Fluor 2013 Annual Report Download - page 132

Download and view the complete annual report

Please find page 132 of the 2013 Fluor annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 148

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146
  • 147
  • 148

FLUOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Interest expense on the 2004 Notes for the years ended December 31, 2013, 2012 and 2011 includes
original coupon interest of $0.3 million, $0.3 million and $0.5 million, respectively. The effective interest
rate on the liability component was 4.375 percent through February 15, 2009 at which time the discount on
the liability was fully amortized. The if-converted value is $54 million and is in excess of the principal value
as of December 31, 2013.
In the first quarter of 2013, the company redeemed its 5.625% Municipal Bonds at a price of 100% of
their principal amount and paid off the remaining balances of various notes payable that were assumed in
connection with the 2012 acquisition of an equipment company.
During the third quarter of 2013, the company established a short-term credit facility to purchase land
and construction equipment associated with the equipment operations in the Global Services segment.
Outstanding borrowings under the facility were $11 million as of December 31, 2013.
As of December 31, 2013, the company was in compliance with all of the financial covenants related to
its debt agreements.
8. 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, 2013 and 2012, $415 million and $337 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 $388 million and $333 million as of December 31, 2013 and 2012,
respectively. Periodic changes in value of these trust investments, most of which are unrealized, are
recognized in earnings, and serve to mitigate changes to obligations included in noncurrent liabilities which
are also reflected in earnings.
The company maintains appropriate levels of insurance for business risks, including workers
compensation and general liability. Insurance coverages contain various retention amounts for which the
company provides accruals based on the aggregate of the liability for reported claims and an actuarially
determined estimated liability for claims incurred but not reported. Other noncurrent liabilities included
$28 million and $23 million as of December 31, 2013 and 2012, respectively, relating to these liabilities. For
certain professional liability risks the company’s retention amount under its claims-made insurance policies
does not include an accrual for claims incurred but not reported because there is insufficient claims history
or other reliable basis to support an estimated liability. The company believes that retained professional
liability amounts are manageable risks and are not expected to have a material adverse impact on results of
operations or financial position.
9. Stock-Based Plans
The company’s executive stock-based plans provide for grants of nonqualified or incentive stock
options, restricted stock awards or units, stock appreciation rights and performance-based VDI units. All
executive stock-based plans are administered by the Organization and Compensation Committee of the
Board of Directors (‘‘Committee’’) comprised of outside directors, none of whom are eligible to
participate in the executive plans. Recorded compensation cost for stock-based payment arrangements,
which is generally recognized on a straight-line basis, totaled $54 million, $40 million and $37 million for
the years ended December 31, 2013, 2012 and 2011, respectively, net of recognized tax benefits of
$32 million, $24 million and $22 million for the years ended 2013, 2012 and 2011, respectively.
F-33