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Improving Everyday Life
FLUOR CORPORATION
2008 ANNUAL REPORT

Table of contents

  • Page 1
    Improving Everyday Life FLUOR CORPORATION 2008 ANNUAL REPORT

  • Page 2
    ... projects on schedule, within budget and with excellence. Fluor is a FORTUNE 500 company with 42,000 employees operating globally. Table of Contents Letter to Shareholders ...1 Our Operations ...4 Oil & Gas ...12 Industrial & Infrastructure ...16 Government ...20 Global Services ...22 Power...

  • Page 3
    ... strategic acquisitions. Our Business Performance Fluor continues to expand globally, with about 45 percent of our new awards in 2008 coming from projects outside the United States. We focused on key growth areas like the Middle East and either opened or expanded offices in Alaska, Argentina, China...

  • Page 4
    ... the Occupational Safety and Health Administration as one of only seven U.S. companies to participate in its Voluntary Protection Programs Corporate Pilot. For more insight into Fluor's global sustainability practices, I encourage you to review page 30 of this annual report. Our Impact on...

  • Page 5
    ... and made significant contributions to Fluor during his 11-year tenure. At the senior management level, Steve Gilbert, senior vice president of Human Resources and Administration, retired after 37 years of valuable service in both business and functional leadership roles. In conclusion, I wish to...

  • Page 6
    ... Research Triangle Park, North Carolina Industrial & Infrastructure Baylor College of Medicine Biomedical Research Facility Houston, Texas Government Department of Energy Savannah River Site Aiken, South Carolina Government U.S. Army Corps of Engineers CETAC II Iraq Oil & Gas PEMEX Refinaci...

  • Page 7
    ...Our Power group designs, builds, commissions and retrofits facilities to meet the growing demand for clean electric power - and in 2008, combined-cycle gas-fired plants and plant-betterment projects led our new awards. Looking ahead, Fluor is extremely well positioned to service the growing global...

  • Page 8
    Solar-powered Lighting Manufacturing Heating, Ventilation, A/C Services Operations & Maintenance Professional & Technical Personnel Contract Staffing Semiconductor Microelectronics Gold Jewelry Mining Computer Products Operations & Maintenance Plastic Water Bottle Petrochemicals

  • Page 9
    ... Electrical Wiring Mining Polyester Petrochemicals Aluminum Can Mining Operations & Maintenance Carpeting Petrochemicals We're Where You Work Look around any office, and there's a good chance you'll see a beverage container, computer or other object whose origins can be traced to a Fluor project...

  • Page 10
    Appliance Steel Operations & Maintenance Electric Appliances Power Spray-on Cleaner Operations & Maintenance Consumer Packaging Commercial & Institutional Water Treatment Federal Projects Gas Stove Gas Processing Floor Laminate Petrochemicals

  • Page 11
    ... Power Telephone Telecommunications Vaccinations Life Sciences House Paint Petrochemicals Plastic Container Petrochemicals Cosmetics Petrochemicals We're Where You Live Electric lighting. Mascara. Clean water. A gas stove. Life-saving drugs. Disaster relief. Without the products and services...

  • Page 12
    Military Support Government Services Aviation Fuel Oil Refining Emission Reduction and Carbon Capture Power Wind Farm Infrastructure & Power Environmental Remediation Government High Speed Rail Infrastructure Road Infrastructure Construction Equipment Equipment & Tool Services Snack Foods ...

  • Page 13
    ... Operations & Maintenance Bridges Infrastructure Logistics Government Services Automotive Components Operations & Maintenance Automotive Fuel Oil Refining Asphalt Oil Refining Plastic Petrochemicals We're Where You Play When you think of a large global corporation like Fluor, a relaxing day...

  • Page 14
    ... and a $300 million consultancy-services contract for Kuwait Oil Company. We also won an LNG terminal in Spain for Enagas worth $320 million. In our petrochemical business, new Chinese projects led the way in 2008, starting with a $1 billion project by LDK Solar in China for the world's largest...

  • Page 15
    ...06 07 08 06 12.0 Backlog 13.5 12 07 Top Image: Fluor is executing a $1.9 billion upgrade and expansion project for Marathon Oil Corporation to add considerable processing capacity to this Detroit, Michigan, refinery. Bottom Right: Located off the northwest coast of Trinidad in 530 feet of...

  • Page 16
    ... Middle East continues to have strong market potential. Other key growth markets include Alaska, Southeast Asia, China, Russia, Eastern Europe and Mexico. For 2009, we anticipate capital expenditures in our upstream segment to be our strongest market with offshore and onshore oil and gas production...

  • Page 17
    Oil & Gas reached a number of safety benchmarks in 2008, including 2 million craft hours on the LDK Solar project and more than 35 million craft hours on the Dow/PIC Olefins II project without incident. Left Image: This Saudi International Petrochemical Co. Ltd. complex in Al Jubail, Saudi Arabia, ...

  • Page 18
    .... Bottom Right: Completed in 2008 by a Fluor-led consortium, Minnesota's Trunk Highway 212 design-build project was recognized by Roads and Bridges magazine as the Number 1 Roadway Project for 2007 . Bottom Left: Installation of Rail Shedder and Truss for BHP Billiton Iron Ore's RGP4 Expansion...

  • Page 19
    ... group, environmentally driven initiatives are becoming more common. For example, in 2008 we were named as the engineering, procurement and construction (EPC) contractor for the Greater Gabbard Wind Farm, a $1.8 billion, 500-megawatt project off the east coast of the United Kingdom. When...

  • Page 20
    ... services for utilities, infrastructure, facilities and roadways. Upon completion, the plant will produce wafers, cells and modules to support the global market for solar energy. Other Global Highlights In the United States, Fluor was awarded the Mid-City/ Expo Light Rail project for the Los Angeles...

  • Page 21
    ... the resources to mobilize quickly on these large-scale projects. Not only is this good news for Fluor, but it can also benefit small local contractors as we engage their services to help us build these complex projects. Overall, we anticipate that new awards for 2009 may be affected by the global...

  • Page 22
    Fluor Corporation 2008 Annual Report Government Serving the Public The projects our Government group tackles are as multifaceted as the federal agencies we serve. We decommission nuclear facilities, replacing weapons plants with environmentally safe parks and wetlands. We support our troops ...

  • Page 23
    ...2.2 NEW AWARDS AND BACKLOG 2.500 Backlog 0.8 06 07 08 0 06 07 0.7 08 Top Image: Savannah River Nuclear Solutions, a Fluor-led partnership, successfully assumed responsibilities to manage and operate the Department of Energy's Savannah River Site in 2008. Bottom Right: Through our LOGCAP...

  • Page 24
    ...: Fluor supports Alabama Power's Barry electric generating station near Mobile, Alabama, with our robust construction and maintenance services. Bottom Right: Our facility management services for IBM in Research Triangle Park, North Carolina, include design and construction of this Executive Brie...

  • Page 25
    ... of goods and services on behalf of all Fluor business segments. And our AMECO® unit established a global account sales team, which is driving significant new business. oil & gas, mining, metals, chemicals and high­ tech industries. We also won work with clients in new markets including a global...

  • Page 26
    ... in California and a $500 million project for a 620-megawatt plant for Brazos Electric Power Cooperative in Jack County, Texas. We also expanded our scope of work with an existing client in Spain with an award for engineering work on the Soto V combined-cycle project. In our nuclear business line...

  • Page 27
    ...tted pilot plant, featuring Fluor's commercially proven Econamine FG PlusSM carbon capture technology, is set to commence operation in Wilhelmshaven, Germany, in 2010. Bottom Left: Fluor is providing critical EPC and commissioning services to help E.ON Kentucky Utilities ensure SO2 compliance - and...

  • Page 28
    ...) 2008 Percent 2007 Percent 2006 Percent Oil & Gas Industrial & Infrastructure Global Services Power Government Total New Awards 60% Oil & Gas 20% Industrial & Infrastructure 9% Global Services 5% Power 6% Government $ 15,147 5,046 2,146 1,339 1,380 $ 25,058 60% 20% 9% 5% 6% 100% $ 13...

  • Page 29
    Fluor Corporation 2008 Annual Report Selected Financial Data Consolidated Operating Results Year Ended December 31 (in millions, except per-share and employee information) Revenue Earnings before taxes Net earnings Earnings per share Basic* Diluted* Return on average shareholders' equity Cash ...

  • Page 30
    Fluor Corporation 2008 Annual Report Board of Directors From left to right, front row: Alan L. Boeckmann Chairman of the Board and Chief Executive Officer; Director of Burlington Northern Santa Fe and BHP Billiton Limited (2001) (1) Peter J. Fluor Fluor's lead independent director; Chairman...

  • Page 31
    ... Chief Executive Officer (1979) David E. Constable Group President, Power (1982) Stephen B. Dobbs Senior Group President, Industrial & Infrastructure, Global Services and Government (1980) Garry W. Flowers Senior Vice President, HSE, Security & Industrial Relations (1978) Glenn C. Gilkey Senior...

  • Page 32
    ... Corporation 2008 Annual Report Sustainability Fluor's Leadership in Sustainability Workplace Diversity and Inclusion At every level of our organization, Fluor champions a number of initiatives to attract, retain and develop a truly global, cross-cultural workforce. Health, Safety and Environmental...

  • Page 33
    ...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) 469-398-7000 (Registrant's telephone number, including area code...

  • Page 34
    ... Accounting and Financial Disclosure ...Controls and Procedures ...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...

  • Page 35
    ... as project management services on a global basis. We serve a diverse set of industries worldwide including oil and gas, chemical and petrochemicals, transportation, mining and metals, power, life sciences and manufacturing. We are also a primary service provider to the U.S. federal government. We...

  • Page 36
    ... world class provider of engineering, procurement, construction, maintenance and project management services, we believe that our business model allows us the opportunity to bring to our clients a compelling business offering that combines excellence in execution, safety, cost containment and...

  • Page 37
    .... Fluor is 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 developing project execution plans...

  • Page 38
    ... need for our clients to develop new sources of supply. Our typical projects in the upstream sector revolve around the production, processing and transporting of oil and gas resources, including the development of major new fields, as well as liquefied natural gas (LNG) projects. In the downstream...

  • Page 39
    ... model to the one used when developing complex transportation projects, we have been successful as a co-developer of what will be the largest offshore wind farm development, located off the coast of the United Kingdom. Fluor ultimately sold its joint venture interest in the wind farm development...

  • Page 40
    ... and plant sites of both third party clients and clients of the company. AMECO supports large construction projects and plants at locations throughout North and South America, South Africa and the Middle East. Global Services serves the temporary staffing market through TRS Staffing Solutions, Inc...

  • Page 41
    ... and plant betterment marketplaces. Our services include engineering, procurement, construction, program management, start-up and commissioning and maintenance. In the gas fueled market, we offer a full range of services for simple and combined cycle reference designs as well as complete solutions...

  • Page 42
    ... staffing and supply chain solutions operations of our Global Services segment do not report backlog due to the quick turnaround between the receipt of new awards and the recognition of revenue. With respect to backlog in our Government segment, if a contract covers multiple years, we only include...

  • Page 43
    ... and highly skilled and experienced technical personnel. A large number of companies are competing in the markets served by our business, including U.S. companies such as Bechtel Group, Inc., Jacobs Engineering Group, Inc., KBR Inc., Chicago Bridge and Iron Company N.V., CH2M Hill Companies Limited...

  • Page 44
    ...is generally driven by reputation, price and the capacity to perform. Key competitive factors in our Government segment are primarily centered on performance and the ability to provide the design, engineering, planning, management and project execution skills required to complete complex projects in...

  • Page 45
    ...Craft and Hourly Employees ...Total ... The number of craft and hourly employees, who provide support throughout the various business segments, varies in relation to the number and size of projects we have in process at any particular time. Available Information Our website address is www.fluor.com...

  • Page 46
    ... of projects with engineering, procurement, construction and management needs. Although economic downturns can impact our entire business, our commodity-based segments tend to be more cyclical in nature, and our commodity-based business lines can be affected by a decrease in worldwide demand...

  • Page 47
    ...significant losses for us with respect to the joint venture. We enter into various joint ventures as part of our engineering, procurement and construction businesses, including ICA Fluor and project-specific joint ventures. The success of these and other joint ventures depends, in large part, on the...

  • Page 48
    ... under the Federal False Claims Act that, if an unfavorable result occurs, could impact our profits and financial condition, as well as our ability to obtain future government work. For example, government agencies such as the U.S. Defense Contract Audit Agency (the ''DCAA'') routinely review and...

  • Page 49
    ..., WorleyParsons Limited and AMEC plc. In particular, the engineering and construction markets are highly competitive and require substantial resources and investment in technology and skilled personnel. Competition also places downward pressure on our contract prices and profit margins. Intense...

  • Page 50
    ... business is affected by unexpected and adverse foreign economic and political conditions, we may experience project disruptions and losses. Project disruptions and losses could significantly reduce our overall revenue and profits. We work in international locations where there are high security...

  • Page 51
    ... our operations. The applicable regulations, as well as the technology and length of time available to comply with those regulations, continue to develop and change. In addition, past activities could also have a material impact on us. For example, when we sold our mining business formerly conducted...

  • Page 52
    ... revenue and profits. Our continued success requires us to hire and retain qualified personnel. The success of our business is dependent upon being able to attract and retain personnel, including engineers, project management and craft employees, who have the necessary and required experience and...

  • Page 53
    ..., shareholders may be limited in the ability to obtain a premium for their shares. Systems and information technology interruption could adversely impact our ability to operate. As a global company, we are heavily reliant on computer, information and communications technology and related systems...

  • Page 54
    ...: Location Interest United States and Canada: Aliso Viejo, California ...Anchorage, Alaska ...Calgary, Canada ...Dallas, Texas ...Greenville, South Carolina ...Houston (Sugar Land), Texas ...Irvine, California ...Irving, Texas ...Long Beach, California ...Mt. Laurel, New Jersey ...Richland...

  • Page 55
    ... did not submit any matters to a vote of security holders during the fourth quarter of 2008. Executive Officers of the Registrant Information regarding the company's executive officers is set forth under the caption ''Executive Officers of the Registrant'' in Part III, Item 10, of this Form 10...

  • Page 56
    ... 12 of the Securities Exchange Act of 1934 (the ''Exchange Act''): Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Number of Shares that May Yet Be Purchased Under Plans or Programs (2) Period Total Number of Shares Purchased (1) Average Price Paid per...

  • Page 57
    ...-for-one stock split. Net earnings in 2008 includes a pre-tax gain of $79 million ($0.27 per share*) from the sale of a joint venture interest in a wind power project in the United Kingdom and tax benefits of $28 million ($0.15 per share*) resulting from statute expirations and tax settlements that...

  • Page 58
    ...project execution activities. The 2008 operating profit of the Industrial & Infrastructure segment included a pre-tax gain from the sale of a joint venture interest in a wind power project in the United Kingdom partially offset by provisions for a fixed-price telecommunications project in the United...

  • Page 59
    ... Oil & Gas, Global Services and Power segments had increases in new awards during 2007, partially offset by decreases in new awards in the Industrial & Infrastructure and Government segments. Approximately 45 percent of consolidated new awards for 2008 were for projects located outside of the United...

  • Page 60
    ... a small initial investment. Execution of a project is generally the single business purpose of these joint venture arrangements. When the company is the primary contractor responsible for execution, the project is accounted for as part of normal operations and included in consolidated revenue using...

  • Page 61
    ...January 1, 2007 balance of retained earnings. 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 SFAS No. 87...

  • Page 62
    ... United States government. The Global Services segment includes operations and maintenance activities, small capital project engineering and execution, site equipment and tool services, industrial fleet outsourcing, plant turnaround services, temporary staffing and supply chain solutions. The Power...

  • Page 63
    ...global execution and project management capabilities and strong financial position. However, the global credit crisis and falling oil prices have resulted in some clients reassessing their capital spending plans for 2009. As such, there is some uncertainty as to the sustainability of the high growth...

  • Page 64
    ... for the public assistance program in support of the Federal Emergency Management Agency (''FEMA''), the Hanford Environmental Management Project in Washington and work that began in late 2008 in support of Logistics Augmentation Program (''LOGCAP IV'') task orders for the United States Army in...

  • Page 65
    ... River project's transitional work and first full year of operations were included as a new award in 2008. The company reports new awards for LOGCAP IV as individual task orders are awarded and funded. The decrease in new awards in 2007 was due to the significant decrease in emergency response work...

  • Page 66
    ...activities. During the fourth quarter of 2008, Global Services began to be impacted by the current global economic downturn, particularly for natural resource prospects. The drop in commodity prices has caused delays of work originally planned for 2008 and 2009. Operating profit margin in the Global...

  • Page 67
    ... margin front-end services in the nuclear business line. Also reflected in 2008 operating profit, but as a partial offset to the drivers of margin improvement, was a fourth quarter provision for an uncollectible retention receivable of $9 million for the Rabigh Combined Cycle Power Plant in Saudi...

  • Page 68
    ... General Electric Company and certain operating subsidiaries as well as Saudi American General Electric (''SAMGE''), a Saudi Arabian corporation. The complaint sought damages in connection with the procurement, engineering and construction of the Rabigh Combined Cycle Power Plant in Saudi Arabia...

  • Page 69
    ...sale of a joint venture interest in a wind power project in the United Kingdom. In addition, cash flows provided by investing activities during 2008 include $48 million primarily related to the disposal of construction equipment associated with the equipment operations in the Global Services segment...

  • Page 70
    ... discounts. Proceeds from the Notes were used to pay off the then-outstanding commercial paper and $100 million was used to obtain ownership of engineering and corporate office facilities in California through payoff of the lease financing. In December 2004, the company irrevocably elected to pay...

  • Page 71
    ... company's short-term financing needs are not expected to be impacted due to its high cash balances and access to short-term borrowing sources. The company also posts surety bonds as generally required by commercial terms, primarily to guarantee its performance on state and local government projects...

  • Page 72
    ... for engineering and project execution office facilities in Sugar Land, Texas, the United Kingdom and various other U.S and international locations, equipment used in connection with long-term construction contracts and other personal property. Uncertain tax contingencies are positions taken...

  • Page 73
    ... the company's insurance or surety programs or limited its ability to access needed insurance or surety capacity. 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. Applying...

  • Page 74
    ...million project by a joint venture, GeneSYS Telecommunications Limited (''GeneSYS''), in which the company owns a 45 percent interest and HSBC Infrastructure Fund Management Limited owns a 55 percent interest. The project was entered into with the United Kingdom Secretary of State for Transport (the...

  • Page 75
    ... Capital Beltway high-occupancy toll (''HOT'') lanes project in Virginia. The project is a public-private partnership between the Virginia Department of Transportation (''VDOT'') and Capital Beltway Express LLC, a joint venture in which the company has a ten percent interest and Transurban (USA) Inc...

  • Page 76
    ... 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...

  • Page 77
    ... 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...

  • Page 78
    ... Information Officer Chairman and Chief Executive Officer Group President, Power Senior Group President, Industrial & Infrastructure, Government and Global Services Senior Vice President, HSE, Security & Industrial Relations Senior Vice President, Human Resources and Administration Group President...

  • Page 79
    ...Mr. Gilkey has been Senior Vice President, Human Resources and Administration since June 2008. Prior to that, he was Vice President, Operations from June 2006 to June 2008 and Vice President, Engineering from January 2001 to June 2006. Mr. Gilkey joined the company in 1988 with previous service from...

  • Page 80
    ...been posted on the ''Sustainability'' - ''Compliance and Ethics'' portion of our website, www.fluor.com. Shareholders may request a free copy of our Code of Business Conduct and Ethics from: Fluor Corporation Attention: Investor Relations 6700 Las Colinas Boulevard Irving, Texas 75039 (469) 398-7220...

  • Page 81
    ... ''Corporate Governance - Board of Directors Meetings and Committees - Audit Committee'' in our Proxy Statement. Item 11. Executive Compensation Information required by this item is included in the following sections of our Proxy Statement for our 2009 annual meeting of shareholders: ''Organization...

  • Page 82
    ... information as of December 31, 2008 with respect to the shares of common stock that may be issued under the Company's equity compensation plans: (a) (b) (c) Number of securities to be Weighted average Number of securities available for issued upon exercise of exercise price of future issuance...

  • Page 83
    ...). Fluor Corporation 2000 Restricted Stock Plan for Non-Employee Directors, as amended and restated on November 1, 2007 (incorporated by reference to Exhibit 10.4 to the registrant's Annual Report on Form 10-K filed on February 29, 2008). Fluor Corporation Executive Deferred Compensation Plan, as...

  • Page 84
    ...10/A (Amendment No. 1) filed on November 22, 2000). Fluor Executives' Supplemental Benefit Plan (incorporated by reference to Exhibit 10.8 to the registrant's Annual Report on Form 10-K filed on February 29, 2008). Fluor Corporation Retirement Plan for Outside Directors (incorporated by reference to...

  • Page 85
    ... on February 7, 2008* 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...

  • Page 86
    ... by the undersigned, thereunto duly authorized. FLUOR CORPORATION By: /s/ D. MICHAEL STEUERT D. Michael Steuert, Senior Vice President and Chief Financial Officer February 25, 2009 Pursuant to the requirements of the Securities Exchange Act of 1934, this annual report on Form 10-K has been signed...

  • Page 87
    ... Martinez /s/ DEAN R. O'HARE Dean R. O'Hare /s/ JOSEPH W. PRUEHER Joseph W. Prueher /s/ PETER S. WATSON Peter S. Watson /s/ SUZANNE H. WOOLSEY Suzanne H. Woolsey Director February 25, 2009 Director February 25, 2009 Director February 25, 2009 Director February 25, 2009 Director February 25...

  • Page 88

  • Page 89
    FLUOR CORPORATION INDEX TO CONSOLIDATED FINANCIAL STATEMENTS TABLE OF CONTENTS PAGE Report of Independent Registered Public Accounting Firm ...Consolidated Statement of Earnings ...Consolidated Balance Sheet ...Consolidated Statement of Cash Flows ...Consolidated Statement of Shareholders' Equity ...

  • Page 90
    ... 2006 the Company changed its method of accounting for defined benefit pension and other postretirement plans. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Fluor Corporation's internal control over financial reporting as of...

  • Page 91
    FLUOR CORPORATION CONSOLIDATED STATEMENT OF EARNINGS Year Ended December 31, 2007 (in thousands, except per share amounts) 2008 2006 TOTAL REVENUE TOTAL COST OF REVENUE Cost of revenue Gain on sale of joint venture interest OTHER (INCOME) AND EXPENSES Corporate administrative and general expense...

  • Page 92
    ... taxes Deferred compensation trusts Other Total other assets LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Trade accounts payable Convertible senior notes Advance billings on contracts Accrued salaries, wages and benefits Other accrued liabilities Total current liabilities LONG-TERM DEBT...

  • Page 93
    ... Funding of deferred compensation trust Taxes paid on vested restricted stock Statute expirations and tax settlements Deferred taxes Stock option tax benefit Retirement plan accrual, net of contributions Decrease (increase) in unbilled fees receivable Changes in operating assets and liabilities...

  • Page 94
    ... of $13,351) Total other comprehensive income Pension plan adjustment (net of deferred taxes of $108,162) Dividends ($0.40 per share) Exercise of stock options and warrants Stock option tax benefit Reclassification upon adoption of new accounting standard Amortization of executive stock plan expense...

  • Page 95
    ... the terms of the respective plans. 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...

  • Page 96
    ..., are included in revenue and cost of revenue when management believes that the company is responsible for the ultimate acceptability of the project. Contracts are segmented between types of services, such as engineering and construction, and accordingly, gross margin related to each activity is...

  • Page 97
    ... the July 16, 2008 stock split. At December 31, 2008, 1,560,856 stock options and 137,482 shares of unvested restricted stock units were not included in the computation of diluted earnings per share because these securities were anti-dilutive. Dilutive securities included in the determination of...

  • Page 98
    ... 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...

  • Page 99
    ... of unamortized executive stock plan expense. Under SFAS 123-R, stock-based compensation for new awards granted to retirement eligible employees is recognized over the period from the grant date to the retirement eligibility date. As part of the adoption of SFAS 123-R in 2006, the impact of the...

  • Page 100
    ... to have a material impact on the company's financial position, results of operations or cash flows. In May 2008, the FASB issued Staff Position APB 14-1, ''Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement)'' (''FSP APB 14...

  • Page 101
    FLUOR CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) for fiscal years beginning after December 15, 2008 and would be applied retrospectively to all periods presented. Management is currently evaluating the impact on the company's financial statements. In June 2008, the FASB ...

  • Page 102
    FLUOR CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Income Taxes The income tax expense (benefit) included in the Consolidated Statement of Earnings is as follows: Year Ended December 31, 2008 2007 2006 (in thousands) Current: Federal Foreign State and local Total current ...

  • Page 103
    ... giving rise to deferred tax assets and liabilities are as follows: December 31, 2008 2007 (in thousands) Deferred tax assets: Accrued liabilities not currently deductible: Employee compensation and benefits Employee time-off accrual Project and non-project reserves Workers' compensation insurance...

  • Page 104
    FLUOR CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 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 ...

  • Page 105
    ... to 2007 primarily as a result of operations in the Oil & Gas segment and performance in the Industrial & Infrastructure segment, including the sale of a joint venture interest in a wind power project in the United Kingdom. Retirement Benefits The company sponsors contributory and non-contributory...

  • Page 106
    ... including the future growth in the number of plan participants and forecasted benefit obligations, inflation and the rate of salary increases are also considered in developing asset allocations and target return assumptions. In the case of certain foreign plans, asset allocations may be governed...

  • Page 107
    ..., 2008, the aggregated projected benefit obligations for all plans were in excess of plan assets. In addition to the company's defined benefit pension plans, the company and certain of its subsidiaries provide health care and life insurance benefits for certain retired employees. The health care and...

  • Page 108
    ...) postretirement benefit obligation at December 31, 2008, 2007 and 2006 was determined in accordance with the current terms of the company's health care plans, together with relevant actuarial assumptions and health care cost trend rates projected at annual rates ranging from 9 percent in 2009 down...

  • Page 109
    ...-by-instrument election. The company adopted both SFAS 157 and SFAS 159 in the first quarter of 2008. The required disclosures of SFAS 157 have been reflected herein. The adoption of SFAS 159 did not have a material impact on its financial position, results of operations or cash flows. F-21

  • Page 110
    ... in credit lines for general purposes. The company's access to the commercial paper market has been limited as a result of the current financial crisis. The company also posts surety bonds as generally required by commercial terms, primarily on state and local government projects to guarantee its...

  • Page 111
    ... of the Notes. On December 30, 2004, the company irrevocably elected to pay the principal amount of the Notes in cash and therefore, there is no dilutive impact on EPS unless the average stock price exceeds the split-adjusted conversion price of $27.85. Throughout 2008, 2007 and 2006, the conversion...

  • Page 112
    ... CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 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...

  • Page 113
    ...For the years 2008, 2007 and 2006, recognized compensation expense of $25 million, $24 million and $28 million, respectively, is included in corporate administrative and general expense related to restricted stock awards and units. The fair value of restricted stock that vested during 2008, 2007 and...

  • Page 114
    FLUOR CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The total intrinsic value, representing the difference between market value on the date of exercise and the option price, of stock options exercised during 2008, 2007 and 2006 was $20 million, $25 million and $22 million, ...

  • Page 115
    ...these matters: Infrastructure Joint Venture Project The company participates in a 50/50 joint venture that is completing a fixed-price transportation infrastructure project in California. The project continues to be subject to circumstances resulting in additional cost including owner-directed scope...

  • Page 116
    ... Embassy Design, increased cost to meet client requirements for additional security-cleared labor, site conditions at certain locations, subcontractor and teaming partner difficulties and the availability and productivity of construction labor. As of December 31, 2008, all embassy projects were...

  • Page 117
    ... General Electric Company and certain operating subsidiaries as well as Saudi American General Electric (''SAMGE''), a Saudi Arabian corporation. The complaint sought damages in connection with the procurement, engineering and construction of the Rabigh Combined Cycle Power Plant in Saudi Arabia...

  • Page 118
    ... adequate and such future cost will not have a material effect on the company's consolidated financial position, results of operations or liquidity. However, the imposition of more stringent requirements under environmental laws or regulations, new developments or changes regarding site cleanup cost...

  • Page 119
    FLUOR CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 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. Applying the guidance of FIN 46(R), the company ...

  • Page 120
    ...million project by a joint venture, GeneSYS Telecommunications Limited (''GeneSYS''), in which the company owns a 45 percent interest and HSBC Infrastructure Fund Management Limited owns a 55 percent interest. The project was entered into with the United Kingdom Secretary of State for Transport (the...

  • Page 121
    ... professional services in the fields of engineering, procurement, construction and maintenance as well as project management services on a global basis and serves a diverse set of industries worldwide including oil and gas, chemical and petrochemicals, transportation, mining and metals, power, life...

  • Page 122
    ... 31, 2008, 2007 and 2006. The Global Services segment includes operations and maintenance activities, small capital project engineering and execution, site equipment and tool services, industrial fleet outsourcing, plant turnaround services and supply chain solutions. In addition, Global Services...

  • Page 123
    FLUOR CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Operating Information by Segment Year Ended December 31, 2008 2007 2006 (in millions) External revenue Oil & Gas Industrial & Infrastructure Government Global Services Power Total external revenue Operating profit (loss) Oil &...

  • Page 124
    ...-Wide Disclosures External Revenue Year Ended December 31, 2008 2007 2006 (in millions) Total Assets At December 31, 2008 2007 United States Canada Asia Pacific (includes Australia) Europe Central and South America Middle East and Africa Total $11,391 1,008 1,991 4,338 1,429 2,169 $22,326...

  • Page 125
    ...a joint venture interest in a wind power project in the United Kingdom. Earnings before taxes in the third quarter of 2007 include a provision of $21 million in the Government segment on a fixed-price project. Earnings before taxes in the fourth quarter of 2008 includes a $16 million loss related to...

  • Page 126
    ...of TRS Staffing Solutions, Inc. AMECO® is a registered service mark of American Equipment Company. Site Services and Fleet Outsourcing are service marks of American Equipment Company. Fluor Constructors International, Inc., P2S is a service mark of Plant Performance Services LLC. Econamine FG Plus...

  • Page 127
    Fluor Corporation 6700 Las Colinas Boulevard Irving, Texas 75039 ï¬,uor.com