Fluor 2013 Annual Report Download

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ANNUAL REPORT
ANNUAL REPORT
2013
2013
GROWTH
THE BLUEPRINT FOR

Table of contents

  • Page 1
    THE BLUEPRINT FOR GROWTH A N N UA L R E P O RT 2013

  • Page 2
    ... PHOT PHOTOGRAPHY FLUOR FL UOR CORPORA CORPORATION TION (NY (NYSE: SE: FLR) is one of the world' world's s larges largest t publicly traded traded engineering, procur pr ocurement, ement, cons construction, truction, maintenanc maintenance e and project project management companies. companies. Over...

  • Page 3
    ... our business have shifted. THROUGHOUT 2013, FLUOR FOCUSED ON ESSENTIAL STEPS TO BUILDING AN EVEN MORE COMPETITIVE AND PROFITABLE COMPANY Yet, we have worked through all of these changes and prospered. We are successful because we have a plan-a blueprint for growth that guides our current actions...

  • Page 4
    FLUOR DAVID T. SEATON Chairman and CEO

  • Page 5
    ...to design and build facilities that operate to clients' exacting standards-safely and reliably. In that regard, we continued to conduct our work in 2013 around a cornerstone of safety-a mainstay of Fluor's heritage and reputation. We also placed key executives in new roles, positioning businesses to...

  • Page 6
    ...LOGCAP IV contract in Afghanistan. The company also won a U.S. Department of Energy contract for the management and operation of the Strategic Petroleum Reserve, the world's largest supply of emergency crude oil. During the year, Fluor received notice to begin construction on Dominion Virginia Power...

  • Page 7
    ...alliances for modular construction and fabrication; and to use our exceptional knowledge in supply chain to provide greater benefit to our clients and improve the profitability of our company. We are positioned to move forward in these strategic areas during 2014. Each of these strategic initiatives...

  • Page 8
    ... and life sciences industries worldwide by providing project management, engineering, procurement, construction, and operations and maintenance solutions. H J L Government Government partners with a number of U.S. government agencies, including the Departments of Defense, Energy, Labor...

  • Page 9
    ...-SN-101 E F G UNITED STATES H J OIL K & GAS 26250 L EUROPE, AFRICA & MIDDLE EAST 31500 CANADA ASIA PACIFIC & AUSTRALIA CYCLONE FEED PUMP - 3900-PU-101 LATIN AMERICA SAG MILL DISCHARGE SCREEN - 3900-SN-101 C BALL MILL No.2 INDUSTRIAL & INFRASTRUCTURE GOVERNMENT POWER CONVEYOR CV-3100 REFER...

  • Page 10

  • Page 11
    Opportunities for our Oil & Gas segment will be robust well into the future. O&G PAGE 9

  • Page 12
    ... International Energy Agency, global energy demand is expected to increase by over 30 percent by 2035. Regardless of market conditions, this trend will drive OPPORTUNITIES FOR OUR OIL & GAS SEGMENT WELL INTO THE FUTURE. Oil & Gas Oil & Gas NEW AWARDS BACKLOG 8.3 2011 15.1 2011 12.6 2012 18.2 2013...

  • Page 13
    ... we are positioning ourselves to be a major player in LNG. The group is already gaining traction through our strategic partnership with JGC, which is opening the door for major projects around the world. Chevron recently awarded us its Kitimat LNG production and export terminal project in Canada. We...

  • Page 14
    ... to capture this business. Fluor is one of the few companies that can deliver a truly integrated solution to fully execute projects-engineering, supply chain, fabrication, modularization, construction and a reliable workforce to achieve our clients' plans. Projects worldwide are increasingly bid on...

  • Page 15
    FLUOR RV 2009 2013 ANNUAL REPORT 6"-GH-20018-1C0031-N N3 N7 N4 4"-BD-20029-1S3984-H TOG EL 118.670 BDA2 N8 K1A N1 V-2001 TOG EL 115.811 K2A 6"-BD-20029-...

  • Page 16
    Fluor's Industrial & Infrastructure business is driven by a trend that predates our company by hundreds of years-urbanization.

  • Page 17
    I&I PAGE 15

  • Page 18
    ... reported $6.6 billion in new awards, a backlog of $10.5 billion, and $476 million in segment profit. Industrial Indus trial & Infrastructure NEW AWARDS BACKLOG 13.3 2011 21.5 2011 10.4 2012 17.2 2013 6.6 2013 10.5 NEW AWARDS AND BACKLOG (Dollars in Billions) 419 177 476 2012 SEGMENT PROFIT...

  • Page 19
    ... N1 a client needs to develop a multi-billion dollar mining complex, Fluor is the company that gets the call. We were entrusted with Rio Tinto's Oyu TOG EL 115.811 Tolgoi project in Mongolia and others of its size because we know how to execute and deliver. ST1C-6 In 2013, we began construction on...

  • Page 20
    ... and maintenance projects in the oil and gas, mining and industrial sectors. future. Few companies can deliver projects on the scale that Fluor can. Our extensive capabilities in self-perform construction, fabrication, modularization, global supply chain and logistics, and our world-class workforce...

  • Page 21
    I&I PAGE 19

  • Page 22

  • Page 23
    The landscape of contract work for the Government group continues to evolve. G PAGE 21

  • Page 24
    ... new solutions to new government agencies. FLUOR'S PROVEN TRACK RECORD AS A LEADING GOVERNMENT SERVICES PREFERRED CONTRACTOR, HELPING ITS CUSTOMERS MANAGE THEIR MYRIAD CHALLENGES, POSITIONS THE GROUP FOR FUTURE GROWTH. Government Gov Go vernment NEW AWARDS BACKLOG 3.7 2011 1.1 3.2 2012 1.0 2013...

  • Page 25
    ... are currently operating three bases. We know how to work within LOGCAP to meet any objective, large or small. Contingency 6 work comes in many shapes and sizes, and this experience will surely serve us well in 7 the future. Through our long-term contract with the Federal Emergency Management Agency...

  • Page 26

  • Page 27
    Global Services provides the construction personnel, fabrication capabilities, equipment and professional staffing needed to execute projects of all sizes and all levels of complexity around the world. GS PAGE 25

  • Page 28
    ..., supporting the execution of projects across all of our business groups. Fluor is one of the few premier engineering, procurement, fabrication and construction companies, and our group plays a vital role in the seamless integration that it takes to deliver a complete solution to the client. We...

  • Page 29
    ... revenue. We currently provide fabrication services through facilities in Canada, the Philippines, Mexico and Australia. We also have advanced our strategy to integrate modularization, which gives us more control over each project's cost and schedule by moving more of the work to the fabrication...

  • Page 30

  • Page 31
    In Power, we help our customers bring megawatts online through a variety of fuel sources. PAGE 29 P

  • Page 32
    ... as a lump-sum project provider, the Power group helps our customers bring megawatts online through a variety of fuel sources, from natural gas to nuclear, coal and solar. We also provide operations and maintenance services to help our power customers run their facilities efficiently. WE SEE...

  • Page 33
    ... initial engineering work on the Dominion North Anna 3 nuclear program in Virginia. We are also pursuing new projects in Europe, and positioning ourselves strategically in Saudi Arabia, which has long-term plans to build 16 reactors. We continue to develop small modular reactor (SMR) technology...

  • Page 34
    ... 2013 2012 2011 ($ in millions) Oil & Gas Industrial & Infrastructure Government* Power Total New Awards...BACKLOG BY REGION Year Ended December 31 2013 2012 2011 ($ in millions) United States Europe, Africa and Middle East Americas (non-U.S.) Asia Pacific (includes Australia) Total Backlog...

  • Page 35
    ... disputed items and $15 million was related to the closeout and final disposition of other matters. Net earnings attributable to Fluor Corporation in 2012 included pre- tax charges of $416 million (or $1.57 per diluted share) for the Greater Gabbard Offshore Wind Farm ("Greater Gabbard") Project...

  • Page 36
    ...; Director of The Mosaic Company (2011) (1) James T. Hackett Partner, Riverstone Holdings LLC; Former Chief Executive Officer of Anadarko Petroleum Corporation; Director of Bunge Limited and Cameron International Corporation (2001) (2) (4) Peter K. Barker Former California Chairman, JP Morgan Chase...

  • Page 37
    ... Technology and Execution Services (2000) Peter Oosterveer Group President, Oil & Gas (1988) Stephen B. Dobbs Group President, Industrial & Infrastructure (1980) Glenn C. Gilkey Senior Vice President, Human Resources and Administration (1988) Bruce A. Stanski Group President, Government (2009...

  • Page 38
    ...Ohio ICA Fluor Fabrication Yard Tampico, Mexico PAGE 13 BOTTOM: PAGE 20 and 22: U.S. Department of Energy Savannah River Site Management and Operations near Aiken, South Carolina PAGE 24: Dow Chemical Gulfstream Program (PDH-1, PUI, LHC9) Freeport, Texas PAGE 27: Minera Los Pelambres Project Chile...

  • Page 39
    ...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 40
    ..., Executive Officers and Corporate Governance ...Executive Compensation ...Security Ownership of Certain Beneficial Owners and Management and Related Stockholders Matters ...Certain Relationships and Related Transactions, and Director Independence ...Principal Accountant Fees and Services ...PART IV...

  • Page 41
    ..., construction, fabrication and modularization, commissioning and maintenance as well as project management services on a global basis. We serve a diverse set of industries worldwide including oil and gas, chemicals and petrochemicals, transportation, mining and metals, power, life sciences and...

  • Page 42
    ...10-K under the caption ''Operating Information by Segment,'' which is incorporated herein by reference. Competitive Strengths As an integrated world class provider of engineering, procurement, construction, maintenance and project management services, we believe that our business model allows us the...

  • Page 43
    ... studies, project development planning, technology evaluation, risk management assessment, global siting, constructability reviews, asset optimization and front-end engineering. • Our procurement organization offers traditional procurement services as well as supply chain solutions aimed at...

  • Page 44
    ... of design, engineering, procurement, construction and project management services to a broad spectrum of energy-related industries. We serve a number of specific industries including upstream oil and gas production, liquefied natural gas (LNG), downstream refining, offshore production, pipeline...

  • Page 45
    ... Australia and Africa. We are one of the few companies with the size and experience to execute large scale mining and metals projects in these difficult locations. In life sciences, we provide design, engineering, procurement, construction and construction management services to the pharmaceutical...

  • Page 46
    ... customized service capabilities that assist clients in the execution of construction projects as well as delivering improvements to their operations and facilities. Capabilities within Global Services include fabrication, modularization, supply chain solutions, construction services, site equipment...

  • Page 47
    ... large construction projects and plants at locations throughout North and South America, Africa (including our growing presence in Mozambique), and the Middle East. Our supply chain solutions business line provides a full range of strategic sourcing solutions to help execute capital projects. Our...

  • Page 48
    ... of services is focused on the design and construction of new transmission lines to connect new capacity from the renewable energy facilities to existing distribution centers. Other Matters Backlog Backlog in the engineering and construction industry is a measure of the total dollar value of work to...

  • Page 49
    ... changes in project schedules, we cannot predict the portion of our December 31, 2013 backlog estimated to be performed annually subsequent to 2014. For additional information with respect to our backlog, please see ''Item 7. - Management's Discussion and Analysis of Financial Condition and Results...

  • Page 50
    ... Engineering, Technip and WorleyParsons Limited. In the engineering, procurement and construction arena, which is served by our Oil & Gas, Industrial & Infrastructure and Power segments, competition is based on an ability to provide the design, engineering, planning, management and project execution...

  • Page 51
    ...425 8,704 38,129 Total Salaried ...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, size and phase of execution of projects we have in process at any particular time. 11

  • Page 52
    ...obtain information about the operation of the Public Reference Room, you may call 1-800-732-0330. We also maintain various documents related to our corporate governance including our Corporate Governance Guidelines, our Board Committee Charters and our Code of Business Conduct and Ethics for Members...

  • Page 53
    ... for our services is dependent upon the existence of projects with engineering, procurement, construction and management needs. Although downturns can impact our entire business, our Oil & Gas segment, Power segment, and mining and metals business line of the Industrial & Infrastructure segment...

  • Page 54
    ... our cost or adversely impact project schedules. These economic conditions have reduced to some extent the availability of liquidity and credit to fund or support the continuation and expansion of industrial business operations worldwide. Current financial market conditions and adverse credit market...

  • Page 55
    ... for an extended period of time. Finally, poor project or contract performance could also impact our backlog and profits. Such developments could have a material adverse effect on our business and our profits. If we experience delays and/or defaults in client payments, we could suffer liquidity...

  • Page 56
    ... 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: • abrupt changes in foreign government policies, laws, treaties, regulations or...

  • Page 57
    ...the planning, design, development, construction, operations and management of industrial facilities and public infrastructure. While we do not generally accept liability for consequential damages, and although we have adopted a range of insurance, risk management and risk avoidance programs designed...

  • Page 58
    ... negatively impact our business and could result in fines, penalties, suspension or in the case of government contracts even debarment. We work in international locations where there are high security risks, which could result in harm to our employees or unanticipated cost. Some of our services are...

  • Page 59
    ...Audit Agency (the ''DCAA'') routinely review and audit government contractors with respect to the adequacy of and our compliance with our internal control systems and policies (including our labor, billing, accounting, purchasing, estimating, compensation and management information systems). Despite...

  • Page 60
    ... in data security could adversely impact our ability to operate and our operating results. As a global company, we are heavily reliant on computer, information and communications technology and related systems in order to properly operate. From time to time, we experience system interruptions and...

  • Page 61
    ... and insurance revenues/reserves. Our actual business and financial results could differ from our estimates of such results, which could have a material negative impact on our financial condition and reported results of operations. Foreign currency risks could have an adverse impact on company...

  • Page 62
    ... often work on large-scale and complex projects, frequently in geographically remote locations. Our project sites can place our employees and others near large equipment, dangerous processes or highly regulated materials, and in challenging environments. Safety is a primary focus of our business and...

  • Page 63
    ... and limit our opportunities for growth or reduce our revenue below current levels. We may be unable to win new contract awards if we cannot provide clients with letters of credits, bonds or other security or credit enhancements. In certain of our business lines it is industry practice for customers...

  • Page 64
    ... reductions or reversals of previously recorded revenue and profits. 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...

  • Page 65
    ... increase the pace of development of carbon capture and storage projects, alternative transportation, alternative energy facilities, such as wind farms, or incentivize increased implementation of clean fuel projects which could positively impact the demand for our services. We cannot predict when...

  • Page 66
    ... Major Facilities Operations of Fluor and its subsidiaries are conducted at both owned and leased properties in domestic and foreign locations totaling approximately 7.3 million rentable square feet. Our executive offices are located at 6700 Las Colinas Boulevard, Irving, Texas. As our business and...

  • Page 67
    ... operations worldwide, the following table describes the location and general character of our more significant existing facilities: Location Interest United States: Aliso Viejo, California ...Greenville, South Carolina ...Houston (Sugar Land), Texas ...Irving, Texas (Corporate Headquarters) Canada...

  • Page 68
    ... December 31, 2013 about purchases by the company of equity securities that are registered by the company pursuant to Section 12 of the Securities Exchange Act of 1934 (the ''Exchange Act''): Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Number of Shares...

  • Page 69
    ... and Financial Statement Schedules.'' Amounts are expressed in millions, except for per share and employee information: 2013 Year Ended December 31, 2012 2011 2010 2009 CONSOLIDATED OPERATING RESULTS Total revenue Earnings before taxes Net earnings attributable to Fluor Corporation(1) Earnings...

  • Page 70
    ... fourth quarter. A significant portion of this tax benefit resulted from the financial impact of the Greater Gabbard Project charges on the foreign subsidiary. Net earnings attributable to Fluor Corporation in 2010 also included a pre-tax charge of $95 million (or $0.33 per diluted share) related to...

  • Page 71
    ...the Greater Gabbard Offshore Wind Farm (''Greater Gabbard'') Project, a $1.8 billion lump-sum project to provide engineering, procurement and construction services for the client's offshore wind farm project in the United Kingdom. The Oil & Gas segment generated significantly higher contributions in...

  • Page 72
    ... share) for the Greater Gabbard Project. Consolidated new awards for 2013 were $25.1 billion compared to $27.1 billion in 2012 and $26.9 billion in 2011. The major contributors of new award activity for all three years were the Oil & Gas and Industrial & Infrastructure segments. Approximately 63...

  • Page 73
    ..., revisions to project scope and cost, and deferrals, as appropriate. As of December 31, 2013, the company began including the unfunded portion of multi-year government contract awards in its backlog to be more comparable to industry practice. Engineering and Construction Partnerships and Joint...

  • Page 74
    ... 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...

  • Page 75
    ...the fields of engineering, procurement, construction, fabrication and modularization, commissioning, maintenance and project management. The company is organized into five principal business segments: Oil & Gas, Industrial & Infrastructure, Government, Global Services and Power. For more information...

  • Page 76
    ...tax charge in the fourth quarter of 2012 due to an unexpected adverse decision in the arbitration proceedings related to the company's claims for additional compensation on the Greater Gabbard Project. Contributions to segment profit in 2013 by the mining and metals business line declined 25 percent...

  • Page 77
    ... Civil Augmentation Program (''LOGCAP IV'') for the United States Army in Afghanistan. Also contributing to the revenue decline was a reduction in project execution activities at the Savannah River Site Management and Operating Project (the ''Savannah River Project'') in South Carolina, which was...

  • Page 78
    ... a reduction in project working capital to support the declining volume of LOGCAP IV project execution activities. Global Services Revenue and segment profit for the Global Services segment are summarized as follows: (in millions) Year Ended December 31, 2013 2012 2011 Revenue Segment profit $611...

  • Page 79
    ... in Afghanistan in 2011. The equipment, temporary staffing and supply chain solutions business lines do not report backlog or new awards. Total assets in the Global Services segment were $759 million as of December 31, 2013 and $769 million as of December 31, 2012. Power Revenue and segment profit...

  • Page 80
    ... tax reserves totaling $30 million attributable to a variety of domestic and international disputed items, including the resolution of an uncertainty associated with a prior year tax restructuring. The 2011 rate was favorably impacted by the release of previously unrecognized tax benefits related to...

  • Page 81
    ... 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 and in determining the appropriate level of reserves...

  • Page 82
    ... small decrease in working capital during 2011, which are discussed in the preceding paragraphs. The company had net cash outlays of $7 million, $175 million and $382 million during 2013, 2012, and 2011, respectively, to fund the project execution activities for the now completed Greater Gabbard...

  • Page 83
    .... During 2011, the company paid $27 million to acquire controlling interests in both NuScale Power, LLC (''NuScale''), an Oregon-based designer of small modular nuclear reactors, and Goar, Allison & Associates, a Texas-based provider of sulfur technologies for upstream gas plants, downstream...

  • Page 84
    ... and $23 million in 2013, 2012 and 2011, respectively. Capital contributions in 2011 represent the funding of a joint venture that is providing services to the Department of Energy under a contract for a gaseous diffusion plant in Portsmouth, Ohio. Effect of Exchange Rate Changes on Cash Unrealized...

  • Page 85
    ... 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...

  • Page 86
    ... the timing of payments indicated in the above table. Operating leases are primarily 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...

  • Page 87
    ...money market funds, U.S. agency securities, U.S. Treasury securities, commercial paper, international government securities and corporate debt securities. The company has not incurred any credit risk losses related to deposits in cash and marketable securities. The company limits exposure to foreign...

  • Page 88
    ... 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...

  • Page 89
    .... In our opinion, Fluor Corporation maintained, in all material respects, effective internal control over financial reporting as of December 31, 2013, based on the COSO criteria. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States...

  • Page 90
    ..., Supply Chain Senior Vice President, Chief Legal Officer and Secretary Group President, Oil & Gas Senior Vice President and Chief Financial Officer Chairman and Chief Executive Officer Senior Vice President and Controller Group President, Government All references are to positions held with Fluor...

  • Page 91
    ... February 2012. Prior to that, he was Chief Operating Officer from November 2009 to February 2011; Senior Group President, Oil & Gas, Power and Government from March 2009 to November 2009; Group President, Oil & Gas from March 2007 to March 2009; Senior Vice President, Corporate Sales Board from...

  • Page 92
    ... Vice President of KBR, Inc.'s Government and Infrastructure division from September 2005 to August 2007. Code of Ethics We have long maintained and enforced a Code of Business Conduct and Ethics that applies to all Fluor officers and employees, including our chief executive officer, chief financial...

  • Page 93
    ... and Related Transactions'' and ''Board Independence'' sections of the ''Corporate Governance'' portion of our Proxy Statement for our 2014 annual meeting of stockholders, which information is incorporated herein by reference. Item 14. Principal Accountant Fees and Services Information required...

  • Page 94
    ... 22, 2012). Fluor Corporation 2000 Restricted Stock Plan for Non-Employee Directors, as amended and restated effective January 1, 2010 (incorporated by reference to Exhibit 10.3 to the registrant's Quarterly Report on Form 10-Q filed on May 10, 2010). Fluor Executive Deferred Compensation Plan, as...

  • Page 95
    ... to the registrant's Annual Report on Form 10-K filed on February 20, 2013). Fluor 409A Executive Deferred Compensation Program, as amended and restated effective January 1, 2014.* Fluor Corporation Amended and Restated 2008 Executive Performance Incentive Plan (incorporated by reference to Exhibit...

  • Page 96
    ...10-Q filed on May 3, 2012). Form of Option Agreement (with international grant language) under the Fluor Corporation Amended and Restated 2008 Executive Performance Incentive Plan (incorporated by reference to Exhibit 10.38 to the registrant's Quarterly Report on Form 10-Q filed on May 5, 2011). 10...

  • Page 97
    ... 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...

  • Page 98
    ... by the undersigned, thereunto duly authorized. FLUOR CORPORATION By: /s/ BIGGS C. PORTER Biggs C. Porter, Senior Vice President and Chief Financial Officer February 18, 2014 Pursuant to the requirements of the Securities Exchange Act of 1934, this annual report on Form 10-K has been signed below...

  • Page 99
    ... H. SULTAN Nader H. Sultan /s/ LYNN C. SWANN Lynn C. Swann /s/ SUZANNE H. WOOLSEY Suzanne H. Woolsey Director February 18, 2014 Director February 18, 2014 Director February 18, 2014 Director February 18, 2014 Director February 18, 2014 Director February 18, 2014 Director February 18...

  • Page 100
    FLUOR CORPORATION INDEX TO CONSOLIDATED FINANCIAL STATEMENTS TABLE OF CONTENTS PAGE Report of Independent Registered Public Accounting Firm ...Consolidated Statement of Earnings ...Consolidated Statement of Comprehensive Income ...Consolidated Balance Sheet ...Consolidated Statement of Cash Flows ...

  • Page 101
    ... generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Fluor Corporation's internal control over financial reporting as of December 31, 2013, based on criteria established in Internal Control...

  • Page 102
    FLUOR CORPORATION CONSOLIDATED STATEMENT OF EARNINGS Year Ended December 31, 2012 (in thousands, except per share amounts) 2013 2011 TOTAL REVENUE TOTAL COST OF REVENUE OTHER (INCOME) AND EXPENSES Corporate general and administrative expense Interest expense Interest income Total cost and ...

  • Page 103
    ... (loss) on available-for-sale securities TOTAL OTHER COMPREHENSIVE LOSS, NET OF TAX COMPREHENSIVE INCOME LESS: COMPREHENSIVE INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS COMPREHENSIVE INCOME ATTRIBUTABLE TO FLUOR CORPORATION See Notes to Consolidated Financial Statements. $823,026 (46,901) 10...

  • Page 104
    ... securities, current ($64,084 and $30,369 related to VIEs) Accounts and notes receivable, net ($220,705 and $193,354 related to VIEs) Contract work in progress ($238,895 and $221,897 related to VIEs) Deferred taxes Other current assets Total current assets PROPERTY, PLANT AND EQUIPMENT Land...

  • Page 105
    FLUOR CORPORATION CONSOLIDATED STATEMENT OF CASH FLOWS Year Ended December 31, 2013 2012 2011 (in thousands) CASH FLOWS FROM OPERATING ACTIVITIES Net earnings Adjustments to reconcile net earnings to cash provided (utilized) by operating activities: Depreciation of fixed assets Amortization of ...

  • Page 106
    ... noncontrolling interests Partner contributions in noncontrolling interests Acquisition and other noncontrolling interest transactions Stock-based plan activity Repurchase of common stock Debt conversions BALANCE AS OF DECEMBER 31, 2013 See Notes to Consolidated Financial Statements. Shares 176,425...

  • Page 107
    ... 2013 presentation. Management has evaluated all material events occurring subsequent to the date of the financial statements up to the date this annual report is filed on Form 10-K. Use of Estimates The preparation of financial statements in accordance with accounting principles generally accepted...

  • Page 108
    FLUOR CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) types of services, such as engineering and construction, and accordingly, gross margin related to each activity is recognized as those separate services are rendered. Changes to total estimated contract cost or losses, if any, ...

  • Page 109
    ..., 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...

  • Page 110
    ...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...

  • Page 111
    FLUOR CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) their fair values. All unvested options outstanding under the company's option plans have grant prices equal to the market price of the company's stock on the dates of grant. Compensation cost for restricted stock and ...

  • Page 112
    FLUOR CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The changes in the balances of each after-tax component of AOCI attributable to Fluor Corporation for the years ended December 31, 2011 and 2012 are as follows: Ownership Share of Equity Unrealized Method Defined Benefit ...

  • Page 113
    ... securities Income tax expense Net of tax (1) Defined benefit pension plan adjustments were reclassified primarily to total cost of revenue and corporate general and administrative expense. During 2013 and 2011, functional currency exchange rates for most of the company's international operations...

  • Page 114
    ... effective for interim and annual reporting periods beginning after December 15, 2013. Management does not expect the adoption of ASU 2013-04 to have a material impact on the company's financial position, results of operations or cash flows. In the first quarter of 2013, the company adopted ASU 2012...

  • Page 115
    ... in the Consolidated Statement of Cash Flows are comprised of: (in thousands) 2013 Year Ended December 31, 2012 2011 (Increase) decrease in: Accounts and notes receivable, net Contract work in progress Other current assets Other assets Increase (decrease) in: Trade accounts payable Advance billings...

  • Page 116
    ... 31, 2013 2012 Deferred tax assets: Accrued liabilities not currently deductible: Employee compensation and benefits Employee time-off accrual Project and non-project reserves Workers' compensation insurance accruals Tax basis of investments in excess of book basis Revenue recognition Net operating...

  • Page 117
    FLUOR CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The company had non-U.S. net operating loss carryforwards, related to various jurisdictions, of approximately $1.1 billion as of December 31, 2013. Of the total losses, $1.0 billion can be carried forward indefinitely and $46 ...

  • Page 118
    ... on the Greater Gabbard Project discussed above. 4. Retirement Benefits The company sponsors contributory and non-contributory defined contribution retirement and defined benefit pension plans for eligible employees worldwide. Domestic and international defined contribution retirement plans are...

  • Page 119
    ... including public U.S. and international equities, U.S. private equities and debt securities. U.S. Pension Plan December 31, 2013 2012 2011 Non-U.S. Pension Plans December 31, 2013 2012 2011 For determining projected benefit obligation at year-end: Discount rates Rates of increase in compensation...

  • Page 120
    ...U.S. and international companies, common or collective trusts with underlying investments in common and preferred stocks and limited partnerships. Publicly traded corporate equity securities are valued based on the last trade or official close of an active market or exchange on the last business day...

  • Page 121
    FLUOR CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) partnerships are valued at the plan's proportionate share of the estimated fair value of the underlying net assets as determined by the general partners. The limited partnerships are classified as Level 3 investments. Other is ...

  • Page 122
    ... 2013 Fair Value Hierarchy Total Level 1 Level 2 Level 3 December 31, 2012 Fair Value Hierarchy Total Level 1 Level 2 Level 3 (in thousands) Assets: Equity securities: Common or collective trusts Limited Partnerships Debt securities: Common or collective trusts Corporate bonds Government securities...

  • Page 123
    FLUOR CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Non-U.S. Pension Plans December 31, 2013 Fair Value Hierarchy Total Level 1 Level 2 December 31, 2012 Fair Value Hierarchy Total Level 1 Level 2 (in thousands) Level 3 Level 3 Assets: Equity securities: Common and preferred...

  • Page 124
    ...Pension Plan December 31, 2013 2012 Non-U.S. Pension Plans December 31, 2013 2012 (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...

  • Page 125
    ...U.S. employees. The health care and life insurance plans are generally contributory, with retiree contributions adjusted annually. The accumulated postretirement benefit obligation as of December 31, 2013 and 2012 was determined in accordance with the current terms of the company's health care plans...

  • Page 126
    ...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 $19 million, $24 million and $36 million during 2013, 2012 and 2011...

  • Page 127
    ..., 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. Consists of investments in U.S. agency securities, U.S. Treasury securities, corporate debt securities and other...

  • Page 128
    ...the fair value include the company's current credit rating, current interest rates, the term of the note and any collateral pledged as security. During 2013, the company paid off the remaining balances of various notes payable that were assumed in connection with the 2012 acquisition of an equipment...

  • Page 129
    FLUOR CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 6. Derivatives and Hedging As of December 31, 2013, the company had total gross notional amounts of $104 million of foreign currency contracts and $12 million of commodity contracts outstanding relating to engineering and ...

  • Page 130
    ...and received proceeds of $492 million, net of underwriting discounts and debt issuance costs. Interest on the 2011 Notes is payable semi-annually on March 15 and September 15 of each year, and began on March 15, 2012. The company may, at any time, redeem the 2011 Notes at a redemption price equal to...

  • Page 131
    FLUOR CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 101 percent of their principal amount, plus accrued and unpaid interest, if any, to the date of purchase. The company is generally not limited under the indenture governing the 2011 Notes in its ability to incur additional ...

  • Page 132
    ... 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. 9. Stock-Based Plans The company's executive stock-based plans provide for grants of...

  • Page 133
    ... joining the Board of Directors which vest ratably over a five year period. For the years 2013, 2012 and 2011, recognized compensation expense of $28 million, $25 million and $25 million, respectively, is included in corporate general and administrative expense related to restricted stock awards and...

  • Page 134
    ... at fair value at the end of each reporting period until the awards are settled. Compensation expense of $43 million, $26 million and $22 million related to these awards is included in corporate general and administrative expense in 2013, 2012 and 2011, respectively, of which $14 million was paid in...

  • Page 135
    ...obligations relate primarily to office facilities, equipment used in connection with long-term construction contracts and other personal property. Net rental expense in 2013 was higher compared to 2012, primarily due to an increase in rental equipment required to support project execution activities...

  • Page 136
    ... to provide engineering, procurement and construction services for the client's offshore wind farm project in the United Kingdom. The primary dispute was resolved in November 2012 resulting in a pre-tax charge against the company's earnings in the fourth quarter of 2012. The client had also filed...

  • Page 137
    ...Conex International (''Conex'') v. Fluor Enterprises Inc. (''FEI''), ruling in favor of Conex and awarding $99 million in damages related to a 2001 construction project. In 2001, Atofina (now part of Total Petrochemicals Inc.) hired Conex International to be the mechanical contractor on a project at...

  • Page 138
    ... as of December 31, 2012, and are included in contract work in progress in the accompanying Consolidated Balance Sheet. There were no recognized claims against clients as of December 31, 2013. The company periodically evaluates its position and the amounts recognized in revenue with respect to all...

  • Page 139
    ... cost will not have a material effect on the company's consolidated financial position, results of operations or liquidity. However, the imposition of more stringent requirements under environmental laws or regulations, new developments or changes regarding site cleanup cost or the allocation of...

  • Page 140
    ...results of operations, financial position or cash flows except for the Fluor SKM joint venture, which is material to the company's revenue and is discussed below under ''- Fluor SKM Joint Venture.'' Below is a discussion of some of the company's more significant or unique VIEs and related accounting...

  • Page 141
    ... in 95 Express Lanes, LLC under the equity method of accounting. Eagle P3 Commuter Rail Project In August 2010, the company was awarded its $1.7 billion share of the Eagle P3 Commuter Rail Project in the Denver metropolitan area. The project is a public-private partnership between the Regional...

  • Page 142
    ...services in the fields of engineering, procurement, construction and maintenance, as well as project management, on a global basis and serves a diverse set of industries worldwide. The five principal business segments are: Oil & Gas, Industrial & Infrastructure, Government, Global Services and Power...

  • Page 143
    ...technical services to the gas fueled, solid fueled, environmental compliance, renewables, nuclear and power services markets. The Power segment includes the operations of NuScale Power, LLC, the Oregon-based designer of small modular nuclear reactors acquired by the company in 2011, which is managed...

  • Page 144
    FLUOR CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Operating Information by Segment (in millions) Year Ended December 31, 2013 2012 2011 External revenue Oil & Gas Industrial & Infrastructure Government Global Services Power Total external revenue Segment profit (loss) Oil & ...

  • Page 145
    FLUOR CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) • Industrial & Infrastructure. Segment profit for 2012 and 2011 was impacted by pre-tax charges for the Greater Gabbard Project totaling $416 million and $60 million, respectively. Segment profit for 2012 also included a pre-...

  • Page 146
    ...of a favorable court ruling that resolved certain disputed items and $15 million was related to the closeout and final disposition of other matters. Net earnings in the fourth quarter of 2012 were impacted by pre-tax charges for the Greater Gabbard Project totaling $416 million (or $1.61 per diluted...

  • Page 147
    ... of Fluor Corporation. TRS is a registered service mark of TRS Staffing Solutions, Inc. AMECO is a registered service mark of American Equipment Company, Inc. Site Services is a registered service mark of American Equipment Company, Inc. Econamine FG Plus is a service mark of Fluor Enterprises, Inc...

  • Page 148
    FLUOR CORPORATION 6 7 0 0 L A S C O L I N A S B LV D IRVING, TEXAS 75039 F L U O R .C O M