Fluor 2011 Annual Report Download - page 72

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Net earnings in 2010 included pre-tax charges of $343 million (or $1.79 per diluted share) on the Greater Gabbard Project.
These charges were partially offset by a tax benefit of $152 million (or $0.84 per diluted share) for a worthless stock deduction
from the tax restructuring of a foreign subsidiary in the 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 in 2010 also included a
pre-tax charge of $95 million (or $0.33 per diluted share) related to a completed infrastructure joint venture project in
California and pre-tax charges of $91 million (or $0.31 per diluted share) on a gas-fired power project in Georgia.
Net earnings in 2009 included a pre-tax charge of $45 million ($0.15 per diluted share) for a paper mill project in the Global
Services segment.
Net earnings in 2008 included a pre-tax gain of $79 million ($0.27 per diluted share) from the sale of a joint venture interest in
the Greater Gabbard Project and tax benefits of $28 million ($0.15 per diluted share) from the expiration of statutes of
limitations and tax settlements that favorably impacted the effective tax rate.
Net earnings in 2007 included a credit of $123 million ($0.68 per diluted share(4)) that resulted from the favorable settlement
of tax audits for the years 1996 through 2000. See Management’s Discussion and Analysis on pages 29 to 46 and Notes to
Consolidated Financial Statements on pages F-7 to F-46 for additional information relating to significant items affecting the
results of operations.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Introduction
The following discussion and analysis is provided to increase the understanding of, and should be read
in conjunction with, the Consolidated Financial Statements and accompanying Notes. For purposes of
reviewing this document, ‘‘segment profit’’ is calculated as revenue less cost of revenue and earnings
attributable to noncontrolling interests excluding: corporate general and administrative expense; interest
expense; interest income; domestic and foreign income taxes; and other non-operating income and
expense items. For a reconciliation of segment profit to earnings before taxes, see ‘‘15. Operations by
Business Segment and Geographical Area’’ in the Notes to Consolidated Financial Statements.
Results of Operations
Summary of Overall Company Results
Consolidated revenue for 2011 increased 12 percent to a record $23.4 billion from $20.8 billion for
2010 principally due to substantial growth in the mining and metals business line of the Industrial &
Infrastructure segment, as well as revenue growth in the Oil & Gas, Government and Global Services
segments. This revenue growth was partially offset by the significant revenue decline in the Power segment
in 2011.
Consolidated revenue for 2010 decreased five percent to $20.8 billion from $22.0 billion for 2009
primarily due to a significant revenue decline in the Oil & Gas segment which was partially offset by large
revenue increases in the Industrial & Infrastructure and Government segments.
The generally sluggish global economy and the uncertain economic conditions in Europe and other
markets have resulted in a highly competitive business environment that has continued to put increased
pressure on margins. This trend is expected to continue and, in certain cases, may result in more lump-sum
project execution for the company. In some instances, margins are being negatively impacted by the change
in the mix of work performed (e.g., a higher mix of construction-related work and a higher content of
customer-furnished materials, which typically generate lower margins than engineering work or projects
without customer-furnished materials).
Earnings before taxes for 2011 increased 79 percent to $1.0 billion from $560 million in 2010. Earnings
for the 2011 period increased primarily due to a reduced level of project charges compared to 2010. During
2010, the company recorded significant charges for two infrastructure projects, both discussed in more
detail in ‘‘— Industrial & Infrastructure’’ below. First, for 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, charges totaling
$343 million were taken in 2010 for estimated cost overruns for a variety of execution challenges that
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