Fluor 2012 Annual Report Download

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Big challenges require big solutions.
2012 Annual Report

Table of contents

  • Page 1
    Big challenges require big solutions. 2012 Annual Report

  • Page 2
    ...26 New Awards and Backlog Data ...28 Selected Financial Data ...29 Board of Directors ...30 Officers ...31 Project Photography ...32 FLUOR CORPORATION (NYSE: FLR) is one of the world's largest publicly traded engineering, procurement, construction, maintenance and project management companies. Over...

  • Page 3
    ... forefront. Our company culture drives us to innovate unprecedented solutions. Over the past century we have become leaders in executing large, complex projects on time and on budget. We have the resources and agility to mobilize great workforces anywhere they are needed. In fact, Fluor people are...

  • Page 4

  • Page 5
    More than 7 billion people populate our planet, with the vast majority congregated in urban areas. Massive infrastructure must constantly be developed to accommodate population growth.

  • Page 6
    Worldwide energy demand is expected to increase 35% by 2030, requiring substantial innovation in fossil-fuel development as well as step-change progress in alternative energies such as solar, wind and nuclear.

  • Page 7

  • Page 8

  • Page 9
    Colossal projects, demanding abundant materials and manpower, are needed to produce the commodities that enhance our standard of living.

  • Page 10
    ... to strategically partner and position the company as a valued resource for clients on the execution of their capital project plans. Fluor was also awarded a five-year enterprise framework agreement for engineering and project management services for Shell's projects in Europe, Africa and the Middle...

  • Page 11
    ... of the new I-495 Express Lanes in Virginia, bringing welcome relief to one of the most congested highway systems in the United States. Another Fluor-led joint venture was named by the Texas Department of Transportation as the preferred bidder for the design, construction and capital maintenance of...

  • Page 12
    - David T. Seaton Chairman and CEO "It's not just about solving the challenges that face us today - it's about looking far enough ahead to solve the issues we'll face 30 years from now." 10 FLUOR CORPORATION

  • Page 13
    ... engineering, fabrication, module assembly and construction services. We also formed a new joint venture with one of Brazil's largest construction companies, which will link that organization's growing presence in Brazil with Fluor's project execution leadership. AMECO, Fluor's integrated equipment...

  • Page 14
    ... response, and environmental and nuclear services support to the U.S. government. Several agencies rely on the group's immense competencies, including the Departments of Defense, Energy, Labor and Homeland Security. Global Services Global Services provides a wide array of solutions to help...

  • Page 15
    Areas of Operation Fluor offers a full range of services through five business groups spanning six continents. This diversified model allows us to address the specific needs of our many end markets by harnessing the tremendous strengths of our global network. This level of versatility and teamwork ...

  • Page 16
    ... future growth of oil, gas and chemicals markets is assured." Peter Oosterveer GROUP PRESIDENT, OIL & GAS Fluor is well positioned to address current market conditions, and we are prepared for an upturn in the long-term outlook. With a presence on every continent except Antarctica, our company has...

  • Page 17
    ... site ready for installation. In 2012, we formed a joint venture to provide fabrication in the Philippines, which will allow us to complete projects faster and more cost effectively for our clients. Oil and gas is an enormous, fast-moving global market, and thus we must always optimize our position...

  • Page 18
    16 FLUOR CORPORATION

  • Page 19
    ...employ an expanding workforce. Having both engineering and construction capabilities allows us to be one of the few viable firms in our industry that are capable of handling such large projects in this rapidly developing market. Our roots are in construction, and it is key to our future growth plans...

  • Page 20
    ... expansion project awarded to us by the Virginia Department of Transportation. The original plan had called for the addition of lanes to the outside of the highway, which was enormously expensive and called for the demolition of hundreds of NEW AWARDS BACKLOG 12.5 2010 12.2 2011 9.5 2012 15...

  • Page 21
    ...Fluor stepped in with a plan to expand to the inside of existing lanes. With this approach, only four structures had to be razed, the land requirement was substantially less, costs were lower, and construction time was reduced. We designed a better mousetrap and won the work. ACCOMPLISHMENTS AND NEW...

  • Page 22
    "On tough projects where capital costs and time-to-market are extremely important, Fluor is recognized as the go-to company." 20 FLUOR CORPORATION

  • Page 23
    ...-making. A good example of our success in the PPP market is our investment in a U.K.-based telecom company, where the project was a success and we were able to realize a $43 million gain from the sale of our interest in 2012. In mining, we expect backlog to trend down in the short term. Owners are...

  • Page 24
    ... projects arise anywhere around the world. We are also relied upon by the Federal Emergency Management NEW AWARDS BACKLOG 2.8 2010 0.8 3.7 2011 1.1 3.2 2012 1.0 2012 2011 2010 142 145 150 NEW AWARDS AND BACKLOG (Dollars in Billions) SEGMENT PROFIT (Dollars in Millions) 22 FLUOR CORPORATION

  • Page 25
    ... support projects, which offer good margins and revenue. Our core services - the operation and maintenance of military bases, the management of DOE sites, and the provision of training through our Job Corps contract with the Department of Labor - are the engine driving our future long-term growth...

  • Page 26
    ... Fluor groups. In 2012, we generated new awards of $904 million and ended the year with a backlog of $1.7 billion." Garry W. Flowers GROUP PRESIDENT, GLOBAL SERVICES STEADY PROGRESS Conditions in the equipment rental market improved worldwide throughout 2012 and growth is expected for several years...

  • Page 27
    ... O&M contracts throughout Sub-Saharan Africa. In South Africa, several large clean fuels projects are in the works that naturally fit our staffing and O&M offerings. And our new TRS office in India has the potential to expand its services beyond current contracts. "Our clients continue to value our...

  • Page 28
    ... Company, both strong long-term clients. Our group is also positioning for the FEED work to build 800 miles of high-voltage power lines for Clean Line Energy. We reported a loss for the year as a result of our investment in NuScale Power in late 2011. NEW AWARDS BACKLOG 0.8 2010 1.0 1.6 2011...

  • Page 29
    ... backlog at 2011 levels. We expect backlog to improve in 2013. In fact, we are already seeing increases in the natural gas, renewables and power services markets, indicating the emergence of near-term opportunities in those segments. We also believe strongly in the future of nuclear power. Our group...

  • Page 30
    ... 3% Government 5% Power 4% Global Services BACKLOG BY REGION Year Ended December 31 ($ in millions) 2012 $ 9,445 9,553 13,355 5,846 $ 38,199 25% 25% 35% 15% 100% 2011 2010 CONSOLIDATED BACKLOG United States Europe, Africa and Middle East Americas Asia Pacific (includes Australia) Total Backlog...

  • Page 31
    Selected Financial Data CONSOLIDATED OPERATING RESULTS Year Ended December 31 (in millions, except per share and employee information) 2012 $ 27,577.1 733.5 456.3 2011 2010 2009 2008 Total revenue Earnings before taxes Net earnings attributable to Fluor Corporation Earnings per share Basic ...

  • Page 32
    ...Inc. (2011) (2) Rosemary T. Berkery Vice Chairman, UBS Wealth Management Americas; Chairman, UBS Bank USA (2010) (3) Peter J. Fluor Fluor's Lead Independent Director; Chairman and Chief Executive Officer of Texas Crude Energy, LLC; Director of Anadarko Petroleum Corporation and Cameron International...

  • Page 33
    ..., Government (2009) Garry W. Flowers Group President, Global Services (1978) Glenn C. Gilkey Senior Vice President, Human Resources and Administration (1988) Kirk D. Grimes Group Executive, Supply Chain (1980) Carlos M. Hernandez Senior Vice President, Chief Legal Officer and Secretary (2007) Peter...

  • Page 34
    ... Co. Acrylic Acid Plant, Saudi Arabia PAGE 12 2ND FROM TOP: Barrick Gold Pueblo Viejo Project, Dominican Republic PAGE 12 MIDDLE: U.S. Army Logistics Civil Augmentation Program (LOGCAP IV), Afghanistan PAGE 12 2nd TO BOTTOM: Sakhalin Energy LNG Plant and Onshore Processing Facility, Sakhalin Island...

  • Page 35
    ...1-16129 FLUOR CORPORATION (Exact name of registrant as specified in its charter) Delaware (State or other jurisdiction of incorporation or organization) 6700 Las Colinas Boulevard Irving, Texas (Address of principal executive offices) 469-398-7000 (Registrant's telephone number, including area code...

  • Page 36
    ... Accounting and Financial Disclosure ...Controls and Procedures ...Other Information ...PART III Item 10. Item 11. Item 12. Item 13. Item 14. Directors, Executive Officers and Corporate Governance ...Executive Compensation ...Security Ownership of Certain Beneficial Owners and Management and Related...

  • Page 37
    ... professional services firms providing engineering, procurement, construction and maintenance as well as project management services on a global basis. We serve a diverse set of industries worldwide including oil and gas, chemicals and petrochemicals, transportation, mining and metals, power, life...

  • Page 38
    ...an integrated world class provider of engineering, procurement, construction, maintenance and project management services, we believe that our business model allows us the opportunity to bring to our clients on a global basis compelling business offerings that combine excellence in execution, safety...

  • Page 39
    ... reducing project cost and schedule. Our clients benefit from our global sourcing and supply expertise, global purchasing power, technical knowledge, processes, systems and experienced global resources. Our traditional procurement activities include strategic sourcing, material management, contracts...

  • Page 40
    ... management services include logistics, development of project execution plans, detailed schedules, cost forecasts, progress tracking and reporting, and the integration of the engineering, procurement and construction efforts. Project management is accountable to the client to deliver the safety...

  • Page 41
    ... including consulting, design, planning, financial structuring, engineering and construction, domestically and internationally. Our service offerings include transportation infrastructure such as roads, highways, bridges and rail. Many of our projects involve the use of public/private partnerships...

  • Page 42
    ... engineering and execution, site equipment and tool services, industrial fleet services, plant turnaround services, supply chain solutions and temporary staffing. Continuing operations and sustaining small capital project services are frequently executed under multi-year alliance agreements directly...

  • Page 43
    ...of services to the gas fueled, solid fuels, environmental compliance, renewables, nuclear and power services markets. Our services include engineering, procurement, construction, program management, start-up and commissioning, operations and maintenance and technical services. Through the gas fueled...

  • Page 44
    ... tables, backlog for the Global Services segment includes our operations and maintenance activities that have yet to be performed. The equipment, temporary staffing and supply chain solutions business lines do not report backlog due to the quick turnaround between the receipt of new awards and...

  • Page 45
    ... experienced technical personnel. A large number of companies are competing in the markets served by our business, including U.S.-based companies such as Bechtel Group, Inc., CH2M Hill Companies Limited, Jacobs Engineering Group, Inc., KBR Inc. and URS Corporation, and international-based companies...

  • Page 46
    ... year to year due to various factors including client demand, producer capacity, market conditions and specific material shortages. Research and Development Aside from our investment in NuScale Power, LLC, we generally do not engage in research and development efforts for new products and services...

  • Page 47
    ... ...Total ... The number of craft and hourly employees, who provide support throughout the various business segments, varies in relation to the number, size and phase of execution of projects we have in process at any particular time. Available Information Our website address is www.fluor.com...

  • Page 48
    ..., suppliers, equipment providers or other third parties (including joint venture or teaming partners); • Changes in local laws or difficulties in obtaining permits, rights of way or approvals; • Unanticipated technical problems, including issues with regard to the design or engineering phases of...

  • Page 49
    ...competitors may be more inclined to take greater or unusual risks or terms and conditions in a contract that we might not deem market or acceptable. Because a significant portion of our revenue is generated from large projects, our results of operations can fluctuate from quarter to quarter and year...

  • Page 50
    ... with engineering, procurement, construction and management needs. Although downturns can impact our entire business, our oil and gas, petrochemicals, power, and mining and metals lines exemplify businesses that are cyclical in nature and have historically been affected by a decrease in worldwide...

  • Page 51
    ... portion of our revenue and profits will continue to come from international projects for the foreseeable future. Operating in the international marketplace exposes us to a number of special risks including: • abrupt changes in foreign government policies, regulations or leadership; • embargoes...

  • Page 52
    ... could adversely affect the business and operations of the venture. At times, we also participate in joint ventures where we are not a controlling party. In such instances, we may have limited control over joint venture decisions and actions, including internal controls and financial reporting which...

  • Page 53
    ... our operations. In addition, if we cannot complete our contracts on time, we may be subject to potential liability claims by our clients which may reduce our profits. We work in international locations where there are high security risks, which could result in harm to our employees or unanticipated...

  • Page 54
    ... to obtain future government work. For example, government agencies such as the U.S. Defense Contract Audit Agency (the ''DCAA'') routinely review and audit government contractors with respect to the adequacy of and our compliance with our internal control systems and policies (including our labor...

  • Page 55
    ... existing government policies designed to protect small businesses and underrepresented minority contractors. Our inability to win or renew government contracts during the procurement processes could harm our operations. We could suffer from a temporary liquidity crisis if the financial institutions...

  • Page 56
    ... with applicable professional standards could result in large damages. Our engineering practice involves professional judgments regarding the planning, design, development, construction, operations and management of industrial facilities and public infrastructure projects. While we do not generally...

  • Page 57
    ... in the future will depend in part upon prevailing capital market conditions, as well as conditions in our business and our operating results; and those factors may affect our efforts to arrange additional financing on terms that are acceptable to us. Furthermore, in the past few years, there has...

  • Page 58
    ... import and export laws. Our global operations require importing and exporting goods and technology across international borders on a regular basis. Our policies mandate strict compliance with U.S. and foreign international trade laws. To the extent we export technical services, data and products...

  • Page 59
    ... operations. A substantial portion of our business is generated either directly or indirectly as a result of federal, state, local and foreign laws and regulations related to environmental matters. A reduction in the number or scope of these laws or regulations, or changes in government policies...

  • Page 60
    ... or reversals of previously recorded revenue and profits. It can be very difficult or expensive to obtain the insurance we need for our business operations. As part of business operations, we maintain insurance both as a corporate risk management strategy and in order to satisfy the requirements of...

  • Page 61
    ...by a variety of factors including our ability to manage attrition, our ability to forecast our need for services which allows us to maintain an appropriately sized workforce, our ability to transition employees from completed projects to new projects or between internal business groups, and our need...

  • Page 62
    ...: Aliso Viejo, California ...Greenville, South Carolina ...Houston (Sugar Land), Texas ...Irving, Texas (Corporate Headquarters) Canada: Calgary, Alberta ...Vancouver, British Columbia ...Latin America: Mexico City, Mexico ...Santiago, Chile ...Europe, Africa and Middle East: Al Khobar, Saudi Arabia...

  • Page 63
    ... $0.125 $0.125 $0.125 Any future cash dividends will depend upon our results of operations, financial condition, cash requirements, availability of surplus and such other factors as our Board of Directors may deem relevant. See ''Item 1A. - Risk Factors.'' At February 14, 2013, there were 162,508...

  • Page 64
    ...information as of the three months ended December 31, 2012 about purchases by the company of equity securities that are registered by the company pursuant to Section 12 of the Securities Exchange Act of 1934 (the ''Exchange Act''): Total Number of Shares Purchased as Part of Publicly Announced Plans...

  • Page 65
    ... consolidated financial statements and related notes included in ''Item 15. - Exhibits and Financial Statement Schedules.'' Amounts are expressed in millions, except for per share and employee information: 2012 Year Ended December 31, 2011 2010 2009 2008 CONSOLIDATED OPERATING RESULTS Total revenue...

  • Page 66
    ... due to substantial growth in the mining and metals business line of the Industrial & Infrastructure segment and growth in the Oil & Gas segment. Revenue in the Global Services and Power segments also increased in 2012 compared to the prior year. Consolidated revenue for 2011 increased 12 percent...

  • Page 67
    ... for a completed infrastructure joint venture project in California; and $91 million ($0.31 per diluted share) for a 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...

  • Page 68
    ... years and drove the increase in backlog in 2012 and 2011 compared to 2010. As of December 31, 2012, approximately 75 percent of consolidated backlog related to projects located outside of the United States. For a more detailed discussion of operating performance of each business segment, corporate...

  • Page 69
    ... performed. For partnerships and joint ventures in the construction industry, unless full consolidation is required, the company generally recognizes its proportionate share of revenue, cost and profit in its Consolidated Statement of Earnings and uses the one-line equity method of accounting in the...

  • Page 70
    ... services on a global basis in the fields of engineering, procurement, construction, maintenance and project management. The company is organized into five principal business segments: Oil & Gas, Industrial & Infrastructure, Government, Global Services and Power. For more information on the business...

  • Page 71
    ... billion in 2010. New awards in 2012 included an oil sands bitumen processing facility in Canada, a gas processing project in Kazakhstan and a petrochemicals complex in the United States. New awards in 2011 included a petrochemicals complex in the Middle East and upstream services associated with an...

  • Page 72
    ... level of project execution activities associated with the growth in the mining and metals business line relative to 2010. The 2010 charges for the two infrastructure projects were offset somewhat by positive contributions from other projects in the segment during the year, which included solid...

  • Page 73
    ... the infrastructure business line in 2010. The new awards in 2011 included $6.2 billion for ongoing iron ore work in Australia, as well as a major copper project in Peru. The new awards in 2010 included an aluminum program in Saudi Arabia valued at $3.4 billion, a $1.4 billion copper mine in Chile...

  • Page 74
    ... improvement in segment profit in 2012 was primarily due to additional contributions from project execution activities on LOGCAP IV task orders, which more than offset charges totaling $13 million related to an adverse judgment in the first quarter of 2012 associated with the company's claim on an...

  • Page 75
    ... be performed comprise Global Services backlog. Short-duration operations and maintenance activities may not contribute to ending backlog. The equipment, temporary staffing and supply chain solutions business lines do not report backlog or new awards. Total assets in the Global Services segment were...

  • Page 76
    ... in Texas and new solar power projects in Arizona and California. The prior year period included project execution activities for several projects which have since been completed, including gas-fired power plants in Texas, Virginia and Georgia. Revenue in 2011 decreased 56 percent compared to 2010...

  • Page 77
    ... of many factors, including lower executive bonuses and reduced foreign currency losses in the current year. The five percent increase in 2011 corporate general and administrative expenses compared to 2010 was primarily the result of higher management incentive compensation and foreign currency...

  • Page 78
    ..., accounts receivable and contract work in progress relate to clients in various industries and locations throughout the world. Most contracts require payments as the projects progress. The company evaluates the counterparty credit risk of third parties as part of its project risk review process and...

  • Page 79
    ...Services segment. During 2012, the company paid $19 million to acquire an equipment company in Mozambique. During 2011, the company paid $27 million to acquire controlling interests in both NuScale Power, LLC, an Oregon-based designer of small modular nuclear reactors, and Goar, Allison & Associates...

  • Page 80
    Texas-based provider of sulfur technologies for upstream gas plants, downstream refineries and gasification. The company continues to make investments in partnerships or joint ventures primarily for the execution of single contracts or projects. Investments in partnerships and joint ventures ...

  • Page 81
    ... a joint venture that is providing services to the Department of Energy under a contract for a gaseous diffusion plant in Portsmouth, Ohio. During 2010, the company repaid $32 million in principal related to loans against the cash surrender value of corporate-owned life insurance policies. Effect of...

  • Page 82
    ... economic conditions; however, management is unable to predict with certainty the amount and mix of future business. Variable Interest Entities In the normal course of business, the company forms partnerships or joint ventures primarily for the execution of single contracts or projects. The company...

  • Page 83
    ... for engineering and project execution office facilities in Sugar Land, Texas, the United Kingdom and various other U.S and international locations, equipment used in connection with long-term construction contracts and other personal property. Uncertain tax contingencies are positions taken...

  • Page 84
    ... issued by the Committee of Sponsoring Organizations of the Treadway Commission (''the COSO Framework''). Management's assessment included an evaluation of the design of the company's internal control over financial reporting and testing of the operational effectiveness of the company's internal 48

  • Page 85
    ... company's internal control over financial reporting was effective as of December 31, 2012. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk...

  • Page 86
    ... of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Fluor Corporation as of December 31, 2012 and 2011 and the related consolidated statements of earnings, comprehensive income, cash flows and changes in equity for each of the three years in the...

  • Page 87
    ... President, Business Development & Strategy Group President, Global Services Senior Vice President, Human Resources and Administration Group President, Supply Chain Senior Vice President, Chief Legal Officer and Secretary Group President, Oil & Gas Senior Vice President and Chief Financial Officer...

  • Page 88
    ... 2009 to January 2012, he was President and CEO of Savannah River Nuclear Solutions, LLC, which contracts with the Federal Government for operations and maintenance of the Savannah River nuclear site. Prior to that, Mr. Flowers was Senior Vice President, HSE, Security and Industrial Relations...

  • Page 89
    ... and employees, including our chief executive officer, chief financial officer, and principal accounting officer and controller. A copy of our Code of Business Conduct and Ethics, as amended, has been posted on the ''Sustainability'' - ''Compliance and Ethics'' portion of our website, www.fluor.com...

  • Page 90
    ...'' and ''Board Independence'' sections of the ''Corporate Governance'' portion of our Proxy Statement for our 2013 annual meeting of stockholders, which information is incorporated herein by reference. Item 14. Principal Accountant Fees and Services Information required by this item is included in...

  • Page 91
    ...). Fluor Corporation 2000 Restricted Stock Plan for Non-Employee Directors, as amended and restated effective January 1, 2010 (incorporated by reference to Exhibit 10.3 to the registrant's Quarterly Report on Form 10-Q filed on May 20, 2010). Fluor Corporation Executive Deferred Compensation Plan...

  • Page 92
    ... Non-Management Director Compensation (incorporated by reference to Exhibit 10.12 to the registrant's Quarterly Report on Form 10-Q filed on August 2, 2012). Fluor Corporation 409A Deferred Directors' Fees Program, as amended and restated effective as of January 1, 2013.* Fluor 409A Executive...

  • Page 93
    ... Fluor Corporation 2000 Restricted Stock Plan for Non-Employee Directors (incorporated by reference to Exhibit 10.29 to the registrant's Quarterly Report on Form 10-Q filed on August 4, 2011). Form of Change in Control Agreement entered into between the registrant and each of its executive officers...

  • Page 94
    ...Stock Growth Incentive Award Agreement under the Fluor Corporation 2008 Executive Performance Incentive Plan (incorporated by reference to Exhibit 10.40 to the registrant's Quarterly Report on Form 10-Q filed on May 5, 2011). Offer of Employment Letter dated January 9, 2009 from Fluor Corporation to...

  • Page 95
    ... /s/ PETER J. FLUOR Peter J. Fluor /s/ JAMES T. HACKETT James T. Hackett Director February 20, 2013 Senior Vice President and Controller February 20, 2013 Senior Vice President and Chief Financial Officer February 20, 2013 Chairman and Chief Executive Officer February 20, 2013 Director February...

  • Page 96
    ...Title Date /s/ KENT KRESA Kent Kresa /s/ DEAN R. O'HARE Dean R. O'Hare /s/ ARMANDO J. OLIVERA Armando J. Olivera /s/ JOSEPH W. PRUEHER Joseph W. Prueher /s/ NADER H. SULTAN Nader H. Sultan /s/ SUZANNE H. WOOLSEY Suzanne H. Woolsey Director February 20, 2013 Director February 20, 2013 Director...

  • Page 97
    FLUOR CORPORATION INDEX TO CONSOLIDATED FINANCIAL STATEMENTS TABLE OF CONTENTS PAGE Report of Independent Registered Public Accounting Firm ...Consolidated Statement of Earnings ...Consolidated Statement of Comprehensive Income ...Consolidated Balance Sheet ...Consolidated Statement of Cash Flows ...

  • Page 98
    ... three years in the period ended December 31, 2012, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Fluor Corporation's internal control over financial reporting...

  • Page 99
    FLUOR CORPORATION CONSOLIDATED STATEMENT OF EARNINGS Year Ended December 31, 2011 (in thousands, except per share amounts) 2012 2010 TOTAL REVENUE TOTAL COST OF REVENUE OTHER (INCOME) AND EXPENSES Corporate general and administrative expense Interest expense Interest income Total cost and ...

  • Page 100
    FLUOR CORPORATION CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME Year Ended December 31, 2012 2011 2010 (in thousands) NET EARNINGS OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX: Foreign currency translation adjustment Ownership share of equity method investees' other comprehensive income (loss) ...

  • Page 101
    FLUOR CORPORATION CONSOLIDATED BALANCE SHEET December 31, 2012 December 31, 2011 (in thousands, except share and per share amounts) ASSETS CURRENT ASSETS Cash and cash equivalents ($411,550 and $472,597 related to variable interest entities (''VIEs'')) Marketable securities, current ($30,369 and ...

  • Page 102
    ... by operating activities CASH FLOWS FROM INVESTING ACTIVITIES Purchases of marketable securities Proceeds from the sales and maturities of marketable securities Capital expenditures Proceeds from disposal of property, plant and equipment Investments in partnerships and joint ventures Proceeds...

  • Page 103
    ... DECEMBER 31, 2009 Net earnings Other comprehensive income Dividends ($0.50 per share) Distributions to noncontrolling interests Partner contributions in noncontrolling interests Stock-based plan activity Repurchase of common stock Debt conversions BALANCE AS OF DECEMBER 31, 2010 Net earnings Other...

  • Page 104
    ...'' below). For joint ventures and partnerships in the construction industry, unless full consolidation is required, the company generally recognizes its proportionate share of revenue, cost and profit in its Consolidated Statement of Earnings and uses the one-line equity method of accounting in the...

  • Page 105
    FLUOR CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) types of services, such as engineering and construction, and accordingly, gross margin related to each activity is recognized as those separate services are rendered. Changes to total estimated contract cost or losses, if any, ...

  • Page 106
    ..., the Internal Revenue Service and various state governments could differ materially from that which is reflected in the Consolidated Financial Statements. Derivatives and Hedging The company limits exposure to foreign currency fluctuations in most of its engineering and construction contracts...

  • Page 107
    ... generally does not require collateral, but in most cases can place liens against the property, plant or equipment constructed or terminate the contract, if a material default occurs. The company evaluates the counterparty credit risk of third parties as part of its project risk review process...

  • Page 108
    FLUOR CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Stock-Based Plans The company applies the provisions of ASC 718 ''Compensation - Stock Compensation'' in its accounting and reporting for stock-based compensation. ASC 718 requires all share-based payments to employees, ...

  • Page 109
    FLUOR CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The tax effects of the components of other comprehensive income (loss) are as follows: Year Ended December 31, 2012 2011 2010 Tax Net-of- BeforeTax Net-of- BeforeTax Net-of(Expense) Tax Tax (Expense) Tax Tax (Expense) Tax ...

  • Page 110
    ...be effective for interim and annual reporting periods beginning after December 15, 2012. Management does not expect the adoption of ASU 2012-04 to have a material impact on the company's financial position, results of operations or cash flows. In August 2012, the FASB issued ASU 2012-03, ''Technical...

  • Page 111
    ...02 is effective for interim and annual impairment tests performed for fiscal years beginning after September 15, 2012. Management does not expect the adoption of ASU 2012-02 to have a material impact on the company's financial position, results of operations or cash flows. In December 2011, the FASB...

  • Page 112
    FLUOR CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 3. Income Taxes The income tax expense (benefit) included in the Consolidated Statement of Earnings is as follows: (in thousands) Year Ended December 31, 2012 2011 2010 Current: Federal Foreign State and local Total current ...

  • Page 113
    ... tax effects of significant temporary differences giving rise to deferred tax assets and liabilities are as follows: (in thousands) December 31, 2012 2011 Deferred tax assets: Accrued liabilities not currently deductible: Employee compensation and benefits Employee time-off accrual Project and non...

  • Page 114
    ... related to the company's claim for additional compensation on the Greater Gabbard Project (see ''13. Contingencies and Commitments''). Earnings before taxes in the United States declined in 2011 compared to 2010 principally due to the reduction in project execution activities in the Power...

  • Page 115
    ... related to domestic and international engineering and construction salaried employees and U.S. craft employees. Contributions to defined benefit pension plans are at least the minimum annual amounts required by applicable regulations. Payments to retired employees under these plans are generally...

  • Page 116
    FLUOR CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) each major asset category including public U.S. and international equities, U.S. private equities and fixed income securities. U.S. Pension Plan December 31, 2012 2011 2010 Non-U.S. Pension Plans December 31, 2012 2011 2010 ...

  • Page 117
    ...in the process of being reallocated to debt securities. Investments in equity securities are utilized to generate long-term capital appreciation to mitigate the effects of increases in benefit obligations resulting from growth in the number of plan participants, inflation, longer life expectancy and...

  • Page 118
    ... primarily observable market information, broker quotes in non-active markets or similar assets. Securities not traded on the last business day are valued at the last reported bid price. As of December 31, 2012, the investments in corporate bonds and government securities held by the U.S. plan were...

  • Page 119
    ... December 31, 2012 and 2011: U.S. Pension Plan December 31, 2012 Fair Value Hierarchy (in thousands) Assets: Equity securities: Common and preferred stock Common or collective trusts Limited Partnerships Debt securities: Common or collective trusts Corporate bonds Government securities Other: Common...

  • Page 120
    FLUOR CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The following table presents a reconciliation of the beginning and ending balances of the fair value measurements using significant unobservable inputs (Level 3): U.S. Pension Plan 2012 2011 Non-U.S. Pension Plans 2012 2011 (...

  • Page 121
    ...Pension Plan December 31, 2012 2011 Non-U.S. Pension Plans December 31, 2012 2011 (in thousands) Change in projected benefit obligation Benefit obligation at beginning of year Service cost Interest cost Employee contributions Currency translation Actuarial (gain) loss Plan amendments Benefits paid...

  • Page 122
    ... subsidiaries provide health care and life insurance benefits for certain retired U.S. employees. The health care and life insurance plans are generally contributory, with retiree contributions adjusted annually. The accumulated postretirement benefit obligation as of December 31, 2012 and 2011 was...

  • Page 123
    ... does not include amounts related to benefit plans applicable to employees associated with certain contracts with the U.S. Department of Energy because the company is not responsible for the current or future funded status of these plans. In the first quarter of 2012, the company adopted ASU 2011-09...

  • Page 124
    FLUOR CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) All of the company's financial instruments carried at fair value are included in the table above. All of the above financial instruments are available-for-sale securities except for those held in the deferred compensation ...

  • Page 125
    ... associated with the hedging instruments designated as fair value hedges for the years ended December 31, 2012, 2011 and 2010 was as follows: Fair Value Hedges (in thousands) Foreign currency forwards Foreign currency forwards Total Location of Gain (Loss) Total cost of revenue Corporate general...

  • Page 126
    FLUOR CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) During 2012, 2011 and 2010, the company recognized gains of less than $0.1 million, $1.1 million and $3.6 million, respectively, in corporate general and administrative expense related to settled foreign currency forward ...

  • Page 127
    ... condition was satisfied during the fourth quarter of 2012 and 2011 and the 2004 Notes were therefore classified as short-term debt as of December 31, 2012 and 2011. Holders of the 2004 Notes were entitled to require the company to purchase all or a portion of their 2004 Notes on February 17, 2009...

  • Page 128
    ... one year to four years. As of December 31, 2012, the company was in compliance with all of the financial covenants related to its debt agreements. 8. Other Noncurrent Liabilities The company has deferred compensation and retirement arrangements for certain key executives which generally provide...

  • Page 129
    ... upon joining the Board of Directors which vest ratably over a five year period. For the years 2012, 2011 and 2010, recognized compensation expense of $25 million, $25 million and $32 million, respectively, is included in corporate general and administrative expense related to restricted stock...

  • Page 130
    ... million and $22 million related to these awards is included in corporate general and administrative expense in 2012 and 2011, respectively, of which $17 million was paid in 2012. The balance of unamortized compensation expense associated with VDI units as of December 31, 2012 was $11 million, which...

  • Page 131
    ... to office facilities, equipment used in connection with long-term construction contracts and other personal property. Net rental expense in 2012 was higher compared to 2011, primarily due to an increase in rental equipment required to support project execution activities in the Government segment...

  • Page 132
    ... clients amounted to $20 million and $298 million as of December 31, 2012 and 2011, respectively, and are included in contract work in progress in the accompanying Condensed Consolidated Balance Sheet. Claim revenue of $278 million for the Greater Gabbard Project was reversed in the fourth quarter...

  • Page 133
    ... with the 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. The primary dispute related to the company's claim for additional compensation for schedule and cost...

  • Page 134
    ...Conex International (''Conex'') v. Fluor Enterprises Inc. (''FEI''), ruling in favor of Conex and awarding $99 million in damages related to a 2001 construction project. In 2001, Atofina (now part of Total Petrochemicals Inc.) hired Conex International to be the mechanical contractor on a project at...

  • Page 135
    ... adequate and such future cost will not have a material effect on the company's consolidated financial position, results of operations or liquidity. However, the imposition of more stringent requirements under environmental laws or regulations, new developments or changes regarding site cleanup cost...

  • Page 136
    ... the VIE, the proportionate consolidation method of accounting is used for joint ventures and partnerships in the construction industry, whereby the company recognizes its proportionate share of revenue, cost and profit in its Consolidated Statement of Earnings and uses the one-line equity...

  • Page 137
    ... (''HOT'') Lanes Project In August 2012, the company was awarded the $925 million Interstate 95 HOT lanes project in Virginia. The project is a public-private partnership between the Virginia Department of Transportation (''VDOT'') and 95 Express Lanes, LLC, a joint venture in which the company has...

  • Page 138
    ... on behalf of DTS. Fluor SKM Joint Venture In 2008, the Fluor SKM joint venture was awarded the initial program management, engineering and construction management contract for the expansion of port, rail and mine facilities for BHP Billiton Limited's iron ore mining project in the Pilbara region of...

  • Page 139
    ... management, start-up and commissioning, operations and maintenance and technical services to the gas fueled, solid fueled, environmental compliance, renewables, nuclear and power services markets. The Power segment includes the operations of NuScale Power, LLC, the Oregon-based designer of small...

  • Page 140
    FLUOR CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Operating Information by Segment (in millions) Year Ended December 31, 2012 2011 2010 External revenue Oil & Gas Industrial & Infrastructure Government Global Services Power Total external revenue Segment profit (loss) Oil & ...

  • Page 141
    ... on a gas-fired power project in Georgia. Enterprise-Wide Disclosures External Revenue Year Ended December 31, 2012 2011 2010 Total Assets As of December 31, 2012 2011 (in millions) United States Canada Asia Pacific (includes Australia) Europe Central and South America Middle East and Africa Total...

  • Page 142
    ...First Quarter Second Quarter Third Quarter Fourth Quarter Year ended December 31, 2012 Revenue Cost of revenue Earnings (loss) before taxes Net earnings Net earnings (loss) attributable to Fluor Corporation Earnings (loss) per share Basic Diluted Year ended December 31, 2011 Revenue Cost of revenue...

  • Page 143
    ...investor.fluor.com to register and learn more about this feature. Fluor is a registered service mark of Fluor Corporation. TRS is a registered service mark of TRS Staffing Solutions, Inc. AMECO is a registered service mark of American Equipment Company. Independent Registered Public Accounting Firm...

  • Page 144
    FLUOR CORPORATION 6700 LAS COLINAS BLVD IRVING, TEXAS 75039 FLUOR.COM