T R A N S F O R M A T I O N
T H R O U G H
I N N O V A T I O N
2 0 1 8
F L U O R A N N U A L R E P O R T
18
dularization
, operations, main
S E : F L R ) is one of
ation and
and
F L U O R C O R P O R A T I O N ( N Y
F L U O R C O R P O R A T I O N ( N Y S E : F L R )
bsidiariesries, ,
zation, operations
momodulari
is an integrated solutions provider for clients in a diverse set of industries worldwide, including oil and gas, chemicals and petrochemicals, mining and metals,
is an integrated solutions provider for clients in a diverse set of industries worldwide, including oil and gas, chemicals and petrochemicals, mining and metals,
transp
ts abroad,
t and other governmenments abroad,
transportation
and performs operations, maintenance and asset integrity activities globally for major industrial clients.
and performs operations, maintenance and asset integrity activities globally for major industrial clients.
s, providing engine
t servicviceses, on a global basis. Fluor, throu
al servicviceses firm firms, providin
ct management ser
, fabrication
gh its operating sug subsidia
the largest profes
tegrity, as well as proje
, on a global basis. Fluor, through its operatin
deral governmenment and other govern
ty, as well as project managemen
and advanced manufacturin
ienceses and advanced manuf
g engineerinering, procuremen
to the U.S. federal govern
tenance and asset in integri
, maintenance and asset
e provider to the U.S. fe
acturing. Fluor is also
t, constructructiontion, fabric
g, procurement, cons
g. Fluor is also a ser
ortation, power, life
is one of the larges
a servicvice provider
, power, life sc scienc
t professionsional ser
ding statemenents ab
tainties, incluluding statem
F O R W A R D - L O O K I N G S T A T E M E N T S
F O R W A R D - L O O K I N G S T A T E M E N T S
sks and
volving rig risks and
uncuncerertainties, inc
tiatives. These e
s, backlog level
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
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
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 di
the Form
lts can be found innd in the Form
may differffer materia
10-K that follows this annual report, under the heading “Item 1A. Risk Factors.”
10-K that follows this annual report, under the heading “Item 1A. Risk Factors.”
This annual report contains statemen
This annual report contains
et outlookook, ne, new award
titute forward-looking statemen
tation of stra
implemenentation
ts involvin
tegic initiatives. Thes
ts that may constitute forward-lookin
concernining factors that may in
statements that may cons
e Fluor’s results can be fou
g factors that may influenc
lly from our expectations
ctions. Ad. Addiditiontional inform
r expectations or proje
fluence Fluor’s resu
materially from ou
klog levels, comp
g statements in
out market outl
of strategic ini
etition, an, and the
w awards, bac
ts about mark
s, competition
or projections
al information
d the implem
ation concern
2 0 1 8
A N N U A L R E P O R T
02 SHAREHOLDER LETTER
10 TIMELINE
12 ENERGY & CHEMICALS
14 MINING, 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
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T R A N S F O R M A T I O N T H R O U G H I N N O V A T I O N
1
DAVID T. SEATON
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
2
2 0 1 8 A N N U A L R E P O R T
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T O O U R V A L U E D S H A R E H O L D E R S
2018 We have entered into a new paradigm
of client behavior, in which operators are shifting
more responsibility to the contractors who serve
them. Fluor has responded.
We are investing in new systems, new tools
growth plans, as well as the assurance our
and new data-driven approaches. We are the
clients need that we have the resources to deliver
preferred contractor in our industry because of
on their projects. There are few companies in
our commitment to safety, cost-competitive
the world with the scope, scale and expertise
innovation and execution excellence.
to handle the most complex challenges, and Fluor
In 2018, Fluor continued to transform itself to
operate at the forefront of rapidly changing global
Every day, in everything we do, we are propelled
markets and build long-term sustainable growth
by Fluor’s purpose: We transform the world by
is committed to remaining at the top of the list.
for our stakeholders.
building prosperity and empowering progress.
This purpose drives a culture of innovation that
Throughout the year we saw ongoing strength in
allows us to heighten safety, to raise project
worldwide economies and a trend of steady growth
certainty for our clients, and to execute with
in the segments we serve. As in previous years, Fluor
excellence. The types of projects we take on
remained focused on its long-term strategies, and
advance economies and elevate populations
our commitment has been rewarded.
all over the world. We know that focusing on this
greater purpose is what ultimately drives long-
As we enter 2019, we will persist in practicing
term profitability and shareholder value.
balance sheet discipline, giving Fluor the strong
foundation we need to support our long-term
0
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5
.
9
1
2
.
9
1
2016
2017
2018
R E V E N U E ( D O L L A R S I N B I L L I O N S )
FINANCIAL RESULTS
In 2018, new awards more than
doubled to $28 billion with
significant awards in several
of our key end markets.
Ending backlog was
$40 billion, a 29-percent
improvement over last year.
Our net earnings were
$225 million, or $1.59 per
diluted share, which were
hampered by performance
issues on a few projects.
Fluor’s revenue for the year
was $19.2 billion, compared
to $19.5 billion for 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 I O N
S O U T H E R N G AT E W AY
D A L L A S , T E X A S — U S A
We are the preferred
contractor in our industry
because of our
commitment to safety,
cost-competitive innovation
and execution excellence.
T R A N S F O R M A T I O N T H R O U G H I N N O V A T I O N
3
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L E T T E R T O S H A R E H O L D E R S ( C O N T I N U E D )
We remain steadfast and are committed
to preserving a solid financial structure
and returning capital to shareholders.
Fluor continued to protect the strength of its balance
sheet, ending the year with $2.0 billion in cash
2018 ACCOMPLISHMENTS
Throughout the year we made significant progress
and marketable securities. During the year we paid
across all Fluor business segments. After a near
$119 million in dividends and had share repurchases
decade-long slump, we are seeing a resurgence in
of $50 million. Client spending has been curtailed
oil and gas spending and several larger projects
over the last five years. Even with this downward
trend, we repurchased $1.5 billion of our shares in
that period. We remain steadfast and are committed
moving forward for our Energy & Chemicals group.
We achieved first steam on our Clean Fuels
megaproject for Kuwait National Petroleum
to preserving a solid financial structure and returning
Company, a project characterized by outstanding
capital to shareholders.
We continue to reduce costs where possible,
always seeking to maintain the right overhead
structure to build our company for optimal
competitiveness. This includes our approach
execution, and we are scheduled for final delivery in
early 2019. Our team completed a series of massive
topside modules at the COOEC-Fluor fabrication
yard and delivered them to the Huizhou Oilfield
development project in the South China Sea. Our
investments in innovation also were instrumental in
toward optimizing our core office space, with further
a Fluor-led joint venture being awarded a $14 billion
reductions planned over the next few years.
contract to design and build LNG Canada’s new export
facility. Using advanced analytics and our Zero Base
ExecutionSM approach, we are able to minimize risk,
introduce rigorous cost control and offer an integrated
0
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0
4
solution utilizing the COOEC-Fluor fabrication yard.
We see this as a momentous entry into the growing
9
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0
3
7
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LNG market, where we believe we are now well
positioned to compete and win.
Our Mining, Industrial, Infrastructure and Power
group also achieved strong growth. Mining was
a particular highlight. Since 2016, our mining
backlog has grown from $500 million to over
$7 billion. Major awards for 2018 include the full EPC
on the Quellaveco copper mega mine in Peru and
Australia’s largest-ever iron ore processing facility
for BHP. Our data indicates that mining is in the first
wave of a robust two-phase recovery.
0
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5
4
0
.
1
2
6
.
2
1
AW A R D S
B A C K L O G
2016
2017
2018
C O N S O L I D A T E D N E W A W A R D S
& B A C K L O G ( D O L L A R S I N B I L L I O N S )
24
2 0 1 8 A N N U A L R E P O R T
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U S A C E P U E R T O R I C O P O W E R R E S T O R AT I O N
— P U E R T O R I C O
C B G B A U X I T E P R O D U C T I O N E X P A N S I O N
K A M S A R — G U I N E A
P E T R O N A S R E F I N E R Y A N D P E T R O C H E M I C A L
I N T E G R AT E D D E V E L O P M E N T ( R A P I D )
J O H O R — M A L A Y S I A
T R A N S F O R M A T I O N T H R O U G H I N N O V A T I O N
5
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L E T T E R T O S H A R E H O L D E R S ( C O N T I N U E D )
P U R P L E L I N E L I G H T R A I L P R O J E C T
M O N T G O M E R Y C O U N T Y A N D P R I N C E G E O R G E ’ S C O U N T Y , M A R Y L A N D — U S A
When it comes time to build
and manage the biggest,
most difficult projects on Earth,
clients turn to Fluor.
A D O T L O O P 2 0 2
S O U T H M O U N TA I N F R E E W AY
P H O E N I X , A R I Z O N A — U S A
26
2 0 1 8 A N N U A L R E P O R T
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In 2019, we will be focused on the execution of these
In our Diversified Services segment, we continue
large projects and on FEED and feasibility studies
to grow our presence in the OpEx-driven facility
leading into the second wave of major awards,
maintenance and asset management services
which is expected to begin in 2020. Fluor is involved
sector through our Stork business. Stork secured a
now, and we are optimistic that we are in a leading
number of new awards, most significantly a two-year
position to win major upcoming work.
extension to provide asset integrity services on
three offshore production platforms in the North Sea.
In 2018, we opened the Governor Mario M. Cuomo
Bridge to serve busy New York traffic, and we
opened the A27/A1 Motorways in the Netherlands
TRENDS AND TRANSFORMATION
In the last five years we have seen a cultural shift in
two months ahead of schedule. We were awarded
the way clients want to structure large EPC projects,
the Gordie Howe International Bridge that will
with an increasing preference for fixed-price or
connect Detroit and Windsor, Canada, and the Los
hybrid contracts. Successful execution of these
Angeles International Airport awarded us a 30-year
higher-margin opportunities requires new, innovative
design, build, finance, operate and maintain contract
approaches to project management that only
for its Automated People Mover. In December the
companies like Fluor can accomplish.
Chicago Transit Authority selected Fluor to modernize
its heavily traveled Red & Purple Rail Lines.
We are achieving this by continuing to expand and
refine our integrated solutions offering. Fluor remains
We enter 2019 with an infrastructure backlog of
focused on fabrication, modularization and direct-hire
$6.3 billion. Going forward, we will continue to
construction. We continuously seek and hire the best
pursue select opportunities in geographies where
people at all levels of our organization and deploy
we can bring unique value and earn strong margins.
them efficiently across our business segments to bring
In December, our power business line placed into
the best value to the company and our clients.
service two gas-fired projects in Florida and Virginia.
This segment will now mainly focus on opportunities
Through integrated solutions, clients are able to
in renewable power generation.
rely on Fluor more comprehensively, which helps
increase the capital efficiency of their projects
Fluor’s Government group was characteristically
while reducing budget and schedule risk. Using the
active in 2018. We finished our deployment to Puerto
strength of our balance sheet, we are able to be
Rico in the aftermath of Hurricane Maria, where we
selective in pursuing those projects with good,
mobilized 3,300 personnel to restore power to a
long-term financial profiles, leading to greater
quarter-million citizens across the island. The group
earnings potential, higher margins and increased
also secured several important new awards. The
share in the markets we serve.
Department of Energy extended our decontamination
and decommissioning work at the Portsmouth
We continue to refine and improve our approach to
Gaseous Diffusion plant through 2021, and extended
executing fixed-price projects. In 2018 we introduced
our management and operating contract for the
an advanced governance process which employs
U.S. Strategic Petroleum Reserve into 2024.
technology that can vastly improve predictability
on complex projects. We are using predictive data
Fluor advanced its strategy to win more National
analytics supported by IBM Watson to assist in every
Nuclear Security Administration laboratory
stage, from bidding to real-time tracking throughout
work with a 10-year contract for the Naval
the project, by learning from over 100 completed
Nuclear Laboratory and an award to perform
Fluor projects and what their success teaches us.
capital construction on the Los Alamos National
We believe the creation of these tools and processes
Laboratory. We also continue to see significant
will help us identify risks sooner and provide a
opportunities in supporting customers through
path toward preserving project profitability.
Fluor’s secured services business.
Fluor’s ongoing transformation has been well
founded. While we knew back in 2011 that the
commodity super cycle was coming to an end,
no one could foresee the severity of the commodity
C U S I A N A A N D C U P I A G U A
O & M C O N T R A C T
C U S I A N A A N D C U P I A G U A — C O L O M B I A
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T R A N S F O R M A T I O N T H R O U G H I N N O V A T I O N
7
L E T T E R T O S H A R E H O L D E R S ( C O N T I N U E D )
L E T T E R T O S H A R E H O L D E R S ( C O N T I N U E D )
2018 was a year of great transformation,
but our journey is just beginning.
price collapse and the length of the downturn. In the
In closing, I would like to thank Fluor’s board of
face of these prevailing conditions we did the hard
directors for their robust involvement in helping
work of transformation, and we have separated Fluor
us overcome the challenges we faced in 2018
from the pack more than ever.
and setting our course for the future. We have an
exceptional, strategically minded board with a
Over the past few years we have seen significant
highly engaged and well-informed approach to
industry consolidation. While others have been
guiding our company.
preoccupied with the integration of internal systems
and cultures, Fluor has been intently focused on
Finally, thank you to Fluor’s worldwide family of
meeting the changing needs of its clients. Today’s
employees. We faced a few challenged projects in
operating environment is more challenging than ever.
2018 that tested our resolve, and we learned from
There has been fundamental and permanent change,
them. Yet, we also successfully executed hundreds
leaving no room for error. Clients are demanding more,
of projects for our clients according to plan, and
and fewer companies can deliver. Fluor can. When it
we delivered as promised. The resiliency of this
comes time to build and manage the biggest, most
company continues to humble me, and it stems from
difficult projects on Earth, clients turn to Fluor. Through
the dedication of our people.
transformation, we have strengthened our position.
OUR OUTLOOK
2018 was a year of great transformation, but our
journey is just beginning. Going forward, we will
continue to innovate our offering to pursue and win
the world’s most select and profitable projects.
Even beyond the factors that we can control, there
Chairman & Chief Executive Officer
are reasons to be optimistic. New tax policy has
March 4th, 2019
DAVID T. SEATON
been established and the regulatory environment
has stabilized, which is attracting a new wave of
manufacturing back to the United States. This clearly
plays to Fluor’s strengths, given our long heritage of
domestic manufacturing projects.
Client confidence is not limited to the United States.
Emboldened by the robust global economy,
operators in Fluor segments around the world are
unlocking larger, longer-term projects. We are
reaping the benefits of their vision for the future.
We continue to differentiate Fluor as the company
that can go anywhere and do anything, no matter
how big, how remote or how complex the project.
We also continue to differentiate ourselves by hiring
the best talent in the markets we serve.
28
2 0 1 8 A N N U A L R E P O R T
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C O N S O L I DAT E D B AC K LO G BY R E G I O N
B AC K LO G BY S E G M E N T
41 %
A M E R I C A S
7 %
A S I A PA C I F I C
& A U S T R A L I A
11 %
G O V E R N M E N T
6 %
D I V E R S I F I E D
S E R V I C E S
23 %
E U R O P E , A F R I C A
& M I D D L E E A S T
29 %
U N I T E D S TAT E S
38 %
M I N I N G ,
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
45 %
E N E R G Y &
C H E M I C A L S
P H O T O C O U R T E S Y O F M A R A T H O N P E T R O L E U M C O R O P O R A T I O N
M A R AT H O N P E T R O L E U M C O R P O R AT I O N S O U T H
T E X A S A S S E T R E P O S I T I O N I N G ( S TA R ) P R O G R A M
T E X A S C I T Y , T E X A S — U S A
T R A N S F O R M A T I O N T H R O U G H I N N O V A T I O N
9
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2018
2018
APRIL
JAN
Launched Safer Together –
our definitive commitment to foster a caring,
prevention-focused safety culture across
the Fluor organization.
Fluor named a FortuneTM World’s
Most Admired Company for 18th Consecutive Year.
FEB
JUNE
and maintain the Los Angeles International Airport
Fluor selected to build, operate
First modules
shipped from COOEC-Fluor fabrication yard
in China to our Kuwait Clean Fuels project.
At year’s end, 80 modules had been shipped,
Automated People Mover, including six stations that connect
bringing the project to 85% completion.
airport facilities and Metro transit to airline terminals.
MAR
JUNE
Fluor completes Puerto
Rico re-electrification project, rebuilding
destroyed grid infrastructure and restoring
power to 250,000 customers.
Fluor awarded contract
for BHP South Flank, the largest iron
ore processing facility ever built in
Western Australia.
APR
JULY
Fluor awarded contract for
mechanical construction of MEGlobal’s new monoethylene
glycol (MEG) manufacturing facility in Freeport, Texas.
2 0 1 8 A N N U A L R E P O R T
2 0 1 8 A N N U A L R E P O R T
Fluor awarded a 10-year contract
for the Naval Nuclear Laboratory with four primary
facilities in New York, Pennsylvania and Idaho.
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JULY
AUG
06
SEPT
SEPT
18
SEPT
Fluor selected as
the preferred contractor to design, build,
finance, operate and maintain the Gordie
Howe International Bridge connecting
Detroit to Windsor, Canada.
KNPC Clean Fuels Project
achieved 60 million work hours without
a lost-time incident.
Awarded contract to
design and build the Quellaveco
copper mega mine in Peru.
OCT
NOV
Final investment
decision reached on LNG Canada, the largest
energy investment in Canadian history
and Fluor’s strategic entry into LNG markets.
Opened the final
Connect 202
span of the Governor Mario M. Cuomo
Bridge, one of the largest single design-
Partners, a Fluor-led joint venture,
placed the largest bridge girder in Arizona
build contracts for a transportation project
history, at 177 feet and 178,200 pounds.
in the United States and the largest
bridge project in New York state history.
DEC
Contract extended
to 2024 to manage and operate the
U.S. Department of Energy’s Strategic
Petroleum Reserve.
In 2018, under Fluor’s
LOGCAP IV contract with the U.S. DOD,
Fluor served 66,100 meals, provided
240,000 gallons of fuel, and maintained
15,400 sleeping quarters.
T R A N S F O R M A T I O N T H R O U G H I N N O V A T I O N
T R A N S F O R M A T I O N T H R O U G H I N N O V A T I O N
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E N E R G Y & C H E M I C A L S
Strategically Shifting
with Market Demands
C O O E C - F L U O R H E A V Y
I N D U S T R I E S C O . , LT D
F A B R I C AT I O N YA R D
Z H U H A I — C H I N A
S A S O L E T H A N E C R A C K E R
A N D D E R I V AT I V E S P R O J E C T
W E S T L A K E , L O U I S I A N A — U S A
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E & C | Y E A R I N R E V I E W
Clients today are
demanding capital efficiency
and execution certainty
on their projects.
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20 16
20 17
20 18
N E W A W A R D S & B A C K L O G
( D O L L A R S I N B I L L I O N S )
AWARDS
BACKLOG
5
2
4
6
6
3
7
3
3
20 16
201 7
2 01 8
S E G M E N T P R O F I T
( D O L L A R S I N M I L L I O N S )
Following a multi-year decline in spending
across the oil & gas segment, we believe 2018
signaled an inflection point as we began to
see final investment decisions and a marked
recovery in our client capital expenditures. While
this recovery is different from the days of peak
oil, with a new energy mix beginning to emerge,
operators across the segment are adapting and
evolving to develop these new resources.
For the past five years we have seen clients
shift their focus to large, complex, multi-phase
projects, particularly in liquefied natural gas.
We have been hard at work building up our LNG
capabilities and are well positioned for the coming
wave of LNG development around the world.
We have transformed Fluor through innovation,
and in 2018 we saw strong evidence that our
P E T R O N A S R E F I N E R Y A N D P E T R O C H E M I C A L
I N T E G R AT E D D E V E L O P M E N T ( R A P I D )
J O H O R — M A L A Y S I A
integrated solutions strategy is working when
Clients today are demanding capital efficiency
we were awarded the LNG Canada project.
and execution certainty on their projects. Through
This project will use all aspects of our integrated
our integrated EPFC (Engineering, Procurement,
solutions model, including engineering,
Fabrication and Construction) solutions, and
procurement, fabrication, modularization,
and a direct-hire construction workforce.
unique innovations such as Zero Base Execution
that can significantly reduce project costs without
The Energy & Chemicals group also is
compromising operational function, Fluor is
seeing significant new downstream opportunities,
delivering solutions to our clients that make their
particularly in Asia where the rise of an
facilities economically viable in any market cycle.
increasingly affluent middle class is driving
As competitors continue to consolidate and
demand for transportation fuels. We are
exit energy markets globally, Fluor remains
participating in the FEED stages now, with strong
committed to serving clients in this space, as we
confidence that we are positioned to capture
have for more than a century. We are collaborating
the follow-on EPCM project work.
with clients to raise their confidence, solve
The petrochemicals market in the United States
their challenges and execute their projects,
continues to progress, with demand for additional
crackers and derivative units. Fluor is currently
building long-term, high-value and high-
volume relationships.
engaged in the early phases of several of these
investment programs as they move from FEED to EPC.
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T R A N S F O R M A T I O N T H R O U G H I N N O V A T I O N
1 3
M I N I N G , 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
Seeing the Results
of Focus and Discipline
2018 was a year of dramatic growth in our Mining,
Industrial, Infrastructure and Power segment,
with Fluor winning and delivering large, complex
projects around the world.
In 2018, our Mining group saw the traction
we have been long preparing for. Leveraging our
deep experience in mining, we knew when and
where the recovery would take place and which
clients would lead the way, and we were able to
move quickly and capitalize, securing a number
of new FEED and EPC awards.
Mining investment decisions are driven by
decade-long supply and demand outlooks.
As urbanization continues and industrialization
escalates, increased demand is inevitable. Fluor
is at the forefront of helping clients satisfy the
supply side of the equation.
Mines of the future will be even more remote and
logistically complex. Declining grades means clients
will need to move more material to extract the same
amount of ore, which in turn drives the need for larger
facilities. These are the mega projects where Fluor
stands apart. A great example of this is the $4 billion
Quellaveco project we were awarded in 2018, in one
of the world’s largest undeveloped copper resources
C B G B A U X I T E
P R O D U C T I O N
E X P A N S I O N
K A M S A R — G U I N E A
S C D O T P O R T
A C C E S S R O A D
C H A R L E S T O N ,
S O U T H C A R O L I N A — U S A
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M I I P | Y E A R I N R E V I E W
Fluor continues to win
opportunities to support
renewal of severely
aged infrastructure.
3
.
5
1
8
.
0
1
6
.
9
4
.
6
1
7
.
7
0
.
4
20 16
20 17
20 18
N E W A W A R D S & B A C K L O G
( D O L L A R S I N B I L L I O N S )
AWARDS
BACKLOG
1
7
1
1
4
1
-
4
1
-
20 16
201 7
2 01 8
S E G M E N T P R O F I T
( D O L L A R S I N M I L L I O N S )
located in the southern region of Peru. Fluor was
selected for our engineering and process expertise,
our global supply chain reach, and our proven
ability to manage and deploy over 10,000 people
at altitude in the remote Andean mountains.
Few, if any, can match us.
“Organize with a Purpose” was the goal of
our early 2018 strategic evaluation of the Mining,
Industrial, Infrastructure and Power groups. The
resulting transformational changes saw us refocus
and the results have been dramatic. Our Infrastructure
business has a number of significant light rail projects
in North America and continues to grow in road/
highway work through our Fluor Heavy Civil unit.
Furthermore, Fluor has solidified its reputation for
delivering large signature bridges with the award of
G R I F O L S N O R T H F R A C T I O N AT I O N
B I O T E C H F A C I L I T Y – E P C
C L A Y T O N , N O R T H C A R O L I N A — U S A
the Gordie Howe International Bridge connecting the
be robust in the long term, driven by an aging
United States and Canada. Fluor continues to win
population and their demand for treatments and
opportunities to support renewal of severely aged
medications. We will continue to invest in our
infrastructure. We are selectively pursuing large
Life Sciences capabilities, driven by our belief in
transit projects under public-private partnership
the long-term potential of this segment.
(P3) structures in strong markets and geographies
where we have established capabilities. While many
Our 2018 strategic review also identified
significant opportunities in renewable power
competitors are exiting P3 markets, Fluor is gathering
segments, and more importantly also indicated that
strength in the space, bolstered by our robust balance
there is greater synergy in having the renewable
sheet, our brand and our broad capabilities.
power capability within our Infrastructure business.
Our Industrial group was bifurcated into a Life
Accordingly, under the auspices of organizing
Sciences unit and an Advanced Manufacturing
with a purpose, we dissolved the existing Power
unit, and we have opened new doors in these fast-
group and redeployed their renewable capabilities
growing segments in areas such as data centers
to Infrastructure.
and composite materials. We also continue to
In 2018, Fluor’s two remaining gas-fired projects
progress well on the largest life sciences project
both achieved commercial in-service status, signaling
being built in the world today. In life sciences,
the number of blockbuster FDA drug approvals
our exit from the fixed-price gas-fired market in the
United States. NuScale, Fluor’s small modular reactor
has decreased, indicating a slowdown in large
(SMR) business, continued to move forward. We
capital expenditures in the short term. Yet there
achieved phase one of the NRC review process in
is an increase in smaller, single-use facilities, for
2018, and we are positioning NuScale with potential
which Fluor is very well positioned. Demand for
investors as we move toward NRC certification.
life sciences facilities generally will continue to
T R A N S F O R M A T I O N T H R O U G H I N N O V A T I O N
1 5
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G O V E R N M E N T
Supporting Missions
that Must Succeed
In 2018, our government customers continued to
trust Fluor for their critical missions. We continue
to be awarded significant contracts because
our customers need the commercially-focused
approach and integrated solutions we apply
across our business lines.
Fluor’s reputation in the government space
is built on our ability to deliver large, complex
projects that meet our customers’ stringent
requirements. We are trusted to provide
transparency, accountability and mission
assurance, demonstrating we are good
stewards of the taxpayer’s money.
We have identified the National Nuclear
Security Administration (NNSA) and select national
laboratories as promising strategic markets,
and we are experiencing solid growth on both
fronts. In 2018 we secured contracts for the Los
Alamos National Laboratory (LANL) and also the
Naval Nuclear Laboratory (NNL), both 10-year
contracts with NNSA scope. The Los Alamos
contract in particular is an example of how our
One Fluor approach offers a winning commercial
solution to our government customer. We bring
expertise, innovation and self-perform construction
capabilities from across the company in response
to national security challenges. The award of LANL
and NNL adds to our already existing lab portfolio,
which includes the Savannah River National
U S D E P T O F N A V Y
A N D N N S A N A V A L
N U C L E A R L A B O R AT O R Y
— U S A
N N S A L O S A L A M O S
N AT I O N A L L A B O R AT O R Y
L OS A L A MOS, NE W ME X ICO — US A
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G O V T | Y E A R I N R E V I E W
We couldn’t be
more proud to serve
those who serve.
2
.
5
6
.
4
6
.
4
1
.
4
8
.
3
6
.
2
20 16
20 17
20 18
N E W A W A R D S & B A C K L O G
( D O L L A R S I N B I L L I O N S )
AWARDS
BACKLOG
9
7
1
8
2
1
5
8
20 16
201 7
2 01 8
S E G M E N T P R O F I T
( D O L L A R S I N M I L L I O N S )
Laboratory, for which we received a contract
extension earlier this year, and the Canadian
Nuclear Laboratories.
Other extensions received in 2018 include
the U.S. Department of Energy’s contracts for
management and operations of the Strategic
Petroleum Reserve, the Savannah River Site, and
the decontamination and decommissioning project
at Portsmouth. We also received extensions on
two key contracts with the U.S. Army. Those are
the Rock Island Arsenal base operations support
contract and the Logistics Civil Augmentation
Program IV (LOGCAP IV).
These extensions testify to the exemplary
performance and dedication of our people.
This is particularly evident with those who support
our troops in Afghanistan, Africa and elsewhere
far from home. Our employees work side by side
with our customers in dangerous, difficult conditions
where there is no option for mission failure. We
are proud to be part of this mission and to serve
those who serve.
We were also honored to use our world-class
contingency expertise to help restore power to
Puerto Rico after Hurricane Maria. We deployed
more than 3,000 personnel and 2,000 pieces of
equipment to bring power back to the ravaged
island. Our ability to respond to large-scale
disasters and humanitarian crises continues to win
the confidence of government agencies. In 2018
we doubled our FEMA business by securing a
number of new task orders. These awards include a
five-year public assistance contract to serve FEMA
zone one, the perennially storm-active East Coast,
another validation of our readiness to act in force
when emergencies arise. We are also supporting
continued FEMA recovery efforts in Puerto Rico.
Moving forward, we see substantial
opportunities across our chosen government
sectors. We are positioned to pursue the $50
billion, multi-decade liquid waste cleanup market,
U S A C E P U E R T O R I C O P O W E R R E S T O R AT I O N
— P U E R T O R I C O
building an impressive roster of experienced
talent renowned in the segment. We also have the
experience and demonstrated capability that the
U.S. military requires as it evolves its response to
future global conflicts. As new mission support
contracts are awarded, we are well situated to
win work anywhere in the world. Additionally, we
continue to support classified agencies across a
spectrum of activities and have been capturing new
work by providing the exacting performance these
customers expect. Fluor’s government business
has grown to be among the leading contractors in
the sectors in which we operate. We are recognized
as a dedicated, capable provider of the critical
services our federal customers need in order to
complete their missions. We bring the best solutions
and people to the challenge – wherever, whenever.
Our customers can’t risk failure. Fluor delivers the
assurance they demand.
T R A N S F O R M A T I O N T H R O U G H I N N O V A T I O N
1 7
934051_TXT.indd 17
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D I V E R S I F I E D S E R V I C E S
Delivering Value
Through Best Practices and Innovation
M E C H A N I C A L A N D
P I P I N G S E R V I C E S
— P E R U
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K G H M S I E R R A
G O R D A M I N E
A N T OFA G A S TA — CHIL E
D S | Y E A R I N R E V I E W
We finished the year with a very
clear picture of who we are
and where we should concentrate
our efforts and investments.
9
.
2
8
.
1
5
.
12
.
2
3
.
2
0
.
2
AWARDS
BACKLOG
4
3
1
2
2
1
0
0
1
20 16
20 17
20 18
N E W A W A R D S & B A C K L O G
( D O L L A R S I N B I L L I O N S )
20 16
201 7
2 01 8
S E G M E N T P R O F I T
( D O L L A R S I N M I L L I O N S )
In 2018, Diversified Services took definitive steps
to ensure the group remains competitive and
differentiated, and offers the best platform to
serve our clients and capture more share of the
O&M market. We finished the year with a very
clear picture of who we are and where we should
concentrate our efforts and investments.
When we acquired Stork in 2016, our
goal was to increase our exposure to clients
on the OpEx side of the business. While
we accomplished this goal, the timing was
challenged. That year began a trend of
customers reducing maintenance programs and
deferring major maintenance and modifications
E & I I N T E G R I T Y S E R V I C E S
— U N I T E D K I N G D O M
to enhance their profitability. While Stork
In 2018, we applied a similar discipline to
maintained profitability in 2017 and 2018,
transform our AMECO business. We optimized the
this new paradigm required us to shape the
spending and fleet utilization using telematics data
business for better performance.
and reporting. We shifted our geographic focus to
We transformed. While we still expect growth
high-return areas. We continued to support Fluor
from our base business, in 2018 we implemented
projects and we grew our base of external work,
mechanisms that bring a high level of discipline to
landing significant contracts with Southern Nuclear,
our business development process. We put 12 of
these mechanisms in place to measure and guide
Vistra Energy and Suncoke.
Fluor’s TRS staffing business flourished in 2018,
progress on our most important opportunities
achieving success by supporting both Fluor and
and initiatives, while continuing to grow our base
external projects across several sectors. A growing
business at a rate suitable for that marketplace.
global economy, coupled with shortages in high-
The system uses incremental reviews to measure
level engineering talent, bodes well for TRS.
traction and determine if we want to maintain
Going forward, we will continue to apply
progress, accelerate efforts, or in some cases exit.
analytical focus and capital discipline to grow
Through this combined growth approach, we
revenue and profitability. We will continue to
believe Stork is now in position to simultaneously
build One Fluor synergies where appropriate,
increase revenue and maintain a stable cost
allowing Stork clients to reach back into the
structure in high-potential regions – the right
formula for profitable growth. We also believe
greater organization for engineering expertise on
their modification projects, and allowing Fluor to
we have struck the right balance in the integration
introduce the Stork O&M integrated solution to its
of Stork into Fluor.
clients during the early stages of its EPC projects.
934051_TXT.indd 19
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T R A N S F O R M A T I O N T H R O U G H I N N O V A T I O N
1 9
N E W AWA R D S A N D B A C K L O G D ATA
N E W AWA R D S A N D B A C K L O G D ATA
N E W AWA R D S BY S E G M E N T
Year Ended December 31
($ in millions)
Energy & Chemicals
Mining, Industrial, Infrastructure & Power
Government
Diversified Services
Total New Awards
N E W AWA R D S BY R E G I O N
Year Ended December 31
($ in millions)
United States
Europe, Africa and Middle East
Americas
Asia Pacific & Australia
Total New Awards
B AC K LO G BY S E G M E N T
Year Ended December 31
($ in millions)
Energy & Chemicals
Mining, Industrial, Infrastructure & Power
Government
Diversified Services
Total Backlog
B AC K LO G BY R E G I O N
Year Ended December 31
($ in millions)
United States
Europe, Africa and Middle East
Americas
Asia Pacific (incl. Australia)
Total Backlog
2
2 0 1 8 A N N U A L R E P O R T
2 0 1 8 A N N U A L R E P O R T
2017
2016
$ 3,950
4,040
2,569
2,007
31%
32%
21%
16%
$ 6,878
7,744
4,562
1,775
33%
37%
22%
8%
$ 12,566
100%
$ 20,959
100%
2017
2016
$ 5,868
3,940
1,808
950
47%
31%
14%
8%
$ 11,272
8,681
715
291
54%
42%
3%
1%
$ 12,566
100%
$ 20,959
100%
2017
2016
$ 15,113
9,580
3,771
2,451
49%
31%
12%
8%
$ 20,549
16,397
5,194
2,872
46%
36%
12%
6%
$ 30,915
100%
$ 45,012
100%
2017
2016
$ 12,908
13,420
2,923
1,664
42%
44%
9%
5%
$ 23,188
16,732
3,135
1,957
52%
37%
7%
4%
$ 30,915
100%
$ 45,012
100%
934051_TXT.indd 20
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C O N S O L I DAT E D O P E R AT I N G R E S U LT S
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
NET EARNINGS
Basic earnings (loss) per share attributable to Fluor Corporation:
Earnings from continuing operations
Loss from discontinued operations, net of taxes
NET EARNINGS
Diluted earnings (loss) per share attributable to Fluor Corporation:
Earnings from continuing operations
Loss from discontinued operations, net of taxes
NET EARNINGS
Cash dividends per common share declared
Return on average shareholders’ equity
C O N S O L I DAT E D F I N A N C I A L P O S I T I O N
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
4.25% Senior Notes
1.5% Convertible Senior Notes
Revolving Credit Facility
Other debt obligations
Shareholders’ equity
Total capitalization
Common shares outstanding at year end
OT H E R 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
S E L E C T E D F I N A N C I A L D ATA
S E L E C T E D F I N A N C I A L D ATA
2017
2016
2015
2014
$ 19,521.0
$ 19,036.5
$ 18,114.0
$ 21,531.6
386.4
546.6
726.6
1,204.9
$ 191.4
$ 281.4
$ 191.4
$ 281.4
$ 1.37
$ 2.02
$ 1.37
$ 2.02
$ 1.36
$ 2.00
$ 1.36
$ 0.84
5.9%
$ 2.00
$ 0.84
9.1%
$ 418.2
(5.7)
$ 412.5
$ 2.89
(0.04)
$ 2.85
$ 2.85
(0.04)
$ 2.81
$ 0.84
13.6%
$ 715.5
(204.6)
$ 510.9
$ 4.54
(1.30)
$ 3.24
$ 4.48
(1.28)
$ 3.20
$ 0.84
20.1%
$ 5,601.3
$ 5,610.3
$ 5,105.4
$ 5,417.8
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
$ 12,565.6
$ 20,959.2
$ 21,846.2
$ 28,831.1
30,915.4
283.1
602.0
(484.3)
(215.5)
31,951
24,755
56,706
45,011.9
235.9
705.9
(741.4)
(10.4)
28,681
32,870
61,551
44,726.1
240.2
849.1
(66.5)
(728.2)
27,195
11,563
38,758
42,481.5
324.7
642.6
(199.1)
(666.4)
27,643
9,865
37,508
Net earnings attributable to Fluor Corporation in 2018 included pre-tax charges totaling $188 million (or $1.02 per diluted share) resulting from forecast revisions for estimated cost growth at a fixed-price gas-fired
power plant project, pre-tax charges totaling $133 million (or $0.89 per diluted share) for estimated cost and schedule impacts on a fixed-price downstream project, and pre-tax charges totaling $40 million (or $0.23
per diluted share) resulting from forecast revisions for estimated cost growth on a fixed-price, offshore project. Net earnings attributable to Fluor Corporation in 2018 also included a pre-tax gain of $125 million (or
$0.77 per diluted share) on the sale of the company’s interest in a joint venture in the United Kingdom. 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 adverse impact of U.S. tax reform legislation enacted in 2017 of $37 million (or $0.27 per diluted share). See page 33
of our form 10-K for all explanatory footnotes relating to this selected financial data.
T R A N S F O R M A T I O N T H R O U G H I N N O V A T I O N
T R A N S F O R M A T I O N T H R O U G H I N N O V A T I O N
934051_TXTcx.indd 21
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YE ARS IN PARENTHESES INDICATE THE YE AR E ACH OFFICER JOINED FLUOR.
2
2 0 1 8 A N N U A L R E P O R T
2 0 1 8 A N N U A L R E P O R T
934051_TXTcx.indd 22
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B O A R D O F D I R E C T O R S
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)
David T. Seaton
Chairman and
Chief Executive Officer
of the Company;
Director of The Mosaic
Company (2011) (1)
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)
Peter K. Barker
Former California
Chairman, JP Morgan
Chase & Co.; Director
of Avery Dennison
Corporation & Franklin
Resources, Inc.
(2007) (1) (2) (4)
Nader H. Sultan
Senior Partner, F & N Consulting
Company; former Chief
Executive Officer of Kuwait
Petroleum Corporation;
Non-Executive Chairman of
Ikarus Petroleum Industries
Company (2009) (2) (3)
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)
Rosemary T. Berkery
Former Vice Chair, UBS Wealth
Management Americas and
Former Chair, UBS Bank USA;
Director of The TJX Companies,
Inc. (2010) (3) (4)
Lynn C. Swann
Athletic Director,
The University of
Southern California;
Director of Evoqua Water
Technologies Corp.
(2013) (2) (3)
Matthew K. Rose
Executive Chairman,
Burlington Northern
Santa Fe, LLC; Director
of AT&T, Inc. (2014) (2) (4)
Deborah D. McWhinney
Former Chief Executive Officer
and Chief Operating Officer
of Global Enterprise Payments
at Citigroup Inc.; Director
of BorgWarner Inc., Focus
Financial Partners Inc. and
IHS Markit Ltd. (2014) (2) (3)
Admiral Samuel J. Locklear III
President, SJL Global Insights,
LLC; U.S. Navy (retired)
(2017) (2) (3)
James T. Hackett
Executive Chairman and
Interim Chief Executive Officer,
Alta Mesa Resources, Inc.;
Director of Alta Mesa Resources,
Inc., Enterprise Products
Holdings, LLC and National
Oilwell Varco, Inc. (2016) (3) (4)
Ye ars in parentheses indicate the ye ar e ach direc tor wa s elec ted to the Board.
(1) E xecutive Commit tee – David T. Se aton, Chairman;
(2) Audit Commit tee – Peter K . Barker, Chairman;
(3) Governance Commit tee – Al an M. Bennet t, Chairman;
(4) Organiz ation and Compensation Commit tee – Peter J. Fluor, Chairman
T R A N S F O R M A T I O N T H R O U G H I N N O V A T I O N
2 3
934051_TXT.indd 23
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T R A N S F O R M A T I O N
T H R O U G H
I N N O V A T I O N
2 4
2 0 1 8 A N N U A L R E P O R T
934051_TXT.indd 24
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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, 2018
or
(cid:2) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from
to
Commission file number: 1-16129
FLUOR CORPORATION
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
6700 Las Colinas Boulevard
Irving, Texas
(Address of principal executive offices)
33-0927079
(I.R.S. Employer
Identification No.)
75039
(Zip Code)
469-398-7000
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Name of Each Exchange on Which Registered
Common Stock, $.01 par value per share
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes (cid:2) No (cid:2)
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the
Exchange Act. Yes (cid:2) No (cid:2)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days. Yes (cid:2) No (cid:2)
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be
submitted 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 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 the 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.
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)
Non-accelerated filer (cid:2)
Accelerated filer (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 29, 2018, the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant
was approximately $6.8 billion based on the closing sale price as reported on the New York Stock Exchange.
As of February 19, 2019, 139,577,519 shares of the registrant’s common stock, $0.01 par value per share, were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Document
Parts Into Which Incorporated
Portions of the Proxy Statement for the Annual
Meeting of Stockholders to be held on May 2, 2019
Part III
FLUOR CORPORATION
INDEX TO ANNUAL REPORT ON FORM 10-K
For the Fiscal Year Ended December 31, 2018
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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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 amounts
or the incurrence of liabilities in excess of amounts previously recognized could result in a charge against
future earnings. As a result, the reader is cautioned to recognize and consider the inherently uncertain
nature of forward-looking statements and not to place undue reliance on them.
These factors include those referenced or described in this Annual Report on Form 10-K (including in
‘‘Item 1A. — Risk Factors’’). We cannot control such risk factors and other uncertainties, and in many
cases, we cannot predict the risks and uncertainties that could cause our actual results to differ materially
from those indicated by the forward-looking statements. You should consider these risks and uncertainties
when you are evaluating us and deciding whether to invest in our securities. Except as otherwise required
by law, we undertake no obligation to publicly update or revise our forward-looking statements, whether as
a result of new information, future events or otherwise.
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, operations,
maintenance and asset integrity, 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
1
manufacturing. We are also a service provider to the U.S. federal government and governments abroad;
and, we perform operations, maintenance and asset integrity activities globally for major industrial clients.
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.
Competitive Strengths
As a world-class integrated solutions provider of engineering, procurement, construction, fabrication
and modularization, operations, maintenance and asset integrity, 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. We believe that our ability to execute, 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. We have also begun a shift
toward data-driven execution, which we expect will serve to increase our ability to meet our clients’ needs.
That shift includes the creation of predictive analytics systems to diagnose, monitor and measure the status
of projects from inception to completion. These systems can help predict critical project outcomes and
provide early insights into the health of projects.
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 is our constant focus on 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, operations, maintenance and asset integrity 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. We believe 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 establish local offices, form strategic alliances with local partners, leverage our
supply chain expertise and emphasize 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.
Integrated Solutions. Through our integrated solutions offering, we can deliver to clients our broad
range of services and offerings in an integrated package. This approach spans the entire lifecycle of a
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project — from initial scoping and front-end engineering to construction, fabrication, equipment and
supply chain to post-completion operations, maintenance and asset integrity — thereby allowing us to
bring our full breadth of resources to better solve client challenges and create opportunities. Our
integrated solutions approach can allow us to exercise better overall control of a project, in collaboration
with our clients, which in turn can result 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.
Market Diversity. The company serves multiple markets across a broad spectrum of industries around
the globe. 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 should allow 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.
Client Relationships. Our culture is based on putting the client 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.
General Operations
Our services fall into six broad categories: engineering and design; procurement; construction;
fabrication and modularization; operations, maintenance and asset integrity; and project management. We
offer these services both independently as well as through our integrated solutions offerings. Our services
can range from basic consulting activities, often at the early stages of a project, to complete design-build,
operations and maintenance contracts.
(cid:129) In engineering and design, we develop solutions to address our clients’ most complex problems. 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 can provide
clients with a varied group of service offerings which can include front-end engineering, conceptual
design, estimating, feasibility studies, permitting, process simulation, technology and licensing
evaluation, scope definition and siting. Our engineering and design 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 can benefit from our global sourcing and supply expertise, global purchasing
power, technical knowledge, processes, systems and experienced global resources. Our procurement
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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, as well as modular construction and asset
support services to clients around the globe from our joint venture yards in China and Mexico. By
operating self-perform fabrication yards in key regions of the world, our off-site fabrication
solutions can 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 operations, maintenance and asset integrity services intended to improve the performance
and extend the life of our clients’ facilities. Diversified services include the delivery of total
maintenance services, facility management, plant readiness, commissioning, start-up and
maintenance technology, small capital projects, and 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.
Our four principal business segments are described below.
Energy & Chemicals
Our Energy & Chemicals segment focuses on opportunities in the upstream, midstream, downstream,
chemical, petrochemical, offshore and onshore oil and gas production, liquefied natural gas and pipeline
markets. We have long served a broad spectrum of industries as an integrated solutions provider offering a
full range of design, engineering, procurement, construction, fabrication and project management services.
While we perform projects that range greatly in size and scope, we believe that one of our distinguishing
features is that we are one of the few companies that have the global strength and experience to perform
extremely large projects in difficult locations. As the locations of large scale energy and chemicals projects
have become more challenging geographically, geopolitically or otherwise, we believe that clients will
continue to look to us based upon our size, strength, global reach, 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
4
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 liquefied natural gas (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.
Mining, Industrial, Infrastructure & Power
The Mining, Industrial, Infrastructure & Power segment provides design, engineering, procurement,
construction and project management services to the mining and metals, transportation, life sciences,
advanced manufacturing and power sectors.
In mining and metals, we provide a full range of services to our clients who produce a variety of
commodities, including bauxite, copper, gold, iron ore, diamond, nickel, alumina, aluminum and
phosphates. Our services include conceptual and feasibility studies through detailed engineering, design,
procurement, construction, commissioning and startup support. Many of these opportunities are being
developed in remote and logistically challenging environments, such as the Andes Mountains, Western
Australia and Africa. We believe we are one of the few companies with the size, regional presence and
experience to execute large scale mining and metals projects in these difficult and remote locations. In the
first quarter of 2018, mining and metals moved from the Energy & Chemicals business segment to the
Mining, Industrial, Infrastructure & Power business segment to align with how these business segments are
managed.
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 replacement and
expansion of aging infrastructure in developed countries continues to drive project opportunities on a
global basis, as well as the need for new infrastructure in emerging countries.
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 projects that 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. We believe the ability to complete projects on a large scale basis,
5
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 offer a full range of services to the renewables, fossil fuel and nuclear
markets. Our offering includes engineering, procurement, construction, program management, startup and
commissioning and technical services. We seek to provide these services to a broad array of utilities,
independent power producers, original equipment manufacturers and other third parties. During 2018, we
exited the fixed-price gas-fired power market in the United States.
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. NuScale has 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 the application to be approved on or
before January 2021.
In the first quarter of 2019, services provided to the commercial nuclear market, as well as NuScale,
will be moved from the Mining, Industrial, Infrastructure & Power business segment to the Government
business segment to align with the manner in which the chief executive officer intends to manage the
business and allocate resources in 2019 and to better reflect the interaction of the commercial and
government nuclear markets.
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.
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 U.S. Department of Energy and international governments where we have
brought our commercial operations and program management expertise to government clients to operate
large nuclear processing facilities and 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 U.S. military-related activities in contested areas
globally, and more specifically in Afghanistan and Africa. Because of our strong network of global
resources, we believe we are well-situated to efficiently and rapidly mobilize the resources necessary for
worldwide defense operations, even in the most remote and difficult locations, to both traditional and U.S.
government classified clients around the world.
In combination with our subsidiary, Fluor Federal Solutions, we are a leading provider of outsourced
services to the U.S. government. We provide operations, maintenance and construction services at military
bases and education and training services through Job Corps programs to the U.S. Department of Labor.
In addition, we provide construction services to new and existing facilities for other U.S. government
agencies, the intelligence community and in support of foreign military sales programs.
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The company is also providing support to the U.S. 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 in support of the Army Corps of Engineers.
Diversified Services
The Diversified Services segment provides a wide array of asset services, asset integrity services,
equipment solutions and staffing services. These services are provided around the world during both the
project delivery phase as well as to new or existing production assets.
Through our subsidiary, Stork, we provide asset services and asset integrity services to the oil and gas,
chemicals, life sciences, power, mining and metals, consumer products and manufacturing industries. We
focus on asset management solutions, as well as providing asset services in diverse areas such as electrical
and instrumentation, fabric maintenance, mechanical and piping. We also provide asset integrity services,
including new asset readiness solutions, inspection of existing assets, and asset turnaround and
modification solutions. 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 operations or maintenance
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, including late-life management solutions.
Diversified Services also includes Site Services(cid:3) and fleet management services through AMECO(cid:3).
AMECO provides integrated construction equipment, tool, scaffolding and fleet service solutions to the
company and third party clients in a focused amount of locations around the world for construction
projects and client production assets.
Staffing services, also part of Diversified Services, are provided through TRS Staffing Solutions(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.
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, 2018 and 2017:
December 31,
2018
December 31,
2017
(in millions)
Energy & Chemicals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mining, Industrial, Infrastructure & Power . . . . . . . . . . . . . . . . . . . . . . . . .
Government(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diversified Services(2)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$17,834
15,254
4,586
2,283
Total(3)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$39,957
$15,113
9,580
3,771
2,451
$30,915
(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, 2018 and 2017, total backlog includes $2.9 billion and
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$741 million, respectively, of unfunded government contracts. For our contingency operations, we
include only those amounts for which specific task orders have been awarded.
(2) The equipment and temporary staffing businesses in the 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, 2018 and 2017 by region:
December 31,
2018
December 31,
2017
(in millions)
United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asia Pacific (including Australia) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Europe, Africa and Middle East . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The Americas (excluding the United States) . . . . . . . . . . . . . . . . . . . . . . . .
$11,737
2,710
9,305
16,205
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$39,957
$12,908
1,664
13,420
2,923
$30,915
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, 2018 backlog estimated to be performed annually subsequent to 2019. 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.
The following table sets forth our changes in consolidated backlog in each year to reach ending
backlog at December 31, 2018 and 2017:
2018
2017
(in millions)
Backlog at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
New awards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments and cancellations, net(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Work performed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 30,915
27,672
90
(18,720)
$ 45,012
12,566
(7,597)
(19,066)
Backlog at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 39,957
$ 30,915
(1) Adjustments and cancellations, net during 2018 included an adjustment to increase backlog as a result
of the adoption of Accounting Standards Codification (‘‘ASC’’) Topic 606, ‘‘Revenue from Contracts
with Customers,’’ on January 1, 2018, and other project scope adjustments and cancellations.
See ‘‘3. Revenue Recognition’’ in the Notes to Consolidated Financial Statements for a further
discussion of the adoption of ASC Topic 606. Adjustments and cancellations, net during 2017 resulted
primarily from the removal of 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.
In 2019, we expect to perform approximately 40 percent of our total backlog reported as of
December 31, 2018. In comparison, during the last three years we expected to annually perform an average
of 44 percent of our total year-end backlog in the subsequent fiscal year.
8
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, 2018, 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, 2018
(in millions)
$21,098
$18,859
(percentage)
53%
47%
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 markup 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
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
9
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 and
modularization, operations, maintenance and asset integrity, and project management 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, 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, Industrial, Infrastructure & Power, and Government segments, 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. We believe 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
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,
reputation 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 2018, revenue earned from agencies of the U.S. government and Exxon Mobil Corporation
accounted for 18 percent and 17 percent, respectively, of our total revenue. We perform work for these
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clients under multiple contracts and sometimes through joint venture arrangements. No other client
accounted for more than 10 percent of our revenues in 2018.
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 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.
Patents
We hold patents and licenses for certain items that we use in our operations, including those held by
NuScale. However, none is so essential that its loss would materially affect our business.
Environmental, Safety and Health Matters
In our business, we provide services at sites throughout the world. Work at some of these sites involves
activities related to nuclear facilities, hazardous waste, hydrocarbon production, distribution and transport,
the military and infrastructure. Some of our work can be performed adjacent to environmentally sensitive
locations such as wetlands, lakes and rivers. We also contract with the U.S. federal government to
remediate hazardous materials, including chemical agents and weapons, as well as to decontaminate and
decommission nuclear sites. These activities can require us to manage, handle, remove, treat, transport and
dispose of toxic, radioactive or hazardous substances. Significant fines, penalties and other sanctions may
arise under environmental health and safety laws and regulations, and many of these laws call for joint and
several and/or strict liability, which can render a party liable without regard to negligence or fault of such
person.
We believe, based upon present information available to us, that we are generally compliant with all
such environmental, health and safety laws and regulations. We further believe that our accruals with
respect to future environmental 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, 2018:
Salaried Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Craft and Hourly Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total
32,272
21,077
53,349
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.
Number of
Employees
11
Executive Officers of the Registrant
The following information is being furnished with respect to the company’s executive officers as of
December 31, 2018:
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 . . . . . . . . . . . .
Carlos M. Hernandez . . . . . .
Rick Koumouris . . . . . . . . . .
Senior Vice President and Controller
59 Executive Vice President, Systems and Supply Chain
59 Group President, Energy & Chemicals
54 Executive Vice President, Business Development and Strategy
54
59 Group President, Government
51 Group President, Diversified Services
64 Executive Vice President, Chief Legal Officer and Secretary
58 Group President, Mining & Metals, Infrastructure, Power,
Life Sciences & Advanced Manufacturing
Mark A. Landry . . . . . . . . . .
Matthew J. McSorley . . . . . .
David T. Seaton . . . . . . . . . .
Bruce A. Stanski . . . . . . . . . .
54 Executive Vice President, Human Resources
49 Executive Vice President, Project Support Services
57 Chairman and Chief Executive Officer
58 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.
Ray F. Barnard
Mr. Barnard has been Executive Vice President, Systems and Supply Chain since 2014. Prior to that,
he was Chief Information Officer from 2005 to 2014. Mr. Barnard joined the company in 2002.
James F. Brittain
Mr. Brittain has been Group President, Energy & Chemicals since 2017. Prior to that, he was Senior
Vice President, Business Line President — Energy & Chemicals from October 2016 to March 2017, Senior
Vice President, Business Line President — Energy & Chemicals Americas from 2014 to 2016 and
Vice President, Project Director — Energy & Chemicals from 2009 to 2014. Mr. Brittain joined the
company in 1987.
Jose-Luis Bustamante
Mr. Bustamante has been Executive Vice President, Business Development and Strategy since 2015.
Prior to that, he was Senior Vice President of Business Development, Marketing and Strategic Planning —
Energy & Chemicals from 2012 to 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 2016. Prior to that, he was Vice President and Controller, Commercial Operations
and Controller, Asia Pacific region from 2014 to 2016 and Vice President, Internal Audit from 2008 to
2014. Mr. Chopra joined the company in 1991.
Thomas P. D’Agostino
Mr. D’Agostino has been Group President, Government since 2017. Prior to that, he was Senior Vice
President, Sales, Government from 2015 to 2017 and Senior Vice President of Strategic Planning and
Development for Government from 2013 to 2015. Prior to joining the company in 2013, he served in
various roles, including Under Secretary for Nuclear Security, Administrator of the National Nuclear
12
Security Administration (NNSA) and Deputy Administrator for Defense Programs from 2007 until his
retirement in 2013.
Taco de Haan
Mr. de Haan has been Group President, Diversified Services since 2017. Prior to that, he was Chief
Executive Officer of Stork from October 2016 to March 2017 and Senior Vice President, Business Line
President — Energy & Chemicals Europe, Africa and Middle East (‘‘EAME’’) from 2014 to 2016. Mr. de
Haan joined the company in 1995.
Carlos M. Hernandez
Mr. Hernandez has been Executive Vice President, Chief Legal Officer and Secretary since 2014.
Prior to that, he was Senior Vice President, Chief Legal Officer and Secretary from 2007 to 2014. Prior to
joining the company in 2007, he was General Counsel and Secretary of ArcelorMittal USA, Inc. from 2005
to 2007.
Rick Koumouris
Mr. Koumouris has been Group President of Mining & Metals, Infrastructure, Power, Life Sciences &
Advanced Manufacturing since 2017. Prior to that, he was Senior Vice President, Business Line
President — Mining & Metals from 2007 to 2017. Mr. Koumouris joined the company in 1987.
Mark A. Landry
Mr. Landry has been Executive Vice President, Human Resources since February 2018. Prior to that,
he was Senior Vice President, Human Resources from 2016 to 2018, had various roles in our Human
Resources group overseeing various commercial operations from 2014 to 2016 and was an HR Director for
Energy & Chemicals and the HR Regional Director for EAME, Asia Pacific and Australia from 2010 to
2014. Mr. Landry joined the company in 1989.
Matthew J. McSorley
Mr. McSorley has been Executive Vice President, Project Support Services since February 2018. Prior
to that, he was Group President, Project Support Services from August 2017 to February 2018, Senior Vice
President, Execution & Resources from 2015 to 2017 and President, Power Business Line from 2013 to
2015. Mr. McSorley joined the company in 1991.
David T. Seaton
Mr. Seaton has been Chief Executive Officer since 2011 and Chairman since 2012. Prior to that, he
was Chief Operating Officer from 2009 to 2011. Mr. Seaton joined the company in 1985.
Bruce A. Stanski
Mr. Stanski has been Executive Vice President and Chief Financial Officer since 2017. Prior to that,
he was Group President, Government from 2009 to 2017. Prior to joining the company in 2009, he was
President, Government and Infrastructure of KBR, Inc. from 2007 to 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 (‘‘SEC’’). These reports, and any
amendments to them, are also available at the Internet website of the SEC, http://www.sec.gov. We also
13
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. Our clients’ interest in
approving new projects, budgets for capital expenditures and need for our services have in the past few
years, and may in the future, be adversely affected by, among other things, poor economic conditions, low
commodity prices, political uncertainties and currency devaluations. Clients have been in the recent past,
and 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. For
example, in our Energy & Chemicals segment, capital expenditures by our clients may be influenced by
factors such as prevailing prices and expectations about future prices for underlying commodities,
technological advances, the costs of exploration, production and delivery of product, domestic and
international political, military, regulatory and economic conditions and other similar factors. Industries
served by that segment 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.
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 on 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 include 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.
Additionally, uncertain economic and political conditions may make it difficult for our clients, our vendors
and us to accurately forecast and plan future business activities. For example, recent changes to U.S.
policies related to global trade and tariffs have resulted in uncertainty surrounding the future of the global
economy as well as retaliatory trade measures implemented by other countries. We cannot predict the
outcome of these changing trade policies or other unanticipated political conditions.
Our project execution activities, including any failure to meet schedule or cost estimates, 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 project delays, cost overruns or
other problems and can include the following:
(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) Unanticipated technical problems, including design or engineering issues;
14
(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) Reliance on historic cost and/or execution data that is not representative of current economic
and/or execution conditions;
(cid:129) Failure to accurately estimate the cost of projects, including due to unforeseen increases in the cost
of labor;
(cid:129) Unanticipated increases in the cost of raw materials, components or equipment, including due to
the imposition of import tariffs;
(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) 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 fees until the performance criteria is achieved. We may
also be required to pay liquidated damages if we fail to complete a project on schedule. 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 work. 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 materially and negatively impacted.
Further, approximately 47 percent of the dollar-value of our backlog is currently fixed-price contracts,
where we bear a significant portion of the risk for delays and cost overruns. We expect this percentage of
fixed-price contracts to increase. 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 the
risk that we may incur certain costs in executing these contracts that are above our estimates and not
recoverable from our clients.
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,
15
thereby increasing the risk that we may have losses on such contracts. Intense competition is expected to
continue in these markets, presenting us with significant challenges in our ability to maintain strong growth
rates and acceptable profit margins. If we are unable to meet these competitive challenges, we could lose
market share to our competitors and experience an overall reduction in our profits.
From time to time, we are involved in litigation proceedings, potential liability claims and contract disputes which
may have a material impact on our financial condition and results of operations.
We may be subject to a variety of legal proceedings, liability claims or contract disputes in virtually
every part of the world. We engage in engineering and construction activities for large facilities where
design, construction or systems failures can result in substantial injury or damage. In addition, the nature
of our business results in clients, subcontractors and suppliers occasionally presenting claims against us for
recovery of costs they incurred in excess of what they expected to incur, or for which they believe they are
not contractually liable. We have been and may in the future be named as a defendant in legal proceedings
where parties may make a claim for damages or other remedies with respect to our projects or other
matters. During times of economic uncertainty, especially with regard to our commodity-based clients,
claim frequencies and amounts tend to increase.
In proceedings where 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 material loss for us, and materially 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, including for monetary damages. 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 ‘‘16. 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.
16
The success of our use of teaming arrangements and joint ventures depends on the satisfactory performance by our
venture partners over whom we may have little or no control, and the failure of those partners to perform their
obligations could impose additional obligations on us that could have a material impact on our financial condition
and results of operations.
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 reputation and could
result in fines, penalties, suspension or, in the case of government contracts, even debarment.
Cyber-security breaches of our systems and information technology could adversely impact our ability to operate.
We utilize, develop, install and maintain a number of information technology systems both for us and
for others. Various privacy and security laws require us to protect sensitive and confidential information
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, as well as those of our clients,
contractors and other vendors, 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
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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. There can be no assurance that our efforts will prevent these
threats. Further, as these security threats continue to evolve, we may be required to devote additional
resources to protect, prevent, detect and respond against such threats. A party who circumvents our
security measures, or those of our clients, contractors or other vendors, could misappropriate confidential
or proprietary information, improperly manipulate data, or cause damage or interruptions to systems. Any
of these events could damage our reputation, result in litigation and regulatory fines and penalties, or have
a material adverse effect on our business, financial condition, results of operations or cash flows.
Furthermore, while we maintain insurance that specifically covers cyber-security threats, our coverage may
not sufficiently cover all types of losses or claims that may arise.
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, 2018, approximately 71 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 or tariff increases;
(cid:129) currency exchange rate fluctuations;
(cid:129) changes in labor conditions and difficulties in staffing and managing international operations,
including logistical and communication challenges;
(cid:129) U.S. government trade or other policy changes in relation to the foreign countries in which we or
our clients operate;
(cid:129) other social, political and economic instability, including recessions and other economic crises in
other regions;
(cid:129) expropriation and nationalization of our assets in a foreign country;
(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.
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In addition, the 2016 referendum by the British voters to exit the European Union, commonly
referred to as ‘‘Brexit,’’ adversely impacted global markets, including currencies, and resulted in the
weakening of the British pound against other currencies. A weaker British pound compared to the U.S.
dollar during a reporting period causes local currency results of our United Kingdom operations and
contracts, denominated in the British pound, to be translated into fewer U.S. dollars. Volatility in exchange
rates may continue as the U.K. negotiates its exit from the E.U. In the longer term, any impact from Brexit
on our international operations will depend, in part, on the outcome of tariff, trade, regulatory and other
negotiations and could adversely affect our results of operations.
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, 2018, our backlog was approximately $40 billion. Our backlog generally consists
of projects for which we have an executed contract or commitment with a client and reflects our expected
revenue from the contract or commitment, which is often subject to revision over time. We cannot
guarantee that the revenue projected in our backlog will be realized or profitable or will not be subject to
delay or suspension. Project cancellations, scope adjustments or deferrals, or foreign currency fluctuations
may occur with respect to contracts reflected in our backlog and could reduce the dollar amount of our
backlog and the revenue and profits that we actually earn; or, may cause the rate at which we perform on
our backlog to decrease. Most of our contracts have termination for convenience provisions in them
allowing clients to cancel projects already awarded to us. Our contracts typically provide for the payment
of fees earned through the date of termination and the reimbursement of costs incurred including
demobilization costs. In addition, projects may remain in our backlog for an extended period of time.
During periods of economic slowdown, or decreases and/or instability in commodity prices, the risk of
backlog projects being suspended, delayed or canceled 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.
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 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. Despite these activities, in these
locations and at these sites, we cannot guarantee the safety of our personnel, nor can we guarantee our
work, equipment or supplies will be free from damage.
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;
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evacuation of personnel and curtailment of services; increased labor and material costs or shortages;
inability to deliver materials, equipment and personnel to jobsites in accordance with contract schedules;
and loss of productivity. We may remain obligated to perform our services after any such natural or
man-made disasters, unless a contract provision provides us with relief from our obligations. The extra
costs incurred as a result of these events may not be reimbursed by our clients. If we are not able to react
quickly to such events, or if a high concentration of our projects are in a specific geographic region that
suffers from a natural or man-made disaster, our operations may be significantly affected, which could
have a negative impact on our operations. In addition, if we cannot complete our contracts on time, we
may be subject to potential liability claims by our clients which may reduce our profits and result in losses.
Our U.S. government contracts and contracting rights may be terminated or otherwise adversely impacted at any
time, and our inability to win or renew government contracts during regulated procurement processes could harm
our operations and reduce our projects and revenues.
We enter into significant government contracts from time to time, such as those contracts that we have
in place with the U.S. Department of Energy and Department of Defense. U.S. government contracts are
subject to various uncertainties, restrictions and regulations, including oversight audits by government
representatives and profit and cost controls, which could result in withholding or delay of payments to us.
U.S. government contracts are also subject to uncertainties associated with Congressional funding,
including the potential impacts of budget deficits, government shutdowns 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
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awards. Moreover, even if we are qualified to work on a government contract, we may not be awarded the
contract because of existing government policies designed to protect small businesses and under-
represented minority contractors. Our inability to win or renew government contracts during the
procurement processes could harm our operations and reduce our profits and revenues.
Many of our U.S. government contracts require security clearances. Depending upon the level of
clearance required, security clearances can be difficult and time-consuming to obtain. If we or our
employees are unable to obtain or retain necessary security clearances, we may not be able to win new
business, and our existing government clients could terminate their contracts with us or decide not to
renew them, thus adversely affecting our revenues.
Under the Budget Control Act of 2011, an automatic sequestration process, or across-the-board
budget cuts (a large portion of which were 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, and the subsequent Balanced Budget Acts of 2015 and 2018, have provided
some sequester relief until the end of 2019, the Budget Control Act of 2011 remains in place, extended
through 2027, and absent additional legislative or other remedial action, the sequestration could require
reduced U.S. federal government spending from 2020 through 2027. 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.
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 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
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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 on 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 reputation and could result in fines, penalties, suspension, or in the case of government
contracts, even debarment.
Our actual results could differ from the assumptions and estimates used to prepare our financial statements.
In preparing our financial statements, we are required under U.S. generally accepted accounting
principles to make estimates and assumptions as of the date of the financial statements. These estimates
and assumptions affect the reported values of assets, liabilities, revenue and expenses, and the disclosure of
contingent assets and liabilities. Areas requiring significant estimates by our management include:
(cid:129) recognition of contract revenue, costs, profits or
losses
in applying the principles of
percentage-of-completion accounting;
(cid:129) recognition of revenues related to project incentives or awards we expect to receive;
(cid:129) recognition of recoveries under contract change orders or claims;
(cid:129) estimated amounts for expected project losses, warranty costs, contract close-out or other costs;
(cid:129) collectability of billed and unbilled accounts receivable and the need and amount of any allowance
for doubtful accounts;
(cid:129) asset valuations;
(cid:129) income tax provisions and related valuation allowances;
(cid:129) determination of expense and potential liabilities under pension and other post-retirement benefit
programs; and
(cid:129) accruals for other estimated liabilities, including litigation and insurance revenues/reserves.
Estimates are based on management’s reasonable assumptions and experience, but are only estimates.
Our actual business and financial results could differ from our estimates of such results due to changes in
facts and circumstances, which could have a material negative impact on our financial condition and
reported results of operations. Further, we are required to record contract revenue as work on a contract
progresses. The cumulative amount of revenue recorded on a contract at any point in time is that
percentage of total estimated revenues that costs incurred to date bear to estimated total costs.
Accordingly, contract revenue and total cost estimates are reviewed and revised as the work progresses.
Adjustments are reflected in contract revenue in the period when such estimates are revised. Such
adjustments could be material and could result in reduced profitability.
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
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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.
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 interruptions, 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. Our systems implementations also 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. However, there is no assurance that our internal controls and procedures will
always 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.
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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 within 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.
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.
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.
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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.
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
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 clients.
incentivize
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.
25
Our company, along with our investment in NuScale, is subject to a number of regulations such as
those from 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.
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 also 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.
26
Our continued success requires us to hire and retain qualified personnel.
The success of our business is dependent upon being able to attract and retain personnel, including
engineers, project management and craft employees around the globe, who have the necessary and
required experience and expertise, and who will perform these services at a reasonable and competitive
rate. Competition for these and other experienced personnel is intense. It may be difficult to attract and
retain qualified individuals with the expertise and in the timeframe demanded by our clients. In certain
geographic areas, for example, we may not be able to satisfy the demand for our services because of our
inability to successfully hire and retain qualified personnel. Also, it may be difficult to replace personnel
who hold government granted eligibility that may be required to obtain certain government projects and/or
who have significant government contract experience.
As some of our executives and other key personnel approach retirement age, we need to provide for
smooth transitions, which may require that we devote time and resources to identify and integrate new
personnel into these leadership roles and other key positions. If we are unable to attract and retain a
sufficient number of skilled personnel or effectively implement appropriate succession plans, our ability to
pursue projects may be adversely affected, the costs of executing our existing and future projects may
increase and our financial performance may decline.
In addition, the cost of providing our services, including the extent to which we utilize our workforce,
affects our profitability. For example, the uncertainty of contract award timing can present difficulties in
matching our workforce size with our contracts. If an expected contract award is delayed or not received,
we could incur costs resulting from excess staff, reductions in staff, or redundancy of facilities that could
have a material adverse impact on our business, financial conditions and results of operations.
The loss of one or a few clients could have an adverse effect on us.
A few clients, including the U.S. government, state governments and U.S. and state government
agencies, have in the past, and may in the future, account for a significant portion of our revenues in any
one year or over a period of several consecutive years, either directly or through participation in a joint
venture that serves as a client. See ‘‘Item 1. — Business — Other Matters — Significant Clients’’ for more
information. Although we have long-standing relationships with many of our significant clients, our clients
may unilaterally reduce, fail to renew or terminate their contracts with us at any time. Most of our
contracts have termination for convenience provisions in them. The loss of business from a significant
client could have a material adverse effect on our business, financial position and results of operations.
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;
(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 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.
27
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.
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 clients 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.
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
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.
28
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.
Our results of operations could be adversely affected as a result of asset impairments.
Our results of operations and financial condition could be adversely affected by impairments to
goodwill, investments, deferred tax assets or other intangible assets. For example, when we acquire a
business, we record goodwill in an amount equal to the amount we paid for the business minus the fair
value of the net tangible assets and other intangible assets of the acquired business. Goodwill and other
intangible assets that have indefinite useful lives cannot be amortized, but instead must be tested at least
annually for impairment. For additional description on this impairment testing, please see ‘‘1. Major
Accounting Policies’’ in the Notes to Consolidated Financial Statements. Any future impairments,
including impairments of goodwill, investments, deferred tax assets or other intangible assets, could have a
material adverse effect on our financial condition and results of operations for the period in which the
impairment is recognized.
In addition, if we determine that an other-than-temporary decline in the fair value exists for a
company in which we have invested, we may have to write down that investment to its fair value and
recognize the related write-down as an investment loss. For cases in which we are required under the
equity method or the proportionate consolidation method of accounting to recognize a proportionate
share of another company’s income or loss, such income or loss may impact our earnings.
Although we expect to realize certain benefits as a result of our acquisitions 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
29
(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.
In the event we make acquisitions using our stock as consideration, stockholders’ ownership percentages 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, other than Stork, are conducted at both owned and leased
properties in domestic and foreign locations totaling approximately 5.7 million rentable square feet, which
constitutes a reduction of approximately 900,000 rentable square feet, or 13.6%, from the end of our 2017
fiscal year. Operations of Stork are conducted at both owned and leased properties totaling approximately
2.9 million rentable square feet, which constitutes a reduction of approximately 200,000 rentable square
feet, or 6.5%, from the end of our 2017 fiscal year. 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 subleased to third party tenants. While we have
30
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
Utrecht, the Netherlands . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Leased
Asia/Asia Pacific:
Cebu, the Philippines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Leased
Manila, the Philippines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Owned and Leased
New Delhi, India . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Leased
Perth, Australia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Leased
Shanghai, China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Leased
In addition, we lease or own a number of sales, administrative and field construction offices,
warehouses and equipment yards strategically located throughout the world. We also, through various joint
ventures, own or lease fabrication yards in China and Mexico.
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 SEC rules and other pending matters as we
may determine to be appropriate.
For information on legal proceedings and matters in dispute, see ‘‘16. Contingencies and
Commitments’’ in the Notes to Consolidated Financial Statements in this report.
Item 4. Mine Safety Disclosures
Information concerning mine safety violations or other regulatory matters required by Section 1503(a)
the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of
of
Regulation S-K (17 CFR 229.104) is included in Exhibit 95 to this report.
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.’’
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 19, 2019, there were 139,577,519 shares outstanding and 4,479 stockholders of record of
the company’s common stock. The company estimates there were an additional 184,717 stockholders
whose shares were held by banks, brokers or other financial institutions at February 8, 2019.
Issuer Purchases of Equity Securities
The following table provides information for the three months ended December 31, 2018 about
purchases by the company of equity securities that are registered by the company pursuant to Section 12 of
the Securities Exchange Act of 1934, as amended (the ‘‘Exchange Act’’).
Period
Total Number
of Shares
Purchased(1)
Average Price
Paid per
Share
Total Number of
Shares Purchased as
Part of Publicly
Announced Plans
or Programs
October 1–October 31, 2018 . . . . . . . . .
November 1–November 30, 2018 . . . . .
December 1–December 31, 2018 . . . . . .
—
1,097,126
—
Total . . . . . . . . . . . . . . . . . . . . . . . .
1,097,126
$ —
45.57
—
$45.57
—
1,097,126
—
1,097,126
Maximum
Number of
Shares that May
Yet Be Purchased
Under Plans or
Programs(2)
11,610,219
10,513,093
10,513,093
(1) Consists of 1,097,126 shares of company stock repurchased and canceled by the company under its
stock repurchase program for total consideration of $50 million.
(2) 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
$19,166.6
481.8
$19,521.0
386.4
$19,036.5
546.6
$18,114.0
726.6
$21,531.6
1,204.9
Year Ended December 31,
2018
2017
2016
2015
2014
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
4.250% 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 provided (utilized) by investing activities
Cash utilized by financing activities
Employees at year end
Salaried employees
Craft/hourly employees
Total employees
$
$
$
$
$
$
$
224.8
—
224.8
1.60
—
1.60
1.59
—
1.59
0.84
$
$
$
$
$
$
$
191.4
—
191.4
1.37
—
1.37
1.36
—
1.36
0.84
$
$
$
$
$
$
$
281.4
—
281.4
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
7.3%
5.9%
9.1%
13.6%
20.1%
$ 5,440.9
3,552.5
$ 5,601.3
3,574.2
$ 5,610.3
3,816.0
$ 5,105.4
2,935.4
$ 5,417.8
3,330.9
1,888.4
1,013.7
8,913.6
569.4
—
494.3
593.9
—
—
30.9
2,963.2
4,651.7
139.7
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
$27,672.3
39,957.3
211.0
162.2
1.4
(140.5)
32,272
21,077
53,349
$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
(1)
Net earnings attributable to Fluor Corporation in 2018 included pre-tax charges totaling $188 million (or $1.02 per diluted
share) resulting from forecast revisions for estimated cost growth at a fixed-price gas-fired power plant project, pre-tax
charges totaling $133 million (or $0.89 per diluted share) for estimated cost and schedule impacts on a fixed-price
33
downstream project and pre-tax charges totaling $40 million (or $0.23 per diluted share) resulting from forecast revisions for
estimated cost growth on a fixed-price, offshore project. Net earnings attributable to Fluor Corporation in 2018 also
included a pre-tax gain of $125 million (or $0.74 per diluted share) on the sale of the company’s interest in a joint venture in
the United Kingdom.
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 adverse impact of U.S. tax reform legislation enacted in 2017
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 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.
See ‘‘Item 7. — Management’s Discussion and Analysis of Financial Condition and Results of Operations’’ on pages 34 to 52
and Notes to Consolidated Financial Statements on pages F-8 to F-53 for additional information relating to significant items
affecting the results of operations for 2016 - 2018.
(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 $2.9 billion, $741 million, $2.7 billion, $912 million and $2.1 billion of unfunded government contracts
as of December 31, 2018, 2017, 2016, 2015 and 2014, respectively.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Introduction
The following discussion and analysis should be read in conjunction with the Consolidated Financial
Statements and accompanying Notes. For purposes of reviewing this document, ‘‘segment profit’’ is
calculated as revenue less cost of revenue and earnings attributable to noncontrolling interests excluding:
corporate general and administrative expense; interest expense; interest income; domestic and foreign
income taxes; and other non-operating income and expense items. For a reconciliation of total segment
profit to earnings before taxes, see Note 19 in the Notes to Consolidated Financial Statements.
Results of Operations
Consolidated revenue was $19.2 billion, $19.5 billion and $19.0 billion during 2018, 2017 and 2016,
respectively. During 2018, a revenue decline in the Energy & Chemicals segment was partially offset by
revenue growth in the Government segment. Revenue in the Mining, Industrial, Infrastructure & Power
and Diversified Services segments remained flat compared to 2017. The company adopted Accounting
Standards Codification (‘‘ASC’’) Topic 606 ‘‘Revenue from Contracts with Customers’’ on January 1, 2018.
The impact of adoption was an increase to the company’s revenue during 2018 of $132 million, primarily in
the Energy & Chemicals segment. See Note 3 in the Notes to Consolidated Financial Statements. During
2017, revenue growth in the Mining, Industrial, Infrastructure & Power, Government and Diversified
Services segments was partially offset by a revenue decline in the Energy & Chemicals segment.
Earnings before taxes for 2018 increased 25 percent to $482 million from $386 million in 2017.
Earnings in 2018 were adversely affected by pre-tax charges totaling $361 million resulting from forecast
revisions for estimated cost and schedule impacts on a fixed-price, gas-fired power plant project, a fixed-
price downstream project and a fixed-price, offshore project. These charges were partially offset by a gain
34
of $125 million associated with the sale of the company’s interest in a joint venture in the United Kingdom.
Earnings in 2018 also benefitted from the adoption of ASC 606 which resulted in an increase to earnings
before taxes of $134 million, primarily in the Energy & Chemicals segment. 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 the
downstream project mentioned above. Excluding the adverse effects of forecast revisions in both 2018 and
2017, the gain on the sale of the joint venture interest in 2018 and the impact of adopting ASC 606,
earnings in 2018 declined when compared to 2017. Earnings declines in 2018 in the Energy & Chemicals;
Mining, Industrial, Infrastructure & Power; and Diversified Services segments were partially offset by an
increase in earnings in the Government segment.
Earnings before taxes for 2017 decreased 29 percent to $386 million from $547 million in 2016.
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 and Mining, Industrial, Infrastructure & Power segments.
The effective tax rate was 39.2%, 31.6%, and 40.1% for 2018, 2017, and 2016, respectively. The 2018
effective tax rate was unfavorably impacted due to a $79 million increase in valuation allowances to reduce
certain deferred tax assets. 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 ‘‘2017 Tax Act’’), as further discussed in Note 6 of the Notes
to Consolidated Financial Statements. Apart from the impact of the 2017 Tax 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. 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 of $1.59 in 2018 included a gain of $0.74 per diluted share from the sale of
the joint venture interest in the U.K. but was adversely affected by charges totaling $2.14 per diluted share
resulting from forecast revisions at the aforementioned power plant project, downstream project and
offshore project. Diluted earnings per share in 2017 decreased to $1.36 from $2.00 in 2016. Diluted
earnings per share in 2017 was 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 U.S. tax reform legislation enacted in 2017 of $0.27 per diluted
share. Diluted earnings per share in 2016 was adversely affected by forecast revisions for estimated cost
increases on the petrochemicals project mentioned above of $1.20 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.
The company’s margins, in some cases, may be favorably or unfavorably impacted by a change in the
amount of materials and customer-furnished materials, which are accounted for as pass-through costs.
As a result of adopting ASC 606 on January 1, 2018, engineering and construction contracts are now
generally accounted for as a single unit of account (a single performance obligation), resulting in a more
constant recognition of revenue and margin over the term of the contract than under the previous
guidance in which the company typically segmented revenue and margin recognition between the
35
engineering and construction phases of its contracts. Prior to 2018, changes in the mix of work performed
by the company had a larger impact, favorably or unfavorably, on the company’s margins. Segment profit
margins were generally higher during the earlier stages of the project life cycle as project execution
activities were more heavily weighted to higher margin engineering activities rather than lower margin
construction activities, particularly when there was a significant amount of materials, including customer-
furnished materials, recognized during construction. For example, during 2017, margins in the company’s
Energy & Chemicals segment were adversely affected by a shift in the mix of work from higher margin
engineering activities to lower margin construction activities.
Consolidated new awards in 2018 were $27.7 billion compared to $12.6 billion in 2017 and
$21.0 billion in 2016. The Energy & Chemicals and Mining, Industrial, Infrastructure & Power segments
were the significant drivers of new award activity during 2018, including a liquefied natural gas export
facility in Canada, a copper project in the south of Peru and an iron ore replacement mine in Australia. 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. Approximately 80 percent of consolidated new
awards for 2018 were for projects located outside of the United States compared to 53 percent for 2017.
Consolidated backlog was $40.0 billion as of December 31, 2018, $30.9 billion as of December 31,
2017, and $45.0 billion as of December 31, 2016. The increase in backlog in 2018 primarily resulted from
the new award activity discussed above. The decrease in backlog in 2017 primarily resulted from the
removal of two nuclear power plant projects for Westinghouse Electric Company LLC (‘‘Westinghouse’’)
and an adjustment to limit the contractual term of the Magnox nuclear 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. As of December 31, 2018, approximately 71 percent of consolidated backlog
related to projects located outside of the United States compared to 58 percent as of December 31, 2017.
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.
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 a
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
$26 million, $26 million and $62 million in 2018, 2017 and 2016, respectively, and has a future funding
commitment of $26 million that is expected to be paid in the fourth quarter of 2019.
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.
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
36
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:
Engineering and Construction Contracts The company recognizes engineering and construction
contract revenue over time, as performance obligations are satisfied, due to the continuous transfer of
control to the customer. Engineering and construction contracts are generally accounted for as a single
unit of account (a single performance obligation) and are not segmented between types of services. The
company recognizes revenue using the percentage-of-completion method, based primarily on contract cost
incurred to date compared to total estimated contract cost. The percentage-of-completion method (an
input method) is the most faithful depiction of the company’s performance because it directly measures the
value of the services transferred to the customer. 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 acting as a principal rather than as an agent (i.e., the company integrates the materials,
labor and equipment into the deliverables promised to the customer). Customer-furnished materials are
only included in revenue and cost when the contract includes construction activity and the company has
visibility into the amount the customer is paying for the materials or there is a reasonable basis for
estimating the amount. The company recognizes revenue, but not profit, on certain uninstalled materials
that are not specifically produced, fabricated, or constructed for a project. Revenue on these uninstalled
materials is recognized when the cost is incurred (when control is transferred). Changes to total estimated
contract cost or losses, if any, are recognized in the period in which they are determined as assessed at the
contract level. Pre-contract costs are expensed as incurred unless they are expected to be recovered from
the client. Project mobilization costs are generally charged to project costs as incurred when they are an
integrated part of the performance obligation being transferred to the client. Customer payments on
engineering and construction contracts are typically due within 30 to 45 days of billing, depending on the
contract.
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. As of December 31, 2018, 53 percent of the company’s revenue backlog was
reimbursable while 47 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 nature of the company’s contracts gives rise to several types of variable consideration, including
claims and unpriced change orders; award and incentive fees; and liquidated damages and penalties. The
company recognizes revenue for variable consideration when it is probable that a significant reversal in the
amount of cumulative revenue recognized will not occur. The company estimates the amount of revenue to
be recognized on variable consideration using the expected value (i.e., the sum of a probability-weighted
amount) or the most likely amount method, whichever is expected to better predict the amount. Factors
considered in determining whether revenue associated with claims (including change orders in dispute and
unapproved change orders in regard to both scope and price) should be recognized include the following:
(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. If the requirements for
37
recognizing revenue for claims or unapproved change orders are met, revenue is recorded only when the
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. As of
December 31, 2018 and 2017, the company had recorded $166 million and $124 million, respectively, of
claim revenue for costs incurred to date and such costs are included in contract assets. 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 as of both December 31, 2018 and
2017. The company believes the ultimate recovery of amounts related to these claims and back charges is
probable in accordance with ASC 606.
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.
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. Consolidated backlog differs from the company’s remaining
unsatisfied performance obligations (‘‘RUPO’’) discussed in Note 3 to the Consolidated Financial
Statements. Backlog includes the amount of revenue the company expects to recognize under ongoing
operations and maintenance contracts for the remainder of the current year renewal period plus up to
three additional years if renewal is considered to be probable, while RUPO includes only the amount of
revenue the company expects to recognize under ongoing operations and maintenance contracts with
definite terms and substantive termination provisions.
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, noncontrolling ownership or participation 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
38
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.
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.
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. The 2017 Tax Act, which was enacted on December 22, 2017, significantly
changed how the U.S. taxes corporations. The 2017 Tax Act requires complex computations to be
performed that were not previously required by U.S. tax law, significant judgments to be made in
interpretations of the provisions of the 2017 Tax Act, significant estimates in calculations, and the
preparation and analysis of information not previously relevant or regularly produced. The U.S. Treasury
Department, the IRS, and other standard-setting bodies will continue to interpret or issue guidance on
how provisions of the 2017 Tax Act will be applied or otherwise administered. As future guidance is issued,
the company may make adjustments to amounts that it has previously recorded that may materially impact
the company’s provision for income taxes in the period in which the adjustments are made.
As of December 31, 2018, the company had deferred tax assets of $673 million which were partially
offset by a valuation allowance of $179 million and further reduced by deferred tax liabilities of
$152 million. The valuation allowance reduces certain deferred tax assets to amounts that are more likely
than not to be realized. The valuation allowance for 2018 primarily relates to the deferred tax assets on
certain net operating loss carryforwards in certain jurisdictions for U.S. and non-U.S. subsidiaries and U.S
foreign tax credit carryforward. 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
39
requirements, tax deductibility, reporting considerations and other factors. Assuming no changes in current
assumptions, the company expects to contribute up to $15 million to its defined benefit pension plans in
2019, 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 $49 million.
Segment Operations
The company provides professional services in the fields of engineering, procurement, construction,
fabrication and modularization, operations, maintenance and asset integrity, and project management, on
a global basis and serves a diverse set of industries worldwide. During the first quarter of 2018, the
company changed the composition of its reportable segments to align them with the manner in which the
chief executive officer manages the business and allocates resources. The operations of the company’s
mining and metals business, previously included in the Energy & Chemicals segment, have been included
in the Mining, Industrial, Infrastructure & Power segment. 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.
In the first quarter of 2019, services provided to the commercial nuclear market, as well as NuScale,
will be moved from the Mining, Industrial, Infrastructure & Power segment to the Government segment to
align with the manner in which the chief executive officer intends to manage the business and allocate
resources in 2019 and to better reflect the interaction of the commercial and government nuclear markets.
Energy & Chemicals
Revenue and segment profit for the Energy & Chemicals segment are summarized as follows:
(in millions)
Revenue
Segment profit
Year Ended December 31,
2018
2017
2016
$7,698.2
$8,565.8
$9,250.0
337.2
424.9
366.4
Revenue in 2018 decreased 10 percent compared to 2017, primarily due to reduced volume of project
execution activity for several chemicals and downstream projects that were nearing completion in 2017.
This revenue decline was partially offset by an increase in project execution activities for a large upstream
project. Revenue in 2017 decreased 7 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 projects.
Segment profit in 2018 and 2017 was adversely affected by charges totaling $133 million and
$44 million, respectively, for estimated cost and schedule impacts on a fixed-price, downstream project.
The company is in the process of finalizing certain close-out matters with the customer, including final
assessments of change orders and liquidated damages. The company’s forecast is based on its assessment
of the probable resolution of these close-out matters, which if not achieved, could result in additional
adjustments. Segment profit in 2018 was further affected by the reduced volume of project execution
activity for several downstream projects that were nearing completion in 2017, as well as charges totaling
$40 million resulting from forecast revisions for estimated cost growth on an offshore project. These
decreases in segment profit were largely offset by the favorable impact of the adoption of ASC 606.
Segment profit in 2016 was adversely affected by charges totaling $265 million resulting from cost growth
on a petrochemicals project. Normalizing for the adverse effects of the forecast revisions in 2017 and 2016,
segment profit declined in 2017 due to lower volume of project execution activity for chemicals projects
nearing completion and a continued shift in mix from higher margin engineering to lower margin
construction activities.
40
Segment profit margin was 4.4 percent, 5.0 percent and 4.0 percent for the years ended December 31,
2018, 2017 and 2016, respectively. The changes in segment profit margin in 2018 and 2017 were primarily
attributable to the same factors that affected revenue and segment profit.
New awards in the Energy & Chemicals segment were $10.6 billion, $4.0 billion and $6.9 billion in
2018, 2017 and 2016, respectively. New awards in 2018 included a liquefied natural gas export facility in
Canada as well as an engineering and procurement contract for a refinery in Texas. New awards in 2017
included an offshore project in the North Sea, 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.
Backlog for the Energy & Chemicals segment was $17.8 billion as of December 31, 2018, $15.1 billion
as of December 31, 2017 and $20.5 billion as of December 31, 2016. The increase in backlog during 2018
resulted from the new award activity discussed above. The reduction in backlog during 2017 resulted
primarily from new award activity being outpaced by work performed.
Total assets in the segment were $1.5 billion as of December 31, 2018 and $1.7 billion as of
December 31, 2017. Total assets as of December 31, 2018 included aged and disputed accounts receivable
of $108 million related to a cost reimbursable, chemicals project in the Middle East. As of February 2019,
management continues to pursue collection of these amounts from the customer and does not believe that
the customer has a contractual basis for withholding payment. The company does not believe it is probable
that losses will be incurred in excess of amounts reserved for this matter.
Mining, Industrial, Infrastructure & Power
Revenue and segment profit for the Mining, Industrial, Infrastructure & Power segment are
summarized as follows:
(in millions)
Revenue
Segment profit (loss)
Year Ended December 31,
2018
2017
2016
$5,186.1
$5,178.4
$4,598.7
(13.6)
(141.0)
170.9
Revenue in 2018 remained flat compared to 2017. Revenue growth from increased project execution
activity for certain existing and recently awarded mining & metals and infrastructure projects was offset by
reduced levels of project execution activity for several power projects, including two nuclear projects that
were canceled during 2017. Revenue in 2017 increased 13 percent compared to 2016 primarily due to
increased project execution activity for several life sciences and advanced manufacturing projects and
mining & metals projects, partially offset by reduced levels of project execution for the two nuclear
projects.
Segment profit in 2018 was adversely affected by charges totaling $188 million resulting from forecast
revisions for estimated cost growth at a fixed-price, gas-fired power plant project. These charges were
largely offset by a gain of $125 million associated with the sale of the company’s interest in a joint venture
in the United Kingdom. Segment profit in 2017 was adversely affected by charges totaling $260 million
resulting from forecast revisions for estimated cost growth at three fixed-price, gas-fired power plant
projects. Excluding the adverse effects of forecast revisions in both 2018 and 2017 and the gain on the sale
of the joint venture interest in 2018, segment profit in 2018 declined when compared to 2017. This decline
resulted primarily from the reduced volume of project execution activity for the power projects mentioned
above, partially offset by the increased project execution activity for the mining & metals and infrastructure
projects mentioned above. Segment profit in 2017, excluding the impact of the forecast revisions
mentioned above, declined when compared to 2016, primarily due to lower contributions from
infrastructure projects. Segment profit margins were (0.3) percent, (2.7) percent and 3.7 percent in 2018,
2017 and 2016, respectively. The change in segment profit margins in 2018 and 2017 were primarily
attributable to the same factors impacting segment profit in those years.
41
The Mining, Industrial, Infrastructure & Power segment includes the operations of NuScale, which
are primarily research and development activities. NuScale expenses, net of qualified reimbursable
expenses, included in the determination of segment profit, were $74 million, $76 million and $92 million
during 2018, 2017 and 2016, respectively.
New awards in the Mining, Industrial, Infrastructure & Power segment were $10.8 billion, $4.0 billion
and $7.7 billion during 2018, 2017 and 2016, respectively. New awards in 2018 included a copper project in
the south of Peru, an iron ore replacement mine in Australia, an international bridge project in Canada, a
mine expansion project in Peru, and the Los Angeles International Airport Automated People Mover
project. New awards in 2017 included a mining project in Chile, 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 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, a pharmaceutical manufacturing facility in
North Carolina and a bauxite mine project in Guinea.
Backlog in the Mining, Industrial, Infrastructure & Power segment was $15.3 billion as of
December 31, 2018, $9.6 billion as of December 31, 2017 and $16.4 billion as of December 31, 2016. The
increase in backlog during 2018 primarily resulted from the new award activity discussed above. The
decrease in backlog during 2017 primarily resulted from the removal of two nuclear power plant projects
for Westinghouse during 2017.
Total assets in the Mining, Industrial, Infrastructure & Power segment were $1.3 billion as of
December 31, 2018 and $1.1 billion as of December 31, 2017. The increase in total assets resulted from
increased working capital assets in support of project execution activities.
Total assets in the Mining, Industrial, Infrastructure & Power segment as of December 31, 2018
included accounts receivable related to the two subcontracts with Westinghouse to manage the
construction workforce at two nuclear power plant projects in South Carolina (‘‘V.C. Summer’’) and
Georgia (‘‘Plant Vogtle’’). On March 29, 2017, 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 canceled 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, 2018 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 has 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.
The company is currently in a dispute with a customer over costs totaling approximately $110 million
that were allegedly incurred by the customer in connection with one of the gas-fired power plant projects
discussed above. The customer has withheld payment of certain invoices outstanding as of December 31,
2018 and drew down in January 2019 on a letter of credit issued on behalf of the company. The company
believes that certain of the customer’s claims are without merit and is vigorously pursuing recovery of the
amounts from the customer. Based upon its evaluation as of December 31, 2018, the company does not
believe it is probable that a loss will be incurred in excess of amounts reserved for this matter.
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Government
Revenue and segment profit for the Government segment are summarized as follows:
(in millions)
Revenue
Segment profit
Year Ended December 31,
2018
2017
2016
$3,772.0
$3,232.7
$2,720.0
178.6
127.9
85.1
Revenue in 2018 increased 17 percent compared to 2017, substantially driven by increased volume of
project execution activities for a power restoration project in Puerto Rico, which commenced in the fourth
quarter of 2017 and was substantially completed in the first half of 2018. Revenue growth in 2018 also
resulted from an increase in hurricane relief efforts for the United States Federal Emergency Management
Agency. These increases in revenue in 2018 were partially offset by lower revenue resulting from the
substantial completion of the Paducah Gaseous Diffusion Plant project in late 2017. 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 the power
restoration project in Puerto Rico.
Segment profit in 2018 increased 40 percent compared to 2017, primarily due to the increased volume
of project execution activities for the power restoration project and hurricane relief efforts discussed
above. Segment profit in 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
restoration project discussed above. Segment profit margins were 4.7 percent, 4.0 percent, and 3.1 percent
in 2018, 2017 and 2016, respectively. The increases in segment profit margin in both 2018 and 2017 were
primarily driven by the same factors that drove the increases in segment profit in both years.
New awards were $4.1 billion, 2.6 billion and 4.6 billion during 2018, 2017 and 2016, respectively. New
awards in 2018 included a five-year extension of the management and operating contract of the Strategic
Petroleum Reserve, a thirty-month extension at the Portsmouth Gaseous Diffusion Plant site, a contract
extension for the LOGCAP IV program and a one-year extension at the Savannah River site. New awards
in 2017 included two awards related to the power 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 $4.6 billion as of December 31, 2018, 3.8 billion as of December 31, 2017 and 5.2 billion
as of December 31, 2016. Total backlog included $2.9 billion, $741 million and $2.7 billion of unfunded
government contracts as of December 31, 2018, 2017 and 2016, respectively. The increase in backlog in
2018 primarily resulted from new award activity for several multi-year decommissioning and cleanup
projects. 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 $823 million as of December 31, 2018 compared to
$732 million as of December 31, 2017. The increase in total assets primarily resulted from increased
working capital in support of project execution activities for several projects including the LOGCAP IV
program in Afghanistan and the Radford Munition Facility. For this latter project, the company is a
subcontractor to a commercial client on a U.S. government project where the company’s forecast is based
on its assessment of the probable resolution of certain change orders submitted to the client which are
currently under discussion, and if not achieved, could adversely affect revenue and segment profit.
43
Diversified Services
Revenue and segment profit for the Diversified Services segment are summarized as follows:
(in millions)
Revenue
Segment profit
Year Ended December 31,
2018
2017
2016
$2,510.3
$2,544.1
$2,467.8
99.6
133.6
121.9
Revenue in 2018 remained relatively flat compared to 2017. Revenue growth from Stork operations in
Latin America and the staffing business were offset by the cancellation of a large operations and
maintenance project in North America and revenue declines in the equipment and power services
businesses. 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.
Segment profit in 2018 decreased by 25 percent compared to 2017, primarily due to the cancellation of
the large operations and maintenance project in North America and lower contributions from the
equipment and power services businesses. 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 margin was 4.0 percent, 5.3 percent and
4.9 percent for the years ended December 31, 2018, 2017 and 2016, respectively. The changes in segment
profit margins in 2018 and 2017 were primarily due to the same factors affecting segment profit.
New awards in the Diversified Services segment were $2.1 billion, 2.0 billion and 1.8 billion in 2018,
2017 and 2016, respectively. Backlog was $2.3 billion as of December 31, 2018, 2.5 billion as of
December 31, 2017 and 2.9 billion as of December 31, 2016. The reduction in backlog during 2018 resulted
from scope changes on certain power services projects and the cancellation of the large operations and
maintenance project in North America. 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 $1.8 billion as of December 31, 2018 compared
to $2.1 billion as of December 31, 2017.
Corporate, Tax and Other Matters
Corporate For the three years ended December 31, 2018, 2017 and 2016, corporate general and
administrative expenses were $148 million, $192 million and $191 million, respectively. The decrease in
corporate general and administrative expenses during 2018 was primarily due to foreign currency exchange
gains in the 2018 period compared to foreign currency exchange losses in the 2017 period, partially offset
by a partial pension settlement charge of $22 million in 2018 (discussed in Note 7 in the Notes to
Consolidated Financial Statements). Corporate general and administrative expenses remained relatively
flat in 2017 compared to 2016. 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.
Net interest expense was $40 million, $40 million and $53 million for the years ended December 31,
2018, 2017 and 2016, respectively. An increase in interest expense related to the issuance of $600 million of
4.250% Senior Notes in August 2018 and the payment of a make-whole premium associated with the
redemption of $500 million of 3.375% Senior Notes in September 2018 (discussed in Note 10 in the Notes
to Consolidated Financial Statements) was offset by an increase in interest income from time deposits. The
decrease in 2017 was primarily due to an increase in interest income resulting from time deposits entered
44
into during the year as well as a decrease in interest expense resulting from the repayment of Stork’s 11.0%
Super Senior Notes and borrowings under a revolving line of credit.
Tax The effective tax rate was 39.2%, 31.6%, and 40.1% for 2018, 2017 and 2016, respectively.
Factors affecting the effective tax rates for 2016 - 2018 are discussed above under ‘‘— Results of
Operations.’’
Recent Accounting Pronouncements
See Note 2 to the Consolidated Financial Statements.
Litigation and Matters in Dispute Resolution
See Note 16 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, including the use of commercial paper. 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, 2018, 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 as of both December 31, 2018 and 2017. Cash and cash
equivalents combined with current and noncurrent marketable securities were $2.0 billion and $2.1 billion
as of December 31, 2018 and 2017, respectively. Cash and cash equivalents are held in numerous accounts
throughout the world to fund the company’s global project execution activities. Non-U.S. cash and cash
equivalents amounted to $964 million and $919 million as of December 31, 2018 and 2017, 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
$392 million and $516 million as of December 31, 2018 and 2017, 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 $856 million and $874 million as of December 31, 2018 and 2017, respectively, and is
presented as ‘‘Contract liabilities’’ 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, 2018 and 2017 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.
45
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 stage of completion and commercial terms of engineering and
construction projects, as well as the company’s execution of its projects within budget. Working capital
requirements also vary by project and relate to clients in various industries and locations throughout the
world. Most contracts require payments as the projects progress. The company evaluates the counterparty
credit risk of third parties as part of its project risk review process. The company maintains adequate
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.
The company’s working capital accounts as of December 31, 2018 reflect the adoption of ASC 606.
(See Note 3 to the Consolidated Financial Statements). Excluding the non-cash impact of adopting
ASC 606, working capital increased primarily due to an increase in contract assets and a decrease in
contract liabilities partially offset by an increase in accounts payable during 2018. Specific factors related to
these drivers include:
(cid:129) An increase in contract assets, primarily driven by project execution activities in the Mining,
Industrial, Infrastructure & Power segment for certain mining & metals and infrastructure projects.
(cid:129) A decrease in contract liabilities in the Energy & Chemicals segment, which resulted primarily from
normal project execution activities on several large projects.
(cid:129) An increase in accounts payable in the Mining, Industrial, Infrastructure & Power segment, which
resulted from normal invoicing activities.
(cid:129) A decrease in other current assets, driven primarily by the receipt of income tax refunds in 2018.
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 assets.
Specific factors related to these drivers include:
(cid:129) A decrease in accounts payable in the Energy & Chemicals 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
joint venture project in the United States.
(cid:129) A decrease in contract assets in the Energy & Chemicals 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 assets. Specific factors related to these drivers include:
(cid:129) An
increase
in accounts payable
in the Energy & Chemicals and Mining, 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 segment.
(cid:129) An increase in accounts receivable, primarily attributable to work performed for an Energy &
Chemicals joint venture project in the United States.
(cid:129) An increase in contract assets in the Mining, Industrial, Infrastructure & Power segment, which
resulted primarily from normal project execution activities for two nuclear projects.
46
Cash provided by operating activities was $162 million, $602 million and $706 million in 2018, 2017
and 2016, respectively. The decrease in cash provided by operating activities in 2018 resulted primarily
from a higher level of working capital outflows during 2018 as compared to the prior year. The decrease in
cash provided by operating activities in 2017 was primarily driven by a decline in net working capital
inflows and lower net earnings compared to 2016, partially offset by a decrease in deferred taxes.
The company made income tax payments (net of refunds) of ($28 million), $175 million and
$165 million in 2018, 2017 and 2016, 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 2018, 2017 and
2016 were $150 million, $165 million and $167 million, respectively. The company contributed
approximately $45 million into its defined benefit pension plans during 2018 and $15 million in both 2017
and 2016. Company contributions to defined benefit pension plans during 2018 included additional
funding required to execute a buy-in policy contract with an insurance company to fully insure the benefits
of the plan in the United Kingdom. Assuming no changes in current assumptions, the company expects to
contribute up to $15 million to its defined benefit pension plans in 2019, which is expected to be in excess
of the minimum funding required. The company does not anticipate any further material contributions to
the U.K. plan. As of December 31, 2018, the accumulated benefit obligation exceeded plan assets for
certain defined benefit pension plans in the Netherlands, Germany and the Philippines. As of
December 31, 2017, the accumulated benefit obligation exceeded plan assets for certain defined benefit
pension plans in the Netherlands and Germany.
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 $74 million, $76 million and
$92 million during 2018, 2017 and 2016, respectively. NuScale expenses for 2018, 2017 and 2016 were
reported net of qualified reimbursable expenses of $62 million, $48 million and $57 million, respectively.
(See Note 1 of the Notes to Consolidated Financial Statements for a further discussion of the cost-sharing
agreements between NuScale and the U.S. Department of Energy.)
Investing Activities
Cash provided by investing activities amounted to $1 million during 2018. Cash utilized by investing
activities amounted to $484 million and $741 million during 2017 and 2016, respectively. The primary
investing activities included purchases, sales and maturities of marketable securities; capital expenditures;
disposals of property, plant and equipment; sales of and 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 may include money market funds,
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 2018 and 2016, proceeds from sales and
maturities of marketable securities exceeded purchases of such securities by $58 million and $162 million,
respectively. During 2017, purchases of marketable securities exceeded proceeds from sales and maturities
of such securities by $21 million. The company held combined current and noncurrent marketable
securities of $215 million and $275 million as of December 31, 2018 and 2017, respectively.
Capital expenditures of $211 million, $283 million and $236 million during 2018, 2017 and 2016,
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 $81 million, $96 million and
$81 million during 2018, 2017 and 2016, respectively, primarily related to the disposal of construction
equipment associated with the equipment operations in the Diversified Services segment.
47
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. 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 issuance of A500 million of 1.750% Senior Notes (the
‘‘2016 Notes’’) due March 21, 2023.
In 2018, the company sold its interest in a joint venture in the United Kingdom and received proceeds
of $125 million, net of expenses. Investments in unconsolidated partnerships and joint ventures were
$73 million, $273 million and $518 million in 2018, 2017 and 2016, respectively. Investments in 2018
included capital contributions to an infrastructure joint venture in the United States as well as investments
in CFHI. Investments in 2017 and 2016 included capital contributions to an Energy & Chemicals joint
venture in the United States and investments in CFHI. The company has a future funding commitment to
CFHI of $26 million that is expected to be paid in the fourth quarter of 2019.
Financing Activities
Cash utilized by financing activities during 2018, 2017 and 2016 of $140 million, $216 million and
$10 million, respectively, included company stock repurchases, dividend payments to stockholders,
proceeds from the issuance of senior notes and commercial paper, 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 the open market or privately negotiated transactions at the company’s discretion. In
2018 and 2016, the company repurchased 1,097,126 shares and 202,650 shares of common stock,
respectively, under its current and previously authorized stock repurchase programs resulting in cash
outflows of $50 million and $10 million, respectively. As of December 31, 2018, 10,513,093 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 2018 will be paid in the first quarter of
2019. Quarterly cash dividends of $0.21 per share were declared in 2018, 2017 and 2016. Dividends of
$119 million were paid during 2018. Dividends of $118 million were paid during both 2017 and 2016. The
payment and level of future cash dividends is subject to the discretion of the company’s Board of Directors.
In August 2018, the company issued $600 million of 4.250% Senior Notes (the ‘‘2018 Notes’’) due
September 15, 2028 and received proceeds of $595 million, net of underwriting discounts. Interest on the
2018 Notes is payable semi-annually on March 15 and September 15 of each year, beginning on March 15,
2019. Prior to June 15, 2028, the company may redeem the 2018 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
June 15, 2028, the company may redeem the 2018 Notes at 100 percent of the principal amount plus
accrued and unpaid interest, if any, to the date of redemption.
In March 2016, the company issued the 2016 Notes 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.
48
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.
For the 2018 Notes, the 2016 Notes and the 2014 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 2018 Notes, the 2016 Notes and the 2014 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. The company may, from time to
time, repurchase the 2018 Notes, the 2016 Notes and the 2014 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 September 2018, the company used a portion of the proceeds from the 2018 Notes to fully redeem
$500 million of 3.375% Senior Notes (the ‘‘2011 Notes’’) due September 15, 2021. The redemption price of
$503 million was equal to 100 percent of the principal amount of the 2011 Notes plus a ‘‘make-whole’’
premium of $3 million.
During the second and third quarters of 2018, the company issued commercial paper to meet its
short-term liquidity needs. All of the outstanding commercial paper was repaid in October 2018.
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.
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 $64 million, $47 million and $58 million in 2018, 2017 and 2016,
respectively. Distributions in 2018, 2017 and 2016 primarily related to transportation joint venture projects
in the United States. Capital contributions by joint venture partners were $5 million, $6 million and
$9 million in 2018, 2017 and 2016, 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
2018 and 2016, most major foreign currencies weakened against the U.S. dollar resulting in unrealized
translation losses of $116 million and $103 million, respectively, of which $62 million and $54 million,
49
respectively, related to cash held by foreign subsidiaries. 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. 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, 2018, 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, 2018, letters of credit and
borrowings totaling $1.6 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 debt-to-capitalization ratio that cannot exceed
0.6 to 1.0 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.
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 $19 billion as of December 31, 2018. 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, 2018 and 2017 in accordance with ASC 460, ‘‘Guarantees,’’ and the carrying value of the
liability was not material.
50
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.
Variable Interest Entities
In the normal course of business, the company forms partnerships or joint ventures primarily for the
execution of single contracts or projects. The company evaluates each partnership and joint venture to
determine whether the entity is a variable interest entity (‘‘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 18 to the Consolidated Financial Statements.
Contractual Obligations
Contractual obligations as of December 31, 2018 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
3.5% Senior Notes
4.250% 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
$ 569
494
594
31
391
317
25
6
107
51
11
396
$2,992
$ —
—
—
27
53
90
2
—
30
11
3
73
$289
$ —
—
—
4
105
124
2
—
12
21
3
158
$429
$569
—
—
—
97
54
2
—
36
19
3
148
$928
$ —
494
594
—
136
49
19
6
29
—
2
17
$1,346
(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
51
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.
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, 2018, the company had total gross notional amounts of
$557 million of foreign currency contracts (primarily related to the British Pound, Kuwaiti Dinar, Indian
Rupee, Philippine Peso, South Korean Won and Chinese Yuan). The foreign currency contracts are of
varying duration, none of which extend beyond December 2021. The company’s historical gains and losses
associated with foreign currency contracts have typically been immaterial, and have largely mitigated the
exposures being hedged. As of December 31, 2018, the company had total gross notional amounts of
$31 million associated with contractual foreign currency payment provisions that were deemed embedded
derivatives. There were no commodity contracts outstanding as of December 31, 2018. 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.
52
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
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, 2018.
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,
2018, 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, 2018, 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, 2018 and 2017, 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, 2018, and
the related notes (collectively referred to as the ‘‘financial statements’’) of Fluor Corporation and our
report dated February 21, 2019 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 21, 2019
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, 2018 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 sections entitled ‘‘Election of Directors — Director Nominees’’ 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 (‘‘Proxy Statement’’) 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:
‘‘Organization and Compensation Committee Report,’’ ‘‘Compensation Committee Interlocks and Insider
Participation,’’ ‘‘Compensation Discussion and Analysis,’’ ‘‘Director Compensation’’ and ‘‘Pay Ratio
Disclosure,’’ 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, 2018 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 . .
6,343,202
—
Total . . . . . . . . . . . . . . . . . . .
6,343,202
$60.25(2)
—
$60.25(2)
11,876,868
—
11,876,868
(1) Consists of (a) the Amended and Restated 2008 Executive Performance Incentive Plan, under which
4,555,770 shares are issuable upon exercise of outstanding options, 425,435 shares are issuable upon
vesting of outstanding restricted stock units, 490,596 shares are issuable if specified performance
target awards are met under outstanding Value Driver Incentive (‘‘VDI’’) unit awards, and under
which no shares remain for future issuance; (b) the 2017 Performance Incentive Plan, under which
33,615 shares are issuable upon exercise of outstanding options, 548,679 shares are issuable upon
vesting of outstanding restricted stock units, 206,598 shares are issuable if specified performance
target awards are met under outstanding VDI unit awards, but under which 11,876,868 shares remain
available for issuance; (c) 50,367 vested restricted stock units deferred by non-associate directors
participating in the 409A Director Deferred Compensation Program that are distributable in the form
of shares; and (d) 32,142 vested restricted stock units granted to non-associate directors that are
subject to a post-vest holding period and for which shares have not been issued.
(2) Weighted-average exercise price of outstanding options only.
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, 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, 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, 2018 and 2017 and for each of the three years
in the period ended December 31, 2018 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
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 (Commission file
number 1-16129) 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 (Commission file number 1-16129) 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 (Commission file number 1-16129)
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 (Commission file number 1-16129)
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 Registration Statement on Form S-3 (Commission file number 333-182283)
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 (Commission file number 1-16129)
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 (Commission file number 1-16129) filed on
March 21, 2016).
57
Exhibit
Description
4.6
10.1
10.2
10.3
10.4
10.5
10.6
10.7
10.8
10.9
10.10
10.11
Fifth Supplemental Indenture between Fluor Corporation and Wells Fargo Bank, National
Association, as trustee, dated as of August 29, 2018 (incorporated by reference to Exhibit 4.1
to the registrant’s Current Report on Form 8-K (Commission file number 1-16129) filed on
August 29, 2018).
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
(Commission file number 1-16129) 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 (Commission file
number 1-16129) 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 (Commission file
number 1-16129) filed on February 17, 2017).**
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 (Commission file number 1-16129) 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 (Commission file
number 1-16129) filed on February 17, 2017).**
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 (Commission file number 1-16129) filed on May 5, 2016).**
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 (Commission file number 1-16129) 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 (Commission file
number 1-16129) 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 (Commission file
number 333-217653) filed on May 4, 2017).**
Form of Restricted Stock Unit Agreement under the Fluor Corporation 2017 Performance
Incentive Plan (incorporated by reference to Exhibit 10.15 to the registrant’s Quarterly Report
on Form 10-Q (Commission file number 1-16129) filed on May 3, 2018).**
Form of Option Agreement under the Fluor Corporation 2017 Performance Incentive Plan
(incorporated by reference to Exhibit 10.16 to the registrant’s Quarterly Report on Form 10-Q
(Commission file number 1-16129) filed on May 3, 2018).**
58
Exhibit
Description
10.12
10.13
10.14
10.15
10.16
10.17
10.18
10.19
10.20
10.21
10.22
10.23
10.24
10.25
Form of Value Driver Incentive Award Agreement under the Fluor Corporation 2017
Performance Incentive Plan (incorporated by reference to Exhibit 10.17 to the registrant’s
Quarterly Report on Form 10-Q (Commission file number 1-16129) filed on May 3, 2018).**
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 (Commission file number 1-16129) filed on February 29, 2008).**
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 (Commission file number 1-16129) 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 (Commission file number 1-16129) filed on February 22, 2012).**
Retention Award, dated November 16, 2017, granted to Mr. Garry W. Flowers (incorporated
by reference to Exhibit 10.18 to the registrant’s Annual Report on Form 10-K (Commission
file number 1-16129) filed on February 20, 2018).**
Retirement and Release Agreement, effective February 8, 2018, between the registrant and
Biggs C. Porter (incorporated by reference to Exhibit 10.19 to the registrant’s Annual Report
on Form 10-K (Commission file number 1-16129) filed on February 20, 2018).**
Summary of Fluor Corporation Non-Management Director Compensation (incorporated by
reference to Exhibit 10.20 to the registrant’s Annual Report on Form 10-K (Commission file
number 1-16129) filed on February 20, 2018).**
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 (Commission file number 1-16129) filed on
August 3, 2017).**
Form of Restricted Stock Unit Agreement granted to directors (2018 grant) under the Fluor
Corporation 2017 Performance Incentive Plan (incorporated by reference to Exhibit 10.25 to
the registrant’s Quarterly Report on Form 10-Q (Commission file number 1-16129) filed on
August 2, 2018).**
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 (Commission file number 1-16129) 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 (Commission file number 1-16129) 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) (Commission file
number 1-16129) 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 (Commission file number 1-16129) 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 (Commission file number 1-16129) filed on June 29, 2010).**
59
Exhibit
Description
10.26
10.27
10.28
10.29
21.1
23.1
31.1
31.2
32.1
32.2
$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 (Commission file number 1-16129) filed on March 2,
2016).
Amendment No. 1, dated as of August 20, 2018, to $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 financial institutions party thereto and BNP Paribas, as
Administrative Agent (incorporated by reference to Exhibit 10.1 to the registrant’s Current
Report on Form 8-K (Commission file number 1-16129) filed on August 23, 2018).
$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-K (Commission file number 1-16129) filed on March 2,
2016).
Amendment No. 1, dated as of August 20, 2018, to $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 financial institutions party thereto and BNP Paribas, as
Administrative Agent (incorporated by reference to Exhibit 10.2 to the registrant’s Current
Report on Form 8-K (Commission file number 1-16129) filed on August 23, 2018).
Subsidiaries of the registrant.*
Consent of Independent Registered Public Accounting Firm.*
Certification of Chief Executive Officer of Fluor Corporation.*
Certification of Chief Financial Officer of Fluor Corporation.*
Certification of Chief Executive Officer pursuant to Rule 13a-14(b) or Rule 15d-14(b) of the
Securities Exchange Act of 1934 and 18 U.S.C. Section 1350.*
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.*
95
Mine Safety Disclosure.*
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.*
*
Exhibit filed with this report.
** Management contract or compensatory plan or arrangement.
60
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, 2018, 2017 and 2016, (ii) the Consolidated Balance Sheet at December 31, 2018 and
December 31, 2017, (iii) the Consolidated Statement of Cash Flows for the years ended December 31,
2018, 2017 and 2016 and (iv) the Consolidated Statement of Equity for the years ended December 31,
2018, 2017 and 2016.
Item 16. Form 10-K Summary
None.
61
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 21, 2019
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 21, 2019
/s/ BRUCE A. STANSKI
Bruce A. Stanski
Executive Vice President and Chief
Financial Officer
February 21, 2019
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 21, 2019
Director
Director
Director
Director
February 21, 2019
February 21, 2019
February 21, 2019
February 21, 2019
62
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/ 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
Date
February 21, 2019
February 21, 2019
February 21, 2019
February 21, 2019
February 21, 2019
February 21, 2019
February 21, 2019
63
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, 2018 and 2017, 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,
2018, 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, 2018 and 2017, and the consolidated results of its operations and its cash
flows for each of the three years in the period ended December 31, 2018, 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, 2018, 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 21, 2019 expressed an unqualified opinion thereon.
Adoption of ASU No. 2014-09 (Topic 606)
As discussed in Note 1 to the consolidated financial statements, the Company changed its method of
accounting for revenue recognition on contracts with customers specifically as it relates to how the
Company determines units of account for its projects in the 2018 financial statements to reflect the
accounting method change due to the adoption of ASU 2014-09 Revenue from Contracts with Customers
(Topic 606).
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 21, 2019
F-2
FLUOR CORPORATION
CONSOLIDATED STATEMENT OF EARNINGS
(in thousands, except per share amounts)
TOTAL REVENUE
TOTAL COST OF REVENUE
OTHER (INCOME) AND EXPENSES
Corporate general and administrative expense
Interest expense
Interest income
Total cost and expenses
EARNINGS BEFORE TAXES
INCOME TAX EXPENSE
NET EARNINGS
LESS: NET EARNINGS ATTRIBUTABLE TO
NONCONTROLLING INTERESTS
NET EARNINGS ATTRIBUTABLE TO FLUOR
CORPORATION
BASIC EARNINGS PER SHARE
DILUTED EARNINGS PER SHARE
SHARES USED TO CALCULATE EARNINGS PER SHARE
Basic
Diluted
Year Ended December 31,
2018
2017
2016
$19,166,599
$19,520,970
$19,036,525
18,496,675
18,902,480
18,246,209
147,958
77,179
(36,965)
192,187
67,638
(27,776)
191,073
69,689
(17,046)
18,684,847
19,134,529
18,489,925
481,752
188,794
292,958
386,441
121,972
264,469
546,600
219,151
327,449
68,125
73,092
46,048
$
$
$
224,833
1.60
1.59
$
$
$
191,377
1.37
1.36
$
$
$
281,401
2.02
2.00
140,413
141,272
139,761
140,893
139,171
140,912
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,
2018
2017
2016
$ 292,958
$264,469
$327,449
(99,809)
74,424
(64,380)
8,942
(52,591)
274
709
(701)
15,609
4,743
(444)
6,036
(5,137)
(662)
207
(142,475)
93,631
(63,936)
150,483
358,100
263,513
65,886
72,296
46,006
CORPORATION
$ 84,597
$285,804
$217,507
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 ($391,635 and $516,046 related to variable interest entities
(‘‘VIEs’’))
Marketable securities, current ($202,481 and $91,295 related to VIEs)
Accounts and notes receivable, net ($214,339 and $327,652 related to VIEs)
Contract assets ($350,814 and $132,500 related to VIEs)
Other current assets ($15,660 and $9,229 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 ($41,479 and $44,004 related to VIEs)
OTHER ASSETS
Marketable securities, noncurrent
Goodwill
Investments
Deferred taxes
Deferred compensation trusts
Other ($26,578 and $27,631 related to VIEs)
Total other assets
TOTAL ASSETS
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Trade accounts payable ($475,018 and $258,592 related to VIEs)
Short-term borrowings
Contracts liabilities ($271,692 and $361,701 related to VIEs)
Accrued salaries, wages and benefits ($28,478 and $32,678 related to VIEs)
Other accrued liabilities ($49,997 and $44,211 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 —
139,653,824 and 139,918,324 shares in 2018 and 2017, 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.
F-5
December 31,
2018
December 31,
2017
$1,764,746
214,828
1,534,339
1,544,981
381,999
5,440,893
81,566
508,120
1,437,540
154,237
53,071
2,234,534
1,220,802
1,013,732
—
533,585
938,490
342,126
328,814
315,997
$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
2,459,012
2,632,754
$8,913,637
$9,327,692
$1,638,891
26,887
855,948
649,486
381,301
3,552,513
1,661,565
581,509
$1,512,740
27,361
874,036
706,520
453,513
3,574,170
1,591,598
669,525
—
—
1,396
82,106
(542,478)
3,422,157
2,963,181
154,869
3,118,050
1,399
88,222
(402,242)
3,654,931
3,342,310
150,089
3,492,399
$8,913,637
$9,327,692
FLUOR CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Year Ended December 31,
2018
2017
2016
Net earnings
Adjustments to reconcile net earnings to cash provided (utilized) by operating
$ 292,958
$ 264,469
$ 327,449
activities:
Depreciation of fixed assets
Amortization of intangibles
(Earnings) loss from equity method investments, net of distributions
Gain on sale of joint venture interest
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
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 joint venture interest
Investments in partnerships and joint ventures
Return of capital from partnerships and joint ventures
Acquisitions, net of cash acquired
Other items
197,585
19,071
980
(124,942)
(22,132)
43,029
18,010
(22,272)
—
70,594
(16,472)
(297,722)
3,477
162,164
(483,513)
541,104
(210,998)
81,038
124,942
(73,145)
22,284
—
(329)
206,113
19,156
2,849
—
(22,746)
40,669
(49,539)
52,615
—
100,286
(8,846)
(11,899)
8,844
601,971
(237,360)
216,436
(283,107)
96,102
—
(273,117)
3,249
—
(6,481)
211,095
14,818
12,180
—
(21,604)
40,086
(22,332)
29,323
(13,280)
(7,912)
(1,756)
135,393
2,459
705,919
(359,986)
522,094
(235,904)
81,162
—
(518,220)
3,783
(240,740)
6,460
Cash provided (utilized) by investing activities
1,383
(484,278)
(741,351)
CASH FLOWS FROM FINANCING ACTIVITIES
Repurchase of common stock
Dividends paid
Proceeds from issuance of Senior Notes
Repayment of 3.375% Senior Notes and Stork Notes
Borrowings under revolving lines of credit
Repayment of borrowings under revolving lines of credit
Debt issuance costs
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
(50,022)
(118,734)
598,722
(503,285)
—
—
(5,061)
(63,523)
5,128
(5,686)
7,258
(5,288)
—
(117,995)
—
—
—
(53,455)
—
(47,215)
6,397
(6,186)
9,380
(6,428)
(140,491)
(215,502)
(62,385)
51,448
(9,718)
(117,995)
552,958
(333,654)
882,142
(917,027)
(3,513)
(57,904)
9,072
(7,007)
3,658
(11,362)
(10,350)
(53,668)
(39,329)
1,804,075
(46,361)
1,850,436
(99,450)
1,949,886
$1,764,746
$1,804,075
$1,850,436
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, 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
Net earnings
Cumulative adjustment for the adoption of
ASC 606
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
—
—
—
—
—
—
—
833
(1,097)
—
—
—
—
—
—
—
8
(11)
—
—
—
153
—
—
5,329
38,413
(50,011)
—
224,833
224,833
68,125
292,958
—
(140,236)
—
—
(338,738)
—
(118,869)
—
—
—
—
—
—
—
—
—
(338,738)
(140,236)
(118,716)
—
—
5,329
38,421
(50,022)
(963)
(2,239)
—
(63,523)
5,128
(1,748)
—
—
(339,701)
(142,475)
(118,716)
(63,523)
5,128
3,581
38,421
(50,022)
BALANCE AS OF DECEMBER 31, 2018
139,654
$1,396
$ 82,106
$(542,478)
$3,422,157
$2,963,181
$154,869
$3,118,050
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 18 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 2017 and 2016 have been reclassified to conform to the 2018 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.
In the first quarter of 2018, the company adopted Accounting Standards Update (‘‘ASU’’) 2014-09
(ASC Topic 606), ‘‘Revenue from Contracts with Customers’’ using the modified retrospective method in
which the new guidance was applied retrospectively to contracts that were not completed as of January 1,
2018. Results for the year ended December 31, 2018 have been presented under Topic 606, while prior
period amounts have not been adjusted and continue to be reported in accordance with previous guidance.
See Note 3 for a further discussion of the adoption and the impact on the company’s financial statements.
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.
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. From time to time, the company also holds
investments in debt securities which are classified as available-for-sale because the investments may be sold
F-8
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLUOR CORPORATION
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.
Revenue Recognition
Engineering and construction contracts. The company recognizes engineering and construction
contract revenue over time, as performance obligations are satisfied, due to the continuous transfer of
control to the customer. Engineering and construction contracts are generally accounted for as a single
unit of account (a single performance obligation) and are not segmented between types of services. The
company recognizes revenue using the percentage-of-completion method, based primarily on contract cost
incurred to date compared to total estimated contract cost. The percentage-of-completion method (an
input method) is the most faithful depiction of the company’s performance because it directly measures the
value of the services transferred to the customer. 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 acting as a principal rather than as an agent (i.e., the company integrates the materials,
labor and equipment into the deliverables promised to the customer). Customer-furnished materials are
only included in revenue and cost when the contract includes construction activity and the company has
visibility into the amount the customer is paying for the materials or there is a reasonable basis for
estimating the amount. The company recognizes revenue, but not profit, on certain uninstalled materials
that are not specifically produced, fabricated, or constructed for a project. Revenue on these uninstalled
materials is recognized when the cost is incurred (when control is transferred). Changes to total estimated
contract cost or losses, if any, are recognized in the period in which they are determined as assessed at the
contract level. Pre-contract costs are expensed as incurred unless they are expected to be recovered from
the client. As of December 31, 2018, the company had $26 million in pre-contract costs classified as a
current asset under contract assets on the Consolidated Balance Sheet. Project mobilization costs are
generally charged to project costs as incurred when they are an integrated part of the performance
obligation being transferred to the client. Customer payments on engineering and construction contracts
are typically due within 30 to 45 days of billing, depending on the contract.
Service contracts. For service contracts (including maintenance contracts) in which the company
has the right to consideration from the customer in an amount that corresponds directly with the value to
the customer of the company’s performance completed to date, revenue is recognized when services are
performed and contractually billable. For all other service contracts, the company recognizes revenue over
time using the cost-to-cost percentage-of-completion method. Service contracts that include multiple
performance obligations are segmented between types of services. For contracts with multiple performance
obligations, the company allocates the transaction price to each performance obligation using an estimate
of the stand-alone selling price of each distinct service in the contract. Revenue recognized on service
contracts that have not been billed to clients is classified as a current asset under contract assets on the
Consolidated Balance Sheet. Amounts billed to clients in excess of revenue recognized on service contracts
to date are classified as a current liability under contract liabilities. Customer payments on service
contracts are typically due within 30 to 90 days of billing, depending on the contract.
Contract assets and liabilities. Contract assets represent revenue recognized in excess of amounts
billed and include unbilled receivables (typically for cost reimbursable contracts) of $1.1 billion and
contract work in progress (typically for fixed-price contracts) of $493 million as of December 31, 2018.
Unbilled receivables, which represent an unconditional right to payment subject only to the passage of
time, are reclassified to accounts receivable when they are billed under the terms of the contract. Advances
that are payments on account of contract assets of $445 million and $337 million as of December 31, 2018
and 2017, respectively, have been deducted from contract assets. Contract liabilities represent amounts
F-9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLUOR CORPORATION
billed to clients in excess of revenue recognized to date. The company recognized revenue of $690 million
during the year ended December 31, 2018 that was included in contract liabilities as of January 1, 2018.
The company anticipates that substantially all incurred cost associated with contract assets as of
December 31, 2018 will be billed and collected within one year.
Variable consideration. The nature of the company’s contracts gives rise to several types of variable
consideration, including claims and unpriced change orders; award and incentive fees; and liquidated
damages and penalties. The company recognizes revenue for variable consideration when it is probable
that a significant reversal in the amount of cumulative revenue recognized will not occur. The company
estimates the amount of revenue to be recognized on variable consideration using the expected value
(i.e., the sum of a probability-weighted amount) or the most likely amount method, whichever is expected
to better predict the amount. Factors considered in determining whether revenue associated with claims
(including change orders in dispute and unapproved change orders in regard to both scope and price)
should be recognized include the following: (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. If the requirements for recognizing revenue for claims or unapproved change orders are
met, revenue is recorded only when the 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.
Warranties. 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.
Practical Expedients.
If the company has a right to consideration from a customer in an amount
that corresponds directly with the value of the company’s performance completed to date (a service
contract in which the company bills a fixed amount for each hour of service provided), the company
recognizes revenue in the amount to which it has a right to invoice for services performed. The company
does not adjust the contract price for the effects of a significant financing component if the company
expects, at contract inception, that the period between when the company transfers a service to a customer
and when the customer pays for that service will be one year or less. The company has made an accounting
policy election to exclude from the measurement of the transaction price all taxes assessed by
governmental authorities that are collected by the company from its customers (use taxes, value added
taxes, some excise taxes).
Research and Development
The company maintains a controlling interest in NuScale Power, LLC (‘‘NuScale’’), the operations of
which are primarily research and development activities associated with
licensing and
commercialization of small modular nuclear reactor technology. Since May 2014, NuScale has been
receiving reimbursement from the U.S. Department of Energy (‘‘DOE’’) for certain qualified expenditures
under cost-sharing award agreements that require NuScale to use the DOE funds to cover first-of-a-kind
engineering costs associated with small modular reactor design development and certification. Costs
associated with NuScale’s research and development activities, net of qualifying reimbursements under the
cost-sharing award, are expensed as incurred and reported in ‘‘Total cost of revenue’’ in the Consolidated
the
F-10
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLUOR CORPORATION
Statement of Earnings. NuScale has submitted its design certification application to the U.S. Nuclear
Regulatory Commission for review and 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)
December 31,
2018
2017
Buildings
Building and leasehold improvements . . . . . . . . . . . . . . . . . . . .
Machinery and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Furniture and fixtures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 340,171
167,949
1,437,540
154,237
$ 316,398
177,306
1,501,452
155,423
Estimated
Useful
Service
Lives
20 – 40
6 – 20
2 – 10
2 – 10
Goodwill and Intangible Assets
Goodwill is not amortized but is subject to annual impairment tests. Interim testing for impairment is
performed if indicators of potential impairment exist. For purposes of impairment testing, goodwill is
allocated to the applicable reporting units based on the current reporting structure. When testing goodwill
for impairment 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 the fourth quarter of 2018, the company completed its annual goodwill impairment test and
quantitatively determined that none of the goodwill was impaired. The decrease in goodwill during 2018
was entirely related to foreign currency translation losses. Goodwill for each of the company’s segments is
presented in Note 19.
The following table provides a summary of the gross carrying amount, accumulated amortization and
net book value of acquired intangible assets as of December 31, 2018 and 2017, 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)
December 31, 2018
December 31, 2017
Gross
Gross
Carrying Accumulated Net Book
Amount(1) Amortization
Value
Carrying Accumulated Net Book
Amortization
Amount
Value
Weighted
Average
Life
$134,432
8,580
$(54,385) $ 80,047 $141,259
9,017
(2,483)
6,097
$(37,885) $103,374
7,279
(1,738)
8
13
50,032
—
50,032
53,004
—
53,004 —
16,900
13,564
—
(7,519)
16,900
6,045
16,900
13,400
—
(5,605)
16,900 —
10
7,795
Total intangible assets
$223,508
$(64,387) $159,121 $233,580
$(45,228) $188,352
(1) The decrease in the gross carrying amount of intangible assets during 2018 was entirely related to
foreign currency translation losses.
F-11
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLUOR CORPORATION
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 both 2019 and 2020, $18 million during 2021, and $17 million during both 2022 and
2023. 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, 2018,
none of the company’s intangible assets with indefinite lives were impaired. In-process research and
development associated with the company’s investment in NuScale is considered indefinite lived until the
related technology is available for commercial use.
Income Taxes
Deferred tax assets and liabilities are recognized for the expected future tax consequences of events
that have been recognized in the company’s financial statements or tax returns. The company evaluates the
realizability of its deferred tax assets and maintains a valuation allowance, if necessary, to reduce certain
deferred tax assets to amounts that are more likely than not to be realized. The factors used to assess the
likelihood of realization are the company’s forecast of future taxable income and available tax planning
strategies that could be implemented to realize the net deferred tax assets. Failure to achieve forecasted
taxable income in the applicable taxing jurisdictions could affect the ultimate realization of deferred tax
assets and could result in an increase in the company’s effective tax rate on future earnings.
Income tax positions must meet a more-likely-than-not recognition threshold to be recognized.
Income tax positions that previously failed to meet the more-likely-than-not threshold are recognized in
the first subsequent financial reporting period in which that threshold is met. Previously recognized tax
positions that no longer meet the more-likely-than-not threshold are derecognized in the first subsequent
financial reporting period in which that threshold is no longer met. The company recognizes potential
interest and penalties related to unrecognized tax benefits within its global operations in income tax
expense.
Judgment is required in determining the consolidated provision for income taxes as the company
considers its worldwide taxable earnings and the impact of the continuing audit process conducted by
various tax authorities. The final outcome of these audits by foreign jurisdictions, the Internal Revenue
Service and various state governments could differ materially from that which is reflected in the
Consolidated Financial Statements.
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 instruments 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, its risk management objectives and strategies for undertaking the hedge transaction, and the
initial quantitative assessment of the hedging instrument’s effectiveness in offsetting changes in the fair
value of the hedged items. The company subsequently assesses hedge effectiveness qualitatively, unless the
facts and circumstances of the hedge relationship change to an extent that the company can no longer
assert qualitatively that the hedge is highly effective. The fair values of all hedging instruments are
F-12
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLUOR CORPORATION
recognized as assets or liabilities at the balance sheet date. For fair value hedges, 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 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. 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.
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’s executive stock-based plans provide for grants of nonqualified or incentive stock
options, restricted stock units, restricted stock and performance-based units, including Value Driver
Incentive (‘‘VDI’’) units. All executive stock-based plans are administered by the Organization and
Compensation Committee of the Board of Directors (the ‘‘Committee’’) comprised of outside directors.
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 to be recognized in the income statement based on their fair values. All unvested stock 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. The fair value of restricted stock units and restricted stock
represents the closing price of the company’s common stock on the date of grant discounted for post-vest
holding periods, when applicable. The fair value of VDI units is determined by adjusting the closing price
of the company’s common stock on the date of grant for any post-vest holding period discounts and for the
effect of market conditions, when applicable.
F-13
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLUOR CORPORATION
Stock-based compensation expense is generally recognized over the required service period, or over a
shorter period when employee retirement eligibility is a factor. All of the stock options, restricted stock
units and stock-based VDI units granted in 2018, 2017 and 2016 can only be settled in company stock and
are accounted for as equity awards in accordance with ASC 718. However, from time to time, the company
grants certain awards that may be settled in cash or company stock. These awards are classified as liabilities
and remeasured at fair value at the end of each reporting period until the awards are settled.
2. Recent Accounting Pronouncements
New accounting pronouncements implemented by the company during 2018 are discussed below or in
the related notes, where appropriate.
In the fourth quarter of 2018, the company adopted ASU 2018-16, ‘‘Inclusion of the Secured
Overnight Financing Rate (‘‘SOFR’’) Overnight Index Swap (‘‘OIS’’) Rate as a Benchmark Interest Rate
for Hedge Accounting Purposes.’’ As a result, entities may designate changes in this rate as the hedged risk
in hedges of interest rate risk for fixed-rate financial instruments. The adoption of ASU 2018-16 did not
have any impact on the company’s financial position, results of operations or cash flows.
In the first quarter of 2018, the company adopted ASU 2014-09 (ASC Topic 606), ‘‘Revenue from
Contracts with Customers’’ and related ASUs. See Note 3 for a further discussion of the adoption and the
impact on the company’s financial statements.
In the first quarter of 2018, the company adopted ASU 2017-12, ‘‘Targeted Improvements to
Accounting for Hedging Activities.’’ This ASU amends the Financial Accounting Standards Board’s
(‘‘FASB’’) 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 nonfinancial and financial risk
components and eliminates the requirement to separately measure and report hedge ineffectiveness. The
adoption of ASU 2017-12 did not have a material impact on the company’s financial position, results of
operations or cash flows.
In the first quarter of 2018, the company adopted ASU 2017-09, ‘‘Compensation — Stock
Compensation (ASC 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. The adoption of ASU 2017-09 did not have any impact on the company’s financial position,
results of operations or cash flows.
In the first quarter of 2018, the company adopted 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. As a result
of the adoption of ASU 2017-07, the service cost component of net periodic pension expense has been
presented in ‘‘Total cost of revenue’’ and the other components of net periodic pension expense have been
presented in ‘‘Corporate general and administrative expense’’ on the Consolidated Statement of Earnings
in 2018. Amounts in 2017 and 2016 have not been reclassified to conform to the new presentation as the
impact to the results of operations was not material. The adoption of ASU 2017-07 did not have any
impact on the company’s financial position or cash flows.
F-14
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLUOR CORPORATION
In the first quarter of 2018, the company adopted ASU 2017-01, ‘‘Business Combinations (ASC
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. The adoption of ASU 2017-01 did not have any impact on the company’s
financial position, results of operations or cash flows.
In the first quarter of 2018, the company adopted ASU 2016-18, ‘‘Statement of Cash Flows (ASC
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. The adoption of
ASU 2016-18 did not have any impact on the company’s cash flows.
In the first quarter of 2018, the company adopted ASU 2016-15, ‘‘Classification of Certain Cash
Receipts and Cash Payments.’’ ASU 2016-15 amends the guidance in 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. The adoption of ASU 2016-15 did not have any impact on the company’s cash flows.
In the first quarter of 2018, the company adopted 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. The adoption of ASU 2016-01 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 November 2018, the FASB issued ASU 2018-18, ‘‘Clarifying the Interaction between Topic 808 and
Topic 606.’’ This ASU clarifies that certain transactions between participants in a collaborative
arrangement should be accounted for under ASC 606 when the counterparty is a customer. ASU 2018-18 is
effective for interim and annual reporting periods beginning after December 15, 2019. Management does
not expect the adoption of ASU 2018-18 to have a material impact on the company’s financial position,
results of operations or cash flows.
In October 2018, the FASB issued ASU 2018-17, ‘‘Targeted Improvements to Related Party Guidance
for Variable Interest Entities.’’ This ASU amends the guidance for determining whether a decision-making
fee is a variable interest. ASU 2018-17 is effective for interim and annual reporting periods beginning after
December 15, 2019. Management does not expect the adoption of ASU 2018-17 to have a material impact
on the company’s financial position, results of operations or cash flows.
In August 2018, the Securities and Exchange Commission (‘‘SEC’’) adopted the final rules under SEC
Release No. 33-10532, Disclosure Update and Simplification. The final rules amend the interim financial
statement requirements to require a reconciliation of changes in stockholders’ equity in the notes or as a
separate statement. The analysis should reconcile the beginning and ending balances of each caption in
stockholders’ equity for each period in which an income statement is presented. The final rules are
effective on November 5, 2018. Therefore, the company will include a consolidated statement of changes in
equity in its interim financial statements beginning with the first quarter of 2019.
In August 2018, the FASB issued ASU 2018-15, ‘‘Customer’s Accounting for Implementation Costs
Incurred in a Cloud Computing Arrangement That Is a Service Contract.’’ This ASU requires customers in
a hosting arrangement that is a service contract to capitalize certain implementation costs as if the
arrangement was an internal-use software project. ASU 2018-15 is effective for interim and annual
F-15
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLUOR CORPORATION
reporting periods beginning after December 15, 2019, with early adoption permitted. Management does
not expect the adoption of ASU 2018-15 to have a material impact on the company’s financial position,
results of operations or cash flows.
In August 2018, the FASB issued ASU 2018-14, ‘‘Disclosure Framework — Changes to the Disclosure
Requirements for Defined Benefit Plans.’’ This ASU amends ASC 715 to add, remove and clarify certain
disclosure requirements related to defined benefit pension and other postretirement plans. ASU 2018-14 is
effective for fiscal years ending after December 15, 2020, with early adoption permitted. Management does
not expect the adoption of ASU 2018-14 to have any impact on the company’s financial position, results of
operations or cash flows.
In August 2018, the FASB issued ASU 2018-13, ‘‘Disclosure Framework — Changes to the Disclosure
Requirements for Fair Value Measurement.’’ This ASU amends ASC 820 to add, remove and modify
certain disclosure requirements for fair value measurements. For example, public companies will now be
required to disclose the range and weighted average used to develop significant unobservable inputs for
Level 3 fair value measurements. ASU 2018-13 is effective for interim and annual reporting periods
beginning after December 15, 2019, with early adoption permitted. Management does not expect the
adoption of ASU 2018-13 to have any impact on the company’s financial position, results of operations or
cash flows.
In February 2018, the FASB issued ASU 2018-02, ‘‘Reclassification of Certain Tax Effects from
Accumulated Other Comprehensive Income,’’ which gives entities the option to reclassify the tax effects
stranded in accumulated other comprehensive income as a result of the enactment of comprehensive tax
legislation, commonly referred to as the Tax Cuts and Jobs Act, to retained earnings. 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 June 2016, the FASB issued ASU 2016-13, ‘‘Measurement of Credit Losses on Financial
Instruments.’’ The amendments in this ASU replace the incurred loss impairment methodology in current
practice with a methodology that reflects expected credit losses and requires consideration of a broader
range of reasonable and supportable information to estimate credit losses. ASU 2016-13 is effective for
interim and annual reporting periods beginning after December 15, 2019. Management does not expect the
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 (ASC Topic 842)’’ which amends the
existing guidance on accounting for leases. Topic 842 was further clarified and amended within
ASU 2017-13, ASU 2018-01, ASU 2018-10, ASU 2018-11 and ASU 2018-20. The new guidance requires
the recognition of right-of-use assets and lease liabilities on the balance sheet for leases with terms greater
than twelve months or leases that contain a purchase option that is reasonably certain to be exercised.
Lessees will classify leases as either finance or operating leases. 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. Topic 842 is effective for interim and annual reporting periods beginning after December 15,
2018. The company will adopt Topic 842 during the first quarter of 2019 using the modified retrospective
method that will result in a cumulative effect adjustment to retained earnings as of the date of adoption.
The new guidance will be applied to leases that exist or are entered into on or after January 1, 2019
without adjusting comparative periods in the financial statements. The company expects to utilize the
package of practical expedients in ASC 842-10-65-1(f) that, upon adoption of Topic 842, allows entities to
(1) not reassess whether any expired or existing contracts are or contain leases, (2) retain the classification
of leases (e.g., operating or finance lease) existing as of the date of adoption and (3) not reassess initial
direct costs for any existing leases. The company also expects to utilize the practical expedient in
F-16
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLUOR CORPORATION
ASC 842-10-65-1(gg) in which an entity need not assess whether existing land easements not previously
accounted for as leases contain a lease under ASC 842. The company is in the final stages of evaluating its
existing lease portfolio, including accumulating all of the necessary information required to properly
account for leases under the new guidance. Based on the most recent assessment of existing leases, the
adoption of Topic 842 is expected to result in a cumulative effect adjustment as of January 1, 2019 to
increase retained earnings by a range of $10 million to $30 million primarily from the recognition of
transaction, as allowed under
previously deferred gains associated with a
ASC 842-10-65-1(ee). Management is continuing to assess the values of the right-of-use assets and lease
liabilities that will be included on the balance sheet as of January 1, 2019. Management does not expect the
adoption of Topic 842 to have a material impact on the company’s results of operations or cash flows.
sale-leaseback
3. Revenue Recognition
On January 1, 2018, the company adopted ASC Topic 606, ‘‘Revenue from Contracts with
Customers,’’ including the following ASUs:
ASU 2014-09, ‘‘Revenue from Contracts with Customers’’ 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.
ASU 2016-08, ‘‘Principal versus Agent Considerations (Reporting Revenue Gross versus Net)’’
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.
ASU 2016-10, ‘‘Identifying Performance Obligations and Licensing’’ amends certain aspects of
ASU 2014-09. ASU 2016-10 amends how an entity should identify performance obligations for immaterial
promised goods or services, shipping and handling activities and promises that may represent performance
obligations. ASU 2016-10 also provides implementation guidance for determining the nature of licensing
and royalties arrangements.
ASU 2016-12, ‘‘Narrow-Scope Improvements and Practical Expedients’’ 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.
ASU 2016-20, ‘‘Technical Corrections and Improvements to Topic 606, Revenue from Contracts with
Customers’’ 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. The company determines its provision for
loss contracts at the contract level.
ASU 2017-05, ‘‘Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial
Sales of Nonfinancial Assets’’ 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.
F-17
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLUOR CORPORATION
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’’ provides
guidance related to the effective dates of the ASUs noted above.
The company adopted ASC Topic 606 using the modified retrospective method, and accordingly the
new guidance was applied retrospectively to contracts that were not completed as of January 1, 2018 (the
date of initial application). As a result, the company has recorded a cumulative effect adjustment to
decrease retained earnings by $339 million as of January 1, 2018 as well as the following cumulative effect
adjustments:
(cid:129) A decrease to accounts receivable of $50 million;
(cid:129) A decrease to contract assets of $19 million;
(cid:129) A decrease to investments of $4 million;
(cid:129) A decrease to other assets of $14 million;
(cid:129) An increase to contract liabilities of $357 million;
(cid:129) A decrease to other accrued liabilities of $14 million;
(cid:129) A decrease to noncurrent liabilities of $1 million;
(cid:129) An increase to deferred tax assets of $89 million; and
(cid:129) A decrease to noncontrolling interests of $1 million.
The decrease in retained earnings primarily resulted from a change in the manner in which the
company determines the unit of account for its projects (i.e., performance obligations). Under the previous
guidance, the company typically segmented revenue and margin recognition between the engineering and
construction phases of its contracts. Upon adoption of ASC Topic 606, engineering and construction
contracts are generally accounted for as a single unit of account (a single performance obligation),
resulting in a more constant recognition of revenue and margin over the term of the contract. In
accordance with ASU 2017-13, certain of the company’s unconsolidated partnerships and joint ventures
will not adopt ASC Topic 606 until the fourth quarter of 2019, at which time the company will record a
cumulative effect adjustment which is not expected to be significant.
The following tables present how the adoption of ASC Topic 606 affected certain line items in the
Consolidated Statement of Earnings:
(in thousands)
Total revenue
Total cost of revenue
Corporate general and administrative expense
Interest expense
Interest income
Earnings before taxes
Income tax expense
Net earnings
Net earnings attributable to noncontrolling interests
Net earnings attributable to Fluor Corporation
Year Ended December 31, 2018
Recognition
Under Previous
Guidance
Impact of the
Adoption of
ASC Topic 606
Recognition
Under
ASC Topic 606
$19,035,074
18,501,168
145,681
77,179
(36,965)
348,011
162,346
185,665
63,793
121,872
$131,525
(4,493)
2,277
—
—
133,741
26,448
107,293
4,332
102,961
$19,166,599
18,496,675
147,958
77,179
(36,965)
481,752
188,794
292,958
68,125
224,833
F-18
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLUOR CORPORATION
The following table presents how the adoption of ASC Topic 606 affected certain line items in the
Consolidated Balance Sheet:
(in thousands)
As of December 31, 2018
Recognition
Under Previous
Guidance
Impact of the
Adoption of
ASC Topic 606
Recognition
Under
ASC Topic 606
Accounts and notes receivable, net
$1,582,515
$ (48,176)
$1,534,339
Contract assets (previously presented as contract work in
progress)
Investments
Deferred tax assets
Other assets
Contract liabilities (previously presented as advance billings
on contracts)
Other accrued liabilities
Noncurrent liabilities
Accumulated other comprehensive loss
Retained earnings
Noncontrolling interests
1,595,131
946,565
273,644
326,855
669,491
392,723
582,844
(552,458)
3,657,767
151,716
(50,150)
(8,075)
68,482
(10,858)
186,457
(11,422)
(1,335)
9,980
(235,610)
3,153
1,544,981
938,490
342,126
315,997
855,948
381,301
581,509
(542,478)
3,422,157
154,869
The following table presents how the adoption of ASC Topic 606 affected certain line items in the
Consolidated Statement of Cash Flows:
(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings
(Earnings) loss from equity method investments, net of
distributions
Deferred taxes
Changes in operating assets and liabilities
Cash provided by operating activities
Remaining Unsatisfied Performance Obligations
Year Ended December 31, 2018
Recognition
Under Previous
Guidance
Impact of the
Adoption of
ASC Topic 606
Recognition
Under
ASC Topic 606
$ 185,665
$ 107,293
292,958
5,473
50,383
(174,711)
162,164
(4,493)
20,211
(123,011)
—
980
70,594
(297,722)
162,164
The company’s remaining unsatisfied performance obligations (‘‘RUPO’’) as of December 31, 2018
represent a measure of the total dollar value of work to be performed on contracts awarded and in
progress. The company had $38 billion in RUPO as of December 31, 2018.
The company estimates that its RUPO as of December 31, 2018 will be satisfied over the following
periods (in millions):
Within 1 year
1 to 2 years
Thereafter
Total remaining unsatisfied performance obligations
$14,877
11,110
11,875
$37,862
F-19
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLUOR CORPORATION
Although RUPO reflects business that is considered to be firm, cancellations, deferrals or scope
adjustments may occur. RUPO is adjusted to reflect any known project cancellations, revisions to project
scope and cost, foreign currency exchange fluctuations and project deferrals, as appropriate.
Disaggregation of Revenue
Revenue disaggregated by reportable segment and geographic area where the work was performed for
the year ended December 31, 2018, 2017 and 2016 is presented in Note 19.
4. 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:
2018
Tax
Before-Tax (Expense) Net-of-Tax
Benefit
Amount
Amount
Year Ended December 31,
2017
Tax
(Expense) Net-of-Tax
Benefit
Amount
Before-
Tax
Amount
Before-
Tax
Amount
2016
Tax
(Expense) Net-of-Tax
Benefit
Amount
(in thousands)
Other comprehensive income (loss):
Foreign currency translation
adjustment
$(116,023)
$16,214
$ (99,809) $110,291
$(35,867)
$74,424
$(102,707) $38,327
$(64,380)
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
12,118
(3,176)
8,942
(1,163)
462
(701)
8,734
(2,698)
6,036
(59,920)
7,329
(52,591)
22,052
(6,443)
15,609
(5,518)
1,490
(1,216)
1,134
(425)
274
709
7,593
(2,850)
4,743
(1,064)
(711)
267
(444)
332
(125)
207
381
402
(5,137)
(662)
(loss)
(161,201)
18,726
(142,475)
138,062
(44,431)
93,631
(100,223)
36,287
(63,936)
Less: Other comprehensive loss
attributable to noncontrolling
interests
Other comprehensive income (loss)
attributable to Fluor Corporation
(2,239)
—
(2,239)
(796)
—
(796)
(42)
—
(42)
$(158,962)
$18,726
$(140,236) $138,858
$(44,431)
$94,427
$(100,181) $36,287
$(63,894)
F-20
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLUOR CORPORATION
The changes in AOCI balances by component (after-tax) for the year ended December 31, 2018 are as
follows:
(in thousands)
Attributable to Fluor Corporation:
Balance as of December 31, 2017
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-
for-Sale
Securities
Accumulated
Other
Comprehensive
Income (Loss),
Net
$(211,177)
$(32,614)
$(152,058)
$(5,684)
$(709)
$(402,242)
(97,570)
—
(97,570)
7,986
956
8,942
(77,209)
24,618
(5,207)
5,481
(52,591)
274
—
709
709
$ —
(172,000)
31,764
(140,236)
$(542,478)
Balance as of December 31, 2018
$(308,747)
$(23,672)
$(204,649)
$(5,410)
Attributable to Noncontrolling
Interests:
Balance as of December 31, 2017
Other comprehensive income
(loss) before reclassifications
Amount reclassified from AOCI
Net other comprehensive
income (loss)
$
(1,462)
$
(2,239)
—
(2,239)
Balance as of December 31, 2018
$
(3,701)
$
—
—
—
—
—
$
$
—
—
—
—
—
$ —
$ —
$
(1,462)
—
—
—
—
—
—
(2,239)
—
(2,239)
$ —
$ —
$
(3,701)
The changes in AOCI balances by component (after-tax) for the year ended December 31, 2017 are as
follows:
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-
for-Sale
Securities
Accumulated
Other
Comprehensive
Income (Loss),
Net
$(286,449)
$(31,913)
$(167,667)
$(10,375)
$(265)
$(496,669)
(in thousands)
Attributable to Fluor
Corporation:
Balance as of December 31, 2016
Other comprehensive income
(loss) before reclassifications
75,272
(2,001)
—
1,300
11,456
4,153
5,499
(497)
(808)
53
89,729
4,698
Amount reclassified from
AOCI
Net other comprehensive
income (loss)
Balance as of December 31, 2017
$(211,177)
$(32,614)
$(152,058)
$ (5,684)
75,272
(701)
15,609
4,691
(444)
$(709)
94,427
$(402,242)
Attributable to Noncontrolling
Interests:
Balance as of December 31, 2016
Other comprehensive income
(loss) before reclassifications
Amount reclassified from
AOCI
Net other comprehensive
income (loss)
$
(614)
$
(848)
—
(848)
Balance as of December 31, 2017
$ (1,462)
$
—
—
—
—
—
$
$
—
—
—
—
—
$
(52)
$ —
$
(666)
13
39
52
—
$
—
—
$ —
(835)
39
(796)
$
(1,462)
F-21
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLUOR CORPORATION
The changes in AOCI balances by component (after-tax) for the year ended December 31, 2016 are as
follows:
(in thousands)
Attributable to Fluor Corporation:
Balance as of December 31, 2015
Other comprehensive income (loss)
before reclassifications
Amount reclassified from AOCI
Net other comprehensive income
(loss)
Attributable to Noncontrolling
Interests:
Balance as of December 31, 2015
Other comprehensive income (loss)
before reclassifications
Amount reclassified from AOCI
Net other comprehensive income
(loss)
Balance as of December 31, 2016
$
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)
$
(114)
$
(500)
—
(500)
(614)
$
—
—
—
—
—
$
$
—
—
—
—
—
$
(510)
$ —
$
(624)
159
299
458
(52)
$
—
—
$ —
$
(341)
299
(42)
(666)
Balance as of December 31, 2016
$(286,449)
$(31,913)
$(167,667)
$(10,375)
During 2018 and 2016, functional currency exchange rates for most of the company’s international
operations weakened against the U.S. dollar, resulting in unrealized translation losses. 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.
F-22
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,
2018
2017
2016
(in thousands)
Component of AOCI:
Ownership share of equity method investees’ other
comprehensive loss
Income tax benefit
Net of tax
Total cost of revenue
Income tax expense
Defined benefit pension plan adjustments
Income tax benefit
Various accounts(1)
Income tax expense
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 (loss) on available-for-sale securities
Income tax benefit (net)
Net of tax
Various accounts(2)
Interest expense
Income tax expense
Net earnings attributable to
noncontrolling interests
Corporate general and
administrative expense
Income tax expense
$ (1,297)
341
$(1,713)
413
$ —
—
$
(956)
$(1,300)
$ —
$(28,730)
4,112
$(6,638)
2,485
$(7,602)
2,851
$(24,618)
$(4,153)
$(4,751)
$ (6,540)
(1,678)
2,737
$ 2,956
(1,678)
(509)
$(6,388)
(1,678)
2,944
(5,481)
769
(5,122)
—
(39)
(299)
$ (5,481)
$
808
$(4,823)
$ (1,134)
425
$
(709)
$
$
(85)
32
(53)
$
$
168
(63)
105
(1) Defined benefit pension plan adjustments were reclassified to ‘‘Corporate general and administrative expense’’ in 2018
and to ‘‘Total cost of revenue’’ and ‘‘Corporate general and administrative expense’’ in 2017 and 2016.
(2) Gains and losses on commodity and foreign currency derivative contracts were reclassified to ‘‘Total cost of revenue’’
and ‘‘Corporate general and administrative expense’’ in 2018, 2017 and 2016.
F-23
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLUOR CORPORATION
5. 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 assets
Other current assets
Other assets
Increase (decrease) in:
Trade accounts payable
Contract liabilities
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)
6.
Income Taxes
Year Ended December 31,
2018
2017
2016
$ (40,785) $ 162,655
140,556
(166,955)
(138,638)
168,021
(3,944)
(23,737)
$(337,775)
(72,419)
19,311
250,332
176,335
(298,517)
(74,302)
(37,782)
(137,441)
60,808
(65,207)
(30,688)
200,480
43,985
40,088
(8,609)
$(297,722) $ (11,899) $ 135,393
$ 66,514
(28,408)
$ 61,560
175,045
$ 72,057
164,836
The 2017 Tax Act, which was enacted on December 22, 2017, reduced the U.S. federal corporate
income tax rate from 35.0% to 21.0% effective January 1, 2018. In addition, the 2017 Tax Act assessed a
one-time transition tax on earnings of non-U.S. subsidiaries that have not been taxed previously in the
U.S., and created new taxes on certain future foreign sourced earnings. Under the 2017 Tax Act, companies
generally are not subject to United States federal income taxes upon the receipt of dividends from foreign
subsidiaries and are not permitted foreign tax credits related to such dividends.
As of December 31, 2017 the company had not fully completed its accounting for the tax effects of the
2017 Tax Act. Accordingly, the company’s provision for income taxes for the year ended December 31,
2017 was based in part on a reasonable estimate of the effects on its transition tax and existing deferred tax
balances. As a result, the company recorded a provisional $37 million income tax expense in the fourth
quarter of 2017. The company completed its analysis of the effects of the 2017 Tax Act in the fourth
quarter of 2018 based upon the guidance, interpretations and data available as of December 31, 2018 and
recorded an immaterial adjustment primarily related to the one-time transition tax.
F-24
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,
2018
2017
2016
$ (10,186) $(119,875) $120,798
95,198
145,064
11,067
(3,503)
113,988
14,398
118,200
21,686
227,063
17,325
60,917
(7,648)
15,720
75,688
8,878
58,601
(65,656)
(857)
70,594
100,286
(7,912)
$188,794
$ 121,972
$219,151
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
Global Intangible Low-Taxed Income
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
Year Ended December 31,
2018
2017
2016
$101,168
$135,255
$191,310
(11,413)
15,294
10,248
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
(9,036)
6,297
79,168
—
—
(1,373)
(1,559)
Total income tax expense
$188,794
$121,972
$219,151
F-25
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
Revenue recognition
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
Tax basis of investments in excess of book basis
Dividend withholding on unremitted non-U.S. earnings
Other
Total deferred tax liabilities
Deferred tax assets, net of deferred tax liabilities
December 31,
2018
2017
$ 45,443
59,192
13,967
12,211
190,591
198,693
82,726
69,898
$ 28,410
58,500
40,966
—
184,517
168,027
71,537
66,286
672,721
(178,678)
618,243
(99,529)
$ 494,043
$ 518,714
(77,574)
(12,126)
(39,687)
(22,530)
(86,780)
—
(42,201)
(73,261)
(151,917)
(202,242)
$ 342,126
$ 316,472
As a result of the Tax Act, the company reported and paid tax on the majority of its previously
unremitted foreign earnings. As of December 31, 2018, the company is indefinitely reinvested only with
respect to unremitted earnings required to meet its working capital and long-term investment needs in the
foreign jurisdictions within which it operates. Beyond those limits, the company expects current earnings
are available for distribution. As of December 31, 2018, the company has recorded $37 million of deferred
tax liabilities associated with earnings not considered indefinitely reinvested, primarily associated with
foreign withholding and income taxes that would be incurred upon distribution. Deferred tax liabilities of
approximately $44 million have not been recorded with respect to unremitted earnings that are considered
indefinitely reinvested, again primarily associated with foreign withholding and income taxes that would be
due upon remittance. The company has no intention of initiating any events that would lead to taxation of
the earnings deemed indefinitely reinvested.
Certain international provisions introduced in the 2017 Tax Act became effective January 1, 2018. As
part of these provisions, an accounting policy election is available to either account for the tax effects of
certain taxes in the period that is subject to such taxes or to provide deferred taxes for book and tax
differences that upon reversal may be subject to such taxes. The company elects to account for the effects
of these provisions in the period that is subject to such tax.
F-26
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLUOR CORPORATION
The company had non-U.S. net operating loss carryforwards related to various jurisdictions of
approximately $776 million as of December 31, 2018. Of the total losses, $525 million can be carried
forward indefinitely and $251 million will begin to expire in various jurisdictions starting in 2019.
The company had U.S. foreign tax credits of approximately $199 million as of December 31, 2018,
which will begin to expire in 2027.
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 2018 and 2017 is primarily due to the
deferred tax assets established for certain net operating loss carryforwards and foreign tax credits. In 2018,
the company recognized a charge to tax expense of $53 million to record a valuation allowance against the
net deferred assets in the Netherlands and Belgium. In addition, the company took a charge of $26 million
to record a valuation allowance against foreign tax credits. In 2017, the company released valuation
allowances on branch net operating losses of $5 million.
The company conducts business globally and, as a result, the company or one or more of its
subsidiaries files income tax returns in the U.S. federal jurisdiction and various state and foreign
jurisdictions. In the normal course of business, the company is subject to examination by taxing authorities
throughout the world, including such major jurisdictions as Australia, Canada, the Netherlands, South
Africa, the United Kingdom and the United States. Although the company believes its reserves for its tax
positions are reasonable, the final outcome of tax audits could be materially different, both favorably and
unfavorably. With a few exceptions, the company is no longer subject to U.S. federal, state and local, or
non-U.S. income tax examinations for years before 2013.
The unrecognized tax benefits as of December 31, 2018 and 2017 were $46 million and $61 million,
respectively, of which $6 million and $13 million, if recognized, would have favorably impacted the
effective tax rates at the end of 2018 and 2017, 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
2018
2017
$60,656
(4,297)
—
(3,608)
(6,775)
$58,881
3,024
—
—
(1,249)
$45,976
$60,656
The company recognizes accrued interest and penalties related to unrecognized tax benefits in income
tax expense. The company had $9 million and $8 million of accrued interest and penalties as of
December 31, 2018 and 2017, respectively.
U.S. and foreign earnings before taxes are as follows:
(in thousands)
United States
Foreign
Total
Year Ended December 31,
2018
2017
2016
$(194,352) $(222,979) $ (33,414)
580,014
609,420
676,104
$ 481,752
$ 386,441
$546,600
F-27
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLUOR CORPORATION
Earnings before taxes in the United States in 2018 were adversely affected by pre-tax charges totaling
$188 million resulting from forecast revisions for estimated cost growth at a fixed-price, gas-fired power
plant project. Earnings before taxes in the United States in 2017 were adversely affected by 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.
7. Retirement Benefits
The company sponsors contributory and non-contributory defined contribution retirement and
defined benefit pension plans for eligible employees worldwide.
Defined Contribution Retirement Plans
Domestic and international defined contribution retirement plans are available to eligible salaried and
craft employees. Contributions to defined contribution retirement plans are based on a percentage of the
employee’s eligible compensation. The company recognized expense of $150 million, $165 million and
$167 million associated with contributions to its defined contribution retirement plans during 2018, 2017
and 2016, respectively.
Defined Benefit Pension Plans
Certain defined benefit pension plans are available to eligible international salaried employees.
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 largest 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 defined benefit pension plan in the United Kingdom
as of April 1, 2011. In 2018, the company executed a buy-in policy contract (the ‘‘buy-in policy’’) with an
insurance company to fully insure the benefits of the defined benefit pension plan in the U.K. The
company does not anticipate any further material contributions to the U.K. plan.
Net periodic pension expense for the company’s defined benefit pension plans included the following
components:
(in thousands)
Service cost
Interest cost
Expected return on assets
Amortization of prior service credit
Recognized net actuarial loss
Loss on settlement
Net periodic pension expense
Year Ended December 31,
2018
2017
2016
$ 17,999
21,820
(38,064)
(935)
8,368
21,900
$ 18,780
22,525
(40,272)
(828)
7,890
184
$ 19,507
26,435
(39,535)
(813)
8,819
396
$ 31,088
$ 8,279
$ 14,809
As a result of the adoption of ASU 2017-07 in 2018, the service cost component of net periodic
pension expense has been presented in ‘‘Total cost of revenue’’ and the other components of net periodic
pension expense have been presented in ‘‘Corporate general and administrative expense’’ on the
Consolidated Statement of Earnings for the year ended December 31, 2018. Amounts in 2017 and 2016
have not been reclassified to conform to the new presentation as the impact to the results of operations
was not material.
F-28
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLUOR CORPORATION
During 2018, lump-sum distributions to participants of the defined benefit pension plan in the United
Kingdom exceeded the sum of the service and interest cost components of net periodic pension cost. As a
result, the company recorded a loss on partial pension settlement of $22 million during the year ended
December 31, 2018 which was included in ‘‘Corporate general and administrative expense’’ in the
Consolidated Statement of Earnings. The lump-sum distributions were funded by assets of the U.K. plan.
The ranges of assumptions indicated below cover defined benefit pension plans in the Netherlands,
the United Kingdom, Germany and the Philippines 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 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. As a result of the buy-in exercise in 2018 (discussed above), the discount
rate for the U.K. plan was determined based on the value of the buy-in policy (and corresponding benefit
obligation) as of December 31, 2018. 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 international equities and government, corporate and other debt securities.
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
December 31,
2018
2017
2016
1.80-7.25% 1.90-5.50% 1.90-5.00%
2.25-7.00% 2.25-7.00% 2.25-7.00%
1.90-5.50% 1.90-5.00% 1.90-5.50%
2.25-7.00% 2.25-7.00% 2.25-7.00%
1.90-7.00% 1.90-7.40% 4.30-7.00%
The company evaluates the funded status of each of its retirement plans using the above assumptions
and determines the appropriate funding level considering applicable regulatory requirements, tax
deductibility, reporting considerations and other factors. The funding status of the plans is sensitive to
changes in long-term interest rates and returns on plan assets, and funding obligations could increase
substantially if interest rates fall dramatically or returns on plan assets are below expectations. Assuming
no changes in current assumptions, the company expects to contribute up to $15 million to its defined
benefit pension plans in 2019, 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 $49 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
2018 Target Allocation
2018
2017
December 31,
40% - 50%
10% - 20%
40% - 50%
41%
16%
43%
68%
25%
7%
100% 100%
The company’s investment strategy is to maintain asset allocations that appropriately address risk
within the context of seeking adequate returns. Investment allocations are determined by each plan’s
F-29
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLUOR CORPORATION
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, 2018 and 2017,
direct investments in equity securities were concentrated in international securities.
Other is comprised of the buy-in policy discussed above, guaranteed investment contracts, foreign
currency contracts, common or collective trusts and short-term investment funds. The initial fair value of
the buy-in policy, which is a Level 3 asset, was equal to the premium paid to secure the policy (i.e., the fair
value of the plan assets plus additional funding to execute the buy-in policy). The fair value of the buy-in
policy mirrors the related benefit obligation, and is adjusted each reporting period based on changes in the
prevailing market conditions that affect the benefit obligation (e.g., inflation, GILT yield), as well as
benefits paid during the period. 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,
which are also Level 3 assets, represents the discounted value of guaranteed benefit payments. The
estimated fair value of foreign currency contracts is determined from broker quotes. Common or collective
trusts hold underlying investments in a variety of asset classes including commodities and foreign currency
contracts.
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-30
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 and valuation inputs and assumptions for significant assets and liabilities classified as
Level 2 and Level 3.
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, 2018 and 2017:
(in thousands)
Assets:
Equity securities:
Common stock
Debt securities:
December 31, 2018
Fair Value Hierarchy
December 31, 2017
Fair Value Hierarchy
Total
Level 1 Level 2
Level 3
Total
Level 1
Level 2
Level 3
$
4,390 $4,390 $ — $
— $
4,806 $4,806 $
— $ —
Corporate bonds
Government securities
Repurchase agreements
475
9,709
835
—
475
— 9,709
835
—
— 155,337
— 305,831
—
—
— 155,337
— 305,831
—
—
—
—
—
Other:
Guaranteed investment contracts
Buy-in insurance policy
Foreign currency contracts and
other
Liabilities:
Debt securities:
19,302
355,422
—
—
—
—
— 19,302
— 355,422
21,030
—
—
—
12,225
—
—
—
— 21,030
—
—
12,225
—
Repurchase agreements
—
—
—
— (110,282)
— (110,282)
—
Other:
Foreign currency contracts and
other
—
—
—
—
(11,138)
— (11,138)
—
Plan assets measured at fair value, net $390,133 $4,390 $11,019 $374,724 $ 377,809 $4,806 $ 351,973 $21,030
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
152,663
386,212
32,563
2,718
$964,289
265,647
380,419
58,900
3,431
$1,086,206
F-31
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
2018
2017
$ 21,030
$19,075
(23,246)
—
—
381,906
—
(4,966)
3,388
—
—
16
—
(1,449)
$374,724
$21,030
The following table presents expected benefit payments related to the company’s defined benefit
pension plans:
(in thousands)
Year Ended December 31,
2019
2020
2021
2022
2023
2024 — 2028
$ 28,741
29,863
40,383
30,684
30,911
169,839
F-32
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
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
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,
2018
2017
$1,098,093
17,999
21,820
3,487
(57,179)
23,077
—
(27,051)
(59,613)
$ 987,989
18,780
22,525
3,112
118,411
(15,437)
(1,058)
(33,948)
(2,281)
1,020,633
1,098,093
1,086,206
(28,742)
44,977
3,487
(54,975)
(27,051)
(59,613)
950,947
38,657
15,283
3,112
114,436
(33,948)
(2,281)
964,289
1,086,206
$ (56,344) $ (11,887)
$
2,409
(1,647)
(57,106)
$ 280,707
$
40,212
(2,208)
(49,891)
$ 235,495
During 2019, approximately $10 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, 2018 and 2017, with the exception of the plan in the United Kingdom. In the aggregate,
these plans had projected benefit obligations of $665 million and $702 million as of December 31, 2018 and
2017, respectively, and plan assets with a fair value of $606 million and $650 million as of December 31,
2018 and 2017, respectively.
The total accumulated benefit obligation for all defined benefit pension plans as of December 31,
2018 and 2017 was $959 million and $1.0 billion, respectively. As of December 31, 2018, the accumulated
benefit obligation exceeded plan assets for certain defined benefit pension plans in the Netherlands,
Germany and the Philippines. As of December 31, 2017, the accumulated benefit obligation exceeded plan
assets for certain defined benefit pension plans in the Netherlands and Germany. In the aggregate, these
plans had accumulated benefit obligations of $70 million and $56 million as of December 31, 2018 and
F-33
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLUOR CORPORATION
2017, respectively, and plan assets with a fair value of $36 million and $21 million as of December 31, 2018
and 2017, respectively.
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 $30 million, $118 million and
$108 million during 2018, 2017 and 2016, respectively. The significant decrease in contributions during
2018 primarily resulted from the cancellation of two nuclear power plant projects in the United States in
2017 and the substantial completion of three Energy & Chemicals projects in Canada by the end of 2017,
all of which had substantial craft employees. 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.
8.
Fair Value Measurements
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-34
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,
2018 and 2017:
December 31, 2018
December 31, 2017
(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
$ — $ — $ — $ — $
—
26,690
—
—
26,690
—
—
1,301 $
57,783
—
—
23,256
— 113,622
$
701
—
23,256
600
57,783
—
— 113,622
$ —
—
—
—
Foreign currency contracts
17,346
— 17,346
— 29,766
—
29,766
—
Liabilities:
Derivative liabilities(5)
Foreign currency contracts
$18,342 $ — $18,342 $ — $ 29,127 $ — $ 29,127 $ —
(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 9 for the classification of foreign currency contracts in the Consolidated Balance Sheet. 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.
The company’s financial instruments presented in the table above included available-for-sale
securities as of December 31, 2017. 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. The amortized cost of these available-for-sale securities was not materially different from the
fair value. The company determined that there was no other-than-temporary
impairment of
available-for-sale securities with unrealized losses as of December 31, 2017. During 2018, 2017 and 2016,
proceeds from sales and maturities of available-for-sale securities were $175 million, $159 million and
$286 million, respectively.
F-35
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLUOR CORPORATION
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)
4.250% Senior Notes(5)
Other borrowings, including
noncurrent portion(6)
Fair Value
Hierarchy
December 31, 2018
December 31, 2017
Carrying Value
Fair Value
Carrying Value
Fair Value
Level 1
Level 2
Level 2
$1,091,868
672,878
214,828
$1,091,868
672,878
214,828
$1,104,316
698,458
103,351
$1,104,316
698,458
103,351
Level 3
32,645
32,645
26,006
26,006
Level 2
Level 2
Level 2
Level 2
$ 569,372
—
494,280
593,871
$ 589,864
—
484,790
583,200
$ 597,674
496,859
493,320
—
$ 622,277
512,475
513,480
—
Level 2
30,929
30,929
31,106
31,106
(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) During 2018, the company issued $600 million of 4.250% Senior Notes and fully redeemed its 3.375%
Senior Notes, as discussed in Note 10. The fair value of the 1.750% Senior Notes, 3.375% Senior
Notes, 3.50% Senior Notes and 4.250% Senior Notes was estimated based on quoted market prices
for similar issues.
(6) Other borrowings primarily represent bank loans and other financing arrangements which mature
within one year. The carrying amount of borrowings under these arrangements approximates fair
value because of the short-term maturity.
9. Derivatives and Hedging
As of December 31, 2018, the company had total gross notional amounts of $523 million of foreign
currency contracts outstanding (primarily related to the British Pound, Kuwaiti Dinar, Indian Rupee,
Philippine Peso, South Korean Won and Chinese Yuan) that were designated as hedging instruments. The
foreign currency contracts are of varying duration, none of which extend beyond May 2021. There were no
commodity contracts outstanding as of December 31, 2018.
F-36
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLUOR CORPORATION
The fair values of derivatives designated as hedging instruments under ASC 815 as of December 31,
2018 and 2017 were as follows:
(in thousands)
Balance Sheet
Location
December 31, December 31,
2018
2017
Balance Sheet
Location
December 31, December 31,
2018
2017
Asset Derivatives
Liability Derivatives
Foreign currency contracts
Foreign currency contracts
Other current assets
Other assets
Total
$12,861
2,669
$15,530
$18,667
6,472
$25,139
Other accrued liabilities
Noncurrent liabilities
$16,582
1,698
$18,280
$19,046
8,654
$27,700
During 2017 and 2016, the company recognized a pre-tax gain of $5 million and a pre-tax loss of
$3 million, respectively, in ‘‘Corporate general and administrative expense’’ associated with foreign
currency contracts designated as fair value hedges. There were no fair value hedges outstanding as of
December 31, 2018. The pre-tax amount of gain (loss) recognized in earnings associated with hedging
instruments designated as fair value hedges offset the amount of gain (loss) recognized in earnings on the
hedged items in the same location on the Consolidated Statement of Earnings.
The after-tax amount of gain (loss) recognized in OCI and reclassified from AOCI into earnings
associated with derivative instruments designated as cash flow hedges for the years ended December 31,
2018, 2017 and 2016 was as follows:
Cash Flow Hedges (in thousands)
2018
2017
2016
Location of Gain (Loss)
2018
2017
2016
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
$ — $
(5,207)
—
44
5,455
—
401 Total cost of revenue $ — $
$
(6,344) Total cost of revenue
(4,432)
(1,049)
52
1,805
(1,049)
$ (550)
(3,224)
(1,049)
—
Interest expense
Total
$(5,207) $5,499 $(5,943)
$(5,481) $
808
$(4,823)
As of December 31, 2018, the company also had total gross notional amounts of $34 million of foreign
currency contracts outstanding that were not designated as hedging instruments. These contracts primarily
related to engineering and construction contract obligations denominated in nonfunctional currencies. As
of December 31, 2018, the company had total gross notional amounts of $31 million associated with
contractual foreign currency payment provisions that were deemed embedded derivatives. Net losses of
$2 million associated with the company’s derivatives and embedded derivatives were included in ‘‘Total
cost of revenue’’ and ‘‘Corporate general and administrative expense’’ for the year ended December 31,
2018. Net gains of $1 million associated with the company’s derivatives and embedded derivatives were
included in ‘‘Total cost of revenue’’ and ‘‘Corporate general and administrative expense’’ for the year
ended December 31, 2017. A gain of less than $0.1 million associated with the company’s derivatives was
included in ‘‘Total cost of revenue’’ for the year ended December 31, 2016.
10. Financing Arrangements
As of December 31, 2018, 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, 2018, letters of credit and
borrowings totaling $1.6 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
F-37
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLUOR CORPORATION
customary financial and restrictive covenants, including a debt-to-capitalization ratio that cannot exceed
0.6 to 1.0 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.
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:
Other borrowings
Long-Term:
1.750% Senior Notes
3.375% Senior Notes
3.5% Senior Notes
4.250% Senior Notes
Other borrowings
December 31,
2018
2017
$ 26,887
$ 27,361
$569,372
$597,674
— 496,859
493,320
—
3,745
494,280
593,871
4,042
In August 2018, the company issued $600 million of 4.250% Senior Notes (the ‘‘2018 Notes’’) due
September 15, 2028 and received proceeds of $595 million, net of underwriting discounts. Interest on the
2018 Notes is payable semi-annually on March 15 and September 15 of each year, beginning on March 15,
2019. Prior to June 15, 2028, the company may redeem the 2018 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
June 15, 2028, the company may redeem the 2018 Notes at 100 percent of the principal amount plus
accrued and unpaid interest, if any, to the date of redemption.
In March 2016, the company issued A500 million of 1.750% Senior Notes (the ‘‘2016 Notes’’) due
March 21, 2023 and received proceeds of A497 million (or approximately $551 million), net of underwriting
discounts. Interest on the 2016 Notes is payable annually on March 21 of each year, beginning on
March 21, 2017. Prior to December 21, 2022, the company may redeem the 2016 Notes at a redemption
price equal to 100 percent of the principal amount, plus a ‘‘make whole’’ premium described in the
indenture. On or after December 21, 2022, the company may redeem the 2016 Notes at 100 percent of the
principal amount plus accrued and unpaid interest, if any, to the date of redemption. Additionally, the
company may redeem the 2016 Notes at any time upon the occurrence of certain changes in U.S. tax laws,
as described in the indenture, at 100 percent of the principal amount plus accrued and unpaid interest, if
any, to the date of redemption.
In November 2014, the company issued $500 million of 3.5% Senior Notes (the ‘‘2014 Notes’’) due
December 15, 2024 and received proceeds of $491 million, net of underwriting discounts. Interest on the
2014 Notes is payable semi-annually on June 15 and December 15 of each year, and began on June 15,
2015. Prior to September 15, 2024, the company may redeem the 2014 Notes at a redemption price equal
to 100 percent of the principal amount, plus a ‘‘make whole’’ premium described in the indenture. On or
after September 15, 2024, the company may redeem the 2014 Notes at 100 percent of the principal amount
plus accrued and unpaid interest, if any, to the date of redemption.
For the 2018 Notes, the 2016 Notes and the 2014 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
F-38
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLUOR CORPORATION
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 2018 Notes, the 2016 Notes and the 2014 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. The company may, from time to
time, repurchase the 2018 Notes, the 2016 Notes and the 2014 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 September 2018, the company used a portion of the proceeds from the 2018 Notes to fully redeem
its $500 million 3.375% Senior Notes (the ‘‘2011 Notes’’) due September 15, 2021. The redemption price of
$503 million was equal to 100 percent of the principal amount of the 2011 Notes plus a ‘‘make-whole’’
premium of $3 million.
During the second and third quarters of 2018, the company issued commercial paper to meet its
short-term liquidity needs. All of the outstanding commercial paper was repaid in October 2018.
Other borrowings of $31 million as of both December 31, 2018 and 2017, primarily represent bank
loans and other financing arrangements associated with Stork.
As of December 31, 2018, the company was in compliance with all of the financial covenants related to
its debt agreements.
11. 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, 2018 and 2017, $334 million and $395 million, respectively, of obligations related to these
plans were included in noncurrent liabilities. To fund these obligations, the company has established
non-qualified trusts, which are classified as noncurrent assets. These trusts primarily hold company-owned
life insurance policies, reported at cash surrender value, and marketable equity securities, reported at fair
value. These trusts were valued at $329 million and $382 million as of December 31, 2018 and 2017,
respectively. Periodic changes in the 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 as of both December 31, 2018 and 2017, 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.
12. Stock-Based Plans
Recorded compensation cost for stock-based payment arrangements, which is generally recognized on
a straight-line basis, totaled $33 million, $26 million and $28 million for the years ended December 31,
2018, 2017 and 2016, respectively, net of recognized tax benefits of $10 million, $16 million and $17 million
for the years ended 2018, 2017 and 2016, respectively.
F-39
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLUOR CORPORATION
The following table summarizes restricted stock unit, restricted stock and stock option activity:
Restricted Stock Units or
Restricted Stock
Stock Options
Weighted
Average
Grant Date
Fair Value
Per Share
Weighted
Average
Exercise Price
Per Share
Number
Number
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
Granted
Expired or canceled
Vested/exercised
603,111
(38,365)
(513,078)
57.88
54.07
51.58
33,615
(352,624)
(161,562)
58.15
64.64
44.92
Outstanding as of December 31, 2018
985,132
$53.78
4,589,385
$60.25
Options exercisable as of December 31, 2018
3,686,189
$61.94
Remaining unvested options outstanding and expected
to vest
867,068
$53.35
Restricted stock units are rights to receive shares subject to certain service and performance
conditions as established by the Committee. The company’s stock-based plans provide that restricted stock
units and restricted stock awarded may not be sold or otherwise transferred until service-based restrictions
have lapsed and any performance objectives have been attained. Generally, upon termination of
employment, restricted stock units and restricted stock which have not vested are forfeited. Restricted
stock units granted to executives in 2018, 2017 and 2016 generally vest ratably over three years. Restricted
stock units granted to directors in 2018 vested immediately while restricted stock units granted to directors
in 2017 and 2016 vested on the first anniversary of the grant. Restricted stock units awarded to directors in
2018 and 2017 and certain executives in 2017 and 2016 are subject to a post-vest holding period of three
years. The fair value of restricted stock units and restricted stock represents the closing price of the
company’s common stock on the date of grant discounted for the post-vest holding period, when
applicable. During 2018, 2017 and 2016, compensation expense related to restricted stock units of
$30 million, $21 million and $27 million, respectively, was included in ‘‘Corporate general and
administrative expense’’ in the Consolidated Statement of Earnings. The fair value of restricted stock units
and shares that vested during 2018, 2017 and 2016 was $28 million, $25 million and $22 million,
respectively. The balance of unamortized restricted stock expense as of December 31, 2018 was
$11 million, which is expected to be recognized over a weighted-average period of 1.3 years.
Stock 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. The options
granted in 2018, 2017 and 2016 vest ratably over three years and expire 10 years after the grant date. Stock
option expense during 2018, 2017 and 2016, which was included in ‘‘Corporate general and administrative
F-40
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLUOR CORPORATION
expense’’ in the Consolidated Statement of Earnings, totaled $4 million, $13 million and $10 million,
respectively. The aggregate intrinsic value, representing the difference between market value on the date
of exercise and the option price, of stock options exercised during 2018, 2017 and 2016 was $2 million,
$2 million and $1 million, respectively. The balance of unamortized stock option expense as of
December 31, 2018 was $1 million, which is expected to be recognized over a weighted-average period of
0.9 years.
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,
2018
2017
$14.87
5.3
2.7%
28.2%
$ 0.84
$14.23
5.8
2.3%
27.8%
$ 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, 2018 is summarized below:
Range of Exercise Prices
$30.46 - $35.00
$42.75 - $62.50
$70.76 - $79.19
Options Outstanding
Options Exercisable
Weighted
Average
Remaining
Contractual
Life (In Years)
Weighted
Average
Exercise Price
Per Share
0.2
6.0
4.3
5.6
$30.46
56.72
76.79
$60.25
Weighted
Average
Remaining
Contractual
Life (In Years)
Weighted
Average
Exercise Price
Per Share
0.2
5.4
4.3
5.0
$30.46
57.82
76.79
$61.94
Number
Exercisable
53,021
2,755,757
877,411
3,686,189
Number
Outstanding
53,021
3,658,953
877,411
4,589,385
As of December 31, 2018, both options outstanding and options exercisable had an aggregate intrinsic
value of less than $0.1 million.
During 2018, 2017 and 2016,VDI units totaling 206,598; 249,204; and 296,052, 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. The performance targets for each
year are 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 awarded in any given year are deemed to be granted each year of
the three year vesting period. During 2018, units totaling 68,866; 72,601; and 90,931 under the 2018 , 2017
and 2016 VDI plans, respectively, were granted at weighted-average grant date fair values of $66.38 per
share, $56.19 per share and $52.21 per share, respectively. VDI units awarded in 2017 and 2016 are subject
to a post-vest holding period of three years. The fair value of VDI units is determined by adjusting the
closing price of the company’s common stock on the date of grant for any post-vest holding period
discounts and for the effect of market conditions, when applicable. For VDI units awarded in 2018 and
2017, the number of units is 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 VDI units
awarded in 2016, the number of units is adjusted at the end of each performance period based only on the
achievement of certain performance targets. VDI units awarded in 2018, 2017 and 2016 can only be settled
F-41
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLUOR CORPORATION
in company stock and are accounted for as equity awards in accordance with ASC 718. Compensation
expense of $9 million, $8 million and $8 million related to stock-based VDI units was included in
‘‘Corporate general and administrative expense’’ in 2018, 2017 and 2016, respectively. The balance of
unamortized compensation expense associated with VDI units as of December 31, 2018 was $1 million,
which is expected to be recognized over a weighted-average period of 0.8 years. During 2017 and 2016, the
company paid $26 million and $17 million for fully vested VDI awards granted in 2014 and 2013,
respectively, that were settled in cash.
13. 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 and VDI units. 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 in 2018 and 2017.
The calculations of the basic and diluted EPS for the years ended December 31, 2018, 2017 and 2016
under the treasury stock method are presented below:
(in thousands, except per share amounts)
Net earnings attributable to Fluor Corporation
Basic EPS attributable to Fluor Corporation:
Weighted average common shares outstanding
Basic earnings per share
Diluted EPS attributable to Fluor Corporation:
Weighted average common shares outstanding
Diluted effect:
Employee stock options, restricted stock units and shares and VDI
units
Weighted average diluted shares outstanding
Diluted earnings per share
Anti-dilutive securities not included above
Year Ended December 31,
2018
2017
2016
$224,833
$191,377
$281,401
140,413
1.60
$
139,761
1.37
$
139,171
2.02
$
140,413
139,761
139,171
859
1,132
1,741
141,272
1.59
$
140,893
1.36
$
140,912
2.00
$
4,183
4,706
3,843
During the years ended December 31, 2018 and 2016, the company repurchased and canceled
1,097,126 and 202,650 shares of its common stock, respectively, under its stock repurchase program for
$50 million and $10 million, respectively.
14. Lease Obligations
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 amounted to
$360 million, $144 million and $152 million for the years ended December 31, 2018, 2017 and 2016,
respectively. Net rental expense increased in 2018 when compared to 2017 and 2016, primarily due to
facility and equipment lease costs incurred for the power restoration project in Puerto Rico.
F-42
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLUOR CORPORATION
The company’s obligations for minimum rentals under non-cancellable operating leases (including
project-related lease agreements that are fully reimbursable by the client) are as follows:
Year Ended December 31,
2019
2020
2021
2022
2023
Thereafter
(in thousands)
$89,700
73,200
50,600
31,600
22,100
50,100
The company recognized $4 million of deferred gains during each year of 2018, 2017 and 2016
associated with a sale-leaseback transaction involving two office buildings during 2015. These gains were
included in corporate general and administrative expense in the Consolidated Statement of Earnings. The
company expects to recognize the remaining deferred gain of $38 million as a cumulative effect adjustment
to retained earnings as of January 1, 2019, upon the adoption of ASC 842.
15. 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,
2018, 2017 and 2016, net earnings attributable to noncontrolling interests were $68 million, $73 million and
$46 million, respectively. Income taxes associated with earnings attributable to noncontrolling interests
were $7 million for the year ended December 31, 2018. Income taxes associated with earnings attributable
to noncontrolling interests were immaterial for the years ended December 31, 2017 and 2016. Distributions
paid to noncontrolling interests were $64 million, $47 million and $58 million for the years ended
December 31, 2018, 2017 and 2016, respectively. Capital contributions by noncontrolling interests were
$5 million, $6 million and $9 million for the years ended December 31, 2018, 2017 and 2016, respectively.
16. Contingencies and Commitments
The company and certain of its subsidiaries are subject to litigation, claims and other commitments
and contingencies arising in the ordinary course of business. Although the asserted value of these matters
may be significant, the company currently does not expect that the ultimate resolution of any open matters
will have a material adverse effect on its consolidated financial position or results of operations.
In May 2018, purported shareholders filed complaints against Fluor Corporation and certain of its
current and former executives in the United States District Court for the Northern District of Texas. The
plaintiffs purport to represent a class of shareholders who purchased or otherwise acquired Fluor common
stock from August 14, 2013 through May 3, 2018, and seek to recover damages arising from alleged
violations of federal securities laws. In December 2018, the court appointed co-lead plaintiffs and co-lead
counsel. It is anticipated that the co-lead plaintiffs will file a consolidated complaint no later than March
2019, after which it is anticipated the company will respond, likely with a motion to dismiss the matter.
While no assurance can be given as to the ultimate outcome of this matter, the company believes that the
claims asserted in the complaint are without merit.
F-43
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLUOR CORPORATION
In September 2018, two separate purported shareholders’ derivative actions were filed against the
members of the Board of Directors of Fluor Corporation, a past Board member and the estate of a past
Board member, as well as certain of Fluor’s executives in the Texas District Court for Dallas County, Texas.
Fluor Corporation is named as a nominal defendant in the actions. These derivative actions purport to
assert claims on behalf of Fluor Corporation and largely make the same allegations as contained in the
securities class action matter discussed above and seek similar relief. In October 2018, the court
consolidated the two actions and later issued an initial scheduling order. The parties are conferring on the
schedule and a possible stay of the case until the company’s motion to dismiss is ruled upon in the
securities class action matter. While no assurance can be given as to the ultimate outcome of this matter,
the company does not believe it is probable that a loss will be incurred.
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. While no assurance can be given as to the ultimate outcome 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 for certain claims (including change orders in dispute and unapproved change orders in
regard to both scope and price) when it is probable that a significant reversal in the amount of cumulative
revenue recognized will not occur. The company estimates the amount of revenue to be recognized on
claims using the expected value (i.e., the sum of a probability-weighted amount) or the most likely amount
method, whichever is expected to better predict the amount. Factors considered in determining whether
revenue associated with claims should be recognized include the following: (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, 2018 and 2017, the company had recorded $166 million and $124 million,
respectively, of claim revenue for costs incurred to date and such costs are included in contract assets.
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 as of both
December 31, 2018 and 2017. The company believes the ultimate recovery of amounts related to these
claims and back charges is probable in accordance with ASC 606.
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.
F-44
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLUOR CORPORATION
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.
17. 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 $19 billion as of December 31, 2018. 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, 2018 and 2017 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.
18. 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 receivable related to work performed for unconsolidated
partnerships and joint ventures included in ‘‘Accounts and notes receivable, net’’ on the Consolidated
Balance Sheet were $154 million and $83 million as of December 31, 2018 and 2017, respectively. Notes
receivable from unconsolidated partnerships and joint ventures included in ‘‘Accounts and notes
receivable, net’’ and ‘‘Other assets’’ on the Consolidated Balance Sheet were $27 million and $22 million as
of December 31, 2018 and 2017, 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 company also executes projects through
F-45
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLUOR CORPORATION
collaborative arrangements for which the company recognizes its relative share of revenue and cost. 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 $921 million and $830 million as of December 31, 2018
and 2017, 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 entities where the company’s investment is presented as a one-line equity method
investment: As of December 31, 2018, current assets of $6.1 billion, noncurrent assets of $2.4 billion,
current liabilities of $3.1 billion and noncurrent liabilities of $3.3 billion; 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. Additionally, the following is a summary of aggregate, unaudited income
statement data for unconsolidated partnerships and joint ventures where the equity method of accounting
is used to recognize the company’s share of net earnings or losses of investees: Revenue of $1.5 billion,
$1.5 billion and $1.6 billion for 2018, 2017 and 2016, respectively; cost of revenue of $1.3 billion,
$1.4 billion and $1.5 billion for 2018, 2017 and 2016, respectively; and net earnings of $35 million,
$26 million and $30 million for 2018, 2017 and 2016, 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 a
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
$26 million, $26 million and $62 million in 2018, 2017 and 2016, respectively, and has a future funding
commitment of $26 million that is expected to be paid in the fourth quarter of 2019.
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
F-46
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLUOR CORPORATION
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 $273 million and $216 million as of
December 31, 2018 and 2017, respectively. 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, 2018 for the unconsolidated VIEs were $81 million.
In some cases, the company is required to consolidate certain VIEs. As of December 31, 2018, the
carrying values of the assets and liabilities associated with the operations of the consolidated VIEs were
$1.3 billion and $825 million, respectively. 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. 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 17 for a further discussion of such agreements.
19. Operations by Business Segment and Geographic Area
The company provides professional services in the fields of engineering, procurement, construction,
fabrication and modularization, operations, maintenance and asset integrity, and project management, on
a global basis and serves a diverse set of industries worldwide.
During the first quarter of 2018, the company changed the composition of its reportable segments to
align them with the manner in which the chief executive officer manages the business and allocates
resources. The operations of the company’s mining and metals business, previously included in the
Energy & Chemicals segment, have been included in the Mining, Industrial, Infrastructure & Power
segment. The company now reports its operating results in the following four reportable segments:
Energy & Chemicals; Mining, Industrial, Infrastructure & Power; Government; and Diversified Services.
Segment operating information for 2017 and 2016, and assets for 2017 have been recast to reflect these
changes.
The Energy & Chemicals segment focuses on opportunities in the upstream, midstream, downstream,
chemical, petrochemical, offshore and onshore oil and gas production, liquefied natural gas and pipeline
markets. This segment has long served a broad spectrum of 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 Energy & Chemicals customer and its affiliates amounted to
17 percent, 13 percent and 10 percent of the company’s consolidated revenue during the years ended
December 31, 2018, 2017 and 2016, respectively.
The Mining, Industrial, Infrastructure & Power segment provides design, engineering, procurement,
construction and project management services to the mining and metals, transportation, life sciences,
advanced manufacturing and power sectors. The operations of NuScale Power, LLC, which is managed as
a separate operating segment, have been aggregated with the Mining, Industrial, Infrastructure & Power
segment for financial reporting purposes.
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
F-47
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLUOR CORPORATION
various agencies of the U.S. government was 18 percent, 15 percent and 13 percent during the years ended
December 31, 2018, 2017 and 2016, respectively.
The Diversified Services segment provides a wide array of asset services, asset integrity services,
equipment solutions and staffing services around the world.
The reportable segments follow the same accounting policies as those described in Major Accounting
Policies (Note 1). Management evaluates a segment’s performance based upon segment profit. The
company incurs cost and expenses and holds certain assets at the corporate level which relate to its
business as a whole. Certain of these amounts have been charged to the company’s business segments by
various methods, largely on the basis of usage. Total assets not allocated to segments and held in
‘‘Corporate and other’’ primarily include cash, marketable securities, income-tax related assets, pension
assets, deferred compensation trust assets and corporate property, plant and equipment.
Segment profit is an earnings measure that the company utilizes to evaluate and manage its business
performance. Segment profit is calculated as revenue less cost of revenue and earnings attributable to
noncontrolling interests excluding: corporate general and administrative expense; interest expense; interest
income; domestic and foreign income taxes; and other non-operating income and expense items.
F-48
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLUOR CORPORATION
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 of fixed assets
Energy & Chemicals
Mining, Industrial, Infrastructure & Power
Government
Diversified Services
Corporate and other
Total depreciation 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(1)
2016(1)
2018
$ 7,698.2
5,186.1
3,772.0
2,510.3
$ 8,565.8
5,178.4
3,232.7
2,544.1
$ 9,250.0
4,598.7
2,720.0
2,467.8
$19,166.6
$19,521.0
$19,036.5
$
$
$
$
$
$
337.2
(13.6)
178.6
99.6
$
424.9
(141.0)
127.9
133.6
601.8
$
545.4
$
— $
9.7
3.9
124.2
59.8
— $
4.7
2.8
137.6
61.0
197.6
$
206.1
$
— $
— $
26.0
7.3
87.8
89.9
$
211.0
$
27.7
4.2
187.1
64.1
283.1
$
366.4
170.9
85.1
121.9
744.3
—
3.9
2.3
139.5
65.4
211.1
—
2.2
2.1
153.1
78.5
235.9
$ 1,525.1
1,318.7
822.7
1,841.0
3,406.1
$ 1,674.2
1,067.3
732.0
2,120.4
3,733.8
$ 8,913.6
$ 9,327.7
$
$
12.6
17.1
58.0
445.9
533.6
$
$
12.6
17.8
58.0
476.3
564.7
(1)
Prior period amounts have not been adjusted for the adoption of ASC Topic 606 under the modified
retrospective method.
Energy & Chemicals. Segment profit in 2018 and 2017 was adversely affected by pre-tax charges
totaling $133 million (or $0.89 per diluted share) and $44 million (or $0.20 per diluted share), respectively,
F-49
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLUOR CORPORATION
for estimated cost and schedule impacts on a fixed-price, downstream project. The company is in the
process of finalizing certain close-out matters with the customer, including final assessments of change
orders and liquidated damages. The company’s forecast is based on its assessment of the probable
resolution of these close-out matters, which if not achieved, could result in additional adjustments.
Segment profit in 2018 was further affected by pre-tax charges totaling $40 million (or $0.23 per diluted
share) resulting from forecast revisions for estimated cost growth on a fixed-price, offshore project.
Segment profit in 2016 was adversely affected by pre-tax charges totaling $265 million (or $1.20 per diluted
share) resulting from cost growth on a petrochemicals project in the United States.
Total assets in the Energy & Chemicals segment as of December 31, 2018 included aged and disputed
accounts receivable of $108 million related to a cost reimbursable, chemicals project in the Middle East. As
of February 2019, management continues to pursue collection of these amounts from the customer and
does not believe that the customer has a contractual basis for withholding payment. The company does not
believe it is probable that losses will be incurred in excess of amounts reserved for this matter.
Mining, Industrial, Infrastructure & Power. Segment profit in 2018 was adversely affected by pre-tax
charges totaling $188 million (or $1.02 per diluted share) resulting from forecast revisions for estimated
cost growth at a fixed-price, gas-fired power plant project. These charges were largely offset by a pre-tax
gain of $125 million (or $0.74 per diluted share) associated with the sale of the company’s interest in a joint
venture in the United Kingdom. Segment profit in 2017 was also 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.
The company is currently in a dispute with a customer over costs totaling approximately $110 million
that were allegedly incurred by the customer in connection with one of the gas-fired power plant projects
discussed above. The customer has withheld payment of certain invoices outstanding as of December 31,
2018 and drew down in January 2019 on a letter of credit issued on behalf of the company. The company
believes that certain of the customer’s claims are without merit and is vigorously pursuing recovery of the
amounts from the customer. Based upon its evaluation as of December 31, 2018, the company does not
believe it is probable that a loss will be incurred in excess of amounts reserved for this matter.
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 $74 million,
$76 million and $92 million during 2018, 2017 and 2016, respectively. NuScale expenses for 2018, 2017 and
2016 were reported net of qualified reimbursable expenses of $62 million, $48 million and $57 million,
respectively. (See Note 1 for a further discussion of the cost-sharing agreements between NuScale and the
DOE.)
Total assets in the Mining, Industrial, Infrastructure & Power segment as of December 31, 2018
included accounts receivable related to two subcontracts with Westinghouse Electric Company LLC
(‘‘Westinghouse’’) to manage the construction workforce at two nuclear power plant projects in South
Carolina (‘‘V.C. Summer’’) and Georgia (‘‘Plant Vogtle’’). On March 29, 2017, 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 canceled 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, 2018 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 has 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
F-50
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLUOR CORPORATION
company does not expect the close-out of these projects to have a material impact on the company’s results
of operations.
Government. The company is a subcontractor to a commercial client on a U.S. government project
where the company’s forecast is based on its assessment of the probable resolution of certain change
orders submitted to the client which are currently under discussion, and if not achieved, could adversely
affect revenue and segment profit.
Diversified Services. During 2018, 2017 and 2016, intercompany revenue for the Diversified Services
segment, excluded from the amounts shown above, was $453 million, $589 million and $524 million,
respectively.
A reconciliation of total segment profit to earnings before taxes is as follows:
Reconciliation of Total Segment Profit to Earnings Before Taxes
(in millions)
Total segment profit
Corporate general and administrative expense
Interest income (expense), net
Earnings attributable to noncontrolling interests
Earnings before taxes
Year Ended December 31,
2018
2017
2016
$ 601.8
(148.0)
(40.1)
68.1
$ 545.4
(192.2)
(39.9)
73.1
$ 744.3
(191.1)
(52.6)
46.0
$ 481.8
$ 386.4
$ 546.6
Corporate general and administrative expense. Significant items that affected corporate general and
administrative expense included: Foreign currency exchange gains and (losses) of $33 million, ($21 million)
and $35 million in 2018, 2017 and 2016, respectively; partial pension settlement expenses of $22 million in
2018; organizational realignment expenses (primarily severance and facility exit costs) of $10 million,
$20 million and $38 million in 2018, 2017 and 2016, respectively; and transaction and integration costs
associated with the Stork acquisition of $25 million in 2016.
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
External Revenue
Year Ended December 31,
2017(1)
2018
2016(1)
Total Assets
As of December 31,
2018
2017
$ 8,306.2
361.6
1,536.3
4,883.0
1,988.2
2,091.3
$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
$4,267.9
339.2
550.0
2,171.0
1,018.9
566.6
$4,808.1
490.5
729.3
2,238.0
675.0
386.8
$19,166.6
$19,521.0
$19,036.5
$8,913.6
$9,327.7
(1) Prior year amounts have not been adjusted for the adoption of ASC Topic 606 under the modified
retrospective method.
F-51
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLUOR CORPORATION
Non-Operating (Income) Expense
Non-operating expenses (net of income) of $0.5 million and $1 million were included in ‘‘Corporate
general and administrative expense’’ in 2018 and 2016, respectively. Non-operating income (net of
expenses) of $6 million was included in ‘‘Corporate general and administrative expense’’ in 2017.
20. Acquisition of Stork Holding B.V.
On March 1, 2016 (‘‘the acquisition date’’), the company acquired 100 percent of Stork for an
aggregate purchase price of A695 million (or approximately $756 million), including the assumption of debt
and other liabilities. Stork, based in the Netherlands, is a global provider of maintenance, modification and
asset integrity services associated with large existing industrial facilities in the oil and gas, chemicals,
petrochemicals, industrial and power markets. The company paid A276 million (or approximately
$300 million) in cash consideration. The company borrowed A200 million (or approximately $217 million)
under its $1.7 billion Revolving Loan and Letter of Credit Facility, and paid A76 million (or approximately
$83 million) of cash on hand to initially finance the Stork acquisition. The A200 million borrowed under the
$1.7 billion Revolving Loan and Letter of Credit Facility was subsequently repaid from the net proceeds of
the 2016 Notes.
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.
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
Year Ended
December 31, 2016
$19,262,991
283,705
F-52
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
FLUOR CORPORATION
21. 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, 2018
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, 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
$4,823.8
4,766.0
(9.1)
(12.1)
$4,883.8
4,673.6
183.6
131.2
$4,658.0
4,432.2
146.5
96.0
(17.6)
114.8
$ (0.13)
(0.13)
$
0.82
0.81
$
77.3
0.55
0.55
$4,835.9
4,685.9
93.4
77.4
60.6
0.43
0.43
$
$4,716.1
4,684.1
(23.9)
(6.6)
(24.0)
$ (0.17)
(0.17)
$
$4,941.6
4,720.1
165.4
112.9
94.5
0.68
0.67
$4,801.0
4,624.9
160.8
77.9
50.3
0.36
0.36
$
$5,027.4
4,812.4
151.5
80.8
60.3
0.43
0.43
$
Net earnings in the first, second, third and fourth quarters of 2018 were adversely affected by pre-tax
charges totaling $125 million (or $0.69 per diluted share), $16 million (or $0.09 per diluted share),
$35 million (or $0.19 per diluted share) and $12 million (or $0.06 per diluted share), respectively, resulting
from forecast revisions for estimated cost growth at a fixed-price, gas-fired power plant project. Net
earnings in the second, third and fourth quarters of 2018 were adversely affected by pre-tax charges
totaling $67 million (or $0.47 per diluted share), $46 million (or $0.30 per diluted share) and $20 million
(or $0.11 per diluted share), respectively, for estimated cost and schedule impacts on a fixed-price,
downstream project. Net earnings in the fourth quarter of 2018 was further affected by pre-tax charges
totaling $40 million (or $0.23 per diluted share) resulting from forecast revisions for estimated cost growth
on a fixed-price, offshore project. Net earnings in the third quarter of 2018 benefitted from the sale of the
company’s interest in a joint venture in the United Kingdom which resulted in a gain of $125 million (or
$0.68 per diluted share).
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 tax reform legislation enacted in 2017 in the United
States.
F-53
O V A T I O N
T R A N S F O R M A T I O N T H R O U G H I N N O V A T I O N
T R A N S F O R M A T I O N T H R O U G H I N N
2 0 1 8 A N N U A L R E P O R T
2 0 1 8 A N N U A L R E P O R T
S H A R E H O L D E R R E F E R E N C E
S H A R E H O L D E R R E F E R E N C E
Stock Informationtion
Common
Common Stock Informa
19, there were
At February 4, 20
At February 4, 2019, there were
,575,074 shares outstanding and
139139,575,074 sh
ares outstanding and
approximately 4,4
s of
areholderders of
approximately 4,492 sh
record of Fluor’s common
record of Fluor
92 sharehol
stock.
’s common stock.
utershareare
Registrar and Transfer Agent
Registrar and Transfer Agent
Comp
Computersh
P.O. Box 505000
P.O. Box 505000
Louisville, KY 40233-5000
Louisville, KY 40233-5000
Telephone: 877.870.2366
Telephone: 877.870.2366
Web: www.computersh
Web: www.comp
utershare.com
/investor
are.com/investor
Independent Registered Public
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Accountin
Accounting Firmg Firm
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ders’ Meetingng
Annual Sharehol
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Please visit investor.fluor.com for
Please visit investor.fluor.com for
inforormation
inf
location of our sh
location
mation regarding the
of our sharehol
regarding the time
areholderders’ me
and
time and
eting.
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Stock Trading
Stock Trading
Fluor’s stock is traded on the
Fluor’s stock is traded on the
New York Stock Exchange.
New York Stock Exc
hange.
Common
Common stock dome
trading symbol: FLR
trading symbol: FLR
stock domesticstic
P E R F O R M A N C E G R A P H
P E R F O R M A N C E G R A P H
The graph to the right depicts the
The graph to the right depicts the
Company’s total return to share--
Company’s total return to share
holders from December 31, 2013,
holders from December 31, 2013,
through December 31, 2018, relative
through December 31, 2018, relative
to the performance of the S&P
to the performance of the S&P
500 Composite Index and the Dow
500 Composite Index and the Dow
Jones Heavy Construc
Jones Hea
tion Industry
vy Construction Industry
Group Index (“DJ Heavy”), which
Group Index (“DJ Heavy”), which
is a published industry index. This
is a published industry index. This
graph assumes the the inves
graph assumes
tment
investment
of $100 on December 31, 2013, in
of $100 on December 31, 2013, in
eacheach of Fluor Corporation,
the S&P
of Fluor Corporation, the S&P
500 Composite Index and the DJ
500 Composite Index and the DJ
Heavy, and the reinvestment of
Heavy, and the reinvestment of
dividends paid since that date.
dividends paid since that date.
Company Contacts
Company Contacts
Sharehol
Shareholderders may cal
888.432.1745
888.432.1745
s may call l
lations:
Investor Relations:
Investor Re
Jason
Landkamer
Jason Landkamer
469.398.7222
469.398.7222
of
s’ receipt of
resources,
serve natural resources,
areholderders’ receipt
eting and conserve natural
Electronic Delivery of Annual Report
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and Proxy Statements
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To expedite sh
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materials, lower the costs of the annual
memeeting and con
we are offering you, as a Fluor share--
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By using Sappi McCoy Silk, Fluor saved
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thethe following resour
ces:
following resources:
Trees: 6 trees planted
Trees: 6 trees planted
Water: 2,895 gallons
Water: 2,895 gallons
Solid Waste: 193 pounds
Solid Waste: 193 pounds
Greenhouse Gases: 534 pounds
Greenhouse Gases: 534 pounds
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$100
$0$0
2013
20142014
20152015
20162016
20172017
2018
2018
Fluor
Fluor
S&P 500
S&P 500
DJ Heavy
DJ Heavy
$100.00
$100.00
$100.00
$100.00
$100.00
$100.00
$76.40
$76.40
$60.48
$60.48
$68.39
$68.39
$68.48
$68.48
$43.41
$43.41
$113.68
$113.68
$115.24
$115.24
$129.02
$129.02
$157.17
$157.17
$150.27
$150.27
$74.48
$74.48
$65.89
$65.89
$81.29
$81.29
$85.65
$85.65
$63.29
$63.29
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