Fluor 2013 Annual Report Download - page 53

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required to pay liquidated damages. In addition, these losses may be material and can, in some
circumstances, equal or exceed the full value of the contract. In such events, our financial condition, results
of operations or cash flow could be negatively impacted.
Intense competition in the global engineering, procurement and construction industry could reduce our market
share and profits.
We serve markets that are highly competitive and in which a large number of multinational companies
compete. These markets can require substantial resources and investment in technology and skilled
personnel. We also see a continuing influx of non-traditional competitors offering below-market pricing
while accepting greater risk. Competition can place downward pressure on our contract prices and profit
margins, and may force us to accept contractual terms and conditions that are not normal or customary,
thereby increasing the risk that we may have losses on such contracts. Intense competition is expected to
continue in these markets, presenting us with significant challenges in our ability to maintain strong growth
rates and acceptable profit margins. If we are unable to meet these competitive challenges, we could lose
market share to our competitors and experience an overall reduction in our profits.
Our revenue and earnings are largely dependent on the award of new contracts which we do not directly control.
A substantial portion of our revenue and earnings is generated from large-scale project awards. The
timing of project awards is unpredictable and outside of our control. Awards, including expansions of
existing projects, often involve complex and lengthy negotiations and competitive bidding processes. These
processes can be impacted by a wide variety of factors including a client’s decision to not proceed with the
development of a project, governmental approvals, financing contingencies, commodity prices,
environmental conditions and overall market and economic conditions. We may not win contracts that we
have bid upon due to price, a client’s perception of our ability to perform and/or perceived technology
advantages held by others. Many of our competitors may be more inclined to take greater or unusual risks
or terms and conditions in a contract that we might not deem acceptable. 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.
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 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 exemplify businesses that are cyclical in nature and have historically been affected
by a decrease in worldwide demand for these projects or the underlying commodities. For example, in both
our Oil & Gas segment and mining and metals business line of the Industrial & Infrastructure segment,
capital expenditures by our clients may be influenced by factors such as prevailing prices and expectations
about future prices, technological advances, the costs of exploration, production and delivery of product,
domestic and international political, military, regulatory and economic conditions and other similar factors.
In our Power segment, new order activity has slowed due to low demand for power, political and
environmental concerns regarding coal-fired power plants, and safety and environmental concerns in the
nuclear sector. In our mining and metal business line of the Industrial & Infrastructure segment, new order
activity has also slowed due in part to volatility in the commodities and capital markets, which have caused
clients in this segment to have a greater focus on their needs for future capital improvements. Industries
such as these and many of the others we serve have historically been and will continue to be vulnerable to
general downturns, which in turn could materially and adversely affect the demand for our services.
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