Fluor 2014 Annual Report Download - page 132

Download and view the complete annual report

Please find page 132 of the 2014 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 144

  • 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

FLUOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In December 2010, the buyer settled with certain plaintiffs without obtaining a release for the benefit
of the company, leaving the company to defend its case with these plaintiffs in the City of St. Louis Circuit
Court. In late July 2011, the jury reached an unexpected verdict in this case, ruling in favor of 16 of the
plaintiffs and against the company and certain former subsidiaries for $38.5 million in compensatory and
economic damages and $320 million in punitive damages. In August 2011, the court entered judgments
based on the verdict. In December 2011, the company appealed the judgments of the court.
In June 2014, the Missouri Court of Appeals issued its opinion reversing and remanding to the trial
court the award of $240 million in punitive damages against Fluor. In addition, the appellate court upheld
the judgment for $38.5 million in compensatory and economic damages and $80 million of punitive
damages against the company and its former subsidiaries to whom the company has provided certain
indemnities relating to the St. Joe and Doe Run businesses.
In October 2014, the company entered into a settlement agreement with counsel for a number of
plaintiffs (including the 16 plaintiffs described above). As a result of the company’s updated assessment of
the estimated loss contingency related to these matters, the company recorded an after-tax loss from
discontinued operations of $205 million during the year ended December 31, 2014. In January 2015, the
company paid approximately $300 million pursuant to the settlement agreement. While the company is
unable to estimate a range of possible losses in the remaining lawsuits, it does not expect any material
charges to result from these cases. In addition, the company will continue to take steps to enforce its rights
to indemnification described above for both the settled matters and outstanding claims.
Guarantees
In the ordinary course of business, the company enters into various agreements providing
performance assurances and guarantees to clients on behalf of certain unconsolidated and consolidated
partnerships, joint ventures and other jointly executed contracts. These agreements are entered into
primarily to support the project execution commitments of these entities. The performance guarantees
have various expiration dates ranging from mechanical completion of the project being constructed to a
period extending beyond contract completion in certain circumstances. The maximum potential amount of
future payments that the company could be required to make under outstanding performance guarantees,
which represents the remaining cost of work to be performed by or on behalf of third parties under
engineering and construction contracts, was estimated to be $17.7 billion as of December 31, 2014.
Amounts that may be required to be paid in excess of estimated cost to complete contracts in progress are
not estimable. For cost reimbursable contracts, amounts that may become payable pursuant to guarantee
provisions are normally recoverable from the client for work performed under the contract. For lump-sum
or fixed-price contracts, the performance guarantee amount is the cost to complete the contracted work,
less amounts remaining to be billed to the client under the contract. Remaining billable amounts could be
greater or less than the cost to complete. In those cases where costs exceed the remaining amounts payable
under the contract, the company may have recourse to third parties, such as owners, co-venturers,
subcontractors or vendors for claims. The company assessed its performance guarantee obligation as of
December 31, 2014 and 2013 in accordance with ASC 460, ‘‘Guarantees,’’ and the carrying value of the
liability was not material.
Financial guarantees, made in the ordinary course of business in certain limited circumstances, are
entered into with financial institutions and other credit grantors and generally obligate the company to
make payment in the event of a default by the borrower. These arrangements require the borrower to
pledge collateral to support the fulfillment of the borrower’s obligation.
F-39