BRIDGING
THE GAP
A
N
N
U
A
L
R
E
P
O
R
T
2
0
1
7
between short-term
adversity and long-
term discipline
10page
G O V . M A R I O M . C U O M O B R I D G E
2 0 1 7 A N N U A L R E P O R T
819586.indd 1
3/1/18 8:56 AM
Bridging The Gap
CONTENTS
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 T A 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.”
819586.indd 2
2/28/18 1:57 PM
A N N U A L R E P O R T
2017
02 SHAREHOLDER LETTER
10 TIMELINE
12 ENERGY, CHEMICALS & MINING
14 INDUSTRIAL, INFRASTRUCTURE & POWER
16 GOVERNMENT
18 DIVERSIFIED SERVICES
20 NEW AWARDS & BACKLOG DATA
21 SELECTED FINANCIAL DATA
22 CORPORATE MANAGEMENT TEAM
23 BOARD OF DIRECTORS
25 FORM 10-K
819586.indd 3
2/28/18 1:57 PM
1
D AV I D T. S E AT 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
While financial markets sometimes drive companies to make
decisions focused on the short term, we remain committed to
deploying our strategies, initiatives and actions with a vision
for the long term.
819586.indd 4
2/28/18 1:57 PM
A N NU A L R E P O R T
2017
TO OUR VALUED SHAREHOLDERS
2017 was a year in which we continued our transformation
into building a company that can deliver sustainable long-
term growth for our stakeholders. We are bridging the gap
between the recent capital constraints of our clients and our
expectation of a multi-year recovery in the markets we serve.
T hus, in 2017 we continued on
our journey to fully deploy our
strategy to deliver the capital-
efficient projects our clients
demand. This was evidenced by new awards
across the entire asset life cycle, from front-
end engineering and design (FEED) to full
engineering, procurement, fabrication and
construction, and to Stork’s operations and
maintenance services.
We have taken significant steps to prepare
our company for the future, making progress
on predictive analytics that will enable more
accurate project reporting and forecasting,
and on developing our proprietary Zero Base
ExecutionSM (ZBESM) approach for simplified
design that delivers fit-for-purpose facilities
which meet our clients’ needs.
Focusing on long-term sustainability has always
been a key part of our foundation. Our clients
create the projects that make society work.
The energy that powers us, the raw materials
that build our industries and cities, the bridges
and highways that connect us, the missions
that keep our people and nations safe – these
are the vitally important arenas in which our
clients operate. Through the power of our
integrated solutions, Fluor helps these clients
bring their plans to fruition.
N O R T H W E S T R E D W AT E R
S T U R G E ON R E FI N E R Y
A L B E R TA , C AN A D A
.
0
9
1
5
.
9
1
1
.
8
1
2 015
2 016
2 01 7
R E V E N U E
( Doll a r s i n B ill io n s )
Focusing on long-term sustainability
has always been a key part of our
foundation. Our clients create the
projects that make society work.
3
819586.indd 5
2/28/18 1:57 PM
A N NU A L R E P O R T
2017
2017
C O N S O L I D AT E D
N E W A W A R D S & B A C K L O G
(Dollar s in Billions )
A w a r d s
B a c k l o g
7
.
4
4
0
.
5
4
8
.
1
2
0
.
1
2
0
.
1
3
6
.
2
1
2015
2016
2017
F I N A N C I A L R E S U LT S
2 0 1 7 AC C O M P L I SH M E N TS
Total new awards for 2017 were $12.6 billion,
and ending backlog was $31 billion. New
awards for the year reflect the fact that many
of our clients continue to evaluate their capital
expenditure needs and remain focused on
moving select advantaged projects forward.
Net earnings attributable to Fluor in 2017
were $191 million, or $1.36 per diluted share.
This includes the impact of recently enacted
U.S. tax reform legislation of $37 million, or
$0.27 per diluted share. Fluor’s revenue for the
full year was $19.5 billion, up from $19 billion
in 2016. We are encouraged by what we see
from a revenue standpoint.
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.
Since we began our strategic journey to
become the integrated solutions provider
of choice for our clients, we have seen a
fundamental shift in our markets, especially
in energy and commodities. More than
ever before, clients are demanding cost
and schedule certainty, and that facilities
be designed and built for capital efficiency,
allowing them to thrive in any commodity
price environment.
Our client-focused approach was a strong
contributor to our selection by LyondellBasell
to perform the engineering and procurement
for its propylene oxide (PO) and tertiary butyl
alcohol (TBA) facility near Houston, Texas.
PO is a key component of many everyday
products, including bedding, furniture,
carpeting, coatings, building materials and
adhesives. The TBA will be converted to fuel
additives that help gasoline burn cleaner and
reduce automobile emissions. This project is
the world’s largest of its kind and represents the
single largest capital investment in Lyondell-
Basell’s history.
Other achievements in the Energy, Chemicals
and Mining segment included the completion
of The Dow Chemical Company’s new
ethylene production facility in Freeport, Texas,
which produces the raw materials for many of
Dow’s industry-leading performance plastics
products. Fluor was involved with this client
throughout the entire project, from FEED
through engineering, procurement
and construction (EPC).
The global mining industry is emerging from
a period of low commodity prices, and over
the past year we have begun to see clients
move forward with significant investments.
In 2017, we secured several FEED awards with
the potential to convert them to full EPC
engagements. We completed the Ma’aden
phosphate megaproject in Saudi Arabia and
signed a memorandum of understanding
to support the client’s future projects.
Additionally, a Fluor joint venture was awarded
the EPC for a copper concentrator at BHP’s
Spence open-cut copper mine in Chile. These
mines produce essential components of
products used for household, industrial and
agricultural applications around the world.
819586.indd 6
2/28/18 1:57 PM
4
U . S . A R M Y C O R P S O F E N G I N E E R S
P U E R T O R I C O R E S T OR AT I ON P R O J E C T
P U E R T O R I C O
In 2017, restoring power to Puerto Rico
was an example of the unique value
that Fluor can bring.
5
819586.indd 7
2/28/18 1:57 PM
U . S. D E P A R T ME N T O F E NE R G Y
I D A H O C L E A N U P P R O J E C T
I D A H O FA L L S , I D A H O , U S A
We remain committed to
deploying our strategies,
initiatives and actions with
a vision for the long term.
6
819586.indd 8
2/28/18 1:58 PM
A N NU A L R E P O R T
2017
As we look to the future, the foundation of
our company is as solid as it has ever been in
our 105-year history.
G O L D C O R P P E Ñ A S Q U I T O P Y R I T E L E A C H P RO J E C T
Z A C AT E C AS , ME X I C O
In our Industrial, Infrastructure and Power
segment, we completed the first span of
the Governor Mario M. Cuomo Bridge in
New York, opening four new lanes to ease the
city’s traffic congestion. Scheduled to fully
open to traffic in 2018, it will be the largest
bridge project in New York State history, and
will significantly enhance travel efficiency for
commuter and commercial traffic. Residents
and visitors in the Boston area will benefit
from the Green Line Light Rail Extension,
which was awarded to a Fluor joint venture in
2017 and is scheduled to open in 2021. And
in the Netherlands, a Fluor joint venture was
selected for a project to expand the A10 South
motorway and the Amsterdam Zuid rail
station, improving quality of life in the area.
In Texas, Fluor benefited from much-needed
investment in the regional road infrastructure,
with two awards to improve highways in
the Dallas area.
In Life Sciences and Advanced Manufacturing,
we are progressing well on our project to design
and build Novo Nordisk’s manufacturing
facility in North Carolina, which will produce
critical ingredients for its new oral treatment
for diabetes patients. The project is Novo
Nordisk’s largest ever, and is the biggest single
life sciences manufacturing investment in
the history of the state. We see significant
opportunities in this market, given the number
of new drugs that were approved by the U.S.
Food and Drug Administration in 2017.
In Power, we are helping clients fulfill their
mission to deliver reliable electricity to
communities. We were selected by Ontario
Power Generation (OPG) in Canada to
provide procurement and construction for
the refurbishment of OPG’s Darlington
Nuclear Generating Station. NuScale Power
made significant progress in 2017 toward
approval for its small modular reactor (SMR)
technology design. In March, the company’s
design certification was accepted for review
by the U.S. Nuclear Regulatory Commission
(NRC), and they recently approved NuScale’s
design approach, eliminating the need for
back-up electrical power. NuScale expects final
approval of its design in 2020, paving the way
for the deployment of the first reactors by the
mid-2020s, delivering a safe, clean, flexible and
more affordable nuclear power solution.
Our Government Group continues to support
our clients’ missions, from contingency
operations and base operations support to
nuclear site clean-up and remediation. In
2017, restoring power to Puerto Rico was an
example of the unique value that Fluor can
bring. After Hurricane Maria devastated the
island, Fluor was brought in by the U.S. Army
Corps of Engineers to bring power back.
We have made significant progress to date
and are proud to help restore a sense of
normalcy to Puerto Rico’s residents. There
is potential for additional work, as the
U.S. Congress moves toward providing
additional disaster relief support to help
rebuild the island’s infrastructure.
Our Diversified Services segment continues to
be a key part of our total integrated solutions
offering by providing facility start-up and
management, plant and facility maintenance,
operations support and asset management
services. In 2017, we fully integrated our
operations and maintenance with Stork.
Despite pressure on maintenance spend,
Stork won a number of awards – including
a contract from Ecopetrol to support its
operations in Colombia, building on a 30-year
relationship with the client. Our AMECO
equipment business and TRS Staffing
Solutions achieved growth by supporting
clients and projects around the world.
I N V ES T I N G I N T H E FU T U R E
While financial markets sometimes drive
companies to make decisions focused on the
short term, we remain committed to deploying
our strategies, initiatives and actions with a
vision for the long term.
For example, we continue to invest in the
innovation that differentiates us from our
competitors and enables us to deliver the
capital-efficient solutions that our clients
demand. In 2017, we held our third Innovation
Unwrapped event, where employees from
across the company competed to spend a week
working on real client challenges – in part with
the client – and come up with robust solutions.
We are implementing solutions from our
previous events, including Safety PinSM,
a smart technology application designed
to improve safety planning and reduce
incidents on job sites.
We also introduced our ZBE approach,
a unique set of work processes that combines
our technical and executional capabilities in
ways our competitors cannot. ZBE allows us
to simplify design for our clients and provide
them with facilities that run effectively and
efficiently on a leaner build.
819586.indd 9
2/28/18 1:58 PM
7
T E X A S D E P A R T M E N T O F T R A N S P O R TAT I O N
H OR S E S H OE P R O J E C T
D A L L A S , T E X A S , U S A
C O N S O L I D AT 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
10%
A M E R I C A S
5%
A S I A PAC I FI C
& AU S T R AL I A
12%
G OV E R N ME N T
8%
D I V E R S I F I E D
S ER V I C E S
43%
E U R O PE , A F R I C A
& MI D D L E E A S T
42%
U N I T E D S TAT E S
25%
I N DU S TR IA L ,
I N F R A S T RUC T U R E
& PO W E R
55%
E N E R G Y,
C H EMI C A L S
& MI NI N G
8
819586.indd 10
2/28/18 1:58 PM
A N NU A L R E P O R T
2017
We simplified our business line organization,
with the leaders now reporting directly to
me. We made executive changes, including
bringing in new leadership to our Power
business line, and we created a Project
Support Services organization with the
goal of providing our projects around the
world with consistency and excellence in
everything from project controls to health,
safety and environment.
Project Support Services oversees our drive
toward data-centric execution as we embrace
what the World Economic Forum has declared
the Fourth Industrial Revolution. In 2017,
we made significant progress on this journey
when we launched a new data-centric execution
platform. This platform will use historical
standardized data to more accurately analyze
and predict project outcomes, helping us to
drive execution excellence and the cost and
schedule certainty that our clients demand.
We believe that by leading the charge, this will
be a game-changer for Fluor and our customers.
Our projects are the building blocks
of progress, from providing energy to
support the needs of the world’s growing
population to developing the infrastructure
that enables global commerce and the
manufacturing facilities that produce life-
saving pharmaceuticals. We are dedicated to
giving back to the communities in which our
employees live and work, and to working in a
sustainable manner. Our focus is on the
long term, whether developing energy-saving
solutions for our offices and projects or
investing in the future of communities around
the world. For example, in 2017 Fluor and its
employees helped more than 200,000 young
people receive 2.6 million hours of life-skills
and leadership training by partnering with
youth-serving organizations and initiatives.
T H E O U T L O O K F O R 2 0 1 8
As we look to the future, the foundation of
our company is as solid as it has ever been in
our 105-year history. We have weathered the
recent market challenges and are ready to take
advantage of the new opportunities that we
expect to see in 2018 and beyond.
Our four Core Values of safety, integrity,
teamwork and excellence remain at the
center of everything we do, every day. Safety
continues to be a major area of emphasis –
while our performance in 2017 improved
compared with 2016, we know we can do more
through an uncompromising focus on safety
and promoting a caring, preventive culture.
We will continue to invest in providing the best
and most advanced education and training for
our workforce as the competition for talent
increases, especially in the United States. This
investment will enable Fluor to maintain its
strong reputation as an employer of choice –
a place that abounds with career opportunities,
and attracts and retains the best and brightest
talent in our industry.
In closing, I want to thank our Board
of Directors – a diverse group of highly
accomplished people who provide us with
the guidance and direction to enable us to
be successful. In 2017, we welcomed retired
U.S. Navy Admiral Sam Locklear to our
Board. I would also like to acknowledge the
passing in December 2017 of Dean O’Hare,
the former chairman and chief executive officer
of the Chubb Corporation. Dean served on our
board for 18 years, and I very much appreciated
the significant contribution he made to Fluor
through his advice and counsel. He will be
sorely missed.
Finally, I want to thank our over 56,000-strong,
talented global workforce for the passion and
commitment they bring to work every day. In
an uncommon year of natural disasters that
severely impacted many of the communities
where our employees live and work, you showed
exceptional strength, decency and humanity.
In addition to extensive volunteer activities,
the Employee Giving Campaign raised more
than $5.6 million to support the health and
wellbeing of communities around the world.
Your actions are a reminder of what truly
matters in life, and why we are all so proud to
be part of a company that supports its clients,
betters the communities where we work,
improves lives and is truly transforming
the world.
DAV I D T. S E AT 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 5 , 2 0 1 8
819586.indd 11
2/28/18 1:58 PM
9
A N NU A L R E P O R T
2017
TIMELINE
M A R C H The U.S. Nuclear Regulatory
Commission (NRC) formally accepted and
started review of the small modular reactor
(SMR) design certification application from
NuScale Power.
M AY Fluor was selected for the Texas
Southern Gateway project, an 11-mile
reconstruction along two major
intersecting highways in Dallas.
AU G U S T Delivered the Ma’aden
phosphate megaproject in Saudi Arabia.
Fluor provided engineering, procurement,
operations, readiness and program
management services, and has secured
a memorandum of understanding to
support the client’s future projects.
AU G U S T Completed the first
span of the Governor Mario M. Cuomo
Bridge (formerly the Tappan Zee Bridge),
opening four new lanes to New York City
commuter traffic.
JA N UA RY Awarded the Zuidasdok
project in Amsterdam, an expansion and
underground installation of the A10 South
motorway and expansion of the Amsterdam
Zuid rail station.
F E B R UA RY Huntsman awarded
Fluor a five-year maintenance contract at
four chemicals manufacturing sites in Texas,
reinforcing the client’s confidence in the
global reach and technical depth we can
bring to O&M engagements.
M A R C H Completed Dow Chemical’s
ethylene production facility on the Texas Gulf
Coast. Fluor was involved from FEED through
EPC, and utilized more than 3,000 craft
professionals onsite at the peak
of construction.
AU G U S T Fluor
broke ground on the
16-mile-long Purple
Line Light Rail
Project in Maryland.
1 0
819586.indd 12
2/28/18 1:58 PM
S E P T E M B E R Awarded contract by
LyondellBasell to build the largest propylene
oxide plant in the world – also the largest
investment in the client’s history. Utilizing
Zero Base ExecutionSM, we greatly simplified
the project to reduce costs by hundreds of
millions of dollars over the original plan.
S E P TE M B E R Fluor was awarded
the EPC for a 95,000-ton-per-day copper
concentrator mining project for the BHP
Spence Project in Chile.
S E P TE M B E R Awarded the Guam
Base Operations Support (BOS) contract,
one of the largest BOS opportunities in the
Department of Defense portfolio.
N OV E M B E R Selected to provide
procurement and construction for refurbishment
work at Ontario Power Generation’s Darlington
Nuclear Generating Station in Canada.
Credit: Ontario Power Generation
N OV E M B E R Awarded the Green Line Rail
Extension in Boston, encompassing seven
new stations, a vehicle storage and
maintenance facility, and
two branch lines.
2017
T E X A S D E P A R T M E N T O F
T R A N S P O R TAT IO N
H OR S E S H OE P R O J E C T
D A L L A S , T E X A S , U S A
O C T O B E R The U.S. Army Corps of
Engineers awarded task orders to support
power restoration in Puerto Rico, and FEMA
issued task orders to support hurricane disaster
recovery efforts along the Gulf Coast.
1 1
D E C E M B E R Completed three
major engineering, procurement,
fabrication and construction (EPFC)
projects in Canada: a new refinery in
Edmonton, and two projects for a large
new oil sands facility in Fort McMurray.
D E C E M B E R Awarded Shell
Penguins Offshore Platform project for
the North Sea, fully leveraging our global
offshore capabilities with Asia design and
modular fabrication capabilities.
819586.indd 13
2/28/18 1:58 PM
E N E R G Y ,
C H E M I C A L S & M I N I N G
WE ARE
SHOWING
CLIENTS WAYS
TO UNLEASH
CAPITAL
H ID A L G O , M E X I C O
P E M E X T R A N S F O R M A C I O N I N D US T R IA L
T U L A R E FI N E R Y U P G R A D E P R O J E C T
819586.indd 14
2/28/18 1:58 PM
A N NU A L R E P O R T
2017
INNOVATING SOLUTIONS TO UNLOCK PROJECTS
C ommodity prices moderately
improved in 2017, continuing
what is predicted to be a steady
but measured multi-year recovery.
In this environment, projects gaining final
investment decision (FID) must meet certain
critical criteria, as clients remain committed
to project investment discipline: Cost and
schedule certainty must be assured, and
facilities must be designed and built for capital
efficiency, allowing them to thrive in any
commodity price environment. While these
hard demands limit the number of projects
approved, they also unlock more of the kinds of
projects where Fluor’s Energy, Chemicals and
Mining business excels.
Fluor continued to lead in 2017 because we
persistently focus on bringing our clients
innovative new solutions to assure project
outcomes, such as our proprietary Zero
Base ExecutionSM process and data-driven
performance. We continue to deliver the value
of modularization through our fabrication
yards, which enables more cost-effective
manufacturing execution for projects
anywhere in the world. We continue to invest
in our leadership, developing people with
fresh ideas for solving complex market
challenges, and we continue to build a stronger,
better-equipped self-perform workforce.
Fluor’s integrated solutions are boosting client
confidence, and we are seeing more project
opportunities globally, namely petrochemical,
LNG and gas in North America, downstream
in Asia Pacific and the Middle East, upstream
in East Africa and mining in South America.
Mining in particular is emerging from an
extended period of underinvestment, and
significant projects are being funded in areas
where Fluor is already well established. We
have secured significant mining FEED awards
for 2018, and we are well positioned to convert
these to full multi-year EPC engagements.
Our outlook is optimistic. As clients faced
tougher choices during the down-cycle, we
listened to their challenges and rose to address
them by developing innovative approaches to
formulate and execute their projects to make
them viable. As FIDs are beginning to rise,
Fluor is in full pursuit, targeting advantaged
projects where we can provide clients with a
solution set to succeed. We are showing clients
ways to unleash capital in an economically
challenging environment and still expect
profitability throughout the project’s lifecycle.
During the downturn, clients showed great
discipline in reducing internal costs and
resetting their businesses. As commodities
recover they are primed for improving returns,
which in turn will enable more projects. Fluor,
too, was hard at work during the downturn,
and we have put our company in an advantaged
position to win this work.
J I M B R I T TA I N
G R O U P P R ES I D E NT , E N E R G Y & C H E M I C A L S
4
.
9
2
0
.
2
1
8
.
1
2
4
.
8
0
.
7
1
4
.
5
A w a r d s
B a c k l o g
7
6
8
5
5
4
1
0
4
2 015
2 016
2 0 17
2 015
2 016
2 0 17
N E W A W A R D S & B A C K L O G
( Doll a r s i n B ill io n s )
S E G M E N T P R O FI T
( Doll a r s i n M ill io n s )
E C M | Y E A R I N R E V I E W
Fluor’s integrated solutions
are boosting client confidence,
and we are seeing more project
opportunities globally.
13
819586.indd 15
2/28/18 1:58 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
WE EXPECT
TO CAPTURE
A LARGE
SHARE OF
OPPORTUNITIES
N O V O N O R D I S K
D A P I U S P R O J E C T
C L AY T O N, N O R T H C A R O L IN A , U S A
819586.indd 16
2/28/18 1:58 PM
A N NU A L R E P O R T
2017
ACHIEVING GROWTH THROUGH DISCIPLINE
Manufacturing market. For example, in
2015 the U.S. Food and Drug Administration
finalized a record number of drug approvals,
which is driving new facility investments now.
We continue to progress well on our
portfolio of projects, including our Novo
Nordisk project, which will be the largest
biotech facility ever built. We also see much
opportunity on the horizon. In 2017, about
40 new drugs were approved, setting the
stage for new multi-year capital spend.
Given our experience, reputation and vast
resources, we expect to capture a large
share of these opportunities.
In Power, demand has flattened in North
America and Europe, yet there are still ample
opportunities as the trend continues away from
coal and toward gas and renewables. Fluor has
experience across the full energy mix, which
we will use to pursue the best opportunities in
regions where we have a strong presence. Our
pursuits in Power will be highly disciplined,
targeting projects, clients and regions where
we can leverage our complete integrated
solutions offering.
In 2017, our NuScale business continued to
blaze the trail toward the future of nuclear
power. The Nuclear Regulatory Commission
accepted for review our design certification
application, a major milestone in our quest to
lead the way in bringing small modular reactor
(SMR) technology to power markets.
R I C K K O U M O U R I S
G R O U P P R E S I D E N T, MI NI NG &
M E TAL S , I N F R A ST R UC T U RE ,
P OW E R , L I F E S C I E N C E S &
A D VA N C E D MA N U FA C T U R IN G
N ew capital projects in Industrial,
Infrastructure and Power
are facing two unbending
requirements: Large investments
must first assure certainty of outcome and
capital efficiency of the finished project,
regardless of market conditions. Only the
most capable and innovative EPC companies
can deliver on both imperatives.
Fluor, plying the power of integrated solutions,
stands at the forefront. North America is
emerging from an extended period of
underinvestment, and we are beginning to
see significant new activity and awards to
replace long-neglected infrastructure.
In 2017, we created a new regional platform
in Texas to leverage our self-perform
construction capabilities in the bid-build
market. We also started on the Purple Line
Light Rail Project in Maryland and the
Green Line Rail Extension in Boston.
Internationally, we are focusing on areas of
high activity where Fluor is well established,
namely Europe and the United Kingdom.
In markets where projects are enabled by
public-private partnership financing
structures, Fluor continues to leverage
its financial strength, P3 experience and
executional capabilities to seize the
advantage in winning the work.
We continue to see a number of opportunities
in our Life Sciences and Advanced
1
.
5
1
7
.
9
1
.
7
2
.
6
7
.
7
6
.
2
A w a r d s
B a c k l o g
6
3
1
)
5
4
(
)
1
7
1
(
2 015
2 016
2 0 17
2 015
2 016
2 0 17
N E W A W A R D S & B A C K L O G
( Doll a r s i n B ill io n s )
S E G M E N T P R O FI T
( Doll a r s i n M ill io n s )
I I P | Y E A R I N R E V I E W
North America is emerging from an
extended period of underinvestment,
and we are beginning to see significant
new activity and awards to replace
long-neglected infrastructure.
15
819586.indd 17
2/28/18 1:58 PM
G O V E R N M E N T
THIS SHIFTING
LANDSCAPE
PRESENTS
ADVANTAGES
FOR FLUOR
U . S . A R M Y C O R P S O F E N G I N E E R S
P U E R T O R I C O P OW E R R E S T O R AT I O N P R O J E C T
P U E R T O R I C O
819586.indd 18
2/28/18 1:58 PM
A N NU A L R E P O R T
2017
BEING INDISPENSABLE TO OUR CLIENTS’ MISSIONS
In our services segment, we won a major
multi-year base operations support contract
in Guam, and we added a number of classified
customers who are increasingly seeing Fluor
as the contractor of choice for this sensitive
work. In environmental and nuclear
remediation, we won a 10-year contract
for the deactivation and remediation of a
gaseous diffusion plant in Kentucky.
We see stability ahead in the government
agencies we support, and in special cases like
disaster relief, we remain ready to respond.
We also have made strategic hires to bolster
our position in the high-level liquid waste
and laboratory management markets.
Wielding the strength of One Fluor, we
are one of the only companies in our space
with the financial foundation and massive
scalable capabilities that government agencies
absolutely rely on to accomplish their missions.
Mounting global challenges will continue to
demand integrated solutions, giving us reason
to expect strong growth ahead.
F or the Government group, 2017
was a year of action and opportunity.
As the incoming administration
established its priorities and
budgets, we saw increased emphasis on
national security and public infrastructure,
and a less restrictive regulatory and contracting
environment. While our group’s skill sets
have been honed for years to fit the needs
of government clients in any political
environment, this shifting landscape
presents advantages for Fluor.
Business was strong in 2017 across our
segments. In contingency operations, Fluor
secured nine new contracts and expanded
existing contracts in Africa, Europe and
the Middle East. Based on our unmatched
ability to provide rapid, scalable resources
for disaster relief, Fluor also was called on to
provide immediate services in the aftermath of
hurricanes in Texas, Florida and Puerto Rico,
and the wildfires in California.
Power restoration in Puerto Rico is a
particularly cogent example of the unique
value Fluor can bring. After Hurricane Maria,
Fluor mobilized to help the U.S. Army Corps
of Engineers begin the difficult process of
restoring power. Our solution integrates
Fluor personnel and equipment with local
contractors and materials, and we have
helped restore power to nearly a quarter
of a million customers.
T O M D ’A G O ST I N O
G R O U P P R ES I D E NT , G O V E R N M E NT
G O V | Y E A R I N R E V I E W
We see stability ahead in the government
agencies we support, and in special cases like
disaster relief, we remain ready to respond.
2
.
5
6
.
4
8
.
3
6
.
2
6
.
3
4
.
1
A w a r d s
B a c k l o g
8
2
1
3
8
5
8
2 015
2 016
2 0 17
2 015
2 016
2 0 17
N E W A W A R D S & B A C K L O G
( Doll a r s i n B ill io n s )
S E G M E N T P R O FI T
( Doll a r s i n M ill io n s )
17
819586.indd 19
2/28/18 1:58 PM
D I V E R S I F I E D S E R V I C E S
NO OTHER
COMPANY CAN
OFFER THIS FULL
SOLUTION LIKE
FLUOR
S T O R K F A B R I C AT I O N & W E L D I N G
W O R K S H O P A C TI VITI E S
T R I N I D A D & T O B A G O
819586.indd 20
2/28/18 1:58 PM
A N NU A L R E P O R T
2017
TAKING INTEGRATED SOLUTIONS TO THE NEXT LEVEL
I n 2017, Diversified Services continued
to be a key strategic component in
Fluor’s integrated solutions offering
and a powerful differentiator for
the company. Operators increasingly are
seeking the advantages that can be realized
by partnering with a company that has the
capability to provide O&M solutions once
the asset comes online. No other company
can offer this full engineering, procurement,
fabrication, construction and maintenance
(EPFCM) solution like Fluor.
While operating budgets typically are more
resilient than capital budgets during market
downcycles, 2017 saw significant pressures
on maintenance spend. Clients are delaying
required maintenance, revisiting their
processes and looking for better ways to
operate their facilities. As One Fluor, we are
applying our vast skilled workforce, technical
expertise and advanced data solutions to help
them achieve their goals.
During 2017 the integration of Stork into
the Fluor organization was successfully
completed. To optimize the business, the Stork
management team composed and commenced
an action plan based on four change steps that
will define our future – Excellence, Lean,
Growth and Innovation. Our first action
was to streamline the business entities
within the Stork offering and reduce costs
to improve our competitive position.
9
.
2
5
.
2
0
.
2
1
.
2
4
.
1
8
.
1
2 015
2 016
2 01 7
N E W A W A R D S & B A C K L O G
( Doll a r s i n B ill io n s )
A w a r d s
B a c k l o g
Our ultimate goal is to evolve from selling
hours to a model that sells solutions that
draw from Fluor’s full resources, allowing
us to align with our clients’ greatest needs
and ambitions. To make this transition, we
are investing in better tools and processes
to elevate our performance in ways others
can’t. Examples include the appointment of
a data architect to drive better operational
analytics for clients, investments in robotics
and 3D printing, and naming a global director
of operational excellence who will oversee
performance of all major contracts around
the world. This approach is already showing its
first successes, with clients implementing best
practices to improve maintenance efficiency
and effectiveness. We also are providing O&M
consultation at the FEED stage of Fluor
projects, helping clients build for operational
efficiency throughout the facility’s lifecycle.
In 2017, our TRS Staffing Solutions business
achieved growth by supporting clients around
the world. We provided qualified workforce
for Fluor’s Tengizchevroil (TCO) megaproject
in Kazakhstan, and for projects in the
Netherlands, Kuwait, Malaysia and Australia,
and disaster relief in hurricane-ravaged areas.
AMECO achieved strong growth in 2017
as well, integrating with contracts across all
Fluor business lines. AMECO significantly
expanded its scaffolding business, renewed two
long-term contracts in Jamaica, booked two
new maintenance contracts with Stork, won a
large mining project in Mexico, and supported
recovery efforts in Puerto Rico with more than
200 equipment units.
TA C O D E H A A N
G R O U P P R ES I D E NT ,
DI V E R S I F I E D S E R V IC E S
7
2
1
2
2
1
4
3
1
D S | Y E A R I N R E V I E W
Operators increasingly are seeking
the advantages that can be realized by
partnering with a company that has the
capability to provide O&M solutions
once the asset comes online.
2 015
2 016
2 0 17
S E G M E N T P R O FI T
( Doll a r s i n M ill io n s )
19
819586.indd 21
2/28/18 1:58 PM
New Awards and Backlog Data
NEW AWARDS BY SEGMENT
Year Ended December 31
($ in millions)
2017
2016
2015
Energy, Chemicals & Mining
$ 5,431
Industrial, Infrastructure & Power
Government
Diversified Services
Total New Awards
NEW AWARDS BY REGION
Year Ended December 31
($ in millions)
United States
Europe, Africa and Middle East
Americas
Asia Pacific & Australia
Total New Awards
BACKLOG BY SEGMENT
Year Ended December 31
($ in millions)
Industrial, Infrastructure & Power
Government
Diversified Services
Total Backlog
BACKLOG BY REGION
Year Ended December 31
($ in millions)
United States
Europe, Africa and Middle East
Americas
Asia Pacific (incl. Australia)
Total Backlog
43%
20%
21%
16%
$ 8,422
6,200
4,562
1,775
40%
30%
22%
8%
$ 11,981
7,064
1,429
1,372
55%
33%
6%
6%
2,559
2,569
2,007
$ 12,566
100%
$ 20,959
100%
$ 21,846
100%
2017
2016
2015
$ 5,868
3,940
1,808
950
47%
31%
14%
8%
$ 11,272
8,681
715
291
54%
42%
3%
1%
$ 11,343
6,003
3,892
608
52%
27%
18%
3%
$ 12,566
100%
$ 20,959
100%
$ 21,846
100%
2017
2016
2015
55%
25%
12%
8%
$ 21,831
15,115
5,194
2,872
48%
34%
12%
6%
$ 29,365
9,682
3,560
2,119
66%
21%
8%
5%
7,696
3,771
2,451
$ 30,915
100%
$ 45,012
100%
$ 44,726
100%
2017
2016
2015
$ 12,908
13,420
2,923
1,664
42%
43%
10%
5%
$ 23,188
16,732
3,135
1,957
52%
37%
7%
4%
$ 18,167
13,351
10,530
2,678
41%
30%
23%
6%
$ 30,915
100%
$ 45,012
100%
$ 44,726
100%
20
Energy, Chemicals & Mining
$ 16,997
819586.indd 22
2/28/18 1:58 PM
Selected Financial Data
CONSOLIDATED OPERATING RESULTS
Year Ended December 31
TOTAL REVENUE
Earnings from continuing operations before taxes
Amounts attributable to Fluor Corporation:
Earnings from continuing operations
Loss from discontinued operations, net of taxes
$ 191.4
$ 281.4
NET EARNINGS
$ 191.4
$ 281.4
Basic earnings (loss) per share attributable to Fluor Corporation:
Earnings from continuing operations
Loss from discontinued operations, net of taxes
$ 1.37
$ 2.02
NET EARNINGS
$ 1.37
$ 2.02
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
$ 1.36
$ 2.00
$ 1.36
$ 0.84
5.9%
$ 2.00
$ 0.84
9.1%
2017
$ 19,521.0
386.4
2016
$ 19,036.5
546.6
2015
$ 18,114.0
726.6
2014
$ 21,531.6
1,204.9
2013
$ 27,351.6
1,177.6
$ 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
$ 4.54
(1.30)
$ 3.24
$ 4.48
(1.28)
$ 3.20
$ 0.84
20.1%
$ 667.7
$ 667.7
$ 4.11
$ 4.11
$ 4.06
$ 4.06
$ 0.64
18.6%
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
$ 5,601.3
$ 5,610.3
$ 5,105.4
$ 5,417.8
$ 5,757.9
3,574.2
2,027.1
1,093.7
9,327.7
597.7
496.9
493.3
31.1
3,342.3
4,961.3
139.9
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
2,935.4
2,170.0
892.3
7,625.4
495.2
491.4
2,997.3
3,983.9
139.0
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
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
$ 12,565.6
30,915.4
283.1
602.0
(484.3)
(215.5)
31,951
24,755
56,706
$ 20,959.2
45,011.9
235.9
705.9
(741.4)
(10.4)
28,681
32,870
61,551
$ 21,846.2
44,726.1
240.2
849.1
(66.5)
(728.2)
27,195
11,563
38,758
$ 28,831.1
42,481.5
324.7
642.6
(199.1)
(666.4)
27,643
9,865
37,508
$ 25,085.6
34,907.1
288.5
788.9
(234.6)
(369.6)
29,425
8,704
38,129
Net earnings attributable to Fluor Corporation in 2017 included pre-tax charges totaling $260 million (or $1.18 per diluted share) resulting from forecast revisions for estimated cost growth at three fixed-price, gas-fired
power plant projects in the southeastern United States, pre-tax charges totaling $44 million (or $0.20 per diluted share) resulting from forecast revisions for estimated cost increases on a downstream project and the
adv erse im pac t of recent ly enacted U.S. tax refor m of $37 million (or $0. 27 per dilu ted sha re). Net earning s attr ibu table to Fluor Cor por ation in 2016 inc lude d a pr e-tax charge of $265 mil lion (or $1.20 per dilu ted
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.
21
819586.indd 23
2/28/18 1:58 PM
C O R P O R A T E
M A N A G E M E N T T E A M
Ray F. Barnard
Executive Vice President,
Systems and Supply Chain (2002)
Taco De Haan
Group President,
Diversified Services (1995)
Matthew McSorley
Executive Vice President,
Project Support Services (1991)
Jim Brittain
Group President, Energy & Chemicals
(1987)
Garry W. Flowers
Executive Vice President (1978)
Jack Penley
Senior Vice President, Construction
& Fabrication (1984)
Jose-Luis Bustamante
Executive Vice President,
Business Development
and Strategy (1990)
Tom D’ Agostino
Group President, Government (2013)
Carlos M. Hernandez
Executive Vice President,
Chief Legal Officer and Secretary (2007)
Rick Koumouris
Group President, Mining & Metals,
Infrastructure, Power, Life Sciences
& Advanced Manufacturing (1987)
Mark A. Landry
Senior Vice President,
Chief Human Resources Officer (1989)
David T. Seaton
Chairman and
Chief Executive Officer (1985)
Bruce A. Stanski
Executive Vice President,
Chief Financial Officer (2009)
Years in parentheses indicate the year each officer joined Fluor.
2 2
819586.indd 24
3/1/18 10:02 AM
B O A R D O F D I R E C T O R S
(See reverse side for listings)
2 3
819586.indd 25
3/1/18 10:02 AM
B O A R D O F D I R E C T O R S
Matthew K. Rose
Executive Chairman,
Burlington Northern
Santa Fe, LLC; Director
of AT&T, Inc.
(2014) (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)
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)
Peter K. Barker
Former California
Chairman, JP Morgan
Chase & Co.; Director
of Avery Dennison
Corporation & Franklin
Resources, Inc.
(2007) (1) (2) (4)
Admiral Joseph W. Prueher
U.S. Navy (retired); former
United States Ambassador
to the People’s Republic of
China (2003) (1) (3) (4)
Rosemary T. Berkery
Vice Chair, UBS Wealth
Management Americas;
Chair, UBS Bank USA (2010)
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)
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)
Lynn C. Swann
Athletic Director,
The University of Southern
California (2013) (2) (3)
Admiral Samuel J. Locklear
President, SJL Global Insights
LLC; U.S. Navy (retired) (2017)
(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) (3) (4)
James T. Hackett
Executive Chairman and Chief
Operating Officer – Midstream,
Alta Mesa Resources, Inc.;
Director of Alta Mesa Resources,
Inc., Enterprise Products Holdings,
LLC and National Oilwell Varco
(2016) (3) (4)
Years in parentheses indicate the year each director was elected to the Board.
(1) Executive Committee – David T. Seaton, Chairman;
(2) Audit Commit tee – Peter K. Barker, Chairma n;
(3) Governance Commit tee – Alan M. Bennett, Chairma n;
(4) Orga nization and Compensation Commit tee –
Peter J. Fluor, Chairma n
2 4
819586.indd 26
2/28/18 1:58 PM
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, 2017
or
(cid:2) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
to
For the transition period from
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, a smaller
reporting company or an emerging growth company. See the definitions of ‘‘large accelerated filer,’’ ‘‘accelerated filer,’’ ‘‘smaller
reporting company’’ and ‘‘emerging growth company’’ in Rule 12b-2 of the Exchange Act.
Non-accelerated filer (cid:2)
Accelerated filer (cid:2)
Large accelerated filer (cid:2)
Smaller reporting company (cid:2)
Emerging growth company (cid:2)
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period
for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. (cid:2)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act). Yes (cid:2) No (cid:2)
As of June 30, 2017, the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was
approximately $6.4 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 16, 2018
Common Stock, $.01 par value per share
139,907,306 shares
DOCUMENTS INCORPORATED BY REFERENCE
Document
Portions of the Proxy Statement for the Annual Meeting
of Stockholders to be held on May 3, 2018 (Proxy
Statement)
Parts Into Which Incorporated
Part III
FLUOR CORPORATION
INDEX TO ANNUAL REPORT ON FORM 10-K
For the Fiscal Year Ended December 31, 2017
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
Exhibits and Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 15.
Item 16.
Form 10-K Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Page
1
14
30
30
31
31
32
33
34
51
52
52
52
55
55
55
56
56
56
57
60
61
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. 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
named to Fortune Magazine’s ‘‘World’s Most Admired Companies(cid:3)’’ for the 18th consecutive year, and we
are ranked by Engineering News Record as number two in its 2017 list of Top 400 Contractors. We were
also named to Forbes’ JUST100(cid:3) list of America’s best corporate citizens, where top companies are ranked
by how they perform on issues that most concern Americans, for the second year in a row. Additionally,
Fluor has been recognized by Ethisphere magazine as a World’s Most Ethical Company(cid:3) for the past
11 years.
Our business is divided into four principal segments. The four segments are: Energy, Chemicals &
Mining; Industrial, Infrastructure & Power; Diversified Services; 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, procure, fabricate, construct, commission, operate, maintain
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
2
our footprint in growth regions by establishing local offices, forming strategic alliances with local partners,
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 cost-efficient basis.
Market Diversity The company serves multiple markets across a broad spectrum of industries around
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 clients, which we believe is a clear differentiator for us.
General Operations
Our services fall into six broad categories: engineering and design; procurement; construction;
fabrication and modularization; maintenance, modification and asset integrity services; 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,
3
technology and licensing evaluation, scope definition and siting. Our engineering and design
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 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 China, Mexico, Canada and Russia.
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) We offer maintenance, modification and asset integrity services in order to improve the
performance and extend the life of our clients’ complex facilities. Our acquisition of Stork
Holding B.V. helped us significantly increase our diversified services offerings and enhance our
integrated solutions capabilities. Diversified 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 diversified services 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 where we focus on opportunities in the upstream, midstream,
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 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
4
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, fabricate 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 geographic 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, phosphates 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. In the first quarter of 2018, mining and metals will be moved from the Energy &
Chemicals business segment to the Industrial, Infrastructure & Power business segment to align with how
these business segments will be managed.
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 technical 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 timely 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, environmental compliance,
renewables, nuclear 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 continue to invest in NuScale Power, LLC (‘‘NuScale’’), a 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 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. We expect our application to be approved on
or before January 2021.
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
defense operations, even in the most remote and difficult locations to both traditional and U.S.
government classified customers around the world.
6
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 and recently in support of the Army Corps of Engineers.
Diversified Services
The Diversified Services segment provides a wide array of maintenance, modification, asset integrity,
equipment and staffing services to support projects across Fluor’s business lines and our clients all over the
world.
Through Stork, we provide 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. 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.
Our power services business line offers 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.
Diversified Services also includes 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.
Staffing services, also part of Diversified Services, are provided 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, 2017 and 2016:
December 31,
2017
December 31,
2016
(in millions)
Energy, Chemicals & Mining . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Industrial, Infrastructure & Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Government(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diversified Services(2)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$16,997
7,696
3,771
2,451
Total(3)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$30,915
$21,831
15,115
5,194
2,872
$45,012
(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, 2017 and 2016, total backlog includes $741 million and
$2.7 billion, 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 Diversified Services segment do not report
backlog or new awards. With respect to our ongoing operations and maintenance and asset integrity
contracts in this 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, 2017 and 2016 by region:
December 31,
2017
December 31,
2016
(in millions)
United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asia Pacific (including Australia) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Europe, Africa and Middle East . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The Americas (excluding the United States) . . . . . . . . . . . . . . . . . . . . . . . .
$12,908
1,664
13,420
2,923
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$30,915
$23,188
1,957
16,732
3,135
$45,012
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, 2017 backlog estimated to be performed annually subsequent to 2018. 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 in each year to reach ending
backlog at December 31, 2017 and 2016:
Backlog at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
New awards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments and cancellations, net(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Work performed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 45,012
12,566
(7,597)
(19,066)
$ 44,726
20,959
(2,061)
(18,612)
Backlog at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 30,915
$ 45,012
2017
2016
(in millions)
(1) Adjustments and cancellations, net during 2017 resulted primarily from the removal of the two
Westinghouse nuclear power plant projects from backlog, an adjustment to limit the contractual term
of the Magnox RSRL Project to a five year term ending in August 2019 and exchange rate
fluctuations. Adjustments and cancellations, net during 2016 resulted primarily from an adjustment
for a liquefied natural gas project in Canada that was suspended, as well as project scope reductions
and exchange rate fluctuations.
In 2018, we expect to perform approximately 51 percent of our total backlog reported as of
December 31, 2017. In comparison, during the last three years we expected to annually perform an average
of 41 percent of our total year-end backlog in the subsequent fiscal year.
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) 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 reimbursable elements. As of December 31, 2017, the following table
breaks down the percentage and amount of revenue associated with these types of contracts for our
existing backlog:
Reimbursable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fixed-Price, Lump-Sum and Guaranteed Maximum . . . . . . . . . . . . . . . . . . . .
December 31, 2017
(in millions)
$19,464
$11,451
(percentage)
63%
37%
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 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 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
9
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
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 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 AECOM, Bechtel Group, Inc., EMCOR Group, Inc., Jacobs Engineering Group, Inc.,
KBR, Inc., Kiewit Corporation, Granite Construction, Inc., and Quanta Services, Inc., and international-
based companies such as ACS Actividades de Construccion y Servicios, Balfour Beatty plc, Chicago Bridge
and Iron Company N.V., Chiyoda Corporation, Hyundai Engineering & Construction Company, Ltd.,
JGC Corporation, McDermott International, Inc., Petrofac Limited, SNC-Lavalin Group, Inc., Samsung
Engineering, Stantec Inc., TechnipFMC plc, Wood Group 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 Diversified Services segment, while having some similarities to the
construction and procurement arena, tend also to have discrete issues impacting individual business lines.
Each of the markets we serve has a large number of companies competing in its markets. In the operations
10
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 geographic
coverage.
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 2017, revenue earned from agencies of the U.S. government and Exxon Mobil Corporation
accounted for 15 percent and 13 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 2017.
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 costs 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 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
11
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 costs are adequate and that any future costs will not have a material effect
on our consolidated financial position, results of operations, liquidity, capital expenditures or competitive
position. Some factors, however, could result in additional expenditures or the provision of additional
accruals in expectation of such expenditures. These include the imposition of more stringent requirements
under environmental laws or regulations, new developments or changes regarding site cleanup costs or the
allocation of such costs 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 as of
December 31, 2017:
Salaried Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Craft and Hourly Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Number of
Employees
31,951
24,755
56,706
The number of craft and hourly employees 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, 2017:
Name
Age
Position with the Company(1)
Ray F. Barnard . . . . . . . . . . .
James F. Brittain . . . . . . . . .
Jose-Luis Bustamante . . . . . .
Robin K. Chopra . . . . . . . . .
Thomas P. D’Agostino . . . . . .
Taco de Haan . . . . . . . . . . . .
Garry W. Flowers . . . . . . . . .
Carlos M. Hernandez . . . . . .
Rick Koumouris . . . . . . . . . .
Senior Vice President and Controller
58 Executive Vice President, Systems and Supply Chain
59 Group President, Energy & Chemicals
54 Executive Vice President, Business Development and Strategy
53
59 Group President, Government
50 Group President, Diversified Services
66 Executive Vice President
63 Executive Vice President, Chief Legal Officer and Secretary
57 Group President, Mining & Metals, Infrastructure, Power,
Mark A. Landry . . . . . . . . . .
David T. Seaton . . . . . . . . . .
Bruce A. Stanski . . . . . . . . . .
Life Sciences & Advanced Manufacturing
Senior Vice President, Human Resources
53
56 Chairman and Chief Executive Officer
57 Executive Vice President and Chief Financial Officer
(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.
12
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.
James F. Brittain
Mr. Brittain has been Group President, Energy & Chemicals since March 2017. Prior to that, he was
Senior Vice President, Business Line President — Energy & Chemicals Americas from February 2014 to
March 2017 and Vice President, Project Director — Energy & Chemicals from February 2009 to February
2014. Mr. Brittain joined the company in 1987.
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
Strategic Planning — Energy & Chemicals from February 2012 to February 2015. 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.
Thomas P. D’Agostino
Mr. D’Agostino has been Group President, Government since August 2017. Prior to that, he was
Senior Vice President, Sales, Government from June 2015 to August 2017 and Senior Vice President of
Strategic Planning and Development for Government from November 2013 to June 2015. Prior to joining
the company in November 2013, he served in various roles, including Under Secretary for Nuclear
Security, Administrator of the National Nuclear Security Administration (NNSA) and Deputy
Administrator for Defense Programs from 2007 until his retirement in February 2013.
Taco de Haan
Mr. de Haan has been Group President, Diversified Services since March 2017 and Chief Executive
Officer of Stork since October 2016. Prior to that, he was Senior Vice President, Business Line
President — Energy & Chemicals EAME from February 2011 to October 2016. Mr. de Haan joined the
company in 1995.
Garry W. Flowers
Mr. Flowers has been Executive Vice President, with responsibility for corporate security and special
projects, since February 2017. Prior to that, he was Executive Vice President, Project Support Services
from February 2014 to February 2017 and Group President, Global Services from January 2012 to
February 2014. 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 September 2007.
13
Rick Koumouris
Mr. Koumouris has been Group President of Mining & Metals, Infrastructure, Power and Life
Sciences & Advanced Manufacturing since March 2017. Prior to that, he was Senior Vice President,
Business Line President — Mining & Metals from March 2007 to March 2017. Mr. Koumouris joined the
company in 1987.
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.
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 Executive Vice President and Chief Financial Officer since August 2017. Prior to
that, he was Group President, Government from August 2009 to August 2017. Prior to joining the company
in March 2009, he was President, Government and Infrastructure of KBR, Inc. from August 2007 to March
2009.
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. Over the past few years,
poor economic conditions, low commodity prices, political uncertainties and currency devaluations have
adversely affected our clients’ interest in approving new projects, reduced our clients’ budgets for capital
expenditures and otherwise caused a slowdown in the services our clients require. Despite improving
conditions, our clients remain selective in how they allocate and expend their capital, which has resulted in
a reduction of the number of projects we may bid on and win, especially the larger scale projects in which
we specialize. 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
14
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 stagnant demand for domestic power,
coupled with improved energy efficiency and political and environmental concerns. In our mining and
metal business line, while new order activity has picked up, the number and the size of the awards are less
than we have historically seen due in part to volatility in the commodities and capital markets, which have
caused clients in this segment to be conservative in how they allocate their investment capital for future
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
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.
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. Unforeseen increases in or failures to properly
estimate the cost of raw materials, components, equipment, labor or the ability to timely obtain them may
result in such cost overruns or project delays. 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 37 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, and we expect this percentage of fixed-price
contracts to increase in subsequent years. 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.
15
Our project execution activities may result in reduced profits or losses that could have a material impact on our
financial condition, results of operations or cash flow.
Because our projects are often technically complex, with multiple phases occurring over several years,
we incur risks in our project execution activities. These risks could result in cost overruns, project delays or
other problems and can include the following:
(cid:129) Unanticipated technical problems, including design or engineering issues;
(cid:129) Inaccurate representations of site conditions and unanticipated changes in the project execution
plan;
(cid:129) Project modifications creating unanticipated costs or delays and failure to properly manage project
modifications;
(cid:129) Inability to achieve guaranteed performance or quality standards with regard to engineering,
construction or project management obligations;
(cid:129) Insufficient or inadequate project execution tools and systems needed to record, track, forecast and
control cost and schedule;
(cid:129) Failure to accurately estimate the cost of projects;
(cid:129) Failure to properly make judgments in accordance with applicable professional standards, including
engineering standards;
(cid:129) Failure to properly assess and update appropriate risk mitigation strategies and measures;
(cid:129) Incorrect assumptions related to productivity, scheduling estimates or future economic conditions
including with respect to the impacts of inflation on lump-sum or fixed-price contracts;
(cid:129) Difficulties related to the performance of our clients, partners, subcontractors, suppliers or other
third parties;
(cid:129) Delays or productivity issues caused by weather; and
(cid:129) Changes in local laws or difficulties or delays in obtaining permits, rights of way or approvals.
These and other risks may result in our failure to achieve contractual cost or schedule commitments,
safety performance, overall client satisfaction or other performance criteria. As a result, we may receive
lower fees or lose our ability to earn incentive fees. 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. In addition, if we fail to meet guaranteed
performance or quality standards, we may be held responsible under the guarantee or warranty provisions
of our contract for cost impact to the client, generally in the form of contractually agreed-upon liquidated
damages or an obligation to re-perform substandard work. We may also be required to pay liquidated
damages if we fail to complete a project on schedule. To the extent these events occur, the total cost to the
project (including any liquidated damages we become liable to pay) could be material and could, 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.
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
16
continue in these markets, presenting us with significant challenges in our ability to maintain strong growth
rates and acceptable profit margins. If we are unable to meet these competitive challenges, we could lose
market share to our competitors and experience an overall reduction in our profits.
Our 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
COOEC Fluor Heavy Industries (‘‘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 or where we team with
unaffiliated parties on a particular project bid. 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. If internal control problems arise within the joint venture, or if our joint venture partners have
financial or operational issues, there could be a material impact on our business, financial condition or
results of 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. 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. 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.
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
17
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 uncertainty, especially with regard to our 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 provide notice or 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 while unresolved claims are pending, we may invest significant
working capital in projects to cover cost overruns pending the resolution of the relevant claims. A failure to
promptly recover on these types of claims could have a material adverse impact on our liquidity and
financial results.
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
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
and while we endeavor to ensure our cloud vendors that store our data maintain similar measures, 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
18
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.
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, 2017, approximately 58 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) other social, political and economic instability;
(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
locations where there is a significant amount of political risk. 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.
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, 2017, our backlog was approximately $30.9 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
19
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 and/or instability 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.
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 are
volatile or relatively 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.
We are dependent upon suppliers and subcontractors to complete many of our contracts.
Some 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
an 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 we rely 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;
20
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. 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 in the government arena or otherwise.
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-
21
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 2018
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.
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. 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
lower or higher tax rate on our earnings, which could have a material impact on our earnings and cash
flows from operations. For example, recently enacted tax reform legislation in the U.S. could significantly
impact our provision for income taxes. In addition, significant judgment is required in determining our
worldwide provision for income taxes and our determinations could be found to be incorrect. 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. Future increases in our tax rate or adverse changes in tax laws could have a material adverse
effect on our profitability and liquidity.
22
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, some of which are hosted by third party providers, 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 personal or financial 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. While we have and require the maintenance of reasonable safeguards
designed to protect against unavailability or loss of data, these safeguards may not be sufficient. We may be
required to expend significant resources to protect against or alleviate damage caused by systems
interruptions and delays, which could have a material adverse effect on our business and cash flows.
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, 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
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. While 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.
Damage to our reputation could in turn cause damage to our business.
Maintaining our reputation is critical to attracting and maintaining our clients and other business
relationships. If we fail to address issues that may give rise to reputational risk, we could significantly harm
our business. These issues may include, but are not limited to, any of the risk factors discussed in this
Item 1A, including compliance with laws, project execution risk, cyber security and safety. If our reputation
is harmed, we could suffer a number of adverse consequences, such as:
(cid:129) reduced demand for our services;
23
(cid:129) lack of investor confidence;
(cid:129) less favorable credit rating;
(cid:129) the inability to attract and retain qualified employees;
(cid:129) a loss of or reduction in scope of current project contracts and fewer contract awards;
(cid:129) less favorable contract terms;
(cid:129) increased litigation and costs; and
(cid:129) heightened regulatory scrutiny.
These and other consequences resulting from damage to our reputation could have a material adverse
effect on our business, financial condition, results of operations and cash flows.
New or changing legal requirements, including those relating to climate change, could adversely affect our 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 and chemicals 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
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.
24
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 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.
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
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.
25
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.
Our employees, contractors and joint venture partners are subject to confidentiality obligations, but this
protection may be inadequate to deter or prevent misappropriation of our confidential information and/or
infringement of our intellectual property rights. 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, or when our
joint venture partner is a competitor who will gain access to our procedures and know-how while working
with us in the performance of services.
Our clients require broad ownership rights in the work product and other materials we deliver. If we
are not able to retain ownership of our pre-existing intellectual property and improvements thereto, it may
affect our ability to provide similar services to other clients in the future, which ultimately, could have a
material adverse effect on our operations.
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
26
financial performance could be adversely affected. When we license our intellectual property to third
parties, the scope of such license grant is limited to a particular plant or project. If such third party exceeds
the scope of the license grant, and if we are unable to detect unauthorized use of our intellectual property
or otherwise take appropriate steps to enforce our rights, our revenue and margins will be adversely
impacted, and the value of our intellectual property portfolio may decline thereby adversely affecting our
competitive advantage and ability to win future work.
Adverse credit and financial market conditions could impair our, our clients’ and our partners’ borrowing capacity,
which could negatively affect our business operations, profits and growth objectives.
Our ongoing ability to generate cash is important for the funding of our continuing operations,
investing in joint ventures, the servicing of our indebtedness, paying dividends to stockholders and making
acquisitions. 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 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.
In addition, adverse credit and financial market conditions could also adversely affect our clients’ and
our partners’ 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. 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.
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.
27
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.
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.
28
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 and investments, there is a possibility
that we may be unable to successfully integrate our businesses or capitalize upon our investments in order to realize
the anticipated benefits of these acquisitions and investments or do so within the intended timeframe.
Whenever we make an acquisition or investment, we have and will continue to devote significant
management attention and resources to integrating or aligning the business practices and operations of
companies we acquire or invest in. Difficulties we may encounter in the integration/alignment process
include:
(cid:129) A delay in the integration or alignment of management teams, strategies, operations, products and
services;
(cid:129) Diversion of the attention of management as a result of the acquisition or investment;
(cid:129) The consequences of a change in tax treatment, including the costs of integration/consolidation and
compliance, and the possibility that the anticipated benefits of the acquisition/investment 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 or aligning complex systems, technology, networks and other assets
into or to be compatible with 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 or investment, including the costs to integrate or consolidate 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 investment, 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
29
(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.
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 and Long Beach) . . . . . . . . . . . . . . . . . . . . . Leased
Canada:
Calgary, Alberta . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Owned
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
own or lease fabrication yards in China, Mexico, Canada and Russia.
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, 2017
Fourth Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Third Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Second Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
First Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Year Ended December 31, 2016
Fourth Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Third Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Second Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
First Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Common Stock
Price Range
High
Low
Dividends
Per Share
$52.03
$46.78
$53.03
$58.37
$57.78
$54.45
$55.69
$55.48
$42.00
$37.04
$43.65
$49.85
$44.05
$47.91
$45.80
$39.48
$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 16, 2018, there were 139,907,306 shares outstanding and 4,687 stockholders of record of
the company’s common stock. The company estimates there were an additional 167,720 stockholders
whose shares were held by banks, brokers or other financial institutions at February 6, 2018.
Issuer Purchases of Equity Securities
The following table provides information as of the three months ended December 31, 2017 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, 2017 . . . . . . . . .
November 1–November 30, 2017 . . . . .
December 1–December 31, 2017 . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . .
—
—
—
—
$ —
—
—
$ —
—
—
—
—
Maximum
Number of
Shares that May
Yet Be Purchased
Under Plans or
Programs(1)
11,610,219
11,610,219
11,610,219
(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,
2017
2016
2015
2014
2013
$19,521.0
386.4
$19,036.5
546.6
$18,114.0
726.6
$21,531.6
1,204.9
$27,351.6
1,177.6
$
$
$
$
$
$
$
191.4
—
191.4
281.4
—
$
281.4
1.37
—
1.37
1.36
—
1.36
0.84
$
$
$
$
$
2.02
—
2.02
2.00
—
2.00
0.84
$
$
$
$
$
$
$
418.2
(5.7)
412.5
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
5.9%
9.1%
13.6%
20.1%
18.6%
$ 5,601.3
3,574.2
$ 5,610.3
3,816.0
$ 5,105.4
2,935.4
$ 5,417.8
3,330.9
$ 5,757.9
3,407.2
2,027.1
1,093.7
9,327.7
597.7
496.9
493.3
—
—
31.1
3,342.3
4,961.3
139.9
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
$12,565.6
30,915.4
283.1
602.0
(484.3)
(215.5)
$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)
31,951
24,755
56,706
28,681
32,870
61,551
27,195
11,563
38,758
27,643
9,865
37,508
29,425
8,704
38,129
(1)
Net earnings attributable to Fluor Corporation in 2017 included pre-tax charges totaling $260 million (or $1.18 per diluted
share) resulting from forecast revisions for estimated cost growth at three fixed-price, gas-fired power plant projects in the
southeastern United States, pre-tax charges totaling $44 million (or $0.20 per diluted share) resulting from forecast revisions
33
for estimated cost increases on a downstream project and the adverse impact of recently enacted U.S. tax reform legislation
of $37 million (or $0.27 per diluted share).
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.
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.
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-52 for additional information relating to significant items
affecting the results of operations for 2015 - 2017.
(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.
Total backlog included $741 million, $2.7 billion, $912 million, $2.1 billion and $983 million of unfunded portion of
multi-year government contracts new awards as of December 31, 2017, 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 was $19.5 billion, $19.0 billion and $18.1 billion during 2017, 2016 and 2015,
respectively. During both 2017 and 2016, revenue growth in the Industrial, Infrastructure & Power,
Government and Diversified Services segments was partially offset by revenue declines in the Energy,
Chemicals & Mining segment.
Earnings from continuing operations before taxes for 2017 decreased 29 percent to $386 million from
$547 million in 2016. Earnings in 2017 were adversely affected by pre-tax charges totaling $304 million
resulting from forecast revisions for estimated cost growth at three fixed-price, gas-fired power plant
projects in the southeastern United States and a downstream project. Earnings in 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 United States. Apart from the adverse effects of the forecast revisions in
both years, earnings in 2017 declined primarily in the Energy, Chemicals & Mining segment.
34
Earnings from continuing operations before taxes for 2016 decreased 25 percent to $547 million from
$727 million in 2015. As discussed above, earnings in 2016 were adversely affected by pre-tax charges
totaling $265 million related to forecast revisions for estimated cost increases on a petrochemicals project,
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.
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 $6 million (net of taxes of $3 million) during 2015 resulting
from the settlement of lead exposure cases and the payment of legal fees related to the divested lead
business of St. Joe Minerals Corporation and The Doe Run Company in Herculaneum, Missouri, which
the company sold in 1994. The company 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 31.6%, 40.1%, and 33.8% for 2017,
2016, and 2015, respectively. The effective tax rate for 2017 was unfavorably impacted by a $37 million tax
charge resulting from the enactment on December 22, 2017 of comprehensive tax legislation commonly
referred to as the Tax Cuts and Jobs Act (the ‘‘Act’’), as further discussed in Note 4 of the Notes to
Consolidated Financial Statements. Apart from the impact of the Act, the effective tax rate for 2017
benefited from the release of a deferred tax liability as a result of the restructuring of certain international
operations and a worthless stock deduction for an insolvent foreign subsidiary. These benefits were
partially offset by the establishment of valuation allowances on certain foreign net operating loss
carryforwards.
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 U.S. 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. 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 2017 decreased to $1.36 from $2.00 in 2016.
Diluted earnings per share in 2017 were adversely affected by charges totaling $1.38 per diluted share
resulting from forecast revisions for estimated cost growth at the three power plant projects and the
downstream project mentioned above as well as the impact of recently enacted U.S. tax reform legislation
of $0.27 per diluted share. Diluted earnings per share from continuing operations in 2016 were adversely
affected by forecast revisions for estimated cost increases on the petrochemicals project mentioned above
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.
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.
35
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.
For example, during 2017, margins in the company’s Energy, Chemicals & Mining segment were adversely
affected by a shift in the mix of work from higher margin engineering activities to lower margin
construction activities.
The Energy, Chemicals & Mining segment remains well positioned for new project activity; however,
delays in final investment decisions continue to affect the timing of new awards.
Consolidated new awards in 2017 were $12.6 billion compared to $21.0 billion in 2016 and
$21.8 billion in 2015. All business segments contributed to the new award activity in 2017, including a
mining project in Chile, a power restoration project in Puerto Rico, a contract extension for the
LOGCAP IV program, a propylene oxide project in Texas and infrastructure projects in the United States
and the Netherlands. 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 which 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. Approximately 53 percent of consolidated new awards for 2017 were for
projects located outside of the United States compared to 46 percent for 2016.
Consolidated backlog was $30.9 billion as of December 31, 2017, $45.0 billion as of December 31,
2016, and $44.7 billion as of December 31, 2015. The decrease in backlog at the end of 2017 primarily
resulted from the removal of two nuclear power plant projects for Westinghouse Electric Company LLC
limit the contractual term of the Magnox nuclear
(‘‘Westinghouse’’) and an adjustment to
decommissioning project in the United Kingdom (the ‘‘Magnox RSRL Project’’) to a five year term, as well
as new award activity being outpaced by work performed. 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. As of December 31, 2017, approximately 58 percent of consolidated
backlog related to projects located outside of the United States compared to 48 percent as of
December 31, 2016.
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 Diversified Services
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
Yard in China’s Guangdong province. The company made additional investments of $62 million in 2016
and $26 million in 2017 and has a future funding commitment of $52 million.
For a more detailed discussion of the operating performance of each business segment, corporate
general and administrative expense and other items, see ‘‘— Segment Operations’’ and ‘‘— Corporate, Tax
and Other Matters’’ below.
36
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 unless they are
expected to be recovered from the client. 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,
2017, 63 percent of the company’s backlog was reimbursable while 37 percent was for fixed-price or
lump-sum 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
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.
37
As of December 31, 2017 and 2016, the company had recorded $124 million and $61 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 $18 million and $41 million
as of December 31, 2017 and 2016, respectively. 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, foreign currency exchange fluctuations
and project 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 it has any of the following characteristics: (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. 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 construction partnerships and joint ventures, 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.
38
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 discussed in Note 4 of the Notes to Consolidated Financial Statements,
enactment of the Act on December 22, 2017 significantly changed how U.S. corporations are taxed. The
Act requires complex computations to be performed that were not previously required in U.S. tax law,
significant judgments to be made in interpretation of the provisions of the Act, the use of significant
estimates in calculations, and the preparation and analysis of information not previously considered
relevant or regularly produced. The U.S. Treasury Department, the IRS, and other standard-setting bodies
could interpret or issue guidance on how provisions of the Act will be applied or otherwise administered
that is different from the company’s interpretation. As the company completes its analysis of the Act,
collects and prepares necessary data, and interprets any additional guidance, the company may make
adjustments to provisional amounts over the next twelve months that may materially impact the company’s
provision for income taxes in the period in which the adjustments are made.
As of December 31, 2017, the company had deferred tax assets of $618 million which were partially
offset by a valuation allowance of $100 million and further reduced by deferred tax liabilities of
$202 million. The valuation allowance reduces certain deferred tax assets to amounts that are more likely
than not to be realized. The valuation allowance for 2017 primarily relates to the deferred tax assets on
certain net operating loss carryforwards in certain jurisdictions 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 $25 million to its defined benefit pension plans in
2018, 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 $57 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 2017, the
company changed the name of the Maintenance, Modification & Asset Integrity segment to Diversified
Services. The company now reports its operating results in the following four reportable segments: Energy,
Chemicals & Mining; Industrial, Infrastructure & Power; Government; and Diversified Services. 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,
2017
2016
2015
$9,376.7
$9,754.2
$11,865.4
454.7
401.5
866.6
Revenue in 2017 decreased 4 percent compared to 2016, primarily due to reduced volume of project
execution activity for chemicals projects completed in 2016 or nearing completion in 2017, partially offset
by an increase in construction activities for an, upstream project and several downstream and mining and
metals projects. 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 2016 was also adversely affected by forecast revisions for a large petrochemical project in the
United States.
Segment profit in 2017 increased compared to 2016 due to the adverse impact of forecast revisions in
2016. Normalizing for the adverse effects of the forecast revisions in 2016, segment profit declined in 2017
due to lower volume of project execution activity for chemicals projects nearing completion, a continued
shift in mix from higher margin engineering to lower margin construction activities, and a forecast revision
for estimated cost increases on a downstream project. Segment profit in 2016 significantly decreased
compared to 2015. Segment profit in 2016 was adversely affected by forecast revisions for estimated cost
increases on the petrochemicals project in the United States of $265 million. The decrease in segment
profit in 2016 was also driven by reduced contributions from the mining and metals business line and
certain upstream projects that were completed or nearing completion in 2015.
Segment profit margin was 4.8 percent, 4.1 percent and 7.3 percent for the years ended December 31,
2017, 2016 and 2015, respectively. The change in segment profit margin in 2017 was primarily attributable
to the same factors that affected revenue and segment profit. Segment profit margin in 2016 was primarily
affected by forecast revisions on the large petrochemicals project discussed above.
New awards in the Energy, Chemicals & Mining segment were $5.4 billion in 2017, $8.4 billion in 2016
and $12.0 billion in 2015. New awards in 2017 included an offshore project in the North Sea, a mining
project in Chile, a propylene oxide project in Texas, a petrochemical project in Malaysia and two refinery
projects in Texas. 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.
Backlog for the Energy, Chemicals & Mining segment was $17.0 billion as of December 31, 2017,
$21.8 billion as of December 31, 2016 and $29.4 billion as of December 31, 2015. The reduction in backlog
during 2017 resulted primarily from new award activity being outpaced by work performed. 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 of 2016, as well as new award activity being outpaced by work
performed. While commodity prices have improved, clients continue to delay final investment decisions.
Total assets in the segment were $1.8 billion as of December 31, 2017 and $2.3 billion as of
December 31, 2016.
40
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,
2017
2016
2015
$4,367.5
$4,094.5
$2,264.0
(170.8)
135.8
(44.9)
Revenue in 2017 increased 7 percent compared to 2016 primarily due to increased project execution
activity for several life sciences and advanced manufacturing projects, partially offset by reduced levels of
project execution for two nuclear projects. 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.
Segment profit in 2017 was adversely affected by pre-tax charges of $260 million resulting from
forecast revisions for estimated cost growth at three fixed-price, gas-fired power plant projects. Segment
profit increased significantly in 2016 compared to 2015 primarily due to the higher volume of project
execution activities for the power projects mentioned in the paragraph above, as well as the adverse impact
in 2015 of a loss of $60 million resulting from forecast revisions on a large gas-fired power plant in
Brunswick County, Virginia. The change in segment profit margins in 2017 and 2016 were primarily
attributable to the same factors impacting segment profit in those years.
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 $76 million, $92 million and
$80 million for 2017, 2016 and 2015, respectively.
New awards in the Industrial, Infrastructure & Power segment were $2.6 billion during 2017,
$6.2 billion during 2016 and $7.1 billion during 2015. New awards in 2017 included the Southern Gateway
project in Texas, the A10 Zuidasdok infrastructure project in Amsterdam and the Green Line Light Rail
Extension project in Boston. 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 an award from Westinghouse to manage the construction workforce at two nuclear
power plant projects in South Carolina (‘‘V.C. Summer’’) and Georgia (‘‘Plant Vogtle’’), a gas-fired power
plant in Florida and a highway project in Texas.
Backlog in the Industrial, Infrastructure & Power segment was $7.7 billion as of December 31, 2017,
$15.1 billion as of December 31, 2016 and $9.7 billion as of December 31, 2015. The decrease in backlog
during 2017 primarily resulted from the removal of the two Westinghouse nuclear power plant projects
during 2017. The increase in backlog during 2016 primarily resulted from project adjustments in the power
business line for the two Westinghouse nuclear power plant projects and new awards in the infrastructure
business line.
Total assets in the Industrial, Infrastructure & Power segment were $926 million as of December 31,
2017 and $750 million as of December 31, 2016. The increase in total assets resulted from increased
working capital in support of project execution activities.
Total assets in the Industrial, Infrastructure & Power segment as of December 31, 2017 included
accounts receivable related to the two subcontracts with Westinghouse to manage the construction
workforce at the Plant Vogtle and V.C. Summer nuclear power plant projects. On March 29, 2017 (‘‘the
bankruptcy petition date’’), Westinghouse filed for Chapter 11 bankruptcy protection in the U.S.
Bankruptcy Court, Southern District of New York. In the third quarter of 2017, the V.C. Summer project
41
was cancelled by the owner. In the fourth quarter of 2017, the remaining scope of work on the Plant Vogtle
project was transferred to a new contractor. In addition to amounts due for post-petition services, total
assets as of December 31, 2017 included amounts due of $66 million and $2 million for services provided to
the V.C. Summer and Plant Vogtle projects, respectively, prior to the date of the bankruptcy petition. See
Note 17 to the Consolidated Financial Statements.
Government
Revenue and segment profit for the Government segment are summarized as follows:
(in millions)
Revenue
Segment profit
Year Ended December 31,
2017
2016
2015
$3,232.7
$2,720.0
$2,557.4
127.9
85.1
83.1
Revenue in 2017 increased 19 percent compared to 2016 primarily due to increases in project
execution activities for several large multi-year decommissioning and cleanup projects, as well as the
commencement of a power restoration project in Puerto Rico (‘‘Power Infrastructure Restoration
Project’’). 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 services projects. 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.
Segment profit for 2017 increased 50 percent compared to 2016, substantially driven by increased
contributions from multi-year decommissioning and cleanup projects and the commencement of the Power
Infrastructure Restoration Project. 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 margin was 4.0 percent, 3.1 percent, and 3.3 percent for the years ended December 31,
2017, 2016 and 2015, respectively. The increase in segment profit margin in 2017 was driven by the same
factors that drove the increase in segment profit. Segment profit margin in 2016 decreased slightly when
compared to 2015 primarily due to lower margin contributions from decommissioning and cleanup
projects.
New awards were $2.6 billion, $4.6 billion and $1.4 billion during 2017, 2016 and 2015, respectively.
New awards in 2017 included two awards related to the Power Infrastructure Restoration Project in Puerto
Rico and contract extensions for both the LOGCAP IV program and the management and operations of
the Strategic Petroleum Reserve project. New awards in 2016 included large awards for multi-year
decommissioning and cleanup projects in the segment’s environmental and nuclear business line.
Backlog was $3.8 billion as of December 31, 2017, $5.2 billion as of December 31, 2016 and
$3.6 billion as of December 31, 2015. Total backlog included $741 million, $2.7 billion and $912 million of
unfunded government contracts as of December 31, 2017, 2016, and 2015, respectively. The decrease in
backlog in 2017 primarily resulted from a customer decision to limit the contractual term of the Magnox
RSRL Project to a five year term ending in August 2019.
Total assets in the Government segment were $732 million as of December 31, 2017 compared to
$494 million as of December 31, 2016. The increase in total assets primarily resulted from increased
working capital in support of project execution activities for the Power Infrastructure Restoration Project
in Puerto Rico.
42
Diversified Services
Revenue and segment profit for the Diversified Services segment are summarized as follows:
(in millions)
Revenue
Segment profit
Year Ended December 31,
2017
2016
2015
$2,544.1
$2,467.8
$1,427.2
133.6
121.9
127.4
Revenue in 2017 increased 3 percent compared to 2016, primarily due to the inclusion of twelve
months of revenue associated with the acquisition of the Stork business (which closed on March 1, 2016)
compared to ten months during 2016, as well as revenue growth from the equipment business in North
America. The increase in revenue in 2017 was partially offset by a lower level of project execution activities
in the power services business. Revenue in 2016 increased 73 percent compared to 2015, primarily due to
the inclusion of ten months of revenue associated with the Stork business. 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.
Segment profit in 2017 increased 10 percent compared to the prior year. Increased contributions from
the equipment business in North America were partially offset by lower contributions from the Stork
business. 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 margin was 5.3 percent, 4.9 percent and 8.9 percent for the years ended December 31,
2017, 2016 and 2015, respectively. The increase in segment profit margin in 2017 was primarily due to the
same factors affecting segment profit. The decline in segment profit margin in 2016 was principally driven
by the inclusion of Stork in 2016.
New awards in the Diversified Services segment were $2.0 billion in 2017, $1.8 billion in 2016 and
$1.4 billion in 2015. Backlog was $2.5 billion as of December 31, 2017, $2.9 billion as of December 31, 2016
and $2.1 billion as of December 31, 2015. The reduction in backlog during 2017 resulted primarily from
new award activity in the Stork and power services business being outpaced by work performed. The
equipment and temporary staffing businesses do not report backlog or new awards.
Total assets in the Diversified Services segment were $2.1 billion as of December 31, 2017 compared
to $2.0 billion as of December 31, 2016.
Corporate, Tax and Other Matters
Corporate For the three years ended December 31, 2017, 2016 and 2015, corporate general and
administrative expenses were $192 million, $191 million and $168 million, respectively. Corporate general
and administrative expenses remained relatively flat in 2017 compared to the prior year. During 2017, the
company incurred foreign currency exchange losses, while recognizing foreign currency exchange gains in
2016. The impact of the foreign currency losses was substantially offset by lower levels of organizational
realignment expenses and compensation during 2017, as well as the inclusion of transaction and integration
costs in 2016 associated with the Stork acquisition. 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 2015, which were partially offset by foreign currency exchange
gains.
Net interest expense was $40 million, $53 million and $28 million for the years ended December 31,
2017, 2016 and 2015, respectively. The decrease in 2017 was primarily due to an increase in interest income
resulting from time deposits entered into during the year as well as a decrease in interest expense resulting
from the repayment of the Stork Notes and borrowings under a revolving line of credit. The increase in
43
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.
Tax The effective tax rate on earnings from continuing operations was 31.6 percent, 40.1 percent,
and 33.8 percent for 2017, 2016, and 2015, respectively. Factors affecting the effective tax rates for
2015 - 2017 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 both committed and
uncommitted lines of credit available to 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 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 a competitive advantage and continued access to the capital markets. As of December 31, 2017,
the company was in compliance with all the financial covenants related to its debt agreements.
Cash Flows
Cash and cash equivalents were $1.8 billion and $1.9 billion as of December 31, 2017 and 2016,
respectively. Cash and cash equivalents combined with current and noncurrent marketable securities were
$2.1 billion as of both December 31, 2017 and 2016. 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 $919 million and $1.0 billion as of December 31, 2017 and 2016,
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 variable interest entities (joint ventures and partnerships). These amounts (which totaled
$516 million and $440 million as of December 31, 2017 and 2016, respectively, as reflected on 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 $874 million and $764 million as of December 31, 2017 and 2016, 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, 2017 and 2016 and, as a result, has appropriately reflected the tax
impact on foreign earnings in deferred taxes.
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
44
credit risk of third parties as part of its project risk review process. The company maintains adequate
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 2017, working capital increased primarily due to an increase in prepaid income taxes and a
decrease in accounts payable, partially offset by decreases in accounts receivable and contract work in
progress. Specific factors related to these drivers include:
(cid:129) A decrease in accounts payable in the Energy, Chemicals & Mining segment, which resulted
primarily from normal invoicing and payment activities.
(cid:129) A decrease in accounts receivable, primarily related to collections from an Energy, Chemicals &
Mining joint venture project in the United States.
(cid:129) A decrease in contract work in progress in the Energy, Chemicals & Mining segment, which
resulted primarily from normal project execution activities.
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.
Cash provided by operating activities was $602 million, $706 million and $849 million in 2017, 2016
and 2015, respectively. The decreases in cash provided by operating activities in both of the last two years
resulted primarily from declines in net working capital inflows and lower net earnings compared to prior
years. The decrease in cash provided by operating activities in 2017 was partially offset by a decrease in
deferred taxes. (See Note 4 of the Notes to Consolidated Financial Statements.)
45
Income tax payments were $175 million, $165 million and $250 million in 2017, 2016 and 2015,
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 2017, 2016 and
2015 were $165 million, $167 million and $146 million, respectively. The company contributed
approximately $15 million into its defined benefit pension plans during both 2017 and 2016 and $58 million
into its defined benefit pension plans during 2015. Company contributions to defined benefit pension plans
during 2015 primarily related to additional funding to settle the U.S. plan. Assuming no changes in current
assumptions, the company expects to contribute up to $25 million in 2018 to its defined benefit pension
plans, which is expected to be in excess of the minimum funding required. As of December 31, 2017 and
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 during 2016. 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, 2017 and 2016.
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
$76 million, $92 million and $80 million during 2017, 2016 and 2015, respectively. NuScale expenses for
2017, 2016 and 2015 were reported net of qualified reimbursable expenses of $48 million, $57 million and
$65 million, respectively. The company anticipates that it will have received cost reimbursements from the
DOE totaling $217 million by the end of the first quarter of 2018. 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 $484 million, $741 million and $67 million during
2017, 2016 and 2015, respectively. The primary investing activities included purchases, sales and maturities
of marketable securities; capital expenditures; disposals of property, plant and equipment; investments in
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 2017,
purchases of marketable securities exceeded proceeds from sales and maturities of such securities by
$21 million. During 2016 and 2015, proceeds from sales and maturities of marketable securities exceeded
purchases of such securities by $162 million and $25 million, respectively. The company held combined
current and noncurrent marketable securities of $275 million and $255 million as of December 31, 2017
and 2016, respectively.
Capital expenditures of $283 million, $236 million and $240 million during 2017, 2016 and 2015,
respectively, primarily related to construction equipment associated with equipment operations in the
Diversified Services segment, as well as expenditures for land, facilities and investments in information
technology. Proceeds from the disposal of property, plant and equipment of $96 million, $81 million and
46
$94 million during 2017, 2016 and 2015, respectively, primarily related to the disposal of construction
equipment associated with the equipment operations in the Diversified Services 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 both 2017 and 2016. These gains were included in
corporate general and administrative expense in the Consolidated Statement of Earnings. The remaining
deferred gain of approximately $43 million is being 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 $273 million, $518 million and
$91 million in 2017, 2016 and 2015, respectively. Investments in 2017 and 2016 included capital
contributions to an Energy, Chemicals & Mining joint venture in the United States and investments in
CFHI. The company has a future funding commitment to CFHI of $52 million.
Financing Activities
Cash utilized by financing activities during 2017, 2016 and 2015 of $216 million, $10 million and
$728 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.
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. In 2016
and 2015, the company repurchased 202,650 shares and 10,104,988 shares of common stock, respectively,
under its current and previously authorized stock repurchase programs resulting in cash outflows of
$10 million and $510 million, respectively. As of December 31, 2017, 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 2017 will be paid in the first quarter of
2018. Quarterly cash dividends of $0.21 per share were declared in 2017, 2016 and 2015. Dividends of
$118 million were paid during both 2017 and 2016. Dividends of $125 million were paid during 2015. 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
47
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. We may, from time to time,
repurchase the 2016 Notes, the 2014 Notes or the 2011 Notes in the open market, in privately-negotiated
transactions or otherwise in such volumes, at such prices and upon such other terms as we deem
appropriate.
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
company repaid and replaced the A110 million Super Senior Revolving Credit Facility with a A125 million
Revolving Credit Facility that was available to fund working capital in the ordinary course of business. This
replacement facility, which bore interest at EURIBOR plus .75%, expired in April 2017. Outstanding
borrowings of $53 million under the A125 million Revolving Credit Facility were repaid in the first quarter
of 2017.
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 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
48
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 $47 million, $58 million and $59 million in 2017, 2016 and 2015,
respectively. Distributions in 2017 primarily related to two transportation joint venture projects in the
United States. 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. Capital contributions by joint venture
partners were $6 million, $9 million and $5 million in 2017, 2016 and 2015, 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
2017, most major foreign currencies strengthened against the U.S. dollar resulting in unrealized translation
gains of $110 million of which $51 million related to cash held by foreign subsidiaries. During 2016 and
2015, most major foreign currencies weakened against the U.S. dollar resulting in unrealized translation
losses of $103 million and $166 million, respectively, of which $54 million and $98 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, 2017, the company had both committed and uncommitted lines of credit available
to be used for revolving loans and letters of credit. As of December 31, 2017, 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 2022. 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 was used for revolving loans, bank guarantees, letters of credit and to fund working capital in
the ordinary course of business. This replacement facility, which bore interest at EURIBOR plus .75%,
expired in April 2017. Outstanding borrowings of $53 million under the A125 million Revolving Credit
Facility were repaid in the first quarter of 2017.
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.
49
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 $14 billion as of December 31, 2017. 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, 2017 and 2016 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 our results, the company mitigates these trends by seeking to
fix the company’s cost at or soon after the time of award on lump-sum or fixed-price contracts 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 (‘‘VIEs’’)
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, 2017 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
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
$ 598
497
493
31
243
327
28
13
91
78
13
449
$2,861
$ —
—
—
27
46
86
2
—
66
20
3
63
313
$ —
—
—
4
91
127
3
—
4
32
4
116
381
$ —
497
—
—
69
58
2
—
21
26
3
156
832
$ 598
—
493
—
37
56
21
13
—
—
3
114
1,335
(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
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.
51
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, 2017, the company had total gross notional amounts of
$934 million of foreign currency contracts (primarily related to the British Pound, Euro, Kuwaiti Dinar,
Indian Rupee, Philippine Peso and South Korean Won). The foreign currency contracts are of varying
duration, none of which extend beyond December 2021. As of December 31, 2017, the company had total
gross notional amounts of $81 million associated with contractual foreign currency payment provisions that
were deemed embedded derivatives. There were no commodity contracts outstanding as of December 31,
2017. 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, 2017.
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
To the Shareholders and the Board of Directors of Fluor Corporation
Report of Independent Registered Public Accounting Firm
Opinion on Internal Control over Financial Reporting
We have audited Fluor Corporation’s internal control over financial reporting as of December 31,
2017, 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). In our
opinion, Fluor Corporation maintained, in all material respects, effective internal control over financial
reporting as of December 31, 2017, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States) (PCAOB), the consolidated balance sheets of Fluor Corporation as of
December 31, 2017 and 2016, 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, 2017, and
the related notes (collectively referred to as the ‘‘financial statements’’) of Fluor Corporation and our
report dated February 20, 2018 expressed an unqualified opinion thereon.
Basis for Opinion
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 Fluor Corporation’s internal control over financial reporting
based on our audit. We are a public accounting firm registered with the PCAOB and are required to be
independent with respect to Fluor Corporation in accordance with the U.S. federal securities laws and the
applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. 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.
Definition and Limitations of Internal Control Over Financial Reporting
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.
/s/Ernst & Young LLP
Dallas, Texas
February 20, 2018
54
Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting during the fourth quarter
of the fiscal year ending December 31, 2017 that have materially affected, or are reasonably likely to
materially affect, our internal control over financial reporting.
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 will be set forth in
the section entitled
including Experience,
‘‘Election of Directors — Biographical Information,
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 that will be contained in the section entitled
‘‘Corporate Governance — Board of Directors Meetings and Committees — Audit Committee’’ in our
Proxy Statement.
Item 11. Executive Compensation
Information required by this item will be included in the following sections of our Proxy Statement for
our 2018 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.
55
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, 2017 with respect to the shares of
common stock that may be issued under the company’s equity compensation plans:
(a)
Number of securities to be
issued upon exercise of
outstanding options,
warrants and rights
(b)
Weighted average
exercise price of
outstanding options,
warrants and rights
(c)
Number of securities available for
future issuance under equity
compensation plans (excluding
securities listed in column (a))
Plan Category
Equity compensation plans
approved by stockholders(1) .
Equity compensation plans not
approved by stockholders . .
5,069,956
—
Total . . . . . . . . . . . . . . . . . . .
5,069,956
$60.08
—
$60.08
12,819,674
—
12,819,674
(1) Consists of the 2003 Executive Performance Incentive Plan (the ‘‘2003 Plan’’), under which 131,811
shares are currently issuable upon exercise of outstanding options, warrants and rights, but under
which no shares remain available for future issuance; the Amended and Restated 2008 Executive
Performance Incentive Plan, under which 4,938,145 shares are currently issuable upon exercise of
outstanding options, warrants and rights, and under which no shares remain for future issuance; and
the 2017 Performance Incentive Plan, under which no securities are currently issuable upon exercise
of outstanding options, warrants or rights, but under which 12,819,674 shares remain available for
issuance.
The additional information required by this item will be 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 2018 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 will be included in the ‘‘Certain Relationships and Related
Transactions’’ and ‘‘Board Independence’’ sections of the ‘‘Corporate Governance’’ portion of our Proxy
Statement for our 2018 annual meeting of stockholders, which information is incorporated herein by
reference.
Item 14. Principal Accountant Fees and Services
Information required by this item will be 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, 2017 and 2016 and for each of the three years
in the period ended December 31, 2017 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
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 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 (incorporated by reference to
Exhibit 10.6 to the registrant’s Annual Report on Form 10-K filed on February 17, 2017).
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 (incorporated by
reference to Exhibit 10.9 to the registrant’s Annual Report on Form 10-K filed on February 17,
2017).
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 (incorporated by
reference to Exhibit 10.14 to the registrant’s Annual Report on Form 10-K filed on
February 17, 2017).
Fluor Corporation 2017 Performance Incentive Plan (incorporated by reference to
Exhibit 10.1 to the registrant’s Registration Statement on Form S-8 filed on May 4, 2017).
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).
58
Exhibit
Description
10.16
10.17
10.18
10.19
10.20
10.21
10.22
10.23
10.24
10.25
10.26
10.27
10.28
21.1
23.1
31.1
31.2
Fluor 409A Executive Deferred Compensation Program, as amended and restated effective
January 1, 2017 (incorporated by reference to Exhibit 10.16 to the registrant’s Quarterly
Report on Form 10-Q filed on November 2, 2017).
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).
Retention Award, dated November 16, 2017, granted to Mr. Garry W. Flowers.*
Retirement and Release Agreement, effective February 8, 2018, between the registrant and
Biggs C. Porter.*
Summary of Fluor Corporation Non-Management Director Compensation.*
Form of Restricted Stock Unit Agreement granted to directors under the Fluor Corporation
2017 Performance Incentive Plan (incorporated by reference to Exhibit 10.19 to the
registrant’s Quarterly Report on Form 10-Q filed on August 3, 2017).
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 (incorporated by reference to Exhibit 10.22 to the registrant’s
Annual Report on Form 10-K filed on February 17, 2017).
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.*
59
Exhibit
Description
32.1
32.2
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.*
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, 2017, 2016 and 2015, (ii) the Consolidated Balance Sheet at December 31, 2017 and
December 31, 2016, (iii) the Consolidated Statement of Cash Flows for the years ended December 31,
2017, 2016 and 2015 and (iv) the Consolidated Statement of Equity for the years ended December 31,
2017, 2016 and 2015.
Item 16. Form 10-K Summary
Not applicable.
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/ BRUCE A. STANSKI
Bruce A. Stanski,
Executive Vice President
and Chief Financial Officer
February 20, 2018
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 20, 2018
/s/ BRUCE A. STANSKI
Bruce A. Stanski
Executive Vice President and Chief
Financial Officer
February 20, 2018
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 20, 2018
Director
Director
Director
Director
February 20, 2018
February 20, 2018
February 20, 2018
February 20, 2018
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 20, 2018
February 20, 2018
February 20, 2018
February 20, 2018
February 20, 2018
February 20, 2018
February 20, 2018
February 20, 2018
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
To the Shareholders and the Board of Directors of Fluor Corporation
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Fluor Corporation (the Company)
as of December 31, 2017 and 2016, 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,
2017, and the related notes (collectively referred to as the ‘‘financial statements’’). In our opinion, the
financial statements present fairly, in all material respects, the consolidated financial position of the
Company as of December 31, 2017 and 2016, and the consolidated results of its operations and its cash
flows for each of the three years in the period ended December 31, 2017, 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) (PCAOB), the Company’s internal control over financial reporting as of
December 31, 2017, 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 20, 2018 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is
to express an opinion on the Company’s financial statements based on our audits. We are a public
accounting firm registered with the PCAOB and are required to be independent with respect to the
Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of
the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement, whether due to error or fraud. Our audits included performing
procedures to assess the risks of material misstatement of the financial statements, whether due to error or
fraud, and performing procedures that respond to those risks. Such procedures include examining, on a
test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also
included evaluating the accounting principles used and significant estimates made by management, as well
as evaluating the overall presentation of the financial statements. We believe that our audits provide a
reasonable basis for our opinion.
/s/Ernst & Young LLP
We have served as the Company’s auditor since 1973.
Dallas, Texas
February 20, 2018
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,
2017
2016
2015
$19,520,970
$19,036,525
$18,114,048
18,902,480
18,246,209
17,019,352
—
—
192,187
67,638
(27,776)
—
—
191,073
69,689
(17,046)
(68,162)
239,896
168,329
44,770
(16,689)
19,134,529
18,489,925
17,387,496
726,552
245,888
480,664
(5,658)
475,006
EARNINGS FROM CONTINUING OPERATIONS BEFORE
TAXES
INCOME TAX EXPENSE
EARNINGS FROM CONTINUING OPERATIONS
386,441
121,972
546,600
219,151
264,469
327,449
LOSS FROM DISCONTINUED OPERATIONS, NET OF TAX
—
—
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
264,469
327,449
73,092
46,048
62,494
$
$
$
$
$
$
$
191,377
191,377
—
191,377
1.37
—
1.37
1.36
—
1.36
$
$
$
$
$
$
$
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
139,761
140,893
139,171
140,912
144,805
146,722
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 gain (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,
2017
2016
2015
$264,469
$327,449
$ 475,006
74,424
(64,380)
(104,595)
(701)
15,609
4,743
(444)
6,036
(5,137)
(662)
207
(7,513)
162,615
(126)
(211)
93,631
(63,936)
50,170
358,100
263,513
525,176
72,296
46,006
61,227
CORPORATION
$285,804
$217,507
$ 463,949
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 ($516,046 and $439,942 related to variable interest entities
(‘‘VIEs’’))
Marketable securities, current ($91,295 and $48,155 related to VIEs)
Accounts and notes receivable, net ($327,652 and $232,242 related to VIEs)
Contract work in progress ($132,500 and $124,677 related to VIEs)
Other current assets ($9,229 and $24,017 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 ($44,004 and $53,728 related to VIEs)
OTHER ASSETS
Marketable securities, noncurrent
Goodwill
Investments
Deferred taxes
Deferred compensation trusts
Other ($27,631 and $24,248 related to VIEs)
Total other assets
TOTAL ASSETS
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Trade accounts payable ($258,592 and $221,601 related to VIEs)
Revolving credit facility and other borrowings
Advance billings on contracts ($361,701 and $263,393 related to VIEs)
Accrued salaries, wages and benefits ($32,678 and $35,573 related to VIEs)
Other accrued liabilities ($44,211 and $32,015 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 —
139,918,324 and 139,258,483 shares in 2017 and 2016, 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,
2017
December 31,
2016
$1,804,075
161,134
1,602,751
1,458,533
574,764
5,601,257
82,794
493,704
1,501,452
155,423
62,237
2,295,610
1,201,929
1,093,681
113,622
564,683
878,863
316,472
381,826
377,288
$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
2,632,754
2,588,924
$9,327,692
$9,216,417
$1,512,740
27,361
874,036
706,520
453,513
3,574,170
1,591,598
669,525
$1,590,506
82,243
763,774
734,649
644,857
3,816,029
1,517,949
639,608
—
—
1,399
88,222
(402,242)
3,654,931
3,342,310
150,089
3,492,399
1,393
38,317
(496,669)
3,582,150
3,125,191
117,640
3,242,831
$9,327,692
$9,216,417
F-5
FLUOR CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Year Ended December 31,
2017
2016
2015
Net earnings
Adjustments to reconcile net earnings to cash provided (utilized) by operating
$ 264,469
$ 327,449
$ 475,006
activities:
Loss from discontinued operations, net of taxes
Pension settlement charge
Depreciation of fixed assets
Amortization of intangibles
(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
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
Investments in partnerships and joint ventures
Acquisitions, net of cash acquired
Other items
—
—
206,113
19,156
2,849
—
(22,746)
40,669
(49,539)
52,615
—
100,286
(8,846)
(11,899)
—
8,844
601,971
—
—
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
(237,360)
216,436
(283,107)
96,102
—
—
(273,117)
—
(3,232)
(359,986)
522,094
(235,904)
81,162
—
—
(518,220)
(240,740)
10,243
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)
849,132
(386,021)
411,380
(240,220)
94,323
82,082
45,566
(91,078)
—
17,461
Cash utilized by investing activities
(484,278)
(741,351)
(66,507)
CASH FLOWS FROM FINANCING ACTIVITIES
Repurchase of common stock
Dividends paid
Proceeds from issuance of 1.75% 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
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
—
(117,995)
—
—
—
—
(53,455)
(47,215)
6,397
(6,186)
9,380
(6,428)
(215,502)
(9,718)
(117,995)
552,958
(3,513)
(333,654)
882,142
(917,027)
(57,904)
9,072
(7,007)
3,658
(11,362)
(509,658)
(125,204)
—
—
(28,425)
—
—
(58,986)
5,254
(8,400)
1,780
(4,591)
(10,350)
(728,230)
51,448
(53,668)
(97,634)
(46,361)
1,850,436
(99,450)
1,949,886
(43,239)
1,993,125
$1,804,075
$1,850,436
$1,949,886
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, 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
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
—
—
—
—
—
—
660
—
—
—
—
—
—
6
—
—
374
—
—
1,610
47,921
—
94,427
—
—
—
—
—
191,377
—
(118,596)
—
191,377
94,427
(118,222)
—
—
—
—
—
1,610
47,927
73,092
(796)
—
(47,215)
6,397
971
—
264,469
93,631
(118,222)
(47,215)
6,397
2,581
47,927
BALANCE AS OF DECEMBER 31, 2017
139,918
$1,399
$ 88,222
$(402,242)
$3,654,931
$3,342,310
$150,089
$3,492,399
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
primarily 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 construction partnerships and joint ventures, 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
disclosed in 2016 and 2015 have been reclassified to conform to the 2017 presentation. 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 unless they are expected to be recovered from the client. 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 $337 million and $382 million as of December 31, 2017 and
2016, 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, 2017 will be billed and collected in 2018.
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.
F-9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLUOR CORPORATION
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
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, up to the total funding award
of $217 million. The company anticipates that it will have received cost reimbursements from the DOE
totaling $217 million by the end of the first quarter of 2018. 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,
2017
2016
$ 316,398
177,306
1,501,452
155,423
$ 322,495
167,552
1,364,231
157,104
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 compares the fair value of each reporting unit with its carrying
amount. If the carrying amount of a reporting unit exceeds its fair value, an impairment loss is recognized.
During 2017, 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). The increase in goodwill during 2017 was entirely
related to foreign currency translation gains. Goodwill for each of the company’s segments is presented in
Note 17.
In September 2017, the company voluntarily changed the date of its annual goodwill impairment
testing for all reporting units previously assessed as of March 1 to October 1. Prior to this change, goodwill
impairment testing for certain reporting units was performed as of March 1, while goodwill impairment
testing for certain recent acquisitions was performed as of October 1. This voluntary change is preferable
as it better aligns the timing of the goodwill impairment testing with the completion of the company’s
strategic and annual operating planning process. The voluntary change in accounting principle related to
F-10
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLUOR CORPORATION
the annual testing date will not delay, accelerate or avoid an impairment charge. This change is not applied
retrospectively as it is impracticable to do so because retrospective application would require application of
significant estimates and assumptions with the use of hindsight. Accordingly, the change will be applied
prospectively.
The following table provides a summary of the net carrying value of acquired intangible assets as of
December 31, 2017 and 2016, 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,
2017
2016
Weighted
Average
Life
$103,374
7,279
53,004
16,900
7,795
$111,616
8,034
47,425
19,038
4,184
$188,352
$190,297
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
$19 million during 2018, 2019, 2020 and 2021 and $18 million during 2022. 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, 2017, 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
F-11
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLUOR CORPORATION
Service and various state governments could differ materially from that which is reflected in the
Consolidated Financial Statements.
Derivatives and Hedging
The company limits exposure to foreign currency fluctuations in most of its engineering and
construction contracts through provisions that require client payments in currencies corresponding to the
currencies in which cost is incurred. Certain financial exposure, which includes currency and commodity
price risk associated with engineering and construction contracts, currency risk associated with 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 derivatives or hedging instruments to
mitigate the risk. The company’s 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. For derivatives that are not designated or do not qualify as hedging
instruments, the change in the fair value of the derivative is offset against the change in the fair value of
the underlying asset or liability through 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.
F-12
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLUOR CORPORATION
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.
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:
2017
2016
2015
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
$110,291
$(35,867)
$74,424
$(102,707)
$38,327
$(64,380) $(166,487) $ 61,892
$(104,595)
Ownership share of equity
method investees’ other
comprehensive income (loss)
Defined benefit pension and
(1,163)
462
(701)
8,734
(2,698)
6,036
(12,226)
4,713
(7,513)
postretirement plan adjustments
22,052
(6,443)
15,609
(5,518)
Unrealized gain (loss) on
derivative contracts
Unrealized gain (loss) on
7,593
(2,850)
4,743
(1,064)
381
402
available-for-sale securities
(711)
267
(444)
332
(125)
207
(5,137)
257,414
(94,799)
162,615
(662)
(302)
(337)
176
126
(126)
(211)
Total other comprehensive income
(loss)
Less: Other comprehensive loss
attributable to noncontrolling
interests
Other comprehensive income (loss)
attributable to Fluor Corporation
138,062
(44,431)
93,631
(100,223)
36,287
(63,936)
78,062
(27,892)
50,170
(796)
—
(796)
(42)
—
(42)
(1,267)
—
(1,267)
$138,858
$(44,431)
$94,427
$(100,181)
$36,287
$(63,894) $ 79,329
$(27,892) $ 51,437
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, 2017 are as
follows:
(in thousands)
Attributable to Fluor Corporation:
Balance as of December 31, 2016
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
$(286,449)
$(31,913)
$(167,667)
$(10,375)
$(265)
$(496,669)
75,272
—
75,272
(2,001)
1,300
11,456
4,153
5,499
(808)
(701)
15,609
4,691
(497)
53
(444)
$(709)
89,729
4,698
94,427
$(402,242)
Balance as of December 31, 2017
$(211,177)
$(32,614)
$(152,058)
$ (5,684)
Attributable to Noncontrolling
Interests:
Balance as of December 31, 2016
$
(614)
$
Other comprehensive income (loss)
before reclassifications
Amount reclassified from AOCI
Net other comprehensive income
(loss)
(848)
—
(848)
Balance as of December 31, 2017
$
(1,462)
$
—
—
—
—
—
$
$
—
—
—
—
—
$
(52)
$ —
$
(666)
13
39
52
—
$
—
—
(835)
39
(796)
$ —
$
(1,462)
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)
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, 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)
During 2017, functional currency exchange rates for most of the company’s international operations
strengthened against the U.S. dollar, resulting in unrealized translation gains. During 2016 and 2015,
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,
2017
2016
2015
(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)
$(1,713)
413
$ — $ (1,487)
—
—
$(1,300)
$ — $ (1,487)
$(6,638)
2,485
$(7,602)
2,851
$(268,795)
100,798
$(4,153)
$(4,751)
$(167,997)
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
$ 2,956
(1,678)
(509)
$(6,388)
(1,678)
2,944
$ (3,490)
(1,678)
1,933
769
(5,122)
(3,235)
(39)
(299)
(276)
$
808
$(4,823)
$ (2,959)
Corporate general and
administrative expense
Income tax expense
$
$
(85)
32
(53)
$
$
168
(63)
105
$
$
152
(57)
95
(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 2017 or requiring
implementation in future periods are discussed below or in the related notes, where appropriate.
In the fourth quarter of 2017, the Securities and Exchange Commission (‘‘SEC’’) staff issued Staff
Accounting Bulletin No. 118 (‘‘SAB 118’’) to address the application of U.S. GAAP related to the
enactment of the comprehensive tax legislation, commonly referred to as the Tax Cuts and Jobs Act
(discussed in Note 4). SAB 118 allows a company to record a provisional amount when it does not have the
necessary information available, prepared, or analyzed in reasonable detail to complete the accounting for
the change in the tax law. The measurement period ends when the company has obtained, prepared and
analyzed the information necessary to finalize the accounting, but cannot extend beyond one year. This
guidance was adopted in the fourth quarter of 2017.
F-16
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLUOR CORPORATION
In the third quarter of 2017, the company elected to adopt Accounting Standards Update (‘‘ASU’’)
2017-04, ‘‘Simplifying the Test for Goodwill Impairment’’ before its effective date. ASU 2017-04 removes
the second step of the goodwill impairment test, which requires a hypothetical purchase price allocation.
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. 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 the first quarter of 2017, the company adopted 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 variable interest entity. The adoption of
ASU 2016-17 did not have any impact on the company’s financial position, results of operations or cash
flows.
In the first quarter of 2017, the company adopted ASU 2016-09, ‘‘Improvements to Employee Share-
Based Payment Accounting.’’ This ASU is intended to simplify various aspects of 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. As a result of the
adoption of ASU 2016-09, the excess tax benefits and tax deficiencies associated with option exercises and
vested share awards are now recognized as income tax benefit or expense in the Condensed Consolidated
Statement of Earnings instead of in additional paid-in capital. Additionally, the excess tax benefits are now
presented as an operating activity on the Condensed Consolidated Statement of Cash Flows, rather than as
a financing activity. ASU 2016-09 also changed the method the company uses to calculate shares for
diluted earnings per share (discussed further in Note 11). The company adopted the provision of
ASU 2016-09 on a prospective basis; therefore, these changes were effective beginning in the first quarter
of 2017. The adoption of ASU 2016-09 did not have a material impact on the company’s financial position,
results of operations or cash flows.
In the first quarter of 2017, the company adopted 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. The adoption
of ASU 2016-07 did not have any impact on the company’s financial position, results of operations or cash
flows.
In the first quarter of 2017, the company adopted 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. The adoption of ASU 2016-05 did not have any impact on the
company’s financial position, results of operations or cash flows.
New accounting pronouncements requiring implementation in future periods are discussed below.
In February 2018, the Financial Accounting Standards Board (‘‘FASB’’) issued ASU 2018-02,
‘‘Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income,’’ which allows a
reclassification from accumulated other comprehensive income to retained earnings for stranded tax
effects resulting form the Tax Cuts and Jobs Act. ASU 2018-02 is effective for interim and annual reporting
periods beginning after December 15, 2018, with early adoption permitted. Management is currently
evaluating the impact that the adoption of ASU 2018-02 will have on the company’s financial position,
results of operations and cash flows.
In August 2017, the FASB issued ASU 2017-12, ‘‘Targeted Improvements to Accounting for Hedging
Activities.’’ This ASU amends the FASB’s hedge accounting model to enable entities to better portray their
risk management activities in the financial statements. ASU 2017-12 expands an entity’s ability to hedge
F-17
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLUOR CORPORATION
nonfinancial and financial risk components and eliminates the requirement to separately measure and
report hedge ineffectiveness. ASU 2017-12 is effective for interim and annual reporting periods beginning
after December 15, 2018, with early adoption permitted. Management does not expect the adoption of
ASU 2017-12 to have a material impact on the company’s financial position, results of operations or cash
flows.
In May 2017, the FASB issued ASU 2017-09, ‘‘Compensation — Stock Compensation (Topic 718):
Scope of Modification Accounting,’’ which clarifies when changes to the terms or conditions of a share-
based payment award must be accounted for as a modification. Entities should apply the modification
accounting guidance if the value, vesting conditions or classification of the award changes. ASU 2017-09 is
effective for interim and annual reporting periods beginning after December 15, 2017. Early adoption is
permitted and prospective application is required. Management does not expect the adoption of
ASU 2017-09 to have a material impact on the company’s financial position, results of operations or cash
flows.
In March 2017, the FASB issued ASU 2017-07, ‘‘Improving the Presentation of Net Periodic Pension
Cost and Net Periodic Postretirement Benefit Cost.’’ ASU 2017-07 requires employers to present the
service cost component of net periodic benefit cost in the same income statement line item as other
compensation costs arising from services rendered during the period. The other components of net
periodic benefit cost are required to be presented separately from the service cost component.
ASU 2017-07 is effective for interim and annual reporting periods beginning after December 15, 2017.
Management does not expect the adoption of ASU 2017-07 to have a material 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 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
F-18
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLUOR CORPORATION
interim and annual reporting periods beginning after December 15, 2019. Management does not expect the
adoption of ASU 2016-13 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,’’ and issued subsequent amendments to the initial guidance in September 2017
within ASU 2017-13 which continues to amend the existing guidance on accounting for leases. The new
standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases
based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This
classification will determine whether lease expense is recognized based on an effective interest method or
on a straight-line basis over the term of the lease, respectively. ASU 2016-02 also 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 and 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,
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. 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
F-19
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLUOR CORPORATION
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.
In February 2017, the FASB issued ASU 2017-05, ‘‘Clarifying the Scope of Asset Derecognition
Guidance and Accounting for Partial Sales of Nonfinancial Assets,’’ which clarifies that the scope and
application of ASC 610-20 on accounting for the sale or transfer of nonfinancial assets and in substance
nonfinancial assets to noncustomers, including partial sales, applies only when the asset (or asset group)
does not meet the definition of a business. ASU 2017-05, 2016-20, 2016-12, 2016-10 and 2016-08 are
effective upon adoption of ASU 2014-09. The company will adopt ASU 2014-09 during the first quarter of
2018 using the modified retrospective method that will result in a cumulative effect adjustment as of the
date of adoption.
In September 2017, the FASB issued ASU 2017-13, ‘‘Amendments to SEC Paragraphs Pursuant to the
Staff Announcement at the July 20, 2017 EITF Meeting and Rescission of Prior SEC Staff Announcements
and Observer Comments,’’ which also provides additional implementation guidance on the previously
issued ASU 2014-09. The amendments represent guidance related to the effective dates of the standards
noted above, therefore, the amendments themselves do not have an effective date.
In 2014, the company established a cross-functional
included
representatives from the company’s four operating segments. The implementation team has evaluated the
impact of adopting the new standard on the company’s contracts expected to be uncompleted as of
January 1, 2018 (the date of adoption). The evaluation included reviewing the company’s accounting
policies and practices to identify differences that would result from applying the requirements of the new
standard. The company has identified and made changes to its processes, systems and controls to support
recognition and disclosure under the new standard. The implementation team has worked closely with
various industry groups to conclude on certain interpretative issues.
implementation team which
Management continues to evaluate the impact of adopting ASU 2014-09, 2016-08, 2016-10, 2016-12,
2016-20, 2017-05 and 2017-13 on the company’s financial position, results of operations, cash flows and
related disclosures. Under the new standard, the company will continue to recognize engineering and
construction contract revenue over time using the percentage-of-completion method, based primarily on
contract cost incurred to date compared to total estimated contract cost. Revenue on the majority of the
company’s contracts will continue to be recognized over time because of the continuous transfer of control
to the customer. However, adoption of the new standard will 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 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. Based on the company’s most recent assessment of
existing contracts, the adoption of ASU 2014-09 is expected to result in a cumulative effect adjustment to
decrease retained earnings by a range of $300 million to $350 million as of January 1, 2018.
F-20
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLUOR CORPORATION
2. Discontinued Operations
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 of St. Joe
Minerals Corporation and The Doe Run Company in Herculaneum, Missouri, which the company sold in
1994, 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.
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,
2017
2016
2015
$ 162,655
140,556
(138,638)
(3,944)
$(337,775) $190,141
80,742
(20,861)
(54,726)
(72,419)
19,311
250,332
(137,441)
60,808
(65,207)
(30,688)
200,480
43,985
40,088
(8,609)
(57,317)
243,996
(38,529)
(39,550)
$ (11,899) $ 135,393
$303,896
$ 61,560
175,045
$ 72,057
164,836
$ 40,585
249,921
The Tax Cuts and Jobs Act (‘‘the Act’’) was enacted into law on December 22, 2017. Income tax
effects resulting from changes in tax laws are accounted for by the company in accordance with the
authoritative guidance, which requires that these tax effects be recognized in the period in which the law is
enacted and the effects are recorded as a component of the provision for income taxes from continuing
operations. As a result, the company recorded provisions for income tax resulting from the enactment of
the Act for the year ended December 31, 2017, as described below.
As of December 31, 2017, the company had not fully completed its accounting for the tax effects of the
enactment of the Act. The company’s provision for income taxes for the year ended December 31, 2017 is
based in part on a reasonable estimate of the effects on its transition tax and existing deferred tax balances.
For the amounts that the company was able to reasonably estimate, the company recognized tax expense of
$37 million relating to the enactment of the Act. As the company completes its analysis of the Act, collects
and prepares necessary data, and interprets any additional guidance issued by the U.S. Treasury
Department, the U.S. Internal Revenue Service (‘‘IRS’’), and other standard-setting bodies, the company
may make adjustments to the provisional amounts. These amounts may materially impact the company’s
F-21
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLUOR CORPORATION
provision for income taxes in the period in which adjustments are made. The primary components of the
$37 million tax expense resulting from the Act include:
(cid:129) Tax expense in the amount of $76 million related to the revaluation of deferred tax assets and
liabilities due to the reduction of the U.S. corporate tax rate from 35% to 21% under the Act.
(cid:129) A tax benefit of $39 million as a result of the one-time transition tax on previously unremitted
foreign earnings. This included the release of deferred tax liabilities for unremitted foreign
earnings, which exceeded $34 million of additional tax on the one-time transition tax. The transition
tax deems a repatriation of the post-1986 earnings and profits not previously distributed (or deemed
distributed). The company has made adjustments related to the withholding taxes that would be
imposed by foreign jurisdictions should the deemed repatriations be followed by actual cash
repatriations but has not made any policy decisions regarding whether to indefinitely reinvest any
amounts deemed repatriated. While the company has accrued the transition tax on the deemed
repatriation of unremitted foreign earnings, the company was unable to determine a reasonable
estimate of the remaining tax liability, if any, under the Act for its remaining outside basis
differences. Therefore, the company has not included a provisional amount for this item in its
financial statements for the year ended December 31, 2017. The company will record amounts as
needed for this item beginning in the first reporting period during the measurement period in which
the company obtains necessary information and is able to analyze and prepare a reasonable
estimate.
The Act includes provisions for Global Intangible Low-Taxed Income (‘‘GILTI’’), under which taxes
on foreign income are imposed in excess of a deemed return on tangible assets of foreign corporations. In
general this income will effectively be taxed at a 10.5% tax rate. As a result, the company’s deferred tax
assets and liabilities are being evaluated to determine if the deferred tax assets and liabilities should be
recognized for the basis differences expected to reverse as a result of GILTI provisions that are effective
for the company after the year ending December 31, 2017. Because of the complexity of the new GILTI tax
rules, the company is continuing to evaluate this provision of the Act and the application of the relevant
U.S. GAAP provisions. Under U.S. GAAP, the company is allowed to make an accounting policy election
of either (i) treating taxes due on future U.S. inclusions in taxable income related to GILTI as a current-
period expense when incurred (the ‘‘period cost method’’), or (ii) factoring such amounts into a company’s
measurement of its deferred taxes (the ‘‘deferred method’’). Currently, the company has not elected a
method and will only do so after its completion of the analysis of the GILTI provisions. Its election method
will depend, in part, on analyzing its global income to determine whether the company expects to have
future U.S. inclusions in its taxable income related to GILTI and, if so, the impact that is expected.
F-22
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLUOR CORPORATION
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,
2017
2016
2015
$(119,875) $120,798
95,198
11,067
145,064
(3,503)
$ 22,465
203,125
15,623
21,686
227,063
241,213
15,720
75,688
8,878
58,601
(65,656)
(857)
8,867
(5,630)
1,438
100,286
(7,912)
4,675
$ 121,972
$219,151
$245,888
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
Worthless stock
Noncontrolling interests
Foreign losses, net
Valuation allowance, net
Statute expirations and tax authority settlements
Revaluation due to Section 987 tax law change
Impact of tax reform
International restructuring
Other, net
Total income tax expense
Year Ended December 31,
2017
2016
2015
$135,255
$191,310
$254,293
6,326
(1,072)
(15,175)
(25,582)
(1,055)
22,860
5,785
(11,101)
—
(16,117)
24,288
6,978
— (13,280)
24,156
—
—
37,423
—
(46,295)
7,132
9,287
11,518
(5,828)
—
(21,873)
8,640
5,611
(7,827)
—
—
—
1,354
$121,972
$219,151
$245,888
F-23
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLUOR CORPORATION
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
Tax basis of investments in excess of book basis
Net operating loss carryforward
U.S. foreign tax credit 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
Dividend withholding on unremitted non-U.S. earnings
Other
Total deferred tax liabilities
Deferred tax assets, net of deferred tax liabilities
December 31,
2017
2016
$ 28,410
58,500
40,966
—
184,517
168,027
71,537
66,286
$ 117,981
94,134
46,219
69,195
180,450
—
271,878
34,147
618,243
(99,529)
814,004
(81,360)
$ 518,714
$ 732,644
(86,780)
(88,262)
— (161,827)
—
(28,446)
(42,201)
(73,261)
(202,242)
(278,535)
$ 316,472
$ 454,109
The company had non-U.S. net operating loss carryforwards related to various jurisdictions of
approximately $794 million as of December 31, 2017. Of the total losses, $557 million can be carried
forward indefinitely and $237 million will begin to expire in various jurisdictions starting in 2018.
The company had U.S. foreign tax credits of approximately $168 million as of December 31, 2017,
which will expire in 2028.
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 2017 and 2016 is primarily due to the
deferred tax assets established for certain net operating loss carryforwards and certain reserves on
investments. In 2017 and 2016, the company released valuation allowances on branch net operating losses
of $5 million and $127 million, respectively. In 2016, the 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. This release did not impact total tax expense as it related to branch income which is included
in the U.S. tax return.
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 in 2016.
F-24
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLUOR CORPORATION
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 IRS for tax years 2012-2013. This resulted in a net
reduction in tax expense of $11 million.
The unrecognized tax benefits as of December 31, 2017 and 2016 were $61 million and $59 million, of
which $13 million and $9 million, if recognized, would have favorably impacted the effective tax rates at the
end of 2017 and 2016, 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
2017
2016
$58,881
3,024
—
—
(1,249)
$ 42,203
30,034
—
(1,044)
(12,312)
$60,656
$ 58,881
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, 2017
and 2016.
U.S. and foreign earnings from continuing operations before taxes are as follows:
(in thousands)
United States
Foreign
Total
Year Ended December 31,
2017
2016
2015
$(222,979) $ (33,414) $ 12,520
714,032
580,014
609,420
$ 386,441
$546,600
$726,552
Earnings from continuing operations before taxes in the United States decreased in 2017 compared to
2016 primarily due to pre-tax charges totaling $260 million related to forecast revisions for estimated cost
growth at three fixed-price, gas-fired power plants in the southeastern United States. Earnings from
continuing operations before taxes in foreign jurisdictions were relatively flat as compared to 2016.
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.
5. Retirement Benefits
The company sponsors contributory and non-contributory defined contribution retirement and
defined benefit pension plans for eligible employees worldwide.
F-25
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLUOR CORPORATION
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 $165 million, $167 million and
$146 million associated with contributions to its defined contribution retirement plans during 2017, 2016
and 2015, 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
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)
2017
2016
2015
2017
2016
2015
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)
$ 18,780
22,525
(40,272)
$ 19,507
26,435
(39,535)
$ 20,517
26,511
(49,066)
—
—
—
867
—
—
9,714
— 250,946
(828)
7,890
184
(813)
8,819
396
(814)
7,681
390
Net periodic pension expense
$
— $
— $264,732
$ 8,279
$ 14,809
$ 5,219
F-26
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLUOR CORPORATION
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
investment manager forecasts are established for all relevant asset classes including public U.S. and
international equities and government, corporate and other debt securities.
U.S. Pension Plan
December 31,
Non-U.S. Pension Plans
December 31,
2017
2016
2015
2017
2016
2015
For determining projected
benefit obligation at
year-end:
Discount rates
Rates of increase in
compensation levels
For determining net periodic
cost for the year:
Discount rates
Rates of increase in
compensation levels
Expected long-term rates
of return on assets
N/A
N/A
N/A
1.90-5.50% 1.90-5.00% 2.35-5.50%
N/A
N/A
N/A
2.25-7.00% 2.25-7.00% 2.25-7.00%
N/A
N/A
1.95% 1.90-5.00% 1.90-5.50% 2.20-5.00%
N/A
N/A
N/A
2.25-7.00% 2.25-7.00% 2.25-8.00%
N/A
N/A
2.95% 1.90-7.40% 4.30-7.00% 4.90-7.00%
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 $25 million to its defined
benefit pension plans in 2018, 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 $57 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
2017
2016
December 31,
65% - 75%
20% - 30%
0% - 10%
68%
25%
7%
68%
26%
6%
100% 100%
F-27
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLUOR CORPORATION
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.
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, 2017 and 2016,
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
F-28
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLUOR CORPORATION
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.
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 defined benefit pension plans that are measured at fair
value on a recurring basis as of December 31, 2017 and 2016:
(in thousands)
Assets:
Equity securities:
Common stock
Debt securities:
December 31, 2017
Fair Value Hierarchy
December 31, 2016
Fair Value Hierarchy
Total
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
$
4,806 $4,806 $
— $ — $
3,187 $3,187 $
— $ —
Corporate bonds
Government securities
155,337
305,831
— 155,337
— 305,831
— 139,243
— 276,266
— 139,243
— 276,266
—
—
Other:
Guaranteed investment
contracts
Foreign currency contracts and
other
Liabilities:
Debt securities:
21,030
12,225
—
—
— 21,030
19,075
12,225
—
5,244
—
—
— 19,075
5,244
—
Repurchase agreements
(110,282)
— (110,282)
— (107,328)
— (107,328)
—
Other:
Foreign currency contracts and
other
(11,138)
— (11,138)
—
(5,113)
—
(5,113)
—
Plan assets measured at fair value,
net
$ 377,809 $4,806 $ 351,973 $21,030 $ 330,574 $3,187 $ 308,312 $19,075
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
265,647
380,419
58,900
3,431
$1,086,206
240,203
337,265
41,744
1,161
$ 950,947
F-29
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLUOR CORPORATION
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
Balance at end of year
2017
2016
$19,075
$ —
(1,268)
3,388
—
—
— 21,923
—
16
—
—
(1,580)
(1,449)
$21,030
$19,075
The following table presents expected benefit payments for the company’s defined benefit pension
plans:
(in thousands)
Year Ended December 31,
2018
2019
2020
2021
2022
2023 — 2027
$ 39,753
39,055
40,856
52,848
42,098
218,507
F-30
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLUOR CORPORATION
Measurement dates for the company’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 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
Projected benefit obligation at end of year
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
Funded Status — (Under)/overfunded
Amounts recognized in the Consolidated Balance Sheet
Pension assets included in other assets
Pension liabilities included in other accrued liabilities
Pension liabilities included in noncurrent liabilities
Accumulated other comprehensive loss (pre-tax)
December 31,
2017
2016
$911,550
$ 987,989
19,507
18,780
26,435
22,525
3,272
3,112
(80,418)
118,411
96,216
(15,437)
—
(1,058)
(33,695)
(33,948)
—
(2,281)
—
55,799
— (10,677)
1,098,093
987,989
920,477
950,947
124,210
38,657
14,868
15,283
3,272
3,112
(88,852)
114,436
(33,695)
(33,948)
—
(2,281)
—
21,923
— (11,256)
1,086,206
950,947
$ (11,887) $ (37,042)
$
40,212
(2,208)
(49,891)
$ 235,495
$ 30,977
(2,001)
(66,018)
$231,225
During 2018, 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.
Projected benefit obligations exceeded plan assets for all defined benefit pension plans as of
December 31, 2017, with the exception of the plan in the United Kingdom. In the aggregate, these plans
had projected benefit obligations of $702 million and plan assets with a fair value of $650 million as of
December 31, 2017.
The total accumulated benefit obligation for all defined benefit pension plans as of December 31,
2017 and 2016 was $1.0 billion and $919 million, respectively. As of December 31, 2017 and 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 during 2016. Plan assets
F-31
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLUOR CORPORATION
exceeded the accumulated benefit obligation for each of the other plans (including the company’s legacy
plan in the Netherlands) as of December 31, 2017 and 2016.
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 $118 million, $108 million and
$22 million during 2017, 2016 and 2015, respectively. The increase in contributions during 2017 and 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-32
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,
2017 and 2016:
December 31, 2017
December 31, 2016
—
—
—
(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
$
1,301 $
57,783
23,256
701
—
23,256
$
600
57,783
—
$ — $ 21,035 $21,035 $
54,840
37,510
—
37,510
—
—
— $ —
—
—
54,840
—
113,622
— 113,622
— 143,553
— 143,553
Commodity contracts
Foreign currency contracts
—
29,766
—
—
—
29,766
—
83
— 34,776
—
—
83
34,776
Liabilities:
Derivative liabilities(5)
Commodity contracts
Foreign currency contracts
$
— $ — $
— $ — $
29,127
—
29,127
129
— 43,574
$ — $
—
129
43,574
$ —
—
(1) Consists of registered money market funds and investments in U.S. agency securities with maturities of three
months or less at the date of purchase. The fair value of the money market funds represents the net asset value of
the shares of such funds as of the close of business at the end of the period. The fair value of the investments in
U.S. agency securities is based on pricing models, which are determined from a compilation of primarily
observable market information, broker quotes in non-active markets or similar assets.
(2) Consists of investments in U.S. agency securities, U.S. Treasury securities, corporate debt securities and
commercial paper 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 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, 2017: money
market funds of $1 million, U.S. agency securities of $3 million, U.S. Treasury securities of $69 million,
corporate debt securities of $97 million and commercial paper of $3 million. As of December 31, 2016,
available-for-sale securities consisted of 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. The
F-33
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLUOR CORPORATION
amortized cost of these available-for-sale securities is not materially different from the fair value. During
2017, 2016 and 2015, proceeds from sales and maturities of available-for-sale securities were $159 million,
$286 million and $336 million, respectively.
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 for
further discussion of nonrecurring fair value measurements related to the company’s acquisition of Stork.
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, 2017
December 31, 2016
Carrying Value
Fair Value
Carrying Value
Fair Value
Level 1
Level 2
Level 2
$1,104,316
698,458
103,351
$1,104,316
698,458
103,351
$1,133,295
696,106
56,197
$1,133,295
696,106
56,197
Level 3
26,006
26,006
29,458
29,458
Level 2
Level 2
Level 2
Level 2
$ 597,674
496,859
493,320
—
$ 622,277
512,475
513,480
—
$ 523,629
496,011
492,360
52,735
$ 551,582
512,510
508,230
52,735
Level 2
31,106
31,106
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 were
estimated based on quoted market prices for similar issues.
(6) Amounts represent borrowings under the company’s A125 million Revolving Credit Facility which
expired 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 primarily represent bank loans and other financing arrangements resulting from 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-34
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLUOR CORPORATION
7. Derivatives and Hedging
As of December 31, 2017, the company had total gross notional amounts of $828 million of foreign
currency contracts outstanding (primarily related to the British Pound, Kuwaiti Dinar, Indian Rupee,
Philippine Peso and South Korean Won) that were designated as hedging instruments. The foreign
currency contracts are of varying duration, none of which extend beyond December 2019. There were no
commodity contracts outstanding as of December 31, 2017. The impact to earnings due to hedge
ineffectiveness was immaterial for the years ended December 31, 2017, 2016 and 2015.
The fair values of derivatives designated as hedging instruments under ASC 815 as of December 31,
2017 and 2016 were as follows:
(in thousands)
Balance Sheet
Location
December 31, December 31,
2017
2016
Balance Sheet
Location
December 31, December 31,
2017
2016
Asset Derivatives
Liability Derivatives
Commodity contracts
Foreign currency contracts
Foreign currency contracts
Other current assets
Other current assets
Other assets
Total
$ —
18,667
6,472
$25,139
$
83
13,231
21,545
$34,859
Other accrued liabilities
Other accrued liabilities
Noncurrent liabilities
$ —
19,046
8,654
$27,700
$
129
16,543
27,031
$43,703
The pre-tax net gains (losses) recognized in earnings associated with the hedging instruments
designated as fair value hedges for the years ended December 31, 2017, 2016 and 2015 were as follows:
Fair Value Hedges (in thousands)
Location of Loss
2017
2016
2015
Foreign currency contracts
Corporate general and administrative expense
$5,415
$(2,886) $(5,191)
The pre-tax amount of gain (loss) recognized in earnings associated with the hedging instruments
designated as fair value hedges noted in the table above offset the amount of gain (loss) 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, 2017, 2016 and 2015 was as follows:
Cash Flow Hedges (in thousands)
2017
2016
2015
Location of Gain (Loss)
2017
2016
2015
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
$
44
5,455
—
$
401
(6,344)
—
$ (728) Total cost of revenue $
(2,532) Total cost of revenue
—
Interest expense
52
1,805
(1,049)
$ (550) $ (385)
(1,525)
(3,224)
(1,049)
(1,049)
Total
$5,499 $(5,943) $(3,260)
$
808
$(4,823) $(2,959)
As of December 31, 2017, the company also had total gross notional amounts of $106 million of
foreign currency contracts outstanding that were not designated as hedging instruments. These contracts
primarily related to engineering contract obligations and monetary assets and liabilities denominated in
nonfunctional currencies. As of December 31, 2017, the company had total gross notional amounts of
$81 million associated with contractual foreign currency payment provisions that were deemed embedded
derivatives. Net gains of $1.1 million associated with the company’s derivatives and embedded derivatives
were included in Cost of Revenue for the year ended December 31, 2017. A gain of less than $0.1 million
associated with the company’s derivatives were included in Cost of Revenues for the year ended
December 31, 2016.
F-35
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLUOR CORPORATION
8.
Financing Arrangements
As of December 31, 2017, the company had both combination of committed and uncommitted lines of
credit available to be used for revolving loans and letters of credit. As of December 31, 2017, 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 2022.
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 was used for revolving loans, bank guarantees, letters of credit and to fund working capital in
the ordinary course of business. This replacement facility, which bore interest at EURIBOR plus .75%,
expired in April 2017. Outstanding borrowings of $53 million under the A125 million Revolving Credit
Facility were repaid in 2017.
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:
December 31,
2017
2016
$
— $ 52,735
29,508
27,361
$597,674
496,859
493,320
3,745
1.750% Senior Notes
3.375% Senior Notes
3.5% Senior Notes
Other borrowings
$523,629
496,011
492,360
5,949
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.
F-36
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLUOR CORPORATION
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. We may, from time to time,
repurchase the 2016 Notes, the 2014 Notes or the 2011 Notes in the open market, in privately-negotiated
transactions or otherwise in such volumes, at such prices and upon such other terms as we deem
appropriate.
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 $31 million and $35 million as of December 31, 2017 and 2016, respectively,
primarily represent bank loans and other financing arrangements resulting from the acquisition of Stork,
exclusive of the Stork Notes.
As of December 31, 2017, 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
can earn either market-based fixed or variable rates of return, at the option of the participants. As of
December 31, 2017 and 2016, $395 million and $356 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
F-37
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLUOR CORPORATION
value. These trusts were valued at $382 million and $348 million as of December 31, 2017 and 2016,
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
$56 million and $65 million as of December 31, 2017 and 2016, 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 $26 million,
$28 million and $36 million for the years ended December 31, 2017, 2016 and 2015, respectively, net of
recognized tax benefits of $16 million, $17 million and $21 million for the years ended 2017, 2016 and 2015,
respectively.
F-38
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, 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
Granted
Expired or canceled
Vested/exercised
402,783
(48,005)
(453,677)
54.88
51.58
59.89
1,103,817
(285,434)
(229,808)
55.35
63.07
40.82
Outstanding as of December 31, 2017
933,464
$51.85
5,069,956
$60.08
Options exercisable as of December 31, 2017
3,323,462
$63.41
Remaining unvested options outstanding and expected
to vest
1,694,099
$53.75
As of December 31, 2017, there was a maximum of 12,819,674 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 3.0 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 2017, 2016 and 2015 generally vest
ratably over three years. For the company’s directors, the restricted units and shares granted in 2017, 2016
and 2015 vest or vested on the first anniversary of the grant. For directors and certain executives, restricted
stock units are subject to a post-vest holding period of three years. The fair value of restricted stock units
and restricted shares represents the closing price of the company’s common stock on the date of grant
discounted for the post-vest holding period, when applicable. For the years 2017, 2016 and 2015,
recognized compensation expense of $21 million, $27 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 2017, 2016 and 2015 was $25 million, $22 million and
$26 million, respectively. The balance of unamortized restricted stock expense as of December 31, 2017
was $8 million, which is expected to be recognized over a weighted-average period of 1.1 years.
F-39
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLUOR CORPORATION
Option grant amounts and award dates are established by the Committee. The exercise price of
options represents the closing price of the company’s common stock on the date of grant. Options normally
extend for 10 years and become exercisable over a vesting period determined by the Committee. The
options granted in 2017, 2016 and 2015 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 2017, 2016 and 2015 was $2 million, $1 million and $1 million, respectively. The
balance of unamortized stock option expense as of December 31, 2017 was $5 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, 2017, 2016 and 2015, which is included in corporate general and administrative
expense in the accompanying Consolidated Statement of Earnings, totaled $13 million, $10 million and
$15 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,
2017
2016
$14.23
5.8
2.3%
27.8%
$ 0.84
$12.55
6.1
1.6%
32.4%
$ 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, 2017 is summarized below:
Range of Exercise Prices
$30.46 - $35.00
$42.75 - $62.50
$68.36 - $80.12
Options Outstanding
Options Exercisable
Weighted
Average
Remaining
Contractual
Life (In Years)
Weighted
Average
Exercise Price
Per Share
1.2
6.9
4.6
6.3
$30.46
56.53
75.54
$60.08
Weighted
Average
Remaining
Contractual
Life (In Years)
Weighted
Average
Exercise Price
Per Share
1.2
5.6
4.6
5.2
$30.46
58.74
75.54
$63.41
Number
Exercisable
76,750
2,193,930
1,052,782
3,323,462
Number
Outstanding
76,750
3,940,424
1,052,782
5,069,956
As of December 31, 2017, options outstanding and options exercisable had an aggregate intrinsic
value of approximately $6 million and $4 million, respectively.
During 2017, 2016 and 2015, performance-based VDI units totaling 249,204; 296,052; and 430,970,
respectively, were awarded to executives. These awards vest after a period of approximately three years
and contain annual performance conditions for each of the three years of the vesting period. Beginning in
2016, the performance targets for each year were generally established in the first quarter of that year.
Under ASC 718, performance-based awards are not deemed granted for accounting purposes until
performance targets have been established. Accordingly, only one-third of the units awards in any given
year are deemed to be granted each year of the three year vesting period. VDI awards granted during 2017
and 2016 are also subject to a post-vest holding period restriction for the period of three years. During
2017, units totaling 83,068 and 92,094 under the 2017 and 2016 VDI plans, respectively, were granted at
weighted-average grant date fair values of $53.35 per share and $51.62 per share, respectively. The grant
date fair value is determined by adjusting the closing price of the company’s common stock on the date of
grant for the post-vest holding period discount and for the effect of the market condition, when applicable.
F-40
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLUOR CORPORATION
For awards granted under the 2017 VDI plan, the number of units will be adjusted at the end of each
performance period based on achievement of certain performance targets and market conditions, as
defined in the VDI award agreement. For awards granted under the 2016 VDI plan, the number of units is
adjusted at the end of each performance period based only on the achievement of certain performance
targets, as defined in the VDI award agreement. Units granted under the 2017, 2016 and 2015 VDI plans
can only be settled in company stock and are accounted for as equity awards in accordance with ASC 718.
Compensation expense of $8 million, $8 million and $11 million related to stock-based VDI units is
included in corporate general and administrative expense in 2017, 2016 and 2015, respectively. The balance
of unamortized compensation expense associated with VDI units as of December 31, 2017 was $1 million,
which is expected to be recognized over a weighted-average period of less than one year. During 2017, the
company paid $26 million for fully vested VDI awards granted in 2014 that were settleable in cash.
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). Diluted EPS reflects the assumed exercise or conversion of all dilutive securities using the
treasury stock method. As a result of the adoption of ASU 2016-09 in the first quarter of 2017, the excess
tax benefits and tax deficiencies that were previously recorded to additional paid-in capital have been
excluded from the hypothetical proceeds used to calculate the repurchase of shares under the treasury
stock method beginning in the first quarter of 2017.
The calculations of the basic and diluted EPS for the years ended December 31, 2017, 2016 and 2015
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
F-41
Year Ended December 31,
2017
2016
2015
$191,377
—
$281,401
—
$418,170
(5,658)
$191,377
$281,401
$412,512
139,761
139,171
144,805
1.37
—
1.37
$
$
2.02
—
2.02
$
$
2.89
(0.04)
2.85
139,761
139,171
144,805
1,132
—
1,741
—
1,827
90
140,893
140,912
146,722
1.36
—
1.36
$
$
2.00
—
2.00
$
$
4,706
3,843
2.85
(0.04)
2.81
3,408
$
$
$
$
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLUOR CORPORATION
During the years ended December 31, 2016 and 2015, the company repurchased and canceled 202,650
and 10,104,988 shares of its common stock, respectively, under its stock repurchase program for
$10 million and $510 million, respectively.
12. Lease Obligations
Net rental expense amounted to approximately $144 million, $152 million and $169 million in the
years ended December 31, 2017, 2016 and 2015, 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 2017 and 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.
The company’s obligations for minimum rentals under non-cancelable operating leases (excluding
project lease agreements which are fully reimbursable by the client) are as follows:
Year Ended December 31,
2018
2019
2020
2021
2022
Thereafter
(in thousands)
$86,300
70,900
55,800
35,500
22,700
55,500
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 both 2017 and 2016. These gains were included in
corporate general and administrative expense in the Consolidated Statement of Earnings. The remaining
deferred gain of approximately $43 million is being 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,
2017, 2016 and 2015, net earnings attributable to noncontrolling interests were $73 million, $46 million and
$62 million, respectively. Income taxes associated with earnings attributable to noncontrolling interests
were immaterial in all periods presented. Distributions paid to noncontrolling interests were $47 million,
$58 million and $59 million for the years ended December 31, 2017, 2016 and 2015, respectively. Capital
contributions by noncontrolling interests were $6 million, $9 million and $5 million for the years ended
December 31, 2017, 2016 and 2015, 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
F-42
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLUOR CORPORATION
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.
Fluor Australia Ltd., a wholly-owned subsidiary of the company (‘‘Fluor Australia’’), completed a cost
reimbursable engineering, procurement and construction management services project for Santos Ltd.
(‘‘Santos’’) involving 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.
Santos has joined Fluor Corporation to the matter on the basis of a parent company guarantee issued for
the project. 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, 2017
and 2016, the company had recorded $124 million and $61 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 $18 million and $41 million as of December 31, 2017 and
2016, respectively. 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
F-43
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLUOR CORPORATION
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 $14 billion as of December 31, 2017. 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, 2017 and 2016 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. Accounts receivables related to work performed for unconsolidated
partnerships and joint ventures included in ‘‘Accounts and notes receivable, net’’ on the Consolidated
Balance Sheet were $83 million and $392 million as of December 31, 2017 and 2016, respectively. The
decrease in this receivable balance in 2017 resulted primarily from collections from one Energy,
Chemicals & Mining joint venture project in the United States. Notes receivable from unconsolidated
partnerships and joint ventures included in ‘‘Accounts and notes receivable, net’’ and ‘‘Other assets’’ on the
Consolidated Balance Sheet were $22 million and $19 million as of December 31, 2017 and 2016,
respectively.
For unconsolidated construction partnerships and joint ventures, 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
$726 million and $454 million as of December 31, 2017 and 2016, 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, 2017, current assets of $3.7 billion, noncurrent assets of $1.7 billion, current liabilities of
$2.1 billion and noncurrent liabilities of $1.7 billion; 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.
income statement data for
is a summary of aggregate, unaudited
Additionally, the following
F-44
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLUOR CORPORATION
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 $1.5 billion, $1.6 billion and
$961 million for 2017, 2016 and 2015, respectively; cost of revenue of $1.4 billion, $1.5 billion and
$926 million for 2017, 2016 and 2015, respectively; and net earnings of $26 million, $30 million and
$14 million for 2017, 2016 and 2015, respectively.
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. The company made additional investments of $62 million in 2016
and $26 million in 2017 and has a future funding commitment of $52 million.
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 it has any of the following characteristics: (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 asset of $216 million as of December 31, 2017 and
a net liability of $9 million as of December 31, 2016. 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 necessary to satisfy the contractual obligations of the VIE. Future funding
commitments as of December 31, 2017 for the unconsolidated VIEs were $39 million.
In some cases, the company is required to consolidate certain VIEs. As of December 31, 2017, the
carrying values of the assets and liabilities associated with the operations of the consolidated VIEs were
$1.2 billion and $700 million, respectively. 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,
F-45
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLUOR CORPORATION
respectively. The assets of a VIE are restricted for use only for the particular VIE and are not available for
general operations of the company.
The company has agreements with certain VIEs to provide financial or performance assurances to
clients. See Note 15 for a further discussion of such agreements.
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 2017, the company changed the name of the Maintenance, Modification &
Asset Integrity segment to Diversified Services. The company reports its operating results in the following
four reportable segments: Energy, Chemicals & Mining; Industrial, Infrastructure & Power; Government;
and Diversified Services.
The Energy, Chemicals & Mining segment is the company’s commodity-related segment which
focuses on opportunities in the upstream, midstream, 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 to 13 percent, 10 percent and 11 percent of the company’s consolidated
revenue during the years ended December 31, 2017, 2016 and 2015, 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, a 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 15 percent, 13 percent and 12 percent during the years ended
December 31, 2017, 2016 and 2015, respectively.
The Diversified Services segment includes Stork, which 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
Diversified Services segment also includes the operations of the company’s equipment and temporary
staffing businesses and power services.
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
F-46
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLUOR CORPORATION
income; domestic and foreign income taxes; other non-operating income and expense items; and loss from
discontinued operations.
Operating Information by Segment
(in millions)
External revenue
Energy, Chemicals & Mining
Industrial, Infrastructure & Power
Government
Diversified Services
Total external revenue
Segment profit (loss)
Energy, Chemicals & Mining
Industrial, Infrastructure & Power
Government
Diversified Services
Total segment profit
Depreciation and amortization of fixed assets
Energy, Chemicals & Mining
Industrial, Infrastructure & Power
Government
Diversified Services
Corporate and other
Total depreciation and amortization of fixed assets
Capital expenditures
Energy, Chemicals & Mining
Industrial, Infrastructure & Power
Government
Diversified Services
Corporate and other
Total capital expenditures
Total assets
Energy, Chemicals & Mining
Industrial, Infrastructure & Power
Government
Diversified Services
Corporate and other
Total assets
Goodwill
Energy, Chemicals & Mining
Industrial, Infrastructure & Power
Government
Diversified Services
Total goodwill
Year Ended December 31,
2017
2016
2015
$ 9,376.7
4,367.5
3,232.7
2,544.1
$ 9,754.2
4,094.5
2,720.0
2,467.8
$11,865.4
2,264.0
2,557.4
1,427.2
$19,521.0
$19,036.5
$18,114.0
$
$
$
$
$
$
$
454.7
(170.8)
127.9
133.6
545.4
$
401.5
135.8
85.1
121.9
744.3
$
866.6
(44.9)
83.1
127.4
$ 1,032.2
— $
4.7
2.8
137.6
61.0
— $
3.9
2.3
139.5
65.4
206.1
$
211.1
$
— $
27.7
4.2
187.1
64.1
283.1
— $
2.2
2.1
153.1
78.5
$
235.9
$
—
4.0
3.2
113.4
68.1
188.7
—
6.1
3.9
158.9
71.3
240.2
$ 1,815.2
926.3
732.0
2,120.4
3,733.8
$ 2,348.0
750.1
493.7
1,952.7
3,671.9
$ 9,327.7
$ 9,216.4
$
$
15.8
14.6
58.0
476.3
564.7
$
$
15.5
13.6
58.0
445.1
532.2
F-47
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLUOR CORPORATION
(cid:129) Energy, Chemicals & Mining. Segment profit for 2017 was adversely affected by pre-tax charges
totaling $44 million (or $0.20 per diluted share) resulting from forecast revisions for estimated cost
increases on a downstream project. 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 decrease in total assets in the
Energy, Chemicals & Mining segment resulted from decreased working capital in support of project
execution activities.
(cid:129) Industrial, Infrastructure & Power. Segment profit for 2017 was adversely affected by pre-tax charges
totaling $260 million (or $1.18 per diluted share) resulting from forecast revisions for estimated cost
growth at three fixed-price, gas-fired power plant projects in the southeastern United States.
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 for research and
development activities associated with the licensing and commercialization of small modular
nuclear reactor technology. NuScale expenses included in the determination of segment profit were
$76 million, $92 million and $80 million during 2017, 2016 and 2015, respectively. NuScale expenses
for 2017, 2016 and 2015 were reported net of qualified reimbursable expenses of $48 million,
$57 million and $65 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.
Total assets in the Industrial, Infrastructure & Power segment as of December 31, 2017 included
accounts receivable related to the two subcontracts with Westinghouse to manage the construction
workforce at the Plant Vogtle and V.C. Summer nuclear power plant projects. On March 29, 2017
(‘‘the bankruptcy petition date’’), Westinghouse filed for Chapter 11 bankruptcy protection in the
U.S. Bankruptcy Court, Southern District of New York. In the third quarter of 2017, the V.C.
Summer project was cancelled by the owner. In the fourth quarter of 2017, the remaining scope of
work on the Plant Vogtle project was transferred to a new contractor. In addition to amounts due
for post-petition services, total assets as of December 31, 2017 included amounts due of $66 million
and $2 million for services provided to the V.C. Summer and Plant Vogtle projects, respectively,
prior to the date of the bankruptcy petition. The company filed mechanic’s liens in South Carolina
against the property of the owner of the V.C. Summer project for amounts due for pre-petition
services rendered to Westinghouse. Based on the company’s evaluation of available information, the
company does not expect the close-out of these projects to have a material impact on the company’s
results of operations.
(cid:129) Government. The increase in total assets in the Government segment resulted from increased
working capital in support of project execution activities for the Power Infrastructure Restoration
Project in Puerto Rico.
(cid:129) Diversified Services. During 2017, 2016 and 2015, intercompany revenue for the Diversified Services
segment, excluded from the amounts shown above, was $589 million, $524 million and $439 million,
respectively. The increase in total assets in the Diversified Services segment resulted from increased
working capital in support of project execution activities.
F-48
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLUOR CORPORATION
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,
2017
2016
2015
$ 545.4
—
—
(192.2)
(39.9)
73.1
$ 744.3
—
—
(191.1)
(52.6)
46.0
$1,032.2
68.2
(239.9)
(168.3)
(28.1)
62.5
$ 386.4
$ 546.6
$ 726.6
(cid:129) Corporate general and administrative expense. Foreign currency exchange losses of $21 million and
foreign currency exchange gains of $35 million were included in corporate general and
administrative expense during 2017 and 2016, respectively. Corporate general and administrative
expense also included organizational realignment expenses (primarily severance and facility exit
costs) of $20 million and $38 million during 2017 and 2016, respectively. Additionally, corporate
general and administrative expense in 2016 included transaction and integration costs associated
with the Stork acquisition of $25 million.
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,
2017
2016
2015
2017
2016
$10,071.1
1,447.5
985.5
4,358.3
968.2
1,690.4
$ 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
$4,808.1
490.5
729.3
2,238.0
675.0
386.8
$4,842.4
749.5
645.8
2,103.7
499.7
375.3
$19,521.0
$19,036.5
$18,114.0
$9,327.7
$9,216.4
Non-operating income (net of expenses) of $6 million and $7 million was included in corporate
general and administrative expense in 2017 and 2015, respectively. Non-operating expenses (net of
income) of $1 million were included in corporate general and administrative expense in 2016.
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
F-49
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLUOR CORPORATION
$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 was available to fund working capital in the ordinary course of business. This
replacement facility, which bore interest at EURIBOR plus .75%, expired in April 2017. Outstanding
borrowings of $53 million under the A125 million Revolving Credit Facility were repaid in the first quarter
of 2017.
The company completed its valuation of Stork’s assets and liabilities at the end of 2016. The aggregate
purchase price noted above was allocated to the major categories of assets acquired and liabilities assumed
based upon their estimated fair values as of the acquisition date. The 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 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 conjunction with the Stork acquisition has been reported in the Diversified Services segment.
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, 2017
Revenue
Cost of revenue
Earnings (loss) before taxes
Net earnings (loss)
Net earnings (loss) attributable to Fluor
Corporation
Earnings (loss) per share
Basic
Diluted
Year ended December 31, 2016
Revenue
Cost of revenue
Earnings (loss) before taxes
Net earnings
Net earnings attributable to Fluor
Corporation
Earnings per share
Basic
Diluted
$4,835.9
4,685.9
93.4
77.4
60.6
0.43
0.43
$
$4,423.9
4,168.1
189.2
119.0
$4,716.1
4,684.1
(23.9)
(6.6)
(24.0)
$ (0.17)
(0.17)
$4,856.1
4,607.9
181.4
120.0
104.3
101.8
$
0.75
0.74
$
0.73
0.72
$4,941.6
4,720.1
165.4
112.9
94.5
0.68
0.67
$
$4,766.9
4,729.7
(2.7)
17.4
4.8
0.03
0.03
$
$5,027.4
4,812.4
151.5
80.8
60.3
0.43
0.43
$
$4,989.6
4,740.5
178.7
71.0
70.5
0.51
0.50
$
Net earnings in the first, second and fourth quarters of 2017 were adversely affected by pre-tax
charges totaling $25 million (or $0.11 per diluted share), $194 million (or $0.89 per diluted share), and
$41 million (or $0.19 per diluted share), respectively, resulting from forecast revisions for estimated cost
growth at three fixed-price, gas-fired power plant projects in the southeastern United States. Net earnings
in the second, third and fourth quarters of 2017 were adversely affected by pre-tax charges totaling
$6 million (or $0.03 per diluted share), $9 million (or $0.04 per diluted share), and $29 million (or $0.13
per diluted share), respectively, resulting from forecast revisions for estimated cost increases on a
downstream project. Additionally, net earnings in the fourth quarter of 2017 were adversely affected by
$37 million (or $0.27 per diluted share) related to the recently enacted tax reform legislation in the United
States.
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
B R I D G I N G T H E G A P 2 0 1 7 A N N U A L R E P O R T
Shareholder Reference
Common Stock Information
At February 16, 2018, there were
139,907,306 shares outstanding and
approximately 4,687 shareholders of
record of Fluor’s common stock.
Registrar and Transfer Agent
Computershare
P.O. Box 505000
Louisville, KY 40233-5000
Telephone: (877) 870-2366
Web: www.computershare.com/investor
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,
2012, through December 31, 2017, 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, 2012,
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 Sappi McCoy Silk, Fluor saved the
following resources:
Trees: 8 trees planted
Water: 3,500 gallons
Solid Waste: 234 pounds
Greenhouse Gases: 646 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.
Unless indicated otherwise, all trade and
service marks are the intellectual property
of Fluor Corporation or its subsidiaries.
© 2018 Fluor Corporation.
All Rights Reserved.
$300
$200
$100
$0
2012
2013
2014
2015
2016
2017
Fluor
S&P 500
DJ Heavy
$100.00
$100.00
$100.00
$137.10
$105.44
$83.47
$131.86
$150.48
$152.55
$129.61
$97.77
$86.50
$94.38
$170.78
$106.71
$94.51
$208.05
$112.44
819586.indd 29
2/28/18 1:58 PM
F L U O R C O R P O R A T I O N
6 7 0 0 L A S C O L I N A S B L V D , I R V I N G , T X 7 5 0 3 9
F L U O R . C O M
819586.indd 30
2/28/18 1:58 PM