A N N U A L R E P O R T
Working
As One
®
T W O T H O U S A N D S I X T E E N
2/24/17 9:28 PM
W O R K I N G A S O N E 20 1 6 A n nu a l R e p or t
contents
I N D U S T R I A L , I N F R A S T R U C T U R E & P O W E R
02 S H A R E H O L D E R L E T T E R
10 2 0 1 6 O V E R V I E W
12 E N E R G Y , C H E M I C A L S & M I N I N G
16
20 G O V E R N M E N T
22 M A I N T E N A N C E , M O D I F I C A T I O N & A S S E T I N T E G R I T Y
24 N E W A W A R D S & B A C K L O G D A T A
25 S E L E C T E D F I N A N C I A L D A T A
26 B O A R D O F D I R E C T O R S
27 O F F I C E R S
29 F O R M 1 0 - K
F L U O R C O R P O R A T I O N ( N Y S E : F L R ) is one of the largest professional services firms, providing engineering, procurement, construction, fabrication and
modularization, commissioning and maintenance, as well as project management services, on a global basis. Fluor, through its operating subsidiaries, is an integrated solutions
provider for clients in a diverse set of industries worldwide, including oil and gas, chemicals and petrochemicals, mining and metals, transportation, power, life sciences and
manufacturing. Fluor is also a service provider to the U.S. federal government and other governments abroad, and performs operations and maintenance activities globally for major
industrial clients.
F O R W A R D - L O O K I N G S TA T E M E N T S This annual report contains statements that may constitute forward-looking statements involving risks and
uncertainties, including statements about market outlook, new awards, backlog levels, competition, and the implementation of strategic initiatives, including investments and
acquisitions. These forward-looking statements reflect the Company’s current analysis of existing information as of the date of this annual report, and are subject to various risks and
uncertainties. As a result, caution must be exercised in relying on forward-looking statements. Due to known and unknown risks, the Company’s actual results may differ materially
from our expectations or projections. Additional information concerning factors that may influence Fluor’s results can be found in the Form 10-K that follows this annual report,
under the heading “Item 1A. Risk Factors.”
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1S I N C E 1 9 1 2
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L E T T E R T O T H E S H A R E H O L D E R S
$2.1B
F L U O R ’ S B A L A N C E S H E E T R E M A I N S S T R O N G , W I T H
$ 2 . 1 B I L L I O N I N C A S H A N D M A R K E T A B L E S E C U R I T I E S
A T Y E A R E N D . D U R I N G T H E Y E A R , W E R E T U R N E D
$ 1 1 8 M I L L I O N I N D I V I D E N D S T O S H A R E H O L D E R S .
K N P C M I N A A B D U L L A H
C L E A N F U E L S P R O J E C T, K U WA I T
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D A V I D T . S E A T O N , C H A I R M A N
& C H I E F E X E C U T I V E O F F I C E R
2016
In 2016, we continued
to increase the diversity
of the clients and end
markets we serve.
T O O U R V A L U E D S H A R E H O L D E R S 2 0 1 6 W A S A Y E A R O F C O N T I N U E D P R O G R E S S I N O U R S T R A T E G I C J O U R N E Y
T O B E C O M E T H E I N T E G R A T E D S O L U T I O N S P R O V I D E R O F C H O I C E F O R O U R C L I E N T S , A N D D E L I V E R L O N G - T E R M S U S T A I N A B L E
G R O W T H F O R O U R S T A K E H O L D E R S .
D U R I N G T H E Y E A R , O U R I N T E G R A T E D S O L U T I O N S P L A T F O R M C O N T I N U E D T O G A I N T R A C T I O N W I T H O U R C L I E N T S I N T H E
D I V E R S E I N D U S T R I E S W E S E R V E A R O U N D T H E W O R L D . T H I S W A S E V I D E N C E D B Y S T R O N G N E W A W A R D P E R F O R M A N C E O F
$ 2 1 B I L L I O N , C O N T R I B U T I N G T O A S O L I D Y E A R - E N D B A C K L O G O F $ 4 5 . 0 B I L L I O N . D U R I N G T H E Y E A R , W E A C H I E V E D S I G N I F I C A N T
M I L E S T O N E S A C R O S S A L L O F O U R B U S I N E S S L I N E S , W H I C H A R E H I G H L I G H T E D T H R O U G H O U T T H I S R E P O R T .
P R O T E C T I N G O U R P E O P L E
Before addressing our 2016 business performance in more detail, I want to discuss safety. Safety is the first of our four Core Values, and one of
the cornerstones of our business. The loss of life at Fluor is simply unacceptable. Our goal is that every one of our employees and subcontractors
returns home safe at the end of the working day.
We continue to take steps in several areas to drive a step change in our safety culture and ensure that we can deliver on this promise. This includes
taking a closer look at how we can protect our people when they are working at operational facilities and, importantly, a training and awareness
campaign to build a behavior-based culture in which all of our employees and subcontractors speak up when they see something that doesn’t look
or feel safe, and encourage others to do the same.
F L U O R 2 0 1 6 A N N U A L R E P O R T
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L E T T E R T O T H E S H A R E H O L D E R S
Our fabrication and
modularization capabilities
continue to be a differentiator
in the markets we serve.
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C O N S O L I D AT E D
N E W A W A R D S
(Dollars in Billions)
C O N S O L I D AT E D
B A C K L O G
(Dollars in Billions)
[ C O N T . ] O U R S T R AT E G I C J O U R N E Y
In 2016, we continued our strategic journey to bring the full breadth of our integrated solutions to our clients. We value our relationships with
them, and are working closely in partnership with them to meet their needs for capital efficiency and cost and schedule certainty. Every year,
we have a separate board meeting for strategy development. The board is a welcome part of our process, and we appreciate their mentorship and
global expertise.
In March, we closed on our acquisition of Stork Holding B.V., a leading global provider of Operations and Maintenance (O&M) services, significantly
expanding our ability to provide complete lifecycle services to our clients around the world.
We made very good progress during the year in integrating Stork into Fluor, and the onboarding of Stork is now largely complete. Going forward,
Stork will focus on expansion outside of its traditional footprint in Europe and South America, and is well positioned to enhance the services
offered by our existing O&M business.
Our fabrication and modularization capabilities continue to be a differentiator in the markets we serve. In 2016, we completed our joint venture
investment in the COOEC-Fluor Heavy Industries (CFHI) fabrication yard in China, significantly expanding our fabrication ability for onshore and
offshore projects globally.
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C F H I FA B R I C AT I O N YA R D
Z H U H A I , C H I N A
During 2016, fabrication played an increasingly important role in major Fluor projects, especially in our Energy, Chemicals and Mining business.
In the fourth quarter, we completed the fabrication and shipment of more than 450 modules for Suncor’s East Tank Farm and Fort Hills oil sands
projects in Canada. Using Fluor’s innovative 3rd Generation Modular ExecutionSM improves safety, reduces costs, and contributes to the increased
schedule certainty and capital efficiency that our clients expect.
Building our self-perform construction workforce continues to be a central tenet of our strategy. The addition of two nuclear power plant projects
in the southeastern United States and the acquisition of Stork significantly boosted our construction workforce in 2016. Craft employees now
account for more than half of our 60,000-strong global Fluor family.
E X C E L L E N C E I N E X E C U T I O N
Fluor completed a majority of projects around the world on time and on budget, proving that we are making positive progress relative to excellence
in execution. However, Fluor’s earnings in 2016 were significantly impacted by execution challenges at a petrochemical project on the U.S. Gulf
Coast that resulted in a $265 million charge. Excellence is one of Fluor’s Core Values and, like safety, is one of the cornerstones of our business.
I am very disappointed in the events that negatively impacted productivity at the project site. While some factors, like bad weather, are unavoidable,
we have control over others. We truly believe this is a unique challenge and not emblematic of a systemic risk.
F L U O R 2 0 1 6 A N N U A L R E P O R T
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N O R T H W E S T R E D WAT E R
S T U R G E O N R E F I N E RY
A L B E RTA , C A N A D A
C O N S O L I D A T E D B A C K L O G B Y R E G I O N
B A C K L O G B Y S E G M E N T
3 %
C A N A DA
4 %
L AT I N A M E R I C A
4 %
A S I A PAC I F I C
& AU S T R A L I A
6 %
M A I N T E N A N C E ,
M O D I F I C AT I O N &
A S S E T I N T E G R I T Y
12%
G OV E R N M E N T
37%
E U R O P E , A F R I C A
& M I D D L E E A S T
52%
U N I T E D S TAT E S
34%
I N D U S T R I A L ,
I N F R A S T R U C T U R E
& P O W E R
48%
E N E R G Y,
C H E M I C A L S &
M I N I N G
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L E T T E R T O T H E S H A R E H O L D E R S
Fluor’s more than 100 years in
operation has given us the experience
and relationships to sustain and grow
our business even in challenging times.
[ C O N T . ] We are taking actions to address these issues, including placing an increased emphasis on quality, innovation and teamwork, another
of Fluor’s Core Values. Going forward, I am confident that our continuing shift toward integrated solutions projects, which give us more control
over execution while meeting our clients’ needs more efficiently, will help improve our ability to manage risk.
F I N A N C I A L R E S U LT S
Fluor’s financial results for 2016 are evidence that our integrated solutions strategy resonates with our clients, especially in a year that saw continuing
volatility in global markets and commodity prices. We are encouraged by the stabilization in prices we began to see in the latter part of the year.
Our clients’ confidence in us was particularly evident in our new awards for the year of $21 billion. The awards were broad-based, and included
major projects across all business lines. These awards contributed to a year-end backlog of $45.0 billion, compared to $44.7 billion in 2015.
Net earnings attributable to Fluor from continuing operations in 2016 were $281 million, or $2.00 per diluted share. Fluor’s revenue for the full year
2016 was $19 billion, up from $18.1 billion in 2015, driven by the Infrastructure and Power segments.
Fluor’s balance sheet remains strong, with $2.1 billion in cash and marketable securities at year end. During the year, we returned $118 million in
dividends to shareholders. We remain committed to being good stewards of our balance sheet and capital structure.
B U S I N E S S A N D M A R K E T D I V E R S I T Y
In 2016, we continued to increase the diversity of the clients and end markets we serve. In Infrastructure, Fluor joint ventures were awarded
contracts for the Purple Line project in Maryland, a major motorway reconstruction project in the Netherlands, and the Loop 202 South Mountain
Freeway in Phoenix, the largest highway project in Arizona’s history. We made significant progress on other mega-projects such as the New NY
Tappan Zee Bridge.
New awards for our Energy, Chemicals and Mining business reflect the drop in capex spending that we started to see two years ago. However,
a select group of projects moved forward; a Fluor joint venture was awarded an upstream mega-project for Tengizchevroil (TCO) in Kazakhstan,
building on Fluor’s more than 30 years’ experience working in that country. In Mining, we began to see signs of improvement, including two awards
for bauxite projects in Africa.
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L E T T E R T O T H E S H A R E H O L D E R S
S U P R E M E M O D U L A R FA B R I C AT I O N
E D M O N T O N , C A N A D A
[ C O N T . ] Our Life Sciences and Advanced Manufacturing business continues to pursue and win opportunities as a new wave of pharmaceuticals
is approved for production. In the United States, the business line was awarded a $1.2 billion contract by Novo Nordisk to design and build its
diabetes Active Pharmaceutical Ingredients (API) manufacturing facility in North Carolina. The project is Novo Nordisk’s largest ever, and the
biggest single life sciences manufacturing investment in the history of the state.
In Power, we made progress on projects in both the gas-fired and nuclear power plant sectors, and received a full notice to proceed award for the
Dominion Greensville gas-fired plant in Virginia. NuScale Power, in which Fluor is a substantial majority investor, achieved a significant milestone on
December 31 when it requested U.S. Nuclear Regulatory Commission approval of its small modular reactor (SMR) technology design. NuScale’s
technology brings a safe, flexible, more affordable nuclear power solution. Nuclear is the largest non-carbon-emitting source of energy, and we
believe it will continue to be an important part of the global energy mix.
Our Government Group progressed its work on nuclear decommissioning in both the United States and the United Kingdom. New awards for the
year include the Idaho Cleanup Project and renewal contracts for our decommissioning and decontamination efforts at the Portsmouth site in Ohio
and the Savannah River site in South Carolina. We expanded our mission to provide contingency support to U.S. military forces across Africa, and
now operate in nine countries across the continent. We are proud to support the U.S. military as they execute their missions around the world.
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T H E O U T L O O K F O R 2 0 1 7 Fluor’s more than 100
years in operation has given us the experience and relationships to
sustain and grow our business even in challenging times. Our four Core
Values of safety, integrity, teamwork and excellence are the foundation
of everything we do.
As we enter 2017, our businesses are poised to contribute to the
continuing improvement in human prosperity. The modern world is
demanding more energy from all available sources, new pharmaceuticals
are being developed to help fight disease, and countries are developing
and modernizing infrastructure at a rapid pace.
Looking ahead, we expect increasing opportunities across all of our
segments and around the globe, as economic factors continue to
improve. By Working as One and fully deploying our integrated solutions
platform, applying innovative approaches and harnessing big-data
analytics, we can further differentiate ourselves across the markets and
industries we serve, to win work and execute with excellence.
D A V I D T . S E A T O N , C H A I R M A N
& C H I E F E X E C U T I V E O F F I C E R
M A R C H 3 , 2 0 1 7
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OVERVIEW
2016
J A N UA RY Mobilized
to support construction on
two nuclear power plants in
Georgia and South Carolina.
M A R C H Stork acquisition completed.
M A R C H Acquired 49% share and
formed the COOEC-Fluor Heavy
Industries (CFHI) fabrication yard in China.
F E B R UA RY Awarded
the Loop 202 South
Mountain Freeway
project in Phoenix, the
largest highway project in
Arizona’s history.
A P R I L Won the Port
Access Road project
in Charleston, South
Carolina, the fastest-
growing major container
port in the United States.
M AY
Completed the
Cerro Verde mine
project in Peru.
J U N E Completed
work on a significant
theme park in China.
J U N E Won the
contract to design and
build the Maryland
Purple Line light rail
project, building upon
Fluor’s ability to put
together mega-scale
P3 solutions.
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2/28/17 2:11 PM
A P R I L Delivered two major segments of the Eagle
P3 Commuter Rail project, one connecting downtown
Denver to Westminster station in the Denver-Boulder
corridor and the other from downtown to Denver
International Airport. This is the nation’s first public-
private partnership (P3) project for commuter rail.
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J U LY Final investment decision
reached for Tengizchevroil
(TCO) Future Growth Project in
Kazakhstan, a large upstream project
awarded to Fluor in a challenging
economic environment.
S E P T E M B E R Won major
multi-year remediation contracts
to operate depleted uranium
hexafluoride conversion facilities
at Department of Energy facilities
in Paducah, Kentucky, and
Piketon, Ohio.
O C T O B E R Awarded
reconstruction of the A27 and A1
motorways in the Netherlands, another
example of Fluor’s ability to provide
clients with viable P3 solutions.
ck
n in
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er
e.
D E C E M B E R Brunswick County Power
Station in Virginia was named Project of the
Year by Power Engineering magazine.
D E C E M B E R Final investment
decision was reached for the building
of new production facilities for Novo
Nordisk in North Carolina, representing
one of the largest current life sciences
investments in the United States.
AU G U S T Extended our Department
of Energy contract for site management
and operation at Savannah River in South
Carolina, a facility that supports the U.S.
nuclear weapons stockpile and nuclear
non-proliferation policies.
D E C E M B E R
Completed work on
all eight of the 419-
foot towers of the
Tappan Zee Bridge,
the largest bridge
project in the history
of New York State.
D E C E M B E R NuScale
Power requested the
U.S. Nuclear Regulatory
Commission (NRC) to approve
the company’s small modular
reactor (SMR) commercial
power plant design.
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E N E R G Y, C H E M I C A L S & M I N I N G
We are providing
avenues to approach
projects in new,
more efficient ways.
E N E R G Y, C H E M I C A L S & M I N I N G For much of 2016, commodity prices continued their multi-year declines. However, in
the latter half of the year we began to see a reversal of this trend, and we believe we have crossed an inflection point toward recovery. We do not
expect this to be a sharp upward acceleration to prices from the previous up-cycle, but rather a moderate, restrained climb to a level below prior
peaks. From a competitive standpoint, this bodes well for Fluor’s Energy, Chemicals and Mining business.
As clients consider unlocking their long-delayed projects in this environment, they must find ways to build capital efficiency and predictability into
their plans. Fluor is in a leading position to provide these assurances. We are making their projects viable like no other company can, through the
power of integrated solutions.
Our robust activity throughout 2016 provides powerful evidence. We received large awards for downstream and chemicals projects, and won
an upstream megaproject for Tengizchevroil (TCO) in Kazakhstan. We progressed a major refining project in Kuwait, demonstrating our ability
to handle large, challenging lump-sum projects in a very competitive market, which is opening the door to new opportunities in the Middle East.
In mining, a segment that hasn’t had significant new activity in over four years, we began to see signs of improvement with awards for two bauxite
projects in Guinea, along with a gold project in Mexico.
We are providing avenues for clients to approach projects in new, more capital-efficient ways at substantially lower costs. For several years,
including the last up-cycle, Fluor has strategically differentiated itself by broadening and deepening its ability to deliver complete, integrated
engineering, procurement, fabrication and construction (EPFC) solutions. Today we can offer our clients unique design and best-country sourcing
approaches, low-cost engineering, modularization, fabrication and self-perform construction with direct-hire personnel. We continue to build out
these capabilities, which are integrated throughout the project to deliver a solution that is focused on our clients' business drivers. Our strategies
have helped Fluor get in front of the challenges of the current business climate, solidify our leadership position – and secure our growth. In fact,
due to our differentiation, we believe a constrained market actually creates opportunities for Fluor that competitors cannot touch.
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K N P C M I N A A B D U L L A H
C L E A N F U E L S P R O J E C T
K U WA I T
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N E W A W A R D S & B A C K L O G
S E G M E N T P R O F I T
(Dollars in Billions)
(Dollars in Millions)
2016
ENERGY, CHEMICAL S & MINING
Awards
Backlog
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T H E O U T L O O K
Global demand for
commodities will
continue to grow,
I N V E S T M E N T S
A N D C A P I T A L
I N E V I T A B LY W I L L H A V E T O B E M A D E . A S W E
E N T E R T H I S P E R I O D O F M O D E R A T E R E C O V E R Y, C L I E N T S W I L L C O N T I N U E T O
I N V E S T M E N T S P E N D I N G A N D M E T I C U L O U S LY
B E D E L I B E R A T E W I T H T H E I R
S E L E C T I V E
I N T H E I R P A R T N E R S H I P S . W I T H O U R A B I L I T Y T O L E V E R A G E
E X P E R T I S E A C R O S S O U R E N T I R E G L O B A L O R G A N I Z A T I O N T O P R O V I D E
C O M P R E H E N S I V E S O L U T I O N S , W E B E L I E V E T H I S
I N
W H I C H F L U O R W I L L T H R I V E .
I S A N E N V I R O N M E N T
S A DA R A C H E M I C A L P R O J E C T
J U B A I L , S AU D I A R A B I A
[ C O N T . ] It is clear that traditional thinking and approaches will no longer work.
Clients want capital-efficient ideas and new ways to create higher return on their projects.
Fluor is delivering, with a model that provides improved cost, schedule and reliability
certainty through integration and innovation.
We are working with advanced software systems and big-data analytics to improve our
predictive risk assessments on major projects. We are implementing Zero Base Execution,
a process that deconstructs a complex project up front and builds it from the inside out,
utilizing Fluor’s unique capabilities across the entire delivery spectrum to create the most
efficient, most economic and most certain approach. Clients are telling us that they see
Zero Base Execution as a breakthrough in how to execute the design and construction of a
facility. Their enthusiasm only encourages us to innovate more.
Going forward, we will continue to expand and deepen our solutions to offer clients an
assured path to making their large, complex projects workable. We will continue to explore
ways to improve our quality and certainty of delivery. Today’s challenges require bold
strategies and big steps. We have risen to meet these challenges, and will continue to do
what it takes to win the best projects and build relationships with our clients.
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F R E E P O R T- M C M O R A N
C E R R O V E R D E M I N E
A R E Q U I PA , P E R U
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I N D U S T R I A L , I N F R A S T R U C T U R E & P O W E R
We are in the
early days of an
infrastructure
renaissance.
I N D U S T R I A L , I N F R A S T R U C T U R E & P O W E R Our Industrial, Infrastructure and Power segment had a strong year
across all of its business lines. We secured several key long-term awards and have a number of large proposals in the works in North America,
as well as Australia and Europe. While much of our business traditionally has been focused on North America, our expansion strategies have served
us well, and we entered 2017 more geographically diversified than we’ve ever been.
A number of global-scale trends continue to drive our business and give us visibility for long-term sustainable growth. As the world’s emerging
economies progress in their development, countries are urbanizing and modernizing at a rapid pace, which is driving projects across our business
lines. To meet demands, industry must expand, new infrastructure must be built, the power grid must diversify and grow, and new advancements
in life sciences must be found.
The opportunities for Fluor are equally as strong in developed countries. The United States is especially fertile ground for our Infrastructure and
Power business. Aging infrastructure is critically behind schedule for replacement. Low natural gas prices are driving a shift in baseload capacity
as utilities opt to build large-scale gas-fired plants. Renewable power markets remain promising, as incentives that were set to expire have been
carried forward.
A number of milestones marked our year of robust performance. Based on our deep experience in the nuclear new-build arena, Westinghouse
hired Fluor to manage the construction of two mega-projects in Georgia and South Carolina. We continued the construction of two of the largest
gas-fired power projects in the world, for Dominion Virginia Power and Duke Energy. In Life Sciences and Advanced Manufacturing, we began
constructing a facility for Novo Nordisk in North Carolina, one of the largest investments of its kind in the United States. This project will use
Fluor’s integrated solutions model to leverage expertise across our business lines. We also have key life sciences projects in Sweden and Ireland.
As a new wave of pharmaceuticals is being approved for production in countries around the world, we see our current projects as the beginning
of a groundswell of activity in this sector.
Fluor continues to expand its international activity in infrastructure markets as well. This is perhaps the most ultra-competitive, highest-risk arena
in which we work, and we have structured our company to thrive here. We know from experience that the key to pursuing, winning and successfully
executing large lump-sum projects in new overseas markets is finding great local expertise. Fluor has a long track record of building strong
international partnerships. To bolster our global footprint, we also are strengthening our operations platform in regions that offer the greatest
opportunities, including Canada and the Netherlands, countries with strong economies and many projects on the horizon.
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TA P PA N Z E E B R I D G E P R O J E C T
H U D S O N R I V E R , N E W Y O R K
Photo courtesy NY Thruway Authority
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N E W A W A R D S & B A C K L O G
S E G M E N T P R O F I T
(Dollars in Billions)
(Dollars in Millions)
2016INDUSTRIAL ,
INFR ASTRUCTURE & POWER
Awards
Backlog
F L U O R 2 0 1 6 A N N U A L R E P O R T
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T H E O U T L O O K
We expect
increasing
opportunities.
I N F R A S T R U C T U R E
I N P L A C E ,
S I G N I F I C A N T F U N D I N G F O R U . S .
G I V I N G S T A T E S A N D M U N I C I P A L I T I E S T H E S T A B I L I T Y T H E Y N E E D T O C O M -
M E N C E T H E I R H I G H E S T - P R I O R I T Y C R I T I C A L P R O J E C T S . F L U O R I S I N A U N I Q U E
P O S I T I O N T O P U R S U E A N D W I N T H E B E S T O F T H E S E P R O D U C T S . E V E R Y Y E A R
W E G R O W I N O U R A B I L I T Y T O L E V E R A G E A W I D E N I N G A R R AY O F I N T E G R A T E D
S O L U T I O N S , A L L O W I N G U S T O D E L I V E R T H E S C H E D U L E A N D B U D G E T C E R -
T A I N T Y T H A T C L I E N T S N E E D M O R E T H A N E V E R B E F O R E .
I S A L R E A D Y
[ C O N T . ] Fluor also is strengthening its already well-established reputation for
providing clients new ways to make projects feasible through public-private partnership
(P3) solutions. P3 expertise is a powerful differentiator for Fluor. Because of our strong
balance sheet and resume of success in the market, we are sought out as a top-tier
P3 facilitator. Few companies can match Fluor’s caliber in putting together a package
for large projects. Our risk management, project controls, self-perform capabilities,
experience with executing complex solutions, and financial resources are all ingredients
that make us competitive in this area.
In the power business line, we expect natural gas prices in the United States to remain
low, driving more opportunities for combined-cycle plant projects. We will continue to
expand our power portfolio internationally, as we pursue mounting opportunities in gas-
fired plants, renewables and nuclear. As we have said for years, nuclear will continue to be
a strong, long-term strategic play for Fluor, where we see opportunity in new technologies
outside the United States. NuScale, our small modular reactor (SMR) business, continues
W E S T I N G H O U S E N U C L E A R P R O J E C T
WAY N E S B O R O , G E O R G I A
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F L U O R 2 0 1 6 A N N U A L R E P O R T
2/24/17 9:25 PM
I N D U S T R I A L , I N F R A S T R U C T U R E & P O W E R
to lead the way toward a new era for nuclear. On December 31, 2016, NuScale requested that the U.S. Nuclear Regulatory Commission (NRC)
approve its design certification application. This is a momentous step that puts our technology on the most direct path to being the SMR solution
for the United States.
While our strategies for growing different segments may vary, one element of our approach will always remain constant: We will continue to
differentiate ourselves through the power of One Fluor – utilizing the global reach, deep expertise and broad capabilities from across Fluor to
pursue, win and execute work.
P3 Public-private
partnership
expertise is
a powerful
differentiator
for Fluor.
E A G L E P 3 C O M M U T E R R A I L L I N E
D E N V E R , C O L O R A D O
F L U O R 2 0 1 6 A N N U A L R E P O R T
706092narcx.indd 19
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2/24/17 9:25 PM
G O V E R N M E N T
U . S . D E PA R T M E N T O F E N E R GY
S AVA N N A H R I V E R S I T E
A I K E N , S O U T H C A R O L I N A
10O V E R T H E N E X T D E C A D E ,
W E A N T I C I P AT E N U C L E A R
R E M E D I AT I O N I N V E S T M E N T S
O F AT L E A S T $ 1 0 B I L L I O N
G O V E R N M E N T Fluor’s Government Group achieved healthy performance throughout 2016, securing both new opportunities and
ongoing work. Clients across a number of U.S. government agencies continued to trust their critical missions to our care: We helped them progress
in the cleanup of legacy nuclear materials. We were essential in the building and management of critical government infrastructure. We provided
vital support and comfort to our troops deployed around the world. In short, we helped our clients achieve their objectives and meet their budgets.
In 2016, we continued to advance our growth strategy of lateral diversification – leveraging our specialized expertise to gain related work with
additional government agencies, as well as with the United States’ allied nations. In that vein, we progressed in our work with the Nuclear
Decommissioning Authority in the United Kingdom. In contingency services, we expanded our support of U.S. military forces across Africa,
and are now operating in nine countries across the continent. Additionally, our government services business continued to build its construction
portfolio, turning solid performance on smaller jobs into larger projects.
T H E O U T L O O K Our strategy has always been to focus our pursuits on
areas of great national interest – missions that the U.S. government must prioritize and
fund. One such mission that will be abundant with opportunity going forward is nuclear
remediation, particularly in the area of high-level liquid waste. Over the next decade we
anticipate investments of at least $10 billion in this market, and Fluor is well-positioned to
be at the forefront of this trend.
We are one of the established leaders in nuclear remediation, with strong relationships
at Savannah River and Hanford, the major sites currently bidding high-level liquid waste
contracts. We expect that Fluor’s extensive experience and good reputation at both of
those sites will afford us a competitive advantage on these pursuits.
F L U O R 2 0 1 6 A N N U A L R E P O R T
2/24/17 9:25 PM
U . S . D E PA R T M E N T O F E N E R GY
G A S E O U S D I F F U S I O N P L A N T
PA D U C A H , K E N T U C K Y
2 0
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L O G C A P I V O P E R AT I O N
U N I T E D A S S I S TA N C E
A F R I C A
Additionally, we anticipate new growth opportunities through differentiated construction for secure services clients, as well as by providing more
services support to surgical and specialized government missions and activities. Our clients know they can entrust their most critical and sensitive
missions to us, because we can execute as a single global entity like no other provider. Our integrated offering and commercial execution model
makes Fluor a more cost-effective resource to enable our clients to achieve their objectives. We are working to widen this gap of differentiation by
demonstrating our ability to rapidly deploy resources anywhere they are needed and readily scaling our services as required.
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N E W A W A R D S & B A C K L O G
S E G M E N T P R O F I T
(Dollars in Billions)
(Dollars in Millions)
2016
GOVERNMENT
Awards
Backlog
F L U O R 2 0 1 6 A N N U A L R E P O R T
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M A I N T E N A N C E , M O D I F I C AT I O N & A S S E T I N T E G R I T Y
Smarter, more efficient
and broader solutions
S U P R E M E M O D U L A R FA B R I C AT I O N
E D M O N T O N , C A N A D A
M A I N T E N A N C E , M O D I F I C AT I O N & A S S E T I N T E G R I T Y When large operators delay their major capital
expenditure projects to wait for improved market conditions, they often turn their attention to ensuring that operational expenditure budgets are
being utilized most efficiently. They seek ways to maintain and enhance their existing facilities and make their current assets perform better. The
Maintenance, Modification and Asset Integrity (MMAI) segment is poised, more than ever, to deliver the smarter operating solutions these clients
need.
In 2016, we expanded our presence in Operations and Maintenance around the world by completing our acquisition of Stork. This is a win-win for
both Fluor and Stork clients. It allows us to offer our legacy clients robust operational solutions on a global scale, while giving Stork clients access
to Fluor’s unique engineering and systems capabilities for their construction projects.
By expanding our large-scale global maintenance and modification capabilities, the addition of Stork brings a valuable new dimension to Fluor’s
integrated solutions offering. While we are well known for designing, building and delivering a project, we now have a compelling offering that
keeps Fluor on the worksite for years and even decades, generating revenue long after construction is completed and the keys are handed over. We
are leveraging a true end-to-end, capex-to-opex capability to bring more value to our clients, and thus to Fluor and its shareholders.
AMECO, Fluor’s equipment business line, is focused on providing integrated products and services. This led to new awards with Fluor on projects
such as the Sunoco Mariner 2 Project in Pennsylvania and Dominion Power’s Greensville County Power Station in Virginia, as well as multiple
awards with Stork in Colombia, South America. As part of the Fluor integrated solution, AMECO expanded the Integrated Scaffolding Program
on multiple Fluor projects, such as Duke Power’s Lee Station in South Carolina and Citrus County in Florida. AMECO also has positioned
itself to provide on-site equipment and maintenance directly to the construction firms that Fluor is managing in an EPCM role with Sasol in
Lake Charles, Louisiana.
Additionally, AMECO continues to strengthen its relationship with long-term clients as their trusted partner, resulting in contract renewals with
clients including Minera Los Pelambres and Barrick Gold in Chile, and Irving Oil in Canada.
Our global staffing business, TRS Staffing Solutions (TRS), supports Fluor, our clients and major businesses with flexible and reliable workforce
solutions. In 2016, TRS found new success working with technology clients located in California and Spain. In the United Kingdom, previous
experience in the wind farm sector helped us secure a significant award with a leading energy provider for the technical/engineering staffing of
a new wind farm being built in Scotland. TRS also saw new growth in Asia and Australia, with its India office adding nearly 200 contractors to
support Fluor projects in Kazakhstan.
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2/24/17 9:25 PM
T H E O U T L O O K Our MMAI segment is primed to grow. Whether we are modifying a plant, deploying our equipment fleet, servicing a
power generation facility, supporting a military base, or conducting any of our many other activities, we will continue to leverage our expertise and
assets to win new work around the world – offering new solutions, expanding into new regions and serving new market segments. Empowered by
our expanded offering, we will also work toward deeper penetration with current clients.
At year’s end, the Stork onboarding was nearly complete. Integration with Fluor has proceeded as planned, with no disruption of business. Going
forward, Stork will now focus on expansion outside of its traditional footprint in Europe and South America. Stork already is providing specialty
services to Fluor construction sites in North America.
Increasingly, we will put the promise of One Fluor synergy to work for our clients with smarter, more efficient and broader solutions. As an example,
we will offer our engineering, procurement and project management expertise at the front end of modification and turnaround projects to help
operators gain more certainty. Every day, we will strive to bring more innovation and better approaches to the table for long-term Stork clients,
long-term Fluor clients, and the future clients we will pursue as one around the world.
S T O R K P L AT F O R M
R I G G I N G P R O J E C T
G U L F O F M E X I C O , U S A
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N E W A W A R D S & B A C K L O G
S E G M E N T P R O F I T
(Dollars in Billions)
(Dollars in Millions)
2016
MAINTENANCE, MODIFICATION
& ASSET INTEGRIT Y
Awards
Backlog
F L U O R 2 0 1 6 A N N U A L R E P O R T
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New Awards and Backlog Data
NEW AWARDS BY SEGMENT
Year Ended December 31
($ in millions)
2016
2015
2014
Energy, Chemicals & Mining
$ 8,422
Industrial, Infrastructure & Power
Government
Maintenance, Modification & Asset Integrity
6,200
4,562
1,775
40%
30%
22%
8%
$ 11,981
7,064
1,429
1,372
55%
33%
6%
6%
$ 20,680
2,347
4,693
1,111
72%
8%
16%
4%
Total New Awards
$ 20,959
100%
$ 21,846
100%
$ 28,831
100%
NEW AWARDS BY REGION
Year Ended December 31
($ in millions)
United States
Europe, Africa and Middle East
Americas
Asia Pacific (incl. Australia)
Total New Awards
BACKLOG BY SEGMENT
Year Ended December 31
($ in millions)
Energy, Chemicals & Mining
Industrial, Infrastructure & Power
Government
Maintenance, Modification & Asset Integrity
2016
2015
2014
$ 11,272
8,681
715
291
54%
42%
3%
1%
$ 11,343
6,003
3,892
608
52%
27%
18%
3%
$ 8,480
6,552
10,582
3,217
29%
23%
37%
11%
$ 20,959
100%
$ 21,846
100%
$ 28,831
100%
2016
2015
2014
$ 21,831
15,115
5,194
2,872
48%
34%
12%
6%
$ 29,365
9,682
3,560
2,119
66%
21%
8%
5%
$ 30,529
4,958
4,741
2,254
72%
12%
11%
5%
Total Backlog
$ 45,012
100%
$ 44,726
100%
$ 42,482
100%
BACKLOG BY REGION
Year Ended December 31
($ in millions)
United States
Europe, Africa and Middle East
Americas
Asia Pacific (incl. Australia)
Total Backlog
2016
2015
2014
$ 23,188
16,732
3,135
1,957
52%
37%
7%
4%
$ 18,167
13,351
10,530
2,678
41%
30%
23%
6%
$ 14,424
12,211
12,694
3,153
34%
29%
30%
7%
$ 45,012
100%
$ 44,726
100%
$ 42,482
100%
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Selected Financial Data
CONSOLIDATED OPERATING RESULTS
Year Ended December 31
(in millions, except per share and employee information)
Total revenue
Earnings from continuing operations before taxes
Amounts attributable to Fluor Corporation:
Earnings from continuing operations
Loss from discontinued operations, net of taxes
Net earnings
Basic earnings (loss) per share attributable
to Fluor Corporation:
Earnings from continuing operations
Loss from discontinued operations, net of taxes
Net earnings
Diluted earnings (loss) per share attributable
to Fluor Corporation:
Earnings from continuing operations
Loss from discontinued operations, net of taxes
Net earnings
Cash dividends per common share declared
Return on average shareholders’ equity
CONSOLIDATED FINANCIAL POSITION
Current assets
Current liabilities
Working capital
Property, plant and equipment, net
Total assets
Capitalization
1.750% Senior Notes
3.375% Senior Notes
3.5% Senior Notes
1.5% Convertible Senior Notes
Revolving Credit Facility
Other debt obligations
Shareholders’ equity
Total capitalization
Common shares outstanding at year end
OTHER DATA
New awards
Backlog at year end
Capital expenditures
Cash provided by operating activities
Cash (utilized) by investing activities
Cash utilized by financing activities
Employees at year end
Salaried employees
Craft/hourly employees
Total employees
2016
2015
2014
2013
2012
$ 19,036.5
546.6
$ 18,114.0
726.6
$ 21,531.6
1,204.9
$ 27,351.6
1,177.6
$ 27,577.1
733.5
$
$
$
$
$
$
$
$
$
$
$
$
$
$
281.4
—
281.4
2.02
—
2.02
2.00
—
2.00
0.84
9.1%
418.2
(5.7)
412.5
2.89
(0.04)
2.85
2.85
(0.04)
2.81
0.84
13.6%
$
$
$
$
$
$
$
715.5
(204.6)
510.9
$ 667.7
—
$ 667.7
4.54
(1.30)
3.24
4.48
(1.28)
3.20
0.84
20.1%
$
$
$
$
$
4.11
—
4.11
4.06
—
4.06
0.64
18.6%
$ 5,610.3
3,816.0
1,794.3
1,017.2
9,216.4
523.6
496.0
492.4
—
52.7
35.5
3,125.2
4,725.4
139.3
$ 5,105.4
2,935.4
2,170.0
892.3
7,625.4
—
495.2
491.4
—
—
—
2,997.3
3,983.9
139.0
$ 20,959.2
45,011.9
235.9
705.9
(741.4)
(10.4)
$ 21,846.2
44,726.1
240.2
849.1
(66.5)
(728.2)
$ 5,417.8
3,330.9
2,086.9
980.3
8,187.5
—
494.3
490.4
18.3
—
10.4
3,110.9
4,124.3
148.6
$ 28,831.1
42,481.5
324.7
642.6
(199.1)
(666.4)
$ 5,757.9
3,407.2
2,350.7
967.0
8,320.7
—
493.5
—
18.4
—
11.4
3,757.0
4,280.3
161.3
$ 25,085.6
34,907.1
288.5
788.9
(234.6)
(369.6)
28,681
32,870
61,551
27,195
11,563
38,758
27,643
9,865
37,508
29,425
8,704
38,129
$
$
$
$
$
$
$
456.3
—
456.3
2.73
—
2.73
2.71
—
2.71
0.64
13.0%
$ 5,844.3
3,887.1
1,957.2
951.3
8,272.5
—
492.7
—
18.5
—
26.3
3,341.3
3,878.8
162.4
$ 27,129.2
38,199.4
254.7
603.8
(13.7)
(616.6)
32,592
8,601
41,193
Net earnings attributable to Fluor Corporation in 2016 included a pre-tax charge of $265 million (or $1.20 per diluted share) related to forecast revisions for estimated cost increases
on a petrochemicals project in the United States. See page 33 of our Form 10-K for all explanatory footnotes relating to this selected financial data.
F L U O R 2 0 1 6 A N N U A L R E P O R T
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B O A R D O F D I R E C T O R S
Fro m l ef t t o r i g h t:
Lynn C. Swann
Athletic Director, The University of Southern
California (2013) (2) (3)
Matthew K. Rose
Executive Chairman, Burlington Northern
Santa Fe, LLC; Director of AT&T, Inc.
(2014) (2) (4)
Rosemary T. Berkery
Vice Chairman, UBS Wealth
Management Americas; Chairman,
UBS Bank USA (2010)
Peter K. Barker
Former California Chairman, JP Morgan Chase
& Co.; Director of Avery Dennison Corporation
and Franklin Resources, Inc. (2007) (1) (2) (4)
Peter J. Fluor
Fluor’s Lead Independent Director; Chairman
and Chief Executive Officer of Texas Crude
Energy, LLC; Director of Anadarko Petroleum
Corporation (1984) (1) (3) (4)
David T. Seaton
Chairman and Chief Executive Officer
of the Company; Director of The Mosaic
Company (2011) (1)
Alan M. Bennett
Former President and Chief Executive
Officer of H & R Block, Inc.; Director of
Halliburton Company and The TJX
Companies, Inc. (2011) (1) (2) (3)
Deborah D. McWhinney
Former Chief Executive Officer and
Chief Operating Officer of Global Enterprise
Payments at Citigroup Inc.; Director of Fresenius
Medical Care AG & Co.; IHS Markit Ltd. and
Lloyd’s Banking Group (2014) (2) (4)
James T. Hackett
Partner, Riverstone Holdings LLC; former
Executive Chairman and Chief Executive
Officer of Anadarko Petroleum Corporation;
Director of Enterprise Products Partners, L.P.
and National Oilwell Varco (2016) (3) (4)
Armando J. Olivera
Former President and Chief Executive
Officer of Florida Power & Light Company;
Director of Consolidated Edison, Inc.
and Lennar Corporation (2012) (3) (4)
Nader H. Sultan
Senior Partner, F & N Consulting Company;
former Chief Executive Officer and Deputy
Chairman of Kuwait Petroleum Corporation;
Non-Executive Chairman of Ikarus Petroleum
Industries Company (2009) (2) (3)
Admiral Samuel J. Locklear
President, SJL Global Insights LLC;
U.S. Navy (retired) (2017) (2) (3)
Admiral Joseph W. Prueher
U.S. Navy (retired); former United States
Ambassador to the People’s Republic of China;
Director of Emerson Electric Co. (2003) (1) (3) (4)
Years in parentheses indicate the year each director was elected to the Board.
(1) Executive Committee – David T. Seaton, Chairman;
(2) Audit Committee – Peter K. Barker, Chairman;
(3) Governance Committee – Alan M. Bennett, Chairman;
(4) Organization and Compensation Committee –
Peter J. Fluor, Chairman
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O F F I C E R S
Fro m l ef t t o r i g h t:
Bruce A. Stanski
Group President,
Government (2009)
Biggs C. Porter
Executive Vice President and
Chief Financial Officer (2012)
Mark A. Landry
Senior Vice President,
Chief Human Resources Officer (1989)
Ray F. Barnard
Executive Vice President,
Systems and Supply Chain (2002)
David T. Seaton
Chairman and
Chief Executive Officer (1985)
Garry W. Flowers
Executive Vice President,
Project Support Services (1978)
Jose-Luis Bustamante
Executive Vice President,
Business Development
and Strategy (1990)
No t p i c t u re d :
Robin K. Chopra
Senior Vice President and
Controller (1991)
Peter Oosterveer
Chief Operating Officer (1989)
Carlos M. Hernandez
Executive Vice President,
Chief Legal Officer and Secretary (2007)
James M. Lucas
Senior Vice President,
Tax and Treasurer (2006)
David Marventano
Senior Vice President,
Government Relations (2003)
This officer information is presented as of December 31, 2016. Years in parentheses indicate the year each officer joined Fluor.
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Working
As One
1S I N C E 1 9 1 2
F L U O R 2 0 1 6 A N N U A L R E P O R T
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2016 Form 10-K
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
(cid:2) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2016
or
(cid:2) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from
to
Commission file number: 1-16129
FLUOR CORPORATION
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
6700 Las Colinas Boulevard
Irving, Texas
(Address of principal executive offices)
33-0927079
(I.R.S. Employer
Identification No.)
75039
(Zip Code)
469-398-7000
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Name of Each Exchange on Which Registered
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 (cid:2) No (cid:2)
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 (cid:2) No (cid:2)
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 (cid:2) No (cid:2)
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 (cid:2) No (cid:2)
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. (cid:2)
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 (cid:2)
Smaller reporting company (cid:2)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Non-accelerated filer (cid:2)
Accelerated filer (cid:2)
Act). Yes (cid:2) No (cid:2)
As of June 30, 2016, the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant
was approximately $6.8 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.
Class
Outstanding at February 13, 2017
Common Stock, $.01 par value per share
139,355,412 shares
DOCUMENTS INCORPORATED BY REFERENCE
Document
Parts Into Which Incorporated
Portions of the Proxy Statement for the Annual
Meeting of Stockholders to be held on May 4, 2017
(Proxy Statement)
Part III
FLUOR CORPORATION
INDEX TO ANNUAL REPORT ON FORM 10-K
For the Fiscal Year Ended December 31, 2016
PART I
Item 1.
Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 1A. Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 1B. Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 2.
Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 3.
Mine Safety Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 4.
PART II
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Item 6.
Item 7.
Purchases of Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Management’s Discussion and Analysis of Financial Condition and Results of
Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 7A. Quantitative and Qualitative Disclosures About Market Risk . . . . . . . . . . . . . . . . .
Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 8.
Changes in and Disagreements with Accountants on Accounting and Financial
Item 9.
Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 9A. Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 9B. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PART III
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . . . . . . . . .
Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Certain Relationships and Related Transactions, and Director Independence . . . . . .
Principal Accountant Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PART IV
Item 15.
Exhibits and Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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i
Forward-Looking Information
From time to time, Fluor(cid:3) 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 revenue
or to incur 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.
Defined Terms
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 joint ventures.
Item 1. Business
PART I
Fluor Corporation was incorporated in Delaware on September 11, 2000 prior to a reverse spin-off
transaction involving the company’s coal business. However, through our predecessors, we have been in
business for over a century. Our principal executive offices are located at 6700 Las Colinas Boulevard,
Irving, Texas 75039, and our telephone number is (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, as well as
interests in joint ventures. Acting through these entities, we are one of the largest professional services
firms providing engineering, procurement, construction, fabrication and modularization, commissioning
and maintenance as well as project management services on a global basis. We are an integrated solutions
provider for our clients in a diverse set of industries worldwide including oil and gas, chemicals and
petrochemicals, mining and metals, transportation, power, life sciences and advanced manufacturing. We
are also a service provider to the U.S. federal government and governments abroad; and we perform
1
operations, maintenance and asset integrity activities globally for major industrial clients. We have been
ranked number one in the engineering and construction industry of Fortune Magazine’s ‘‘World’s Most
Admired Companies(cid:3)’’ for the past five years in a row, and we are ranked by Engineering News-Record as
number one in their 2016 list of Top 100 Contractors. We were also named to Forbes’ inaugural JUST100(cid:3)
list, where top companies are ranked by how they perform on issues that most concern Americans.
In 2016, we realigned our business into four principal segments. The four segments are Energy,
Chemicals & Mining; Industrial, Infrastructure & Power; Maintenance, Modification & Asset Integrity
(sometimes referred to herein as ‘‘MMAI’’); and Government. 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-47 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 solutions provider of engineering, procurement, construction, fabrication,
maintenance and project management services, we believe that our business model allows us the
opportunity to bring to our clients on a global basis capital efficient 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, commission and manage complex projects often
in geographically challenging locations gives us a distinct competitive advantage. We strive to complete our
projects meeting or exceeding all client specifications. In an increasingly competitive environment, we are
also continually emphasizing cost and schedule controls so that we meet our clients’ performance
requirements as well as their schedule and budgetary needs.
Financial Strength We believe that we are among the most financially sound companies in our
industry. 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.
The maintenance of a safe and secure workplace is a key business driver for us and our clients. In the areas
in which we provide our services, we strive to deliver excellent safety performance. In our experience,
whether in an office or at a job-site, a safe environment decreases risks, assures a proper environment for
all workers, enhances their morale and improves their productivity, reduces project cost and generally
improves client relations. We believe that our commitment to safety is one of our most distinguishing
features.
Global Execution Platform As one of the
largest U.S.-based, publicly-traded engineering,
procurement, construction, fabrication and maintenance companies, 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 on opportunities near these locations. It also allows us to mobilize quickly to project
sites around the world and to draw on our local knowledge and talent pools. In many of the countries
where we work, clients are requiring more local content in their projects by mandating use of in-country
talent and procurement of in-country goods and services. To meet these challenges, we continue to expand
our footprint in growth regions by establishing local offices, forming strategic alliances with local partners,
2
leveraging our supply chain expertise and emphasizing local training programs. We also continue to expand
the scope of services in our distributed execution centers where we can continue to provide superior
services on a very cost-efficient basis.
Market Diversity The company serves multiple markets across a broad spectrum of industries across
the globe and offers a wide variety of engineering, procurement, construction, fabrication and
modularization, commissioning and maintenance services. 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.
Client Relationships Our culture is based on putting the customer at the center of everything we do.
We actively pursue relationships with new clients while at the same time building on our long-term
relationships with existing clients. We continue to believe that long-term relationships with existing,
sometimes decades-old, clients serves us well by allowing us to better understand and be more responsive
to their requirements. Regardless of whether our clients are new or have been with us for many years, our
ability to successfully foster relationships is a key driver to the success of our business.
Risk Management We believe that our ability to assess, understand, gauge, mitigate and manage
project risk, especially in difficult locations or circumstances or in a complicated contracting environment,
provides us with a proven ability to deliver the project certainty our clients demand. We have an
experienced management team, and utilize a systematic and disciplined approach towards managing risks.
We believe that our comprehensive risk management approach allows us to better control costs and
schedule, which in turn leads to clients who are satisfied with the delivered product.
Integrated Solutions Through our integrated solutions offering, we can deliver to clients our broad
range of engineering, procurement, construction, fabrication, equipment services, maintenance and
management services and offerings in an integrated package. This approach spans the entire lifecycle of a
project — from initial scoping and front end engineering to construction, fabrication, equipment and
supply chain to post-completion operations and maintenance — thereby allowing us to bring our full
breadth of resources to better solve client challenges and create opportunities. Our integrated solutions
approach allows us to exercise better overall control of a project, in collaboration with our clients, which in
turn results in more predictable and profitable results while enhancing the value, safety and efficiencies we
can bring to a project. We believe we are one of the few industry players who have the capability to deliver
integrated solutions to our client, which we believe is a clear differentiator for us.
General Operations
Our services fall into six broad categories: engineering and design, procurement, construction,
fabrication, maintenance, modification and asset integrity and project management. We offer these
services both independently as well as through our integrated solutions offerings. Our services can range
from basic consulting activities, often at the early stages of a project, to complete design-build and
maintenance contracts.
(cid:129) In engineering and design, we develop solutions to address our clients’ most complex problems on a
cost-effective basis. Our engineering services range from traditional engineering disciplines such as
piping, mechanical, electrical, control systems, civil, structural and architectural to advanced
engineering specialties including process engineering, chemical engineering, simulation, enterprise
integration, integrated automation processes and interactive 3-D modeling. Through our design
solutions, we provide clients with a varied group of service offerings which can include front-end
engineering, conceptual design, estimating, feasibility studies, permitting, process simulation,
technology and licensing evaluation, scope definition and siting. Our engineering and design
3
solutions are intended to align each project’s function, scope, cost and schedule in concert with
client objectives in order to best optimize project success.
(cid:129) Our procurement organization offers traditional procurement services as well as supply chain
solutions aimed at improving product quality and performance while also reducing project cost and
schedule. Our clients benefit from our global sourcing and supply expertise, global purchasing
power, technical knowledge, processes, systems and experienced global resources. Our traditional
procurement activities include strategic sourcing, material management, contracts management,
buying, expediting, supplier quality inspection and logistics.
(cid:129) In construction, we mobilize, execute, commission and demobilize projects on a self-perform or
subcontracted basis. Generally, we are responsible for the completion of a project, often in difficult
locations and under challenging circumstances. We are frequently designated as a program
manager, where a client has facilities in multiple locations, complex phases in a single project
location, or a large-scale investment in a facility. Depending upon the project, we often serve as the
primary contractor or we may act as a subcontractor to another party.
(cid:129) We also provide a variety of fabrication and modularization services, including integrated
engineering and modular fabrication and assembly, modular construction and asset support services
to customers around the globe from our joint venture yards in Mexico, Russia and Canada. In
addition, in early 2016, we commenced operations of our new fabrication joint venture entity with
Chinese Offshore Oil Exploration Company. Known as COOEC Fluor Heavy Industries Co., Ltd.
(‘‘CFHI’’), this joint venture provides us with the ability to produce cost effective and very large
fabrication solutions, in a world-class, state-of-art facility located near Zhuhai, China. By operating
self-perform fabrication yards in key regions of the world, our off-site fabrication solutions help our
clients achieve cost and schedule savings by reducing on-site craft needs and shifting work to
inherently safer and more controlled work environments.
(cid:129) Under our maintenance, modification and asset integrity offering, our clients ask us to improve the
performance and extend the life of their complex facilities. In early 2016, we acquired Stork
Holding B.V., a global provider of MMAI services which significantly increased our offerings in this
business while also enhancing our integrated solutions capabilities. Our MMAI services include the
delivery of total maintenance services, facility management, plant readiness, commissioning,
start-up and maintenance technology, small capital projects, turnaround and outage services, all on
a global basis. Among other things, we can provide key management, staffing and management
skills as well as equipment, tools and fleet services to clients on-site at their facilities. Our MMAI
activities also include routine and outage/turnaround maintenance services, general maintenance
and asset management, emissions reduction technologies and services, and restorative, repair,
predictive and prevention services.
(cid:129) Project management, the primary responsibility of managing all aspects of the effort to deliver
projects on schedule and within budget, is required on every project. We are often hired as the
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 four principal business segments, as described below.
Energy, Chemicals & Mining
Energy, Chemicals & Mining is our commodity-related segment where we focus on opportunities in
the upstream, downstream, chemical, petrochemical, offshore and onshore oil and gas production,
liquefied natural gas, pipeline, metals and mining markets. We have long served a broad spectrum of
4
commodity-based industries as an integrated solutions provider offering a full range of design, engineering,
procurement, construction, fabrication and project management services. 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 experience to perform extremely large projects in difficult
locations. As the locations of large scale energy, chemicals and mining 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, experience and track-record to manage their complex projects.
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 materials, equipment and subcontractors. We have the capacity to design and construct new facilities,
upgrade, modernize and expand existing facilities, and rebuild facilities following fires and explosions. 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 infrastructure associated with major new fields and pipelines, as
well as LNG projects. We are also involved in offshore production facilities and in conventional and
unconventional gas projects in various geographical locations.
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, where an increasing number of countries are implementing
stronger environmental standards.
We have been very active for several years in the chemicals and petrochemicals market, with major
projects involving the expansion of ethylene based derivatives. The most active markets have been in the
United States, Middle East and Asia, where there is significant demand for chemical products.
In mining and metals, we provide a full range of services to the bauxite, copper, gold, iron ore,
diamond, 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, Western Australia and Africa. We are one of the few
companies with the size and experience to execute large scale mining and metals projects in these difficult
locations.
Industrial, Infrastructure & Power
The Industrial, Infrastructure & Power segment provides design, engineering, procurement,
construction and project management services
life sciences, advanced
to
manufacturing, water and power sectors. These projects often require application of our clients’
state-of-the-art processes and intellectual knowledge. We focus on providing our clients with capital
efficiencies through solutions that seek to reduce costs and compress delivery schedules. By doing so, we
are able to complete our clients’ projects on a quick and more cost efficient basis.
transportation,
the
In infrastructure, we are an industry leader in developing projects for both domestic and international
governments, such as roads, highways, bridges and rail, with particular interest in large, complex projects.
We provide a broad range of services including consulting, design, planning, financial structuring,
engineering and construction. We also provide long-term operation and maintenance services for transit
and highway projects. Our projects may 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 and rail lines that
would not have otherwise been undertaken, had only public funding been available. The need for new
5
infrastructure in emerging countries and the replacement and expansion of aging infrastructure in
developed countries continues to drive project opportunities on a global basis.
For the advanced manufacturing market, we provide design, engineering, procurement, construction
and construction management services to a wide variety of industries on a global basis. We specialize in
designing fit-for-purpose projects which incorporate lean manufacturing concepts while also satisfying
client sustainability goals. Our experience spans a wide variety of market segments ranging from traditional
manufacturing to advanced technology projects.
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 the power market, we provide a full range of services to the gas fueled, nuclear, environmental
compliance, renewables and solid fueled markets. Our offering includes engineering, procurement,
construction, program management, start-up and commissioning and technical services. We provide these
services to a broad array of utilities, independent power producers, original equipment manufacturers and
other third parties.
We also continue to invest in NuScale Power, LLC (‘‘NuScale’’), an Oregon-based small modular
nuclear reactor (‘‘SMR’’) technology company. NuScale is a leader in the development of light water,
passively safe SMRs, which we believe will provide us with significant future project opportunities. In 2014,
the U.S. Department of Energy and NuScale entered into a cooperative agreement whereby the
government will reimburse certain NuScale research and development efforts through 2019. In December
2016, NuScale submitted its design certification application to the U.S. Nuclear Regulatory Commission, a
major step towards the eventual construction of the first SMR nuclear power facility.
Government
Our Government segment is a provider of engineering, construction, logistics, base and facilities
operations and maintenance, contingency response and environmental and nuclear services to the U.S.
government and governments abroad. Because the U.S. and other governments are the largest purchasers
of outsourced services in the world, government work represents an attractive opportunity for the
company.
For the energy sector, we provide site management, environmental remediation, decommissioning,
engineering and construction services and have been very successful in addressing the myriad
environmental and regulatory challenges associated with legacy and operational nuclear sites. We are an
industry leader in nuclear remediation at governmental facilities. We also provide safe, dependable and
value-added nuclear operation services for the United States Department of Energy (‘‘DOE’’) and
international governments where we have brought our commercial operations and program management
expertise to government clients to help stabilize substantial quantities of high-level, hazardous nuclear
materials. We also manage the processing of low-level and high-level radioactive waste as well as
development plans for on-site or off-site safe disposal of nuclear waste.
The Government segment also provides engineering and construction services, logistics and
life-support, as well as contingency operations support, to the defense sector. We support military logistical
and infrastructure needs around the world. Specifically, we provide life-support, engineering, procurement,
construction and logistical augmentation services to the U.S. military and coalition forces in various
international locations, with a primary focus on the United States military-related activities in and around
the Middle East and more specifically in Afghanistan and Africa. Because of our strong network of global
resources, we believe we are well-situated to efficiently and effectively mobilize the resources necessary for
6
defense operations, even in the most remote and difficult locations to both traditional and U.S.
government classified customers around the world.
In combination with our subsidiary, Fluor Federal Solutions, we are a leading provider of outsourced
services to the U.S. 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. In
addition, we provide construction services to new and existing facilities for the U.S. military, the
intelligence community and in support of foreign military sales programs.
The company is also providing 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.
Maintenance, Modification & Asset Integrity
The MMAI segment represents a combination of other operating segments that provide a wide array
of integrated solutions to support projects across Fluor groups and our clients all over the world.
Activities in this segment 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 focus on asset management
solutions, as well as providing services in diverse areas such as electrical and instrumentation, fabric
maintenance, mechanical and piping. We also provide inspection and integrity services to our clients to
better ensure the reliable operations of their projects. Our capabilities in this area were greatly enhanced
by our acquisition of Stork Holding, B.V. which closed in March 2016. This business, driven by annual
operating expenditures, often benefits from large projects that originate in another of our segments which
can lead to long-term maintenance or operations opportunities. Conversely, our long-term maintenance
contracts can lead to larger capital projects for our other business segments when those needs arise. Our
goal is to help clients improve the performance of their assets while also extending asset life.
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.
MMAI also provides Site Services(cid:3) and fleet management services through AMECO(cid:3). AMECO
provides integrated construction equipment, tool, and fleet service solutions to the company and third
party clients on a global basis for construction projects and plant sites. AMECO supports large
construction projects and plants at locations throughout North and South America, Africa, the Middle
East, Australia and Southeast Asia.
MMAI serves the staffing market through TRS(cid:3). TRS is a global enterprise of staffing specialists that
provides the company and third party clients with technical, professional and craft resources either on a
contract or permanent placement basis.
Other Matters
Backlog
Backlog represents the total amount of revenues we expect to record in the future based upon
contracts that have been awarded to us. Backlog is stated in terms of gross revenues and may include
significant estimated amounts of third party, subcontracted and pass-through costs.
7
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 company’s segments at December 31, 2016 and 2015:
December 31,
2016
December 31,
2015
(in millions)
Energy, Chemicals & Mining . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Industrial, Infrastructure & Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Government(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Maintenance, Modification & Asset Integrity(2) . . . . . . . . . . . . . . . . . . . . . .
$21,831
15,115
5,194
2,872
Total(3)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$45,012
$29,365
9,682
3,560
2,119
$44,726
(1) U.S. government agencies operate under annual fiscal appropriations by Congress and fund various
federal contracts only on an incremental basis. With respect to backlog in our Government segment, if
a contract covers multiple years, we include the full contract award, whether funded or unfunded,
excluding option periods. As of December 31, 2016 and 2015, total backlog includes $2.7 billion and
$912 million, respectively, of unfunded government contracts. For our contingency operations, we
include only those amounts for which specific task orders have been awarded.
(2) The equipment and temporary staffing businesses in the MMAI segment do not report backlog or new
awards. With respect to our ongoing operations and maintenance contracts in the MMAI segment,
backlog includes the amount of revenue we expect to recognize for the remainder of the current year
renewal period plus up to three additional years if renewal is considered to be probable.
(3) For projects related to proportionately consolidated joint ventures, we include only our percentage
ownership of each joint venture’s backlog.
The following table sets forth our consolidated backlog at December 31, 2016 and 2015 by region:
December 31,
2016
December 31,
2015
(in millions)
United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asia Pacific (including Australia) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Europe, Africa and Middle East . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The Americas (excluding the United States) . . . . . . . . . . . . . . . . . . . . . . . .
$23,188
1,957
16,732
3,135
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$45,012
$18,167
2,678
13,351
10,530
$44,726
In 2017, we expect to perform approximately 42 percent of our total backlog reported as of
December 31, 2016. In comparison, during the last three years we expected to annually perform an average
of 45 percent of our total year end backlog in the subsequent fiscal year.
Although backlog reflects business that is considered to be firm, cancellations, deferrals or scope
adjustments may occur. Backlog is adjusted to reflect any known project cancellations, revisions to project
scope and cost, foreign currency exchange fluctuations and project deferrals, as appropriate. Backlog
denominated in foreign currencies is measured using average exchange rates. Due to additional factors
outside of our control, such as changes in project schedules, we cannot predict the portion of our
December 31, 2016 backlog estimated to be performed annually subsequent to 2017. Accordingly, backlog
is not necessarily indicative of future earnings or revenues and no assurances can be provided that we will
ultimately realize on our backlog.
8
The following table sets forth our changes in consolidated backlog at December 31, 2016 and 2015:
December 31,
2016
December 31,
2015
(in millions)
Backlog — beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
New awards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments and cancellations, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Work performed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 44,726
20,959
(2,061)
(18,612)
$ 42,482
21,846
(1,987)
(17,615)
Backlog — end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 45,012
$ 44,726
For additional information with respect to our backlog, please see ‘‘Item 7. — Management’s
Discussion and Analysis of Financial Condition and Results of Operations,’’ below.
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 types of contracts: (a) cost reimbursable contracts and (b) fixed-
price, lump-sum or guaranteed maximum contracts. In some markets, we are seeing ‘‘hybrid’’ contracts
containing both fixed-price and cost reimbursable elements. As of December 31, 2016, the following table
breaks down the percentage and amount of revenue associated with these types of contracts for our
existing backlog:
Cost Reimbursable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fixed-Price, Lump-Sum and Guaranteed Maximum . . . . . . . . . . . . . . . . . . . .
December 31, 2016
(in millions)
$33,045
$11,967
(percentage)
73%
27%
In accordance with industry practice, most of our contracts, including those with the U.S. government
are subject to termination at the discretion of our client. In such situations, our contracts typically provide
for the payment of fees earned through the date of termination and the reimbursement of costs incurred
including demobilization costs.
Under cost reimbursable contracts, the client reimburses us based upon negotiated rates and pays us a
pre-determined or fixed 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, primarily acting as a prime contractor or a major subcontractor for a
number of 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 lump-sum contracts and negotiated fixed-price contracts. Under
lump-sum contracts, we typically bid against our competitors on a contract based upon specifications
provided by the client. This type of contracting presents certain inherent risks including the possibility of
ambiguities in the specifications received, or economic and other changes that may occur during the
9
contract period. Under negotiated fixed-price contracts, we are selected as contractor first, and then we
negotiate price with the client. Negotiated fixed-price contracts frequently occur in single-responsibility
arrangements where we perform some of the work before negotiating the total price for the project.
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 types of contracts, we can benefit from cost
savings; however, if the project does not proceed as originally planned, we generally cannot recover cost
overruns except in certain limited situations.
Guaranteed maximum price contracts are 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.
Some of our contracts, regardless of type, may operate under joint ventures or other teaming
arrangements. Typically, we enter into these arrangements with reputable companies with whom we have
worked previously. These arrangements are generally made to strengthen our market position or technical
skills, or where the size, scale or location of the project directs the use of such arrangements.
Competition
We are one of the world’s largest providers of engineering, procurement, construction, fabrication,
operations and maintenance 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, Ltd., Jacobs Engineering Group, Inc.,
KBR, Inc., Kiewit Corporation, Granite Construction, Inc. and AECOM, and international-based
companies such as AMEC Foster Wheeler plc, Balfour Beatty plc, Chicago Bridge and Iron
Company N.V., Chiyoda Corporation, Hyundai Engineering & Construction Company, Ltd., JGC
Corporation, Petrofac Limited, SNC-Lavalin Group, Inc., Samsung Engineering, TechnipFMC plc and
WorleyParsons Limited.
In the engineering, procurement, fabrication and construction arena, which is served by our Energy,
Chemicals & Mining segment and our Industrial, Infrastructure & Power segment, competition is based on
an 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,
fabrication and construction business derives its competitive strength from our diversity, excellence in
execution, reputation for quality, technology, cost-effectiveness, worldwide procurement capability, project
management expertise, geographic coverage, 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 MMAI segment, while having some similarities to the construction
and procurement arena, 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. In the operations and maintenance
markets, barriers to entry are both financially and logistically low, with the result that the industry is highly
fragmented with no single company being dominant. Competition in those markets is generally driven by
reputation, price and the capacity to perform. The equipment sector, which operates in numerous markets,
is highly fragmented and very competitive, with a large number of competitors mostly operating in specific
geographic areas. The competition in the equipment sector 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, client relationships, breadth of
service and the ability to identify and retain qualified personnel and geographical coverage.
10
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, cost-efficient and compliant manner.
Significant Clients
For 2016, revenue earned from agencies of the U.S. government and Exxon Mobil Corporation
accounted for 13 percent and 10 percent, respectively, of our total revenue. We perform work for these
clients under multiple contracts and sometimes through joint venture arrangements. No other client
accounted for more than 10 percent of our revenues in 2016.
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
Aside from our investment in NuScale, we generally do not engage in significant research and
development efforts for new products and services and, 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. See ‘‘Item 7. — Management’s Discussion
and Analysis of Financial Condition and Results of Operations — Power’’ for further discussion of the
operations of NuScale.
Patents
We hold patents and licenses for certain items that we use in our operations, including those held by
NuScale and Stork. However, none is so essential that its loss would materially affect our business.
Environmental, Safety and Health Matters
In our business, we engage in the design, engineering, construction, construction management,
fabrication and operations and maintenance at sites throughout the world. Work at some of these sites
involves activities related to nuclear facilities, hazardous waste, hydrocarbon production, distribution and
transport, the military and infrastructure. Some of our work can be performed adjacent to environmentally
sensitive locations such as wetlands, lakes and rivers. We also contract with the U.S. federal government to
remediate hazardous materials, including chemical agents and weapons, as well as to decontaminate and
decommission nuclear sites. These activities can require us to manage, handle, remove, treat, transport and
dispose of toxic, radioactive or hazardous substances. Significant fines, penalties and other sanctions may
arise under environmental health and safety laws and regulations, and many of these laws call for joint and
several and/or strict liability, which can render a party liable without regard to negligence or fault of such
person.
We believe, based upon present information available to us, that we are generally compliant with all
such environmental health and safety laws and regulations. We further believe 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
11
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, 2016:
Salaried Employees:
Energy, Chemicals & Mining . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Industrial, Infrastructure & Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Government . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Maintenance, Modification & Asset Integrity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Salaried . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Craft and Hourly Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Number of
Employees
14,234
2,491
3,940
4,579
3,437
28,681
32,870
61,551
The number of craft and hourly employees, who provide support throughout the various business
segments, varies in relation to the number, size and phase of execution of projects we have in process at
any particular time.
Executive Officers of the Registrant
The following information is being furnished with respect to the company’s executive officers as of
December 31, 2016:
Name
Age
Position with the Company(1)
Ray F. Barnard . . . . . . . . . . .
Jose-Luis Bustamante . . . . . .
Robin K. Chopra . . . . . . . . .
Garry W. Flowers . . . . . . . . .
Carlos M. Hernandez . . . . . .
Mark A. Landry . . . . . . . . . .
Peter Oosterveer . . . . . . . . . .
Biggs C. Porter . . . . . . . . . . .
David T. Seaton . . . . . . . . . .
Bruce A. Stanski . . . . . . . . . .
Senior Vice President and Controller
57 Executive Vice President, Systems and Supply Chain
53 Executive Vice President, Business Development and Strategy
52
65 Executive Vice President, Project Support Services
62 Executive Vice President, Chief Legal Officer and Secretary
52
59 Chief Operating Officer
63 Executive Vice President and Chief Financial Officer
55 Chairman and Chief Executive Officer
56 Group President, Government
Senior Vice President, Human Resources
(1) All references are to positions held with Fluor Corporation. All of the officers listed in the preceding
table serve in their respective capacities at the pleasure of the Board of Directors.
Ray F. Barnard
Mr. Barnard has been Executive Vice President, Systems and Supply Chain since February 2014. Prior
to that, he was Chief Information Officer from February 2005 to February 2014. Mr. Barnard joined the
company in 2002.
Jose-Luis Bustamante
Mr. Bustamante has been Executive Vice President, Business Development and Strategy since
February 2015. Prior to that, he was Senior Vice President of Business Development, Marketing and
12
Strategic Planning for Oil & Gas from February 2012 to February 2015 and Vice President, Sales from
August 2007 to February 2012. Mr. Bustamante joined the company in 1990.
Robin K. Chopra
Mr. Chopra has been Senior Vice President and Controller, as well as the Principal Accounting
Officer of Fluor since March 2016. Prior to that, he was Controller of our former Energy & Chemicals,
Industrial & Infrastructure and Power segments from September 2014 to March 2016 and Vice President,
Internal Audit from March 2008 to September 2014. Mr. Chopra joined the company in 1991.
Garry W. Flowers
Mr. Flowers has been Executive Vice President, Project Support Services since February 2014 and has
also led HSE, Security and Industrial Relations since November 2003. Prior to February 2014, Mr. Flowers
was Group President, Global Services from January 2012 to February 2014 and was President and CEO of
Savannah River Nuclear Solutions, LLC from September 2009 to January 2012. Mr. Flowers joined the
company in 1978.
Carlos M. Hernandez
Mr. Hernandez has been Executive Vice President, Chief Legal Officer and Secretary since October
2007, when he joined the company. Prior to joining the company, he was General Counsel and Secretary of
ArcelorMittal USA, Inc. from April 2005 to October 2007.
Mark A. Landry
Mr. Landry has been Senior Vice President, Human Resources since July 2016. Prior to that he had
various roles in our Human Resources group overseeing various commercial operations from May 2014 to
July 2016 and was an HR Director for Energy & Chemicals and the HR Regional Director for EAME,
Asia Pacific and Australia from December 2010 to May 2014. Mr. Landry joined the company in 1989.
Peter Oosterveer
Mr. Oosterveer has been Chief Operating Officer since February 2014. Prior to that, he was Group
President, Oil & Gas from March 2009 to February 2014. Mr. Oosterveer joined the company in 1989.
Biggs C. Porter
Mr. Porter has been Executive Vice President and Chief Financial Officer since May 2012, when he
joined the company. Prior to joining the company, he was Chief Financial Officer of Tenet Healthcare, Inc.
from June 2006 to March 2012.
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. Mr. Seaton joined
the company in 1985.
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.
13
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
Code of Business Conduct and Ethics for Members of the Board of Directors on the ‘‘Sustainability’’
portion of our website under the heading ‘‘Corporate Governance Documents’’ filed under ‘‘Governance.’’
Item 1A. Risk Factors
We are vulnerable to the cyclical nature of the markets we serve.
The demand for our services is dependent upon the existence of projects with engineering,
procurement, construction, fabrication, maintenance and management needs. Current economic
conditions and commodity prices have adversely affected our clients’ interest in approving new projects,
have reduced our clients’ budgets for capital expenditures and have otherwise caused a slowdown in the
services our clients require. We derive a substantial portion of our revenues from companies in the oil and
gas industry, a historically cyclical industry that is significantly affected by the levels and volatility of oil and
gas prices. Recent and/or continuing declines or moderations in oil or natural gas prices or activities have
materially and adversely affected the demand for our services in our Energy, Chemicals & Mining
segment. In our Energy, Chemicals & Mining segment, capital expenditures by our clients may be
influenced by factors such as prevailing prices and expectations about future prices for underlying
commodities, 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 the power portion of our Industrial, Infrastructure & Power segment, new order activity has continued
to see relatively low demand for our services in power due to political and environmental concerns
regarding coal-fired power plants and safety and environmental concerns in the nuclear sector. In our
mining and metal business line of the Energy, Chemicals & Mining segment, new order activity has also
shown continued slowing due in part to volatility in the commodities and capital markets, which have
caused clients in this segment to re-evaluate their needs for future capital improvements. Industries such as
these and many of the others we serve have historically been and will continue to be vulnerable to general
downturns, which in turn could materially and adversely affect the demand for our services.
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 project awards. The
timing of project awards is unpredictable and outside of our control. Awards, including expansions of
existing projects, often involve complex and lengthy negotiations and competitive bidding processes. These
processes can be impacted by a wide variety of factors including a client’s decision to not proceed with the
development of a project, governmental approvals, financing contingencies, commodity prices,
environmental conditions and overall market and economic conditions. 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. 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 acceptable especially when the markets for
the services we typically offer are relatively soft. Because a significant portion of our revenue is generated
from large projects, our results of operations can fluctuate quarterly and annually depending on whether
and when large project awards occur and the commencement and progress of work under large contracts
14
already awarded. 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 economic and
political conditions also make it extremely difficult for our clients, our vendors and us to accurately
forecast and plan future business activities. For example, following the recent elections in the United
States, many observers expect spending on U.S. infrastructure to increase. There is no assurance that such
spending will increase or, if it does, that we will benefit from any increases in spending.
We may experience reduced profits or losses under contracts if costs increase above estimates.
Generally our business is performed under contracts that include cost and schedule estimates in
relation to our services. Inaccuracies in these estimates may lead to cost overruns that may not be paid by
our clients thereby resulting in reduced profits or losses. If a contract is significant or there are one or
more events that impact a contract or multiple contracts, cost overruns could have a material impact on
our reputation or our financial results, negatively impacting our financial condition, results of operations
or cash flow. Approximately 27 percent of the dollar-value of our backlog is currently fixed-price contracts,
where we bear a significant portion of the risk for cost overruns. Reimbursable contract types, such as
those that include negotiated hourly billing rates, may restrict the kinds or amounts of costs that are
reimbursable, therefore exposing us to risk that we may incur certain costs in executing these contracts that
are above our estimates and not recoverable from our clients. If we fail to accurately estimate the
resources and time necessary for these types 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.
In some markets, there is a trend towards cost-reimbursable contracts with incentive fee
arrangements. Typically, our incentive fees are based on achievement of target completion dates or target
costs, overall safety performance, overall client satisfaction and other performance criteria. If we fail to
meet such targets or achieve the expected performance standards, we may receive a lower or even zero
incentive fee. In other cases, our fee will not change but we will have to continue to perform work without
additional fee until the performance criteria is achieved. In both instances, this could result in lower than
expected gross margins. Accordingly, for these and other reasons, there is no assurance that the contracts
in our backlog, assuming they produce the revenue expected, will generate gross margins at the rates we
expect or have realized in the past.
Risks under our contracts which could result in cost overruns, project delays or other problems can
also include:
(cid:129) Difficulties related to the performance of our clients, partners, subcontractors, suppliers or other
third parties;
(cid:129) Changes in local laws or difficulties or delays in obtaining permits, rights of way or approvals;
(cid:129) Unanticipated technical problems, including design or engineering issues;
(cid:129) Insufficient or inadequate project execution tools and systems needed to record, track, forecast and
control cost and schedule;
(cid:129) Unforeseen increases in or failures to properly estimate the cost of raw materials, components,
equipment, labor or the inability to timely obtain them;
(cid:129) Delays or productivity issues caused by weather conditions;
(cid:129) Incorrect assumptions related to productivity, scheduling estimates or future economic conditions;
and
(cid:129) Project modifications creating unanticipated costs or delays.
15
These risks tend to be exacerbated for longer-term contracts because there is increased risk that the
circumstances under which we based our original cost estimates or project schedules will 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. In addition, these losses may be material and can, in some
circumstances, equal or exceed the full value of the contract. In such events, our financial condition, results
of operations or cash flow could be negatively impacted.
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, 2016, our backlog was approximately $45.0 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 or will not be subject to
delay or suspension. Project cancellations, scope adjustments or deferrals, or foreign currency fluctuations
may occur 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; or, may cause the rate at which we perform on
our backlog to decrease. Most of our contracts have termination for convenience provisions in them
allowing clients to cancel projects already awarded to us. Our contracts typically provide for the payment
of fees earned through the date of termination and the reimbursement of costs incurred including
demobilization costs. In addition, projects may remain in our backlog for an extended period of time.
During periods of economic slowdown or decreases in commodity prices, the risk of backlog projects being
suspended, delayed or cancelled generally increases. Finally, poor project or contract performance could
also impact our backlog and profits. Such developments could have a material adverse effect on our
business and our profits.
Intense competition in the global engineering, procurement 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. These markets can require substantial resources and investment in technology and skilled
personnel. We also see a continuing influx of non-traditional competitors offering below-market pricing
while accepting greater risk. Competition can place downward pressure on our contract prices and profit
margins, and may force us to accept contractual terms and conditions that are not normal or customary,
thereby increasing the risk that we may have losses on such contracts. 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.
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, including a decline in commodity prices and currency
devaluations, have reduced and continue to negatively impact our clients’ 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 or financial
sequestration 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 have reduced to some extent 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
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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 award and execution
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. If we extend a significant portion of credit to our clients or projects in a
specific geographic region or industry, we may experience higher levels of collection risk or non-payment if
those clients are impacted by factors specific to their geographic industry or region. Finally, our business
has traditionally lagged recoveries in the general economy, and therefore may not recover as quickly as the
economy as a whole.
We have international operations that are subject to foreign economic and political uncertainties and risks.
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 international economic and political conditions that change (sometimes
frequently) for reasons which are beyond our control. As of December 31, 2016, approximately 48 percent
of our 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 risks including:
(cid:129) abrupt changes in government policies, laws, treaties (including those impacting trade), regulations
or leadership;
(cid:129) embargoes or other trade restrictions, including sanctions;
(cid:129) restrictions on currency movement;
(cid:129) tax increases;
(cid:129) currency exchange rate fluctuations;
(cid:129) changes in labor conditions and difficulties in staffing and managing international operations;
(cid:129) U.S. government policy changes in relation to the foreign countries in which we or our clients
operate;
(cid:129) international hostilities; and
(cid:129) unrest, civil strife, acts of war, terrorism and insurrection.
Also, the lack of a well-developed legal system in some of the countries where we operate may make it
difficult to enforce our contractual rights or to defend ourself against claims made by others. We operate in
countries where there is a significant amount of political risk including the Middle East, Kazakhstan,
Russia, China, and Argentina. In addition, military action or continued unrest 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 on each project, depending on the location of the project and the
particular stage of each such project. For example, our risk exposure with respect to a project in an early
development phase, such as engineering, will generally be less than our risk exposure on a project that is in
the construction phase. To the extent that our international business is affected by unexpected and adverse
foreign economic and political conditions and risks, we may experience project disruptions and losses.
Project disruptions and losses could significantly reduce our overall revenue and profits.
Additional risks to our business may result from the United Kingdom’s proposed withdrawal from the
European Union. In June 2016, the United Kingdom voted in favor of a referendum, commonly known as
‘‘Brexit’’, which sets in motion its withdrawal from the European Union. It is anticipated that this process,
when completed, could result in greater regulatory complexities and possibly result in more restrictive
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business activities between the United Kingdom and the European Union. In addition, Brexit may cause
general disruption to the global economic markets. We have significant business operations in the United
Kingdom. Brexit may adversely impact our relationships with our existing and future customers, suppliers,
employees and subcontractors, and may otherwise have an adverse effect on our business, operations and
financial condition.
Our use of teaming arrangements and joint ventures, which are important to our business, exposes us to risk and
uncertainty because the success of those ventures depends on the satisfactory performance by our venture partners
over whom we may have little or no control. The failure of our venture partners to perform their venture obligations
could impose additional financial and performance obligations on us that could result in reduced profits or, in some
cases, significant losses for us with respect to the venture.
In the ordinary course of business, and as has become increasingly common in our industry, we
execute specific projects and otherwise conduct certain operations through joint ventures, consortiums,
partnerships and other collaborative arrangements (collectively, ‘‘ventures’’), including ICA Fluor and
CFHI. We have various ownership interests in these ventures, with such ownership typically being
proportionate to our decision-making and distribution rights. The ventures generally contract directly with
the third party client; however, services may be performed directly by the venture, or may be performed by
us, our partners, or a combination thereof.
Our success in many of our markets is dependent, in part, on the presence or capability 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. Differences in opinions or views between venture
partners can result in delayed decision-making or failure to agree on material issues which could adversely
affect the business and operations of our ventures. In many of the countries in which we engage in joint
ventures, it may be difficult to enforce our contractual rights under the applicable joint venture agreement.
At times, we also participate in ventures where we are not a controlling party. In such instances, we
may have limited control over venture decisions and actions, including internal controls and financial
reporting which may have an impact on our business. To the extent the controlling partner makes decisions
that negatively impact the joint venture, if internal control problems arise within the joint venture, or if our
joint venture partner has financial or operational issues, there could be a material impact on our business,
financial condition or results of operations.
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 venture which are not necessarily proportionate with the
reward we expect to receive or which may differ from risks or responsibilities we would normally accept in
our own operations. The success of these and other ventures also depends, in large part, on the satisfactory
performance by our venture partners of their venture obligations, including their obligation to commit
working capital, equity or credit support as required by the venture and to support their indemnification
and other contractual obligations. If our venture partners fail to satisfactorily perform their venture
obligations the 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 by the venture of the contracted services and to meet any
performance guarantees. We may also be subject to joint and several liability for our venture partners
under the applicable contracts for venture projects. These additional obligations could result in reduced
profits or, in some cases, increased liabilities or significant losses for us with respect to the venture, and in
turn, our business and operations. In addition, a failure by a venture partner to comply with applicable
laws, rules or regulations could negatively impact our business and could result in fines, penalties,
suspension or in the case of government contracts even debarment.
Cyber-security breaches of our systems and information technology could adversely impact our ability to operate.
We utilize, develop, install and maintain a number of information technology systems both for us and
for others. Various privacy and security laws require us to protect sensitive and confidential information
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from disclosure. In addition, we are bound by our client and other contracts, as well as our own business
practices, to protect confidential and proprietary information (whether it be ours or a third party’s
information entrusted to us) from disclosure. Our computer systems face the threat of unauthorized
access, computer hackers, viruses, malicious code, cyber attacks, phishing and other security incursions and
system disruptions, including attempts to improperly access our confidential and proprietary information
as well as the confidential and proprietary information of our clients and other business partners. While we
endeavor to maintain industry-accepted security measures and technology to secure our computer systems,
these systems and the information stored on these systems may still be subject to threats. A party who
circumvents our security measures could misappropriate confidential or proprietary information, or could
cause damage or interruptions to our systems. Any of these events could damage our reputation or have a
material adverse effect on our business, financial condition, results of operations or cash flows.
From time to time, 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. In addition, the nature
of our business results in clients, subcontractors and suppliers occasionally presenting claims against us for
recovery of costs 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. During times of economic downturns, especially with regard to commodity-based clients, claim
frequencies and amounts tend to increase.
In proceedings 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. 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. Our professional liability coverage is on a
‘‘claims-made’’ basis covering only claims actually made during the policy period currently in effect. 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 legal proceedings, liability claims or contract disputes, 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. For further information on matters in dispute, please see ‘‘14. Contingencies and
Commitments’’ in the Notes to Consolidated Financial Statements.
Our failure to recover adequately on claims against project owners, subcontractors or suppliers 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 subcontractors and suppliers. If we fail to properly document the nature of change orders or claims,
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 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
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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.
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 clients in amounts sufficient to cover expenditures as they are incurred. Some of our clients
may find it increasingly difficult to pay invoices for our services timely, especially as commodity prices
decrease and remain low, increasing the risk that our accounts receivable could become uncollectible and
ultimately be written off. In certain cases, our clients for our large projects are project-specific entities that
do not have significant assets other than their interests in the project. From time to time, it may be difficult
for us to collect payments owed to us by these clients. In addition, clients may request extension of the
payment terms otherwise agreed to under our contracts. 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.
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 to a client that we will
complete a project by a scheduled date. We sometimes warrant that a 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. Also,
our contracts typically include limited warranties, providing assurances to clients that our completed work
will meet industry standards of quality. If we subsequently fail to complete the project as scheduled, or if
the project subsequently fails to meet guaranteed performance or quality standards, we may be held
responsible under the guarantee or warranty provisions of our contract 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 or an obligation to re-perform substandard
work. To the extent that these events occur, the total cost of the project (including any liquidated damages
we become liable to pay) could exceed our original estimates and we could experience reduced profits or,
in some cases, a loss for that project.
Our project execution activities may result in liability for faulty engineering or similar professional services.
Because our projects are often technically complex, our failure to make
judgments and
recommendations in accordance with applicable professional standards, including engineering standards,
could result in damages. Our business involves professional judgments regarding the planning, design,
development, construction, operations and management of industrial facilities and public infrastructure.
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, subcontractors or suppliers 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.
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We are dependent upon suppliers and subcontractors 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. If the amount we are required to pay for subcontractors or
equipment and supplies exceeds what we have estimated, especially in a fixed-price type contract, we may
suffer losses on these contracts. If a supplier or subcontractor fails to provide supplies, technology,
equipment or services as required under a contract to us, our joint venture partner, our client or any other
party involved in the project for any reason, or provides supplies, technology, equipment or services that
are not an acceptable quality, we may be required to source those supplies, technology, equipment or
services on a delayed basis or at a higher price than anticipated, which could impact contract profitability.
In addition, faulty workmanship, 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 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 suppliers or subcontractors, if a
subcontractor or supplier were to fail there can be no assurance that the marketplace can provide
replacement technology, equipment, materials 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 could result in fines, penalties, suspension or in the
case of government contracts 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 or increase our costs to operate. As an example, from time to
time we face unexpected severe weather conditions which may result in delays in our operations;
evacuation of personnel and curtailment of services; increased labor and material costs or shortages;
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 disasters, unless a contract provision provides us with relief from our obligations. The extra
costs incurred as a result of these events may not be reimbursed by our clients. If we are not able to react
quickly to such events, or if a high concentration of our projects are in a specific geographic region that
suffers from a natural or man-made disaster, 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 and result in losses.
Our U.S. government contracts and contracting rights may be terminated or otherwise adversely impacted at any
time, and our inability to win or renew government contracts during regulated procurement processes could harm
our operations and reduce our projects and revenues.
We enter into significant government contracts, from time to time, such as those contracts that we
have in place with the U.S. Department of Energy and Department of Defense. U.S. 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.
U.S. government contracts are also subject to uncertainties associated with Congressional funding,
including the potential impacts of budget deficits and federal sequestration. A significant portion of our
business is derived as a result of U.S. government regulatory, military and infrastructure priorities.
Changes in these priorities, which can occur due to policy changes or changes in the economy, could
adversely impact our revenues. For example, the U.S. government has continued to close bases in
Afghanistan where we have performed significant work under the Logistics Civil Augmentation Program
(‘‘LOGCAP IV’’). Moreover, existing contracts we are operating under could be moved from one
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government department to another which could result in a termination of that contract. The U.S.
government is under no obligation to maintain program funding at any specific level and funds for a
program may even be eliminated. Our U.S. government clients may terminate or decide not to renew our
contracts with little or no prior notice.
In addition, U.S. government contracts are subject to specific regulations such as 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. Failure to comply with any of
these regulations and other government requirements may result in contract price adjustments, financial
penalties or contract termination. Our U.S. government contracts are also subject to audits, cost reviews
and investigations by U.S. government contracting oversight agencies such as the U.S. Defense Contract
Audit Agency (the ‘‘DCAA’’). The DCAA reviews 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). The DCAA also has the ability to review how we have accounted
for costs under the FAR and CAS. The DCAA presents its report 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, or if they believe that we have engaged in
inappropriate accounting or other activities, payments to us may be disallowed or we could be required to
refund previously collected payments. Additionally, we may be subject to criminal and civil penalties,
suspension or debarment from future government contracts, and qui tam litigation brought by private
individuals on behalf of the U.S. government under the False Claims Act, which could include claims for
treble damages. Furthermore, in this environment, if we have significant disagreements with our
government clients concerning costs incurred, negative publicity could arise which could adversely affect
our industry reputation and our ability to compete for new contracts.
Most U.S. government contracts are awarded through a rigorous competitive process. The U.S.
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 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 and reduce our profits and revenues.
Many of our U.S. government contracts require security clearances. Depending upon the level of
clearance required, 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 government clients could terminate their contracts with us or decide not to
renew them, thus adversely affecting our revenues.
Under the Budget Control Act of 2011, an automatic sequestration process, or across-the-board
budget cuts (a large portion of which was defense-related), was triggered when the Joint Select Committee
on Deficit Reduction, a committee of twelve members of Congress, failed to agree on a deficit reduction
plan for the U.S. federal budget. The sequestration began on March 1, 2013. Although the Bipartisan
Budget Act of 2013 provides some sequester relief until the end of 2017, absent additional legislative or
other remedial action, the sequestration requires reduced U.S. federal government spending from 2017
through 2025. A significant reduction in federal government spending or a change in budgetary priorities
could reduce demand for our services, cancel or delay federal projects, and result in the closure of federal
facilities and significant personnel reductions, which could have a material adverse effect on our results of
operations and financial condition.
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If one or more of our U.S. government contracts are terminated for any reason including for
convenience, if we are suspended or debarred from U.S. government contract work, or if payment of our
cost is disallowed, we could suffer a significant reduction in expected revenue and profits.
Employee, agent or partner misconduct or our overall failure to comply with laws or regulations could weaken our
ability to win contracts, which could result in reduced revenues and profits.
Misconduct, fraud, non-compliance with applicable laws and regulations, or other improper activities
by one of our employees, agents or partners could have a significant negative impact on our business and
reputation. Such misconduct could include the failure to comply with anti-corruption, export control and
environmental regulations; federal procurement regulations, regulations regarding the pricing of labor and
other costs in government contracts and regulations regarding the protection of sensitive government
information; regulations on lobbying or similar activities; regulations pertaining to the internal control over
financial reporting; and, various other applicable laws or regulations. The precautions we take to prevent
and detect fraud, misconduct or failures to comply with applicable laws and regulations may not be
effective, and we could face unknown risks or losses. Our failure to comply with applicable laws or
regulations or acts of fraud or misconduct could subject us to fines and penalties, loss of security clearance
and suspension or debarment from contracting with government agencies, which could weaken our ability
to win contracts and have a material adverse impact on our revenues and profits.
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, and our tax
estimates and tax positions 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.
Systems and information technology interruption, as well as new systems implementation, 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 operate. From time to time, we experience system interruptions
and delays that may be planned for upgrades or that may be unplanned. Unplanned interruptions include
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, loss of critical or sensitive data (including private data) or loss of
funds; could delay or prevent operations (including the processing of transactions and reporting of
financial results); and could adversely affect our reputation or our operating results.
We continue to evaluate the need to upgrade and/or replace our systems and network infrastructure to
protect our computing environment, to stay current on vendor supported products and to improve the
efficiency of our systems and for other business reasons. The implementation of new systems and
information technology could adversely
imposing substantial capital
expenditures, demands on management time and risks of delays or difficulties in transitioning to new
systems. And, our systems implementations may not result in productivity improvements at the levels
anticipated. Systems implementation disruption and any other information technology disruption, if not
anticipated and appropriately mitigated, could have a material adverse effect on our business.
impact our operations by
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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 corruption to
some degree and, in certain circumstances, strict compliance with anti-bribery laws may conflict with local
customs and practices. We train our personnel concerning anti-bribery laws and issues, and we also inform
our partners, subcontractors, suppliers, 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
compliance. We cannot assure that our internal controls and procedures always will protect us from the
possible 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, subcontractors or suppliers), we could suffer from
criminal or civil penalties or other sanctions, including contract cancellations or debarment, and loss of
reputation, any of which could have a material adverse effect on our business. Litigation or investigations
relating to alleged or suspected violations of anti-bribery laws, even if ultimately such litigation or
investigations demonstrate that we did not violate anti-bribery laws, could be costly and could divert
management’s attention away from other aspects of our business.
New or changing legal requirements could adversely effect out operating results.
Our business and results of operations could be affected by the passage of climate change, defense,
environmental, infrastructure, trade and other laws, policies and regulations. For example, growing
concerns about climate change may result in the imposition of additional environmental regulations.
Legislation, international protocols or treaties, regulation or other restrictions on emissions could affect
our clients, including those who (a) are involved in the exploration, production or refining of fossil fuels
such as our Energy, Chemicals & Mining segment clients, (b) emit greenhouse gases through the
combustion of fossil fuels, including some of our power business 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 us and 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 nuclear reactors or
incentivize increased implementation of clean fuel projects which could positively impact the demand for
our services. As another example, the implementation of trade barriers, countervailing duties, or border
taxes, or the addition, relaxation or repeal of laws, policies and regulations regarding the industries and
sectors in which we work could result in a decline in demand for our services, or may make the manner in
which we perform our services, especially from outside the United States, less cost efficient. Furthermore,
changes to existing trade agreements may impact our business operations. 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.
We could be adversely impacted if we fail to comply with domestic and international import and export laws.
Our global operations require importing and exporting goods and technology across international
borders on a regular basis. Our policies mandate 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
24
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, including nuclear and other
radioactive materials, which, if improperly handled or disposed of, could subject us to civil and criminal
liabilities. It is impossible to reliably predict the full 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. 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, may not be covered by
insurance, could reduce our profits and therefore could materially impact our future operations.
In addition, risks associated with nuclear projects, due to their size, construction duration and
complexity, may be increased by new and modified permitting, licensing and regulatory approvals and
requirements that can be even more stringent and time consuming than similar conventional projects. Our
company, along with our investment in NuScale, is subject to a number of regulations such as the U.S.
Nuclear Regulatory Commission and non-U.S. regulatory bodies, such as the International Atomic Energy
Commission and the European Union, which can have a substantial effect on our nuclear operations and
investments. Delays in receiving necessary approvals, permits or licenses, the failure to maintain sufficient
compliance programs, and other problems encountered during construction (including changes to such
regulatory requirements) could significantly increase our costs or have an adverse effect on our results of
operations, our return on investments, our financial position and our cash flow.
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.
If we do not have adequate indemnification for our nuclear services, it could adversely affect our business and
financial condition.
We provide services to the U.S. Department of Energy and the nuclear energy industry in the
on-going maintenance and modification of nuclear facilities as well as decontamination and
decommissioning activities of nuclear plants. The Price-Anderson Act generally indemnifies parties
performing services to nuclear power plants and Department of Energy contractors; however, not all
activities we engage in on behalf of our clients are covered. Thus, if the Price-Anderson Act
indemnification protections do not apply to our services, or if the exposure occurs outside of the United
States in a region that does not have protections comparable to the Price-Anderson Act, our business and
financial condition could be adversely affected by our client’s refusal to contract with us, by our inability to
obtain commercially reasonable insurance or third party indemnification, or by the potentially significant
monetary damages we could incur.
Through a joint venture, we also provide services to the United Kingdom’s Nuclear Decommissioning
Agency (‘‘NDA’’) relating to the clean up and decommissioning of certain public sector sites in the United
Kingdom. Indemnification provisions under the Nuclear Installations Act of 1965 available to nuclear site
25
licensees, the Atomic Energy Authority and the Crown, and contractual indemnification from the NDA do
not apply to every liability that we might incur while performing services for the NDA. If the Nuclear
Installations Act of 1965 and contractual indemnification provisions do not apply to our services or if our
exposure occurs outside of the United Kingdom, our business and financial condition could be adversely
affected.
Foreign currency risks could have an adverse impact on company revenue, earnings and/or backlog.
Certain of our contracts subject us to foreign currency risk, particularly when project contract revenue
is denominated in a currency different than the contract costs. In addition, 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 and meet transactional requirements. We
may attempt to minimize our exposure to foreign currency risk by obtaining contract provisions that
protect us from foreign currency fluctuations and/or by implementing hedging strategies utilizing
derivatives as hedging instruments. However, these actions may not always eliminate all foreign currency
risk, and as a result our profitability on certain projects could be affected.
Our monetary assets and liabilities denominated in nonfunctional currencies are subject to currency
fluctuations when measured period to period for financial reporting purposes. In addition, the U.S. dollar
value of our backlog may from time to time increase or decrease significantly due to foreign currency
volatility. We may also be exposed to limitations on our ability to reinvest earnings from operations in one
country to fund our operations in other countries.
The company’s reported revenue and earnings of foreign subsidiaries could be affected by foreign
currency volatility. Revenue, cost and earnings of foreign subsidiaries with functional currencies other than
the U.S. dollar are translated into U.S. dollars for reporting purposes. If the U.S. dollar appreciates against
a foreign subsidiary’s non-U.S. dollar functional currency, the company would report less revenue, cost and
earnings in U.S. dollars than it would have had the U.S. dollar depreciated against the same foreign
currency or if there had been no change in the exchange rate.
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 differentiate our services through our technologies
and know-how. This success includes the ability of companies in which we invest, such as NuScale to
protect their intellectual property rights. We rely principally on a combination of patents, copyrights, 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 that do not protect intellectual property rights to the
same extent as the laws of the United States. We cannot provide assurances that others will not
independently develop technology substantially similar to our trade secret technology or that we can
successfully preserve our intellectual property rights in the future. Our intellectual property rights could be
invalidated, circumvented, challenged or infringed upon. Litigation to determine the scope of intellectual
property rights, even if ultimately successful, could be costly and could divert management’s attention away
from other aspects of our business.
In addition, our clients or other third parties may also provide us with their technology and
intellectual property. There is a risk that we may not sufficiently protect our or their information from
improper use or dissemination and, as a result, could be subject to claims and litigation and resulting
liabilities, loss of contracts or other consequences that could have an adverse impact on our business,
financial condition and results of operation.
We also hold licenses from third parties which may be utilized in our business operations. If we are no
longer able to license such technology on commercially reasonable terms or otherwise, our business and
financial performance could be adversely affected.
26
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, who have the necessary and
required experience and expertise, and who will perform these services at a reasonable and competitive
rate. Competition for these and other experienced personnel is intense. It may be difficult to attract and
retain qualified individuals with the expertise and in the timeframe demanded by our clients. In certain
geographic areas, for example, we may not be able to satisfy the demand for our services because of our
inability to successfully hire and retain qualified personnel. Also, it may be difficult to replace personnel
who hold government granted eligibility that may be required to obtain certain government projects and/or
who have significant government contract experience.
As some of our executives and other key personnel approach retirement age, we need to provide for
smooth transitions, which may require that we devote time and resources to identify and integrate new
personnel into these leadership roles and other key positions. If we are unable to attract and retain a
sufficient number of skilled personnel or effectively implement appropriate succession plans, our ability to
pursue projects may be adversely affected, the costs of executing our existing and future projects may
increase and our financial performance may decline.
In addition, the cost of providing our services, including the extent to which we utilize our workforce,
affects our profitability. For example, the uncertainty of contract award timing can present difficulties in
matching our workforce size with our contracts. If an expected contract award is delayed or not received,
we could incur costs resulting from excess staff, reductions in staff, or redundancy of facilities that could
have a material adverse impact on our business, financial conditions and results of operations.
Our employees work on projects that are inherently dangerous and in locations where there are high security risks,
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 or high risk
locations that are subject to political, social or economic risks, or war or civil unrest. In those locations
where we have employees or operations, we may expend significant efforts and incur substantial security
costs to maintain the safety of our personnel. In addition, our project sites can place our employees and
others near large equipment, dangerous processes or substances or highly regulated materials, and in
challenging environments. Safety is a primary focus of our business and is critical to our reputation and
performance. 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, the completion of a project could be delayed and we could experience
investigations or litigation. 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. And, despite these activities, in these locations and at these sites, we cannot guarantee the safety
of our personnel, nor damage to or loss of work, equipment or supplies.
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,
making acquisitions, investing in joint ventures and the servicing of our indebtedness. To the extent that
existing cash balances and cash flow from operations, together with borrowing capacity under our existing
credit facilities, are insufficient to make investments or acquisitions or provide needed working capital, we
may require additional financing from other sources. Our ability to obtain such additional financing in the
27
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, if global economic, political or other market conditions adversely
affect 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.
We may be unable to win new contract awards if we cannot provide clients with letters of credit, bonds or other
security or credit enhancements.
In certain of our business lines it is industry practice for customers to require surety bonds, letters of
credit, bank guarantees or other forms of credit enhancement. Surety 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, while we have had adequate capacity under our existing credit facilities, any
capacity that may be required in excess of our credit limits would be at our lenders’ sole discretion and
therefore is not certain. Failure to provide credit enhancements on terms required by a client may result in
an inability to compete for or win a project.
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 provide assurances 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 or jurisdictions where we have had little to no prior
operations experience and thus 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 or businesses
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 the 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.
Although we expect to realize certain benefits as a result of our acquisitions, there is a possibility that we may be
unable to successfully integrate our businesses in order to realize the anticipated benefits of these acquisitions or do
so within the intended timeframe.
As a result of recent acquisitions or with regard to future acquisitions , or those that may occur in the
future, we have been and will continue to devote significant management attention and resources to
integrating the business practices and operations of companies we acquire. Difficulties we may encounter
in the integration process include:
(cid:129) A delay in the integration of management teams, strategies, operations, products and services;
(cid:129) Diversion of the attention of management as a result of the acquisition;
28
(cid:129) The consequences of a change in tax treatment, including the costs of integration and compliance,
and the possibility that the anticipated benefits of the acquisition will not be realized;
(cid:129) Differences in corporate culture and management philosophies;
(cid:129) The ability to retain key personnel;
(cid:129) The challenges of integrating complex systems, technology, networks and other assets into ours in a
way that minimizes any adverse effects on the business; and
(cid:129) Potential unknown liabilities and unforeseen increased expenses or delays associated with the
acquisition, including the costs to integrate beyond current estimates.
Any of these factors could affect each company’s ability to maintain business relationships or our
ability to achieve the anticipated benefits of the acquisition, or could reduce our earnings or otherwise
adversely affect our business and financial results.
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:
(cid:129) recognition of contract revenue, costs, profits or
losses
in applying the principles of
percentage-of-completion accounting;
(cid:129) recognition of revenues related to project incentives or awards we expect to receive;
(cid:129) recognition of recoveries under contract change orders or claims;
(cid:129) estimated amounts for expected project losses, warranty costs, contract close-out or other costs;
(cid:129) collectability of billed and unbilled accounts receivable and the need and amount of any allowance
for doubtful accounts;
(cid:129) asset valuations;
(cid:129) income tax provisions and related valuation allowances;
(cid:129) determination of expense and potential liabilities under pension and other post-retirement benefit
programs; and
(cid:129) accruals for other estimated liabilities, including litigation and insurance revenues/reserves.
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.
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 to satisfy the requirements of many of our contracts. Although in the past we have been generally able
to cover our insurance needs, there can be no assurances that we can secure all necessary or appropriate
insurance in the future, or that such insurance can be economically secured. For example, catastrophic
events can result in decreased coverage limits, more limited coverage, increased premium costs or
deductibles. 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 cannot
satisfy their insurance requirements to us, then our overall risk exposure and operational expenses could
be increased and our business operations could be interrupted.
29
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.
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:
(cid:129) stockholders may not act by written consent;
(cid:129) there are various restrictions on the ability of a stockholder to call a special meeting or to nominate
a director for election; and
(cid:129) our Board of Directors can authorize the issuance of preferred shares.
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.
Item 2. Properties
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
are 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
30
subleased 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
United States:
Interest
Greenville, South Carolina . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Owned
Houston (Sugar Land), Texas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Leased
Irving, Texas (Corporate Headquarters) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Owned
Southern California (Aliso Viejo, Irvine and Long Beach) . . . . . . . . . . . . . . . . Leased
Canada:
Calgary, Alberta . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Owned and Leased
Vancouver, British Columbia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Leased
Latin America:
Buenos Aires, Argentina . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Leased
Mexico City, Mexico . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Leased
Santiago, Chile . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Owned and Leased
Europe, Africa and Middle East:
Al Khobar, Saudi Arabia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Owned
Amsterdam, the Netherlands . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Owned
Farnborough, England . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Owned and Leased
Gliwice, Poland . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Owned
Johannesburg, South Africa . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Leased
Asia/Asia Pacific:
Cebu, the Philippines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Leased
Manila, the Philippines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Owned and Leased
New Delhi, India . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Leased
Perth, Australia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 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. In addition, through various joint ventures, we
fabricate in Mexico, Canada, Russia and China.
Item 3. Legal Proceedings
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. Management periodically assesses our
liabilities and contingencies in connection with these matters based upon the latest information available.
We disclose material pending legal proceedings pursuant to Securities and Exchange Commission rules
and other pending matters as we may determine to be appropriate.
For information on legal proceedings and matters in dispute, see ‘‘14. Contingencies and
Commitments’’ in the Notes to Consolidated Financial Statements.
Item 4. Mine Safety Disclosures
Not applicable.
31
PART II
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
reported in the Consolidated Transactions Reporting System, and the cash dividends paid per share of
common stock.
Year Ended December 31, 2016
Fourth Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Third Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Second Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
First Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Year Ended December 31, 2015
Fourth Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Third Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Second Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
First Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Common Stock
Price Range
High
Low
Dividends
Per Share
$57.78
$54.45
$55.69
$55.48
$50.91
$53.48
$62.26
$61.06
$44.05
$47.91
$45.80
$39.48
$40.61
$40.70
$52.72
$51.80
$0.21
$0.21
$0.21
$0.21
$0.21
$0.21
$0.21
$0.21
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 13, 2017, there were 139,355,412 shares outstanding and 4,915 stockholders of record of
the company’s common stock. The company estimates there were an additional 185,321 stockholders
whose shares were held by banks, brokers or other financial institutions at February 7, 2017.
Issuer Purchases of Equity Securities
The following table provides information as of the three months ended December 31, 2016 about
purchases by the company of equity securities that are registered by the company pursuant to Section 12 of
the Exchange Act.
Period
Total Number
of Shares
Purchased
Average Price
Paid per
Share
Total Number of
Shares Purchased as
Part of Publicly
Announced Plans
or Programs
October 1–October 31, 2016 . . . . . . . . .
November 1–November 30, 2016 . . . . .
December 1–December 31, 2016 . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . .
—
—
—
—
$ —
—
—
$ —
—
—
—
—
Maximum
Number of
Shares that May
Yet Be Purchased
Under Plans or
Programs(1)
11,610,219
11,610,219
11,620,219
(1) The share repurchase program was originally announced on November 3, 2011 for 12,000,000 shares
and has been amended to increase the size of the program by an aggregate 34,000,000 shares, most
recently in February 2016 with an increase of 10,000,000 shares. The company continues to repurchase
shares from time to time in open market transactions or privately negotiated transactions, including
through pre-arranged trading programs, at its discretion, subject to market conditions and other
factors and at such time and in amounts that the company deems appropriate.
32
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. — Exhibits and Financial Statement Schedules.’’ Amounts are expressed in millions, except for
per share and employee information:
CONSOLIDATED OPERATING RESULTS
Total revenue
Earnings from continuing operations before taxes
Amounts attributable to Fluor Corporation:
Earnings from continuing operations(1)
Loss from discontinued operations, net of taxes
Net earnings(1)
Basic earnings (loss) per share attributable to Fluor
Corporation:
Earnings from continuing operations(1)
Loss from discontinued operations, net of taxes
Net earnings(1)
Diluted earnings (loss) per share attributable to Fluor
Corporation:
Earnings from continuing operations(1)
Loss from discontinued operations, net of taxes
Net earnings(1)
Cash dividends per common share declared
Return on average shareholders’ equity(2)
CONSOLIDATED FINANCIAL POSITION
Current assets
Current liabilities
Working capital
Property, plant and equipment, net
Total assets
Capitalization
1.750% Senior Notes
3.375% Senior Notes
3.5% Senior Notes
1.5% Convertible Senior Notes
Revolving Credit Facility
Other debt obligations
Shareholders’ equity
Total capitalization
Common shares outstanding at year end
OTHER DATA
New awards
Backlog at year end(3)
Capital expenditures
Cash provided by operating activities
Cash utilized by investing activities
Cash utilized by financing activities
Employees at year end
Salaried employees
Craft/hourly employees
Total employees
Year Ended December 31,
2016
2015
2014
2013
2012
$19,036.5
546.6
$18,114.0
726.6
$21,531.6
1,204.9
$27,351.6
1,177.6
$27,577.1
733.5
$
$
$
$
$
$
$
281.4
—
281.4
418.2
(5.7)
$
412.5
2.02
—
2.02
2.00
—
2.00
0.84
$
$
$
$
$
2.89
(0.04)
2.85
2.85
(0.04)
2.81
0.84
$
$
$
$
$
$
$
715.5
(204.6)
510.9
4.54
(1.30)
3.24
4.48
(1.28)
3.20
0.84
$
$
$
$
$
$
$
667.7
—
667.7
4.11
—
4.11
4.06
—
4.06
0.64
$
$
$
$
$
$
$
456.3
—
456.3
2.73
—
2.73
2.71
—
2.71
0.64
9.1%
13.6%
20.1%
18.6%
13.0%
$ 5,610.3
3,816.0
$ 5,105.4
2,935.4
$ 5,417.8
3,330.9
$ 5,757.9
3,407.2
$ 5,844.3
3,887.1
1,794.3
1,017.2
9,216.4
523.6
496.0
492.4
—
52.7
35.5
3,125.2
4,725.4
139.3
2,170.0
892.3
7,625.4
—
495.2
491.4
—
—
—
2,997.3
3,983.9
139.0
2,086.9
980.3
8,187.5
—
494.3
490.4
18.3
—
10.4
3,110.9
4,124.3
148.6
2,350.7
967.0
8,320.7
—
493.5
—
18.4
—
11.4
3,757.0
4,280.3
161.3
1,957.2
951.3
8,272.5
—
492.7
—
18.5
—
26.3
3,341.3
3,878.8
162.4
$20,959.2
45,011.9
235.9
705.9
(741.4)
(10.4)
$21,846.2
44,726.1
240.2
849.1
(66.5)
(728.2)
$28,831.1
42,481.5
324.7
642.6
(199.1)
(666.4)
$25,085.6
34,907.1
288.5
788.9
(234.6)
(369.6)
$27,129.2
38,199.4
254.7
603.8
(13.7)
(616.6)
28,681
32,870
61,551
27,195
11,563
38,758
27,643
9,865
37,508
29,425
8,704
38,129
32,592
8,601
41,193
(1)
Net earnings attributable to Fluor Corporation in 2016 included a pre-tax charge of $265 million (or $1.20 per diluted share)
related to forecast revisions for estimated cost increases on a petrochemicals project in the United States.
33
Net earnings attributable to Fluor Corporation in 2015 included a pre-tax pension settlement charge of $240 million (or
$1.04 per diluted share), a pre-tax loss of $60 million (or $0.26 per diluted share) resulting from forecast revisions for a large
gas-fired power plant in Brunswick County, Virginia, and a pre-tax gain of $68 million (or $0.30 per diluted share) related to
the sale of 50 percent of the company’s ownership interest in its principal operating subsidiary in Spain to facilitate the
formation of an Energy, Chemicals & Mining joint venture. Net earnings attributable to Fluor Corporation in 2015 also
included an after-tax loss from discontinued operations of $6 million (or $0.04 per diluted share) resulting from the
settlement of lead exposure cases related to the previously divested lead business of St. Joe Minerals Corporation and The
Doe Run Company in Herculaneum, Missouri and the payment of legal fees incurred in connection with a pending
indemnification action against the buyer of the lead business for these settlements and others. The tax effect associated with
this loss was $3 million.
Net earnings attributable to Fluor Corporation in 2014 included an after-tax loss from discontinued operations of
$205 million (or $1.28 per diluted share) in connection with the reassessment of estimated loss contingencies related to the
divested lead business. The tax effect associated with this loss was $112 million.
Net earnings attributable to Fluor Corporation in 2013 included pre-tax income of $57 million (or $0.22 per diluted share)
resulting from the favorable resolution of various issues with the U.S. government related to 2001 - 2013. Of this amount,
$31 million was the result of resolving challenges as to the reimbursability of certain costs, $11 million was the result of a
favorable court ruling that resolved certain disputed items and $15 million was related to the closeout and final disposition of
other matters.
Net earnings attributable to Fluor Corporation in 2012 included pre-tax charges of $416 million (or $1.57 per diluted share)
for the Greater Gabbard Offshore Wind Farm Project (‘‘Greater Gabbard Project’’), a pre-tax gain of $43 million (or $0.16
per diluted share) on the sale of the company’s unconsolidated interest in a telecommunications company located in the
United Kingdom and tax benefits of $43 million ($0.25 per diluted share) associated with the net reduction of tax reserves
for various domestic and international disputed items and a U.S. Internal Revenue Service (‘‘IRS’’) settlement.
See ‘‘Item 7. — Management’s Discussion and Analysis of Financial Condition and Results of Operations’’ on pages 34 to 51
and Notes to Consolidated Financial Statements on pages F-8 to F-53 for additional information relating to significant items
affecting the results of operations for 2014 - 2016.
(2)
(3)
Return on average shareholders’ equity is calculated based on net earnings from continuing operations attributable to Fluor
Corporation divided by the average shareholders’ equity of the five most recent quarters.
The company began including the unfunded portion of multi-year government contract new awards in its backlog as of
December 31, 2013 to be more comparable to industry practice. As a result of this change, total backlog included
$2.7 billion, $912 million, $2.1 billion and $983 million of unfunded government contracts as of December 31, 2016, 2015,
2014 and 2013, respectively.
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; other non-operating income and expense
items; and loss from discontinued operations. For a reconciliation of total segment profit to earnings from
continuing operations before taxes, see Note 17 in the Notes to Consolidated Financial Statements.
Results of Operations
Consolidated revenue for 2016 was $19.0 billion compared to $18.1 billion for 2015. During 2016,
revenue growth in the Industrial, Infrastructure & Power, Government and Maintenance, Modification &
Asset Integrity segments were partially offset by a revenue decline in the Energy, Chemicals & Mining
segment. The revenue growth resulted primarily from increased project execution activities for several
power projects, as well as revenue contributions from the acquired Stork business. Revenue in the Energy,
Chemicals & Mining segment decreased due to reduced levels of project execution activities in the mining
and metals business line and for certain large chemicals projects that were completed or nearing
completion in the prior year.
Consolidated revenue for 2015 was $18.1 billion compared to $21.5 billion for 2014. This decrease was
principally due to certain large upstream projects that were completed or nearing completion and a
significant decline in project execution activities in the mining and metals business line of the Energy,
34
Chemicals and Mining segment as well as reduced project execution activities in the infrastructure business
line of the Industrial, Infrastructure & Power segment.
Earnings from continuing operations before taxes for 2016 decreased 25 percent to $547 million from
$727 million in 2015. Earnings from continuing operations before taxes for 2016 were adversely affected by
pre-tax charges totaling $265 million related to forecast revisions for estimated cost increases on a
petrochemicals project in the Energy, Chemicals & Mining segment, which were partially offset by higher
contributions from power projects in the Industrial, Infrastructure & Power segment. Earnings from
continuing operations before taxes for 2016 were also affected by higher corporate general and
administrative expenses.
Earnings from continuing operations before taxes for 2015 decreased 40 percent to $727 million from
$1.2 billion in 2014 primarily due to a pre-tax pension settlement charge of $240 million (discussed below).
The decrease in earnings from continuing operations before taxes in 2015 also reflected reduced
contributions from the power and infrastructure business lines of the Industrial, Infrastructure & Power
segment. These declines were partially offset by a $68 million pre-tax gain related to the sale of 50 percent
of the company’s ownership interest in its principal operating subsidiary in Spain to facilitate the formation
of an Energy, Chemicals & Mining joint venture.
During 2015, the company settled the remaining obligations associated with the U.S. defined benefit
pension plan (the ‘‘U.S. plan’’). Plan participants received vested benefits from the plan assets by electing
either a lump-sum distribution, roll-over contribution to other defined contribution or individual
retirement plans, or an annuity contract with a third-party provider. As a result of the settlement, the
company was relieved of any further obligation. During 2015, the company recorded a pension settlement
charge of $240 million which consisted primarily of unrecognized actuarial losses included in accumulated
other comprehensive loss.
As discussed in Note 2 of the Notes to Consolidated Financial Statements, the company recorded an
after-tax loss from discontinued operations of $205 million (net of taxes of $112 million) during 2014 in
connection with the reassessment of estimated loss contingencies related to the lead business of St. Joe
Minerals Corporation and The Doe Run Company in Herculaneum, Missouri, which the company sold in
1994. During 2015, the company recorded an after-tax loss from discontinued operations of $6 million (net
of taxes of $3 million) resulting from the settlement of lead exposure cases and the payment of legal fees
related to the divested lead business. The company has filed suit against the buyer seeking indemnification
for all liabilities arising from these lead exposure cases.
The effective tax rate on earnings from continuing operations was 40.1 percent, 33.8 percent and
29.3 percent for 2016, 2015 and 2014, respectively. The 2016 rate was unfavorably impacted by foreign
losses without a tax benefit and by an adjustment to deferred tax assets as a result of the issuance of
treasury regulations under Internal Revenue Code Section 987 for foreign currency translation gains and
losses. The unfavorable impact was partially offset by a benefit from the resolution of an IRS audit for tax
years 2012 - 2013 and the domestic production activities deduction. The 2015 rate was impacted
unfavorably by foreign losses without a tax benefit, partially offset by benefits resulting from an IRS
settlement for tax years 2004 - 2005 and the conclusion of an IRS audit for tax years 2009 - 2011. The 2014
rate was impacted favorably by the release of previously unrecognized tax positions related to the
conclusion of an IRS audit for tax years 2006 - 2008, the reversal of certain valuation allowances, and the
domestic production activities deduction. All periods benefitted from earnings attributable to
noncontrolling interests for which income taxes are not typically the responsibility of the company.
Diluted earnings per share from continuing operations in 2016 were $2.00 which were adversely
affected by forecast revisions for estimated cost increases on a petrochemicals project in the United States
of $1.20 per diluted share. Diluted earnings per share from continuing operations in 2015 were $2.85,
including a pension settlement charge of $1.04 per diluted share. Diluted earnings per share from
continuing operations were $4.48 in 2014. In addition to the pension settlement charge, the decrease in
2015 earnings was driven by the lower performance of the segments noted above in the discussion of
35
earnings from continuing operations before taxes. The impact of having fewer outstanding shares due to
the repurchase of common stock slightly offset the reduction in earnings.
The company’s results reported by foreign subsidiaries with non-U.S. dollar functional currencies are
affected by foreign currency volatility. When the U.S. dollar appreciates against the non-U.S. dollar
functional currencies of these subsidiaries, the company’s reported revenue, cost and earnings, after
translation into U.S. dollars, are lower than what they would have been had the U.S. dollar depreciated
against the same foreign currencies or if there had been no change in the exchange rates.
The company’s margins, in some cases, may be favorably or unfavorably impacted by a change in the
mix of work performed or a change in the amount of materials and customer-furnished materials, which
are accounted for as pass-through costs. Segment profit margins are generally higher during the earlier
stages of the project life cycle as project execution activities are more heavily weighted to higher margin
engineering activities rather than lower margin construction activities, particularly when there is a
significant amount of materials, including customer-furnished materials, recognized during construction.
During 2015, the Energy, Chemicals & Mining segment experienced higher segment profit margin when
compared to 2014 due to a greater mix of engineering activities compared to the prior year. This trend is
expected to reverse in the near term as some of our larger projects progress into the construction phase of
the project life cycle.
The Energy, Chemicals & Mining segment remains well positioned for new project activity; however,
declining commodity prices have affected the timing of new awards and the pace of execution on certain
existing projects.
Consolidated new awards for 2016 were $21.0 billion compared to $21.8 billion in 2015 and
$28.8 billion in 2014. The Energy, Chemicals & Mining; Industrial, Infrastructure & Power; and
Government segments were the significant drivers of new award activity during 2016, including an award
for the Tengiz Oil Expansion Project in Kazakhstan that was awarded in the third quarter. The Energy,
Chemicals & Mining and Industrial, Infrastructure & Power segments were the major contributors to the
new award activity during 2015. The major contributors of new award activity during 2014 were the Energy,
Chemicals & Mining and Government segments. Approximately 46 percent of consolidated new awards for
2016 were for projects located outside of the United States compared to 48 percent for 2015.
Consolidated backlog was $45.0 billion as of December 31, 2016, $44.7 billion as of December 31,
2015, and $42.5 billion as of December 31, 2014. The higher backlog at the end of 2016 was due to
significant new awards and project adjustments in the Energy, Chemicals & Mining and Industrial,
Infrastructure & Power segments, partially offset by an adjustment for a liquefied natural gas project that
was suspended in the third quarter. The higher backlog at the end of 2015 was primarily due to significant
new awards in the Industrial, Infrastructure & Power segment, partially offset by declines in backlog in the
mining and metals business line of the Energy, Chemicals & Mining segment and the Government
segment. As of December 31, 2016, approximately 48 percent of consolidated backlog related to projects
located outside of the United States compared to 59 percent as of December 31, 2015.
On March 1, 2016, the company acquired 100 percent of Stork Holding B.V. (‘‘Stork’’) for an
aggregate purchase price of A695 million (or approximately $756 million), including the assumption of debt
and other liabilities. Stork, based in the Netherlands, is a global provider of maintenance, modification and
asset integrity services associated with large existing industrial facilities in the oil and gas, chemicals,
petrochemicals, industrial and power markets. The company paid A276 million (or approximately
$300 million) in cash consideration. The operations of Stork are reported in the Maintenance,
Modification & Asset Integrity segment below. See Note 18 to the Consolidated Financial Statements for a
further discussion of the acquisition.
In February 2016, the company made an initial cash investment of $350 million in COOEC Fluor
Heavy Industries Co., Ltd. (‘‘CFHI’’), a joint venture in which the company has a 49% ownership interest
and Offshore Oil Engineering Co., Ltd., a subsidiary of China National Offshore Oil Corporation, has 51%
ownership interest. Through CFHI, the two companies own, operate and manage the Zhuhai Fabrication
36
Yard in China’s Guangdong province. An additional investment of $62 million was made in September
2016 and another $78 million is expected to be made in September 2017.
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 and Estimates
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 through the date of the issuance 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:
is
on
revenue
recognized
Engineering
and Construction Contracts Contract
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 on a cost-plus, fixed-fee
or percentage-fee basis. As of December 31, 2016, 73 percent of the company’s backlog was cost
reimbursable while 27 percent was for fixed-price, lump-sum or guaranteed maximum 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. The company generally provides limited warranties for work
performed under its engineering and construction contracts. The warranty periods typically extend for a
limited duration following substantial completion of the company’s work on a project. Historically,
warranty claims have not resulted in material costs incurred, and any estimated costs for warranties are
included in the individual project cost estimates for purposes of accounting for long-term contracts.
The company has made claims arising from the performance under its contracts. The company
recognizes revenue, but not profit, for certain claims (including change orders in dispute and unapproved
change orders in regard to both scope and price) when it is determined that recovery of incurred cost is
probable and the amounts can be reliably estimated. Under claims accounting (ASC 605-35-25), these
requirements are satisfied when (a) the contract or other evidence provides a legal basis for the claim,
(b) additional costs were caused by circumstances that were unforeseen at the contract date and not the
result of deficiencies in the company’s performance, (c) claim-related costs are identifiable and considered
reasonable in view of the work performed, and (d) 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
37
extent that costs associated with the claims or unapproved change orders have been incurred. Back charges
to suppliers or subcontractors are recognized as a reduction of cost when it is determined that recovery of
such cost is probable and the amounts can be reliably estimated. Disputed back charges are recognized
when the same requirements described above for claims accounting have been satisfied. The company
periodically evaluates its positions and amounts recognized with respect to all its claims and back charges.
As of December 31, 2016 and 2015, the company had recorded $61 million and $30 million, respectively, of
claim revenue for costs incurred to date and such costs are included in contract work in progress.
Additional costs, which will increase the claim revenue balance over time, are expected to be incurred in
future periods. The company had also recorded disputed back charges totaling $41 million as of
December 31, 2016. The company believes the ultimate recovery of amounts related to these claims and
back charges is probable in accordance with ASC 605-35-25.
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, deferrals 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 secure specialty skills required for project execution.
In accordance with ASC 810, ‘‘Consolidation,’’ the company assesses its partnerships and joint
ventures at inception to determine if any meet the qualifications of a variable interest entity (‘‘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 investment is typically nominal and not sufficient to permit the
entity to finance its activities without additional subordinated financial support.
The company also evaluates whether it is the primary beneficiary of each VIE and consolidates the
VIE if the company has both (a) the power to direct the economically significant activities of the entity and
(b) 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 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 partnerships and joint ventures in the construction industry, unless full consolidation is required,
the company generally recognizes its proportionate share of revenue, cost and profit in its Consolidated
Statement of Earnings and uses the one-line equity method of accounting in the Consolidated Balance
Sheet, which is a common application of ASC 810-10-45-14 in the construction industry. The most
significant application of the proportionate consolidation method is in the Energy, Chemicals & Mining,
38
Industrial, Infrastructure & Power and Government segments. The cost and equity methods of accounting
are also used, depending on the company’s respective ownership interest and amount of influence on the
entity, as well as other factors. At times, the company also executes projects through collaborative
arrangements for which the company recognizes its relative share of revenue and cost.
Deferred Taxes and Uncertain Tax Positions 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, 2016, the company had deferred tax assets of $ 814 million
which were partially offset by a valuation allowance of $81 million and further reduced by deferred tax
liabilities of $279 million. The valuation allowance reduces certain deferred tax assets to amounts that are
more likely than not to be realized. The valuation allowance for 2016 primarily relates to the deferred tax
assets on certain net operating loss carryforwards for U.S. and non-U.S. subsidiaries. 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
ASC 715-30, ‘‘Defined Benefit Plans — Pension.’’ 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 contribute up to $15 million to its defined benefit pension plans in
2017, which is expected to be in excess of the minimum funding required. If the discount rates were
reduced by 25 basis points, plan liabilities would increase by approximately $51 million.
Segment Operations
The company provides professional services in the fields of engineering, procurement, construction,
fabrication and modularization, commissioning and maintenance, as well as project management services,
on a global basis and serves a diverse set of industries worldwide. During the first quarter of 2016, the
company changed the composition of its reportable segments to better reflect the diverse end markets that
the company serves. The company now reports its operating results in four reportable segments as follows:
Energy, Chemicals & Mining; Industrial, Infrastructure & Power; Government; and Maintenance,
Modification & Asset Integrity. Segment operating information and assets for 2015 and 2014 have been
recast to reflect these changes. For more information on the business segments see ‘‘Item 1. — Business’’
above.
39
Energy, Chemicals & Mining
Revenue and segment profit for the Energy, Chemicals & Mining segment are summarized as follows:
(in millions)
Revenue
Segment profit
Year Ended December 31,
2016
2015
2014
$9,754.2
$11,865.4
$14,563.0
401.5
866.6
869.2
Revenue in 2016 decreased by 18 percent compared to 2015 primarily due to a significant decline in
volume of the mining and metals business line, as well as a reduced volume of project execution activities
for certain large chemicals projects that were completed or nearing completion in the prior year. Revenue
in 2015 decreased by 19 percent compared to 2014, primarily due to lower project execution activities for
certain large upstream projects that were completed or nearing completion in 2014 and volume declines in
the mining and metals business line, which were partially offset by an increase in project execution
activities for numerous petrochemicals projects on the Gulf Coast of the United States and downstream
projects across various regions.
Segment profit in 2016 significantly decreased compared to 2015. Segment profit in 2016 was
adversely affected by forecast revisions for estimated cost increases on a petrochemicals project in the
United States of $265 million. The decrease in segment profit was also driven by reduced contributions
from the mining and metals business line and certain upstream projects that were completed or nearing
completion in the prior year. Segment profit in 2015 was essentially flat as compared to 2014. Higher
contributions associated with the increase in project execution activities for numerous downstream projects
across various regions were offset by reduced contributions from the mining and metals business line and
upstream projects that were completed or nearing completion in 2014.
Segment profit margin was 4.1 percent, 7.3 percent and 6.0 percent for the years ended December 31,
2016, 2015 and 2014, respectively. Segment profit margin in 2016 was primarily affected by forecast
revisions on the large petrochemicals project discussed above. The improvement in segment profit margin
in 2015 was largely attributable to the continued shift in the mix of work from lower margin construction
activities to higher margin engineering activities and positive contributions from the downstream projects
that were completed or nearing completion. Segment profit margin in 2015 further benefitted from the
company’s cost optimization activities when compared to 2014.
New awards in the Energy, Chemicals & Mining segment were $8.4 billion in 2016, $12.0 billion in
2015 and $20.7 billion in 2014. New awards in 2016 included an upstream project for the Tengiz Oil
Expansion Project in Kazakhstan and a bauxite mine project in Guinea. New awards in 2015 included a
refinery project in Kuwait, a large natural gas transmission project in the United States, production and
chemicals work in Canada, and additional refinery projects in Europe and the United States. New awards
in 2014 included a significant amount of the engineering, procurement and construction value of a
liquefied natural gas facility in Canada, refinery projects in Kuwait, Malaysia, Mexico and Argentina, an oil
sands project in Canada, and a petrochemicals complex on the Gulf Coast of the United States.
Backlog for the Energy, Chemicals & Mining segment was $21.8 billion as of December 31, 2016,
$29.4 billion as of December 31, 2015 and $30.5 billion as of December 31, 2014. The reduction in backlog
during 2016 resulted primarily from an adjustment for a liquefied natural gas project in Canada that was
suspended in the third quarter, as well as new award activity being outpaced by work performed during
2016. The continued decline in oil prices since the latter part of 2014 has affected the timing of new awards
and pace of execution on certain existing projects. The mining and metals business line also continues to
experience the deferral of major capital investment decisions by some mining customers as a result of
softening commodity demand.
40
Total assets in the segment were $2.3 billion as of December 31, 2016 and $1.7 billion as of
December 31, 2015. The increase in total assets primarily resulted from the company’s investment in CFHI
and increased working capital in support of project execution activities.
Industrial, Infrastructure & Power
Revenue and segment profit for the Industrial, Infrastructure & Power segment are summarized as
follows:
(in millions)
Revenue
Segment profit (loss)
Year Ended December 31,
2016
2015
2014
$4,094.5
$2,264.0
$2,854.8
135.8
(44.9)
147.5
Revenue in 2016 increased 81 percent compared to 2015, primarily due to increased project execution
activities in the power business line for several projects, including two nuclear projects and several
gas-fired power plants in the southeastern United States. Revenue in 2015 decreased 21 percent compared
to 2014, primarily due to reduced project execution activities in the infrastructure business line, which was
largely attributable to the completion of a domestic transportation project in 2014.
Segment profit increased significantly in 2016 compared to 2015 primarily due to the higher volume of
project execution activities for the power projects mentioned above, as well as the adverse impact in the
prior year of a loss of $60 million resulting from forecast revisions on a large gas-fired power plant in
Brunswick County, Virginia. Segment profit decreased significantly in 2015 compared to 2014. Factors
contributing to the decline in segment profit during 2015 included the aforementioned loss on the gas-fired
power plant in Brunswick County, Virginia, reduced contributions from the infrastructure business line
resulting from the completion of a domestic transportation project in 2014 and an increase in NuScale
expenses, net of qualified reimbursable expenditures.
Segment profit margin significantly increased in 2016 compared to the prior year principally driven by
the same factors affecting segment profit. Segment profit margin in 2015 decreased over 2014 due to the
same factors that drove the decrease in segment profit during 2015.
The Industrial, Infrastructure & Power segment includes the operations of NuScale, which are
primarily research and development activities. NuScale expenses, net of qualified reimbursable
expenditures, included in the determination of segment profit, were $92 million, $80 million and
$46 million for 2016, 2015 and 2014, respectively.
New awards in the Industrial, Infrastructure & Power segment were $6.2 billion during 2016,
$7.1 billion during 2015 and $2.3 billion during 2014. New awards in 2016 were primarily in the
infrastructure business line and included the Purple Line Light Rail Transit Project in Maryland, the Loop
202 South Mountain Freeway Project in Arizona, the Port Access Road Project in South Carolina, an
award on a combined-cycle power plant in Greensville County, Virginia and a pharmaceutical
manufacturing facility in North Carolina. New awards in 2015 included a $5.0 billion award from
Westinghouse Electric Company to manage the construction workforce at two Westinghouse nuclear
power plant projects in Georgia and South Carolina on a cost-plus, fixed-fee basis, a gas-fired power plant
in Florida and a highway project in Texas. New awards in 2014 included A9 Holendrecht — Diemen road
project in the Netherlands, a gas-fired power plant project in South Carolina and a large manufacturing
facility in the United States.
Backlog in the Industrial, Infrastructure & Power segment was $15.1 billion as of December 31, 2016,
$9.7 billion as of December 31, 2015 and $5.0 billion as of December 31, 2014. The increases in backlog
during 2016 primarily resulted from project adjustments in the power business line for the two
Westinghouse nuclear power plant projects discussed above and new awards in the infrastructure business
line. The increase in backlog during 2015 resulted from new awards in the power business line discussed
above.
41
Total assets in the Industrial, Infrastructure & Power segment were $750 million as of December 31,
2016 and $544 million as of December 31, 2015. The increase in total assets in the Industrial,
Infrastructure & Power segment resulted from increased working capital in support of project execution
activities. Total assets as of December 31, 2016 include accounts receivable and contract work in progress
totaling $144 million related to the two Westinghouse nuclear power plant projects.
Government
Revenue and segment profit for the Government segment are summarized as follows:
(in millions)
Revenue
Segment profit
Year Ended December 31,
2016
2015
2014
$2,720.0
$2,557.4
$2,511.9
85.1
83.1
92.7
Revenue in 2016 increased 6 percent compared to 2015 primarily due to the commencement of
project execution activities for the Idaho Cleanup Project Core Contract (‘‘Idaho Core Project’’) during
2016 and an increase in project execution activities for construction projects within the services business
line. These increases were largely offset by lower revenue from the Magnox nuclear decommissioning
project in the United Kingdom (the ‘‘Magnox RSRL Project’’) and the continued reduction in project
execution activities associated with the LOGCAP IV program in Afghanistan. Revenue in 2015 increased
2 percent compared to 2014 primarily due to the increased project execution activities for several large
multi-year decommissioning and cleanup projects awarded in 2014, largely offset by a reduction in project
execution activities associated with LOGCAP IV.
Segment profit for 2016 increased 2 percent compared to 2015, primarily due to contributions from
the commencement of project execution activities for the Idaho Core Project, as well as the favorable
effect of the segment’s cost optimization efforts. These increases were offset by reduced contributions from
the Magnox RSRL Project and the LOGCAP IV program. Segment profit for 2015 decreased 10 percent
compared to 2014, primarily due to the decline in project execution activities for LOGCAP IV. This
decline was partially offset by increased contributions from project execution activities for several large
multi-year decommissioning and cleanup projects, as well as improved contributions from a base
operations support services contract.
Segment profit margin was 3.1 percent, 3.3 percent, and 3.7 percent for the years ended December 31,
2016, 2015 and 2014, respectively. Segment profit margins in 2016 and 2015 declined when compared to
2014 due to lower margin contributions from decommissioning and cleanup projects awarded in recent
years, as well as the continued decline in project execution activity for the LOGCAP IV program.
New awards were $4.6 billion during 2016, $1.4 billion during 2015, and $4.7 billion during 2014. New
awards in 2016 and 2014 included large awards for multi-year decommissioning and cleanup projects in the
segment’s environmental and nuclear business line.
Backlog was $5.2 billion as of December 31, 2016, $3.6 billion as of December 31, 2015 and
$4.7 billion as of December 31, 2014. Total backlog included $2.7 billion, $912 million, and $2.1 billion of
unfunded government contracts as of December 31, 2016, 2015, and 2014, respectively. The increase in
backlog in 2016 resulted primarily from the previously mentioned multi-year decommissioning and cleanup
project awards in the environmental and nuclear business line.
Total assets in the Government segment were $494 million as of December 31, 2016 compared to
$495 million as of December 31, 2015.
42
Maintenance, Modification & Asset Integrity
Revenue and segment profit for the Maintenance, Modification & Asset Integrity segment are
summarized as follows:
(in millions)
Revenue
Segment profit
Year Ended December 31,
2016
2015
2014
$2,467.8
$1,427.2
$1,601.9
121.9
127.4
153.0
Revenue in 2016 increased 73 percent compared to 2015, primarily due to the inclusion of ten months
of revenue associated with the acquisition of the Stork business, which closed on March 1, 2016. The
increase in revenue from Stork was partially offset by lower revenues for the equipment business due to the
demobilization of projects in Latin America and North America and a lower level of project execution
activities in both the continuous site presence and power services business lines. Revenue in 2015
decreased 11 percent compared to 2014, primarily due a lower level of project execution activities in the
continuous site presence business line’s operations in North America and Australia, as well as volume
declines in the equipment business line’s operations in Mexico, Africa and Afghanistan.
Segment profit in 2016 declined 4.4 percent compared to the prior year resulting primarily from the
lower level of project execution activities in the power services and continuous site presence business lines,
which exceeded segment profit contributions from Stork. Segment profit in 2015 decreased 17 percent
compared to the prior year, principally due to volume declines in the equipment business line’s operations
in Mexico, Afghanistan and Africa and reduced contributions from the continuous site presence business
line.
Segment profit margin was 4.9 percent, 8.9 percent and 9.6 percent for the years ended December 31,
2016, 2015 and 2014, respectively. The decline in segment profit margin in 2016 was principally driven by
the inclusion of Stork in 2016. The decline in segment profit margin in 2015 was primarily attributable
from the reduced volumes of the equipment business line.
New awards in the Maintenance, Modification & Asset Integrity segment were $1.8 billion in 2016,
$1.4 billion in 2015 and $1.1 billion in 2014. Backlog was $2.9 billion as of December 31, 2016, $2.1 billion
as of December 31, 2015 and $2.3 billion as of December 31, 2014. The increase in backlog during 2016
was primarily due to the inclusion of backlog from the Stork acquisition.
Total assets in the Maintenance, Modification & Asset Integrity segment were $2.0 billion as of
December 31, 2016 compared to $924 million as of December 31, 2015. The increase in total assets
resulted from the company’s acquisition of Stork.
Corporate, Tax and Other Matters
Corporate For the three years ended December 31, 2016, 2015 and 2014, corporate general and
administrative expenses were $191 million, $168 million and $183 million, respectively. The increase in
2016 was primarily attributable to transaction costs and integration activities associated with the Stork
acquisition and higher organizational realignment expenses when compared to the prior year, which were
partially offset by foreign currency exchange gains. The decline in 2015 resulted primarily from reductions
in stock price-driven compensation expense and organizational realignment expenses as compared to 2014.
Net interest expense was $53 million, $28 million and $11 million for the years ended December 31,
2016, 2015 and 2014, respectively. The increase in 2016 was primarily due to interest associated with debt
assumed in the Stork acquisition and the A500 million of 1.750% Senior Notes issued in March 2016.
Interest expense increased in 2015 compared to 2014 due to the issuance of $500 million of 3.5% Senior
Notes in November 2014.
43
Tax The effective tax rate on earnings from continuing operations was 40.1 percent, 33.8 percent and
29.3 percent for 2016, 2015 and 2014, respectively. Factors affecting the effective tax rates for 2014 - 2016
are discussed above under ‘‘— Results of Operations.’’
Litigation and Matters in Dispute Resolution
See Note 14 to the 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 capital markets. The company has committed and
uncommitted lines of credit, which may be used for revolving loans and letters of credit. The company
believes that for at least the next 12 months, cash generated from operations, along with its unused credit
capacity and substantial cash position, is sufficient to support operating requirements. However, the
company regularly reviews its sources and uses of liquidity and may pursue opportunities to increase its
liquidity position. The company’s financial strategy and consistent performance have earned it strong
credit ratings, resulting in competitive advantage and continued access to the capital markets. As of
December 31, 2016, the company was in compliance with all of the financial covenants related to its debt
agreements.
Cash Flows
Cash and cash equivalents were $1.9 billion as of both December 31, 2016 and 2015. Cash and cash
equivalents combined with current and noncurrent marketable securities were $2.1 billion and $2.4 billion
as of December 31, 2016 and 2015, respectively. Cash and cash equivalents are held in numerous accounts
throughout the world to fund the company’s global project execution activities. Non-U.S. cash and cash
equivalents amounted to $1.0 billion and $1.3 billion as of December 31, 2016 and 2015, respectively.
Non-U.S. cash and cash equivalents exclude deposits of U.S. legal entities that are either swept into
overnight, offshore accounts or invested in offshore, short-term time deposits, to which there is
unrestricted access.
In evaluating its liquidity needs, the company considers cash and cash equivalents held by its
consolidated VIEs (joint ventures and partnerships). These amounts (which totaled $440 million and
$290 million as of December 31, 2016 and 2015, respectively, as reflected in the Consolidated Balance
Sheet) were not necessarily readily available for general purposes. In its evaluation, the company also
considers the extent to which the current balance of its advance billings on contracts (which totaled
$764 million and $754 million as of December 31, 2016 and 2015, respectively, as reflected on the
Consolidated Balance Sheet) is likely to be sustained or consumed over the near term for project execution
activities and the cash flow requirements of its various foreign operations. In some cases, it may not be
financially efficient to move cash and cash equivalents between countries due to statutory dividend
limitations and/or adverse tax consequences. The company did not consider any cash to be permanently
reinvested overseas as of December 31, 2016 and 2015 and, as a result, has accrued the U.S. deferred tax
liability on foreign earnings, as appropriate.
Operating Activities
Cash flows from operating activities result primarily from earnings sources and are affected by
changes in operating assets and liabilities which consist primarily of working capital balances for projects.
Working capital levels vary from year to year and are primarily affected by the company’s volume of work.
These levels are also impacted by the mix, stage of completion and commercial terms of engineering and
construction projects, as well as the company’s execution of its projects within budget. Working capital
requirements also vary by project and relate to clients in various industries and locations throughout the
world. Most contracts require payments as the projects progress. The company evaluates the counterparty
credit risk of third parties as part of its project risk review process. The company maintains adequate
44
reserves for potential credit losses and generally such losses have been minimal and within management’s
estimates. Additionally, 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. As a result, the company’s cash position is reduced as customer
advances are utilized, unless they are replaced by advances on other projects. The company maintains cash
reserves and borrowing facilities to provide additional working capital in the event that a project’s net
operating cash outflows exceed its available cash balances.
During 2016, working capital decreased primarily due to an increase in accounts payable and a
decrease in joint venture net working capital partially offset by increases in accounts receivable and
contract work in progress. Specific factors related to these drivers include:
(cid:129) An
increase
in accounts payable
in the Energy, Chemicals & Mining and Industrial,
Infrastructure & Power segments which resulted from normal invoicing activities.
(cid:129) A decrease in the net working capital of a project joint venture in the Energy, Chemicals & Mining
segment.
(cid:129) An increase in accounts receivable, primarily attributable to work performed for an Energy,
Chemicals & Mining joint venture project in the United States.
(cid:129) An increase in contract work in progress in the Industrial, Infrastructure & Power segment, which
resulted primarily from normal project execution activities for two nuclear projects.
During 2015, working capital decreased primarily due to a decrease in accounts receivable and
contract work in progress and an increase in advance billings partially offset by an increase in prepaid
income taxes. Specific factors related to these drivers include:
(cid:129) A decrease in accounts receivable in the Energy, Chemicals & Mining segment, primarily related to
collections for a coal bed methane gas project in Australia.
(cid:129) A decrease in contract work in progress in the Energy, Chemicals & Mining segment that resulted
primarily from normal project execution activities. A significant contributor to the decrease in
contract work in progress in the Energy, Chemicals & Mining segment was a major mine
replacement project in Canada.
(cid:129) An increase in advance billings in the Energy, Chemicals & Mining segment which was the result of
normal project execution activities for several projects including an upstream project in Russia.
During 2014, working capital increased primarily due to an increase in accounts receivable and
decreases in accounts payable and advance billings partially offset by a decrease in contract work in
progress. Significant drivers of these fluctuations were:
(cid:129) An increase in accounts receivable in the Energy, Chemicals & Mining segment. The higher
accounts receivable balance in 2014 resulted primarily from normal billing activities for various
projects and was not indicative of any significant collection or liquidity issues.
(cid:129) A decrease in accounts payable in the Energy, Chemicals & Mining segment. The lower accounts
payable balance in 2014 resulted primarily from normal invoicing and payment activities. A
significant contributor to the decrease in accounts payable in the Energy, Chemicals & Mining
segment was a major mine replacement project in Canada.
(cid:129) Decreases in advance billings in both the Industrial, Infrastructure & Power and Government
segments which were the result of normal project execution activities for several projects including a
gaseous diffusion plant project in Portsmouth, Ohio.
(cid:129) A decrease in contract work in progress in the Energy, Chemicals & Mining segment that resulted
primarily from normal project execution activities. A significant contributor to the decrease in
contract work in progress in the Energy, Chemicals & Mining segment was a coal bed methane gas
project in Australia.
45
Cash provided by operating activities was $706 million, $849 million and $643 million in 2016, 2015
and 2014, respectively. The decrease in cash provided by operating activities in 2016 resulted primarily
from a decline in net working capital inflows compared to 2015 and a lower level of net earnings in 2016.
The improvement in cash flows from operating activities in 2015 resulted from favorable year-over-year
changes in working capital, partially offset by cash outflows totaling $316 million associated with
discontinued operations as discussed below.
Income tax payments were $165 million, $250 million and $228 million in 2016, 2015 and 2014,
respectively.
Cash from operating activities is used to provide contributions to the company’s defined contribution
and defined benefit pension plans. Contributions into the defined contribution plans during 2016, 2015 and
2014 were $167 million, $146 million and $150 million, respectively. The company contributed
approximately $15 million, $58 million and $63 million into its defined benefit pension plans during 2016,
2015 and 2014, respectively. Company contributions to defined benefit pension plans during 2015 primarily
related to additional funding to settle the U.S. plan. Company contributions to defined benefit pension
plans were higher during 2014 in order to achieve targeted funding levels. Assuming no changes in current
assumptions, the company expects to contribute up to $15 million in 2017 to its defined benefit pension
plans, which is expected to be in excess of the minimum funding required. As of December 31, 2016, the
accumulated benefit obligation exceeded plan assets for certain defined benefit pension plans in the
Netherlands and Germany that the company assumed in the Stork acquisition. Plan assets exceeded the
accumulated benefit obligation for each of the other non-U.S plans (including the company’s legacy plan in
the Netherlands) as of December 31, 2016. The accumulated benefit obligation exceeded plan assets for
the company’s legacy plan in the Netherlands as of December 31, 2015. Plan assets exceeded the
accumulated benefit obligation for each of the other non-U.S plans as of December 31, 2015.
In May 2014, NuScale entered into a cooperative agreement establishing the terms and conditions of a
multi-year funding award totaling $217 million under the DOE’s Small Modular Reactor Licensing
Technical Support Program. NuScale expenses included in the determination of net earnings were
$92 million, $80 million and $46 million during 2016, 2015 and 2014, respectively. NuScale expenses for
2016, 2015 and 2014 were reported net of qualified reimbursable expenses of $57 million, $65 million and
$38 million, respectively. For further discussion of the cooperative agreement, see Note 1 to the
Consolidated Financial Statements.
During 2014, the company recorded a loss from discontinued operations in connection with the
reassessment of estimated loss contingencies related to the previously divested lead business of St. Joe
Minerals Corporation and The Doe Run Company in Herculaneum, Missouri. In October 2014, the
company entered into a settlement agreement with counsel for a number of plaintiffs, and in January 2015,
the company paid $306 million pursuant to the settlement agreement. See Note 2 to the Consolidated
Financial Statements for further discussion of the matter.
Investing Activities
Cash utilized by investing activities amounted to $741 million, $67 million and $199 million during
2016, 2015 and 2014, respectively. The primary investing activities included purchases, sales and maturities
of marketable securities; capital expenditures; disposals of property, plant and equipment; investments in
and sales of partnerships and joint ventures; and business acquisitions.
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 2016,
2015 and 2014, proceeds from sales and maturities of marketable securities exceeded purchases of such
securities by $162 million, $25 million and $9 million, respectively. The company held combined current
46
and noncurrent marketable securities of $255 million and $418 million as of December 31, 2016 and 2015,
respectively.
Capital expenditures of $236 million, $240 million and $325 million during 2016, 2015 and 2014,
respectively, primarily related to construction equipment associated with equipment operations in the
Maintenance, Modification & Asset Integrity segment, as well as expenditures for land, facilities and
investments in information technology. Proceeds from the disposal of property, plant and equipment of
$81 million, $94 million and $106 million during 2016, 2015 and 2014, respectively, primarily related to the
disposal of construction equipment associated with the equipment operations in the Maintenance,
Modification & Asset Integrity segment.
During 2015, the company sold two office buildings located in California for net proceeds of
$82 million and subsequently entered into a twelve year lease with the purchaser. The resulting gain on the
sale of the property was approximately $58 million, of which $7 million was recognized during the fourth
quarter of 2015 and $4 million was recognized during 2016. For both years, the gain was included in
corporate general and administrative expense in the Consolidated Statement of Earnings. The remaining
deferred gain of approximately $47 million will be amortized over the remaining life of the lease on a
straight-line basis.
During 2016, the company acquired 100 percent of Stork for an aggregate purchase price of
A695 million (or approximately $756 million), including the assumption of debt and other liabilities. Stork,
based in the Netherlands, is a global provider of maintenance, modification and asset integrity services
associated with large existing industrial facilities in the oil and gas, chemicals, petrochemicals, industrial
and power markets. The company paid A276 million (or approximately $300 million) in cash consideration.
The company borrowed A200 million (or approximately $217 million) under its $1.7 billion Revolving Loan
and Letter of Credit Facility, and paid A76 million (or approximately $83 million) of cash on hand to
initially finance the Stork acquisition. The A200 million borrowed under the $1.7 billion Revolving Loan
and Letter of Credit Facility was subsequently repaid from the net proceeds of the 2016 Notes as discussed
in Note 8 to the Consolidated Financial Statements.
During 2015, the company sold 50% of its ownership of Fluor S.A., its principal Spanish operating
subsidiary, to Sacyr Industrial, S.L.U. for a cash purchase price of approximately $46 million, subject to
certain purchase price adjustments. The company deconsolidated the subsidiary and recorded a pre-tax
non-operating gain of $68 million during 2015, which was determined based on the proceeds received on
the sale and the estimated fair value of the company’s retained 50% noncontrolling interests, less the
carrying value of the net assets associated with the former subsidiary.
Investments in unconsolidated partnerships and joint ventures were $518 million, $91 million and
$39 million in 2016, 2015 and 2014, respectively. Investments during 2016 included cash investments
totaling $412 million in COOEC Fluor Heavy Industries Co., Ltd. (‘‘CFHI’’), a joint venture in which the
company has a 49% ownership interest and Offshore Oil Engineering Co., Ltd., a subsidiary of China
National Offshore Oil Corporation, has 51% ownership interest. Through CFHI, the two companies own,
operate and manage the Zhuhai Fabrication Yard in China’s Guangdong province. An additional
investment of $78 million is expected to be made in September 2017.
During 2014, the company sold its interest in two joint ventures in the Industrial, Infrastructure &
Power segment for $44 million. The company had a 10 percent interest in both joint ventures and
accounted for these investments using the equity method.
Financing Activities
Cash utilized by financing activities during 2016, 2015 and 2014 of $10 million, $728 million and
$666 million, respectively, included company stock repurchases, company dividend payments to
stockholders, proceeds from the issuance of senior notes, repayments of debt, borrowings and repayments
under revolving lines of credit, and distributions paid to holders of noncontrolling interests.
47
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 202,650 shares, 10,104,988 shares and 13,331,402 shares of common stock under its
current and previously authorized stock repurchase programs resulting in cash outflows of $10 million,
$510 million and $906 million in 2016, 2015 and 2014, respectively. As of December 31, 2016, 11,610,219
shares could still be purchased under the existing stock repurchase program.
Quarterly cash dividends are typically paid during the month following the quarter in which they are
declared. Therefore, dividends declared in the fourth quarter of 2016 will be paid in the first quarter of
2017. Quarterly cash dividends of $0.21 per share were declared in 2016, 2015 and 2014. Dividends of
$118 million, $125 million and $126 million, were paid during 2016, 2015 and 2014, respectively. The
payment and level of future cash dividends is subject to the discretion of the company’s Board of Directors.
In March 2016, the company issued A500 million of 1.750% Senior Notes (the ‘‘2016 Notes’’) due
March 21, 2023 and received proceeds of A497 million (or approximately $551 million), net of underwriting
discounts. Interest on the 2016 Notes is payable annually on March 21 of each year, beginning on
March 21, 2017. Prior to December 21, 2022, the company may redeem the 2016 Notes at a redemption
price equal to 100 percent of the principal amount, plus a ‘‘make whole’’ premium described in the
indenture. On or after December 21, 2022, the company may redeem the 2016 Notes at 100 percent of the
principal amount plus accrued and unpaid interest, if any, to the date of redemption. Additionally, the
company may redeem the 2016 Notes at any time upon the occurrence of certain changes in U.S. tax laws,
as described in the indenture, at 100 percent of the principal amount plus accrued and unpaid interest, if
any, to the date of redemption.
In November 2014, the company issued $500 million of 3.5% Senior Notes (the ‘‘2014 Notes’’) due
December 15, 2024 and received proceeds of $491 million, net of underwriting discounts. Interest on the
2014 Notes is payable semi-annually on June 15 and December 15 of each year, and began on June 15,
2015. Prior to September 15, 2024, the company may redeem the 2014 Notes at a redemption price equal
to 100 percent of the principal amount, plus a ‘‘make whole’’ premium described in the indenture. On or
after September 15, 2024, the company may redeem the 2014 Notes at 100 percent of the principal amount
plus accrued and unpaid interest, if any, to the date of redemption.
In September 2011, the company issued $500 million of 3.375% Senior Notes (the ‘‘2011 Notes’’) due
September 15, 2021 and received proceeds of $492 million, net of underwriting discounts. Interest on the
2011 Notes is payable semi-annually on March 15 and September 15 of each year, and began on March 15,
2012. 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.
For the 2016 Notes, the 2014 Notes and the 2011 Notes, if a change of control triggering event occurs,
as defined by the terms of the respective indentures, the company will be required to offer to purchase
applicable notes at a purchase price equal to 101 percent of their principal amount, plus accrued and
unpaid interest, if any, to the date of redemption. The company is generally not limited under the
indentures governing the 2016 Notes, the 2014 Notes and 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 conjunction with the acquisition of Stork on March 1, 2016, the company assumed Stork’s
outstanding debt obligations, including its 11.0% Super Senior Notes due 2017 (the ‘‘Stork Notes’’),
borrowings under a A110 million Super Senior Revolving Credit Facility, and other debt obligations. On
March 2, 2016, the company gave notice to all holders of the Stork Notes of the full redemption of the
outstanding A273 million (or approximately $296 million) principal amount of Stork Notes plus a
redemption premium of A7 million (or approximately $8 million) effective March 17, 2016. The
redemption of the Stork Notes was initially funded with additional borrowings under the company’s
$1.7 billion Revolving Loan and Letter of Credit Facility, which borrowings were subsequently repaid from
the net proceeds of the 2016 Notes. Certain other outstanding debt obligations assumed in the Stork
acquisition of A20 million (or approximately $22 million) were settled in March 2016. In April 2016, the
48
company repaid and replaced the A110 million Super Senior Revolving Credit Facility with a A125 million
Revolving Credit Facility that is available to fund working capital in the ordinary course of business. This
replacement facility expires in April 2017 and bears interest at EURIBOR plus .75%. Outstanding
borrowings under this facility amounted to A50 million (or approximately $53 million) as of December 31,
2016.
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. In
December 2004, the company irrevocably elected to pay the principal amount of the 2004 Notes in cash.
During 2014, holders converted less than $0.1 million of the 2004 Notes in exchange for the principal
balance owed in cash plus 1,750 shares of the company’s common stock. During the first half of 2015,
holders converted $8 million of the 2004 Notes in exchange for the principal balance owed in cash plus
167,674 shares of the company’s common stock at a conversion rate of 37.0997 shares per each $1,000
principal amount of the 2004 Notes. On May 7, 2015, the company redeemed the remaining $10 million of
outstanding 2004 Notes at a redemption price equal to 100 percent of the principal amount plus accrued
and unpaid interest up to (but excluding) May 7, 2015.
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 $58 million, $59 million and $138 million in 2016, 2015 and 2014,
respectively. Distributions in 2016 primarily related to three transportation joint venture projects in the
United States. Distributions in 2015 primarily related to two transportation joint venture projects in the
United States and an iron ore joint venture project in Australia. Distributions in 2014 primarily related to
two transportation joint venture projects in the United States and a mining joint venture project in
Argentina. Capital contributions by joint venture partners were $9 million, $5 million and $3 million in
2016, 2015 and 2014, respectively.
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 accumulated other comprehensive loss. During
2016, 2015 and 2014, most major foreign currencies weakened against the U.S. dollar resulting in
unrealized translation losses of $103 million, $166 million and $197 million, respectively, of which
$54 million, $98 million and $68 million, respectively, related to cash held by foreign subsidiaries. The cash
held in foreign currencies will primarily be used for project-related expenditures in those currencies, and
therefore the company’s exposure to exchange gains and losses is generally mitigated.
Off-Balance Sheet Arrangements
As of December 31, 2016, the company had a combination of committed and uncommitted lines of
credit that may be used for revolving loans and letters of credit. As of December 31, 2016, letters of credit
and borrowings totaling $1.7 billion were outstanding under these committed and uncommitted lines of
credit. The committed lines of credit include a $1.7 billion Revolving Loan and Letter of Credit Facility
and a $1.8 billion Revolving Loan and Letter of Credit Facility. Both facilities mature in February 2021.
The company may utilize up to $1.75 billion in the aggregate of the combined $3.5 billion committed lines
of credit for revolving loans, which may be used for acquisitions and/or general purposes. Each of the
credit facilities may be increased up to an additional $500 million subject to certain conditions, and contain
customary financial and restrictive covenants, including a maximum ratio of consolidated debt to tangible
net worth of one-to-one and a cap on the aggregate amount of debt of the greater of $750 million or
A750 million for the company’s subsidiaries. Borrowings under both facilities, which may be denominated
in USD, EUR, GBP or CAD, bear interest at rates based on the Eurodollar Rate or an alternative base
rate, plus an applicable borrowing margin.
In connection with the Stork acquisition, the company assumed a A110 million Super Senior Revolving
Credit Facility that bore interest at EURIBOR plus 3.75%. In April 2016, the company repaid and
49
replaced the A110 million Super Senior Revolving Credit Facility with a A125 million Revolving Credit
Facility which may be used for revolving loans, bank guarantees, letters of credit and to fund working
capital in the ordinary course of business. This replacement facility expires in April 2017 and bears interest
at EURIBOR plus .75%. The A125 million Revolving Credit Facility was included in committed lines of
credit as of December 31, 2016. Outstanding borrowings under this facility amounted to A50 million (or
approximately $53 million) as of December 31, 2016.
Letters of credit are provided in the ordinary course of business primarily to indemnify the company’s
clients if the company fails to perform its obligations under its contracts. Surety bonds may be used as an
alternative to letters of credit.
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 project being constructed to a
period extending beyond contract completion in certain circumstances. The maximum potential amount of
future payments that the company could be required to make under outstanding performance guarantees,
which represents the remaining cost of work to be performed by or on behalf of third parties under
engineering and construction contracts, was estimated to be $16 billion as of December 31, 2016. 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. The company assessed its performance guarantee obligation as of
December 31, 2016 and 2015 in accordance with ASC 460, ‘‘Guarantees,’’ and the carrying value of the
liability was not material.
Financial guarantees, made in the ordinary course of business 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. These arrangements generally require the
borrower to pledge collateral to support the fulfillment of the borrower’s obligation.
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 and
Estimates’’ above and Note 16 to the Consolidated Financial Statements.
50
Contractual Obligations
Contractual obligations as of December 31, 2016 are summarized as follows:
Contractual Obligations
Total
1 year or less
2–3 years
4–5 years Over 5 years
Payments Due by Period
(in millions)
Debt:
1.750% Senior Notes
3.375% Senior Notes
3.5% Senior Notes
Revolving Credit Facility
Other borrowings
Interest on debt obligations(1)
Operating leases(2)
Capital leases
Uncertain tax positions(3)
Joint venture contributions
Pension minimum funding(4)
Other post-employment benefits
Other compensation-related obligations(5)
Total
$ 524
496
492
53
35
277
338
31
9
119
53
16
439
2,882
$ —
—
—
53
29
47
81
8
—
80
10
3
89
400
$ —
—
—
—
6
86
113
3
—
19
21
5
108
361
$ —
496
—
—
—
81
71
1
—
12
22
4
91
778
$ 524
—
492
—
—
63
73
19
9
8
—
4
151
1,343
(1)
Interest is based on the borrowings that are presently outstanding and the timing of payments indicated in
the above table.
(2) Operating leases are primarily for engineering and project execution office facilities in Texas, California,
the United Kingdom and various other U.S and international locations, equipment used in connection with
long-term construction contracts and other personal property.
(3) Uncertain tax positions taken or expected to be taken on an income tax return may result in additional
payments to tax authorities. The total amount of the accrual for uncertain tax positions related to the
company’s effective tax rate is included in the ‘‘Over 5 years’’ column as the company is not able to
reasonably estimate the timing of potential future payments. If a tax authority agrees with the tax position
taken or expected to be taken or the applicable statute of limitations expires, then additional payments
would not be necessary.
(4) The company generally provides funding to its international pension plans to at least the minimum required
by applicable regulations. In determining the minimum required funding, the company utilizes current
actuarial assumptions and exchange rates to forecast estimates of amounts that may be payable for up to
five years in the future. In management’s judgment, minimum funding estimates beyond a five-year time
horizon cannot be reliably estimated. Where minimum funding as 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.
(5)
Principally deferred executive compensation.
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.
Certain of the company’s contracts are subject to foreign currency risk. 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
51
performed. However, in cases where revenue and expenses are not denominated in the same currency, the
company may hedge its exposure, if material and if an efficient market exists, as discussed below.
The company utilizes derivative instruments to mitigate certain financial exposures, including currency
and commodity price risk associated with engineering and construction contracts, currency risk associated
with monetary assets and liabilities denominated in nonfunctional currencies and risk associated with
interest rate volatility. As of December 31, 2016, the company had total gross notional amounts of
$1 billion of foreign currency contracts of less than three years duration (primarily related to the British
Pound, Euro, Kuwaiti Dinar and South Korean Won) and total gross notional amounts of $2 million of
commodity contracts of less than one year duration. The company’s historical gains and losses associated
with derivative instruments have typically been immaterial, and have largely mitigated the exposures being
hedged. The company does not enter into derivative transactions for speculative purposes.
The company’s results reported by foreign subsidiaries with non-U.S. dollar functional currencies are
also affected by foreign currency volatility. When the U.S. dollar appreciates against the non-U.S. dollar
functional currencies of these subsidiaries, the company’s reported revenue, cost and earnings, after
translation into U.S. dollars, are lower than what they would have been had the U.S. dollar depreciated
against the same foreign currencies or if there had been no change in the exchange rates.
The company’s long-term debt obligations typically carry a fixed-rate coupon, and therefore, its
exposure to interest rate risk is not material.
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
Our management, with the participation of our chief executive officer and chief financial officer, are
responsible for establishing and maintaining ‘‘disclosure controls and procedures’’ (as defined in
Rule 13a-15(e) under the Exchange Act) for our company. Based on their evaluation as of the end of the
period covered by this report, our chief executive officer and chief financial officer have concluded that our
disclosure controls and procedures were effective to ensure that the information required to be disclosed
by us in this Annual Report on Form 10-K was (i) recorded, processed, summarized and reported within
the time periods specified in the SEC’s rules and (ii) accumulated and communicated to our management,
including our principal executive and principal financial officers, to allow timely decisions regarding
required disclosures.
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
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
52
issued by the Committee of Sponsoring Organizations of the Treadway Commission (the 2013 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, 2016.
In accordance with guidance issued by the Securities and Exchange Commission, companies are
permitted to exclude acquisitions from their final assessment of internal control over financial reporting
during the year of the acquisition. Management’s assessment of the effectiveness of our internal control
over financial reporting as of December 31, 2016 did not include an assessment of the effectiveness of
internal control over financial reporting of Stork Holding B.V. (‘‘Stork’’), which was acquired on March 1,
2016. The operating results of Stork are included in our consolidated financial statements from the period
subsequent to the acquisition date and include $1.2 billion and $263 million of total and net assets,
respectively, as of December 31, 2016 and $1.2 billion in revenue for the year ended December 31, 2016.
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.
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.
53
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,
2016, based on criteria established in Internal Control — Integrated Framework issued by the Committee
of Sponsoring Organizations of the Treadway Commission (2013 framework) (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.
As indicated in the accompanying Management’s Report on Internal Control Over Financial
Reporting, management’s assessment of and conclusion on the effectiveness of internal control over
financial reporting did not include the internal controls of Stork Holding B.V., which is included in the
2016 consolidated financial statements of Fluor Corporation and constituted $1.2 billion and $263 million
of total and net assets, respectively, as of December 31, 2016 and $1.2 billion of revenues for the year then
ended. Our audit of internal control over financial reporting of Fluor Corporation also did not include an
evaluation of the internal control over financial reporting of Stork Holding B.V.
In our opinion, Fluor Corporation maintained, in all material respects, effective internal control over
financial reporting as of December 31, 2016, 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, 2016 and
2015, and the related consolidated statements of earnings, comprehensive income, cash flows and changes
in equity for each of the three years in the period ended December 31, 2016 of Fluor Corporation and our
report dated February 17, 2017 expressed an unqualified opinion thereon.
/s/Ernst & Young LLP
Dallas, Texas
February 17, 2017
54
Changes in Internal Control over Financial Reporting
Except as described below, there have been no changes in our internal control over financial reporting
during the fourth quarter of the fiscal year ending December 31, 2016 that have materially affected, or are
reasonably likely to materially affect, our internal control over financial reporting.
We recently acquired Stork and are in the process of integrating Stork’s operations with the
operations of Fluor Corporation, including integration of financial reporting processes and procedures and
internal controls over financial reporting. We believe we will be able to maintain sufficient controls over
our financial reporting throughout this integration process. Because of the size, complexity and timing of
the Stork acquisition, the internal controls over financial reporting of Stork have been excluded from our
assessment of the effectiveness of our internal control over financial reporting as of December 31, 2016 (as
described above).
Item 9B. Other Information
None.
Item 10. Directors, Executive Officers and Corporate Governance
Directors, Executive Officers, Promoters and Control Persons
PART III
The information required by Paragraph (a), and Paragraphs (c) through (g) of Item 401 of
Regulation S-K (except for information required by Paragraphs (d) — (f) of that Item to the extent the
required information pertains to our executive officers) and Item 405 of Regulation S-K is set forth in the
section entitled ‘‘Election of Directors — Biographical Information, including Experience, Qualifications,
Attributes and Skills’’ and ‘‘Section 16(a) Beneficial Ownership Reporting Compliance’’ in our definitive
proxy statement to be filed with the SEC pursuant to Regulation 14A within 120 days after the close of our
fiscal year and is incorporated herein by reference. The information required by Paragraph (b) of Item 401
of Regulation S-K , as well as the information required by Paragraphs (d) — (f) of that Item to the extent
the required information pertains to our executive officers, is set forth in Part I, Item 1 of this Annual
Report on Form 10-K under the heading ‘‘Executive Officers of the Registrant.’’
Code of Ethics
We have long maintained and enforced a Code of Business Conduct and Ethics that applies to 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’’ — ‘‘Ethics and
Compliance’’ 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 ‘‘Sustainability’’ portion of our website under the heading ‘‘Corporate
Governance Documents’’ filed under ‘‘Governance.’’ 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.
55
Item 11. Executive Compensation
Information required by this item is included in the following sections of our Proxy Statement for our
2017 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.
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, 2016 with respect to the shares of
common stock that may be issued under the company’s equity compensation plans:
Plan Category
Equity compensation plans
(a)
(b)
(c)
Number of securities to be Weighted average Number of securities available for
issued upon exercise of
outstanding options,
warrants and rights
exercise price of
outstanding options,
warrants and rights
future issuance under equity
compensation plans (excluding
securities listed in column (a))
approved by stockholders(1) . . . .
4,481,381
Equity compensation plans not
approved by stockholders . . . . .
—
Total . . . . . . . . . . . . . . . . . . . . . .
4,481,381
$60.45
—
$60.45
7,374,485
—
7,374,485
(1) Consists of the 2014 Restricted Stock Plan for Non-Employee Directors, under which no securities are
currently issuable upon exercise of outstanding options, warrants or rights, but under which
437,556 shares remain available for future issuance; the 2003 Executive Performance Incentive Plan
(the ‘‘2003 Plan’’), under which 270,207 shares are currently issuable upon exercise of outstanding
options, warrants and rights, but under which no shares remain available for future issuance; and the
Amended and Restated 2008 Executive Performance Incentive Plan, under which 4,211,174 shares are
currently issuable upon exercise of outstanding options, warrants and rights, and under which
6,936,929 shares remain available for issuance.
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 2017 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 ‘‘Board Independence’’ sections of the ‘‘Corporate Governance’’ portion of our Proxy Statement for
our 2017 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.
56
Item 15. Exhibits and Financial Statement Schedules
(a) Documents filed as part of this annual report on Form 10-K:
PART IV
1.
Financial Statements:
Our consolidated financial statements at December 31, 2016 and 2015 and for each of the three years
in the period ended December 31, 2016 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
EXHIBIT INDEX
3.1
3.2
4.1
4.2
4.3
4.4
4.5
10.1
10.2
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 8, 2012).
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 February 9, 2016).
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).
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).
Second Supplemental Indenture between Fluor Corporation and Wells Fargo Bank, National
Association, as trustee, dated as of June 22, 2012 (incorporated by reference to Exhibit 4.2 to
the registrant’s Form S-3ASR filed on June 22, 2012).
Third Supplemental Indenture between Fluor Corporation and Wells Fargo Bank, National
Association, as trustee, dated as of November 25, 2014 (incorporated by reference to
Exhibit 4.1 to the registrant’s Current Report on Form 8-K filed on November 25, 2014).
Fourth Supplemental Indenture between Fluor Corporation and Wells Fargo Bank, National
Association, as trustee, dated as of March 21, 2016 (incorporated by reference to Exhibit 4.3 to
the registrant’s Current Report on Form 8-K filed on March 21, 2016).
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).
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).
57
Exhibit
Description
10.3
10.4
10.5
10.6
10.7
10.8
10.9
10.10
10.11
10.12
10.13
10.14
10.15
10.16
Fluor Corporation Amended and Restated 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 3, 2013).
Form of Stock Option Agreement under the Fluor Corporation Amended and Restated 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).
Form of Option Agreement (2015 grants) under the Fluor Corporation Amended and
Restated 2008 Executive Performance Incentive Plan (incorporated by reference to
Exhibit 10.26 to the registrant’s Quarterly Report on Form 10-Q filed on April 30, 2015).
Form of Option Agreement (2017 grants) under the Fluor Corporation Amended and
Restated 2008 Executive Performance Incentive Plan.*
Form of Value Driver Incentive Award Agreement (for the senior team) under the Fluor
Corporation Amended and Restated 2008 Executive Performance Incentive Plan
(incorporated by reference to Exhibit 10.24 to the registrant’s Quarterly Report on Form 10-Q
filed on April 30, 2015).
Form of Value Driver Incentive Award Agreement (for the senior team, with a post-vesting
holding period) under the Fluor Corporation Amended and Restated 2008 Executive
Performance Incentive Plan (incorporated by reference to Exhibit 10.7 to the registrant’s
Quarterly Report on Form 10-Q filed on May 5, 2016).
Form of Value Driver Incentive Award Agreement (2017 grants) under the Fluor Corporation
Amended and Restated 2008 Executive Performance Incentive Plan.*
Form of Value Driver Incentive Award Agreement (for non-senior executives) under the Fluor
Corporation Amended and Restated 2008 Executive Performance Incentive Plan
(incorporated by reference to Exhibit 10.25 to the registrant’s Quarterly Report on Form 10-Q
filed on April 30, 2015).
Form of Value Driver Incentive Award Agreement (cash-based, for non-senior executives)
under the Fluor Corporation Amended and Restated 2008 Executive Performance Incentive
Plan (incorporated by reference to Exhibit 10.9 to the registrant’s Quarterly Report on
Form 10-Q filed on May 5, 2016).
Form of Restricted Stock Unit Agreement under the Fluor Corporation Amended and
Restated 2008 Executive Performance Incentive Plan (incorporated by reference to
Exhibit 10.27 to the registrant’s Quarterly Report on Form 10-Q filed on April 30, 2015).
Form of Restricted Stock Unit Agreement (for the senior team, with a post-vesting holding
period) under the Fluor Corporation Amended and Restated 2008 Executive Performance
Incentive Plan (incorporated by reference to Exhibit 10.10 to the registrant’s Quarterly Report
on Form 10-Q filed on May 5, 2016).
Form of Restricted Stock Unit Agreement (2017 grants) under the Fluor Corporation
Amended and Restated 2008 Executive Performance Incentive Plan.*
Fluor 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).
Fluor 409A Executive Deferred Compensation Program, as amended and restated effective
January 1, 2014 (incorporated by reference to Exhibit 10.13 to the registrant’s Annual Report
on Form 10-K filed on February 18, 2014).
58
Exhibit
Description
10.17
10.18
10.19
10.20
10.21
10.22
10.23
10.24
10.25
10.26
10.27
21.1
23.1
31.1
31.2
32.1
Executive Severance Plan (incorporated by reference to Exhibit 10.7 to the registrant’s Annual
Report on Form 10-K filed on February 22, 2012).
Summary of Fluor Corporation Non-Management Director Compensation (incorporated by
reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed on February 7,
2017).
Fluor Corporation 2014 Restricted Stock Plan for Non-Employee Directors (incorporated by
reference to Exhibit 10.1 to the registrant’s Registration Statement on Form S-8 filed on
May 1, 2014).
Form of Restricted Stock Unit Agreement under the Fluor Corporation 2014 Restricted Stock
Plan for Non-Employee Directors (incorporated by reference to Exhibit 10.19 to the
registrant’s Quarterly Report on Form 10-Q filed on August 4, 2016).
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).
Fluor Corporation 409A Director Deferred Compensation Program, as amended and restated
effective as of November 2, 2016.*
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).
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).
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).
$1,800,000,000 Amended and Restated Revolving Loan and Letter of Credit Facility
Agreement dated as of February 25, 2016, among Fluor Corporation, Fluor B.V., the Lenders
thereunder, BNP Paribas, as Administrative Agent and an Issuing Lender, Bank of America,
N.A., as Syndication Agent, and Citibank, N.A. and The Bank of Tokyo — Mitsubishi
UFJ, Ltd., as Co-Documentation Agents (incorporated by reference to Exhibit 10.1 to the
registrant’s Current Report on Form 8-K filed on March 2, 2016).
$1,700,000,000 Amended and Restated Revolving Loan and Letter of Credit Facility
Agreement dated as of February 25, 2016, among Fluor Corporation, Fluor B.V., the Lenders
thereunder, BNP Paribas, as Administrative Agent and an Issuing Lender, Bank of America,
N.A., as Syndication Agent, and Citibank, N.A. and The Bank of Tokyo — Mitsubishi
UFJ, Ltd., as Co-Documentation Agents (incorporated by reference to Exhibit 10.2 to the
registrant’s Current Report on Form 8-Q filed on March 2, 2016).
Subsidiaries of the registrant.*
Consent of Independent Registered Public Accounting Firm.*
Certification of Chief Executive Officer of Fluor Corporation.*
Certification of Chief Financial Officer of Fluor Corporation.*
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.*
59
Exhibit
Description
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.*
* New exhibit filed with this report.
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, 2016, 2015 and 2014, (ii) the Consolidated Balance Sheet at December 31, 2016 and
December 31, 2015, (iii) the Consolidated Statement of Cash Flows for the years ended December 31,
2016, 2015 and 2014 and (iv) the Consolidated Statement of Equity for the years ended December 31,
2016, 2015 and 2014.
60
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.
SIGNATURES
FLUOR CORPORATION
By:
/s/ BIGGS C. PORTER
Biggs C. Porter,
Executive Vice President
and Chief Financial Officer
February 17, 2017
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
Principal Financial Officer:
Chairman and Chief Executive
Officer
February 17, 2017
/s/ BIGGS C. PORTER
Biggs C. Porter
Executive Vice President and Chief
Financial Officer
February 17, 2017
Principal Accounting Officer:
/s/ ROBIN K. CHOPRA
Robin K. Chopra
Other Directors:
/s/ PETER K. BARKER
Peter K. Barker
/s/ ALAN M. BENNETT
Alan M. Bennett
/s/ ROSEMARY T. BERKERY
Rosemary T. Berkery
/s/ PETER J. FLUOR
Peter J. Fluor
Senior Vice President and
Controller
February 17, 2017
Director
Director
Director
Director
February 17, 2017
February 17, 2017
February 17, 2017
February 17, 2017
61
Signature
/s/ JAMES T. HACKETT
James T. Hackett
/s/ SAMUEL J. LOCKLEAR
Samuel J. Locklear
/s/ DEBORAH D. MCWHINNEY
Deborah D. McWhinney
/s/ ARMANDO J. OLIVERA
Armando J. Olivera
/s/ JOSEPH W. PRUEHER
Joseph W. Prueher
/s/ MATTHEW K. ROSE
Matthew K. Rose
/s/ NADER H. SULTAN
Nader H. Sultan
/s/ LYNN C. SWANN
Lynn C. Swann
Title
Director
Director
Director
Director
Director
Director
Director
Director
Date
February 17, 2017
February 17, 2017
February 17, 2017
February 17, 2017
February 17, 2017
February 17, 2017
February 17, 2017
February 17, 2017
62
FLUOR CORPORATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
TABLE OF CONTENTS
Report of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statement of Earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statement of Comprehensive Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statement of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statement of Changes in Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PAGE
F-2
F-3
F-4
F-5
F-6
F-7
F-8
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,
2016 and 2015, and the related consolidated statements of earnings, comprehensive income, cash flows and
changes in equity for each of the three years in the period ended December 31, 2016. 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, 2016 and 2015, and the consolidated
results of its operations and its cash flows for each of the three years in the period ended December 31,
2016, 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,
2016, based on criteria established in Internal Control-Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated
February 17, 2017 expressed an unqualified opinion thereon.
/s/Ernst & Young LLP
Dallas, Texas
February 17, 2017
F-2
FLUOR CORPORATION
CONSOLIDATED STATEMENT OF EARNINGS
(in thousands, except per share amounts)
TOTAL REVENUE
TOTAL COST OF REVENUE
OTHER (INCOME) AND EXPENSES
Gain related to a partial sale of a subsidiary
Pension settlement charge
Corporate general and administrative expense
Interest expense
Interest income
Total cost and expenses
Year Ended December 31,
2016
2015
2014
$19,036,525
$18,114,048
$21,531,577
18,246,209
17,019,352
20,132,544
—
—
191,073
69,689
(17,046)
(68,162)
239,896
168,329
44,770
(16,689)
—
—
182,711
29,681
(18,268)
18,489,925
17,387,496
20,326,668
EARNINGS FROM CONTINUING OPERATIONS BEFORE
TAXES
INCOME TAX EXPENSE
546,600
219,151
726,552
245,888
1,204,909
352,815
EARNINGS FROM CONTINUING OPERATIONS
327,449
480,664
852,094
LOSS FROM DISCONTINUED OPERATIONS, NET OF TAX
—
(5,658)
(204,551)
NET EARNINGS
LESS: NET EARNINGS ATTRIBUTABLE TO
NONCONTROLLING INTERESTS
NET EARNINGS ATTRIBUTABLE TO FLUOR
CORPORATION
AMOUNTS ATTRIBUTABLE TO FLUOR CORPORATION
Earnings from continuing operations
Loss from discontinued operations, net of tax
Net earnings
BASIC EARNINGS (LOSS) PER SHARE ATTRIBUTABLE TO
FLUOR CORPORATION
Earnings from continuing operations
Loss from discontinued operations, net of tax
Net earnings
DILUTED EARNINGS (LOSS) PER SHARE ATTRIBUTABLE
TO FLUOR CORPORATION
Earnings from continuing operations
Loss from discontinued operations, net of tax
Net earnings
SHARES USED TO CALCULATE EARNINGS PER SHARE
Basic
Diluted
327,449
475,006
647,543
46,048
62,494
136,634
$
$
$
$
$
$
$
281,401
281,401
—
281,401
2.02
—
2.02
2.00
—
2.00
$
$
$
$
$
$
$
412,512
418,170
(5,658)
412,512
2.89
(0.04)
2.85
2.85
(0.04)
2.81
$
$
$
$
$
$
$
510,909
715,460
(204,551)
510,909
4.54
(1.30)
3.24
4.48
(1.28)
3.20
139,171
140,912
144,805
146,722
157,487
159,616
DIVIDENDS DECLARED PER SHARE
$
0.84
$
0.84
$
0.84
See Notes to Consolidated Financial Statements.
F-3
FLUOR CORPORATION
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(in thousands)
NET EARNINGS
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX:
Foreign currency translation adjustment
Ownership share of equity method investees’ other comprehensive
income (loss)
Defined benefit pension and postretirement plan adjustments
Unrealized loss on derivative contracts
Unrealized gain (loss) on available-for-sale securities
TOTAL OTHER COMPREHENSIVE INCOME (LOSS), NET OF
TAX
COMPREHENSIVE INCOME
LESS: COMPREHENSIVE INCOME ATTRIBUTABLE TO
NONCONTROLLING INTERESTS
COMPREHENSIVE INCOME ATTRIBUTABLE TO FLUOR
Year Ended December 31,
2016
2015
2014
$327,449
$ 475,006
$ 647,543
(64,380)
(104,595)
(125,809)
6,036
(5,137)
(662)
207
(7,513)
162,615
(126)
(211)
1,838
(66,848)
(2,064)
(437)
(63,936)
50,170
(193,320)
263,513
525,176
454,223
46,006
61,227
129,325
CORPORATION
$217,507
$ 463,949
$ 324,898
See Notes to Consolidated Financial Statements.
F-4
FLUOR CORPORATION
CONSOLIDATED BALANCE SHEET
(in thousands, except share and per share amounts)
ASSETS
CURRENT ASSETS
Cash and cash equivalents ($439,942 and $289,991 related to variable interest entities
(‘‘VIEs’’))
Marketable securities, current ($48,155 and $70,176 related to VIEs)
Accounts and notes receivable, net ($232,242 and $186,833 related to VIEs)
Contract work in progress ($124,677 and $178,826 related to VIEs)
Other current assets ($24,017 and $27,362 related to VIEs)
Total current assets
PROPERTY, PLANT AND EQUIPMENT
Land
Buildings and improvements
Machinery and equipment
Furniture and fixtures
Construction in progress
Less accumulated depreciation
Net property, plant and equipment ($53,728 and $70,247 related to VIEs)
OTHER ASSETS
Marketable securities, noncurrent
Goodwill
Investments
Deferred taxes
Deferred compensation trusts
Other ($24,248 and $24,141 related to VIEs)
Total other assets
TOTAL ASSETS
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Trade accounts payable ($221,601 and $178,139 related to VIEs)
Revolving credit facility and other borrowings
Advance billings on contracts ($263,393 and $188,484 related to VIEs)
Accrued salaries, wages and benefits ($35,573 and $47,526 related to VIEs)
Other accrued liabilities ($32,015 and $25,384 related to VIEs)
Total current liabilities
LONG-TERM DEBT DUE AFTER ONE YEAR
NONCURRENT LIABILITIES
CONTINGENCIES AND COMMITMENTS
EQUITY
Shareholders’ equity
Capital stock
Preferred — authorized 20,000,000 shares ($0.01 par value), none issued
Common — authorized 375,000,000 shares ($0.01 par value); issued and outstanding —
139,258,483 and 139,018,309 shares in 2016 and 2015, respectively
Additional paid-in capital
Accumulated other comprehensive loss
Retained earnings
Total shareholders’ equity
Noncontrolling interests
Total equity
TOTAL LIABILITIES AND EQUITY
See Notes to Consolidated Financial Statements.
December 31,
2016
December 31,
2015
$1,850,436
111,037
1,700,224
1,537,289
411,284
5,610,270
77,985
490,047
1,364,231
157,104
50,047
2,139,414
1,122,191
1,017,223
143,553
532,239
740,385
454,109
348,487
370,151
$1,949,886
197,092
1,203,024
1,376,471
378,927
5,105,400
72,244
434,213
1,252,615
135,701
43,644
1,938,417
1,046,077
892,340
220,634
111,646
337,930
394,832
360,725
201,899
2,588,924
1,627,666
$9,216,417
$7,625,406
$1,590,506
82,243
763,774
734,649
644,857
3,816,029
1,517,949
639,608
$1,266,509
—
754,037
669,592
245,214
2,935,352
986,564
589,991
—
—
1,393
38,317
(496,669)
3,582,150
3,125,191
117,640
3,242,831
1,390
—
(432,775)
3,428,732
2,997,347
116,152
3,113,499
$9,216,417
$7,625,406
F-5
FLUOR CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Year Ended December 31,
2016
2015
2014
Net earnings
Adjustments to reconcile net earnings to cash provided (utilized) by operating
$ 327,449
$ 475,006
$ 647,543
activities:
Loss from discontinued operations, net of taxes
Pension settlement charge
Depreciation of fixed assets
Amortization of intangibles
Loss on sale of equity method investments
(Earnings) loss from equity method investments, net of distributions
Gain related to a partial sale of a subsidiary
Gain on sale of property, plant and equipment
Amortization of stock-based awards
Deferred compensation trust
Deferred compensation obligation
Statute expirations and tax settlements
Deferred taxes
Excess tax benefit from stock-based plans
Net retirement plan accrual (contributions)
Changes in operating assets and liabilities
Cash outflows from discontinued operations
Other items
Cash provided by operating activities
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of marketable securities
Proceeds from the sales and maturities of marketable securities
Capital expenditures
Proceeds from disposal of property, plant and equipment
Proceeds from sale of buildings
Proceeds from a partial sale of a subsidiary
Proceeds from sales of equity method investments
Investments in partnerships and joint ventures
Acquisitions, net of cash acquired
Other items
Cash utilized by investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Repurchase of common stock
Dividends paid
Proceeds from issuance of 1.75% Senior Notes
Proceeds from issuance of 3.5% Senior Notes
Debt and credit facility issuance costs
Repayment of Stork Notes, convertible debt and other borrowings
Borrowings under revolving lines of credit
Repayment of borrowings under revolving lines of credit
Distributions paid to noncontrolling interests
Capital contributions by noncontrolling interests
Taxes paid on vested restricted stock
Stock options exercised
Excess tax benefit from stock-based plans
Other items
Cash utilized by financing activities
Effect of exchange rate changes on cash
Decrease in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
See Notes to Consolidated Financial Statements.
F-6
—
—
211,095
14,818
—
12,180
—
(21,604)
40,086
(22,332)
29,323
(13,280)
(7,912)
—
(1,756)
135,393
—
2,459
705,919
(359,986)
522,094
(235,904)
81,162
—
—
—
(518,220)
(240,740)
10,243
(741,351)
(9,718)
(117,995)
552,958
—
(3,513)
(333,654)
882,142
(917,027)
(57,904)
9,072
(7,007)
3,658
—
(11,362)
5,658
239,896
188,700
1,038
—
(1,597)
(68,162)
(31,272)
61,053
44,298
(6,854)
(7,827)
4,675
—
(37,805)
303,896
(316,195)
(5,376)
204,551
—
191,701
893
2,158
1,295
—
(33,878)
48,232
(16,614)
14,755
(19,331)
62,084
(4,089)
(40,093)
(408,861)
(8,058)
286
849,132
642,574
(386,021)
411,380
(240,220)
94,323
82,082
45,566
—
(91,078)
—
17,461
(410,508)
419,398
(324,704)
105,872
—
—
44,000
(38,687)
—
5,514
(66,507)
(199,115)
(509,658)
(125,204)
—
—
—
(28,425)
—
—
(58,986)
5,254
(8,400)
1,780
—
(4,591)
(906,083)
(126,218)
—
494,595
(7,685)
(74)
—
—
(138,041)
3,336
(11,475)
24,189
4,089
(3,049)
(10,350)
(728,230)
(666,416)
(53,668)
(97,634)
(67,500)
(99,450)
1,949,886
(43,239)
1,993,125
(290,457)
2,283,582
$1,850,436
$1,949,886
$1,993,125
FLUOR CORPORATION
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(in thousands, except per share amounts) Shares Amount
Common Stock
Additional
Paid-In
Capital
Accumulated
Other
Total
Comprehensive Retained
Earnings
Income (Loss)
Shareholders’ Noncontrolling
Equity
Interests
Total
Equity
BALANCE AS OF DECEMBER 31, 2013
161,288
$1,613
$ 12,911
$(298,201)
$4,040,664
$3,756,987
$ 123,836
$3,880,823
Net earnings
Other comprehensive loss
Dividends ($0.84 per share)
Distributions to noncontrolling interests
Capital contributions by noncontrolling
interests
Other noncontrolling interest transactions
Stock-based plan activity
Repurchase of common stock
Debt conversions
—
—
—
—
—
—
675
(13,331)
2
—
—
—
—
—
—
6
(133)
—
—
—
—
—
—
(186,011)
—
—
—
751
66,919
(80,581)
—
—
—
—
—
—
510,909
—
(132,608)
—
—
—
—
(825,369)
1
510,909
(186,011)
(132,608)
—
—
751
66,925
(906,083)
1
136,634
(7,309)
—
(138,041)
3,336
(5,497)
—
—
—
647,543
(193,320)
(132,608)
(138,041)
3,336
(4,746)
66,925
(906,083)
1
BALANCE AS OF DECEMBER 31, 2014
148,634
$1,486
$
Net earnings
Other comprehensive income (loss)
Dividends ($0.84 per share)
Distributions to noncontrolling interests
Capital contributions by noncontrolling
interests
Other noncontrolling interest transactions
Stock-based plan activity
Repurchase of common stock
Debt conversions
—
—
—
—
—
—
321
(10,105)
168
—
—
—
—
—
—
5
(101)
—
—
—
—
—
—
—
334
54,656
(54,789)
(201)
$(484,212)
$3,593,597
$3,110,871
$ 112,959
$3,223,830
—
51,437
—
—
—
—
—
—
—
412,512
—
(122,609)
—
—
—
—
(454,768)
—
412,512
51,437
(122,609)
—
—
334
54,661
(509,658)
(201)
62,494
(1,267)
—
(58,986)
5,254
(4,302)
—
—
—
475,006
50,170
(122,609)
(58,986)
5,254
(3,968)
54,661
(509,658)
(201)
BALANCE AS OF DECEMBER 31, 2015
139,018
$1,390
$
Net earnings
Other comprehensive loss
Dividends ($0.84 per share)
Distributions to noncontrolling interests
Capital contributions by noncontrolling
interests
Other noncontrolling interest transactions
Stock-based plan activity
Repurchase of common stock
—
—
—
—
—
—
443
(203)
—
—
—
—
—
—
5
(2)
—
—
—
270
—
—
852
37,193
2
$(432,775)
$3,428,732
$2,997,347
$ 116,152
$3,113,499
—
(63,894)
—
—
281,401
—
(118,265)
—
281,401
(63,894)
(117,995)
—
—
—
—
—
—
—
—
(9,718)
—
852
37,198
(9,718)
46,048
(42)
—
(57,904)
9,072
4,314
—
—
327,449
(63,936)
(117,995)
(57,904)
9,072
5,166
37,198
(9,718)
BALANCE AS OF DECEMBER 31, 2016
139,258
$1,393
$ 38,317
$(496,669)
$3,582,150
$3,125,191
$ 117,640
$3,242,831
See Notes to Consolidated Financial Statements.
F-7
FLUOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Major Accounting Policies
Principles of Consolidation
The financial statements include the accounts of Fluor Corporation and its subsidiaries (‘‘the
company’’). The company frequently forms joint ventures or partnerships with unrelated third parties for
the execution of single contracts or projects. The company assesses its joint ventures and partnerships at
inception to determine if any meet the qualifications of a variable interest entity (‘‘VIE’’) in accordance
with Accounting Standards Codification (‘‘ASC’’) 810, ‘‘Consolidation.’’ If a joint venture or partnership is
a VIE and the company is the primary beneficiary, the joint venture or partnership is fully consolidated
(see Note 16 below). For partnerships and joint ventures in the construction industry, unless full
consolidation is required, the company generally recognizes its proportionate share of revenue, cost and
profit in its Consolidated Statement of Earnings and uses the one-line equity method of accounting in the
Consolidated Balance Sheet, which is a common application of ASC 810-10-45-14 in the construction
industry. The cost and equity methods of accounting are also used, depending on the company’s respective
ownership interest and amount of influence on the entity, as well as other factors. At times, the company
also executes projects through collaborative arrangements for which the company recognizes its relative
share of revenue and cost.
All significant intercompany transactions of consolidated subsidiaries are eliminated. Certain amounts
in 2015 and 2014 have been reclassified to conform to the 2016 presentation due to the implementation of
new accounting pronouncements discussed below. Segment operating information for 2015 and 2014 has
been recast to reflect changes in the composition of the company’s reportable segments as discussed in
Note 17. Management has evaluated all material events occurring subsequent to the date of the financial
statements up to the filing date of this annual report on Form 10-K.
The Consolidated Financial Statements as of and for the year ended December 31, 2016 include the
financial statements of Stork Holding B.V. (‘‘Stork’’) since March 1, 2016, the date of acquisition. See
Note 18 for a discussion of the acquisition.
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 through the date of the issuance 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.
F-8
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLUOR CORPORATION
Engineering and Construction Contracts
The
contract
company
construction
revenue using
recognizes engineering and
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
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. Advances that are payments on account of contract work in progress of $382 million and
$343 million as of December 31, 2016 and 2015, respectively, have been deducted from 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 substantially all incurred cost
associated with contract work in progress as of December 31, 2016 will be billed and collected in 2017.
The company recognizes revenue, but not profit, for certain claims (including change orders in dispute
and unapproved change orders in regard to both scope and price) when it is determined that recovery of
incurred cost is probable and the amounts can be reliably estimated. Under claims accounting
(ASC 605-35-25), these requirements are satisfied when (a) the contract or other evidence provides a legal
basis for the claim, (b) additional costs were caused by circumstances that were unforeseen at the contract
date and not the result of deficiencies in the company’s performance, (c) claim-related costs are
identifiable and considered reasonable in view of the work performed, and (d) 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. Back charges to suppliers or subcontractors are recognized as a reduction of cost when
it is determined that recovery of such cost is probable and the amounts can be reliably estimated. Disputed
back charges are recognized when the same requirements described above for claims accounting have been
satisfied. The company generally provides limited warranties for work performed under its engineering and
construction contracts. The warranty periods typically extend for a limited duration following substantial
completion of the company’s work on a project. Historically, warranty claims have not resulted in material
costs incurred, and any estimated costs for warranties are included in the individual project cost estimates
for purposes of accounting for long-term contracts.
Service Contracts
For service contracts (including maintenance contracts) that do not satisfy the criteria for revenue
recognition using the percentage-of-completion method, revenue is recognized when services are
performed. Revenue recognized on service contracts that have not been billed to clients is classified as a
current asset under contract work in progress. Amounts billed to clients in excess of revenue recognized on
service contracts to date are classified as a current liability under advance billings on contracts.
Research and Development
The company maintains a controlling interest in NuScale Power, LLC (‘‘NuScale’’), the operations of
which are primarily research and development activities. In May 2014, NuScale entered into a cooperative
F-9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLUOR CORPORATION
agreement establishing the terms and conditions of a funding award totaling $217 million under the DOE’s
Small Modular Reactor Licensing Technical Support Program. This cost-sharing award requires NuScale to
use the DOE funds to cover first-of-a-kind engineering costs associated with small modular reactor design
development and certification. The DOE is to provide cost reimbursement for up to 43 percent of qualified
expenditures incurred during the period from June 1, 2014 to May 31, 2019. Costs associated with
NuScale’s research and development activities, net of qualifying reimbursements under the cost-sharing
award, are expensed as incurred and reported as a reduction of ‘‘Total cost of revenue’’ in the Consolidated
Statement of Earnings. In December 2016, NuScale submitted its design certification application to the
U.S. Nuclear Regulatory Commission for approval of NuScale’s small modular nuclear reactor commercial
power plant design. Aside from the operations of NuScale, the company generally does not engage in
significant research and development activities for new products and services.
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:
(cost in thousands)
Buildings
Building and leasehold improvements
Machinery and equipment
Furniture and fixtures
Goodwill and Intangible Assets
December 31,
2016
2015
$ 322,495
167,552
1,364,231
157,104
$ 276,161
158,052
1,252,615
135,701
Estimated
Useful
Service
Lives
20 – 40
6 – 20
2 – 10
2 – 10
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 quantitatively, 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 2016, the company completed its annual goodwill impairment test
and quantitatively determined that none of the goodwill was impaired. The company recorded $417 million
of goodwill during 2016 in conjunction with the Stork acquisition (see Note 18). Goodwill for each of the
company’s segments is presented in Note 17.
F-10
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLUOR CORPORATION
The following table provides a summary of the net carrying value of acquired intangible assets as of
December 31, 2016 and 2015, including the weighted average life of each major intangible asset class, in
years:
(in thousands)
Customer relationships (finite-lived)
Trade names (finite-lived)
Trade names (indefinite-lived)
In-process research and development (indefinite-lived)
Other (finite-lived)
Total intangible assets
December 31,
2016
2015
Weighted
Average
Life
$111,616
8,034
47,425
19,038
4,184
$ —
—
—
19,038
5,252
$190,297
$24,290
8
13
—
—
10
Intangible assets with finite lives are amortized on a straight-line basis over the useful lives of those
assets. The aggregate amortization expense for intangible assets with finite lives is expected to be
$18 million, $17 million, $17 million, $17 million and $16 million during 2017, 2018, 2019, 2020 and 2021,
respectively. Intangible assets with indefinite lives are not amortized but are subject to annual impairment
tests. Interim testing for impairment is also 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, 2016, none of the company’s intangible assets with indefinite lives were impaired. In-process
research and development associated with the company’s investment in NuScale is considered indefinite
lived until the related technology is available for commercial use.
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.
F-11
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLUOR CORPORATION
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 monetary
assets and liabilities denominated in nonfunctional currencies and risk associated with interest rate
volatility, may subject the company to earnings volatility. In cases where financial exposure is identified,
the company generally implements a hedging strategy utilizing derivative instruments as hedging
instruments to mitigate the risk. These hedging instruments are designated as either fair value or cash flow
hedges in accordance with ASC 815, ‘‘Derivatives and Hedging.’’ 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 hedging
instruments are highly effective in offsetting changes in the fair value of the hedged items. The fair values
of all hedging 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 hedging 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 hedging instrument’s gain or loss due to changes in fair value is recorded as a
component of accumulated other comprehensive income (loss) (‘‘AOCI’’) and is reclassified into earnings
when the hedged item settles. Any ineffective portion of a hedging instrument’s change in fair value is
immediately recognized in earnings. The company does not enter into derivative instruments for
speculative purposes. Under ASC 815, in certain limited circumstances, foreign currency payment
provisions could be deemed embedded derivatives. If an embedded foreign currency derivative is
identified, the derivative is bifurcated from the host contract and the change in fair value is recognized
through earnings.
The company maintains master netting arrangements with certain counterparties to facilitate the
settlement of derivative instruments; however, the company reports the fair value of derivative instruments
on a gross basis.
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.
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’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. There are no significant concentrations of credit risk with any individual counterparty
related to our derivative contracts.
The company monitors the credit quality of its counterparties and has not incurred any significant
credit risk losses related to its deposits or derivative contracts.
F-12
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLUOR CORPORATION
Stock-Based Plans
The company applies the provisions of ASC 718, ‘‘Compensation — Stock Compensation,’’ in its
accounting and reporting for stock-based compensation. ASC 718 requires all stock-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. 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. Stock-based compensation expense is generally
recognized over the required service period, or over a shorter period when employee retirement eligibility
is a factor. Certain awards that may be settled in cash or company stock are classified as liabilities and
remeasured at fair value at the end of each reporting period until the awards are settled.
Other Comprehensive Income (Loss)
ASC 220,
‘‘Comprehensive Income,’’ 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 available-for-sale
securities and derivative contracts, ownership share of equity method investees’ other comprehensive
income (loss), and adjustments related to defined benefit pension and postretirement plans, as
components of accumulated other comprehensive income (loss).
The tax effects of the components of other comprehensive income (loss) are as follows:
2016
2015
2014
Year Ended December 31,
(in thousands)
Other comprehensive income (loss):
Foreign currency translation
Tax
Before-Tax (Expense) Net-of-Tax Before-Tax (Expense) Net-of-Tax Before-Tax (Expense) Net-of-Tax
Benefit
Amount
Amount
Amount
Amount
Amount
Amount
Benefit
Benefit
Tax
Tax
adjustment
$(102,707)
$38,327
$(64,380) $(166,487) $ 61,892
$(104,595) $(197,361) $ 71,552
$(125,809)
Ownership share of equity
method investees’ other
comprehensive income (loss)
Defined benefit pension and
8,734
(2,698)
6,036
(12,226)
4,713
(7,513)
5,892
(4,054)
1,838
postretirement plan adjustments
(5,518)
(5,137)
257,414
(94,799)
162,615
(106,957)
40,109
(66,848)
Unrealized loss on derivative
contracts
Unrealized gain (loss) on
available-for-sale securities
Total other comprehensive income
(loss)
Less: Other comprehensive loss
attributable to noncontrolling
interests
Other comprehensive income (loss)
attributable to Fluor Corporation
381
402
(1,064)
(662)
332
(125)
207
(302)
(337)
176
126
(126)
(2,837)
(211)
(700)
773
263
(2,064)
(437)
(100,223)
36,287
(63,936)
78,062
(27,892)
50,170
(301,963)
108,643
(193,320)
(42)
—
(42)
(1,267)
—
(1,267)
(7,309)
—
(7,309)
$(100,181)
$36,287
$(63,894) $ 79,329
$(27,892) $ 51,437
$(294,654) $108,643
$(186,011)
F-13
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLUOR CORPORATION
The changes in AOCI balances by component (after-tax) for the year ended December 31, 2016 are as
follows:
(in thousands)
Attributable to Fluor Corporation:
Balance as of December 31, 2015
Other comprehensive income (loss)
before reclassifications
Amount reclassified from AOCI
Net other comprehensive income
(loss)
Ownership
Share of
Equity Method
Investees’ Other
Comprehensive
Income (Loss)
Foreign
Currency
Translation
Defined
Benefit
Pension and
Postretirement
Plans
Unrealized
Gain (Loss)
on Derivative
Contracts
Unrealized
Gain (Loss)
on Available- Comprehensive
Accumulated
Other
for-Sale
Securities
Income
(Loss), Net
$(222,569)
$(37,949)
$(162,530)
$ (9,255)
$(472)
$(432,775)
(63,880)
—
(63,880)
6,036
—
6,036
(9,888)
4,751
(5,943)
4,823
(5,137)
(1,120)
312
(105)
207
$(265)
(73,363)
9,469
(63,894)
$(496,669)
Balance as of December 31, 2016
$(286,449)
$(31,913)
$(167,667)
$(10,375)
Attributable to Noncontrolling
Interests:
Balance as of December 31, 2015
$
(114)
$
Other comprehensive income (loss)
before reclassifications
Amount reclassified from AOCI
Net other comprehensive income
(loss)
Balance as of December 31, 2016
$
(500)
—
(500)
(614)
$
—
—
—
—
—
$
$
—
—
—
—
—
$
(510)
$ —
$
(624)
159
299
458
(52)
$
—
—
(341)
299
(42)
$ —
$
(666)
The changes in AOCI balances by component (after-tax) for the year ended December 31, 2015 are as
follows:
(in thousands)
Attributable to Fluor Corporation:
Balance as of December 31, 2014
Other comprehensive loss before
reclassifications
Amount reclassified from AOCI
Net other comprehensive income
(loss)
Ownership
Share of
Equity Method
Investees’ Other
Comprehensive
Income (Loss)
Foreign
Currency
Translation
Defined
Benefit
Pension and
Postretirement
Plans
Unrealized
Gain (Loss)
on Derivative
Contracts
Unrealized
Gain (Loss)
on Available- Comprehensive
Accumulated
Other
for-Sale
Securities
Income
(Loss), Net
$(119,416)
$(30,436)
$(325,145)
$(8,954)
$(261)
$(484,212)
(109,361)
6,208
(9,000)
1,487
(5,382)
167,997
(3,260)
2,959
(103,153)
(7,513)
162,615
(301)
(116)
(95)
(211)
$(472)
(127,119)
178,556
51,437
$(432,775)
Balance as of December 31, 2015
$(222,569)
$(37,949)
$(162,530)
$(9,255)
Attributable to Noncontrolling
Interests:
Balance as of December 31, 2014
Other comprehensive loss before
reclassifications
Amount reclassified from AOCI
Net other comprehensive income
(loss)
$
1,328
$
(1,442)
—
(1,442)
Balance as of December 31, 2015
$
(114)
$
—
—
—
—
—
$
$
—
—
—
—
—
$ (685)
$ —
$
643
(101)
276
175
—
—
(1,543)
276
(1,267)
$ (510)
$ —
$
(624)
F-14
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLUOR CORPORATION
The changes in AOCI balances by component (after-tax) for the year ended December 31, 2014 are as
follows:
(in thousands)
Attributable to Fluor Corporation:
Balance as of December 31, 2013
Other comprehensive loss before
reclassifications
Amount reclassified from AOCI
Net other comprehensive income
(loss)
Ownership
Share of
Equity Method
Investees’ Other
Comprehensive
Income (Loss)
Foreign
Currency
Translation
Defined
Benefit
Pension and
Postretirement
Plans
Unrealized
Gain (Loss)
on Derivative
Contracts
Unrealized
Gain (Loss)
on Available- Comprehensive
Accumulated
Other
for-Sale
Securities
Income
(Loss), Net
$
(164)
$(32,274)
$(258,297)
$(7,642)
$ 176
$(298,201)
(119,252)
—
(7,958)
9,796
(74,924)
8,076
(119,252)
1,838
(66,848)
(2,151)
839
(1,312)
$(8,954)
(349)
(88)
(437)
$(261)
(204,634)
18,623
(186,011)
$(484,212)
Balance as of December 31, 2014
$(119,416)
$(30,436)
$(325,145)
Attributable to Noncontrolling
Interests:
Balance as of December 31, 2013
Other comprehensive loss before
reclassifications
Amount reclassified from AOCI
Net other comprehensive loss
$
7,885
(6,557)
—
(6,557)
Balance as of December 31, 2014
$
1,328
$
$
—
—
—
—
—
$
$
—
—
—
—
—
$
67
$ —
$
7,952
(795)
43
(752)
—
—
(7,352)
43
(7,309)
$ (685)
$ —
$
643
During 2016, 2015 and 2014, functional currency exchange rates for most of the company’s
international operations weakened against the U.S. dollar, resulting in unrealized translation losses.
F-15
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLUOR CORPORATION
The significant items reclassified out of AOCI and the corresponding location and impact on the
Consolidated Statement of Earnings are as follows:
Location in Consolidated
Statements of Earnings
Year Ended December 31,
2016
2015
2014
(in thousands)
Component of AOCI:
Foreign currency translation adjustment
Income tax benefit
Net of tax
Ownership share of equity method investees’ other
comprehensive loss
Income tax benefit
Net of tax
Gain related to a partial
sale of a subsidiary
Income tax expense
Total cost of revenue
Income tax expense
Defined benefit pension plan adjustments
Income tax benefit
Various accounts(1)
Income tax expense
$ — $ (9,932)
3,724
—
$ — $ (6,208)
$
$
—
—
—
$ — $ (1,487)
—
—
$(15,662)
5,866
$ — $ (1,487)
$ (9,796)
$(7,602)
2,851
$(268,795)
100,798
$(12,922)
4,846
$(4,751)
$(167,997)
$ (8,076)
Net of tax
Unrealized gain (loss) on derivative contracts:
Commodity and foreign currency contracts
Interest rate contracts
Income tax benefit (net)
Net of tax:
Less: Noncontrolling interests
Net of tax and noncontrolling interests
Unrealized gain on available-for-sale securities
Income tax expense
Net of tax
Total cost of revenue
Interest expense
Income tax expense
Net earnings attributable to
noncontrolling interests
$(6,388)
(1,678)
2,944
$ (3,490)
(1,678)
1,933
(5,122)
(3,235)
$
255
(1,678)
541
(882)
(299)
(276)
(43)
$(4,823)
$ (2,959)
$
(839)
Corporate general and
administrative expense
Income tax expense
$
$
168
(63)
105
$
$
152
(57)
95
$
$
140
(52)
88
(1) Defined benefit pension plan adjustments were reclassified primarily to total cost of revenue, corporate general and
administrative expense and pension settlement charge.
Recent Accounting Pronouncements
New accounting pronouncements
implemented by the company during 2016 or requiring
implementation in future periods are discussed below or in the related notes, where appropriate.
In the fourth quarter of 2016, the company adopted Accounting Standards Update (‘‘ASU’’) 2014-15,
‘‘Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern.’’ This ASU
requires management to perform interim and annual assessments of an entity’s ability to continue as a
going concern within one year of the date the financial statements are issued and to provide certain
disclosures if conditions or events raise substantial doubt about the entity’s ability to continue as a going
concern. The adoption of ASU 2014-15 did not have any impact on the company’s financial position,
results of operations or cash flows.
In the first quarter of 2016, the company adopted ASU 2015-17, ‘‘Balance Sheet Classification of
Deferred Taxes’’ on a retrospective basis. This ASU requires entities to classify all deferred tax assets and
F-16
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLUOR CORPORATION
liabilities as noncurrent on the balance sheet instead of separating deferred taxes into current and
noncurrent. As a result of the adoption of ASU 2015-17, deferred tax assets of $173 million were
reclassified from current assets to noncurrent assets on the Consolidated Balance Sheet as of
December 31, 2015. The adoption of ASU 2015-17 did not have any impact on the company’s results of
operations or cash flows.
In the first quarter of 2016, the company adopted ASU 2015-16, ‘‘Simplifying the Accounting for
Measurement-Period Adjustments.’’ This ASU requires an acquirer in a business combination to recognize
adjustments to provisional amounts that are identified during the measurement period in the reporting
period in which the adjustment amounts are determined. The adoption of ASU 2015-16 did not have any
impact on the company’s financial position, results of operations or cash flows.
In the first quarter of 2016, the company adopted ASU 2015-15, ‘‘Presentation and Subsequent
Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements — Amendments to
SEC Paragraphs Pursuant to Staff Announcement at June 18, 2015 EITF Meeting (SEC Update),’’ which
clarifies the presentation and measurement of debt issuance costs incurred in connection with line of credit
arrangements. The adoption of ASU 2015-15 did not have any impact on the company’s financial position,
results of operations or cash flows.
In the first quarter of 2016, the company adopted ASU 2015-07, ‘‘Disclosure for Investments in
Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent),’’ which eliminates the
requirement to categorize investments measured using the net asset value practical expedient within the
fair value hierarchy table. The adoption of ASU 2015-07 did not have any impact on the company’s
financial position, results of operations or cash flows. However, as a result of adopting ASU 2015-07, plan
assets that are reported using the net asset value practical expedient are no longer included in the fair
value hierarchy table in Note 5.
In the first quarter of 2016, the company adopted ASU 2015-05, ‘‘Customer’s Accounting for Fees
Paid in a Cloud Computing Arrangement’’ on a prospective basis. This ASU clarifies the circumstances
under which a cloud computing customer would account for the arrangement as a license of internal-use
software. The adoption of ASU 2015-05 did not have a material impact on the company’s financial
position, results of operations or cash flows.
In the first quarter of 2016, the company adopted ASU 2015-03, ‘‘Simplifying the Presentation of Debt
Issuance Costs’’ on a retrospective basis. This ASU changes the presentation of debt issuance costs on the
balance sheet by requiring entities to present such costs as a direct deduction from the related debt liability
rather than as an asset. As a result of the adoption of ASU 2015-03, debt issuance costs of $6 million were
reclassified from noncurrent assets to a direct deduction of long-term debt on the Consolidated Balance
Sheet as of December 31, 2015. The adoption of ASU 2015-03 did not have any impact on the company’s
results of operations or cash flows.
In the first quarter of 2016, the company adopted ASU 2015-02, ‘‘Amendments to the Consolidation
Analysis.’’ This ASU amends the consolidation guidance for VIEs and general partners’ investments in
limited partnerships and modifies the evaluation of whether limited partnerships and similar legal entities
are VIEs or voting interest entities. The adoption of ASU 2015-02 did not have a material impact on the
company’s financial position, results of operations or cash flows.
In the first quarter of 2016, the company adopted ASU 2015-01, ‘‘Simplifying Income Statement
Presentation by Eliminating the Concept of Extraordinary Items.’’ Under this ASU, an entity will no longer
be allowed to separately disclose extraordinary items, net of tax, in the income statement after income
from continuing operations if an event or transaction is unusual in nature and occurs infrequently. The
adoption of ASU 2015-01 did not have any impact on the company’s financial position, results of
operations or cash flows.
F-17
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLUOR CORPORATION
In the first quarter of 2016, the company adopted ASU 2014-12, ‘‘Accounting for Share-Based
Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved After the
Requisite Service Period.’’ This ASU requires that a performance target that affects vesting, and that could
be achieved after the requisite service period, be treated as a performance condition. The adoption of
ASU 2014-12 did not have any impact on the company’s financial position, results of operations or cash
flows.
In January 2017, the Financial Accounting Standards Board (‘‘FASB’’) issued ASU 2017-04,
‘‘Simplifying the Test for Goodwill Impairment.’’ ASU 2017-04 removes the second step of the goodwill
impairment test, which requires a hypothetical purchase price allocation. A goodwill impairment will now
be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying
amount of goodwill. ASU 2017-04 is effective for interim and annual reporting periods beginning after
December 15, 2019 and will be applied prospectively. Management does not expect the adoption of
ASU 2017-04 to have any impact on the company’s financial position, results of operations or cash flows.
In January 2017, the FASB issued ASU 2017-01, ‘‘Business Combinations (Topic 805): Clarifying the
Definition of a Business’’ which changes the definition of a business to assist entities with evaluating when
a set of transferred assets and activities is a business. ASU 2017-01 requires an entity to evaluate if
substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or
a group of similar identifiable assets; if so, the set of transferred assets and activities is not a business.
ASU 2017-01 is effective for interim and annual reporting periods beginning after December 15, 2017.
Management does not expect the adoption of ASU 2017-01 to have any impact on the company’s financial
position, results of operations or cash flows.
In November 2016, the FASB issued ASU 2016-18, ‘‘Statement of Cash Flows (Topic 230): Restricted
Cash (a consensus of the FASB Emerging Issues Task Force).’’ ASU 2016-18 requires an entity to include
in its cash and cash-equivalent balances in the statement of cash flows those amounts that are deemed to
be restricted cash and restricted cash equivalents. ASU 2016-18 is effective for interim and annual
reporting periods beginning after December 15, 2017. Management does not expect the adoption of
ASU 2016-18 to have a material impact on the company’s financial position, results of operations or cash
flows.
In October 2016, the FASB issued ASU 2016-17, ‘‘Interests Held through Related Parties That Are
Under Common Control’’ which amends the consolidation requirements that apply to a single decision
maker’s evaluation of interests held through related parties that are under common control when it is
determining whether it is the primary beneficiary of a VIE. ASU 2016-17 is effective for interim and
annual reporting periods beginning after December 15, 2016. Management does not expect the adoption of
ASU 2016-17 to have a material impact on the company’s financial position, results of operations or cash
flows.
In August 2016, the FASB issued ASU 2016-15, ‘‘Classification of Certain Cash Receipts and Cash
Payments.’’ ASU 2016-15 amends the guidance in Accounting Standards Codification (‘‘ASC’’) 230, which
often requires judgment to determine the appropriate classification of cash flows as operating, investing or
financing activities, and has resulted in diversity in practice in how certain cash receipts and cash payments
are classified. ASU 2016-15 is effective for interim and annual reporting periods beginning after
December 15, 2017 and should be applied on a retrospective basis. Management does not expect the
adoption of ASU 2016-15 to have a material impact on the company’s cash flows.
In June 2016, the FASB issued ASU 2016-13, ‘‘Measurement of Credit Losses on Financial
Instruments.’’ The amendments in this ASU replace the incurred loss impairment methodology in current
practice with a methodology that reflects expected credit losses and requires consideration of a broader
range of reasonable and supportable information to estimate credit losses. ASU 2016-13 is effective for
interim and annual reporting periods beginning after December 15, 2019. Management does not expect the
F-18
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLUOR CORPORATION
adoption of ASU 2016-13 to have a material impact on the company’s financial position, results of
operations or cash flows.
In March 2016, the FASB issued ASU 2016-09, ‘‘Improvements to Employee Share-Based Payment
Accounting.’’ This ASU is intended to simplify various aspects of the accounting for share-based payment
awards, including income tax consequences, classification of awards as either equity or liabilities,
classification on the statement of cash flows and forfeiture rate calculations. ASU 2016-09 is effective for
interim and annual reporting periods beginning after December 15, 2016. Management does not expect the
adoption of ASU 2016-09 to have a material impact on the company’s financial position, results of
operations or cash flows.
In March 2016, the FASB issued ASU 2016-07, ‘‘Simplifying the Transition to the Equity Method of
Accounting’’ which eliminates the requirement to retrospectively apply equity method accounting when an
investor obtains significant influence over a previously held investment. ASU 2016-07 is effective for
interim and annual reporting periods beginning after December 15, 2016, and should be applied
prospectively. Management does not expect the adoption of ASU 2016-07 to have a material impact on the
company’s financial position, results of operations or cash flows.
In March 2016, the FASB issued ASU 2016-05, ‘‘Effect of Derivative Contract Novations on Existing
Hedge Accounting Relationships.’’ This ASU clarifies that the novation of a derivative contract in a hedge
accounting relationship does not, in and of itself, require dedesignation of that hedge accounting
relationship. ASU 2016-05 is effective for interim and annual reporting periods beginning after
December 15, 2016. ASU 2016-05 can be applied on either a prospective or modified retrospective basis.
Management does not expect the adoption of ASU 2016-05 to have a material impact on the company’s
financial position, results of operations or cash flows.
In February 2016, the FASB issued ASU 2016-02, ‘‘Leases: Amendments to the FASB Accounting
Standards Codification,’’ which amends the existing guidance on accounting for leases. This ASU requires
the recognition of lease assets and lease liabilities on the balance sheet, and the disclosure of key
information about leasing arrangements. ASU 2016-02 is effective for interim and annual reporting periods
beginning after December 15, 2018. Early adoption is permitted and modified retrospective application is
required for leases that exist or are entered into after the beginning of the earliest comparative period in
the financial statements. Management is currently evaluating the impact of adopting ASU 2016-02 on the
company’s financial position, results of operations or cash flows.
In January 2016, the FASB issued ASU 2016-01, ‘‘Financial Instruments — Overall — Recognition
and Measurement of Financial Assets and Financial Liabilities.’’ This ASU requires entities to measure
equity investments that do not result in consolidation and are not accounted for under the equity method
at fair value and to recognize any changes in fair value in net income unless the investments qualify for a
practicability exception. ASU 2016-01 is effective for interim and annual reporting periods beginning after
December 15, 2017. Management does not expect the adoption of ASU 2016-01 to have a material impact
on the company’s financial position, results of operations or cash flows.
Revenue Recognition
In May 2014, the FASB issued ASU 2014-09, ‘‘Revenue from Contracts with Customers,’’ which
outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts
with customers and supersedes most current revenue recognition guidance, including industry-specific
guidance. ASU 2014-09 outlines a five-step process for revenue recognition that focuses on transfer of
control, as opposed to transfer of risk and rewards, and also requires enhanced disclosures regarding the
nature, amount, timing and uncertainty of revenues and cash flows from contracts with customers. Major
provisions include determining which goods and services are distinct and represent separate performance
obligations, how variable consideration (which may include change orders and claims) is recognized,
F-19
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLUOR CORPORATION
whether revenue should be recognized at a point in time or over time and ensuring the time value of
money is considered in the transaction price.
As a result of the deferral of the effective date in ASU 2015-14, ‘‘Revenue from Contracts with
Customers — Deferral of the Effective Date,’’ the company will now be required to adopt ASU 2014-09
for interim and annual reporting periods beginning after December 15, 2017. Early adoption is permitted
as of interim and annual reporting periods beginning after December 15, 2016. ASU 2014-09 can be
applied either retrospectively to each prior period presented or as a cumulative-effect adjustment as of the
date of adoption.
In March 2016, the FASB issued ASU 2016-08, ‘‘Principal versus Agent Considerations (Reporting
Revenue Gross versus Net)’’ which clarifies the principal versus agent guidance in ASU 2014-09.
ASU 2016-08 clarifies how an entity determines whether to report revenue gross or net based on whether it
controls a specific good or service before it is transferred to a customer. ASU 2016-08 also reframes the
indicators to focus on evidence that an entity is acting as a principal rather than as an agent.
In April 2016, the FASB issued ASU 2016-10, ‘‘Identifying Performance Obligations and Licensing,’’
which amends certain aspects of ASU 2014-09. ASU 2016-10 amends how an entity should identify
performance obligations for immaterial promised goods or services, shipping and handling activities and
promises that may represent performance obligations. ASU 2016-10 also provides implementation
guidance for determining the nature of licensing and royalties arrangements.
In May 2016, the FASB issued ASU 2016-12, ‘‘Narrow-Scope Improvements and Practical
Expedients,’’ which also clarifies certain aspects of ASU 2014-09 including the assessment of collectability,
presentation of sales taxes, treatment of noncash consideration, and accounting for completed contracts
and contract modifications at transition.
In December 2016, the FASB issued ASU 2016-20, ‘‘Technical Corrections and Improvements to
Topic 606, Revenue from Contracts with Customers,’’ which allows an entity to determine the provision for
loss contracts at either the contract level or the performance obligation level as an accounting policy
election. ASU 2016-20, 2016-12, 2016-10 and 2016-08 are effective upon adoption of ASU 2014-09.
Management is currently evaluating the impact of adopting ASU 2014-09, 2016-08, 2016-10, 2016-12
and 2016-20 on the company’s financial position, results of operations, cash flows and related disclosures.
Adoption of these ASUs is expected to affect the manner in which the company determines the unit of
account for its projects (i.e., performance obligations). Under existing guidance, the company typically
segments revenue and margin recognition between the engineering and construction phases of its
contracts. Upon adoption, the company expects that the entire engineering and construction contract will
typically be a single unit of account (a single performance obligation), which will result in a more constant
recognition of revenue and margin over the term of the contract. The company will adopt ASU 2014-09
during the first quarter of 2018. The company expects to adopt this new standard using the modified
retrospective method that will result in a cumulative effect adjustment as of the date of adoption.
2. Discontinued Operations
During 2014, the company recorded an after-tax loss from discontinued operations of $205 million in
connection with the reassessment of estimated loss contingencies related to the lead business of St. Joe
Minerals Corporation and The Doe Run Company in Herculaneum, Missouri, which the company sold in
1994. The tax effect associated with this loss was $112 million. During 2015, the company recorded an
after-tax loss from discontinued operations of $6 million resulting from the settlement of lead exposure
cases related to the divested lead business and the payment of legal fees incurred in connection with a
pending indemnification action against the buyer of the lead business for these settlements and others. The
tax effect associated with this loss was $3 million.
F-20
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLUOR CORPORATION
3. Consolidated Statement of Cash Flows
The changes in operating assets and liabilities as shown in the Consolidated Statement of Cash Flows
are comprised of:
(in thousands)
(Increase) decrease in:
Accounts and notes receivable, net
Contract work in progress
Other current assets
Other assets
Increase (decrease) in:
Trade accounts payable
Advance billings on contracts
Accrued liabilities
Other liabilities
Increase (decrease) in cash due to changes in operating assets
and liabilities
Cash paid during the year for:
Interest
Income taxes (net of refunds)
4.
Income Taxes
Year Ended December 31,
2016
2015
2014
$(337,775) $190,141
80,742
(20,861)
(54,726)
(72,419)
19,311
250,332
$(336,109)
50,570
24,659
48,403
200,480
43,985
40,088
(8,609)
(57,317)
243,996
(38,529)
(39,550)
(153,515)
(63,594)
31,697
(10,972)
$ 135,393
$303,896
$(408,861)
$ 72,057
164,836
$ 40,585
249,921
$ 23,509
228,471
The income tax expense (benefit) included in the Consolidated Statement of Earnings from
continuing operations is as follows:
(in thousands)
Current:
Federal
Foreign
State and local
Total current
Deferred:
Federal
Foreign
State and local
Total deferred
Total income tax expense
Year Ended December 31,
2016
2015
2014
$120,798
95,198
11,067
$ 22,465
203,125
15,623
$126,490
151,240
13,001
227,063
241,213
290,731
58,601
(65,656)
(857)
8,867
(5,630)
1,438
74,037
(10,353)
(1,600)
(7,912)
4,675
62,084
$219,151
$245,888
$352,815
F-21
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLUOR CORPORATION
A reconciliation of U.S. statutory federal income tax expense to income tax expense is as follows:
(in thousands)
U.S. statutory federal tax expense
Increase (decrease) in taxes resulting from:
State and local income taxes
Other permanent items, net
Noncontrolling interests
Foreign losses, net
Valuation allowance, net
Statute expirations and tax authority settlements
Revaluation due to Section 987 tax law change
Other changes to unrecognized tax positions
Other, net
Total income tax expense
Year Ended December 31,
2016
2015
2014
$191,310
$254,293
$421,718
5,785
(11,101)
(16,117)
24,288
6,978
(13,280)
24,156
2,061
5,071
11,518
(5,828)
(21,873)
8,640
5,611
(7,827)
—
491
863
7,670
(9,378)
(47,822)
4,121
(12,984)
(19,331)
—
5,574
3,247
$219,151
$245,888
$352,815
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:
(in thousands)
Deferred tax assets:
Accrued liabilities not currently deductible:
Employee compensation and benefits
Employee time-off accrual
Project and non-project reserves
Workers’ compensation insurance accruals
Tax basis of investments in excess of book basis
Revenue recognition
Net operating loss carryforward
Other comprehensive loss
Other
Total deferred tax assets
Valuation allowance for deferred tax assets
Deferred tax assets, net
Deferred tax liabilities:
Book basis of property, equipment and other capital costs in excess of tax
basis
Residual U.S. tax on unremitted non-U.S. earnings
Revenue recognition
Other
Total deferred tax liabilities
Deferred tax assets, net of deferred tax liabilities
F-22
December 31,
2016
2015
$ 117,981
94,134
46,219
10,681
69,195
17,525
180,450
271,878
5,941
$ 124,300
92,507
22,270
12,083
—
—
184,475
258,618
57,285
814,004
(81,360)
751,538
(167,360)
$ 732,644
$ 584,178
(88,262)
(161,827)
—
(28,446)
(45,611)
(95,823)
(17,518)
(30,394)
(278,535)
(189,346)
$ 454,109
$ 394,832
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLUOR CORPORATION
The company had non-U.S. net operating loss carryforwards, related to various jurisdictions, of
approximately $760 million as of December 31, 2016. Of the total losses, $574 million can be carried
forward indefinitely and $186 million will begin to expire in various jurisdictions starting in 2017.
The company maintains a valuation allowance to reduce certain deferred tax assets to amounts that
are more likely than not to be realized. The valuation allowance for 2016 and 2015 is primarily due to the
deferred tax assets established for certain net operating loss carryforwards and certain reserves on
investments. The recent strong earnings history of our U.K. branch provided enough positive evidence to
release a $127 million valuation allowance on its net operating loss carryforward in 2016. This release does
not impact total tax expense as it relates to branch income which is included in the U.S. tax return. The
Stork acquisition added $36 million to the valuation allowance as a result of purchase price accounting. In
2015 and 2014, we released valuation allowance on branch net operating losses of $47 million and
$24 million, respectively.
On December 7, 2016, the U.S. Treasury issued regulations under Internal Revenue Code Section 987
(‘‘Section 987 Regulations’’) which prescribes how companies are required to calculate foreign currency
translation gains and losses for income tax purposes for branches that have functional currencies other
than the U.S. dollar. The issuance of the Section 987 Regulations necessitated the reduction of deferred
tax assets in the amount of $24 million.
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
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 2013.
In 2016, the company concluded an audit with the U.S. Internal Revenue Service (‘‘IRS’’) for tax years
2012-2013. This resulted in a net reduction in tax expense of $11 million. During 2015, the company
reached a settlement on certain issues with the IRS for tax years 2004 - 2005 and concluded an audit with
the IRS for tax years 2009 - 2011, which resulted in a net reduction in tax expense of $8 million. During
2014, the company concluded an audit with the IRS for tax years 2006 - 2008. This resulted in a net
reduction in tax expense of $19 million.
The unrecognized tax benefits as of December 31, 2016 and 2015 were $59 million and $42 million, of
which $9 million and $21 million, if recognized, would have favorably impacted the effective tax rates at the
end of 2016 and 2015, 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)
Balance at beginning of year
Change in tax positions of prior years
Change in tax positions of current year
Reduction in tax positions for statute expirations
Reduction in tax positions for audit settlements
Balance at end of year
F-23
2016
2015
$ 42,203
30,034
—
(1,044)
(12,312)
$ 33,972
18,860
—
(539)
(10,090)
$ 58,881
$ 42,203
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLUOR CORPORATION
The company recognizes accrued interest and penalties related to unrecognized tax benefits in income
tax expense. The company had $8 million of accrued interest and penalties as of both December 31, 2016
and 2015.
U.S. and foreign earnings from continuing operations before taxes are as follows:
(in thousands)
United States
Foreign
Total
Year Ended December 31,
2016
2015
2014
$ (33,414) $ 12,520
714,032
580,014
$ 332,497
872,412
$546,600
$726,552
$1,204,909
Earnings from continuing operations before taxes in the United States decreased in 2016 compared to
2015 primarily due to pre-tax charges totaling $265 million related to forecast revisions for estimated cost
increases on a petrochemicals project in the Energy, Chemicals & Mining segment. Earnings from
continuing operations before taxes in foreign jurisdictions decreased in 2016 compared to 2015 primarily
due to lower contributions from the Energy, Chemicals & Mining segment. Earnings from continuing
operations before taxes in the United States decreased in 2015 compared to 2014 primarily due to a pre-tax
pension settlement charge of $240 million (discussed in Note 5 below). Earnings from continuing
operations before taxes in foreign jurisdictions decreased in 2015 compared to 2014 primarily due to lower
contributions from the mining and metals business line of the Energy, Chemicals & Mining segment.
5. Retirement Benefits
The company sponsors contributory and non-contributory defined contribution retirement and
defined benefit pension plans for eligible employees worldwide.
Defined Contribution Retirement Plans
Domestic and international defined contribution retirement plans are available to eligible salaried and
craft employees. Contributions to defined contribution retirement plans are based on a percentage of the
employee’s eligible compensation. The company recognized expense of $167 million, $146 million and
$150 million associated with contributions to its defined contribution retirement plans during 2016, 2015
and 2014, respectively.
Defined Benefit Pension Plans
Certain defined benefit pension plans are available to eligible international salaried employees. A
defined benefit pension plan was previously available to U.S. salaried and craft employees; however, the
U.S. defined benefit pension plan (the ‘‘U.S. plan’’) was terminated on December 31, 2014 (see further
discussion below). Contributions to defined benefit pension plans are at least the minimum amounts
required by applicable regulations. Benefit payments under these plans are generally based upon length of
service and/or a percentage of qualifying compensation.
The company’s Board of Directors previously approved amendments to freeze the accrual of future
service-related benefits for salaried participants of the U.S. plan as of December 31, 2011 and craft
participants of the U.S. plan as of December 31, 2013. During the fourth quarter of 2014, the company’s
Board of Directors approved an amendment to terminate the U.S. plan effective December 31, 2014. In
December 2015, the company settled the remaining obligations associated with the U.S. plan. Plan
participants received vested benefits from the plan assets by electing either a lump-sum distribution,
roll-over contribution to other defined contribution or individual retirement plans, or an annuity contract
with a third-party provider. As a result of the settlement, the company was relieved of any further
F-24
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLUOR CORPORATION
obligation. During 2015, the company recorded a pension settlement charge of $251 million, of which
$11 million was reimbursable and included in ‘‘Total cost of revenue’’ and $240 million was recorded as
‘‘Pension settlement charge’’ in the Consolidated Statement of Earnings. The settlement charge consisted
primarily of unrecognized actuarial losses included in AOCI. The settlement of the plan obligations did not
have a material impact on the company’s cash position.
The company’s defined benefit pension plan in the Netherlands was closed to new participants on
December 31, 2013. The company previously approved an amendment to freeze the accrual of future
service-related benefits for eligible participants of the U.K. pension plan as of April 1, 2011.
Net periodic pension expense for the U.S. and non-U.S. defined benefit pension plans included the
following components:
U.S. Pension Plan
Year Ended December 31,
Non-U.S. Pension Plans
Year Ended December 31,
(in thousands)
2016
2015
2014
2016
2015
2014
Service cost
Interest cost
Expected return on assets
Amortization of prior service cost/
(credits)
Recognized net actuarial loss
Loss on settlement
$
6,800
— $
—
16,116
— (19,711)
$ 3,800
31,675
(30,105)
$ 19,507
26,435
(39,535)
$ 20,517
26,511
(49,066)
$ 16,217
34,536
(48,077)
867
—
—
9,714
— 250,946
750
4,435
—
(813)
8,819
396
(814)
7,681
390
—
7,738
—
Net periodic pension expense
$
— $264,732
$ 10,555
$ 14,809
$ 5,219
$ 10,414
The ranges of assumptions indicated below cover defined benefit pension plans in the United States,
the Netherlands, the United Kingdom, Germany, the Philippines and Australia and are based on the
economic environment in each host country at the end of each respective annual reporting period. The
discount rates for the non-U.S. defined benefit pension plans were determined primarily based on a
hypothetical yield curve developed from the yields on high quality corporate and government bonds with
durations consistent with the pension obligations in those countries. The discount rate for the U.S. plan
was determined based on assumptions which reflected the intended settlement of the plan in 2015.
Benefits that were assumed to be settled as lump-sum payments to plan participants were estimated using
interest rates prescribed by law. Benefits that were assumed to be settled through an annuity purchase
were estimated using a blend of U.S. Treasury and high-quality corporate bond discount rates. The
expected long-term rate of return on asset assumptions utilizing historical returns, correlations and
F-25
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLUOR CORPORATION
investment manager forecasts are established for each major asset category including public U.S. and
international equities and government, corporate and other debt securities.
For determining projected benefit
obligation at year-end:
Discount rates
Rates of increase in compensation
U.S. Pension Plan
December 31,
Non-U.S. Pension Plans
December 31,
2016
2015
2014
2016
2015
2014
N/A
N/A 1.95% 1.90-5.00% 2.35-5.50% 2.20-5.00%
levels
N/A
N/A
N/A 2.25-7.00% 2.25-7.00% 2.25-8.00%
For determining net periodic cost for the
year:
Discount rates
Rates of increase in compensation
N/A 1.95% 4.95% 1.90-5.50% 2.20-5.00% 3.55-5.00%
levels
N/A
N/A
N/A 2.25-7.00% 2.25-8.00% 2.25-9.00%
Expected long-term rates of return on
assets
N/A 2.95% 4.55% 4.30-7.00% 4.90-7.00% 4.75-7.00%
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 contribute up to $15 million to its defined
benefit pension plans in 2017, 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 defined benefit pension plans would
increase by approximately $51 million.
The following table sets forth the target allocations and the weighted average actual allocations of
plan assets:
Asset category:
Debt securities
Equity securities
Other
Total
Target Allocation
2016
2015
December 31,
65% - 75%
20% - 30%
0% - 10%
68%
26%
6%
70%
27%
3%
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
governing body. Asset allocations may be affected by local regulations. 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.
Investments in debt securities are used to provide stable investment returns while protecting the
funding status of the plans. Investments in equity securities are utilized to generate long-term capital
appreciation to mitigate the effects of increases in benefit obligations resulting from inflation, longer life
expectancy and salary growth. 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.
F-26
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLUOR CORPORATION
Plan assets included investments in common or collective trusts (or ‘‘CCTs’’), 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 net asset value of the shares or units of such
funds as determined by the issuer. A redemption notice period of no more than 30 days is required for the
plans to redeem certain investments in common or collective trusts. At the present time, there are no other
restrictions on how the plans may redeem their investments.
Debt securities are comprised of corporate bonds, government securities, repurchase agreements 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 no significant concentration exists in any one rating category or industry. Government
securities include international government bonds, some of which are inflation-indexed. Corporate bonds
and government securities are valued based on pricing models, which are determined from a compilation
of primarily observable market information, broker quotes in non-active markets or similar assets.
Equity securities are diversified across various industries and are comprised of common stocks of
international companies as well as common or collective trusts with underlying investments in common and
preferred stocks. 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 both December 31, 2016 and 2015,
direct investments in equity securities were concentrated in international securities.
Other is primarily comprised of common or collective trusts, short-term investment funds, guaranteed
investment contracts and foreign currency contracts. Common or collective trusts hold underlying
investments in a variety of asset classes including commodities and foreign currency contracts. The
estimated fair value of foreign currency contracts is determined from broker quotes. Guaranteed
investment contracts are insurance contracts that guarantee a principal repayment and a stated rate of
interest. The estimated fair value of these insurance contracts represents the discounted value of
guaranteed benefit payments. These insurance contracts were classified as Level 3 investments, as defined
below.
The fair value hierarchy established by ASC 820, ‘‘Fair Value Measurement,’’ prioritizes the use of
inputs used in valuation techniques into the following three levels:
(cid:129) Level 1 — quoted prices in active markets for identical assets and liabilities
(cid:129) Level 2 — inputs other than quoted prices in active markets for identical assets and liabilities that
are observable, either directly or indirectly
(cid:129) Level 3 — unobservable inputs
The company measures and reports assets and liabilities at fair value utilizing pricing information
received from third parties. The company performs procedures to verify the reasonableness of pricing
information received for significant assets and liabilities classified as Level 2.
F-27
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLUOR CORPORATION
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 non-U.S. defined benefit pension plans that are measured at
fair value on a recurring basis as of December 31, 2016 and 2015:
(in thousands)
Assets:
Equity securities:
Common stock
Debt securities:
December 31, 2016
Fair Value Hierarchy
December 31, 2015
Fair Value Hierarchy
Total
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
$
3,187 $3,187 $
— $ — $
2,150 $2,150 $
— $ —
Corporate bonds
Government securities
139,243
276,266
— 139,243
— 276,266
— 147,559
— 169,433
— 147,559
— 169,433
Other:
Guaranteed investment contracts
Foreign currency contracts and
other
Liabilities:
Debt securities:
19,075
5,244
—
—
— 19,075
—
—
—
5,244
— 16,489
— 16,489
—
—
—
—
Repurchase agreements
(107,328)
— (107,328)
—
—
—
—
—
Other:
Foreign currency contracts and
other
(5,113)
—
(5,113)
— (19,211)
— (19,211)
—
Plan assets measured at fair value, net
$ 330,574 $3,187 $ 308,312 $19,075 $316,420 $2,150 $314,270 $ —
Plan assets measured at net asset value:
CCTs — equity securities
CCTs — debt securities
CCTs — other
Plan assets not measured at fair value,
net
Total plan assets, net
240,203
337,265
41,744
1,161
$ 950,947
242,028
318,103
29,265
14,661
$920,477
The following table presents a reconciliation of the beginning and ending balances of the fair value
measurements using significant unobservable inputs (Level 3):
(in thousands)
Balance at beginning of year
Actual return on plan assets:
Assets still held at reporting date
Assets sold during the period
Acquisitions
Purchases
Sales
Settlements
U.S. Pension Plan
2015(1)
2016
Non-U.S.
Pension Plans
2016
2015(2)
$ — $ 12,393
$ — $ 6,651
—
— (1,268)
—
(344)
136
—
—
—
— 21,923
—
—
—
—
—
— (6,307)
— (12,529)
—
—
— (1,580)
Balance at end of year
$ — $
— $19,075
$ —
F-28
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLUOR CORPORATION
(1) The U.S. plan held investments in limited partnerships as of January 1, 2015. Limited partnerships
were 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 were classified as Level 3
investments, as defined above. In anticipation of the plan settlement, the company purchased all of
the remaining investments in limited partnerships from the U.S. plan during the third quarter of 2015,
as allowed under a prohibited transaction exemption with the U.S. Department of Labor. The
purchase price approximated the fair value of the investments as of September 30, 2015.
(2) The non-U.S. plans held common or collective trusts with underlying investments in real estate as of
January 1, 2015. These assets were classified as Level 3 investments and subsequently sold during
2015.
The following table presents expected benefit payments for the non-U.S. defined benefit pension
plans:
(in thousands)
Year Ended December 31,
2017
2018
2019
2020
2021
2022 — 2026
Non-U.S.
Pension Plans
$ 33,153
33,790
34,430
36,287
47,918
191,299
F-29
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLUOR CORPORATION
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:
(in thousands)
Change in projected benefit obligation
Benefit obligation at beginning of year
Service cost
Interest cost
Employee contributions
Currency translation
Actuarial (gain) loss
Plan amendments
Benefits paid
Settlements
Acquisitions
Other
U.S. Pension Plan
Non-U.S. Pension Plans
December 31,
December 31,
2016
2015
2016
2015
$911,550
$ — $ 815,368
19,507
6,800
26,435
16,116
—
3,272
— (80,418)
96,216
—
(33,695)
—
55,799
(10,677)
—
—
—
—
(40,050)
—
—
—
—
(22,068)
— (768,185)
—
—
(7,981)
—
$1,005,138
20,517
26,511
—
(76,801)
(32,104)
—
(31,711)
—
—
—
Projected benefit obligation at end of year
—
— 987,989
911,550
Change in plan assets
Plan assets at beginning of year
Actual return on plan assets
Company contributions
Employee contributions
Currency translation
Benefits paid
Settlements
Acquisitions
Other
Plan assets at end of year
—
—
—
—
—
—
(22,068)
— (768,185)
—
—
(7,981)
—
920,477
751,268
124,210
(8,034)
14,868
55,000
—
3,272
— (88,852)
(33,695)
—
21,923
(11,256)
1,032,133
(8,349)
3,446
—
(75,042)
(31,711)
—
—
—
—
— 950,947
920,477
Funded Status — (Under)/overfunded
$ — $
— $ (37,042) $
8,927
Amounts recognized in the Consolidated Balance Sheet
Pension assets included in other assets
Pension assets included in other accrued liabilities
Pension liabilities included in noncurrent liabilities
Accumulated other comprehensive loss (pre-tax)
$ — $
—
—
$ — $
— $ 30,977
—
(2,001)
— (66,018)
— $231,225
$
84,328
—
(75,401)
$ 247,541
During 2017, approximately $7 million of the amount of accumulated other comprehensive loss shown
above is expected to be recognized as components of net periodic pension expense for the non-U.S. plans.
Projected benefit obligations exceeded plan assets for all defined benefit pension plans as of
December 31, 2016, with the exception of the plan in the United Kingdom. In the aggregate, these plans
had projected benefit obligations of $625 million and plan assets with a fair value of $557 million as of
December 31, 2016.
The total accumulated benefit obligation for all defined benefit pension plans as of December 31,
2016 and 2015 was $919 million and $863 million, respectively. As of December 31, 2016, the accumulated
F-30
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLUOR CORPORATION
benefit obligation exceeded plan assets for certain defined benefit pension plans in the Netherlands and
Germany that the company assumed in the Stork acquisition. Plan assets exceeded the accumulated benefit
obligation for each of the other non-U.S plans (including the company’s legacy plan in the Netherlands) as
of December 31, 2016. The accumulated benefit obligation exceeded plan assets for the company’s legacy
plan in the Netherlands as of December 31, 2015. Plan assets exceeded the accumulated benefit obligation
for each of the other non-U.S plans as of December 31, 2015.
Multiemployer Pension Plans
In addition to the company’s defined benefit pension plans discussed above, the company participates
in multiemployer pension plans for its union construction and maintenance craft employees. Contributions
are based on the hours worked by employees covered under various collective bargaining agreements.
Company contributions to these multiemployer pension plans were $108 million, $22 million and
$23 million during 2016, 2015 and 2014, respectively. The increase in contributions during 2016 primarily
resulted from an increase in craft employees at two nuclear power plant projects in the United States and a
refinery project in Canada. The company is not aware of any significant future obligations or funding
requirements related to these plans other than the ongoing contributions that are paid as hours are worked
by plan participants. None of these multiemployer pension plans are individually significant to the
company.
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.
6.
Fair Value of Financial Instruments
The fair value hierarchy established by ASC 820, ‘‘Fair Value Measurement,’’ prioritizes the use of
inputs used in valuation techniques into the following three levels:
(cid:129) Level 1 — quoted prices in active markets for identical assets and liabilities
(cid:129) Level 2 — inputs other than quoted prices in active markets for identical assets and liabilities that
are observable, either directly or indirectly
(cid:129) Level 3 — unobservable inputs
The company measures and reports assets and liabilities at fair value utilizing pricing information
received from third parties. The company performs procedures to verify the reasonableness of pricing
information received for significant assets and liabilities classified as Level 2.
F-31
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLUOR CORPORATION
The following table presents, for each of the fair value hierarchy levels required under ASC 820-10,
the company’s assets and liabilities that are measured at fair value on a recurring basis as of December 31,
2016 and 2015:
December 31, 2016
December 31, 2015
—
—
—
(in thousands)
Assets:
Cash and cash equivalents(1)
Marketable securities, current(2)
Deferred compensation trusts(3)
Marketable securities,
noncurrent(4)
Derivative assets(5)
Fair Value Hierarchy
Fair Value Hierarchy
Total
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
$ 21,035 $21,035 $
— $ — $ 19,161 $19,161 $
54,840
37,510
—
37,510
54,840
—
—
—
87,763
60,003
—
60,003
— $ —
—
—
87,763
—
143,553
— 143,553
— 220,634
— 220,634
Commodity contracts
Foreign currency contracts
83
34,776
—
—
83
34,776
—
—
341
8,439
—
—
341
8,439
Liabilities:
Derivative liabilities(5)
Commodity contracts
Foreign currency contracts
$
129
43,574
$ — $
—
129
43,574
$ — $
2,510 $ — $
— 14,138
—
2,510 $ —
—
14,138
(1) Consists primarily of registered money market funds valued at fair value. These investments represent the net
asset value of the shares of such funds as of the close of business at the end of the period.
(2) Consists of investments in U.S. agency securities, U.S. Treasury securities and corporate debt securities with
maturities of less than one year that are valued based on pricing models, which are determined from a
compilation of primarily observable market information, broker quotes in non-active markets or similar assets.
(3) Consists primarily of registered money market funds and an equity index fund valued at fair value. These
investments, which are trading securities, represent the net asset value of the shares of such funds as of the close
of business at the end of the period based on the last trade or official close of an active market or exchange.
(4) Consists of investments in U.S. agency securities, U.S. Treasury securities and corporate debt securities with
maturities ranging from one year to three years that are valued based on pricing models, which are determined
from a compilation of primarily observable market information, broker quotes in non-active markets or similar
assets.
(5)
See Note 7 for the classification of commodity and foreign currency contracts in the Consolidated Balance Sheet.
Commodity and foreign currency contracts are estimated using standard pricing models with market-based
inputs, which take into account the present value of estimated future cash flows.
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, 2016: money
market funds of $21 million, U.S. agency securities of $11 million, U.S. Treasury securities of $87 million
and corporate debt securities of $100 million. As of December 31, 2015, available-for-sale securities
consisted of money market funds of $19 million, U.S. agency securities of $18 million, U.S. Treasury
securities of $102 million and corporate debt securities of $189 million. The amortized cost of these
available-for-sale securities is not materially different from the fair value. During 2016, 2015 and 2014,
proceeds from sales and maturities of available-for-sale securities were $286 million, $336 million and
$274 million, respectively.
F-32
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLUOR CORPORATION
In addition to assets and liabilities that are measured at fair value on a recurring basis, the company is
required to measure certain assets and liabilities at fair value on a nonrecurring basis. See Notes 18 and 19
for further discussion of nonrecurring fair value measurements related to the company’s acquisition of
Stork and a partial sale of a subsidiary.
The carrying values and estimated fair values of the company’s financial instruments that are not
required to be measured at fair value in the Consolidated Balance Sheet are as follows:
(in thousands)
Assets:
Cash(1)
Cash equivalents(2)
Marketable securities, current(3)
Notes receivable, including
noncurrent portion(4)
Liabilities:
1.750% Senior Notes(5)
3.375% Senior Notes(5)
3.5% Senior Notes(5)
Revolving Credit Facility(6)
Other borrowings, including
noncurrent portion(7)
Fair Value
Hierarchy
December 31, 2016
December 31, 2015
Carrying Value
Fair Value
Carrying Value
Fair Value
Level 1
Level 2
Level 2
$1,133,295
696,106
56,197
$1,133,295
696,106
56,197
$1,073,756
856,969
109,329
$1,073,756
856,969
109,329
Level 3
29,458
29,458
19,182
19,182
Level 2
Level 2
Level 2
Level 2
$ 523,629
496,011
492,360
52,735
$ 551,582
512,510
508,230
52,735
$
— $
495,165
491,399
—
—
509,025
504,265
—
Level 2
35,457
35,457
—
—
(1) Cash consists of bank deposits. Carrying amounts approximate fair value.
(2) Cash equivalents consist of held-to-maturity time deposits with maturities of three months or less at
the date of purchase. The carrying amounts of these time deposits approximate fair value because of
the short-term maturity of these instruments.
(3) Marketable securities, current consist of held-to-maturity time deposits with original maturities
greater than three months that will mature within one year. The carrying amounts of these time
deposits approximate fair value because of the short-term maturity of these instruments. Amortized
cost is not materially different from the fair value.
(4) Notes receivable are carried at net realizable value which approximates fair value. Factors considered
by the company in determining the fair value include the credit worthiness of the borrower, current
interest rates, the term of the note and any collateral pledged as security. Notes receivable are
periodically assessed for impairment.
(5) The fair value of the 1.750% Senior Notes, 3.375% Senior Notes and 3.5% Senior Notes are estimated
based on quoted market prices for similar issues.
(6) Amounts represent borrowings under the company’s A125 million Revolving Credit Facility which
expires in April 2017, as discussed in Note 8. The carrying amount of the borrowings under this
revolving credit facility approximates fair value because of the short-term maturity
(7) Other borrowings as of December 31, 2016 primarily represent bank loans and other financing
arrangements assumed in conjunction with the acquisition of Stork. See Note 18 for a further
discussion of the acquisition. The majority of these borrowings mature within one year. The carrying
amount of borrowings under these arrangements approximates fair value because of the short-term
maturity.
F-33
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLUOR CORPORATION
7. Derivatives and Hedging
As of December 31, 2016, the company had total gross notional amounts of approximately $1 billion
of foreign currency contracts (primarily related to the British Pound, Euro, Kuwaiti Dinar and South
Korean Won) and $2 million of commodity contracts outstanding relating to engineering and construction
contract obligations and monetary assets and liabilities denominated in nonfunctional currencies. The
foreign currency contracts are of varying duration, none of which extend beyond December 2019. The
commodity contracts are of varying duration, none of which extend beyond December 2017. The impact to
earnings due to hedge ineffectiveness was immaterial for the years ended December 31, 2016, 2015 and
2014.
The fair values of derivatives designated as hedging instruments under ASC 815 as of December 31,
2016 and 2015 were as follows:
(in thousands)
Balance Sheet
Location
December 31, December 31,
2016
2015
Balance Sheet
Location
December 31, December 31,
2016
2015
Asset Derivatives
Liability Derivatives
Commodity contracts
Foreign currency contracts
Commodity contracts
Foreign currency contracts
Other current assets
Other current assets
Other assets
Other assets
Total
$
83
13,231
—
21,545
$34,859
$ 326
6,865
15
1,574
$8,780
Other accrued liabilities
Other accrued liabilities
Noncurrent liabilities
Noncurrent liabilities
$
129
16,543
—
27,031
$43,703
$ 2,195
12,381
315
1,757
$16,648
The pre-tax net losses recognized in earnings associated with the hedging instruments designated as
fair value hedges for the years ended December 31, 2016, 2015 and 2014 were as follows:
Fair Value Hedges (in thousands)
Location of Loss
2016
2015
2014
Foreign currency contracts
Corporate general and administrative expense
$(2,886) $(5,191) $(3,322)
The pre-tax net losses recognized in earnings on hedging instruments for the fair value hedges offset
the amount of gains recognized in earnings on the hedged items in the same locations in the Consolidated
Statement of Earnings.
The after-tax amount of gain (loss) recognized in OCI and reclassified from AOCI into earnings
associated with the derivative instruments designated as cash flow hedges for the years ended
December 31, 2016, 2015 and 2014 was as follows:
Cash Flow Hedges (in thousands)
2016
2015
2014
Location of Gain (Loss)
2016
2015
2014
After-Tax Amount of Gain
(Loss) Recognized in OCI
After-Tax Amount of Gain
(Loss) Reclassified from
AOCI into Earnings
Commodity contracts
Foreign currency contracts
Interest rate contracts
$
(6,344)
—
401 $ (728) $ (881) Total cost of revenue $ (550) $ (385) $
(2,532)
—
(1,270) Total cost of revenue
—
Interest expense
(3,224)
(1,049)
(1,525)
(1,049)
(59)
269
(1,049)
Total
$(5,943) $(3,260) $(2,151)
$(4,823) $(2,959) $ (839)
F-34
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLUOR CORPORATION
As of December 31, 2016, the company also had total gross notional amounts of $0.1 million of
foreign currency contracts and $0.2 million of commodity contracts outstanding that were not designated
as hedging instruments. These contracts primarily related to engineering and construction and operations
and maintenance contract obligations denominated in nonfunctional currencies. A gain of less than
$0.1 million associated with these contracts was included in Cost of Revenues for the year ended
December 31, 2016.
8.
Financing Arrangements
As of December 31, 2016, the company had a combination of committed and uncommitted lines of
credit that may be used for revolving loans and letters of credit. As of December 31, 2016, letters of credit
and borrowings totaling $1.7 billion were outstanding under these committed and uncommitted lines of
credit. The committed lines of credit include a $1.7 billion Revolving Loan and Letter of Credit Facility
and a $1.8 billion Revolving Loan and Letter of Credit Facility. Both facilities mature in February 2021.
The company may utilize up to $1.75 billion in the aggregate of the combined $3.5 billion committed lines
of credit for revolving loans, which may be used for acquisitions and/or general purposes. Each of the
credit facilities may be increased up to an additional $500 million subject to certain conditions, and contain
customary financial and restrictive covenants, including a maximum ratio of consolidated debt to tangible
net worth of one-to-one and a cap on the aggregate amount of debt of the greater of $750 million or
A750 million for the company’s subsidiaries. Borrowings under both facilities, which may be denominated
in USD, EUR, GBP or CAD, bear interest at rates based on the Eurodollar Rate or an alternative base
rate, plus an applicable borrowing margin.
In connection with the Stork acquisition, the company assumed a A110 million Super Senior Revolving
Credit Facility that bore interest at EURIBOR plus 3.75%. In April 2016, the company repaid and
replaced the A110 million Super Senior Revolving Credit Facility with a A125 million Revolving Credit
Facility which may be used for revolving loans, bank guarantees, letters of credit and to fund working
capital in the ordinary course of business. This replacement facility expires in April 2017 and bears interest
at EURIBOR plus .75%. The A125 million Revolving Credit Facility was included in committed lines of
credit as of December 31, 2016. Outstanding borrowings under this facility amounted to A50 million (or
approximately $53 million) as of December 31, 2016.
Letters of credit are provided in the ordinary course of business primarily to indemnify the company’s
clients if the company fails to perform its obligations under its contracts. Surety bonds may be used as an
alternative to letters of credit.
Consolidated debt consisted of the following:
(in thousands)
Current:
Revolving Credit Facility
Other borrowings
Long-Term:
1.750% Senior Notes
3.375% Senior Notes
3.5% Senior Notes
Other borrowings
December 31,
2016
2015
$ 52,735
29,508
$
—
—
$523,629
496,011
492,360
5,949
$
—
495,165
491,399
—
In March 2016, the company issued A500 million of 1.750% Senior Notes (the ‘‘2016 Notes’’) due
March 21, 2023 and received proceeds of A497 million (or approximately $551 million), net of underwriting
F-35
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLUOR CORPORATION
discounts. Interest on the 2016 Notes is payable annually on March 21 of each year, beginning on
March 21, 2017. Prior to December 21, 2022, the company may redeem the 2016 Notes at a redemption
price equal to 100 percent of the principal amount, plus a ‘‘make whole’’ premium described in the
indenture. On or after December 21, 2022, the company may redeem the 2016 Notes at 100 percent of the
principal amount plus accrued and unpaid interest, if any, to the date of redemption. Additionally, the
company may redeem the 2016 Notes at any time upon the occurrence of certain changes in U.S. tax laws,
as described in the indenture, at 100 percent of the principal amount plus accrued and unpaid interest, if
any, to the date of redemption.
In November 2014, the company issued $500 million of 3.5% Senior Notes (the ‘‘2014 Notes’’) due
December 15, 2024 and received proceeds of $491 million, net of underwriting discounts. Interest on the
2014 Notes is payable semi-annually on June 15 and December 15 of each year, and began on June 15,
2015. Prior to September 15, 2024, the company may redeem the 2014 Notes at a redemption price equal
to 100 percent of the principal amount, plus a ‘‘make whole’’ premium described in the indenture. On or
after September 15, 2024, the company may redeem the 2014 Notes at 100 percent of the principal amount
plus accrued and unpaid interest, if any, to the date of redemption.
In September 2011, the company issued $500 million of 3.375% Senior Notes (the ‘‘2011 Notes’’) due
September 15, 2021 and received proceeds of $492 million, net of underwriting discounts. Interest on the
2011 Notes is payable semi-annually on March 15 and September 15 of each year, and began on March 15,
2012. 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.
For the 2016 Notes, the 2014 Notes and the 2011 Notes, if a change of control triggering event occurs,
as defined by the terms of the respective indentures, the company will be required to offer to purchase the
applicable notes at a purchase price equal to 101 percent of their principal amount, plus accrued and
unpaid interest, if any, to the date of redemption. The company is generally not limited under the
indentures governing the 2016 Notes, the 2014 Notes and 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 conjunction with the acquisition of Stork on March 1, 2016, the company assumed Stork’s
outstanding debt obligations, including its 11.0% Super Senior Notes due 2017 (the ‘‘Stork Notes’’),
borrowings under the A110 million Super Senior Revolving Credit Facility, and other debt obligations. On
March 2, 2016, the company gave notice to all holders of the Stork Notes of the full redemption of the
outstanding A273 million (or approximately $296 million) principal amount of Stork Notes plus a
redemption premium of A7 million (or approximately $8 million) effective March 17, 2016. The
redemption of the Stork Notes was initially funded with additional borrowings under the company’s
$1.7 billion Revolving Loan and Letter of Credit Facility, which borrowings were subsequently repaid from
the net proceeds of the 2016 Notes. Certain other outstanding debt obligations assumed in the Stork
acquisition of A20 million (or approximately $22 million) were settled in March 2016. See Note 18 for a
further discussion of the acquisition.
Other borrowings of $35 million as of December 31, 2016 primarily represent bank loans and other
financing arrangements assumed in conjunction with the acquisition of Stork, exclusive of the Stork Notes.
As of December 31, 2016, the company was in compliance with all of the financial covenants related to
its debt agreements.
9. Other Noncurrent Liabilities
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
F-36
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLUOR CORPORATION
can earn either market-based fixed or variable rates of return, at the option of the participants. As of
December 31, 2016 and 2015, $356 million and $372 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 primarily hold company-owned
life insurance policies, reported at cash surrender value, and marketable equity securities, reported at fair
value. These trusts were valued at $348 million and $361 million as of December 31, 2016 and 2015,
respectively. Periodic changes in 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.
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
determined estimated liability for claims incurred but not reported. Other noncurrent liabilities included
$65 million and $26 million as of December 31, 2016 and 2015, 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.
10. Stock-Based Plans
The company’s executive stock-based plans provide for grants of nonqualified or incentive stock
options, restricted stock awards or units, stock appreciation rights and performance-based Value Driver
Incentive (‘‘VDI’’) units. 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 executive plans. Recorded compensation cost for stock-based
payment arrangements, which is generally recognized on a straight-line basis, totaled $28 million,
$36 million and $45 million for the years ended December 31, 2016, 2015 and 2014, respectively, net of
recognized tax benefits of $17 million, $21 million and $27 million for the years ended 2016, 2015 and 2014,
respectively.
F-37
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLUOR CORPORATION
The following table summarizes restricted stock, restricted stock unit and stock option activity:
Restricted Stock or
Restricted Stock Units
Stock Options
Weighted
Average
Grant Date
Fair Value
Per Share
Weighted
Average
Exercise Price
Per Share
Number
Number
Outstanding as of December 31, 2013
977,766
$57.36
2,964,707
$58.63
Granted
Expired or canceled
Vested/exercised
370,014
(30,032)
(449,227)
79.06
69.17
57.08
684,486
(58,215)
(417,970)
79.19
73.33
57.67
Outstanding as of December 31, 2014
868,521
$66.35
3,173,008
$62.92
Granted
Expired or canceled
Vested/exercised
556,323
(30,484)
(456,052)
58.85
64.74
62.92
963,288
(118,356)
(46,414)
59.05
63.60
38.25
Outstanding as of December 31, 2015
938,308
$63.62
3,971,526
$62.25
Granted
Expired or canceled
Vested/exercised
553,415
(16,298)
(443,062)
46.50
54.26
64.55
662,001
(63,229)
(88,917)
46.07
50.25
41.13
Outstanding as of December 31, 2016
1,032,363
$54.19
4,481,381
$60.45
Options exercisable as of December 31, 2016
3,017,969
$62.46
Remaining unvested options outstanding and expected
to vest
1,419,510
$56.30
As of December 31, 2016, there were a maximum of 7,374,485 shares available for future grant under
the company’s various stock-based plans. Shares available for future grant included shares which may be
granted by the Committee as either stock options, on a share-for-share basis, or restricted stock awards,
restricted stock units and VDI units on the basis of one share for each 2.25 available shares.
Restricted stock units and restricted shares 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 company’s executives, the restricted units granted in 2016, 2015 and 2014 generally vest
ratably over three years. For the company’s directors, the restricted units and shares granted in 2016, 2015
and 2014 vest or vested on the first anniversary of the grant. For the years 2016, 2015 and 2014, recognized
compensation expense of $27 million, $31 million and $31 million, respectively, is included in corporate
general and administrative expense related to restricted stock awards and units. The fair value of restricted
stock units and shares that vested during 2016, 2015 and 2014 was $22 million, $26 million and $35 million,
respectively. The balance of unamortized restricted stock expense as of December 31, 2016 was
$11 million, which is expected to be recognized over a weighted-average period of 1.0 years.
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
F-38
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLUOR CORPORATION
become exercisable over a vesting period determined by the Committee. The options granted in 2016, 2015
and 2014 vest ratably over three 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 2016, 2015 and
2014 was $1 million, $1 million and $8 million, respectively. The balance of unamortized stock option
expense as of December 31, 2016 was $4 million, which is expected to be recognized over a weighted-
average period of 1.2 years. Expense associated with stock options for the years ended December 31, 2016,
2015 and 2014, which is included in corporate general and administrative expense in the accompanying
Consolidated Statement of Earnings, totaled $10 million, $15 million and $17 million, respectively.
The fair value of options on the grant date and the significant assumptions used in the Black-Scholes
option-pricing model are as follows:
Weighted average grant date fair value
Expected life of options (in years)
Risk-free interest rate
Expected volatility
Expected annual dividend per share
December 31,
2016
2015
$12.55
6.1
1.6%
32.4%
$ 0.84
$16.72
5.9
1.7%
32.1%
$ 0.84
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, 2016 is summarized below:
Range of Exercise Prices
$30.46 - $41.77
$42.11 - $62.50
$68.36 - $80.12
Options Outstanding
Options Exercisable
Weighted
Average
Remaining
Contractual
Life (In Years)
Weighted
Average
Exercise Price
Per Share
2.2
6.8
5.3
6.3
$30.46
56.17
74.86
$60.45
Weighted
Average
Remaining
Contractual
Life (In Years)
Weighted
Average
Exercise Price
Per Share
2.2
5.6
4.9
5.2
$30.46
58.67
73.94
$62.46
Number
Exercisable
136,144
1,880,754
1,001,071
3,017,969
Number
Outstanding
136,144
3,131,826
1,213,411
4,481,381
As of December 31, 2016, options outstanding and options exercisable had an aggregate intrinsic
value of approximately $10 million and $5 million, respectively.
Stock-based VDI units awarded under the plans include performance measures and are issued based
on target award values. The number of units awarded is determined by dividing the applicable target award
value by the closing price of the company’s common stock on the date of grant. The number of units is
adjusted at the end of each performance period based on the achievement of certain performance criteria.
The VDI awards granted in 2016, 2015 and 2014 vest after a period of approximately three years. VDI
awards granted during 2016 are also subject to a post-vest holding period restriction for the period of three
years. The VDI awards granted in 2016 and 2015 can only be settled in company stock and are accounted
for as equity awards in accordance with ASC 718. The VDI awards granted in 2014 may be settled in cash,
based on the closing price of the company’s common stock on the vesting date, or company stock. In
accordance with ASC 718, the awards granted in 2014 were classified as liabilities and remeasured at fair
value at the end of each reporting period until the awards are settled. Compensation expense of $8 million,
$11 million and $24 million related to stock-based VDI units is included in corporate general and
administrative expense in 2016, 2015 and 2014, respectively, of which $0.4 million was paid in 2016. The
F-39
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLUOR CORPORATION
balance of unamortized compensation expense associated with VDI units as of December 31, 2016 was
$3 million, which is expected to be recognized over a weighted-average period of less than one year.
11. Earnings Per Share
Basic 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, VDI units and the 1.5% Convertible Senior
Notes (in 2015 and 2014). Diluted EPS reflects 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, 2016, 2015 and 2014
under the treasury stock method are presented below:
(in thousands, except per share amounts)
Amounts attributable to Fluor Corporation:
Earnings from continuing operations
Loss from discontinued operations, net of taxes
Net earnings
Basic EPS attributable to Fluor Corporation:
Weighted average common shares outstanding
Earnings from continuing operations
Loss from discontinued operations, net of taxes
Net earnings
Diluted EPS attributable to Fluor Corporation:
Weighted average common shares outstanding
Diluted effect:
Employee stock options, restricted stock units and shares and VDI
units
Conversion equivalent of dilutive convertible debt
Weighted average diluted shares outstanding
Earnings from continuing operations
Loss from discontinued operations, net of taxes
Net earnings
Anti-dilutive securities not included above
Year Ended December 31,
2016
2015
2014
$281,401
—
$418,170
(5,658)
$ 715,460
(204,551)
$281,401
$412,512
$ 510,909
139,171
144,805
157,487
2.02
—
2.02
$
$
2.89
(0.04)
2.85
$
$
4.54
(1.30)
3.24
139,171
144,805
157,487
1,741
—
1,827
90
1,719
410
140,912
146,722
159,616
2.00
—
2.00
3,843
$
$
$
$
2.85
(0.04)
2.81
3,408
4.48
(1.28)
3.20
769
$
$
$
$
During the years ended December 31, 2016, 2015 and 2014, the company repurchased and canceled
202,650; 10,104,988; and 13,331,402 shares of its common stock, respectively, under its stock repurchase
program for $10 million, $510 million, and $906 million, respectively.
F-40
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLUOR CORPORATION
12. Lease Obligations
Net rental expense amounted to approximately $152 million, $169 million and $218 million in the
years ended December 31, 2016, 2015 and 2014, 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 2016 was lower compared to 2015, primarily due to a decrease in
rental equipment and facilities required to support project execution activities in the Energy, Chemicals &
Mining segment. Net rental expense in 2015 was lower compared to 2014, primarily due to a decrease in
rental equipment and facilities required to support project execution activities in the mining and metals
business line of the Energy, Chemicals & Mining segment as well as the Government segment.
The company’s obligations for minimum rentals under non-cancelable operating leases are as follows:
Year Ended December 31,
2017
2018
2019
2020
2021
Thereafter
(in thousands)
$80,600
63,100
50,200
40,500
29,900
73,200
During 2015, the company sold two office buildings located in California for net proceeds of
$82 million and subsequently entered into a twelve year lease with the purchaser. The resulting gain on the
sale of the property was approximately $58 million, of which $7 million was recognized during the fourth
quarter of 2015 and $4 million was recognized during 2016. These gains were included in corporate general
and administrative expense in the Consolidated Statement of Earnings. The remaining deferred gain of
approximately $47 million will be amortized over the remaining life of the lease on a straight-line basis.
13. Noncontrolling Interests
The company applies the provisions of ASC 810-10-45, which establishes accounting and reporting
standards for ownership interests in subsidiaries held by parties other than the parent, the amount of
consolidated net earnings attributable to the parent and to the noncontrolling interests, 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,
2016, 2015 and 2014, net earnings attributable to noncontrolling interests were $46 million, $62 million and
$137 million, respectively. Income taxes associated with earnings attributable to noncontrolling interests
were immaterial in all periods presented. Distributions paid to noncontrolling interests were $58 million,
$59 million and $138 million for the years ended December 31, 2016, 2015 and 2014, respectively. Capital
contributions by noncontrolling interests were $9 million, $5 million and $3 million for the years ended
December 31, 2016, 2015 and 2014, respectively.
14. Contingencies and Commitments
The company and certain of its subsidiaries are subject to litigation, claims and other commitments
and contingencies arising in the ordinary course of business. Although the asserted value of these matters
may be significant, the company currently does not expect that the ultimate resolution of any open matters
will have a material adverse effect on its consolidated financial position or results of operations.
F-41
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLUOR CORPORATION
Fluor Australia Ltd., a wholly-owned subsidiary of the company (‘‘Fluor Australia’’), completed a cost
reimbursable engineering, procurement and construction management services for Santos Ltd. (‘‘Santos’’)
on a large network of natural gas gathering and processing facilities in Queensland, Australia. On
December 13, 2016, Santos filed an action in Queensland Supreme Court against Fluor Australia, asserting
various causes of action and seeking damages of approximately AUD $1.47 billion. The company believes
that the claims asserted by Santos are without merit and is vigorously defending these claims. 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 this action.
Other Matters
The company has made claims arising from the performance under its contracts. The company
recognizes revenue, but not profit, for certain claims (including change orders in dispute and unapproved
change orders in regard to both scope and price) when it is determined that recovery of incurred costs is
probable and the amounts can be reliably estimated. Under claims accounting (ASC 605-35-25), these
requirements are satisfied when (a) the contract or other evidence provides a legal basis for the claim,
(b) additional costs were caused by circumstances that were unforeseen at the contract date and not the
result of deficiencies in the company’s performance, (c) claim-related costs are identifiable and considered
reasonable in view of the work performed, and (d) evidence supporting the claim is objective and
verifiable. Similarly, the company recognizes disputed back charges to suppliers or subcontractors as a
reduction of cost when the same requirements have been satisfied. The company periodically evaluates its
positions and amounts recognized with respect to all its claims and back charges. As of December 31, 2016
and 2015, the company had recorded $61 million and $30 million, respectively, of claim revenue for costs
incurred to date and such costs are included in contract work in progress. Additional costs, which will
increase the claim revenue balance over time, are expected to be incurred in future periods. The company
had also recorded disputed back charges totaling $41 million as of December 31, 2016. The company
believes the ultimate recovery of amounts related to these claims and back charges is probable in
accordance with ASC 605-35-25.
From time to time, the company enters into significant contracts with the U.S. government and its
agencies. Government contracts are subject to audits and investigations by government representatives
with respect to the company’s compliance with various restrictions and regulations applicable to
government contractors, including but not limited to the allowability of costs incurred under reimbursable
contracts. In connection with performing government contracts, the company maintains reserves for
estimated exposures associated with these 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.
15. 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 project being constructed to a
period extending beyond contract completion in certain circumstances. The maximum potential amount of
future payments that the company could be required to make under outstanding performance guarantees,
F-42
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLUOR CORPORATION
which represents the remaining cost of work to be performed by or on behalf of third parties under
engineering and construction contracts, was estimated to be $16 billion as of December 31, 2016. 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. The company assessed its performance guarantee obligation as of
December 31, 2016 and 2015 in accordance with ASC 460, ‘‘Guarantees,’’ and the carrying value of the
liability was not material.
Financial guarantees, made in the ordinary course of business 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. These arrangements generally require the
borrower to pledge collateral to support the fulfillment of the borrower’s obligation.
16. Partnerships and Joint Ventures
In the normal course of business, the company forms partnerships or joint ventures primarily for the
execution of single contracts or projects. The majority of these partnerships or joint ventures are
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. Receivables related to work performed for unconsolidated partnerships and
joint ventures included in ‘‘Accounts and notes receivable, net’’ in the Consolidated Balance Sheet were
$392 million and $132 million as of December 31, 2016 and 2015, respectively. The increase in this
receivable balance in 2016 resulted primarily from one Energy, Chemicals & Mining joint venture project
in the United States.
For unconsolidated partnerships and joint ventures in the construction industry, the company
generally recognizes its proportionate share of revenue, cost and profit in its Consolidated Statement of
Earnings and uses the one-line equity method of accounting on the Consolidated Balance Sheet, which is a
common application of ASC 810-10-45-14 in the construction industry. The equity method of accounting is
also used for other investments in entities where the company has significant influence. The company’s
investments in unconsolidated partnerships and joint ventures accounted for under these methods
amounted to $454 million and $292 million as of December 31, 2016 and 2015, respectively, and were
classified under ‘‘Investments’’ and ‘‘Other accrued liabilities’’ on the Consolidated Balance Sheet. The
following is a summary of aggregate, unaudited balance sheet data for these unconsolidated partnerships
and joint ventures where the company’s investment is presented as a one-line equity method
investment: As of December 31, 2016, current assets of $3.5 billion, noncurrent assets of $1.3 billion,
current liabilities of $3.0 billion and noncurrent liabilities of $628 million; as of December 31, 2015, current
assets of $3.2 billion, noncurrent assets of $444 million, current liabilities of $2.5 billion and noncurrent
liabilities of $445 million. Additionally, the following is a summary of aggregate, unaudited income
statement data for unconsolidated partnerships and joint ventures where the equity method of accounting
is used to recognize the company’s share of net earnings or losses of investees: Revenue of $1.6 billion,
$961 million and $879 million for 2016, 2015 and 2014, respectively; cost of revenue of $1.5 billion,
$926 million and $822 million for 2016, 2015 and 2014, respectively; net earnings of $30 million for 2016,
net earnings of $14 million for 2015 and net loss of $8 million for 2014.
F-43
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLUOR CORPORATION
In February 2016, the company made an initial cash investment of $350 million in COOEC Fluor
Heavy Industries Co., Ltd. (‘‘CFHI’’), a joint venture in which the company has a 49% ownership interest
and Offshore Oil Engineering Co., Ltd., a subsidiary of China National Offshore Oil Corporation, has 51%
ownership interest. Through CFHI, the two companies own, operate and manage the Zhuhai Fabrication
Yard in China’s Guangdong province. An additional investment of $62 million was made in the third
quarter of 2016 and another $78 million is expected to be made in September 2017.
Variable Interest Entities
In accordance with ASC 810, ‘‘Consolidation,’’ 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
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. The company concludes that it is the primary beneficiary and
consolidates the VIE if the company has both (a) the power to direct the economically significant activities
of the entity and (b) 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.
The net carrying value of the unconsolidated VIEs classified under ‘‘Investments’’ and ‘‘Other accrued
liabilities’’ on the Consolidated Balance Sheet was a net liability of $9 million as of December 31, 2016 and
a net asset of $208 million as of December 31, 2015. The decrease in net carrying value primarily resulted
from charges related to forecast revisions for estimated cost increases on an Energy, Chemicals & Mining
joint venture project. 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, 2016 for the unconsolidated VIEs were
$42 million.
In some cases, the company is required to consolidate certain VIEs. As of December 31, 2016, the
carrying values of the assets and liabilities associated with the operations of the consolidated VIEs were
$959 million and $566 million, respectively. As of December 31, 2015, the carrying values of the assets and
liabilities associated with the operations of the consolidated VIEs were $863 million and $443 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.
F-44
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLUOR CORPORATION
The company has agreements with certain VIEs to provide financial or performance assurances to
clients as discussed in Note 15. Below is a discussion of some of the company’s more significant or unique
VIEs and related accounting considerations.
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 is not the primary beneficiary. DTH is accounted for under the equity method of
accounting. The company’s maximum exposure to loss relating to its investments in DTH is limited to the
carrying value of its investment of $8 million.
The construction of the railways and facilities, which is nearing completion, 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. For the years ended December 31, 2016, 2015 and 2014, the company’s results of
operations included revenue of $138 million, $251 million and $361 million, respectively, from DTH. As of
December 31, 2016, the combined carrying values of the assets and liabilities of DTS and DTC were
$90 million and $71 million, respectively. As of December 31, 2015, the combined carrying values of the
assets and liabilities of DTS and DTC were $96 million and $42 million, respectively. The company has
provided certain performance guarantees on behalf of DTS.
17. Operations by Business Segment and Geographic Area
The company provides professional services in the fields of engineering, procurement, construction,
fabrication and modularization, commissioning and maintenance, as well as project management services,
on a global basis and serves a diverse set of industries worldwide.
During the first quarter of 2016, the company changed the composition of its reportable segments to
better reflect the diverse end markets that the company serves. The company now reports its operating
results in four reportable segments as follows: Energy, Chemicals & Mining; Industrial, Infrastructure &
Power; Government; and Maintenance, Modification & Asset Integrity. Segment operating information
and assets for 2015 and 2014 have been recast to reflect these changes.
The Energy, Chemicals & Mining segment is the company’s commodity-related segment which
focuses on opportunities in the upstream, downstream, chemical, petrochemical, offshore and onshore oil
and gas production, liquefied natural gas, pipeline, metals and mining markets. This segment has long
served a broad spectrum of commodity-based industries as an integrated solutions provider offering a full
range of design, engineering, procurement, construction, fabrication and project management services.
The revenue of a single customer and its affiliates of the Energy, Chemicals & Mining segment amounted
F-45
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLUOR CORPORATION
to 10 percent, 11 percent and 15 percent of the company’s consolidated revenue during the years ended
December 31, 2016, 2015 and 2014, respectively.
The Industrial, Infrastructure & Power segment provides design, engineering, procurement,
construction and project management services
life sciences, advanced
to
manufacturing, water and power sectors. The Industrial, Infrastructure & Power segment includes the
operations of NuScale Power, LLC, an Oregon-based small modular nuclear reactor technology company,
which is managed as a separate operating segment within the Industrial, Infrastructure & Power segment.
transportation,
the
The Government segment provides engineering, construction, logistics, base and facilities operations
and maintenance, contingency response and environmental and nuclear services to the U.S. government
and governments abroad. The percentage of the company’s consolidated revenue from work performed for
various agencies of the U.S. government was 13 percent, 12 percent and 11 percent during the years ended
December 31, 2016, 2015 and 2014, respectively.
The Maintenance, Modification & Asset Integrity segment is comprised of several operating segments
that do not meet the requirement under ASC 280, ‘‘Segment Reporting,’’ for separate disclosure, and
therefore, have been combined under the aggregation criteria of ASC 280. The Maintenance,
Modification & Asset Integrity segment provides 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. The Maintenance, Modification &
Asset Integrity segment includes the operations of the company’s equipment business, temporary staffing,
power services, as well as the recently acquired Stork business.
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. The company incurs
cost and expenses and holds certain assets at the corporate 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. Total assets not allocated to segments and held in ‘‘Corporate and other’’
primarily include cash, marketable securities, income-tax related assets, pension assets, deferred
compensation trust assets and corporate property, plant and equipment.
Segment profit is an earnings measure that the company utilizes to evaluate and manage its business
performance. 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; other non-operating income and expense items; and loss from
discontinued operations.
F-46
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLUOR CORPORATION
Operating Information by Segment
(in millions)
External revenue
Energy, Chemicals & Mining
Industrial, Infrastructure & Power
Government
Maintenance, Modification & Asset Integrity
Total external revenue
Segment profit (loss)
Energy, Chemicals & Mining
Industrial, Infrastructure & Power
Government
Maintenance, Modification & Asset Integrity
Total segment profit
Depreciation and amortization of fixed assets
Energy, Chemicals & Mining
Industrial, Infrastructure & Power
Government
Maintenance, Modification & Asset Integrity
Corporate and other
Total depreciation and amortization of fixed assets
Capital expenditures
Energy, Chemicals & Mining
Industrial, Infrastructure & Power
Government
Maintenance, Modification & Asset Integrity
Corporate and other
Total capital expenditures
Total assets
Energy, Chemicals & Mining
Industrial, Infrastructure & Power
Government
Maintenance, Modification & Asset Integrity
Corporate and other
Total assets
Goodwill
Energy, Chemicals & Mining
Industrial, Infrastructure & Power
Government
Maintenance, Modification & Asset Integrity
Total goodwill
Year Ended December 31,
2016
2015
2014
$ 9,754.2
4,094.5
2,720.0
2,467.8
$11,865.4
2,264.0
2,557.4
1,427.2
$14,563.0
2,854.8
2,511.9
1,601.9
$19,036.5
$18,114.0
$21,531.6
401.5
135.8
85.1
121.9
744.3
$
$
866.6
(44.9)
83.1
127.4
869.2
147.5
92.7
153.0
$ 1,032.2
$ 1,262.4
$
$
$
$
$
— $
3.9
2.3
139.5
65.4
— $
4.0
3.2
113.4
68.1
211.1
$
188.7
$
— $
2.2
2.1
153.1
78.5
— $
6.1
3.9
158.9
71.3
$
235.9
$
240.2
$
$ 2,348.0
750.1
493.7
1,952.7
3,671.9
$ 1,728.0
544.2
495.4
923.8
3,934.0
$ 9,216.4
$ 7,625.4
$
$
15.5
13.6
58.0
445.1
532.2
$
15.5
13.8
58.0
24.3
$
111.6
—
4.2
5.4
111.8
70.3
191.7
—
10.4
2.2
224.0
88.1
324.7
(cid:129) Energy, Chemicals & Mining. Segment profit for 2016 was adversely affected by pre-tax charges
totaling $265 million (or $1.20 per diluted share) related to forecast revisions for estimated cost
increases on a petrochemicals project in the United States. The increase in total assets in the
Energy, Chemicals & Mining segment resulted from the company’s investment in CFHI and
increased working capital in support of project execution activities.
F-47
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLUOR CORPORATION
for research and development activities associated with
(cid:129) Industrial, Infrastructure & Power. Segment profit for 2015 included a loss of $60 million (or $0.26
per diluted share) resulting from forecast revisions for a large gas-fired power plant in Brunswick
County, Virginia. Segment profit for all periods included the operations of NuScale, which are
primarily
licensing and
commercialization of small modular nuclear reactor technology. NuScale expenses included in the
determination of segment profit were $92 million, $80 million and $46 million during 2016, 2015
and 2014, respectively. NuScale expenses for 2016, 2015 and 2014 were reported net of qualified
reimbursable expenses of $57 million, $65 million and $38 million, respectively. (See Note 1 for a
further discussion of the cooperative agreement between NuScale and the DOE.) The increase in
total assets in the Industrial, Infrastructure & Power segment resulted from increased working
capital in support of project execution activities.
the
(cid:129) Maintenance, Modification & Asset Integrity. During 2016, 2015 and 2014, intercompany revenue for
the Maintenance, Modification & Asset Integrity segment, excluded from the amounts shown
above, was $524 million, $439 million and $531 million, respectively. The increase in revenue and
total assets, including goodwill, in the Maintenance, Modification & Asset Integrity resulted from
the company’s acquisition of Stork.
Reconciliation of Total Segment Profit to Earnings from Continuing Operations Before Taxes
(in millions)
Total segment profit
Gain related to a partial sale of a subsidiary
Pension settlement charge
Corporate general and administrative expense
Interest income (expense), net
Earnings attributable to noncontrolling interests
Earnings from continuing operations before taxes
Year Ended December 31,
2016
2015
2014
$ 744.3
—
—
(191.1)
(52.6)
46.0
$1,032.2
68.2
(239.9)
(168.3)
(28.1)
62.5
$1,262.4
—
—
(182.7)
(11.4)
136.6
$ 546.6
$ 726.6
$1,204.9
(cid:129) Corporate general and administrative expense. Corporate general and administrative expense in 2016
included transaction and integration costs associated with the Stork acquisition of $25 million,
organizational realignment expenses (primarily severance and facility exit costs) of $38 million and
foreign currency exchange gains of $35 million.
F-48
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLUOR CORPORATION
Operating Information by Geographic Area
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.
(in millions)
United States
Canada
Asia Pacific (includes Australia)
Europe
Central and South America
Middle East and Africa
Total
Non-Operating (Income) Expense
External Revenue
Year Ended December 31,
Total Assets
As of December 31,
2016
2015
2014
2016
2015
$ 9,891.9
2,170.1
1,010.2
3,372.1
1,006.2
1,586.0
$ 7,857.3
2,459.3
870.4
2,509.2
2,560.4
1,857.4
$ 7,466.2
4,133.3
2,568.0
2,070.1
2,494.8
2,799.2
$4,842.4
749.5
645.8
2,103.7
499.7
375.3
$4,306.0
800.9
541.2
1,364.6
251.7
361.0
$19,036.5
$18,114.0
$21,531.6
$9,216.4
$7,625.4
Non-operating expenses (net of income) of $1 million were included in corporate general and
administrative expense in 2016. Non-operating income of $7 million was included in corporate general and
administrative expense in 2015. There were no non-operating expenses during 2014.
18. Acquisitions of Stork Holding B.V.
On March 1, 2016 (‘‘the acquisition date’’), the company acquired 100 percent of Stork for an
aggregate purchase price of A695 million (or approximately $756 million), including the assumption of debt
and other liabilities. Stork, based in the Netherlands, is a global provider of maintenance, modification and
asset integrity services associated with large existing industrial facilities in the oil and gas, chemicals,
petrochemicals, industrial and power markets. The company paid A276 million (or approximately
$300 million) in cash consideration. The company borrowed A200 million (or approximately $217 million)
under its $1.7 billion Revolving Loan and Letter of Credit Facility, and paid A76 million (or approximately
$83 million) of cash on hand to initially finance the Stork acquisition. The A200 million borrowed under the
$1.7 billion Revolving Loan and Letter of Credit Facility was subsequently repaid from the net proceeds of
the 2016 Notes as discussed in Note 8.
In conjunction with the acquisition, the company assumed Stork’s outstanding debt obligations,
including the Stork Notes, borrowings under a A110 million Super Senior Revolving Credit Facility, and
other debt obligations. On March 2, 2016, the company gave notice to all holders of the Stork Notes of the
full redemption of the outstanding A273 million (or approximately $296 million) principal amount of Stork
Notes plus a redemption premium of A7 million (or approximately $8 million) effective March 17, 2016.
The redemption of the Stork Notes was initially funded with additional borrowings under the company’s
$1.7 billion Revolving Loan and Letter of Credit Facility, which borrowings were subsequently repaid from
the net proceeds of the 2016 Notes. Certain other outstanding debt obligations assumed in the Stork
acquisition of A20 million (or approximately $22 million) were settled in March 2016. In April 2016, the
company repaid and replaced the A110 million Super Senior Revolving Credit Facility with a A125 million
Revolving Credit Facility that is available to fund working capital in the ordinary course of business. This
replacement facility expires in April 2017 and bears interest at EURIBOR plus .75%.
The aggregate purchase price noted above has been allocated to the major categories of assets
acquired and liabilities assumed based upon their estimated fair values as of the acquisition date. The
F-49
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLUOR CORPORATION
excess of the purchase price over the estimated fair value of the net tangible and identifiable intangible
assets acquired, totaling A384 million (or approximately $417 million), has been recorded as goodwill.
The company has made certain changes to the purchase price allocation since the initial estimates
reported in the first quarter of 2016. These changes primarily relate to the following:
(cid:129) Identifiable intangible assets, which were originally aggregated with goodwill, have been separately
reported at their estimated fair value of A171 million (or approximately $186 million).
(cid:129) Deferred tax assets decreased by A2 million (or approximately $2 million) primarily to record the
deferred tax impact of valuation adjustments associated with identifiable intangible assets.
(cid:129) Property, plant and equipment increased by A11 million (or approximately $12 million) to reflect its
estimated fair value.
(cid:129) Additional fair value adjustments, primarily related to contracts, and certain balance sheet
reclassifications have been made to other assets and liabilities resulting in a net decrease of
A32 million (or approximately $35 million) to net assets acquired. These adjustments did not
materially affect any individual asset or liability account.
(cid:129) Goodwill decreased by A148 million (or approximately $161 million) to reflect all of the changes to
the purchase price allocation noted above.
Adjustments to the Consolidated Statement of Earnings for 2016 related to the income effects that
would have been recognized in previous periods if the adjustments to provisional amounts were recognized
as of the acquisition date were not significant.
The fair value of acquired intangible assets, which consisted primarily of customer relationships and
trade names, as well as below market contracts and leases were determined using income-based
approaches that utilized unobservable Level 3 inputs, including significant management assumptions such
as forecasted revenue and operating margins, customer attrition, and weighted average cost of capital.
Customer relationships are being amortized on a straight-line basis over their estimated useful lives of
8 years. Acquired trade names with finite lives are being amortized on a straight-line basis over their
estimated useful lives, ranging from 2 to 15 years. Trade names with indefinite lives are not amortized, but
are subject to annual impairment testing (See Note 1).
The fair value of property, plant and equipment was determined using a cost-based approach that
considers the estimated reproductive cost of the assets adjusted for depreciation factors, which include
physical deterioration and functional or economic obsolescence. This approach uses Level 3 inputs that are
generally unobservable in the marketplace. A market-based approach was also applied as a secondary
method to estimate the fair value of certain assets. The market-based approach utilized observable Level 2
inputs for similar assets in active markets.
Goodwill represents the excess of the purchase price over the fair value of the underlying net assets
acquired. Factors contributing to the goodwill balance include the acquired established workforce and the
estimated future synergies associated with the combined operations. Of the total goodwill recorded in
conjunction with the Stork acquisition, none is expected to be deductible for tax purposes. The goodwill
recognized
in the Maintenance,
Modification & Asset Integrity segment.
in conjunction with the Stork acquisition has been reported
F-50
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLUOR CORPORATION
The following table summarizes the fair values of assets acquired and liabilities assumed as of the
acquisition date:
(in thousands)
Cash and cash equivalents
Accounts and notes receivable
Contract work in process
Other current assets
Property, plant and equipment
Investments
Intangible assets
Goodwill
Deferred taxes, net
Other assets
Trade accounts payable
Advance billings on contracts
Other accrued liabilities
Revolving credit facility and other borrowings
Long-term debt
Noncurrent liabilities
Noncontrolling interests
Net assets acquired
In EUR
A 54,441
167,894
96,667
51,065
162,525
1,487
171,000
383,734
9,867
900
(113,898)
(21,364)
(205,034)
(400,228)
(15,295)
(65,001)
(2,947)
A 275,813
In USD
$ 59,204
182,585
105,125
55,533
176,746
1,617
185,963
417,310
10,730
979
(123,864)
(23,234)
(222,975)
(435,248)
(16,633)
(70,689)
(3,205)
$ 299,944
Since the acquisition date, revenue and earnings from Stork of $1.2 billion and $10 million,
respectively, for the year ended December 31, 2016 have been included in the Consolidated Statement of
Earnings. Integration costs of $14 million and transaction costs of $11 million were included in corporate
general and administrative expense for the year ended December 31, 2016.
The following pro forma financial information reflects the Stork acquisition as if it had occurred on
January 1, 2015 and includes adjustments for debt refinancing and transaction costs.
(in thousands)
Pro forma revenue
Pro forma net earnings attributable to Fluor Corporation
19. Partial Sale of a Subsidiary
Year Ended December 31,
2016
2015
$19,262,991
283,705
$19,786,167
413,040
On September 30, 2015, the company sold 50% of its ownership of Fluor S.A., its principal Spanish
operating subsidiary, to Sacyr Industrial, S.L.U. for a cash purchase price of approximately $46 million,
subject to certain purchase price adjustments. The company deconsolidated the subsidiary and recorded a
pre-tax non-operating gain of $68 million during the third quarter of 2015, which was determined based on
the sum of the proceeds received on the sale and the estimated fair value of the company’s retained 50%
noncontrolling interest, less the carrying value of the net assets associated with the former subsidiary. The
estimated fair value of the company’s retained noncontrolling interest was $44 million as of the transaction
date. The fair value was estimated using a combination of income-based and market-based valuation
approaches utilizing unobservable Level 3 inputs, including significant management assumptions such as
forecasted revenue and operating margins, weighted average cost of capital and earnings multiples.
Observable inputs, such as the cash consideration received for the divested share of the entity, were also
considered.
F-51
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLUOR CORPORATION
20. 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, 2016
Revenue
Cost of revenue
Earnings (loss) from continuing operations
before taxes
Earnings from continuing operations
Loss from discontinued operations, net of
taxes
Net earnings
Net earnings attributable to Fluor
Corporation
Basic earnings per share attributable to Fluor
Corporation:
Earnings from continuing operations
Loss from discontinued operations, net of
taxes
Net earnings
Diluted earnings per share attributable to
Fluor Corporation:
Earnings from continuing operations
Loss from discontinued operations, net of
taxes
Net earnings
Year ended December 31, 2015
Revenue
Cost of revenue
Earnings (loss) from continuing operations
before taxes
Earnings (loss) from continuing operations
Loss from discontinued operations, net of
taxes
Net earnings (loss)
Net earnings (loss) attributable to Fluor
Corporation
Basic earnings (loss) per share attributable to
Fluor Corporation:
Earnings (loss) from continuing operations
Loss from discontinued operations, net of
taxes
Net earnings (loss)
Diluted earnings (loss) per share attributable
to Fluor Corporation:
Earnings (loss) from continuing operations
Loss from discontinued operations, net of
taxes
Net earnings (loss)
$4,423.9
4,168.1
$4,856.1
4,607.9
$4,766.9
4,729.7
$4,989.6
4,740.5
189.2
119.0
—
119.0
104.3
181.4
120.0
—
120.0
101.8
(2.7)
17.4
—
17.4
4.8
178.7
71.0
—
71.0
70.5
$
0.75
$
0.73
$
0.03
$
0.51
—
0.75
0.74
—
0.74
—
0.73
0.72
—
0.72
—
0.03
0.03
—
0.03
—
0.51
0.50
—
0.50
$4,548.6
4,251.2
$4,810.1
4,516.1
$4,384.6
4,133.8
$4,370.7
4,118.3
248.9
165.6
—
165.6
144.1
238.8
160.7
—
160.7
148.5
278.2
186.8
(5.1)
181.7
171.3
(39.3)
(32.4)
(0.6)
(33.0)
(51.4)
$
0.98
$
1.02
$
1.22
$ (0.36)
—
0.98
0.96
—
0.96
—
1.02
1.00
—
1.00
(0.03)
1.19
1.21
(0.04)
1.17
—
(0.36)
(0.36)
—
(0.36)
Net earnings in the second and third quarters of 2016 were adversely affected by pre-tax charges of
$24 million (or $0.10 per diluted share) and $241 million (or $1.10 per diluted share), respectively, related
to forecast revisions for estimated cost increases on a petrochemicals project in the United States.
F-52
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLUOR CORPORATION
Net earnings in the third quarter of 2015 included a pre-tax gain of $68 million (or $0.30 per diluted
share) related to the sale of 50 percent of the company’s ownership interest in its principal operating
subsidiary in Spain to facilitate the formation of an Energy, Chemicals & Mining joint venture. Net
earnings in the third and fourth quarters of 2015 included a pre-tax loss of $21 million (or $0.09 per diluted
share) and $31 million (or $0.14 per diluted share), respectively, resulting from forecast revisions for a
large gas-fired power plant in Brunswick County, Virginia. Net earnings in the third and fourth quarters of
2015 included pre-tax pension settlement charges of $9 million (or $0.04 per diluted share) and
$231 million (or $1.04 per diluted share), respectively.
Net earnings in 2015 included losses from discontinued operations related to the previously divested
lead business of St. Joe Minerals Corporation and The Doe Run Company in Herculaneum, Missouri. The
2015 losses from discontinued operations resulted from the settlement of lead exposure cases and the
payment of legal fees incurred in connection with a pending indemnification action against the buyer of the
lead business for these settlements and others.
F-53
W O R K I N G A S O N E 20 1 6 A n nu a l R e p or t
Shareholder Reference
Common Stock Information
At February 17, 2017, there were
139,372,412 shares outstanding and
approximately 4,907 shareholders of record
of Fluor’s common stock.
Registrar and Transfer Agent
Computershare
P.O. Box 30170
College Station, TX 77842-3170
Telephone: (877) 870-2366
Web: www.computershare.com
Independent Registered Public
Accounting Firm
Ernst & Young LLP
One Victory Park
Suite 2000
2323 Victory Avenue
Dallas, TX 75219
Annual Shareholders’ Meeting
Please visit investor.fluor.com for
information regarding the time and location
of our shareholders’ meeting.
Stock Trading
Fluor’s stock is traded on the
New York Stock Exchange.
Common stock domestic
trading symbol: FLR
Performance Graph
The graph to the right depicts the Company’s
total return to shareholders from December 31,
2011, through December 31, 2016, relative to
the performance of the S&P 500 Composite
Index and the Dow Jones Heavy Construction
Industry Group Index (“DJ Heavy”), which is a
published industry index. This graph assumes
the investment of $100 on December 31, 2011,
in each of Fluor Corporation, the S&P 500
Composite Index and the DJ Heavy, and the
reinvestment of dividends paid since that date.
Environmental Benefits Statement
Environmental impact estimates were
made using the Environmental Defense
Paper Calculator.
For More Information Visit:
www.papercalculator.org
By using Appleton Coated Utopia TWO: XTRA
Green, Fluor saved the following resources:
Trees: 45 fully grown
Water: 16,292 gallons
Kilo-watt Hours: 5589.96 kwh
Energy: 30.9 million BTU
Solid Waste: 2,695 pounds
Greenhouse Gases: 15,268 pounds
Company Contacts
Shareholders may call
(888) 432-1745
Investor Relations:
Geoffrey D. Telfer
(469) 398-7070
Electronic Delivery of Annual Report
and Proxy Statements
To expedite shareholders’ receipt of materials,
lower the costs of the annual meeting and
conserve natural resources, we are offering
you, as a Fluor shareholder, the option of
viewing future Fluor Annual Reports and
Proxy Statements on the Internet. Please visit
investor.fluor.com to register and learn more
about this feature.
Fluor is a registered service mark of Fluor
Corporation. TRS is a registered service
mark of TRS Staffing Solutions, Inc.
AMECO is a registered service mark of
American Equipment Company, Inc. 3rd
Gen Modular Execution is a service mark
of Fluor. Fluor Constructors is a service
mark of Fluor Corporation. Copyright 2017
Stork, A Fluor Company. All Rights Reserved.
$300
$200
$100
$0
2011
2012
2013
2014
2015
2016
Fluor
S&P 500
DJ Heavy
$100.00
$100.00
$100.00
$118.15
$163.29
$124.76
$98.76
$115.50
$153.54
$174.54
$120.74
$157.90
$116.99
$176.94
$102.82
$111.67
$198.09
$125.91
2/24/17 9:28 PM
F L U O R C O R P O R A T I O N
6700 Las Colinas Blvd., Irving, TX 75039
Fluor.com
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