Fluor 2014 Annual Report Download - page 46

well as our reputation. Risks under our contracts which could result in cost overruns, project delays or
other problems can also include:
• Difficulties related to the performance of our clients, partners, subcontractors, suppliers or other
third parties;
• Changes in local laws or difficulties or delays in obtaining permits, rights of way or approvals;
• Unanticipated technical problems, including design or engineering issues;
• Insufficient or inadequate project execution tools and systems needed to record, track, forecast and
control cost and schedule;
• Unforeseen increases in or failures to properly estimate the cost of raw materials, components,
equipment, labor or the inability to timely obtain them;
• Delays or productivity issues caused by weather conditions;
• Incorrect assumptions related to productivity, scheduling estimates or future economic conditions;
and
• Project modifications creating unanticipated costs or delays.
These risks tend to be exacerbated for longer-term contracts because there is increased risk that the
circumstances under which we based our original cost estimates or project schedules will change with a
resulting increase in costs. In many of these contracts, we may not be able to obtain compensation for
additional work performed or expenses incurred, and if a project is not executed on schedule, we may be
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.
Our backlog is subject to unexpected adjustments and cancellations and, therefore, may not be a reliable indicator of
our future revenue or earnings.
As of December 31, 2014, our backlog was approximately $42.5 billion. Our backlog generally consists
of projects for which we have an executed contract or commitment with a client and reflects our expected
revenue from the contract or commitment, which is often subject to revision over time. We cannot
guarantee that the revenue projected in our backlog will be realized or profitable. Project cancellations,
scope adjustments or deferrals may occur with respect to contracts reflected in our backlog and could
reduce the dollar amount of our backlog and the revenue and profits that we actually earn. Most of our
contracts have termination for convenience provisions in them allowing clients to cancel projects already
awarded to us. In addition, projects may remain in our backlog 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.
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.
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