Fluor 2011 Annual Report Download - page 73

impacted the schedule and project cost forecast, including material and equipment delivery issues,
productivity issues, the bankruptcy of a major subcontractor and weather-related delays. The company also
recorded a charge of $95 million during the prior year after an adverse bankruptcy court ruling on the
priority of claims made by its joint venture against a bankrupt client entity for a completed $700 million
fixed-price infrastructure joint venture project near San Diego, California. During 2011, the company
recorded additional charges for the Greater Gabbard Project totaling $60 million, primarily due to
increased costs associated with the installation of subsea cable and schedule delays related to adverse
weather conditions. The 2011 results were also positively impacted by improved performance in the mining
and metals business line of the Industrial & Infrastructure segment and the Global Services segment, offset
somewhat by lower earnings in the Power and Oil & Gas segments.
Earnings before taxes were $560 million in 2010, down from $1.1 billion in 2009. The decrease in
earnings for 2010 was primarily due to the impact of charges totaling $343 million for the Greater Gabbard
Project and a charge totaling $95 million for the completed infrastructure joint venture project in
California. Some of the impact of the charges for the Greater Gabbard Project and the infrastructure joint
venture project was offset by improved performance in 2010 on other Industrial & Infrastructure projects
in the infrastructure and mining and metals business lines. The 2010 results were also impacted by the
lower volume and associated earnings in the Oil & Gas segment due to reduced project execution activities
as a number of large projects that were awarded in 2006 through 2008 had been completed or were near
completion. In addition, the earnings of the segment were impacted by slower new award activity during
2009 and the first half of 2010 related to the global recession, a decline in the demand for new capacity in
the refining, petrochemical and polysilicon markets, and a highly competitive business environment that
resulted from changed market conditions. Improved performance was noted in the Government, Global
Services and Power segments for 2010. The 2010 improvement in the Government segment was primarily
the result of a higher level of project execution activities to support the United States Army in
Afghanistan. The Global Services segment’s increase in profitability in 2010 compared to the prior year
was primarily because the 2009 period included a $45 million charge related to the uncollectability of a
client receivable for a paper mill project. The Power segment contributed higher earnings during 2010
compared to the prior year mostly due to higher contributions from the Oak Grove coal-fired power
project and a gas-fired power plant, both in Texas. These positive results in the Power segment were offset
somewhat by charges of $91 million taken in 2010 on a gas-fired power project in Georgia for estimated
additional costs to complete the project. The company reported lower corporate general and
administrative expense in 2010 when compared to 2009, primarily as a result of overhead reduction efforts
and lower management incentive compensation.
The effective tax rate was 30.3 percent, 21.2 percent and 35.5 percent for 2011, 2010 and 2009,
respectively. The 2011 rate was favorably impacted by the release of previously unrecognized tax benefits
related to the expiration of statutes of limitations and the resolution of various disputed items. The lower
2010 rate was primarily attributable to a $152 million tax benefit that resulted from a worthless stock
deduction for the tax restructuring of a foreign subsidiary in the fourth quarter, partially offset by an
increase in the valuation allowance associated with net operating losses. Factors affecting the effective tax
rates for 2009 - 2011 are discussed further under ‘‘— Corporate, Tax and Other Matters’’ below.
Net earnings attributable to Fluor Corporation were $3.40 per diluted share in 2011 compared to
$1.98 and $3.75 per diluted share in 2010 and 2009, respectively. Net earnings attributable to Fluor
Corporation in 2011 reflected the additional pre-tax charges of $60 million ($0.21 per diluted share) for the
Greater Gabbard Project noted above. Net earnings attributable to Fluor Corporation in 2010 included the
negative impact of the following pre-tax charges previously discussed: $343 million ($1.79 per diluted
share) for the Greater Gabbard Project; $95 million ($0.33 per diluted share) for the completed
infrastructure joint venture project in California; and $91 million ($0.31 per diluted share) for the gas-fired
power project in Georgia. Net earnings attributable to Fluor Corporation in 2010 also included the
$152 million ($0.84 per diluted share) tax benefit described above for 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 attributable to Fluor
30