Furthermore, in the past few years, there has been significant upheaval and turmoil in financial markets and in many financial institutions, and if these conditions cause deterioration of the financial institutions which provide credit to us, it is possible that our ability to draw upon our credit facilities may be impacted. If adequate funds are not available, or are not available on acceptable terms, we may not be able to make future investments, take advantage of acquisitions or other opportunities, or respond to competitive challenges.
Foreign exchange risks may affect our ability to realize a profit from certain projects.
We generally attempt to denominate our contracts in the currencies of our expenditures. However, we do enter into contracts that subject us to currency risk exposure, particularly to the extent contract revenue is denominated in a currency different than the contract costs. We attempt to minimize our exposure from currency risks by obtaining escalation provisions for projects in inflationary economies or entering into
20
derivative (hedging) instruments, when there is currency risk exposure that is not naturally mitigated via our contracts. However, these actions may not always eliminate all currency risk exposure. Based on fluctuations in currency, the U.S. dollar value of our backlog may from time to time increase or decrease significantly. The company does not enter into derivative instruments or hedging activities for speculative purposes. Our operational cash flows and cash balances, though predominately held in U.S. dollars, may consist of different currencies at various points in time in order to execute our project contracts globally. Non-U.S. asset and liability balances are subject to currency fluctuations when measured period to period for financial reporting purposes in U.S. dollars. Financial hedging may be used to minimize currency volatility for financial reporting purposes.
Our employees work on projects that are inherently dangerous and a failure to maintain a safe work site could result in significant losses.
We often work on large-scale and complex projects, frequently in geographically remote locations. Our project sites can place our employees and others near large equipment, dangerous processes or highly regulated materials, and in challenging environments. Safety is a primary focus of our business and is critical to our reputation. Often, we are responsible for safety on the project sites where we work. Many of our clients require that we meet certain safety criteria to be eligible to bid on contracts, and some of our contract fees or profits are subject to satisfying safety criteria. Unsafe work conditions also have the potential of increasing employee turnover, increasing project costs and raising our operating costs. If we fail to implement appropriate safety procedures and/or if our procedures fail, our employees or others may suffer injuries or even loss of life. Although we maintain functional groups whose primary purpose is to implement effective health, safety and environmental procedures throughout our company, the failure to comply with such procedures, client contracts or applicable regulations could subject us to losses and liability.
We work in international locations where there are high security risks, which could result in harm to our employees or unanticipated cost.
Some of our services are performed in high risk locations, such as Afghanistan and Iraq, where the country or location is subject to political, social or economic risks, or war or civil unrest. In those locations where we have employees or operations, we may incur substantial security costs to maintain the safety of our personnel. Despite these activities, in these locations, we cannot guarantee the safety of our personnel and we may suffer future losses of employees and subcontractors.
We could be adversely impacted if we fail to comply with domestic and international export laws.
Our global operations require importing and exporting goods and technology across international borders on a regular basis. Our policy mandates strict compliance with U.S. and foreign international trade laws. To the extent we export technical services, data and products outside of the United States, we are subject to U.S. and international laws and regulations governing international trade and exports including but not limited to the International Traffic in Arms Regulations, the Export Administration Regulations and trade sanctions against embargoed countries, which are administered by the Office of Foreign Assets Control with the Department of Treasury. From time to time, we identify certain inadvertent or potential export or related violations. These violations may include, for example, transfers without required governmental authorization. A failure to comply with these laws and regulations could result in civil or criminal sanctions, including the imposition of fines, the denial of export privileges and suspension or debarment from participation in U.S. government contracts.
Past and future environmental, safety and health regulations could impose significant additional cost on us that reduce our profits.
We are subject to numerous environmental laws and health and safety regulations. Our projects can involve the handling of hazardous and other highly regulated materials which, if improperly handled or disposed of, could subject us to civil and criminal liabilities. It is impossible to reliably predict the full
21
nature and effect of judicial, legislative or regulatory developments relating to health and safety regulations and environmental protection regulations applicable to our operations. The applicable regulations, as well as the technology and length of time available to comply with those regulations, continue to develop and change. In addition, past activities could also have a material impact on us. For example, when we sold our mining business formerly conducted through St. Joe Minerals Corporation, we retained responsibility for certain non-lead related environmental liabilities, but only to the extent that such liabilities were not covered by St. Joe's comprehensive general liability insurance and the buyer's indemnification obligations. The cost of complying with rulings and regulations, satisfying any environmental remediation requirements for which we are found responsible, or satisfying claims or judgments alleging personal injury, property damage or natural resource damages as a result of exposure to or contamination by hazardous materials, including as a result of commodities such as lead or asbestos-related products, could be substantial, could reduce our profits and could materially impact our future operations.
A substantial portion of our business is generated either directly or indirectly as a result of federal, state, local and foreign laws and regulations related to environmental matters. A reduction in the number or scope of these laws or regulations, or changes in government policies regarding the funding, implementation or enforcement of such laws and regulations, could significantly reduce the size of one of our markets and limit our opportunities for growth or reduce our revenue below current levels.
We may be unable to win new contract awards if we cannot provide clients with letters of credits, bonds or other security or credit enhancements.
In certain of our business lines, it is industry practice for customers to require bonds, letters of credit, bank guarantees or other forms of credit enhancement. These bonds, letters of credit or guarantees indemnify our clients if we fail to perform our obligations under our contracts. Historically, we have had strong surety bonding capacity due to our industry leading credit rating, but, bonding is provided at the surety's sole discretion. In addition, because of the overall limitations in worldwide bonding capacity, we may find it difficult to find sufficient surety bonding capacity to meet our total surety bonding needs. With regard to letters of credit, we believe we have adequate capacity under our credit facilities but any amounts required in excess of our credit limits would be at our lenders' sole discretion. Failure to provide credit enhancements on terms required by a client may result in an inability to compete for or win a project.
We may be affected by market or regulatory responses to climate change.
Growing concerns about climate change may result in the imposition of additional environmental regulations. For example, there is a growing consensus that new and additional regulations concerning greenhouse gas emissions and/or "cap and trade" legislation may be enacted, which could result in increased compliance costs for us and our clients. Legislation, international protocols, regulation or other restrictions on emissions could also affect our clients, including those who (a) are involved in the exploration, production or refining of fossil fuels such as our Oil & Gas clients, (b) emit greenhouse gases through the combustion of fossil fuels, including some of our Power clients or (c) emit greenhouse gases through the mining, manufacture, utilization or production of materials or goods. Such legislation or restrictions could increase the costs of projects for our clients or, in some cases, prevent a project from going forward, thereby potentially reducing the need for our services which could in turn have a material adverse effect on our operations and financial condition. However, legislation and regulation regarding climate change could also increase the pace of development of carbon capture and storage projects, alternative transportation, alternative energy facilities, such as wind farms, or incentivize increased implementation of clean fuel projects which could positively impact the company. We cannot predict when or whether any of these various legislative and regulatory proposals may become law or what their effect will be on us and our customers.
22
Our actual results could differ from the assumptions and estimates used to prepare our financial statements.
In preparing our financial statements, we are required under U.S. generally accepted accounting principles to make estimates and assumptions as of the date of the financial statements. These estimates and assumptions affect the reported values of assets, liabilities, revenue and expenses, and the disclosure of contingent assets and liabilities. Areas requiring significant estimates by our management include:
Our actual business and financial results could differ from our estimates of such results, which could have a material negative impact on our financial condition and reported results of operations.
Our use of the percentage-of-completion method of accounting could result in a reduction or reversal of previously recorded revenue or profits.
Under our accounting procedures, we measure and recognize a large portion of our profits and revenue under the percentage-of-completion accounting methodology. This methodology allows us to recognize revenue and profits ratably over the life of a contract by comparing the amount of the cost incurred to date against the total amount of cost expected to be incurred. The effect of revisions to revenue and estimated cost is recorded when the amounts are known and can be reasonably estimated, and these revisions can occur at any time and could be material. On a historical basis, we believe that we have made reasonably reliable estimates of the progress towards completion on our long-term contracts. In addition, from time to time, when calculating the total amount of profits and losses, we include unapproved claims as contract revenue when collection is deemed probable based upon the criteria for recognizing unapproved claims under Accounting Standards Codification ("ASC") 605-35-25. Including unapproved claims in this calculation increases the operating income (or reduces the operating loss) that would otherwise be recorded without consideration of the probable unapproved claim. Given the uncertainties associated with these types of contracts, it is possible for actual cost to vary from estimates previously made, which may result in reductions or reversals of previously recorded revenue and profits.
Our continued success requires us to hire and retain qualified personnel.
The success of our business is dependent upon being able to attract and retain personnel, including engineers, project management and craft employees around the globe and who have the necessary and required experience and expertise. Competition for these kinds of personnel is intense. In addition, as some of our key personnel approach retirement age, we need to provide for smooth transitions, and our operations and results may be negatively affected if we are not able to do so.
It can be very difficult or expensive to obtain the insurance we need for our business operations.
As part of business operations, we maintain insurance both as a corporate risk management strategy and in order to satisfy the requirements of many of our contracts. Although we have in the past been
23
generally able to cover our insurance needs, there can be no assurances that we can secure all necessary or appropriate insurance in the future. We also monitor the financial health of the insurance companies from which we procure insurance, and this is one of the factors we take into account when purchasing insurance. Our insurance is purchased from a number of the world's leading providers, often in layered insurance or quota share arrangements. If any of our third party insurers fail, abruptly cancel our coverage or otherwise can not satisfy their insurance requirements to us, then our overall risk exposure and operational expenses could be increased and our business operations could be interrupted.
Any acquisitions, dispositions or other investments may present risks or uncertainties.
We have made and expect to continue to pursue selective acquisitions or dispositions of businesses, or investments in strategic business opportunities. We cannot assure you that we will be able to locate suitable acquisitions or investments, or that we will be able to consummate any such transactions on terms and conditions acceptable to us, or that such transactions will be successful. Acquisitions may bring us into businesses we have not previously conducted and expose us to additional business risks that are different from those we have traditionally experienced. We also may encounter difficulties identifying all significant risks during our due diligence activities or integrating acquisitions and successfully managing the growth we expect to experience from these acquisitions. We may not be able to successfully cause a buyer of a divested business to assume the liabilities of that business or, even if such liabilities are assumed, we may have difficulties enforcing our rights, contractual or otherwise, against the buyer. We may invest in companies that fail, causing a loss of all or part of our investment. In addition, if we determine that an other-than-temporary decline in the fair value exists for a company in which we have invested, we may have to write down that investment to its fair value and recognize the related write-down as an investment loss. For cases in which we are required under equity method or the proportionate consolidation method of accounting to recognize a proportionate share of another company's income or loss, such income or loss may impact our earnings.
In the event we make acquisitions using our stock as consideration, stockholders' ownership percentage would be diluted.
We intend to grow our business not only organically but also potentially through acquisitions. One method of paying for acquisitions or to otherwise fund our corporate initiatives is through the issuance of additional equity securities. If we do issue additional equity securities, the issuance would have the effect of diluting our earnings per share and stockholders' percentage ownership.
As a holding company, we are dependent on our subsidiaries for cash distributions to fund debt payments and other corporate liabilities.
Because we are a holding company, we have no true operations or significant assets other than the stock we own of our subsidiaries. We depend on dividends, loans and other distributions from these subsidiaries to be able to service our indebtedness, fund share repurchases and satisfy other financial obligations. Contractual limitations and legal regulations may restrict the ability of our subsidiaries to make such distributions to us or, if made, may be insufficient to cover our financial obligations.
We maintain a workforce based upon current and anticipated workloads. If we do not receive future contract awards or if these awards are delayed, significant cost may result.
Our estimates of future performance depend on, among other matters, whether and when we will receive certain new contract awards, including the extent to which we utilize our workforce. The rate at which we utilize our workforce is impacted by a variety of factors including our ability to manage attrition, our ability to forecast our need for services which allows us to maintain an appropriately sized workforce, our ability to transition employees from completed projects to new projects or between internal business groups, and our need to devote resources to non-chargeable activities such as training or business development. While our estimates are based upon our good faith judgment, these estimates can be unreliable and may frequently change based on newly available information. In the case of large-scale
24
domestic and international projects where timing is often uncertain, it is particularly difficult to predict whether and when we will receive a contract award. The uncertainty of contract award timing can present difficulties in matching our workforce size with our contract needs. If an expected contract award is delayed or not received, we could incur cost resulting from reductions in staff or redundancy of facilities that would have the effect of reducing our profits.
Delaware law and our charter documents may impede or discourage a takeover or change of control.
Fluor is a Delaware corporation. Various anti-takeover provisions under Delaware law impose impediments on the ability of others to acquire control of us, even if a change of control would be beneficial to our stockholders. In addition, certain provisions of our charters and bylaws may impede or discourage a takeover. For example:
These types of provisions in our charters and bylaws could also make it more difficult for a third party to acquire control of us, even if the acquisition would be beneficial to our stockholders. Accordingly, stockholders may be limited in the ability to obtain a premium for their shares.
Item 1B.
Unresolved Staff Comments
None.
Major Facilities
Operations of Fluor and its subsidiaries are conducted at both owned and leased properties in domestic and foreign locations totaling approximately 7.2 million rentable square feet. Our executive offices are located at 6700 Las Colinas Boulevard, Irving, Texas. As our business and the mix of structures is constantly changing, the extent of utilization of the facilities by particular segments cannot be accurately stated. In addition, certain owned or leased properties of Fluor and its subsidiaries are leased or subleased
25
to third party tenants. While we have operations worldwide, the following table describes the location and general character of our more significant existing facilities:
|
Location
|
Interest | |
|---|---|---|
|
United States: |
||
|
Aliso Viejo, California |
Owned and Leased | |
|
Greenville, South Carolina |
Owned and Leased | |
|
Houston (Sugar Land), Texas |
Leased | |
|
Irving, Texas (Corporate Headquarters) |
Owned | |
|
Canada: |
||
|
Calgary, Alberta |
Owned and Leased | |
|
South America: |
||
|
Santiago, Chile |
Owned and Leased | |
|
Europe, Africa and Middle East: |
||
|
Al Khobar, Saudi Arabia |
Owned | |
|
Farnborough, England |
Owned and Leased | |
|
Haarlem, the Netherlands |
Owned | |
|
Johannesburg, South Africa |
Leased | |
|
Asia/Asia Pacific: |
||
|
Cebu, the Philippines |
Leased | |
|
Manila, the Philippines |
Owned and Leased | |
|
Melbourne, Australia |
Leased | |
|
New Delhi, India |
Leased | |
|
Shanghai, China |
Leased |
We also lease or own a number of sales, administrative and field construction offices, warehouses and equipment yards strategically located throughout the world.
Fluor and its subsidiaries, as part of their normal business activities, are parties to a number of legal proceedings and other matters in various stages of development. While we cannot predict the outcome of these proceedings, in our opinion and based on reports of counsel, any liability arising from these matters individually and in the aggregate will not have a material adverse effect upon the consolidated financial position or the results of operations of the company, after giving effect to provisions already recorded.
For information on matters in dispute, see "13. Contingencies and Commitments" in the Notes to Consolidated Financial Statements.
Item 4.
Mine Safety Disclosures
Not applicable.
Executive Officers of the Registrant
Information regarding the company's executive officers is set forth under the caption "Executive Officers of the Registrant" in Part III, Item 10, of this Form 10-K and is incorporated herein by this reference.
Item 5.
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Our common stock is traded on the New York Stock Exchange under the symbol "FLR." The following table sets forth for the quarters indicated the high and low sales prices of our common stock, as
26
reported in the Consolidated Transactions Reporting System, and the cash dividends paid per share of common stock.
|
|
Common Stock
Price Range |
|
||||||||
|---|---|---|---|---|---|---|---|---|---|---|
|
|
Dividends
Per Share |
|||||||||
|
|
High | Low | ||||||||
|
Year Ended December 31, 2011 |
||||||||||
|
Fourth Quarter |
$ | 60.76 | $ | 44.16 | $ | .125 | ||||
|
Third Quarter |
$ | 68.00 | $ | 45.86 | $ | .125 | ||||
|
Second Quarter |
$ | 74.58 | $ | 60.10 | $ | .125 | ||||
|
First Quarter |
$ | 75.76 | $ | 63.43 | $ | .125 | ||||
|
Year Ended December 31, 2010 |
||||||||||
|
Fourth Quarter |
$ | 67.31 | $ | 47.94 | $ | .125 | ||||
|
Third Quarter |
$ | 51.00 | $ | 41.20 | $ | .125 | ||||
|
Second Quarter |
$ | 55.47 | $ | 41.68 | $ | .125 | ||||
|
First Quarter |
$ | 50.50 | $ | 41.71 | $ | .125 | ||||
Any future cash dividends will depend upon our results of operations, financial condition, cash requirements, availability of surplus and such other factors as our Board of Directors may deem relevant. See "Item 1A. — Risk Factors."
At February 16, 2012, there were 169,003,400 shares outstanding and 6,567 stockholders of record of the company's common stock. The company estimates there were an additional 179,794 stockholders whose shares were held by banks, brokers or other financial institutions at February 16, 2012.
Issuer Purchases of Equity Securities
The following table provides information as of the three months ending December 31, 2011 about purchases by the company of equity securities that are registered by the company pursuant to Section 12 of the Securities Exchange Act of 1934 (the "Exchange Act"):
|
Period
|
Total Number
of Shares Purchased (1) |
Average Price
Paid per Share |
Total Number of
Shares Purchased as Part of Publicly Announced Plans or Programs |
Maximum
Number of Shares that May Yet Be Purchased Under Plans or Programs (2) |
|||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
October 1–October 31, 2011 |
— | $ | — | — | 12,000,000 | ||||||||
|
November 1–November 30, 2011 |
350,000 | 52.42 | 350,000 | 11,650,000 | |||||||||
|
December 1–December 31, 2011 |
400,000 | 53.95 | 400,000 | 11,250,000 | |||||||||
|
Total |
750,000 | $ | 53.24 | 750,000 | 11,250,000 | ||||||||
27
Item 6.
Selected Financial Data
The following table presents selected financial data for the last five years. This selected financial data should be read in conjunction with the consolidated financial statements and related notes included in Item 15 of this Form 10-K. Amounts are expressed in millions, except for per share and employee information:
|
|
Year Ended December 31, | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
|
2011
|
2010
|
2009
|
2008
|
2007
|
|||||||||||
|
CONSOLIDATED OPERATING RESULTS |
||||||||||||||||
|
Total revenue |
$ |
23,381.4 |
$ |
20,849.3 |
$ |
21,990.3 |
$ |
22,325.9 |
$ |
16,691.0 |
||||||
|
Earnings before taxes (1)(2) |
1,001.8 |
559.6 |
1,136.8 |
1,141.7 |
659.9 |
|||||||||||
|
Net earnings attributable to Fluor Corporation (1) (5) |
593.7 | 357.5 | 684.9 | 716.1 | 528.0 | |||||||||||
|
Earnings per share (1)(3)(4) (5) |
||||||||||||||||
|
Basic |
$ | 3.44 | $ | 2.01 | $ | 3.79 | $ | 3.99 | $ | 2.99 | ||||||
|
Diluted |
3.40 | 1.98 | 3.75 | 3.89 | 2.88 | |||||||||||
|
Cash dividends per common share (4) |
0.50 | 0.50 | 0.50 | 0.50 | 0.40 | |||||||||||
|
Return on average shareholders' equity (1) |
17.4 | % | 10.4 | % | 23.0 | % | 28.1 | % | 27.3 | % | ||||||
|
CONSOLIDATED FINANCIAL POSITION |
||||||||||||||||
|
Current assets (1) |
$ |
5,880.6 |
$ |
5,562.8 |
$ |
5,122.1 |
$ |
4,668.5 |
$ |
4,055.9 |
||||||
|
Current liabilities (1) |
3,840.1 | 3,523.4 | 3,301.4 | 3,162.2 | 2,850.5 | |||||||||||
|
Working capital (1) |
2,040.5 | 2,039.4 | 1,820.7 | 1,506.3 | 1,205.4 | |||||||||||
|
Property, plant and equipment, net |
921.6 |
866.3 |
837.0 |
799.8 |
784.4 |
|||||||||||
|
Total assets (1) |
8,270.3 | 7,614.9 | 7,178.5 | 6,423.6 | 5,792.6 | |||||||||||
|
Capitalization |
||||||||||||||||
|
Senior Notes |
495.7 | — | — | — | — | |||||||||||
|
Convertible Senior Notes (1) |
19.5 | 96.7 | 109.8 | 133.2 | 297.7 | |||||||||||
|
Other debt obligations |
17.8 | 17.8 | 17.7 | 17.7 | 17.7 | |||||||||||
|
Shareholders' equity (1) |
3,395.5 | 3,497.0 | 3,305.5 | 2,671.3 | 2,280.4 | |||||||||||
|
Total capitalization (1) |
3,928.5 | 3,611.5 | 3,433.0 | 2,822.2 | 2,595.8 | |||||||||||
|
Total debt as a percent of total capitalization (1) |
13.6 | % | 3.2 | % | 3.7 | % | 5.3 | % | 12.2 | % | ||||||
|
Shareholders' equity per common share (1) (4) |
$ | 20.09 | $ | 19.82 | $ | 18.48 | $ | 14.71 | $ | 12.85 | ||||||
|
Common shares outstanding at year end (4) |
169.0 | 176.4 | 178.8 | 181.6 | 177.4 | |||||||||||
|
OTHER DATA |
||||||||||||||||
|
New awards |
$ |
26,896.1 |
$ |
27,362.9 |
$ |
18,455.4 |
$ |
25,057.8 |
$ |
22,590.1 |
||||||
|
Backlog at year end |
39,483.7 | 34,908.7 | 26,778.7 | 33,245.3 | 30,170.8 | |||||||||||
|
Capital expenditures |
338.2 | 265.4 | 233.1 | 299.6 | 284.2 | |||||||||||
|
Cash provided by operating activities (2) |
889.7 | 550.9 | 905.0 | 991.6 | 933.8 | |||||||||||
|
Cash provided (utilized) by investing activities |
(436.4 | ) | 218.4 | (818.1 | ) | 22.5 | (793.4 | ) | ||||||||
|
Cash provided (utilized) by financing activities (1) |
(395.8 | ) | (389.9 | ) | (323.0 | ) | (270.2 | ) | 4.9 | |||||||
|
Employees at year end |
||||||||||||||||
|
Salaried employees |
33,252 | 29,159 | 24,943 | 27,958 | 25,842 | |||||||||||
|
Craft/hourly employees |
9,835 | 10,070 | 11,209 | 14,161 | 15,418 | |||||||||||
|
Total employees |
43,087 | 39,229 | 36,152 | 42,119 | 41,260 | |||||||||||
28
Net earnings in 2010 included pre-tax charges of $343 million (or $1.79 per diluted share) on the Greater Gabbard Project. These charges were partially offset by a tax benefit of $152 million (or $0.84 per diluted share) for a worthless stock deduction from the tax restructuring of a foreign subsidiary in the fourth quarter. A significant portion of this tax benefit resulted from the financial impact of the Greater Gabbard Project charges on the foreign subsidiary. Net earnings in 2010 also included a pre-tax charge of $95 million (or $0.33 per diluted share) related to a completed infrastructure joint venture project in California and pre-tax charges of $91 million (or $0.31 per diluted share) on a gas-fired power project in Georgia.
Net earnings in 2009 included a pre-tax charge of $45 million ($0.15 per diluted share) for a paper mill project in the Global Services segment.
Net earnings in 2008 included a pre-tax gain of $79 million ($0.27 per diluted share) from the sale of a joint venture interest in the Greater Gabbard Project and tax benefits of $28 million ($0.15 per diluted share) from the expiration of statutes of limitations and tax settlements that favorably impacted the effective tax rate.
Net earnings in 2007 included a credit of $123 million ($0.68 per diluted share (4) ) that resulted from the favorable settlement of tax audits for the years 1996 through 2000. See Management's Discussion and Analysis on pages 29 to 46 and Notes to Consolidated Financial Statements on pages F-7 to F-46 for additional information relating to significant items affecting the results of operations.
Item 7.
Management's Discussion and Analysis of Financial Condition and Results of Operations
Introduction
The following discussion and analysis is provided to increase the understanding of, and should be read in conjunction with, the Consolidated Financial Statements and accompanying Notes. For purposes of reviewing this document, "segment profit" is calculated as revenue less cost of revenue and earnings attributable to noncontrolling interests excluding: corporate general and administrative expense; interest expense; interest income; domestic and foreign income taxes; and other non-operating income and expense items. For a reconciliation of segment profit to earnings before taxes, see "15. Operations by Business Segment and Geographical Area" in the Notes to Consolidated Financial Statements.
Results of Operations
Summary of Overall Company Results
Consolidated revenue for 2011 increased 12 percent to a record $23.4 billion from $20.8 billion for 2010 principally due to substantial growth in the mining and metals business line of the Industrial & Infrastructure segment, as well as revenue growth in the Oil & Gas, Government and Global Services segments. This revenue growth was partially offset by the significant revenue decline in the Power segment in 2011.
Consolidated revenue for 2010 decreased five percent to $20.8 billion from $22.0 billion for 2009 primarily due to a significant revenue decline in the Oil & Gas segment which was partially offset by large revenue increases in the Industrial & Infrastructure and Government segments.
The generally sluggish global economy and the uncertain economic conditions in Europe and other markets have resulted in a highly competitive business environment that has continued to put increased pressure on margins. This trend is expected to continue and, in certain cases, may result in more lump-sum project execution for the company. In some instances, margins are being negatively impacted by the change in the mix of work performed (e.g., a higher mix of construction-related work and a higher content of customer-furnished materials, which typically generate lower margins than engineering work or projects without customer-furnished materials).
Earnings before taxes for 2011 increased 79 percent to $1.0 billion from $560 million in 2010. Earnings for the 2011 period increased primarily due to a reduced level of project charges compared to 2010. During 2010, the company recorded significant charges for two infrastructure projects, both discussed in more detail in "— Industrial & Infrastructure" below. First, for the Greater Gabbard Offshore Wind Farm ("Greater Gabbard") Project, a $1.8 billion lump-sum project to provide engineering, procurement and construction services for the client's offshore wind farm project in the United Kingdom, charges totaling $343 million were taken in 2010 for estimated cost overruns for a variety of execution challenges that
29
impacted the schedule and project cost forecast, including material and equipment delivery issues, productivity issues, the bankruptcy of a major subcontractor and weather-related delays. The company also recorded a charge of $95 million during the prior year after an adverse bankruptcy court ruling on the priority of claims made by its joint venture against a bankrupt client entity for a completed $700 million fixed-price infrastructure joint venture project near San Diego, California. During 2011, the company recorded additional charges for the Greater Gabbard Project totaling $60 million, primarily due to increased costs associated with the installation of subsea cable and schedule delays related to adverse weather conditions. The 2011 results were also positively impacted by improved performance in the mining and metals business line of the Industrial & Infrastructure segment and the Global Services segment, offset somewhat by lower earnings in the Power and Oil & Gas segments.
Earnings before taxes were $560 million in 2010, down from $1.1 billion in 2009. The decrease in earnings for 2010 was primarily due to the impact of charges totaling $343 million for the Greater Gabbard Project and a charge totaling $95 million for the completed infrastructure joint venture project in California. Some of the impact of the charges for the Greater Gabbard Project and the infrastructure joint venture project was offset by improved performance in 2010 on other Industrial & Infrastructure projects in the infrastructure and mining and metals business lines. The 2010 results were also impacted by the lower volume and associated earnings in the Oil & Gas segment due to reduced project execution activities as a number of large projects that were awarded in 2006 through 2008 had been completed or were near completion. In addition, the earnings of the segment were impacted by slower new award activity during 2009 and the first half of 2010 related to the global recession, a decline in the demand for new capacity in the refining, petrochemical and polysilicon markets, and a highly competitive business environment that resulted from changed market conditions. Improved performance was noted in the Government, Global Services and Power segments for 2010. The 2010 improvement in the Government segment was primarily the result of a higher level of project execution activities to support the United States Army in Afghanistan. The Global Services segment's increase in profitability in 2010 compared to the prior year was primarily because the 2009 period included a $45 million charge related to the uncollectability of a client receivable for a paper mill project. The Power segment contributed higher earnings during 2010 compared to the prior year mostly due to higher contributions from the Oak Grove coal-fired power project and a gas-fired power plant, both in Texas. These positive results in the Power segment were offset somewhat by charges of $91 million taken in 2010 on a gas-fired power project in Georgia for estimated additional costs to complete the project. The company reported lower corporate general and administrative expense in 2010 when compared to 2009, primarily as a result of overhead reduction efforts and lower management incentive compensation.
The effective tax rate was 30.3 percent, 21.2 percent and 35.5 percent for 2011, 2010 and 2009, respectively. The 2011 rate was favorably impacted by the release of previously unrecognized tax benefits related to the expiration of statutes of limitations and the resolution of various disputed items. The lower 2010 rate was primarily attributable to a $152 million tax benefit that resulted from a worthless stock deduction for the tax restructuring of a foreign subsidiary in the fourth quarter, partially offset by an increase in the valuation allowance associated with net operating losses. Factors affecting the effective tax rates for 2009 - 2011 are discussed further under "— Corporate, Tax and Other Matters" below.
Net earnings attributable to Fluor Corporation were $3.40 per diluted share in 2011 compared to $1.98 and $3.75 per diluted share in 2010 and 2009, respectively. Net earnings attributable to Fluor Corporation in 2011 reflected the additional pre-tax charges of $60 million ($0.21 per diluted share) for the Greater Gabbard Project noted above. Net earnings attributable to Fluor Corporation in 2010 included the negative impact of the following pre-tax charges previously discussed: $343 million ($1.79 per diluted share) for the Greater Gabbard Project; $95 million ($0.33 per diluted share) for the completed infrastructure joint venture project in California; and $91 million ($0.31 per diluted share) for the gas-fired power project in Georgia. Net earnings attributable to Fluor Corporation in 2010 also included the $152 million ($0.84 per diluted share) tax benefit described above for the tax restructuring of a foreign subsidiary in the fourth quarter. A significant portion of this tax benefit resulted from the financial impact of the Greater Gabbard Project charges on the foreign subsidiary. Net earnings attributable to Fluor
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Corporation in 2009 included a $45 million ($0.15 per diluted share) pre-tax charge for the uncollectability of the paper mill project receivable in the Global Services segment noted above.
Consolidated new awards for 2011 were $26.9 billion compared to $27.4 billion in 2010 and $18.5 billion in 2009. New award activity in 2011 and 2010 were driven by the strength of the mining and metals business line in the Industrial & Infrastructure segment and the Oil & Gas segment. The lower level of new awards in 2009 was primarily attributable to the global recession, though the Oil & Gas and Industrial & Infrastructure segments were still the principal drivers of the new award activity for the company. Approximately 84 percent of consolidated new awards for 2011 were for projects located outside of the United States.
Consolidated backlog was $39.5 billion as of December 31, 2011, $34.9 billion as of December 31, 2010, and $26.8 billion as of December 31, 2009. The increase in backlog during 2011 and 2010 was due to the strength of the new award activity noted above in the Industrial & Infrastructure and Oil & Gas segments. Backlog was lower at the end of 2009 primarily because of the impact of the global recession on new award activity, as well as certain project cancellations and scope reductions attributable to the global credit crisis and falling oil prices. The Industrial & Infrastructure and Oil & Gas segments made up the vast majority of backlog for all three years, but at lower levels in 2009 compared to both 2010 and 2011. As of December 31, 2011, approximately 78 percent of consolidated backlog related to projects located outside of the United States.
For a more detailed discussion of operating performance of each business segment, corporate general and administrative expense and other items, see "— Segment Operations" and "— Corporate, Tax and Other Matters" below.
Discussion of Critical Accounting Policies
The company's discussion and analysis of its financial condition and results of operations is based upon its Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The company's significant accounting policies are described in the Notes to Consolidated Financial Statements. The preparation of the Consolidated Financial Statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. Estimates are based on information available as of the date of the financial statements and, accordingly, actual results in future periods could differ from these estimates. Significant judgments and estimates used in the preparation of the Consolidated Financial Statements apply to the following critical accounting policies:
Engineering and Construction Contracts Contract revenue is recognized on the percentage-of-completion method based on contract cost incurred to date compared to total estimated contract cost. Contracts are generally segmented between types of services, such as engineering and construction, and accordingly, gross margin related to each activity is recognized as those separate services are rendered. The percentage-of-completion method of revenue recognition requires the company to prepare estimates of cost to complete for contracts in progress. In making such estimates, judgments are required to evaluate contingencies such as potential variances in schedule and the cost of materials, labor cost and productivity, the impact of change orders, liability claims, contract disputes and achievement of contractual performance standards. Changes in total estimated contract cost and losses, if any, are recognized in the period they are determined. Pre-contract costs are expensed as incurred. The majority of the company's engineering and construction contracts provide for reimbursement of cost plus a fixed or percentage fee. As of December 31, 2011, 85 percent of the company's backlog was cost reimbursable while 15 percent was for fixed-price, lump-sum, guaranteed maximum or unit price contracts. In certain instances, the company provides guaranteed completion dates and/or achievement of other performance criteria. Failure to meet schedule or performance guarantees could result in unrealized incentive fees or liquidated damages. In addition, increases in contract cost can result in non-recoverable cost which could exceed revenue realized from the projects.
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Claims arising from engineering and construction contracts have been made against the company by clients, and the company has made claims against clients for cost incurred in excess of current contract provisions. The company recognizes revenue, but not profit, for certain significant claims when it is determined that recovery of incurred cost is probable and the amounts can be reliably estimated. Under Accounting Standards Codification ("ASC") 605-35-25, these requirements are satisfied when the contract or other evidence provides a legal basis for the claim, additional costs were caused by circumstances that were unforeseen at the contract date and not the result of deficiencies in the company's performance, claim-related costs are identifiable and considered reasonable in view of the work performed, and evidence supporting the claim is objective and verifiable. Recognized claims against clients amounted to $298 million and $209 million as of December 31, 2011 and 2010, respectively. Cost, but not profit, associated with unapproved change orders is accounted for in revenue when it is probable that the cost will be recovered through a change in the contract price. In circumstances where recovery is considered probable, but the revenue cannot be reliably estimated, cost attributable to change orders is deferred pending determination of the impact on contract price. If the requirements for recognizing revenue for claims or unapproved change orders are met, revenue is recorded only to the extent that costs associated with the claims or unapproved change orders have been incurred.
Backlog in the engineering and construction industry is a measure of the total dollar value of work to be performed on contracts awarded and in progress. Although backlog reflects business that is considered to be firm, cancellations or scope adjustments may occur. Backlog is adjusted to reflect any known project cancellations, revisions to project scope and cost, and deferrals, as appropriate.
Engineering and Construction Partnerships and Joint Ventures Certain contracts are executed jointly through partnership and joint venture arrangements with unrelated third parties. Generally, these arrangements are characterized by a 50 percent or less ownership interest that requires only a small initial investment. The arrangements are often formed for the single business purpose of executing a specific project and allow the company to share risks and /or secure specialty skills required for project execution.
The company evaluates at inception each partnership and joint venture to determine if it qualifies as a variable interest entity ("VIE") under ASC 810. A variable interest entity is an entity used for business purposes that either (a) does not have equity investors with voting rights or (b) has equity investors who are not required to provide sufficient financial resources for the entity to support its activities without additional subordinated financial support. The majority of the company's partnerships and joint ventures qualify as VIEs because the total equity investment is typically nominal and not sufficient to permit the entity to finance its activities without additional subordinated financial support. Upon the occurrence of certain events outlined in ASC 810, the company reassesses its initial determination of whether the partnership or joint venture is a VIE.
The company also evaluates whether it is the primary beneficiary of each VIE and consolidates the VIE if the company has both (1) the power to direct the economically significant activities of the entity and (2) the obligation to absorb losses of, or the right to receive benefits from, the entity that could potentially be significant to the variable interest entity. The company considers the contractual agreements that define the ownership structure, distribution of profits and losses, risks, responsibilities, indebtedness, voting rights and board representation of the respective parties in determining whether it qualifies as the primary beneficiary. The company also considers all parties that have direct or implicit variable interests when determining whether it is the primary beneficiary. In most cases, the company does not qualify as the primary beneficiary. When the company is determined to be the primary beneficiary, the VIE is consolidated. As required by ASC 810, management's assessment of whether the company is the primary beneficiary of a VIE is continuously performed.
For joint ventures and partnerships in the construction industry, unless full consolidation is required, the company generally recognizes its proportionate share of revenue, cost and segment profit in its Consolidated Statement of Earnings and uses the one-line equity method of accounting in the Consolidated Balance Sheet, as allowed under ASC 810-10-45-14. At times, the cost and equity methods of accounting are also used, depending on the company's respective ownership interest, amount of influence
32
in the VIE and other factors. The most significant application of the proportionate consolidation method is in the Oil & Gas, Industrial & Infrastructure and Government segments.
Goodwill and Intangible Assets Goodwill is not amortized but is subject to annual impairment tests. Interim testing for impairment is performed if indicators of potential impairment exist. For purposes of impairment testing, goodwill is allocated to the applicable reporting units based on the current reporting structure. When testing goodwill for impairment, the company first compares the fair value of each reporting unit with its carrying amount. If the carrying amount of a reporting unit exceeds its fair value, a second step is performed to measure the amount of potential impairment. In the second step, the company compares the implied fair value of reporting unit goodwill with the carrying amount of the reporting unit's goodwill. If the carrying amount of reporting unit goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized. During 2011, the company completed its annual goodwill impairment tests in the first quarter and determined that none of the goodwill was impaired because the fair value of each reporting unit substantially exceeded its carrying amount.
Intangible assets with indefinite lives are not amortized but are subject to annual impairment tests. Interim testing for impairment is performed if indicators of potential impairment exist. An intangible asset with an indefinite life is impaired if its carrying value exceeds its fair value. As of December 31, 2011, none of the company's intangible assets with indefinite lives were impaired. Intangible assets with finite lives arise from business acquisitions and are amortized on a straight-line basis over the useful lives of those assets, ranging from one to ten years.
Deferred Taxes and Tax Contingencies Deferred tax assets and liabilities are recognized for the expected future tax consequences of events that have been recognized in the company's financial statements or tax returns. As of December 31, 2011, the company had deferred tax assets of $614 million which were partially offset by a valuation allowance of $145 million and further reduced by deferred tax liabilities of $94 million. The valuation allowance reduces certain deferred tax assets to amounts that are more likely than not to be realized. The allowance for 2011 primarily relates to the deferred tax assets on certain net operating and capital loss carryforwards for U.S. and non-U.S. subsidiaries and certain reserves on investments. The company evaluates the realizability of its deferred tax assets by assessing its valuation allowance and by adjusting the amount of such allowance, if necessary. The factors used to assess the likelihood of realization are the company's forecast of future taxable income and available tax planning strategies that could be implemented to realize the net deferred tax assets. Failure to achieve forecasted taxable income in the applicable taxing jurisdictions could affect the ultimate realization of deferred tax assets and could result in an increase in the company's effective tax rate on future earnings.
Income tax positions must meet a more-likely-than-not recognition threshold to be recognized. Income tax positions that previously failed to meet the more-likely-than-not threshold are recognized in the first subsequent financial reporting period in which that threshold is met. Previously recognized tax positions that no longer meet the more-likely-than-not threshold are derecognized in the first subsequent financial reporting period in which that threshold is no longer met. The company recognizes potential interest and penalties related to unrecognized tax benefits within its global operations in income tax expense.
Retirement Benefits The company accounts for its defined benefit pension plans in accordance with Statement of Financial Accounting Standards ("SFAS") No. 87, "Employers' Accounting for Pensions," as amended by SFAS No. 158, "Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans" (ASC 715-30). As required by ASC 715-30, the unfunded or overfunded projected benefit obligation is recognized in the company's financial statements. Assumptions concerning discount rates, long-term rates of return on plan assets and rates of increase in compensation levels are determined based on the current economic environment in each host country at the end of each respective annual reporting period. The company evaluates the funded status of each of its retirement plans using these current assumptions and determines the appropriate funding level considering applicable regulatory requirements, tax deductibility, reporting considerations and other factors. Assuming no changes in current assumptions, the company expects to fund between $30 million and $60 million for the calendar year 2012,
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which is expected to be in excess of the minimum funding required. If the discount rates were reduced by 25 basis points, plan liabilities for the U.S. and non-U.S. plans would increase by approximately $18 million and $26 million, respectively.
Segment Operations
The company provides professional services on a global basis in the fields of engineering, procurement, construction, maintenance and project management. The company is organized into five business segments: Oil & Gas, Industrial & Infrastructure, Government, Global Services and Power. For more information on the business segments see "Item 1 — Business" above.
Oil & Gas
Revenue and segment profit for the Oil & Gas segment are summarized as follows:
|
|
Year Ended December 31, | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
|
(in millions)
|
2011
|
2010
|
2009
|
|||||||
|
Revenue |
$ | 7,961.7 | $ | 7,740.0 | $ | 11,826.9 | ||||
|
Segment profit |
275.6 |
344.0 |
729.7 |
|||||||
Revenue in 2011 increased three percent compared to 2010 primarily because of increased construction-related activities, including a greater content of customer-furnished materials for projects that were awarded in 2010. Revenue in 2010 decreased 35 percent compared to 2009 due to reduced project execution activities as a number of large projects that were awarded from 2006 through 2008 had been completed or were near completion. In addition, revenue in 2010 was impacted by slower new award activity during 2009 and the first half of 2010.
Segment profit in 2011 decreased 20 percent compared to 2010 primarily because the 2010 results were favorably impacted by contributions of certain large projects that were completed or nearing completion, as well as various other large projects that achieved their peak earnings that year. In addition, 2010 segment profit was favorably impacted by the successful resolution of some disputed items and the expiration of certain warranty obligations. Segment profit in 2010 decreased 53 percent compared to 2009 due to the reduced project execution activities and reduced new awards, noted above, that also caused the decline in revenue in 2010. In addition, segment profit in 2009 included the net positive impact of close-out issues for certain projects nearing completion, with the approval of change orders and the successful resolution of disputed items.
Segment profit margin was 3.5 percent in 2011 compared to 4.4 percent in 2010 and 6.2 percent in 2009. The reduction in segment profit margin for 2011 compared to 2010 was primarily due to a shift in the mix of work from higher margin engineering activities to lower margin construction activities, with a corresponding higher content of customer-furnished materials. The successful resolution of some disputed items and the expiration of certain warranty obligations in 2010 also contributed to the higher segment profit margin in 2010, relative to 2011. Segment profit margin was higher in 2009 than in both 2010 and 2011 primarily due to the aforementioned net positive impact of close-out issues in 2009 for certain projects nearing completion. Segment profit margin in 2010 and 2011 was also negatively impacted by lower operating leverage with the contraction of business volume, along with a more competitive business environment.
New awards in the Oil & Gas segment were $8.3 billion in 2011, $9.7 billion in 2010 and $7.0 billion in 2009. New awards in 2011 included a $2.7 billion grassroots petrochemicals complex in the Middle East and upstream services associated with a major open pit mine relocation project in Canada valued at $1.5 billion. New awards in 2010 included upstream services associated with a liquefied natural gas project in Australia valued at $3.5 billion and $2.4 billion for an oil sands program in Canada. New awards in 2009 included $1.8 billion for a Canadian oil sands program and also an expansion to an onshore production facility in Russia.
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Backlog for the Oil & Gas segment was $15.1 billion as of December 31, 2011 compared to $14.3 billion as of December 31, 2010 and $11.8 billion as of December 31, 2009.
From 2006 through 2008, the segment participated in an expanding market that included very large project awards in diverse geographic locations, which were well suited to the company's global execution and project management capabilities and strong financial position. The global recession, changing market conditions and a decline in demand for new capacity in the refining, petrochemical and polysilicon markets resulted in lower new award activity in 2009 and the first half of 2010, as well as $5.2 billion of project cancellations and scope reductions during 2009. As a consequence of this lower level of new award activity and the 2009 project cancellations and scope reductions, the segment's 2010 and 2011 revenue and segment profit declined when compared to 2009. Although the market conditions for the segment have improved somewhat since the recession, a highly competitive business environment has resulted in significant pressure on margins. It is anticipated that these market conditions will continue and that the highly competitive business environment could result in continued margin pressures and more lump-sum project execution for the segment.
Total assets in the segment were $1.2 billion as of December 31, 2011, $986 million as of December 31, 2010 and $972 million as of December 31, 2009. The higher level of total assets in 2011 compared to 2010 and 2009 was primarily to meet working capital requirements to support project execution activities.
Industrial & Infrastructure
Revenue and segment profit for the Industrial & Infrastructure segment are summarized as follows:
|
|
Year Ended December 31, | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
|
(in millions)
|
2011
|
2010
|
2009
|
|||||||
|
Revenue |
$ | 9,700.4 | $ | 6,867.2 | $ | 4,820.6 | ||||
|
Segment profit (loss) |
389.3 |
(169.7 |
) |
140.4 |
||||||
Revenue in 2011 increased 41 percent compared to 2010, and revenue in 2010 increased 42 percent from 2009, primarily due to substantial growth in the mining and metals business line.
Segment profit and segment profit margin increased significantly in 2011 compared to 2010 primarily because the prior year included the impact of significant charges for two infrastructure projects. For the Greater Gabbard Project, charges totaling $343 million were taken in 2010 for estimated cost overruns for a variety of execution challenges that impacted the schedule and project cost forecast, including material and equipment delivery issues, productivity issues, the bankruptcy of a major subcontractor and weather-related delays. The segment also recorded a charge of $95 million during the prior year third quarter after an adverse bankruptcy court ruling on the priority of claims made by its joint venture against a bankrupt client entity for a completed $700 million fixed-price infrastructure joint venture project near San Diego, California. As a result of the ruling, the company determined that the likelihood of recovering cost overruns resulting from owner-directed scope changes was no longer considered probable. During 2011, the segment recorded additional charges for the Greater Gabbard Project totaling $60 million, primarily due to increased costs associated with the installation of subsea cable and schedule delays related to adverse weather conditions. Challenges in the cable installation process have been compounded by the bankruptcy of a critical subcontractor in January 2011 which forced the project to secure alternative vessels and equipment. The project forecast has been revised for the cost overruns and the company has taken a number of actions to mitigate further cost growth.
The 2011 charges for the Greater Gabbard Project were offset by positive contributions from other projects in the segment during the year, including $20 million for forecast adjustments due to the achievement of progress milestones on two infrastructure road projects, $11 million from the closeout of an infrastructure project, $11 million of costs recovered in a settlement with the bankrupt client for the above-referenced fixed-price infrastructure joint venture project, and $10 million related to the favorable resolution of certain disputed items and the achievement of incentive targets on a mining project. Segment
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profit in 2011 was also favorably impacted by a significantly higher level of project execution activities related to the growth in the mining and metals business line, noted above.
Segment profit and segment profit margin declined significantly in 2010 compared to 2009 due to the impact of significant charges for the Greater Gabbard Project and the fixed-price infrastructure joint venture project, discussed above. The 2010 charges for these two projects were offset somewhat by positive contributions from other projects in the segment during the year, including $16 million of fees earned at financial closing for an infrastructure rail project, $13 million for the final negotiated settlement and closeout of both an infrastructure road project and an infrastructure telecommunications project, and $11 million for the approval of a significant change order for another infrastructure road project. In addition, there were increased contributions in segment profit in 2010 when compared to 2009 due to a significantly higher level of project execution activities related to the growth in the mining and metals business line, noted above.
The company is involved in a dispute in connection with the Greater Gabbard Project. The dispute relates to the company's claim for additional compensation for schedule and cost impacts arising from delays in the fabrication of monopiles and transition pieces, along with certain disruption and productivity issues associated with construction activities and weather-related delays. The company believes the schedule and cost impacts are attributable to the client and other third parties. As of December 31, 2011, the company had recorded $265 million of claim revenue related to this issue for costs incurred to date. Additional costs arising from this dispute are expected to be incurred during the remaining life of the project and, as a result, claim revenue will increase accordingly. The company believes the ultimate recovery of incurred and future costs is probable under ASC 605-35-25. The company will continue to periodically evaluate its position and the amount recognized in revenue with respect to this claim. The project is expected to be substantially complete by the second quarter of 2012. However, the resolution of the claims is expected to extend beyond the completion date of the project. As of December 31, 2011, the client had also previously withheld the contractual maximum for liquidated damages related to the dispute of approximately $150 million. The company will also seek to recover in arbitration a significant portion of the withheld liquidated damages. Should the company not be successful in its pursuit of schedule relief related to certain delays covered by the claim, the liquidated damages not recovered from the client could result in a charge to earnings, as would any unrecovered claim amounts.
New awards in the Industrial & Infrastructure segment were $12.2 billion during 2011, $12.5 billion during 2010 and $6.8 billion during 2009. New awards in 2011 were primarily attributable to the mining and metals business line, and included $6.2 billion for ongoing iron ore work in Australia, as well as a major copper project in Peru. The increased new award activity in 2010 was primarily attributable to the mining and metals business line, with significant contributions from the infrastructure business line. The new awards in 2010 included an aluminum program in Saudi Arabia valued at $3.4 billion, a $1.4 billion copper mine in Chile and $1.7 billion for an infrastructure rail project in the United States. New awards during 2009 were driven by the mining and metals business line, including a $2.9 billion iron ore project in Australia and a $2.2 billion nickel project in Canada.
Ending backlog for the segment increased to $19.6 billion for 2011 from $16.9 billion for 2010 and $10.2 billion for 2009. The growth in backlog during 2011 and 2010 was driven by the substantial new award activity in the mining and metals business line.
Total assets in the Industrial & Infrastructure segment were $944 million as of December 31, 2011 compared to $535 million as of December 31, 2010 and $676 million as of December 31, 2009. The increase in total assets in 2011 compared to 2010 was mainly due to an increase in working capital to support the growth in the mining and metals business line. The decrease in total assets in 2010 compared to 2009 was primarily attributable to a reduction in work in process on the Greater Gabbard Project with the installation of certain offshore materials and the write-off of the investment for the fixed-price infrastructure joint venture project in California.
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Government
Revenue and segment profit for the Government segment are summarized as follows:
|
|
Year Ended December 31, | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
|
(in millions)
|
2011
|
2010
|
2009
|
|||||||
|
Revenue |
$ | 3,398.2 | $ | 3,038.0 | $ | 1,983.2 | ||||
|
Segment profit |
145.5 |
142.2 |
116.8 |
|||||||
Revenue in 2011 and 2010 increased 12 percent and 53 percent compared to 2010 and 2009, respectively, principally due to an increase in the volume of work for the Logistics Civil Augmentation Program ("LOGCAP IV") for the United States Army in Afghanistan. Project execution activities associated with the gaseous diffusion plant contract for the Department of Energy in Portsmouth, Ohio (the "Portsmouth Project"), awarded in the first quarter of 2011, also contributed to the 2011 revenue increase, though the impact was largely offset by a reduction in revenue attributable to the close-out of the American Recovery and Reinvestment Act ("ARRA") funded work at the Savannah River Site Management and Operating Project (the "Savannah River Project") in South Carolina and the completion of many task orders for the U.S. Army Corps of Engineers Transatlantic Programs Center ("CETAC") logistics program in Iraq. Revenue growth in 2010 for the Savannah River Project and ARRA funded work at the Savannah River Project site was offset by a decrease in revenue at the Hanford Environmental Management Project (the "Hanford Project") in the state of Washington, which was completed in 2009.
Segment profit during 2011 and 2010 increased two percent and 22 percent compared to 2010 and 2009, respectively, primarily due to additional contributions from higher levels of project execution activities on LOGCAP IV task orders. The growth in segment profit for 2011 was also attributable to the Portsmouth Project, though reduced contributions from CETAC task orders and the ARRA work at Savannah River more than offset its positive impact.
Segment profit margin was 4.3 percent, 4.7 percent and 5.9 percent for the years ended December 31, 2011, 2010 and 2009, respectively. The higher segment profit margin in 2009 was primarily attributable to the favorable resolution of disputed items and warranty obligations for the Bagram Air Base contract in Afghanistan that resulted in the recognition of $15.3 million of segment profit during the year.
New awards were $3.7 billion during 2011, $2.8 billion during 2010 and $2.3 billion during 2009. The increase in new award activity in 2011 was primarily attributable to the initial contract funding for the Portsmouth Project and increased funding for LOGCAP IV task orders. New awards in 2011 also included the annual funding for the Savannah River Project. Significant new awards for 2010 included LOGCAP IV task orders, which drove the increase in new award activity compared to 2009, and the annual funding for the Savannah River Project. Significant new awards for 2009 included the annual funding for the Savannah River Project, the multi-year ARRA funding at the Savannah River Project site and LOGCAP IV task orders. The company reports new awards for LOGCAP IV as individual task orders are awarded and funded.
Backlog was $1.1 billion as of December 31, 2011, $751 million as of December 31, 2010 and $1.0 billion as of December 31, 2009. The growth in backlog during 2011 was driven by the initial contract funding for the Portsmouth Project and increased funding for LOGCAP IV task orders. The higher backlog in 2009 compared to 2010 was primarily due to the multi-year funding for ARRA work at the Savannah River Project site that was a new award in 2009, and partially worked off by the end of 2010.
Total assets in the Government segment were $800 million as of December 31, 2011, $1.1 billion as of December 31, 2010 and $660 million as of December 31, 2009. The decrease in total assets in 2011 compared to 2010 was mainly due to a decrease in working capital related to the LOGCAP IV task orders. The increase in total assets in 2010 compared to 2009 corresponded to an increase in working capital to support project execution activities, particularly for LOGCAP IV task orders.
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Global Services
Revenue and segment profit for the Global Services segment are summarized as follows:
|
|
Year Ended December 31, | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
|
(in millions)
|
2011
|
2010
|
2009
|
|||||||
|
Revenue |
$ | 1,577.7 | $ | 1,508.6 | $ | 1,578.1 | ||||
|
Segment profit |
151.8 |
133.3 |
106.6 |
|||||||
Revenue in 2011 increased five percent compared to 2010 principally due to the equipment business line which experienced a higher volume of work in Afghanistan and South America. A decrease in current year revenue attributable to the close-out of the Gulf Coast oil spill cleanup project in 2010 was offset by an increase in other 2011 operations and maintenance business line project execution activities and an increase in revenue in the temporary staffing business line. Revenue decreased four percent during 2010 compared to the prior year primarily due to the reduction in the equipment business line's Iraq business activities. This revenue decline was partially offset by an increase in revenue related to the Gulf Coast oil spill cleanup in the operations and maintenance business line.
Segment profit during 2011 increased 14 percent compared to 2010, primarily due to the improved performance from the equipment business line, as noted above. Increased segment profit in the current year from the temporary staffing business line was offset by a decrease in contributions from the operations and maintenance business line, the latter of which was primarily the result of the close-out of the Gulf Coast oil spill cleanup project in the prior year. Segment profit during 2010 increased 25 percent compared to 2009 primarily because 2009 included a $45 million charge related to the uncollectability of a client receivable for a paper mill where the company's scope of work was to recommission, start up and operate the facility. Segment profit in 2010 benefitted from the Gulf Coast oil spill cleanup activities, though the resulting positive contribution was more than offset by the overall weak economic conditions impacting all business lines, including the continued delay and reduction in capital work and maintenance activities in the operations and maintenance business line and reduced activity in the domestic and European operations of the temporary staffing business line.
Segment profit margin was 9.6 percent, 8.8 percent and 6.8 percent for the years ended December 31, 2011, 2010 and 2009. Segment profit margin for 2011 was higher compared to 2010 due to improvement in margins in the equipment business line's activities in Afghanistan and South America. The lower 2009 segment profit margin was due to the factors that impacted segment profit noted above, particularly the charge related to the write-off of the uncollectable receivable for the paper mill project.
New awards in the Global Services segment were $1.0 billion during 2011, $1.6 billion during 2010 and $903 million during 2009. The operations and maintenance business line continues to experience lower volume with existing clients, as well as delayed new client releases. New awards for all three years included new work and renewals for key clients, such as IBM (all years), ALCOA (all years), Procter & Gamble (all years) and SAPREF of South Africa (2010).
Backlog for the Global Services segment was $1.9 billion as of December 31, 2011, $2.1 billion as of December 31, 2010 and $1.8 billion as of December 31, 2009. Operations and maintenance activities that have yet to be performed comprise Global Services backlog. Short-duration operations and maintenance activities may not contribute to ending backlog. In addition, the equipment, temporary staffing and supply chain solutions business lines do not report backlog or new awards.
Total assets in the Global Services segment were $937 million as of December 31, 2011, $824 million as of December 31, 2010 and $745 million as of December 31, 2009. The increase in the segment's total assets in 2011 corresponded to an increase in working capital and equipment to support the equipment business line. The increase in total assets in 2010 was due to an increase in working capital to support projects in the operations and maintenance business line, additional working capital to support ongoing equipment transactions and an expansion of the equipment fleet to support long-term agreements.
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Power
Revenue and segment profit for the Power segment are summarized as follows:
|
|
Year Ended December 31, | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
|
(in millions)
|
2011
|
2010
|
2009
|
|||||||
|
Revenue |
$ | 743.4 | $ | 1,695.5 | $ | 1,781.5 | ||||
|
Segment profit |
81.1 |
170.9 |
157.7 |
|||||||
Revenue in 2011 decreased 56 percent compared to 2010 primarily due to the expected reduction in project execution activities on several projects which have reached or are near final completion, including the Oak Grove coal-fired power project in Texas for Luminant, a unit of Energy Future Holdings Corporation, gas-fired power plants in Texas and Virginia, and pre-construction services on a nuclear new build project in Texas, as well as reduced volume on certain other projects progressing toward completion. The segment's revenue decreased five percent in 2010 compared to 2009 primarily due to the reduction in project execution activities on the Oak Grove project which reached final completion in 2010. Also in 2010, revenue increases associated with project execution activities on gas-fired power plant projects located in Texas, Virginia and Georgia were largely offset by a decline in revenue due to reduced volume on various other projects progressing toward completion.
Segment profit during 2011 decreased 53 percent compared to 2010 principally due to reduced contributions from the Oak Grove project. The reduced contributions from other projects nearing completion, including the gas-fired power plant project in Texas, pre-construction services on the nuclear new build project in Texas and an emissions control retrofit project in South Carolina, were offset by lower charges taken for cost overruns on the gas-fired power plant project in Georgia ($13 million during 2011 compared to $91 million in 2010) and improved performance on the gas-fired power plant project in Virginia due to the achievement of major milestones. Segment profit in 2010 increased eight percent compared to 2009 primarily due to increased contributions from the Oak Grove project as a result of reaching final completion and acceptance and achieving contractual performance guarantees, along with improved performance from the gas-fired power plant project in Texas. These positive results were partially offset by the charges taken in 2010 on the gas-fired power project in Georgia, noted above.
Segment profit margin in the Power segment was 10.9 percent, 10.1 percent and 8.9 percent for 2011, 2010 and 2009, respectively. The fluctuations in segment profit margin from year to year are explained by the same factors that impacted revenue and segment profit, discussed above.
The Power segment continues to be impacted by relatively weak demand for new power generation. Improving market opportunities include gas-fired baseload generation, renewable energy, regional transmission additions and air emissions compliance projects for existing coal-fired power plants. New awards in the Power segment are typically large in amount and occur on an irregular basis. New awards of $1.6 billion in 2011 included an air emissions control construction program for Luminant, a new gas-fired power plant project in Texas, and a new solar power project in Arizona. New awards of $757 million in 2010 included work for nuclear preconstruction services and the renewal of the Luminant system-wide fossil maintenance program in Texas. New awards of $1.3 billion in 2009 included a gas-fired plant in Virginia and nuclear preconstruction services.
Backlog was $1.8 billion as of December 31, 2011, $972 million as of December 31, 2010 and $1.9 billion as of December 31, 2009. The increase in backlog in 2011 was principally driven by the 2011 new awards mentioned in the preceding paragraph which were awarded in the latter part of the year. The decline in backlog in 2010 was primarily because the work performed on the Oak Grove project, major gas-fired power plant projects in Texas, Virginia and Georgia, and certain other projects was not replaced by new award activity of equal or greater value.
Total assets in the Power segment were $191 million as of December 31, 2011, $97 million as of December 31, 2010 and $171 million as of December 31, 2009. The increase in the segment's total assets in 2011 was attributable to an increase in work in process for the purchase of certain solar power plant
39
equipment in advance of customer reimbursement and the consolidation of the assets of NuScale Power, a small modular nuclear reactor technology company that the company acquired a majority interest in during late 2011. The decrease in the segment's total assets in 2010 was due to a reduction in working capital for project execution activities, including the Oak Grove project.
Corporate, Tax and Other Matters
Corporate For the three years ended December 31, 2011, 2010 and 2009, corporate general and administrative expenses were $163 million, $156 million and $179 million, respectively. The five percent increase in 2011 corporate general and administrative expenses compared to 2010 was primarily the result of higher management incentive compensation and foreign currency losses, offset somewhat by overhead reduction efforts and other factors. The decrease in 2010 was primarily due to overhead reduction efforts and lower management incentive compensation. Corporate general and administrative expense included $14 million of non-operating expense in 2011, primarily due to expenses associated with previously divested operations, and $2 million of non-operating expense in both 2010 and 2009.
Net interest income was $16 million, $11 million and $14 million for the years ended December 31, 2011, 2010 and 2009, respectively. The increase in net interest income in 2011 was due to higher cash balances in certain international locations that earn higher yields, offset partially by an increase in interest expense due to the September 2011 issuance of Senior Notes (discussed in more detail below). The lower 2010 net interest income compared to 2009 was primarily due to the impact of lower interest rates.
Tax The effective tax rate on the company's pretax earnings was 30.3 percent, 21.2 percent and 35.5 percent for the years 2011, 2010 and 2009, respectively. The 2011 rate was favorably impacted by the release of previously unrecognized tax benefits related to the expiration of statutes of limitations and the resolution of various disputed items. The lower 2010 rate was primarily attributable to a $152 million tax benefit that resulted from a worthless stock deduction for the tax restructuring of a foreign subsidiary in the fourth quarter, partially offset by an increase in the valuation allowance associated with net operating losses. A significant portion of the $152 million tax benefit resulted from the financial impact of the 2010 Greater Gabbard Project charges on the foreign subsidiary.
Litigation and Matters in Dispute Resolution
See "13. Contingencies and Commitments" below in the Notes to Consolidated Financial Statements.
Liquidity and Financial Condition
Liquidity is provided by available cash and cash equivalents and marketable securities, cash generated from operations, credit facilities and access to financial markets. The company has committed and uncommitted lines of credit totaling $3.8 billion, which may be used for revolving loans, letters of credit and general purposes. The company believes that for at least the next 12 months, cash generated from operations, along with its unused credit capacity of $2.6 billion and substantial cash position, is sufficient to fund operating requirements. However, the company regularly reviews its sources and uses of liquidity and may pursue opportunities to increase its liquidity positions in favorable market conditions. The company's conservative financial strategy and consistent performance have earned it strong credit ratings, resulting in continued access to the financial markets. As of December 31, 2011, the company was in compliance with all its covenants related to its debt agreements. The company's total debt to total capitalization ("debt-to-capital") ratio as of December 31, 2011 was 13.6 percent compared to 3.2 percent as of December 31, 2010 primarily due to the company's $500 million debt issuance in September 2011 which is discussed in the financing activities section below.
Cash Flows
Cash and cash equivalents were $2.2 billion as of December 31, 2011 compared to $2.1 billion as of December 31, 2010. Cash and cash equivalents combined with current and noncurrent marketable securities were $2.8 billion as of December 31, 2011 compared to $2.6 billion as of December 31, 2010.
40
Cash and cash equivalents are held in numerous accounts throughout the world to fund the company's global project execution activities. As of December 31, 2011 and 2010, cash and cash equivalents held outside the United States amounted to $1.5 billion and $1.6 billion, respectively. The company did not consider any cash to be permanently reinvested overseas as of December 31, 2011 and 2010 and, as a result, has accrued the U.S. deferred tax liability on foreign earnings, as appropriate.
Operating Activities
Cash provided by operating activities was $890 million, $551 million and $905 million in 2011, 2010 and 2009, respectively. Cash provided by operating activities improved in 2011 primarily due to increases in earnings sources and positive cash flows resulting from a net reduction in operating assets and liabilities, partially offset by higher retirement plan contributions. The net reduction in operating assets and liabilities during 2011 was primarily attributable to decreases in prepaid income taxes and increases in both client advances and accounts payable associated with project execution activities in the Oil & Gas segment, partially offset by increases in contract work in process. The increases in client advances and accounts payable during 2011 resulted primarily from normal project execution activities associated with numerous projects. The increase in work in process during 2011 resulted from normal project execution activities associated with numerous projects, as well as amounts funded for the losses and claim on the Greater Gabbard Project. Cash provided by operating activities declined in 2010 primarily due to lower earnings sources. Cash provided by operating activities in both 2010 and 2009 resulted primarily from earnings sources reduced by cash outflows from net increases in operating assets and liabilities. The net increase in operating assets and liabilities in 2010 resulted from a higher accounts receivable balance as well as amounts funded for the losses and claim on the Greater Gabbard Project and the gas-fired power project in Georgia. The higher accounts receivable balance in 2010 was the net result of normal billing and collection activities associated with numerous projects and not indicative of any significant collection or liquidity issue. The net increase in operating assets and liabilities in 2009 pertained to increases in prepaid income taxes and contract work in process, partially offset by lower accounts receivable balances. The increase in contract work in process resulted from increases in project execution activities and costs associated with the claim on the Greater Gabbard Project.
The levels of operating assets and liabilities vary from year to year and are affected by the mix, stage of completion and commercial terms of engineering and construction projects, as well as the company's volume of work and the execution of its projects within budget. Certain projects receive advance payments from clients. A normal trend for these projects is to have higher cash balances during the initial phases of execution which then level out toward the end of the construction phase. Project working capital requirements will vary by project. The company's cash position is reduced as customer advances are used in project execution, unless they are replaced by advances on new projects. The company maintains cash reserves and borrowing facilities to satisfy any net operating cash outflows in the event there is an investment in operating assets that exceeds the projects' available cash balances.
The company had net cash outlays of $361 million, $277 million, and $243 million during 2011, 2010, and 2009, respectively, to fund the project execution activities for the Greater Gabbard Project as discussed above under " — Industrial & Infrastructure."
Income tax payments of $177 million in 2011 were lower than income taxes paid of $202 million in 2010 primarily due to the prepayment of 2011 taxes in 2010. Income tax payments of $202 million in 2010 were lower than income taxes paid in 2009 of $418 million primarily due to the prepayment of 2010 taxes in 2009, as well as lower tax payments resulting from a worthless stock deduction that was due to the tax restructuring of a foreign subsidiary in the fourth quarter. A significant portion of this tax benefit resulted from the financial impact of the Greater Gabbard Project charges on the foreign subsidiary.
Cash from operating activities is used to provide contributions to the company's defined contribution and defined benefit plans. Contributions into the defined contribution plans during 2011, 2010 and 2009 were $109 million, $96 million and $99 million, respectively. The company contributed $122 million, $43 million and $34 million into its defined benefit pension plans during 2011, 2010 and 2009, respectively.
41
The increase in contributions to the defined benefit pension plans during 2011 was primarily due to lower long-term interest rates coupled with the business objective to generally maintain plan assets in excess of accumulated benefit obligations. As of December 31, 2011, 2010 and 2009, plan assets of all of the company's more significant benefit plans exceeded accumulated benefit obligations.
Investing Activities
Cash utilized by investing activities amounted to $436 million and $818 million in 2011 and 2009, respectively, while cash provided by investing activities amounted to $218 million in 2010. The primary investing activities during 2011, 2010 and 2009 included purchases, sales and maturities of marketable securities, capital expenditures, business acquisitions and disposals of property, plant and equipment.
The company holds cash in bank deposits and marketable securities which are governed by the company's investment policy. This policy focuses on, in order of priority, the preservation of capital, maintenance of liquidity and maximization of yield. These investments include money market funds which invest in U.S. Government-related securities, bank deposits placed with highly-rated financial institutions, repurchase agreements that are fully collateralized by U.S. Government-related securities, high-grade commercial paper and high quality short-term and medium-term fixed income securities. During 2011 and 2009, purchases of marketable securities exceeded proceeds from the sales and maturities by $133 million and $623 million, respectively. During 2010, proceeds from the sales and maturities of marketable securities exceeded purchases by $438 million. The company held current and noncurrent marketable securities of $600 million and $472 million as of December 31, 2011 and 2010, respectively.
Cash utilized by investing activities in 2011, 2010 and 2009 included capital expenditures of $338 million, $265 million and $233 million, respectively. Capital expenditures during 2011, 2010 and 2009 included significant outflows related to the equipment business line of the Global Services segment, as well as investments in information technology and the refurbishment of facilities. Cash flows provided by investing activities include proceeds of $54 million in both 2011 and 2010 and $38 million in 2009 primarily from the disposal of construction equipment associated with the equipment operations in the Global Services segment.
During 2011, the company paid $27 million to acquire controlling interests in both NuScale Power, LLC, an Oregon-based designer of small modular nuclear reactors, and Goar, Allison & Associates, a Texas-based provider of sulfur technologies for upstream gas plants, downstream refineries and gasification.
Financing Activities
Cash utilized by financing activities during 2011, 2010 and 2009 of $396 million, $390 million and $323 million, respectively, included company stock repurchases, company dividend payments to stockholders, proceeds from the issuance of senior notes, convertible note repayments, distributions paid to holders of noncontrolling interests and corporate-owned life insurance loan repayments.
The company has a common stock repurchase program, authorized by the Board of Directors, to purchase shares in open market or privately negotiated transactions at the company's discretion. The company repurchased 10,050,000 shares, 3,079,600 shares and 3,060,000 shares of common stock under its current and previously authorized stock repurchase programs resulting in cash outflows of $640 million, $175 million and $125 million in 2011, 2010 and 2009, respectively. As of December 31, 2011, 11.3 million shares could still be purchased under the existing stock repurchase program.
During 2011, 2010 and 2009, the company's Board of Directors authorized the payment of quarterly dividends of $0.125 per share. Dividends of $88 million, $90 million and $91 million, were paid during 2011, 2010 and 2009, respectively. Declared dividends are typically paid during the month following the quarter in which they are declared. The payment and level of future cash dividends is subject to the discretion of the company's Board of Directors. On February 2, 2012, the company's Board of Directors authorized an increase in the company's quarterly dividend from $0.125 per share to $0.16 per share.
42
In September 2011, the company issued $500 million of 3.375 percent Senior Notes (the "2011 Notes") due September 15, 2021 and received proceeds of $492 million, net of underwriting discounts and debt issuance costs. Interest on the 2011 Notes is payable semi-annually on March 15 and September 15 of each year, beginning on March 15, 2012. The net proceeds of the 2011 Notes will be used for general corporate purposes. The company may, at any time, redeem the 2011 Notes at a redemption price equal to 100 percent of the principal amount, plus a "make whole" premium described in the indenture. Additionally, if a change of control triggering event occurs, as defined by the terms of the indenture, the company will be required to offer to purchase the 2011 Notes at a purchase price equal to 101 percent of their principal amount, plus accrued and unpaid interest, if any, to the date of purchase. The company is generally not limited under the indenture governing the 2011 Notes in its ability to incur additional indebtedness provided the company is in compliance with certain restrictive covenants, including restrictions on liens and restrictions on sale and leaseback transactions. These covenants are not expected to impact the company's liquidity or capital resources.
In February 2004, the company issued $330 million of 1.5% Convertible Senior Notes (the "2004 Notes") due February 15, 2024 and received proceeds of $323 million, net of underwriting discounts. Proceeds from the 2004 Notes were used to pay off the then-outstanding commercial paper and $100 million was used to obtain ownership of engineering and corporate office facilities in California through payoff of the lease financing. In December 2004, the company irrevocably elected to pay the principal amount of the 2004 Notes in cash. The 2004 Notes are convertible during any fiscal quarter if the closing price of the company's common stock for at least 20 trading days in the 30 consecutive trading day-period ending on the last trading day of the previous fiscal quarter is greater than or equal to 130 percent of the conversion price in effect on that 30 th trading day (the "trigger price"). The trigger price is currently $35.83, but is subject to adjustment as outlined in the indenture. The trigger price condition was satisfied during the fourth quarter of 2011 and 2010 and the 2004 Notes were therefore classified as current as of December 31, 2011 and 2010. Shares of the company's common stock are issued to satisfy any appreciation between the conversion price and the market price on the date of conversion. During 2011, holders converted $77 million of the 2004 Notes in exchange for the principal balance owed in cash plus 1,678,095 shares of the company's common stock. During 2010, holders converted $13 million of the 2004 Notes in exchange for the principal balance owed in cash plus 184,563 shares of the company's common stock. During 2009, holders converted $24 million of the 2004 Notes in exchange for the principal balance owed in cash plus 253,309 shares of the company's common stock. The company does not know the timing or principal amount of the remaining Notes that may be presented for conversion in future periods. Holders of the 2004 Notes will be entitled to require the company to purchase all or a portion of their 2004 Notes at 100 percent of the principal amount plus unpaid interest on February 15, 2014 and February 15, 2019. The 2004 Notes are currently redeemable at the option of the company, in whole or in part, at 100 percent of the principal amount plus accrued and unpaid interest. In the event of a change of control of the company, each holder may require the company to repurchase the 2004 Notes for cash, in whole or in part, at 100 percent of the principal amount plus accrued and unpaid interest. The carrying value amount of the 2004 Notes was $19 million and $97 million as of December 31, 2011 and 2010, respectively.
Distributions paid to holders of noncontrolling interests represent cash outflows to partners of consolidated partnerships or joint ventures created primarily for the execution of single contracts or projects. Distributions paid were $104 million, $84 million and $76 million in 2011, 2010 and 2009, respectively. The significant increase in distributions in 2011 was due to the Rapid Growth Project. The increase during 2010 was due to the Rapid Growth Project and the Interstate 495 Capital Beltway Project which are discussed at "14. Variable Interest Entities."
During 2010, the company repaid $32 million in principal related to loans against the cash surrender value of corporate-owned life insurance policies.
Effect of Exchange Rate Changes on Cash
Unrealized translation gains and losses resulting from changes in functional currency exchange rates are reflected in the cumulative translation component of other comprehensive loss. During 2011,
43
functional currency exchange rates for most of the company's international operations weakened against the U.S. dollar, resulting in unrealized translation losses. During 2010 and 2009, functional currency exchange rates for most of the company's international operations strengthened against the U.S. dollar, resulting in unrealized translation gains. Unrealized losses of $31 million in 2011 and unrealized gains of $68 million and $89 million in 2010 and 2009, respectively, related to the effect of exchange rate changes on cash. The cash held in foreign currencies will primarily be used for project-related expenditures in those currencies, and therefore the company's exposure to realized exchange gains and losses is considered nominal.
Off-Balance Sheet Arrangements
On December 14, 2010, the company entered into a $1.2 billion Revolving Performance Letter of Credit Facility Agreement ("Letter of Credit Facility") that matures in 2015 and an $800 million Revolving Loan and Financial Letter of Credit Facility Agreement ("Revolving Credit Facility") that matures in 2013. Borrowings on the $800 million Revolving Credit Facility are to bear interest at rates based on the London Interbank Offered Rate ("LIBOR") or an alternative base rate, plus an applicable borrowing margin. The Letter of Credit Facility may be increased up to an additional $500 million subject to certain conditions.
As of December 31, 2011, the company had a combination of committed and uncommitted lines of credit that totaled $3.8 billion. These lines may be used for revolving loans, letters of credit or general purposes. The committed lines consist of the two facilities discussed above, as well as a $500 million letter of credit facility that matures in 2014. Letters of credit are provided in the ordinary course of business primarily to indemnify our clients if we fail to perform our obligations under our contracts. As of December 31, 2011, $1.2 billion in letters of credit were outstanding under these lines of credit. Surety bonds are also posted as an alternative form of credit enhancement.
Guarantees, Inflation and Variable Interest Entities
Guarantees
In the ordinary course of business, the company enters into various agreements providing performance assurances and guarantees to clients on behalf of certain unconsolidated and consolidated partnerships, joint ventures and other jointly executed contracts. These agreements are entered into primarily to support the project execution commitments of these entities. The performance guarantees have various expiration dates ranging from mechanical completion of the facilities being constructed to a period extending beyond contract completion in certain circumstances. The maximum potential payment amount of an outstanding performance guarantee is the remaining cost of work to be performed by or on behalf of third parties under engineering and construction contracts. Amounts that may be required to be paid in excess of estimated cost to complete contracts in progress are not estimable. For cost reimbursable contracts, amounts that may become payable pursuant to guarantee provisions are normally recoverable from the client for work performed under the contract. For lump-sum or fixed-price contracts, the performance guarantee amount is the cost to complete the contracted work less amounts remaining to be billed to the client under the contract. Remaining billable amounts could be greater or less than the cost to complete. In those cases where costs exceed the remaining amounts payable under the contract, the company may have recourse to third parties, such as owners, co-venturers, subcontractors or vendors for claims. Performance guarantees outstanding as of December 31, 2011 were estimated to be $4.6 billion. The company assessed its performance guarantee obligation as of December 31, 2011 and 2010 in accordance with Financial Accounting Standards Board Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others" (ASC 460) and the carrying value of the liability was not material.
Financial guarantees, made in the ordinary course of business on behalf of clients and others in certain limited circumstances, are entered into with financial institutions and other credit grantors and generally obligate the company to make payment in the event of a default by the borrower. Most arrangements require the borrower to pledge collateral in the form of property, plant and equipment which is deemed adequate to recover amounts the company might be required to pay.
44
Inflation
Although inflation and cost trends affect the company, its engineering and construction operations are generally protected by the ability to fix the company's cost at the time of bidding or to recover cost increases in cost reimbursable contracts. The company has taken actions to reduce its dependence on external economic conditions; however, management is unable to predict with certainty the amount and mix of future business.
Variable Interest Entities
In the normal course of business, the company forms partnerships or joint ventures primarily for the execution of single contracts or projects. The company evaluates each partnership and joint venture to determine whether the entity is a VIE. If the entity is determined to be a VIE, the company assesses whether it is the primary beneficiary and needs to consolidate the entity.
For further discussion of the company's VIEs, see Discussion of Critical Accounting Policies above and "14. Variable Interest Entities" below in the Notes to Consolidated Financial Statements.
Contractual Obligations
Contractual Obligations as of December 31, 2011 are summarized as follows:
|
|
|
Payments Due by Period
|
||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Contractual Obligations
|
Total
|
1 year or less
|
2–3 years
|
4–5 years
|
Over 5 years
|
|||||||||||
|
(in millions) |
||||||||||||||||
|
Debt: |
||||||||||||||||
|
3.375% Senior Notes |
$ | 496 | $ | — | $ | — | $ | — | $ | 496 | ||||||
|
1.5% Convertible Senior Notes |
19 | 19 | — | — | — | |||||||||||
|
5.625% Municipal bonds |
18 | — | — | — | 18 | |||||||||||
|
Interest on debt obligations (1) |
169 | 18 | 35 | 35 | 81 | |||||||||||
|
Operating leases (2) |
267 | 39 | 77 | 51 | 100 | |||||||||||
|
Uncertain tax contingencies (3) |
78 | — | — | — | 78 | |||||||||||
|
Joint venture contributions |
35 | 11 | 4 | 20 | — | |||||||||||
|
Pension minimum funding (4) |
77 | 10 | 20 | 47 | — | |||||||||||
|
Other post-employment benefits |
35 | 5 | 10 | 8 | 12 | |||||||||||
|
Other compensation-related obligations (5) |
341 | 44 | 65 | 53 | 179 | |||||||||||
|
Total |
$ | 1,535 | $ | 146 | $ | 211 | $ | 214 | $ | 964 | ||||||
|
|
|
|||||||||||||||
45
determined for each individual plan would not achieve a funded status to the level of accumulated benefit obligations, additional discretionary funding may be provided from available cash resources.
Item 7A.
Quantitative and Qualitative Disclosures about Market Risk
Cash and marketable securities are deposited with major banks throughout the world. Such deposits are placed with high quality institutions and the amounts invested in any single institution are limited to the extent possible in order to minimize concentration of counterparty credit risk. Marketable securities consist of time deposits, registered money market funds, U.S. agency securities, U.S. Treasury securities, commercial paper, international government securities and corporate debt securities. The company has not incurred any credit risk losses related to deposits in cash and marketable securities.
The company limits exposure to foreign currency fluctuations in most of its engineering and construction contracts through provisions that require client payments in currencies corresponding to the currency in which cost is incurred. As a result, the company generally does not need to hedge foreign currency cash flows for contract work performed. However, in cases where revenue and expenses are not denominated in the same currency, the company hedges its exposure, if material, as discussed below.
The company utilizes derivative instruments to mitigate certain financial exposure, including currency and commodity price risk associated with engineering and construction contracts, currency risk associated with intercompany transactions and risk associated with interest rate volatility. The company does not enter into derivative transactions for speculative purposes. As of December 31, 2011, the company had foreign exchange forward contracts of less than one year duration and a total gross notional amount of $736 million. As of December 31, 2011, the company had commodity swap forward contracts of less than three years duration and a total gross notional amount of $12 million. The company's historical gains and losses associated with derivative instruments have been immaterial.
The company's long-term debt obligations carry a fixed-rate coupon and its exposure to interest rate risk is not material due to the low interest rates on these obligations.
Item 8.
Financial Statements and Supplementary Data
The information required by this Item is submitted as a separate section of this Form 10-K. See "Item 15 — Exhibits and Financial Statement Schedules" below.
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A.
Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Based on their evaluation as of December 31, 2011, which is the end of the period covered by this annual report on Form 10-K, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) of the Exchange Act) are effective, based upon an evaluation of those controls and procedures required by paragraph (b) of Rule 13a-15 or Rule 15d-15 of the Exchange Act.
Management's Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining effective internal control over financial reporting and for the assessment of the effectiveness of internal control over financial reporting. The company's internal control over financial reporting is a process designed, as defined in Rule 13a-15(f) under the Exchange Act, to provide reasonable assurance regarding the reliability of financial reporting
46
and the preparation of consolidated financial statements for external purposes in accordance with generally accepted accounting principles in the United States.
In connection with the preparation of the company's annual consolidated financial statements, management of the company has undertaken an assessment of the effectiveness of the company's internal control over financial reporting based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission ("the COSO Framework"). Management's assessment included an evaluation of the design of the company's internal control over financial reporting and testing of the operational effectiveness of the company's internal control over financial reporting. Based on this assessment, management has concluded that the company's internal control over financial reporting was effective as of December 31, 2011.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
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Ernst & Young LLP, the independent registered public accounting firm that audited the company's consolidated financial statements included in this annual report on Form 10-K, has issued an attestation report on the effectiveness of the company's internal control over financial reporting which appears below.
Attestation Report of the Independent Registered Public Accounting Firm
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Shareholders of Fluor Corporation
We have audited Fluor Corporation's internal control over financial reporting as of December 31, 2011, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). Fluor Corporation's management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management's Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the company's internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company's assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, Fluor Corporation maintained, in all material respects, effective internal control over financial reporting as of December 31, 2011, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Fluor Corporation as of December 31, 2011 and 2010 and the related consolidated statements of earnings, cash flows and equity for each of the three years in the period ended December 31, 2011 of Fluor Corporation and our report dated February 22, 2012 expressed an unqualified opinion thereon.
/s/ Ernst & Young LLP
Dallas,
Texas
February 22, 2012
48
Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting during the fourth quarter of the fiscal year ending December 31, 2011 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
None.
Item 10.
Directors, Executive Officers and Corporate Governance
Executive Officers of the Registrant
The following information is being furnished with respect to the company's executive officers:
|
Name
|
Age | Position with the Company (1) | ||
|---|---|---|---|---|
|
Stephen B. Dobbs |
55 |
Senior Group President, Industrial & Infrastructure |
||
|
David R. Dunning |
60 |
Group President, Power |
||
|
Garry W. Flowers |
61 |
Group President, Global Services |
||
|
Glenn C. Gilkey |
53 |
Senior Vice President, Human Resources and Administration |
||
|
Kirk D. Grimes |
54 |
Group Executive, Operations |
||
|
Carlos M. Hernandez |
57 |
Senior Vice President, Chief Legal Officer and Secretary |
||
|
John L. Hopkins |
58 |
Group Executive, Corporate Development |
||
|
Peter Oosterveer |
54 |
Group President, Oil & Gas |
||
|
David T. Seaton |
50 |
Chairman and Chief Executive Officer |
||
|
Gary G. Smalley |
53 |
Senior Vice President and Controller |
||
|
Bruce A. Stanski |
51 |
Group President, Government |
||
|
D. Michael Steuert |
63 |
Senior Vice President and Chief Financial Officer |
Stephen B. Dobbs
Mr. Dobbs has been Senior Group President, Industrial & Infrastructure since January 2012. Prior to that, he was Senior Group President, Industrial & Infrastructure and Global Services from March 2009 to January 2012; Senior Group President, Industrial & Infrastructure, Government and Global Services from March 2007 to March 2009; Group President, Industrial and Infrastructure from September 2005 to March 2007; President, Infrastructure from 2002 to September 2005; and President, Transportation from 2001 to 2002. Mr. Dobbs joined the company in 1980.
David R. Dunning
Mr. Dunning has been Group President, Power since March 2009. Prior to that, he was Senior Vice President, Sales, Marketing and Strategic Planning for Power from March 2006 to March 2009; Vice President, Sales for the Power Group from July 2003 to March 2006; and Vice President, Sales for the Duke/Fluor Daniel partnership from March 2001 to July 2003. Mr. Dunning joined the company in 1977.
Garry W. Flowers
Mr. Flowers has been Group President, Global Services since January 2012. From September 2009 to January 2012, he was President and CEO of Savannah River Nuclear Solutions, LLC, which contracts with the Federal Government for operations and maintenance of the Savannah River nuclear site. Prior to that,
49
Mr. Flowers was Senior Vice President, HSE, Security and Industrial Relations from November 2003 to September 2009; and Vice President, Industrial Relations from December 1995 to November 2003. Mr. Flowers joined the company in 1978.
Glenn C. Gilkey
Mr. Gilkey has been Senior Vice President, Human Resources and Administration since June 2008. Prior to that, he was Vice President, Operations from June 2006 to June 2008 and Vice President, Engineering from January 2001 to June 2006. Mr. Gilkey joined the company in 1988 with previous service from 1981 to 1984.
Kirk D. Grimes
Mr. Grimes has been Group Executive, Operations since January 2012. Prior to that, he was Group President, Global Services from October 2003 to January 2012; and Group Executive, Oil & Gas from February 2001 to October 2003. Mr. Grimes joined the company in 1980.
Carlos M. Hernandez
Mr. Hernandez has been Senior Vice President, Chief Legal Officer and Secretary since October 2007. Prior to joining the company, he was General Counsel and Secretary of ArcelorMittal USA, Inc. from April 2005 to October 2007, and General Counsel and Secretary of International Steel Group Inc., from September 2004 to April 2005, prior to its acquisition by Mittal Steel Company. Prior to that, he was General Counsel of Fleming Companies, Inc. from February 2001 to August 2004. Fleming Companies, Inc. filed for bankruptcy protection under Chapter 11 of the U.S. Bankruptcy Code on April 1, 2003.
John L. Hopkins
Mr. Hopkins has been Group Executive, Corporate Development since August 2009. Prior to that he was Group President, Government from October 2003 to August 2009; Group Executive, Sales, Marketing and Strategic Planning from February 2002 to October 2003; and Group Executive, Fluor Global Services from September 2001 to February 2002. Mr. Hopkins joined the company in 1984.
Peter Oosterveer
Mr. Oosterveer has been Group President, Oil & Gas since March 2009. Prior to that, he was Senior Vice President, Business Line Lead-Chemicals from February 2007 to March 2009; Vice President, Business Line Lead-Chemicals from September 2005 to February 2007; and Vice President, Operations from October 2002 to September 2005. Mr. Oosterveer joined the company in 1989.
David T. Seaton
Mr. Seaton has been Chief Executive Officer since February 2011 and Chairman since February 2012. Prior to that, he was Chief Operating Officer from November 2009 to February 2011; Senior Group President, Oil & Gas, Power and Government from March 2009 to November 2009; Group President, Oil & Gas from March 2007 to March 2009; Senior Vice President, Corporate Sales Board from September 2005 to March 2007; Senior Vice President, Chemicals Business Line from October 2004 to September 2005; and Senior Vice President, Sales for Oil & Gas from March 2002 to October 2004. Mr. Seaton joined the company in 1985.
Gary G. Smalley
Mr. Smalley has been Senior Vice President and Controller since March 2008. He was Vice President of Internal Audit from September 2002 to March 2008 and prior to that served in a number of financial
50
management roles, including Controller of South Latin America and Controller of Australia. Mr. Smalley joined the company in 1991.
Bruce A. Stanski
Mr. Stanski has been Group President, Government since August 2009. Prior to joining the company in March 2009, he was President, Government and Infrastructure of KBR, Inc. from August 2007 to March 2009; Executive Vice President of KBR, Inc.'s Government and Infrastructure division from September 2005 to August 2007; and Senior Vice President, Government Operations of KBR, Inc. from August 2004 to September 2005. Mr. Stanski also previously served as the Chief Financial Officer of KBR, Inc.
D. Michael Steuert
Mr. Steuert has been Senior Vice President and Chief Financial Officer since May 2001. Prior to joining the company in 2001, he was Senior Vice President and Chief Financial Officer of Litton Industries, Inc., a major defense contractor, from 1999 to May 2001.
Code of Ethics
We have long maintained and enforced a Code of Business Conduct and Ethics that applies to all Fluor officers and employees, including our chief executive officer, chief financial officer, and principal accounting officer and controller. A copy of our Code of Business Conduct and Ethics, as amended, has been posted on the "Sustainability" — "Compliance and Ethics" portion of our website, www.fluor.com .
We have disclosed and intend to continue to disclose any changes or amendments to our code of ethics or waivers from our code of ethics applicable to our chief executive officer, chief financial officer, and principal accounting officer and controller by posting such changes or waivers to our website.
Corporate Governance
We have adopted Corporate Governance Guidelines, which are available on our website at www.fluor.com under the "Investor Relations" portion of our website.
Additional Information
The additional information required by Item 401 of Regulation S-K is hereby incorporated by reference from the information contained in the section entitled "Election of Directors — Biographical Information, including Experience, Qualifications, Attributes and Skills" in our Proxy Statement for our 2012 annual meeting of stockholders. Disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is incorporated by reference from the information contained in the section entitled "Section 16(a) Beneficial Ownership Reporting Compliance" in our Proxy Statement. Information regarding the Audit Committee is hereby incorporated by reference from the information contained in the section entitled "Corporate Governance — Board of Directors Meetings and Committees — Audit Committee" in our Proxy Statement.
Item 11.
Executive Compensation
Information required by this item is included in the following sections of our Proxy Statement for our 2012 annual meeting of stockholders: "Organization and Compensation Committee Report," "Compensation Committee Interlocks and Insider Participation," "Executive Compensation" and "Director Compensation," as well as the related pages containing compensation tables and information, which information is incorporated herein by reference.
51
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Equity Compensation Plan Information
The following table provides information as of December 31, 2011 with respect to the shares of common stock that may be issued under the Company's equity compensation plans:
|
Plan Category
|
(a)
Number of securities to be issued upon exercise of outstanding options, warrants and rights |
(b)
Weighted average exercise price of outstanding options, warrants and rights |
(c)
Number of securities available for future issuance under equity compensation plans (excluding securities listed in column (a)) |
|||||||
|---|---|---|---|---|---|---|---|---|---|---|
|
Equity compensation plans approved by stockholders (1) |
2,899,501 | $ | 50.00 | 7,193,545 | ||||||
|
Equity compensation plans not approved by stockholders |
— | — | — | |||||||
|
Total |
2,899,501 | $ | 50.00 | 7,193,545 | ||||||
The additional information required by this item is included in the "Stock Ownership and Stock-Based Holdings of Executive Officers and Directors" and "Stock Ownership of Certain Beneficial Owners" sections of our Proxy Statement for our 2012 annual meeting of stockholders, which information is incorporated herein by reference.
Item 13.
Certain Relationships and Related Transactions, and Director Independence
Information required by this item is included in the "Certain Relationships and Related Transactions" and "Determination of Independence of Directors" sections of the "Corporate Governance" portion of our Proxy Statement for our 2012 annual meeting of stockholders, which information is incorporated herein by reference.
Item 14.
Principal Accountant Fees and Services
Information required by this item is included in the "Ratification of Appointment of Independent Registered Public Accounting Firm" section of our Proxy Statement, which information is incorporated herein by reference.
52
Item 15.
Exhibits and Financial Statement Schedules
1. Financial Statements:
Our consolidated financial statements at December 31, 2011 and 2010 and for each of the three years in the period ended December 31, 2011 and the notes thereto, together with the report of the independent registered public accounting firm on those consolidated financial statements are hereby filed as part of this annual report on Form 10-K, beginning on page F-1.
2. Financial Statement Schedules:
No financial statement schedules are presented since the required information is not present or not present in amounts sufficient to require submission of the schedule, or because the information required is included in the consolidated financial statements and notes thereto.
3. Exhibits:
| Exhibit | Description | ||
|---|---|---|---|
| 3.1 | Amended and Restated Certificate of Incorporation of the registrant (incorporated by reference to Exhibit 3.1 to the registrant's Current Report on Form 8-K filed on May 6, 2011). | ||
|
|
3.2 |
|
Amended and Restated Bylaws of the registrant (incorporated by reference to Exhibit 3.2 to the registrant's Current Report on Form 8-K filed on May 6, 2011). |
|
|
4.1 |
|
Indenture between Fluor Corporation and Bank of New York, as trustee, dated as of February 17, 2004 (incorporated by reference to Exhibit 4.1 to the registrant's Current Report on Form 8-K filed on February 17, 2004). |
|
|
4.2 |
|
First Supplemental Indenture between Fluor Corporation and The Bank of New York, as trustee, dated as of February 17, 2004 (incorporated by reference to Exhibit 4.2 to the registrant's Current Report on Form 8-K filed on February 17, 2004). |
|
|
4.3 |
|
Senior Debt Securities Indenture between Fluor Corporation and Wells Fargo Bank, National Association, as trustee, dated as of September 8, 2011 (incorporated by reference to Exhibit 4.3 to the registrant's Current Report on Form 8-K filed on September 8, 2011). |
|
|
4.4 |
|
First Supplemental Indenture between Fluor Corporation and Wells Fargo Bank, National Association, as trustee, dated as of September 13, 2011 (incorporated by reference to Exhibit 4.4 to the registrant's Current Report on Form 8-K filed on September 13, 2011). |
|
|
10.1 |
|
Distribution Agreement between the registrant and Fluor Corporation (renamed Massey Energy Company) (incorporated by reference to Exhibit 10.1 to the registrant's Current Report on Form 8-K filed on December 7, 2000). |
|
|
10.2 |
|
Fluor Corporation 2000 Restricted Stock Plan for Non-Employee Directors, as amended and restated effective January 1, 2010 (incorporated by reference to Exhibit 10.3 to the registrant's Quarterly Report on Form 10-Q filed on May 20, 2010). |
|
|
10.3 |
|
Fluor Corporation Executive Deferred Compensation Plan, as amended and restated effective April 21, 2003 (incorporated by reference to Exhibit 10.5 to the registrant's Annual Report on Form 10-K filed on February 29, 2008). |
53
| 10.4 | Fluor Corporation Deferred Directors' Fees Program, as amended and restated effective January 1, 2002 (incorporated by reference to Exhibit 10.9 to the registrant's Annual Report on Form 10-K filed on March 31, 2003). | ||
|
|
10.5 |
|
Directors' Life Insurance Summary (incorporated by reference to Exhibit 10.12 to the registrant's Registration Statement on Form 10/A (Amendment No. 1) filed on November 22, 2000). |
|
|
10.6 |
|
Fluor Executives' Supplemental Benefit Plan (incorporated by reference to Exhibit 10.8 to the registrant's Annual Report on Form 10-K filed on February 29, 2008). |
|
|
10.7 |
|
Executive Severance Plan.* |
|
|
10.8 |
|
Fluor Corporation 2001 Fluor Stock Appreciation Rights Plan, as amended and restated on November 1, 2007 (incorporated by reference to Exhibit 10.12 to the registrant's Annual Report on Form 10-K filed on February 29, 2008). |
|
|
10.9 |
|
Fluor Corporation 2003 Executive Performance Incentive Plan, as amended and restated as of March 30, 2005 (incorporated by reference to Exhibit 10.15 to the registrant's Quarterly Report on Form 10-Q filed on May 5, 2005). |
|
|
10.10 |
|
Form of Compensation Award Agreements for grants under the Fluor Corporation 2003 Executive Performance Incentive Plan (incorporated by reference to Exhibit 10.16 to the registrant's Quarterly Report on Form 10-Q filed on November 9, 2004). |
|
|
10.11 |
|
Offer of Employment Letter dated May 7, 2001 from Fluor Corporation to D. Michael Steuert (incorporated by reference to Exhibit 10.17 to the registrant's Annual Report on Form 10-K filed on March 15, 2004). |
|
|
10.12 |
|
Summary of Fluor Corporation Non-Management Director Compensation (incorporated by reference to Exhibit 10.15 to the registrant's Quarterly Report on Form 10-Q filed on November 4, 2010). |
|
|
10.13 |
|
Fluor Corporation 409A Deferred Directors' Fees Program, effective as of January 1, 2005 (incorporated by reference to Exhibit 10.1 to the registrant's Current Report on Form 8-K filed on December 21, 2007). |
|
|
10.14 |
|
Fluor 409A Executive Deferred Compensation Program, as amended and restated effective January 1, 2012.* |
|
|
10.15 |
|
Fluor Corporation 2008 Executive Performance Incentive Plan (incorporated by reference to Exhibit 10.1 to the registrant's Current Report on Form 8-K filed on May 9, 2008). |
|
|
10.16 |
|
Form of Indemnification Agreement entered into between the registrant and each of its directors and executive officers (incorporated by reference to Exhibit 10.21 to the registrant's Annual Report on Form 10-K filed on February 25, 2009). |
|
|
10.17 |
|
Retention Award granted to Stephen B. Dobbs on February 7, 2008 (incorporated by reference to Exhibit 10.22 to the registrant's Annual Report on Form 10-K filed on February 25, 2009). |
|
|
10.18 |
|
Retention Award granted to David T. Seaton on February 7, 2008 (incorporated by reference to Exhibit 10.23 to the registrant's Annual Report on Form 10-K filed on February 25, 2009). |
|
|
10.19 |
|
Form of Value Driver Incentive Award Agreement under the Fluor Corporation 2008 Executive Performance Incentive Plan (incorporated by reference to Exhibit 10.24 to the registrant's Quarterly Report on Form 10-Q filed on May 11, 2009). |
|
|
10.20 |
|
Form of Stock Option Agreement under the Fluor Corporation 2008 Executive Performance Incentive Plan (incorporated by reference to Exhibit 10.25 to the registrant's Quarterly Report on Form 10-Q filed on May 11, 2009). |
54
| 10.21 | Form of Restricted Stock Unit Agreement under the Fluor Corporation 2008 Executive Performance Incentive Plan (incorporated by reference to Exhibit 10.26 to the registrant's Quarterly Report on Form 10-Q filed on May 11, 2009). | ||
|
|
10.22 |
|
Form of Non-U.S. Stock Growth Incentive Award Agreement under the Fluor Corporation 2008 Executive Performance Incentive Plan (incorporated by reference to Exhibit 10.27 to the registrant's Quarterly Report on Form 10-Q filed on May 11, 2009). |
|
|
10.23 |
|
Form of Stock Option Agreement (with double trigger change of control) under the Fluor Corporation 2008 Executive Performance Incentive Plan (incorporated by reference to Exhibit 10.28 to the registrant's Quarterly Report on Form 10-Q filed on May 10, 2010). |
|
|
10.24 |
|
Form of Restricted Stock Unit Agreement (with double trigger change of control) under the Fluor Corporation 2008 Executive Performance Incentive Plan (incorporated by reference to Exhibit 10.29 to the registrant's Quarterly Report on Form 10-Q filed on May 10, 2010). |
|
|
10.25 |
|
Form of Non-U.S. Stock Growth Incentive Award Agreement (with double trigger change of control) under the Fluor Corporation 2008 Executive Performance Incentive Plan (incorporated by reference to Exhibit 10.30 to the registrant's Quarterly Report on Form 10-Q filed on May 10, 2010). |
|
|
10.26 |
|
Form of Restricted Unit Award Agreement under the Fluor Corporation 2000 Restricted Stock Plan for Non-Employee Directors (incorporated by reference to Exhibit 10.28 to the registrant's Quarterly Report on Form 10-Q filed on August 4, 2011). |
|
|
10.27 |
|
Form of Restricted Stock Agreement under the Fluor Corporation 2000 Restricted Stock Plan for Non-Employee Directors (incorporated by reference to Exhibit 10.29 to the registrant's Quarterly Report on Form 10-Q filed on August 4, 2011). |
|
|
10.28 |
|
Form of Change in Control Agreement entered into between the registrant and each of its executive officers (incorporated by reference to Exhibit 10.1 to the registrant's Current Report on Form 8-K filed on June 29, 2010). |
|
|
10.29 |
|
Letter of Credit Facility Agreement, dated September 16, 2009, among Fluor Corporation, BNP Paribas, as Administrative Agent and an Issuing Lender, and the lenders party thereto (including schedules and exhibits thereto) (incorporated by reference to Exhibit 10.32 to the registrant's Quarterly Report on Form 10-Q filed on July 27, 2010). |
|
|
10.30 |
|
Revolving Loan and Financial Letter of Credit Facility Agreement dated as of December 14, 2010, among Fluor Corporation, the Lenders thereunder, Bank of America, N.A., in its capacity as Administrative Agent and an Issuing Lender, BNP Paribas, in its capacity as Co-Syndication Agent and an Issuing Lender, Citibank, N.A. and Intesa Sanpaolo S.p.A., as Co-Syndication Agents, and ING Bank N.V., Dublin Branch, Wells Fargo Bank, N.A. and Lloyds TSB, as Co-Documentation Agents (incorporated by reference to Exhibit 10.32 to the registrant's Annual Report on Form 10-K filed on February 23, 2011). |
|
|
10.31 |
|
Revolving Performance Letter of Credit Facility Agreement dated as of December 14, 2010, among Fluor Corporation, the Lenders thereunder, BNP Paribas, as Administrative Agent and an Issuing Lender, Bank of America, N.A., as Co-Syndication Agent and an Issuing Lender, The Bank of Tokyo-Mitsubishi UFJ, Ltd. and The Bank of Nova Scotia, as Co-Syndication Agents and Banco Santander, S.A., New York Branch and Crédit Agricole Corporate and Investment Bank, as Co-Documentation Agents (incorporated by reference to Exhibit 10.33 to the registrant's Annual Report on Form 10-K filed on February 23, 2011). |
|
|
10.32 |
|
Retention Award granted to D. Michael Steuert on August 4, 2010 (incorporated by reference to Exhibit 10.34 to the registrant's Annual Report on Form 10-K filed on February 23, 2011). |
|
|
10.33 |
|
Retention Award granted to Peter Oosterveer on February 7, 2008 (incorporated by reference to Exhibit 10.35 to the registrant's Quarterly Report on Form 10-Q filed on May 5, 2011). |
55
| 10.34 | Retention Award granted to Peter Oosterveer on December 11, 2009 (incorporated by reference to Exhibit 10.36 to the registrant's Quarterly Report on Form 10-Q filed on May 5, 2011). | ||
|
|
10.35 |
|
Form of Value Driver Incentive Award Agreement (payable in shares) under the Fluor Corporation 2008 Executive Performance Incentive Plan (incorporated by reference to Exhibit 10.37 to the registrant's Quarterly Report on Form 10-Q filed on May 5, 2011). |
|
|
10.36 |
|
Form of Option Agreement (with international grant language) under the Fluor Corporation 2008 Executive Performance Incentive Plan (incorporated by reference to Exhibit 10.38 to the registrant's Quarterly Report on Form 10-Q filed on May 5, 2011). |
|
|
10.37 |
|
Form of Restricted Stock Unit Agreement (with international grant language) under the Fluor Corporation 2008 Executive Performance Incentive Plan (incorporated by reference to Exhibit 10.39 to the registrant's Quarterly Report on Form 10-Q filed on May 5, 2011). |
|
|
10.38 |
|
Form of Non-U.S. Stock Growth Incentive Award Agreement under the Fluor Corporation 2008 Executive Performance Incentive Plan (incorporated by reference to Exhibit 10.40 to the registrant's Quarterly Report on Form 10-Q filed on May 5, 2011). |
|
|
10.39 |
|
Offer of Employment Letter dated January 9, 2009 from Fluor Corporation to Bruce A. Stanski.* |
|
|
21.1 |
|
Subsidiaries of the registrant.* |
|
|
23.1 |
|
Consent of Independent Registered Public Accounting Firm.* |
|
|
31.1 |
|
Certification of Chief Executive Officer of Fluor Corporation.* |
|
|
31.2 |
|
Certification of Chief Financial Officer of Fluor Corporation.* |
|
|
32.1 |
|
Certification of Chief Executive Officer pursuant to Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350.* |
|
|
32.2 |
|
Certification of Chief Financial Officer pursuant to Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350.* |
|
|
101.INS |
|
XBRL Instance Document.* |
|
|
101.SCH |
|
XBRL Taxonomy Extension Schema Document.* |
|
|
101.CAL |
|
XBRL Taxonomy Extension Calculation Linkbase Document.* |
|
|
101.LAB |
|
XBRL Taxonomy Extension Label Linkbase Document.* |
|
|
101.PRE |
|
XBRL Taxonomy Extension Presentation Linkbase Document.* |
|
|
101.DEF |
|
XBRL Taxonomy Extension Definition Linkbase Document.* |
Attached as Exhibit 101 to this report are the following documents formatted in XBRL (Extensible Business Reporting Language): (i) the Consolidated Statement of Earnings for the years ended December 31, 2011, 2010 and 2009, (ii) the Consolidated Balance Sheet at December 31, 2011 and December 31, 2010, (iii) the Consolidated Statement of Cash Flows for the years ended December 31, 2011, 2010 and 2009 and (iv) the Consolidated Statement of Equity for the years ended December 31, 2011, 2010 and 2009.
56
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this annual report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized.
| FLUOR CORPORATION | ||||
|
|
|
By: |
|
/s/ D. MICHAEL STEUERT D. Michael Steuert, Senior Vice President and Chief Financial Officer |
February 22, 2012
Pursuant to the requirements of the Securities Exchange Act of 1934, this annual report on Form 10-K has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| Signature | Title | Date | ||
|---|---|---|---|---|
|
|
|
|
|
|
| Principal Executive Officer and Director: | ||||
|
/s/ DAVID T. SEATON David T. Seaton |
|
Chairman and Chief Executive Officer |
|
February 22, 2012 |
|
Principal Financial Officer: |
|
|
|
|
|
/s/ D. MICHAEL STEUERT D. Michael Steuert |
|
Senior Vice President and Chief Financial Officer |
|
February 22, 2012 |
|
Principal Accounting Officer: |
|
|
|
|
|
/s/ GARY G. SMALLEY Gary G. Smalley |
|
Senior Vice President and Controller |
|
February 22, 2012 |
|
Other Directors: |
|
|
|
|
|
/s/ PETER K. BARKER Peter K. Barker |
|
Director |
|
February 22, 2012 |
|
/s/ ALAN M. BENNETT Alan M. Bennett |
|
Director |
|
February 22, 2012 |
|
/s/ ROSEMARY T. BERKERY Rosemary T. Berkery |
|
Director |
|
February 22, 2012 |
|
/s/ PETER J. FLUOR Peter J. Fluor |
|
Director |
|
February 22, 2012 |
|
/s/ JAMES T. HACKETT James T. Hackett |
|
Director |
|
February 22, 2012 |
57
| Signature | Title | Date | ||
|---|---|---|---|---|
|
|
|
|
|
|
|
/s/ KENT KRESA
Kent Kresa |
Director | February 22, 2012 | ||
|
/s/ DEAN R. O'HARE Dean R. O'Hare |
|
Director |
|
February 22, 2012 |
|
/s/ JOSEPH W. PRUEHER Joseph W. Prueher |
|
Director |
|
February 22, 2012 |
|
/s/ NADER H. SULTAN Nader H. Sultan |
|
Director |
|
February 22, 2012 |
|
/s/ SUZANNE H. WOOLSEY Suzanne H. Woolsey |
|
Director |
|
February 22, 2012 |
58
FLUOR CORPORATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
F-1
Report of Independent Registered Public Accounting Firm
The Board of Directors and Shareholders of Fluor Corporation
We have audited the accompanying consolidated balance sheets of Fluor Corporation as of December 31, 2011 and 2010, and the related consolidated statements of earnings, cash flows and equity for each of the three years in the period ended December 31, 2011. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Fluor Corporation at December 31, 2011 and 2010, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2011, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Fluor Corporation's internal control over financial reporting as of December 31, 2011, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 22, 2012 expressed an unqualified opinion thereon.
/s/ Ernst & Young LLP
Dallas,
Texas
February 22, 2012
F-2
FLUOR CORPORATION
CONSOLIDATED STATEMENT OF EARNINGS
|
|
Year Ended December 31, | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
|
(in thousands, except per share amounts)
|
2011
|
2010
|
2009
|
|||||||
|
TOTAL REVENUE |
$ | 23,381,399 | $ | 20,849,349 | $ | 21,990,297 | ||||
|
TOTAL COST OF REVENUE |
22,232,483 |
20,144,099 |
20,689,161 |
|||||||
|
OTHER (INCOME) AND EXPENSES |
||||||||||
|
Corporate general and administrative expense |
163,460 | 156,268 | 178,520 | |||||||
|
Interest expense |
15,601 | 10,616 | 10,054 | |||||||
|
Interest income |
(31,961 | ) | (21,230 | ) | (24,226 | ) | ||||
|
Total cost and expenses |
22,379,583 | 20,289,753 | 20,853,509 | |||||||
|
EARNINGS BEFORE TAXES |
1,001,816 |
559,596 |
1,136,788 |
|||||||
|
INCOME TAX EXPENSE |
303,729 | 118,514 | 403,913 | |||||||
|
NET EARNINGS |
698,087 |
441,082 |
732,875 |
|||||||
|
NET EARNINGS ATTRIBUTABLE TO NONCONTROLLING INTERESTS |
(104,359 |
) |
(83,586 |
) |
(47,986 |
) |
||||
|
NET EARNINGS ATTRIBUTABLE TO FLUOR CORPORATION |
$ |
593,728 |
$ |
357,496 |
$ |
684,889 |
||||
|
|
|
|||||||||
|
BASIC EARNINGS PER SHARE |
$ |
3.44 |
$ |
2.01 |
$ |
3.79 |
||||
|
|
|
|||||||||
|
DILUTED EARNINGS PER SHARE |
$ |
3.40 |
$ |
1.98 |
$ |
3.75 |
||||
|
|
|
|||||||||
|
|
|
|
|
|
|
|
|
|||
|
Basic |
172,501 | 178,047 | 179,100 | |||||||
|
Diluted |
174,564 | 180,988 | 180,862 | |||||||
|
|
|
|||||||||
See Notes to Consolidated Financial Statements.
F-3
FLUOR CORPORATION
CONSOLIDATED BALANCE SHEET
See Notes to Consolidated Financial Statements.
F-4
FLUOR CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
|
|
Year Ended December 31, | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
|
(in thousands)
|
2011
|
2010
|
2009
|
|||||||
|
CASH FLOWS FROM OPERATING ACTIVITIES |
||||||||||
|
Net earnings |
$ |
698,087 |
$ |
441,082 |
$ |
732,875 |
||||
|
Adjustments to reconcile net earnings to cash provided by operating activities: |
||||||||||
|
Depreciation of fixed assets |
199,365 | 189,350 | 180,849 | |||||||
|
Amortization of intangibles |
2,574 | 1,234 | 1,162 | |||||||
|
Restricted stock and stock option amortization |
36,757 | 46,824 | 33,624 | |||||||
|
Deferred compensation trust |
10,449 | (28,614 | ) | (44,606 | ) | |||||
|
Deferred compensation obligation |
(12,518 | ) | 33,737 | 45,700 | ||||||
|
Funding of deferred compensation trust |
— | (5,000 | ) | (10,000 | ) | |||||
|
Statute expirations and tax settlements |
(13,795 | ) | (10,686 | ) | (5,568 | ) | ||||
|
Deferred taxes |
(17,398 | ) | 12,707 | 74,662 | ||||||
|
Excess tax benefit from stock-based plans |
(12,737 | ) | (893 | ) | (1,294 | ) | ||||
|
Retirement plan accrual, net of contributions |
(69,581 | ) | 22,264 | 44,798 | ||||||
|
Changes in operating assets and liabilities |
46,005 | (173,007 | ) | (143,932 | ) | |||||
|
Equity in (earnings) of investees, net of dividends |
19,225 | 12,343 | (3,699 | ) | ||||||
|
Other items |
3,336 | 9,573 | 441 | |||||||
|
Cash provided by operating activities |
889,769 | 550,914 | 905,012 | |||||||
|
CASH FLOWS FROM INVESTING ACTIVITIES |
||||||||||
|
Purchases of marketable securities |
(857,787 |
) |
(853,622 |
) |
(1,663,013 |
) |
||||
|
Proceeds from the sales and maturities of marketable securities |
724,409 | 1,291,159 | 1,039,684 | |||||||
|
Capital expenditures |
(338,167 | ) | (265,410 | ) | (233,113 | ) | ||||
|
Proceeds from disposal of property, plant and equipment |
53,752 | 53,692 | 37,568 | |||||||
|
Investments in partnerships and joint ventures |
(8,089 | ) | (10,035 | ) | (1,681 | ) | ||||
|
Proceeds from sale of assets |
11,016 | — | — | |||||||
|
Acquisitions |
(27,326 | ) | — | — | ||||||
|
Other items |
5,768 | 2,646 | 2,496 | |||||||
|
Cash (utilized) provided by investing activities |
(436,424 | ) | 218,430 | (818,059 | ) | |||||
|
CASH FLOWS FROM FINANCING ACTIVITIES |
||||||||||
|
Repurchase of common stock |
(639,556 |
) |
(175,058 |
) |
(125,419 |
) |
||||
|
Dividends paid |
(87,678 | ) | (90,093 | ) | (90,692 | ) | ||||
|
Proceeds from issuance of Senior Notes |
495,595 | — | — | |||||||
|
Debt issuance costs |
(4,066 | ) | — | — | ||||||
|
Settlement of Treasury rate lock agreements |
(16,778 | ) | — | — | ||||||
|
Repayment of convertible debt |
(77,234 | ) | (13,097 | ) | (23,789 | ) | ||||
|
Distributions paid to noncontrolling interests |
(103,659 | ) | (83,656 | ) | (75,727 | ) | ||||
|
Capital contribution by joint venture partners |
22,789 | 1,000 | — | |||||||
|
Repayment of corporate-owned life insurance loans |
— | (32,163 | ) | — | ||||||
|
Taxes paid on vested restricted stock |
(18,693 | ) | (6,899 | ) | (5,700 | ) | ||||
|
Stock options exercised |
25,410 | 14,040 | 2,671 | |||||||
|
Excess tax benefit from stock-based plans |
12,737 | 893 | 1,294 | |||||||
|
Other items |
(4,692 | ) | (4,839 | ) | (5,635 | ) | ||||
|
Cash utilized by financing activities |
(395,825 | ) | (389,872 | ) | (322,997 | ) | ||||
|
Effect of exchange rate changes on cash |
(31,106 | ) | 68,497 | 88,748 | ||||||
|
Increase (decrease) in cash and cash equivalents |
26,414 | 447,969 | (147,296 | ) | ||||||
|
Cash and cash equivalents at beginning of year |
2,134,997 | 1,687,028 | 1,834,324 | |||||||
|
Cash and cash equivalents at end of year |
$ | 2,161,411 | $ | 2,134,997 | $ | 1,687,028 | ||||
|
|
|
|||||||||
See Notes to Consolidated Financial Statements.
F-5
FLUOR CORPORATION
CONSOLIDATED STATEMENT OF EQUITY
|
|
Common Stock |
Additional
Paid-In Capital |
Accumulated
Other Comprehensive Income (Loss) |
|
Total
Shareholders' Equity |
|
|
||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
|
Retained
Earnings |
Noncontrolling
Interests |
Total
Equity |
||||||||||||||||||||||
|
(in thousands, except per share amounts)
|
Shares
|
Amount
|
|||||||||||||||||||||||
|
BALANCE AS OF DECEMBER 31, 2008 |
181,556 | $ | 1,816 | $ | 778,537 | $ | (356,969 | ) | $ | 2,247,938 | $ | 2,671,322 | $ | 51,862 | $ | 2,723,184 | |||||||||
|
|
|
||||||||||||||||||||||||
|
Comprehensive income |
|||||||||||||||||||||||||
|
Net earnings |
— | 684,889 | 684,889 | 47,986 | 732,875 | ||||||||||||||||||||
|
Foreign currency translation adjustment of total shareholders' equity (net of deferred taxes of $49,656) |
82,722 | — | 82,722 | — | 82,722 | ||||||||||||||||||||
|
Foreign currency translation adjustment of noncontrolling interests |
— | — | — | 4,239 | 4,239 | ||||||||||||||||||||
|
Pension plan adjustment (net of deferred taxes of $29,425) |
49,043 | — | 49,043 | — | 49,043 | ||||||||||||||||||||
|
Unrealized gain on available-for-sale securities (net of deferred taxes of $871) |
1,120 | — | 1,120 | — | 1,120 | ||||||||||||||||||||
|
Unrealized gain on derivative contracts (net of deferred taxes of $1,856) |
3,097 | — | 3,097 | — | 3,097 | ||||||||||||||||||||
|
Total comprehensive income |
135,982 | 684,889 | 820,871 | 52,225 | 873,096 | ||||||||||||||||||||
|
Dividends ($0.50 per share) |
— | (90,399 | ) | (90,399 | ) | — | (90,399 | ) | |||||||||||||||||
|
Distributions to noncontrolling interests |
— | — | — | (75,727 | ) | (75,727 | ) | ||||||||||||||||||
|
Stock-based plan activity |
76 | — | 31,886 | — | — | 31,886 | — | 31,886 | |||||||||||||||||
|
Repurchase of common stock |
(3,060 | ) | (29 | ) | (125,390 | ) | — | — | (125,419 | ) | — | (125,419 | ) | ||||||||||||
|
Debt conversions |
253 | 1 | (2,729 | ) | — | — | (2,728 | ) | — | (2,728 | ) | ||||||||||||||
|
BALANCE AS OF DECEMBER 31, 2009 |
178,825 | $ | 1,788 | $ | 682,304 | $ | (220,987 | ) | $ | 2,842,428 | $ | 3,305,533 | $ | 28,360 | $ | 3,333,893 | |||||||||
|
|
|
||||||||||||||||||||||||
|
Comprehensive income |
|||||||||||||||||||||||||
|
Net earnings |
— | 357,496 | 357,496 | 83,586 | 441,082 | ||||||||||||||||||||
|
Foreign currency translation adjustment of total shareholders' equity (net of deferred taxes of $20,326) |
33,914 | — | 33,914 | — | 33,914 | ||||||||||||||||||||
|
Foreign currency translation adjustment of noncontrolling interests |
— | — | — | 2,336 | 2,336 | ||||||||||||||||||||
|
Pension plan adjustment (net of deferred taxes of $16,965) |
28,274 | — | 28,274 | — | 28,274 | ||||||||||||||||||||
|
Ownership share of equity method investee's other comprehensive loss (net of deferred taxes of $12,667) |
(19,791 | ) | — | (19,791 | ) | — | (19,791 | ) | |||||||||||||||||
|
Unrealized loss on available-for-sale securities (net of deferred taxes of $82) |
(137 | ) | — | (137 | ) | — | (137 | ) | |||||||||||||||||
|
Unrealized gain on derivative contracts (net of deferred taxes of $820) |
2,416 | — | 2,416 | — | 2,416 | ||||||||||||||||||||
|
Total comprehensive income |
44,676 | 357,496 | 402,172 | 85,922 | 488,094 | ||||||||||||||||||||
|
Dividends ($0.50 per share) |
— | (89,967 | ) | (89,967 | ) | — | (89,967 | ) | |||||||||||||||||
|
Distributions to noncontrolling interests |
— | — | — | (83,656 | ) | (83,656 | ) | ||||||||||||||||||
|
Partner contributions in noncontrolling interests |
— | — | — | 1,000 | 1,000 | ||||||||||||||||||||
|
Stock-based plan activity |
495 | 6 | 54,851 | — | — | 54,857 | — | 54,857 | |||||||||||||||||
|
Repurchase of common stock |
(3,080 | ) | (31 | ) | (175,027 | ) | — | — | (175,058 | ) | — | (175,058 | ) | ||||||||||||
|
Debt conversions |
185 | 1 | (539 | ) | — | — | (538 | ) | — | (538 | ) | ||||||||||||||
|
BALANCE AS OF DECEMBER 31, 2010 |
176,425 | $ | 1,764 | $ | 561,589 | $ | (176,311 | ) | $ | 3,109,957 | $ | 3,496,999 | $ | 31,626 | $ | 3,528,625 | |||||||||
|
|
|
||||||||||||||||||||||||
|
Comprehensive income |
|||||||||||||||||||||||||
|
Net earnings |
— | 593,728 | 593,728 | 104,359 | 698,087 | ||||||||||||||||||||
|
Foreign currency translation adjustment of total shareholders' equity (net of deferred taxes of $26,599) |
(44,331 | ) | — | (44,331 | ) | — | (44,331 | ) | |||||||||||||||||
|
Foreign currency translation adjustment of noncontrolling interests |
— | — | — | 4,213 | 4,213 | ||||||||||||||||||||
|
Pension plan adjustment (net of deferred taxes of $35,071) |
58,451 | — | 58,451 | — | 58,451 | ||||||||||||||||||||
|
Ownership share of equity method investee's other comprehensive loss (net of deferred taxes of $9,701) |
(23,791 | ) | — | (23,791 | ) | — | (23,791 | ) | |||||||||||||||||
|
Unrealized loss on available-for-sale securities (net of deferred taxes of $266) |
(445 | ) | — | (445 | ) | — | (445 | ) | |||||||||||||||||
|
Unrealized loss on derivative contracts (net of deferred taxes of $7,078) |
(12,865 | ) | — | (12,865 | ) | 523 | (12,342 | ) | |||||||||||||||||
|
Total comprehensive income |
(22,981 | ) | 593,728 | 570,747 | 109,095 | 679,842 | |||||||||||||||||||
|
Dividends ($0.50 per share) |
— | (86,669 | ) | (86,669 | ) | — | (86,669 | ) | |||||||||||||||||
|
Distributions to noncontrolling interests |
— | — | — | (103,659 | ) | (103,659 | ) | ||||||||||||||||||
|
Partner contributions in noncontrolling interests |
— | — | — | 22,789 | 22,789 | ||||||||||||||||||||
|
Acquisition and other noncontrolling interest transactions |
(534 | ) | — | — | (534 | ) | 4,530 | 3,996 | |||||||||||||||||
|
Stock-based plan activity |
926 | 11 | 56,196 | — | — | 56,207 | — | 56,207 | |||||||||||||||||
|
Repurchase of common stock |
(10,050 | ) | (101 | ) | (612,992 | ) | — | (26,463 | ) | (639,556 | ) | — | (639,556 | ) | |||||||||||
|
Debt conversions |
1,678 | 16 | (1,685 | ) | — | — | (1,669 | ) | — | (1,669 | ) | ||||||||||||||
|
BALANCE AS OF DECEMBER 31, 2011 |
168,979 | $ | 1,690 | $ | 2,574 | $ | (199,292 | ) | $ | 3,590,553 | $ | 3,395,525 | $ | 64,381 | $ | 3,459,906 | |||||||||
|
|
|
||||||||||||||||||||||||
See Notes to Consolidated Financial Statements.
F-6
FLUOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Major Accounting Policies
Principles of Consolidation
The financial statements include the accounts of the company and its subsidiaries. The equity method of accounting is generally used for investment ownership ranging from 20 percent to 50 percent. Investment ownership of less than 20 percent is generally accounted for on the cost method. Joint ventures and partnerships in which the company has the ability to exert significant influence, but does not control, are accounted for using the equity method of accounting. Certain contracts are executed jointly through partnerships and joint ventures with unrelated third parties. The company consolidates certain variable interest entities ("VIEs") in accordance with Accounting Standards Codification ("ASC") 810 (see "14. Variable Interest Entities" below). For joint ventures and partnerships in the construction industry, unless full consolidation is required, the company generally recognizes its proportionate share of revenue, cost and segment profit in its Consolidated Statement of Earnings and uses the one-line equity method of accounting in the Consolidated Balance Sheet, as allowed under ASC 810-10-45-14. At times, the cost and equity methods of accounting are also used.
All significant intercompany transactions of consolidated subsidiaries are eliminated. Certain amounts in 2010 and 2009 have been reclassified to conform to the 2011 presentation. Management has evaluated all material events occurring subsequent to the date of the financial statements up to the date and time this annual report is filed on Form 10-K.
Use of Estimates
The preparation of financial statements in accordance with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect reported amounts. These estimates are based on information available as of the date of the financial statements. Therefore, actual results could differ from those estimates.
Cash and Cash Equivalents
Cash and cash equivalents include securities with maturities of three months or less at the date of purchase. Securities with maturities beyond three months are classified as marketable securities within current and noncurrent assets.
Marketable Securities
Marketable securities consist of time deposits placed with investment grade banks with original maturities greater than three months, which by their nature are typically held to maturity, and are classified as such because the company has the intent and ability to hold them to maturity. Held-to-maturity securities are carried at amortized cost. The company also has investments in debt securities which are classified as available-for-sale because the investments may be sold prior to their maturity date. Available-for-sale securities are carried at fair value. The cost of securities sold is determined by using the specific identification method. Marketable securities are assessed for other-than-temporary impairment.
Engineering and Construction Contracts
The company recognizes engineering and construction contract revenue using the percentage-of-completion method, based primarily on contract cost incurred to date compared to total estimated contract cost. Cost of revenue includes an allocation of depreciation and amortization. Customer-furnished materials, labor and equipment and, in certain cases, subcontractor materials, labor and equipment, are included in revenue and cost of revenue when management believes that the company is responsible for the ultimate acceptability of the project. Contracts are generally segmented between
F-7
FLUOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
types of services, such as engineering and construction, and accordingly, gross margin related to each activity is recognized as those separate services are rendered. Changes to total estimated contract cost or losses, if any, are recognized in the period in which they are determined. Pre-contract costs are expensed as incurred. Revenue recognized in excess of amounts billed is classified as a current asset under contract work in progress. Amounts billed to clients in excess of revenue recognized to date are classified as a current liability under advance billings on contracts. The company anticipates that the majority of incurred cost associated with contract work in progress as of December 31, 2011 will be billed and collected in 2012. The company recognizes revenue, but not profit, for certain significant claims when it is determined that recovery of incurred cost is probable and the amounts can be reliably estimated. Under ASC 605-35-25, these requirements are satisfied when the contract or other evidence provides a legal basis for the claim, additional costs were caused by circumstances that were unforeseen at the contract date and not the result of deficiencies in the company's performance, claim-related costs are identifiable and considered reasonable in view of the work performed, and evidence supporting the claim is objective and verifiable. Cost, but not profit, associated with unapproved change orders is accounted for in revenue when it is probable that the cost will be recovered through a change in the contract price. In circumstances where recovery is considered probable but the revenue cannot be reliably estimated, cost attributable to change orders is deferred pending determination of the impact on contract price. If the requirements for recognizing revenue for claims or unapproved change orders are met, revenue is recorded only to the extent that costs associated with the claims or unapproved change orders have been incurred.
Property, Plant and Equipment
Property, plant and equipment are recorded at cost. Leasehold improvements are amortized over the shorter of their economic lives or the lease terms. Depreciation is calculated using the straight-line method over the following ranges of estimated useful service lives, in years:
|
|
December 31, |
|
||||||||
|---|---|---|---|---|---|---|---|---|---|---|
|
|
Estimated
Useful Service Lives |
|||||||||
|
(cost in thousands)
|
2011
|
2010
|
||||||||
|
Buildings |
$ |
278,029 |
$ |
281,013 |
20 – 40 |
|||||
|
Building and leasehold improvements |
141,335 | 131,546 | 6 – 20 | |||||||
|
Machinery and equipment |
1,245,770 | 1,163,860 | 2 – 10 | |||||||
|
Furniture and fixtures |
135,449 | 135,830 | 2 – 10 | |||||||
Goodwill and Intangible Assets
Goodwill is not amortized but is subject to annual impairment tests. Interim testing for impairment is performed if indicators of potential impairment exist. For purposes of impairment testing, goodwill is allocated to the applicable reporting units based on the current reporting structure. When testing goodwill for impairment, the company first compares the fair value of each reporting unit with its carrying amount. If the carrying amount of a reporting unit exceeds its fair value, a second step is performed to measure the amount of potential impairment. In the second step, the company compares the implied fair value of reporting unit goodwill with the carrying amount of the reporting unit's goodwill. If the carrying amount of reporting unit goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized. During 2011, the company completed its annual goodwill impairment test in the first quarter and determined that none of the goodwill was impaired because the fair value of each reporting unit substantially exceeded its carrying amount.
Intangible assets with indefinite lives are not amortized but are subject to annual impairment tests. Interim testing for impairment is performed if indicators of potential impairment exist. An intangible asset
F-8
FLUOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
with an indefinite life is impaired if its carrying value exceeds its fair value. As of December 31, 2011, none of the company's intangible assets with indefinite lives were impaired. Intangibles assets with finite lives arise from business acquisitions and are amortized on a straight-line basis over the useful lives of those assets, ranging from one to ten years.
Income Taxes
Deferred tax assets and liabilities are recognized for the expected future tax consequences of events that have been recognized in the company's financial statements or tax returns. The company evaluates the realizability of its deferred tax assets and maintains a valuation allowance, if necessary, to reduce certain deferred tax assets to amounts that are more likely than not to be realized. The factors used to assess the likelihood of realization are the company's forecast of future taxable income and available tax planning strategies that could be implemented to realize the net deferred tax assets. Failure to achieve forecasted taxable income in the applicable taxing jurisdictions could affect the ultimate realization of deferred tax assets and could result in an increase in the company's effective tax rate on future earnings.
Income tax positions must meet a more-likely-than-not recognition threshold to be recognized. Income tax positions that previously failed to meet the more-likely-than-not threshold are recognized in the first subsequent financial reporting period in which that threshold is met. Previously recognized tax positions that no longer meet the more-likely-than-not threshold are derecognized in the first subsequent financial reporting period in which that threshold is no longer met. The company recognizes potential interest and penalties related to unrecognized tax benefits within its global operations in income tax expense.
Judgment is required in determining the consolidated provision for income taxes as the company considers its worldwide taxable earnings and the impact of the continuing audit process conducted by various tax authorities. The final outcome of these audits by foreign jurisdictions, the Internal Revenue Service and various state governments could differ materially from that which is reflected in the Consolidated Financial Statements.
Derivatives and Hedging
The company limits exposure to foreign currency fluctuations in most of its engineering and construction contracts through provisions that require client payments in currencies corresponding to the currencies in which cost is incurred. Certain financial exposure, which includes currency and commodity price risk associated with engineering and construction contracts, currency risk associated with intercompany transactions, and risk associated with interest rate volatility may subject the company to earnings volatility. In cases where financial exposure is identified, the company generally mitigates the risk by utilizing derivative instruments. The company's derivative instruments are designated as either fair value or cash flow hedges in accordance with Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities" (ASC 815). The company formally documents its hedge relationships at inception, including identification of the hedging instruments and the hedged items, as well as its risk management objectives and strategies for undertaking the hedge transaction. The company also formally assesses, both at inception and at least quarterly thereafter, whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in the fair value of the hedged items. The fair values of all derivative instruments are recognized as assets or liabilities at the balance sheet date. For fair value hedges, the effective portion of the change in the fair value of the derivative instrument is offset against the change in the fair value of the underlying asset or liability through earnings. For cash flow hedges, the effective portion of the derivative instruments' gains or losses due to changes in fair value are recorded as a component of accumulated other comprehensive income (loss) ("OCI") and are reclassified into earnings when the hedged items settle. Any ineffective
F-9
FLUOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
portion of a derivative instrument's change in fair value is recognized in earnings immediately. The company does not enter into derivative instruments or hedging activities for speculative purposes.
Under ASC 815, in certain limited circumstances, foreign currency payment provisions could be deemed embedded derivatives. As of December 31, 2011, 2010 and 2009, the company had no significant embedded derivatives in any of its contracts.
The Company offsets fair value amounts for multiple derivative instruments executed with the same counterparty under a master netting arrangement, as permitted by ASC 815.
Concentrations of Credit Risk
Accounts receivable and all contract work in progress are from clients in various industries and locations throughout the world. Most contracts require payments as the projects progress or, in certain cases, advance payments. The company generally does not require collateral, but in most cases can place liens against the property, plant or equipment constructed or terminate the contract if a material default occurs. The company evaluates the counterparty credit risk of third parties as part of its project risk review process and in determining the appropriate level of reserves. The company maintains adequate reserves for potential credit losses and generally such losses have been minimal and within management's estimates. However, in the third quarter of 2010, the company recognized a pre-tax charge of $95 million related to a bankruptcy court ruling that adversely impacted the collectability of amounts due the company on a completed infrastructure joint venture project in California. In 2011, $11 million of this amount was recovered in a settlement with the bankrupt client.
Cash and marketable securities are deposited with major banks throughout the world. Such deposits are placed with high quality institutions and the amounts invested in any single institution are limited to the extent possible in order to minimize concentration of counterparty credit risk. The company has not incurred any credit risk losses related to these deposits.
The company's counterparties for derivative contracts are large financial institutions selected based on profitability, strength of balance sheet, credit ratings and capacity for timely payment of financial commitments, which are unlikely to be adversely affected by foreseeable events. There are no significant concentrations of credit risk with any individual counterparty related to our derivative contracts.
The company monitors credit risk by continuously assessing the credit quality of its counterparties.
Stock-Based Plans
The company applies the provisions of SFAS No. 123-R "Accounting for Share-Based Payment" (ASC 718) in its accounting and reporting for stock-based compensation. ASC 718 requires all share-based payments to employees, including grants of employee stock options, to be recognized in the income statement based on their fair values. All unvested options outstanding under the company's option plans have grant prices equal to the market price of the company's stock on the dates of grant. Under ASC 718, stock-based compensation for new awards granted to retirement eligible employees is recognized over the period from the grant date to the retirement eligibility date. Compensation cost for restricted stock and restricted stock units is determined based on the fair market value of the company's stock at the date of grant. Compensation cost for stock appreciation rights is determined based on the change in the fair market value of the company's stock during the period.
Comprehensive Income (Loss)
SFAS No. 130 "Reporting Comprehensive Income" (ASC 220) establishes standards for reporting and displaying comprehensive income and its components in the consolidated financial statements. The company reports the cumulative foreign currency translation adjustments, unrealized gains and losses on
F-10
FLUOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
available-for-sale securities and derivative contracts, ownership share of equity method investee's other comprehensive loss, and adjustments related to defined benefit pension and postretirement plans, as components of accumulated other comprehensive income (loss). The after-tax components of accumulated other comprehensive income (loss), net are as follows:
|
(in thousands)
|
Foreign
Currency Translation |
Unrealized
Gain (Loss) on Available- for-Sale Securities |
Unrealized
Gain (Loss) on Derivative Contracts |
Ownership Share
of Equity Method Investee's Other Comprehensive Loss |
Defined Benefit
Pension and Postretirement Plans |
Accumulated
Other Comprehensive Income (Loss), Net |
|||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Balance as of December 31, 2008 |
$ |
(56,535 |
) |
$ |
331 |
$ |
(3,428 |
) |
$ |
— |
$ |
(297,337 |
) |
$ |
(356,969 |
) |
|||
|
Current period change |
82,722 | 1,120 | 3,097 | — | 49,043 | 135,982 | |||||||||||||
|
Balance as of December 31, 2009 |
26,187 | 1,451 | (331 | ) | — | (248,294 | ) | (220,987 | ) | ||||||||||
|
Current period change |
33,914 | (137 | ) | 2,416 | (19,791 | ) | 28,274 | 44,676 | |||||||||||
|
Balance as of December 31, 2010 |
60,101 | 1,314 | 2,085 | (19,791 | ) | (220,020 | ) | (176,311 | ) | ||||||||||
|
Current period change |
(44,331 | ) | (445 | ) | (12,865 | ) | (23,791 | ) | 58,451 | (22,981 | ) | ||||||||
|
Balance as of December 31, 2011 |
$ | 15,770 | $ | 869 | $ | (10,780 | ) | $ | (43,582 | ) | $ | (161,569 | ) | $ | (199,292 | ) | |||
|
|
|
||||||||||||||||||
During 2011, functional currency exchange rates for most of the company's international operations weakened against the U.S. dollar, resulting in unrealized translation losses. During 2010 and 2009, functional currency exchange rates for most of the company's international operations strengthened against the U.S. dollar, resulting in unrealized translation gains.
Recent Accounting Pronouncements
In December 2011, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2011-12, "Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in ASU 2011-05". ASU 2011-12 indefinitely deferred the provisions of ASU 2011-05 (see below) that required entities to present reclassification adjustments out of accumulated other comprehensive income by component in both the statement in which net income is presented and the statement in which other comprehensive income is presented. This requirement will be further deliberated by the FASB at a future date. All other requirements in ASU 2011-05 are not affected by this update. The amendments in ASU 2011-12 are effective for interim and annual reporting periods beginning after December 15, 2011 and will be applied on a retrospective basis.
In December 2011, the FASB issued ASU 2011-11, "Disclosures about Offsetting Assets and Liabilities," which requires an entity to disclose the nature of its rights of setoff and related arrangements associated with its financial instruments and derivative instruments. The objective of ASU 2011-11 is to make financial statements that are prepared under U.S. GAAP more comparable to those prepared under International Financial Reporting Standards ("IFRS"). The new disclosures will give financial statement users information about both gross and net exposures. ASU 2011-11 is effective for interim and annual reporting periods beginning after January 1, 2013 and will be applied on a retrospective basis.
In September 2011, the FASB issued ASU 2011-09, "Disclosures about an Employer's Participation in a Multiemployer Plan," which amends ASC 715-80 by increasing the quantitative and qualitative disclosures an employer is required to provide about its participation in significant multiemployer plans that offer pension or other postretirement benefits. The objective of ASU 2011-09 is to enhance the transparency of disclosures about the significant multiemployer plans in which an employer participates,
F-11
FLUOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
the level of the employer's participation in those plans, the financial health of the plans, and the nature of the employer's commitments to the plans. ASU 2011-09 is effective for interim and annual reporting periods beginning after December 15, 2011 and will be applied on a retrospective basis.
In September 2011, the FASB issued ASU 2011-08, "Testing Goodwill for Impairment." ASU 2011-08 allows entities testing goodwill for impairment the option of performing a qualitative assessment before calculating the fair value of a reporting unit (i.e., the first step of the goodwill impairment test). If entities determine, on the basis of qualitative factors, that the fair value of the reporting unit is more likely than not greater than the carrying amount, a quantitative calculation would not be needed. ASU 2011-08 is effective for interim and annual goodwill impairment tests performed for fiscal years beginning after December 15, 2011. Management does not expect the adoption of ASU 2011-08 to have a material impact on the company's financial position, results of operations and cash flows.
In June 2011, the FASB issued ASU 2011-05, "Presentation of Comprehensive Income," which amends certain guidance in ASC 220, "Comprehensive Income." ASU 2011-05 revises the manner in which entities present comprehensive income in their financial statements. ASU 2011-05 removes the presentation options in ASC 220 and requires entities to report components of comprehensive income in either (1) a continuous statement of comprehensive income or (2) two separate but consecutive statements. ASU 2011-05 is effective for interim and annual reporting periods beginning after December 15, 2011 and will be applied on a retrospective basis.
In May 2011, the FASB issued ASU 2011-04, "Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS," which amends certain guidance in ASC 820, "Fair Value Measurement." ASU 2011-04 expands ASC 820's existing disclosure requirements for fair value measurements and makes other amendments. ASU 2011-04 is effective for interim and annual reporting periods beginning after December 15, 2011 and will be applied on a prospective basis.
In the first quarter of 2011, the company adopted FASB ASU 2009-13, "Multiple-Deliverable Revenue Arrangements," which amends certain guidance in ASC 605-25, "Revenue Recognition — Multiple Element Arrangements." ASU 2009-13 requires entities to allocate revenue in an arrangement using estimated selling prices of the delivered goods and services based on a selling price hierarchy. The amendments eliminate the residual method of revenue allocation and require revenue to be allocated using the relative selling price method. The adoption of ASU 2009-13 did not have an impact on the company's financial position, results of operations and cash flows.
F-12
FLUOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. Consolidated Statement of Cash Flows
The changes in operating assets and liabilities as shown in the Consolidated Statement of Cash Flows are comprised of:
|
|
Year Ended December 31, | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
|
(in thousands)
|
2011
|
2010
|
2009
|
|||||||
|
(Increase) decrease in: |
||||||||||
|
Accounts and notes receivable, net |
$ | (44,438 | ) | $ | (208,303 | ) | $ | 281,805 | ||
|
Contract work in progress |
(504,670 | ) | (54,576 | ) | (359,991 | ) | ||||
|
Other current assets |
199,412 | (104,526 | ) | (76,927 | ) | |||||
|
Other assets |
(18,118 | ) | 10,081 | 9,425 | ||||||
|
Increase (decrease) in: |
||||||||||
|
Trade accounts payable |
320,708 | 82,016 | 135,228 | |||||||
|
Advance billings on contracts |
47,897 | 91,660 | (94,680 | ) | ||||||
|
Accrued liabilities |
61,560 | 22,296 | (10,633 | ) | ||||||
|
Other liabilities |
(16,346 | ) | (11,655 | ) | (28,159 | ) | ||||
|
Increase (decrease) in cash due to changes in operating assets and liabilities |
$ | 46,005 | $ | (173,007 | ) | $ | (143,932 | ) | ||
|
|
|
|||||||||
|
Cash paid during the year for: |
||||||||||
|
Interest |
$ | 28,255 | $ | 9,761 | $ | 9,190 | ||||
|
Income taxes |
176,915 | 202,341 | 417,844 | |||||||
|
|
|
|||||||||
3. Income Taxes
The income tax expense (benefit) included in the Consolidated Statement of Earnings is as follows:
|
|
Year Ended December 31, | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
|
(in thousands)
|
2011
|
2010
|
2009
|
|||||||
|
Current: |
||||||||||
|
Federal |
$ | 117,868 | $ | 22,406 | $ | 289,302 | ||||
|
Foreign |
176,116 | 94,293 | 63,268 | |||||||
|
State and local |
27,143 | 27,260 | 21,190 | |||||||
|
Total current |
321,127 | 143,959 | 373,760 | |||||||
|
Deferred: |
||||||||||
|
Federal |
(13,039 | ) | (26,322 | ) | 10,293 | |||||
|
Foreign |
(883 | ) | 2,355 | 12,509 | ||||||
|
State and local |
(3,476 | ) | (1,478 | ) | 7,351 | |||||
|
Total deferred |
(17,398 | ) | (25,445 | ) | 30,153 | |||||
|
Total income tax expense |
$ | 303,729 | $ | 118,514 | $ | 403,913 | ||||
|
|
|
|||||||||
F-13
FLUOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
A reconciliation of U.S. statutory federal income tax expense to income tax expense is as follows:
|
|
Year Ended December 31, | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
|
(in thousands)
|
2011
|
2010
|
2009
|
|||||||
|
U.S. statutory federal tax expense |
$ |
350,635 |
$ |
195,859 |
$ |
397,876 |
||||
|
Increase (decrease) in taxes resulting from: |
||||||||||
|
State and local income taxes |
15,360 | 16,255 | 21,125 | |||||||
|
Other permanent items, net |
(7,932 | ) | (10,575 | ) | (4,618 | ) | ||||
|
Worthless stock |
— | (152,409 | ) | — | ||||||
|
Noncontrolling interests |
(35,682 | ) | (28,644 | ) | (15,504 | ) | ||||
|
Valuation allowance, net |
11,014 | 90,214 | 3,296 | |||||||
|
Statute expirations and tax authority settlements |
(13,795 | ) | (10,686 | ) | (5,568 | ) | ||||
|
Other changes to unrecognized tax positions |
(8,973 | ) | (1,075 | ) | 14,218 | |||||
|
Other, net |
(6,898 | ) | 19,575 | (6,912 | ) | |||||
|
Total income tax expense |
$ | 303,729 | $ | 118,514 | $ | 403,913 | ||||
|
|
|
|||||||||
F-14
FLUOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Deferred taxes reflect the tax effects of differences between the amounts recorded as assets and liabilities for financial reporting purposes and the amounts recorded for income tax purposes. The tax effects of significant temporary differences giving rise to deferred tax assets and liabilities are as follows:
|
|
December 31, | ||||||
|---|---|---|---|---|---|---|---|
|
(in thousands)
|
2011
|
2010
|
|||||
|
Deferred tax assets: |
|||||||
|
Accrued liabilities not currently deductible: |
|||||||
|
Employee compensation and benefits |
$ | 62,134 | $ | 64,909 | |||
|
Employee time-off accrual |
83,526 | 72,799 | |||||
|
Project and non-project reserves |
132,872 | 127,862 | |||||
|
Workers' compensation insurance accruals |
6,269 | 7,308 | |||||
|
Tax basis of investments in excess of book basis |
1,632 | — | |||||
|
Net operating loss carryforwards |
172,852 | 143,953 | |||||
|
Unrealized currency loss |
11,659 | 9,880 | |||||
|
Capital loss carryforwards |
3,896 | 3,896 | |||||
|
Other comprehensive loss |
113,957 | 105,159 | |||||
|
Other |
24,928 | 26,969 | |||||
|
Total deferred tax assets |
613,725 | 562,735 | |||||
|
Valuation allowance for deferred tax assets |
(144,582 | ) | (133,568 | ) | |||
|
Deferred tax assets, net |
$ | 469,143 | $ | 429,167 | |||
|
Deferred tax liabilities: |
|||||||
|
Book basis of property, equipment and other capital costs in excess of tax basis |
(57,558 | ) | (40,124 | ) | |||
|
Residual U.S. tax on unremitted non-U.S. earnings |
(23,003 | ) | (19,703 | ) | |||
|
Book basis of investments in excess of tax basis |
— | (9,482 | ) | ||||
|
Other |
(13,521 | ) | (10,768 | ) | |||
|
Total deferred tax liabilities |
(94,082 | ) | (80,077 | ) | |||
|
Deferred tax assets, net of deferred tax liabilities |
$ | 375,061 | $ | 349,090 | |||
The company had non-U.S. net operating loss carryforwards, related to various jurisdictions, of approximately $616 million as of December 31, 2011. Of the total losses, $563 million can be carried forward indefinitely and $53 million will begin to expire in various jurisdictions starting in 2013.
The company had non-U.S. capital loss carryforwards of approximately $11 million as of December 31, 2011, which can be carried forward indefinitely.
The company maintains a valuation allowance to reduce certain deferred tax assets to amounts that are more likely than not to be realized. The allowances for 2011 and 2010 primarily related to the deferred tax assets established for certain net operating and capital loss carryforwards and certain reserves on investments. The net increase in the valuation allowance during 2011 was primarily due to an increase in net operating losses.
The company conducts business globally and, as a result, the company or one or more of its subsidiaries files income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. In the normal course of business, the company is subject to examination by taxing authorities throughout the world, including such major jurisdictions as Australia, Canada, the Netherlands, South Africa, the United Kingdom and the United States. Although the company believes its reserves for its tax positions are reasonable, the final outcome of tax audits could be materially different, both favorably and
F-15
FLUOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
unfavorably. With a few exceptions, the company is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations for years before 2003.
The unrecognized tax benefits as of December 31, 2011 and 2010 were $215 million and $219 million, of which $78 million and $68 million, if recognized, would have favorably impacted the effective tax rates at the end of 2011 and 2010, respectively. The company does not anticipate any significant changes to the unrecognized tax benefits within the next twelve months.
A reconciliation of the beginning and ending amount of unrecognized tax benefits including interest and penalties is as follows:
|
(in thousands)
|
2011
|
2010
|
|||||
|---|---|---|---|---|---|---|---|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of year |
$ | 219,028 | $ | 226,847 | |||
|
Change in tax positions of prior years |
9,765 | 6,428 | |||||
|
Change in tax positions of current year |
— | — | |||||
|
Reduction in tax positions for statute expirations |
(874 | ) | (3,903 | ) | |||
|
Reduction in tax positions for audit settlements |
(12,921 | ) | (10,344 | ) | |||
|
Balance at end of year |
$ | 214,998 | $ | 219,028 | |||
|
|
|
||||||
The company recognizes accrued interest and penalties related to unrecognized tax benefits in income tax expense. The company has $14 million and $22 million in interest and penalties accrued as of December 31, 2011 and 2010.
U.S. and foreign earnings before taxes are as follows:
|
|
Year Ended December 31, | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
|
|
2011
|
2010
|
2009
|
|||||||
|
(in thousands)
|
|
|
|
|||||||
|
United States |
$ | 346,016 | $ | 454,066 | $ | 734,059 | ||||
|
Foreign |
655,800 | 105,530 | 402,729 | |||||||
|
Total |
$ | 1,001,816 | $ | 559,596 | $ | 1,136,788 | ||||
|
|
|
|||||||||
Earnings before taxes in the United States declined in 2011 compared to 2010 principally due to the reduction in project execution activities in the Power segment (see "— Power"), as well as reduced contributions from various projects in the Oil & Gas segment (see "— Oil & Gas"). Earnings before taxes in foreign jurisdictions increased significantly in 2011 compared to 2010 primarily due to increased contributions from the Industrial & Infrastructure segment including a reduced level of pre-tax charges for the Greater Gabbard Project (see "— Industrial & Infrastructure" and "13. Contingencies and Commitments") and improved performance in the mining and metals business line (see "— Industrial & Infrastructure"). Earnings before taxes in the United States in 2010 decreased compared to 2009 primarily due to pre-tax charges for the gas-fired power project in Georgia in the Power segment (see "— Power") and pre-tax charges for the completed infrastructure joint venture project in California in the Industrial & Infrastructure segment (see "— Industrial & Infrastructure" and "13. Contingencies and Commitments"). Earnings before taxes in foreign jurisdictions decreased in 2010 compared to 2009 primarily due to the pre-tax charges for the Greater Gabbard Project in the Industrial & Infrastructure segment (see "— Industrial & Infrastructure" and "13. Contingencies and Commitments").
4. Retirement Benefits
The company sponsors contributory and non-contributory defined contribution retirement and defined benefit pension plans for eligible employees worldwide. Contributions to defined contribution retirement plans are based on a percentage of the employee's compensation. Expense recognized for these
F-16
FLUOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
plans of approximately $109 million, $96 million and $99 million in the years ended December 31, 2011, 2010 and 2009, respectively, is primarily related to domestic engineering and construction operations. The defined benefit pension plans are primarily related to domestic and international engineering and construction salaried employees and U.S. craft employees. Contributions to defined benefit pension plans are at least the minimum annual amount required by applicable regulations. Payments to retired employees under these plans are generally based upon length of service, age and/or a percentage of qualifying compensation.
Net periodic pension expense for the U.S. and non-U.S. defined benefit pension plans includes the following components:
|
|
U.S. Pension Plan | Non-U.S. Pension Plans | |||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
|
Year Ended December 31, | Year Ended December 31, | |||||||||||||||||
|
(in thousands)
|
2011
|
2010
|
2009
|
2011
|
2010
|
2009
|
|||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost |
$ | 37,172 | $ | 36,668 | $ | 37,167 | $ | 8,219 | $ | 10,509 | $ | 9,337 | |||||||
|
Interest cost |
36,136 | 38,417 | 33,595 | 34,502 | 31,328 | 30,349 | |||||||||||||
|
Expected return on assets |
(40,430 | ) | (42,396 | ) | (38,113 | ) | (42,852 | ) | (36,611 | ) | (31,147 | ) | |||||||
|
Amortization of prior service cost/(credits) |
(168 | ) | — | 10 | — | — | — | ||||||||||||
|
Recognized net actuarial loss |
13,955 | 18,765 | 25,669 | 5,874 | 8,203 | 11,631 | |||||||||||||
|
(Gain on curtailment)/loss on settlement |
(618 | ) | — | — | 1,111 | — | — | ||||||||||||
|
Net periodic pension expense |
$ | 46,047 | $ | 51,454 | $ | 58,328 | $ | 6,854 | $ | 13,429 | $ | 20,170 | |||||||
|
|
|
||||||||||||||||||
The ranges of assumptions indicated below cover defined benefit pension plans in the United States, the Netherlands, the United Kingdom, Australia, the Philippines (2011 only) and Germany, and are based on the economic environment in each host country at the end of each respective annual reporting period. The discount rate assumption for the U.S. defined benefit plan was determined by discounting the expected future benefit payments using yields based on a portfolio of high quality corporate bonds having maturities that are consistent with the expected timing of future payments to plan participants. The discount rates for the non-U.S. defined benefit plans were determined primarily based on a hypothetical yield curve developed from the yields on high quality corporate bonds with durations consistent with the pension obligations in that country. The expected long-term rate of return on asset assumptions utilizing
F-17
FLUOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
historical returns, correlations and investment manager forecasts are established for each major asset category including public U.S. and international equities, U.S. private equities and fixed income securities.
|
|
U.S. Pension Plan | Non-U.S. Pension Plans | |||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
|
December 31, | December 31, | |||||||||||||||||
|
|
2011
|
2010
|
2009
|
2011
|
2010
|
2009
|
|||||||||||||
|
For determining projected benefit obligation at year-end: |
|||||||||||||||||||
|
Discount rates |
5.05% | 5.65% | 6.50% | 3.75-6.75% | 5.10-5.50% | 5.75% | |||||||||||||
|
Rates of increase in compensation levels |
N/A | 4.00% | 4.00% | 2.25-9.00% | 2.25-4.50% | 3.00-4.50% | |||||||||||||
|
For determining net periodic cost for the year: |
|||||||||||||||||||
|
Discount rates |
5.65% | 6.50% | 6.25% | 5.10-9.20% | 5.75% | 4.75-6.50% | |||||||||||||
|
Rates of increase in compensation levels |
4.00% | 4.00% | 4.00% | 2.25-9.00% | 2.25-4.50% | 3.00-4.50% | |||||||||||||
|
Expected long-term rates of return on assets |
6.69% | 7.50% | 8.00% | 5.00-8.00% | 5.00-7.00% | 5.00-7.00% | |||||||||||||
The company evaluates the funded status of each of its retirement plans using the above assumptions and determines the appropriate funding level considering applicable regulatory requirements, tax deductibility, reporting considerations and other factors. The funding status of the plans is sensitive to changes in long-term interest rates and returns on plan assets, and funding obligations could increase substantially if interest rates fall dramatically or returns on plan assets are below expectations. Assuming no changes in current assumptions, the company expects to fund approximately $30 million to $60 million for calendar year 2012, which is expected to be in excess of the minimum funding required. If the discount rates were reduced by 25 basis points, plan liabilities for the U.S. and non-U.S. plans would increase by approximately $18 million and $26 million, respectively.
During the first quarter of 2011, the company and its Board of Directors approved an amendment to the U.K. pension plan to freeze the accrual of future service-related benefits for certain eligible participants on April 1, 2011. Accordingly, the company remeasured the assets and liabilities of the U.K. pension plan and recognized a curtailment accounting event, resulting in a net reduction in the pension obligation of $18 million and an after-tax decrease in accumulated other comprehensive loss of $11 million.
During the third quarter of 2011, the company and its Board of Directors approved an amendment to the U.S. pension plan to freeze the accrual of future service-related benefits for certain eligible participants on December 31, 2011. Accordingly, as of September 30, 2011, the company remeasured the assets and liabilities of the U.S. pension plan and recognized a curtailment accounting event, resulting in a net reduction in the pension obligation of $29 million and an after-tax decrease in accumulated other comprehensive loss of $18 million.
F-18
FLUOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following table sets forth the target allocations and the weighted average actual allocations of plan assets:
|
|
|
U.S. Plan
Assets December 31, |
|
Non-U.S. Plan
Assets December 31, |
|||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
|
Target Allocation
|
2011
|
2010
|
Target Allocation
|
2011
|
2010
|
|||||||||||
|
Asset category: |
|||||||||||||||||
|
Equity securities |
20% - 25% |
19% |
24% |
20% - 45% |
33% |
40% |
|||||||||||
|
Debt securities |
70% - 80% | 69% | 75% | 55% - 65% | 62% | 54% | |||||||||||
|
Other |
0% - 5% | 12% | 1% | 5% - 15% | 5% | 6% | |||||||||||
|
Total |
100% | 100% | 100% | 100% | |||||||||||||
|
|
|
||||||||||||||||
The company's investment strategy is to maintain asset allocations that appropriately address risk within the context of seeking adequate returns. Investment allocations are determined by each plan's investment committee and/or trustees. In the case of certain foreign plans, asset allocations may be impacted by local requirements. Long-term allocation guidelines are set and expressed in terms of a target range allocation for each asset class to provide portfolio management flexibility. Short-term deviations from these allocations may exist from time to time for tactical investment or strategic implementation purposes. During 2011, the company continued to reallocate a larger percentage of its U.S. and non-U.S. plan assets into debt securities to reduce volatility and protect the funded status of the plans. As of December 31, 2011, the percentage of U.S. plan assets categorized as "Other" exceeded the target allocation due to the inclusion of temporarily held short-term investment funds that were in the process of being reallocated to debt securities.
Investments in equity securities are utilized to generate long-term capital appreciation to mitigate the effects of increases in benefit obligations resulting from growth in the number of plan participants, inflation, longer life expectancy and salary growth. Investments in debt securities are used to provide stable investment returns while protecting the funding status of the plans. While most of the company's plans are not prohibited from investing in the company's common stock or debt securities, there are no such direct investments at the present time.
Plan assets include investments in common or collective trusts, which offer efficient access to diversified investments across various asset categories. The estimated fair value of the investments in the common or collective trusts represents the underlying net asset value of the shares or units of such funds as determined by the issuer. At the present time, there are no restrictions on how the plans may redeem their investments.
Equity securities are diversified across various industries and are comprised of common and preferred stocks of U.S. and international companies, common or collective trusts with underlying investments in common and preferred stocks and limited partnerships. Publicly traded corporate equity securities are valued based on the last trade or official close of an active market or exchange on the last business day of the plan's year. Securities not traded on the last business day are valued at the last reported bid price. As of December 31, 2011, the aggregate concentration in equity securities for the various plans was approximately 45 percent in U.S. securities and 55 percent in international securities. Limited partnerships are valued at the plan's proportionate share of the estimated fair value of the underlying net assets as determined by the general partners. The limited partnerships are classified as Level 3 investments.
Debt securities are comprised of corporate bonds, government securities and common or collective trusts, with underlying investments in corporate bonds, government and asset backed securities and interest rate swaps. Corporate bonds primarily consist of investment-grade rated bonds and notes, of which
F-19
FLUOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
no significant concentration exists in any one rating category or industry. Government securities include inflation-indexed U.S. treasury notes and international and U.S. government bonds. Corporate bonds and government securities are valued based on evaluated prices, which are determined from a compilation of primarily observable market information, broker quotes in non-active markets or similar assets. Securities not traded on the last business day are valued at the last reported bid price. As of December 31, 2011, the investments in corporate bonds and government securities held by the U.S. plan were primarily concentrated in U.S. issuers.
Other is primarily comprised of common collective trusts, foreign exchange forward contracts and insurance contracts. Common collective trusts hold underlying investments in commodities, foreign exchange foreign contracts and real estate. Common collective trusts with underlying investments in real estate are classified as Level 3 investments. Insurance contracts are valued based on actuarial assumptions and are also classified as Level 3 investments.
Liabilities primarily consist of foreign currency exchange contracts and obligations to return collateral under securities lending arrangements. The estimated fair value of foreign exchange forward contracts is determined from broker quotes. The estimated fair value of obligations to return collateral under securities lending arrangements are determined based on the last traded price of the underlying securities held as collateral.
The company measures and reports assets and liabilities at fair value utilizing pricing information received from third-party pricing services. The company performs procedures to verify the reasonableness of pricing information received for significant assets and liabilities classified as Level 2.
F-20
FLUOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following table presents, for each of the fair value hierarchy levels required under ASC 820-10, the plan assets and liabilities of the company's U.S. and non-U.S. defined benefit pension plans that are measured at fair value on a recurring basis as of December 31, 2011 and 2010:
U.S. Pension Plan
|
|
December 31, 2011 | December 31, 2010 | |||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
|
Fair Value Measurements Using | Fair Value Measurements Using | |||||||||||||||||||||||
|
(in thousands)
|
Total
|
Quoted Prices
in Active Markets for Identical Assets (Level 1) |
Significant
Other Observable Inputs (Level 2) |
Significant
Unobservable Inputs (Level 3) |
Total
|
Quoted Prices
in Active Markets for Identical Assets (Level 1) |
Significant
Other Observable Inputs (Level 2) |
Significant
Unobservable Inputs (Level 3) |
|||||||||||||||||
|
Assets: |
|||||||||||||||||||||||||
|
Equity securities: |
|||||||||||||||||||||||||
|
Common and preferred stock |
$ | 95,714 | $ | 95,714 | $ | — | $ | — | $ | 117,061 | $ | 117,061 | $ | — | $ | — | |||||||||
|
Common or collective trusts |
12,821 | — | 12,821 | — | — | — | — | — | |||||||||||||||||
|
Limited Partnerships |
19,314 | — | — | 19,314 | 19,596 | — | — | 19,596 | |||||||||||||||||
|
Debt securities: |
|||||||||||||||||||||||||
|
Common or collective trusts |
— | — | — | — | 63,125 | — | 63,125 | — | |||||||||||||||||
|
Corporate bonds |
393,338 | — | 393,338 | — | 298,788 | — | 298,788 | — | |||||||||||||||||
|
Government securities |
73,079 | — | 73,079 | — | 71,178 | — | 71,178 | — | |||||||||||||||||
|
Other: |
|||||||||||||||||||||||||
|
Common or collective trusts — money market funds |
79,624 | — | 79,624 | — | 5,818 | — | 5,818 | — | |||||||||||||||||
|
Other assets |
6,322 | — | 6,322 | — | 23,943 | — | 23,943 | — | |||||||||||||||||
|
Liabilities: |
|||||||||||||||||||||||||
|
Foreign currency exchange contracts and other |
(6,338 | ) | — | (6,338 | ) | — | (23,775 | ) | — | (23,775 | ) | — | |||||||||||||
|
Plan assets measured at fair value, net |
$ | 673,874 | $ | 95,714 | $ | 558,846 | $ | 19,314 | $ | 575,734 | $ | 117,061 | $ | 439,077 | $ | 19,596 | |||||||||
|
Plan assets not measured at fair value, net |
16,680 |
42,311 |
|||||||||||||||||||||||
|
Total plan assets, net |
$ |
690,554 |
$ |
618,045 |
|||||||||||||||||||||
F-21
FLUOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Non-U.S. Pension Plans
|
|
December 31, 2011 | December 31, 2010 | |||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
|
Fair Value Measurements Using | Fair Value Measurements Using | |||||||||||||||||||||||
|
(in thousands)
|
Total
|
Quoted Prices
in Active Markets for Identical Assets (Level 1) |
Significant
Other Observable Inputs (Level 2) |
Significant
Unobservable Inputs (Level 3) |
Total
|
Quoted Prices
in Active Markets for Identical Assets (Level 1) |
Significant
Other Observable Inputs (Level 2) |
Significant
Unobservable Inputs (Level 3) |
|||||||||||||||||
|
Assets: |
|||||||||||||||||||||||||
|
Equity securities: |
|||||||||||||||||||||||||
|
Common and preferred stock |
$ | 83,151 | $ | 83,151 | $ | — | $ | — | $ | 80,415 | $ | 80,415 | $ | — | $ | — | |||||||||
|
Common or collective trusts |
164,201 | — | 164,201 | — | 191,396 | — | 191,396 | — | |||||||||||||||||
|
Debt securities: |
|||||||||||||||||||||||||
|
Common or collective trusts |
468,140 | — | 468,140 | — | 364,020 | — | 364,020 | — | |||||||||||||||||
|
Corporate bonds |
542 | — | 542 | — | — | — | — | — | |||||||||||||||||
|
Government securities |
4,263 | — | 4,263 | — | — | — | — | — | |||||||||||||||||
|
Other: |
|||||||||||||||||||||||||
|
Common or collective trusts |
32,663 | — | 24,572 | 8,091 | 38,803 | — | 30,740 | 8,063 | |||||||||||||||||
|
Other assets |
4,661 | — | 870 | 3,791 | 4,629 | — | 1,006 | 3,623 | |||||||||||||||||
|
Plan assets measured at fair value, net |
$ | 757,621 | $ | 83,151 | $ | 662,588 | $ | 11,882 | $ | 679,263 | $ | 80,415 | $ | 587,162 | $ | 11,686 | |||||||||
|
Plan assets not measured at fair value, net |
10,340 |
1,330 |
|||||||||||||||||||||||
|
Total plan assets, net |
$ |
767,961 |
$ |
680,593 |
|||||||||||||||||||||
The following table presents a reconciliation of the beginning and ending balances of the fair value measurements using significant unobservable inputs (Level 3):
|
|
U.S. Pension Plan |
Non-U.S.
Pension Plan |
|||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
(in thousands)
|
2011
|
2010
|
2011
|
2010
|
|||||||||
|
Balance at beginning of year |
$ | 19,596 | $ | 20,702 | $ | 11,686 | $ | 12,108 | |||||
|
Actual return on plan assets: |
|||||||||||||
|
Assets still held at reporting date |
909 | 1,977 | 32 | (390 | ) | ||||||||
|
Assets sold during the period |
477 | (1,501 | ) | — | — | ||||||||
|
Purchases |
— | 37 | 761 | 202 | |||||||||
|
Sales |
(1,668 | ) | (1,619 | ) | — | — | |||||||
|
Settlements |
— | — | (597 | ) | (234 | ) | |||||||
|
Balance at end of year |
$ | 19,314 | $ | 19,596 | $ | 11,882 | $ | 11,686 | |||||
F-22
FLUOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following table presents expected benefit payments for the U.S. and non-U.S. defined benefit pension plans:
|
Year Ended December 31,
|
U.S. Pension
Plan |
Non-U.S.
Pension Plans |
|||||
|---|---|---|---|---|---|---|---|
|
|
(in thousands)
|
(in thousands)
|
|||||
|
2012 |
$ | 35,487 | $ | 24,186 | |||
|
2013 |
37,938 | 23,394 | |||||
|
2014 |
40,184 | 25,248 | |||||
|
2015 |
40,058 | 26,214 | |||||
|
2016 |
41,491 | 28,320 | |||||
|
2017 — 2021 |
235,280 | 163,843 | |||||
Measurement dates for the company's U.S. and non-U.S. defined benefit pension plans are December 31. The following table sets forth the change in projected benefit obligation, plan assets and funded status of the U.S. and non-U.S. plans:
|
|
U.S. Pension Plan | Non-U.S. Pension Plans | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
|
December 31, | December 31, | |||||||||||
|
(in thousands)
|
2011
|
2010
|
2011
|
2010
|
|||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in projected benefit obligation |
|||||||||||||
|
Benefit obligation at beginning of year |
$ | 666,973 | $ | 608,213 | $ | 626,618 | $ | 590,598 | |||||
|
Service cost |
37,172 | 36,668 | 8,219 | 10,509 | |||||||||
|
Interest cost |
36,136 | 38,417 | 34,502 | 31,328 | |||||||||
|
Employee contributions |
— | — | 4,145 | 5,797 | |||||||||
|
Currency translation |
— | — | (12,521 | ) | (25,971 | ) | |||||||
|
Actuarial (gain) loss |
38,082 | 17,951 | (4,773 | ) | 35,322 | ||||||||
|
Plan amendments |
— | (1,322 | ) | — | — | ||||||||
|
Benefits paid |
(38,459 | ) | (32,954 | ) | (26,226 | ) | (21,349 | ) | |||||
|
Curtailments |
(62,899 | ) | — | (15,870 | ) | — | |||||||
|
Other |
— | — | 6,023 | 384 | |||||||||
|
Projected benefit obligation at end of year |
677,005 | 666,973 | 620,117 | 626,618 | |||||||||
|
Change in plan assets |
|||||||||||||
|
Plan assets at beginning of year |
618,045 | 582,470 | 680,593 | 609,729 | |||||||||
|
Actual return on plan assets |
39,918 | 58,529 | 70,972 | 80,773 | |||||||||
|
Company contributions |
71,050 | 10,000 | 50,998 | 32,619 | |||||||||
|
Employee contributions |
— | — | 4,145 | 5,797 | |||||||||
|
Currency translation |
— | — | (18,929 | ) | (26,976 | ) | |||||||
|
Benefits paid |
(38,459 | ) | (32,954 | ) | (26,226 | ) | (21,349 | ) | |||||
|
Other |
— | — | 6,408 | — | |||||||||
|
Plan assets at end of year |
690,554 | 618,045 | 767,961 | 680,593 | |||||||||
|
Funded status |
$ | 13,549 | $ | (48,928 | ) | $ | 147,844 | $ | 53,975 | ||||
|
Amounts recognized in the Consolidated Balance Sheet |
|||||||||||||
|
Pension assets included in other assets |
$ | 13,549 | $ | — | $ | 151,967 | $ | 54,845 | |||||
|
Pension liabilities included in noncurrent liabilities |
— | (48,928 | ) | (4,123 | ) | (870 | ) | ||||||
|
Accumulated other comprehensive loss |
144,243 | 181,716 | 109,290 | 164,762 | |||||||||
|
|
|
||||||||||||
F-23
FLUOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
During 2012, approximately $14 million for the U.S. plan and $3 million for the non-U.S. plans of the amount of accumulated other comprehensive loss shown above is expected to be recognized as components of net periodic pension expense.
For the defined benefit pension plans in Australia, the Philippines and Germany, the projected benefit obligations exceeded the plan assets. In the aggregate, these plans had projected benefit obligations of $26 million and plan assets with a fair value of $22 million.
The total accumulated benefit obligation for the U.S. and non-U.S. plans as of December 31, 2011 was $677 million and $590 million, respectively. The total accumulated benefit obligation for the U.S. and non-U.S. plans as of December 31, 2010 was $605 million and $546 million, respectively. As of December 31, 2011 and 2010, plan assets for each of the company's benefit plans exceeded the accumulated benefit obligation, except for Germany in which the accumulated benefit obligation exceeded plan assets by less than $1 million as of December 31, 2011.
In addition to the company's U.S. defined benefit pension plans, the company and certain of its subsidiaries provide health care and life insurance benefits for certain retired U.S. employees. The health care and life insurance plans are generally contributory, with retiree contributions adjusted annually. The accumulated postretirement benefit obligation as of December 31, 2011 and 2010 was determined in accordance with the current terms of the company's health care plans, together with relevant actuarial assumptions and health care cost trend rates projected at annual rates ranging from 8.5 percent in 2012 down to five percent in 2019 and beyond. The effect of a one percent annual increase in these assumed cost trend rates would increase the accumulated postretirement benefit obligation and interest cost by approximately $0.6 million and less than $0.1 million, respectively. The effect of a one percent annual decrease in these assumed cost trend rates would decrease the accumulated postretirement benefit obligation and interest cost by approximately $0.5 million and less than $0.1 million, respectively.
Net periodic postretirement benefit cost includes the following components:
|
|
Year Ended December 31, | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
|
(in thousands)
|
2011
|
2010
|
2009
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost |
$ | — | $ | — | $ | — | ||||
|
Interest cost |
723 | 951 | 1,394 | |||||||
|
Expected return on assets |
— | — | — | |||||||
|
Amortization of prior service cost |
— | — | — | |||||||
|
Recognized net actuarial loss |
679 | 827 | 787 | |||||||
|
Net periodic postretirement benefit cost |
$ | 1,402 | $ | 1,778 | $ | 2,181 | ||||
|
|
|
|||||||||
F-24
FLUOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following table sets forth the change in the accumulated postretirement benefit obligation:
|
|
Year Ended December 31, | ||||||
|---|---|---|---|---|---|---|---|
|
(in thousands)
|
2011
|
2010
|
|||||
|
|
|
|
|
|
|
|
|
|
Change in accumulated postretirement benefit obligation |
|||||||
|
Benefit obligation at beginning of year |
$ | 18,311 | $ | 19,743 | |||
|
Service cost |
— | — | |||||
|
Interest cost |
723 | 951 | |||||
|
Employee contributions |
269 | 290 | |||||
|
Actuarial (gain) loss |
308 | 191 | |||||
|
Benefits paid |
(2,783 | ) | (2,864 | ) | |||
|
Benefit obligation at end of year |
$ | 16,828 | $ | 18,311 | |||
|
|
|
||||||
|
Funded status |
$ | (16,828 | ) | $ | (18,311 | ) | |
|
|
|
||||||
Unrecognized net actuarial losses totaling $5 million and $6 million as of December 31, 2011 and 2010, respectively, were classified in accumulated other comprehensive loss. The accumulated postretirement benefit obligation classified in current liabilities is approximately $3 million as of both December 31, 2011 and 2010. The remaining balance of the accumulated postretirement benefit obligation is classified in noncurrent liabilities for both years.
The discount rate used in determining the accumulated postretirement benefit obligation was 3.85 percent as of December 31, 2011 and 4.30 percent as of December 31, 2010. The discount rate used for accumulated postretirement obligation is determined based on the same considerations discussed above that impact defined benefit plans in the United States. Benefit payments, as offset by retiree contributions, are not expected to change significantly in the future.
The preceding information does not include amounts related to benefit plans applicable to employees associated with certain contracts with the U.S. Department of Energy because the company is not responsible for the current or future funded status of these plans.
F-25
FLUOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
5. Fair Value of Financial Instruments
The following table presents, for each of the fair value hierarchy levels required under SFAS No. 157, "Fair Value Measurements" (ASC 820-10), the company's assets and liabilities that are measured at fair value on a recurring basis as of December 31, 2011 and 2010:
|
|
December 31, 2011 | December 31, 2010 | |||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
|
Fair Value Measurements Using | Fair Value Measurements Using | |||||||||||||||||||||||
|
(in thousands)
|
Total
|
Quoted Prices
in Active Markets for Identical Assets (Level 1) |
Significant
Other Observable Inputs (Level 2) |
Significant
Unobservable Inputs (Level 3) |
Total
|
Quoted Prices
in Active Markets for Identical Assets (Level 1) |
Significant
Other Observable Inputs (Level 2) |
Significant
Unobservable Inputs (Level 3) |
|||||||||||||||||
|
Assets (6) : |
|||||||||||||||||||||||||
|
Cash and cash equivalents |
$ | 24,364 | $ | 24,364 | (1) | $ | — | $ | — | $ | 43,794 | $ | 20,498 | (1) | $ | 23,296 | (2) | $ | — | ||||||
|
Marketable securities, current |
72,845 | — | 72,845 | (2) | — | 141,192 | — | 141,192 | (2) | — | |||||||||||||||
|
Deferred compensation trusts |
76,844 | 76,844 | (3) | — | — | 73,916 | 73,916 | (3) | — | — | |||||||||||||||
|
Marketable securities, noncurrent |
503,550 | — | 503,550 | (4) | — | 279,080 | — | 279,080 | (4) | — | |||||||||||||||
|
Derivative assets (5) |
|||||||||||||||||||||||||
|
Commodity swap forward contracts |
2,535 | — | 2,535 | — | 5,138 | — | 5,138 | — | |||||||||||||||||
|
Foreign currency contracts |
3,105 | — | 3,105 | — | 731 | — | 731 | — | |||||||||||||||||
|
Liabilities (6) : |
|||||||||||||||||||||||||
|
Derivative liabilities (5) |
|||||||||||||||||||||||||
|
Commodity swap forward contracts |
$ | 53 | $ | — | $ | 53 | $ | — | $ | 64 | $ | — | $ | 64 | $ | — | |||||||||
|
Foreign currency contracts |
4,612 | — | 4,612 | — | 2,527 | — | 2,527 | — | |||||||||||||||||
All of the company's financial instruments carried at fair value are included in the table above. All of the above financial instruments are available-for-sale securities except for those held in the deferred compensation trusts, which are trading securities, and derivative assets and liabilities. The company has determined that there was no other-than-temporary impairment of available-for-sale securities with unrealized losses, and the company expects to recover the entire cost basis of the securities. The available-for-sale securities are made up of the following security types as of December 31, 2011: money market funds of $24 million, U.S. agency securities of $237 million, U.S. Treasury securities of $99 million,
F-26
FLUOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
corporate debt securities of $235 million, and other securities of $5 million. As of December 31, 2010, available-for-sale securities consisted of money market funds of $20 million, U.S. agency securities of $155 million, U.S. Treasury securities of $59 million, corporate debt securities of $196 million, commercial paper of $26 million and other securities of $8 million. The amortized cost of these available-for-sale securities is not materially different than the fair value. During 2011, 2010 and 2009, proceeds from sales and maturities of available-for-sale securities were $497 million, $522 million and $196 million, respectively.
The estimated fair values of the company's financial instruments that are not measured at fair value on a recurring basis are as follows:
|
|
December 31, 2011 | December 31, 2010 | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
(in thousands)
|
Carrying Value
|
Fair Value
|
Carrying Value
|
Fair Value
|
|||||||||
|
Assets: |
|||||||||||||
|
Cash and cash equivalents (1) |
$ | 2,137,047 | $ | 2,137,047 | $ | 2,091,203 | $ | 2,091,203 | |||||
|
Marketable securities, current (2) |
23,593 | 23,593 | 52,087 | 52,087 | |||||||||
|
Notes receivable, including noncurrent portion |
41,957 | 41,957 | 44,789 | 44,789 | |||||||||
|
Liabilities: |
|||||||||||||
|
3.375% Senior Notes |
495,723 | 500,254 | — | — | |||||||||
|
1.5% Convertible Senior Notes |
19,458 | 35,647 | 96,692 | 230,214 | |||||||||
|
5.625% Municipal Bonds |
17,777 | 17,901 | 17,759 | 18,039 | |||||||||
Fair values were determined as follows:
In the first quarter of 2010, the company adopted FASB ASU 2010-06 "Improving Disclosure about Fair Value Measurements" (ASC 820). ASU 2010-06 requires, on a prospective basis, additional disclosures regarding significant transfers in and out of Level 1 and Level 2 fair value measurements, of which the company had none for the years ended December 31, 2011 and 2010. ASU 2010-06 also clarifies existing disclosure requirements related to the level of disaggregation of fair value measurements for each class of assets and liabilities and disclosures about inputs and valuation techniques used to measure fair value. The adoption of ASU 2010-06 did not have a material impact on the company's disclosures in its Consolidated Financial Statements.
6. Derivatives and Hedging
As of December 31, 2011, the company had total gross notional amounts of $736 million of foreign exchange forward contracts and $12 million of commodity swap forward contracts outstanding relating to
F-27
FLUOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
engineering and construction contract obligations and intercompany transactions. The foreign exchange forward contracts are of varying duration, none of which extend beyond December 2012. The commodity swap forward contracts are of varying duration, none of which extend beyond August 2014. The impact to earnings due to hedge ineffectiveness was immaterial for the years ended December 31, 2011, 2010 and 2009.
The fair values of derivatives designated as hedging instruments under ASC 815 as of December 31, 2011 and 2010 were as follows:
|
|
Asset Derivatives | Liability Derivatives | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
(in thousands)
|
Balance Sheet
Location |
December 31,
2011 |
December 31,
2010 |
Balance Sheet
Location |
December 31,
2011 |
December 31,
2010 |
|||||||||||
|
Commodity swaps |
Other current assets | $ | 2,451 | $ | 3,675 | Other accrued liabilities | $ | — | $ | 32 | |||||||
|
Foreign currency forwards |
Other current assets | 3,105 | 731 | Other accrued liabilities | 4,612 | 2,527 | |||||||||||
|
Commodity swaps |
Other assets | 84 | 1,463 | Noncurrent liabilities | 53 | 32 | |||||||||||
|
Total derivatives |
$ | 5,640 | $ | 5,869 | $ | 4,665 | $ | 2,591 | |||||||||
The pre-tax amount of gain (loss) recognized in earnings associated with the derivative instruments designated as fair value hedges for the years ended December 31, 2011, 2010 and 2009 was as follows:
|
Fair Value Hedges (in thousands)
|
Location of Gain (Loss)
|
2011
|
2010
|
2009
|
||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Foreign currency forwards |
Total cost of revenue | $ | — | $ | 3,465 | $ | (6,075 | ) | ||||
|
Foreign currency forwards |
Corporate general and administrative expense | 15,064 | 6,864 | 16,483 | ||||||||
|
Total |
$ | 15,064 | $ | 10,329 | $ | 10,408 | ||||||
The pre-tax amount of gain (loss) recognized in earnings on derivatives for the fair value hedges noted in the table above offsets the amount of gain (loss) recognized in earnings on the hedged items in the same locations on the Consolidated Statement of Earnings.
The after-tax amount of gain (loss) recognized in OCI and reclassified from accumulated OCI into earnings associated with the derivative instruments designated as cash flow hedges for the years ended December 31, 2011, 2010 and 2009 was as follows:
|
|
|
|
|
|
After-Tax Amount of Gain
(Loss) Reclassified from Accumulated OCI into Earnings |
||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
|
After-Tax Amount of Gain
(Loss) Recognized in OCI |
|
|||||||||||||||||||
|
Cash Flow Hedges (in thousands)
|
Location of Gain (Loss)
|
||||||||||||||||||||
|
2011
|
2010
|
2009
|
2011
|
2010
|
2009
|
||||||||||||||||
|
Commodity swaps |
$ | 1,755 | $ | 916 | $ | 1,954 | Total cost of revenue | $ | 4,052 | $ | (2,066 | ) | $ | (3,244 | ) | ||||||
|
Foreign currency forwards |
(1,544 | ) | (389 | ) | (2,399 | ) | Total cost of revenue | (1,156 | ) | 177 | (298 | ) | |||||||||
|
Treasury rate lock agreements |
(10,486 | ) | — | — | Interest Expense | (306 | ) | — | — | ||||||||||||
|
Total |
$ | (10,275 | ) | $ | 527 | $ | (445 | ) | $ | 2,590 | $ | (1,889 | ) | $ | (3,542 | ) | |||||
During 2011 and 2010, the company recognized gains of $1.1 million and $3.6 million, respectively, in corporate general and administrative expense related to settled foreign currency forward contracts which were not designated as hedges for accounting purposes. These foreign currency forward contracts mitigated short-term economic exposures.
7. Financing Arrangements
On December 14, 2010, the company entered into a $1.2 billion Revolving Performance Letter of Credit Facility Agreement ("Letter of Credit Facility") that matures in 2015 and an $800 million Revolving Loan and Financial Letter of Credit Facility Agreement ("Revolving Credit Facility") that matures in 2013. Borrowings on the $800 million Revolving Credit Facility are to bear interest at rates based on the London
F-28
FLUOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Interbank Offered Rate ("LIBOR") or an alternative base rate, plus an applicable borrowing margin. The Letter of Credit Facility may be increased up to an additional $500 million subject to certain conditions.
As of December 31, 2011, the company had a combination of committed and uncommitted lines of credit that totaled $3.8 billion. These lines may be used for revolving loans, letters of credit or general purposes. The committed lines consist of the two facilities discussed above, as well as a $500 million letter of credit facility that matures in 2014. Letters of credit are provided in the ordinary course of business primarily to indemnify our clients if we fail to perform our obligations under our contracts. As of December 31, 2011, $1.2 billion in letters of credit were outstanding under these lines of credit. Surety bonds are also posted as an alternative form of credit enhancement.
Consolidated debt consisted of the following:
|
|
December 31, | ||||||
|---|---|---|---|---|---|---|---|
|
(in thousands)
|
2011
|
2010
|
|||||
|
Current: |
|||||||
|
1.5% Convertible Senior Notes |
$ | 19,458 | $ | 96,692 | |||
|
Long-Term: |
|||||||
|
3.375% Senior Notes |
495,723 | — | |||||
|
5.625% Municipal Bonds |
17,777 | 17,759 | |||||
In September 2011, the company issued $500 million of 3.375 percent Senior Notes (the "2011 Notes") due September 15, 2021 and received proceeds of $492 million, net of underwriting discounts and debt issuance costs. Interest on the 2011 Notes is payable semi-annually on March 15 and September 15 of each year, beginning on March 15, 2012. The net proceeds of the 2011 Notes will be used for general corporate purposes. The company may, at any time, redeem the 2011 Notes at a redemption price equal to 100 percent of the principal amount, plus a "make whole" premium described in the indenture. Additionally, if a change of control triggering event occurs, as defined by the terms of the indenture, the company will be required to offer to purchase the 2011 Notes at a purchase price equal to 101 percent of their principal amount, plus accrued and unpaid interest, if any, to the date of purchase. The company is generally not limited under the indenture governing the 2011 Notes in its ability to incur additional indebtedness provided the company is in compliance with certain restrictive covenants, including restrictions on liens and restrictions on sale and leaseback transactions.
In February 2004, the company issued $330 million of 1.5 percent Convertible Senior Notes (the "2004 Notes") due February 15, 2024 and received proceeds of $323 million, net of underwriting discounts. In December 2004, the company irrevocably elected to pay the principal amount of the 2004 Notes in cash. Interest on the 2004 Notes is payable semi-annually on February 15 and August 15 of each year. The 2004 Notes are convertible into shares of the company's common stock par value $0.01 per share, at a conversion rate of 36.2815 shares per each $1,000 principal amount of the 2004 Notes, subject to adjustment as described in the indenture. The 2004 Notes are convertible during any fiscal quarter if the closing price of the company's common stock for at least 20 trading days in the 30 consecutive trading day-period ending on the last trading day of the previous fiscal quarter is greater than or equal to 130 percent of the conversion price in effect on that 30 th trading day (the "trigger price"). The trigger price is currently $35.83, but is subject to adjustment as outlined in the indenture. The trigger price condition was satisfied during the fourth quarter of 2011 and 2010 and the 2004 Notes were therefore classified as current as of December 31, 2011 and 2010.
Holders of the 2004 Notes were entitled to require the company to purchase all or a portion of their 2004 Notes on February 17, 2009 at 100 percent of the principal amount plus accrued and unpaid interest; a de minimis amount of 2004 Notes were tendered for purchase. Holders of the 2004 Notes will again be
F-29
FLUOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
entitled to have the company purchase their 2004 Notes at the same price on February 15, 2014 and February 15, 2019. The 2004 Notes are currently redeemable at the option of the company, in whole or in part, at 100 percent of the principal amount plus accrued and unpaid interest. In the event of a change of control of the company, each holder may require the company to repurchase the 2004 Notes for cash, in whole or in part, at 100 percent of the principal amount plus accrued and unpaid interest.
Pursuant to the requirements of Emerging Issues Task Force ("EITF") Issue No. 04-8, "The Effect of Contingently Convertible Debt on Diluted Earnings per Share" (ASC 260-10), the company includes in the diluted EPS computations, based on the treasury stock method, shares that may be issuable upon conversion of the 2004 Notes. On December 30, 2004, the company irrevocably elected to pay the principal amount of the 2004 Notes in cash, and therefore there is no dilutive impact on EPS unless the average stock price exceeds the conversion price of $27.56. Upon conversion, shares of the company's common stock are issued to satisfy any appreciation between the conversion price and the market price on the date of conversion. During 2011, holders converted $77 million of the 2004 Notes in exchange for the principal balance owed in cash plus 1,678,095 shares of the company's common stock. During 2010, holders converted $13 million of the 2004 Notes in exchange for the principal balance owed in cash plus 184,563 shares of the company's common stock.
The company applies the provisions of FASB Staff Position ("FSP") APB 14-1, "Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement)" (ASC 470-20). ASC 470-20 requires the issuer of a convertible debt instrument to separately account for the liability and equity components in a manner that reflects the entity's nonconvertible debt borrowing rate when interest expense is recognized in subsequent periods.
The following table presents information related to the liability and equity components of the 2004 Notes:
|
|
December 31, | ||||||
|---|---|---|---|---|---|---|---|
|
(in thousands)
|
2011
|
2010
|
|||||
|
Carrying value of the equity component |
$ | 19,514 | $ | 21,181 | |||
|
Principal amount and carrying value of the liability component |
19,458 | 96,692 | |||||
Interest expense for the years ended December 31, 2011, 2010 and 2009 includes original coupon interest of $0.5 million, $1.5 million and $1.9 million, respectively. The effective interest rate on the liability component was 4.375 percent through February 15, 2009 at which time the discount on the liability was fully amortized. The if-converted value is $35 million and is in excess of the principal value as of December 31, 2011.
The Municipal Bonds are due June 1, 2019 with interest payable semi-annually on June 1 and December 1 of each year, commencing December 1, 1999. The bonds are redeemable, in whole or in part, at the option of the company at a redemption price ranging from 100 percent to 102 percent of the principal amount of the bonds on or after June 1, 2009. In addition, the bonds are subject to other redemption clauses, at the option of the holder, should certain events occur, as defined in the offering prospectus.
As of December 31, 2011, the company was in compliance with all of the financial covenants related to its debt agreements.
8. Other Noncurrent Liabilities
The company maintains appropriate levels of insurance for business risks, including workers compensation and general liability. Insurance coverages contain various retention amounts for which the company provides accruals based on the aggregate of the liability for reported claims and an actuarially
F-30
FLUOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
determined estimated liability for claims incurred but not reported. Other noncurrent liabilities include $8 million and $10 million as of December 31, 2011 and 2010, respectively, relating to these liabilities. For certain professional liability risks the company's retention amount under its claims-made insurance policies does not include an accrual for claims incurred but not reported because there is insufficient claims history or other reliable basis to support an estimated liability. The company believes that retained professional liability amounts are manageable risks and are not expected to have a material adverse impact on results of operations or financial position.
The company has deferred compensation and retirement arrangements for certain key executives which generally provide for payments upon retirement, death or termination of employment. The deferrals can earn either market-based fixed or variable rates of return, at the option of the participants. As of December 31, 2011 and 2010, $326 million and $347 million, respectively, of obligations related to these plans were included in noncurrent liabilities. To fund these obligations, the company has established non-qualified trusts, which are classified as noncurrent assets. These trusts held primarily company- owned life insurance policies and marketable equity securities valued at $303 million and $313 million as of December 31, 2011 and 2010, respectively. Periodic changes in fair value of these trust investments, most of which are unrealized, are recognized in earnings, and serve to mitigate changes to obligations included in noncurrent liabilities which are also reflected in earnings.
9. Stock-Based Plans
The company's executive stock-based plans provide for grants of nonqualified or incentive stock options, restricted stock awards or units and stock appreciation rights ("SARS"). All executive stock-based plans are administered by the Organization and Compensation Committee of the Board of Directors ("Committee") comprised of outside directors, none of whom are eligible to participate in the plans. Option grant amounts and award dates are established by the Committee. Option grant prices are the fair value of the company's common stock at such date of grant. Options normally extend for 10 years and become exercisable over a vesting period determined by the Committee. Recorded compensation cost for share-based payment arrangements, which is generally recognized on a straight-line basis, totaled $23 million, $30 million and $21 million for the years ended December 31, 2011, 2010 and 2009, respectively, net of recognized tax benefits of $14 million, $18 million and $13 million for the years ended 2011, 2010 and 2009, respectively.
F-31
FLUOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following table summarizes restricted stock, restricted stock unit and stock option activity:
|
|
Restricted Stock or Restricted Stock Units | Stock Options | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
|
Number
|
Weighted
Average Grant Date Fair Value Per Share |
Number
|
Weighted
Average Exercise Price Per Share |
|||||||||
|
Outstanding as of December 31, 2008 |
1,523,306 | $ | 41.81 | 1,625,242 | $ | 50.34 | |||||||
|
Granted |
622,509 |
30.87 |
884,808 |
30.65 |
|||||||||
|
Expired or canceled |
(21,531 | ) | 33.63 | (34,266 | ) | 31.55 | |||||||
|
Vested/exercised |
(491,226 | ) | 40.03 | (115,302 | ) | 23.17 | |||||||
|
Outstanding as of December 31, 2009 |
1,633,058 | $ | 38.28 | 2,360,482 | $ | 44.56 | |||||||
|
Granted |
844,706 |
42.93 |
1,140,303 |
42.78 |
|||||||||
|
Expired or canceled |
(90,921 | ) | 40.09 | (96,639 | ) | 43.20 | |||||||
|
Vested/exercised |
(500,735 | ) | 42.16 | (368,307 | ) | 38.12 | |||||||
|
Outstanding as of December 31, 2010 |
1,886,108 | $ | 39.25 | 3,035,839 | $ | 44.71 | |||||||
|
Granted |
291,912 |
70.59 |
548,391 |
70.76 |
|||||||||
|
Expired or canceled |
(55,159 | ) | 52.87 | (73,599 | ) | 56.66 | |||||||
|
Vested/exercised |
(828,246 | ) | 41.44 | (611,130 | ) | 41.57 | |||||||
|
Outstanding as of December 31, 2011 |
1,294,615 |
$ |
44.33 |
2,899,501 |
$ |
50.00 |
|||||||
|
Options exercisable as of December 31, 2011 |
1,316,082 |
$ |
49.96 |
||||||||||
|
Remaining unvested options outstanding and expected to vest |
1,535,916 |
$ |
50.03 |
||||||||||
|
|
|
||||||||||||
As of December 31, 2011, there were a maximum of 7,193,545 shares available for future grant under the company's various stock-based plans. Shares available for future grant include shares which may be granted by the Committee as either stock options, on a share-for-share basis, or restricted stock or restricted stock units, on the basis of one share for each 1.75 available shares.
Restricted stock awards issued under the plans provide that shares awarded may not be sold or otherwise transferred until service-based restrictions have lapsed and any performance objectives have been attained as established by the Committee. Restricted stock units are rights to receive shares subject to certain service and performance conditions as established by the Committee. Generally, upon termination of employment, restricted stock units and restricted shares which have not vested are forfeited. For the years 2011, 2010 and 2009, recognized compensation expense of $25 million, $32 million and $23 million, respectively, is included in corporate general and administrative expense related to restricted stock awards and units. The fair value of restricted stock that vested during 2011, 2010 and 2009 was $58 million, $22 million and $19 million, respectively. The balance of unamortized restricted stock expense as of December 31, 2011 was $16 million, which is expected to be recognized over a weighted-average period of 1.4 years.
The aggregate intrinsic value, representing the difference between market value on the date of exercise and the option price, of stock options exercised during 2011, 2010 and 2009 was $18 million, $6 million and $3 million, respectively. The balance of unamortized stock option expense as of December 31, 2011 was $7 million, which is expected to be recognized over a weighted-average period of
F-32
FLUOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
1.4 years. Expense associated with stock options for the years ended December 31, 2011, 2010 and 2009, which is included in corporate general and administrative expense in the accompanying Consolidated Statement of Earnings, totaled $12 million, $15 million and $11 million, respectively.
The fair value on the grant date and the significant assumptions used in the Black-Scholes option-pricing model are as follows:
|
|
December 31, | ||||||
|---|---|---|---|---|---|---|---|
|
|
2011
|
2010
|
|||||
|
Weighted average grant date fair value |
$ | 23.41 | $ | 14.51 | |||
|
Expected life of options (in years) |
4.5 | 4.3 | |||||
|
Risk-free interest rate |
2.2 | % | 2.1 | % | |||
|
Expected volatility |
38.8 | % | 40.6 | % | |||
|
Expected annual dividend per share |
$ | 0.50 | $ | 0.50 | |||
The computation of the expected volatility assumption used in the Black-Scholes calculations is based on a 50/50 blend of historical and implied volatility.
Information related to options outstanding as of December 31, 2011 is summarized below:
|
|
Options Outstanding | Options Exercisable | |||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Range of Exercise Prices
|
Number
Outstanding |
Weighted
Average Remaining Contractual Life (In Years) |
Weighted
Average Exercise Price Per Share |
Number
Exercisable |
Weighted
Average Remaining Contractual Life (In Years) |
Weighted
Average Exercise Price Per Share |
|||||||||||||
|
$30.46 - $41.77 |
506,226 | 7.2 | $ | 30.57 | 239,387 | 7.2 | $ | 30.46 | |||||||||||
|
$42.11 - $49.25 |
1,408,421 | 7.1 | 43.24 | 611,549 | 6.1 | 43.55 | |||||||||||||
|
$68.36 - $80.12 |
984,854 | 7.8 | 69.66 | 465,146 | 6.2 | 68.42 | |||||||||||||
|
|
2,899,501 | 7.3 | $ | 50.00 | 1,316,082 | 6.3 | $ | 49.96 | |||||||||||
As of December 31, 2011, options outstanding and options exercisable had an aggregate intrinsic value of approximately $20 million and $9 million, respectively.
10. Earnings Per Share
Basic earnings per share ("EPS") is calculated by dividing net earnings attributable to Fluor Corporation by the weighted average number of common shares outstanding during the period. Potentially dilutive securities include employee stock options, restricted stock units and shares, and the 1.5% Convertible Senior Notes (see "7. Financing Arrangements" above for information about the Convertible Senior Notes).
In 2009, the company applied the provisions of FSP Emerging Issues Task Force ("EITF") 03-6-1, "Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities" (ASC 260-10-45). ASC 260-10-45 clarified that all outstanding unvested share-based payment awards that contain rights to nonforfeitable dividends participate in undistributed earnings with common shareholders. The company's unvested restricted stock units and unvested restricted shares of stock were considered to be participating securities since the quarterly dividends paid were nonforfeitable. ASC 260-10-45 required that the two-class method of computing basic EPS be applied. Under the two-class method, the company's stock options were not considered to be participating securities.
Starting in the first quarter of 2010, dividends on unvested restricted stock units and unvested restricted stock were accumulated and became payable only when the units and shares vest. As a result, the company's unvested restricted stock units and unvested restricted shares are no longer considered to be
F-33
FLUOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
participating securities and the two-class method of computing EPS is not required. Diluted EPS for 2011 and 2010 reflect the assumed exercise or conversion of all dilutive securities using the treasury stock method.
The calculations of the basic and diluted EPS for the years ended December 31, 2011 and 2010 under the treasury stock method are presented below:
|
|
Year Ended
December 31, |
||||||
|---|---|---|---|---|---|---|---|
|
(in thousands, except per share amounts)
|
2011
|
2010
|
|||||
|
Net earnings attributable to Fluor Corporation |
$ | 593,728 | $ | 357,496 | |||
|
Basic EPS: |
|||||||
|
Weighted average common shares outstanding |
172,501 | 178,047 | |||||
|
Basic earnings per share |
$ | 3.44 | $ | 2.01 | |||
|
|
|
||||||
|
Diluted EPS: |
|||||||
|
Weighted average common shares outstanding |
172,501 | 178,047 | |||||
|
Diluted effect: |
|||||||
|
Employee stock options and restricted stock units and shares |
1,393 | 1,380 | |||||
|
Conversion equivalent of dilutive convertible debt |
670 | 1,561 | |||||
|
Weighted average diluted shares outstanding |
174,564 | 180,988 | |||||
|
Diluted earnings per share |
$ | 3.40 | $ | 1.98 | |||
|
|
|
||||||
|
Anti-dilutive securities not included above |
824 | 1,253 | |||||
|
|
|
||||||
The calculations of the basic and diluted EPS for the year ended December 31, 2009 under the two-class method are presented below:
|
|
Year Ended
December 31, |
|||
|---|---|---|---|---|
|
(in thousands, except per share amounts)
|
2009
|
|||
|
Basic EPS: |
||||
|
Net earnings attributable to Fluor Corporation |
$ | 684,889 | ||
|
Portion allocable to common shareholders |
99.10 | % | ||
|
Net earnings allocable to common shareholders |
$ | 678,725 | ||
|
Weighted average common shares outstanding |
179,100 | |||
|
Basic earnings per share |
$ | 3.79 | ||
|
|
|
|||
|
Diluted EPS: |
||||
|
Net earnings allocable to common shareholders |
$ | 678,725 | ||
|
Weighted average common shares outstanding |
179,100 | |||
|
Diluted effect: |
||||
|
Employee stock options |
189 | |||
|
Conversion equivalent of dilutive convertible debt |
1,573 | |||
|
Weighted average diluted shares outstanding |
180,862 | |||
|
Diluted earnings per share |
$ | 3.75 | ||
|
|
|
|||
|
Anti-dilutive securities not included above |
864 | |||
|
|
|
|||
F-34
FLUOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The table below sets forth the calculation of the percentage of net earnings allocable to common shareholders under the two-class method:
|
|
Year Ended
December 31, |
|||
|---|---|---|---|---|
|
(shares in thousands)
|
2009
|
|||
|
Numerator: |
||||
|
Weighted average participating common shares |
179,100 | |||
|
|
|
|||
|
Denominator: |
||||
|
Weighted average participating common shares |
179,100 | |||
|
Add: Weighted average restricted shares and units |
1,635 | |||
|
Weighted average participating shares |
180,735 | |||
|
|
|
|||
|
Portion allocable to common shareholders |
99.10 | % | ||
During the years ended December 31, 2011, 2010 and 2009, the company repurchased and canceled 10,050,000, 3,079,600 and 3,060,000 shares of its common stock, respectively, under its stock repurchase program for $640 million, $175 million, and $125 million, respectively.
11. Lease Obligations
Net rental expense amounted to approximately $166 million, $228 million and $220 million in the years ended December 31, 2011, 2010 and 2009, respectively. The company's lease obligations relate primarily to office facilities, equipment used in connection with long-term construction contracts and other personal property. Net rental expense in 2011 declined due to a reduction in rental equipment required to support project execution activities in the Oil & Gas and Government segments.
The company's obligations for minimum rentals under non-cancelable operating leases are as follows:
|
Year Ended December 31,
|
(in thousands)
|
|||
|---|---|---|---|---|
|
2012 |
$ | 39,500 | ||
|
2013 |
42,800 | |||
|
2014 |
34,100 | |||
|
2015 |
27,800 | |||
|
2016 |
22,800 | |||
|
Thereafter |
100,300 | |||
12. Noncontrolling Interests
The company applies the provisions of SFAS No. 160, "Noncontrolling Interests in Consolidated Financial Statements" (ASC 810-10-45). ASC 810-10-45 establishes accounting and reporting standards for ownership interests in subsidiaries held by parties other than the parent, the amount of consolidated net income attributable to the parent and to the noncontrolling interest, changes in a parent's ownership interest and the valuation of retained noncontrolling equity investments when a subsidiary is deconsolidated.
As required by ASC 810-10-45, the company has separately disclosed on the face of the Consolidated Statement of Earnings for all periods presented the amount of net earnings attributable to the company and the amount of net earnings attributable to noncontrolling interests. For the years ended December 31, 2011, 2010 and 2009, earnings attributable to noncontrolling interests were $106 million, $85 million and $50 million, respectively, and the related tax was $2 million, $1 million and $2 million, respectively. Distributions paid to noncontrolling interests were $104 million, $84 million and $76 million for the years
F-35
FLUOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
ended December 31, 2011, 2010 and 2009, respectively. Capital contributions by noncontrolling interests were $23 million and $1 million for the years ended December 31, 2011 and 2010, respectively. There were no capital contributions by noncontrolling interests during 2009.
13. Contingencies and Commitments
The company and certain of its subsidiaries are involved in various litigation matters. Additionally, the company and certain of its subsidiaries are contingently liable for commitments and performance guarantees arising in the ordinary course of business. The company and certain of its clients have made claims arising from the performance under its contracts. The company recognizes revenue, but not profit, for certain significant claims when it is determined that recovery of incurred costs is probable and the amounts can be reliably estimated. Under ASC 605-35-25, these requirements are satisfied when the contract or other evidence provides a legal basis for the claim, additional costs were caused by circumstances that were unforeseen at the contract date and not the result of deficiencies in the company's performance, claim-related costs are identifiable and considered reasonable in view of the work performed, and evidence supporting the claim is objective and verifiable. Recognized claims against clients amounted to $298 million and $209 million as of December 31, 2011 and December 31, 2010, respectively, and are primarily included in contract work in progress in the accompanying Consolidated Balance Sheet. The company periodically evaluates its position and the amounts recognized in revenue with respect to all its claims. Amounts ultimately realized from claims could differ materially from the balances included in the financial statements. The company does not expect that the ultimate resolution of these matters will have a material adverse effect on its consolidated financial position or results of operations.
As of December 31, 2011, several matters were in the litigation and dispute resolution process. The following discussion provides a background and current status of these matters:
Greater Gabbard Offshore Wind Farm Project
The company is involved in a dispute in connection with the Greater Gabbard Project, a $1.8 billion lump-sum project to provide engineering, procurement and construction services for the client's offshore wind farm project in the United Kingdom. The dispute relates to the company's claim for additional compensation for schedule and cost impacts arising from delays in the fabrication of monopiles and transition pieces, along with certain disruption and productivity issues associated with construction activities and weather-related delays. The company believes these schedule and cost impacts are attributable to the client and other third parties.
As of December 31, 2011, the company had recorded $265 million of claim revenue related to this issue for costs incurred to date. Additional project costs related to the claim are expected to be incurred in future quarters and, as a result, claim revenue will increase during the life of the project. The company believes the ultimate recovery of incurred and future costs related to the claim is probable under ASC 605-35-25. The company will continue to periodically evaluate its position and the amount recognized in revenue with respect to this claim. As of December 31, 2011, the client had also previously withheld the contractual maximum for liquidated damages related to the dispute of approximately $150 million. The company will also seek to recover in arbitration a significant portion of the withheld liquidated damages. Should the company not be successful in its pursuit of schedule relief related to certain delays covered by the claim, the liquidated damages not recovered from the client could result in a charge to earnings, as would any unrecovered claim amounts. The project is expected to be substantially complete by the second quarter of 2012. However, the resolution of the claims is expected to extend beyond the completion date of the project.
F-36
FLUOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
St. Joe Minerals Matters
Since 1995, the company has been named as a defendant in a number of lawsuits alleging injuries resulting from the lead business of St. Joe Minerals Corporation ("St. Joe") and The Doe Run Company ("Doe Run") in Herculaneum, Missouri. The company was named as a defendant in these lawsuits as a result of its ownership or other interests in St. Joe and Doe Run in the period between 1981 and 1994. In 1994, the company sold its interests in St. Joe and Doe Run, along with all liabilities associated with the lead business, pursuant to a sale agreement in which the buyer agreed to indemnify the company for those liabilities. Until December 2010, substantially all the lawsuits were settled and paid by the buyer; and in all cases the company was fully released.
In December 2010, the buyer settled with certain plaintiffs without obtaining a release for the benefit of the company, leaving the company to defend its case with these plaintiffs in the City of St. Louis Circuit Court. In late July 2011, the jury reached an unexpected verdict in this case, ruling in favor of 16 of the plaintiffs and against the company and certain former subsidiaries for $38.5 million in compensatory and economic damages and $320 million in punitive damages. In August 2011, the court entered judgments based on the verdict.
In December 2011, the company appealed the judgments of the court. The company strongly believes that the judgments are not supported by the facts or the law and that it is probable that such judgments will be overturned. Therefore, based upon the present status of this matter, the company does not believe it is probable that a loss will be incurred. Accordingly, the company has not recorded a charge as a result of the judgments. The company has also taken steps to enforce its rights to the indemnification described above.
The company, the buyer of the smelter operations, and other entities are defendants in 22 additional lawsuits relating to the lead business of St. Joe and Doe Run. The company believes it has strong defenses to these lawsuits and is vigorously defending its position. In addition, the company believes it is entitled to indemnification under the sale agreement for each of the matters raised in these lawsuits. While we believe we will be ultimately successful in these various matters, if we were unsuccessful in our appeal of the ruling referenced above or in any of the other lawsuits, or in the prosecution of and collection on our indemnity claims, we would have to recognize a substantial charge to our earnings.
Embassy Projects
The company constructed 11 embassy projects for the U.S. Department of State under fixed-price contracts. Some of these projects were adversely impacted by higher costs due to schedule extensions, scope changes causing material deviations from the Standard Embassy Design, increased costs to meet client requirements for additional security-cleared labor, site conditions at certain locations, subcontractor and teaming partner difficulties and the availability and productivity of construction labor. All embassy projects were completed prior to 2011.
There are outstanding claims on two embassy projects, totaling $33 million that had been recognized in revenue in previous years. Total claims-related costs incurred to date for these two projects along with claims for equitable adjustment submitted or identified, exceed the amount recorded in claims revenue. All claims have been certified in accordance with federal contracting requirements.
Conex International v. Fluor Enterprises, Inc.
In November 2006, a Jefferson County, Texas, jury reached an unexpected verdict in the case of Conex International ("Conex") v. Fluor Enterprises Inc. ("FEI"), ruling in favor of Conex and awarding $99 million in damages related to a 2001 construction project.
In 2001, Atofina (now part of Total Petrochemicals Inc.) hired Conex International to be the mechanical contractor on a project at Atofina's refinery in Port Arthur, Texas. FEI was also hired to
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FLUOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
provide certain engineering advice to Atofina on the project. There was no contract between Conex and FEI. Later in 2001 after the project was complete, Conex and Atofina negotiated a final settlement for extra work on the project. Conex sued FEI in September 2003, alleging damages for interference and misrepresentation and demanding that FEI should pay Conex the balance of the extra work charges that Atofina did not pay in the settlement. Conex also asserted that FEI interfered with Conex's contract and business relationship with Atofina. The jury verdict awarded damages for the extra work and the alleged interference.
The company appealed the decision and the judgment against the company was reversed in its entirety in December 2008. Both parties appealed the decision to the Texas Supreme Court, and the Court denied both petitions. The company requested rehearing on two issues to the Texas Supreme Court, and that request was denied. The Texas Supreme Court remanded the matter back to the trial court for a new trial. The matter has been stayed, pending resolution of certain technical issues associated with the 2011 bankruptcy filing by the plaintiff's parent. Based upon the present status of this matter, the company does not believe that there is a reasonable possibility that a loss will be incurred.
Asbestos Matters
The company is a defendant in various lawsuits wherein plaintiffs allege exposure to asbestos fibers and dust due to work that the company may have performed at various locations. The company has substantial third party insurance coverage to cover a significant portion of existing and any potential cost, settlements or judgments. No material provision has been made for any present or future claims and, based upon our historical experience with these types of claims and an analysis of the pending claims, the company does not believe that there is a reasonable possibility that any potential losses arising from these claims would have a material adverse impact on its financial position, results of operations or cash flows. Over the past year, the number of pending asbestos-related cases has decreased. This decrease reflects the dismissal or settlement of a number of cases against the company as well as a decline in the number of cases filed against the company during the year. In addition, the cases resolved by the company during the year involved little or no payment by the company.
Guarantees
In the ordinary course of business, the company enters into various agreements providing performance assurances and guarantees to clients on behalf of certain unconsolidated and consolidated partnerships, joint ventures and other jointly executed contracts. These agreements are entered into primarily to support the project execution commitments of these entities. The performance guarantees have various expiration dates ranging from mechanical completion of the facilities being constructed to a period extending beyond contract completion in certain circumstances. The maximum potential payment amount of an outstanding performance guarantee is the remaining cost of work to be performed by or on behalf of third parties under engineering and construction contracts. Amounts that may be required to be paid in excess of estimated cost to complete contracts in progress are not estimable. For cost reimbursable contracts, amounts that may become payable pursuant to guarantee provisions are normally recoverable from the client for work performed under the contract. For lump-sum or fixed-price contracts, the performance guarantee amount is the cost to complete the contracted work less amounts remaining to be billed to the client under the contract. Remaining billable amounts could be greater or less than the cost to complete. In those cases where costs exceed the remaining amounts payable under the contract, the company may have recourse to third parties, such as owners, co-venturers, subcontractors or vendors for claims. Performance guarantees outstanding as of December 31, 2011 were estimated to be $4.6 billion. The company assessed its performance guarantee obligation as of December 31, 2011 and 2010 in accordance with FASB Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements for
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FLUOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Guarantees, Including Indirect Guarantees of Indebtedness of Others" (ASC 460) and the carrying value of its liability was not material.
Financial guarantees, made in the ordinary course of business on behalf of clients and others in certain limited circumstances, are entered into with financial institutions and other credit grantors and generally obligate the company to make payment in the event of a default by the borrower. Most arrangements require the borrower to pledge collateral in the form of property, plant and equipment which is deemed adequate to recover amounts the company might be required to pay.
Other Matters
The company's operations are subject to and affected by federal, state and local laws and regulations regarding the protection of the environment. The company maintains reserves for potential future environmental cost where such obligations are either known or considered probable, and can be reasonably estimated.
The company believes, based upon present information available to it, that its reserves with respect to future environmental cost are adequate and such future cost will not have a material effect on the company's consolidated financial position, results of operations or liquidity. However, the imposition of more stringent requirements under environmental laws or regulations, new developments or changes regarding site cleanup cost or the allocation of such cost among potentially responsible parties, or a determination that the company is potentially responsible for the release of hazardous substances at sites other than those currently identified, could result in additional expenditures, or the provision of additional reserves in expectation of such expenditures.
14. Variable Interest Entities
In the normal course of business, the company forms partnerships or joint ventures primarily for the execution of single contracts or projects. These partnerships or joint ventures are typically characterized by a 50 percent or less, noncontrolling ownership or participation interest, with decision making and distribution of expected gains and losses typically being proportionate to the ownership or participation interest. Many of the partnership and joint venture agreements provide for capital calls to fund operations, as necessary. Such funding is infrequent and is not anticipated to be material. The company accounts for its partnerships and joint ventures in accordance with ASC 810.
During the first quarter of 2010, the company prospectively adopted SFAS No. 167, "Amendments to FASB Interpretation No. 46(R)", which amends ASC 810 for interim and annual reporting periods beginning after November 15, 2009. The prospective adoption of this amendment did not have an impact on the company's financial position, results of operations or cash flows.
In accordance with ASC 810, as amended, the company assesses its partnerships and joint ventures at inception to determine if any meet the qualifications of a VIE. The company considers a partnership or joint venture a VIE if either (a) the total equity investment is not sufficient to permit the entity to finance its activities without additional subordinated financial support, (b) characteristics of a controlling financial interest are missing (either the ability to make decisions through voting or other rights, the obligation to absorb the expected losses of the entity or the right to receive the expected residual returns of the entity), or (c) the voting rights of the equity holders are not proportional to their obligations to absorb the expected losses of the entity and/or their rights to receive the expected residual returns of the entity, and substantially all of the entity's activities either involve or are conducted on behalf of an investor that has disproportionately few voting rights. Upon the occurrence of certain events outlined in ASC 810, the company reassesses its initial determination of whether the partnership or joint venture is a VIE. The majority of the company's partnerships and joint ventures qualify as VIEs because the total equity
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FLUOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
investment is typically nominal and not sufficient to permit the entity to finance its activities without additional subordinated financial support.
The company also performs a qualitative assessment of each VIE to determine if the company is its primary beneficiary, as required by ASC 810, as amended. The company concludes that it is the primary beneficiary and consolidates the VIE if the company has both (1) the power to direct the economically significant activities of the entity and (2) the obligation to absorb losses of, or the right to receive benefits from, the entity that could potentially be significant to the VIE. The company considers the contractual agreements that define the ownership structure, distribution of profits and losses, risks, responsibilities, indebtedness, voting rights and board representation of the respective parties in determining if the company is the primary beneficiary. The company also considers all parties that have direct or implicit variable interests when determining whether it is the primary beneficiary. As required by ASC 810, management's assessment of whether the company is the primary beneficiary of a VIE is continuously performed.
In most cases, when the company is not the primary beneficiary and not required to consolidate the VIE, the proportionate consolidation method of accounting is used for joint ventures and partnerships in the construction industry, whereby the company recognizes its proportionate share of revenue, cost and segment profit in its Consolidated Statement of Earnings and uses the one-line equity method of accounting in the Consolidated Balance Sheet as allowed under ASC 810-10-45-14. The equity and cost methods of accounting for the investments are also used, depending on the company's respective ownership interest, amount of influence over the VIE and the nature of services provided by the VIE. The aggregate investment carrying value of the unconsolidated VIEs was $50 million and $84 million as of December 31, 2011 and 2010, respectively, and was classified under "Investments" in the Consolidated Balance Sheet. Some of the company's VIEs have debt; however, such debt is typically non-recourse in nature. The company's maximum exposure to loss as a result of its investments in unconsolidated VIEs is typically limited to the aggregate of the carrying value of the investment and future funding commitments. Future funding commitments as of December 31, 2011 for the unconsolidated VIEs were $35 million.
In some cases, the company is required to consolidate certain VIEs. As of December 31, 2011, the carrying values of the assets and liabilities associated with the operations of the consolidated VIEs were $1.1 billion and $774 million, respectively. As of December 31, 2010, the carrying values of the assets and liabilities associated with the operations of the consolidated VIEs were $676 million and $550 million, respectively. The assets of a VIE are restricted for use only for the particular VIE and are not available for general operations of the company.
The company has agreements with certain VIEs to provide financial or performance assurances to clients. Refer to "13. Contingencies and Commitments" for a further discussion of such agreements. None of the VIEs are individually material to the company's results of operations, financial position or cash flows except as discussed below under "— Rapid Growth Project." Below is a discussion of some of the company's more significant or unique VIEs and related accounting considerations.
Rapid Growth Project
In 2008, the Fluor SKM joint venture was awarded the initial program management, engineering and construction management contract for the expansion of port, rail and mine facilities for BHP Billiton Limited's iron ore mining project in the Pilbara region of Western Australia. Fluor SKM is a joint venture between Fluor Australia Pty Ltd and Sinclair Knight Merz ("Fluor SKM") in which Fluor Australia Pty Ltd has a 55 percent interest and Sinclair Knight Merz has the remaining 45 percent interest.
The company has evaluated its interest in Fluor SKM and has determined that the company is the primary beneficiary. Accordingly, the company consolidates the accounts of Fluor SKM. For the years ended December 31, 2011, 2010 and 2009, the company's results of operations included revenue of
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FLUOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
$1.8 billion, $2.4 billion and $1.5 billion, respectively. As of December 31, 2011, the carrying values of the assets and liabilities of the Fluor SKM joint venture were $92 million and $112 million, respectively. As of December 31, 2010, the carrying values of the assets and liabilities of the Fluor SKM joint venture were $106 million and $130 million, respectively.
Eagle P3 Commuter Rail Project
In August 2010, the company was awarded its $1.7 billion share of the Eagle P3 Commuter Rail Project in the Denver metropolitan area. The project is a public-private partnership between the Regional Transportation District in Denver, Colorado ("RTD") and Denver Transit Partners ("DTP"), a wholly-owned subsidiary of Denver Transit Holdings LLC ("DTH"), a joint venture in which the company has a 10 percent interest, with two additional partners each owning a 45 percent interest. Under the agreement, RTD owns and oversees the addition of railways, facilities and rolling stock for three new commuter and light rail corridors in the Denver metropolitan area. RTD is funding the construction of the railways and facilities through the issuance of $398 million of private activity bonds, as well as from various other sources, including federal grants. RTD advanced the proceeds of the private activity bonds to DTP as a loan that is non-recourse to the company and will be repaid to RTD over the life of the concession agreement. DTP, as concessionaire, will design, build, finance, operate and maintain the railways, facilities and rolling stock under a 35-year concession agreement. The company has determined that DTH is a VIE for which the company does not qualify as the primary beneficiary. DTH is accounted for under the equity method of accounting. Based on contractual documents, the company's maximum exposure to loss relating to its investments in DTH is limited to its future funding commitment of $5 million, plus the carrying value of its investment of less than $1 million.
The construction of the railways and facilities is being performed through subcontract arrangements by Denver Transit Systems ("DTS") and Denver Transit Constructors ("DTC"), construction joint ventures in which the company has an ownership interest of 50 percent and 40 percent, respectively. The company has determined that DTS and DTC are VIEs for which the company is the primary beneficiary. Therefore, the company consolidates the accounts of DTS and DTC in its financial statements. As of December 31, 2011, the combined carrying values of the assets and liabilities of DTS and DTC were $133 million and $113 million, respectively. As of December 31, 2010, the combined carrying values of the assets and liabilities of DTS and DTC were $124 million and $118 million, respectively. The company has provided certain performance guarantees on behalf of DTS.
Interstate 495 Capital Beltway Project
In December 2007, the company was awarded the $1.3 billion Interstate 495 Capital Beltway high-occupancy toll ("HOT") lanes project in Virginia. The project is a public-private partnership between the Virginia Department of Transportation ("VDOT") and Capital Beltway Express LLC, a joint venture in which the company has a 10 percent interest and Transurban (USA) Inc. has a 90 percent interest ("Fluor-Transurban"). Under the agreement, VDOT owns and oversees the addition of traffic lanes, interchange improvements and construction of HOT lanes on 14 miles of the I-495 Capital Beltway in northern Virginia. Fluor-Transurban, as concessionaire, will develop, design, finance, construct, maintain and operate the improvements and HOT lanes under an 80 year concession agreement. The construction is being financed through grant funding from VDOT, non-recourse borrowings from issuance of public tax-exempt bonds, a non-recourse loan from the federal Transportation Infrastructure Finance Innovation Act (TIFIA), which is administered by the U.S. Department of Transportation and equity contributions from the joint venture members.
The construction of the improvements and HOT lanes are being performed by a construction joint venture in which the company has a 65 percent interest and Lane Construction has a 35 percent interest
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FLUOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
("Fluor-Lane"). Transurban (USA) Inc. will perform the operations and maintenance upon completion of the improvements and commencement of operations of the toll lanes.
The company has also evaluated its interest in Fluor-Lane and has determined that it is the primary beneficiary. Accordingly, the company consolidates the accounts of Fluor-Lane. As of December 31, 2011, the company's financial statements include assets of $153 million and liabilities of $149 million for Fluor-Lane. As of December 31, 2010, the company's financial statements include assets of $175 million and liabilities of $171 million for Fluor-Lane.
The company has also evaluated its interest in Fluor-Transurban and has determined that it is not the primary beneficiary. Based on contractual documents, the company's maximum exposure to loss relating to its investment in Fluor-Transurban is its future funding commitment of $15 million, plus its investment balance of $1 million. The company will never have repayment obligations associated with any of the debt because it is non-recourse to the joint venture members. The company accounts for its ownership interest in Fluor-Transurban under the equity method of accounting.
15. Operations by Business Segment and Geographical Area
The company provides professional services in the fields of engineering, procurement, construction and maintenance, as well as project management, on a global basis and serves a diverse set of industries worldwide. The five principal business segments are: Oil & Gas, Industrial & Infrastructure, Government, Global Services and Power, as discussed further below.
The Oil & Gas segment provides design, engineering, procurement, construction and project management professional services for upstream oil and gas production, downstream refining, offshore production, chemicals and petrochemicals markets. The revenue of a single customer and its affiliates of the Oil & Gas segment amounted to 13 percent of the company's consolidated revenue during the year ended December 31, 2011.
The Industrial & Infrastructure segment provides design, engineering, procurement and construction services to the transportation, wind power, mining and metals, life sciences, manufacturing, commercial and institutional, telecommunications, microelectronics and healthcare sectors. The revenue of a single customer and its affiliates of both the Industrial & Infrastructure and Global Services segments amounted to 12 percent of the company's consolidated revenue during the year ended December 31, 2010.
The Government segment provides engineering, construction, logistics support, contingency response, and management and operations services to the U.S. government. The percentage of the company's consolidated revenue from work performed for various agencies of the U.S. government was 14 percent and 15 percent during the years ended December 31, 2011 and 2010, respectively.
The Global Services segment includes operations and maintenance activities, small capital project engineering and execution, site equipment and tool services, industrial fleet services, plant turnaround services and supply chain solutions. In addition, Global Services provides temporary staffing of technical, professional and administrative personnel for projects in all segments.
The Power segment provides engineering, procurement, construction, program management, start-up and commissioning, operations and maintenance and technical services to the gas fueled, solid fueled, environmental compliance, renewables, nuclear and power services markets. The Power segment includes the operations of NuScale Power, LLC, the Oregon-based designer of small modular nuclear reactors acquired by the company in 2011, which is considered a separate operating segment of the company.
The reportable segments follow the same accounting policies as those described in Major Accounting Policies. Management evaluates a segment's performance based upon segment profit. Intersegment revenue is insignificant. The company incurs cost and expenses and holds certain assets at the corporate
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FLUOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
level which relate to its business as a whole. Certain of these amounts have been charged to the company's business segments by various methods, largely on the basis of usage.
Engineering services for international projects are often performed within the United States or a country other than where the project is located. Revenue associated with these services has been classified within the geographic area where the work was performed.
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FLUOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Operating Information by Segment
|
|
Year Ended December 31, | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
|
(in millions)
|
2011
|
2010
|
2009
|
|||||||
|
External revenue |
||||||||||
|
Oil & Gas |
$ | 7,961.7 | $ | 7,740.0 | $ | 11,826.9 | ||||
|
Industrial & Infrastructure |
9,700.4 | 6,867.2 | 4,820.6 | |||||||
|
Government |
3,398.2 | 3,038.0 | 1,983.2 | |||||||
|
Global Services |
1,577.7 | 1,508.6 | 1,578.1 | |||||||
|
Power |
743.4 | 1,695.5 | 1,781.5 | |||||||
|
Total external revenue |
$ | 23,381.4 | $ | 20,849.3 | $ | 21,990.3 | ||||
|
|
|
|||||||||
|
Segment profit (loss) |
||||||||||
|
Oil & Gas |
$ | 275.6 | $ | 344.0 | $ | 729.7 | ||||
|
Industrial & Infrastructure |
389.3 | (169.7 | ) | 140.4 | ||||||
|
Government |
145.5 | 142.2 | 116.8 | |||||||
|
Global Services |
151.8 | 133.3 | 106.6 | |||||||
|
Power |
81.1 | 170.9 | 157.7 | |||||||
|
Total segment profit |
$ | 1,043.3 | $ | 620.7 | $ | 1,251.2 | ||||
|
|
|
|||||||||
|
Depreciation and amortization of fixed assets |
||||||||||
|
Oil & Gas |
$ | — | $ | — | $ | — | ||||
|
Industrial & Infrastructure |
4.8 | 4.5 | 5.7 | |||||||
|
Government |
10.8 | 7.4 | 3.2 | |||||||
|
Global Services |
117.5 | 108.3 | 99.0 | |||||||
|
Power |
— | — | — | |||||||
|
Corporate and other |
66.3 | 69.2 | 72.9 | |||||||
|
Total depreciation and amortization of fixed assets |
$ | 199.4 | $ | 189.4 | $ | 180.8 | ||||
|
|
|
|||||||||
|
Total assets |
||||||||||
|
Oil & Gas |
$ | 1,245.0 | $ | 986.3 | $ | 972.3 | ||||
|
Industrial & Infrastructure |
943.6 | 534.9 | 675.9 | |||||||
|
Government |
799.6 | 1,070.4 | 660.3 | |||||||
|
Global Services |
936.6 | 823.9 | 744.5 | |||||||
|
Power |
191.1 | 97.2 | 171.0 | |||||||
|
Corporate and other |
4,154.4 | 4,102.2 | 3,954.5 | |||||||
|
Total assets |
$ | 8,270.3 | $ | 7,614.9 | $ | 7,178.5 | ||||
|
|
|
|||||||||
|
Capital expenditures |
||||||||||
|
Oil & Gas |
$ | — | $ | — | $ | — | ||||
|
Industrial & Infrastructure |
— | 5.9 | 7.0 | |||||||
|
Government |
10.7 | 16.2 | 9.1 | |||||||
|
Global Services |
248.6 | 185.5 | 155.9 | |||||||
|
Power |
— | — | — | |||||||
|
Corporate and other |
78.9 | 57.8 | 61.1 | |||||||
|
Total capital expenditures |
$ | 338.2 | $ | 265.4 | $ | 233.1 | ||||
|
|
|
|||||||||
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FLUOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Effective January 1, 2010, the company moved its power services business to the Power segment from the Global Services segment. The operating results and total assets presented above have been recast to reflect this change.
Enterprise-Wide Disclosures
|
|
External Revenue
Year Ended December 31, |
Total Assets
As of December 31, |
||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
(in millions)
|
2011
|
2010
|
2009
|
2011
|
2010
|
|||||||||||
|
United States |
$ |
6,959.8 |
$ |
7,640.8 |
$ |
10,792.6 |
$ |
4,655.3 |
$ |
4,255.1 |
||||||
|
Canada |
4,127.5 | 2,422.0 | 709.0 | 709.9 | 915.9 | |||||||||||
|
Asia Pacific (includes Australia) |
4,395.5 | 3,325.4 | 2,898.4 | 957.1 | 534.5 | |||||||||||
|
Europe |
1,736.8 | 3,030.1 | 3,910.5 | 1,287.5 | 1,421.9 | |||||||||||
|
Central and South America |
2,822.5 | 1,687.1 | 1,379.5 | 328.3 | 143.5 | |||||||||||
|
Middle East and Africa |
3,339.3 | 2,743.9 | 2,300.3 | 332.2 | 344.0 | |||||||||||
|
Total |
$ | 23,381.4 | $ | 20,849.3 | $ | 21,990.3 | $ | 8,270.3 | $ | 7,614.9 | ||||||
|
|
|
|||||||||||||||
Reconciliation of Segment Information to Consolidated Amounts
|
|
Year Ended December 31, | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
|
(in millions)
|
2011
|
2010
|
2009
|
|||||||
|
Total segment profit |
$ |
1,043.3 |
$ |
620.7 |
$ |
1,251.2 |
||||
|
Corporate general and administrative expense |
(163.5 | ) | (156.3 | ) | (178.5 | ) | ||||
|
Interest income, net |
16.4 | 10.6 | 14.2 | |||||||
|
Earnings attributable to noncontrolling interests |
105.6 | 84.6 | 49.9 | |||||||
|
Earnings before taxes |
$ | 1,001.8 | $ | 559.6 | $ | 1,136.8 | ||||
|
|
|
|||||||||
Non-Operating (Income) and Expense
Non-operating expense items of $13.5 million, $1.6 million and $1.7 million were included in corporate general and administrative expense in 2011, 2010 and 2009, respectively. Non-operating expenses increased during 2011 primarily due to expenses associated with previously divested operations.
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FLUOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
16. Quarterly Financial Data (Unaudited)
The following is a summary of the quarterly results of operations:
|
(in millions, except per share amounts)
|
First Quarter
|
Second Quarter
|
Third Quarter
|
Fourth Quarter
|
|||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Year ended December 31, 2011 |
|||||||||||||
|
Revenue |
$ | 5,057.8 | $ | 6,033.9 | $ | 6,037.6 | $ | 6,252.1 | |||||
|
Cost of revenue |
4,787.5 | 5,727.0 | 5,775.5 | 5,942.5 | |||||||||
|
Earnings before taxes |
241.1 | 281.2 | 230.9 | 248.6 | |||||||||
|
Net earnings |
161.2 | 191.5 | 161.6 | 183.8 | |||||||||
|
Net earnings attributable to Fluor Corporation |
139.7 | 165.5 | 135.4 | 153.1 | |||||||||
|
Earnings per share |
|||||||||||||
|
Basic |
$ | 0.79 | $ | 0.95 | $ | 0.79 | $ | 0.91 | |||||
|
Diluted |
0.78 | 0.94 | 0.78 | 0.90 | |||||||||
|
Year ended December 31, 2010 |
|||||||||||||
|
Revenue |
$ | 4,918.9 | $ | 5,152.1 | $ | 5,511.5 | $ | 5,266.8 | |||||
|
Cost of revenue |
4,658.3 | 4,868.4 | 5,449.7 | 5,167.7 | |||||||||
|
Earnings before taxes |
233.1 | 259.1 | 24.9 | 42.5 | |||||||||
|
Net earnings (loss) |
153.7 | 178.4 | (30.1 | ) | 139.1 | ||||||||
|
Net earnings (loss) attributable to Fluor Corporation |
136.6 | 157.4 | (53.6 | ) | 117.1 | ||||||||
|
Earnings (loss) per share |
|||||||||||||
|
Basic |
$ | 0.77 | $ | 0.88 | $ | (0.30 | ) | $ | 0.66 | ||||
|
Diluted |
0.76 | 0.87 | (0.30 | ) | 0.65 | ||||||||
Net earnings in the third quarter of 2011 was impacted by pre-tax charges for the Greater Gabbard Project totaling $38 million (or $0.14 per diluted share). The Greater Gabbard Project is discussed in "13. Contingencies and Commitments" above.
Net earnings in the second and fourth quarter of 2010 included pre-tax charges of $51 million (or $0.18 per diluted share) and $28 million (or $0.10 per diluted share), respectively, on a gas-fired power project in Georgia. Net earnings in the third quarter of 2010 included a pre-tax charge of $95 million (or $0.33 per diluted share) for the completed infrastructure joint venture project in California, as well as a pre-tax charge of $163 million (or $0.92 per diluted share) on the Greater Gabbard Project. Net earnings in the fourth quarter of 2010 included an additional $180 million pre-tax charge (or $0.89 per diluted share) for the Greater Gabbard Project.
Net earnings and Net earnings attributable to Fluor Corporation in 2010 included a $152 million ($0.84 per diluted share) tax benefit for a worthless stock deduction from the tax restructuring of a foreign subsidiary. A significant portion of this tax benefit resulted from the financial impact of the 2010 Greater Gabbard Project charges on the foreign subsidiary.
17. Subsequent Events
On February 2, 2012, the company's Board of Directors authorized an increase in the company's quarterly dividend from $0.125 per share to $0.16 per share.
F-46
Exhibit 10.7
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FLUOR CORPORATION AND SUBSIDIARIES |
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Policy Manual |
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Section: |
Human Resources |
Effective: |
02/02/2012 |
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Directive: |
MPE-HR-005 |
Supersedes: |
06/01/07 |
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Subject: |
Executive Severance Policy |
Last Review: |
02/02/2012 |
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Applies To: |
Fluor Corporation and Subsidiaries |
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PURPOSE
The purpose of this Executive Severance Policy is to provide severance compensation to eligible executives of Fluor Corporation and designated subsidiaries who leave the Company, depending on the circumstances and conditions leading to termination. It is intended that the provisions of the Policy comply with the exclusion from Section 409A of the U.S. Internal Revenue Code for so-called short-term deferrals, and all provisions of the Policy will be construed and interpreted in a manner consistent with the requirements for avoiding taxes and penalties under Section 409A.
ELIGIBILITY
Individuals who are eligible are executives of Fluor Corporation and designated subsidiaries actively at work who are participants in the Fluor Corporation and Subsidiaries 2008 Executive Performance Incentive Plan (or any successor plan, the “Incentive Plan”) and who execute the required settlement and release agreement in exchange for the severance. In the event of reclassification from Officer to Non-officer, the individual will retain the Officer level severance pay structure for one year after the reclassification. In the event of decertification from EMT to Non-EMT status, this policy will be in effect for one year from the date of decertification.
DEFINITIONS
For the purpose of the Policy, the following definitions apply:
A.
Voluntary Separation
Action taken by an executive which results in the executive no longer being employed by the
Company for reasons including: personal reasons, to seek or accept other employment, for failure to return at conclusion of leave, or to voluntarily retire.
B. Involuntary Separation
1. Action taken by the Company due to reduction in force, reorganization or reduced workload or other similar circumstances whereby the executive’s services are no longer required by the Company. Executives involuntarily separated who meet the retirement criteria may elect retirement under those benefit plans of the Company that provide retirement benefits.
2. Action taken by the Company when an executive has a qualifying disability under the Americans with Disabilities Act, or a similar disability statute, and is unable to perform her/his essential job functions with or without reasonable accommodation.
This Fluor Corporation policy is subject to modification or revision in part or in its entirety to reflect changes in conditions subsequent to the effective date of this policy.
C.
Involuntary Discharge
Action taken by the Company for reasons other than stated in Paragraph B above including but not limited to absenteeism, misconduct, insubordination, appearing at work under the influence of a controlled substance or alcohol, unethical behavior, disclosure of confidential information, sexual harassment, employment discrimination, unsatisfactory performance, or violation of any Company policy.
D. Officer
An executive who is a Vice President or above of Fluor Corporation, Fluor Enterprises Inc., or Fluor Constructors, Inc., who participates in the Incentive Plan.
F. Completed Years of Accumulated Service
A period of accumulated service with the Company, subject to the limitation set forth in Paragraph A.4.c under Procedures .
G. Beneficiary
The beneficiary/beneficiaries for the Executive Severance Policy will be determined, in order, and, as applicable, by (i.) the related Beneficiary form on file with the Executive Compensation department; (ii.) the beneficiary/beneficiaries listed on file with the Company’s Savings Investment Plan (SIP); (iii.) the beneficiary/beneficiaries listed on file with a Company Group Life/Health Insurance Plan; and, in the absence of any designation, by (iv.) the administrator or executor of the executive’s estate.
H. Total and Permanent Disability
As set forth in the Company’s Long Term Disability Plan for Salaried Employees Summary Plan Description, an individual is totally and permanently disabled when, on the date of disability, he/she meets the following definition of disability:
· Own Occupation Period. For the first 24 months for which benefits are paid, you are unable to perform the material and substantial duties of the occupation that you were performing when your Disability or Partial Disability began due to sickness or injury.
· Any Occupation Period. After benefits have been paid for 24 months, you are unable to perform the material and substantial duties of any gainful occupation due to sickness or injury.
If your occupation requires a license, “loss of license” for any reason does not, in itself, constitute disability.
PROCEDURES
A. Severance Pay
1. Voluntary Separation
The Company will not provide severance pay nor consider proration of incentive compensation in connection with any voluntary separation as set out in Paragraph A under Definitions .
2. Involuntary Separation
Severance pay will be based on current base salary and Completed Years of Accumulated Service as follows:
a. Officers
1) Two weeks of severance pay for each Completed Year of Accumulated Service up to 52 weeks.
2) Minimum eight weeks of severance pay.
b. Non-Officer Executives
1) Two weeks of severance pay for each Completed Year of Accumulated Service up to 26 weeks.
2) Minimum four weeks of severance pay.
3. Involuntary Discharge
The Company will not provide severance pay nor consider proration of incentive compensation in connection with any Involuntary Discharge as set out in Paragraph C under Definitions .
4. Limitations
a. The total Completed Years of Accumulated Service calculated for a severance payment may only be used one time in severance calculations. So, in the case of re-hire, a subsequent calculation of severance would not include any Years of Accumulated Service previously used to calculate any other severance payment(s).
b. In cases where the executive is entitled to legislated severance pay in non-U.S. countries, the executive may not receive a severance payment hereunder or severance payment may be reduced.
5. Lump Sum Payment
Severance pay will be paid in a lump sum within 75 days following the date of separation provided that the executive executes the required release within this time period. Failure to execute such release will forfeit the executive’s right to severance pay.
6. Payment in the Event of Death
In the event of an executive’s death prior to payment of any severance benefit, payment will be made to the designated beneficiary in a lump sum within 75 days following the date of separation.
B. Annual Incentive Compensation (As defined in the Incentive Plan).
1. Voluntary Separation
The Company will not provide a prorated incentive award except, at the discretion of the Company, in the case of death, or total and permanent disability.
2. Involuntary Separation
The Company will not provide a prorated incentive award.
3. Involuntary Discharge
The Company will not provide a prorated incentive award.
C. Perquisites
Company perquisites will be awarded to a separating executive according to the designated perquisite policies located in the Human Resources (HR) section of this manual.
E. Insurance Coverage
Applicable insurance coverage, i.e., group health, long-term disability, executive health, etc., will cease on date of termination, unless the departing executive converts coverage to an individual policy, where such coverage may available. Where applicable, the departing executive may elect continued coverage through the Consolidated Omnibus Budget Reconciliation Act (COBRA).
F. Time Off with Pay (TOWP) Program
Balance will be paid at time of termination.
G. Stock Based Awards
Upon separation, the treatment of stock-based awards is governed by the individual stock-based award agreement(s) and the Incentive Plan.
H. Long Term Incentive (LTI) Program
Upon separation, the treatment of stock-based awards is governed by the individual stock-based award agreement(s) and the Incentive Plan.
I. Separation and Release (S & R) Agreements of All Claims
No severance benefit will be due eligible executives unless a settlement and release agreement provided by the Company has been properly and timely executed.
J. Policy Review
This policy will be reviewed on a periodic basis and amended to comply with established governmental rules and regulations and in accordance with Company policies and procedures.
EXCEPTIONS
Exceptions require the approval of the Chairman and Chief Executive Officer of Fluor Corporation for executives other than section 16(b) officers. Exceptions for 16(b) officers may additionally require approval by the Organization and Compensation Committee of the Board of Directors.
Exhibit 10.14
FLUOR 409A
EXECUTIVE DEFERRED COMPENSATION PROGRAM
As Amended and Restated Effective January 1, 2012
ARTICLE I
THE PLAN
1.1 NAME . This Plan is known as the “Fluor 409A Executive Deferred Compensation Program.”
1.2 PURPOSE . This Plan is maintained for the purpose of providing Eligible Executives with a means to satisfy future financial needs and also for the purpose of providing such Eligible Executives with retirement and other benefits which, because of various contribution and benefit accrual limitations, cannot be provided for them under the tax qualified profit sharing and savings plans in which such Eligible Executive is a participant. The Company intends that the Plan constitute an unfunded “top hat” plan maintained for the purpose of providing deferred compensation to a select group of management or highly compensated employees under applicable provisions of ERISA. The Company also intends that the Plan comply with the applicable provisions of Section 409A. The provisions of this restated Plan document will be effective January 1, 2012.
1.3 PLAN ADMINISTRATION . The Plan will be administered by the Administrative Committee in accordance with the following:
(a) The Administrative Committee, on behalf of the Participants and their Beneficiaries, will enforce the Plan in accordance with its terms, be charged with the general administration of the Plan, and have all powers necessary to accomplish its purposes, including, but not by way of limitation, the following:
(i) To determine all questions relating to the eligibility of employees to participate;
(ii) To construe and interpret the terms and provisions of this Plan;
(iii) To compute and certify to the amount and kind of benefits payable to Participants or their Beneficiaries;
(iv) To maintain all records that may be necessary for the administration of the Plan;
(v) To provide for the disclosure of all information and the filing or provision of all reports and statements to Participants, Beneficiaries or governmental agencies as the Administrative Committee may determine or as required by law;
(vi) To make and publish such rules for the regulation of the Plan and procedures for the administration of the Plan as are not inconsistent with the terms hereof; and
(vii) To appoint a Plan administrator or any other agent, and to delegate to such person such powers and duties in connection with the administration of the Plan as the Administrative Committee may from time to time prescribe.
FLUOR 409A EXECUTIVE DEFERRED COMPENSATION PROGRAM
(b) The Administrative Committee will have sole and full discretion to make factual determinations as may be necessary and to construe and interpret the terms and provisions of this Plan, which interpretation or construction will be final and binding on all parties, including but not limited to the Company and any Participant or Beneficiary. The Administrative Committee will administer such terms and provisions in a uniform manner and in full accordance with any and all laws applicable to the Plan.
(c) To enable the Administrative Committee to perform its functions, the Company will supply full and timely information to the Administrative Committee on all Plan matters relating to the Participants, their death or other cause of termination, and such other pertinent facts as the Administrative Committee may require.
ARTICLE II
DEFINITIONS
2.1 DEFINITIONS .
Account or Accounts means the Deferral Accounts and the Employer Contribution Accounts, collectively, maintained for each Participant. The Administrative Committee may establish one or more subaccounts with respect to an Eligible Executive’s Accounts.
Adjustment has the meaning set forth in Section 5.3.
Administrative Committee means the Administrative Committee appointed by the Company to administer the Plan.
Basic Compensation means the compensation specified under the Savings Investment Plan with respect to which Pre-Tax Contributions, Savings Investment Plan Company Contributions and Savings Investment Plan Matching Contributions are made.
Beneficiary means the person designated by the Participant to receive a distribution of his or her benefits under the Plan upon the death of the Participant. If the Participant is married, his or her spouse will be his or her Beneficiary, unless his or her spouse consents in writing to the designation of an alternate Beneficiary. In the event that a Participant fails to designate a Beneficiary, or if the Participant’s Beneficiary does not survive the Participant, the Participant’s Beneficiary will be his or her surviving spouse, if any, or if the Participant does not have a surviving spouse, his or her estate. The term “Beneficiary” also will mean a Participant’s spouse or former spouse who is entitled to all or a portion of a Participant’s benefit pursuant to Section 8.3.
Change of Control means the occurrence of an “event” described in Treasury Regulation section 1.409A-3(i)(5), including, without limitation:
(a) a change in ownership of the Company as a result of a person, or more than one person acting as a group acquiring ownership that in the aggregate constitutes more than fifty percent (50%) of the total fair market value of the Company (this provision does not apply to a person or group already possessing more than fifty percent (50%) of the total fair market value of the Company); or
(b) a change in effective control of the Company as a result of a person or more than one person acting as a group acquiring (or has acquired during the twelve (12) month period ending on the date of the most recent acquisition by such person or group) ownership of stock of the Company possessing more than thirty percent (30%) of the total voting power of the stock of the Company; or
(c) a change in effective control of the Company as a result of the majority of members of the Company’s Board of Directors being replaced during any twelve (12) month period by directors whose appointment or election is not endorsed by a majority of the members of the Company’s Board of Directors before the date of the appointment or election, or
(d) a change in ownership of a substantial portion of the Company’s assets as a result of a person or more than one person acting as a group acquiring (or has acquired during the twelve (12) month period ending on the date of the most recent acquisition by such person or persons) assets from the Company that have a total gross fair market value equal to more than forty percent (40%) of the total gross fair market value of all of the assets of the Company immediately before such acquisition or acquisitions).
Code means the Internal Revenue Code of 1986, as amended.
Company means Fluor Corporation and (a) any company which is a member of a controlled group of corporations, as defined in section 414(b) of the Code, which controlled group includes Fluor Corporation; (b) any trade or business under common control as defined in section 414(c) of the Code with Fluor Corporation; (c) any organization (whether or not incorporated) which is a member of an affiliated service group that includes Fluor Corporation or any entity described in (a) and (b) above; and (d) any other entity required to be aggregated with Fluor Corporation or any other entity described in (a), (b) and (c) above pursuant to regulations under section 414(o) of the Code; provided, however, that any reference to the Company with respect to matters relating to the administration, design or termination of the Plan refers only to Fluor Corporation.
Company Contribution (Former P2) IRS Limit Make-Up Contributions means the Company contributions made to compensate an Eligible Executive for reductions in the Savings Investment Plan Company Contribution, if any, that result from the limitations imposed by sections 401(a)(17) and 415 of the Code.
Company Contribution (Former P2) Salary Deferral Make-Up Contributions means the Company contributions made to compensate an Eligible Executive for reductions in the Savings Investment Plan Company Contribution, if any, that result from Regular Salary Deferrals under this Plan.
Crediting Options means the investment options selected by the Administrative Committee for the purpose of determining gains and/or losses to Participant Accounts, as modified from time to time as described in Section 6.1
Deferral Accounts means the separate bookkeeping accounts maintained with respect to a Participant’s (a) Incentive Award Deferrals, (b) Regular Salary Deferrals, (c) Excess-401(k) Salary Deferrals and (d) Vested Dividend Deferrals. The Administrative
Committee may maintain separate bookkeeping accounts with respect to each deferral source for each Plan Year and/or may combine sources for each Plan Year with respect to which a deferral election is made.
Deferral Election Date means, as applicable, the Initial Deferral Election Date, Salary Deferral Election Date, Incentive Award Deferral Election Date, or Vested Dividend Deferral Election Date.
Designated Filing Person means the Executive Compensation Department of Fluor Corporation or its designee who is responsible for receiving, reviewing and recording Election Forms.
Election Form means the form or forms filed by an Eligible Executive on or before whichever of the Initial Deferral Election Date, the Salary Deferral Election Date, the Incentive Award Deferral Election Date, or the Vested Dividend Deferral Election Date apply, and which complies with the requirements of this Plan, provided, however, that such form or forms will contain such terms and be in such form as determined by the Administrative Committee. The Administrative Committee may utilize separate Election Forms for deferral elections and distribution elections under this Plan.
Eligible Executive means any Employee whose home country is the United States and is a member of the executive management team or any other person who the Administrative Committee determines to be eligible for participation in the Plan.
Employee means each person classified by the Company currently, or in any prior or future Plan Year, as a common law employee, but excluding each other person, including but not limited to persons classified by the Company as independent contractors, consultants, and employees of an entity other than the Company, even if such person is subsequently determined by the Company, the Internal Revenue Service, the Department of Labor, or a court of competent jurisdiction to be a common law employee of the Company.
Employer 401(k) Match Make-Up Contributions means the Company contributions made to compensate an Eligible Executive for reductions in the Savings Investment Plan Matching Contributions that result from the limitations imposed by sections 401(a)(17) and 415 of the Code.
Employer Contribution Accounts means the bookkeeping accounts maintained with respect to Employer Contributions. The Administrative Committee may maintain separate bookkeeping accounts with respect to each Employer Contribution source for each Plan Year and/or may combine sources for each Plan Year with respect to which an Employer Contribution is made.
Employer Contributions means the Company contributions made with respect to an Eligible Executive under the Plan that may consist of: (a) Company Contribution (Former P2) IRS Limit Make-Up Contributions, (b) Company Contribution (Former P2) Salary Deferral Make-Up Contributions, (c) Employer Discretionary Contributions, (d) Employer 401(k) Match Make-Up Contributions and (e) Employer Salary Deferral Make-Up Contributions.
Employer Discretionary Contributions means the Company discretionary contributions, if any, made with respect to an Eligible Executive for a Plan Year.
Employer Salary Deferral Make-Up Contributions means the Company contributions made to compensate an Eligible Executive for reductions in the Savings Investment Plan Matching Contributions that result from Regular Salary Deferrals under this Plan.
ERISA means the Employee Retirement Income Security Act of 1974, as amended.
Excess 401(k) Salary Deferrals means the deferral of Salary made by a Participant under this Plan to supplement his or her Pre-Tax Contributions under the Savings Investment Plan.
Incentive Award means the annual incentive awards or any other awards made pursuant to the terms of the Incentive Plan.
Incentive Award Deferral Election Date means the last day of the Plan Year preceding the Plan Year in which the initial performance period of such Incentive Award commences. However, if such Incentive Award qualifies as “performance-based compensation” under Section 409A and the applicable performance period is at least one (1) year, the Incentive Award Deferral Election Date will be the date that is six (6) months before the end of the performance period (or, if earlier, when the amount of the Incentive Award has become ascertainable within the meaning of Section 409A).
Incentive Award Deferrals means the deferral of Incentive Awards made by a Participant under this Plan.
Incentive Plan means the Fluor Corporation 2008 Executive Performance Incentive Plan or any successor to such plan or any other incentive program for Eligible Executives designated by the Administrative Committee.
Initial Deferral Election Date means the thirtieth (30th) day following the day on which a person first becomes an Eligible Executive; provided, however, that the Initial Deferral Election Date will not apply to any individual who is a participant in a plan that is aggregated with the Plan for purposes of Section 409A except to the extent permitted by Section 409A. For purposes of determining an Eligible Executive’s Initial Deferral Election Date, an Eligible Executive, who incurs a Termination of Service (including Retirement) and is reemployed and eligible to participate in the Plan at a date which is more than twenty-four (24) months after such Termination of Service (or Retirement), will be treated as having an Initial Deferral Election Date.
Net Asset Value means a fund’s share value, calculated once a day, based on the closing market price for each security in the fund’s portfolio. It is computed either by reference to a commercial exchange (NYSE, AMEX, Nasdaq, etc.) or by deducting the fund’s liabilities from the portfolio’s total assets and dividing this amount by the number of shares outstanding.
Organization and Compensation Committee means the Organization and Compensation Committee of the Board of Directors of Fluor Corporation.
Participant means any Eligible Executive who has one or more Deferral Accounts and/or Employer Contribution Accounts under this Plan.
Plan means the Fluor 409A Executive Deferred Compensation Program, the terms of which are set forth herein.
Plan Year means the twelve (12) month period ending on December 31 of each year.
Pre-Tax Contributions means the pre-tax contributions made by an Eligible Executive under the Savings Investment Plan.
Regular Salary Deferrals means a deferral of Salary made by an Eligible Executive under this Plan which amounts are not related to his or her Pre-Tax Contributions under the Savings Investment Plan.
Retirement means with respect to Salary Deferrals, Incentive Awards, Vested Dividends or Employer Contributions deferred for a given Plan Year, as applicable, the age and/or service criteria specified by the Company for retirement applicable to the Eligible Executive based on his or her age and years of service at the time of his or her initial employment (or reemployment) by the Company as determined pursuant to the following schedule:
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Age |
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Years of Service |
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Any |
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30 |
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55 |
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15 |
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56 |
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14 |
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57 |
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13 |
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58 |
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11 |
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59 |
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8 |
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60 |
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5 |
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65 |
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Any |
For this purpose years of service will be determined based on each twelve (12) month period of service with the Company. In the event that an Eligible Executive terminates employment and is reemployed by the Company, he or she will be given credit for his or her prior years of service with the Company.
Salary means the compensation regularly paid to an Eligible Executive by the Company per payroll period in the form of base salary ( including amounts contributed by the Company on behalf of the Eligible Executive as Pre-Tax Contributions under the Savings Investment Plan and amounts contributed under the Company’s Code section 125 cafeteria plan), but excluding bonuses, commissions, incentives, site adders, overtime
and other irregular payments including severance pay, lump sum vacation payments and merit increases paid in a lump sum, and before deductions authorized by such Eligible Executive or required by law to be withheld from such Eligible Executive.
Salary Deferral Election Date means the last day of the Plan Year preceding the Plan Year in which the Salary to be deferred is paid.
Salary Deferrals means the Regular Salary Deferrals and/or Excess 401(k) Salary Deferrals made by an Eligible Executive under this Plan.
Savings Investment Plan means the Fluor Corporation Employees’ Savings Investment Plan or any successor to such plan.
Savings Investment Plan Company Contribution means the amounts contributed to a Participant, if any, under the Savings Investment Plan as discretionary (former P2) contributions.
Savings Investment Plan Matching Contribution Rate means the percent of Basic Compensation matched under the Savings Investment Plan (currently one hundred percent (100%) of the first five percent (5%)) with respect to Pre-Tax Contributions made under such plan.
Savings Investment Plan Matching Contributions means the amounts contributed to a Participant under the Savings Investment Plan as matching contributions with respect to Pre-Tax Contributions under the Savings Investment Plan.
Section 409A means section 409A of the Code.
Specified Employee means an Employee who is a one percent (1%) owner of the Company or classified by the Company as an officer (in each case, regardless of such Employee’s level of compensation) on January 1 st of the year in which an Eligible Executive’s Termination of Service (including Retirement) occurs. Such definition of Specified Employee will be incorporated into and binding upon the Plan and its Participants and all other nonqualified deferred compensation plans maintained by the Company and their participants as if fully set forth therein.
Statutory Limitation Payroll Date means the final payroll date during the Plan Year on which an Eligible Executive can receive a Savings Investment Plan Matching Contribution resulting solely from the limitations imposed by either section 402(g) or 401(a)(17) of the Code; provided, further, that for purposes of this Plan, the reference will be construed as referring only to the portion of the Eligible Executive’s Basic Compensation paid on such final payroll date which is subject to such limitations.
Termination of Service means a separation from service from the Company for any reason, within the meaning of Section 409A, including, termination of the employee-employer relationship between a Participant and the Company by reason of Retirement, death, resignation, involuntary termination, or permanent total disability. To the extent permitted by Section 409A, a Participant will be deemed to have incurred a Termination of Service when it is reasonably anticipated that a permanent reduction in the level of services with respect to such Participant equals forty-nine percent (49%) or less of the
average level of services he or she provided in the immediately preceding three (3) years.
Time of Deferral means each Salary Deferral Election Date, Incentive Award Deferral Election Date and/or Vested Dividend Deferral Election Date applicable to the Salary, Incentive Awards or Vested Dividends that are deferred with respect to the particular Plan Year. The Time of Deferral with respect to Employer Contributions means the last day of the Plan Year preceding the Plan Year in which such contributions will be made.
Unforeseeable Emergency means a severe financial hardship to the Participant caused by a:
(a) sudden and unexpected illness or accident of the Participant, the Participant’s spouse, the Participant’s Beneficiary, or of a dependent of the Participant (as defined in section 152 of the Code, without regard to sections 152(b)(1), (b)(2), and (d)(1)(B)), or
(b) loss of the Participant’s property due to casualty, or other extraordinary and unforeseeable circumstances caused by a result of events beyond the Participant’s control.
Valuation Date means the last day of the month (or such other date determined by the Administrative Committee on a uniform and nondiscriminatory basis).
Vested Dividends means the dividends payable with respect to vested restricted stock units or restricted stock shares awarded to the Eligible Executive under the Incentive Plan.
Vested Dividends Deferral means a deferral of Vested Dividends that is made prior to the Plan Year in which the restricted stock units or restricted stock shares with respect to which such dividends will be paid have vested.
Vested Dividend Deferral Election Date means the last day of the Plan Year preceding the Plan Year in which the restricted stock units or restricted stock shares with respect to which such dividends will be paid will vest and that occurs at least twelve (12) months prior to the original dividend payout date and that defers payment of such dividends for a period of at least five (5) years.
ARTICLE III
PARTICIPATION AND DEFERRALS
3.1 AMOUNTS SUBJECT TO DEFERRAL . Subject to the provisions of this Plan and the effect of any previously authorized or required deductions, reductions, income or employment tax withholdings applicable to such compensation, an Eligible Executive may elect to defer all or any portion of his or her Salary, Incentive Award or Vested Dividends.
3.2 SALARY DEFERRALS . A person who is an Eligible Executive on a Salary Deferral Election Date (or on such Eligible Executive’s Initial Deferral Election Date, if applicable) will be entitled to elect to make up to two types of Salary Deferrals under the Plan:
(a) Regular Salary Deferrals, and
(b) Excess 401(k) Salary Deferrals.
The Eligible Executive may elect to defer distribution of his or her Regular Salary Deferrals until the earliest of (i) a date certain or (ii) the Eligible Executive’s Retirement or Termination of Service, as applicable. Conversely, the distribution of Excess 401(k) Deferrals may only be deferred until the Eligible Executive’s Retirement or Termination from Service.
In order to be effective with respect to Salary paid during a Plan Year, an Election Form must be filed with the Designated Filing Person by the Salary Deferral Election Date for such Plan Year, or, where applicable, by the Initial Deferral Election Date, and only the last Election Form filed on or before that date will be considered a properly filed Election Form with respect to such Plan Year (or portion of Plan Year). The Election Form must specify:
(A) the type of Salary deferral to be made (i.e., a Regular Salary Deferral or a Excess 401(k) Salary Deferral),
(B) the percentage or dollar amount of Salary, as specified by the Administrative Committee, to be deferred with respect to each type of Salary Deferral for each pay period,
(C) with respect to Excess 401(k) Salary Deferrals, the pay period on which such Salary Deferrals will commence,
(D) with respect to Regular Salary Deferrals the date on which payment of such Salary Deferrals will be made or commenced (Excess 401(k) Salary Deferrals will automatically be deferred until the Eligible Executive’s Termination or Service or Retirement, as applicable), and
(E) the form in which payment of each type of Salary Deferrals will be made.
A separate Election Form must be filed for each Plan Year. In addition, the Administrative Committee may prescribe that a single Election Form will apply to all Termination of Service or Retirement distribution elections. Deferred amounts withheld from an Eligible Executive’s Salary will be credited to such Eligible Executive’s Salary Deferral Account as of the payroll date in which such amounts are withheld.
3.3 INCENTIVE AWARD DEFERRALS . A person who is an Eligible Executive on the Incentive Award Deferral Election Date will be entitled to elect to defer amounts of Incentive Awards under this Plan. The Eligible Executive may elect to defer distribution of an Incentive Award until the earliest of (a) a date certain or (b) the Eligible Executive’s Retirement or Termination of Service, as applicable. At the discretion of the Administrative Committee, the election regarding the deferral period may be combined with the Eligible Executive’s election with respect to Regular Salary Deferrals.
In order to be effective with respect to an Incentive Award, an Election Form must be filed with the Designated Filing Person by the Incentive Award Deferral Election Date with respect to such Incentive Award, and only the last Election Form filed on or before
such date will be considered a properly filed Election Form with respect to such Incentive Award. The Election Form must specify:
(i) either the percentage of the Incentive Award, or a fixed dollar amount, as specified by the Administrative Committee, to be deferred,
(ii) the date on which payment of such deferrals will be made or commenced, and
(iii) the form in which payment of such deferrals will be made.
At the discretion of the Administrative Committee, the Incentive Award Deferral regarding the deferral period and/or form of payment may be combined with the Eligible Executive’s Regular Salary Deferral election. In addition, the Administrative Committee may prescribe that a single Election Form will apply to all Termination of Service or Retirement distribution elections. Deferred amounts withheld from an Eligible Executive’s Incentive Award will be credited to such Eligible Executive’s Incentive Award Deferral Account as of the payroll date in which such amounts are withheld.
3.4 VESTED DIVIDEND DEFERRALS . A person who is an Eligible Executive on the Vested Dividend Deferral Election Date will be entitled to elect to defer amounts of Vested Dividends. The Eligible Executive may elect to defer the distribution of Vested Dividends until the earliest of (a) a date certain that is at least five (5) years from the date such Vested Dividends would otherwise be paid or (b) the Eligible Executive’s Retirement or Termination of Service that is at least five (5) years from the date such Vested Dividends would otherwise be paid, as applicable. In the event of a Participant’s Retirement or Termination of Service within the five (5) year deferral period specified in (b), the Participant’s Vested Dividend Deferrals will be paid on the designated date certain (or if no such date is designated the fifth (5 th ) anniversary of the date such Vested Dividends would have otherwise been paid (i.e., the original dividend distribution date)).
In order to be effective with respect to Vested Dividends, an Election Form must be filed with the Designated Filing Person by the Vested Dividend Deferral Election Date with respect to such Vested Dividends, and only the last Election Form filed on or before such date will be considered a properly filed Election Form with respect to such Vested Dividends. The Election Form must specify:
(i) either the percentage of the Vested Dividends, or a fixed dollar amount, as specified by the Administrative Committee, to be deferred,
(ii) the date on which payment of such deferrals will be made or commenced, and
(iii) the form in which payment of such deferrals will be made.
A new Election Form is required to be filed with respect to each deferral of Vested Dividends. In addition, the Administrative Committee may prescribe that a single Election Form will apply to all Termination of Service or Retirement distribution elections. Deferred amounts withheld from an Eligible Executive’s Vested Dividends will be credited to such Eligible Executive’s Vested Dividend Deferral Account as of the date such Vested Dividends are paid.
3.5 STATUS AS ELIGIBLE EXECUTIVE OR PARTICIPANT . If an Eligible Executive is removed from the executive management team or a position that has been designated as eligible under this Plan, such Eligible Executive will, notwithstanding such removal, continue to make Regular Salary Deferrals, Excess 401(k) Salary Deferrals, Incentive Award Deferrals and Vested Dividend Deferrals, as applicable, and with respect to Excess 401(k) Salary Deferrals will be credited with Employer 401(k) Match Make-Up Contributions through the end of the calendar year in which such removal occurred. An election will become irrevocable on the Deferral Election Date with respect to the calendar year to which it applies, except to the extent permitted by Section 409A if the Participant experiences an Unforeseeable Emergency.
Once an Eligible Executive defers an amount hereunder, or is allocated an amount under Section 4.1, such person will become a Participant, and will remain a Participant until all amounts credited to such person hereunder are distributed to such person.
ARTICLE IV
EMPLOYER CONTRIBUTIONS
4.1 EMPLOYER CONTRIBUTIONS . Each Plan Year, the Company may make the following Employer Contributions on behalf of an Eligible Executive:
(a) Company Contribution (Former P2) IRS Limit Make-Up Contributions . An Eligible Executive who is entitled to receive a Savings Investment Plan Company Contribution will receive a Company Contribution (Former P2) IRS Limit Make-Up Contribution in an amount equal to the excess of the amount of the Savings Investment Plan Company Contribution which would have been allocated to such Eligible Executive’s account under the Savings Investment Plan for the calendar year but for the limitations imposed by sections 401(a)(17) and 415 of the Code over the actual amount of the Savings Investment Plan Company Contribution allocated to the Eligible Executive’s accounts under the Savings Investment Plan for the calendar year. Company Contribution (Former P2) IRS Limit Make-Up Contributions will be made at the same time such contributions would have been made under the Savings Investment Plan.
(b) Company Contribution (Former P2) Salary Deferral Make-Up Contributions . An Eligible Executive who is entitled to receive a Savings Investment Plan Discretionary Contribution and who makes Regular Salary Deferrals to this Plan will receive a Company Contribution (Former P2) Salary Deferral Make-Up Contribution that is equal to the amount by which the Savings Investment Plan Company Contribution to the Eligible Executive’s account under the Savings Investment Plan was reduced by reason of such Regular Salary deferrals made under this Plan. The Company Contribution (Former P2) Salary Deferral Make-Up Contribution will be made at the same time such contributions would have been made under the Savings and Investment Plan.
(c) Employer Discretionary Contributions . The Company may elect to make an Employer Discretionary Contribution under this Plan for any Plan Year in such amount and subject to such conditions as the Company determines in its sole and absolute discretion. Employer Discretionary Contributions will be made at the time determined by the Company in either the calendar year in which such contribution relates or in the following Plan Year.
(d) Employer 401(k) Match Make-Up Contributions . An Eligible Executive who makes Excess 401(k) Salary Deferrals to the Plan will receive a Employer 401(k) Match Make-Up Contribution with respect to each payroll period occurring on or after such Eligible Executive’s Statutory Limitation Payroll Date in an amount equal to the product of the percent of the Eligible Executive’s Salary deferred under the Plan (in accordance with Section 3.2(b)) multiplied by the Savings Investment Plan Matching Contribution Rate. Employer 401(k) Match Make-Up Contributions will be made on a payroll basis for those payroll periods to which such contributions are due.
(e) Employer Salary Deferral Make-Up Contribution . An Eligible Executive who makes Regular Salary Deferrals to the Plan will receive an Employer Salary Deferral Make-Up Contribution equal to the amount of the Savings Investment Plan Matching Contribution the Eligible Executive would have received on the amount of such Regular Salary Deferrals if he or she did not defer such amounts under the Plan. Employer Salary Deferral Make-Up Contributions will be made on a payroll basis for those payroll periods for which a Regular Salary Deferral is made.
4.2 EMPLOYER CONTRIBUTION DEFERRAL ELECTIONS . All Employer Contributions will be deferred until the Eligible Executive’s Retirement or Termination of Service, as applicable, and will be paid in accordance with the Participant’s Retirement or Termination of Service distribution election for the Plan Year for which such Employer Contributions are made. In the event that the Participant does not make a Retirement or Termination of Service distribution election for the Plan Year for which the Employer Contributions are made, such contributions will be paid in a lump sum upon the Participant’s Retirement or Termination of Service, as applicable, pursuant to Section 7.3. For purposes of determining the Participant’s Retirement or Termination of Service distribution election, in the event that the Administrative Committee does not provide that a single Retirement or Termination of Service distribution election will apply to all deferrals for a Plan Year, the Retirement or Termination of Service election made with respect to the Participant’s Regular Salary Deferrals, if any, will apply to his or her Employer Contributions for such Plan Year.
Employer Contributions will be credited to the Eligible Executive’s Employer Contribution Account at the time specified in Section 4.1.
ARTICLE V
MAINTENANCE OF ACCOUNTS
5.1 DEFERRAL ACCOUNTS . The Company will maintain one or more Deferral Accounts, as applicable, for each Eligible Executive with respect to his or her Incentive Award Deferrals, Salary Deferrals and Vested Dividend Deferrals.
5.2 EMPLOYER CONTRIBUTION ACCOUNTS . The Company will maintain one or more Employer Contribution Accounts, as applicable, for each Eligible Executive with respect to his or her Company Contribution (Former P2) IRS Limit Make-Up Contributions, Company Contribution (Former P2) Salary Deferral Make-Up Contributions, Employer Discretionary Contributions, Employer 401(k) Match Make-Up Contributions and Employer Salary Deferral Make-Up Contributions.
5.3 ADJUSTMENTS . Each Account will be adjusted daily to reflect any gains and/or losses thereon (deemed or actual) (the “ Adjustment ”) in accordance with the provisions of Section 6.1.
ARTICLE VI
CREDITING OPTIONS
6.1 CREDITING OPTIONS . The Administrative Committee is responsible for selecting the Crediting Options under the Plan, any of which may be changed, modified or deleted, or additional investment options may be added, by the Administrative Committee in its discretion. At the time that an Eligible Executive first becomes a Participant, the Participant will be required to allocate his or her deferrals among the Crediting Options available at the time. The Crediting Options will be used as a measure of the deemed investment performance of the balances of each of the Participant’s Accounts by the Administrative Committee.
Notwithstanding the preceding paragraph, all stock units (or equivalents) that are deferred into a Participant Accounts as Incentive Awards will not be subject to adjustment under the provisions of this Section 6.1. Any investment adjustment with respect to stock units (or equivalents) will instead be governed by the terms of the Incentive Plan granting the stock units (or equivalents), and such stock units (or equivalents) will be deemed to have been granted under such Incentive Plan.
6.2 INITIAL DESIGNATIONS . In making the initial Crediting Options designation, the Participant may specify that all or any percentage (expressed in one percent (1%) multiples) of his or her Accounts be deemed to be invested in one or more of the Crediting Options.
6.3 SUBSEQUENT DESIGNATIONS . Each Participant will also be able to reallocate the Crediting Options to be used in the future for each of his or her Accounts, for current Account balances and future contributions, on any business day on a form provided by the Administrative Committee (all elections to be expressed in one percent (1%) multiples). Any reallocation among the Crediting Options will be effective on the business day following the day on which the form is received by the Administrative Committee. Until a Participant delivers a new Crediting Options form to the Administrative Committee, his or her prior Crediting Options election will control.
6.4 MISSING OR INVALID DESIGNATIONS . If a Participant fails to designate any Crediting Option for the Accounts, he or she will be deemed to have designated the Money Market Option (or its equivalent) until a Crediting Options designation is received by the Administrative Committee. Similarly, if a Participant has designated a Crediting Option which is removed or no longer available, the Participant will be deemed to have designated the Crediting Option selected by the Administrative Committee and communicated to Participants as its replacement until such time a new Crediting Options designation is received by the Administrative Committee.
6.5 EFFECT OF CHANGE IN DESIGNATION . The Company will use the Participant’s Crediting Option designations as the basis for calculating the Adjustment component of each Account. If a Participant changes his or her Crediting Option designations, then such change will supersede the previous designation effective the next business day after the change is received by the Company.
6.6 CALCULATION OF ADJUSTMENT . The Adjustment will be determined for every Account each day that the investment associated with the particular Crediting Option is actively traded. The daily Adjustment for each Crediting Option will be determined as follows:
(a) As of each trading day of the associated investment of the Crediting Option in which a Participant has a beginning balance for the day in any Account, the amount of each Account deemed invested in a particular Crediting Option will either be credited or debited with an amount equal to that determined by multiplying the amount of such Account (as measured by the beginning balance number of shares) deemed invested in a particular Crediting Option by the change in the Net Asset Value reported for that day for the associated investment.
(b) As to any amounts distributed, the Administrative Committee will cease crediting or debiting Adjustments to the Accounts on the last Valuation Date prior to the applicable distribution event set forth in Articles VII and VIII.
(c) Distribution amounts determined under Articles VII and VIII will include the cumulative Adjustments made to the Accounts of the Participant in accordance with this Article VI.
6.7 LIMITATIONS . Allocation will be made solely among the Crediting Options selected by the Administrative Committee. A Participant will have absolutely no ownership interest in any Crediting Option or any underlying investment. The Company will be the sole owner of any funds invested in any such investment, as well as all amounts accounted for in the Accounts, all of which will at all times be subject to the claims of the Company’s creditors. A Participant will have a contractual right to payment of an amount equal to the balance in each of his or her Accounts in accordance with this Article and Articles VII and VIII.
ARTICLE VII
ACCOUNT DISTRIBUTIONS
7.1 NO DEFERRAL PERIOD SPECIFIED . With respect to those portions of the Deferral Accounts (including, any Adjustments related thereto) for which a Participant may designate a specific deferral period pursuant to Article III and as to which no specific deferral period has been selected by the Participant prior to the Time of Deferral:
(a) The lump sum payment or the first installment payment will be paid in the month following Termination of Service or Retirement, as applicable.
(b) In the case of installment payments, the second installment will be paid in January following the calendar year in which the first installment was paid and all remaining installments will be paid annually in January.
(c) Other provisions notwithstanding, a Participant who is a Specified Employee and entitled to a distribution as a result of a Termination of Service (including Retirement) will receive the applicable lump sum or initial payment six (6) months after the Termination of Service (or Retirement) or, if earlier, upon death.
7.2 SPECIFIED DEFERRAL PERIOD . With respect to those portions of the Deferral Accounts (including any Adjustments related thereto) for which a Participant may designate a specific deferral period pursuant to Article III and as to which a specified deferral period has been selected by a Participant at the Time of Deferral:
(a) The lump sum payment or the first installment will be paid in the month following the earlier of (i) the Participant’s Termination of Service or Retirement, as applicable, or (ii) the occurrence of the date certain (i.e., upon expiration of the specific deferral period).
(b) In the case of installment payments, the second installment will be paid in January following the year in which the first installment was paid and all remaining installments will be paid annually in January.
(c) Notwithstanding any date certain election by a Participant, if the Participant has a Termination of Service (including Retirement) before all distributions are made pursuant thereto, such election will no longer apply and the deferral election applicable to distributions to be made in connection with the Participant’s Termination of Service or Retirement, as applicable, instead will become effective.
(d) Other provisions notwithstanding, a Participant who is a Specified Employee and entitled to a distribution as a result of a Termination of Service (including Retirement) will receive the applicable lump sum or initial payment six (6) months after the Termination of Service (or Retirement) or, if earlier, upon death.
7.3 NO FORM OF DISTRIBUTION IS SPECIFIED . With respect to any Account (including, any Adjustments thereto) as to which no specific form of distribution has been selected by the Participant at the Time of Deferral, the distribution will be in the form of a single lump sum payment.
7.4 FORM OF DISTRIBUTION IS SPECIFIED . With respect to any Account (including any Adjustments thereto) as to which a form of distribution has been selected by the Participant at the Time of Deferral, the distribution will be in the form designated.
7.5 ELECTION CHANGES . A Participant may change the time and form of payment by making a subsequent distribution election. A subsequent distribution election must be made at least twelve (12) months before the payment otherwise would have been made and will become effective twelve (12) months after the election has been received by the Company. The subsequent distribution election must defer payment to a date at least five (5) years later than originally scheduled.
7.6 DEATH BENEFITS . If elected by the Eligible Executive in the time and manner specified in Article III, in the event of the death of a Participant while employed by the Company, the Participant’s benefits will be distributed to the Participant’s Beneficiary in a single lump sum payment as soon as administratively feasible following the Participant’s death, but no later than December 31 following death. In the event the Eligible Executive does not make this election and he or she dies while employed by the Company, his or her benefits will be paid according to the terms of his or her Retirement election.
7.7 RELEASE OF CLAIM . Acceptance of payment of the distributions required hereunder by a Participant or his or her Beneficiary (as applicable) will constitute a release by such Participant or Beneficiary (as applicable) of all claims against the Company by the Participant or Beneficiary (as applicable).
ARTICLE VIII
OTHER DISTRIBUTION EVENTS
8.1 CHANGE OF CONTROL . Notwithstanding any other Section hereof, if a Participant has a Termination of Service (including Retirement) for any reason other than death, within the two (2) year period beginning on the date that a Change of Control occurs, then the Company will pay to the Participant by the end of the month following the month of termination (six months (6) after the date of the Termination of Service (or Retirement) if the Participant is a Specified Employee) a lump sum distribution of all of his or her Accounts (including any Adjustments). If a Participant dies after Termination of Service (including Retirement), but before payment of any amount payable under this Section, then such amount will be paid to the Participant’s Beneficiary within the first fifteen (15) days of the month following the month of the Participant’s death.
8.2 UNFORESEEABLE EMERGENCY . A distribution of a portion of a Participant’s Accounts because of an Unforeseeable Emergency will be permitted only to the extent required by the Participant to satisfy the emergency. Whether an Unforeseeable Emergency has occurred will be determined solely by the Administrative Committee in its reasonable discretion. The circumstances that will constitute an Unforeseeable Emergency will depend upon the specific facts of each case, but, in any event, any distribution under this Section will not exceed the amount required by the Participant to resolve the hardship after (a) reimbursement or compensation through insurance or otherwise, (b) obtaining liquidation of the Participant’s assets, to the extent such liquidation would not itself cause a severe financial hardship, or (c) suspension of Salary Deferrals under the Plan. In all events, a distribution will be made in connection with an Unforeseeable Emergency only to the extent permitted by Section 409A.
8.3 DISTRIBUTION IN THE EVENT OF DIVORCE . In the event of the divorce or legal separation of a Participant, and the awarding of all or a portion of the Participant’s Accounts to the spouse of the Participant by court order, such spouse may elect, by filing with the Administrative Committee a form specified by the Administrative Committee and by providing such other information as the Administrative Committee may in its discretion reasonably request in order to confirm that the applicable facts and circumstances are present, to receive a distribution of his or her court-awarded portion of the Participant’s Accounts in the form of a lump sum subject to the terms of Section 9.1.
ARTICLE IX
MISCELLANEOUS PROVISIONS
9.1 PARTICIPANT RIGHTS IN THE UNFUNDED PLAN . Any liability of the Company to any Participant with respect to any benefit will be based solely upon the contractual obligations created by the Plan; no such obligation will be deemed to be secured by any pledge or any encumbrance on any property of the Company. The Company’s obligations under this Plan will be an unfunded and unsecured promise to pay. No Participant or his or her Beneficiaries will have any rights under the Plan other than those of an unsecured creditor of the Company. Assets segregated or identified by the
Company for the purpose of paying benefits pursuant to the Plan remain general corporate assets subject to the claims of the Company’s creditors.
9.2 NON-ASSIGNABILITY . Subject to the provisions of Section 9.3, neither the Participant nor his or her Beneficiary will have any power or rights to transfer, assign, anticipate, hypothecate or otherwise encumber any part or all of the amounts payable hereunder, which are expressly declared to be un-assignable and non-transferable. Any such attempted assignment or transfer will be void and the Company will thereupon have no further liability to such Participant or such Beneficiary hereunder. No amount payable hereunder will, prior to actual payment thereof, be subject to seizure by any creditor of any Participant or Beneficiary for the payment of debt, judgment or other obligation, by a proceeding at law or in equity, nor transferable by operation of law in the event of the bankruptcy, insolvency or death of the Participant, his or her designated Beneficiary or any other beneficiary hereunder.
9.3 TERMINATION OR AMENDMENT OF PLAN . The Company retains the right, at any time and in its sole discretion, to amend or terminate the Plan, in whole or in part. Any amendment of the Plan will be approved by the Organization and Compensation Committee, will be in writing, and will be communicated to the Participants. In addition, the Administrative Committee may amend the Plan at any time to (a) comply with changes required by law or (b) make any other change to the Plan, provided that any such change has no adverse financial impact on the Company and no adverse impact on the rights of a Participant. The Administrative Committee will also have the discretionary authority to change the requirements of eligibility or to modify the Crediting Options hereunder without Organization and Compensation Committee approval. No amendment of the Plan will materially impair or curtail the Company’s contractual obligations arising from deferral elections previously made or for benefits accrued prior to such amendment without Participant consent. In the event of Plan termination, payment of Deferral and Employer Contribution Accounts will occur in accordance with existing Participant distribution elections.
9.4 CONTINUATION OF EMPLOYMENT . This Plan will not be deemed to constitute a contract of employment between the Company and an Eligible Executive or Participant. Nothing in the Plan or in any instrument executed pursuant to the Plan will confer upon any Eligible Executive or Participant any right to continue in the employ of the Company or affect the right of the Company to terminate the employment of any Eligible Executive or Participant at any time with or without cause. Nothing in the Plan will otherwise affect any Eligible Executive or Participant’s employment relationship with the Company.
9.5 RESPONSIBILITY FOR LEGAL EFFECT . Neither the Administrative Committee nor the Company make any representations or warranties, express or implied, or assumes any responsibility concerning the legal, tax or other implications or effects of this Plan.
9.6 WITHHOLDING . The Company will withhold from or offset against any payment or accrual made under the Plan any taxes the Company determines it is required to withhold by applicable federal, state, local or foreign laws.
9.7 OTHER COMPENSATION PLANS . The adoption of the Plan will not affect any other incentive or other compensation plans in effect for the Company or any subsidiary, nor will the Plan preclude the Company from establishing any other forms of incentive or other compensation for employees of the Company or any subsidiary.
9.8 PLAN BINDING ON SUCCESSORS . The Plan will be binding upon the successors and assigns of the Company.
9.9 CONSTRUCTION . Wherever appropriate in this Plan, nouns in the singular will include the plural. The terms “herein,” “hereof,” “hereunder” and similar terms refer to this document, unless otherwise qualified by the context. The pronouns “he,” “him” and “his” used in the Plan will also refer to similar pronouns of the feminine gender unless otherwise qualified by the context.
9.10 CONTROLLING LAW . The Plan will be governed by and construed in accordance with the internal law, without regard to conflict of law principles, of the State of Delaware to the extent not pre-empted by the laws of the United States of America.
9.11 NO DUPLICATION . In no event will the benefit provided under the Plan duplicate any benefits accrued and/or payable under the Fluor Corporation Deferred Compensation Program (frozen effective December 31, 2004).
9.12 SECTION 409A COMPLIANCE . The provisions of the Plan will be construed and administered in a manner that enables the Plan to comply with the provisions of Section 409A.
Exhibit 10.39
[Fluor Letterhead]
January 9, 2009
Mr. B. A. Stanski
2709 Howard Grove Road
Davidsonwille, Maryland 21035
Dear Bruce:
We are pleased to extend to you an offer of employment as Group President, Government with Fluor Corporation, Inc. (“Fluor” or the “Company”). We are confident that we will benefit from your experience and are sure that you will find Fluor a challenging and enjoyable environment in which to work.
Base Salary
Your starting annual base salary will be $450,000. You will be reviewed for future salary increases consistent with our executive salary administration program.
Annual Incentive
You will be reviewed on an annual basis for incentive purposes. Your target bonus is 75% of your base salary, or $337,500. Your incentive opportunity range is from zero to twice this amount based on your individual performance and the overall results of the corporation. Annual incentives are awarded on a fiscal year basis payable within 90 days following the close of the fiscal year. Your first year incentive will be pro-rated for actual months worked during the fiscal year.
Hiring Bonus
You will be paid a lump sum hiring bonus of $200,000 during your first month of employment. All applicable taxes will be withheld from the hiring bonus. By signing this letter, Fluor is authorized to deduct this amount from your final pay if you should voluntarily terminate your employment within one year from your date of hire.
Retention Bonus
You will earn a three-year cash retention bonus of $1,500,000 vesting in three payments. The first payment of $500,000 will be payable within 30 days after your first year of employment. The second payment of $500,000 will be payable within 30 days after your second year of employment. The third and final payment will be payable within 30 days after your third year of employment The retention award will be considered earned and payable if (a) you remain continuously employed by the Company for 3 years from your start date (to be decided), or (b) your employment terminates prior to the retention period due to (i) death, (ii) permanent and total disability, (iii) a Company initiated termination other than on a for-cause basis or (iv) a Company initiated termination following a Change of Control.
If in the event your employment terminates prior to the earnout date for any reason other than stated above (including, without limitation, your voluntary termination or a termination for cause), then the remaining retention award will be forfeited in its entirety.
For purposes hereof, the term “Change of Control” shall be deemed to have occurred if, (a) a third person, including a “group” as defined in Section 13(d)(3) of the Securities Exchange Act of 1934, acquires shares of the Company having 25% or more of the votes that may be cast for the election of directors of the Company or (b) as a result of any cash tender or exchange offer, merger or other business combination, or any combination of the preceding (a “transaction”), the persons who are the directors of the Company before the transaction shall cease to constitute a majority of the Board of Directors of the Company or any successor thereto.
Long Term Incentive Program
We will recommend to the Organization and Compensation Committee of the Board of Directors your participation in the fiscal year 2009 long term incentive award program. This program emphasizes long-term company performance and management’s alignment to the creation of long-term shareholder value. The current target award value under this year’s program for your level is $800,000, which is comprised of the following elements:
· $268,000 in our Value Driver Incentive Program (VDI), which is a cash award based on performance against established corporate objectives. The program has a two-year performance period and is paid in two installments. The first 50 percent installment will be paid after the conclusion of the two-year performance period and the last 50 percent installment will be paid after the third year;
· $266,000 in Restricted Stock Units (RSUs) based on the closing stock price on date of grant. The grant vests in thirds over three (3) years; and
· $266,666 in Stock Options based on the black-scholes valuation method on date of grant. The grant vests in thirds over three (3) years.
Long term incentive grants are typically made in March of each year. Your first grant will be made after your employment begins with Fluor and the Organization and Compensation Committee of the Board of Directors meets to approve it . The design and target values associated with this program are reviewed in November of each year so the components, timing and/or award values may change slightly.
Perquisite Allowance
You will be paid a Monthly Perquisite Allowance of US$2,525, less applicable withholding taxes. This monthly allowance is intended to assist you in leasing or buying and insuring an automobile, as well securing financial planning services of your choice, and maintaining a country club membership. Business use of your automobile will be reimbursed in accordance with Fluor’s personnel policy.
Executive Deferred Compensation Program (EDCP)
You will be eligible to participate in this program from date of hire. Starting in 2010, three deferral options will be available to help you reduce your tax obligations and plan for financial security: salary deferral, incentive awards deferral, and excess 401(k) contributions. In 2009, you will only be eligible to participate in salary deferrals. Participation in this program is voluntary. Amounts deferred under this program may be deferred until termination, retirement or for a specified period of time of three years or more and will accrue interest based on the allocation of your Executive Deferred Compensation Program
balance among the available crediting options. Participation in this program is subject to continued executive status.
You must enroll within 30 days of your hire date with Fluor through Mullin TBG, our program administrator. Please contact Jessica Green at 469.398.7047 for more information on this program and/or to obtain enrollment materials.
401(k) Savings Investment Plan (SIP)
You will be eligible immediately to participate in the 401(k) SIP. You may elect to defer up to 50% of your base monthly salary up to IRS maximums. After one year of service, the Company makes matching contributions of 100% of the first 5% of your contributions. The Company match is discretionary and is declared annually. If you have a qualified profit sharing distribution, you may rollover the funds provided they are from a qualified plan and constitute a rollover contribution under applicable IRS Code.
You will be eligible for a Performance Contribution after one year of service. Based on financial performance, the Company may make a discretionary annual company performance contribution to your SIP account. The amount of the contribution will depend on the overall financial performance of the Company and employees will receive awards based on a percentage of their eligible base salary. The vesting schedule for participants is 100% after three years of service. You will manage the investment of your contributions among several varied investment funds.
Fluor Corporation Defined Retirement Plan
You will be eligible to participate in the Fluor Corporation Defined Retirement Plan after completing one year of service. Once eligible, the Company credits your account with a percentage of pay based on your age and years of service as of January 1 of the plan year. The vesting schedule for participants is 100% after three years of service.
Executive Paid Physical Examination Program
As a member of the Executive Management Team, you will be required to participate in Fluor’s Senior Management Executive Physical Examination Program, which is directly billed to the Company through the Executive Services department. Additional information on this program may be obtained by contacting the Executive Services team.
Group Health, Life, Dental and Long-Term Disability Insurance Coverage
Your share of the cost for a standard group health insurance will be 0.75% of your base salary plus a premium of $62.50 (employee only) up to a maximum of $384.46 per month. Your share of the cost for group dental insurance is 0.1% of your base salary plus a premium of $3.76 (employee only) up to a maximum of $26.25 a month. Additionally, you may, at your option, cover your dependents on our group health care, dental care, and life insurance plans for a monthly premium. You may also purchase additional life insurance.
Other Employee Benefits
In addition, other benefits available include an Employee and Family Assistance Program, Travel Accident Insurance, and Tax Savings Accounts, which give you the ability to pay qualifying medical, dental, and child/elder care expenses with pre-tax dollars.
Time Off With Pay (TOWP)
The Time Off With Pay (TOWP) accrual rate is based on the total number of years of continuous service. Therefore, you will start accruing TOWP from your start date at the rate of 3.85 hours per week, 200 hours per year. TOWP is used for holidays, vacations, sick leaves, personal time off, and a variety of other types of time off. It is accrued with no limit and no loss of time except for use. At termination or retirement from the Company, you will receive the entire balance of unused TOWP. To recognize your seniority, we will credit your TOWP account with 160 hours.
Contingencies
The Immigration Reform and Control Act of 1986 requires Fluor to verify and record both your identity and right to work in the United States. Accordingly, this offer of employment is contingent on your being able to satisfy the above mentioned law on or before your first day of work. Further, the executive status of a position is discretionary and subject to change.
In addition, this offer of employment is contingent upon your successful completion of a pre-employment drug screen test to be conducted by Medtox. This screening must be completed prior to your first day of work. We recommend that you not resign your current position until a satisfactory drug test result is received. To coordinate an appointment for a chemical screening, please call Medtox at 1.888.557.2590 as soon as possible. A Chain of Custody form is included in your offer package and should be brought with you to your chemical screening appointment.
Further, as with most companies, the employment relationship with Fluor is based on the mutual consent of you and the Company. Your employment with Fluor is not for any specified period of time and can be terminated by either you or the Company at any time with or without any cause or advance notice. Nothing contained in this letter is intended, nor should it be construed, to alter the at-will relationship Fluor and its employees maintain with one another. Although the Company reserves the right to change from time-to-time other terms, conditions, and benefits of employment, the at-will nature of employment with the Company is one aspect of our employment relationship that will not change. The only way the at-will nature of our employment relationship can be changed is by way of an express written agreement, signed by you and the Senior Vice President of Human Resources and Administration.
This offer of employment is also contingent upon your ability to work for the Company without restrictions from any previous employer. By accepting this offer, you represent that you are aware of no obligations legal or otherwise, inconsistent with the terms of this offer letter or with your undertaking employment with Fluor. You further represent that there are no restrictions on your right to leave your present employer to join Fluor in any capacity or to perform any work on behalf of Fluor, except as provided in this paragraph. You will not disclose to Fluor, or use, or induce Fluor to use any proprietary
information or trade secrets of others. You also represent and warrant that you have returned all proprietary and confidential information belonging to all prior employers.
We look forward to your joining the Company and are sure that your employment with Fluor will be both successful and rewarding for you. Orientation and the processing of your new hire paperwork will take place the morning of your first day of work.
The new-hire paperwork and additional information can be accessed at http://www.fluormembers.com/NewHire/newhire.htm. After you access the site, first click on “Welcome to Fluor” and next “Instructions for New Hires” to navigate through the website. Enclosed are hard copies of the paperwork included in the link, should this be more convenient. On your first day, please report to the Main Reception Lobby of Fluor Corporation at 6700 Las Colinas Boulevard, Irving, Texas at 8:00 a.m.
Please review the entire contents of this offer letter thoroughly and let us know of your decision to join the Company by signing a copy of this offer letter and returning it, along with the enclosed authorization forms and completed application to Executive Services via email at Executive Compensation@fluor.com; fax to 469.398.7288; or send in the enclosed self-addressed envelope as soon as possible. By signing this offer letter, you also acknowledge that no other promises or representations have been made to you other than those contained in this offer letter. This offer of employment is valid for thirty (30) days from the date of this letter. An additional copy is enclosed for your records.
Should you have any questions regarding the details of this offer letter, please contact me at 469.398.7148 or Lisa Schlepp, Executive Director of Human Resources, at 469.398.7121.
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Sincerely, |
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/s/ Alan Boeckmann |
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Alan Boeckmann |
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Chairman and Chief Executive Officer |
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cc: Glenn Gilkey |
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ALB: mjp |
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Enclosures |
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Accepted: |
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/s/ Bruce A. Stanski |
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13 March 09 |
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Bruce A. Stanski |
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Date |
Exhibit 21.1
FLUOR CORPORATION SUBSIDIARIES
[Note: Roman numerals below denote the level of the subsidiary. For example, “I” represents a first tier subsidiary of Fluor Corporation; “II” represents a second tier subsidiary, etc.]
|
|
|
Percent |
|
Organized |
|
Subsidiary Name |
|
Holding |
|
Under Laws Of |
|
|
|
|
|
|
|
I American Equipment Company, Inc. |
|
100.0000 |
|
South Carolina |
|
II AMECO PANAMA S.A. |
|
100.0000 |
|
Panama |
|
II AMECO Services Inc. |
|
100.0000 |
|
Delaware |
|
III Equipos y Servicios De Venezuela ESV. C. A. |
|
90.0000 |
|
Venezuela |
|
III Mikisew AMECO Group, Inc. |
|
49.0000 |
|
Alberta |
|
II United Rentals Industrial Services LLC |
|
50.0000 |
|
Delaware |
|
II Ameco Services, S. de R.L. de C.V. |
|
72.6016 |
|
Mexico |
|
II American Construction Equipment Company, Inc. |
|
100.0000 |
|
California |
|
III AMECO Holdings, Inc. |
|
100.0000 |
|
California |
|
IV AMECO Caribbean, Inc. |
|
100.0000 |
|
California |
|
V Ameco Inc. |
|
100.0000 |
|
Saint Lucia |
|
IV Ameco Mexico Administracion y Servicios, S. de R.L. de C.V. |
|
0.2000 |
|
Mexico |
|
IV Ameco Peru S.A.C. |
|
0.8357 |
|
Peru |
|
IV AMECO Project Services, Inc. |
|
100.0000 |
|
Philippines |
|
IV Ameco Pty Ltd. |
|
100.0000 |
|
Australia |
|
IV Ameco Services S.R.L. |
|
5.2591 |
|
Argentina |
|
IV Ameco Services, S. de R.L. de C.V. |
|
3.0992 |
|
Mexico |
|
IV Maquinaria Ameco Guatemala, Limitada |
|
80.0000 |
|
Guatemala |
|
III Ameco Mexico Administracion y Servicios, S. de R.L. de C.V |
|
99.8000 |
|
Mexico |
|
III Ameco Peru S.A.C. |
|
99.1643 |
|
Peru |
|
III Ameco Services S.R.L. |
|
94.7400 |
|
Argentina |
|
III Ameco Services, S. de R.L. de C.V. |
|
24.2992 |
|
Mexico |
|
II BWJ, LLC |
|
100.0000 |
|
Delaware |
|
II Palmetto Seed Capital Ltd. Partnership |
|
7.3529 |
|
South Carolina |
|
II SMA Equipment, LLC |
|
100.0000 |
|
Delaware |
|
II Vantage Information Systems, Inc. |
|
100.0000 |
|
Delaware |
|
|
|
|
|
|
|
I Fluor Constructors International, Inc. |
|
100.0000 |
|
California |
|
II Fluor Constructors Canada Ltd. |
|
100.0000 |
|
New Brunswick |
|
III Fluor Canada Partners |
|
25.0000 |
|
Alberta |
|
II Fluor Management and Technical Services, Inc. |
|
100.0000 |
|
California |
|
|
|
|
|
|
|
I Fluor Enterprises, Inc. |
|
100.0000 |
|
California |
|
II 660904 N.B. Inc |
|
100.0000 |
|
New Brunswick |
|
II ABF Barge, LLC |
|
75.0000 |
|
Delaware |
|
II American Bridge/Fluor Enterprises Inc A Joint Venture |
|
50.0000 |
|
California |
|
II Bellefonte Construction Services LLC |
|
65.0000 |
|
Delaware |
|
II Brady-Fluor, LLC |
|
49.0000 |
|
Delaware |
|
II Capital Beltway Express LLC |
|
10.0000 |
|
Delaware |
|
II Caribbean Thermal Electric, LLC |
|
49.0000 |
|
Delaware |
|
II Cascadia Monorail Company LLC |
|
100.0000 |
|
Delaware |
|
II Cheyenne River Constructors, LLC |
|
100.0000 |
|
Delaware |
|
II Claiborne Fuels, Inc. |
|
100.0000 |
|
California |
|
III Claiborne Fuels, L.P. |
|
1.0000 |
|
Delaware |
|
II Cibolo Creek Infrastructure Joint Venture |
|
55.0000 |
|
Texas (JV) |
|
II Daniel International Corporation |
|
100.0000 |
|
South Carolina |
|
III Greenville RP Associates, LLC |
|
50.0000 |
|
South Carolina |
|
|
|
Percent |
|
Organized |
|
Subsidiary Name |
|
Holding |
|
Under Laws Of |
|
|
|
|
|
|
|
III Daniel Navarra, S.A. |
|
100.0000 |
|
Spain |
|
III Fluor Daniel Engineering, Inc. |
|
100.0000 |
|
Ohio |
|
III Fluor Management Company L.P. |
|
46.0676 |
|
Delaware |
|
IV Greenville RP Associates, LLC |
|
50.0000 |
|
South Carolina |
|
II DAX Industries, Inc. |
|
5.0000 |
|
Texas |
|
II Del-Jen, Inc. |
|
100.0000 |
|
California |
|
III Academy Facility Management |
|
51.0000 |
|
Maryland |
|
III Alcon Services Group |
|
33.3333 |
|
Alaska |
|
III Chugach Eareckson Support Services, JV |
|
49.0000 |
|
Alaska |
|
III Del-Jen International Corporation |
|
100.0000 |
|
Delaware |
|
III PRI/DJI, A Reconstruction JV |
|
49.0000 |
|
Mississippi |
|
III Rock Island Integrated Services |
|
51.0000 |
|
Illinois |
|
III Trend Western Technical Corporation |
|
100.00 |
|
California |
|
II Denver Transit Holdings, LLC |
|
10.0000 |
|
Delaware |
|
III Denver Transit Partners, LLC |
|
100.0000 |
|
Delaware |
|
II Denver Transit Operators, LLC |
|
33.3333 |
|
Delaware |
|
II Denver Transit Systems, LLC |
|
50.0000 |
|
Delaware |
|
II Denver Transit Constructors, LLC |
|
40.0000 |
|
Delaware |
|
II Duke/Fluor Daniel |
|
49.9999 |
|
North Carolina |
|
II Efdee Connecticut Architects, Inc. |
|
100.0000 |
|
Connecticut |
|
II Efdee Engineering Professional Corporation |
|
100.0000 |
|
North Carolina |
|
II Efdee Mississippi Architects, A Professional Corporation |
|
100.0000 |
|
Mississippi |
|
II Efdee New York Engineers & Architects P.C. |
|
100.0000 |
|
New York |
|
II Encee Architecture Services, P.C. |
|
100.0000 |
|
North Carolina |
|
II ESSI, LLC |
|
33.3333 |
|
Delaware |
|
III ESSI Limited |
|
100.0000 |
|
England |
|
II eTech Solutions, Inc. |
|
100.0000 |
|
Nevada |
|
II Evergreen Equipment and Personnel Leasing, Inc. |
|
100.0000 |
|
Rhode Island |
|
II F&F Infrastructure, LLC |
|
50.0000 |
|
Colorado |
|
II FCI/Fluor/Parsons, a Joint Venture |
|
30.0000 |
|
California |
|
II FD Architects & Engineers Corporation |
|
100.0000 |
|
New Jersey |
|
II FD Mexico, Inc. |
|
100.0000 |
|
Delaware |
|
II FD/MK Limited Liability Company |
|
60.0000 |
|
Delaware |
|
II FDEE Consulting, Inc. |
|
100.0000 |
|
California |
|
II FDHM, Inc. |
|
100.0000 |
|
California |
|
II Fluor (Nigeria) Limited |
|
100.0000 |
|
Nigeria |
|
II Fluor A&E Services, Inc. |
|
100.0000 |
|
California |
|
II Fluor Abadan Limited |
|
100.0000 |
|
Bermuda |
|
II Fluor Alaska, Inc. |
|
100.0000 |
|
Alaska |
|
II Fluor Americas, Inc. |
|
100.0000 |
|
California |
|
II Fluor Ames Kraemer, LLC |
|
40.0000 |
|
Delaware |
|
II Fluor Atlantic Limited |
|
100.0000 |
|
Bermuda |
|
II Fluor Australia Pty Ltd |
|
100.0000 |
|
Australia |
|
III Fluor Aker Solutions JV |
|
50.0000 |
|
Australia |
|
III Fluor Construction Services Pty Ltd. |
|
100.0000 |
|
Australia |
|
III Fluor Global Services Australia Pty Ltd |
|
100.0000 |
|
Australia |
|
IV Fluor Maintenance Services Pty Ltd |
|
100.0000 |
|
Australia |
|
IV Fluor Operations and Maintenance Services Pty Ltd |
|
100.0000 |
|
Australia |
|
IV Fluor Services Pty Ltd |
|
100.0000 |
|
Australia |
|
III Fluor Power Services Pty Ltd |
|
100.0000 |
|
Australia |
|
III Fluor Rail Services Pty Ltd |
|
100.0000 |
|
Australia |
|
III Fluor-SKM Iron Ore Joint Venture |
|
55.0000 |
|
Australia |
|
III Karratha Engineering Services Pty Ltd |
|
100.0000 |
|
Australia |
|
III PT Signet Indonesia |
|
10.0000 |
|
Indonesia |
|
III Signet Holdings Pty Ltd |
|
100.0000 |
|
Australia |
|
IV PT Signet Indonesia |
|
90.0000 |
|
Indonesia |
|
|
|
Percent |
|
Organized |
|
Subsidiary Name |
|
Holding |
|
Under Laws Of |
|
|
|
|
|
|
|
IV Signet Engineering Pty Ltd |
|
100.0000 |
|
Australia |
|
V Signet Ingenieria S.A |
|
0.0100 |
|
Chile |
|
VI Constructora Lequena S.A. |
|
100.0000 |
|
Chile |
|
IV Signet Ingenieria S.A. |
|
99.9900 |
|
Chile |
|
V Constructora Lequena S.A. |
|
100.0000 |
|
Chile |
|
IV Westquip Australia Pty Ltd |
|
100.0000 |
|
Australia |
|
III TRS Staffing Solutions (Australia) Pty Ltd |
|
100.0000 |
|
Australia |
|
III WorleyParsons Fluor Joint Venture |
|
50.0000 |
|
Australia |
|
II Fluor Canada Ltd. |
|
100.0000 |
|
New Brunswick |
|
III B.C. Mining Joint Venture |
|
50.0000 |
|
Canada |
|
III Fluor Canada Partners |
|
75.0000 |
|
Alberta |
|
III Fluor Daniel International Services Inc. |
|
10.0000 |
|
Barbados |
|
III Fluor Engineering Solutions Ltd. |
|
100.0000 |
|
New Brunswick |
|
III Fluor WEP Holdings Inc. |
|
100.0000 |
|
New Brunswick |
|
III TRS Staffing Solutions (Canada) Inc. |
|
100.0000 |
|
Canada |
|
III Wright Engineers (Chile) Limitada |
|
100.0000 |
|
Chile |
|
III Wright Engineers Limitada Peru |
|
35.0000 |
|
Peru |
|
II Fluor Cebu, Inc. |
|
100.0000 |
|
Philippines |
|
II Fluor Chile, Inc. |
|
100.0000 |
|
California |
|
III Ameco Chile S.A. |
|
99.0000 |
|
Chile |
|
III Fluor Chile Ingenieria y Construccion S.A. |
|
99.0000 |
|
Chile |
|
IV CEJV Ingeniería Y Construcción Limitada |
|
50.0000 |
|
Chile |
|
IV Fluor Techint SRL Construccion y Servicios Limitada |
|
50.0000 |
|
Chile |
|
III Ingenieria y Construcciones Fluor Daniel Chile Limitada |
|
99.1000 |
|
Chile |
|
II Fluor Closure Company, Inc. |
|
100.0000 |
|
Washington |
|
II Fluor Colombia Limited |
|
100.0000 |
|
Delaware |
|
II Fluor ConOps Limited |
|
100.0000 |
|
Guernsey |
|
II Fluor Daniel (Japan) Inc. |
|
100.0000 |
|
Japan |
|
II Fluor Daniel (Malaysia) Sdn. Bhd. |
|
100.0000 |
|
Malaysia |
|
II Fluor Daniel (NPOSR), Inc. |
|
100.0000 |
|
Delaware |
|
II Fluor Daniel Alumatech, Inc. |
|
100.0000 |
|
Delaware |
|
II Fluor Daniel America, Ltda. |
|
100.0000 |
|
California |
|
II Fluor Daniel Brasil, Ltda. |
|
99.9997 |
|
Brazil |
|
II Fluor Daniel Caribbean, Inc. |
|
100.0000 |
|
Delaware |
|
III DMIS, Inc. |
|
100.0000 |
|
South Carolina |
|
III Duke/Fluor Daniel Caribbean, S.E. |
|
0.2500 |
|
Puerto Rico |
|
III Fluor Daniel Export Services, Inc. |
|
100.0000 |
|
Delaware |
|
III Fluor Daniel International (Malaysia) Sdn. Bhd. |
|
100.0000 |
|
Malaysia |
|
III Fluor Daniel Maintenance Services, Inc. |
|
100.0000 |
|
Delaware |
|
III Fluor Daniel Services Corporation |
|
100.0000 |
|
Delaware |
|
III Fluor Facility & Plant Services, Inc. |
|
100.0000 |
|
South Carolina |
|
II Fluor Daniel China, Inc. |
|
100.0000 |
|
California |
|
II Fluor Daniel China Services, Inc. |
|
100.0000 |
|
California |
|
II Fluor Daniel China Technology, Inc. |
|
100.0000 |
|
California |
|
II Fluor Daniel Coal Services International, Inc. |
|
100.0000 |
|
Delaware |
|
III Duke/Fluor Daniel International |
|
49.9999 |
|
Nevada |
|
IV Duke/Fluor Daniel Caribbean, S.E. |
|
99.0000 |
|
Puerto Rico |
|
III Duke/Fluor Daniel LLC |
|
49.9999 |
|
Nevada |
|
II Fluor Daniel Construction Company |
|
100.0000 |
|
California |
|
II Fluor Daniel Development Corporation |
|
100.0000 |
|
California |
|
III Crown Energy Company |
|
100.0000 |
|
New Jersey |
|
III Fluor Daniel Modesto, Inc. |
|
100.0000 |
|
California |
|
IV Wilmore/Fluor Modesto LLC |
|
50.0000 |
|
California |
|
III Fluor Daniel Temecula, Inc. |
|
100.0000 |
|
California |
|
IV Fluor Daniel Ada, Inc. |
|
50.0000 |
|
Idaho |
|
III Fluor Daniel Tempe, Inc. |
|
100.0000 |
|
California |
|
IV Ciudad Del Lago, LLC |
|
50.0000 |
|
Delaware |
|
IV Fluor Daniel Ada, Inc. |
|
50.0000 |
|
Idaho |
|
|
|
Percent |
|
Organized |
|
Subsidiary Name |
|
Holding |
|
Under Laws Of |
|
|
|
|
|
|
|
III Gloucester Limited, Inc. |
|
100.0000 |
|
California |
|
III Gloucester Limited II, Inc. |
|
100.0000 |
|
California |
|
III San Diego Expressway L.P. |
|
3.9300 |
|
California |
|
III FBT Services, Inc. |
|
100.0000 |
|
California |
|
II Fluor Daniel Eastern, Inc. |
|
100.0000 |
|
California |
|
III Fluor Kazakhstan LLC |
|
100.0000 |
|
Delaware |
|
III FPMM, XXK |
|
100.0000 |
|
Mongolia |
|
III P.T. Fluor Daniel Indonesia |
|
80.0000 |
|
Indonesia |
|
IV PT. MITRA BERSAMA ENGINEERING |
|
99.0000 |
|
Indonesia |
|
II Fluor Daniel Energy Investments, Inc. |
|
100.0000 |
|
Delaware |
|
III The Beacon Group Energy Investment Fund, L.P. |
|
7.5920 |
|
Delaware |
|
II Fluor Daniel Engineers & Constructors, Inc. |
|
100.0000 |
|
Delaware |
|
III Fluor (China) Engineering and Construction Co. Ltd. |
|
100.0000 |
|
P.R.C. |
|
III Fluor Daniel Project Consultants (Shenzhen) Co., Ltd. |
|
100.0000 |
|
P.R.C. |
|
II Fluor Daniel Engineers & Constructors, Ltd. |
|
100.0000 |
|
California |
|
II Fluor Daniel Engineers & Consultants Ltd. |
|
100.0000 |
|
Mauritius |
|
III Fluor Daniel India Private Limited |
|
80.0000 |
|
India |
|
II Fluor Mining and Metals France, Inc.. |
|
100.0000 |
|
Delaware |
|
II Fluor Daniel Espana, S.A. |
|
100.0000 |
|
California |
|
III Fluor Arabia Limited |
|
50.0000 |
|
Saudi Arabia |
|
II Fluor Daniel Eurasia, Inc. |
|
100.0000 |
|
California |
|
III Sakhalin Neftegas Technology |
|
50.0000 |
|
Russia |
|
II Fluor Europe B.V. |
|
100.0000 |
|
Netherlands |
|
III Fluor Belgium, N.V. |
|
100.0000 |
|
Belgium |
|
III Fluor Engineering N.V. |
|
100.0000 |
|
Belgium |
|
III Fluor Finance International B.V./S.a.r.l. |
|
100.0000 |
|
Netherlands |
|
III Fluor B.V. |
|
100.0000 |
|
Netherlands |
|
IV Fluor Consultants B.V. |
|
100.0000 |
|
Netherlands |
|
IV Fluor Infrastructure B.V. |
|
100.0000 |
|
Netherlands |
|
V Infraspeed Holdings B.V. |
|
3.4800 |
|
Netherlands |
|
VI Infraspeed B.V. |
|
100.0000 |
|
Netherlands |
|
V Infraspeed Maintenance B.V. |
|
11.0000 |
|
Netherlands |
|
V Infraspeed EPC Consortium V.O.F |
|
9.2000 |
|
Netherlands |
|
V Poort van Den Bosch B.V. |
|
10.0000 |
|
Netherlands |
|
V Poort van Den Bosch V.O.F. |
|
10.0000 |
|
Netherlands |
|
V OptimA15 B.V i.o. |
|
19.2500 |
|
Netherlands |
|
V Autobahnplus A8 Holding Gmbh |
|
25.0000 |
|
Germany |
|
VI Autobahnplus A8 GmbH |
|
100.0000 |
|
Germany |
|
IV TRS Staffing Solutions B.V. |
|
100.0000 |
|
Netherlands |
|
IV Fluor Kuwait KSC |
|
49.0000 |
|
Kuwait |
|
III Fluor Daniel E&C LLC |
|
100.0000 |
|
Russia |
|
IV Neftegasservis Limited |
|
25.0000 |
|
Cyprus |
|
V Sakhalinneftegasservis LLC |
|
66.6700 |
|
Russia |
|
III Fluor Eastern Services B.V. |
|
100.0000 |
|
Netherlands |
|
III Fluor, S.A. |
|
3.9200 |
|
Spain |
|
IV Fluor EIA, S.L |
|
100.0000 |
|
Spain |
|
IV Fluor Plant Engineering, S.A. |
|
100.0000 |
|
Spain |
|
IV Technical Resource Solutions, S.L. |
|
100.0000 |
|
Spain |
|
III Fluor S.A. |
|
100.0000 |
|
Poland |
|
II Fluor Daniel Florida Rail, Inc. |
|
100.0000 |
|
Delaware |
|
II Fluor Daniel Global Limited |
|
100.0000 |
|
Guernsey |
|
III Fluor Daniel Global Contracting Limited |
|
100.0000 |
|
Guernsey |
|
III Fluor Daniel Global Placement Limited |
|
100.0000 |
|
Guernsey |
|
III Fluor Daniel Global Placement Services Limited |
|
100.0000 |
|
Guernsey |
|
III Fluor Daniel Global Services Limited |
|
100.0000 |
|
Guernsey |
|
III Fluor Daniel Global Support Services Limited |
|
100.0000 |
|
Guernsey |
|
III Fluor Daniel Global TRS Limited |
|
100.0000 |
|
Guernsey |
|
|
|
Percent |
|
Organized |
|
Subsidiary Name |
|
Holding |
|
Under Laws Of |
|
|
|
|
|
|
|
III Fluor Daniel Global TRS Services Limited |
|
100.0000 |
|
Guernsey |
|
II Fluor GmbH |
|
100.0000 |
|
Germany |
|
III Arbeitsgemeinschaft BAB A 8 Ausbau Augsburg — München |
|
25.0000 |
|
Germany |
|
II Fluor Daniel Holdings, Inc. |
|
100.0000 |
|
California |
|
III Conga Earthworks Team SRL |
|
100.0000 |
|
Peru |
|
III Fluor Central Asia LLP |
|
99.0000 |
|
Kazakhstan |
|
III Fluor Daniel Holdings (Botswana) (Pty) Limited |
|
100.0000 |
|
Botswana |
|
III Fluor Daniel Global Services Private Limited |
|
100.0000 |
|
India |
|
III FWPJV Limited |
|
50.0000 |
|
England |
|
IV KPJV Limited |
|
76.0000 |
|
England |
|
III Morning Star for General Services LLC |
|
100.0000 |
|
Iraq |
|
III Qatar National Facility Services |
|
49.0000 |
|
Qatar |
|
II Fluor Daniel Illinois, Inc. |
|
100.0000 |
|
Delaware |
|
III Duke/Fluor Daniel |
|
49.9999 |
|
North Carolina |
|
II Fluor Daniel India, Inc. |
|
100.0000 |
|
California |
|
II Fluor Daniel Indiana Limited Partnership |
|
1.0000 |
|
Indiana |
|
II Fluor Daniel International Services Inc. |
|
90.0000 |
|
Barbados |
|
II Fluor Daniel Latin America, Inc. |
|
100.0000 |
|
California |
|
III Grupo Alvica USA, LLC |
|
80.0000 |
|
Delaware |
|
III Grupo Empresarial Alvica, S.A. |
|
80.0000 |
|
Venezuela |
|
IV Grupo Alvica SCS |
|
0.1000 |
|
Venezuela |
|
III Servicios Cuyuni, E.T.T., C.A. |
|
80.0000 |
|
Venezuela |
|
II Fluor Daniel Mexico S.A. |
|
100.0000 |
|
California |
|
III ICA-Fluor Daniel, S. de R.L. de C.V. |
|
49.0000 |
|
Mexico |
|
III Interim Project Solutions, S. de R.L. de C.V |
|
0.2000 |
|
Mexico |
|
III TRS International Group, S. de R.L. de C.V. |
|
0.0954 |
|
Mexico |
|
II Fluor Daniel Mining & Metals, Ltd. |
|
100.0000 |
|
California |
|
III Ameco Chile S.A. |
|
1.0000 |
|
Chile |
|
III Fluor Chile Ingenieria y Construccion S.A. |
|
1.0000 |
|
Chile |
|
IV CEJV Ingeniería Y Construcción Limitada |
|
50.0000 |
|
Chile |
|
III Ingenieria y Construcciones Fluor Daniel Chile Limitada |
|
0.9000 |
|
Chile |
|
II Fluor Daniel Overseas, Inc. |
|
100.0000 |
|
California |
|
III PFD International LLC |
|
50.0000 |
|
Delaware |
|
II Fluor Daniel P.R.C., Ltd. |
|
100.0000 |
|
California |
|
II Fluor Daniel Pacific, Inc. |
|
100.0000 |
|
California |
|
III Fluor Daniel-AMEC Philippines, Inc. |
|
50.0000 |
|
Philippines |
|
II Fluor Daniel Pulp & Paper, Inc. |
|
100.0000 |
|
California |
|
III Fluor Daniel Indiana Limited Partnership |
|
99.0000 |
|
Indiana |
|
II Fluor Daniel Real Estate Services, Inc. |
|
100.0000 |
|
South Carolina |
|
II Fluor Daniel South America Limited |
|
100.0000 |
|
California |
|
III Choice Equipos y Servicios S.A.C |
|
87.0000 |
|
Peru |
|
II Fluor Daniel South East Asia, Ltd. |
|
100.0000 |
|
California |
|
II Fluor Daniel Technical Services, Inc. |
|
100.0000 |
|
Texas |
|
II Fluor Daniel Thailand Holdings Corporation |
|
100.0000 |
|
California |
|
II Fluor Daniel Thailand, Ltd. |
|
100.0000 |
|
California |
|
II Fluor Daniel Venture Group, Inc. |
|
100.0000 |
|
California |
|
III CommTech Technology Partners IV, a California Limited Partnership |
|
1.0835 |
|
California |
|
III Fluor Daniel Asia, Inc. |
|
100.0000 |
|
California |
|
IV Duke/Fluor Daniel International Services |
|
49.9999 |
|
Nevada |
|
V Duke/Fluor Daniel Caribbean, S.E. |
|
0.5000 |
|
Puerto Rico |
|
V Duke/Fluor Daniel International Services (Trinidad) Limited |
|
100.0000 |
|
Trinidad |
|
IV P.T. Fluor Daniel Indonesia |
|
20.0000 |
|
Indonesia |
|
V Fluor Aker Solutions Indonesia JV |
|
50.0000 |
|
Indonesia |
|
V P.T. MITRA BERSAMA ENGINEERING |
|
99.0000 |
|
Indonesia |
|
IV P.T. Nusantara Power Services |
|
70.0000 |
|
Indonesia |
|
III Micogen Inc. |
|
100.0000 |
|
California |
|
|
|
Percent |
|
Organized |
|
Subsidiary Name |
|
Holding |
|
Under Laws Of |
|
|
|
|
|
|
|
III Micogen Limited I, Inc. |
|
100.0000 |
|
California |
|
III Micogen Limited II, Inc. |
|
100.0000 |
|
California |
|
III Soli-Flo LLC |
|
25.0000 |
|
Delaware |
|
IV Soli-Flo, Inc. |
|
100.0000 |
|
California |
|
V Soli-Flo Material Transfer, L.P. |
|
1.0000 |
|
California |
|
V Soli-Flo Partners, L.P. |
|
1.0000 |
|
California |
|
III Soli-Flo Material Transfer, L.P. |
|
24.7500 |
|
California |
|
III Soli-Flo Partners, L.P. |
|
24.7500 |
|
California |
|
III Springfield Resource Recovery, Inc. |
|
100.0000 |
|
Mass. |
|
IV Springfield Resource Recovery Limited Partnership |
|
10.0000 |
|
Mass. |
|
III Springfield Resource Recovery Limited Partnership |
|
90.0000 |
|
Mass. |
|
II Fluor Daniel, a Professional Architectural Corporation |
|
100.0000 |
|
Louisiana |
|
II Fluor Daniel, Inc. — Philippines |
|
100.0000 |
|
Philippines |
|
II Fluor, S.A. |
|
96.0800 |
|
Spain |
|
III Fluor Plant Engineering, S.A. |
|
100.0000 |
|
Spain |
|
III Technical Resource Solutions SL |
|
100.0000 |
|
Spain |
|
II Fluor Distribution Companies, Inc. |
|
100.0000 |
|
California |
|
II Fluor Engineering Corporation |
|
100.0000 |
|
Michigan |
|
II Fluor Enterprises Group, Inc. |
|
100.0000 |
|
Delaware |
|
II Fluor Federal Global Projects, Inc. |
|
100.0000 |
|
Delaware |
|
II Fluor Federal Services, Inc. |
|
100.0000 |
|
Washington |
|
III Fluor-B&W Oak Ridge LLC |
|
65.5000 |
|
Tennessee |
|
III Fluor-B&W Portsmouth LLC |
|
51.0000 |
|
Ohio |
|
III Fluor Carlsbad, LLC |
|
100.0000 |
|
Delaware |
|
III Fluor Federal, Inc. |
|
100.0000 |
|
Washington |
|
III Fluor Portsmouth LLC |
|
60.0000 |
|
Ohio |
|
III Fluor West Valley, LLC |
|
100.0000 |
|
New York |
|
III Savannah River Nuclear Solutions, LLC |
|
48.0000 |
|
South Carolina |
|
II Fluor Federal Services, LLC |
|
100.0000 |
|
Delaware |
|
III Alutiiq-Fluor Constructors, LLC |
|
49.0000 |
|
Alaska |
|
III Ford Island Properties, LLC |
|
10.0000 |
|
Hawaii |
|
II Fluor Federal Services NWS, Inc. |
|
100.0000 |
|
Washington |
|
II Fluor Federal Solutions, LLC |
|
100.0000 |
|
South Carolina |
|
III Fluor-CDM Space Services, LLC |
|
100.0000 |
|
South Carolina |
|
III Fluor Federal Solutions — Europe GmbH |
|
100.0000 |
|
Germany |
|
III Island Support Solutions, LLC |
|
100.0000 |
|
Delaware |
|
|
|
|
|
|
|
II Fluor Fernald, Inc. |
|
100.0000 |
|
California |
|
III Fluor Environmental Resources Management Services, Inc. |
|
100.0000 |
|
Delaware |
|
II Fluor Finance U.S., Inc. |
|
100.0000 |
|
Texas |
|
II Fluor Supply Chain Solutions LLC |
|
100.0000 |
|
Delaware |
|
III Fluor Supply Chain Solutions International LLC |
|
100.0000 |
|
Delaware |
|
II Fluor Government Group International, Inc. |
|
100.0000 |
|
Delaware |
|
II Fluor Gulf Communications, Inc. |
|
100.0000 |
|
California |
|
II Fluor Hanford, Inc. |
|
100.0000 |
|
Washington |
|
III CBV/CCSi, LLC |
|
23.0540 |
|
Delaware |
|
III CBV/Mundo, LLC |
|
71.0500 |
|
Delaware |
|
III CBV/Mundo II, LLC |
|
28.1500 |
|
Delaware |
|
III CBV/Vivid, LLC |
|
28.4000 |
|
Delaware |
|
III Columbia Basin Ventures LLC |
|
36.3400 |
|
Delaware |
|
II Fluor/HDR Global Design Consultants, LLC |
|
50.0000 |
|
Delaware |
|
II Fluor Indonesia, Inc. |
|
100.0000 |
|
California |
|
II Fluor Industrial Services, Inc. |
|
100.0000 |
|
Delaware |
|
II Fluor Intercontinental, Inc. |
|
100.0000 |
|
California |
|
III Dominican Republic Combined Cycle, LLC |
|
49.0000 |
|
Delaware |
|
III Fluor Daniel Brasil, Ltda. |
|
0.0003 |
|
Brazil |
|
|
|
Percent |
|
Organized |
|
Subsidiary Name |
|
Holding |
|
Under Laws Of |
|
|
|
|
|
|
|
III Fluor Daniel Nigeria Limited |
|
60.0000 |
|
Nigeria |
|
III Fluor Intercontinental Contingency Solutions, LLC |
|
100.0000 |
|
Delaware |
|
III Fluor JAJ, Inc. |
|
100.0000 |
|
Delaware |
|
IV J. A. Jones International, LLC |
|
100.0000 |
|
Delaware |
|
III FLUOR M ltd |
|
100.000 |
|
Macedonia |
|
III Fluor Middle East, LLC |
|
100.00 |
|
Delaware |
|
IV FluorAMEC, LLC |
|
51.00 |
|
Delaware |
|
III Grupo Alvica SCS |
|
79.9200 |
|
Venezuela |
|
III NWKC LLC |
|
50.0000 |
|
Delaware |
|
II Fluor International Limited |
|
100.0000 |
|
Bermuda |
|
II Fluor International Limited |
|
100.0000 |
|
England |
|
III Fluor Projects Limited |
|
100.0000 |
|
England |
|
III Citylink Telecommunications Holdings Limited |
|
18.0000 |
|
England |
|
IV Citylink Telecommunications Limited |
|
100.0000 |
|
England |
|
III Fluor Caspian Services Limited |
|
100.0000 |
|
England |
|
III Fluor Industrial Services Limited |
|
100.0000 |
|
England |
|
III Fluor Limited |
|
100.0000 |
|
England |
|
IV Bell Rock Offshore Winds Limited |
|
25.0000 |
|
England |
|
IV Kazakh Projects Joint Venture Limited |
|
100.0000 |
|
England |
|
IV Seagreen Wind Energy Limited |
|
50.0000 |
|
England |
|
V Seagreen Alpha Wind Energy Limited |
|
100.0000 |
|
England |
|
V Seagreen Bravo Wind Energy Limited |
|
100.0000 |
|
England |
|
V Seagreen Charlie Wind Energy Limited |
|
100.0000 |
|
England |
|
V Seagreen Delta Wind Energy Limited |
|
100.0000 |
|
England |
|
V Seagreen Echo Wind Energy Limited |
|
100.0000 |
|
England |
|
V Seagreen Foxtrot Wind Energy Limited |
|
100.0000 |
|
England |
|
V Seagreen Golf Wind Energy Limited |
|
100.0000 |
|
England |
|
III Fluor Ocean Services Limited |
|
100.0000 |
|
England |
|
III Genesys Telecommunications Holdings Limited |
|
45.0000 |
|
England |
|
IV Genesys Telecommunications Limited |
|
100.0000 |
|
England |
|
III KDPC Limited |
|
50.0000 |
|
England |
|
III PFD (UK) Limited |
|
50.0000 |
|
England |
|
III TRS Staffing Solutions Limited |
|
100.0000 |
|
England |
|
II Fluor International, Inc. |
|
100.0000 |
|
California |
|
III Fluor Mideast Limited |
|
100.0000 |
|
California |
|
II Fluor Ireland Limited |
|
100.0000 |
|
Ireland |
|
III Fluor-PM JV |
|
50.0000 |
|
Ireland |
|
III Fluor Daniel - E-E-L Limited |
|
50.0000 |
|
Ireland |
|
III TRS Staffing Solutions Limited |
|
100.0000 |
|
Ireland |
|
II Fluor Kazakhstan Inc. |
|
100.0000 |
|
Texas |
|
II Fluor-Lane, LLC |
|
65.0000 |
|
Delaware |
|
II Fluor Maintenance Services, Inc. |
|
100.0000 |
|
California |
|
III Norfolk Maintenance Corporation |
|
100.0000 |
|
California |
|
II Fluor Mediterranean, Inc. |
|
100.0000 |
|
California |
|
II Fluor Mideast Limited |
|
100.0000 |
|
Bermuda |
|
II Fluor NE, Inc. |
|
100.0000 |
|
Arizona |
|
III ADP Marshall Contractors, Inc. |
|
100.0000 |
|
Delaware |
|
III ADP Marshall Limited |
|
100.0000 |
|
Ireland |
|
III ADP/FD of Nevada, Inc. |
|
100.0000 |
|
Nevada |
|
III M&W/Marshall, a Joint Venture |
|
50.0000 |
|
Oregon |
|
II Fluor Nuclear Services, Inc. |
|
100.0000 |
|
Ohio |
|
II Fluor Plant Services International, Inc. |
|
100.0000 |
|
California |
|
II Fluor Projects, Inc. |
|
100.0000 |
|
Texas |
|
II Fluor Real Estate Services, Inc. |
|
100.0000 |
|
Delaware |
|
II Fluor Reinsurance Investments, Inc. |
|
100.0000 |
|
Delaware |
|
III International Insurance Advisors, Inc. |
|
10.7672 |
|
Delaware |
|
|
|
Percent |
|
Organized |
|
Subsidiary Name |
|
Holding |
|
Under Laws Of |
|
|
|
|
|
|
|
II Fluor Services International, Inc. |
|
100.0000 |
|
Nevada |
|
II Fluor Transworld Services, Inc. |
|
100.0000 |
|
California |
|
III Neftegasservis Limited |
|
25.0000 |
|
Cyprus |
|
IV Sakhalinneftegasservis LLC |
|
66.6700 |
|
Russia |
|
II Fluor Technologies Corporation |
|
100.0000 |
|
Delaware |
|
II Fluor Texas, Inc. |
|
100.0000 |
|
Texas |
|
III KazakhNefteGasServis LLP |
|
50.0000 |
|
Kazakhstan |
|
II Fluor US Services, Inc. |
|
100.0000 |
|
Delaware |
|
II Fluor Virginia, Inc. |
|
100.0000 |
|
Delaware |
|
II Fluor West Africa, Inc. |
|
100.0000 |
|
Delaware |
|
II Fluor WorleyParsons Arctic Solutions |
|
50.0000 |
|
Alaska |
|
II FMC Holding Company LLC |
|
100.0000 |
|
Delaware |
|
III Fluor Management Company L.P. |
|
20.5277 |
|
Delaware |
|
II FRES, Inc. |
|
100.0000 |
|
Delaware |
|
II Fru-Con/Fluor Daniel Joint Venture |
|
50.0000 |
|
Missouri |
|
II Goar, Allison & Associates, LLC |
|
100.0000 |
|
Texas |
|
II Indo-Mauritian Affiliates Limited |
|
100.0000 |
|
Mauritius |
|
III Fluor Daniel India Private Limited |
|
20.0000 |
|
India |
|
II Integrated Facility Management Services, a Joint Venture |
|
49.0000 |
|
Texas |
|
II Plant Performance Services — Canada, Inc. |
|
100.0000 |
|
New Brunswick |
|
III P2S Driver Maintenance Inc. |
|
50.0000 |
|
Alberta |
|
II Lone Star Infrastructure, LLC |
|
45.0000 |
|
Delaware |
|
II Lone Star Infrastructure, Joint Venture |
|
45.0000 |
|
Texas |
|
II Louisiana Operations and Maintenance Services LLC |
|
100.0000 |
|
Louisiana |
|
II Micogen Limited III, Inc. |
|
100.0000 |
|
California |
|
III Claiborne Fuels, L.P. |
|
99.0000 |
|
Delaware |
|
II Middle East Fluor |
|
100.0000 |
|
California |
|
II NuScale Holdings Corp. |
|
56.4600 |
|
Oregon |
|
II NuScale Power, LLC |
|
97.4800 |
|
Oregon |
|
II Nutmeg Valley Resources, Inc. |
|
100.0000 |
|
California |
|
II Oregon Bridge Delivery Partners Joint Venture |
|
50.0000 |
|
Oregon |
|
II Phoenix Constructor, Joint Venture |
|
32.5000 |
|
New York |
|
II Plant Engineering Services LLC |
|
100.0000 |
|
Delaware |
|
II Plant Performance Services International, Ltd. |
|
100.0000 |
|
Bermuda |
|
III Fluor International Nigeria Limited |
|
60.0000 |
|
Nigeria |
|
II Plant Performance Services International LLC |
|
100.0000 |
|
Delaware |
|
III Plant Performance Services Caribbean Limited |
|
100.0000 |
|
Trinidad & Tobago |
|
II Platte River Constructors, Ltd. |
|
49.0000 |
|
Ohio |
|
II Prairie Link Constructors JV |
|
60.0000 |
|
Dallas/Williamson |
|
II Prairie Link Constructors, LLC |
|
55.0000 |
|
Delaware |
|
II Provo River Constructors |
|
42.5000 |
|
Utah |
|
II Saddleback Constructors |
|
27.0000 |
|
Delaware |
|
II Servicios Minería, Inc. |
|
100.0000 |
|
Delaware |
|
II Signet Technology Inc. |
|
100.0000 |
|
Colorado |
|
II Soli-Flo LLC |
|
25.0000 |
|
Delaware |
|
III Soli-Flo, Inc. |
|
100.0000 |
|
California |
|
IV Soli-Flo Material Transfer, L.P. |
|
1.0000 |
|
California |
|
IV Soli-Flo Partners, L.P. |
|
1.0000 |
|
California |
|
II Soli-Flo Material Transfer, L.P. |
|
24.7500 |
|
California |
|
II Soli-Flo Partners, L.P. |
|
24.7500 |
|
California |
|
II Strategic Organizational Systems Enterprises, Inc. |
|
100.0000 |
|
California |
|
III Strategic Organizational Systems Environmental Engineering Division, Inc. |
|
100.0000 |
|
Texas |
|
II Support Services International, LLC |
|
100.0000 |
|
South Carolina |
|
II Tar River Constructors, LLC |
|
100.0000 |
|
Delaware |
|
II TDF, Inc. |
|
100.0000 |
|
California |
|
III Barringford Limited |
|
100.0000 |
|
B. Virgin Isles |
|
|
|
Percent |
|
Organized |
|
Subsidiary Name |
|
Holding |
|
Under Laws Of |
|
|
|
|
|
|
|
IV Fluor Daniel Engineers SA (PTY) Limited |
|
100.0000 |
|
Liechtenstein |
|
V Trans-Africa Projects Ltd. |
|
50.0000 |
|
Mauritius |
|
V Trans-Africa Projects (Pty) Ltd. |
|
50.0000 |
|
R. South Africa |
|
IV Fluor SA (Pty) Limited |
|
100.0000 |
|
Liechtenstein |
|
V Fluor-Igoda Projects (Proprietary) Limited |
|
70.0000 |
|
South Africa |
|
V Fluor Global Plant Services (Proprietary) Ltd. |
|
100.0000 |
|
R. South Africa |
|
V Rhus Investments (PTY) Ltd. |
|
100.0000 |
|
R. South Africa |
|
IV TRS Staffing Solutions SA (Pty) Ltd. |
|
100.0000 |
|
B. Virgin Isles |
|
II Trans Florida Express, LLC |
|
100.0000 |
|
Delaware |
|
II Valley Corridor Constructors |
|
30.0000 |
|
Colorado |
|
II Valley Infrastructure Group, LLC |
|
33.3333 |
|
Delaware |
|
II Venezco, Inc. |
|
100.0000 |
|
California |
|
II Williams Brothers Engineering Company |
|
100.0000 |
|
Delaware |
|
III Fluor Argentina, Inc. |
|
100.0000 |
|
Delaware |
|
III Williams Brothers Engineering Limited |
|
100.0000 |
|
England |
|
III Williams Brothers Engineering Pty Ltd |
|
100.0000 |
|
Australia |
|
III Williams Brothers Process Services, Inc. |
|
100.0000 |
|
Delaware |
|
II WODECO Nigeria Limited |
|
60.0000 |
|
Nigeria |
|
|
|
|
|
|
|
I Fluor Holding Company LLC |
|
100.0000 |
|
Delaware |
|
|
|
|
|
|
|
II Compania Minera San Jose Del Peru S.A. |
|
99.0000 |
|
Peru |
|
II Fluor Management Company L.P. |
|
33.4047 |
|
Delaware |
|
II Global Builders Insurance Ltd. |
|
100.0000 |
|
Bermuda |
|
II Mineral Resource Development Corporation |
|
100.0000 |
|
Delaware |
|
III Compania Minera San Jose Del Peru S.A. |
|
1.0000 |
|
Peru |
|
III St. Joe Minerals Corporation & Cia. |
|
0.0125 |
|
Brazil |
|
II Robil International Corporation |
|
100.0000 |
|
Delaware |
|
II St. Joe Egypt Exploration Corporation |
|
100.0000 |
|
Delaware |
|
II St. Joe Exploracion Minera, Inc. |
|
100.0000 |
|
Delaware |
|
II St. Joe Luisito de Oro, Inc. |
|
100.0000 |
|
Delaware |
|
II St. Joe Minerals Corporation & Cia. |
|
99.9875 |
|
Brazil |
|
|
|
|
|
|
|
I TRS Staffing Solutions, Inc. |
|
100.0000 |
|
South Carolina |
|
|
|
|
|
|
|
II Interim Project Solutions, S. de R.L. de C.V. |
|
99.8000 |
|
Mexico |
|
II TRS International Group, S. de. R.L. de C.V. |
|
99.9046 |
|
Mexico |
|
II TRS International Payroll Co. |
|
100.0000 |
|
Texas |
|
II TRS Staffing Solutions Caribbean, Inc. |
|
100.0000 |
|
Puerto Rico |
Exhibit 23.1
Consent of Independent Registered Public Accounting Firm
We consent to the incorporation by reference in the following Registration Statements:
| 1 | ) | Registration Statement (Form S-8 No. 333-52992) pertaining to the Fluor Corporation 2000 Executive Performance Incentive Plan and the Fluor Corporation 2000 Restricted Stock Plan for Non-Employee Directors, | |
| 2 | ) | Registration Statement (Form S-8 No. 333-63868) pertaining to the Fluor Daniel Craft Employees 401(k) Retirement Plan, | |
| 3 | ) | Registration Statement (Form S-8 No. 333-63870) pertaining to the Fluor Corporation Salaried Employees' Savings Investment Plan, | |
| 4 | ) | Registration Statement (Form S-8 No. 333-63872) pertaining to the TRS 401(k) Retirement Plan, | |
| 5 | ) | Registration Statement (Form S-8 No. 333-63858) pertaining to the AMECO and Subsidiaries Salaried Employees 401(k) Retirement Plan, | |
| 6 | ) | Registration Statement (Form S-8 No. 333-63860) pertaining to the DMIS, Inc. Nissan Maintenance Project Retirement & Savings Plan, | |
| 7 | ) | Registration Statement (Form S-8 No. 333-63862) pertaining to the Fluor Corporation Employees' Performance Plan, | |
| 8 | ) | Registration Statement (Form S-8 No. 333-63864) pertaining to the TRS Salaried Employees' 401(k) Retirement Plan, | |
| 9 | ) | Registration Statement (Form S-3 No. 333-63984) and related Prospectus for Fluor Corporation pertaining to the registration of $300,000,000 of debt securities and any underlying Securities, | |
| 10 | ) | Registration Statement (Form S-8 No. 333-67000) pertaining to the 2001 Key Employee Performance Incentive Plan, | |
| 11 | ) | Registration Statement (Form S-8 No. 333-84790) pertaining to the Fluor Executive Deferred Compensation Program, | |
| 12 | ) | Registration Statement (Form S-8 No. 333-105308) pertaining to the Fluor Corporation 2003 Executive Performance Incentive Plan, | |
| 13 | ) | Registration Statement (Form S-8 No. 333-105309) pertaining to the Fluor Corporation Deferred Directors' Fees Program, | |
| 14 | ) | Registration Statement (Form S-3 MEF No. 333-112644) and related Prospectus of Fluor Corporation pertaining to the registration of $30,000,000 of debt securities, | |
| 15 | ) | Registration Statement (Form S-8 No. 333-120374) pertaining to the TRS 401(k) Retirement Plan, | |
| 16 | ) | Registration Statement (Form S-8 No. 333-120372) pertaining to the Fluor Corporation Salaried Employees' Savings Investment Plan, | |
| 17 | ) | Registration Statement (Form S-8 No. 333-115080) pertaining to the Fluor Corporation 2000 Restricted Stock Plan for Non-Employee Directors, | |
| 18 | ) | Registration Statement (Form S-8 No. 333-148269) pertaining to the Fluor 409A Executive Deferred Compensation Program, | |
| 19 | ) | Registration Statement (Form S-8 No. 333-148270) pertaining to the Fluor Corporation 409A Deferred Directors' Fees Program, | |
| 20 | ) | Registration Statement (Form S-8 No. 333-148278) pertaining to the Fluor Executive Deferred Compensation Program, | |
| 21 | ) | Registration Statement (Form S-8 No. 333-150549) pertaining to the TRS 401(k) Retirement Plan, | |
| 22 | ) | Registration Statement (Form S-8 No. 333-150550) pertaining to the Fluor Corporation Employees' Savings Investment Plan, | |
| 23 | ) | Registration Statement (Form S-8 No. 333-150857) pertaining to the Fluor Corporation 2008 Executive Performance Incentive Plan, | |
| 24 | ) | Registration Statement (Form S-3 No. 333-156137) and related Prospectus of Fluor Corporation pertaining to the registration of its debt securities, common stock, preferred stock, and warrants, | |
| 25 | ) | Registration Statement (Form S-8 No. 333-168411) pertaining to the Fluor Corporation Employees' Savings Investment Plan; |
of our reports dated February 22, 2012, with respect to the consolidated financial statements of Fluor Corporation and the effectiveness of internal control over financial reporting of Fluor Corporation, included in this Annual Report (Form 10-K) of Fluor Corporation for the year ended December 31, 2011.
/S/ ERNST & YOUNG LLP
Dallas,
Texas
February 22, 2012
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO RULE 13a-14(a) OR RULE 15d-14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
I, David T. Seaton, certify that:
1. I have reviewed this annual report on Form 10-K of Fluor Corporation;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
| Date: February 22, 2012 | By: |
/s/ DAVID T. SEATON
David T. Seaton, Chairman and Chief Executive Officer |
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO RULE 13a-14(a) OR RULE 15d-14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
I, D. Michael Steuert, certify that:
1. I have reviewed this annual report on Form 10-K of Fluor Corporation;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
| Date: February 22, 2012 | By: |
/s/ D. MICHAEL STEUERT
D. Michael Steuert, Senior Vice President and Chief Financial Officer |
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO RULE 13a-14(b) OR RULE 15d-14(b)
OF THE SECURITIES EXCHANGE ACT OF 1934
AND 18 U.S.C. SECTION 1350
In connection with the Annual Report of Fluor Corporation (the "Company") on Form 10-K for the period ended December 31, 2011, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, David T. Seaton, Chairman and Chief Executive Officer of the Company, certify, for purposes of 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:
| Date: February 22, 2012 | By: |
/s/ DAVID T. SEATON
David T. Seaton, Chairman and Chief Executive Officer |
A signed original of this written statement required by 18 U.S.C. Section 1350 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO RULE 13a-14(b) OR RULE 15d-14(b)
OF THE SECURITIES EXCHANGE ACT OF 1934
AND 18 U.S.C. SECTION 1350
In connection with the Annual Report of Fluor Corporation (the "Company") on Form 10-K for the period ended December 31, 2011, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, D. Michael Steuert, Senior Vice President and Chief Financial Officer of the Company, certify, for purposes of 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:
| Date: February 22, 2012 | By: |
/s/ D. MICHAEL STEUERT
D. Michael Steuert, Senior Vice President and Chief Financial Officer |
A signed original of this written statement required by 18 U.S.C. Section 1350 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.